Covidien Reports Fourth-Quarter and Fiscal 2007 Results




    Fourth-quarter diluted GAAP earnings per share from continuing operations
were $0.07; excluding specified items, adjusted diluted earnings per share
from continuing operations were $0.63

    HAMILTON, BERMUDA, December 6 /CNW/ - Covidien Ltd. (NYSE:   COV; BSX: COV)
today reported results for the fourth quarter of fiscal 2007 (July - September
2007), the first quarter in which the Company operated independent of Tyco
International.

    Net sales rose 5% to $2.6 billion from $2.5 billion a year ago, led by
the Medical Devices and Imaging Solutions business segments. Sales growth was
driven by higher volume and new products. Favorable foreign exchange
contributed 2 percentage points to the sales increase. Strong double-digit
sales growth was posted internationally, fueled by Europe, Asia-Pacific and
Other Americas.

    Fourth-quarter gross margin of 48% was up 2 full percentage points from
that of the prior year. This substantial improvement reflected favorable
product mix and foreign exchange, as well as cost savings from manufacturing,
which more than offset higher costs for raw materials and transportation.

    Selling, general and administrative expenses were substantially higher
than in the year-ago fourth quarter. The increase was attributable to planned
growth in selling and marketing investments and higher administrative
expenses, primarily compensation and benefit costs, as well as costs to
separate from Tyco International. Research and Development (R&D) spending in
the quarter was well above that of the year before and represented 3.0% of
sales, versus 2.7% of sales last year.

    For the fourth quarter, the Company reported operating income of $156
million. Operating income included a $290 million non-cash charge primarily
for impairments of long-lived assets in the Imaging Solutions and Retail
Products segments, $32 million of restructuring charges and $5 million of
additional insurance recoveries related to Covidien's portion of the Tyco
International shareholder class action settlement. Excluding these three
specified items, fourth-quarter operating income would have been $473 million,
representing 18.2% of sales.

    The fourth-quarter effective tax rate of 71% reflected the goodwill
impairment charge, only a portion of which was tax deductible, and other
adjustments to legacy income tax liabilities. Excluding specified items, the
fourth-quarter tax rate was 27%.

    Fourth-quarter diluted GAAP earnings per share from continuing operations
of $0.07 included the following items: $0.52 relating to impairments of
long-lived assets, $0.04 for restructuring charges, $0.01 for other tax
matters that affected the effective tax rate and ($0.01) for the insurance
recoveries related to Covidien's portion of the Tyco International shareholder
class action settlement. Excluding these items, diluted earnings per share
from continuing operations were $0.63.

    For fiscal 2007, net sales of $10.2 billion were 5% above the $9.6
billion in the prior year, with favorable foreign exchange contributing 2
percentage points to the sales increase. Sales rose 2% in the United States
and 11% outside the U.S., with double-digit growth in Europe, Asia-Pacific and
Other Americas.

    The Company reported operating income of $438 million in fiscal 2007. The
2007 operating income included a $1.2 billion charge for Covidien's portion of
the Tyco International shareholder class action settlement, a $290 million
non-cash charge primarily for impairments of long-lived assets in the Imaging
Solutions and Retail Products segments, $58 million of restructuring charges
and $38 million of in-process R&D charges. Excluding these specified items,
fiscal 2007 operating income would have been $2.0 billion, representing 19.9%
of sales.

    Fiscal 2007 diluted GAAP loss per share from continuing operations of
($0.68) included the following items: $2.42 related to Covidien's portion of
the Tyco International shareholder class action settlement, $0.53 for the
impairments of long-lived assets, $0.31 for the loss on early extinguishment
of debt, $0.07 for restructuring charges, $0.06 for in-process R&D charges,
$0.03 for other tax matters that affected the effective tax rate and ($0.02)
for the impact of non-GAAP dilutive shares. Excluding these items, diluted
earnings per share from continuing operations were $2.72.

    "The sales results for the fourth quarter, which was our first
independent quarter following the separation from Tyco International, and for
fiscal 2007 were consistent with our expectations," said President and Chief
Executive Officer Richard J. Meelia. "Fourth-quarter sales growth was led by
strong performances in our Medical Devices and Imaging Solutions segments,
aided by new products and further recovery from last year's product-related
issues. Our International businesses again registered excellent sales gains,
reflecting the incremental investments we made in recent years to augment the
sales force and expand geographically.

