UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002 Commission File Number 0-8672
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ST. JUDE MEDICAL, INC.
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(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1276891
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
One Lillehei Plaza, St. Paul, Minnesota 55117
---------------------------------------------
(Address of principal executive offices)
(651) 483-2000
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months; and (2) has been subject to such filing
requirements for the past 90 days.
YES _X_ NO ___
The number of shares of common stock, par value $.10 per share, outstanding on
July 26, 2002 was 176,889,862.
PART I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------
Net sales $ 404,348 $ 336,062 $ 775,541 $ 662,127
Cost of sales 128,962 110,223 247,750 217,300
- ------------------------------------------------------------------------------------------------------------------
Gross profit 275,386 225,839 527,791 444,827
Selling, general and administrative expense 131,210 117,080 253,897 230,701
Research and development expense 49,291 41,126 95,756 80,631
Purchased in-process research and
development charge -- 5,000 -- 5,000
- ------------------------------------------------------------------------------------------------------------------
Operating profit 94,885 62,633 178,138 128,495
Other income (expense) 227 (2,540) (258) (5,637)
- ------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 95,112 60,093 177,880 122,858
Income tax expense 25,557 16,274 46,249 31,965
- ------------------------------------------------------------------------------------------------------------------
Net earnings $ 69,555 $ 43,819 $ 131,631 $ 90,893
==================================================================================================================
==================================================================================================================
Net earnings per share:
Basic $ 0.39 $ 0.26 $ 0.75 $ 0.53
Diluted $ 0.38 $ 0.25 $ 0.72 $ 0.51
Weighted average shares outstanding:
Basic 176,396 171,573 175,810 171,324
Diluted 183,472 177,606 182,929 177,204
==================================================================================================================
See notes to condensed consolidated financial statements.
1
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
JUNE 30, 2002 DECEMBER 31,
(UNAUDITED) 2001 (SEE NOTE)
- ------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and equivalents $ 172,891 $ 148,335
Accounts receivable, less allowances of $21,585 in 2002
and $17,210 in 2001 385,379 320,683
Inventories 244,955 240,390
Deferred income taxes 40,564 36,563
Other 64,514 51,575
- ------------------------------------------------------------------------------------------------
Total current assets 908,303 797,546
Property, plant and equipment - at cost 662,654 631,134
Less accumulated depreciation (365,627) (335,491)
- ------------------------------------------------------------------------------------------------
Net property, plant and equipment 297,027 295,643
Other assets
Goodwill, net 324,331 321,562
Other intangible assets, net 79,737 68,367
Deferred income taxes 67,238 67,238
Other 98,638 78,371
- ------------------------------------------------------------------------------------------------
Total other assets 569,944 535,538
- ------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,775,274 $ 1,628,727
================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 99,198 $ 88,925
Income taxes payable 89,683 63,475
Accrued expenses 193,255 169,454
- ------------------------------------------------------------------------------------------------
Total current liabilities 382,136 321,854
Long-term debt -- 123,128
Commitments and contingencies -- --
Shareholders' equity
Preferred stock -- --
Common stock 17,668 17,442
Additional paid-in capital 184,380 126,005
Retained earnings 1,266,540 1,134,909
Accumulated other comprehensive income
Cumulative translation adjustment (78,075) (103,781)
Unrealized gain on available-for-sale securities 2,625 9,170
- ------------------------------------------------------------------------------------------------
Total shareholders' equity 1,393,138 1,183,745
- ------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,775,274 $ 1,628,727
================================================================================================
NOTE: The balance sheet at December 31, 2001 has been derived from the Company's
audited financial statements at that date. See notes to condensed consolidated
financial statements.
2
ST. JUDE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
2002 2001
- ------------------------------------------------------------------------------------------------------------------
Operating Activities
Net earnings $ 131,631 $ 90,893
Depreciation 30,816 28,173
Amortization 2,742 15,729
Purchased in-process research and development charge -- 5,000
Deferred income taxes 11 --
Changes in operating assets and liabilities, net of business acquisitions:
Accounts receivable (51,278) (27,953)
Inventories 2,632 (20,448)
Other current assets (21,341) 12,352
Accounts payable and accrued expenses 20,884 5,172
Income taxes 44,730 16,255
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 160,827 125,173
Investing Activities
Purchase of property, plant and equipment (24,851) (35,899)
Business acquisition payments (14,810) (6,819)
Other (19,837) (13,966)
- ------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (59,498) (56,684)
Financing Activities
Proceeds from exercise of stock options 40,906 20,787
Borrowings under debt facilities 352,000 1,183,000
Payments under debt facilities (475,128) (1,248,100)
- ------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (82,222) (44,313)
Effect of currency exchange rate changes on cash 5,449 (5,350)
- ------------------------------------------------------------------------------------------------------------------
Net increase in cash and equivalents 24,556 18,826
Cash and equivalents at beginning of period 148,335 50,439
- ------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 172,891 $ 69,265
==================================================================================================================
See notes to condensed consolidated financial statements.
3
ST. JUDE MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States (U.S.) for interim financial information, and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by accounting
principles generally accepted in the U.S. for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the interim periods are not necessarily indicative of the
results that may be expected for the full year.
Preparation of the Company's financial statements in conformity with accounting
principles generally accepted in the U.S. requires management to make estimates
and assumptions that affect the reported amounts in the financial statements and
accompanying notes. Actual results could differ from those estimates. For
further information, refer to the consolidated financial statements and
footnotes included in the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001.
Certain 2001 amounts have been reclassified to conform to the 2002 presentation.
