St. Jude Medical Reports Second Quarter 2014 Results

  St. Jude Medical Reports Second Quarter 2014 Results

Business Wire

ST. PAUL, Minn. -- July 16, 2014

St. Jude Medical, Inc. (NYSE:STJ) today reported sales and net earnings for
the second quarter ended June 28, 2014.

Second quarter highlights:

  *Net sales increased 3 percent and adjusted net earnings per share
    increased 6 percent
  *ICD sales increased 2 percent, demonstrating our continued leadership
    position in quadripolar CRT therapy
  *The company completed its acquisition of CardioMEMS, Inc., and began its
    strategic launch of the CardioMEMS™ HF System, the first and only
    FDA-approved heart failure monitoring device proven to significantly
    reduce hospital admissions when used by physicians to manage heart failure

Second Quarter 2014 Sales

The company reported net sales of $1.448 billion in the second quarter of
2014, a 3 percent increase on a reported and constant-currency basis over net
sales of $1.403 billion in the second quarter of 2013. Favorable foreign
currency translation comparisons increased second quarter sales by
approximately $4 million.

Commenting on the company’s financial results, St. Jude Medical Chairman,
President and Chief Executive Officer Daniel J. Starks said, “The progress we
made during the second quarter positions us to accelerate sales growth while
continuing to deliver EPS leverage. Our growth is based on differentiated
medical technology that improves patient outcomes and reduces the cost of
health care.”

Cardiac Rhythm Management (CRM)

Total CRM sales, which include implantable cardioverter defibrillator (ICD)
and pacemaker products, were $733 million for the second quarter of 2014, a 2
percent increase compared with the second quarter of 2013.

Of that total, ICD product sales were $462 million in the second quarter, a 2
percent increase compared with the second quarter of 2013.

Second quarter pacemaker sales were $271 million, a 3 percent increase
compared with the second quarter of 2013.

Atrial Fibrillation (AF)

AF product sales for the second quarter totaled $257 million, an 8 percent
increase over the second quarter of 2013.

Cardiovascular

Total cardiovascular sales, which primarily include vascular and structural
heart products, were $351 million for the second quarter of 2014, a 3 percent
increase compared to the second quarter of 2013.

Total structural heart product sales for the second quarter of 2014 were $171
million, a 6 percent increase compared with the second quarter of 2013.

Sales of vascular products in the second quarter of 2014 were $180 million, a
1 percent increase over the second quarter of 2013.

Neuromodulation

Neuromodulation product sales were $107 million in the second quarter of 2014,
down 1 percent compared with the second quarter of 2013.

Second Quarter Earnings Results

In the second quarter, the company recognized net after-tax charges of $21
million, or $0.08 per share, primarily related to continued actions associated
with our previously announced restructuring activities. Including these items,
reported net earnings for the second quarter of 2014 were $270 million or
$0.93 per share, compared with reported net earnings for the second quarter of
2013 of $115 million or $0.40 per share.

In accordance with GAAP, reported net earnings for the second quarter 2014 do
not include any benefit from the research and development tax credit, which
has yet to be extended for 2014. Including the benefit of this adjustment and
excluding the second quarter charges, adjusted net earnings for the second
quarter of 2014 were $295 million, or $1.02 per share, a 6 percent increase
compared with adjusted net earnings for the second quarter of 2013 of $0.96
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 2014 Sales and Earnings Guidance

For the third quarter, St. Jude Medical expects revenue to be in the range of
$1.315 billion to $1.395 billion. For the full-year 2014, we now expect total
revenue to be in the range of $5.640 billion to $5.760 billion. During a
conference call today, St. Jude Medical will provide its range for revenue
expectations for the third quarter and full-year 2014 by product category.

The company expects its consolidated adjusted net earnings for the third
quarter of 2014 to be in the range of $0.95 to $0.97 per share and for
full-year 2014 consolidated adjusted net earnings to now be in the range of
$3.96 to $4.01. 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, restructuring charges, impairment 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, discrete income tax adjustments 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 and adjusted
constant-currency net earnings per share 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 net earnings.
St. Jude Medical management uses constant-currency growth measurements to
forecast and evaluate the operational performance of the company as well as to
compare results 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 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, investors.sjm.com.

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.

