St. Jude Medical, Inc. (NYSE: STJ) today reported sales and net
earnings for the third quarter ended October 2, 2010.
Third Quarter Sales
The Company reported net sales of $1.240 billion in the third
quarter of 2010, an increase of 7 percent compared with the $1.160
billion in the third quarter of 2009. Revenue for the third quarter
increased 8 percent after adjusting for the impact of foreign
currency. Foreign currency translation comparisons decreased third
quarter sales by approximately $10 million.
Commenting on the Company’s results, St. Jude Medical Chairman,
President and Chief Executive Officer Daniel J. Starks said, “Our
third quarter results reinforce our conviction that our growth
program is on track and that St. Jude Medical is well positioned to
continue growing long term at a superior rate. We now have raised
our 2010 EPS guidance range for the third time in three quarters.
We have good momentum as we prepare to finish up the year and look
to 2011.”
Cardiac Rhythm Management (CRM)
Total CRM sales, which include ICD and pacemaker products, were
$738 million for the third quarter of 2010, a 7 percent increase
compared with the third quarter of 2009. On a currency neutral
basis, total CRM sales grew 8 percent over the comparable quarter
in 2009.
Of that total, ICD product sales were $439 million in the third
quarter, a 13 percent increase compared with the third quarter of
2009. ICD revenue grew 14 percent after adjusting for the impact of
foreign currency.
Third quarter pacemaker sales were $299 million, consistent with
the third quarter of 2009 on a reported and constant currency
basis.
Atrial Fibrillation (AF)
AF product sales for the third quarter of 2010 totaled $169
million, an 8 percent increase over the third quarter of 2009. On a
currency neutral basis, total AF sales grew 9 percent over the
comparable quarter in 2009.
Neuromodulation
Neuromodulation product sales were $93 million in the third
quarter of 2010, up 11 percent from the comparable quarter of 2009
on a reported and constant currency basis.
Cardiovascular
Total cardiovascular sales, which primarily include vascular
closure and heart valve products, were $240 million for the third
quarter of 2010, a 4 percent increase over the third quarter of
2009 on a reported and constant currency basis.
Sales of vascular closure products in the third quarter of 2010
were $86 million.
Heart valve product sales for the third quarter of 2010 were $78
million.
Third Quarter Earnings Results
In the third quarter, the Company recorded after-tax charges of
$11 million, or $0.03 per diluted share, related primarily to
closing and other costs associated with the acquisition of LightLab
Imaging, Inc. and recorded $12 million, or $0.04 per diluted share,
of in-process research and development expenses related to the
acquisition of certain pre-development technology assets.
Including these items, reported net earnings for the third
quarter of 2010 were $208 million, or $0.63 per share. This
compares to reported net earnings for the third quarter of 2009 of
$167 million or $0.48 per share.
In accordance with GAAP, reported net earnings for the third
quarter 2010 do not include any benefit from the research and
development tax credit, which has yet to be extended for 2010.
Including the benefit of this adjustment and excluding the third
quarter charges, adjusted net earnings for the third quarter of
2010 were $238 million, or $0.72 per diluted 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.
Fourth Quarter and Full-Year 2010 Sales and Earnings
Guidance
During a conference call today, St. Jude Medical will provide
its range for revenue expectations for the fourth quarter by
product category and update its expectations related to full-year
earnings per share.
The Company expects its consolidated adjusted net earnings for
the fourth quarter of 2010 to be in the range of $0.72 to $0.74 per
diluted share and for full-year 2010 consolidated adjusted net
earnings to be in the range of $2.98 to $3.00 per diluted share, a
$0.09 increase on the top end of the guidance from the full-year
2010 guidance we gave during our second quarter earnings call. A
reconciliation of the Company’s quarterly and annual guidance is
provided in the schedule below.
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 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.
Conference Call/Webcast
St. Jude Medical’s third quarter 2010 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 visit sjm.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, risks related to the Company's proposed
acquisition of AGA Medical Holdings 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 Quarterly Report on Form 10-Q
for the fiscal quarter ended April 3, 2010. The Company does not
intend to update these statements and undertakes no duty to any
person to provide any such update under any circumstance.
Summary of Third Quarter 2010
Sales Reported % Quarter Ended 10/2/10
Sales Change vs.
(dollars in millions)
3Q09 Total Sales
$1,240 7% Total International Sales
$582 Total US Sales $658
Worldwide Cardiac Rhythm Management
$738 7% International Cardiac Rhythm
Management $320 U.S. Cardiac Rhythm Management
$418
Worldwide ICD
$439 13% International ICD $155
U.S. ICD $284
Worldwide Pacemakers $299 0%
International Pacemakers $165 U.S. Pacemakers
$134
Worldwide Atrial
Fibrillation $169 8% International
Atrial Fibrillation $97 U.S. Atrial
Fibrillation $72
Worldwide
Cardiovascular $240 4%
International Cardiovascular $149 U.S.
Cardiovascular $91
Worldwide
Neuromodulation $93 11%
International Neuromodulation $16 U.S.
Neuromodulation $77
St. Jude Medical, Inc.