    "For the fourth consecutive quarter, we delivered a significant
improvement in gross margin. On an adjusted basis, our operating margin for
fiscal 2007 was slightly below our expectations, due to an accelerated
investment in selling and marketing and some separation-related expenses. We
were also pleased to execute on a major objective by refinancing $2.75 billion
of debt after the quarter closed. We replaced a large portion of our
borrowings under an unsecured bridge loan with fixed rate notes," Mr. Meelia
said.

    "The entire Covidien organization played an integral part in our 2007
performance, as we successfully managed the separation from Tyco International
while meeting our operational expectations. The Company is in an excellent
position to strengthen our position as a global leader in the healthcare
industry," Mr. Meelia added.

    Results by business segment follow.

    Medical Devices sales climbed 9% in the fourth quarter to $1.6 billion
from $1.5 billion in the previous year. Sales growth was driven by new
products, volume and acquisitions, as well as by favorable foreign exchange,
which contributed 3 percentage points to the sales increase. Sales of
Endomechanical (laparoscopic instruments and stapling) were well above those
of a year ago, paced by Europe and Asia, where sales force expansion
contributed to the advance. Both Energy (vessel sealing, electrosurgery and
hardware) and Soft Tissue Repair (sutures, mesh and biosurgery products)
registered strong double-digit growth in the quarter.

    The Energy increase was due to vessel sealing and hardware products,
while Soft Tissue Repair benefited from higher sales of mesh and sutures.
Sales of Vascular (compression and vascular therapy) and SharpSafety (needles,
syringes, and sharps disposal) were both well ahead of those of a year ago.
Airway & Ventilation (airway management, ventilators, breathing systems, sleep
and inhalation therapy) sales rose in the quarter, due to a good performance
in International markets and the acquisition of Airox.

    For fiscal 2007, Medical Devices sales grew 8% to $6.2 billion from $5.7
billion a year ago, due primarily to higher sales of Endomechanical, Energy
and Soft Tissue Repair products. Favorable foreign exchange contributed 3
percentage points to the sales advance.

    Following the close of the quarter, the Company announced the acquisition
of Scandius Biomedical, Inc., a developer of devices for sports-related
surgeries. In addition, Covidien announced an agreement with Allergan, Inc. to
co-promote the Lap-Band(R) adjustable gastric banding system.

    Pharmaceutical Products sales increased 4% to $327 million from $314
million in the fourth quarter of last year. Growth was paced by Specialty
Chemicals, which posted sales well above those of a year ago, and by higher
sales of Active Pharmaceutical Ingredients (API). In Specialty Chemicals, the
quarterly sales advance was due to higher pharmaceutical sales in Europe and
increased laboratory chemicals sales in the U.S., while the API sales gain was
attributable to growth in narcotic products and bulk acetaminophen. These
increases more than offset a slight decline in Dosage Pharmaceuticals.

    For fiscal 2007, Pharmaceutical Products sales climbed 9% to $1.3 billion
from $1.2 billion last year. Sales growth was broad-based, with good gains
across all product lines.

    Imaging Solutions sales rose 11% to $252 million, compared with $228
million in the prior year's fourth quarter. Favorable foreign exchange
contributed 2 percentage points to the sales increase. Sales growth was paced
by a sizable gain for Radiopharmaceuticals, due to higher U.S. sales of
cardiology and oncology products, and somewhat increased sales of Contrast
Products, attributable to higher sales of delivery systems. Contrast agent
unit volume grew in the quarter, but sales were flat, due to significant
pricing declines.

    For fiscal 2007, Imaging Solutions sales climbed 8% to $942 million,
versus $870 million the year before. Favorable foreign exchange contributed 2
percentage points to the sales growth. The segment's 2007 sales increase was
fueled by a strong double-digit gain for Radiopharmaceuticals, reflecting
recovery from product-related issues in 2006.

    Medical Supplies sales decreased 1% to $250 million from $253 million in
the fourth quarter of the previous year. Higher sales of nursing care products
were more than offset by lower sales of Original Equipment Manufacturer (OEM)
products, including needles and pre-filled syringes, and the discontinuance of
a supply agreement.

