Covidien plc today reported results for the first quarter of fiscal 2012 (October-December 2011). First-quarter net sales of $2.90 billion increased 5% from the $2.77 billion reported a year ago. Foreign exchange rate movement had no impact on the quarterly sales growth rate.
First-quarter 2012 gross margin of 58.7% rose 2.0 percentage points from the 56.7% of the prior-year period. On an adjusted basis, first-quarter 2012 gross margin of 58.8% was at a record quarterly level, 1.2 percentage points above that of a year ago. This improvement reflected manufacturing cost reduction, benefits from our restructuring programs, favorable foreign exchange and positive business mix.
Selling, general and administrative expenses for the first quarter of 2012 were above those of the comparable quarter of the year before. This was due to higher legal charges and to spending on growth initiatives, primarily to expand the Company’s sales and marketing presence in emerging markets. Research and Development (R&D) expense in the first quarter climbed 21% and represented 5.0% of net sales, versus 4.3% of sales in the year-ago period.
In the first quarter of 2012, the Company reported operating income of $636 million, versus $549 million in the same period the year before. First-quarter 2012 adjusted operating income, excluding the specified items shown on the attached quarterly Non-GAAP reconciliations table, was $705 million, compared with $615 million in the previous year. First-quarter 2012 adjusted operating income, excluding the specified items, represented 24.3% of sales, versus 22.2% a year ago.
The first-quarter 2012 effective tax rate was 16.7%, versus an effective tax rate of 16.1% in the first quarter of 2011. The first-quarter 2012 adjusted tax rate, excluding specified items, was 17.4%, versus 18.4% in the first quarter a year earlier.
Diluted GAAP earnings per share from continuing operations were $1.02 in the first quarter of 2012, versus $0.87 per share in the comparable quarter last year. First-quarter 2012 adjusted diluted earnings per share, excluding specified items, were $1.13, versus $0.95 a year ago, a 19% increase.
“We are off to an excellent start in fiscal 2012, with good sales gains, record gross and operating margins and double-digit EPS growth,” said José E. Almeida, President and CEO. “This strong performance was again led by our largest business segment, Medical Devices, which delivered growth fueled by double-digit advances in Energy and Vascular products.
“During the first quarter, we also significantly increased R&D spending and continued to invest in our emerging markets, where sales again climbed at a double-digit pace,” Mr. Almeida said. “Looking forward, although we face some pressure on our reported results due to the recent strengthening of the U.S. dollar, we remain comfortable with the current annual consensus EPS estimates for 2012. We expect that our broad product portfolio, robust pipeline of new products and ongoing strategic investments funded by our strong cash flow will drive superior operational results for the remainder of 2012 and beyond.”