Medtronic Third Quarter Revenue Increases 10% to $3.851 Billion; Raises Lower End of EPS Guidance for Current Fiscal Year
- Non-GAAP diluted EPS of $0.77 grew 8%; GAAP diluted EPS of $0.75 grew 21%
- International revenue of $1.615 billion grew 11% on a constant currency basis; 22% as reported
- Free cash flow exceeds $1.3 billion; GAAP cash flow from operations of $1.488 billion
- Worldwide ICD revenue growth of 5% on a constant currency basis; 9% as reported
- Worldwide CardioVascular revenue growth of 21% on a constant currency basis; 28% as reported
MINNEAPOLIS - Feb. 23, 2010 - Medtronic, Inc. (NYSE:MDT) today reported financial results for the third quarter of fiscal year 2010, which ended January 29, 2010.
The company reported third quarter revenue of $3.851 billion, a 10 percent increase over third quarter revenue reported a year ago, or a 6 percent increase after adjusting for a favorable $144 million foreign exchange impact. Revenue outside the United States grew to $1.615 billion, an increase of 22 percent as reported and 11 percent on a constant currency basis over the same period last year, representing 42 percent of total revenue this quarter.
Net earnings in the third quarter were $831 million, or $0.75 per diluted share, an increase of 19 percent and 21 percent, respectively. As detailed in the attached table, after adjusting for the impact of adopting a new accounting standard for non-cash interest expense on convertible debt effective the beginning of fiscal year 2010 and in-process research and development charges in the year ago period, third quarter net earnings and diluted earnings per share on a non-GAAP basis were $857 million and $0.77, respectively, an increase of 8 percent over the same period in the prior year.
"Our third quarter results reflect a building track record of delivering consistent execution on our financial commitments," said Bill Hawkins, Medtronic chairman and chief executive officer. "In addition to the solid revenue growth and strong cash flows driven by our globally diversified product portfolio, we also continued to deliver meaningful operating leverage as demonstrated by a 20 percent increase in operating income."
Cardiac Rhythm Disease Management
Cardiac Rhythm Disease Management (CRDM) revenue of $1.243 billion grew 6 percent as reported and 2 percent on a constant currency basis after adjusting for a favorable $54 million foreign exchange impact. Worldwide implantable cardioverter defibrillator (ICD) revenue was $756 million. Outside the United States, CRDM revenue grew 2 percent on a constant currency basis, driven by the growing success of the AF Solutions business as well as solid growth in ICD sales.
CardioVascular revenue of $722 million grew 28 percent as reported and 21 percent on a constant currency basis after adjusting for a favorable $39 million foreign exchange impact. Coronary, Structural Heart, and Endovascular revenue grew 23 percent, 20 percent, and 15 percent, respectively, all on a constant currency basis. Adoption of the Endeavor® stent in Japan and strong international growth across the entire CardioVascular segment contributed to the strong quarterly performance.
Spinal revenue of $842 million grew 1 percent as reported and declined 1 percent on a constant currency basis after adjusting for a favorable $17 million foreign exchange impact. Core Spinal products, which include Kyphon, declined 2 percent on a constant currency basis. Biologics revenue grew 2 percent on a constant currency basis. Outside the United States, Core Spinal products grew 4 percent on a constant currency basis and Biologics grew 9 percent on a constant currency basis.
Neuromodulation revenue of $394 million grew 11 percent as reported and 8 percent on a constant currency basis after adjusting for a favorable $13 million foreign exchange impact. Growth in Neuromodulation continues to be driven by strong sales of Activa PC and RC Deep Brain Stimulation systems for movement disorders, and InterStim Therapy for overactive bladder and urinary retention, as well as bowel control outside the United States.
Diabetes revenue of $311 million grew 12 percent as reported and 8 percent on a constant currency basis after adjusting for a favorable $11 million foreign exchange impact. Growth in Diabetes was attributed to worldwide sales of continuous glucose monitoring systems as well as the recent launch of the Paradigm Veo insulin pump in Asia and Europe.
Surgical Technologies revenue of $239 million grew 15 percent as reported and 12 percent on a constant currency basis after adjusting for a favorable $7 million foreign exchange impact. Sales of monitoring and power equipment in the Ear, Nose and Throat division, and strong U.S. sales of Navigation equipment contributed to solid growth.
Physio-Control revenue of $100 million grew 11 percent as reported and 8 percent on a constant currency basis after adjusting for a favorable $3 million foreign exchange impact. Strong international sales and sales of the LIFEPAK 15 monitor/defibrillator, launched earlier in the fiscal year, contributed to revenue growth in the quarter. The company was pleased to receive notice last week from the U.S. Food and Drug Administration to resume unrestricted global shipments.
The company today updated diluted earnings per share guidance for fiscal year 2010. The company raised the lower end of fiscal year 2010 EPS guidance to a range of $3.20 to $3.22, which compares to the previous guidance of $3.17 to $3.22. This updated guidance represents fiscal year 2010 EPS growth of 12 percent to 13 percent after adjusting for the dilution from the AF and transcatheter valve acquisitions.
As in the past, all earnings per share ranges exclude any unusual charges or gains that might occur during the fiscal year and the impact of the non-cash charge to interest expense due to the change in accounting rules governing convertible debt and include $0.06 to $0.07 of acquisition dilution for the full fiscal year.
"Our number one position in almost all of our businesses clearly demonstrates the strength of our technology and customer-focused leadership," said Hawkins. "We remain focused on providing innovative, cost-effective solutions to the growing global challenge of chronic disease affecting more people worldwide than ever before."
Medtronic will host a webcast today, February 23 at 8 a.m. Eastern Time (7 a.m. Central Time), to provide information about its businesses for the public, analysts and news media. This quarterly webcast can be accessed by clicking on the Investors link on the Medtronic home page at www.medtronic.com and this earnings release will be archived at www.medtronic.com/newsroom. Within 24 hours, a replay of the webcast and a transcript of the company's prepared remarks will be available in the "Events & Presentations" section of the Investor Relations homepage.
Medtronic, Inc., headquartered in Minneapolis, is the world's leading medical technology company, alleviating pain, restoring health and extending life for people with chronic disease. Its Internet address is www.medtronic.com.
This press release contains forward-looking statements related to results of Medtronic's 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, 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.Unless otherwise noted, all comparisons made in this news release are on an "as reported basis," not on a constant currency basis, and references to quarterly figures increasing or decreasing are in comparison to the third quarter of fiscal year 2009.