ST. LOUIS, April 18 /PRNewswire/ -- Mallinckrodt Inc. (NYSE: MKG) today
reported record third quarter fiscal 2000 earnings from continuing operations
of $58 million, or 85 cents per share on a diluted basis, compared with
$54 million, or 75 cents per share, last year. Excluding a net nonrecurring
gain resulting from the sale of the medical gas business, partially offset by
a charge for manufacturing consolidations, earnings were $57 million, or
83 cents per share, representing increases of 5 percent and 11 percent,
respectively, over the prior year. Cash earnings per share for the quarter
were $1.11 per share.
Sales for the quarter were $659 million, a 3 percent decrease from last
year. Excluding divested businesses, sales increased 1 percent. Sales to
customers outside the United States were $211 million, or 32 percent of the
total for the quarter.
"Advance purchasing in the second quarter in preparation for Y2K and an
early flu season that dropped off rapidly lowered third-quarter sales of
respiratory and pharmaceutical products," commented Mallinckrodt's Chairman
and Chief Executive Officer C. Ray Holman.
Third quarter strategic and operational actions designed to enhance
profitability and the growth prospects of the Respiratory segment included the
January sale of the medical gas division to Airgas for a pretax gain of
$17 million and the announcement of plans to transfer critical care ventilator
production from Carlsbad, CA, to Galway, Ireland, resulting in a $7 million
charge in the third quarter. An additional charge of $5 million related to
the manufacturing consolidations is anticipated in the fourth quarter.
"With the successful implementation of several ongoing tax planning
initiatives and a reduction in nondeductible goodwill amortization related to
divested businesses, we were able to lower our effective tax rate on earnings
from continuing operations before nonrecurring items to 29 percent for fiscal
2000 with a year-to-date adjustment in the current quarter," said Michael A.
Rocca, senior vice president and chief financial officer.
Segment Results
Mallinckrodt's Respiratory segment reported third-quarter sales of
$274 million, compared with $303 million in the third quarter of fiscal 1999.
Excluding divested businesses, higher volumes were more than offset by price
declines and negative foreign currency impact. Respiratory operating
earnings, excluding the charge for manufacturing consolidations and the impact
of divested businesses, were $39 million compared with $36 million in the same
quarter of last year.
Pharmaceuticals reported third-quarter sales of $198 million, up 9 percent
over the $182 million recorded in the third quarter of fiscal 1999. Operating
earnings declined to $35 million, from $36 million last year, reflecting costs
of manufacturing site capacity additions and lower manufacturing volumes
associated with inventory reductions.
The Imaging segment reported third-quarter sales of $187 million, a
2 percent decline from the $192 million reported in the third quarter last
year. Imaging operating earnings declined to $23 million, from $31 million
last year, due to lower volume and costs of implementing alternate synthesis
for ioversol, the raw material for Optiray.
Nine-Month Results
Net sales for the first nine months of fiscal 2000 increased 3 percent to
$1.95 billion, compared with $1.91 billion a year earlier. Excluding sales of
businesses divested, net sales increased 5 percent.
Earnings from continuing operations for the first nine months of fiscal
2000 were $142 million, or $2.04 per share on a diluted basis. Excluding the
net gain from the nonrecurring items identified above, the December 1999 sale
of HemoCue, a blood-testing equipment company, and the write-down of an
investment in an equity security in the second quarter, earnings from
continuing operations for the first nine months of fiscal 2000 were
$137 million, or $1.96 per share, representing increases of 13 percent and
17 percent from last year's $121 million, or $1.68 per share from continuing
operations. Cash earnings per share, defined as earnings from continuing
operations, excluding net nonrecurring gains, plus amortization, were
$2.85 per share for the first nine months of fiscal 2000.
During the first nine months of fiscal 2000, the company repurchased
3.9 million shares of stock at an average price of $29.78 per share.
Inventories and receivables declined, reflecting continuing progress in
working capital reduction initiatives. The debt-to-total capital ratio at the
end of the quarter was 48.7 percent, according to Rocca.
Outlook
Concerning fiscal 2000, Holman said, "As a result of a lower effective tax
rate from successful tax strategies, we are raising our expectations for
earnings per share, excluding nonrecurring items, to be in the upper end of a
range of $2.65 to $2.70."
Looking beyond fiscal 2000, "We are now fully engaged in strategic and
financial planning," Holman said. "The process is even more intensive and
comprehensive than in prior years considering the company's low stock price."
