Good morning. My name is Jackie and I will be your conference operator today. At this time would like to welcome everyone to the Medtronic first quarter earnings conference call. [Operator Instructions]. Thank you. I would now like to turn the conference over to Ryan Weispfenning. Please go ahead.

Great. Thank you, Jackie. Good morning and welcome to Medtronic's first quarter conference call and webcast. During the next hour Omar Ishrak, Medtronic Chairman and Chief Executive Officer and Karen Parkhill, Medtronic Chief Financial Officer, will provide comments on the results of our FY '17 first quarter which ended on July 29, 2016. After our prepared remarks we will be happy to take your questions. First, a few logistical comments. Earlier this morning we issued a press release containing our financial statements and a revenue by division summary. We also issued an earnings presentation that provides additional details on our performance and outlook. You should note that many of the statements made during this call may be considered forward-looking statements and that actual results might differ materially from those projected in any forward-looking statements. Additional information concerning factors that could cause actual results to differ is contained in our periodic reports and other filings that we make with the SEC and we do not undertake to update any forward-looking statement. In addition, the reconciliations of any non-GAAP financial measures are available on our website investorrelations.Medtronics.com. Unless we say otherwise, references to quarterly results increasing or decreasing are in comparison to the first quarter of FY '16 and all year-over-year growth ranges are given on a constant currency and constant weeks basis which adjust for the negative effect of foreign currency translation and the extra week that was in our prior-year first quarter. As previously disclosed, we estimate the extra week had an approximate $450 million impact on revenue and $0.08 to $0.10 impact to earnings per share. The extra week impact for each business or region was estimated by adjusting Q1 FY '16 revenue by the prorated total Company impact. The constant currency adjustment details can be found in the reconciliation tables included with our earnings press release. With that I am now pleased to turn the call over to Medtronic Chairman and Chief Executive Officer, Omar Ishrak.

Good morning and thank you, Ryan and thank you to everyone for joining us. This morning we reported first quarter revenue of $7.2 billion and non-GAAP diluted earnings per share of $1.03 representing another quarter of strong top and bottom line growth. All our business groups and regions delivered strong growth, resulting in Company-wide revenue growth over 5%. In addition, our continued focus on both operating and financial leverage drove solid double-digit EPS growth and strong cash flow generation as we continue to strategically deploy our capital against our priorities of reinvesting with discipline in M&A and R&D, returning substantial cash to our shareholders and deleveraging our balance sheet. We feel very good about our momentum to start our fiscal year and are confident in our ability to the sustain this performance over the coming quarters. Now let's turn to the drivers of our revenue growth. We have three specific growth priorities stemming from our overall strategies. New therapies, emerging markets and services and solutions with quantified growth expectations for each. In New Therapies we delivered results at the upper end of our goal in Q1 contributing over 300 basis points to our total Company growth. In our Cardiac and Vascular Group which grew in the mid single-digits, we continue to complement our steady cadence of differentiated products with market-leading breadth, scale and technology innovation. In CRHF, our AF Solutions and Diagnostic Businesses again delivered impressive growth. AF Solutions grew in the mid-30%s, well above market growth on the strength of Arctic Front Advance cryoballoon and our recent FIRE AND ICE clinical data. In Diagnostics which grew in the low double-digits, market acceptance of our Reveal LINQ insertable loop recorder had strong momentum resulting in increased pacemaker pull-through. In our core CRHF and peripherals business revenues were flat in the…

Thank you, Omar. Our first quarter revenue $7.166 billion decreased 1% as reported or increased over 5% on a constant currency, constant week basis. Foreign currency had a negative $7 million impact on first quarter revenue and acquisitions and divestitures contributed approximately a net 70 basis points to revenue growth. GAAP diluted earnings per share were $0.66. Non-GAAP was $1.03. After adjusting for the $0.04 impact from foreign currency translation and the $0.08 to $0.10 estimated impact from the extra week last fiscal year, non-GAAP diluted EPS grew approximately 14% to 16%. EPS came in slightly above our expectations due to a $0.01 to $0.02 tax benefit. In addition to the $376 million after-tax adjustment for amortization expense, non-GAAP adjustments to earnings on an after-tax basis were a $79 million net restructuring charge and a $39 million charge for acquisition-related items, both stemming mostly from our continued integration of Covidien. A $52 million litigation charge and a $31 million net benefit related to the resolution of several tax matters with the IRS, including a benefit from our Tyco tax issue and a charge for a proposed agreement resolving matters stemming from several acquisitions. The net tax benefit does not include any impact related to our Puerto Rico royalty rate dispute with the IRS which has not yet been resolved [Technical Difficulty] for the quarter was 27.4% on a constant currency basis. Adjusting for the extra week, the operating margin showed an approximate 100 basis point improvement over the prior year. Our operating margin included a gross margin of 68.9%, SG&A of 34% and R&D of 7.8%, all on a constant currency basis. While our gross margin was down slightly, mainly due to revenue mix, we drove improvement in SG&A, largely a result of execution on our Covidien synergies. We're pleased…

