Boston Scientific Announces Results For First Quarter Ended March 31, 2007
PRNewswire-FirstCall
NATICK, Mass.
(NYSE:BSX)

NATICK, Mass., April 23 /PRNewswire-FirstCall/ -- Boston Scientific Corporation (NYSE: BSX) today announced financial results for the first quarter ended March 31, 2007, as well as guidance for net sales and earnings per share (EPS) for the second quarter of 2007.

  Highlights
  -- Delivered operating results at the high end of the Company's sales and
     EPS ranges
  -- Recorded net sales of $2.086 billion, reported EPS of $0.08 and
     adjusted EPS of $0.20 (excluding net special charges and amortization
     and stock compensation expense)
  -- Achieved double-digit sequential growth in worldwide cardiac rhythm
     management (CRM) sales for the second consecutive quarter
  -- Resolved the CRM warning letter issued by the FDA to Guidant in
     December 2005
  -- Received regulatory approval for the TAXUS® Express(2)™
     paclitaxel-eluting coronary stent system in Japan

Net sales for the first quarter of 2007 were $2.086 billion as compared to $1.620 billion for the first quarter of 2006. The first quarter 2007 operating results include the Company's CRM and cardiac surgery businesses, which were acquired as part of Guidant on April 21, 2006. Worldwide sales of the Company's CRM group for the first quarter of 2007 were $539 million, which included $398 million of implantable cardioverter defibrillator (ICD) sales, as compared to CRM sales of $489 million for the fourth quarter of 2006, which included $356 million of ICD sales. U.S. CRM sales for the first quarter of 2007 were $349 million, which included $273 million of ICD sales, as compared to U.S. CRM sales of $320 million for the fourth quarter of 2006, which included $250 million of ICD sales.

For comparison purposes -- as though Boston Scientific had acquired Guidant on January 1, 2006 -- worldwide CRM sales for the first quarter of 2006 would have been approximately $562 million, including $419 million of ICD sales. Similarly, U.S. CRM sales for the first quarter of 2006 would have been approximately $388 million, including $309 million of ICD sales.

Worldwide sales of the Company's drug-eluting coronary stent systems for the first quarter of 2007 were $468 million as compared to $633 million for the first quarter of 2006 and $506 million for the fourth quarter of 2006. U.S. sales of drug-eluting coronary stent systems for the first quarter of 2007 were $293 million as compared to $419 million for the first quarter of 2006 and $329 million for the fourth quarter of 2006. Worldwide sales of coronary stent systems for the first quarter of 2007 were $527 million as compared to $668 million for the first quarter of 2006 and $550 million for the fourth quarter of 2006. U.S. sales of coronary stent systems for the first quarter of 2007 were $317 million as compared to $429 million for the first quarter of 2006 and $347 million for the fourth quarter of 2006.

Reported net income for the first quarter of 2007 was $120 million, or $0.08 per share, on approximately 1.5 billion weighted average shares outstanding. Reported results for the first quarter of 2007 included net special charges (after-tax) of $26 million, or approximately $0.02 per share, which consisted primarily of charges related to the Guidant acquisition. Reported net income for the first quarter of 2006 was $332 million, or $0.40 per share, on approximately 830 million weighted average shares outstanding. Reported results for the first quarter of 2006 included net special charges (after-tax) of $29 million, or approximately $0.03 per share, which consisted primarily of investment write-downs due to the termination of a gene therapy trial.

Adjusted net income for the quarter, excluding net special charges and amortization and stock compensation expense, was $295 million, or $0.20 per share. Adjusted net income for the first quarter of 2006, excluding net special charges and amortization and stock compensation expense, was $415 million, or $0.50 per share.

"I am pleased we came in at the upper end of our ranges for sales and EPS for the quarter," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "While drug-eluting stent sales were lower than we hoped due to market dynamics, our performance within the market remained strong, and we continue to expect market fundamentals to improve over time. CRM sales were higher than anticipated, achieving double-digit sequential growth for the second consecutive quarter. We are also continuing to make substantial progress on quality, most notably resolving the deficiencies in the CRM warning letter, which has been the number one priority for our CRM Group. This important milestone is solid evidence we are moving in the right direction."

