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  • News Releases

    Boston Scientific Announces Results For Third Quarter 2016

    MARLBOROUGH, Mass., Oct. 26, 2016 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX) generated sales of $2.105 billion during the third quarter ended September 30, 2016, compared to the company's guidance range for the quarter of $2.035 to $2.085 billion. This represents growth of 11 percent on a reported basis and 10 percent on an operational basis (calculated on a constant currency basis), all compared to the prior year period. The company reported GAAP earnings of $228 million, or $0.17 per share, compared to a loss of $(0.15) a year ago, and achieved adjusted earnings per share of $0.27 for the period, compared to $0.24 a year ago.

    "Our differentiated products and services continue to make a meaningful impact for our customers and the patients they treat, as shown by very strong revenue growth in the third quarter and year to date," said Mike Mahoney, chairman and chief executive officer, Boston Scientific. "Our global team is delivering excellent performance across our various business units and geographies."

    Third quarter financial results and recent developments:

    • Reported third quarter sales of $2.105 billion, representing an increase of 11 percent on a reported basis and 10 percent on an operational basis, all compared to the prior year period.
    • Grew organic revenue 9 percent in the third quarter over the prior year period. Organic revenue growth excludes the impact of changes in foreign currency exchange rates and sales from the acquisition of the American Medical Systems (AMS) male urology portfolio for the month of July.
    • Reported GAAP earnings of $0.17 per share compared to the company's guidance range of $0.13 to $0.15 per share. Achieved adjusted earnings per share of $0.27 compared to the guidance range of $0.25 to $0.27 per share.
    • Achieved third quarter revenue growth in all segments, all compared to the prior year period:
      • MedSurg: 15 percent (14 percent operational and 10 percent organic)
      • Cardiovascular: 13 percent (12 percent operational and organic)
      • Rhythm Management: 4 percent (3 percent operational and organic)
    • Delivered strong regional revenue growth, all compared to the prior year period:
      • U.S.: 11 percent (11 percent operational and 9 percent organic)
      • Europe: 6 percent (7 percent operational and 5 percent organic)
      • AMEA (Asia-Pacific, Middle East and Africa): 20 percent (12 percent operational and organic)
      • Emerging markets:* 10 percent (19 percent operational and organic)
    • Entered into a definitive agreement and commenced a cash tender offer to acquire EndoChoice Holdings, Inc. (NYSE: GI), which offers physicians a broad portfolio of products to treat gastrointestinal conditions, for approximately $210 million.
    • Launched the Resolution 360™ Hemoclip, designed to offer gastroenterologists greater control when performing hemostatic clipping, used in endoscopic procedures of the upper and lower gastrointestinal (GI) tract to stop and help prevent bleeding that occurs with conditions including peptic ulcers, polyps removed during a colonoscopy and diverticulosis of the colon.
    • Received U.S. Food and Drug Administration (FDA) approval for the EMBLEM™ MRI Subcutaneous Implantable Defibrillator (S-ICD) System, as well as magnetic resonance (MR) conditional labeling for all previously implanted EMBLEM S-ICD Systems. United Healthcare, the largest private healthcare insurer in the U.S., also now covers the EMBLEM S-ICD System for a subset of patients indicated for implantable cardioverter-defibrillator (ICD) therapy. As a result, an estimated 91 percent of the insured U.S. residents now has access through Medicare, Medicaid or their private health plan.
    • Received CE Mark for the LOTUS Edge™ Valve System**, the company's next-generation transcatheter aortic valve replacement (TAVR) technology.
    • Announced data from the MAJESTIC trial of the Eluvia™ Drug-Eluting Vascular Stent System*** demonstrating 92.5% freedom from total lesion revascularization (FTLR) at two years, at the annual meeting of the Cardiovascular and Interventional Radiology Society of Europe (CIRSE). Also at CIRSE, unveiled data from the All-Comer Registry for the Ranger Drug-Coated Balloon Catheter** confirming the benefit of an efficient-release drug coated balloon (DCB) in long lesions by achieving 91.9% FTLR rate at six months.
    • Made a $25 million strategic investment in VENITI Inc., a maker of stents for chronic venous insufficiency, which affects more than 20 million adults across the United States and Europe.

