Q2 2013 Earnings Call Transcript

Transcript Call Date 04/26/2013

Operator: Good day, ladies and gentlemen, and welcome to the Second Quarter 2013 Covidien Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session.

During today's call, Covidien may make some forward-looking statements and it's possible that actual results could differ materially from their current expectations. Please refer to the cautionary statements contained in Covidien's SEC filings included in the Form 10-K and 10-Q reports for additional information about factors that could cause actual results to materially differ from those anticipated in such forward-looking statements.

The Company may also discuss some non-GAAP financial measures with respect to our performance. A reconciliation of non-GAAP to GAAP measures can be found in Covidien's press release and its related financial tables as well as in the Investor Relations section of

I would now like to turn the presentation over to Mr. Cole Lannum, Vice President, Investor Relations. Please proceed sir.

Coleman N. Lannum - VP, IR: Thanks, Shikana, and good morning, everyone. With me today are Joe Almeida, Covidien's Chairman, President and CEO; and Chuck Dockendorff, our Chief Financial Officer.

In addition, given the impending spin off of our Pharmaceuticals business in a couple of months, we also have Mark Trudeau, President of Pharmaceuticals, joining us on the call today. We'll be making some brief introductory remarks and then spend most of the time this morning answering your questions. I want to remind you that today's call will focus on our second quarter results. We will not be discussing guidance or our future outlook. As noted in the release, we will provide guidance for both RemainCo, Covidien and for Mallinckrodt after the close next Friday.

For the second quarter we reported GAAP diluted earnings per share of $0.93 and after adjusting for certain specified items, our non-GAAP earnings came in at $1.12 per share.

I'll now turn the call over to Joe who will go through more detail on the second quarter results. Joe?

Jose E. Almeida - Chairman, President and CEO: Thanks Cole. Let me begin by saying that we are pleased with our second quarter results. Sales were on plan, up 7% operationally and up 5% as reported. In several key categories including Stapling, Energy, Neurovascular and Specialty Pharmaceuticals, we continue to grow ahead of the market and the recent investments we have made are contributing to our robust performance.

In the Medical Devices segment we had a very good quarter with 6% operational growth and broad based increases across the segment. In the Pharmaceuticals business, sales were significantly higher than a year ago led by an outstanding performance for Specialty Pharmaceuticals.

And in Supplies, reported sales were above a year ago, reflecting increases in Nursing Care led by enteral feeding products. Before I go into more detail on these results, I'd like to spend a brief moment discussing the healthcare products marketplace.

Overall, we saw very little change in the market environment over the last several months, with no rebound in the U.S. in procedures of interest to us. In Western Europe, austerity programs and the economic slowdown continue to pressure all of Medtech with particular weakness in Spain and Italy. However, our overall European performance was better than expected driven by the much smaller but faster growing emerging market portion of Europe. For our emerging markets business overall comprising Eastern Europe, Middle East and Africa, Asia and Latin America, we had another excellent quarter with operational sales growth in the high teens and double-digits increases in all regions and all product lines.

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