Thanks, Karen. And we will now open the phone lines for Q&A. In addition to Karen, I've asked Mike Coyle, President of our Cardiac and Vascular Group; Bryan Hanson, President of our Minimally Invasive Therapies Group; Geoff Martha, President of our Restorative Therapies Group and Hooman Hakami, President of our Diabetes Group, to join us. [Operator Instructions]. If you have additional questions, please contact Ryan in our investor relations team after the call. Operator, first question please.

[Operator Instructions]. Our first question comes from the line of Mike Weinstein with JPMorgan

Just maybe Omar I want to do start with HeartWare could you just spend a minute on why now on HeartWare that was the biggest question people had is people understand the franchise but why did you do the transaction today and then second there was obviously some dilution that comes with buying HeartWare given the burn in the company how did you offset that?

Okay why now well you know when you deal with their opportunistic elements which can come through so that was clearly one, the other is we really felt that we were in a position where we were getting critical mass around our expertise in heart failure and where HeartWare was positioned as a company we felt that we could add immediate value and through that combination drive up significant revenue not only in the first year but in the next couple of years through real sort of milestones that the company can meet such as reaching approval for destination therapy and then other new products so that was we felt a good timing for us. And besides you can't plan acquisitions to the month period, it depends on a variety of circumstances and things just fell into place. We felt we had the management bandwidth to do this the team was well-prepared, we had the right capabilities and we had additional synergies that we could add in many different ways. So we felt this was absolutely the right time. And in terms of the dilution that obviously comes along with an acquisition this size, there are offset to the cardiac and vascular group made that unless Mike is going to comment on the overall thing on that.

Sure, Mike, obviously we had a number investments internally going on in R&D programs directed specifically at heart failure including diagnostic programs and services as well as enhancements to our CRT product lines and we basically are reallocating resources and people to support the activities within HeartWare and backing off on some of those because we actually think HeartWare return on investment will be even better.

If I could just ask two quick follow-ups. Mike this was a tougher quarter for the traditional ICD business for the high power business, could you just comment on that and I was wondering if Hooman could comment on 670G timing in light of the 630 approval. Thanks.

As a relates to ICD or think probably the thing that is impacting the overall market is U.S. replacements and that we saw pretty stable low single-digit growth in initial implants for ICDs but we’re now getting to a point where year-over-year comparisons on frankly replacements are down and sort of the low double-digit kind of range which is obviously a function of what's patents to initial implants 5 to 8 years ago depending what you're talking about CRT to standardize CDs. So that's obviously putting some strain on the overall market growth. We actually took share in the ICD market as we continue to get the benefit of the MRI safe technologies rolling into not just the standard ICD's but also into CRT-D. And that's something that we think we can continue, we think we are very much in the front end of basically the mix shift toward use of MRI in standard high-powered and into CRT-D and we also obviously have a very robust set of new products that are just hitting the market and will be added to over the course of the next several quarters including the Visia AF and a single chamber segment as well as the Clary's [ph] CRT-D device which adds the effective CRT algorithm to our overall set of offerings. So we think -- obviously the market is going to provide a bit of a head wind because of the replacements but we think we’re in a good position to continue to take share and mitigate some of that. I was particularly encouraging to me that we could get to that mid single-digit growth when we’re seeing that kind of stress metrics in the ICD market but obviously we’re in a little bit of an off segment on our DES market as well and yet are able to still get into mid-single-digit growth so we think it speaks to the importance and value of the breadth of the portfolio.

