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[Operator Instructions] It is now my pleasure to turn the floor over to Dan Starks. Please go ahead.Daniel Starks Thank you, Carrie. Welcome to the St. Jude Medical Second Quarter 2010 Earnings Conference Call. With me on the call today are John Heinmiller, Executive Vice President and Chief Financial Officer; Mike Rousseau, Group President; Eric Fain, President of our Cardiac Rhythm Management Division; and Angie Craig, Vice President of Corporate Relations. I want to first ask John Heinmiller to conduct his normal review of our second quarter results, along with his typical update for the entire St. Jude Medical business. I will then address several topics and open it up for your questions. Go ahead, John. John Heinmiller Thank you, Dan. Sales for the quarter totaled $1,313,000,000, up approximately 11% over the $1,184,000,000 million reported in the second quarter of last year. Favorable foreign currency translations versus last year's second quarter increased this quarter's sales by about $5 million. The impact of these foreign currency translations on any one product category is negligible. As a result, we will not call out our constant currency sales growth as it is approximately the same as the reported sales growth. At the end of 2009, the federal research and development tax credit expired, and Congress has not yet extended the credit for 2010. 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 net earnings, however, we are assuming that the tax credit will be extended retroactively for 2010 as in past years. As a result, comments referencing second quarter results and our guidance for 2010, 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, 2010. To the extent that the federal R&D tax credit is not enacted, our effective income tax rate for 2010 would be higher than what is being presented during this call.
Earnings per share were $0.79 for the second quarter of 2010, a 25% increase over EPS of $0.63 in the second quarter of 2009 and above our guidance range of $0.73 to $0.75. Before we discuss our second quarter 2010 sales results by product category, with guidance for the third quarter and the remainder of 2010, let me comment on foreign currency.As discussed on prior calls, the two main currencies influencing St. Jude Medical's operations are the euro and the yen. In preparing our sales and earnings guidance in April 2010 covering the second quarter and the remainder of the year, we used exchange rates, which assumed that each euro would translate into about $1.33 to $1.38, and for the yen, each 90 to 95 yen would translate into USD $1. The actual average exchange rates used to translate our sales into U.S. dollars versus the midpoint of the exchange rate assumptions we provided in our April guidance reduced second quarter reported sales by approximately $12 million. In preparing our sales and earnings guidance for the third quarter and the second half of 2010, we are now assuming that each euro will translate into about $1.23 to $1.28, and for the yen, each 86 to 91 yen will translate into USD $1. This change in assumption regarding currency exchange rates decreases total forecasted sales for the remainder of 2010 by about $25 million to $35 million, which we estimate will reduce EPS by approximately $0.03 to $0.04 over the remainder of the year. Now for the sales by product category discussion. Total Cardiac Rhythm Management or CRM sales, which includes revenues from both our ICD and pacemaker product lines, were $788 million, up 12% from last year's second quarter. For the second quarter, ICD sales were $471 million, up 18% from last year's second quarter. U.S. ICD sales were $300 million, up 18% from last year's second quarter, and international ICD sales were $171 million, also representing an 18% increase over the second quarter of 2009. Read the rest of this transcript for free on seekingalpha.com