St. Jude Medical, Inc. (NYSE: STJ) today reported sales and net
earnings for its third quarter ended October 3, 2015. The company
announced on October 8, 2015, that it had completed its acquisition
of Thoratec, which did not affect the operational results of the
company’s third quarter.
Third quarter 2015 highlights:
- Net sales increased by approximately 6
percent on a constant currency basis compared to the prior year
quarter
- CardioMEMS™ HF System sales totaled
approximately $20 million
- Worldwide neuromodulation revenue
increased by approximately 19 percent on a constant currency basis,
marking the fifth consecutive quarter of sales acceleration on a
year over year basis
- St. Jude Medical’s global leadership
position in heart failure was expanded through the acquisition of
Thoratec, which generated $124 million in sales during its third
quarter of 2015
Third Quarter 2015 Sales
The company reported net sales of $1.339 billion in the third
quarter of 2015, a 2 percent decrease compared to net sales of
$1.372 billion in the third quarter of 2014. On a constant currency
basis, net sales increased by approximately 6 percent compared to
the third quarter of 2014.
Commenting on the company’s financial results, St. Jude Medical
Chairman, President and Chief Executive Officer Daniel J. Starks
said, “Third quarter results confirm that our innovation based
growth program continues to gain traction. Now we are focused on
efficiently integrating our acquisition of Thoratec and
strengthening our entire portfolio of growth drivers for 2016.”
Cardiac Rhythm Management (CRM)
Total CRM sales, which include implantable cardioverter
defibrillator (ICD) and pacemaker products, were $630 million for
the third quarter of 2015, an 8 percent decline compared to the
prior year quarter. After adjusting for the impact of foreign
currency, CRM sales decreased 1 percent compared to the prior year
quarter.
Of that total, ICD product sales were $392 million in the third
quarter, a 7 percent decline on a reported basis and decreased 1
percent on a constant currency basis compared to the prior year
quarter.
Third quarter pacemaker sales were $238 million, a 10 percent
decline compared to the prior year quarter. On a constant currency
basis, pacemaker product sales decreased 1 percent compared to the
prior year quarter.
Atrial Fibrillation (AF)
AF product sales for the third quarter totaled $271 million, a 7
percent increase compared to the prior year quarter. On a constant
currency basis, AF product sales increased 17 percent compared to
the prior year quarter.
Cardiovascular
Total cardiovascular sales, which primarily include structural
heart and vascular products, were $317 million for the third
quarter of 2015, a 2 percent decline compared to the prior year
quarter. On a constant currency basis, cardiovascular sales
increased 7 percent compared to the prior year quarter.
Structural heart product sales for the third quarter of 2015
were $141 million, up 1 percent on a constant currency basis
compared to the prior year quarter.
Sales of vascular products in the third quarter of 2015 were
$176 million, a 14 percent increase on a constant currency basis
compared to the prior year quarter.
Neuromodulation
St. Jude Medical sales of neuromodulation products were $121
million in the third quarter of 2015, a 13 percent increase on a
reported basis and a 19 percent increase on a constant currency
basis compared to the prior year quarter.
Third Quarter Earnings Results
In the third quarter the company recognized net after-tax
expenses of $43 million, or $0.15 per diluted share, primarily
related to acquisition-related adjustments, discrete income tax
expenses and ongoing restructuring activities. Including these
items, reported net earnings for the third quarter of 2015 were
$215 million or $0.75 per share, compared with reported net
earnings for the third quarter of 2014 of $238 million or $0.82 per
share. Reported results also include the $16 million after-tax
impact, or $0.06 per diluted share, of amortization of intangible
assets.
In accordance with GAAP, reported net earnings for the third
quarter 2015 do not include any benefit from the federal research
and development tax credit, which has yet to be extended for 2015.
Including the benefit of this adjustment and excluding the third
quarter net expenses and intangible amortization expense, adjusted
net earnings for the third quarter of 2015 were $277 million, or
$0.97 per share. A reconciliation of the company’s non-GAAP
adjusted results to the company’s GAAP reported results is provided
in the schedules at the end of the press release.
