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St. Jude Medical Management Discusses Q2 2012 Results - Earnings Call Transcript

Daniel J. Starks

Thank you, Christie. Welcome to the St. Jude Medical Second Quarter 2012 Earnings Conference Call. With me on the call today are John Heinmiller, Executive Vice President and Chief Financial Officer; Eric Fain, President of our Cardiac Rhythm Management division; Mike Rousseau, Group President; and Angie Craig, Vice President of Corporate Relations and Human Resources.

Our plan this morning is for John Heinmiller to provide his normal review of our financial results for the second quarter 2012 and to give sales and earnings guidance for the third quarter and full year 2012. 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 $1,410,000,000, down approximately 2% from the $1,446,000,000 reported in the second quarter of last year. Unfavorable foreign currency translations versus last year's second quarter reduced this quarter's sales by about $47 million. We will update our currency assumptions in a moment, but the actual average exchange rates during the second quarter were within our previous guidance range. On a constant currency basis, second quarter sales increased approximately 1% versus last year.

During the second quarter, we recognized $27 million or $0.08 per share in after-tax charges primarily in connection with our previously announced restructuring actions initiated during the second quarter of 2011 to streamline manufacturing within our CRM business, which consists primarily of closing down operations at our location in Sweden as well as costs associated with our continuing efforts to leverage our sales and sales support organizations. Comments during this call referencing second quarter results and guidance for full year 2012 results, including earnings per share amounts, will be exclusive of these items.

At the end of 2011, the federal research and development tax credit expired, and it has not yet been extended for 2012. In this circumstance, GAAP requires us to estimate and record our effective income tax rate, assuming that the R&D credit is not extended. For purposes of this conference call and our calculation of adjusted earnings, however, we are assuming that the tax credit will be extended for 2012 as in past years. As a result, comments referencing second quarter results and our guidance for 2012, including earnings per share amounts, are presented based on an effective income tax rate that contemplates the extension of the tax credit retroactive to January 1, 2012. To the extent that the federal research and development tax credit is not renewed, our effective income tax rate for 2012 would be higher than what is being presented during this call.

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