NOTE 2 - INVENTORIES
Inventories consist of the following:
JUNE 30, DECEMBER 31,
2002 2001
- ----------------------------------------------------------------------------------------------
Finished goods $ 151,396 $ 135,543
Work in process 33,942 35,984
Raw materials 59,617 68,863
- ----------------------------------------------------------------------------------------------
$ 244,955 $ 240,390
==============================================================================================
NOTE 3 - GOODWILL AND OTHER INTANGIBLE ASSETS
The Company adopted all provisions of Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets" (Statement 142), on
January 1, 2002. Under Statement 142, goodwill is no longer amortized, but is
subject to annual impairment tests. The following table reconciles reported 2001
net earnings and basic and diluted net earnings per share had this statement
been effective January 1, 2001:
4
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, 2001 June 30, 2001
- --------------------------------------------------------------------------------------------
NET EARNINGS:
Reported net earnings $ 43,819 $ 90,893
Goodwill amortization, net of taxes 5,334 10,505
- --------------------------------------------------------------------------------------------
Adjusted net earnings $ 49,153 $ 101,398
============================================================================================
BASIC NET EARNINGS PER SHARE:
Reported net earnings $ 0.26 $ 0.53
Goodwill amortization, net of taxes 0.03 0.06
- --------------------------------------------------------------------------------------------
Adjusted basic net earnings per share $ 0.29 $ 0.59
============================================================================================
DILUTED NET EARNINGS PER SHARE:
Reported net earnings $ 0.25 $ 0.51
Goodwill amortization, net of taxes 0.03 0.06
- --------------------------------------------------------------------------------------------
Adjusted diluted net earnings per share $ 0.28 $ 0.57
============================================================================================
The net carrying amount of goodwill for the six months ended June 30, 2002
increased $2,769 to $324,331 due to translation fluctuations of non-U.S.
goodwill balances.
The Company completed its initial required goodwill impairment test under
Statement 142 in the second quarter of 2002, which indicated that goodwill was
not impaired.
Balances of other intangible assets as of June 30, 2002 and December 31, 2001
were as follows:
JUNE 30, DECEMBER 31,
2002 2001
- ------------------------------------------------------------------------------------------------------
Original Accumulated Original Accumulated
AMORTIZED INTANGIBLE ASSETS: Cost Amortization Cost Amortization
- ------------------------------------------------------------------------------------------------------
Purchased technology & patents $ 71,367 $ (14,259) $ 72,050 $ (12,440)
Other 23,879 (1,250) 9,046 (289)
- ------------------------------------------------------------------------------------------------------
$ 95,246 $ (15,509) $ 81,096 $ (12,729)
======================================================================================================
Total other intangible assets, net $ 79,737 $ 68,367
- ------------------------------------------------------------------------------------------------------
During the first quarter of 2002, the Company reclassified $24,599 of certain
intangible assets to goodwill based upon the guidance provided in Statement 142
and Statement of Financial Accounting Standards No. 141, "Business
Combinations." This reclassification has been reflected in the goodwill and
other intangible asset balances as of December 31, 2001 for comparative
purposes.
5
NOTE 4 - LONG-TERM DEBT
The Company issues short-term, unsecured commercial paper with maturities up to
270 days. These commercial paper borrowings are backed by the Company's
committed credit facility and bear interest at varying market rates. The Company
had no outstanding commercial paper borrowings at June 30, 2002 and $123,128 of
commercial paper borrowings at December 31, 2001.
The Company has a $350,000 unsecured, revolving credit facility that expires in
March 2003. The Company's commercial paper borrowings are backed by this
committed credit facility. The Company also borrows from time to time under
uncommitted, due-on-demand credit facilities with various banks.
At December 31, 2001, the Company classified all of its commercial paper
borrowings as long-term on its balance sheet, as the Company had the ability to
repay these short-term obligations with available cash from its existing
long-term, committed credit facility. During 2002, the Company repaid all of its
commercial paper borrowings.
The Company's credit facility agreement contains various restrictive covenants
such as minimum financial ratios, limitations on additional liens or
indebtedness, and limitations on certain acquisitions and investments, all of
which the Company was in compliance with at June 30, 2002. The Company's credit
facility agreement does not include a provision for termination of the facility
or acceleration of repayment due to changes in the Company's credit rating.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
SILZONE(R) LITIGATION: The Company has been sued by patients alleging defects in
the Company's mechanical heart valves and valve repair products with Silzone(R)
coating. Some of these cases are seeking monitoring of patients implanted with
Silzone(R)-coated valves and repair products who allege no injury to date. Some
of these cases are seeking class action status. The Company voluntarily recalled
products with Silzone(R) coating on January 21, 2000, and sent a Recall Notice
and Advisory concerning the recall to physicians and others. See also Note 7
regarding the special charges associated with this matter.
In 2001, the U.S. Judicial Panel on Multi-District Litigation ruled that certain
lawsuits filed in U.S. federal district court involving products with Silzone(R)
coating should be part of Multi-District Litigation proceedings under the
supervision of U.S. District Court Judge John Tunheim in Minnesota. As a result,
actions involving products with Silzone(R) coating have been and will likely
continue to be transferred to Judge Tunheim for coordinated or consolidated
pretrial proceedings. There are other actions involving products with Silzone(R)
coating in various state courts that may or may not be coordinated with the
matters presently before Judge Tunheim.
While it is not possible to predict the outcome of these cases, the Company
believes that it has adequate product liability insurance to cover the costs
associated with them. The Company further believes that any costs not covered by
product liability insurance will not have a material adverse impact on the
Company's financial position or liquidity, but may be material to the
consolidated results of operations of a future period.
6
GUIDANT LITIGATION: In November 1996 Guidant Corporation ("Guidant") sued St.
Jude Medical alleging that St. Jude Medical did not have a license to certain
patents controlled by Guidant covering ICD products and alleging that St. Jude
Medical was infringing those patents.