    For fiscal 2007, sales of Medical Supplies, at $993 million, remained
relatively flat versus those of a year ago. Higher sales of nursing care
products and favorable foreign exchange countered the impact of a mid-year
2006 divestiture.

    Retail Products sales of $164 million in the fourth quarter were 23%
below last year's $213 million. The sales decline resulted primarily from
lower infant care volume, attributable to the planned withdrawal from several
low-margin, private-label contracts, coupled with greater price competition by
branded competitors.

    For fiscal 2007, sales of Retail Products declined 13% to $744 million
from $855 million a year ago.

    FISCAL 2008 OUTLOOK

    Consistent with prior guidance, the Company estimates sales growth for
the 2008 fiscal year will be in the 3% - 5% range, excluding the impact of
foreign exchange, or 4% - 6% including foreign exchange at current rates. Net
sales, including foreign exchange at current rates, are expected to grow 6% to
8% versus 2007 in the Medical Devices segment, 3% to 6% in Pharmaceutical
Products and 7% to 10% in Imaging Solutions. The Company expects sales in
Medical Supplies to be flat to down 3%, with Retail Products sales flat to
down 5%. Consistent with prior guidance, the operating margin is expected to
be in the 19% - 20% range and we anticipate the effective tax rate will be in
the 30% - 32% range for fiscal 2008, excluding the impact of one-time items.

    ABOUT COVIDIEN LTD.

    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 product lines in five
segments: Medical Devices, Pharmaceutical Products, Imaging Solutions, Medical
Supplies and Retail Products. With 2007 revenue of $10 billion, Covidien has
more than 43,000 employees worldwide in 57 countries, and its products are
sold in over 130 countries. Please visit www.covidien.com to learn more about
our business.

    CONFERENCE CALL AND WEBCAST

    The Company will hold a conference call for investors today, beginning at
8:30 a.m. ET. This call can be accessed three ways:

    --  Web - Go to Covidien's website at www.covidien.com. A replay of the
call will be available through December 13 at the same website.

    --  Telephone - The dial-in number for participants in the United States
is (800)-510-0219. For participants outside the United States, the dial-in
number is (617)-614-3451. The access code for both numbers is 92427674.

    --  Audio replay - The conference call will be available for replay,
beginning at noon ET on December 6, 2007, and ending at 11:59 p.m. on December
13, 2007. The dial-in number for participants in the United States is
(888)-286-8010. For participants outside the United States, the replay dial-in
number is (617)-801-6888. The replay access code for all callers is 43084639.

    NON-GAAP FINANCIAL MEASURES

    This press release contains financial measures, including adjusted
operating income, adjusted earnings per share and adjusted operating margin,
that 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 definition of these non-GAAP measures may differ from
similarly titled measures used by others.

    The non-GAAP financial measures used in this press release adjust for
specified items that can be highly variable or difficult to predict. The
Company generally uses these non-GAAP financial measures to facilitate
management's financial and operational decision-making, including evaluation
of Covidien's historical operating results, comparison to competitors'
operating results and determination of management incentive compensation.
These non-GAAP financial measures reflect an additional way of viewing aspects
of the Company's operations that, when viewed with GAAP results and the
reconciliations to corresponding GAAP financial measures, may provide a more
complete understanding of factors and trends affecting Covidien's business.

    Because non-GAAP financial measures exclude the effect of items that will
increase or decrease the Company's reported results of operations, management
strongly encourages investors to review the Company's consolidated financial
statements and publicly filed reports in their entirety. A reconciliation of
the non-GAAP financial measures to the most directly comparable GAAP financial
measures is included in the tables accompanying this release.

    The Company presents its operating margin 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.

    FORWARD-LOOKING STATEMENTS

    Any statements contained in this press release 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, risks
and uncertainties relating to the integration of businesses we have acquired
or may acquire in the future, changing technologies, product development and
market acceptance of our products, the cost and pricing of our products,
manufacturing, competition, customers' capital spending and government funding
policies, changes in governmental regulations, the use and protection of
intellectual property rights, litigation and exposure to foreign currency
fluctuations. These and other factors are identified and described in more
detail in our filings with the SEC. We disclaim any obligation to update these
forward-looking statements other than as required by law.

