Covidien plc. (COV)

COV 
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Covidien plc (COV)

Citi 2013 Global Healthcare Conference

February 26, 2013 3:00 pm ET

Executives

Coleman N. Lannum - Vice President of Investor Relations

Charles J. Dockendorff - Chief Financial Officer and Executive Vice President

Analysts

Matthew J. Dodds - Citigroup Inc, Research Division

Presentation

Matthew J. Dodds - Citigroup Inc, Research Division

This is Matthew Dodds with Citigroup, for those of you on the webcast. And it is my pleasure to introduce once again for the Citi healthcare conference, Covidien. We have with us today Chuck Dockendorff, who's Executive Vice President and Chief Financial Officer; and Cole Lannum, Vice President, Investor Relations Officer. Cole was supposed to bring the pro forma slides of the 2 separate businesses, but I think he didn't get them done in time, so we're going to do full fireside Q&As through the session. So I definitely need some audience help, if I look like I start to flail about 20 minutes in, but I did have a few. So again, I encourage participation, and, Chuck and Cole, thanks for coming.

Coleman N. Lannum

Absolutely. Thank you.

Matthew J. Dodds - Citigroup Inc, Research Division

Yes. No problem.

Question-and-Answer Session

Matthew J. Dodds - Citigroup Inc, Research Division

Okay, so the first question I've been forced into asking, because I forgot in the last couple, we call it the Medtronic question. I know you don't give forward guidance -- or talk about the current quarter, so I'll have to wordsmith just a little bit. When you look at Europe and the way Europe works, my assumption has been, for some countries, there's a bit of a kind of "running out of gas" scenario towards the end of the year where they kind of push out procedures, they run out of budget and it kind of goes into early into the next calendar year. And then when you get there and some of the money comes in, you see kind of a nice -- or a decent rebound in the beginning of the year. When you gave your guidance for -- your fiscals was a little bit off, but when you gave your guidance looking at 2013 in Europe, I'm pretty sure you said stable, maybe slightly worse. Is that the way to characterize your thinking...

Charles J. Dockendorff

More of the same, more of what it's been. That's kind of what we felt about it, which is relatively flat.

Matthew J. Dodds - Citigroup Inc, Research Division

So looking at that, do you feel there's any skew in the year? Do you feel like the beginning of the year starts better, the end starts worse? Is there sort of anything to -- not you in particular, but a surprise of someone else that the beginning of the year doesn't start well?

Charles J. Dockendorff

No. I think that, typically, at the end of our fiscal year, which is September, you do have a little bit of a runoff in type of capital equipment sales and some of those things that salespeople are working on for a while, and contracts, some of the energy-based devices that have some capital components to it. There certainly is a subtle push in that as salespeople are trying to hit their quota in the end of the year and hit targets. And typically, as we go over to our new fiscal year, you would see a little lower sales volume in those bigger ticket items. But other than that, our business is pretty steady. The single-use disposable, for the most part, so it does stay pretty constant and pretty level for that period. We do have a little bit of seasonality in our international sales. Our second quarter is typically a little bit better, which would be the January quarter, and we've seen that historically but nothing that is dramatically, you would say, "Wow, that's a big change." I think it has something to do with vacations in the summer, whatever, a little bit. But I think from our standpoint, we're seeing Europe and all of that area pretty much the way it has been. We've got pockets of our business that are doing really well in Europe. Those products like energy and neurovascular, those products are still doing well even in a difficult environment, with the austerity programs going on and all of that. Other parts of the business are relatively flat. And you see that the government is trying to come out and do a little bit more on pricing, on tenders and things like that, but we're able to work around those and work with the governments to get through those issues. But for the most part, we're expecting Europe to be in kind of that status for a while. Just yesterday, we saw on the papers the whole issue over in Italy, so anti-austerity and what's going to happen there, more uncertainty. But for the most part, we feel like Europe is still going to be relatively -- I don't want to stay stable, but flat year-over-year until they can seem to solve their problems or the economy gets better and they begin to work their way out of some of those situations.

Coleman N. Lannum

And let me add one thing too, Matt, this might help as well. Recall that we reported our first quarter results in the fourth week of January. And on that call, we, across the board, raised guidance for all of our businesses on a revenue basis. And obviously, we took all of the effects that we knew at that time in account. So do understand that we do kind of see through some of these things. And while you're always going to see day-to-day, week-to-week, month-to-month fluctuations, the underlying trend has been relatively steady for us really for the last couple of years.

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