     

    * We define Emerging Markets as including certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we include 20 countries in our definition of Emerging Markets.
    ** The LOTUS Edge™ Valve System and Ranger™ Drug-Coated Balloon Catheter are not available for use or sale in the U.S.
    *** In the U.S., the Eluvia™ Drug-Eluting Vascular Stent System is an investigational device, limited by federal law to investigational use only.

     

     

    Net sales for the third quarter:







    Change




    Three Months Ended
    September 30,


    As Reported Basis


    Less: Impact of
    Foreign Currency


    Constant
    Currency
    Basis


    in millions

    2016

    2015





















       Interventional Cardiology

    $

    568


    $

    500



    14


    %


    $

    (1)


    1


    %


    13


    %



       Peripheral Interventions

    257


    227



    12


    %


    3


    1


    %


    11


    %



    Cardiovascular

    825


    727



    13


    %


    2


    1


    %


    12


    %



       Cardiac Rhythm Management

    467


    451



    4


    %


    1


    1


    %


    3


    %



       Electrophysiology

    60


    57



    5


    %


    0


    0


    %


    5


    %



    Rhythm Management

    527


    508



    4


    %


    1


    1


    %


    3


    %



       Endoscopy

    367


    331



    11


    %


    5


    2


    %


    9


    %



       Urology and Pelvic Health

    248


    198



    26


    %


    (3)


    0


    %


    26


    %

    *


       Neuromodulation

    138


    124



    11


    %


    (1)


    (1)


    %


    12


    %



    MedSurg

    753


    653



    15


    %


    1


    1


    %


    14


    %

















    Net Sales

    $

    2,105


    $

    1,888



    11


    %


    $

    4


    1


    %


    10


    %

















    *Urology and Pelvic Health grew 13% on an organic basis.
















    Growth rates are based on actual, non-rounded amounts and may not recalculate precisely.



    Sales growth rates that exclude the impact of changes in foreign currency exchange rates and/or the impact of recent acquisitions with significant sales are not prepared in accordance with U.S. GAAP. An explanation of the company's use of these non-GAAP financial measures is included in the exhibits attached to this news release.

    On a consolidated GAAP basis, net income for the third quarter of 2016 was $228 million, or $0.17 per share. These results included an intangible asset impairment charge, acquisition-related net credits, restructuring and restructuring-related net charges, litigation-related net charges and amortization expense, of $140 million (after-tax) or $0.10 per share. Adjusted net income for the third quarter of 2016, excluding these net charges, was $368 million, or $0.27 per share.

    On a consolidated GAAP basis, net loss for the third quarter of 2015 was $198 million, or $(0.15) per share. These results included intangible asset impairment charges, acquisition-related net charges, restructuring and restructuring-related net charges, litigation-related net charges, pension termination charges and amortization expense, of $524 million (after-tax) or $0.39 per share. Adjusted net income for the third quarter of 2015, excluding these net charges, was $326 million, or $0.24 per share.

    Guidance for Full Year and Fourth Quarter 2016

    The company now estimates revenue for the full year 2016 to be in a range of $8.335 to $8.385 billion (compared to prior guidance of $8.270 to $8.370 billion), which versus the prior year period represents growth of approximately 11 to 12 percent on a reported basis, growth of approximately 12 percent on an operational basis, and growth of approximately 9 percent on an organic basis. The company now estimates income on a GAAP basis in a range of $0.32 to $0.34 per share (compared to prior guidance of $0.30 to $0.35 per share), and now estimates adjusted earnings, excluding intangible asset impairment charges, acquisition-related net charges, litigation-, and restructuring and restructuring-related net charges, and amortization expense, in a range of $1.09 to $1.11 per share (compared to prior guidance of $1.07 to $1.11 per share).

    The company estimates sales for the fourth quarter of 2016 to be in a range of $2.140 to $2.190 billion, which versus the prior year period represents growth of approximately 8 to 11 percent on a reported basis, and growth of  approximately 7 to 9 percent on an operational basis. The company estimates earnings on a GAAP basis in a range of $0.15 to $0.17 per share. Adjusted earnings, excluding acquisition-related net charges, restructuring and restructuring-related net charges and amortization expense, are estimated in a range of $0.27 to $0.29 per share.