Guidance for Second Quarter 2007

The Company estimates net sales for the second quarter of 2007 of between $2.0 billion and $2.1 billion. Adjusted EPS, excluding net special charges and amortization and stock compensation expense, are estimated to range between $0.15 and $0.20 per share. The Company estimates EPS on a GAAP basis of between $0.04 and $0.09 per share.

Boston Scientific officials will be discussing these results with analysts on a conference call at 5:30 pm. (ET) Monday, April 23, 2007. 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.

Use of non-GAAP Financial Information

To supplement Boston Scientific's consolidated condensed financial statements presented on a GAAP basis, the Company discloses certain non-GAAP measures that exclude certain charges, including non-GAAP net income/loss and non-GAAP net income/loss per diluted share. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. A reconciliation of the non-GAAP financial measures to the corresponding GAAP measures is included in the tables below. In addition, an explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included under "Use of Non-GAAP Financial Measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

   CONTACT:

   Paul Donovan
   508-650-8541 (office)
   508-667-5165 (mobile)
   Media Relations
   Boston Scientific Corporation

   Dan Brennan
   508-650-8538 (office)
   617-459-2703 (mobile)
   Investor Relations
   Boston Scientific Corporation


                        BOSTON SCIENTIFIC CORPORATION
                               WORLDWIDE SALES
                                 (Unaudited)

                                    Three Months Ended
                                         March 31,             Change
                                                           As
                                                        Reported   Constant
  In millions                                           Currency   Currency
                                     2007        2006    Basis      Basis

  DOMESTIC                          $1,271       $991      28%       28%

     Europe                            463        314      47%       35%
     Japan                             159        134      19%       21%
     Inter-Continental                 193        181       7%        5%
  INTERNATIONAL                        815        629      30%       23%

  WORLDWIDE                         $2,086     $1,620      29%       26%


                                        Three Months Ended
                                            March 31,         Change
                                                           As
                                                        Reported   Constant
  In millions                        2007        2006   Currency   Currency
                                                          Basis     Basis

     Interventional Cardiology        $804       $949     (15%)     (17%)
     Peripheral Interventions
      / Vascular Surgery               154       184      (16%)     (18%)
     Electrophysiology                  36        34        6%        5%
     Neurovascular                      90        80       14%       11%
     Cardiac Surgery                    50       N/A       N/A       N/A
     Cardiac Rhythm Management         539       N/A       N/A       N/A
  CARDIOVASCULAR                     1,673     1,247       34%       32%

     Oncology                           56        54        4%        2%
     Endoscopy                         200       180       11%        9%
     Urology                            95        90        6%        5%
  ENDOSURGERY                          351       324        8%        7%

  NEUROMODULATION                       62        49       28%       26%

  WORLDWIDE                         $2,086    $1,620       29%       26%


  Certain amounts in the tables above may not sum or recalculate due to
  rounding of individual components.


                      BOSTON SCIENTIFIC CORPORATION
           NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
                               (Unaudited)

                                  Q1 2007 Net Sales as compared to Q1 2006
                                                 Increase /
                                  Increase /     (Decrease) -   Estimated
                                  (Decrease) -    Constant        Impact
                                 As Reported      Currency      of Foreign
  In millions                       Basis          Basis         Currency

  DOMESTIC                            $280          $280

     Europe                           $149          $112            $37
     Japan                              25            28             (3)
     Inter-Continental                  12             8              4
  INTERNATIONAL                        186           148             38

  WORLDWIDE                           $466          $428            $38



                                  Q1 2007 Net Sales as compared to Q1 2006
                                                     Increase /
                                    Increase /      (Decrease) -   Estimated
                                    (Decrease) -     Constant       Impact
                                   As Reported       Currency     of Foreign
  In millions                         Basis           Basis        Currency

     Interventional Cardiology       $(145)          $(162)         $17
     Peripheral Interventions
      /Vascular Surgery                (30)            (33)           3
     Electrophysiology                   2               2
     Neurovascular                      10               9            1
     Cardiac Surgery                    50              49            1
     Cardiac Rhythm Management         539             528           11
  CARDIOVASCULAR                       426             393           33

     Oncology                            2               1            1
     Endoscopy                          20              16            4
     Urology                             5               5
  ENDOSURGERY                           27              22            5

  NEUROMODULATION                       13              13

  WORLDWIDE                           $466            $428          $38


    Actual calculation of the percentage change in net sales on a constant
    currency basis may differ slightly due to rounding of amounts in the
    tables above.

