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Covidien Reports First-Quarter Fiscal 2014 Results

Covidien plc (NYSE: COV) today announced financial results for the first quarter of fiscal 2014 (October - December 2013). First-quarter net sales of $2.64 billion increased 3% from the $2.57 billion in the first quarter a year ago. Operational sales growth in the quarter was 5%, as foreign exchange rate movement lowered the quarterly sales growth rate by two percentage points.

“We are off to an excellent start in fiscal 2014, with results exceeding our expectations,” said José E. Almeida, Chairman, President and CEO. “We continued the strong execution of our global strategy during the quarter, further positioning the company for long-term growth and increased shareholder value.”

During the first quarter of 2014, Covidien executed on its strategy of innovation, customer-focused portfolio management, emerging markets growth and driving operational leverage. Recent highlights include:

  • Continuing to grow above market in many product categories including vessel sealing, stapling, sutures and sensors.
  • Announcing the acquisition of Given Imaging, advancing the company’s strategy to more comprehensively address key specialties and procedures globally.
  • Announcing the addition of two advanced energy devices to Covidien’s vessel sealing portfolio -- LigaSure Impact™ and LigaSure™ Blunt Tip -- as well as the new Capnostream ® 20p bedside monitor.
  • Entering into two transactions - one in Brazil and the other in China - that will accelerate the company’s emerging markets ‘value segment’ strategy.
  • Announcing the sale of the Confluent biosurgery product line to enable even greater focus on growth initiatives. This transaction closed on January 15.
  • Acquiring approximately 4.5 million ordinary shares under a previously announced share buyback program.

First-quarter 2014 gross margin of 59.2% decreased 0.7 percentage points from the 59.9% of the prior-year period. On an adjusted basis, excluding the specified items shown on the attached quarterly Non-GAAP reconciliations table, first-quarter 2014 gross margin of 59.4% was 0.5 percentage points below that of a year ago. The positive net impact of price, volume and mix was more than offset by increased manufacturing costs, resulting in a decline in gross margin on both a reported and adjusted basis.

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