    
                                Covidien Ltd.
              Consolidated and Combined Statements of Operations
           Quarters Ended September 28, 2007 and September 29, 2006
                 (dollars in millions, except per share data)

                                                 Quarters Ended
                                       -----------------------------------
                                                 Percent           Percent
                                       September  of Net September  of Net
                                        28, 2007  Sales   29, 2006  Sales
                                       ----------------- -----------------

    Net sales                          $  2,601   100.0% $  2,481   100.0%
    Cost of products sold                 1,354    52.1%    1,341    54.1%
                                       ---------         ---------
       Gross profit                       1,247    47.9%    1,140    45.9%

    Selling, general and
     administrative expenses                697    26.8%      520    21.0%
    Research and development expenses        77     3.0%       68     2.7%
    In-process research and
     development charges                      -     0.0%       60     2.4%
    Class action settlement, net of
     insurance recoveries                    (5)   -0.2%        -     0.0%
    Impairments of long-lived assets        290    11.1%        -     0.0%
    Restructuring and other charges,
     net                                     32     1.2%        -     0.0%
    (Gain) on divestiture                     -     0.0%       (3)   -0.1%
                                       ---------         ---------
       Operating income                     156     6.0%      495    20.0%

    Interest expense                         63     2.4%       40     1.6%
    Interest income                          (8)   -0.3%       (9)   -0.4%
    Other expense, net                      (15)   -0.6%        9     0.4%
                                       ---------         ---------
       Income from continuing
        operations before income taxes      116     4.5%      455    18.3%

    Income taxes                             82     3.2%      120     4.8%
                                       ---------         ---------
       Income from continuing
        operations                           34     1.3%      335    13.5%

    (Income) from discontinued
     operations, net of income taxes          -     0.0%       (5)   -0.2%
                                       ---------         ---------
       Net income                      $     34     1.3% $    340    13.7%
                                       ---------         ---------


    Basic earnings per share (1)
       Income from continuing
        operations                     $   0.07          $   0.68
       (Income) from discontinued
        operations                            -             (0.01)
       Net income                          0.07              0.69

    Diluted earning per share (1)
       Income from continuing
        operations                     $   0.07          $   0.68
       (Income) from discontinued
        operations                            -             (0.01)
       Net income                          0.07              0.69

    Weighted-average number of shares
     outstanding (1)
       Basic                                497               497
       Diluted                              500               497


    ----------------------------------

    (1) Following the separation from Tyco International, Covidien had 497
     million common shares outstanding. This amount is being utilized to
     calculate earnings per share for the periods prior to the Separation.
     The same number of shares has been used to calculate diluted earnings
     per share and basic earnings per share for periods prior to the
     Separation because there were no common shares of Covidien publicly
     traded prior to July 2, 2007, and no Covidien restricted shares nor
     share options were outstanding prior to the Separation.
    

    
                                Covidien Ltd.
                           Non-GAAP Reconciliations
           Quarters Ended September 28, 2007 and September 29, 2006
                 (dollars in millions, except per share data)

                                   Quarter Ended September 28, 2007
                             ---------------------------------------------
                                       Income from              Diluted
                                        continuing              earnings
                                        operations              per share
                                         before    Income from    from
                             Operating   income     continuing  continuing
                               income     taxes     operations  operations
                             --------- ----------- ----------- -----------

    GAAP                     $    156  $      116  $       34  $     0.07
    Adjustments:
      Class action
       settlement, net of
       insurance recoveries        (5)         (5)         (5)      (0.01)
      Impairments of long-
       lived assets (1)           290         290         262        0.52
      Restructuring and
       other charges, net
       (2)                         32          32          20        0.04
      Tax matters                                           4        0.01
                             --------- ----------- -----------
    As adjusted              $    473  $      433  $      315        0.63
                             --------- ----------- -----------


    ------------------------


    (1) We recorded asset impairment charges of $290 million, primarily
     related to a goodwill impairment charge of $256 million, within our
     Retail Products segment, and a non-amortizable trademark impairment
     of $33 million, within our Imaging Solutions segment.

    (2) Restructuring charges of $32 million related primarily to
     severance costs and asset impairment charges within our Medical
     Devices segment.



