NATICK, Mass., April 26 /PRNewswire-FirstCall/ -- Boston Scientific Corporation (NYSE: BSX) today announced financial results for the first quarter ended March 31, 2010, as well as guidance for net sales and earnings per share (EPS) for the second quarter and full year 2010.

First quarter highlights (sales growth rates are at constant currency):

• Achieved sales of $1.960 billion and adjusted EPS of $0.16, reporting a GAAP loss of $1.05 per share
• Maintained leadership position in the global drug-eluting stent (DES) market with 45 percent share in the U.S., 43 percent share in Japan, and 38 percent share worldwide
• Launched the PROMUS® Everolimus-Eluting Coronary Stent System in Japan and received a $250 million acquisition-related milestone payment from Abbott Laboratories
• Increased worldwide Endoscopy sales nine percent
• Increased worldwide Urology and Women's Health sales six percent
• FDA advisory panel unanimously recommended approval of an expanded indication for the Company's cardiac resynchronization therapy defibrillators (CRT-Ds)
• Received FDA approval for the Express® LD Iliac Premounted Stent System for use in iliac arteries

"It was a challenging quarter including a settlement to resolve long-standing litigation, and the CRM ship hold and product removal actions," said Ray Elliott, President and Chief Executive Officer of Boston Scientific.  "However, the return of COGNIS® and TELIGEN® to the U.S. market -- coupled with exceptional cash flow and a strong cadence from our new product pipeline -- were positive factors."

The Cardiac Rhythm Management (CRM) ship hold and product removal actions created an adverse impact on both sales and earnings within the first quarter.  The combination of the expected financial impact of these actions -- coupled with slower expected market growth -- caused a $1.8 billion write-down of goodwill associated with the Company's U.S. CRM business unit, which it acquired through the Guidant acquisition.  This is a non-cash charge that has no impact on the Company's debt covenants.  The amount of the charge is subject to finalization during the second quarter of 2010.

Net sales for the first quarter of 2010 were $1.960 billion, as compared to net sales of $2.010 billion for the first quarter of 2009.  Excluding the impact of foreign currency and net sales from divested businesses, net sales decreased six percent as compared to the prior period.

Worldwide CRM net sales for the first quarter -- on a reported basis -- were as follows:

Worldwide coronary stent system net sales for the first quarter -- on a reported basis -- were as follows:

Reported net loss for the first quarter of 2010 was $1.589 billion, or $1.05 per share.  Reported results included goodwill and intangible asset impairment charges; acquisition- and restructuring-related net credits; and amortization expense (after-tax) of $1.840 billion, or $1.21 per share, which consisted of:

• $1.848 billion (on both a pre-tax and after-tax basis) of goodwill impairment charges associated with the Company's U.S. CRM business unit;
• $51 million ($60 million pre-tax) of intangible asset impairment charges;
• a $216 million ($250 million pre-tax) gain related to the receipt of an acquisition-related milestone payment from Abbott Laboratories;
• $56 million ($80 million pre-tax) of restructuring and restructuring-related costs associated with the Company's 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan;
• $101 million ($128 million pre-tax) of amortization expense.

Adjusted net income for the first quarter of 2010, excluding these net charges, was $251 million, or $0.16 per share.

Reported net loss for the first quarter of 2009 was $13 million, or $0.01 per share.  Reported results included acquisition-, divestiture-, restructuring- and litigation-related net charges; discrete tax benefits, and amortization expense (after-tax) of $302 million, or $0.20 per share.  Adjusted net income for the first quarter of 2009, excluding these net charges, was $289 million, or $0.19 per share.

Guidance for Second Quarter and Full Year 2010

The Company estimates net sales for the second quarter of 2010 of between $1.825 billion and $1.925 billion.  Adjusted earnings, excluding restructuring and restructuring-related costs and amortization expense, are estimated to range between $0.06 and $0.10 per share.  The Company estimates results on a GAAP basis of between a loss of $0.03 and income of $0.02 per share.

