The Company provides adjusted net earnings and adjusted net earnings per share because St. Jude Medical management believes that in order to properly understand the Company’s short-term and long-term financial trends, investors may wish to consider the impact of certain adjustments (such as in-process research and development charges, impairment charges, restructuring charges, litigation charges or litigation reserve adjustments and income tax adjustments). These adjustments result from facts and circumstances (such as business development activities, restructuring activities, asset impairment events or developments, settlements and other developments relating to litigation and resolution of audits by tax authorities) that vary in frequency and impact on the Company’s results of operations. St. Jude Medical management uses adjusted net earnings and adjusted net earnings per share to forecast and evaluate the operational performance of the Company as well as to compare results of current periods to prior periods on a consolidated basis.
Non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. Investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
St. Jude Medical’s fourth quarter and full-year 2008 earnings call can be heard live today beginning at 7 a.m. CDT (also archived for 90 days) on the following website:
| St. Jude Medical, Inc. Global Headquarters One Lillehei Plaza St. Paul, MN 55117-9913 USA Tel 651 483 2000 www.sjm.com |
St. Jude Medical, Inc.
Condensed Consolidated Statements of Earnings
(in thousands, except per share amounts)
(Unaudited)
| | Three Months Ended | | Year Ended | |
| | January 3, 2009 | | December 29, 2007 | | January 3, 2009 | | December 29, 2007 | |
Net sales | | $ | 1,132,617 | | $ | 1,018,123 | | $ | 4,363,251 | | $ | 3,779,277 | |
Cost of sales | | | | | | | | | | | | | |
Cost of sales before special charges | | | 283,834 | | | 266,443 | | | 1,105,938 | | | 1,003,302 | |
Special charges | | | 64,603 | | | 38,292 | | | 64,603 | | | 38,292 | |
Total cost of sales | | | 348,437 | | | 304,735 | | | 1,170,541 | | | 1,041,594 | |
Gross profit | | | 784,180 | | | 713,388 | | | 3,192,710 | | | 2,737,683 | |
| | | | | | | | | | | | | |
Selling, general & administrative expense | | | 451,824 | | | 367,609 | | | 1,636,526 | | | 1,382,466 | |
Research & development expense | | | 138,655 | | | 123,889 | | | 531,799 | | | 476,332 | |
Purchased R & D | | | 319,354 | | | 0 | | | 319,354 | | | 0 | |
Special charges | | | 49,984 | | | 50,382 | | | 49,984 | | | 85,382 | |
Operating profit | | | (175,637 | ) | | 171,508 | | | 655,047 | | | 793,503 | |
Other income (expense), net | | | (16,926 | ) | | (25,955 | ) | | (24,306 | ) | | (49,198 | ) |
Earnings before income taxes | | | (192,563 | ) | | 145,553 | | | 630,741 | | | 744,305 | |
Income tax expense | | | 1,893 | | | 27,279 | | | 246,414 | | | 185,267 | |
Net earnings | | $ | (194,456 | ) | $ | 118,274 | | $ | 384,327 | | $ | 559,038 | |
| | | | | | | | | | | | | |
Adjusted net earnings (Non-GAAP) | | $ | 209,728 | (1) | $ | 189,304 | (2) | $ | 806,623 | (3) | $ | 651,943 | (4) |
| | | | | | | | | | | | | |
Diluted net earnings per share | | | ($0.56 | ) | $ | 0.34 | | $ | 1.10 | | $ | 1.59 | |
Adjusted diluted net earnings per share (Non-GAAP) | | $ | 0.60 | (1) | $ | 0.54 | (2) | $ | 2.31 | (3) | $ | 1.85 | (4) |
| | | | | | | | | | | | | |
Weighted average shares outstanding- basic | | | 344,498 | | | | | | | | | | |
Weighted average shares outstanding- diluted | | | 348,936 | | | 350,696 | | | 349,722 | | | 352,444 | |
(1) | Fourth quarter 2008 adjusted net earnings and adjusted diluted net earnings per share exclude the following after-tax items totaling $404,184 or $1.16 per share: |
- $319,354 purchased R&D charges, or $0.92 per share, primarily associated with the Company’s acquisition of MediGuide, Inc.
-$59,270 impairment and other charges, or $0.17 per share, principally related to writing down intangible assets and a technology license agreement to fair value. Of the associated pre-tax amount of $93,449, $43,465 was recorded as a special charge to cost of sales.
-$8,064 impairment charges, or $0.02 per share, related to a decline in the fair values of strategic cost investments that are not considered temporary. The associated pre-tax amount of $12,902 was recorded to other income (expense).
-$8,709 contract termination costs, or $0.03 per share, related to unfavorable inventory purchase contracts that were terminated in the fourth quarter. The associated pre-tax amount of $13,730 was recorded as a special charge to cost of sales.
