St. Jude Medical Reports Fourth Quarter and Full-Year 2014 Results
Fourth quarter highlights:
- Net sales increased by approximately 5 percent on a constant-currency basis over the prior year
- Sales of the CardioMEMS™ HF System were approximately
$12 million - Atrial fibrillation sales increased approximately 17 percent on a constant-currency basis over the prior year
- Adjusted net earnings per share of
$1.03 increased by approximately 11 percent on a constant currency basis, compared with the prior year
Fourth Quarter and Full-Year 2014 Sales
The company reported net sales of
For the full-year 2014, net sales were
Commenting on the company’s financial results,
Cardiac Rhythm Management (CRM)
Total CRM sales, which include implantable cardioverter defibrillator (ICD) and pacemaker products, were
Of that total, ICD product sales were
Fourth quarter pacemaker sales were
Atrial Fibrillation (AF)
AF product sales for the fourth quarter totaled
Cardiovascular
Total cardiovascular sales, which primarily include structural heart and vascular products, were
Structural heart product sales for the fourth quarter of 2014 were
Sales of vascular products in the fourth quarter of 2014 were
Neuromodulation
Fourth Quarter and Full-Year Earnings Results
In the fourth quarter the Company recorded after-tax charges of
Including these items, reported net earnings for the fourth quarter of 2014 were
Excluding these items, adjusted net earnings for the fourth quarter of 2014 were
First Quarter and Full-Year 2015 Sales and Earnings Guidance
For the first quarter,
Beginning in 2015, adjusted earnings excludes after-tax intangible amortization expense. After-tax intangible amortization expense for 2014 was approximately
Conference Call / Webcast
St. Jude Medical’s fourth quarter and full-year 2014 earnings call can be heard live via webcast today beginning at
Annual Investor Meeting
The company has scheduled an annual investor meeting for
About
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
Summary of 4Q14 Sales and Reconciliation to Constant Currency Sales Growth |
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(in millions) |
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(unaudited) |
Constant |
Constant |
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4Q14 Sales |
4Q13 Sales |
Reported % |
Currency % |
Reported |
Currency $ |
Foreign |
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Change vs. |
Change vs. |
$ Change |
Change |
Currency |
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4Q13 |
4Q13 |
vs. 4Q13 |
vs. 4Q13 |
Impact |
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Total Sales | 1% | 5% | - |
|||||||||||
Total International Sales | -3% | 4% | ||||||||||||
Total U.S. Sales | 6% | |||||||||||||
Worldwide Cardiac Rhythm Management | -3% | 1% | - |
- |
||||||||||
International Cardiac Rhythm Management | -6% | 1% | ||||||||||||
U.S. Cardiac Rhythm Management | 0% | |||||||||||||
Worldwide ICD | -4% | 0% | - |
- |
- |
|||||||||
International ICD | -7% | 0% | ||||||||||||
U.S. ICD | -1% | |||||||||||||
Worldwide Pacemakers | -2% | 3% | - |
- |
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International Pacemakers | -4% | 3% | ||||||||||||
U.S. Pacemakers | 2% | |||||||||||||
Worldwide Atrial Fibrillation | 12% | 17% | - |
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International Atrial Fibrillation | 11% | 19% | ||||||||||||
U.S. Atrial Fibrillation | 14% | |||||||||||||
Worldwide Cardiovascular | -1% | 3% | - |
- |
||||||||||
International Cardiovascular | -10% | -4% | ||||||||||||
U.S. Cardiovascular | 19% | |||||||||||||
Worldwide Structural Heart | -5% | -1% | - |
- |
- |
