ST. LOUIS, Mo., April 20 /PRNewswire/ -- Mallinckrodt Inc. (NYSE: MKG)
today reported third-quarter fiscal year 1999 earnings from continuing
operations of $54.1 million, or 75 cents per share on a diluted basis.
For the same quarter last year, the company reported earnings from
continuing operations of $40.2 million, or 54 cents per share, before charges
related to the integration of respiratory-products company Nellcor Puritan
Bennett (NPB). With those charges, the company recorded earnings from
continuing operations in the third quarter of fiscal 1998 of $31.9 million, or
43 cents per share. The net earnings for the third quarter last year were
$27.9 million, or 38 cents per share, which included income from discontinued
operations and a charge related to settlement costs from the sale of the
company's animal health segment.
"At the beginning of fiscal 1999, we provided earnings guidance of $2.25
to $2.35 per share. We are now on track to achieve the upper end of that
range," said C. Ray Holman, chairman and chief executive officer of
Mallinckrodt. "Although we continue to post earnings well ahead of Wall
Street expectations and have cash earnings per share in the range of $3.47 to
$3.52 range, we are trading at less than 7.5 times cash earnings." Cash
earnings per share are defined as earnings per share from continuing
operations plus amortization. The consensus estimate for third quarter
earnings was 64 cents per share.
Holman added, "With our transition to a specialty medical products company
complete, the future provides opportunities for sustained sales growth, and
strategic cost management will continue to support bottom line performance."
Mallinckrodt's net sales in the third quarter of fiscal 1999 were $675.0
million, which is a four percent increase over the $649.8 million reported in
the same quarter last year. Excluding sales from businesses divested in the
current fiscal year, sales growth would have been five percent. Sales growth
was negatively affected by a one percentage point decline in pricing. Sales
to customers outside the United States accounted for $221.6 million, or 33
percent of sales.
Business Overview
Mallinckrodt's Respiratory Group reported third-quarter sales of
$302.5 million, an increase of six percent over the $286.0 million reported in
the third quarter of fiscal 1998. Excluding sales from businesses divested in
the current fiscal year, sales growth would have been eight percent.
Volume growth in respiratory products sales was four percent; pricing
increased one percentage point. Respiratory operating earnings were
$41.0 million, an increase of 57 percent over the $26.1 million in the same
quarter last year, excluding prior-year charges related to the integration of
NPB. Solid sales growth of ventilators, pulse oximetry, and disposables,
products in which the company holds strong market leadership, contributed to
the continued improvement in operating earnings. Within pulse oximetry, sales
to Mallinckrodt's original equipment monitor manufacturers were especially
strong, increasing 15 percent over the prior year.
The Imaging Group reported third-quarter sales of $190.7 million, compared
with $190.9 million in the third quarter last year. Volume growth was six
percent, offset by lower pricing. Imaging operating earnings were $31.1
million, compared with $38.9 million reported in the comparable period last
year. Sales of radiopharmaceutical products to Premier hospitals, strategic
cost management programs and improved plant performance partially offset the
lower pricing in X-Ray contrast media. Mallinckrodt is one of Premier's
corporate partners.
The Pharmaceuticals Group reported third-quarter sales of $181.8 million,
five percent higher than the $172.9 million recorded in the third quarter of
fiscal 1998. Sales volume and pricing contributed four percent and one
percent, respectively, to the growth. Operating earnings for the group were
$35.5 million, a 16 percent increase over the $30.7 million reported in the
comparable period last year. Increased sales of both bulk and dosage
pharmaceuticals and improved plant performance contributed to the strong
earnings improvement.
Nine-Month Results
Net sales for the first nine months of fiscal 1999 increased 11 percent to
$1.903 billion, compared with $1.712 billion a year earlier. The fiscal 1998
net sales included only seven months of results from businesses acquired with
the purchase of NPB. On a pro forma basis, net sales increased five percent
over the $1.807 billion recorded for the prior year first nine months. Sales
volume increased six percent. Pricing declined one percentage point.
