Perhaps overshadowed by increasing talk of doubts in the completion of its takeover by Medtronic, Covidien has announced financial results for the third quarter of its 2014 fiscal year. Third-quarter net sales of $2.69 billion increased 4%, both on a reported and on an operational basis, from the $2.58 billion in the third quarter a year ago.
Covidien’s most recently reported quarter is littered with events that need to be adjusted out of the final reckoning, although what sits atop the income statement is a net sales figure some 4% higher than in the equivalent period a year ago at $2.69 billion.
So-called “specified items” incurred in the quarter include a mixture of costs relating to acquisition and restructuring. The biggest “specified item” however is the $181 million legal charge resulting from an increase to the company’s estimated indemnification obligation in pelvic mesh products liability cases.
Third-quarter 2014 gross margin, following adjustment for a few unusual items, was pretty much bang on the same figure of a year ago, at 59.4%.
Exceptional events also impacted the company’s Selling, General and Admin Expenses, although once removed the result was a net reduction due to productivity improvements, partially offset by acquisition-related expenses and other growth initiatives. R&D expenses as a percentage of sales, held steady.
Operating income, after adjustment for specified items, was $609 million, compared with $554 million in the previous year, representing 22.7% of sales, versus 21.5% of sales a year ago.
Third-quarter 2014 adjusted diluted earnings per share from continuing operations, excluding the aforementioned specified items, were $1.04, versus $0.91 a year ago, an increase of 14%.
By Product line
Results by product line are always more illuminating, many of the acquisitions of recent years having a direct influence on current revenue streams. For example, in the Surgical Solutions business area, sales were 8% higher than a year ago, boosted by products brought in under the Given Imaging and Barrx acquisitions. Vessel sealing and synthetic mesh both achieved double-digit quarterly sales gains, while General Surgical, operational sales were somewhat below those of a year ago, primarily as a result of the sale of the Confluent biosurgery product line in January 2014, partially offset by the impact of the New Wave Surgical acquisition.
Vascular Therapies sales of $417 million in the third quarter were level with last year’s third-quarter sales on both a reported and operational basis. Sales in Peripheral Vascular were about the same as a year ago, with increases in sales of chronic venous insufficiency and procedural support products offset by decreases in sales of compression and dialysis products and the impact of the company’s exit from the renal denervation market. Neurovascular sales were also virtually unchanged from a year ago, as sales growth of flow diversion products were offset by lower sales of access delivery products.
Respiratory and Patient Care third-quarter sales of $966 million were 2% higher, on both a reported and operational basis, compared with last year’s third-quarter sales of $948 million. Patient Monitoring sales were 6% above those of a year ago, primarily resulting from increased sales of capnography products, which continued to grow above 30%. Airway & Ventilation sales grew modestly during the quarter due to increased sales of ventilators. Patient Care sales were slightly above those of a year ago, led by higher sales of SharpSafety™ products primarily resulting from the continued impact of favorable pricing and a competitive shortage of pre-filled syringes. Nursing Care sales were marginally below those in the prior year quarter, mainly due to lower sales of enteral feeding products.
“We delivered solid performance in the third quarter, returning to double-digit EPS growth,” said José E. Almeida, chairman, president and CEO, Covidien. “This performance reflects significant increases in Advanced Surgical, aided by global market share gains in vessel sealing and stapling. Substantial growth in both our gastrointestinal and interventional lung offerings, as well as productivity improvements, also contributed to this positive result.”
So there you have it. The full analysis, including those execptional items can be found in the original press release on Business Wire here.
Source: Covidien, plc., Business Wire