Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
COMMISSION FILE NO. 0-8672
------------------------------
ST. JUDE MEDICAL, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-1276891
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
ONE LILLEHEI PLAZA
ST. PAUL, MINNESOTA 55117
(Address of principal executive offices)
(651) 483-2000
(Registrant's telephone number, including area code)
------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK ($.10 PAR VALUE) PREFERRED STOCK PURCHASE RIGHTS
(Title of class) (Title of class)
NEW YORK STOCK EXCHANGE AND CHICAGO BOARD OPTIONS EXCHANGE
(Name of exchange on which registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
------------------------------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _____
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 aggregate market value of the voting stock held by non-affiliates
of the Registrant was approximately $5.1 billion at February 21, 2001, when the
closing sale price of such stock, as reported on the New York Stock Exchange,
was $60.00 per share.
The Registrant had 85,640,177 shares of its $0.10 par value Common
Stock outstanding as of February 21, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 2000, are incorporated by reference in Parts I, II and
IV. Portions of the Company's definitive Proxy Statement dated March 28, 2001,
are incorporated by reference in Part III.
PART I
ITEM 1. BUSINESS
GENERAL
St. Jude Medical, Inc., together with its subsidiaries (collectively
"St. Jude" or the "Company") is a global leader in the development,
manufacturing and distribution of medical technology products for the cardiac
rhythm management, cardiology and vascular access, and cardiac surgery markets.
St. Jude has two reportable segments: Cardiac Rhythm Management (CRM)
and Cardiac Surgery (CS - formerly known as Heart Valve Disease Management). The
CRM segment, which includes the results from the Company's Cardiac Rhythm
Management Division and Daig Division, develops, manufactures and distributes
bradycardia pulse generator and tachycardia implantable cardioverter
defibrillator (ICD) systems, electrophysiology and interventional cardiology
catheters, and vascular closure devices. The CS segment develops, manufactures
and distributes mechanical and tissue heart valves and valve repair products,
and suture-free devices to facilitate coronary artery bypass graft anastomoses.
Effective September 27, 1999, St. Jude acquired Vascular Science, Inc.
("VSI"), a development-stage company focused on the development of suture-free
devices to facilitate coronary artery bypass graft anastomoses.
Effective March 16, 1999, St. Jude purchased the Angio-Seal(TM)
business of Tyco International Ltd. Angio-Seal(TM) manufactured and marketed
hemostatic puncture closure devices.
During 2000 and 1999, the Company acquired various businesses used in
the distribution of the Company's products.
The Company markets its products primarily in the United States,
Western Europe and Japan through both a direct employee-based sales organization
and independent distributors. In addition, St. Jude maintains geographically
based sales and marketing organizations that are responsible for marketing,
sales and distribution of the Company's products in Eastern Europe, Africa, the
Middle East, Canada, Latin America and the Asia-Pacific region.
Typically, the Company's net sales are somewhat higher in the first and
second quarters and lower in the third and fourth quarters. Lower net sales in
the third quarter result from patient tendency to defer, if possible, cardiac
procedures during the summer months and from the seasonality of the U.S. and
Western European markets where summer vacation schedules normally result in
fewer surgical procedures. Lower net sales in the fourth quarter result from
fewer selling days in the quarter because of holidays in the U.S. and other
markets, and patient tendency to defer, if possible, cardiac procedures during
these holiday seasons. Independent distributors randomly place large orders that
can distort the net
2
sales pattern just described. In addition, new product introductions,
acquisitions, and regulatory approvals can modify the typical net sales pattern.
In 2000, approximately 78% of net sales were derived from cardiac
rhythm management segment products, and approximately 22% from cardiac surgery
segment products. Approximately 63% of the Company's 2000 net sales were in the
U.S. market, as compared with 62% in 1999. Additional segment information is set
forth in the Company's 2000 Annual Report to Shareholders on pages 21 and 22 of
the Financial Report and is incorporated herein by reference.
CARDIAC RHYTHM MANAGEMENT
The Cardiac Rhythm Management Division ("CRMD") is headquartered in
Sylmar, California and has manufacturing facilities in California, Arizona,
South Carolina and Sweden. The Daig Division ("Daig") is headquartered in
Minnesota and has manufacturing facilities in Minnesota and Puerto Rico.
CRMD pacemakers and related systems treat patients with hearts that
beat inappropriately slow, a condition known as bradycardia. ICDs and related
systems treat patients with hearts that beat inappropriately fast, a condition
known as tachycardia. Daig's specialized disposable cardiovascular catheters and
related devices are used in the electrophysiology portion of the cardiac rhythm
management market and the cardiology and vascular access market.
Typically implanted pectorally, just below the collarbone, pacemakers
monitor the heart's rate and, when necessary, deliver low-level electrical
impulses that stimulate an appropriate heartbeat. The pacemaker is connected to
the heart by one or two leads that carry the electrical impulses to the heart
and information from the heart back to the pacemaker. An external programmer
enables the physician to retrieve diagnostic information from the pacemaker and
reprogram the pacemaker in accordance with the patient's changing needs.
Single-chamber pacemakers stimulate only one chamber of the heart (atrium or
ventricle), while dual-chamber devices can sense and pace in both the upper and
lower chambers.
CRMD's current pacing products include the advanced featured
Integrity(TM) AFx Micro and the Integrity(TM) AFx models, FDA approved in
December 2000 and May 2000, respectively. The Integrity(TM) models build on the
successful platform of the Affinity(R) product line with the beat-by-beat
AutoCapture(TM) pacing system. Also available are the January 1999 FDA approved
Affinity(R), and the August 1999 FDA approved Entity(TM) family of pacemakers,
containing the proven Omnisense(TM) activity-based sensor, and the Tempo(R)
pacemaker family, which uses fifth-generation Minute Ventilation sensor
technology. These pacemaker families are highly automatic and contain many
advanced features and diagnostic capabilities to optimize cardiac therapy. All
are small and physiologic in shape to enhance patient comfort.