Earnings from continuing operations for the first nine months of fiscal
1999 were $120.9 million, or $1.68 per share on a diluted basis, representing
increases of 40 percent and 44 percent, respectively, over $86.6 million, or
$1.17 per share, last year before charges related to the acquisition and
integration of NPB. With those charges, the company recorded a loss from
continuing operations in the first nine months of fiscal 1998 of $278.4
million, or $3.83 per share.
Net earnings for the first nine months of fiscal 1999 were $143.5 million,
or $1.99 per share, which included $22.6 million, or 31 cents per share, from
the after-tax gain realized on the sale of the industrial chemicals business
under discontinued operations. The net loss for the first nine months last
year was $276.3 million, or $3.80 per share, which included $10.5 million, or
14 cents per share, from discontinued operations.
Based in St. Louis, Mo., Mallinckrodt Inc. has three healthcare product
groups -- Respiratory, Imaging and Pharmaceuticals. The company operates in
more than 100 countries and had fiscal 1998 net sales of $2.4 billion. The
Mallinckrodt web site 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;
difficulties or delays in addressing "Year 2000" problems in the company's
operations, or the inability of a major supplier or customer to continue
operations due to such problems; 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,
1999 1998 1999 1998
Net sales $675.0 $649.8 $1,902.9 $1,711.7
Operating costs and expenses:
Cost of goods sold 359.1 344.6 1,025.1 1,016.2
Selling, administrative
and general expenses 176.1 190.5 530.7 486.6
Purchased research
and development 306.3
Research and development
expenses 38.1 42.3 109.4 106.7
Other operating (income)
expense, net .1 (5.2) (5.2) (7.5)
Total operating costs and
expenses 573.4 572.2 1,660.0 1,908.3
Operating earnings (loss) 101.6 77.6 242.9 (196.6)
Interest and other nonoperating
income (expense), net (.5) 1.6 .2 13.1
Interest expense (21.4) (28.3) (64.5) (75.6)
Earnings (loss) from continuing
operations before income taxes 79.7 50.9 178.6 (259.1)
Income tax provision 25.6 19.0 57.7 19.3
Earnings (loss) from continuing
operations 54.1 31.9 120.9 (278.4)
Discontinued operations (4.0) 22.6 10.5
Earnings (loss) before cumulative
effect of accounting change 54.1 27.9 143.5 (267.9)
Cumulative effect of accounting
change (8.4)
Net earnings (loss) 54.1 27.9 143.5 (276.3)
Preferred stock dividends (.1) (.1) (.3) (.3)
Available for common shareholders $54.0 $27.8 $143.2 $(276.6)
Basic earnings per common share:
Earnings (loss) from
continuing operations $.76 $.44 $1.68 $(3.83)
Discontinued operations (.06) .31 .14
Cumulative effect of
accounting change (.11)
Net earnings (loss) $.76 $.38 $1.99 $(3.80)
Average common shares 71,301,412 73,080,647 71,858,140 72,837,966
Diluted earnings per common share:
Earnings (loss) from
continuing operations $.75 $.43 $1.68 $(3.83)
Discontinued operations (.05) .31 .14
Cumulative effect of
accounting change (.11)
Net earnings (loss) $.75 $.38 $1.99 $(3.80)
Average common shares 71,598,023 73,776,568 72,062,276 72,837,966
Actual shares outstanding at
end of period 70,960,322 73,136,729
(See accompanying notes to financial results.)
MALLINCKRODT INC.