NOTE - An explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included in the exhibit labeled "Use of Non-GAAP Financial Measures."

                      BOSTON SCIENTIFIC CORPORATION
                        GAAP RESULTS OF OPERATIONS
                               (Unaudited)

                                        Three Months Ended
                                             March 31,
  In millions, except per share data      2007      2006

  Net sales                              $2,086    $1,620
  Cost of products sold                     568       374
  Gross profit                            1,518     1,246

  Selling, general and
   administrative expenses                  735       470
  Research and development
   expenses                                 289       186
  Royalty expense                            52        55
  Amortization expense                      155        38
  Purchased research and
   development                                5
                                          1,236       749
  Operating income                          282       497

  Other income (expense):
     Interest expense                      (141)      (37)
     Other, net                              18       (29)

  Income before income taxes                159       431
  Income taxes                               39        99

  Net income                               $120      $332


  Net income per common share -
   assuming dilution                      $0.08     $0.40

  Weighted average shares
   outstanding - assuming
   dilution                             1,497.8     830.4


                      BOSTON SCIENTIFIC CORPORATION
   NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS
                               (Unaudited)

NOTE - An explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included in the exhibit labeled "Use of Non-GAAP Financial Measures."

                                           Three Months       Three Months
                                               Ended             Ended
                                          March 31, 2007     March 31, 2006
                                                  Impact             Impact
                                                    per                per
                                           Net    diluted     Net    diluted
  In millions, except per share data      income   share    income    share

  GAAP results                             $120    $0.08     $332     $0.40
  Non-GAAP adjustments:
     Acquisition-related and other costs     20     0.01       29      0.03
     Amortization and stock compensation
      expense                               149     0.10       54      0.07
     Discrete income tax items                6     0.01
  Adjusted results                         $295    $0.20     $415     $0.50


                                           Three Months Ended
                                                March 31,
                                             2007     2006
  Acquisition-related and other costs:
     Integration costs (a)                    $12
     Fair-value adjustment for the sharing
      of proceeds feature of the Abbott
      stock purchase (b)                        8
     Purchased research and development         5
     Investment portfolio activity (b)                 $38
                                               25       38
     Income tax benefit                        (5)      (9)
  Acquisition-related and other costs,
   net of tax                                 $20      $29

  Amortization and stock compensation
   expense:
     Amortization expense                    $155      $38
     Stock compensation expense (c)            34       32
                                              189       70
     Income tax benefit                       (40)     (16)
  Amortization and stock compensation
   expense, net of tax                       $149      $54

  (a) Recorded $9 million to selling, general and administrative expenses,
      $2 million to cost of products sold and $1 million to research and
      development expenses.
  (b) Recorded to other, net
  (c) Recorded $23 million in 2007 to selling, general and administrative
      expenses, $7 million to research and development expenses and $4
      million to cost of products sold; recorded $20 million in 2006 to
      selling, general and administrative expenses, $6 million to research
      and development expenses and $6 million to cost of products sold.


                      BOSTON SCIENTIFIC CORPORATION
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                               (Unaudited)

                                                March 31,      December 31,
  In millions                                       2007              2006

  Assets
  Current assets:
     Cash and cash equivalents                    $1,340            $1,668
     Trade accounts receivable, net                1,435             1,424
     Inventories                                     793               749
     Deferred income taxes                           581               583
     Other current assets                            435               477
        Total current assets                       4,584             4,901

  Property, plant and equipment, net               1,748             1,726
  Investments                                        563               596
  Other assets                                       214               237
  Intangible assets, net                          23,960            23,636
                                                 $31,069           $31,096

  Liabilities and Stockholders' Equity
  Current liabilities:
     Borrowings due within one year                   $7                $7
     Accounts payable and accrued expenses         1,925             2,067
     Other current liabilities                       438               556
        Total current liabilities                  2,370             2,630