                                   Quarter Ended September 29, 2006
                             ---------------------------------------------
                                       Income from              Diluted
                                        continuing              earnings
                                        operations              per share
                                         before    Income from    from
                             Operating   income     continuing  continuing
                               income     taxes     operations  operations
                             --------- ----------- ----------- -----------

    GAAP                     $    495  $      455  $      335  $     0.68
    Adjustments:
      In-process research
       and development
       charges (1)                 60          60          60        0.12
      (Gain) on divestiture        (3)         (3)         (2)          -
      Tax matters (2)                                      18        0.04
                             --------- ----------- -----------
    As adjusted              $    552  $      512  $      411        0.83
                             --------- ----------- -----------


    ------------------------


    (1) The Medical Devices segment recorded in-process research and
     development charges of $49 million in connection with the acquisition
     of 100% of Confluent Surgical, Inc. and $11 million in connection
     with the acquisition of 50% of Airox S.A.

    (2) Our tax rate was negatively impacted by $18 million, which
     primarily consists of tax and interest related to federal, state and
     non-U.S. tax audit activity.
    

    
                                Covidien Ltd.
                        Segment and Geographical Sales
           Quarters Ended September 28, 2007 and September 29, 2006
                            (dollars in millions)

                                          Quarters Ended
                         -------------------------------------------------
                                   September         Percent
                         September    29,    Percent  change   Operational
                          28, 2007  2006(2)   change  currency    growth
                         --------- --------- ------- --------- -----------

    Medical Devices (1)
     United States       $     705 $     666      6%        0%          6%
     Non-U.S.                  903       807     12%        6%          6%
                         --------- ---------
                             1,608     1,473      9%        3%          6%

    Pharmaceutical
     Products (1)
     United States             266       260      2%        0%          2%
     Non-U.S.                   61        54     13%        6%          7%
                         --------- ---------
                               327       314      4%        1%          3%

    Imaging Solutions
     (1)
     United States             179       162     10%        0%         10%
     Non-U.S.                   73        66     11%        8%          3%
                         --------- ---------
                               252       228     11%        2%          8%

    Medical Supplies (1)
     United States             223       227     -2%        0%         -2%
     Non-U.S.                   27        26      4%        8%         -4%
                         --------- ---------
                               250       253     -1%        1%         -2%

    Retail Products (1)
     United States             164       213    -23%        0%        -23%
     Non-U.S.                    -         -      0%        0%          0%
                         --------- ---------
                               164       213    -23%        0%        -23%

    Covidien Ltd. (1)
     United States           1,537     1,528      1%        0%          1%
     Non-U.S.                1,064       953     12%        6%          5%
                         --------- ---------
                         $   2,601 $   2,481      5%        2%          2%



    --------------------

    (1) Sales to external customers are reflected in the regions based on
     the location of the sales force executing the transaction.

    (2) Certain geographic sales have been reclassified to conform to
     current year presentation.
    

    
                                Covidien Ltd.
                          Select Product Line Sales
           Quarters Ended September 28, 2007 and September 29, 2006
                            (dollars in millions)

                                          Quarters Ended
                         -------------------------------------------------
                                                     Percent
                         September September Percent  change   Operational
                          28, 2007  29, 2006  change  currency    growth
                         --------- --------- ------- --------- -----------

    Medical Devices
     Endomechanical (1)  $     479 $     443      8%        4%          4%
     Soft Tissue Repair
      (2)                      127       110     15%        5%         10%
     Energy (3)                169       135     25%        3%         22%
     Oximetry and
      Monitoring (4)           150       145      3%        3%          1%
     Airway and
      Ventilation (5)          202       192      5%        4%          2%
     Vascular (6)              127       117      9%        2%          7%
     SharpSafety (7)           119       109      9%        2%          7%
     Clinical Care (8)          97        93      4%        3%          1%

    Imaging Solutions
     Radiopharmaceuticals
      (9)                $     124 $     105     18%        3%         15%
     Contrast (10)             128       123      4%        2%          2%



    ---------------------

    (1) Endomechanical includes our laparoscopic instruments and surgical
     staplers.

    (2) Soft Tissue Repair includes our suture products, mesh products and
     biosurgery products.