CONSOLIDATED BALANCE SHEETS
(In millions)
March 31, June 30,
1999 1998
Assets
Current assets:
Cash and cash equivalents $59.7 $55.5
Trade receivables, less
allowances of $22.7 at March 31
and $16.7 at June 30 493.3 486.3
Inventories 527.8 470.0
Deferred income taxes 110.1 95.2
Other current assets 60.7 61.5
Net current assets of
discontinued operations 4.8
Total current assets 1,251.6 1,173.3
Investments and other
noncurrent assets, less allowances
of $8.4 at March 31 and $5.8 at June 30 65.3 154.5
Property, plant and equipment, net 878.6 894.9
Goodwill and other intangible assets, net 1,567.0 1,633.4
Net noncurrent assets of
discontinued operations 12.4
Deferred income taxes 4.4 4.6
Total assets $ 3,766.9 $ 3,873.1
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt $310.3 $311.4
Accounts payable 185.7 215.0
Accrued liabilities 444.8 532.0
Income taxes payable 85.0 122.3
Deferred income taxes 1.2 1.4
Total current liabilities 1,027.0 1,182.1
Long-term debt, less current maturities 944.1 944.5
Deferred income taxes 403.0 396.2
Postretirement benefits 169.3 169.2
Other noncurrent liabilities
and deferred credits 180.0 175.2
Total liabilities 2,723.4 2,867.2
Total shareholders' equity 1,043.5 1,005.9
Total liabilities and
shareholders' equity $3,766.9 $3,873.1
(See accompanying notes to financial results.)
MALLINCKRODT INC.
NOTES TO INTERIM FINANCIAL RESULTS
All references to years are to fiscal years ended June 30 unless otherwise
stated.
(a) On August 28, 1997, Mallinckrodt Inc. (the Company or Mallinckrodt)
acquired Nellcor Puritan Bennett Incorporated (Nellcor) through an
agreement to purchase for cash all the outstanding shares of common stock
of Nellcor. The aggregate purchase price of the Nellcor acquisition was
approximately $1.9 billion. The acquisition was accounted for under the
purchase method of accounting and, accordingly, the results of operations
of Nellcor have been included in the Company's consolidated financial
statements since September 1, 1997. The purchase price of the acquisition
was allocated to the assets acquired and liabilities assumed based upon
generally accepted accounting principles and estimated fair values at the
date of acquisition.
In connection with the Company's filing of a shelf registration for debt
securities in December 1997, Mallinckrodt was engaged in discussions with
the staff of the Securities and Exchange Commission (SEC) regarding the
purchase price allocation related to the acquisition of Nellcor. The
Company has concluded these discussions with the SEC and, as a result, has
agreed to recalculate and restate the amount of purchase price allocated
to purchased research and development under a methodology preferred by the
SEC. The amount of purchased research and development charged to
operations in the first quarter of 1998 of $398.3 million has been reduced
by $90 million to $308.3 million. Of this amount, $306.3 million related
to ongoing operations and $2.0 million related to operations classified as
discontinued operations. This one-time noncash acquisition-related cost
had no tax benefit. A corresponding $90 million increase in goodwill is
being amortized on a straight-line basis over the previously established
30-year amortization period beginning in September 1997.
The sale of Nellcor inventories, which were stepped up to fair value in
connection with the allocation of purchase price, resulted in charges of
$75.4 million, $46.7 million net of taxes for the nine months ended March
31, 1998. Of the pre-tax amount, $74.4 million related to ongoing
operations and the remainder related to operations classified as
discontinued operations. In addition, results for the quarter and nine
months ended March 31, 1998 included Nellcor integration charges of $12.5
million, $8.3 million net of taxes, and $19.2 million, $12.6 million net
of taxes, respectively.
(b) The Company sold certain chemical additive product lines in the
second quarter of 1998. In the fourth quarter of 1998, the Company sold
its catalyst business and Aero Systems division. In June 1998, the
Company committed to the sale of the remaining chemical additives business
of the catalysts and chemical additives division, and closing of the sale
occurred on July 31, 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.
Included in discontinued operations for the nine months ended March 31,
1998 are the earnings from operations of the catalysts and chemical
additives and Aero Systems divisions, which included $12.1 million of
after-tax earnings from operations, $2.6 million of after-tax acquisition
accounting charges, and a gain of $8.9 million after taxes resulting from
the sale of chemical additive product lines, offset by a one-time, after-
tax charge of $7.9 million related to settlement costs from the June 30,
1997 sale of the animal health segment.
