“While this was a challenging quarter from a revenue perspective, I was encouraged by the management team’s ability to execute on delivering the bottom line. “Medtronic, Inc., today announced financial results for its third quarter of fiscal year 2012, which ended January 27, 2012.
Sales up 1% in real terms
The company reported worldwide third quarter revenue of $3.918 billion, compared to the $3.857 billion reported in the third quarter of fiscal year 2011, an increase of 2 percent as reported or 1 percent on a constant currency basis after adjusting for a $13 million favorable foreign currency impact.
Earnings up 2%
As reported, third quarter net earnings were $935 million, or $0.88 per diluted share, an increase of 1 percent and 2 percent, respectively, over the same period in the prior year.
International revenue up 6%
International revenue of $1.773 billion increased 7 percent as reported or 6 percent on a constant currency basis. International sales accounted for 45 percent of Medtronic’s worldwide revenue in the quarter. Emerging market revenue of $395 million increased 15 percent as reported or 16 percent on a constant currency basis.
Results by Business Group
Cardiac and Vascular Group
The Cardiac and Vascular Group at Medtronic is comprised of Cardiac Rhythm Disease Management (CRDM) and CardioVascular. The group had worldwide sales in the quarter of $2.029 billion, representing an increase of 2 percent as reported or 1 percent on a constant currency basis. Cardiac and Vascular Group international sales of $1.152 billion increased 5 percent as reported and on a constant currency basis. Group revenue performance was driven by Endovascular and Peripheral, Structural Heart, AF Solutions, Renal Denervation, Pacing, and Coronary sales offset by declines in implantable cardioverter defibrillators (ICDs).
Third quarter revenue of $1.192 billion represented a decrease of 2 percent as reported or 3 percent on a constant currency basis. Third quarter revenue from ICDs was $674 million, down 9 percent on a constant currency basis, while pacing revenue was $467 million, an increase of 3 percent on a constant currency basis. Weaker ICD sales, primarily due to declining procedure volumes in the U.S. market versus the prior year, were partially offset by continued growth of the AF Solutions and Pacing businesses.
Revenue of $837 million represents growth of 8 percent as reported and on a constant currency basis. The Coronary, Structural Heart, and Endovascular and Peripheral businesses grew worldwide revenue 3 percent, 10 percent, and 17 percent, respectively, on a constant currency basis. In Structural Heart, transcatheter valves continued to drive growth. Endovascular and Peripheral revenue growth was driven by the continued success of the Endurant® stent graft for the treatment of abdominal aortic aneurysms.
Restorative Therapies Group
The Restorative Therapies Group at Medtronic is comprised of Spine, Neuromodulation, Diabetes, and Surgical Technologies. The group had worldwide sales in the quarter of $1.889 billion, representing an increase of 1 percent as reported and on a constant currency basis. Restorative Therapies Group international sales of $621 million increased 11 percent as reported or 10 percent on a constant currency basis. Group revenue was driven by solid performances in Surgical Technologies, Diabetes and Neuromodulation, offset by continued challenges in U.S. Spine.
$784 million represented a decline of 9 percent as reported or 10 percent on a constant currency basis. International sales for the Spine business increased 7 percent as reported or 4 percent on a constant currency basis. Core Spine revenue of $596 million, which includes core metal constructs, interspinous process decompression devices, and balloon kyphoplasty products, declined 6 percent on a constant currency basis. Biologics revenue of $188 million declined 20 percent on a constant currency basis, driven by declines in U.S. sales of INFUSE®, partially offset by revenue growth in Other Biologics.
Revenue of $419 million increased 4 percent as reported and on a constant currency basis. Growth continues to be driven by strong sales of InterStim® Therapy. The RestoreSensor™ spinal cord stimulator with its proprietary AdaptiveStim™ technology continues to perform well in Europe, and was approved in the U.S. and Japan in the third quarter. The U.S. launch of this product was delayed for most of the quarter due to a supply disruption resulting from the flooding in Thailand, which has subsequently been resolved.
Diabetes revenue of $367 million grew 8 percent as reported and on a constant currency basis. Growth in the quarter was driven by strong sales of continuous glucose monitoring (CGM) products and consumables. The Enlite™ CGM sensor had strong growth in Europe, and the company continues to make progress on its IDE study for U.S. approval of this next generation sensor.
Surgical Technologies revenue of $319 million grew 23 percent as reported or 22 percent on a constant currency basis. Excluding revenue from the Advanced Energy business, consisting of our Salient Surgical Technologies and PEAK Surgical acquisitions, Surgical Technologies revenue grew 10 percent on a constant currency basis. Revenue growth was well-balanced across the businesses’ core platforms including Power, Navigation, Monitoring, Imaging, and Hydrocephalus Management.
“I am pleased that a majority of our business mix continued to report strong, consistent revenue growth in the upper single digits. However, this was masked by continued challenges in our U.S. ICD and Spine performance,” said Omar Ishrak, Medtronic chairman and chief executive officer. “Stabilizing these businesses along with delivering on our key strategic imperatives of improving execution, optimizing innovation, and accelerating globalization should position us well to deliver long-term sustainable growth.”
“While this was a challenging quarter from a revenue perspective, I was encouraged by the management team’s ability to execute on delivering the bottom line. In addition, we have recently launched several new products including RestoreSensor™, Solera™ 5.5 and 6.0 Spinal Systems, and now Resolute Integrity™ which should contribute to improved revenue performance,” said Ishrak. “We remain optimistic that long-term growth should improve as we dramatically expand our global footprint and focus on delivering economic value as well as clinical value to our customers.”