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International Structural Heart | -12% | -6% | ||||||||||||
U.S. Structural Heart | 12% | |||||||||||||
Worldwide Vascular | 3% | 7% | - |
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International Vascular | -8% | -2% | ||||||||||||
U.S. Vascular | 24% | |||||||||||||
Worldwide Neuromodulation | 8% | 10% | - |
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International Neuromodulation | 21% | 27% | ||||||||||||
U.S. Neuromodulation | 2% | |||||||||||||
Summary of 2014 Sales and Reconciliation to Constant Currency Sales Growth |
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(in millions) |
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(unaudited) |
Constant |
Constant |
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2014 Sales |
2013 Sales |
Reported % |
Currency % |
Reported |
Currency $ |
Foreign |
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Change vs. |
Change vs. |
$ Change |
Change |
Currency |
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|
|
2013 |
2013 |
vs. 2013 |
vs. 2013 |
Impact |
||||||||
Total Sales | 2% | 4% | - |
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Total International Sales | 2% | 5% | ||||||||||||
Total U.S. Sales | 2% | |||||||||||||
Worldwide Cardiac Rhythm Management | 0% | 2% | - |
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International Cardiac Rhythm Management | -1% | 2% | ||||||||||||
U.S. Cardiac Rhythm Management | 1% | |||||||||||||
Worldwide ICD | 0% | 1% | - |
|||||||||||
International ICD | -3% | -1% | ||||||||||||
U.S. ICD | $1,027 | 2% | ||||||||||||
Worldwide Pacemakers | 0% | 2% | - |
|||||||||||
International Pacemakers | 1% | 4% | ||||||||||||
U.S. Pacemakers | -1% | |||||||||||||
Worldwide Atrial Fibrillation | 9% | 11% | - |
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International Atrial Fibrillation | 10% | 13% | ||||||||||||
U.S. Atrial Fibrillation | 7% | |||||||||||||
Worldwide Cardiovascular | 1% | 3% | - |
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International Cardiovascular | -2% | 1% | ||||||||||||
U.S. Cardiovascular | 6% | |||||||||||||
Worldwide Structural Heart | 1% | 3% | - |
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International Structural Heart | -1% | 2% | ||||||||||||
U.S. Structural Heart | 5% | |||||||||||||
Worldwide Vascular | 1% | 2% | - |
|||||||||||
International Vascular | -3% | 0% | ||||||||||||
U.S. Vascular | 7% | |||||||||||||
Worldwide Neuromodulation | 3% | 3% | - |
|||||||||||
International Neuromodulation | 23% | 25% | ||||||||||||
U.S. Neuromodulation | -5% | |||||||||||||
Condensed Consolidated Balance Sheets | ||||
(in millions) | ||||
(Unaudited) | ||||
Cash and cash equivalents | ||||
Accounts receivable, net | 1,215 | |||
Inventories | 784 | 708 | ||
Other current assets | 473 | 407 | ||
Property, plant & equipment, net | 1,343 | 1,410 | ||
Goodwill | 3,532 | 3,524 | ||
Other intangible assets, net | 851 | 911 | ||
Other assets | 567 | 493 | ||
Total assets | ||||
Current debt obligations | ||||
Other current liabilities | 1,073 | 1,318 | ||
Long-term debt | 2,273 | 3,518 | ||
Deferred income taxes | 240 | 240 | ||
Long-term other liabilities | 784 | 706 | ||
Total equity | 4,244 | 4,404 | ||
Total liabilities & equity | ||||
Condensed Consolidated Statements of Earnings | ||||||||
(in millions, except per share amounts) | ||||||||
(Unaudited) | ||||||||
Three Months Ended | Year Ended | |||||||
Net sales | ||||||||
Cost of sales: | ||||||||
Cost of sales before special charges | 420 | 406 | 1,597 | 1,529 | ||||
Special charges | 5 | 24 | 56 | 45 | ||||
Total cost of sales | 425 | 430 | 1,653 | 1,574 | ||||
Gross profit | 1,014 | 992 | 3,969 | 3,927 | ||||
