NATICK, Mass., Oct. 18 /PRNewswire-FirstCall/ -- Boston Scientific Corporation (NYSE: BSX) today announced financial results for the third quarter ended September 30, 2006.
Net sales for the third quarter of 2006 were $2.026 billion as compared to $1.511 billion for the third quarter of 2005, an increase of 34 percent. The increase was primarily attributable to the inclusion of $491 million of net sales from the Company's cardiac rhythm management (CRM) and cardiac surgery businesses.
Reported net income for the third quarter of 2006 was $76 million, or $0.05 per share, on approximately 1.5 billion weighted average shares outstanding. Reported results for the third quarter of 2006 included charges (after-tax) of $77 million, or approximately $0.05 per share, which consisted primarily of expenses resulting from purchase accounting and other charges related to the Guidant acquisition.
Reported net loss for the third quarter of 2005 was $269 million, or $0.33 per share, on approximately 820 million weighted average shares outstanding. Reported results for the third quarter of 2005 included charges (after-tax) of $616 million, or approximately $0.75 per share, which consisted primarily of a settlement agreement with Medinol Ltd.
Operating cash flow for the third quarter of 2006 approximated $480 million. Adjusted net income for the quarter, excluding net charges and amortization and stock compensation expense, was $291 million, or $0.20 per share. Adjusted net income for the third quarter of 2005, excluding net charges and amortization and stock compensation expense, was $379 million, or $0.46 per share.
Worldwide sales of TAXUS® paclitaxel-eluting coronary stent systems were $572 million for the third quarter of 2006 as compared to $601 million for the third quarter of 2005. U.S. sales of TAXUS coronary stent systems were $384 million for the third quarter of 2006 as compared to $404 million for the third quarter of 2005.
Worldwide CRM sales were $446 million, which included $315 million of worldwide implantable cardioverter defibrillator (ICD) sales and $131 million of worldwide pacemaker sales. U.S. CRM sales were $296 million, which included $221 million of U.S. ICD sales and $75 million of U.S. pacemaker sales.
"Despite the challenges in Q3, we were able to achieve results near the high end of our previously announced preliminary sales and earnings ranges," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "We look forward to providing an update on our business and our growth opportunities at our November 6 analyst meeting."
Boston Scientific officials will be discussing these and other issues with analysts on a conference call at 4:30 p.m. (ET) Wednesday, October 18, 2006. The Company will webcast the call to all interested parties through its website: http://www.bostonscientific.com/. Please see the website for details on how to access the webcast. The webcast will be available for one year on the Boston Scientific website.
Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a broad range of interventional medical specialties. For more information, please visit: http://www.bostonscientific.com/.
This press release contains forward-looking statements. The Company wishes to caution the reader of this press release that actual results may differ from those discussed in the forward-looking statements and may be adversely affected by, among other things, risks associated with new product development and introduction, clinical trials, regulatory approvals, competitive offerings, intellectual property, litigation, integration of acquired companies, the Company's overall business strategy, and other factors described in the Company's filings with the Securities and Exchange Commission.
Non-GAAP Measures
The Company discloses non-GAAP measures that exclude certain charges. These supplemental measures exclude the impact of certain charges such as purchase accounting adjustments, costs associated with acquisitions and investment portfolio activity that are highly variable and difficult to predict. The Company's non-GAAP adjusted net income also excludes stock-based compensation expense that the Company started recording under FAS 123® in the first quarter of 2006. Management uses these supplemental measures to evaluate performance period over period, to analyze the underlying trends in the Company's business and to establish operational goals and forecasts that are used in allocating resources. Since management finds these measures to be useful, the Company believes that its investors benefit from seeing the Company's results through the eyes of management in addition to seeing its GAAP results.
The Company recognizes that these charges can have a material impact on the Company's cash flows and net income. Although the Company believes it is useful for investors to see its core performance free of certain charges, investors should understand that the excluded items are actual expenses that impact the cash available to the Company for other uses. To gain a complete picture of the Company's performance, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the Company, which is only a subset, albeit a critical one, of the Company's performance.