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 28, 2013 and Quarterly
Report on Form 10-Q for the fiscal quarter ended March 29, 2014. 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 2014 Sales and Reconciliation to Constant-Currency Sales Growth
(in millions)                                                       
(unaudited)                                            Constant                  Constant
                    2Q14       2Q13       Reported     Currency     Reported     Currency
                    Sales      Sales      %            %            $            $
                                          Change       Change       Change       Change
                                          vs.          vs.
                                 2Q13       2Q13       vs. 2Q13   vs. 2Q13
Total Sales       $1,448   $1,403   3%         3%         $45        $41
Total
International     $779     $734     6%         6%                   
Sales
Total U.S.        $669     $669     0%                             
Sales
Worldwide
Cardiac Rhythm    $733     $718     2%         2%         $15        $13
Management
International
Cardiac Rhythm    $351     $338     4%         3%                   
Management
U.S. Cardiac
Rhythm            $382     $380     1%                             
Management
Worldwide ICD     $462     $454     2%         1%         $8         $6
International     $187     $184     2%         1%                   
ICD
U.S. ICD          $275     $270     2%                             
Worldwide         $271     $264     3%         3%         $7         $7
Pacemakers
International     $164     $154     6%         6%                   
Pacemakers
U.S. Pacemakers   $107     $110     -3%                            
Worldwide
Atrial            $257     $237     8%         8%         $20        $19
Fibrillation
International
Atrial            $159     $145     10%        9%                   
Fibrillation
U.S. Atrial       $98      $92      7%                             
Fibrillation
Worldwide         $351     $340     3%         3%         $11        $10
Cardiovascular
International     $233     $223     4%         4%                   
Cardiovascular
U.S.              $118     $117     1%                             
Cardiovascular
Worldwide         $107     $108     -1%        -1%        -$1        -$1
Neuromodulation
International     $36      $28      29%        29%                  
Neuromodulation
U.S.              $71      $80      -11%                           
Neuromodulation
                                                                                 


St. Jude Medical, Inc.
Condensed Consolidated Statements of Earnings
(in millions, except per share amounts)
(Unaudited)
                                                            
                       Three Months Ended            Six Months Ended
                                                                           
                       June          June            June          June
                       28,           29,             28,           29,
                       2014          2013            2014          2013
Net sales              $1,448        $1,403          $2,811        $2,741
Cost of sales:
Cost of sales
before special         407           381             789           740
charges
Special charges        26            1               27            19
Total cost of          433           382             816           759
sales
Gross profit           1,015         1,021           1,995         1,982
                                                                           
Selling, general &
administrative         523           489             988           957
expense
Research &
development            178           173             348           333
expense
Special charges        25            77              58            102
Operating profit       289           282             601           590
Other expense, net     21            183             41            231
Earnings before
noncontrolling         268           99              560           359
interest and
income taxes
Income tax expense     22            (8)             75            30
(benefit)
Net earnings
before                 246           107             485           329
noncontrolling
interest
Net loss
attributable to        (24)          (8)             (34)          (9)
noncontrolling
interest
Net earnings
attributable to        $270          $115            $519          $338
St. Jude Medical,
Inc.
                                                                           
Adjusted net
earnings
attributable to        $295    (1)   $275    (2)     $573    (3)   $538    (4)
St. Jude Medical,
Inc. (Non-GAAP)
                                                                           
Diluted net
earnings per share
attributable to        $0.93         $0.40           $1.80         $1.18
St. Jude Medical,
Inc.
Adjusted diluted
net earnings per
share attributable     $1.02   (1)   $0.96   (2)     $1.98   (3)   $1.87   (4)
to St. Jude
Medical, Inc.
(Non-GAAP)
                                                                           
Cash dividends         $0.27         $0.25           $0.54         $0.50
declared per share
                                                                           
Weighted average
shares                 288.9         286.7           289.1         287.1
outstanding-
diluted
                                                                           


(1) Second quarter 2014 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 $21 or $0.08
per share:
- $42 charges, or $0.15 per share, primarily related to continued actions
associated with our previously announced restructuring activities. The
associated pre-tax amount of $60 was recorded as a Special Charge to Cost of
sales ($26) and Special charges ($34).
- $9 charges, or $0.03 per share, of acquisition-related costs primarily
related to contingent consideration fair value adjustments and costs
associated with acquiring the CardioMEMS noncontrolling equity interests. The
associated pre-tax amount of $31 was recorded as Selling, general &
administrative expense.
- $11 charges, or $0.04 per share, related to litigation costs resulting from
product field actions for our legacy IESD business. The associated pre-tax
amount of $18 was recorded to Special charges.
- $17 benefit, or $0.06 per share, related to a favorable judgment and
resolution of a patent infringement case. The associated pre-tax amount of $27
was recorded as a benefit to Special charges.
- $24 income tax benefit, or $0.08 per share, related to discrete income tax
adjustments associated with international tax positions.
Second quarter 2014 adjusted net earnings attributable to St. Jude Medical,
Inc. and adjusted diluted net earnings per share attributable to St. Jude
Medical, Inc. include $4 of income tax benefit, or $0.01 per share, for the
second quarter expected benefit from the federal research and development tax
credit not yet extended for 2014.

(2) 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, contingent consideration fair value
adjustments 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 extinguishment costs
primarily associated with the make-whole redemption 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.

