DUBLIN - Sunday, July 29th 2012 [ME NewsWire]
Net sales up 3% (operational growth 6%); Medical Devices sales up 4% (operational growth 8%)
Third-quarter diluted GAAP earnings per share from continuing
operations were $0.93; excluding specified items, adjusted diluted
earnings per share from continuing operations were $1.07, up 6%
(BUSINESS WIRE)-- Covidienplc (NYSE: COV) today reported results for the
third quarter of fiscal 2012 (April - June 2012). Third-quarter net
sales of $3.01 billion increased 3% from the $2.93 billion reported in
the third quarter last year. Operational sales growth in the quarter was
6%, as foreign exchange rate movement lowered the quarterly sales
growth rate by three percentage points.
Third-quarter 2012 gross margin of 57.8% rose 0.7 percentage points from
the 57.1% of the prior-year period. On an adjusted basis, excluding the
specified items shown on the attached quarterly Non-GAAP
reconciliations table, third-quarter 2012 gross margin of 58.0% was 0.9
percentage points above that of a year ago. This improvement reflected
positive business mix and benefits from our manufacturing cost reduction
program.
Selling, general and administrative expenses for the third quarter of
2012 were higher than those of the comparable quarter of the year
before. This was primarily due to spending on growth initiatives to
expand the Company’s sales and marketing presence in emerging markets,
partially offset by productivity gains. Research and development
(R&D) expense in the third quarter of 2012 increased 15% and
represented 5.3% of net sales, versus 4.7% of sales a year ago.
In the third quarter of 2012, the Company reported operating income of
$617 million, versus $615 million in the same period the year before.
Third-quarter 2012 adjusted operating income, excluding specified items
on the attached table, was $676 million, compared with $647 million in
the prior year. Third-quarter 2012 adjusted operating income, excluding
the specified items, represented 22.5% of sales, versus 22.1% of sales a
year ago.
The third-quarter 2012 effective tax rate was 21.5%, versus an effective
tax rate of 4.7% in the third quarter of 2011. The third-quarter 2012
adjusted tax rate, excluding specified items on the attached table, was
17.6%, versus 16.8% in the third quarter last year.
Diluted GAAP earnings per share from continuing operations were $0.93 in
the third quarter of 2012, versus $1.06 per share in the comparable
quarter last year. Third-quarter 2012 adjusted diluted earnings per
share, excluding specified items on the attached table, were $1.07,
versus $1.01 a year earlier, a 6% increase.
For the first nine months of fiscal 2012, net sales of $8.85 billion
were 4% above the $8.50 billion in the first nine months of the previous
year. Foreign exchange rate movement lowered the nine-month sales
growth rate by one percentage point.
The Company reported operating income of $1.86 billion in the first nine
months of fiscal 2012, versus $1.78 billion in the first nine months a
year ago. Nine-month 2012 adjusted operating income, excluding the
specified items on the attached table, was $2.03 billion, versus $1.88
billion in the first nine months of the previous year. Nine-month 2012
adjusted operating income, excluding specified items, represented 23.0%
of sales, versus 22.2% last year.
The effective tax rate was 17.3% for the first nine months of fiscal
2012, versus an effective tax rate of 13.4% in the same period of 2011.
Excluding the specified items on the attached table, the adjusted tax
rate for the first nine months of 2012 was 17.3%, versus 18.3% in the
first nine months of 2011.
For the first nine months of 2012, diluted GAAP earnings per share from
continuing operations were $2.95, versus $2.85 in the year-ago period.
Excluding the specified items on the attached table, adjusted diluted
earnings per share from continuing operations were $3.24, versus $2.89
in the comparable period last year, a 12% gain.
“We delivered a solid performance in the third-quarter. Top-line
operational growth was in line with our expectations, and we generated
improved gross and operating margins. That said, our results as reported
were restrained by the strength of the U.S. dollar against most foreign
currencies and by a slowdown in Europe, where economic conditions
remain challenging,” said José E. Almeida, Chairman, President and CEO.
