VOL. 126 | NO. 102 | Wednesday, May 25, 2011
Medtronic Profits Drop 19 Percent In Q4
By Aisling Maki
Medtronic Inc.’s fiscal fourth quarter earnings dropped 19 percent and the company predicted lower-than-expected growth for the year ahead because of a slump in implants sales.
But the Minneapolis-based medical device company – whose Spinal and Biologics Business is based in Memphis at 1800 Pyramid Place – also reported a slight increase in revenue for both the fourth quarter and the fiscal year, which ended April 29.
Spinal fourth quarter revenue of $875 million decreased 1 percent as reported or 2 percent on a constant currency basis, while international spinal business sales saw a 12 percent increase as reported or 6 percent increase on a constant currency basis.
Medtronic, which recently announced significant job cuts, said its fiscal year revenue was $15.9 billion, a 1 percent increase as reported, or an increase of 2 percent after adjusting for $12 million of favorable foreign currency impact and approximately $200 million of revenue benefit from the extra week in Q1 2010.
Fiscal year-end net earnings for 2011 were $3.1 billion as reported, which was flat, or $2.86 per diluted share, an increase of 3 percent.
Medtronic reported worldwide Q4 revenue of $4.3 billion, an increase of 2 percent as reported, or flat on a constant currency basis.
The company said revenue growth was driven by emerging technologies, performance in emerging markets and continued steady growth in key businesses, including coronary & peripheral, structural heart, endovascular, diabetes and surgical technologies.
“We saw steady growth across most of our businesses and geographies, which was offset by challenging dynamics in the U.S. implantable cardiac defibrillator and spinal markets.”
As reported, Q4 net earnings and diluted earnings per share were $776 million and 72 cents, a decrease of 19 percent and 16 percent, respectively, compared to the same period in fiscal year 2010.
Medtronic has struggled to maintain earnings growth amid sluggish sales of its two leading products: heart defibrillators and spinal implants. In February the company announced 2,000 layoffs to bolster its financial position, including some in Memphis.
Its fiscal year 2011 international revenue of $6.8 billion grew 6 percent both as reported and after adjusting for a $12 million favorable foreign currency impact and the benefit of the extra week in fiscal year 2010.
International revenue represented 43 percent of total company revenues for the year, and fourth quarter international revenue of $1.96 billion increased 12 percent, or 7 percent on a constant currency basis.
Fourth quarter emerging market revenue of $397 million increased 24 percent as reported, or 20 percent on a constant currency basis. This figure included Greater China growth of 24 percent, Latin America growth of 22 percent, India growth of 19 percent, and the Middle East and Africa growth of 19 percent, all on a constant currency basis.
“We saw steady growth across most of our businesses and geographies, which was offset by challenging dynamics in the U.S. implantable cardiac defibrillator and spinal markets,” said Medtronic CEO Bill Hawkins in a statement. Hawkins will be replaced June 13 by General Electric Healthcare unit head Omar Ishrak. “We continue to advance our industry-leading pipeline, making strategic investments in our emerging technologies and emerging market operations that will drive our performance and position us well for future growth.”
For the fourth quarter, sales of implantable heart rhythm products fell 7 percent to $1.32 billion as fewer surgeons implanted the heart-pacing devices. Sales of the company’s biggest business, called implantable cardioverter defibrillators, fell 16 percent to $760 million as U.S. sales continued to slump. Sales of stents and other cardiovascular devices grew 16 percent to $879 million.
Medtronic’s Restorative Therapies Group, comprised of spinal, neuromodulation, diabetes and surgical technologies, reported worldwide sales of $7.4 billion for the fiscal year, which increased 2 percent as reported or 3 percent after adjusting for foreign currency and the benefit of the extra week in fiscal year 2010.
Restorative Therapies Group sales for Q4 2011 were $1.97 billion, an increase of 4 percent as reported or 2 percent on a constant currency basis.
Restorative Therapies Group International sales of $649 million increased 13 percent as reported or 7 percent on a constant currency basis. Group revenue performance was led by steady growth in the diabetes, surgical technologies and neuromodulation businesses, offset by softer sales in spinal.
Solid performances from the Solera posterior fixation system, Atlantis Vision Elite cervical plate and the Osteotech acquisition were offset by declines in interspinous process decompressions systems and balloon kyphoplasty.
The Associated Press contributed to this report.