Yes with respective 670 Mike, the PMA is with the FDA, it's really hard to predict when they're going to improve it obviously it's in their hands now. We are working actively with them to answer the questions that they have regarding our submission but as you know and as Omar talked about in the commentary in the meantime we launched the 630G we received approval and have launched the 630G and we're excited about this. This is going to address some of the biggest requests we've seen from patients color screen waterproofs remote [indiscernible] capability and so it's a chance for us to really bring additional enhancements to our patients while the 670 process goes on. So we’re excited about the new product that we have and in the meantime we’re working actively with the FDA on the 670.

Our next question comes from the line of David Lewis with Morgan Stanley.

Just a couple of questions here. Omar the last four quarters as you know organic growth has been extremely stable within Medtronic, in this quarter there were a couple of areas Mike mentioned one of them but the stem [ph] franchise U.S. geography broadly at a little bit the emerging market geography what if you could sort of address those few areas and may be a couple different people but just more specifically after that four quarters of significant stability of organic growth can that organic growth number get better here over the next several quarters and I have a quick follow-up after that.

Well you know look we've always said that one of our main strength is the diversity of not only our portfolio but our geographic presence as well as the nature of the sources of revenue that we have from emerging markets from services solutions and new therapies. And that by definition means that there will be areas which are strong one quarter and week in others but overall we're pretty confident, very confident that we can maintain even just organically the mid-single-digit range within the full range of mid single-digits. We expect acquisition to supplement that and give us more confidence in holding that range but our new product introduction and so on as well as our geographic extension should enable us to that. Now specifically to your question, you know we would really bit of a down product cycle if you like in the U.S. where most of our new products have the biggest impact. We think we'll get up bonus of new products in the coming quarters and that will pick it up again but the slight drop in U.S. revenue from our typically we've been doing about 4 to 3 this quarter is primarily that. We think in many areas we continue to show strength particularly in surgical procedures and within the MITG portfolio and that really hasn't changed. And like Mike pointed out a little earlier we’re in a down product cycle actually both in cardiac and in diabetes which we think will come back in the next few quarters. So that’s the dynamics in the U.S. market and new therapies. And also you know the other thing that I would like to point out is RTG, our restorative therapies growth led by Spine which we're watching very carefully, we're encouraged to see good strength there or early strength, I mean it's -- we've got to demonstrate sustained capability of mid single-digit growth there but we're pleased to see the way that RTG is moving now and offsetting pressures even in that portfolio with strength in other areas. And in an emerging markets actually again we’re quite pleased, we’re trying to -- went through all kinds of gyrations in the last two years if you like and through that we've maintained either double-digit growth plus and minus is a little bit in that geography and then the other geographies have balanced each other out. I mean Middle East and Africa has been a very strong contributor of emerging market growth over the last several orders. This quarter there were conditions there but then other geographies such as Latin America showed considerable strength and China for that matter to offset that. So we’re very confident that the projection that we made of sort of low to mid teens double-digit growth in the emerging markets is something that is quite sustainable despite macroeconomic challenges that may come about. I think I covered your points David.

You did Omar, thank you. And just a quick follow-up on earnings and margins broadly for Karen and the broader team. So just to avoid any confusion we've had a last couple of quarters, your commentary Karen thinking about consensus in the second quarter earnings number we kind of come around kind of a 150 number plus or minus a penny I wonder if could just comment about your comfortability with the consensus or that number and then just broadly if you take a step back from the analyst day, margins were the real focus and I wonder you're giving us 12% to 16% for this year but your confidence that we continue to see the durability of that 12% to 16% or sort of mid-teens earnings growth and of all those plans and restructuring plans you referred to when does the investor really start to see the inflection in this plan where they could really get this sense of the sustainability of this long term double-digit teens profile. Thank you.

Thanks David. I don't comment specifically on consensus numbers but happy for any of you to follow up with Ryan to go through your models at any point in time. In terms of our confidence in delivering our long term bottom line EPS growth I think this company has a very strong ability and we're very confident in our ability to deliver our commitment. Not only do we have significant growth on the top line particularly from emerging markets as Omar noted, but we have been driving strong synergies from the Covidien acquisition and we're focused on delivering additional leverage of beyond the Covidien acquisition through significant focus on managing our cost efficiently and I feel we’re very confident in our ability to do just that.

I think maybe if I could just add to that your question about when to watch for inflection points, well listen like we've said before the Covidien synergies if we hit our $850 million projection that alone takes us through the double-digit EPS sort of projection. I mean by definition in FY '17 and mostly in FY '18. Now as we transition beyond that, we're like I mentioned in the Investor Day working on other efficiency programs in operations and in functions and many other areas which will then sustain that level. So those programs that we worked on right now but clearly the real results will prove themselves beyond FY '17.

