DUBLIN - Sunday, April 29th 2012 [ME NewsWire]
Net sales up 5%; Medical Devices sales up 7%
Second-quarter diluted GAAP earnings per share from continuing
operations were $1.01; excluding specified items, adjusted diluted
earnings per share from continuing operations were $1.05, up 13%
(BUSINESS WIRE)-- Covidienplc (NYSE: COV) today reported results for the
second quarter of fiscal 2012 (January-March 2012). Second-quarter net
sales of $2.95 billion increased 5% from the $2.80 billion reported in
the second quarter of a year ago. Foreign exchange rate movement lowered
the quarterly sales growth rate by one percentage point.
Second-quarter 2012 gross margin of 57.9% rose 0.9 percentage points
from the 57.0% of the prior-year period. On an adjusted basis, excluding
the specified items shown on the attached quarterly Non-GAAP
reconciliations table, second-quarter 2012 gross margin of 58.1% was 0.8
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 second quarter of
2012 were above those of the comparable quarter of the year before. This
was due to spending on growth initiatives, primarily to expand the
Company’s sales and marketing presence in emerging markets. Research and
Development (R&D) expense in the second quarter of 2012 climbed 28%
and represented 5.7% of net sales, versus 4.6% of sales in the year-ago
period. Excluding a license agreement expense, second quarter 2012
R&D spending grew 19% and represented 5.2% of sales.
In the second quarter of 2012, the Company reported operating income of
$609 million, versus $615 million in the same period the year before.
Second-quarter 2012 adjusted operating income, excluding specified items
on the attached table, was $652 million, compared with $621 million in
the previous year. Second-quarter 2012 adjusted operating income,
excluding the specified items, represented 22.1% of sales, versus 22.2%
of sales a year ago.
The second-quarter 2012 effective tax rate was 13.6%, versus an
effective tax rate of 19.5% in the second quarter of 2011. The
second-quarter 2012 adjusted tax rate, excluding specified items on the
attached table, was 17.1%, versus 19.8% in the second quarter a year
earlier. The decrease in the tax rate, compared to the prior year
period, was due to the implementation of tax planning strategies.
Diluted GAAP earnings per share from continuing operations were $1.01 in
the second quarter of 2012, versus $0.92 per share in the comparable
quarter last year. Second-quarter 2012 adjusted diluted earnings per
share, excluding specified items on the attached table, were $1.05,
versus $0.93 a year ago, a 13% increase.
For the first six months of fiscal 2012, net sales of $5.84 billion were
5% above the $5.57 billion in the first half of the previous year, with
foreign exchange rate movement having no impact on the six-month sales
growth rate.
The Company reported operating income of $1.25 billion in the first six
months of fiscal 2012, versus $1.16 billion in the comparable period of
the year before. Six-month 2012 adjusted operating income, excluding the
specified items on the attached table, was $1.36 billion, versus $1.24
billion in the first six months of the prior year. Six-month 2012
adjusted operating income, excluding specified items, represented 23.2%
of sales, versus 22.2% a year ago.
The effective tax rate was 15.2% for the first six months of fiscal
2012, versus an effective tax rate of 17.9% in the same period of 2011.
Excluding the specified items on the attached table, the adjusted tax
rate for the first six months of 2012 was 17.2%, versus 19.1% in the
first six months of 2011.
For the first six months of 2012, diluted GAAP earnings per share from
continuing operations were $2.02, versus $1.79 in the year-ago period.
Excluding the specified items on the attached table, adjusted diluted
earnings per share from continuing operations were $2.17, versus $1.88
in the comparable period last year, a 15% gain.
“Our second-quarter performance was paced by good top-line growth,
improvements in gross and operating margin and a double-digit increase
in earnings per share,” said José E. Almeida, Chairman, President and
CEO. “Once again, our largest business segment, Medical Devices, drove
our strong performance, with broad-based growth that was led by
double-digit advances in Energy and Vascular products.
“While economic conditions in Europe remain challenging and will
continue to require close monitoring, our European sales growth
accelerated for the second quarter in a row,” Mr. Almeida said. “The
second-quarter operational gain of 6% was the fastest growth we have
seen in Europe in more than two years. In addition, during the quarter,
we continued to significantly increase R&D spending and to make
growth-driving investments in emerging markets, where sales again
climbed rapidly. Looking forward, we remain comfortable with our
previous guidance for the year.”
BUSINESS SEGMENT RESULTS
Medical Devicessales of $2.00 billion in the second quarter were 7%
higher than the $1.88 billion in the comparable quarter of last year.
Growth was driven by new products and increased volume. Second-quarter
sales in Endomechanical rose from those of the prior year, fueled by
good growth for stapling products that was led by our innovative
Tri-Staple™ reloads. In Soft Tissue Repair, sales were slightly above
those of a year ago, as an increase for sutures was partially offset by a
decline for mechanical fixation and biosurgery products. Energy
registered another double-digit quarterly sales gain, primarily due to
the continued excellent performance of vessel sealing products. Sales in
Oximetry & Monitoring were higher than a year ago, spurred by a
strong double-digit advance for monitors. Airway & Ventilation sales
were even with those of last year, as an increase in airway products
countered lower sales of ventilators. Vascular products posted another
strong quarterly sales showing, led by outstanding gains for
neurovascular, peripheral vascular and venous insufficiency products.
For the first six months of fiscal 2012, Medical Devices sales rose 6%
to $3.99 billion from $3.75 billion in the comparable period a year ago.
Growth was led by increased sales of Energy and Vascular products.
Pharmaceuticalssales of $508 million in the second quarter were up 4%
from last year’s second-quarter sales of $490 million. Sales of
Specialty Pharmaceuticals climbed sharply from those of a year ago, due
to strong growth for the EXALGO® and PENNSAID® products, coupled with
increased sales of generics. Sales of Active Pharmaceutical Ingredients
were below those of the previous year, primarily due to lower sales of
narcotics related to customer order timing. Sales of Contrast Products
were well below those of the second quarter of 2011, reflecting customer
order timing and decreased sales in the United States. Sales of
Radiopharmaceuticals were higher than in the prior year, chiefly
reflecting stronger generator sales.
For the first six months of fiscal 2012, Pharmaceuticals sales rose 4%
to $998 million from $960 million a year ago. The increase was primarily
attributable to growth for Specialty Pharmaceuticals.
Medical Suppliessecond-quarter sales of $434 million were unchanged from
the comparable quarter of 2011, as increased sales of Medical Surgical
and OEM products were offset by lower sales of Nursing Care and
SharpSafety products.
For the first six months of fiscal 2012, sales of Medical Supplies, at
$858 million, were virtually unchanged from last year’s $856 million, as
higher sales of Nursing Care and Medical Surgical products were about
offset by lower sales of SharpSafety™ products.
In the second quarter of 2012, Covidien purchased approximately 2.9
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 41,000
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 866-825-1709. For
participants outside the U.S., the dial-in number is 617-213-8060. The
access code for all callers is 95914121.
Through an audio replay: A replay of the conference call will be
available beginning at 11:30 a.m. on April 27, 2012, and ending at 5:00
p.m. on May 4, 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
64664732.
NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including operational
growth, adjusted gross margin, adjusted operating income, adjusted
earnings per share, adjusted operating margin and free cash flow, 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 Company defines free cash flow as net cash provided
by continuing operating activities less capital expenditures.
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 plc
Eric Kraus, 508-261-8305
Senior Vice President
Corporate Communications
eric.kraus@covidien.com
Covidien plc
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
Todd Carpenter, 508-452-4363
Director
Investor Relations
todd.carpenter@covidien.com