Readers are therefore reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that the Company's non-GAAP information may be different from the non-GAAP information provided by other companies.
CONTACT: Milan Kofol
508-650-8569 (Office)
617-834-8595 (Mobile)
Investor Relations
Boston Scientific Corporation
Paul Donovan
508-650-8541 (Office)
508-667-5165 (Mobile)
Media Relations
Boston Scientific Corporation
BOSTON SCIENTIFIC CORPORATION
WORLDWIDE SALES
REGIONAL SUMMARY
(Unaudited)
Three Months Ended
September 30, Change
As Reported Constant
In millions Currency Currency
2006 2005 Basis Basis
DOMESTIC $ 1,273 $ 926 37% 37%
Europe 402 274 47% 41%
Japan 148 140 6% 9%
Inter-Continental 203 171 19% 18%
INTERNATIONAL 753 585 29% 26%
WORLDWIDE $ 2,026 $ 1,511 34% 33%
Nine Months Ended
September 30, Change
As Reported Constant
In millions Currency Currency
2006 2005 Basis Basis
DOMESTIC $ 3,579 $ 2,924 22% 22%
Europe 1,147 871 32% 33%
Japan 431 440 (2%) 5%
Inter-Continental 599 508 18% 17%
INTERNATIONAL 2,177 1,819 20% 21%
WORLDWIDE $ 5,756 $ 4,743 21% 22%
BOSTON SCIENTIFIC CORPORATION
WORLDWIDE SALES
DIVISIONAL SUMMARY
(Unaudited)
Three Months Ended
September 30, Change
As Reported Constant
In millions Currency Currency
2006 2005 Basis Basis
Interventional Cardiology $ 868 $ 892 (3%) (4%)
Peripheral Interventions/
Vascular Surgery 154 176 (13%) (13%)
Electrophysiology 32 32 0% 2%
Neurovascular 81 67 21% 19%
Cardiac Surgery 45 NA NA NA
Cardiac Rhythm Management 446 NA NA NA
CARDIOVASCULAR 1,626 1,167 39% 37%
Oncology 60 52 15% 14%
Endoscopy 187 172 9% 9%
Urology 93 85 9% 9%
ENDOSURGERY 340 309 10% 10%
NEUROMODULATION 60 35 71% 68%
WORLDWIDE $ 2,026 $ 1,511 34% 33%
Nine Months Ended
September 30, Change
As Reported Constant
In millions Currency Currency
2006 2005 Basis Basis
Interventional Cardiology $ 2,781 $ 2,891 (4%) (3%)
Peripheral Interventions/
Vascular Surgery 506 537 (6%) (5%)
Electrophysiology 99 97 2% 4%
Neurovascular 243 206 18% 19%
Cardiac Surgery 83 NA NA NA
Cardiac Rhythm Management 882 NA NA NA
CARDIOVASCULAR 4,594 3,731 23% 24%
Oncology 166 154 8% 9%
Endoscopy 556 519 7% 8%
Urology 273 238 15% 15%
ENDOSURGERY 995 911 9% 10%
NEUROMODULATION 167 101 65% 65%
WORLDWIDE $ 5,756 $ 4,743 21% 22%
BOSTON SCIENTIFIC CORPORATION
GAAP RESULTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
In millions, except per share data 2006 2005
Net sales $ 2,026 $ 1,511
Cost of products sold 630 343
Gross profit 1,396 1,168
Selling, general and administrative
expenses 719 444
Research and development expenses 272 181
Royalty expense 57 52
Amortization expense 153 47
Litigation-related charges 780
1,201 1,504
Operating income/(loss) 195 (336)
Other income/(expense):
Interest expense (143) (21)
Other, net (1) 5
Income/(loss) before income taxes 51 (352)
Income tax benefit (25) (83)
Net income/(loss) $ 76 $ (269)
Net income/(loss) per common share -
assuming dilution $ 0.05 $ (0.33)
Weighted average shares outstanding -
assuming dilution 1,486.7 819.9
BOSTON SCIENTIFIC CORPORATION
NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATION
(Unaudited)
The Company discloses non-GAAP measures that exclude certain charges. These supplemental measures exclude the impact of certain charges such as purchase accounting adjustments, costs associated with acquisitions and investment portfolio activity that are highly variable and difficult to predict. The Company's non-GAAP adjusted net income also excludes stock-based compensation expense that the Company started recording under FAS 123® in the first quarter of 2006. Management uses these supplemental measures to evaluate performance period over period, to analyze the underlying trends in the Company's business and to establish operational goals and forecasts that are used in allocating resources. Since management finds these measures to be useful, the Company believes that its investors benefit from seeing the Company's results through the eyes of management in addition to seeing its GAAP results.
