St. Jude Medical Reports Second Quarter 2013 Results
St. Jude Medical Reports Second Quarter 2013 Results
ST. PAUL, Minn.--(BUSINESS WIRE)-- St. Jude Medical, Inc. (NYS: STJ) today reported sales and net earnings for the second quarter ended June 29, 2013.
Second Quarter Sales
The Company reported net sales of $1.403 billion in the second quarter of 2013, slightly less than net sales of $1.410 billion in the second quarter of 2012. Unfavorable foreign currency translation comparisons decreased second quarter sales by approximately $31 million. On a currency neutral basis, net sales increased by approximately 2 percent from the second quarter of 2012.
Commenting on the Company's financial results, St. Jude Medical Chairman, President and Chief Executive Officer Daniel J. Starks said, "During the second quarter, St. Jude Medical made good progress towards accelerating our sales growth on a sustainable basis. Our operating discipline, healthy balance sheet and strong cash flow will continue to allow us to fund disciplined acquisitions and return value to shareholders. We remain confident in our ability to deliver double-digit constant currency growth in 2013 adjusted earnings per share."
Cardiac Rhythm Management (CRM)
Total CRM sales, which include implantable cardioverter defibrillator (ICD) and pacemaker products, were $718 million for the second quarter of 2013, a 4 percent decrease compared to the second quarter of 2012. After adjusting for the impact of foreign currency, total CRM sales decreased 2 percent.
Of that total, ICD product sales were $454 million in the second quarter, a 1 percent decrease compared to the second quarter of 2012. ICD revenue was flat after adjusting for the impact of foreign currency.
Second quarter pacemaker sales were $264 million, an 8 percent decrease compared to the second quarter of 2012. On a currency neutral basis, pacemaker revenue declined 6 percent.
Atrial Fibrillation (AF)
AF product sales for the second quarter totaled $237 million, a 9 percent increase over the second quarter of 2012. On a constant currency basis, AF product sales increased 12 percent in the second quarter of 2013.
Cardiovascular
Total cardiovascular sales, which primarily include vascular and structural heart products, were $340 million for the second quarter of 2013, flat compared to the second quarter of 2012. On a constant currency basis, cardiovascular sales increased 3 percent compared to the second quarter of 2012.
Total structural heart product sales for the second quarter of 2013 were $162 million, up approximately 1 percent compared with the second quarter of 2012. On a constant currency basis, structural heart sales increased approximately 4 percent.
Sales of vascular products in the second quarter of 2013 were $178 million, a 1 percent decrease from the second quarter of 2012. On a constant currency basis, vascular product sales were up approximately 3 percent.
Neuromodulation
St. Jude Medical sales of neuromodulation products were $108 million in the second quarter of 2013, up approximately 2 percent from the prior year.
Second Quarter Earnings Results
In the second quarter, the Company recognized after-tax charges of $160 million, or $0.56 per share, primarily relating to debt retirement costs associated with the redemption of long-term notes prior to their scheduled maturities and continued actions associated with our previously announced restructuring activities. Including these items, reported net earnings for the second quarter of 2013 were $0.40 per share. This compares to reported net earnings for the second quarter of 2012 of $0.78 per share.
Adjusted net earnings for the second quarter of 2013 were $275 million, or $0.96 per share. This compares to adjusted net earnings for the second quarter of 2012 of $0.88 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 schedules at the end of the press release.
Third Quarter and Full-Year 2013 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 2013 by product category.
The Company expects its consolidated net earnings for the third quarter of 2013 to be in the range of $0.88 to $0.90 per share and for full-year 2013 consolidated net earnings to now be in the range of $3.70 to $3.73, increasing the lower end of the range by $0.02. A further 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 acquisition-related costs, 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 acquisitions, 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.
The Company provides constant currency sales growth 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 foreign currency translation on net sales. St. Jude Medical management uses constant currency sales growth to forecast and evaluate the operational performance of the Company as well as to compare sales of current periods to prior periods.