Mallinckrodt Inc. is a global manufacturer and marketer of specialty
medical products designed to sustain breathing, diagnose disease and relieve
pain. Named one of America's most admired medical products and equipment
companies by Fortune magazine, Mallinckrodt does business in more than 100
countries. In fiscal 1999, combined net sales were $2.6 billion for
Mallinckrodt's respiratory, imaging and pharmaceutical product lines. Based
in St. Louis, Missouri, Mallinckrodt's website address is
( http://www.mallinckrodt.com ).
This news release contains forward-looking statements that involve risks
and uncertainties. These statements are based on current expectations; actual
results may differ materially. Among the factors that could cause actual
results to differ materially from those projected are the following: the
effect of business and economic conditions; the impact of competitive products
and continued pressure on prices realized by the company for its products;
constraints on supplies of raw materials used in manufacturing certain of the
company's products; capacity constraints limiting the production of certain
products; difficulties or delays in the development, production, testing, and
marketing of products; difficulties or delays in receiving required
governmental or regulatory approvals; market acceptance issues, including the
failure of products to generate anticipated sales levels; difficulties in
rationalizing acquired businesses and in realizing related cost savings and
other benefits; the effects of and changes in trade, monetary and fiscal
policies, laws and regulations; foreign exchange rates and fluctuations in
those rates; the costs and effects of legal and administrative proceedings,
including environmental proceedings and patent disputes involving the company;
and the risk factors reported from time to time in the company's SEC reports.
The company undertakes no obligation to update any forward-looking statements
as a result of future events or developments.
MALLINCKRODT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except share and per share amounts)
Quarter Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
Net sales $659.0 $676.1 $1,954.9 $1,905.9
Operating costs
and expenses:
Cost of goods sold 370.5 359.1 1,093.1 1,025.1
Selling, general and
administrative
expenses 165.4 177.1 525.0 531.0
Research and
development expenses 40.3 38.1 105.4 109.4
Total operating costs
and expenses 576.2 574.3 1,723.5 1,665.5
Operating earnings 82.8 101.8 231.4 240.4
Nonoperating income
(expense), net 18.3 (.7) 34.6 2.7
Interest expense (15.9) (21.4) (55.0) (64.5)
Earnings from continuing
operations before
income taxes 85.2 79.7 211.0 178.6
Income tax provision 27.3 25.6 68.6 57.7
Earnings from continuing
operations 57.9 54.1 142.4 120.9
Discontinued operations 22.6
Net earnings 57.9 54.1 142.4 143.5
Preferred stock
dividends (.1) (.1) (.3) (.3)
Available for common
shareholders $57.8 $54.0 $142.1 $143.2
Basic earnings per
common share:
Earnings from
continuing operations $.85 $.76 $2.05 $1.68
Discontinued operations .31
Net earnings $.85 $.76 $2.05 $1.99
Average common
shares 68,197,469 71,301,412 69,369,074 71,858,140
Diluted earnings
per common share:
Earnings from
continuing operations $.85 $.75 $2.04 $ 1.68
Discontinued operations .31
Net earnings $.85 $.75 $2.04 $ 1.99
Average common
shares 68,295,683 71,598,023 69,674,894 72,062,276
Actual shares
outstanding
at end of period 67,220,217 70,960,322
(See accompanying notes to financial results.)
MALLINCKRODT INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
March 31, June 30,
2000 1999
Assets
Current assets:
Cash and cash equivalents $33.2 $32.7
Trade receivables, less allowances
of $21.8 at March 31 and $17.9 at June 30 452.5 490.9
Inventories 484.7 530.3
Deferred income taxes 78.2 54.7
Other current assets 64.4 61.3
Total current assets 1,113.0 1,169.9
Investments and other noncurrent assets 90.0 67.2
Property, plant and equipment, net 827.7 870.7
Goodwill and other intangible assets, net 1,390.0 1,545.3
Deferred income taxes 4.1 4.3
Total assets $3,424.8 $3,657.4
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $481.6 $383.8
Accounts payable 202.1 221.2
Accrued liabilities 376.1 459.5
Income taxes payable 80.5 77.3
Deferred income taxes .9 1.2
Total current liabilities 1,141.2 1,143.0
Long-term debt, less current maturities 541.4 742.5
Deferred income taxes 340.2 363.0
Postretirement benefits 167.1 166.5
Other noncurrent liabilities
and deferred credits 157.6 182.0
Total liabilities 2,347.5 2,597.0
Total shareholders' equity 1,077.3 1,060.4
Total liabilities and shareholders' equity $3,424.8 $3,657.4
(See accompanying notes to financial results.)
MALLINCKRODT INC.