“Operational sales growth in the quarter was particularly strong in
Medical Devices, our largest business segment, led by Energy and
Vascular products, both of which climbed at a double-digit pace.
“In emerging markets, sales growth was outstanding, reflecting the
incremental investments we’ve made recently to expand our sales force
and our marketing efforts in these fast-growing regions,” Mr. Almeida
said. “In addition, we have been very active on the M&A front this
year, closing several acquisitions this quarter, strengthening our
portfolio in several categories that represent excellent growth
opportunities.”
BUSINESS SEGMENT RESULTS
Medical Devicessales of $2.06 billion in the third quarter were 4%
higher than the $1.99 billion in the comparable quarter of last year.
Operational sales growth in the quarter was 8%, as foreign exchange rate
movement lowered the quarterly sales growth rate by four percentage
points. Growth was driven by new products and increased volume.
Operationally, third-quarter sales in Endomechanical were higher than
those of the prior year, fueled by double-digit gains for stapling
products, led by our innovative Tri-Staple™ reloads. In Soft Tissue
Repair, sales were above those of a year ago, as increases for sutures
and mesh were only partially offset by a decline for mechanical fixation
products. Energy registered another double-digit quarterly sales
advance, largely due to the continued strong performance of vessel
sealing products. In Oximetry & Monitoring, operational sales were
above those of the year before, aided by increased sales of sensors and
monitors. Airway & Ventilation sales were also ahead of last year’s
showing, chiefly due to a double-digit increase for ventilators.
Vascular products posted another strong quarterly sales gain, led by
exceptional growth for neurovascular and a substantial increase for
peripheral vascular products.
For the first nine months of fiscal 2012, Medical Devices sales rose 5%
to $6.05 billion from $5.74 billion in the comparable period a year ago,
led by higher sales of Vascular and Energy products. Foreign exchange
lowered the nine-month sales growth rate by two percentage points.
Pharmaceuticalssales of $501 million in the third quarter were virtually
unchanged from last year’s third-quarter sales of $500 million.
Operational sales growth in the quarter was 2%, as foreign exchange rate
movement reduced the quarterly sales growth rate by two percentage
points. Sales of Specialty Pharmaceuticals climbed sharply from those of
a year ago, primarily due to the strong performance of the EXALGO® and
PENNSAID® products. Sales of Active Pharmaceutical Ingredients were
above those of the third quarter of 2011, led by higher sales of
narcotics. Sales of Contrast Products fell sharply from those of the
year before, reflecting customer order timing and continued weakness in
the United States. Sales of Radiopharmaceuticals rose slightly, compared
with the prior year, chiefly reflecting increased generator sales.
For the first nine months of fiscal 2012, Pharmaceuticals sales advanced
3% to $1.50 billion from $1.46 billion a year ago. The increase was
largely attributable to growth for Specialty Pharmaceuticals.
Medical Suppliesthird-quarter sales of $443 million were little changed
from the $441 million in the comparable quarter of 2011. Operational
sales growth in the quarter was 2%, as foreign exchange rate movement
reduced the quarterly sales growth rate by two percentage points.
Increased sales of Nursing Care and Medical Surgical products
essentially offset lower sales of SharpSafety™ products.
For the first nine months of fiscal 2012, sales of Medical Supplies, at
$1.30 billion, were virtually unchanged from those of the same period a
year ago, as higher sales of Nursing Care and Medical Surgical products
were countered by lower sales of SharpSafety and OEM products.
In the third quarter of 2012, Covidien purchased approximately 4.3
million ordinary shares under its previously announced share buyback
program.
ABOUT COVIDIEN
Covidien is a leading global healthcare products company that creates
innovative medical solutions for better patient outcomes and delivers
value through clinical leadership and excellence. Covidien manufactures,
distributes and services a diverse range of industry-leading product
lines in three segments: Medical Devices, Pharmaceuticals and Medical
Supplies. With 2011 revenue of $11.6 billion, Covidien has 43,000
employees worldwide in more than 65 countries, and its products are sold
in over 140 countries. Please visit www.covidien.comto learn more about
our business.
