St. Jude Medical reports net sales of $1.203 billion in fourth-quarter of 2009

Jan 27 2010

St. Jude Medical, Inc. (NYSE: STJ) today reported sales and net earnings for the fourth quarter and year ended Jan. 2, 2010.

Fourth Quarter and Full-Year Sales

The Company reported net sales of $1.203 billion in the fourth quarter of 2009, an increase of 6 percent over the $1.133 billion in the fourth quarter of 2008. As a reminder, the fourth quarter of 2009 had one fewer week of sales compared to the year-ago period. Foreign currency translation comparisons increased fourth quarter sales by approximately $50 million.

Net sales in 2009 were $4.681 billion compared to $4.363 billion in 2008, an increase of 7 percent. Foreign currency translation comparisons decreased full-year 2009 sales by about $99 million. On a currency neutral basis, net sales grew 10 percent over the prior year.

Commenting on the Company’s results and growth program, St. Jude Medical Chairman, President and Chief Executive Officer Daniel J. Starks said, “We are pleased with our sequential increase in sales during the fourth quarter, particularly given the fewer selling days. We overachieved our earnings guidance range for the fourth quarter and we believe our growth programs are on track for a successful 2010. We look forward to providing our guidance for the first quarter and 2010 on our earnings call this morning.”

Cardiac Rhythm Management (CRM)

Total Cardiac Rhythm Management sales, which include implantable cardioverter defibrillator (ICD) and pacemaker products, were $698 million for the fourth quarter of 2009, a 3 percent increase compared to the fourth quarter of 2008. After adjusting for the impact of foreign currency, total CRM sales decreased 1 percent. Total CRM product sales for the full-year 2009 were $2.769 billion, representing a 3 percent increase over 2008. On a currency neutral basis, total CRM sales grew 5 percent over the prior year.

Of that total, ICD product sales were $395 million in the fourth quarter, a 2 percent increase compared to the fourth quarter of 2008. ICD revenue growth decreased 1 percent after adjusting for the impact of foreign currency. ICD product sales for the full-year 2009 were $1.578 billion, representing a 3 percent increase over 2008. On a constant currency basis, total ICD sales grew 5 percent over the prior year.

Fourth quarter pacemaker sales were $303 million, an increase of 3 percent from the comparable quarter of 2008. After adjusting for the impact of foreign currency, pacemaker sales decreased 1 percent. Total pacemaker sales for 2009 were $1.191 billion, up 2 percent over 2008. On a constant currency basis, total pacemaker sales grew 4 percent over the prior year.

Atrial Fibrillation (AF)

AF product sales for the fourth quarter totaled $171 million, a 10 percent increase over the fourth quarter of 2008. AF sales grew 4 percent after adjusting for the impact of foreign currency. For the year 2009, AF product sales were $628 million, an increase of 15 percent over the prior year. On a constant currency basis, AF product sales increased 17 percent in 2009.

Neuromodulation

St. Jude Medical sales of neuromodulation products were $94 million in the fourth quarter of 2009, up 21 percent from the comparable quarter of 2008. On a constant currency basis, neuromodulation product sales increased 18 percent in the fourth quarter of 2009. Total neuromodulation product sales for 2009 were $331 million, up 30 percent over the prior year. On a constant currency basis, neuromodulation product sales increased 32 percent in 2009.

Cardiovascular

Total cardiovascular sales, which include primarily vascular closure and heart valve products, were $240 million for the fourth quarter of 2009, a 10 percent increase over the fourth quarter of 2008. After adjusting for the impact of foreign currency, total cardiovascular sales increased 4 percent. Total cardiovascular product sales for 2009 were $953 million, up 11 percent over 2008. On a constant currency basis, cardiovascular product sales increased 13 percent in 2009.

Sales of vascular closure products in the fourth quarter of 2009 were $94 million, a 2 percent increase over the fourth quarter of 2008. Total vascular closure product sales for 2009 were $381 million, up 4 percent over 2008.

Total heart valve product sales for the fourth quarter of 2009 were $79 million, flat compared with the fourth quarter of 2008. Total heart valve product sales for 2009 were $323 million, flat when compared to 2008.

Fourth Quarter and Full-Year Earnings Results

In the fourth quarter, the Company recorded purchased research and development charges of $4 million and recorded $44 million of after-tax special charges, consisting of $33 million of employee termination and other costs related to restructuring actions announced in the third quarter and $11 million of inventory write-offs related to discontinued products. Also during the fourth quarter, the Company recorded a $24 million after-tax benefit related to certain annual discretionary compensation accruals that were reversed in the fourth quarter due to the fact that the Company does not intend to pay out these awards.

Including these items, reported net profit for the fourth quarter of 2009 was $190 million, or $0.57 per share. This compares to reported net loss for the fourth quarter of 2008 of $201 million, or $0.58 per share. For the full-year 2009, reported net earnings were $777 million, or $2.26 per share.

Excluding these charges and the after-tax benefit recorded in the fourth quarter, adjusted net earnings for the fourth quarter of 2009 were $214 million, or $0.64 per share. Adjusted net earnings for the full year 2009 were $838 million or $2.43 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.

First 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 first quarter and full year 2010 by product category.

The Company expects its consolidated earnings for the first quarter of 2010 to be in the range of $0.66 to $0.68 per diluted share and for full-year 2010 in the range of $2.71 to $2.76, an increase of approximately 12 percent to 14 percent over 2009.

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, 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, 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.