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 2013 earnings call can be heard live via webcast 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 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 December 29, 2012 and Quarterly Report on Form 10-Q for the fiscal quarter ended March 30, 2013. 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 Second Quarter 2013 Sales and Reconciliation to Constant Currency Sales Growth | ||||||||||||
(in millions) | ||||||||||||
(unaudited) | Constant | Constant | ||||||||||
2Q13 Sales | 2Q12 Sales | Reported % | Currency % | Reported | Currency $ | |||||||
Change vs. | Change vs. | $Change | Change | |||||||||
2Q12 | 2Q12 | vs. 2Q12 | vs. 2Q12 | |||||||||
Total Sales | $1,403 | $1,410 | 0% | 2% | -$7 | $24 | ||||||
Total International Sales | $734 | $746 | ||||||||||
Total U.S. Sales | $669 | $664 | ||||||||||
Worldwide Cardiac Rhythm Management | $718 | $746 | -4% | -2% | -$28 | -$16 | ||||||
International Cardiac Rhythm Management | $338 | $362 | ||||||||||
U.S. Cardiac Rhythm Management | $380 | $384 | ||||||||||
Worldwide ICD | $454 | $459 | -1% | 0% | -$5 | $2 | ||||||
International ICD | $184 | $192 | ||||||||||
U.S. ICD | $270 | $267 | ||||||||||
Worldwide Pacemakers | $264 | $287 | -8% | -6% | -$23 | -$18 | ||||||
International Pacemakers | $154 | $170 | ||||||||||
U.S. Pacemakers | $110 | $117 | ||||||||||
Worldwide Atrial Fibrillation | $237 | $218 | 9% | 12% | $19 | $27 | ||||||
International Atrial Fibrillation | $145 | $132 | ||||||||||
U.S. Atrial Fibrillation | $92 | $86 | ||||||||||
Worldwide Cardiovascular | $340 | $340 | 0% | 3% | $0 | $11 | ||||||
International Cardiovascular | $223 | $226 | ||||||||||
U.S. Cardiovascular | $117 | $114 | ||||||||||
Worldwide Neuromodulation | $108 | $106 | 2% | 2% | $2 | $2 | ||||||
International Neuromodulation | $28 | $26 | ||||||||||
U.S. Neuromodulation | $80 | $80 | ||||||||||
St. Jude Medical, Inc. | |||||
Condensed Consolidated Balance Sheets | |||||
(in millions) | |||||
(Unaudited) | |||||
June 29, 2013 | December 29, 2012 | ||||
Cash and cash equivalents | $1,220 | $1,194 | |||
Accounts receivable, net | 1,377 | 1,349 | |||
Inventories | 643 | 610 | |||
Other current assets | 461 | 398 | |||
Property, plant & equipment, net | 1,432 | 1,425 | |||
Goodwill | 3,139 | 2,961 | |||
Other intangible assets, net | 877 | 804 | |||
Other assets | 511 | 530 | |||
Total assets | $9,660 | $9,271 | |||
Current debt obligations | $518 | $530 | |||
Other current liabilities | 1,050 | 1,245 | |||
Long-term debt | 3,095 | 2,550 | |||
Deferred income taxes, net | 349 | 323 | |||
Long-term other liabilities | 571 | 529 | |||
Total equity | 4,077 | 4,094 | |||
Total liabilities & equity | $9,660 | $9,271 | |||
St. Jude Medical, Inc. | ||||||||||||||||
Condensed Consolidated Statements of Earnings | ||||||||||||||||
(in millions, except per share amounts) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 29, 2013 | June 30, 2012 | June 29, 2013 | June 30, 2012 | |||||||||||||
Net sales | $1,403 | $1,410 | $2,741 | $2,805 | ||||||||||||
Cost of sales: | ||||||||||||||||
Cost of sales before special charges | 381 | 367 | 740 | 725 | ||||||||||||
Special charges | 1 | 16 | 19 | 39 | ||||||||||||
Total cost of sales | 382 | 383 | 759 | 764 | ||||||||||||
Gross profit | 1,021 | 1,027 | 1,982 | 2,041 | ||||||||||||
Selling, general & administrative expense | 489 | 494 | 957 | 984 | ||||||||||||
Research & development expense | 173 | 173 | 333 | 348 | ||||||||||||
Special charges | 77 | 22 | 102 | 69 | ||||||||||||
Operating profit | 282 | 338 | 590 | 640 | ||||||||||||
Other expense, net | 183 | 25 | 231 | 48 | ||||||||||||
Earnings before income taxes | 99 | 313 | 359 | 592 | ||||||||||||
Income tax expense | (8 | ) | 69 | 30 | 136 | |||||||||||
