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/