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St. Jude Medical (STJ)
Q3 2013 Earnings Call
October 16, 2013 8:00 am ET
Daniel J. Starks - Chairman, Chief Executive Officer and President
John C. Heinmiller - Executive Vice President
Eric S. Fain - President of Implantable Electronic Systems Division
Michael T. Rousseau - Group President
Robert A. Hopkins - BofA Merrill Lynch, Research Division
Michael N. Weinstein - JP Morgan Chase & Co, Research Division
Lawrence Biegelsen - Wells Fargo Securities, LLC, Research Division
Kristen M. Stewart - Deutsche Bank AG, Research Division
Danielle Antalffy - Leerink Swann LLC, Research Division
Tao Levy - Wedbush Securities Inc., Research Division
Frederick A. Wise - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by STJ
» St. Jude Medical, Inc. Discusses Q3 2013 Results (Webcast)
» St. Jude Medical, Inc. (STJ) CEO Discusses Q2 2013 Results - Earnings Call Transcript
» St. Jude Medical's Management Presents at 38th Annual Deutsche Bank Health Care Conference (Transcript)
Before we begin, let me remind you that some of the statements made during this conference call may be considered forward-looking statements. The company's 10-K for fiscal year 2012 and 10-Q for the fiscal quarter ended June 29, 2013, identify certain factors that could cause the company's actual results to differ materially from those projected in any forward-looking statements made this morning. The company does not undertake to update any forward-looking statements as a result of the new information or future events or developments. The 10-K and 10-Q, as well as the company's other SEC filings, are available through the company or online.
During the call, non-GAAP financial measures may be used to provide information pertinent to ongoing business performance. Tables reconciling these measures to most comparable GAAP measures are available in the company's press release issued earlier this morning or on the St. Jude Medical website at www.sjm.com.
[Operator Instructions] It is now my pleasure to turn the floor over to Dan Starks.
Daniel J. Starks
Thank you, Lisa. Welcome to the St. Jude Medical Third Quarter 2013 Earnings Conference Call. With me on the call today are John Heinmiller, Executive Vice President; Mike Rousseau, Group President; Eric Fain, President of our Implantable Electronic Systems Division; Don Zurbay, Chief Financial Officer; and Rachel Ellingson, Vice President of Corporate Relations.
Our plan this morning is for John Heinmiller to provide his normal review of our financial results for the third quarter 2013 and to give sales and earnings guidance for the fourth quarter and full year 2013. I will then address several topics and open it up for your questions. Go ahead, John.
John C. Heinmiller
Thank you, Dan. Sales for the quarter totaled $1,338,000,000, up approximately 1% from the $1,326,000,000 reported in the third quarter of last year. Unfavorable foreign currency translations versus last year's third quarter reduced this quarter's sales by about $26 million. We will update our currency assumptions in a moment, but the actual average exchange rates during the third quarter were within our previous guidance range. On a constant currency basis, third quarter sales increased 3% versus last year.
During the third quarter, we recognized $15 million or $0.05 per share in certain after-tax charges, primarily relating to acquisition-related costs and our previously announced restructuring activities. We also recognized an income tax benefit of $15 million or $0.05 per share related to the settlement of certain tax matters. For further information related to these items, please refer to details provided in the press release. Comments during this call referencing third quarter results and guidance for full year 2013 results, including EPS amounts, will be exclusive of these items.
Earnings per share were $0.90 for the third quarter of 2013, an 8% increase over adjusted EPS of $0.83 in the third quarter of 2012. We estimate that on a constant currency basis, earnings per share increased approximately 12% versus last year.
Before we discuss our third quarter 2013 sales results by product category with guidance for the fourth quarter of 2013, let me comment on foreign currency. As discussed on prior calls, the 2 main currencies influencing St. Jude Medical's operations are the euro and the yen. In preparing our sales and earnings guidance for the third quarter of 2013, we used exchange rates, which assumed that each euro would translate into about $1.28 to $1.33 and that each JPY 97 to JPY 102 would translate into USD 1. For the third quarter, the actual average exchange rates for the euro and the yen were consistent with these assumptions.
In preparing our sales and earnings guidance for the fourth quarter of 2013, we are now assuming that each euro will translate into about $1.33 to $1.38 and that each JPY 95 to JPY 100 will translate into USD 1. This change in assumption regarding currency exchange rates increases total forecasted sales for the fourth quarter of 2013 by about $10 million to $15 million.
Now for the sales by product category discussion for the third quarter. Total cardiac rhythm management or CRM sales, which includes revenue from both our ICD and pacemaker product lines, were $682 million, down 1% from last year's third quarter. On a constant currency basis, third quarter CRM sales were flat versus the third quarter of last year.
For the third quarter, ICD sales were $418 million, up 1% versus last year's third quarter. On a constant currency basis, third quarter ICD sales were up 2% versus last year. U.S. ICD sales were $253 million, up 2% versus last year's third quarter. International ICD sales were $165 million, flat versus the third quarter of 2012, including $3 million of unfavorable foreign currency translations. On a constant currency basis, international ICD sales increased 2% versus last year's third quarter.
For low-voltage devices, sales for the third quarter totaled $264 million, down 5% versus last year's third quarter. On a constant currency basis, third quarter low-voltage device sales decreased 3% versus last year. In the United States, pacemaker sales were $107 million, down 6% from last year's third quarter. In our international markets, pacemaker sales were approximately $157 million, down 5% versus the third quarter of 2012, including $6 million of unfavorable foreign currency translations. On a constant currency basis, international pacemaker sales were down 1% versus last year's third quarter.