St. Jude Medical (STJ) Q3 2011 Earnings Call October 19, 2011 8:00 am ET Executives John C. Heinmiller - Chief Financial Officer, Principal Accounting Officer and Executive Vice President Daniel J. Starks - Chairman of the Board, Chief Executive Officer and President Analysts Michael N. Weinstein - JP Morgan Chase & Co, Research Division Frederick A. Wise - Leerink Swann LLC, Research Division Robert A. Hopkins - BofA Merrill Lynch, Research Division Joanne K. Wuensch - BMO Capital Markets U.S. Kristen M. Stewart - Deutsche Bank AG, Research Division Presentation Operator
[Operator Instructions] It is now my pleasure to turn the floor over to Dan Starks.Daniel J. Starks Thank you, Brooke. Welcome to the St. Jude Medical Third Quarter 2011 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 third quarter 2011 and to give sales and earnings guidance for the fourth quarter and full year 2011. 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 $1,383,000,000, up approximately 12% over the 1,240,000,000 reported in the third quarter of last year. Favorable foreign currency translations versus last year's third quarter increased this quarter sales by about $73 million. On a constant currency basis, third quarter sales increased approximately 6% versus last year. During the third quarter, we recognized $21 million or $0.06 per share in after-tax special charges, primarily in connection with our previously announced restructuring actions initiated during the second quarter to realign certain activities within our CRM business, as well as costs associated with our continuing efforts to improve our international sales and sales support organization. In addition, we recognized $9 million or $0.03 per share in after-tax charges related to increased collection risk for accounts receivable related to one customer in Europe. Additional information about these charges can be found in today's press release. Comments during this conference call referencing third quarter results and guidance for our full year 2011 results, including earnings per share, will be exclusive of these items.
Earnings per share were $0.78 for the third quarter of 2011, an 8% increase over adjusted EPS of $0.72 in the third quarter of 2010. During the third quarter, we completed our $500 million share repurchases program that was announced in August. This reduced the weighted average shares of common stock outstanding in the third quarter by approximately 6 million shares, which provided one $0.01 of benefit to our adjusted EPS.Before we discuss our third quarter 2011 sales results by product category, with guidance for the fourth quarter, 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 and full year 2011, we used exchange rates which assumed that each euro would translate into about $1.37 to $1.42 and each JPY 78 to JPY 83 would translate into USD $1. For the third quarter, the actual average exchange rates for the euro and the yen versus these assumptions did not result in a material difference in reported sales. In preparing our sales and earnings guidance for the fourth quarter, we have updated the currency rates used in our model. We are now assuming that for the fourth quarter of 2011, each euro will translate into about $1.33 to $1.38 and that each JPY 76 to JPY 81 will translate into USD $1. This change in assumption regarding currency exchange rates decreases total forecasted sales for the fourth quarter of 2011 by about $20 million to $25 million, which we estimate will reduce fourth quarter EPS by approximately $0.02 to $0.03. 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 $751 million, up 2% from last year's third quarter. On a constant currency basis, third quarter CRM sales were down 3% versus the third quarter of last year.
For the third quarter, ICD sales were $445 million, up 1% from last year's third quarter. On a constant currency basis, third quarter ICD sales decreased 3% versus last year. U.S. ICD sales were $257 million, down 10% versus last year's third quarter. International ICD sales were $188 million, a 21% increase over the third quarter of 2010, including $20 million of favorable foreign currency translations.Read the rest of this transcript for free on seekingalpha.com