Outside the United States, CRMD also offers the Integrity(TM) AFx
Micro, the world's smallest dual-chamber pacemaker, with an Atrial Suppression
algorithm called DAO (Dynamic Atrial Overdrive(TM)). DAO is a therapy designed
to suppress atrial fibrillation, a common heart arrhythmia, and is currently
under clinical investigation in the United States. The single-chamber
pacemakers, the Microny(R) SR+ and the Regency(R) pacemaker families, are also
available outside the United States; while the Microny(R) II SR+ is awaiting FDA
approval in the United States.
The Integrity(TM), Affinity(R), Entity(TM) and Regency(R) families of
pacemakers, as well as the Microny(R) SR+, all offer the unique feature of the
beat-by-beat AutoCapture(TM) pacing system. The AutoCapture(TM) pacing system
enables the pacemaker to monitor every paced beat to verify that the heart has
been stimulated ("capture"), deliver a back-up pulse in the event of noncapture,
continuously measure threshold, and make adjustments in energy output to match
changing patient needs.
3
CRMD's current pacing leads include the active-fixation Tendril(R) DX
and SDX families and the passive-fixation Passive Plus(R) DX family which are
available worldwide, and the passive-fixation Membrane(TM) EX family which is
currently available outside the United States. All three lead families feature
steroid elution, which helps suppress the body's inflammatory response to a
foreign object.
CRMD's ICDs monitor the heartbeat and deliver higher energy electrical
impulses, or "shocks," to terminate ventricular tachycardia (VT) and ventricular
fibrillation (VF). In ventricular tachycardia, the lower chambers of the heart
contract at an abnormally rapid rate and typically deliver less blood to the
body's tissues and organs. VT can progress to VF, in which the heart beats so
rapidly and erratically that it can no longer pump blood. Like pacemakers, ICDs
are typically implanted pectorally, connected to the heart by leads, and
programmed non-invasively.
St. Jude received FDA approval on its first dual-chamber ICD, the
Photon(R) DR, in October 2000. The Photon(R) DR is a dual chamber ICD, offering
the features of Morphology Discrimination (MD) and AV Rate Branch designed to
enhance the precision of ventricular-based arrhythmia detection. The full CRMD
ICD product offering includes the Photon(R), Profile(TM) MD, and Contour(R) MD.
The Company's ICDs are used with the dual electrode and single
electrode TVL and TVL-ADX (active-fix) transvenous leads. The Photon(TM) DR ICD
is programmable with the APS III universal programmer. The Contour(R) MD and
Profile(TM) ICDs are currently programmable with the PR-3500 and PR-1500
programmers, and will be programmable by the APS III by mid-2001.
The CRMD APS(R) III universal pacemaker and ICD programmer is an
intuitive, easy-to-use programmer that supports St. Jude's ICDs and pacemakers,
including the recently FDA approved Photon(R) DR dual-chamber ICD and the
Integrity(TM) pacemaker family. Older pacemaker and ICD products continue to be
supported by the APS(R) II and the PR-3500 and PR-1500 patient management
systems. All CRMD programmers allow the physician to efficiently utilize the
extensive diagnostic and therapeutic capabilities of CRMD's pacemakers and ICDs.
Specialized disposable cardiovascular devices, sold by Daig, include
percutaneous (through the skin) catheter introducers, diagnostic guidewires,
vascular sealing devices, angiography catheters, electrophysiology (EP)
catheters and bipolar temporary pacing catheters (used with external
pacemakers). Percutaneous catheter introducers are used to create passageways
for cardiovascular catheters from outside the human body through the skin into a
vein, artery or other location inside the body. Daig's percutaneous catheter
introducer products consist primarily of peel-away and non peel-away sheaths,
sheaths with and without hemostasis valves, dilators, guidewires, repositioning
sleeves, obturators and needles. All of these products are offered in a variety
of sizes and packaging configurations. Diagnostic guidewires are used in
conjunction with percutaneous catheter introducers to aid in the introduction of
intravascular catheters. Daig's diagnostic guidewires are available in multiple
lengths and incorporate a surface finish for lasting lubricity. Vascular sealing
devices are used to close femoral artery puncture wounds following angioplasty,
stenting and diagnostic procedures.
Angiography catheters are used in coronary angiography procedures to
obtain images of coronary arteries to identify structural cardiac diseases. EP
catheters are placed into the human body percutaneously to aid in the diagnosis
and treatment of cardiac arrhythmias (abnormal heart rhythms). Between two and
five EP catheters are generally used in each electrophysiology procedure. Daig's
EP catheters are available in multiple configurations. Bipolar temporary pacing
catheters are inserted percutaneously for temporary use (less than one hour to a
maximum of one week) with external pacemakers to provide patient stabilization
prior to implantation of a permanent pacemaker, following a heart attack, or
during surgical procedures. Daig produces and markets several designs of bipolar
temporary pacing catheters.
4
CARDIAC SURGERY
The Cardiac Surgery Division (CSD) is headquartered in St. Paul,
Minnesota and has manufacturing facilities in Minnesota, Puerto Rico, Canada and
Brazil. CSD is comprised of its Heart Value Group (HVG) and its Anastomotic
Technology Group (ATG). Heart valve replacement or repair may be necessary
because the natural heart valve has deteriorated due to congenital defects or
disease. Heart valves facilitate the one-way flow of blood in the heart and
prevent significant backflow of blood into the heart and between the heart's
chambers.
HVG offers both mechanical and tissue replacement heart valves and
valve repair products. The St. Jude Medical(R) mechanical heart valve has been
implanted in over one million patients to date. The SJM Regent(TM) mechanical
heart valve was approved for sale in Europe in December 1999 and is currently in
a clinical trial in the United States. The Company markets the Toronto SPV(R)
stentless tissue valve, a stentless tissue valve and the SJM(R) Biocor(TM)
tissue valve. The Company received FDA approval for the U.S. market release of
the Toronto SPV(R) in November 1997 at which time the product was launched and
physician training commenced. The SJM Epic(TM) tissue heart valve received
European regulatory approval in late 1998 and was launched in Europe in 1999. On
January 21, 2000 the Company discontinued sales of CSD products, including heart
valves, with Silzone(R) cuffs due to a higher incidence of perivalvular leak
associated with this product in a clinical study. The Company also recalled
unimplanted inventory of this product.