St. Jude Medical's contention that it had obtained a license from Guidant to the
patents in issue when it acquired certain assets of Telectronics in November
1996 was rejected by an arbitrator in July 2000. In May 2001, a federal district
court judge also ruled that the Guidant patent license with Telectronics had not
transferred to St. Jude Medical.
Guidant's suit in the United States District Court for the Southern District of
Indiana originally alleged infringement by St. Jude Medical of four patents.
Guidant later dismissed its claim on one patent (the '678 patent). In addition,
in response to a stipulation by the parties, the court ruled that a second
patent (the '191 patent) was invalid. Guidant appealed the ruling of invalidity
concerning the '191 patent, but in a ruling issued July 11, 2002, the U.S. Court
of Appeals for the Federal Circuit rejected Guidant's appeal and affirmed the
district court's ruling of invalidity.
A jury trial involving the two remaining patents asserted by Guidant (the '288
and '472 patents) commenced in June 2001. The jury issued its verdict on July 3,
2001, finding that both the '472 and '288 patents were valid and that St. Jude
Medical did not infringe the '288 patent. The jury also found that St. Jude did
infringe the '472 patent, which expired on March 4, 2001, but that the
infringement was not willful. The jury awarded damages of $140,000 to Guidant.
In rulings dated February 13, 2002 and July 5, 2002, the judge overseeing the
jury trial issued his decisions on the various post-trial motions. In
particular, the judge ruled that the '472 patent was invalid on two grounds:
lack of proper written description and double patenting. The judge also ruled
that claims 1 and 18 were not infringed as a matter of law.
The judge further ruled that the '288 patent was invalid for both obviousness
and failure to disclose the best mode.
The judge also found that St. Jude Medical was entitled to a new trial on the
issue of damages in the event the court's rulings on the other matters were
reversed on appeal. Finally, the judge held that in the event his other rulings
were reversed, St. Jude Medical would be entitled to a new trial because of
misconduct by Guidant and its attorneys during the first trial and that, in such
an event, Guidant would have to pay certain attorney's fees of St. Jude Medical.
The court also ruled on several other motions, not summarized here.
The primary effect of the court's post-trial rulings was to eliminate the
$140,000 verdict against St. Jude Medical. The Company expects that Guidant will
appeal the judge's decision. While it is not possible to predict the outcome of
an appeal process, the Company believes that it has meritorious defenses against
the claims asserted by Guidant.
OTHER LITIGATION MATTERS: The Company is involved in various other product
liability lawsuits, claims and proceedings that arise in the ordinary course of
business. Subject to self-insured retentions, the Company believes it has
product liability insurance sufficient to cover such claims and suits.
7
NOTE 6 - SHAREHOLDERS' EQUITY
CAPITAL STOCK: On May 16, 2002, the Company's Board of Directors declared a
two-for-one stock split in the form of a 100% stock dividend to shareholders of
record on June 10, 2002. Net earnings per share, shares outstanding and weighted
average shares outstanding have been restated to reflect the stock dividend. The
Company's authorized capital consists of 25,000 shares of $1.00 per share par
value preferred stock and 250,000 shares of $0.10 per share par value common
stock. There were no shares of preferred stock issued or outstanding during 2001
or 2002. There were 176,682 and 174,419 shares of common stock outstanding at
June 30, 2002 and December 31, 2001.
SHARE REPURCHASES: In September 1999, the Company's Board of Directors
authorized the repurchase of up to $250,000 of the Company's outstanding common
stock over a three-year period. The Company repurchased 1,955 shares of its
common stock for $29,826 during 1999. No additional shares have been repurchased
since 1999.
NOTE 7 - SPECIAL CHARGES
2001 SPECIAL CHARGE: In July 2001, the Company initiated efforts to streamline
its heart valve operations, consolidate its U.S. sales activities and
restructure its international sales organization. As a result of these
activities, the Company recorded pre-tax special charges of $20,657 in the third
quarter of 2001, consisting of employee severance costs resulting from the
elimination of approximately 90 production and administrative positions
($5,293), inventory write-offs and scrap ($9,490), capital equipment write-offs
($3,379) and other costs related primarily to lease terminations and other
facility exit costs due to the closing and consolidation of sales offices
($2,495). The Company has utilized $15,396 of these special charge accruals
through June 30, 2002, consisting of $3,417 of employee severance costs, $7,373
of inventory write-offs and scrap, $3,379 of capital equipment write-offs, and
$1,227 of other costs. The Company estimates that the remaining accruals will be
utilized primarily during 2002.
During the third quarter of 2001, the Company also wrote off $12,177 of certain
diagnostic equipment deemed obsolete due to the overwhelming acceptance of newer
technology equipment which received U.S. regulatory approvals in late 2000 and
early 2001, and was launched earlier in 2001.
SILZONE(R) SPECIAL CHARGES: On January 21, 2000, the Company initiated a
worldwide voluntary recall of all field inventory of heart valve replacement and
repair products incorporating Silzone(R) coating on the sewing cuff fabric. The
Company concluded that it will no longer utilize Silzone(R) coating. The Company
recorded a special charge accrual totaling $26,101 during the first quarter of
2000 relating to asset write-downs ($9,465) and other costs ($16,636), including
monitoring expenses, associated with this recall and product discontinuance. The
Company has more than $200 million remaining in product liability insurance
currently available for the Silzone(R) related matters. In the second quarter of
2002, the Company determined that the Silzone(R) reserves for other costs should
be increased by $11,000 due primarily to difficulties in getting the Company's
insurance carriers to pay various costs as required by the product liability
insurance policies. This additional accrual is included in selling, general and
administrative expenses for the second quarter ended June 30, 2002. The Company
has utilized $22,329 of these special charge accruals through June 30, 2002,
8
consisting of $9,465 for asset write-downs and $12,864 for other costs. The
Company estimates that the remaining accruals will be utilized during 2002
through 2004. There can be no assurance that the final costs associated with
this recall that are not covered by insurance, including litigation-related
costs, will not exceed management's estimates.
