Medtronic, Inc. (NYSE:MDT) today announced financial results for its second quarter of fiscal year 2010, which ended Oct. 30, 2009.
The company reported second quarter revenue of $3.838 billion, an 8 percent increase as reported and on a constant currency basis compared to the $3.570 billion reported in the second quarter of fiscal year 2009. Reported second quarter net earnings were $868 million, or $0.78 per diluted share, increasing 59 and 63 percent, respectively, over the same period in the prior year. As detailed in the attached table, after adjusting for a litigation gain and the impact of adopting a new accounting standard for non-cash interest expense on convertible debt effective the beginning of fiscal year 2010, second quarter net earnings and diluted earnings per share on a non-GAAP basis were $850 million and $0.77, an increase of 12 percent and 15 percent, respectively, over the same period in the prior year.
Revenue outside the United States of $1.541 billion grew 12 percent compared to the same period last year, or 13 percent on a constant currency basis, accounting for 40 percent of Medtronic’s worldwide revenue.
“Our solid financial performance this quarter was driven by consistent execution across our diversified portfolio of businesses,” said Bill Hawkins, Medtronic chairman and chief executive officer. “We are well-positioned to deliver on our commitments for the balance of our fiscal year and to launch innovative new products to drive further growth in the coming years.”
Cardiac Rhythm Disease Management
Cardiac Rhythm Disease Management (CRDM) revenue of $1.278 billion grew 3 percent as reported and on a constant currency basis. Revenue from implantable cardioverter defibrillators (ICDs) was $754 million, while pacing revenue was $498 million in the quarter. Outside the United States, CRDM revenue grew 4 percent on a constant currency basis, driven by the growing success of the AF Solutions business as well as solid growth in ICDs.
CardioVascular revenue of $696 million grew 17 percent as reported and 18 percent on a constant currency basis after adjusting for an unfavorable $5 million foreign exchange impact. The CardioVascular business continues to experience strong global growth across the Coronary, Endovascular and Structural Heart Disease divisions, which grew 18 percent, 28 percent and 11 percent, respectively, on a constant currency basis. Continued adoption and use of the Endeavor® Drug-eluting Stent in Japan following its commercial launch earlier this fiscal year helped Coronary revenue grow to $369 million for the quarter.
Spinal revenue of $862 million grew 4 percent as reported and on a constant currency basis. Both Core Spinal and Biologics products saw positive growth in the quarter. Core Spinal products, which include Kyphon, increased 2 percent on a constant currency basis. Biologics revenue grew 12 percent on a constant currency basis. Outside the United States, Spinal revenue grew 10 percent on a constant currency basis driven by solid growth in China, Middle East/Africa, Canada and Latin America.
Neuromodulation revenue of $384 million grew 12 percent as reported and on a constant currency basis. 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 used to treat urinary and bowel incontinence.
Diabetes revenue of $300 million grew 10 percent as reported and 11 percent on a constant currency basis after adjusting for an unfavorable $2 million foreign exchange impact. This growth was driven by strong U.S. insulin pump and continuous glucose monitoring (CGM) product sales, as well as strong sales of consumables in Europe. International sales grew 10 percent on a constant currency basis over the same quarter last year.
Surgical Technologies revenue of $224 million grew 5 percent as reported and 6 percent on a constant currency basis after adjusting for an unfavorable $2 million foreign exchange impact. Growth in the business was attributed to strong sales in the monitoring product and power disposable product lines within the ENT division. Service plans for Navigation equipment used in both brain and spinal surgery procedures remained a positive contributor to revenue in the second quarter as well.
Physio-Control revenue of $94 million grew 25 percent as reported and 24 percent on a constant currency basis after adjusting for a favorable $1 million foreign exchange impact. Strong international sales and sales of the LIFEPAK 15 monitor/defibrillator, launched earlier in the fiscal year, contributed to favorable revenue growth in the quarter.
The company today updated diluted earnings per share guidance and revenue outlook for fiscal year 2010. The company raised fiscal year 2010 EPS guidance to a range of $3.17 to $3.22, which compares to the previous guidance of $3.10 to $3.20. This updated guidance represents fiscal year 2010 EPS growth of 11 percent to 13 percent, after adjusting for $0.06 to $0.07 of acquisition dilution.
The company also reiterated its 5 percent to 8 percent constant currency revenue growth outlook for the foreseeable future and believes that the 5 percent to 8 percent constant currency growth rate remains reasonable for the second half of fiscal year 2010.
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 includes $0.06 to $0.07 of acquisition dilution for the full fiscal year. In addition, EPS guidance does not take into account any potential impact from a U.S. medical device industry tax being proposed as part of broader U.S. healthcare reform.
“I am pleased that we continue to perform well in this challenging macroeconomic environment, which reflects the underlying resilience and strength of Medtronic’s diverse businesses across the globe,” said Hawkins. “Our businesses are focused on therapies for the most prevalent chronic diseases, and we will deliver innovative solutions to physicians and their patients around the world.”