Our next question comes from the line of Bob Hopkins with Bank of America.

So just two quick questions one is just to clarify question on the revenue growth guidance for 2017 you know given that now you've closed HeartWare. I hear you specifically on the upper end of the mid-single-digit range but I'm just curious does M&A add about a point to growth for 2017 given all the deals that have happened?

Well yes I mean if you have the deals up its something like that probably a little less than that but you know the main point though here is that the range that we projected really balances out issues that may arise, market issues and other issues that arise in our business. We feel confident that even organically that we will be in the mid-single-digit range and the whole range. And we feel that acquisitions give us increased confidence that we will hit that and probably in the higher end of that range I mean certainly this year with HeartWare we've got increased confidence for that. But that's the way in which we're looking at this. You know it's probably if you want to direct answer to your question is probably slightly under a point that the acquisitions are adding but things roll off other things come in, it's pretty dynamic picture and believe it or not there are some divestitures as well like the drug business and other things that grow out of our portfolio. So net-net it's probably a little less than a full point.

And Bob we did say that this quarter net M&A added about 70 basis points this quarter.

Great. Thank you. No, I understand the philosophy around the guidance I just wanted to make sure I had a good understanding of all the moving parts. And then for second question just on the product side I was wondering if Mike could talk a little bit about the upcoming MRI safe competition, we’ve started to see a little bit of that roll-in just Mike your confidence in mid-single-digit growth now that we're about to see a steady cadence of MRI safe competition and then quickly on the diabetes side I heard the timelines for 670G but I just want to make sure there's no change in timelines on 670G from your perspective?

So on MRI, we obviously think this should become standard of care and right now if you just look at the most mature products we have in that segment are in a dual chamber pacing area and there the mix is still in the U.S. which is the most developed market in the sense or still -- only 70% of our business is actually MRI safe and recognizing that we're just a little over half the pacing business that means that less than half of the patients we’re getting pacemakers in the United States that are getting MRI safe devices and as you go into the other product lines ICD's it's more like a 50% penetration rate for us when you get to CRT-D it's more like a 30% penetration rate for us or mix for us. So these penetration rates are very low and so we still think there's plenty of upside to go in those spaces, but as competitors catch up to this which still we have got it's only happening on the [indiscernible] side right now and is expected to take still several quarters into next year next calendar year before we see ICD competition CRT-D competition in those areas. We're continuing to advance the bulk. I mean obviously on the pacing side it's Micra right where we basically have an opportunity to significantly shift to very much value-added product in a single chamber segment as we get our reimbursement in place for that which is going to happen before the end of the fiscal year. In the standard ICD segment for single chamber the addition of Visia AF is being very well received in the marketplace. It is the only single chamber device that could actually do monitoring of atrial fibrillation without having a lead. So it gives a very significant benefit beyond simply the MRI safe characteristics of the products. And then in the CRT-D side we're obviously adding significant therapeutic value with things like adaptive CRT and effective CRT which basically improve response rates in CRT and because our hardware platforms Amplia in particular are basically positioned to be able to do multi-point pacing. We're going to add multi-point pacing capability to that Amplia product with software downloads below the end of the fiscal year. So we continue to advance the offerings that we have beyond MRI as competitors catch up in MRI.

And in terms of diabetes the 670G is on track but Hooman do you want to say a couple of words on that?

Sure. There's absolutely no change or any indication that things are going to push out on the 670G and may be Bob just an additional point of clarification we didn't launch the 630 because we thought there was a risk to the 670 timeline. So the 670 is as I said we're working very, very closely with the FDA, the relationship is outstanding and we’re actively engaged with -- we launched the 630 not due to anything related to the 670 but because of two things. One it gives our patients the request that they've asked for and I touched on what some of those were from waterproof to color screen and at the same time what it does is it refreshes our product line in the U.S. the 530G was launched in September of 2013 that’s three years ago. And we held our own with this product even at this long anniversary but if you take a look at how well the 640 has done outside the United States, we felt that by bringing these patient centric features and a new hardware platform into the U.S. now, we could really refresh our product line and really drive growth in the U.S. while we wait for the 670.

Our next question comes from the line of Kristen Stewart with Deutsche Bank.

