Net sales up 5%; Medical Devices sales up 6%
First-quarter diluted GAAP earnings per share from continuing operations were $1.02; excluding specified items, adjusted diluted earnings per share from continuing operations were $1.13, up 19%
Fiscal 2012 sales guidance updated
(BUSINESS WIRE)-- Covidien plc (NYSE: COV) today reported results for the first quarter of fiscal 2012 (October-December 2011). First-quarter net sales of $2.90 billion increased 5% from the $2.77 billion reported a year ago. Foreign exchange rate movement had no impact on the quarterly sales growth rate.
First-quarter 2012 gross margin of 58.7% rose 2.0 percentage points from the 56.7% of the prior-year period. On an adjusted basis, first-quarter 2012 gross margin of 58.8% was at a record quarterly level, 1.2 percentage points above that of a year ago. This improvement reflected manufacturing cost reduction, benefits from our restructuring programs, favorable foreign exchange and positive business mix.
Selling, general and administrative expenses for the first quarter of 2012 were above those of the comparable quarter of the year before. This was due to higher legal charges and 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 first quarter climbed 21% and represented 5.0% of net sales, versus 4.3% of sales in the year-ago period.
In the first quarter of 2012, the Company reported operating income of $636 million, versus $549 million in the same period the year before. First-quarter 2012 adjusted operating income, excluding the specified items shown on the attached quarterly Non-GAAP reconciliations table, was $705 million, compared with $615 million in the previous year. First-quarter 2012 adjusted operating income, excluding the specified items, represented 24.3% of sales, versus 22.2% a year ago.
The first-quarter 2012 effective tax rate was 16.7%, versus an effective tax rate of 16.1% in the first quarter of 2011. The first-quarter 2012 adjusted tax rate, excluding specified items, was 17.4%, versus 18.4% in the first quarter a year earlier.
Diluted GAAP earnings per share from continuing operations were $1.02 in the first quarter of 2012, versus $0.87 per share in the comparable quarter last year. First-quarter 2012 adjusted diluted earnings per share, excluding specified items, were $1.13, versus $0.95 a year ago, a 19% increase.
“We are off to an excellent start in fiscal 2012, with good sales gains, record gross and operating margins and double-digit EPS growth,” said José E. Almeida, President and CEO. “This strong performance was again led by our largest business segment, Medical Devices, which delivered growth fueled by double-digit advances in Energy and Vascular products.
“During the first quarter, we also significantly increased R&D spending and continued to invest in our emerging markets, where sales again climbed at a double-digit pace,” Mr. Almeida said. “Looking forward, although we face some pressure on our reported results due to the recent strengthening of the U.S. dollar, we remain comfortable with the current annual consensus EPS estimates for 2012. We expect that our broad product portfolio, robust pipeline of new products and ongoing strategic investments funded by our strong cash flow will drive superior operational results for the remainder of 2012 and beyond.”
BUSINESS SEGMENT RESULTS
Medical Devicessales of $1.98 billion in the first quarter were 6% higher than the $1.88 billion in the comparable quarter of last year. Growth was driven by new products and increased volume. First-quarter sales in Endomechanical rose above those of the prior year, fueled by a good growth for stapling products, paced by our innovative Tri-Staple™ reloads. In Soft Tissue Repair, sales were slightly below those of a year ago, as an increase for sutures was more than offset by a decline for mechanical fixation and mesh products. Energy registered another strong double-digit quarterly sales gain, largely due to the continuation of exceptional growth in sales of vessel sealing products. In the Oximetry & Monitoring product line, growth was primarily attributable to higher sales of monitors. In Airway & Ventilation, sales were below those of the year before, as an increase in airway products was overshadowed by lower sales of ventilators. Vascular products posted sales well above those of the previous year, paced by double-digit increases for neurovascular and venous insufficiency products.
Pharmaceuticalssales of $490 million in the first quarter were up 4% from last year’s first-quarter sales of $470 million. Sales of Specialty Pharmaceuticals were slightly above those of a year ago, due to favorable generic pricing and growth for the EXALGO® and PENNSAID® products. Sales of Active Pharmaceutical Ingredients climbed 21%, driven by a sharp gain in narcotics, largely the result of customer order timing. Higher sales in Contrast Products reflected a one-time customer order and increased sales outside the United States. Sales of Radiopharmaceuticals were somewhat below those of the prior year, as higher generator sales were more than offset by lower sales of thallium and other products.
On December 15, 2011, the Company announced that it plans to spin off its pharmaceuticals business into a standalone public company. It anticipates that the transaction will be in the form of a distribution that will be tax-free to U.S. shareholders of a new publicly traded stock in the new pharmaceuticals company. Covidien currently expects that completion of the transaction could take up to 18 months. Earlier this month, the Company announced the appointment of Mark Trudeau as president of its Pharmaceuticals segment and a senior vice president of the Company, effective February 1. A 25-year pharmaceuticals industry veteran, Trudeau is president and chief executive officer of Bayer Healthcare, LLC.
Medical Suppliesfirst-quarter sales of $424 million were virtually unchanged from the $422 million reported in the comparable quarter of 2011, as increased sales of Nursing Care and Medical Surgical products countered decreases for SharpSafety and OEM products.
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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
Coleman Lannum, CFA, 508-452-4343
Vice President
Investor Relations
cole.lannum@covidien.com
Todd Carpenter, 508-452-4363
Director
Investor Relations
todd.carpenter@covidien.com
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