St. Jude Medical, Inc. (STJ)

STJ 
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St. Jude Medical, Inc. (STJ)

March 12, 2013 10:15 am ET

Executives

John C. Heinmiller - Executive Vice President

Analysts

Matthew Taylor - Barclays Capital, Research Division

Presentation

Matthew Taylor - Barclays Capital, Research Division

Thanks for joining us. We have another presentation this morning from St. Jude Medical. And Executive Vice President, John Heinmiller; and J.C. Weigelt from Investor Relations. I'm really pleased to have St. Jude joining us this morning, the company that we think has -- going to have improving growth prospects for the year. And we think they have very attractive flexibility from the restructuring and buybacks that they put in place. And so we think it's a fact that it should outperform over the next 12 months. I think this morning, John is going to go through some slides, and then we'll do some brief Q&A after the presentation. So with that, let me turn it over to John.

John C. Heinmiller

First, the forward-looking statement here that any comments we make on a forward-looking basis are tied back to the risk factors that are disclosed in our recent 10-K filing. The other thing I would mention this morning before we get into our slides is a lot of these slides are going to look familiar to you if you attended the St. Jude Medical Analyst Day presentation in early February. None of the comments that I'm going to make today are meant to change any of the guidance that we have or really give any kind of a inter-quarter update of any kind. So just make sure that -- stay disciplined to that perspective.

And then as Matt mentioned, I've got a number of slides here. I'm going to purposely work through the slides quickly so that we save time for the Q&A portion of this morning's presentation.

So when we think about 2013, it really brings us back just to put some context on it, is what did we learn in 2012 and how did we come into the year 2013 with our attitude with the 2012 results. And we missed our revenue expectations when we go back and scorecard ourselves in 2012 from where we thought revenues where going to come in at the beginning of the year to where they ultimately came in. There were a number of influences in the market that were negative during 2012, and we were mindful of that as we came into 2013. We have a very disciplined operating environment. We're focused on the cost structures that we're managing. And during the August through the end of the year of 2012, we initiated a restructuring of our organizational structure and generated significant savings.

So you go back, despite the challenges of 2012, we delivered earnings per share expectations and we went through the end of 2012 and really changed the organizational structure.

That generated savings when we look into 2013 of about $100 million, and that gives us confidence that, that will give us the funding we need to continue to invest in the research and development activities and manage the market development activities through the SG&A line.

What we focused on is trying to develop innovative technologies that have -- that will improve patient outcomes and reduce the cost of health care, and that's what really drives our strategic thinking. We know that when we were able to accomplish that, where we think of our quadripolar CRT-D technology and then this year coming to a pacemaker platform that, that can become a standard of care and has the characteristics of improving patient outcomes and reducing costs. Our FFR or PressureWire technology is a good example of that, where the improvement in patient care demonstrated in clinical studies and the reduction in the cost of coronary artery disease treatment.

The first quarter of 2013, as we look at our guidance for 2013, we expect our quarter to be down here if we hit the midpoint of our guidance ranges. On a constant currency basis, revenue would be down 2.5% year-over-year. The full year 2013 sales, and Matt alluded to this in his opening comments, that we expect our revenue growth to accelerate during the year and part of that is tied to the new products that we're introducing during 2013.

Here is our 2013 guidance by product category, including our earnings per share guidance for the year. So total sales up 1.4% on a constant currency basis, assuming that we hit the midpoint of our guidance ranges, and earnings per share up 6.5%. So you see the leverage in the earnings per share tied to the benefit of the cost savings that we achieved in our restructuring, as well as the recent share repurchases.

So we see that on this slide we kind of highlight the impact of those 2 initiatives. And what we remind ourselves is there a number of things that, including the medical device tax that's coming into our earnings statement for the first time in 2013, as well as funding a number of the growth initiatives that we have that then factors all that into our guidance. So the guidance that we're providing incorporates the impact of the medical device tax. And that if 2013, if we can meet our revenue goals, then we have a good chance of delivering or exceeding the earnings per share expectations.

The real challenge for us is to generate sales growth in 2013. And this is our -- with the backdrop of the share repurchase and the restructuring, we've got leverage in our income statement, the real challenge is delivering on the sales growth.

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