Fourth Quarter and Full-Year 2015 Sales and Earnings
Guidance
For the fourth quarter, the consolidated St. Jude Medical
business, which now includes Thoratec, expects constant currency
revenue growth in the range of 7 percent to 8 percent compared to
the fourth quarter of 2014. Organic constant currency sales growth
for the fourth quarter is expected to be flat to slightly down. The
currency impact in the fourth quarter of 2015 is expected to
negatively impact revenue by approximately $75 million to $85
million. Fourth quarter 2015 constant currency revenue growth
guidance is negatively impacted by approximately 5 to 6 percentage
points due to the extra selling week in the fourth quarter of 2014,
which is the result of five fewer selling days in the fourth
quarter of 2015 versus the prior year quarter. During its earnings
conference call today, St. Jude Medical will provide an update to
its range for revenue expectations for the full-year 2015 by
product category.
The company expects its consolidated adjusted net earnings for
the fourth quarter of 2015 to be in the range of $1.00 to $1.02 per
share and for full-year 2015 consolidated adjusted net earnings to
be in the range of $3.93 to $3.95. A further reconciliation of the
company’s quarterly guidance is provided in the schedules at the
end of the press release.
Conference Call / Webcast
St. Jude Medical’s third quarter earnings call can be heard live
via webcast today beginning at 7 a.m. CT via the St. Jude Medical
Investor Relations website (investors.sjm.com). Approximately one
hour following the call, a replay will be available (archived for
90 days) on the Investor Events and Presentations webpage in the
Investor Relations section of the St. Jude Medical website.
St. Jude Medical will also be tweeting live during the call on
our Investor Relations Twitter account, @StJudeMedicalIR.
About St. Jude Medical
St. Jude Medical is a global medical device manufacturer
dedicated to transforming the treatment of some of the world’s most
expensive epidemic diseases. The company does this by developing
cost-effective medical technologies that save and improve lives of
patients around the world. Headquartered in St. Paul, Minn., St.
Jude Medical has four major clinical focus areas that include
cardiac rhythm management, atrial fibrillation, cardiovascular and
neuromodulation. For more information, please visit sjm.com or
follow us on Twitter @StJudeMedicalIR.
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 3, 2015 and Quarterly Report on Form 10-Q for the fiscal
quarter ended July 4, 2015. 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 3Q15 Sales and Reconciliation to Constant
Currency Sales Growth (in millions)
(unaudited)
Constant Constant 3Q15
Sales 3Q14 Sales Reported % Currency %
Reported
Currency Foreign Change vs. Change vs.
$ Change
$ Change
Currency
3Q14 3Q14
vs. 3Q14 vs. 3Q14
Impact Total Sales $1,339
$1,372 -2% 6% -$33
$80 -$113 Total International Sales
$634 $706 -10% 6%
Total U.S. Sales $705 $666
6%
Worldwide Cardiac Rhythm
Management $630 $688
-8% -1% -$58 -$7
-$51 International Cardiac Rhythm Management
$277 $315 -12% 4% U.S.
Cardiac Rhythm Management $353 $373
-5%
Worldwide ICD
$392 $422 -7% -1%
-$30 -$2 -$28
International ICD $138 $160
-14% 3% U.S. ICD $254
$262 -3%
Worldwide
Pacemakers $238 $266
-10% -1% -$28 -$5
-$23 International Pacemakers $139
$155 -10% 5% U.S. Pacemakers
$99 $111 -10%
Worldwide Atrial Fibrillation
$271 $253 7% 17%
$18 $42 -$24 International
Atrial Fibrillation $148 $155
-4% 12% U.S. Atrial Fibrillation
$123 $98 25%
Worldwide Cardiovascular $317
$324 -2% 7% -$7
$24 -$31 International Cardiovascular
$178 $204 -13% 2%
U.S. Cardiovascular $139 $120
17%
Worldwide Structural Heart
$141 $155 -9%
1% -$14 $1 -$15
International Structural Heart $88 $101
-14% 1% U.S. Structural Heart
$53 $54 1%
Worldwide Vascular $176 $169
4% 14% $7
$23 -$16 International Vascular $90
$103 -13% 3% U.S.
Vascular $86 $66 29%
Worldwide Neuromodulation
$121 $107 13% 19%
$14 $21 -$7 International
Neuromodulation $31 $32
-4% 17% U.S. Neuromodulation $90
$75 19%
Note:
Percentage changes are based on actual, non-rounded amounts and may
not recalculate precisely.
St. Jude Medical, Inc.
Condensed Consolidated Balance Sheets (in millions)
(Unaudited) October 3,
2015 January 3, 2015 Cash and cash equivalents $2,535
$1,442 Accounts receivable, net 1,180 1,215 Inventories 841 784
Other current assets 435 473 Property, plant & equipment, net
1,268 1,343 Goodwill 3,515 3,532 Other intangible assets, net 782
851 Other assets 569 567 Total assets $11,125 $10,207
Current debt obligations $1,796 $1,593 Other current liabilities
1,062 1,073 Long-term debt 3,264 2,273 Long-term other liabilities
1,006 1,024 Total equity 3,997 4,244 Total liabilities & equity
$11,125 $10,207
St. Jude Medical, Inc.