NOTE 8 - NET EARNINGS PER SHARE
The table below sets forth the computation of basic and diluted net earnings per
share:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2002 2001 2002 2001
- -------------------------------------------------------------------------------------------------------------
Numerator:
Net earnings $ 69,555 $ 43,819 $ 131,631 $ 90,893
Denominator:
Basic-weighted average shares outstanding 176,396 171,573 175,810 171,324
Effect of dilutive securities:
Employee stock options 7,051 5,953 7,096 5,802
Restricted shares 25 80 23 78
- -------------------------------------------------------------------------------------------------------------
Diluted-weighted average shares outstanding 183,472 177,606 182,929 177,204
=============================================================================================================
Basic net earnings per share $ .39 $ .26 $ .75 $ .53
=============================================================================================================
Diluted net earnings per share $ .38 $ .25 $ .72 $ .51
=============================================================================================================
Diluted-weighted average shares outstanding have not been adjusted for certain
employee stock options and awards where the effect of those securities would
have been anti-dilutive.
NOTE 9 - COMPREHENSIVE INCOME (LOSS)
Other comprehensive income (loss) consists of unrealized gains or losses on
available-for-sale marketable securities and foreign currency translation
adjustments, net of taxes. Other comprehensive income (loss) was $23,720 and
$(16,027) for the three months ended June 30, 2002 and 2001, and $19,161 and
$(29,604) for the first six months of 2002 and 2001. Total comprehensive income
(loss) combines reported net earnings (loss) and other comprehensive income
(loss). Total comprehensive income was $93,275 and $27,792 for the three months
ended June 30, 2002 and 2001, and $150,792 and $61,289 for the first six months
of 2002 and 2001.
NOTE 10 - OTHER INCOME (EXPENSE)
Other income (expense) consists primarily of interest income and interest
expense, net.
9
NOTE 11 - SEGMENT AND GEOGRAPHICAL INFORMATION
SEGMENT INFORMATION: The Company manages its business on the basis of one
reportable segment - the development, manufacture and distribution of
cardiovascular medical devices for the global cardiac rhythm management (CRM),
cardiac surgery (CS) and cardiology and vascular access (C/VA) markets. The
Company's principal products in each of these markets are: bradycardia pacemaker
systems, tachycardia implantable cardioverter defibrillator (ICD) systems, and
electrophysiology catheters in CRM; mechanical and tissue heart valves, valve
repair products, and suture-free devices to facilitate coronary artery bypass
graft anastomoses in CS; and vascular closure devices, catheters, guidewires and
introducers in C/VA.
Net sales by class of similar products were as follows:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
NET SALES 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------
Cardiac rhythm management $ 290,680 $ 238,284 $ 558,478 $ 467,317
Cardiac surgery 66,287 63,849 129,169 129,494
Cardiology and vascular access 47,381 33,929 87,894 65,316
- -------------------------------------------------------------------------------------------
$ 404,348 $ 336,062 $ 775,541 $ 662,127
===========================================================================================
GEOGRAPHICAL INFORMATION: The following tables present certain geographical
financial information:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
NET SALES 2002 2001 2002 2001
- -------------------------------------------------------------------------------------------
United States $ 267,725 $ 216,958 $ 513,555 $ 427,608
International 136,623 119,104 261,986 234,519
- -------------------------------------------------------------------------------------------
$ 404,348 $ 336,062 $ 775,541 $ 662,127
===========================================================================================
JUNE 30, DECEMBER 31,
LONG-LIVED ASSETS* 2002 2001
- -------------------------------------------------------------
United States $ 652,737 $ 626,140
International 146,996 137,803
- -------------------------------------------------------------
$ 799,733 $ 763,943
=============================================================
*LONG-LIVED ASSETS EXCLUDE DEFERRED INCOME TAXES.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
RESULTS OF OPERATIONS
NET SALES: Net sales for the second quarter of 2002 totaled $404,348, a 20.3%
increase over the $336,062 reported in the second quarter of 2001. For the first
six months of 2002, net sales totaled $775,541, a 17.1% increase over the
$662,127 reported in the first half of 2001. The impact of foreign currency
translation in the comparison of net sales for the second quarter and first six
months of 2002 to 2001 was not significant.
Cardiac rhythm management (CRM) net sales for the second quarter of 2002 were
$290,680, a 22.0% increase over the $238,284 reported in the second quarter of
2001. CRM net sales for the first six months of 2002 were $558,478, a 19.5%
increase over the $467,317 reported in 2001. The increase in CRM net sales for
the second quarter and first six months of 2002 was primarily due to increased
bradycardia, implantable cardioverter defibrillator (ICD) and electrophysiology
catheter unit sales. The increase in bradycardia net sales was attributable to
the on-going success of the Company's Integrity AFx(R), Integrity(R) Micro and
Identity(TM) family of pacemakers, all with atrial fibrillation suppression
technology. The Company's ICD net sales benefited from the full second quarter
availability of the Company's Atlas(TM) family of ICDs and the introduction of
the Riata(TM) family of defibrillation leads to the U.S. market during the
quarter.
Cardiac surgery (CS) net sales for the second quarter of 2002 were $66,287, a
3.8% increase from the $63,849 reported in the second quarter of 2001. CS sales
for the first six months of 2002 were $129,169 compared with $129,494 reported
in 2001. The increase in CS net sales for the second quarter of 2002 was due to
an increase in aortic connector sales as a result of the on-going sales ramp up
of this product in the U.S. market. This was offset in part by a decrease in
heart valve net sales due to a clinical preference shift from mechanical valves
to tissue valves in the U.S. market where the Company holds significant
mechanical valve market share and a smaller share of the tissue valve market.
