Halyard Health, Inc. reported fourth quarter and full-year 2017 results.

"2017 was a strong year and I'm proud of our team's execution and accomplishments. Momentum in our Medical Device business continued as we accelerated our growth, increased the number of product launches and delivered earnings ahead of plan," said Joe Woody, Halyard chief executive officer. "With the divestiture of S&IP on track to close in early second quarter and our playbook for growth, we are well positioned to succeed in 2018. I'm confident about our outlook, and through strategic investments in product innovation, commercial excellence, and M&A we expect to be well positioned to capitalize on the opportunities ahead."

2017 Financial Highlights

• Fourth quarter continuing operations, or Medical Device sales, were $166 million, an 8 percent increase from the prior year. For the year, sales were $612 million, an 8 percent increase from 2016.

• Net income for the fourth quarter was $33 million, compared to $10 million in the prior year. Additionally, Medical Device operating profit for the fourth quarter increased 17 percent to $39 million.

• Fourth quarter diluted earnings per share totaled $0.69, compared to $0.21 a year ago. 2017 diluted earnings per share were $1.69, compared to $0.85 a year ago.

• Adjusted diluted earnings per share were $0.73, up 43 percent compared to the prior year. For the full year, adjusted diluted earnings per share were $2.35, up 18 percent from a year ago.

• For the year EBITDA was $183 million compared to $153 million in the prior year. Adjusted EBITDA for the year increased 7 percent to $226 million, compared to $211 million a year ago.

Operational and Business Highlights

• Accelerated transformation into a pure-play Medical Device business through the announced sale of Surgical and Infection Prevention - the transaction remains on track to close in early second quarter.

• Continued to invest in the R&D team and capabilities with nine new Medical Device products launched, finishing the year ahead of plan.

• Focused on establishing an enhanced organizational structure for a pure-play Medical Device business, strengthening the leadership team, including recent appointment of John Tushar, as President - Global Franchises.

Fourth Quarter 2017 Operating Results From Continuing Operations

Medical Device net sales totaled $166 million, an 8 percent increase compared to the fourth quarter last year. Performance was driven by solid demand across all product categories as volumes increased 9 percent, which was partially offset by 1 percent lower selling prices.

Operating loss was $3 million compared to a loss of $30 million in 2016. Volume growth and lower expenses related to excluded items helped drive performance. On an adjusted basis, operating profit was $7 million compared to a loss of $11 million in 2016.

As a result of the previously announced divestiture, the S&IP segment operating results are reflected as discontinued operations for all periods presented. Treating S&IP as discontinued operations results in significant shared overhead costs previously allocated to the S&IP business that are now included in continuing operations. Included in fourth quarter continuing operations are costs previously allocated to S&IP of $30 million in 2017 and $33 million in 2016.

Adjusted operating profit for the fourth quarter excludes $5 million of restructuring charges, $2 million for acquisition-related charges, $3 million for litigation matters and $5 million of intangible amortization expense, offset by $6 million for a change in internal policies, as the company begins the process of re-aligning its policies post-divestiture.

Adjusted EBITDA for the fourth quarter, excluding divestiture-related charges, restructuring charges, acquisition-related charges, policy changes and litigation expenses was $64 million, compared to $51 million in the prior year.

Full-Year 2017 Results From Continuing Operations

Medical Device net sales totaled $612 million, an 8 percent increase compared to 2016. Organic sales volumes increased 5 percent and Corpak-related sales contributed an additional 3 percent of volume growth. Performance was driven by solid demand across all four product categories.

Operating loss was $43 million, compared to a loss of $107 million in 2016. Performance was impacted by higher volume and lower expenses related to excluded items.

Shared overhead costs previously allocated to S&IP now included in continuing operations were $116 million in 2017 and $114 million in 2016.

Cash Flow and Balance Sheet

Cash from operations less capital expenditures, or free cash flow, for the quarter was $52 million compared to $38 million a year ago. For the year, free cash flow was $101 million compared to $160 million in the prior year. The decrease in 2017 was due primarily to higher capital spending and a lower year-over-year working capital benefit. At year-end 2017, the company's cash balance was $220 million.

Discontinued Operations

Fourth quarter net sales from discontinued operations were $262 million, a 2 percent increase, compared to the fourth quarter a year ago. Two percent volume growth was driven by continued strong demand for exam gloves and an increase in facial protection due to the cold and flu season. Volume growth was partially offset by 1 percent lower selling prices, concentrated in exam gloves. Adjusted net income for the quarter totaled $35 million, even compared to the prior year.

For the year, net sales of $1,013 million were 1 percent lower compared to 2016, on a constant currency basis. One percent volume growth was offset by 2 percent lower selling prices. Adjusted net income for 2017 was $122 million, compared to $128 million in the prior year.

2018 Key Planning Assumptions

The company expects to provide its 2018 financial outlook following the close of the Owens & Minor S&IP transaction. The formal closing activities are expected to occur in early second quarter.

The company provided the following key planning assumptions for continuing operations:

• Medical Device sales are expected to increase 4 to 6 percent, on a constant currency basis.

• We expect the foreign currency translation impact to be even compared to the prior year.

• The adjusted effective tax rate is anticipated to be between 25 and 27 percent, as the company anticipates the new U.S. tax regulations will have a positive impact on its adjusted effective tax rate.

• Net dis-synergies from the S&IP divestiture are expected to range between $15 to $20 million.