    Conference Call Information

    Boston Scientific management will be discussing these results with analysts on a conference call today at 8:00 a.m. (ET). The company will webcast the call to interested parties through its website: www.bostonscientific.com. Please see the website for details on how to access the webcast. The webcast will be available for approximately one year on the Boston Scientific website.

    About Boston Scientific
    Boston Scientific transforms lives through innovative medical solutions that improve the health of patients around the world.  As a global medical technology leader for more than 35 years, we advance science for life by providing a broad range of high performance solutions that address unmet patient needs and reduce the cost of healthcare. For more information, visit www.bostonscientific.com and connect on Twitter and Facebook.

    Cautionary Statement Regarding Forward-Looking Statements

    This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements may be identified by words like "anticipate," "expect," "project," "believe," "plan," "estimate," "intend" and similar words.  These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance.  These forward-looking statements include, among other things, statements regarding our expected net sales, GAAP, organic and operational revenue growth rates, GAAP earnings and adjusted earnings for the fourth quarter and full year 2016; our financial performance; our business plans; and our positioning for revenue and earnings growth.  If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements.  These risks and uncertainties, in some cases, have affected and in the future could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this press release.  As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements.

    Risks and uncertainties that may cause such differences include, among other things: future economic, political, competitive, reimbursement and regulatory conditions; new product introductions and the market acceptance of those products; markets for our products; expected pricing environment; expected procedural volumes; the closing and integration of acquisitions; clinical trial results; demographic trends; intellectual property rights; litigation; financial market conditions; the execution and effect of our restructuring program; the execution and effect of our business strategy, including our cost-savings and growth initiatives; and future business decisions made by us and our competitors. New risks and uncertainties may arise from time to time and are difficult to predict. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control.  For a further list and description of these and other important risks and uncertainties that may affect our future operations, see Part I, Item IA - Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A - Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file hereafter.  We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions, or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements.  This cautionary statement is applicable to all forward-looking statements contained in this press release.

    Use of Non-GAAP Financial Information
    A reconciliation of the company's non-GAAP financial measures to the corresponding GAAP measures, and an explanation of the company's use of these non-GAAP financial measures, is included in the exhibits attached to this news release.

     

    CONTACT:


    Media:

    Tom Keppeler



    508-683-6585 (office)



    Media Relations



    Boston Scientific Corporation



    tom.keppeler@bsci.com





    Investors:

    Susan Lisa, CFA



    508-683-5565 (office)



    Investor Relations



    Boston Scientific Corporation



    investor_relations@bsci.com

     

     

    BOSTON SCIENTIFIC CORPORATION

    CONDENSED CONSOLIDATED GAAP RESULTS OF OPERATIONS

    (Unaudited)



    Three Months Ended
    September 30,


    Nine Months Ended
    September 30,

    in millions, except per share data

    2016

    2015


    2016

    2015







    Net sales

    $

    2,105


    $

    1,888



    $

    6,195


    $

    5,499


    Cost of products sold

    594


    539



    1,805


    1,600


    Gross profit

    1,511


    1,349



    4,390


    3,899








    Operating expenses:






    Selling, general and administrative expenses

    772


    729



    2,268


    2,095


    Research and development expenses

    232


    221



    664


    632


    Royalty expense

    20


    17



    59


    53


    Amortization expense

    136


    131



    408


    361


    Intangible asset impairment charges

    7


    10



    7


    19


    Contingent consideration expense (benefit)

    (13)


    40



    23


    86


    Restructuring charges

    5


    7



    22


    16


    Litigation-related charges (credits)

    4


    457



    632


    649


    Pension termination charges


    36




    44



    1,163


    1,648



    4,083


    3,955


    Operating income (loss)

    348


    (299)



    307


    (56)








    Other income (expense):






    Interest expense

    (58)


    (58)



    (175)


    (225)


    Other, net

    (33)


    (10)



    (44)


    (31)


    Income (loss) before income taxes

    257


    (367)



    88


    (312)


    Income tax expense (benefit)

    29


    (169)



    (135)


    (215)


    Net income (loss)

    $

    228


    $

    (198)



    $

    223


    $

    (97)








    Net income (loss) per common share - basic

    $

    0.17


    $

    (0.15)



    $

    0.16


    $

    (0.07)