    (3) Energy includes our vessel sealing products, electrosurgical
     products, ablation products and related capital equipment.

    (4) Oximetry and Monitoring includes our sensors and monitors products
     and our temperature management products.

    (5) Airway and Ventilation includes our airway products, ventilator
     products, breathing systems, sleep products and inhalation therapy
     products.

    (6) Vascular includes our compression products and vascular therapy
     products.

    (7) SharpSafety includes our needles and syringes products and our
     sharps disposable products.

    (8) Clinical Care includes our urology products, enteral feeding
     products and other advanced woundcare products.

    (9) Radiopharmaceuticals includes our radioactive isotopes and
     associated pharmaceutical products used for the diagnosis and
     treatment of disease.

    (10) Contrast includes our contrast delivery systems and contrast
     agents.
    

    
                                Covidien Ltd.
              Consolidated and Combined Statements of Operations
         Fiscal Years Ended September 28, 2007 and September 29, 2006
                 (dollars in millions, except per share data)

                                                    Fiscal Years
                                          --------------------------------
                                                   Percent         Percent
                                                    of Net          of Net
                                            2007    Sales   2006    Sales
                                          ---------------- ---------------

    Net sales                             $10,170   100.0% $9,647   100.0%
    Cost of products sold                   5,333    52.4%  5,161    53.5%
                                          --------         -------
       Gross profit                         4,837    47.6%  4,486    46.5%

    Selling, general and administrative
     expenses                               2,537    24.9%  2,081    21.6%
    Research and development expenses         274     2.7%    262     2.7%
    In-process research and development
     charges                                   38     0.4%     63     0.7%
    Class action settlement, net of
     insurance recoveries                   1,202    11.8%      -     0.0%
    Impairments of long-lived assets          290     2.9%      -     0.0%
    Restructuring and other charges, net       58     0.6%      -     0.0%
    (Gain) on divestitures, net                 -     0.0%    (48)   -0.5%
                                          --------         -------
       Operating income                       438     4.3%  2,128    22.1%

    Interest expense                          188     1.8%    171     1.8%
    Interest income                           (36)   -0.4%    (32)   -0.3%
    Other expense, net                        135     1.3%     15     0.2%
                                          --------         -------
       Income from continuing operations
        before income taxes                   151     1.5%  1,974    20.5%

    Income taxes                              488     4.8%    504     5.2%
                                          --------         -------
       (Loss) income from continuing
        operations                           (337)   -3.3%  1,470    15.2%

    Loss from discontinued operations,
     net of income taxes                        5     0.0%    315     3.3%
                                          --------         -------
       Net (loss) income                  $  (342)   -3.4% $1,155    12.0%
                                          --------         -------


    Basic earnings per share (1)
       (Loss) income from continuing
        operations                        $ (0.68)         $ 2.96
       Loss from discontinued operations     0.01            0.63
       Net (loss) income                    (0.69)           2.33

    Diluted earning per share (1)
       (Loss) income from continuing
        operations                        $ (0.68)         $ 2.96
       Loss from discontinued operations     0.01            0.63
       Net (loss) income                    (0.69)           2.33

    Weighted-average number of shares
     outstanding (1)
       Basic                                  497             497
       Diluted                                497             497


    -------------------------------------

    (1) Following the separation from Tyco International, Covidien had 497
     million common shares outstanding. This amount is being utilized to
     calculate earnings per share for the periods prior to the Separation.
     The same number of shares has been used to calculate diluted earnings
     per share and basic earnings per share for periods prior to the
     Separation because there were no common shares of Covidien publicly
     traded prior to July 2, 2007, and no Covidien restricted shares nor
     share options were outstanding prior to the Separation.
    