I was wondering if you could just I guess take a step back and I guess since this is your first call just refresh us on I guess your thoughts on joining Medtronic and I know as mentioned before on the call, the operating margins has been a real big goal for Medtronic. I was wondering if you could just refresh us on the overall thoughts there and just again Medtronic from a broader sense on your enthusiasm on joining the team.

I'm thrilled to be a part of this great team. Medtronic is an amazing company with a very strong mission that clearly spoke to me personally. I think we're a leader in the industry from a vision perspective and I'm excited to be at a company that is leading not just, not just the medical device industry but the healthcare industry in general and I'm thrilled to be at a team where we're focused on growth and efficiency. In terms specifically of the operating margin as you know our focus is to drive a stronger growth in our bottom line and we have in our top line and the only way you do that is through efficiency in our margins. We're very focused on that we talked about driving the Covidien synergies through to completion and ultimately achieving the $850 million commitment that we have put out there. And then on top of that, as we said we're focused on driving efficiencies throughout the company looking at all of our processing, bringing in lean Six Sigma to make us better and more efficient, centralizing resources where we can and ultimately driving double-digit bottom-line growth which is much stronger than a very impressive mid-single-digit top line growth.

Okay. And then just I guess from your perspective where do you think that you're going to add the most value from Medtronic and can you just give us your thoughts on capital deployment and how you look at the lens of with M&A.

Sure. I'm happy to talk about those. I'm excited to step into the very big shoes of Gary and I intend to steer the ship very much in the same direction that he has. I do come from a financial industry background most recently though I've had experience in many industries within financial services obviously one of the key things that we had been doing in an ultra-low rate environment was focused on efficiency and driving strong bottom-line. And so that's exactly what we'll be doing here. In terms of capital deployment, I think the highest and best use of our capital is to grow the intrinsic value of the company through reinvestment first and foremost, but beyond that I think it's very important to have a dividend that is strong and that does steadily grow with earnings and then on top of that, where we can have meaningful pay back to our shareholders through share repurchase and that's exactly what we're doing with our commitment to deliver a minimum of 50% of our free cash flow to our shareholders in the form of share repurchase. In addition to the ability of us on trapping more cash we have an additional $5 billion commitment over a three-year period from FY '16 to FY '18. So obviously I firmly believe in all that we're doing with the company and hope that helps.

Let me also add, look it's a pleasure to welcome Karen onto the team. She's made a great start and really -- if nothing else we value the fresh thinking and a fresh angle that is very useful for us as we go forward.

Our next question comes from the line of Larry Biegelsen with Wells Fargo.

Omar, I wanted to start with a big picture question for you. In calendar Q1 2016, it was generally a strong quarter for the largest med-tech companies, we actually found acceleration in the weighted average of organic growth for the large [indiscernible] 5% to 6% depending on whether it include Edwards and Intuitive. So the question I have for you is what you think is driving improvement in the industry growth, how sustainable is it -- could you actually see growth improve for the industry from here or do you think 5% to 6% is the new norm and then I had a follow-up.

Look you know the industry is very broad so to be specific about this stuff but just a few reflections on this. First of all, if you're in healthcare your entitlement is growth because the opportunities in healthcare are limitless. If you look at it both from a medical innovation perspectives, the number of problems that have to be solved that patients will value, that create a real difference in people's lives driving equity in healthcare around the world. The opportunities there are again limitless and we're just scratching the surface and then on top of that you know like we've talked about the challenge of addressing wastage in healthcare where we’re literally wasting across the world hundreds of billions of dollars in total healthcare spend which -- of which there's inefficiency in deliveries primarily because of payment models and so on around the world. So if you look at all that collectively, the fact that the healthcare industry is growing is really not a surprise in many ways. It's an entitlement that the healthcare industry should have. And I think the fact that there was momentum this last quarter and last couple of quarters I mean that's -- it's too tough to call on something with that short a timeline but I've every expectation that all stakeholders in healthcare if they get their heads around these opportunities will steady increase in the growth profile in healthcare I think that's our entitlement. I think that's the only real comment I can make. I think all the companies that you listed are good companies with innovation driving and creating new markets. We expect to be an equal player in many of those areas, but there are lots of people out there with great sense of purpose and inventiveness in driving the solution. So again I just put it in the perspective of overall healthcare this is not one that should ever be a down market if we as players and stakeholders in the healthcare market can get our heads around this.