    Net income (loss) per common share - assuming dilution

    $

    0.17


    $

    (0.15)



    $

    0.16


    $

    (0.07)








    Weighted-average shares outstanding






    Basic

    1,360.6


    1,344.0



    1,356.1


    1,339.7


    Assuming dilution

    1,379.7


    1,344.0



    1,374.9


    1,339.7


     

     

    BOSTON SCIENTIFIC CORPORATION

    CONDENSED CONSOLIDATED BALANCE SHEETS



    As of


    September 30,


    December 31,

    in millions, except share data

    2016


    2015


    (Unaudited)



    ASSETS




    Current assets:




    Cash and cash equivalents

    $

    237



    $

    319


    Trade accounts receivable, net

    1,385



    1,275


    Inventories

    998



    1,016


    Deferred and prepaid income taxes

    84



    496


    Other current assets

    477



    365


    Total current assets

    3,181



    3,471






    Property, plant and equipment, net

    1,500



    1,490


    Goodwill

    6,498



    6,473


    Other intangible assets, net

    5,838



    6,194


    Other long-term assets

    680



    505


    TOTAL ASSETS

    $

    17,697



    $

    18,133






    LIABILITIES AND STOCKHOLDERS' EQUITY




    Current liabilities:




    Current debt obligations

    $

    254



    $

    3


    Accounts payable

    298



    209


    Accrued expenses

    2,099



    1,970


    Other current liabilities

    365



    248


    Total current liabilities

    3,016



    2,430






    Long-term debt

    5,171



    5,674


    Deferred income taxes

    26



    735


    Other long-term liabilities

    3,002



    2,974






    Commitments and contingencies








    Stockholders' equity




    Preferred stock, $.01 par value - authorized 50,000,000 shares,




     none issued and outstanding




    Common stock, $.01 par value - authorized 2,000,000,000 shares -




     issued 1,609,010,333 shares as of September 30, 2016 and




    1,594,213,786 shares as of December 31, 2015

    19



    16


    Treasury stock, at cost - 247,566,270 shares as of September 30, 2016




    and December 31, 2015

    (1,717)



    (1,717)


    Additional paid-in capital

    16,985



    16,860


    Accumulated deficit

    (8,706)



    (8,927)


    Accumulated other comprehensive income (loss), net of tax

    (99)



    88


    Total stockholders' equity

    6,482



    6,320


    TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

    $

    17,697



    $

    18,133


     

     

    BOSTON SCIENTIFIC CORPORATION

    NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS

    (Unaudited)




    Three Months Ended September 30, 2016


    in millions, except per share data


    Pre-Tax


    Tax

    Impact (a)


    After-Tax


    Impact per
    Share


    GAAP net income (loss)


    $

    257



    $

    (29)



    $

    228



    $

    0.17



    Non-GAAP adjustments:










    Intangible asset impairment charge


    7



    (1)



    6



    0.00



    Acquisition-related net credits (b)


    (1)



    (1)



    (2)



    (0.00)



    Restructuring and restructuring-related net charges (c)


    17



    (4)



    13



    0.01



    Litigation-related net charges


    4



    (1)



    3



    0.00



    Amortization expense


    136



    (16)



    120



    0.09



    Adjusted net income


    $

    420



    $

    (52)



    $

    368



    $

    0.27

























    Three Months Ended September 30, 2015


    in millions, except per share data


    Pre-Tax


    Tax

    Impact (a)


    After-Tax


    Impact per
    Share


    GAAP net income (loss)


    $

    (367)



    $

    169



    $

    (198)



    $

    (0.15)



    Non-GAAP adjustments:










    Intangible asset impairment charges


    10



    (1)



    9



    0.01


    *

    Acquisition-related net charges (d)


    80



    (12)



    68



    0.05


    *

    Restructuring and restructuring-related net charges (e)


    21



    (3)



    18



    0.01


    *

    Litigation-related net charges


    457



    (165)



    292



    0.22


    *

    Pension termination charges


    36



    (13)



    23



    0.02


    *

    Amortization expense


    131



    (17)



    114



    0.08


    *

    Adjusted net income


    $

    368



    $

    (42)



    $

    326



    $

    0.24













    *Assumes dilution of 20.2 million shares for the three months ended September 30, 2015 for all or a portion of these non-GAAP Adjustments











    (a)  Amounts are tax effected at the company's effective tax rate, unless the amount is a significant unusual or infrequently occurring item in accordance with FASB Accounting Standards Codification section 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate."


