Covidien reports first-quarter 2010 results
By Al-Bawaba Reporters
Jan 24, 2010 (Al-Bawaba via COMTEX) --
Covidien plc (NYSE: COV) today reported results for the first quarter of fiscal 2010 (October - December 2009). First-quarter net sales of $2.7 billion were up 7% from the $2.6 billion reported a year ago, with favorable foreign exchange of $121 million increasing the quarterly sales growth rate by approximately 5 percentage points.
Excluding $96 million in sales of oxycodone hydrochloride extended-release tablets (Oxy ER) in the first-quarter 2009, first-quarter 2010 net sales grew 11%, while operational growth (net sales growth, excluding the effect of foreign exchange) was 6%, driven primarily by higher volume and new products.
First-quarter 2010 gross margin of 54.3% rose 0.8 percentage points from the prior-year period. As shown on the attached Non-GAAP Reconciliations table, gross margin was up 2.5 percentage points from the 2009 adjusted gross margin of 51.8%. The first-quarter 2010 improvement reflected positive mix in all three segments, benefits from our restructuring program and favorable foreign exchange.
Selling, general and administrative expenses for the first quarter of fiscal 2010 were significantly higher than those of a year ago. The 2010 expenses included planned increases in selling and marketing, unfavorable foreign exchange and expenses related to recent acquisitions. Research and Development (R&D) expense in the quarter climbed 7% from that of the prior year and represented 3.7% of net sales.
In the first quarter, the Company reported operating income of $552 million, versus $544 million in the same period the year before. First-quarter 2010 adjusted operating income, excluding the specified items shown in the attached Non-GAAP Reconciliations table, was up 21% to $590 million, compared with $489 million the previous year. First-quarter adjusted operating income, excluding the specified items, represented 21.5% of sales, versus 19.8% a year ago.
The first-quarter effective tax rate was 21.1%. Excluding the specified items shown in the attached Non-GAAP Reconciliations table, the first-quarter tax rate was 22.6%.
Diluted GAAP earnings per share from continuing operations were $0.82 in the first quarter, versus $0.75 per share in the comparable quarter last year. First-quarter adjusted diluted earnings per share, excluding the specified items, were $0.86, versus $0.65 a year ago, a 32% increase.
"Our excellent performance in the first quarter of fiscal 2010 reflected the success of ongoing strategic initiatives focused on innovation and growth," said Richard J. Meelia, Chairman, President and CEO. "Building on last year"s strong operational sales gains, we delivered exceptional growth in our largest business segment, Medical Devices, which generated broad-based improvement across its product lines. With higher-margin products increasing their contribution to all three Covidien business segments, our gross margin climbed sharply in the quarter, significantly exceeding our expectations. We are confident that this upward trend in margin improvement is sustainable and, as a result, we are raising our previously announced 2010 operating margin guidance.
"During the quarter, we continued to reshape and strengthen our portfolio, acquiring Aspect Medical Systems and announcing the sale of our U.S. radiopharmacies. We also received FDA approval for two major new Pharmaceutical products that we plan to launch in the next few months. We expect that these and other superior new products will fuel our growth in an increasingly competitive marketplace. We also expect to drive growth this year through key strategic investments funded by our continued strong cash flow," Mr. Meelia said. (C) 2010 Al Bawaba (www.albawaba.com)
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