plc (NYSE: COV) today reported results for the third quarter of fiscal 2013 (April - June 2013). Third-quarter net sales of $2.58 billion increased 3% from the $2.51 billion in the third quarter a year ago. Foreign exchange rate movement lowered the quarterly sales growth rate by two percentage points. The Pharmaceuticals business, which was spun off from Covidien on June 28, 2013, is reported in discontinued operations.
“We delivered a solid performance in the third quarter. Operational sales growth was in line with our expectations, but our reported sales growth was restrained by the strength of the U.S. dollar against most foreign currencies,” said José E. Almeida, Chairman, President and CEO. “In the Medical Devices segment, continued strong results in stapling and vessel sealing paced our quarterly performance.
“In emerging markets, we again generated significant sales gains, reflecting the investments we’ve made to expand our sales force and build capabilities in these fast-growing regions,” Mr. Almeida said. “With the Pharmaceuticals spin-off now behind us, we are focused on strengthening our Medical Devices and Supplies businesses through organic growth, new products and geographic expansion.”
Third-quarter 2013 gross margin of 59.5% declined 0.8 percentage points from the 60.3% of the prior-year period. On an adjusted basis, excluding the specified items shown on the attached quarterly Non-GAAP reconciliations table, third-quarter 2013 gross margin of 59.5% was 1.0 percentage point below that of a year ago. The decline was primarily due to unfavorable foreign exchange.
Selling, general and administrative expenses for the third quarter of 2013 were above those of the comparable quarter of the year before. This was due to unfavorable foreign exchange, the medical device tax and spending on growth initiatives, partially offset by productivity improvements. Research and development (R&D) expense represented 5.0% of net sales in the third quarters of both 2013 and 2012.