ST. LOUIS, Aug. 11 /PRNewswire/ -- Mallinckrodt Inc. (NYSE: MKG) today
reported fiscal year 1999 earnings from continuing operations of $173 million,
or $2.40 per share on a diluted basis. Net earnings for fiscal 1999 were
$196 million, or $2.72 per share, which included $23 million, or 32 cents per
share, from the after-tax gain realized on the sale of the industrial
chemicals business included in discontinued operations.
In fiscal 1998, the company reported earnings from continuing operations
of $130 million, or $1.77 per share, before charges related to the acquisition
and integration of respiratory-products company Nellcor Puritan Bennett (NPB).
With those charges, the company recorded a loss from continuing operations for
fiscal 1998 of $268 million, or $3.69 per share. The net loss for fiscal 1998
was $204 million, or $2.81 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.
Mallinckrodt's Chairman and CEO C. Ray Holman said, "Fiscal 1999 was a
good year for Mallinckrodt, with earnings exceeding expectations in all four
quarters. Several of our units turned in outstanding performances.
Contributing to the results were volume growth, strategic cost management and
continuous improvement initiatives." Cash earnings per share, defined as
earnings per share from continuing operations plus goodwill amortization, were
$3.58.
Mallinckrodt's net sales for fiscal 1999 were $2.6 billion, up 9 percent
over $2.4 billion reported for fiscal 1998. Excluding sales from businesses
divested and acquired in fiscal 1999 and 1998, and including sales from NPB
for the full year of fiscal 1998, pro forma sales growth was 5 percent. NPB
was acquired at the end of August 1997. Pro forma sales volume was up 6
percent offset by a 1 percentage point decline in pricing. Sales to customers
outside the United States accounted for $838 million, or 32 percent of total
company sales.
Fourth Quarter Performance
Net sales for the fourth quarter of fiscal 1999 increased 4 percent to
$678 million, compared with $655 million for the fourth quarter of fiscal
1998. Excluding sales of businesses divested and acquired in fiscal 1999 and
the effect of foreign currency changes, sales volume increased 5 percent.
Pricing impact was negligible.
Earnings from continuing operations for the fourth quarter of fiscal 1999
were $52 million, or 73 cents per share on a diluted basis, representing
increases of 19 percent and 22 percent, respectively, over $44 million, or
60 cents per share, last year before charges related to the integration of
NPB. With those charges, the company recorded earnings from continuing
operations in the fourth quarter of fiscal 1998 of $10 million, or 13 cents
per share.
Net earnings for the fourth quarter of fiscal 1999 were $53 million, or
74 cents per share. Net earnings for the fourth quarter of fiscal 1998 were
$72 million, or 98 cents per share, which included $62 million, or 85 cents
per share, from the after-tax gain realized on the sale of the catalyst
business and the related earnings from operations for the quarter, net of
taxes, all included in discontinued operations.
Business Overview
Mallinckrodt's Respiratory Group reported fourth-quarter sales of
$295 million, an increase of 3 percent over the $287 million reported in the
fourth quarter of fiscal 1998. Excluding sales from businesses divested and
acquired in the current fiscal year, sales growth was 5 percent. Volume
growth in Respiratory products was 8 percent; pricing declined 2 percentage
points, and the impact of foreign currency changes decreased sales growth by
1 percentage point. Respiratory operating earnings were $42 million, a
70 percent increase over the $25 million in the same quarter last year,
excluding prior-year charges related to the integration of NPB. Record sales
and earnings growth in pulse oximetry, supported by more than 50,000 shipments
of OEM modules in fiscal 1999, contributed to Respiratory's performance.
Ventilator sales continued at record levels driven by strong acceptance of the
840, the top-of-the-line critical care ventilator introduced in May 1998. The
strength in the pulse oximetry and ventilator areas was offset by lower
alternate care sales due to delayed new product introductions and uncertainty
regarding reimbursement in the sleep and portable ventilation products.