Annuloplasty rings are prosthetic devices used to repair diseased or
damaged mitral heart valves. The Company has executed a license agreement with
Professor Jacques Seguin to manufacture and market an advanced semi-rigid
annuloplasty ring, known as the SJM(R) Seguin annuloplasty ring. HVG also
markets the SJM Tailor(TM) annuloplasty ring.
HVG has also entered into an agreement with LifeNet Transplant
Services, which enables it to assist in the marketing of human donated allograft
heart valves.
ATG has developed a suture-free device to facilitate coronary artery
bypass graft proximal anastomoses and commenced marketing of this product in
Western Europe in 2000. This product has been submitted to the FDA for approval,
which is expected in 2001. ATG is also developing a distal anastomoses
suture-free device and next generation proximal devices.
SUPPLIERS
The Company purchases raw materials and other items from numerous
suppliers for use in its products. For certain materials that the Company
believes are critical and may be difficult to obtain from an alternative
supplier, the Company maintains sizable inventories of up to three years of its
projected requirements for certain materials, some of which are available only
from a single supplier. The Company has been advised from time to time that
certain of these suppliers may terminate sales of products to customers that
manufacture implantable medical devices in an effort to reduce their potential
products liability exposure. Some of these suppliers have modified their
positions and have indicated a willingness to either temporarily continue to
provide product until such time as an alternative vendor or product can be
qualified or to reconsider the supply relationship. While the Company believes
that alternative sources of raw materials are available and that there is
sufficient lead time in which to qualify such other sources, any supply
interruption could have a material adverse effect on the Company's ability to
manufacture its products.
5
COMPETITION
Within the medical technology industry, competitors range from small
start-up companies to companies with significant resources. The Company's
customers consider many factors when choosing supplier partners including
product reliability, clinical outcomes, product availability, inventory
consignment, price and product services provided by the manufacturer. Market
share can shift as a result of technological innovation, product recalls and
product safety alerts, as well as other business factors. This emphasizes the
need to provide the highest quality products and services. St. Jude expects the
competition to continue to increase by using tactics such as consigned
inventory, bundled product sales and reduced pricing.
CRMD has traditionally been a technological leader in the bradycardia
pacemaker market. The Company has strong bradycardia market share positions in
all major developed markets. There are three principal manufacturers and
suppliers of ICDs, one of which is the Company. ICD therapy is a highly
competitive market. The Company's other two competitors account for more than
80% of the worldwide ICD sales. These two competitors are larger than the
Company and have invested substantial amounts in ICD research and development.
The market areas Daig focuses on are the cardiac catheterization laboratories
and the electrophysiology laboratories throughout the world. These are growing
markets with numerous competitors.
The Company is the world's leading manufacturer and supplier of
mechanical heart valves. There are two other principal and several other smaller
mechanical heart valve manufacturers. The Company also competes against two
principal and a large number of other smaller tissue heart valve manufacturers.
The medical technology market is a dynamic market currently undergoing
significant change due to cost of care considerations, regulatory reform,
industry consolidation and customer consolidation. The ability to provide cost
effective clinical outcomes is becoming increasingly more important for medical
technology manufacturers.
MARKETING
The Company's products are sold in over 100 countries throughout the
world. No distributor organization or single customer accounted for more than
10% of 2000, 1999 or 1998 consolidated net sales.
In the United States, St. Jude sells directly to hospitals through a
combination of independent distributors and an employee based sales
organization. In Western Europe, the Company has employee based sales
organizations selling in 14 countries. Throughout the rest of the world the
Company uses a combination of independent distributor and direct sales
organizations.
Group purchasing organizations (GPOs) in the U.S. continue to
consolidate the purchasing for some of the Company's customers. A few 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 CRM products to members of these GPOs.
Payment terms worldwide are consistent with local practice. Orders are
shipped as they are received and, therefore, no material backlog exists.
6
RESEARCH AND DEVELOPMENT
The Company is focused on the development of new products and
improvements to existing products. In addition, research and development expense
reflects the Company's efforts to obtain FDA approval of certain new products
and processes, and to maintain the highest quality standards of existing
products. The Company's research and development expenses, exclusive of
purchased in-process research and development, were $137,814,000 (11.7% of net
sales), $125,059,000 (11.2% of net sales) and $99,756,000 (9.8% of net sales) in
2000, 1999 and 1998, respectively.
GOVERNMENT REGULATION
The medical devices manufactured and marketed by the Company are
subject to regulation by the FDA and, in most instances, by state and foreign
governmental authorities or their designated representatives. Under the U.S.
Federal Food, Drug and Cosmetic Act (the "Act"), and regulations thereunder,
manufacturers of medical devices must comply with certain policies and
procedures that regulate the composition, labeling, testing, manufacturing,
packaging and distribution of medical devices. Medical devices are subject to
different levels of government approval requirements, the most comprehensive of
which requires the completion of an FDA approved clinical evaluation program and
submission and approval of a pre-market approval ("PMA") application before a
device may be commercially marketed. The Company's mechanical and tissue heart
valves, ICDs, certain pacemakers and leads and certain electrophysiology
catheter applications are subject to this level of approval or as a supplement
to a PMA approval. Other pacemakers and leads, annuloplasty ring products and
other electrophysiology and interventional cardiology products are currently
marketed under the 510(k) pre-market notification procedure of the Act.
In addition, the FDA may require testing and surveillance programs to
monitor the effect of approved products which have been commercialized and it
has the power to prevent or limit further marketing of a product based on the
results of these post-marketing programs. The FDA also conducts inspections
prior to approval of a PMA to determine compliance with the quality system
regulations which covers manufacturing and design and may, at any time after
approval of a PMA or granting of a 510(K), conduct periodic inspections to
determine compliance with both good manufacturing practice regulations and/or
current medical device reporting regulations. If the FDA were to conclude that
St. Jude was not in compliance with applicable laws or regulations, it could
institute proceedings to detain or seize products, issue a recall, impose
operating restrictions, assess civil penalties and recommend criminal
prosecution to the Department of Justice. Furthermore, the FDA could proceed to
ban, or request recall, repair, replacement or refund of the cost of, any device
manufactured or distributed.
The FDA also regulates record keeping for medical devices and reviews
hospital and manufacturers' required reports of adverse experiences to identify
potential problems with FDA authorized devices. Aggressive regulatory action may
be taken due to adverse experience reports.