Selling, general & administrative expense | 457 | 455 | 1,856 | 1,805 | ||||
Research & development expense | 175 | 186 | 692 | 691 | ||||
Amortization of intangible assets | 24 | 20 | 89 | 79 | ||||
Special charges | 78 | 183 | 181 | 301 | ||||
Operating profit | 280 | 148 | 1,151 | 1,051 | ||||
Other expense, net | 22 | 19 | 83 | 267 | ||||
Earnings before noncontrolling interest and income taxes | 258 | 129 | 1,068 | 784 | ||||
Income taxes | 20 | 18 | 113 | 92 | ||||
Net earnings before noncontrolling interest | 238 | 111 | 955 | 692 | ||||
Net loss attributable to noncontrolling interest | (7) | (12) | (47) | (31) | ||||
Net earnings attributable to |
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Diluted net earnings per share attributable to |
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Adjusted diluted net earnings per share attributable to |
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Cash dividends declared per share | ||||||||
Weighted average shares outstanding- diluted | 290.6 | 296.2 | 289.7 | 290.6 | ||||
(1) See accompanying reconciliation tables. | ||||||||
Non-GAAP Financial Measures Reconciliations (Unaudited) | ||||||||||||||||||||||||||||||
Three Months Ended |
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Earnings before | Diluted net earnings | |||||||||||||||||||||||||||||
noncontrolling | Net earnings before | Net loss attributable | Net earnings | per share | ||||||||||||||||||||||||||
interest and income | noncontrolling | to noncontrolling | attributable to St. |
attributable to St. |
|
Diluted EPS growth |
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(in millions, except per share amounts) | taxes | Income taxes | Effective tax rate | interest | interest | rate | ||||||||||||||||||||||||
As reported (GAAP) | $ | 258 | $ | 20 | 7.8 | % | $ | 238 | $ | (7 | ) | $ | 245 | $ | 0.84 | 100 | % | |||||||||||||
Restructuring activities | 30 | 8 | 22 | - | 22 | 0.08 | ||||||||||||||||||||||||
Acquisition-related costs | 14 | 4 | 10 | - | 10 | 0.03 | ||||||||||||||||||||||||
Product field action costs and litigation costs | 6 | 2 | 4 | - | 4 | 0.01 | ||||||||||||||||||||||||
Legal settlements | 14 | 6 | 8 | - | 8 | 0.03 | ||||||||||||||||||||||||
Intangible asset impairment charges | 33 | 12 | 21 | - | 21 | 0.07 | ||||||||||||||||||||||||
R&D credit | - | 12 | (12 | ) | - | (12 | ) | (0.04 | ) | |||||||||||||||||||||
As adjusted (Non-GAAP) | $ | 355 | $ | 64 | 18.0 | % | $ | 291 | $ | (7 | ) | $ | 298 | $ | 1.03 | 4 | % | |||||||||||||
Unfavorable foreign currency impact vs. 2014 | 0.07 | |||||||||||||||||||||||||||||
Constant currency as adjusted (non-GAAP) | $ | 1.10 | 11 | % | ||||||||||||||||||||||||||
Three Months Ended |
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Earnings before | Diluted net earnings | |||||||||||||||||||||||||||||
noncontrolling | Net earnings before | Net loss attributable | Net earnings | per share | ||||||||||||||||||||||||||
interest and income | noncontrolling | to noncontrolling | attributable to St. | attributable to St. | ||||||||||||||||||||||||||
(in millions, except per share amounts) | taxes | Income taxes | Effective tax rate | interest | interest | |||||||||||||||||||||||||
As reported (GAAP) | $ | 129 | $ | 18 | 14.0 | % | $ | 111 | $ | (12 | ) | $ | 123 | $ | 0.42 | |||||||||||||||
Restructuring activities | 139 | 42 | 97 | - | 97 | 0.33 | ||||||||||||||||||||||||
Acquisition-related costs | 18 | 3 | 15 | - | 15 | 0.05 | ||||||||||||||||||||||||
Product field action costs and litigation costs | 39 | 14 | 25 | - | 25 | 0.08 | ||||||||||||||||||||||||
Intangible asset impairment charges | 29 | 10 | 19 | - | 19 | 0.06 | ||||||||||||||||||||||||