Cardiology and vascular access (C/VA) net sales for the second quarter of 2002
were $47,381, a 39.6% increase over the $33,929 reported in the second quarter
of 2001. C/VA net sales for the first six months of 2002 were $87,894, a 34.6%
increase over the $65,316 reported in 2001. The increase in C/VA net sales is
primarily due to increased Angio-Seal(TM) vascular closure unit sales,
benefiting from the on-going success of the Company's new Angio-Seal(TM) STS
Platform which was launched in the first quarter of 2002.
GROSS PROFIT: Gross profit for the second quarter of 2002 totaled $275,386, or
68.1% of net sales, as compared with $225,839, or 67.2% of net sales, during the
second quarter of 2001. For the first six months of 2002 and 2001, gross profit
was $527,791, or 68.1% of net sales, and $444,827, or 67.2% of net sales. The
improvement in the gross profit percentage is due primarily to higher ICD and
pacemaker unit volumes and improved CRM manufacturing efficiencies.
11
SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSE: SG&A expense for the second
quarter of 2002 totaled $131,210, or 32.4% of net sales, compared with $117,080,
or 34.8% of net sales, for the second quarter of 2001. For the first six months
of 2002, SG&A expense totaled $253,897, or 32.7% of net sales, compared with
$230,701, or 34.8% of net sales. The decrease in SG&A expense as a percentage of
net sales was primarily attributable to the elimination of goodwill amortization
expense in 2002 due to the Company's adoption of Financial Accounting Standards
Statement No. 142, "Goodwill and Other Intangible Assets," effective January 1,
2002. Goodwill amortization expense was $7,112 in the second quarter of 2001,
and $14,007 in the first six months of 2001. Higher sales volume and increased
productivity of the Company's recently reorganized sales organizations also
improved SG&A expense as a percentage of net sales during the second quarter of
2002.
During the second quarter of 2002, the Company received a cash payment of
$18,500 relating to the settlement of certain patent litigation, which was
recorded in the SG&A expense line item. Also during the second quarter of 2002,
the Company recorded an $11,000 SG&A charge to increase the reserve for expenses
related to the Silzone(R) recall (see Special charges) and a $7,500
discretionary contribution to its charitable foundation.
RESEARCH AND DEVELOPMENT (R&D) EXPENSE: R&D expenses in the second quarter of
2002 totaled $49,291, or 12.2% of net sales, compared with $41,126, or 12.2% of
net sales, for the second quarter of 2001. For the first six months of 2002, R&D
expense totaled $95,756, or 12.3% of net sales, compared with $80,631, or 12.2%
of net sales, in 2001. The increase in R&D expenses is primarily attributable to
increased CRM activities relating primarily to ICDs and products treating
emerging indications in atrial fibrillation and congestive heart failure.
PURCHASED IN-PROCESS RESEARCH AND DEVELOPMENT CHARGE: The Company recorded a
purchased in-process research and development charge of $5,000 during the second
quarter of 2001 relating to a performance-based milestone payment associated
with the 1999 acquisition of Vascular Science, Inc. (VSI). The Company
anticipates additional in-process research and development charges related to
the VSI acquisition as additional milestones are achieved. See "Purchased
in-process research and development charges" in the Company's Annual Report or
Form 10-K for the fiscal year ended December 31, 2001 for additional discussion
on the VSI acquisition and related accounting.
SPECIAL CHARGES: In July 2001, the Company initiated efforts to streamline its
heart valve operations, consolidate its U.S. sales activities and restructure
its international sales organization. As a result of these activities, the
Company recorded pre-tax special charges of $20,657 in the third quarter of
2001, consisting of employee severance costs resulting from the elimination of
approximately 90 production and administrative positions ($5,293), inventory
write-offs and scrap ($9,490), capital equipment write-offs ($3,379) and other
costs related primarily to lease terminations and other facility exit costs due
to the closing and consolidation of sales offices ($2,495). The Company has
utilized $15,396 of these special charge accruals through June 30, 2002,
consisting of $3,417 of employee severance costs, $7,373 of inventory write-offs
and scrap, $3,379 of capital equipment write-offs, and $1,227 of other costs.
The Company estimates that the remaining accruals will be utilized primarily
during 2002.
During the third quarter of 2001, the Company also wrote off $12,177 of certain
diagnostic equipment deemed obsolete due to the overwhelming acceptance of newer
technology equipment which received U.S. regulatory approvals in late 2000 and
early 2001, and was launched earlier in 2001.
12
On January 21, 2000, the Company initiated a worldwide voluntary recall of all
field inventory of heart valve replacement and repair products incorporating
Silzone(R) coating on the sewing cuff fabric. The Company concluded that it will
no longer utilize Silzone(R) coating. The Company recorded a special charge
accrual totaling $26,101 during the first quarter of 2000 relating to asset
write-downs ($9,465) and other costs ($16,636), including monitoring expenses,
associated with this recall and product discontinuance. The Company has more
than $200 million remaining in product liability insurance currently available
for the Silzone(R) related matters. In the second quarter of 2002, the Company
determined that the Silzone(R) reserves for other costs should be increased by
$11,000 due primarily to difficulties in getting the Company's insurance
carriers to pay various costs as required by the product liability insurance
policies. This additional accrual is included in selling, general and
administrative expenses for the second quarter ended June 30, 2002. The Company
has utilized $22,329 of these special charge accruals through June 30, 2002,
consisting of $9,465 for asset write-downs and $12,864 for other costs. The
Company estimates that the remaining accruals will be utilized during 2002
through 2004. There can be no assurance that the final costs associated with
this recall that are not covered by insurance, including litigation-related
costs, will not exceed management's estimates.
OTHER INCOME (EXPENSE): Other income (expense) consists primarily of interest
income and interest expense, net. The change in other income (expense) during
2002 as compared with 2001 is due primarily to reduced interest expense as a
result of lower debt levels and lower interest rates in 2002.