Diagnostic-related groups ("DRG") reimbursement schedules regulate the
amount the United States government, through the Health Care Financing
Administration ("HCFA"), will reimburse hospitals and doctors for the inpatient
care of persons covered by Medicare. In response to rising Medicare and Medicaid
costs, several legislative proposals have been advanced which would restrict
future funding increases for these programs. Changes in current DRG
reimbursement levels could have an adverse effect on its domestic pricing
flexibility.
7
St. Jude's business outside the United States is subject to medical
device laws in individual foreign countries. These laws range from extensive
device approval requirements in some countries for all or some of the Company's
products, to requests for data or certifications in other countries. Generally,
regulatory requirements are increasing in these countries. In the European
Economic Community ("EEC"), the regulatory systems have been harmonized and
approval to market in EEC countries (the CE Mark) can be obtained through one
agency. In addition, government funding of medical procedures is limited and in
certain instances is being reduced.
A number of medical device regulatory agencies have begun considering
whether to continue to permit the sale of medical devices that incorporate any
bovine material because of concerns about Bovine Spongiform Encephalopathy
(BSE), sometimes referred to as "mad cow disease." It is believed that in some
instances this disease has been transmitted to humans through the consumption of
beef. There have been no reported cases of BSE in the U.S. Some of the Company's
products use bovine collagen (Angio-Seal(TM) and vascular grafts) which is
derived from the bovine component scientifically rated as least likely to
transmit the disease. Some of the Company's tissue heart valves incorporate a
strip of bovine pericardial material. The Company is cooperating with these
regulatory agencies.
In 1994 the predecessor organization to Pacesetter, Inc. ("Pacesetter"
- - a wholly owned subsidiary of St. Jude) entered a consent decree which settled
a lawsuit brought by the United States in U.S. District Court for the District
of New Jersey. The consent decree which remains in effect indefinitely requires
that Pacesetter comply with the FDA's good manufacturing practice regulations
and identifies several specific provisions of those regulations. The consent
decree provides for FDA inspections and that Pacesetter is obligated to pay
certain costs of the inspections.
In May 1995 Telectronics Pacing Systems, Inc. ("Telectronics" - now
part of Pacesetter) and its President entered into a consent decree with the
FDA. The consent decree, which remains in effect indefinitely, requires that
Telectronics comply with the FDA's good manufacturing practice regulations and
identifies several specific provisions of those regulations. The consent decree
provides for FDA inspections and that Telectronics is obligated to pay certain
costs of the inspections.
PATENTS AND LICENSES
The Company's policy is to protect its intellectual property rights
related to its medical devices. Where appropriate, St. Jude applies for United
States and foreign patents. In those instances where the Company has acquired
technology from third parties, it has sought to obtain rights of ownership to
the technology through the acquisition of underlying patents or licenses.
While the Company believes design, development, regulatory and
marketing aspects of the medical device business represent the principal
barriers to entry into such business, it also recognizes that its patents and
license rights may make it more difficult for its competitors to market products
similar to those produced by the Company. St. Jude can give no assurance that
any of its patent rights, whether issued, subject to license, or in process,
will not be circumvented or invalidated. Further, there are numerous existing
and pending patents on medical products and biomaterials. There can be no
assurance that the Company's existing or planned products do not or will not
infringe such rights or that others will not claim such infringement. No
assurance can be given that the Company will be able to prevent competitors from
challenging the Company's patents or entering markets currently served by the
Company.
INSURANCE
The medical technology industry has historically been subject to
significant products liability claims. Such claims could be asserted against the
Company in the future for events not known to
8
management at this time. Management has adopted risk management practices,
including products liability insurance coverage, which management believes are
prudent.
California earthquake insurance is currently difficult to procure,
extremely costly, and restrictive in terms of coverage. The Company's earthquake
and related business interruption insurance for its CRMD operations located in
Sylmar and Sunnyvale, California provides for limited coverage above a
significant self-insured retention. There are several factors that preclude the
Company from determining the effect an earthquake may have on its business.
These factors include, but are not limited to, the severity and location of the
earthquake, the extent of any damage to the Company's manufacturing facilities,
the impact of such an earthquake on the Company's California workforce and the
infrastructure of the surrounding communities, and the extent, if any, of damage
to the Company's inventory and work in process. While the Company's exposure to
significant losses occasioned by a California earthquake would be partially
mitigated by its ability to manufacture certain of the CRMD products at its
Swedish manufacturing facility, any such losses could have a material adverse
effect on the Company, the duration of which cannot be reasonably predicted. The
Company has expanded the manufacturing capabilities at its Swedish facility and
has constructed a pacemaker component manufacturing facility in Arizona. In
addition, the Company has moved significant finished goods inventory to
locations outside California. These facilities and inventory transfers would
further mitigate the adverse impact of a California earthquake.
EMPLOYEES
As of December 31, 2000, the Company had 4,951 full-time employees. It
has never experienced a work stoppage as a result of labor disputes and none of
its employees are represented by a labor organization, with the exception of the
Company's Swedish employees and certain employees in France.
INTERNATIONAL OPERATIONS
The Company's foreign business is subject to such special risks as
exchange controls, currency devaluation, the imposition or increase of import or
export duties and surtaxes, and international credit or financial problems.
Currency exchange rate fluctuations vis-a-vis the U.S. dollar can affect
reported net earnings. The Company may hedge a portion of this exposure, from
time to time, to reduce the effect of foreign currency rate fluctuations on net
earnings. See the "Market Risk" section on pages 4 and 5 of "Management's
Discussion and Analysis of Results of Operations and Financial Condition",
incorporated herein by reference from the Company's 2000 Annual Report to
Shareholders. Operations outside the United States present complex tax and cash
management issues that necessitate sophisticated analysis and diligent
monitoring to meet the Company's financial objectives.
ITEM 2. PROPERTIES
St. Jude's principal executive offices are owned and are located in St.
Paul, Minnesota. Manufacturing facilities are located in California, Minnesota,
Arizona, South Carolina, Canada, Brazil, Puerto Rico and Sweden. The Company
owns approximately 62%, or 380,000 square feet, of the total manufacturing space
and the balance is leased.
