NEW YORK--(EON: Enhanced Online News)--Covidien (NYSE: COV), a leading global provider of healthcare products, today outlined the key strategic initiatives, growth opportunities and innovations that are expected to drive the Company’s growth in 2014 and beyond at a meeting held here for the investment community.
“We will use our strong cash flow to fund business expansion, while remaining committed to return at least 50% of our free cash flow to shareholders through dividends and share repurchases.”
Chairman, President and CEO José (Joe) E. Almeida spoke about Covidien’s plans to address the changing healthcare landscape and the Company’s evolving strategies, including broaden innovation focus, portfolio and investment opportunities, emerging markets and operational leverage.
“Despite the challenging external environment, we are delivering a very solid performance in 2013,” Almeida said. “Our focus on growth, leverage and capital allocation will be the drivers of our future performance. We will make further investments to expand our capabilities, particularly in emerging markets, and to capitalize on the market opportunities across our business.
“We are evolving our commercial model, offering value-added services, and launching a steady stream of new products in all product lines. Our strategic investment opportunities, combined with additional portfolio management activities, will accelerate our growth,” he added. “We will use our strong cash flow to fund business expansion, while remaining committed to return at least 50% of our free cash flow to shareholders through dividends and share repurchases.”
Chief Financial Officer Charles Dockendorff provided an outlook for fiscal 2014. The Company estimates that net sales in the 2014 fiscal year will increase 2% to 5% versus 2013 net sales. Net sales are expected to increase 2% to 5% versus 2013 in the Medical Devices segment and be about even with 2013 net sales in Medical Supplies. All sales growth rates assume current foreign exchange rates.
Excluding the impact of one-time items, the operating margin is expected to be in the 21.5% to 22.5% range, and Covidien anticipates the effective tax rate will be in the 16.0% to 17.0% range for fiscal 2014. In addition, the Company is targeting a dividend payout ratio in excess of 35% over time and is committed to achieving a payout ratio of at least 30% within the next 12 months.
Individuals who were unable to attend the meeting in person may view a replay of the presentations at Covidien’s website: http://investor.covidien.com. Presentation materials are also available at the same website.
Covidien is a leading global healthcare products company that creates innovative medical solutions for better patient outcomes and delivers value through clinical leadership and excellence. Covidien manufactures, distributes and services a diverse range of industry-leading products in medical devices and supplies. With 2012 revenue of $9.9 billion, Covidien has 38,000 employees worldwide in 70 countries, and its products are sold in over 140 countries. Please visit www.covidien.com to learn more about our business.
NON-GAAP FINANCIAL MEASURES
This press release contains financial measures, including adjusted operating margin and free cash flow, which are considered “non-GAAP” financial measures under applicable Securities & Exchange Commission rules and regulations. These non-GAAP financial measures should be considered supplemental to and not a substitute for financial information prepared in accordance with generally accepted accounting principles. The Company’s definition of these non-GAAP measures may differ from similarly titled measures used by others.
The Company presents its operating margin and effective tax rate forecast before special items to give investors a perspective on the expected underlying business results. Because the Company cannot predict the amount and timing of such items and the associated charges or gains that will be recorded in the Company’s financial statements, it is difficult to include the impact of those items in the forecast.
Free cash flow is defined as net cash provided by continuing operating activities less capital expenditures.
Any statements contained in this communication that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on our management's current beliefs and expectations, but are subject to a number of risks, uncertainties and changes in circumstances, which may cause actual results or Company actions to differ materially from what is expressed or implied by these statements. The factors that could cause actual future results to differ materially from current expectations include, but are not limited to, our ability to effectively introduce and market new products or keep pace with advances in technology, the reimbursement practices of a small number of large public and private insurers, cost-containment efforts of customers, purchasing groups, third-party payors and governmental organizations, intellectual property rights disputes, complex and costly regulation, including healthcare fraud and abuse regulations and the Foreign Corrupt Practices Act, manufacturing or supply chain problems or disruptions, rising commodity costs, recalls or safety alerts and negative publicity relating to Covidien or its products, product liability losses and other litigation liability, divestitures of some of our businesses or product lines, our ability to execute strategic acquisitions of, investments in or alliances with other companies and businesses, competition, risks associated with doing business outside of the United States, foreign currency exchange rates and environmental remediation costs. These and other factors are identified and described in more detail in our Annual Report on Form 10-K for the fiscal year ended September 28, 2012, and in subsequent filings with the SEC. We disclaim any obligation to update these forward-looking statements other than as required by law.