Discrete income tax expense | - | (15 | ) | 15 | - | 15 | 0.05 | |||||||||||||||||||||||
As adjusted (Non-GAAP) | $ | 354 | $ | 72 | 20.3 | % | $ | 282 | $ | (12 | ) | $ | 294 | $ | 0.99 | |||||||||||||||
Year Ended |
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Earnings before | Diluted net earnings | |||||||||||||||||||||||||||||
noncontrolling | Net earnings before | Net loss attributable | Net earnings | per share | ||||||||||||||||||||||||||
interest and income | noncontrolling | to noncontrolling | attributable to St. |
attributable to St. |
|
Diluted EPS growth |
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(in millions, except per share amounts) | taxes | Income taxes | Effective tax rate | interest | interest | rate | ||||||||||||||||||||||||
As reported (GAAP) | $ | 1,068 | $ | 113 | 10.6 | % | $ | 955 | $ | (47 | ) | $ | 1,002 | $ | 3.46 | 39 | % | |||||||||||||
Restructuring activities | 140 | 41 | 99 | - | 99 | 0.34 | ||||||||||||||||||||||||
Acquisition-related costs | 62 | 12 | 50 | 16 | 34 | 0.12 | ||||||||||||||||||||||||
Product field action costs and litigation costs | 52 | 15 | 37 | - | 37 | 0.13 | ||||||||||||||||||||||||
Legal settlements | (13 | ) | (4 | ) | (9 | ) | - | (9 | ) | (0.03 | ) | |||||||||||||||||||
Intangible asset impairment charges | 58 | 21 | 37 | - | 37 | 0.13 | ||||||||||||||||||||||||
Discrete income tax benefits | - | 48 | (48 | ) | - | (48 | ) | (0.17 | ) | |||||||||||||||||||||
R&D credit | - | - | - | - | - | - | ||||||||||||||||||||||||
As adjusted (Non-GAAP) | $ | 1,367 | $ | 246 | 18.0 | % | $ | 1,121 | $ | (31 | ) | $ | 1,152 | $ | 3.98 | 6 | % | |||||||||||||
Unfavorable foreign currency impact vs. 2014 | 0.10 | |||||||||||||||||||||||||||||
Constant currency as adjusted (non-GAAP) | $ | 4.08 | 9 | % | ||||||||||||||||||||||||||
Year Ended |
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Earnings before | Diluted net earnings | |||||||||||||||||||||||||||||
noncontrolling | Net earnings before | Net loss attributable | Net earnings | per share | ||||||||||||||||||||||||||
interest and income | noncontrolling | to noncontrolling | attributable to St. | attributable to St. | ||||||||||||||||||||||||||
(in millions, except per share amounts) | taxes | Income taxes | Effective tax rate | interest | interest | |||||||||||||||||||||||||
As reported (GAAP) | $ | 784 | $ | 92 | 11.7 | % | $ | 692 | $ | (31 | ) | $ | 723 | $ | 2.49 | |||||||||||||||
Restructuring activities | 243 | 69 | 174 | - | 174 | 0.60 | ||||||||||||||||||||||||
Acquisition-related costs | 54 | 3 | 51 | - | 51 | 0.18 | ||||||||||||||||||||||||
Product field action costs and litigation costs | 39 | 14 | 25 | - | 25 | 0.09 | ||||||||||||||||||||||||
Legal settlements | 22 | 8 | 14 | - | 14 | 0.05 | ||||||||||||||||||||||||
Intangible asset impairment charges | 42 | 15 | 27 | - | 27 | 0.09 | ||||||||||||||||||||||||
Debt retirement costs | 161 | 60 | 101 | - | 101 | 0.35 | ||||||||||||||||||||||||
R&D credit | - | 21 | (21 | ) | - | (21 | ) | (0.07 | ) | |||||||||||||||||||||
As adjusted (Non-GAAP) | $ | 1,345 | $ | 282 | 21.0 | % | $ | 1,063 | $ | (31 | ) | $ | 1,094 | $ | 3.76 | |||||||||||||||
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. | ||||||||||||||||||||||||||||||
Summary of 2014 Amortization Impact on Selected Financial Measures (Unaudited) | ||||||||||||||||||||
Beginning in fiscal 2015, the Company will exclude amortization of intangible assets from its adjusted earnings (non-GAAP). | ||||||||||||||||||||
For comparison purposes, the impacts to selected financial statement line items and effective tax rate are as follows: | ||||||||||||||||||||
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | Fiscal Year | ||||||||||||||||