The Company also maintains sales and administrative offices inside the
United States at 17 locations in 7 states and outside the United States at 34
locations in 23 countries. With the exception of one location, all of these
locations are leased.
9
In management's opinion, all buildings, machinery and equipment are in
good condition, suitable for their purposes and are maintained on a basis
consistent with sound operations. Currently the Company is using substantially
all of its available space to develop, manufacture and market its products.
ITEM 3. LEGAL PROCEEDINGS
IRS MATTERS
During 2000, the Company and the Internal Revenue Service ("IRS")
settled the IRS Tax Court suit for the tax periods 1990-1991 and subsequent year
disputes for the tax periods 1992-1997. The issues raised by the IRS related
primarily to the Company's Puerto Rican operations. The settlement did not have
a material impact on the Company's consolidated financial statements.
SILZONE(R) LITIGATION
The Company has been sued by patients alleging defects in the Company's
mechanical heart valves with a Silzone(R) coating. The Company recalled products
with a Silzone(R) coating on January 21, 2000, and sent a Recall notice and
Advisory concerning the recall to physicians and others. Some of these cases are
seeking monitoring of patients implanted with Silzone(R)-coated valves who
allege no injury to date. Some of these cases are seeking class action status.
The Company intends to vigorously defend these cases.
GUIDANT LITIGATION
GUIDANT'S CLAIMS AGAINST SJM On November 26, 1996, Guidant Corporation
(a competitor of St. Jude Medical) ("Guidant") and related parties filed a
lawsuit against St. Jude Medical, Inc. ("St. Jude Medical"), Pacesetter, Inc.
("Pacesetter" - a wholly owned subsidiary of St. Jude Medical), Ventritex, Inc.
("Ventritex") and certain members of the Telectronics Group in State Superior
Court in Marion County, Indiana (the "Telectronics Action"). The lawsuit
alleges, among other things, that, pursuant to an agreement entered into in
1993, certain Guidant parties granted Ventritex intellectual property licenses
relating to cardiac stimulation devices, and that such licenses would terminate
upon the consummation of the merger of Ventritex into Pacesetter (the "Merger").
The lawsuit further alleges that, pursuant to an agreement entered into in 1994
(the "Telectronics Agreement"), certain Guidant parties granted the Telectronics
Group intellectual property licenses relating to cardiac stimulation devices.
The lawsuit seeks declaratory and injunctive relief, among other things, to
prevent and invalidate the transfer of the Telectronics Agreement to Pacesetter
in connection with Pacesetter's acquisition of Telectronics' assets (the
"Telectronics Acquisition") and the application of license rights granted under
the Telectronics Agreement to the manufacture and sale by Pacesetter of
Ventritex's products following the consummation of the Merger. The court
overseeing this case issued a stay of this matter in July 1998 so that the
issues could be addressed in an arbitration requested by the Telectronics Group
and Pacesetter.
Guidant and related parties also filed suit against St. Jude Medical,
Pacesetter and Ventritex on November 26, 1996, in the United States District
Court for the Southern District of Indiana. This second lawsuit seeks (i) a
declaratory judgment that Pacesetter's manufacture, use or sale of cardiac
stimulation devices of the type or similar to the type which Ventritex
manufactured and sold at the time the Guidant parties filed their complaint
would, upon consummation of the Merger, be unlicensed and constitute an
infringement of patent rights owned by certain Guidant parties, (ii) to enjoin
the manufacture, use or sale by St. Jude Medical, Pacesetter or Ventritex of
cardiac stimulation devices of the type which Ventritex manufactured at the time
the Guidant parties filed their complaint, and (iii) certain damages and costs.
This second lawsuit was stayed by the court in July 1998 given the order to
arbitrate, as discussed below.
10
St. Jude Medical believes that the foregoing state and federal court
complaints contain a number of significant factual inaccuracies concerning the
Telectronics Acquisition and the terms and effects of the various intellectual
property license agreements referred to in such complaints. For these reasons
and others, St. Jude Medical believes that the allegations set forth in the
complaints are without merit. St. Jude Medical has vigorously defended its
interests in these cases and will continue to do so.
ORDER TO ARBITRATE As a result of the state and federal lawsuits
brought by Guidant and related parties, the Telectronics Group and Pacesetter
filed a lawsuit in the United States District Court for the District of
Minnesota seeking (i) a declaratory judgment that the Guidant parties' claims,
as reflected in the Telectronics Action, are subject to arbitration pursuant to
the arbitration provisions of the Telectronics Agreement, (ii) an order that the
defendants arbitrate their claims against the Telectronics Group and Pacesetter
in accordance with the arbitration provisions of the Telectronics Agreement,
(iii) to enjoin the defendants preliminarily and permanently from litigating
their dispute with the Telectronics Group and Pacesetter in any other forum, and
(iv) certain costs. After the Eighth Circuit Court of Appeals ruled on an appeal
in favor of the Telectronics Group and Pacesetter in May 1998, the United States
District Court for the District of Minnesota issued an order on July 8, 1998
directing the arbitration requested by the Telectronics Group and Pacesetter to
proceed.
STATUS OF ARBITRATION The arbitrator selected for the arbitration
initially ruled that Pacesetter and St. Jude Medical should not participate in
the arbitration proceeding which would determine whether the Telectronics
Agreement transferred to Pacesetter. Based on this ruling, the Telectronics
Group and the Guidant parties participated in the arbitration proceeding. This
proceeding occurred in late April 2000, and, on July 10, 2000, the arbitrator
issued a ruling that the attempted assignment and transfer of patent licenses in
the Telectronics Agreement by the Telectronics Group to Pacesetter was
ineffective. As a result of this decision, the Guidant parties filed papers with
the U.S. District Court for the Southern District of Indiana seeking to lift the
stay of the patent infringement court proceedings in that court which had been
entered in June 1998. The court granted Guidant's request to lift the stay and
the matter involving Guidant's patent infringement claims against St. Jude
Medical is scheduled for trial in June 2001.
