|Medtronic Reports Third Quarter Earnings|
MINNEAPOLIS - Feb. 18, 2014 - Medtronic, Inc. (NYSE: MDT) today announced financial results for its third quarter of fiscal year 2014, which ended January 24, 2014.
The company reported worldwide third quarter revenue of $4.163 billion, compared to the $4.027 billion reported in the third quarter of fiscal year 2013, an increase of 4 percent on a constant currency basis after adjusting for a $41 million negative foreign currency impact or 3 percent as reported. As reported, third quarter net earnings were $762 million, or $0.75 per diluted share, a decrease of 23 percent for both compared to the same period in the prior year. Third quarter net earnings and diluted earnings per share on a non-GAAP basis were $916 million and $0.91, a decrease of 3 percent and 2 percent, respectively, over the same period in the prior year. This decline was primarily driven by a difficult comparison due to a $0.03 benefit the company received in the third quarter of fiscal year 2013 from the extension of the U.S. R&D tax credit, which has not yet been renewed this year, as well as higher levels of interest expense and U.S. medical device excise tax in the third quarter of fiscal year 2014 compared to the same period last year. The most significant third quarter GAAP to non-GAAP adjustment was a charge primarily related to the impairment of the company's renal denervation in-process research and development and related long-lived assets following the announcement that the HTN-3 trial did not meet its primary efficacy endpoint. While the company is still in the process of evaluating the long-term strategy for its renal denervation program, an impairment charge was deemed necessary as a majority of the value of the renal denervation intangible assets were tied to U.S. approval.
Third quarter international revenue of $1.898 billion increased 4 percent on a constant currency basis or 2 percent as reported. International sales accounted for 46 percent of Medtronic's worldwide revenue in the quarter. Emerging market revenue of $521 million increased 12 percent on a constant currency basis or 10 percent as reported and represented 13 percent of company revenue.
"In Q3, our overall organization once again delivered balanced growth, with strong performances in some areas offsetting challenges in other parts of our business," said Omar Ishrak, Medtronic chairman and chief executive officer. "We remain focused on building a track record of operational execution to deliver consistent and reliable results."
Cardiac and Vascular Group
CRDM revenue of $1.184 billion grew 2 percent on a constant currency basis or 1 percent as reported. Third quarter revenue from ICDs was $655 million, an increase of 1 percent on a constant currency basis. In international markets, strong adoption of the Viva(TM) XT CRT-D drove growth in Western Europe and Japan. Pacing revenue was $439 million, a decline of 2 percent on a constant currency basis. AF Solutions grew over 20 percent driven by robust growth from the Arctic Front® CryoAblation System, which grew over 30 percent.
Coronary revenue of $436 million was flat on a constant currency basis or declined 2 percent as reported. Sales of drug-eluting stents increased 5 percent on a constant currency basis, driven by global share gains of the Resolute® Integrity® drug-eluting stent.
Structural Heart revenue of $281 million grew 4 percent on a constant currency basis or 3 percent as reported. Growth was driven by continued strong international results from the CoreValve® transcatheter aortic heart valve. The company received FDA approval for this product for extreme risk patients in the U.S. late in the third quarter.
Endovascular revenue of $218 million grew 4 percent on a constant currency basis or 3 percent as reported. Q3 growth was negatively affected by the divestiture of a reentry catheter product line, as well as removing a peripheral below-the-knee product from the market. The Aortic business had mid-single digit revenue growth on a constant currency basis in the U.S. and Europe despite competitive pressure from new entrants.
Restorative Therapies Group
Spine revenue of $744 million was flat on a constant currency basis or declined 1 percent as reported. Core Spine revenue of $631 million was flat on a constant currency basis or declined 1 percent as reported. Excluding sales of balloon kyphoplasty, Core Spine grew in the low-single digits on a constant currency basis both globally and in the U.S. The company estimates the global and U.S. spine markets continued to show signs of stability. The Core Spine business continues to differentiate itself from competition through its Surgical Synergy(TM) program of enabling technologies, including imaging, navigation, and powered surgical instruments. BMP revenue of $113 million declined 1 percent on a constant currency basis, as the business is seeing signs of sequential stability in underlying demand and faced a favorable comparison due to a supply constraint in the prior year period.
Surgical Technologies revenue of $386 million grew 11 percent on a constant currency basis or 10 percent as reported. Revenue growth was driven by upgrades of the StealthStation® S7® Surgical Navigation System and NIM® ENT nerve monitoring capital equipment, robust U.S. sales of O-arm® imaging capital equipment, and continued strong adoption of the Aquamantys® Transcollation® and PEAK PlasmaBlade® technologies.
Neuromodulation revenue of $478 million increased 7 percent on both a constant currency basis and as reported. Growth was driven by strong performance from Activa® deep brain stimulation systems and the RestoreSensor® SureScan® MRI spinal cord stimulator.
Revenue Outlook and Earnings per Share Guidance
"The U.S. approvals of CoreValve and the MiniMed 530G System marked important milestones and are part of an ongoing product launch cadence of innovative therapies," said Ishrak. "In addition, Medtronic is uniquely positioned to lead the shift to value-based healthcare, directing our products and solutions to help providers, payers, and governments achieve their goals in driving more value into healthcare systems around the world. We are seeing promising results from our early efforts, including both our Cath Lab Managed Services and Cardiocom businesses, and we believe that we have significant opportunities ahead as we transform our company from being primarily a device provider today into the premier global medical technology solutions partner of tomorrow."
About MedtronicMedtronic, Inc., headquartered in Minneapolis is the global leader in medical technology - alleviating pain, restoring health, and extending life for millions of people around the world.
This press release contains forward-looking statements related to product growth drivers, market position, strategies for growth and leadership, and Medtronic's future results of operations, which are subject to risks and uncertainties, such as competitive factors, difficulties and delays inherent in the development, manufacturing, marketing and sale of medical products, the outcome of litigation matters, government regulation and general economic conditions and other risks and uncertainties described in Medtronic's periodic reports on file with the Securities and Exchange Commission. Actual results may differ materially from anticipated results. Medtronic does not undertake to update its forward-looking statements.
Earnings per share guidance excludes adjustments relating to acquisition-related items, charitable donations to the Medtronic Foundation, restructuring charges and credits, certain litigation charges, and any unusual charges or gains that might occur during the fiscal year. The guidance provided only reflects information available to Medtronic at this time.
Unless otherwise noted, all comparisons made in this news release are on an "as reported basis" and not on a constant currency basis. References to quarterly figures increasing or decreasing are in comparison to the third quarter of fiscal year 2013.