And Mike, the intermediate risk indication for CoreValve in the Ce Mark [ph] approval came earlier than people expected, what do you think the implications are for the market and for CoreValve for that intermediate risk indication and just Karen the net other expense or income for the remainder of the year it was a little bit lower this quarter than we expected and the catch rate as well, could you comment on that please. Thanks a lot.

As it relates to intermediate risk we were certainly expecting these developments both in terms of [Technical Difficulty] Edwards approval in the United States. We reflected that in our estimates for the overall market which we showed at the analyst meeting. So I wouldn't necessarily change what we said at that time. Other than to say it's obviously good to see these developments tending to happen sooner rather than later in terms of regulatory organizations looking at these compelling data and basically making sure these technologies are available to patients in the intermediate risk group and so we look forward to obviously finishing the [indiscernible] study working with the FDA to get label indications for that in the United States and we think the growth profile will be overall [indiscernible] market which was very robust in Q1 is going to continue to be a very impressive driver of growth for us and for Medtec in general.

Yes on net other expense we did mention the fact that our medical device tax does flow through that line item and obviously that was down year-over-year about $55 million. We did have currency gains that run through that line item as well. Those were down year-over-year too. In terms of our tax rate we did have several discrete tax benefits in the quarter that did push our overall tax rate down to 15.7% for the year. We do still do expect our tax rate to be within the range that we talked about before of 16.5% to 17.5%.

Our next question comes from the line of Bruce Nudell from SunTrust Robinson Humphrey.

Omar, we recently revisited the surgical practice patterns in orthopedics and some things don't seem to change. There seems to be just some [Technical Difficulty] for the status quo and some of the intricacies of gaining share in terms of repacing of internal savings pose another impediment to change. Should we be thinking about Medtronic's orthopedic initiative principally on the basis of broad solutions including management of patients and post-acute care or is really the implant side of the business really seminal to your thinking?

No, I think it's a former, it is a broad solution that is necessary and we feel that there is a lot of cost I mean the majority of cost in that overall episode is actually in the post-acute space and so we think we can make a considerable difference but let's not just put that in a single bucket because in overall process includes proper risk stratification of the patients and that risk stratification drives a very specific care pathway to which adherents must be made and then following that, a clear handoff to post-acute care in the most efficient manner possible and finally a clear measurement and accountability for the outcome of the patient. Those four things that I've just outlined are not things that today are look at holistically. And I think in each one of those areas there's considerable inefficiency and we believe that putting technology and using technology will not only create an inflection point, in the short term, but will actually create long term sustainability of savings in that process because as you improve outcomes, you improve your cohort selection and risk stratification. Your care pathways improve and then through all of that implants will play a role in terms of providing the most effective implant at the appropriate cost and when there is innovation in those areas we use them to drive up outcomes. So that’s the way we look at it but you have to start with the holistic view and implant is only a portion of that and that’s our view. Geoff, do you want to add anything to that quick

No I think you're right if we look at this holistic view we look at it in several areas like the segmentation of the patients and the risk analytics, the pre-procedure patient engagement and education. The inner operative technologies not just the implants but different surgical tools that can be used that can lower the procedure cost during the hospital stay or downstream. And then the post-acute remote patient monitoring and then finally the patient reported outcomes the data collection reporting on that and look, we're seeing examples for example I was just with our Advanced Energy business yesterday in Portsmouth, New Hampshire and they have the technology that almost adds almost $500 to the cost of the procedure and when they -- over the last year with the advent of knowing that CGR was coming they really had to -- they revamped their go to market strategy, did that patient segmentation that Omar was talking about was very clear to the surgeon partners and the health systems they are selling into, what patient cohorts the hemostasis technology, what patient cohorts that added value to downstream and what it did not. Okay? So they did that patient segmentation, they published some papers on the value of the technology downstream for those courts in patients both clinically and economically and they have seen a big boost in their business. So we’re seeing the impact when you look at it holistically you can document and I think it's a matter of time you'll see certain technologies separate themselves that way both good and bad, up and down and so I take your point on the I guess the -- what would you call the built-in forces that are keeping things stable but I think over time as hospitals and health systems and payers become more sophisticated in looking at this holistic approach and looking at the clinical and economic impact across the 90 day period in this case I think you're going to see separation. I just don't think people have fully grasped it yet.