BACKGROUND CONCERNING PATENTS INVOLVED IN GUIDANT'S CLAIMS In the
patent infringement case in federal court in Indiana, the Guidant parties
initially asserted claims against St. Jude Medical and Pacesetter involving four
separate patents. One of these patents (`678) expired May 3, 1998. The other
patents involved expire, according to their terms, on March 7, 2001 (`472
patent), February 25, 2003 (`191 patent), and December 22, 2003 (`288 patent),
respectively, although St. Jude Medical has claims in the court action which, if
upheld, would cause some of the patents to expire earlier, if they apply at all.
Although Guidant has requested injunctive relief and damages as part of the
federal court lawsuit in Indiana, the request for an injunction would be barred
for any expired patent. Guidant is seeking damages for the time period prior to
expiration of the patents.
MARKMAN RULINGS The federal district court in Indiana has issued
decisions as part of the court's Markman's process which interpret what the
claims in the patents mean. These decisions are available on the court's website
at HTTP://WWW.INSD.USCOURTS.GOV.
Although Guidant asserted patent infringement claims against St. Jude
Medical involving four patents when it initiated the litigation in 1996, the
number of patents involving the claims Guidant is asserting against St. Jude
Medical has changed over time. First, Guidant elected to withdraw its claims
against St. Jude Medical involving the `678 patent prior to the court issuing
its Markman decisions. After the Markman decisions, St. Jude Medical moved for
summary judgment asking the court to rule that the
11
`191 patent is invalid. However, before the court issued a ruling on this
summary judgment motion, Guidant and St. Jude Medical entered into a stipulation
regarding the claims involving the `191 patent. Based on this stipulation, the
court entered an order ruling that claims 1-14 in the `191 patent are invalid.
In this order, the court also dismissed Guidant's claims against St. Jude
Medical involving the `191 patent with prejudice. The order also provided that
Guidant may make an immediate appeal of the `191 patent claim construction
issues, and on February 8, 2001, Guidant filed a notice of appeal concerning the
court's rulings on the `191 patent.
Thus, at the present time, Guidant's claims against St. Jude Medical
involving two patents (`288 and `472) remain in the case set for trial. St. Jude
Medical continues to believe that the patent infringement claims asserted by
Guidant in this litigation are without merit, and will continue to vigorously
defend its interest in this litigation.
OTHER LITIGATION AND PROCEEDINGS
The Company is unaware of any other pending legal proceedings which it
regards as likely to have a material adverse effect on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 2000.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
The information set forth under the captions "Dividends" and "Stock
Exchange Listings" on pages 6 and 24 of the Financial Report included in the
Company's 2000 Annual Report to Shareholders is incorporated herein by
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Five Year Summary
Financial Data" on page 23 of the Financial Report included in the Company's
2000 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
The information set forth under the caption "Management's Discussion
and Analysis of Results of Operations and Financial Condition" on pages 1
through 6 of the Financial Report included in the Company's 2000 Annual Report
to Shareholders is incorporated herein by reference.
12
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information appearing under the caption "Market Risk" on pages 4
and 5 of the Financial Report included in the Company's 2000 Annual Report to
Shareholders is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Consolidated Financial Statements of the Company and
Report of Independent Auditors set forth on pages 7 through 22 of the Financial
Report included in the Company's 2000 Annual Report to Shareholders are
incorporated herein by reference:
Consolidated Statements of Earnings - Fiscal Years ended December 31,
2000, 1999 and 1998
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Shareholders' Equity - Fiscal Years ended
December 31, 2000, 1999, and 1998
Consolidated Statements of Cash Flows - Fiscal Years ended December 31,
2000, 1999 and 1998
Notes to Consolidated Financial Statements
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Board of Directors" in the
Company's definitive Proxy Statement dated March 28, 2001, is incorporated
herein by reference. Information on executive officers is as follows:
Name Age Position*
- ---------------------- ----- --------------------------------------------------------
Terry L. Shepherd 48 Chief Executive Officer (1999)
Daniel J. Starks 46 President and Chief Operating Officer (2001)
David W. Adinolfi 45 President, Daig Division (2001)
Robert Cohen 43 Vice President, Business & Technology Development (1998)
Michael J. Coyle 38 President, Cardiac Rhythm Management Division (2001)
George J. Fazio 41 President, Health Care Services (1999)
Peter L. Gove 53 Vice President, Corporate Relations (1994)
Steven J. Healy 43 President, Cardiac Surgery Division (1999)
13
John C. Heinmiller 46 Vice President, Finance and Chief Financial Officer (1998)
Jeri L. Jones 43 Vice President, Information Technology and Chief Information
Officer (2000)
Kevin T. O'Malley 49 Vice President and General Counsel (1994)
Frieda J. Valk 47 Vice President, Administration (1999)
- -----------------------
*Dates in brackets indicate period during which the named executive officers
began serving in such capacity.
Executive officers serve at the pleasure of the Board of Directors.
Mr. Shepherd's business experience is set forth in the Company's
definitive Proxy Statement dated March 28, 2001 under the section "Board of
Directors." Such information is incorporated herein by reference.
Mr. Stark's business experience is set forth in the Company's
definitive Proxy Statement dated March 28, 2001 under the section "Board of
Directors." Such information is incorporated herein by reference.
Mr. Adinolfi joined St. Jude in 1994 as a result of the acquisition of
Pacesetter, Inc. In February 2001, he was appointed as President of the Daig
Division after having several management positions at the Company's Cardiac
Rhythm Management Division. Prior to joining Pacesetter in 1989 as Director of
Marketing, Mr. Adinolfi spent five years at Cordis and Telectronics in a variety
of marketing, sales and management positions.
Mr. Cohen joined the Company in 1998 as Vice President, Business &
Technology Development. Prior to joining the Company, he was employed by Sulzer
Medica. During his 16-year career in the medical device industry, Mr. Cohen has
been associated with Pfizer Inc. and GCI Medical, an investment firm focused on
the medical technology industry.
Mr. Coyle joined St. Jude in 1994 as Director, Business Development and
was appointed President of the Cardiac Rhythm Management Division in February
2001. Mr. Coyle previously served as the Chief Operating Officer of Daig since
1997. Prior to joining St. Jude, he spent nine years with Eli Lilly & Company in
a variety of technical and business management roles in both its Pharmaceutical
and Medical Device Divisions.
Mr. Fazio joined St. Jude in 1992 as a Heart Valve Division territory
sales representative. In 1999, he was appointed as the President, Health Care
Services. From 1997 to 1999, Mr. Fazio served as the General Manager of the
Company's Canadian affiliate.