INCOME TAXES: The Company's effective income tax rate was 26.9% for the second
quarter of 2002 as compared with 25.0% for the second quarter of 2001, and 26.0%
for the first six months of 2002 as compared with 25.0% for the first six months
of 2001, exclusive of the $5,000 purchased in-process research and development
charge in 2001. The increase in the Company's effective income tax rate is due
to a larger percentage of the Company's taxable income being generated in higher
taxing jurisdictions. The Company anticipates that its effective income tax rate
before purchased in-process research and development and special charges will
continue to increase in 2003 due to a larger percentage of the Company's
forecasted taxable income being generated in higher taxing jurisdictions.
The Company has not recorded U.S. deferred income taxes on certain of its
non-U.S. subsidiaries' undistributed earnings, as such amounts are intended to
be reinvested outside the United States indefinitely. However, should the
Company change its business and tax strategies in the future and decide to
repatriate a portion of these earnings to one of the Company's U.S.
subsidiaries, additional U.S. tax liabilities would be incurred.
At June 30, 2002, the Company has approximately $52,000 of deferred tax assets
related to U.S. tax loss carryforwards, arising primarily from acquisitions,
which expire from 2003 to 2021, for which no valuation allowance has been
recorded. The Company believes that these loss carryforwards will be fully
utilized based upon its estimates of future taxable income. However, if these
estimates of future taxable income are not met, a valuation allowance for some
of these deferred tax assets would be required.
13
The Company from time to time faces challenges from tax authorities regarding
the amount of taxes due. These challenges include questions regarding the timing
and amount of deductions and the allocation of income among various tax
jurisdictions. The Company's U.S. federal tax filings prior to 1998 have been
examined by the Internal Revenue Service (IRS) and the Company has settled all
differences arising out of those examinations. Consistent with the Company's
status with the U.S. federal tax authorities as a "coordinated industry case,"
the IRS is currently in the process of examining the Company's U.S. federal tax
returns for the calendar years 1998, 1999 and 2000. Although the Company
believes it has recorded an appropriate income tax provision in each of those
years, there can be no assurance that the IRS will not take positions contrary
to those taken by the Company. The Company further believes that any costs not
covered by the Company's income tax provision will not have a material adverse
impact on the Company's consolidated financial position or liquidity, but may be
material to the consolidated results of operations of a future period.
STOCK SPLIT: On May 16, 2002, the Company's Board of Directors declared a
two-for-one stock split in the form of a 100% stock dividend to shareholders of
record on June 10, 2002. Net earnings per share, shares outstanding and weighted
average shares outstanding have been restated to reflect the stock dividend.
OUTLOOK: The Company expects that market demand, government regulation and
reimbursement policies, and societal pressures will continue to change the
worldwide health care industry, resulting in further business consolidations and
alliances. The Company participates with industry groups to promote the use of
advanced medical device technology in a cost-conscious environment. Customer
service in the form of cost-effective clinical outcomes will continue to be a
primary focus for the Company.
The global medical technology industry is highly competitive. Competitors have
historically employed litigation to gain a competitive advantage. In addition,
the Company's products must continually improve technologically and provide
improved clinical outcomes due to the competitive nature of the industry.
The heart valve and repair portion of the cardiac surgery market is highly
competitive, and consists of mechanical heart valves, tissue heart valves, and
repair products. Since 1999, the market has shifted to tissue heart valves and
repair products from mechanical heart valves, resulting in an overall market
share loss for the Company. Competition is anticipated to continue to place
pressure on pricing and terms, including a trend toward vendor-owned
(consignment) inventory at the hospitals, and health care reform is expected to
result in further hospital consolidations over time.
The cardiac rhythm management market is also a highly competitive industry and
has undergone consolidation. There are currently three principal suppliers,
including the Company, and the Company's two principal competitors both have
substantially greater assets and sales than the Company. Rapid technological
change in the CRM market is expected to continue, requiring the Company to
invest heavily in R&D and to effectively market its products.
The Company operates in an industry that is susceptible to significant product
liability claims. These claims may be brought by individuals seeking relief for
themselves or, increasingly, by groups seeking to represent a class. In
addition, product liability claims may be asserted against the Company in the
14
future relative to events that are not known to management at the present time.
While it is not possible to predict the outcome of every claim, the Company
believes that it has adequate product liability insurance to cover the costs
associated with them. The Company further believes that any costs not covered by
product liability insurance, including the Company's self-insured deductible,
will not have a material adverse impact on the Company's consolidated financial
position or liquidity, but may be material to the consolidated results of
operations of a future period.
Subsequent to the tragic events of September 2001, the product liability
insurance market has dramatically changed. The Company has secured product
liability coverage for 2002; however, the self-insured retention and insurance
premiums are significantly higher than in prior years. There can be no assurance
that this trend will reverse in the near future. As a result of the increased
self-insured retention for 2002, the Company has increased financial exposure in
the event of significant product liability matters. However, management believes
that any payment under the Company's 2002 policy self-insured retention would
not have a material adverse impact on the Company's consolidated financial
position or liquidity, but may be material to the consolidated results of
operations of a future period.
Group purchasing organizations (GPOs) in the United States continue to
consolidate the purchasing for some of the Company's customers. Several GPOs
have executed contracts with the Company's CRM market competitors, which exclude
the Company. These contracts, if enforced, may adversely affect the Company's
sales of these products to members of these GPOs.
CRITICAL ACCOUNTING POLICIES
Management has identified the most critical accounting policies upon which the
Company's financial status depends. Management determined the critical
accounting policies by considering accounting policies that involve the most
complex or subjective decisions or assessments. Management identified the
Company's most critical accounting policies to be those related to income taxes,
product liability accruals, special charges, accounts receivable allowance for
doubtful accounts, and estimated useful lives of property, plant and equipment.