Condensed Consolidated Statements of Earnings (in
millions, except per share amounts) (Unaudited)
Three
Months Ended Nine Months Ended
October 3, 2015
September 27, 2014 October 3, 2015 September 27,
2014 Net sales $1,339 $1,372 $4,094 $4,183 Cost of sales: Cost
of sales before special charges 408 388 1,220 1,177 Special charges
17 24 24 51 Total cost of sales 425 412 1,244 1,228 Gross profit
914 960 2,850 2,955 Selling, general & administrative
expense 413 453 1,290 1,399 Research & development expense 161
169 499 517 Amortization of intangible assets 23 23 71 65 Special
charges 23 45 57 103 Operating profit 294 270 933 871 Other
expense, net 33 20 70 61 Earnings before noncontrolling interest
and income taxes 261 250 863 810 Income taxes 46 18 110 93 Net
earnings before noncontrolling interest 215 232 753 717 Net loss
attributable to noncontrolling interest - (6) (14) (40) Net
earnings attributable to St. Jude Medical, Inc. $215 $238 $767 $757
Diluted net earnings per share attributable to St. Jude
Medical, Inc. $0.75 $0.82 $2.68 $2.62 Adjusted diluted net earnings
per share attributable to St. Jude Medical, Inc. (Non-GAAP) (1)
$0.97 $1.02 $2.92 $3.09 Cash dividends declared per share
$0.29 $0.27 $0.87 $0.81 Weighted average shares outstanding-
diluted 286.3 290.0 286.3 289.4 (1) See accompanying
reconciliation tables.
Non-GAAP Financial Measures
Reconciliations (Unaudited)
Three Months Ended October 3, 2015
Earnings before Net earnings Net loss
Diluted net
noncontrolling before attributable to
Net earnings
earnings per share
interest and noncontrolling noncontrolling
attributable to St.
attributable to St.
Diluted EPS
(in millions, except per share
amounts)
income taxes Income taxes Effective tax
rate interest interest
Jude Medical, Inc.
Jude Medical, Inc.
growth rate
As reported (GAAP)
$ 261 $ 46
17.6 % $ 215 $ - $
215 $ 0.75 -9 %
Restructuring activities 32 10 22 - 22 0.08 Acquisition-related
costs 6 8 (2 ) (2 ) (0.01 ) Product field action costs and
litigation costs 5 2 3 - 3 0.01 Legal settlements 1 - 1 - 1 0.00
Intangible asset impairment charges 2 1 1 - 1 0.00 Amortization of
intangible assets 23 7 16 - 16 0.06 Discrete income tax expenses -
(18 ) 18 - 18 0.06 R&D credit - (3 ) 3 - 3 0.01
As adjusted (Non-GAAP)
$ 330
$ 53 16.1
% $ 277
$ - $ 277
$ 0.97 -5
% Unfavorable foreign currency impact vs. 2014 0.17
Constant currency as adjusted
(non-GAAP)
$ 1.14 12
% Product field Intangible asset Restructuring
Acquisition- action costs and impairment activities
related costs litigation costs Legal
settlements charges Total
Special charges (cost of sales) $ 18 $ - $ (1 ) $ - $ - $ 17
Selling, general & administrative expense - (8 ) - - - (8 )
Special charges (operating expenses) 14 - 6 1 2 23 Other expense,
net - 14 -
- -
14
$ 32
$ 6 $ 5
$ 1 $
2 $ 46
Three Months Ended September 27, 2014
Earnings before Net earnings Net loss
Diluted net
noncontrolling before attributable to Net earnings
earnings per share
interest and noncontrolling noncontrolling attributable to St.
attributable to St.