  Long-term debt                                   8,898             8,895
  Deferred income taxes                            2,645             2,784
  Other long-term liabilities                      1,607             1,489

  Stockholders' equity                            15,549            15,298
                                                 $31,069           $31,096


                      BOSTON SCIENTIFIC CORPORATION
      ESTIMATED Q2 2007 NON-GAAP NET INCOME PER SHARE RECONCILIATION
                               (Unaudited)

                                             Net Income per Share - Assuming
                                                         Dilution
                                                  Q2 Low           Q2 High

  GAAP estimated results                           $0.04             $0.09

  Estimated amortization and stock
   compensation expense                             0.10              0.10
  Estimated acquisition-related and
   other charges                                    0.01              0.01

  Adjusted estimated results                       $0.15             $0.20

NOTE - An explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included in the exhibit labeled "Use of Non-GAAP Financial Measures."

Use of Non-GAAP Financial Measures

To supplement Boston Scientific's consolidated condensed financial statements presented on a GAAP basis, the Company discloses and forecasts certain non-GAAP measures that exclude certain charges, including non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange. These non- GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.

The GAAP measure most comparable to non-GAAP net income is GAAP net income and the GAAP measure most comparable to non-GAAP net income per diluted share is GAAP net income per diluted share. Reconciliations of each of these non- GAAP financial measures to the corresponding GAAP measure are included in the accompanying schedules.

To calculate regional and divisional revenue growth rates that exclude the impact of foreign exchange, the Company converts actual current-period net sales from local currency to U.S. dollars using constant foreign exchange rates. The GAAP measure most comparable to this non-GAAP measure is growth rate percentages based on GAAP revenue. A reconciliation of this non-GAAP financial measure to the corresponding GAAP measure is included in the preceding tables.

Use and Economic Substance of Non-GAAP Financial Measures Used by Boston Scientific

Management uses these supplemental non-GAAP measures to evaluate performance period over period, to analyze the underlying trends in the Company's business, to assess its performance relative to its competitors, and to establish operational goals and forecasts that are used in allocating resources. In addition, following the Company's acquisition of Guidant, and the related increase in the Company's debt, management has heightened its focus on cash generation and debt pay down. Management uses these non-GAAP measures as the basis for assessing the ability of the underlying business to generate cash and pay down debt. In addition, management uses these non-GAAP measures to further its understanding of the performance of the Company's operating segments. The adjustments excluded from the Company's non-GAAP measures are consistent with those excluded from its reportable segments' measure of profit or loss. These adjustments are excluded from the segment measures that are reported to the Company's chief operating decision maker and are used to make operating decisions and assess performance.

The following is an explanation of each of the adjustments that management excluded as part of its non-GAAP measures for the first quarter of 2007 and 2006, as well as reasons for excluding each of these individual items:

  -- Acquisition-related and other costs -- For 2007, these adjustments
     consisted primarily of integration costs associated with the Guidant
     acquisition that are non-capitalized expenses, the fair value
     adjustment related to the sharing of proceeds feature of the Abbott
     stock purchase and purchased research and development. For 2006, these
     adjustments consisted primarily of asset write-downs. The integration
     costs associated with the Guidant acquisition and asset write-downs do
     not reflect expected future operating expenses. The fair value
     adjustment related to the sharing of proceeds feature of the Abbott
     stock purchase is not indicative of the Company's on-going operations
     and is not used by management to assess the Company's performance, or
     compare the Company's performance to prior periods. Purchased research
     and development is a non-cash charge and does not impact the Company's
     liquidity or compliance with the covenants included in its debt
     agreements. Management removes the impact of purchased research and
     development from the Company's operating performance to assist in
     assessing the Company's cash generated from operations. Management
     believes this information may be useful to users of its financial
     statements and, therefore, has excluded these charges for purposes of
     calculating these non-GAAP measures to facilitate an evaluation of the
     Company's current operating performance and comparison to the Company's
     past operating performance.
  -- Amortization and stock compensation expense -- The amount of
     amortization and stock compensation expense vary based on decisions
     made at the corporate level and the expenses are not necessarily
     reflective of operating performance. In addition, amortization and
     stock compensation expense are non-cash charges and do not impact the
     Company's liquidity or compliance with the covenants included in its
     debt agreements. Further, following the Company's acquisition of
     Guidant, and the related increase in the Company's debt, management has
     heightened its focus on cash generation and debt pay down. Management
     removes the impact of stock compensation and amortization from the
     Company's operating performance to assist in assessing the Company's
     cash generated from operations. Management believes this is a critical
     metric for the Company in measuring the Company's ability to generate
     cash and pay down debt. Therefore, amortization and stock compensation
     expense are excluded from management's assessment of operating
     performance and are also excluded from the measures management uses to
     set employee compensation. Accordingly, management believes this may be
     useful information to users of its financial statements and therefore
     has excluded these charges for purposes of calculating these non-GAAP
     measures to facilitate an evaluation of the Company's current operating
     performance, particularly in terms of liquidity.
  -- Discrete income tax items -- The items relate to certain tax exposures
     associated with prior periods. Accordingly, management excluded these
     items for purposes of calculating these non-GAAP measures to facilitate
     an evaluation of the Company's current operating performance and
     comparison to the Company's past operating performance.
  -- Foreign exchange on net sales -- The impact of foreign exchange is
     highly variable and difficult to predict. Accordingly, management
     excludes the impact of foreign exchange for purposes of reviewing
     regional and divisional revenue growth rates to facilitate an
     evaluation of the Company's current operating performance and
     comparison to the Company's past operating performance.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