The Imaging Group reported a 2 percent increase in fourth-quarter sales of
$208 million, compared with $203 million in the fourth quarter last year.
Sales volume overall was flat with fiscal 1998; pricing added 2 percentage
points of sales growth, occurring mostly in radiopharmaceuticals. Imaging
operating earnings declined to $29 million, compared with $36 million reported
in the comparable period last year. The decline was primarily attributed to
increased administrative expenses and OPTISON(R) clinicals for the quarter.
The Pharmaceuticals Group reported fourth-quarter sales of $176 million,
6 percent higher than the $165 million recorded in the fourth quarter of
fiscal 1998. Sales volume contributed 5 percentage points of growth and
pricing added 1 percentage point of growth. Operating earnings for the group
were $30 million, a 12 percent increase over the $27 million reported in the
comparable period last year. Strong sales growth of both bulk and dosage
pharmaceuticals contributed to the earnings improvement.
Outlook
Reaffirming the earnings outlook for FY2000, Michael A. Rocca, senior vice
president and chief financial officer at Mallinckrodt, said, "We are
comfortable with an earnings per share consensus range of $2.50 to $2.60,
representing earnings growth of 4 to 8 percent for each quarter and for the
total year over the strong performance in fiscal '99."
Chairman and CEO Ray Holman added, "With our transformation to a specialty
medical products company virtually complete, we will focus on opportunities
to accelerate sales growth and continue strategic cost management to support
improved profitability."
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 1999 net sales of $2.6 billion. The
Mallinckrodt website address is http://www.mallinckrodt.com .
This news release contains forward-looking statements that involve risks
and uncertainties. These statements, which are set forth under the heading
"Outlook," 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.
For more information contact: Media, Barbara Abbett, 314-654-5230,
E-mail, Ccommu@mkg.com, or Investor, Barbara Gould, 314-654-3190, E-mail,
Invest@mkg.com, both of Mallinckrodt.
Mallinckrodt Inc.
Consolidated Statements of Operations
(In millions, except share and per share amounts)
Quarter Ended Year Ended
June 30, June 30,
1999 1998 1999 1998
Net sales....................$678.3 $655.3 $ 2,581.2 $ 2,367.0
Operating costs and expenses:
Cost of goods sold.........354.8 352.6 1,379.9 1,368.8
Selling, administrative
and general expenses......191.8 228.4 722.5 715.0
Purchased research
and development........... 306.3
Research and
development expenses...... 42.8 42.3 152.2 149.0
Other operating income, net (6.1) (1.6) (11.3) (9.1)
Total operating costs
and expenses................583.3 621.7 2,243.3 2,530.0
Operating earnings (loss).... 95.0 33.6 337.9 (163.0)
Interest and other
nonoperating income, net.... 1.3 1.7 1.5 14.8
Interest expense.............(20.5) (26.2) (85.0) (101.8)
Earnings (loss) from
continuing operations
before income taxes......... 75.8 9.1 254.4 (250.0)
Income tax
provision (benefit)......... 23.8 (.9) 81.5 18.4
Earnings (loss) from
continuing operations....... 52.0 10.0 172.9 (268.4)
Discontinued operations...... .7 61.9 23.3 72.4
Earnings (loss) before
cumulative effect
of accounting change........ 52.7 71.9 196.2 (196.0)
Cumulative effect of
accounting change........... (8.4)
Net earnings (loss).......... 52.7 71.9 196.2 (204.4)
Preferred stock dividends.... (.1) (.1) (.4) (.4)
Available for
common shareholders.........$52.6 $71.8 $195.8 $(204.8)
Basic earnings per common share:
Earnings (loss) from
continuing operations..... $.73 $.13 $2.41 $(3.69)
Discontinued operations.... .01 .85 .32 .99
Cumulative effect
of accounting change...... (.11)
Net earnings (loss)........$ .74 $ .98 $2.73 $(2.81)
Average common shares........70,963,26073,168,737 71,634,420 72,920,659
Diluted earnings
per common share:
Earnings (loss) from
continuing operations.....$ .73 $ .13 $2.40 $(3.69)
Discontinued operations.... .01 .85 .32 .99
Cumulative effect
of accounting change...... (.11)
Net earnings (loss)........$ .74 $ .98 $2.72 $(2.81)
Average common shares........71,408,67273,477,174 71,898,875 72,920,659
Actual shares
outstanding at
end of period............... 70,702,689 73,174,651
(See accompanying notes to financial results.)