(in millions, except per share
amounts)
income taxes Income taxes Effective tax
rate interest interest
Jude Medical, Inc. Jude Medical, Inc. As
reported (GAAP)
$ 250 $ 18 7.2
% $ 232 $ (6 ) $
238 $ 0.82 Restructuring activities 16
4 12 - 12 0.04 Acquisition-related costs 15 2 13 - 13 0.04 Product
field action costs and litigation costs 28 6 22 - 22 0.08
Intangible asset impairment charges 25 9 16 - 16 0.06 Amortization
of intangible assets 23 8 15 - 15 0.05 Discrete income tax benefits
- 24 (24 ) - (24 ) (0.08 ) R&D credit - (4 ) 4 - 4 0.01
As
adjusted (Non-GAAP)
$ 357 $
67 18.8 %
$ 290 $ (6
) $ 296
$ 1.02 Product field Intangible
asset Restructuring Acquisition- action costs and impairment
activities related costs litigation
costs charges Total Cost of
sales before special charges
$ - $ 2
$
- $ - $ 2 Special charges (cost of sales) 1 -
23 - 24 Selling, general & administrative expense - 13 - - 13
Special charges (operating expenses) 15
- 5 25
45
$ 16
$ 15 $ 28
$ 25
$ 84 Nine Months Ended
October 3, 2015
Earnings before Net earnings Net loss
Diluted net
noncontrolling before attributable to
Net earnings
earnings per share
interest and noncontrolling noncontrolling
attributable to St.
attributable to St.
Diluted EPS
(in millions, except per share
amounts)
income taxes Income taxes Effective tax
rate interest interest
Jude Medical, Inc.
Jude Medical, Inc.
growth rate
As reported (GAAP)
$ 863 $ 110
12.7 % $ 753 $ (14
) $ 767 $ 2.68 2 %
Restructuring activities 81 24 57 - 57 0.20
Acquisition-related costs (26 ) 10 (36 ) 4 (40 ) (0.14 ) Product
field action costs and litigation costs 7 3 4 - 4 0.01 Legal
settlements (9 ) (4 ) (5 ) - (5 ) (0.02 ) Intangible asset
impairment charges 2 1 1 - 1 0.00 Amortization of intangible assets
71 22 49 - 49 0.17 Discrete income tax benefits - 11 (11 ) - (11 )
(0.04 ) R&D credit - (14 ) 14 - 14 0.05
As adjusted (Non-GAAP)
$ 989
$ 163 16.5
% $ 826
$ (10 ) $ 836
$ 2.92
-6 % Unfavorable foreign currency impact vs.
2014 0.50 Constant currency as adjusted
(non-GAAP)
$ 3.42 11
%
Product field Intangible asset Restructuring
Acquisition-
action costs and
impairment activities
related costs
litigation costs
Legal settlements
charges Total Special charges
(cost of sales) $ 31 $ - $ (7 ) $ - $ - $ 24 Selling, general &
administrative expense - (41 ) - - - (41 ) Research &
development expense - 1 - - - 1 Special charges (operating
expenses) 50 - 14 (9 ) 2 57 Other expense, net -
14 -
- -
14
$ 81 $
(26 ) $ 7
$ (9 ) $ 2
$ 55 Nine
Months Ended September 27, 2014
Earnings before Net earnings Net loss
Diluted net
noncontrolling before attributable to
Net earnings
earnings per share
interest and noncontrolling noncontrolling
attributable to St.
attributable to St.
(in millions, except per share
amounts)
income taxes Income taxes Effective tax
rate interest interest
Jude Medical, Inc.
Jude Medical, Inc.
As reported (GAAP)
$ 810 $ 93
11.5 % $ 717 $ (40
) $ 757 $ 2.62
Restructuring activities 110 33 77 - 77 0.27 Acquisition-related
costs 48 8 40 16 24 0.08 Product field action costs and litigation
costs 46 13 33 - 33 0.11 Legal settlements (27 ) (10 ) (17 ) - (17
) (0.06 ) Intangible asset impairment charges 25 9 16 - 16 0.06
Amortization of intangible assets 65 24 41 - 41 0.14 Discrete
income tax benefits - 48 (48 ) - (48 ) (0.17 ) R&D credit - (12
) 12 - 12 0.04
As adjusted (Non-GAAP)
$ 1,077
$ 206
19.1 % $ 871
$ (24 )
$ 895 $ 3.09
Product field Intangible asset Restructuring
Acquisition-
action costs and impairment activities
related costs
litigation costs Legal settlements
charges Total Cost of sales
before special charges $ - $ 2 $ - $ - $ - $ 2 Special charges
(cost of sales) 28 - 23 - - 51 Selling, general &
administrative expense - 46 - - - 46 Special charges (operating
expenses) 82 -
23 (27 )
25 103
$
110 $ 48
$ 46 $ (27
) $ 25
$ 202 The sum of the components
may not equal the total due to rounding and quantities of shares
outstanding in different periods. Tax rates vary and are
applied based on the item's nature and tax jurisdiction where it is
incurred.