Non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations relying on these non-GAAP financial measures are:

  -- Items such as purchased research and development, the fair value
     adjustment related to the sharing of proceeds feature of the Abbott
     stock purchase and the impairment of certain of the Company's
     investments reflect economic costs to the Company and are not reflected
     in non-GAAP net income and non-GAAP net income per diluted share.
  -- Items such as Guidant integration costs and discrete income tax items
     that are excluded from non-GAAP net income and non-GAAP net income per
     diluted share can have a material impact on cash flows and GAAP net
     income and net income per diluted share.
  -- Items such as amortization of purchased intangible assets, though not
     directly affecting Boston Scientific's cash flow position, represent a
     reduction in value of intangible assets over time. The expense
     associated with this reduction in value is not included in Boston
     Scientific's non-GAAP net income or non-GAAP net income per diluted
     share and therefore these measures do not reflect the full economic
     effect of the reduction in value of those intangible assets.
  -- Items such as stock compensation expense, though not directly affecting
     the Company's cash flow position, represent compensation cost under
     GAAP. Stock compensation expense is not included in non-GAAP net income
     or non-GAAP net income per diluted share and therefore these measures
     do not reflect the full economic cost of compensating employees.
  -- Revenue growth rates stated on a constant currency basis, by their
     nature, exclude the impact of foreign exchange, which may have a
     material impact on GAAP net sales.
  -- Other companies may calculate non-GAAP net income, non-GAAP net income
     per diluted share, or regional and divisional revenue growth rates that
     exclude the impact of foreign exchange differently than Boston
     Scientific does, limiting the usefulness of those measures for
     comparative purposes.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures

Boston Scientific compensates for the limitations on its non-GAAP financial measures by relying upon its GAAP results to gain a complete picture of the Company's performance. 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.

The Company provides detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure in the accompanying schedules, and Boston Scientific encourages investors to review these reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that providing non-GAAP net income, non-GAAP net income per share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange in addition to the related GAAP measures provides investors with greater transparency to the information used by Boston Scientific management in its financial and operational decision- making and allows investors to see Boston Scientific's results "through the eyes" of management. The Company further believes that providing this information better enables Boston Scientific's investors to understand the Company's operating performance and to evaluate the methodology used by management to evaluate and measure such performance. Disclosure of these non- GAAP financial measures also facilitates comparisons of Boston Scientific's operating performance with the performance of other companies in its industry that supplement their GAAP results with non-GAAP financial measures.

SOURCE: Boston Scientific Corporation

CONTACT: Media Relations, Paul Donovan, +1-508-650-8541, mobile,
+1-508-667-5165, Investor Relations, Dan Brennan, +1-508-650-8538, mobile,
+1-617-459-2703, both of Boston Scientific Corporation

Web site: http://www.bostonscientific.com/

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