Net earnings | 107 | 244 | 329 | 456 | ||||||||||||
Net loss attributable to noncontrolling interest | (8 | ) | 0 | (9 | ) | 0 | ||||||||||
Net earnings attributable to St. Jude Medical, Inc. | 115 | 244 | 338 | $456 | ||||||||||||
Adjusted net earnings attributable to St. Jude Medical, Inc. (Non-GAAP) | $275 | (1) | $276 | (2) | $538 | (3) | $548 | (4) | ||||||||
Diluted net earnings per share attributable to St. Jude Medical, Inc. | $0.40 | $0.78 | $1.18 | $1.44 | ||||||||||||
Adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. (Non-GAAP) | $0.96 | (1) | $0.88 | (2) | $1.87 | (3) | $1.73 | (4) | ||||||||
Cash dividends declared per share | $0.25 | $0.23 | $0.50 | $0.46 | ||||||||||||
Weighted average shares outstanding- diluted | 286.7 | 315.2 | 287.1 | 316.4 | ||||||||||||
(1) | Second quarter 2013 adjusted net earnings attributable to St. Jude Medical, Inc. and adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. exclude the following after-tax items totaling $160 or $0.56 per share: | |
- $34 charges, or $0.12 per share, primarily related to previously announced business realignment and restructuring related actions as we continue to integrate our product divisions and centralize certain support functions. The associated pre-tax amount of $43 was recorded as a Special Charge to Cost of sales ($1) and Special charges ($42). | ||
- $14 charges, or $0.05 per share, related to a license dispute settlement charge. The associated pre-tax amount of $22 was recorded to Special charges. | ||
- $8 charges, or $0.03 per share, related to intangible asset impairment charges. The associated pre-tax amount of $13 was recorded to Special charges. | ||
- $3 charges, or $0.01 per share, related to transaction costs, acquired inventory step-up amortization expense and other acquisition-related costs. The associated pre-tax amount of $4 was recorded to Cost of sales ($1) and Selling, general & administrative expense ($3). | ||
- $101 charges, or $0.35 per share related to debt retirement costs primarily associated with the make-whole provisions of long-term notes retired in the second quarter of 2013 prior to their scheduled maturities. | ||
The associated pre-tax amount of $161 was recorded to Other expense, net. | ||
(2) | Second quarter 2012 adjusted net earnings attributable to St. Jude Medical, Inc. and adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. exclude after-tax charges totaling $27 or $0.08 per share, primarily related to ongoing restructuring activities to realign certain activities in our CRM business as well as costs primarily associated with continuing efforts to improve our sales and sales support organizations. The associated pre-tax amount of $38 was recorded as a Special Charge to Cost of sales ($16) and Special charges ($22). | |
Second quarter 2012 adjusted net earnings attributable to St. Jude Medical, Inc. and adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. include $5 of income tax benefit, or $0.02 per share, for the second quarter 2012 benefit relating to the federal research and development tax credit that was extended in 2013 retroactive to the beginning of the 2012 fiscal year. | ||
(3) | First six months 2013 adjusted net earnings attributable to St. Jude Medical, Inc. and adjusted diluted net earnings per share attributable to St. Jude Medical, Inc. exclude the following after-tax items totaling $200 or $0.69 per share: | |
- $66 charges, or $0.22 per share, primarily related to previously announced business realignment and restructuring related actions as we continue to integrate our product divisions and centralize certain support functions. The associated pre-tax amount of $86 was recorded as a Special Charge to Cost of sales ($19) and Special charges ($67). | ||
- $14 charges, or $0.05 per share, related to a license dis |