NOTES TO INTERIM FINANCIAL RESULTS
Mallinckrodt Inc. and its subsidiaries, collectively, are called the
"Company" or "Mallinckrodt." All references to years are to fiscal years
ended June 30 unless otherwise stated. Certain amounts in the prior year were
reclassified to conform to the current year presentation. All earnings per
share amounts are calculated on a diluted basis unless otherwise stated.
(a) On January 21, 2000, the Company sold its medical gas business, which
was part of the Respiratory segment. The transaction resulted in a $17.4
million pretax gain included in nonoperating income (expense), net, $5.3
million net of tax for the quarter and nine months ended March 31, 2000.
(b) Included in operating earnings for the quarter and nine months ended
March 31, 2000 are pretax charges of $7.3 million and $15.5 million,
respectively, associated with product line rationalizations and the
consolidation of certain manufacturing facilities within the Respiratory
segment. The charge during the quarter ended March 31, 2000 is primarily
associated with severance and related costs for the affected employees.
It is expected that an additional pretax charge of about $5 million will
be recorded in the quarter ending June 30, 2000.
(c) On December 16, 1999, the Company sold its blood analysis product
line, which was part of the Respiratory segment. The transaction resulted
in a $26.9 million pretax gain, $16.6 million net of tax. The pretax gain
is included in nonoperating income (expense), net for the nine months
ended March 31, 2000.
(d) During the quarter ended December 31, 1999, the Company recorded a
pretax charge of $10.5 million, $6.5 million net of tax, associated with
the write-down of an investment in an equity security due to a decline in
fair value considered to be other than temporary. The pretax charge is
included in nonoperating income (expense), net for the nine months ended
March 31, 2000.
(e) The nonrecurring items discussed above had the following impact on
results of operations for the quarter and nine months ended March 31, 2000
(in millions).
Nine
Quarter Months
Ended Ended
March 31, March 31,
2000 2000
Operating earnings
Respiratory manufacturing consolidation $(7.3) $(15.5)
Nonoperating income (expense), net
Sale of medical gas business 17.4 17.4
Sale of blood analysis product line 26.9
Write-down of investment in equity security (10.5)
Earnings from continuing operations before
income taxes $10.1 $18.3
Earnings from continuing operations $1.2 $5.6
(f) The Company's subsidiary, Puritan-Bennett Corporation (Puritan-
Bennett), is a defendant in an action that was filed on August 29, 1997
and is currently pending in the U.S. 10th Circuit Court of Appeals. This
case relates to a 1996 Asset Purchase Agreement (Agreement) whereby
Puritan-Bennett agreed to purchase certain assets of New Mexico Steel.
The purchase price of the assets was $1.2 million. Said purchase price
was to be adjusted upward or downward based upon post-closing schedules of
inventory, accounts receivable and office equipment to be provided by
Puritan-Bennett. Plaintiff alleges that Puritan-Bennett breached the
Agreement by failing to deliver the post-closing schedules in a timely
manner. On September 23, 1999, a jury returned a verdict against Puritan-
Bennett and in favor of New Mexico Steel in the amount of $.4 million in
compensatory and $5.0 million in punitive damages. On January 4, 2000,
the U.S. District Court for the District of New Mexico reduced the
punitive damages to $2.5 million. The Company believes that the verdict
is not supported by the law or the facts of the case and is a product of
passion and prejudice on the part of the jury. The Company intends to
vigorously challenge this verdict and to seek a further reduction of the
trial court's judgment on appeal.
(g) On July 31, 1998, the Company completed the sale of the remaining
chemical additives business of the catalyst and chemical additives
division, which was reclassified to discontinued operations in June 1998.
The transaction resulted in a $37.0 million gain on sale, $22.6 million
net of taxes, which was included in discontinued operations for the nine
months ended March 31, 1999. Earnings from operations were zero for the
one month of operations in 1999.
MALLINCKRODT INC.
BUSINESS PROFILE
(Dollars in millions)
Quarter Ended March 31, Nine Months Ended March 31,
% %
2000 1999 Change 2000 1999 Change
Net sales
Respiratory $273.8 $302.7 (10) $848.1 $849.3 --
Imaging 186.9 191.6 (2) 563.6 571.5 (1)
Pharmaceuticals 198.3 181.8 9 543.2 485.1 12
$659.0 $676.1 (3) $1,954.9 $1,905.9 3
Operating earnings
Respiratory $30.6 $41.2 (26) $98.8 $95.2 4
Imaging 22.9 31.1 (26) 69.3 90.6 (24)
Pharmaceuticals 34.6 35.5 (3) 81.1 73.1 11
88.1 107.8 (18) 249.2 258.9 (4)
Corporate expense (5.3) (6.0) 12 (17.8) (18.5) 4
$82.8 $101.8 (19) $231.4 $240.4 (4)
Selected cash flow information
Depreciation $92.0 $93.4
Amortization 61.9 63.5
Capital expenditures (90.0) (83.0)
Issuance of common stock 5.5 2.5
Acquisition of treasury stock (117.1) (60.0)
Dividends paid (34.3) (32.1)
Redemption of common stock purchase rights (3.6)
MALLINCKRODT INC.
