Covidien Reports Second-Quarter Fiscal 2014 Results

Covidien plc (NYSE: COV) today announced financial results for the second quarter of fiscal 2014. Second-quarter net sales of $2.60 billion increased 3% from the $2.53 billion in the second quarter a year ago. Operational sales growth was 4% in the second quarter, as foreign exchange rate movement lowered the quarterly sales growth rate by just over one percentage point.

“As we continue to invest in and execute our global strategy, we are seeing results in line with our year-to-date expectations” said José E. Almeida, chairman, president and CEO, Covidien. “With the impact of the medical device tax annualized and, at today’s rates, the majority of the negative currency impact behind us, we expect the company to return to double-digit EPS growth, possibly as soon as the third quarter.”

During the second quarter of 2014, Covidien continued to execute on its strategy of innovation, customer-focused portfolio management, emerging markets growth and driving operational leverage. Recent highlights include:
  • Completing the acquisition of Given Imaging, which provides the company additional scale and scope to serve the multibillion dollar global gastrointestinal market.
  • Launching the Endo GIA™ Reinforced Reload with Tri-Staple™ technology in both the U.S. and Japan and rolling out additional products including the Puritan Bennett™ 980 ventilator, Symbotex™ Composite Mesh for hernia repair and Kangaroo™ Feeding Tube with IRIS Technology.
  • Opening a Covidien Center for Innovation in India, the company’s first medical training and education center in the country.
  • Acquiring approximately 1.2 million ordinary shares under a previously announced share buyback program, returning over $2.0 billion to shareholders over the last twelve months through share repurchases and dividends.

Second-quarter 2014 gross margin of 58.4% decreased 2.0 percentage points from 60.4% in the prior-year period. On an adjusted basis, excluding the specified items shown on the attached quarterly Non-GAAP reconciliations table, second-quarter 2014 gross margin of 58.6% was 1.8 percentage points below that of a year ago. The decline in gross margin primarily resulted from unfavorable foreign exchange.

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