Mallinckrodt Inc.
Consolidated Balance Sheets
(In millions)
June 30,
1999 1998
Assets
Current assets:
Cash and cash equivalents........................ $32.7 $55.5
Trade receivables, less allowances
of $17.9 in 1999 and $16.7 in 1998.............. 490.9 486.3
Inventories...................................... 530.3 470.0
Deferred income taxes............................ 54.7 95.2
Other current assets............................. 61.3 61.5
Net current assets of discontinued operations.... 4.8
Total current assets...............................1,169.9 1,173.3
Investments and other noncurrent assets,
less allowances of $8.6 in 1999 and $5.8 in 1998.. 67.2 154.5
Property, plant and equipment, net................. 870.7 894.9
Goodwill and other intangible assets, net..........1,545.3 1,633.4
Net noncurrent assets of discontinued operations... 12.4
Deferred income taxes.............................. 4.3 4.6
Total assets.......................................$3,657.4 $3,873.1
Liabilities and Shareholders' Equity
Current liabilities:
Short-term debt..................................$383.8 $311.4
Accounts payable................................. 221.2 215.0
Accrued liabilities.............................. 459.5 532.0
Income taxes payable............................. 77.3 122.3
Deferred income taxes............................ 1.2 1.4
Total current liabilities..........................1,143.0 1,182.1
Long-term debt, less current maturities............ 742.5 944.5
Deferred income taxes.............................. 363.0 396.2
Postretirement benefits............................ 166.5 169.2
Other noncurrent liabilities and deferred credits.. 182.0 175.2
Total liabilities..................................2,597.0 2,867.2
Total shareholders' equity.........................1,060.4 1,005.9
Total liabilities and shareholders' equity.........$ 3,657.4 $ 3,873.1
(See accompanying notes to financial results.)
Mallinckrodt Inc.
Consolidated Statements of Cash Flows
(In millions)
Year Ended June 30,
1999 1998
Cash Flows -- Operating Activities
Net earnings (loss)..................................$196.2 $(204.4)
Adjustments to reconcile net
earnings (loss) to net cash provided
(used) by operating activities:
Depreciation.......................................130.6 114.3
Amortization.......................................84.5 75.3
Postretirement benefits............................(2.6) 6.3
Gains on asset disposals...........................(39.7) (114.3)
Deferred income taxes..............................13.6 (75.8)
Write-off of purchased research and development.... 308.3
Sale of inventory stepped up
to fair value at acquisition...................... 75.4
Write-off of pre-operating costs................... 12.5
382.6 197.6
Changes in operating assets and liabilities:
Trade receivables..................................(9.2) (15.6)
Inventories........................................(62.2) (18.1)
Other current assets............................... 4.5 63.8
Accounts payable, accrued liabilities
and income taxes payable, net.....................(112.2) (15.8)
Net assets of discontinued operations.............. (.4)
Other noncurrent liabilities and deferred credits.. 8.1 30.6
Other, net.........................................(18.0) 1.3
Net cash provided by operating activities............193.6 243.4
Cash Flows -- Investing Activities
Capital expenditures.................................(116.9) (142.7)
Acquisition spending.................................(3.5) (1,790.9)
Proceeds from asset disposals........................75.4 308.2
Proceeds from redemption and sale of investments.....89.8 8.8
Purchase of investments and intangible assets........(11.5) (17.0)
Net cash provided (used) by investing activities.....33.3 (1,633.6)
Cash Flows -- Financing Activities
Increase (decrease) in notes payable.................(126.2) 279.5
Proceeds from long-term debt......................... 399.8
Payments on long-term debt...........................(8.1) (3.9)
Issuance of Mallinckrodt common stock................ 6.1 20.2
Acquisition of treasury stock........................(74.0) (9.7)
Dividends paid.......................................(43.9) (48.5)
Redemption of common stock purchase rights...........(3.6)
Net cash provided (used) by financing activities.....(249.7) 637.4
Decrease in cash and cash equivalents................(22.8) (752.8)
Cash and cash equivalents at beginning of year.......55.5 808.3
Cash and cash equivalents at end of year.............$32.7 $55.5
(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 twelve
months ended June 30, 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 twelve months ended June 30, 1998 included Nellcor
integration charges of $49.4 million, $33.8 million net of taxes, and
$68.6 million, $46.4 million net of taxes, respectively.
