| St. Jude Medical, Inc.
Global Headquarters
One St. Jude Medical Drive
St. Paul, MN 55117-9913 USA
Tel 651 756 2000
sjm.com |
News Release
| |
MEDIA AND INVESTOR CONTACT: | INVESTOR CONTACT: |
Angie Craig | J.C. Weigelt |
acraig@sjm.com | jweigelt@sjm.com |
Tel 651 756 2191 | Tel 651 756 4347 |
St. Jude Medical Reports Second Quarter 2011 Results
ST. PAUL, Minn. – July 20, 2011 – St. Jude Medical, Inc. (NYSE: STJ) today reported sales and net earnings for the second quarter ended July 2, 2011.
Second Quarter Sales
The Company reported net sales of $1.447 billion in the second quarter of 2011, an increase of 10 percent compared with the $1.313 billion in the second quarter of 2010. Revenue for the second quarter increased 4 percent after adjusting for the impact of foreign currency. Foreign currency translation comparisons increased second quarter sales by approximately $75 million.
Commenting on the second quarter and the Company’s growth program, St. Jude Medical Chairman, President and Chief Executive Officer Daniel J. Starks said, “St. Jude Medical delivered record sales during the second quarter. We are making good progress implementing our new growth drivers and diversifying our growth portfolio. Although sales in the U.S. were down 2% due primarily to weakness in the U.S. cardiac rhythm management market, international sales increased 23% and now represent the majority of our business.”
Cardiac Rhythm Management (CRM)
Total CRM sales, which include ICD and pacemaker products, were $793 million for the second quarter of 2011, a 1 percent increase compared with the second quarter of 2010. Total CRM sales for the second quarter grew 3 percent after adjusting for the one-time benefit of a competitor’s suspension of sales of ICD products in the United States during the prior year.
Of that total, ICD product sales were $477 million in the second quarter, a 1 percent increase compared with the second quarter of 2010. Adjusting for the one-time benefit we experienced in the U.S. in the prior year, ICD revenue grew 5 percent this quarter.
Second quarter pacemaker sales were $316 million, essentially equal to the second quarter of 2010.
| St. Jude Medical, Inc.
Global Headquarters
One St. Jude Medical Drive
St. Paul, MN 55117-9913 USA
Tel 651 756 2000
sjm.com |
Atrial Fibrillation (AF)
AF product sales for the second quarter totaled $208 million, an 18 percent increase over the second quarter of 2010.
Neuromodulation
St. Jude Medical sales of neuromodulation products were $104 million in the second quarter of 2011, up 9 percent from the comparable quarter of 2010.
Cardiovascular
Total cardiovascular sales, which primarily include vascular and structural heart products, were $342 million for the second quarter of 2011, a 35 percent increase over the second quarter of 2010. This division now includes sales from AGA Medical, Inc., which St. Jude Medical acquired in November 2010.
Sales of vascular products during the second quarter of 2011 were $189 million, up 14 percent from the comparable quarter of 2010.
Structural heart product sales for the second quarter of 2011 were $153 million, a 74 percent increase over the second quarter of 2010, with the addition of AGA Medical products to the business.
Second Quarter Earnings Results
In the second quarter of 2011 the Company recorded after-tax charges of $10 million, or $0.03 per share, related to the remaining increase in cost of goods sold that resulted from the step up in inventory values required under acquisition accounting associated with the AGA Medical acquisition.
In addition, the Company recognized $32 million, or $0.10 per share, in other after-tax charges, primarily related to restructuring actions initiated during the second quarter to realign certain activities within its CRM business. A key component of these restructuring activities relates to the Company’s decision to transition CRM manufacturing out of Sweden to more cost-advantaged locations.
Including these items, reported net earnings for the second quarter of 2011 was $241 million, or $0.72 per share. This compares to reported net earnings for the second quarter of 2010 of $254 million, or $0.77 per share. Excluding these items, adjusted net earnings for the second quarter of 2011 were $283 million, or $0.85 per share. A reconciliation of the Company's non-GAAP adjusted net earnings per share to the Company's GAAP net earnings per share is provided in the schedule at the end of the press release.
Third Quarter and Full Year 2011 Sales and Earnings Guidance
During a conference call today, St. Jude Medical will provide its range for revenue expectations for the third quarter and full year by product category.
The Company expects its consolidated adjusted net earnings for the third quarter of 2011 to be in the range of $0.74 to $0.76 per diluted share and for the full-year to be in the range of $3.25 to $3.30. A further reconciliation of the Company’s quarterly and annual guidance is provided in the schedule below.
| St. Jude Medical, Inc.
Global Headquarters
One St. Jude Medical Drive
St. Paul, MN 55117-9913 USA
Tel 651 756 2000
sjm.com |
Non-GAAP Financial Measures
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, acquisition related 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, acquisitions, restructuring activities, asset impairment events or developments, settlements and other developments relating to litigation) 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.
Conference Call/Webcast
St. Jude Medical’s second quarter 2011 earnings call can be heard live today beginning at 7 a.m. CDT (also archived for 90 days) on the Investor Relations section of our website sjm.com.