-$4,699 charges or $0.01 per share, related to the Company providing its remote patient monitoring system without charge to existing St. Jude Medical CRM patients. The associated pre-tax amount of $7,408 was recorded as a special charge to cost of sales.
-$22,200 contribution expenses, or $0.06 per share, to non-profit organizations including the St. Jude Medical Foundation. The associated pre-tax amount of $35,000 was recorded toSG&A expense.
-$18,112 income tax benefit, or $0.05 per share, for the benefit relating to the first nine months of 2008 from the federal research and development tax credit extended in the fourth quarter of 2008 retroactive to the beginning of the year.
(2) | Fourth quarter 2007 adjusted net earnings and adjusted diluted net earnings per share exclude after tax charges of: |
- $21,452, or $0.06 per share, related to initiatives being undertaken to streamline the Company’s operations, primarily in international geographies.
- $15,683, or $0.05 per share, for an impairment charge related to the Company’s investment in ProRhythm, Inc. The associated $25,094 pre-tax amount was recorded as part of other income (expense).
- $14,922, or $0.04 per share, for impairment charges related to acquired intangible assets associated with a distribution agreement that were written down to fair value.
- $11,516, or $0.03 per share, for write-offs of inventory related to discontinued products.
- $7,457, or $0.02 per share, related to write-offs of programmers deemed obsolete due to the completed roll-out of the Company’s Merlin CRM programmer platform.
(3) | Year ended 2008 adjusted net earnings and adjusted diluted net earnings per share exclude after tax charges of: |
- $319,354 purchased R&D charges, or $0.92 per share, primarily associated with the Company’s acquisition of MediGuide, Inc.
-$59,270 impairment and other charges, or $0.17 per share, principally related to writing down intangible assets and a technology license agreement to fair value. of the associated pre-tax amount of $93,449, $43,465 was recorded as a special charge to cost of sales.
-$8,064 impairment charges, or $0.02 per share, related to a decline in the fair values of strategic cost investments that are not considered temporary. The associated pre-tax amount of $12,902 was recorded to other income (expense).
-$8,709 contract termination costs, or $0.03 per share, related to unfavorable inventory purchase contracts that were terminated in the fourth quarter. The associated pre-tax amount of $13,730 was recorded as a special charge to cost of sales.
-$4,699 charges or $0.01 per share, related to the Company providing its remote patient monitoring system without charge to existing St. Jude Medical CRM patients. The associated pre-tax amount of $7,408 was recorded as a special charge to cost of sales.
-$22,200 contribution expenses, or $0.06 per share, to non-profit organizations including the St. Jude Medical Foundation. The associated pre-tax amount of $35,000 was recorded to SG&A expense.
| St. Jude Medical, Inc. Global Headquarters One Lillehei Plaza St. Paul, MN 55117-9913 USA Tel 651 483 2000 www.sjm.com |
(4) | Fiscal year 2007 adjusted net earnings and adjusted diluted net earnings per share exclude after-tax charges of: |
- $21,875, or $0.06 per share, related to the settlement of a patent litigation matter.
- $21,452, or $0.06 per share, related to initiatives being undertaken to streamline the Company’s operations, primarily in international geographies.
- $15,683, or $0.05 per share, for an impairment charge related to the Company's investment in ProRhythm, Inc. The associated $25,094 pre-tax amount was recorded to other income (expense).
- $14,922, or $0.04 per share, for impairment charges related to acquired intangible assets associated with a distribution agreement that were written down to fair value.
- $11,516, or $0.03 per share, for write-offs of inventory related to discontinued products.
- $7,457, or $0.02 per share, related to write-offs of programmers deemed obsolete due to the completed roll-out of the Company’s Merlin CRM programmer platform.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| | January 3, 2009 | | December 29, 2007 | |
Cash and cash equivalents | | $ | 136,443 | | $ | 389,094 | |
Accounts receivable, net | | | 1,101,258 | | | 1,023,952 | |
Inventories | | | 546,499 | | | 457,734 | |
Other current assets | | | 295,863 | | | 257,403 | |
Property, plant & equipment, net | | | 980,176 | | | 776,795 | |
Goodwill | | | 1,979,407 | | | 1,657,313 | |
Other intangible assets, net | | | 500,535 | | | 498,700 | |
Other assets | | | 184,164 | | | 268,413 | |
Total assets | | $ | 5,724,345 | | $ | 5,329,404 | |
| | | | | | | |
Current portion of long-term debt | | $ | 75,518 | | $ | 1,205,498 | |
Other current liabilities | | | 953,006 | | | 643,731 | |
Long-term debt | | | 1,126,084 | | | 182,493 | |
Deferred income taxes, net | | | 114,072 | | | 107,011 | |
Long-term other liabilities | | | 219,759 | | | 262,661 | |
Total equity | | | 3,235,906 | | | 2,928,010 | |
Total liabilities & equity | | $ | 5,724,345 | | $ | 5,329,404 | |