    (b) In the third quarter of 2016, pre-tax acquisition-related net credits were $1 million, of which $7 million was recorded in cost of products sold, $5 million of was recorded in selling, general and administrative expenses, and $13 million was recorded as a benefit to contingent consideration.


    (c) In the third quarter of 2016, pre-tax restructuring charges were $5 million and pre-tax restructuring-related charges were $12 million, of which $8 million was recorded in cost of products sold and $4 million was recorded in selling, general and administrative expenses.


    (d) In the third quarter of 2015, pre-tax acquisition-related net charges were $80 million, of which $16 million was recorded in cost of products sold, $23 million was recorded in selling, general and administrative expenses, $1 million was recorded in research and development, and $40 million was recorded as contingent consideration expense.


    (e) In the third quarter of 2015, pre-tax restructuring charges were $7 million and pre-tax restructuring-related charges were $14 million, of which $5 million was recorded in cost of products sold and $9 million was recorded in selling, general and administrative expenses.


    An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.


     

     



    Nine Months Ended September 30, 2016


    in millions, except per share data


    Pre-Tax


    Tax

    Impact (a)


    After-Tax


    Impact per
    Share


    GAAP net income (loss)


    $

    88



    $

    135



    $

    223



    $

    0.16



    Non-GAAP adjustments:










    Intangible asset impairment charge


    7



    (1)



    6



    0.00



    Acquisition-related net charges (b)


    93



    (3)



    90



    0.07



    Restructuring and restructuring-related net charges (c)


    55



    (13)



    42



    0.03



    Litigation-related net charges


    632



    (228)



    404



    0.29



    Amortization expense


    408



    (54)



    354



    0.26



    Adjusted net income


    $

    1,283



    $

    (164)



    $

    1,119



    $

    0.81

























    Nine Months Ended September 30, 2015


    in millions, except per share data


    Pre-Tax


    Tax

    Impact (a)


    After-Tax


    Impact per
    Share


    GAAP net income (loss)


    $

    (312)



    $

    215



    $

    (97)



    $

    (0.07)



    Non-GAAP adjustments:










    Intangible asset impairment charges


    19



    (3)



    16



    0.01


    *

    Acquisition-related net charges (d)


    169



    (17)



    152



    0.11


    *

    Restructuring and restructuring-related net charges (e)


    58



    (10)



    48



    0.04


    *

    Litigation-related net charges


    649



    (235)



    414



    0.31


    *

    Debt extinguishment charges (f)


    45



    (16)



    29



    0.02


    *

    Pension termination charges


    44



    (16)



    28



    0.02


    *

    Amortization expense


    361



    (46)



    315



    0.23


    *

    Adjusted net income


    $

    1,033



    $

    (128)



    $

    905



    $

    0.67













    *Assumes dilution of 21.5 million shares for the nine months ended September 30, 2015 for all or a portion of these non-GAAP Adjustments











    (a)  Amounts are tax effected at the company's effective tax rate, unless the amount is a significant unusual or infrequently occurring item in accordance with FASB Accounting Standards Codification section 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate."


    (b) In the first nine months of 2016, pre-tax acquisition-related net charges were $93 million, of which $39 million was recorded in cost of products sold, $31 million was recorded in selling, general and administrative expenses, and $23 million was recorded as contingent consideration expense.


    (c) In the first nine months of 2016, pre-tax restructuring charges were $22 million and pre-tax restructuring-related charges were $33 million, of which $20 million was recorded in cost of products sold and $13 million was recorded in selling, general and administrative expenses.


    (d) In the first nine months of 2015, pre-tax acquisition-related net charges were $169 million, of which $24 million were recorded in cost of products sold, $36 million was recorded in selling, general and administrative expense, $19 million was recorded in research and development, $86 million was recorded as a contingent consideration expense, and $4 million was recorded as interest expense.


    (e) In the first nine months of 2015, pre-tax restructuring charges were $16 million and pre-tax restructuring-related charges were $42 million, of which $20 million was recorded in cost of products sold and $22 million was recorded in selling, general and administrative expenses.