About St. Jude Medical
St. Jude Medical develops medical technology and services that focus on putting more control into the hands of those who treat cardiac, neurological and chronic pain patients worldwide. The company is dedicated to advancing the practice of medicine by reducing risk wherever possible and contributing to successful outcomes for every patient. St. Jude Medical is headquartered in St. Paul, Minn. and has four major focus areas that include: cardiac rhythm management, atrial fibrillation, cardiovascular and neuromodulation. For more information, please visitsjm.com.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. Such forward-looking statements include the expectations, plans and prospects for the Company, including potential clinical successes, anticipated regulatory approvals and future product launches, and projected revenues, margins, earnings and market shares. The statements made by the Company are based upon management’s current expectations and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include market conditions and other factors beyond the Company’s control and the risk factors and other cautionary statements described in the Company’s filings with the SEC, including those described in the Risk Factors and Cautionary Statements sections of the Company’s Annual Report on Form 10-K for the fiscal year ended January 1, 2011 and Quarterly Report on Form 10-Q for the fiscal quarter ended April 2, 2011. The Company does not intend to update these statements and undertakes no duty to any person to provide any such update under any circumstance.
| St. Jude Medical, Inc.
Global Headquarters
One St. Jude Medical Drive
St. Paul, MN 55117-9913 USA
Tel 651 756 2000
sjm.com |
| Summary of Second Quarter 2011 Sales | | |
Quarter Ended 07/02/11 (dollars in millions) | Sales | Reported % Change vs. 2Q10 |
| Total Sales | $1,447 | 10% |
| Total International Sales | $769 | |
| Total US Sales | $678 | |
| Worldwide Cardiac Rhythm Management | $793 | 1% |
| International Cardiac Rhythm Management | $392 | |
| U.S. Cardiac Rhythm Management | $401 | |
| Worldwide ICD | $477 | 1% |
| International ICD | $205 | |
| U.S. ICD | $272 | |
| Worldwide Pacemakers | $316 | 0% |
| International Pacemakers | $187 | |
| U.S. Pacemakers | $129 | |
| Worldwide Atrial Fibrillation | $208 | 18% |
| International Atrial Fibrillation | $124 | |
| U.S. Atrial Fibrillation | $84 | |
| Worldwide Cardiovascular | $342 | 35% |
| International Cardiovascular | $226 | |
| U.S. Cardiovascular | $116 | |
| Worldwide Neuromodulation | $104 | 9% |
| International Neuromodulation | $27 | |
| U.S. Neuromodulation | $77 | |
St. Jude Medical, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(Unaudited)
| | | | | | | | |
| | | July 2, 2011 | | January 1, 2011 | |
| Cash and cash equivalents | | $ | 832,817 | | $ | 500,336 | |
| Accounts receivable, net | | | 1,443,614 | | | 1,331,210 | |
| Inventories | | | 699,163 | | | 667,545 | |
| Other current assets | | | 382,922 | | | 413,057 | |
| Property, plant & equipment, net | | | 1,384,516 | | | 1,323,931 | |
| Goodwill | | | 2,979,493 | | | 2,955,602 | |
| Other intangible assets, net | | | 945,393 | | | 987,060 | |
| Other assets | | | 427,479 | | | 387,707 | |
| Total assets | | $ | 9,095,397 | | $ | 8,566,448 | |
| | | | | | | | |
| Current debt obligations | | $ | 80,465 | | $ | 79,637 | |
| Other current liabilities | | | 925,857 | | | 937,613 | |
| Long-term debt | | | 2,486,016 | | | 2,431,966 | |
| Deferred income taxes, net | | | 303,313 | | | 310,503 | |
| Long-term other liabilities | | | 464,064 | | | 435,058 | |
| Total equity | | | 4,835,682 | | | 4,371,671 | |
| Total liabilities & equity | | $ | 9,095,397 | | $ | 8,566,448 | |
| St. Jude Medical, Inc.
Global Headquarters
One St. Jude Medical Drive
St. Paul, MN 55117-9913 USA
Tel 651 756 2000
sjm.com |
St. Jude Medical, Inc.