(in millions, except per share amounts) | 2014 | 2014 | 2014 | 2014 | 2014 | |||||||||||||||
Amortization of intangible assets | $ | 21 | $ | 21 | $ | 23 | $ | 24 | $ | 89 | ||||||||||
Income taxes | (8 | ) | (8 | ) | (8 | ) | (8 | ) | (32 | ) | ||||||||||
Net earnings attributable to |
$ | 13 | $ | 13 | $ | 15 | $ | 16 | $ | 57 | ||||||||||
Diluted net earnings per share attributable to |
$ | 0.04 | $ | 0.04 | $ | 0.05 | $ | 0.06 | $ | 0.20 | ||||||||||
Effective tax rate percentage point increase | 1.2 pts | 1.1 pts | 1.1 pts | 1.0 pts | 1.1 pts | |||||||||||||||
The sum of the components may not equal the total due to rounding and quantities of shares outstanding in different periods. | ||||||||||||||||||||
2015 Earnings Guidance Reconciliation | ||||
(Unaudited) | ||||
First Quarter | Full Year | |||
Estimated 2015 diluted net earnings per share attributable to St. Jude Medical,Inc. | ||||
Estimated restructuring activities | 0.05 | 0.15 | ||
Estimated acquisition-related costs | - | 0.02 | ||
Estimated amortization of intangible assets | 0.06 | 0.22 | ||
Estimated federal R&D tax credit 2015 extension (1) | 0.02 | 0.06 | ||
Estimated 2015 adjusted diluted net earnings per share attributable to |
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Estimated unfavorable foreign currency impact vs 2014 | 0.15 | 0.55 - 0.60 | ||
Estimated constant currency 2015 adjusted diluted EPS (Non-GAAP) (2) | ||||
Estimated % change vs 2014 adjusted diluted EPS excluding amortization (Non-GAAP) | 4% - 6% | 8% - 10% | ||
2014 adjusted diluted EPS (Non-GAAP) | ||||
2014 amortization of intangible assets | 0.04 | 0.20 | ||
2014 adjusted diluted EPS excluding amortization (Non-GAAP) | ||||
The sum of the components may not equal the total due to rounding and quantities of shares outstanding in different periods. | ||||
(1) The federal research and development tax credit has not yet been extended for 2015. The Company's above estimated 2015 adjusted diluted net earnings per share attributable to |
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(2) To measure estimated 2015 adjusted net earnings per share in constant currency, the estimated 2015 adjusted net earnings per share measurement is translated at the comparable prior period 2014 foreign currency exchange rates. |
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2015 Sales Guidance Reconciliation | ||||
(in millions) | ||||
(Unaudited) | ||||
First Quarter | Full Year | |||
2014 total sales | ||||
Estimated 2015 sales | ||||
Estimated 2015 % change vs 2014 | (4%) - (3%) | (3%) - (1%) | ||
Estimated unfavorable foreign currency impact vs 2014 | ||||
Estimated constant currency 2015 total sales (Non-GAAP) (3) | ||||
Estimated 2015 constant currency % change vs 2014 (Non-GAAP) | 2% - 4% | 3% - 5% | ||
(3) To measure estimated 2015 net sales on a constant currency basis, the estimated 2015 net sales is translated at the comparable prior period 2014 foreign currency exchange rates. |
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Non-GAAP Financial Measures
The company provides the following non-GAAP financial measures because
- 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 and integration costs.
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.
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.
Debt retirement costs – These amounts are associated with the make-whole provisions of long-term notes retired prior to their scheduled maturities.
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
The company also provides constant currency sales growth and constant currency adjusted EPS growth because
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.
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