    (f) Debt extinguishment charges are recorded in interest expense.


    An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.












     

     

    BOSTON SCIENTIFIC CORPORATION

    SEGMENT INFORMATION

    (Unaudited)


    SEGMENT NET SALES*


    Three Months Ended
    September 30,


    Nine Months Ended
    September 30,

    in millions


    2016


    2015


    Change


    2016


    2015


    Change
















            Interventional Cardiology


    $

    620



    $

    551



    13

    %


    $

    1,870



    $

    1,659



    13

    %

            Peripheral Interventions


    273



    246



    11

    %


    815



    723



    13

    %

    Cardiovascular


    893



    797



    12

    %


    2,685



    2,382



    13

    %
















            Cardiac Rhythm Management


    498



    483



    3

    %


    1,481



    1,456



    2

    %

            Electrophysiology


    64



    61



    5

    %


    192



    182



    5

    %

    Rhythm Management


    562



    544



    3

    %


    1,673



    1,638



    2

    %
















            Endoscopy


    393



    362



    9

    %


    1,148



    1,042



    10

    %

            Urology and Pelvic Health


    260



    207



    26

    %


    773



    479



    61

    %

            Neuromodulation


    143



    128



    12

    %


    407



    369



    11

    %

    MedSurg


    796



    697



    14

    %


    2,328



    1,890



    23

    %
















    Subtotal Core Businesses


    2,251



    2,038



    10

    %


    6,686



    5,910



    13

    %
















    Foreign Currency


    (146)



    (150)



    N/A



    (491)



    (411)



    N/A

















    Net Sales


    $

    2,105



    $

    1,888



    11

    %


    $

    6,195



    $

    5,499



    13

    %















    Growth rates are based on actual, non-rounded amounts and may not recalculate precisely.















     

     

    SEGMENT OPERATING INCOME*


    Three Months Ended
    September 30,


    Nine Months Ended
    September 30,

    in millions


    2016


    2015


    2016


    2015










    Segment operating income









    Cardiovascular


    $

    292



    $

    249



    $

    885



    $

    732


    Rhythm Management


    113



    97



    300



    252


    MedSurg


    262



    235



    763



    590


    Operating income allocated to reportable segments


    667



    581



    1,948



    1,574


    Corporate expenses and currency exchange


    (156)



    (145)



    (446)



    (334)


    Intangible asset impairment charges; acquisition-related net
    charges and credits; restructuring- and restructuring-related net
    charges; litigation-related net charges and credits; and pension
    termination charges


    (27)



    (604)



    (787)



    (935)


    Amortization expense


    (136)



    (131)



    (408)



    (361)


    Operating income (loss)


    $

    348



    $

    (299)



    $

    307



    $

    (56)











    *We measure and evaluate our reportable segments based on segment net sales and operating income, excluding the impact of changes in foreign currency. Sales generated from reportable segments, as well as operating results of reportable segments and corporate expenses, are based on internally-derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. We exclude from segment operating income certain corporate-related expenses and certain transactions or adjustments that our chief operating decision maker considers to be non-operational, such as amounts related to intangible asset impairment charges; acquisition-related net charges and credits; restructuring- and restructuring-related net charges; litigation-related net charges and credits; pension termination charges; and amortization expense.  Although we exclude these amounts from segment operating income, they are included in reported consolidated operating income (loss) and are included in the reconciliation above.

     

     

    BOSTON SCIENTIFIC CORPORATION

    WORLDWIDE CARDIAC RHYTHM MANAGEMENT (CRM) SALES BY COMPONENT

    (Unaudited)




    Three Months Ended
    September 30,

    (in millions)


    2016


    2015

    Defibrillator systems


    311



    326


    Pacemaker systems


    156



    125


    CRM products


    $

    467



    $

    451















    Nine Months Ended
    September 30,

    (in millions)


    2016


    2015

    Defibrillator systems


    956



    996


    Pacemaker systems


    422



    371


    CRM products


    $

    1,378



    $

    1,367











     

     

    BOSTON SCIENTIFIC CORPORATION

    SEGMENT AND REGIONAL NET SALES

    (Unaudited)