The Company recognizes that these charges can have a material impact on the Company's cash flows and net income. Although the Company believes it is useful for investors to see its core performance free of certain charges, investors should understand that the excluded items are actual expenses that impact the cash available to the Company for other uses. To gain a complete picture of the Company's performance, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the Company, which is only a subset, albeit a critical one, of the Company's performance.
Readers are therefore reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. It should be noted as well that the Company's non-GAAP information may be different from the non-GAAP information provided by other companies.
Three Months Ended Three Months Ended
September 30, 2006 September 30, 2005
Impact per Impact per
In millions, except Net diluted Net (loss) diluted
per share data income share /income share
GAAP results $ 76 $ 0.05 $ (269) $ (0.33)
Non-GAAP adjustments:
Purchase accounting adjustments 59 0.04
Merger-related and other costs 18 0.01 18 0.02 *
Litigation-related charges 598 0.73
Amortization and stock
compensation expense 138 0.10 32 0.04 *
Adjusted results $ 291 $ 0.20 $ 379 $ 0.46 *
* Calculated by assuming dilution
from stock equivalents of 10.9
million shares
Three Months Ended
September 30,
2006 2005
Purchase accounting adjustments:
Step-up value of inventory
sold(a) $ 94
Income tax benefit (35)
Purchase accounting adjustments,
net of tax $ 59
Merger-related and other costs:
Integration costs(b) $9
Fair-value adjustment for the
sharing of proceeds feature of
the Abbott stock purchase(c) 13
CRM technology offering charge(a) 31
Business optimization charges(d) $ 28
53 28
Income tax benefit (35) (10)
Merger-related and other costs,
net of tax $ 18 $ 18
Litigation-related charges:
Litigation-related charges $ 780
Income tax benefit (182)
Litigation-related charges,
net of tax $ 598
Amortization and stock
compensation expense:
Amortization expense $ 153 $ 37
Stock compensation expense(e) 26 5
179 42
Income tax benefit (41) (10)
Amortization and stock
compensation expense, net of tax $ 138 $ 32
(a) Recorded to cost of products sold
(b) Recorded $7 million to selling, general and administrative expenses
and $2 million to research and development expenses
(c) Recorded to other, net
(d) Recorded $11 million to selling, general and administrative
expenses, $7 million to research and development expenses and $10
million to amortization expense
(e) Recorded $16 million in 2006 to selling, general and administrative
expenses, $6 million to research and development expenses and $4
million to cost of products sold; recorded $5 million in 2005 to
selling, general and administrative expenses
BOSTON SCIENTIFIC CORPORATION
GAAP RESULTS OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30,
In millions, except per share data 2006 2005
Net sales $ 5,756 $ 4,743
Cost of products sold 1,681 1,044
Gross profit 4,075 3,699
Selling, general and administrative
expenses 1,917 1,346
Research and development expenses 741 506
Royalty expense 177 174
Amortization expense 356 114
Purchased research and development 4,117 276
Litigation-related charges 780
7,308 3,196
Operating (loss)/income (3,233) 503
Other income/(expense):
Interest expense (291) (58)
Other, net (180) 8
(Loss)/income before income taxes (3,704) 453
Income tax expense 150 159
Net (loss)/income $ (3,854) $ 294
Net (loss)/income per common share -
assuming dilution $ (3.19) $ 0.35
Weighted average shares outstanding -
assuming dilution 1,207.0 840.3
BOSTON SCIENTIFIC CORPORATION
NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATION
(Unaudited)
Nine Months Ended Nine Months Ended
