Daniel J. StarksThank 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.
Earnings per share were $0.88 for the second quarter of 2012, a 4% increase over adjusted earnings per share of $0.85 in the second quarter of 2011. We estimate that on a constant currency basis, earnings per share increased approximately 11% versus last year.Before we discuss our second quarter 2012 sales results by product category with guidance for the third quarter and the remainder of 2012, 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 second quarter and full year 2012, we used exchange rates which assumed that each euro would translate into about $1.28 to $1.33 and that each JPY 80 to JPY 85 would translate into USD $1. For the second 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 third quarter and remainder of 2012, we are now assuming that each euro will translate into about $1.20 to $1.25 and that each JPY 78 to JPY 83 will translate into USD $1. This change in assumption regarding currency exchange rates decreases total forecasted sales for the second half of 2012 by about $35 million to $40 million, which we estimate will reduce earnings per share for the second half of 2012 by approximately $0.04 to $0.05. Now for the sales by product category discussion for the second quarter. Total cardiac rhythm management sales, which includes revenue from both our ICD and pacemaker product lines, were $746 million, down 6% from last year's second quarter. On a constant currency basis, second quarter CRM sales were down 3% versus the second quarter of last year. For the second quarter, ICD sales were $459 million, down 4% versus last year's second quarter. On a constant currency basis, second quarter ICD sales were essentially equal to last year. US ICD sales were $267 million, down 2% versus last year's second quarter. International ICD sales were $192 million, down 6% versus the second quarter of 2011, including $15 million of unfavorable foreign currency translations. On a constant currency basis, international ICD sales increased 1% versus last year's second quarter. Read the rest of this transcript for free on seekingalpha.com