These accounting policies are discussed in the notes to the consolidated
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2001, and in relevant sections in this
Management's Discussion and Analysis.
FINANCIAL CONDITION
The Company's liquidity and cash flows remained strong during the first six
months of 2002. The Company's current assets to current liabilities ratio was
2.4 to 1 at June 30, 2002, as compared with 2.5 to 1 at December 31, 2001.
At December 31, 2001 and June 30, 2002, substantially all of the Company's cash
and equivalents were held by the Company's non-U.S. subsidiaries. These funds
are also available for use in the Company's U.S. operations; however, they would
be subject to additional U.S. tax upon repatriation (see Income taxes).
15
The Company has a $350,000 unsecured, revolving credit facility that expires in
March 2003. The Company's commercial paper borrowings are backed by this
committed credit facility. The Company also borrows from time to time under
uncommitted, due-on-demand credit facilities with various banks. Management
believes that the Company can obtain a new credit facility or renegotiate and
extend its current credit facility prior to March 2003.
The Company's credit facility agreement contains various restrictive covenants
such as minimum financial ratios, limitations on additional liens or
indebtedness, and limitations on certain acquisitions and investments, all of
which the Company was in compliance with at June 30, 2002. The Company's credit
facility agreement does not include a provision for termination of the facility
or acceleration of repayment due to changes in the Company's credit rating.
At December 31, 2001, the Company classified all of its commercial paper
borrowings as long-term on its balance sheet, as the Company had the ability to
repay these short-term obligations with available cash from its existing
long-term, committed credit facility. During 2002, the Company repaid all of its
interest-bearing debt utilizing cash generated from operations and the proceeds
from employee stock option exercises.
In September 1999, the Company's Board of Directors authorized the repurchase of
up to $250,000 of the Company's outstanding common stock over a three-year
period. The Company repurchased 1,955 shares of its common stock for $29,826
during 1999. No additional shares have been repurchased since 1999.
Management believes that cash generated from operations and cash available under
the Company's credit facilities will be sufficient to meet the Company's working
capital and capital investment needs in the near term. Should suitable
investment opportunities arise, management believes that the Company's earnings,
cash flows and balance sheet will permit the Company to obtain additional debt
financing or equity capital, if necessary.
The Company has no off-balance sheet financing arrangements other than certain
operating leases previously disclosed in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2001. There have been no significant changes in
the Company's operating lease obligations since December 31, 2001.
CAUTIONARY STATEMENTS
In this discussion and in other written or oral statements made from time to
time, we have included and may include statements that may constitute
"forward-looking statements" within the meaning of the safe harbor provisions of
the Private Litigation Securities Reform Act of 1995. These forward-looking
statements are not historical facts but instead represent our beliefs regarding
future events, many of which, by their nature, are inherently uncertain and
beyond our control. These statements relate to our future plans and objectives,
among other things. By identifying these statements for you in this manner, we
are alerting you to the possibility that our actual results may differ, possibly
materially, from the results indicated by these forward-looking statements. We
undertake no obligation to update any forward-looking statements.
16
Various factors contained in the previous discussion and those described below
may affect the Company's operations and results. Since it is not possible to
foresee all such factors, you should not consider these factors to be a complete
list of all risks or uncertainties. Risk factors include the following:
1. Legislative or administrative reforms to the U.S. Medicare and Medicaid
systems or similar reforms of foreign reimbursement systems in a manner
that significantly reduces reimbursement for procedures using the
Company's medical devices or denies coverage for such procedures.
2. Acquisition of key patents by others that have the affect of excluding
the Company from market segments or require the Company to pay
royalties.
3. Economic factors, including inflation, changes in interest rates and
changes in foreign currency exchange rates.
4. Product introductions by competitors which have advanced technology,
better features or lower pricing.
5. Price increases by suppliers of key components, some of which are
sole-sourced.
6. A reduction in the number of procedures using the Company's devices
caused by cost containment pressures or preferences for alternate
therapies.
7. Safety, performance or efficacy concerns about the Company's marketed
products, many of which are expected to be implanted for many years,
leading to recalls and advisories with the attendant expenses and
declining sales.
8. Changes in laws, regulations or administrative practices affecting
government regulation of the Company's products, such as FDA laws and
regulations, that increase pre-approval testing requirements for
products or impose additional burdens on the manufacture and sale of
medical devices.
9. Difficulties obtaining, or the inability to obtain, appropriate levels
of product liability insurance.
10. A serious earthquake affecting the Company's facilities in Sunnyvale or
Sylmar, California.
11. Health care industry consolidation leading to demands for price
concessions or the exclusion of some suppliers from significant market
segments.
12. Adverse developments in litigation including product liability
litigation and patent litigation or other intellectual property
litigation including that arising from the Telectronics and Ventritex
acquisitions.
17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes from December 31, 2001 in the
Company's market risk. For further information on market risk, refer to Item 7A
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2001.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SILZONE(R) LITIGATION: The Company has been sued by patients alleging
defects in the Company's mechanical heart valves and valve repair products with
Silzone(R) coating. Some of these cases are seeking monitoring of patients
implanted with Silzone(R)-coated valves and repair products who allege no injury
to date. Some of these cases are seeking class action status. The Company
voluntarily recalled products with Silzone(R) coating on January 21, 2000, and
sent a Recall Notice and Advisory concerning the recall to physicians and
others. See also Note 7 regarding the special charges associated with this
matter.