    
                                Covidien Ltd.
                           Non-GAAP Reconciliations
         Fiscal Years Ended September 28, 2007 and September 29, 2006
                 (dollars in millions, except per share data)

                                           Fiscal Year 2007
                             ---------------------------------------------
                                                                Diluted
                                       Income from               (loss)
                                        continuing   (Loss)     earnings
                                        operations   income     per share
                                         before       from        from
                             Operating   income     continuing  continuing
                               income     taxes     operations  operations
                             --------- ----------- ----------- -----------

    GAAP                     $    438  $      151  $     (337) $    (0.68)
    Adjustments:
      In-process research
       and development
       charges (1)                 38          38          30        0.06
      Class action
       settlement, net of
       insurance recoveries
       (2)                      1,202       1,202       1,202        2.42
      Impairments of long-
       lived assets (3)           290         290         262        0.53
      Restructuring and
       other charges, net
       (4)                         58          58          37        0.07
      Loss on the early
       extinguishment of
       debt (5)                               155         152        0.31
      Tax matters (6)                                      16        0.03
      Impact of non-GAAP
       dilutive shares (7)                                          (0.02)
                             --------- ----------- -----------
    As adjusted              $  2,026  $    1,894  $    1,362        2.72
                             --------- ----------- -----------


    ------------------------


    (1) Our Medical Devices segment recorded an in-process research and
     development charge of $30 million in connection with the acquisition
     of intellectual property from Sorbx, LLC. In addition, our Medical
     Devices segment recorded an in-process research and development
     charge of $8 million in connection with the acquisition of the
     remaining outstanding shares of Airox S.A.

    (2) We were allocated a net charge of $1,202 million from Tyco
     International for our portion of Tyco International's class action
     settlement. This amount is comprised of our portion of the class
     action settlement of $1,249 million, net of our portion of the
     related insurance recovery of $47 million.

    (3) We recorded asset impairment charges of $290 million, primarily
     related to a goodwill impairment charge of $256 million, within our
     Retail Products segment, and a non-amortizable trademark impairment
     of $33 million, within our Imaging Solutions segment.

    (4) Restructuring charges of $58 million related primarily to
     severance costs and asset impairment charges within our Medical
     Devices segment.

    (5) We recorded a loss on the early extinguishment of debt of $155
     million, of which $146 million was allocated to us by Tyco
     International. The loss on the early extinguishment of debt was
     included in "Other expense, net" in our Consolidated Statement of
     Operations.

    (6) Our tax rate was negatively impacted by $16 million, which
     consists of certain tax costs incurred in connection with our
     separation from Tyco International and other adjustments to legacy
     income tax liabilities, partially offset by the release of deferred
     tax valuation allowances related to changes in non-U.S. tax law.

    (7) We have 497 million GAAP basic and diluted weighted-average shares
     outstanding for fiscal 2007. There are no dilutive shares outstanding
     for fiscal 2007 as we have a GAAP loss from continuing operations and
     an increase in weighted-average shares outstanding would have a anti-
     dilutive effect. For our non-GAAP income from continuing operations
     we had an incremental dilutive effect of 3 million shares or
     weighted-average shares outstanding of 500 million shares. The impact
     of the non-GAAP dilutive shares was a decrease of $0.02 per share.


                                           Fiscal Year 2006
                             ---------------------------------------------
                                       Income from              Diluted
                                        continuing              earnings
                                        operations              per share
                                         before    Income from    from
                             Operating   income     continuing  continuing
                               income     taxes     operations  operations
                             --------- ----------- ----------- -----------

    GAAP                     $  2,128  $    1,974  $    1,470  $     2.96
    Adjustments:
      In-process research
       and development
       charges (1)                 63          63          63        0.13
      (Gain) on divestiture
       (2)                        (48)        (48)        (38)      (0.08)
      Tax matters (3)                                      25        0.05
                             --------- ----------- -----------
    As adjusted              $  2,143  $    1,989  $    1,520        3.06
                             --------- ----------- -----------


    ------------------------


    (1) The Medical Devices segment recorded in-process research and
     development charges of $49 million in connection with the acquisition
     of 100% of Confluent Surgical, Inc., $11 million in connection with
     the acquisition of 50% of Airox S.A. and $3 million in connection
     with the acquisition of over 90% of Floreane Medical Implants, S.A.

    (2) (Gain) of $48 million is primarily related to the sale of the
     Radionics product line within the Medical Devices segment.

    (3) Our tax rate was negatively impacted by $25 million, which
     primarily consists of tax and interest related to federal, state and
     non-U.S. tax audit activity.
    