September 30, 2006 September 30, 2005
Impact Impact
Net per per
(loss)/ diluted Net diluted
In millions, except per share data income share income share
GAAP results $ (3,854) $(3.19) $ 294 $ 0.35
Non-GAAP adjustments:
Purchase accounting adjustments 4,483 3.71 267 0.32
Merger-related and other costs 114 0.09 * 23 0.03
AAA program cancellation charges (31) (0.03)*
Investment portfolio activity 81 0.07 *
Litigation-related charges 598 0.71
Amortization and stock compensation
expense 325 0.27 * 89 0.10
Adjusted results $ 1,118 $ 0.92 * $ 1,271 $ 1.51
* Calculated by assuming dilution
from stock equivalents of 14.2
million shares
Nine Months Ended
September 30,
2006 2005
Purchase accounting adjustments:
Purchased research and development $ 4,184 $ 276
Step-up value of inventory sold(a) 279
4,463 276
Income tax expense/(benefit) 20 (9)
Purchase accounting adjustments,
net of tax $ 4,483 $ 267
Merger-related and other costs:
Integration costs(b) $42
Fair-value adjustment for the
sharing of proceeds feature of
the Abbott stock purchase(c) 100
Charitable donation(c) 5
CRM technology offering charge(a) 31
Certain retirement benefits(d) $ 17
Business optimization charges(f) 28
178 45
Income tax benefit (64) (22)
Merger-related and other costs, net
of tax $ 114 $ 23
AAA program cancellation charges:
Purchased research and development $ (67)
Facility costs and severance(e) 31
Amortization expense 23
(13)
Income tax benefit (18)
AAA program cancellation charges,
net of tax $ (31)
Investment portfolio activity:
Investment portfolio activity(c) $ 105
Income tax benefit (24)
Investment portfolio activity,
net of tax $ 81
Litigation-related charges:
Litigation-related charges $ 780
Income tax benefit (182)
Litigation-related charges,
net of tax $ 598
Amortization and stock compensation
expense:
Amortization expense $ 333 $ 104
Stock compensation expense(g) 89 13
422 117
Income tax benefit (97) (28)
Amortization and stock compensation
expense, net of tax $ 325 $ 89
(a) Recorded to cost of products sold
(b) Recorded $39 million to selling, general and administrative expenses
and $3 million to research and development expenses
(c) Recorded to other, net
(d) Recorded to selling, general and administrative expenses
(e) Recorded to research and development expenses
(f) Recorded $11 million to selling, general and administrative
expenses, $7 million to research and development expenses and $10
million to amortization expense
(g) Recorded $59 million in 2006 to selling, general and administrative
expenses, $18 million to research and development expenses and $12
million to cost of products sold; recorded $13 million in 2005 to
selling, general and administrative expenses
BOSTON SCIENTIFIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
In millions 2006 2005
Assets
Current assets:
Cash, cash equivalents and short-
term investments $ 1,541 $ 848
Trade accounts receivable, net 1,460 932
Inventories 759 418
Other current assets 989 433
Total current assets 4,749 2,631
Property, plant and equipment, net 1,672 1,011
Intangible assets, net 23,743 3,735
Investments 568 594
Other assets 220 225
$ 30,952 $ 8,196
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings due within one year $ 5 $ 156
Accounts payable and accrued
expenses 1,815 1,229
Other current liabilities 830 94
Total current liabilities 2,650 1,479
Long-term debt 8,893 1,864
Other long-term liabilities 4,393 571
Stockholders' equity 15,016 4,282
$ 30,952 $ 8,196
SOURCE: Boston Scientific Corporation
CONTACT: Milan Kofol, +1-508-650-8569 (Office) or +1-617-834-8595
(Mobile), Investor Relations, or Paul Donovan, +1-508-650-8541 (Office) or
+1-508-667-5165 (Mobile), Media Relations, both of Boston Scientific
Corporation
Web site: http://www.bostonscientific.com/