Covidien (NYSE:COV) said it expects to pull the trigger on the spinout of its pharmaceuticals division near the end of June and issued guidance for its new, sleeker post-spinout profile.
The Mansfield, Mass.-based medical device company forecast sales growth of 4%-5% for fiscal 2013, excluding the Mallinckrodt pharma business. Mallinckrodt plc is expected to begin going it alone after the close of trading June 28, Covidien said.
"We have made very substantial progress since announcing our plan to spin off the pharmaceuticals business in December 2011," chairman, president & CEO José Almeida said in prepared remarks. "Pharmaceuticals has strengthened its operations, enhanced its new products pipeline and established the infrastructure necessary to operate as a standalone company. We expect the spin-off will give both businesses greater flexibility to focus on and pursue their respective growth strategies, while potentially providing shareholders with greater value over the longer term."
Covidien also issued revised financial statements for fiscal 2010, 2011 and 2012 and for the 1st 2 quarters of FY2013.
The new entity logged profits of $1.91 billion, or $3.92 per share, on sales of $9.85 billion during fiscal 2012. That’s the same profit reported for the combined Covidien, but combined sales were $11.85 billion, representing a 16.9% difference.
Profits for the new Covidien during Q1 2013 were $460 million, or 97¢ per share, on sales of $2.57 billion. Including Mallinckrodt’s results, the company had posted profits of $493 million, or $1.03 per share, on sales of $3.06 billion.
During Q2 2013, Covidien said its re-stated sales were $2.53 billion, down from $3.10 billion including Mallinckrodt’s revenues. The company did not provide updated profit or earnings numbers for Q3 2013.
Covidien said it expects the medical device tax to add between $75 million and $100 million to its annual selling, general & administrative expenses, noting that the tax will only apply to 3 quarters during fiscal 2013.
"Our revised sales guidance, excluding the Pharmaceuticals business, reflects our year-to-date performance and current foreign exchange rates," CFO Charles Dockendorff said in prepared remarks. "We have narrowed all the ranges and the reduction in the sales ranges is primarily due to unfavorable foreign exchange rate movement versus our earlier guidance. Once we have annualized the impact of the medical device tax and unfavorable foreign exchange, we are confident that Covidien will deliver improved top-line performance and accelerate earnings growth in fiscal 2014."
Investors on Wall Street reacted by sending COV shares up 1.5% to $65.30 apiece today as of about 10:20 a.m.