CONFERENCE CALL AND WEBCAST
The Company will hold a conference call for investors today, beginning at 8:30 a.m. ET. This call can be accessed three ways:
At Covidien’s website: http://investor.covidien.com
By telephone: For both “listen-only” participants and those
participants who wish to take part in the question-and-answer portion of
the call, the telephone dial-in number in the U.S. is 800-901-5218. For
participants outside the U.S., the dial-in number is 617-786-4511. The
access code for all callers is 19519455.
Through an audio replay: A replay of the conference call will be
available beginning at 11:30 a.m. on July 26, 2012, and ending at 5:00
p.m. on August 2, 2012. The dial-in number for U.S. participants is
888-286-8010. For participants outside the U.S., the replay dial-in
number is 617-801-6888. The replay access code for all callers is
92136868.
NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including operational
growth, adjusted gross margin, adjusted operating income, adjusted
earnings per share and adjusted operating margin, which are considered
“non-GAAP” financial measures under applicable Securities & Exchange
Commission rules and regulations.
These non-GAAP financial measures should be considered supplemental to
and not a substitute for financial information prepared in accordance
with generally accepted accounting principles. The Company’s definition
of these non-GAAP measures may differ from similarly titled measures
used by others.
The non-GAAP financial measures used in this press release adjust for
specified items that can be highly variable or difficult to predict. The
Company generally uses these non-GAAP financial measures to facilitate
management’s financial and operational decision-making, including
evaluation of Covidien’s historical operating results, comparison to
competitors’ operating results and determination of management incentive
compensation. These non-GAAP financial measures reflect an additional
way of viewing aspects of the Company’s operations that, when viewed
with GAAP results and the reconciliations to corresponding GAAP
financial measures, may provide a more complete understanding of factors
and trends affecting Covidien's business.
Because non-GAAP financial measures exclude the effect of items that
will increase or decrease the Company’s reported results of operations,
management strongly encourages investors to review the Company’s
consolidated financial statements and publicly filed reports in their
entirety. A reconciliation of the non-GAAP financial measures to the
most directly comparable GAAP financial measures is included in the
tables accompanying this release.
FORWARD-LOOKING STATEMENTS
Any statements contained in this communication that do not describe
historical facts may constitute forward-looking statements as that term
is defined in the Private Securities Litigation Reform Act of 1995. Any
forward-looking statements contained herein are based on our
management's current beliefs and expectations, but are subject to a
number of risks, uncertainties and changes in circumstances, which may
cause actual results or Company actions to differ materially from what
is expressed or implied by these statements. The factors that could
cause actual future results to differ materially from current
expectations include, but are not limited to, our ability to effectively
introduce and market new products or keep pace with advances in
technology, the reimbursement practices of a small number of large
public and private insurers, cost-containment efforts of customers,
purchasing groups, third-party payors and governmental organizations,
intellectual property rights disputes, complex and costly regulation,
including healthcare fraud and abuse regulations and the Foreign Corrupt
Practices Act, manufacturing or supply chain problems or disruptions,
rising commodity costs, recalls or safety alerts and negative publicity
relating to Covidien or its products, product liability losses and other
litigation liability, divestitures of some of our businesses or product
lines, our ability to execute strategic acquisitions of, investments in
or alliances with other companies and businesses, competition, risks
associated with doing business outside of the United States, foreign
currency exchange rates and environmental remediation costs. These and
other factors are identified and described in more detail in our Annual
Report on Form 10-K for the fiscal year ended September 30, 2011, and in
subsequent filings with the SEC. We disclaim any obligation to update
these forward-looking statements other than as required by law.
To view the full report and tables please click here.
Contacts
Covidien
Eric Kraus, 508-261-8305
Senior Vice President
Corporate Communications
eric.kraus@covidien.com
Bruce Farmer, 508-452-4372
Vice President
Public Relations
bruce.farmer@covidien.com
Bruce Farmer, 508-452-4372
Vice President
Public Relations
bruce.farmer@covidien.com
Todd Carpenter, 508-452-4363
Director
Investor Relations
todd.carpenter@covidien.com
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