Mr. Gove joined the Company in 1994 as Vice President, Corporate
Relations. Prior to joining the Company, Mr. Gove was Vice President, Marketing
and Communications of Control Data Systems, Inc., a computer services company,
from 1991 to 1994. From 1981 to 1990, Mr. Gove held various executive positions
with Control Data Corporation. From 1970 to 1981, Mr. Gove held various
management positions with the State of Minnesota and the U.S. Government.
14
Mr. Healy first joined the Company in 1983 as a Heart Valve Division
sales representative. In 1999 he was appointed as the President, Cardiac Surgery
Division (formerly known as the Heart Valve Division). From 1996 to 1999, Mr.
Healy was the Vice President of Sales and Marketing for the Heart Valve
Division. He served as the Heart Valve Division's Vice President of Marketing
from 1993 to 1996.
Mr. Heinmiller joined the Company in 1998 as Vice President of
Corporate Business Development. In September 1998 he was appointed Vice
President, Finance and Chief Financial Officer. Prior to joining the Company,
Mr. Heinmiller was president of F3 Corporation, a privately held asset
management company, and was vice president of finance and administration for
Daig Corporation. Mr. Heinmiller is also a former audit partner in the
Minneapolis office of Grant Thornton LLP, a national public accounting firm. Mr.
Heinmiller is a director of Lifecore Biomedical, Inc. and Arctic Cat, Inc.
Ms. Jones joined St. Jude in 1999 as Vice President, Information
Technology, and was appointed Vice President, Information Technology and Chief
Information Officer in 2000. Prior to joining the Company, Ms. Jones was Vice
President of Systems Development at U.S. Bancorp from 1993 to 1999. From 1990 to
1993, Ms. Jones was a Senior Manager in Information Technology Consulting with
Ernst & Young, LLP. From 1979 to 1990, she held several positions in Accounting
and then Information Technology with General Mills, Inc.
Mr. O'Malley joined the Company in 1994 as Vice President and General
Counsel. Prior to joining St. Jude, Mr. O'Malley was employed by Eli Lilly &
Company for 15 years in various positions, including his last position of
General Counsel of the Medical Device and Diagnostics Division.
Ms. Valk joined the Company in 1996 as Human Resources Director of St.
Jude Medical Europe. She was appointed as Vice President, Administration in
1999. Prior to joining the Company, Mrs. Valk was employed by Eli Lilly &
Company for sixteen years in various positions including pharmaceutical sales,
sales management, sales training and human resources.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Company's definitive Proxy Statement dated March 28, 2001, is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information set forth under the caption "Share Ownership of
Management and Directors and Certain Beneficial Owners" in the Company's
definitive Proxy Statement dated March 28, 2001, is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the captions "Governance of the
Company" and "Executive Compensation" in the Company's definitive Proxy
Statement dated March 28, 2001, is incorporated herein by reference.
15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Company and
Report of Independent Auditors as set forth on pages 7 through 22
of the Financial Report included in the Company's 2000 Annual
Report to Shareholders (see Exhibit 13) are incorporated herein by
reference:
Consolidated Statements of Earnings - Fiscal Years ended December
31, 2000, 1999 and 1998
Consolidated Balance Sheets - December 31, 2000 and 1999
Consolidated Statements of Shareholders' Equity - Fiscal Years
ended December 31, 2000, 1999, and 1998
Consolidated Statements of Cash Flows - Fiscal Years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
(2) FINANCIAL STATEMENT SCHEDULE
Schedule II, Valuation and Qualifying Accounts, is filed as part
of this Form 10-K Annual Report (see Item 14(d)).
The report of the Company's Independent Auditors with respect to the
financial statement schedule is incorporated herein by reference from Exhibit 23
attached hereto.
All other financial statements and schedules not listed have been
omitted because the required information is included in the consolidated
financial statements or the notes thereto, or is not applicable.
(3) EXHIBITS
EXHIBIT EXHIBIT INDEX
- ---------------- ------------------------------------------------------------
3.1 Articles of Incorporation as amended on September 5, 1996,
are incorporated by reference from Exhibit 3.2 of the
Company's Form 10-K filed on March 27, 1997.
16
EXHIBIT EXHIBIT INDEX
- ---------------- ------------------------------------------------------------
3.2 Bylaws are incorporated by reference from Exhibit 3(ii) of
the Company's Form 10-Q filed on November 10, 1997.
4.1 Rights Agreement dated as of June 16, 1997, between the
Company and American Stock Transfer and Trust Company, as
Rights Agent including the Certificate of Designation,
Preferences and Rights of Series B Junior Preferred Stock is
incorporated by reference from Exhibit 4 of the Company's
Form 10-Q dated August 12, 1997.
4.2 Indenture dated as of August 21, 1996, between the Company
and State Street Bank and Trust Company, as Trustee is
incorporated by reference from Ventritex's Form S-3/A (no.
333-07651) filed on August 2, 1996.