    
                                Covidien Ltd.
                        Segment and Geographical Sales
         Fiscal Years Ended September 28, 2007 and September 29, 2006
                            (dollars in millions)

                                             Fiscal Years
                            ----------------------------------------------
                                                     Percent
                                             Percent  change   Operational
                              2007   2006(2)  change  currency    growth
                            ------- -------- ------- --------- -----------

    Medical Devices (1)
     United States          $ 2,722 $  2,608      4%        0%          4%
     Non-U.S.                 3,439    3,103     11%        5%          6%
                            ------- --------
                              6,161    5,711      8%        3%          5%

    Pharmaceutical Products
     (1)
     United States            1,104    1,018      8%        0%          8%
     Non-U.S.                   226      201     12%        6%          6%
                            ------- --------
                              1,330    1,219      9%        1%          8%

    Imaging Solutions (1)
     United States              671      633      6%        0%          6%
     Non-U.S.                   271      237     14%        8%          6%
                            ------- --------
                                942      870      8%        2%          6%

    Medical Supplies (1)
     United States              887      894     -1%        0%         -1%
     Non-U.S.                   106       98      8%        8%          0%
                            ------- --------
                                993      992      0%        1%         -1%

    Retail Products (1)
     United States              744      855    -13%        0%        -13%
     Non-U.S.                     -        -      0%        0%          0%
                            ------- --------
                                744      855    -13%        0%        -13%

    Covidien Ltd. (1)
     United States            6,128    6,008      2%        0%          2%
     Non-U.S.                 4,042    3,639     11%        6%          6%
                            ------- --------
                            $10,170 $  9,647      5%        2%          3%



    -------------------------------

    (1) Sales to external customers are reflected in the regions based on
     the location of the sales force executing the transaction.

    (2) Certain geographic sales have been reclassified to conform to
     current year presentation.
    

    
                                Covidien Ltd.
                          Select Product Line Sales
         Fiscal Years Ended September 28, 2007 and September 29, 2006
                            (dollars in millions)

                                              Fiscal Years
                               -------------------------------------------
                                                     Percent
                                             Percent  change   Operational
                                2007   2006   change  currency    growth
                               ------ ------ ------- --------- -----------

    Medical Devices
     Endomechanical (1)        $1,858 $1,727      8%        3%          4%
     Soft Tissue Repair (2)       494    421     17%        5%         13%
     Energy (3)                   629    523     20%        3%         17%
     Oximetry and Monitoring
      (4)                         597    559      7%        2%          5%
     Airway and Ventilation
      (5)                         766    730      5%        3%          2%
     Vascular (6)                 482    454      6%        1%          5%
     SharpSafety (7)              461    430      7%        1%          6%
     Clinical Care (8)            372    352      6%        3%          3%

    Imaging Solutions
     Radiopharmaceuticals (9)  $  476 $  422     13%        2%         10%
     Contrast (10)                466    448      4%        2%          2%



    ---------------------------------

    (1) Endomechanical includes our laparoscopic instruments and surgical
     staplers.

    (2) Soft Tissue Repair includes our suture products, mesh products and
     biosurgery products.

    (3) Energy includes our vessel sealing products, electrosurgical
     products, ablation products and related capital equipment.

    (4) Oximetry and Monitoring includes our sensors and monitors products
     and our temperature management products.

    (5) Airway and Ventilation includes our airway products, ventilator
     products, breathing systems, sleep products and inhalation therapy
     products.

    (6) Vascular includes our compression products and vascular therapy
     products.

    (7) SharpSafety includes our needles and syringes products and our
     sharps disposable products.

    (8) Clinical Care includes our urology products, enteral feeding
     products and other advanced woundcare products.

    (9) Radiopharmaceuticals includes our radioactive isotopes and
     associated pharmaceutical products used for the diagnosis and
     treatment of disease.

    (10) Contrast includes our contrast delivery systems and contrast
     agents.
    




For further information:

For further information: Covidien Ltd. Eric Kraus, 508-261-8305 Senior
Vice President Corporate Communications eric.kraus@covidien.com or Coleman
Lannum, CFA, 508-452-4343 Vice President Investor Relations
cole.lannum@covidien.com or Bruce Farmer, 508-452-4372 Director Financial
Communications bruce.farmer@covidien.com or Wayde McMillan, 508-452-4387
Director Investor Relations wayde.mcmillan@covidien.com

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COVIDIEN LTD.

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