BUSINESS PROFILE RESTATED FOR NONRECURRING ITEMS AND DIVESTED OPERATIONS
(Dollars in millions)
As Reported Nonrecurring Items
2000 1999 % Change 2000 1999
Net sales
Respiratory $273.8 $302.7 (10)
Imaging 186.9 191.6 (2)
Pharmaceuticals 198.3 181.8 9
$659.0 $676.1 (3)
Operating earnings
Respiratory $30.6 $41.2 (26) $(7.3)
Imaging 22.9 31.1 (26)
Pharmaceuticals 34.6 35.5 (3)
Corporate (5.3) (6.0) 12
$82.8 $101.8 (19)
Nonoperating income
(expense), net $18.3 $(.7) $17.4
Nine Months Ended March 31,
Net sales
Respiratory $848.1 $849.3 --
Imaging 563.6 571.5 (1)
Pharmaceuticals 543.2 485.1 12
$1,954.9 $1,905.9 3
Operating earnings
Respiratory $98.8 $95.2 4 $(15.5)
Imaging 69.3 90.6 (24)
Pharmaceuticals 81.1 73.1 11
Corporate (17.8) (18.5) 4
$231.4 $240.4 (4)
Nonoperating income
(expense), net $34.6 $2.7 $33.8
Ongoing Excluding
Nonrecurring Items Divested Operations
2000 1999 % Change 2000 1999
Net Sales
Respiratory $273.8 $302.7 (10) $3.4 $27.7
Imaging 186.9 191.6 (2) 2.4
Pharmaceuticals 198.3 181.8 9
$659.0 $676.1 (3)
Operating earnings
Respiratory $37.9 $41.2 (8) $(.9) $5.4
Imaging 22.9 31.1 (26) .4
Pharmaceuticals 34.6 35.5 (3)
Corporate (5.3) (6.0) 12
$90.1 $101.8 (11)
Nonoperating income
(expense), net $.9 $(.7)
Nine Months Ended March 31,
Net Sales
Respiratory $848.1 $849.3 -- $60.3 $91.7
Imaging 563.6 571.5 (1) .9 7.8
Pharmaceuticals 543.2 485.1 12
$1,954.9 $1,905.9 3
Operating earnings
Respiratory $114.3 $95.2 20 $15.2 $19.6
Imaging 69.3 90.6 (24) .1 1.0
Pharmaceuticals 81.1 73.1 11
Corporate (17.8) (18.5) 4
$246.9 $240.4 3
Nonoperating income $.8 $2.7
Restated - Excluding Nonrecurring Items and
Divested Operations
2000 1999 % Change
Net Sales
Respiratory $270.4 $275.0 (2)
Imaging 186.9 189.2 (1)
Pharmaceuticals 198.3 181.8 9
$655.6 $646.0 1
Operating earnings
Respiratory $38.8 $35.8 8
Imaging 22.9 30.7 (25)
Pharmaceuticals 34.6 35.5 (3)
Corporate (5.3) (6.0) 12
$91.0 $96.0 (5)
Nonoperating income (expense), net $.9 $(.7)
Nine Months Ended March 31,
Net Sales
Respiratory $787.8 $757.6 4
Imaging 562.7 563.7 --
Pharmaceuticals 543.2 485.1 12
$1,893.7 $1,806.4 5
Operating earnings
Respiratory $99.1 $75.6 31
Imaging 69.2 89.6 (23)
Pharmaceuticals 81.1 73.1 11
Corporate (17.8) (18.5) 4
$231.6 $219.8 5
Nonoperating income
(expense), net $.8 $ 2.7
SOURCE Mallinckrodt Inc.
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Related links:
http://www.mallinckrodt.com
Company News On-Call:
http://www.prnewswire.com/comp/440950.html or fax,
800-758-5804, ext. 440950
CONTACT:
Media, Barbara Abbett, 314-654-5230, e-mail,
barbara.abbett@mkg.com, or Investors, Doug McKinney,
314-654-5264,e-mail, doug.mckinney@mkg.com, both of Mallinckrodt
Inc.
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