(c) The Company elected to early adopt the provisions of the American
Institute of Certified Public Accountants SOP 98-5, "Reporting on the
Costs of Start-Up Activities" (SOP 98-5), in its financial statements for
the year ended June 30, 1998. The effect of adoption of SOP 98-5 was to
record a charge of $8.4 million, net of taxes, for the cumulative effect
of an accounting change to expense costs that had previously been
capitalized prior to July 1, 1997.
(d) The diluted share base for the nine months ended March 31, 1998
excluded incremental shares related to employee stock options of 719,496.
These shares were excluded due to their antidilutive effect as a result of
the Company's loss from continuing operations during this period.
MALLINCKRODT INC.
BUSINESS PROFILE AND SELECTED CASH FLOW INFORMATION
(Dollars in millions)
Quarter Ended Nine Months Ended
March 31, March 31,
% %
1999 1998 Change 1999 1998 Change
Net sales
Respiratory $302.5 $286.0 6 $849.0 $703.6 21
Imaging 190.7 190.9 568.8 557.3 2
Pharmaceuticals 181.8 172.9 5 485.1 450.8 8
Total $675.0 $649.8 4 $1,902.9 $1,711.7 11
Operating earnings (loss)
Respiratory $41.0 $26.1 57 $97.7 $77.3 26
Imaging 31.1 38.9 (20) 90.6 88.0 3
Pharmaceuticals 35.5 30.7 16 73.1 56.2 30
Total 107.6 95.7 12 261.4 221.5 18
Corporate expense (6.0) (5.6) (7) (18.5) (18.2) (2)
Total 101.6 90.1 13 242.9 203.3 19
Acquisition and
integration charges (12.5) (399.9)
Total $101.6 $77.6 $242.9 $(196.6)
Selected cash flow information
Depreciation $93.1 $91.9
Amortization 63.5 57.9
Capital expenditures (83.0) (110.3)
Issuance of Mallinckrodt common stock 2.5 17.0
Acquisition of treasury stock (60.0) (9.7)
Dividends paid (32.1) (36.3)
Purchase of stock redemption rights (3.6)
MALLINCKRODT INC.
PRO FORMA NET SALES AND OPERATING EARNINGS
(Dollars in millions)
Nine Months Ended
March 31,
%
1999 1998 Change
Pro forma net sales
Respiratory $849.0 $798.9* 6
Imaging as reported 568.8 557.3 2
Pharmaceuticals as reported 485.1 450.8 8
Total $1,902.9 $1,807.0* 5
Pro forma operating earnings
Respiratory $97.7 $59.6* 64
Imaging as reported 90.6 88.0 3
Pharmaceuticals as reported 73.1 56.2 30
Total 261.4 203.8* 28
Corporate expense as reported (18.5) (18.2) (2)
Total $242.9 $185.6 31
* Includes unaudited pro forma adjustments to present results of the
Respiratory Group as if the August 28, 1997 acquisition of Nellcor Puritan
Bennett Incorporated (Nellcor) had occurred as of the beginning of 1997.
Operating earnings include certain adjustments, such as amortization of
goodwill and intangible assets, and additional depreciation expense.
Operating earnings exclude integration-related charges and the noncash
acquisition-related costs for the write-off of purchased research and
development, and charges related to the sale of Nellcor inventories, which
were stepped up to fair value in connection with the allocation of
purchase price. The pro forma financial information does not necessarily
reflect the results of operations that would have occurred had
Mallinckrodt and Nellcor operated as a combined entity during such
periods.
SOURCE Mallinckrodt Inc.
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http://www.prnewswire.com/comp/440950.html or fax,
800-758-5804, ext. 440950
CONTACT:
Barbara Abbett, 314-654-5230, or E-mail:
Communications@mkg.com, or Investor, Barbara Gould, 314-654-3190,
or E-mail: Invest@mkg.com, both of Mallinckrodt
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