    Q3 2016 Segment Net Sales as compared to Q3 2015



    MedSurg

    Cardiovascular

    Rhythm Management

    Total BSC

    Percentage change in net sales, as reported

    15

    %

    13

    %

    4

    %

    11

    %

    Less: Impact of Foreign Currency Fluctuations

    1

    %

    1

    %

    1

    %

    1

    %

    Percentage change in net sales, constant currency

    14

    %

    12

    %

    3

    %

    10

    %

    Less: Impact of AMS acquisition

    4

    %

    0

    %

    0

    %

    1

    %

    Percentage change in net sales, organic

    10

    %

    12

    %

    3

    %

    9

    %


    Q3 2016 Regional Net Sales as compared to Q3 2015



    U.S.

    Europe

    AMEA

    Emerging Markets

    Percentage change in net sales, as reported

    11

    %

    6

    %

    20

    %

    10

    %

    Less: Impact of Foreign Currency Fluctuations

    0

    %

    (1)

    %

    8

    %

    (9)

    %

    Percentage change in net sales, constant currency

    11

    %

    7

    %

    12

    %

    19

    %

    Less: Impact of AMS acquisition

    2

    %

    2

    %

    0

    %

    0

    %

    Percentage change in net sales, organic

    9

    %

    5

    %

    12

    %

    19

    %


    Q3 2016 Urology and Pelvic Health Net Sales as compared to Q3 2015



    Urology and
    Pelvic Health


    Percentage change in net sales, as reported

    26

    %







    Less: Impact of Foreign Currency Fluctuations

    0

    %


    Percentage change in net sales, constant currency

    26

    %


    Less: Impact of AMS acquisition

    13

    %


    Percentage change in net sales, organic

    13

    %


     

    An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.

     

     

    BOSTON SCIENTIFIC CORPORATION

    ESTIMATED REVENUE NON-GAAP GROWTH RATES AND NON-GAAP NET INCOME PER COMMON SHARE RECONCILIATIONS

    (Unaudited)


    Q4 and Full Year 2016 Estimated Revenue Growth Rates



    Q4 2016 Estimate


    Full Year 2016 Estimate


    (Low)

    (High)


    (Low)

    (High)

    Estimated GAAP sales growth

    8

    %

    11

    %


    11

    %

    12

    %

    Less: Estimated Impact of Foreign Currency Fluctuations

    1

    %

    2

    %


    (1)

    %

    0

    %

    Estimated sales growth, constant currency

    7

    %

    9

    %


    12

    %

    12

    %

    Less: Impact of AMS acquisition

    N/A


    N/A



    3

    %

    3

    %

    Estimated sales growth, organic

    7

    %

    9

    %


    9

    %

    9

    %

     

     

    Q4 and Full Year 2016 EPS Guidance



    Q4 2016 Estimate


    Full Year 2016
    Estimate


    Prior Full Year
    2016 Estimate


    (Low)

    (High)


    (Low)

    (High)


    (Low)

    (High)

    GAAP results

    $

    0.15


    $

    0.17



    $

    0.32


    $

    0.34



    $

    0.30


    $

    0.35











    Intangible asset impairment charges




    0.00


    0.00





    Estimated acquisition-related net charges

    0.01


    0.01



    0.07


    0.07



    0.08


    0.08


    Estimated restructuring and restructuring-related charges

    0.03


    0.03



    0.07


    0.07



    0.06


    0.05


    Estimated amortization expense

    0.08


    0.08



    0.34


    0.34



    0.34


    0.34


    Litigation-related charges




    0.29


    0.29



    0.29


    0.29











    Adjusted results

    $

    0.27


    $

    0.29



    $

    1.09


    $

    1.11



    $

    1.07


    $

    1.11











     

    An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.

    Use of Non-GAAP Financial Measures

    To supplement our financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures, including adjusted net income (earnings) and adjusted net income (earnings) per share that exclude certain amounts, and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impact of recent acquisitions with significant sales. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United States.

    The GAAP financial measure most directly comparable to adjusted net income is GAAP net income and the GAAP financial measure most directly comparable to adjusted net income per share is GAAP net income per share. To calculate adjusted net sales that exclude the impact of changes in foreign currency exchange rates, we convert actual net sales from local currency to U.S. dollars using constant foreign currency exchange rates in the current and prior period. The GAAP financial measure most directly comparable to this constant currency growth rate and/or growth rates excluding the impacts of recent acquisitions with significant sales is growth rate percentages using net sales on a GAAP basis. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included in the accompanying schedules.

    Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors, and to establish operational goals and forecasts that are used in allocating resources. In addition, management uses these non-GAAP financial measures to further its understanding of the performance of our operating segments. With the exception of the impact of recent acquisitions with significant sales, the adjustments excluded from our non-GAAP financial measures are consistent with those excluded from our operating segments' measures of net sales and profit or loss. These adjustments are excluded from the segment measures that are reported to our chief operating decision maker that are used to make operating decisions and assess performance.

    We believe that presenting adjusted net income and adjusted net income per share that exclude certain amounts, and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impact of recent acquisitions with significant sales, in addition to the corresponding GAAP financial measures, provides investors greater transparency to the information used by management for its operational decision-making and allows investors to see our results "through the eyes" of management. We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance.

    The following is an explanation of each of the adjustments that management excluded as part of these non-GAAP financial measures for the three and nine months ended September 30, 2016 and 2015, and for the forecasted three month period and full year ending December 31, 2016, as well as reasons for excluding each of these individual items:

    Adjusted Net Income and Adjusted Net Income per Share:

    • Intangible asset impairment charges - This amount represents write-downs of certain intangible asset balances in the first nine months of 2016 and 2015. We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment and test our indefinite-lived intangible assets at least annually for impairment. If we determine the carrying value of the amortizable intangible asset is not recoverable or we conclude that it is more likely than not that the indefinite-live asset is impaired, we will write the carrying value down to fair value in the period identified. We exclude the impact of impairment charges from management's assessment of operating performance and from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management has excluded intangible asset impairment charges for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Acquisition-related net charges (credits) - These adjustments may consist of (a) contingent consideration fair value adjustments; (b) gains on previously held investments; (c) purchased and/or funded in-process research and development expenses incurred outside of a business combination; and (d) due diligence, other fees, inventory step up amortization, and integration and exit costs. The contingent consideration adjustments represent accounting adjustments to state contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood and amount of future contingent consideration payments. Due diligence, other fees, inventory step-up amortization, and integration and exit costs include legal, tax, severance and other expenses associated with prior and potential future acquisitions that can be highly variable and not representative of ongoing operations. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Restructuring and restructuring-related net charges (credits) - These adjustments represent severance and other direct costs associated with our restructuring programs. These costs are excluded by management in assessing our operating performance, as well as from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these costs for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Litigation-related net charges (credits) - These adjustments include certain significant product liability and other litigation-related charges and credits. These amounts are excluded by management in assessing our operating performance, as well as from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Debt extinguishment charges - This item represents premiums, accelerated amortization of debt issuance costs and investor discount costs net of interest rate hedge gains related to the early extinguishment of $1.0 billion of public senior notes during the second quarter of 2015. These adjustments are not expected to recur and do not reflect expected ongoing operating results. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Pension termination charges - This item represents charges associated with the termination of the Guidant Retirement Plan, a frozen defined benefit plan. These charges are not expected to recur after 2015 and do not reflect expected ongoing operating results. Accordingly, management has excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
    • Amortization expense - We record intangible assets at historical cost and amortize them over their estimated useful lives. Amortization expense is excluded from management's assessment of operating performance and is also excluded from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management has excluded amortization expense for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

    Adjusted Net Sales Excluding the Impact of Changes in Foreign Currency Exchange Rates and/or the Impact of Recent Acquisitions with Significant Sales

    • The impact of changes in foreign currency exchange rates is highly variable and difficult to predict. The impact of recent acquisitions with significant sales in the current period and no prior period equivalent may distort our presentation of organic growth. Accordingly, management excludes the impact of changes in foreign currency exchange rates and/or the impacts of recent acquisitions with significant sales for purposes of reviewing the net sales and growth rates to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

    Adjusted net income and adjusted net income per share that exclude certain amounts, and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impacts of recent acquisitions with significant sales, are not in accordance with U.S. GAAP and should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Further, other companies may calculate these non-GAAP financial measures differently than we do, which may limit the usefulness of those measures for comparative purposes.  

    Boston Scientific Corporation

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