2015 Earnings Guidance
Reconciliation (Unaudited)
Fourth Quarter Full Year Estimated 2015 diluted net earnings
per share attributable to St. Jude Medical,Inc. $0.35 - $0.41 $3.04
- $3.10 Estimated restructuring activities 0.02 0.23 Estimated
acquisition-related costs 0.46 - 0.48 0.33 - 0.35 Product field
action costs and litigation costs - 0.01 Legal settlements - (0.02)
Estimated amortization of intangible assets 0.11 - 0.13 0.28 - 0.30
Discrete income tax benefits - (0.04) Estimated R&D credit 0.02
0.06 Estimated 2015 adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. (Non-GAAP) $1.00 - $1.02
$3.93 - $3.95 The sum of the components may not equal the
total due to rounding and quantities of shares outstanding in
different periods.
2015 Sales Guidance
Reconciliation (in millions) (Unaudited)
Fourth Quarter Full Year 2014 total sales $1,439 $5,622
Estimated 2015 sales* $1,455 - $1,480 $5,549 - $5,574 Estimated
2015 % change vs 2014 1% - 3% (1%) Estimated unfavorable
foreign currency impact vs 2014 $75 - $85 $397 - $407 Estimated
constant currency 2015 total sales (Non-GAAP) $1,540 - $1,555
$5,956 - $5,971 Estimated 2015 constant currency % change vs 2014
(Non-GAAP) 7% - 8% 6% *Includes $125 to $130 million in
Thoratec sales
Non-GAAP Financial Measures
The company provides the following non-GAAP financial measures
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 discussed below. St. Jude Medical management
uses these non-GAAP financial measures 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.
- Adjusted earnings before noncontrolling
interest and income taxes
- Adjusted income taxes and adjusted
effective tax rate
- Adjusted net earnings before
noncontrolling interest
- Adjusted net loss attributable to
noncontrolling interest
- Adjusted net earnings attributable to
St. Jude Medical, Inc.
- Adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. and adjusted diluted EPS
growth rate
- Adjusted constant currency diluted net
earnings per share attributable to St. Jude Medical, Inc. and
adjusted constant currency diluted EPS growth rate
The adjustments made to GAAP financial measures result from
facts and circumstances that vary in frequency and impact on the
Company’s results of operations. The following is an explanation of
each of the adjustments that management excludes in calculating its
non-GAAP measures.
Restructuring activities – These amounts represent severance
costs and other termination benefits, inventory write-offs
primarily associated with discontinued product lines, fixed asset
write-offs related to assets no longer expected to be utilized and
other restructuring costs.
Acquisition-related costs – These amounts consist of contingent
consideration fair value adjustments, acquired inventory step-up
amortization, other transaction costs, integration costs and
financing commitment fees.
Product field action costs and litigation costs – These amounts
primarily relate to inventory write-off and disposal costs,
additional warranty and patient monitoring costs, and estimated
legal costs for outstanding legal matters associated with product
field actions.
Legal settlements – These amounts consist of losses that are
probable and reasonably estimable, gains related to favorable
resolutions of litigation matters and probable insurance
recoveries.
Intangible asset impairment charges – These amounts represent
non-cash impairments of certain definite and indefinite-lived
intangible assets.
Amortization of intangible assets – These amounts represent the
non-cash amortization expenses we recognized for definite-lived
intangible assets.
Discrete income tax items – These amounts represent tax effects
related to significant unusual or infrequent items not attributable
to current-year ordinary income, such as settlement of tax
positions and discrete tax adjustments to uncertain tax
positions.
R&D credit – These amounts represent the impact of the
federal research and development tax credit to present comparative
periods assuming that the tax credit had been enacted in all
periods presented.
Foreign currency impact – These amounts represent the impact to
net sales and adjusted diluted net earnings per share attributable
to St. Jude Medical, Inc. after translating net sales and the
consolidated statement of earnings at comparable prior period
foreign currency exchange rates.
The company also provides constant currency sales growth and
constant currency adjusted EPS 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 and adjusted EPS. St. Jude Medical management uses constant
currency sales growth and constant currency adjusted EPS growth to
forecast and evaluate the operational performance of the company as
well as to compare sales and adjusted EPS 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20151021005310/en/
St. Jude Medical, Inc.Media Contact:Kate Stoltenberg,
651-756-3388kstoltenberg@sjm.comorInvestor Contact:J.C. Weigelt,
651-756-4347jweigelt@sjm.com
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