(3) First six months 2014 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 $46 or $0.16
per share:
- $65 charges, or $0.22 per share, primarily related to continued actions
associated with our previously announced restructuring activities. The
associated pre-tax amount of $94 was recorded as a Special Charge to Cost of
sales ($27) and Special charges ($67).
- $11 charges, or $0.04 per share, related to contingent consideration fair
value adjustments and other acquisition-related costs. The associated pre-tax
amount of $33 was recorded as Selling, general & administrative expense.
- $11 charges, or $0.04 per share, related to litigation costs resulting from
product field actions for our legacy IESD business. The associated pre-tax
amount of $18 was recorded to Special charges.
- $17 benefit, or $0.06 per share, related to a favorable judgment and
resolution of a patent infringement case. The associated pre-tax amount of $27
was recorded as a benefit to Special charges.
- $24 income tax benefit, or $0.08 per share, related to discrete income tax
adjustments associated with international tax positions.
First six months 2014 adjusted net earnings attributable to St. Jude Medical,
Inc. and adjusted diluted net earnings per share attributable to St. Jude
Medical, Inc. include $8 of income tax benefit, or $0.02 per share, for the
first six months expected benefit from the federal research and development
tax credit not yet extended for 2014.

(4) 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 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.
- $32 charges, or $0.11 per share, related to transaction costs, acquired
inventory step-up amortization expense, contingent consideration fair value
adjustments and other acquisition-related costs, including a loss on a
previously held cost investment. The associated pre-tax amount of $33 was
recorded to Cost of sales ($1), Selling, general & administrative expense ($3)
and Other expense, net ($29).
- $101 charges, or $0.35 per share related to debt extinguishment costs
primarily associated with the make-whole redemption 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.
-$21 income tax benefit, or $0.07 per share, for the benefit relating to 2012
from the federal research and development tax credit extended in the first
quarter of 2013, retroactive to the beginning of the 2012 tax year.



2014 Earnings Guidance Reconciliation
                                                                    
                                        Third                  Full Year
                                        Quarter 2014           2014
                                                                           
Estimated 2014 diluted net earnings     $0.82 - $              $3.57 - $
per share attributable to St. Jude      0.84                   3.62
Medical,Inc.
Restructuring charges                   0.05           (5)     0.31        (5)
Acquisition-related charges             0.07           (6)     0.14        (6)
Product litigation costs and other      -                      (0.02)      (7)
legal matter adjustments
Discrete income tax adjustments         -                      (0.08)      (8)
Federal R&D tax credit 2014             0.01           (9)     0.04        (9)
extension
Estimated 2014 adjusted diluted net     $0.95- $               $3.96 - $
earnings per share attributable to      0.97                   4.01
St. Jude Medical, Inc. (Non-GAAP)
                                                                           


(5) The Company's above estimated 2014 adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. (Non-GAAP) excludes the impact of
after-tax charges expected to be recognized related to ongoing business
restructuring activities.
(6) The Company's above estimated 2014 adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. (Non-GAAP) excludes the impact of
after-tax charges expected to be recognized related to acquisition-related
activities.
(7) The Company's above estimated 2014 adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. (Non-GAAP) excludes the impact of
after-tax items recognized in the second quarter of 2014 related to product
litigation costs and the favorable judgment and resolution of a patent
infringement case.
(8) The Company's above estimated 2014 adjusted diluted net earnings per share
attributable to St. Jude Medical, Inc. (Non-GAAP) excludes the impact of
discrete income tax benefits recognized in the second quarter of 2014 related
to certain international tax positions.
(9) The federal research and development tax credit has not yet been extended
for 2014. The Company's above estimated 2014 adjusted diluted net earnings per
share attributable to St. Jude Medical, Inc. (non-GAAP) assumes that the tax
credit will be enacted for the full year 2014.



St. Jude Medical, Inc.
Condensed Consolidated Balance Sheets
(in millions)
(Unaudited)
                                                  
                                     June 28, 2014     December 28, 2013
Cash and cash equivalents            $1,580            $1,373
Accounts receivable, net             1,439             1,422
Inventories                          801               708
Other current assets                 400               407
Property, plant & equipment, net     1,382             1,410
Goodwill                             3,484             3,524
Other intangible assets, net         868               911
Other assets                         489               493
Total assets                         $10,443           $10,248
                                                       
Current debt obligations             $564              $62
Other current liabilities            1,263             1,318
Long-term debt                       3,642             3,518
Deferred income taxes, net           231               240
Long-term other liabilities          708               706
Total equity                         4,035             4,404
Total liabilities & equity           $10,443           $10,248
                                                       

Contact:

St. Jude Medical, Inc.
Micki Sievwright, 651-756-4615
msievwright@sjm.com
or
J.C. Weigelt, 651-756-4347
jweigelt@sjm.com
 
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