In 2001, the U.S. Judicial Panel on Multi-District Litigation ruled
that certain lawsuits filed in U.S. federal district court involving products
with Silzone(R) coating should be part of Multi-District Litigation proceedings
under the supervision of U.S. District Court Judge John Tunheim in Minnesota. As
a result, actions involving products with Silzone(R) coating have been and will
likely continue to be transferred to Judge Tunheim for coordinated or
consolidated pretrial proceedings. There are other actions involving products
with Silzone(R) coating in various state courts that may or may not be
coordinated with the matters presently before Judge Tunheim.
While it is not possible to predict the outcome of these cases, the
Company believes that it has adequate product liability insurance to cover the
costs associated with them. The Company further believes that any costs not
covered by product liability insurance will not have a material adverse impact
on the Company's financial position or liquidity, but may be material to the
consolidated results of operations of a future period.
GUIDANT LITIGATION: In November 1996 Guidant Corporation ("Guidant")
sued St. Jude Medical alleging that St. Jude Medical did not have a license to
certain patents controlled by Guidant covering ICD products and alleging that
St. Jude Medical was infringing those patents.
St. Jude Medical's contention that it had obtained a license from
Guidant to the patents in issue when it acquired certain assets of Telectronics
in November 1996 was rejected by an arbitrator in July 2000. In May 2001, a
federal district court judge also ruled that the Guidant patent license with
Telectronics had not transferred to St. Jude Medical.
Guidant's suit in the United States District Court for the Southern
District of Indiana originally alleged infringement by St. Jude Medical of four
patents. Guidant later dismissed its claim on one patent (the '678 patent). In
addition, in response to a stipulation by the parties, the court ruled that a
second patent (the '191 patent) was invalid. Guidant appealed the ruling of
invalidity concerning the '191 patent, but in a ruling issued July 11, 2002, the
U.S. Court of Appeals for the Federal Circuit rejected Guidant's appeal and
affirmed the district court's ruling of invalidity.
18
A jury trial involving the two remaining patents asserted by Guidant
(the '288 and '472 patents) commenced in June 2001. The jury issued its verdict
on July 3, 2001, finding that both the '472 and '288 patents were valid and that
St. Jude Medical did not infringe the '288 patent. The jury also found that St.
Jude did infringe the '472 patent, which expired on March 4, 2001, but that the
infringement was not willful. The jury awarded damages of $140,000 to Guidant.
In rulings dated February 13, 2002 and July 5, 2002, the judge
overseeing the jury trial issued his decisions on the various post-trial
motions. In particular, the judge ruled that the '472 patent was invalid on two
grounds: lack of proper written description and double patenting. The judge also
ruled that claims 1 and 18 were not infringed as a matter of law.
The judge further ruled that the '288 patent was invalid for both
obviousness and failure to disclose the best mode.
The judge also found that St. Jude Medical was entitled to a new trial
on the issue of damages in the event the court's rulings on the other matters
were reversed on appeal. Finally, the judge held that in the event his other
rulings were reversed, St. Jude Medical would be entitled to a new trial because
of misconduct by Guidant and its attorneys during the first trial and that, in
such an event, Guidant would have to pay certain attorney's fees of St. Jude
Medical. The court also ruled on several other motions, not summarized here.
The primary effect of the court's post-trial rulings was to eliminate
the $140,000 verdict against St. Jude Medical. The Company expects that Guidant
will appeal the judge's decision. While it is not possible to predict the
outcome of an appeal process, the Company believes that it has meritorious
defenses against the claims asserted by Guidant.
OTHER LITIGATION MATTERS: The Company is involved in various other
product liability lawsuits, claims and proceedings that arise in the ordinary
course of business. Subject to self-insured retentions, the Company believes it
has product liability insurance sufficient to cover such claims and suits.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on May 16, 2002. In
conjunction therewith, proxies were solicited in accordance with Regulation 14A.
The following actions were taken:
(1) Richard R. Devenuti, Stuart M. Essig, Thomas H. Garrett III and Wendy
L. Yarno were elected to the Board of Directors for terms ending in
2005. Shareholders approved management's nominees to the Board of
Directors by votes as follows (adjusted for the stock split as of June
10, 2002): 129,488,110, 130,217,044, 130,186,632 and 129,501,612 in
favor; 1,492,890, 763,956, 794,368 and 1,479,388 withheld for Messrs.
Devenuti, Essig and Garrett and Ms. Yarno, respectively. Six other
directors are serving unexpired terms as follows: Walter L. Sembrowich,
Daniel J. Starks and Frank C-P Yin - through 2003; Terry L. Shepherd,
David A. Thompson and Stefan K. Widensohler - through 2004. Ronald A.
Matricaria will retire from the Board of Directors at the end of 2002.
19
(2) The shareholders ratified and approved the St. Jude Medical, Inc. 2002
Stock Plan by a vote (adjusted for the stock split as of June 10, 2002)
of 89,444,610 in favor, 15,556,114 opposed and 939,716 abstaining from
voting.
(3) The shareholders ratified the reappointment of Ernst & Young LLP as the
Company's independent auditor for 2002 by a vote (adjusted for the
stock split as of June 10, 2002) of 126,578,518 in favor, 3,823,786
opposed and 577,496 abstaining from voting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 3.1 Articles of Incorporation, as amended on May 5, 1989,
May 4, 1990 and September 5, 1996
Exhibit 10.14 St. Jude Medical, Inc. 2002 Stock Plan, As Amended
Exhibit 99.1 Certification by Chief Executive Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2 Certification by Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ST. JUDE MEDICAL, INC.
August 9, 2002 /s/ JOHN C. HEINMILLER
- -------------- ----------------------
DATE JOHN C. HEINMILLER
Vice President - Finance
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
20
EXHIBIT INDEX
Exhibit No. Exhibit
- ----------- --------------------------------------------------------------
3.1 Articles of Incorporation, as amended on May 5, 1989, May 4,
1990 and September 5, 1996
10.14 St. Jude Medical, Inc. 2002 Stock Plan, As Amended
99.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002