10.1 Employment letter dated as of March 9, 1993, between the
Company and Ronald A. Matricaria is incorporated by
reference from Exhibit 10.1 of the Company's Form 10-K
Annual Report for the year ended December 31, 1993.*
10.2 Employment letter dated as of November 8, 1996, between the
Company to Ronald A. Matricaria is incorporated by reference
from Exhibit 10.2 of the Company's Form 10-K Annual Report
for the year ended December 31, 1998.*
10.3 Employment letter dated as of February 23, 1999, between the
Company and Ronald A. Matricaria is incorporated by
reference from Exhibit 10.13 of the Company's Form 10-K
Annual Report for the year ended December 31, 1998.*
10.4 Employment Agreement effective as of May 5, 1999 between the
Company and Terry L. Shepherd is incorporated by reference
from Exhibit 10.15 of the Company's Form 10-K Annual Report
for the year ended December 31, 1998.*
10.5 Form of Indemnification Agreement that the Company has
entered into with officers and directors. Such agreement
recites the provisions of Minnesota Statutes Section
302A.521 and the Company's Bylaw provisions (which are
substantially identical to the Statute) and is incorporated
by reference from Exhibit 10(d) of the Company's Form 10-K
Annual Report for the year ended December 31, 1986.*
17
EXHIBIT EXHIBIT INDEX
- ---------------- ------------------------------------------------------------
10.6 Form of Employment Agreement that the Company has entered
into with officers relating to severance matters in
connection with a change in control is incorporated by
reference from Exhibit 10.4 of the Company's Form 10-K
Annual Report for the year ended December 31, 1998.*
10.7 The Management Incentive Compensation Plan is incorporated
by reference from Appendix A of the Company's definitive
Proxy Statement dated March 26, 1999.*
10.8 Management Savings Plan dated February 1, 1995, is
incorporated by reference from Exhibit 10.7 of the Company's
Form 10-K Annual Report for the year ended December 31,
1994.*
10.9 Retirement Plan for members of the Board of Directors as
amended on March 15, 1995, is incorporated by reference from
Exhibit 10.6 of the Company's Form 10-K Annual Report for
the year ended December 31, 1994.*
10.10 The St. Jude Medical, Inc. 1992 Employee Stock Purchase
Savings Plan is incorporated by reference from the Company's
Form S-8 Registration Statement dated June 10, 1992,
(Commission File No. 33-48502). *
10.11 The St. Jude Medical, Inc. 1991 Stock Plan is incorporated
by reference from the Company's Form S-8 Registration
Statement dated June 28, 1991 (Commission File No.
33-41459).*
10.12 The St. Jude Medical, Inc. 1994 Stock Option Plan is
incorporated by reference from the Company's Form S-8
Registration Statement dated July 1, 1994 (Commission File
No. 33-54435).*
10.13 The St. Jude Medical Inc. 1997 Stock Option Plan is
incorporated by reference from the Company's Form S-8
Registration Statement dated December 22, 1997 (Commission
File No. 333-42945).*
10.14 A Split Dollar Insurance Agreement as amended April 29, 1999
between St. Jude Medical, Inc. and Ronald A. and Lucille E.
Matricaria is incorporated by reference from Exhibit 10.14
of the Company's Form 10-K Annual Report for the year ended
December 31, 1999.*
18
EXHIBIT EXHIBIT INDEX
- ---------------- ------------------------------------------------------------
10.15 The St. Jude Medical Inc. 2000 Stock Option Plan is
incorporated by reference from the Company's Form S-8
Registration Statement dated July 31, 2000 (Commission File
No. 333-42668).*
10.16 The St. Jude Medical, Inc. 2000 Employee Stock Purchase
Savings Plan is incorporated by reference from the Company's
Form S-8 Registration Statement dated July 31, 2000
(Commission File No. 333-42658).*
10.17 Amended and Restated Employment Agreement dated as of March
25, 2001, between the Company and Daniel J. Starks. * #
10.18 Form of Severance Agreement that the Company has entered
into with officers relating to severance matters in
connection with a change in control.* #
10.19 Amended and Restated Employment Agreement dated as of March
25, 2001, between the Company and Terry L. Shepherd. * #
13 Portions of the 2000 Annual Report to Shareholders are
incorporated by reference in this Annual Report on Form 10-K
#
21 Subsidiaries of the Company #
23 Consent of Independent Auditors #
- -----------------------------
* Management contract or compensatory plan or arrangement.
# Filed as an exhibit to this Annual Report on Form 10-K.
(B) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 2000
A Form 8-K was filed on December 1, 2000, and on December 22, 2000,
announcing certain rulings by the U.S. District Court in Indianapolis as part of
the court's Markman process, which further interprets certain ambiguous terms
used in the patents which are the subject of litigation between Guidant and St.
Jude Medical.
(C) EXHIBITS: Reference is made to Item 14(a)(3).
(D) SCHEDULES:
19
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
COL. A COL. B COL. C COL. D COL. E
- ------------------------------ ----------------- ----------------- ------------------ -----------------
BALANCE AT ADDITIONS BALANCE AT
BEGINNING OF CHARGED TO END OF
DESCRIPTION YEAR EXPENSE DEDUCTIONS(1) YEAR
- ------------------------------ ----------------- ----------------- ------------------ -----------------
Allowance for doubtful accounts
Fiscal Year Ended:
December 31, 2000 $13,529 $6,913 $6,611 $13,831
December 31, 1999 12,352 5,421 4,244 13,529
December 31, 1998 12,712 14 374 12,352
- --------------------------------
(1) Uncollectible accounts written off, net of recoveries.
For the purposes of complying with the amendments to the rules
governing Form S-8 under the Securities Act of 1933, the undersigned Company
hereby undertakes as follows, which undertaking shall be incorporated by
reference into the Company's Registration Statements of Form S-8 Nos. 33-9262
(filed October 3, 1986), 33-41459 (filed June 28, 1991), 33-48502 (filed June
10, 1992), 33-54435 (filed July 1, 1994), 333-42945 (filed December 22, 1997),
333-42658 (filed July 31, 2000), and 333-42668 (filed July 31, 2000):
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company has been advised that, in the
opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the Securities Act of 1933 and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the Company will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
20
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
Date: March 26, 2001 By /s/ TERRY L. SHEPHERD
-----------------------
Terry L. Shepherd
CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
By /s/ JOHN C. HEINMILLER
----------------------
John C. Heinmiller
VICE PRESIDENT, FINANCE AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
/s/ RONALD A. MATRICARIA Director March 26, 2001 /s/ DANIEL J. STARKS Director March 26, 2001
- --------------------------- -----------------------
Ronald A. Matricaria Daniel J. Starks
/s/ LOWELL C. ANDERSON Director March 26, 2001 /s/ TERRY L. SHEPHERD Director March 26, 2001
- --------------------------- -----------------------
Lowell C. Anderson Terry L. Shepherd
/s/ STUART M. ESSIG Director March 26, 2001 /s/ DAVID A. THOMPSON Director March 26, 2001
- --------------------------- -----------------------
Stuart M. Essig David A. Thompson
/s/ THOMAS H. GARRETT III
- --------------------------- Director March 26, 2001 _______________________ Director March 26, 2001
Thomas H. Garrett III Gail R. Wilensky
/s/ WALTER L. SEMBROWICH Director March 26, 2001
- ---------------------------
Walter L. Sembrowich
21