(b) The Company sold certain chemical additive product lines in the
second quarter of 1998, and recorded a gain on sale, net of taxes, of
$8.7 million in discontinued operations. In the fourth quarter of
1998, the Company sold its catalyst business and Aero Systems
division. The catalyst sale resulted in a gain, net of taxes, of
$60.2 million recorded in discontinued operations. No gain or loss
was recognized on the sale of the Aero Systems division, and there
were no earnings from operations net of $2.6 million of after-tax
acquisition accounting charges. Included in discontinued operations
for the twelve months ended June 30, 1998 are the earnings from
operations of the catalysts and chemical additives and Aero Systems
divisions, which included $11.4 million of after-tax earnings from
operations of the catalysts and chemical additives division, 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. 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, $23.3 million
net of taxes, which was included in discontinued operations for the
twelve months ended June 30, 1999. Earnings from operations were
zero for the one month of operations.
(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 twelve months ended June 30, 1998
excluded incremental shares related to employee stock options of
612,285. 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
(Dollars in millions)
Quarter Ended June 30, Year Ended June 30,
% %
1999 1998 Change 1999 1998 Change
Net sales
Respiratory...........$294.7 $286.9 3 $1,143.7 $990.5 15
Imaging............... 207.6 203.0 2 776.4 760.3 2
Pharmaceuticals.......176.0 165.4 6 661.1 616.2 7
$678.3 $655.3 4 $2,581.2 $2,367.0 9
Operating
earnings (loss)
Respiratory...........$42.4 $24.9 70 $140.1 $102.2 37
Imaging............... 28.7 35.8 (20) 119.3 123.8 (4)
Pharmaceuticals....... 30.2 27.0 12 103.3 83.2 24
101.3 87.7 16 362.7 309.2 17
Corporate expense..... (6.3) (4.7) (34) (24.8) (22.9) (8)
95.0 83.0 14 337.9 286.3 18
Acquisition and
integration
charges.............. (49.4) (449.3)
$95.0 $33.6 $337.9 $(163.0)
Mallinckrodt Inc.
Pro Forma Net Sales and Operating Earnings
(Dollars in millions)
Year Ended June 30,
%
1999 1998 Change
Pro forma net sales
Respiratory............................$1,143.7 $1,085.8* 5
Imaging as reported.................... 776.4 760.3 2
Pharmaceuticals as reported............ 661.1 616.2 7
$2,581.2 $2,462.3* 5
Pro forma operating earnings
Respiratory............................$140.1 $84.5* 66
Imaging as reported.................... 119.3 123.8 (4)
Pharmaceuticals as reported............ 103.3 83.2 24
362.7 291.5* 24
Corporate expense as reported.......... (24.8) (22.9) (8)
$337.9 $268.6* 26
* 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.mallinckrodt.com
Company News On-Call:
http://www.prnewswire.com/comp/440950.html or fax,
800-758-5804, ext. 440950
CONTACT:
Media Contact, Barbara Abbett, 314-654-5230,
E-mail, Ccommu@mkg.com, or Investor Contact, Barbara Gould,
314-654-3190, E-mail, Invest@mkg.com, both of Mallinckrodt
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