Condensed Consolidated Statements of Earnings
(in thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended | | Six Months Ended | |
| | | | | | | | | | | | | | |
| | | July 2, 2011 | | July 3, 2010 | | July 2, 2011 | | July 3, 2010 | |
| Net sales | | $ | 1,446,751 | | $ | 1,312,769 | | $ | 2,822,264 | | $ | 2,574,465 | |
| Cost of sales | | | | | | | | | | | | | |
| Cost of sales before special charges | | | 383,877 | | | 345,302 | | | 748,319 | | | 666,471 | |
| Special charges | | | 11,046 | | | 0 | | | 11,046 | | | 0 | |
| Total cost of sales | | | 394,923 | | | 345,302 | | | 759,365 | | | 666,471 | |
| Gross profit | | | 1,051,828 | | | 967,467 | | | 2,062,899 | | | 1,907,994 | |
| | | | | | | | | | | | | | |
| Selling, general & administrative expense | | | 513,841 | | | 447,610 | | | 1,027,161 | | | 890,900 | |
| Research & development expense | | | 176,334 | | | 155,104 | | | 352,067 | | | 306,334 | |
| Purchased in-process R & D charges | | | 4,400 | | | 0 | | | 4,400 | | | 0 | |
| Special charges | | | 32,169 | | | 0 | | | 32,169 | | | 0 | |
| Operating profit | | | 325,084 | | | 364,753 | | | 647,102 | | | 710,760 | |
| Other income (expense), net | | | (25,013 | ) | | (20,230 | ) | | (51,465 | ) | | (40,546 | ) |
| Earnings before income taxes | | | 300,071 | | | 344,523 | | | 595,637 | | | 670,214 | |
| Income tax expense | | | 59,177 | | | 90,485 | | | 121,315 | | | 177,607 | |
| Net earnings | | $ | 240,894 | | $ | 254,038 | | $ | 474,322 | | $ | 492,607 | |
| | | | | | | | | | | | | | |
| Adjusted net earnings (Non-GAAP) | | $ | 282,600 | (1) | $ | 261,092 | (2) | $ | 544,140 | (3) | $ | 506,012 | (4) |
| | | | | | | | | | | | | | |
| Diluted net earnings per share | | $ | 0.72 | | $ | 0.77 | | $ | 1.43 | | $ | 1.50 | |
| Adjusted diluted net earnings per share (Non-GAAP) | | $ | 0.85 | (1) | $ | 0.79 | (2) | $ | 1.65 | (3) | $ | 1.54 | (4) |
| | | | | | | | | | | | | | |
| Cash dividends declared per share | | $ | 0.21 | | | | | $ | 0.42 | | | | |
| | | | | | | | | | | | | | |
| Weighted average shares outstanding- diluted | | | 332,635 | | | 329,313 | | | 330,757 | | | 328,684 | |
| (1) | Second quarter 2011 adjusted net earnings and adjusted diluted net earnings per share exclude the following after-tax charges totaling $41,706 or $0.13 per share: |
| | - | $9,987 charges, or $0.03 per share, related to AGA Medical Holdings, Inc. acquired inventory step up amortization expense. The associated pre-tax amount of $14,622 was recorded to Cost of sales. |
| | - | $28,969 charges, or $0.09 per share, primarily related to restructuring actions initiated during the second quarter to realign certain activities in our CRM business. The associated pre-tax amount of $43,215 was recorded as a Special Charge to Cost of sales ($11,046) and Special charges ($32,169). |
| | - | $2,750 Purchased in-process R&D charges, or $0.01 per share, associated with the Company's acquisition of certain pre-development technology assets. |
| | | |
| (2) | Second quarter 2010 adjusted net earnings and adjusted diluted net earnings per share include $7,054 of income tax benefit, or $0.02 per share, related to the benefit from the federal research and development tax credit extended in the fourth quarter of 2010 retroactive to the beginning of the year. |
| | | |
| (3) | First six months 2011 adjusted net earnings and adjusted diluted net earnings per share exclude the following after-tax charges totaling $69,818 or $0.22 per share: |
| | - | $19,250 charges, or $0.06 per share, related to AGA Medical Holdings, Inc. acquired inventory step up amortization expense. The associated pre-tax amount of $29,442 was recorded to Cost of sales. |
| | - | $28,969 charges, or $0.09 per share, primarily related to restructuring actions initiated during the second quarter to realign certain activities in our CRM business. The associated pre-tax amount of $43,215 was recorded as a Special Charge to Cost of sales ($11,046) and Special charges ($32,169). |
| | - | $18,849 charges, or $0.06 per share, primarily related to post acquisition expenses for AGA Medical Holdings, Inc. which principally include contract termination costs and other integration costs in international locations. The associated pre-tax amount of $24,922 was recorded to SG&A expense. |
| | - | $2,750 Purchased in-process R&D charges, or $0.01 per share, associated with the Company's acquisition of certain pre-development technology assets. |
| | | |
| (4) | First six months 2010 adjusted net earnings and adjusted diluted net earnings per share include $13,405 of income tax benefit, or $0.04 per share, related to the benefit from the federal research and development tax credit extended in the fourth quarter of 2010 retroactive to the beginning of the year. |
2011 Earnings Guidance Reconciliation
| | | | | | | | |
| | | Third Quarter 2011 | | Full Year 2011 | |
| | | | | | | | |
| Estimated 2011 diluted net earnings per share | | $ | 0.74 - $0.76 | | $ | 3.03 - $3.08 | |
| Estimated 2011 adjusted diluted net earnings per share (Non-GAAP) | | $ | 0.74 - $0.76 | | $ | 3.25 - $3.30 | (5) |
| (5) | The Company’s above estimated 2011 adjusted diluted net earnings per share (Non-GAAP) excludes the impact of after-tax charges recognized during the first six months of 2011 (detailed in footnote 3 above). |