Condensed Consolidated Statements of Earnings (in
thousands, except per share amounts) (Unaudited)
Three
Months Ended Nine Months Ended
October 2, 2010
October 3, 2009 October 2, 2010 October 3,
2009 Net sales $1,239,905 $1,159,606 $3,814,370 $3,477,811 Cost
of sales Cost of sales before special charges 339,819 299,670
1,006,290 899,709 Special charges 0 6,061 0 6,061 Total cost of
sales 339,819 305,731 1,006,290 905,770 Gross profit 900,086
853,875 2,808,080 2,572,041 Selling, general &
administrative expense 438,723 427,227 1,329,623 1,276,071 Research
& development expense 150,135 142,224 456,469 424,627 Purchased
R & D 12,244 0 12,244 0 Special charges 0 42,394 0 42,394
Operating profit 298,984 242,030 1,009,744 828,949 Other
income (expense), net (11,111) (23,594) (51,657) (35,867)
Earnings before income taxes 287,873 218,436 958,087 793,082 Income
tax expense 79,488 51,501 257,095 205,506 Net earnings $208,385
$166,935 $700,992 $587,576 Adjusted net earnings (Non-GAAP)
$237,637 (1) $203,989 (2) $743,649 (3) $624,630 (4) Diluted
net earnings per share $0.63 $0.48 $2.13 $1.69 Adjusted diluted net
earnings per share (Non-GAAP) $0.72 (1) $0.59 (2) $2.26 (3) $1.79
(4) Weighted average shares outstanding- diluted 329,927
344,298 329,101 348,242
(1) Third quarter 2010 adjusted net
earnings and adjusted diluted net earnings per share exclude
after-tax charges of $10,714 or $0.03 per share, related primarily
to closing and other costs associated with the Company's
acquisition of LightLab Imaging, Inc. The associated pre-tax amount
of $14,635 was recorded to Cost of sales ($1,700) and SG&A
expense ($12,935).Third quarter 2010 adjusted net earnings and
adjusted diluted net earnings per share exclude $12,244 or $0.04
per share, of in-process research and development expenses related
to the acquisition of certain pre-development technology
assets.Third quarter 2010 adjusted net earnings and adjusted
diluted net earnings per share include $6,294 of income tax
benefit, or $0.02 per share, related to the expected benefit from
the federal research and development tax credit not yet extended
for 2010.
(2) Third quarter 2009 adjusted net
earnings and adjusted diluted net earnings per share exclude the
following after-tax items totaling $37,054 or $.11 per
share:-$31,867 charges, or $0.09 per share, primarily related to
employee termination costs related to continuing efforts to improve
sales and and sales support productivity as well as to streamline
manufacturing operations.-$5,187 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 $8,300 was recorded to other income
(expense).
(3) First nine months 2010 adjusted net
earnings and adjusted diluted net earnings per share exclude
after-tax charges of $10,714 or $0.03 per share, related primarily
to closing and other costs associated with the Company's
acquisition of LightLab Imaging, Inc. The associated pre-tax amount
of $14,635 was recorded to Cost of sales ($1,700) and SG&A
expense ($12,935).First nine months 2010 adjusted net earnings and
adjusted diluted net earnings per share exclude $12,244 or $0.04
per share, of in-process research and development expenses related
to the acquisition of certain pre-development technology
assets.First nine months 2010 adjusted net earnings and adjusted
diluted net earnings per share include $19,699 of income tax
benefit, or $0.06 per share, related to the expected benefit from
the federal research and development tax credit not yet extended
for 2010.
(4) First nine months 2009 adjusted net
earnings and adjusted diluted net earnings per share exclude the
following after-tax items totaling $37,054 or $.10 per
share:-$31,867 charges, or $0.09 per share, primarily related to
employee termination costs related to continuing efforts to improve
sales and and sales support productivity as well as to streamline
manufacturing operations.-$5,187 impairment charges, or $0.01 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 $8,300 was recorded to other income
(expense).
Condensed Consolidated Balance
Sheets (in thousands) (Unaudited)
October 2, 2010 January 2, 2010 Cash and cash
equivalents $851,614 $392,927 Accounts receivable, net 1,261,414
1,170,579 Inventories 688,657 659,960 Other current assets 415,827
336,740 Property, plant & equipment, net 1,257,229 1,153,086
Goodwill 2,075,620 2,005,851 Other intangible assets, net 469,550
456,142 Other assets 365,375 250,526 Total assets $7,385,286
$6,425,811 Current debt obligations $0 $334,787 Other
current liabilities 730,217 732,526 Long-term debt 1,988,266
1,587,615 Deferred income taxes, net 120,831 132,392 Long-term
other liabilities 355,336 314,940 Total equity 4,190,636 3,323,551
Total liabilities & equity $7,385,286 $6,425,811
2010 Earnings Guidance Reconciliation
Fourth Quarter 2010 Full Year 2010
Estimated 2010 diluted net earnings per share $ 0.64 - $ 0.68 $
2.77 - $ 2.81 Estimated 2010 adjusted diluted net earnings per
share (Non-GAAP) $ 0.72 - $ 0.74 (5) $ 2.98 - $ 3.00 (5)
(5) The federal research and development
tax credit has not yet been extended for 2010. The Company's above
estimated 2010 adjusted diluted net earnings per share (Non-GAAP)
assumes that the tax credit will be approved retroactive to January
1, 2010. Additionally, estimated adjusted diluted net earnings per
share exclude charges of $0.04 - $0.06 related primarily to closing
and other costs expected to be incurred in connection with the
previously announced acquisition of AGA Medical Holdings, Inc.
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