And just a follow-up for Mike. Mike, you know there were reports of vascular injuries with CoreValve, I'm presuming that was mainly it's training issue not a class affect related to the longer size of the self-expanding kind of devices. And a second follow-up on I'm presuming you pull the trigger on HeartWare being pretty comfortable with HVAC, it's going to be competitive until the pipeline evolves and just any thoughts you might have on the pipeline.

Sure. So on the field action we took obviously we monitor all the patients that are being treated with our products and in that particular case we saw some overlap between specific anatomic issues and an increase in vascular trauma. So it was in fact only about training that this field action was done, it was to improve sensitivity to those particular aspects when screening patients and making sure that care is taken in terms of the delivery of the device. I would point out that our instance of vascular injuries actually below what is in the TBT registry. So we have a low threshold for identifying these issues and what we think we can help improve outcomes we obviously take action to do it. So there was no change to the product, there were no issues with manufacturing, it basically was a training issue. On HeartWare obviously we're very bullish on the HVAC system as it is we think that device it performed very well, we were obviously able to see details of the clinical evidence that they generated in support of their U.S. approval in advance of making the decision to acquire the company and I think you’ve seen especially in their most recent quarterly earnings results that in Europe there is beginning to see after the initial trial a nice bounce back in terms of overall share which obviously is consistent with our view that this product with its smaller size and its performance characteristics should be able to compete very effectively in that space. We continue to look at the MVAD device and decide how aggressively we want to pursue that and we're working closely with the leadership team there, very impressed with the people who are doing that work and we look forward to being a leader in this space for decades to come.

Our next question comes from the line of Vijay Kumar, Evercore ISI.

So maybe one I had a guidance clarification question and one follow-up. I guess when you look at sequentially 1Q versus 2Q, 1Q we came at the high end on a constant currency constant week EPS growth. 2Q was sort of looking at the bottom end of the 12% to 14% range, so can you just talk to sort of what changed in 1Q and 2Q and when I look at the annual guidance rate 1Q revenues came in 200 basis points above internal plans, So if we’re looking at low half of the annual sort of 5% to 6% but we came in north of 5% and so revenues came in better in 1Q but I'm just curious why how EPS we sort of re-created on the EPS guidance.

In terms of first quarter versus second quarter yes our first quarter we did come in at the high end of that 12% to 16% growth range and we did give guidance that we expect second quarter to be at the low end of that 12% to 16% range. The key reason is the tax rate. We expect our tax rate from the second quarter last year to second quarter this year to be about 50 basis points higher. In terms of revenue growth rate, obviously we do expect our second quarter to be in the same line as our overall annual growth rate of 5% to 6%. Clearly we've got the HeartWare acquisition closing that gives us confidence around that range.

And then maybe one follow-up, I guess a lot of questions have been asked but I'm just curious maybe if Mike can answer this have you had conversations with the FDA on whether they would accept a one-year data for CoreValve given we have notion, we have subgroup analysis of high risk and your peer [indiscernible] just got approval based on one year data and if you had those conversations what's been the response? Thank you.

Obviously it's always a very fluid discussion with FDA and I have been very impressed with the way they have adapted their views in the TAVR space to the quality of the clinical evidence and have been flexible in terms of timing on approvals in the space generally I think we saw that again with Edwards and we had approval and so this group I think is extremely effective at balancing the therapeutic benefit of products with their risk and trying to get good new therapies to the market as quickly as they can. So we will as you point out continued to basically look at one year and two year cuts on the data. There was a large number of patients that we have, we've obviously completed enrollment. As we have said we expect around ACC to be reviewing those data publicly and obviously we'll continue to work with the FDA and they will ultimately be the one to decide when the product is approved.

Okay. Thanks to all of you for your questions and in conclusion, let me just reiterate that we're focused and consistently delivering on our three commitments mid-single-digit constant currency revenue growth, double-digit constant currency EPS growth and returning a minimum of 50% of our adjusted free cash flow to our shareholders. And as I noted earlier we feel that the appropriate application of medical technology that can help address inefficiencies and improve outcomes in healthcare delivery driving new forms of value creation. With our differentiated growth platforms and leadership in the strong end markets we believe that we're well positioned to capture this to ultimately create a long term dependable value for our shareholders. With that and on behalf of our entire management team I would like to thank you again for your continued support and interest in Medtronic. We look forward to updating you in our progress on our Q2 call which we currently anticipate holding on Tuesday, November 22nd. Thank you all and have a great day.

Thank you. This concludes today's conference call. You may now disconnect.