As a result of the ship hold and product removal actions involving the Company's ICDs and CRT-Ds during the quarter, the Company is revising estimates for the full year ending December 31, 2010.  The Company now estimates net sales for the full year 2010 of between $7.6 billion and $8.0 billion.  Adjusted earnings, excluding goodwill and intangible asset impairment charges, acquisition-related credits, restructuring and restructuring-related costs, and amortization expense, are estimated to range between $0.50 and $0.60 per share.  The Company now estimates a net loss on a GAAP basis of between $1.00 and $0.88 per share.

Boston Scientific officials will be discussing these results with analysts on a conference call at 8:00 a.m. (ET) Tuesday, April 27.  The Company will webcast the call to all 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 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: www.bostonscientific.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of 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 financial performance, new product approvals and sales, regulatory compliance and product removal actions, our market position, cash flow, debt repayment, write-down of goodwill and other asset impairments, acquisitions and divestitures, restructuring activities and litigation charges.  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 factors, in some cases, have affected and in the future (together with other factors) 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.

Factors that may cause such differences include, among other things: future economic, competitive, reimbursement and regulatory conditions; new product introductions; demographic trends; intellectual property; litigation; financial market conditions; and future business decisions made by us and our competitors.  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 will file hereafter.  We disclaim any intention or obligation to publicly update or revise any forward-looking statements 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 document.

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 measures, is included in the exhibits attached to this press release. 

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

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

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

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

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

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

Use of Non-GAAP Financial Measures

To supplement Boston Scientific's condensed consolidated financial statements presented on a GAAP basis; the Company discloses certain non-GAAP measures that exclude certain amounts, including non-GAAP net income, non-GAAP net income per 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 share is GAAP net income per 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 accompanying schedules.

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, 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 three months ended March 31, 2010 and 2009 and for the forecasted three month period ending June 30, 2010 and full year ending December 31, 2010, as well as reasons for excluding each of these individual items:

• Goodwill and Other intangible asset impairment charges - These amounts represent non-cash write-downs of certain of the Company's intangible assets and goodwill balances attributable to its U.S. Cardiac Rhythm Management business unit. Following the Company's acquisition of Guidant Corporation in 2006, 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 these charges 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, these charges 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.

• Acquisition-related credit - This adjustment represents a gain resulting from a receipt related to Guidant Corporation's sale of its vascular intervention and endovascular solutions businesses to Abbott Laboratories and is not indicative of future operating results. Management removes the impact of this credit from the Company's operating results to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance.  

• Divestiture-related gains – These amounts represent gains and related tax impacts that the Company recognized related to the sale of certain non-strategic investments. The sale of these non-strategic investments were substantially completed during 2008. These gains are not indicative of future operating performance and are not used by management to assess operating performance. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance.  

• Restructuring and restructuring-related costs – These adjustments represent primarily severance, asset write-offs, costs to transfer production lines from one facility to another, and other costs associated with the Company's 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan. These expenses are excluded by management in assessing the Company's operating performance, as well as from the Company's operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance.  

• Litigation-related charges –These charges are attributable to certain patent litigation and other legal matters. These amounts represent significant charges during the first quarter of 2009 and do not reflect expected on-going operating expenses. Accordingly, management excluded these charges for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and for comparison to the Company's past operating performance.

• Discrete tax items - These items represent adjustments of certain tax positions, which were initially established in prior periods as a result of acquisitions or as a result of divestiture- and litigation-related charges or credits, or restructuring and restructuring-related costs. These adjustments do not reflect expected on-going operating results. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance and for comparison to the Company's past operating performance.

• Amortization expense - Amortization expense 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 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 expense is excluded from management's assessment of operating performance and is 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 amortization expense for purposes of calculating these non-GAAP measures to facilitate an evaluation of the Company's current operating performance, particularly in terms of liquidity.

• 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 from or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are:

• Items such as restructuring and restructuring-related costs, litigation-related charges, and discrete 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 the gain on acquisition-related milestone and divestiture-related gains reflect economic benefits to the Company and are not reflected in non-GAAP net income and non-GAAP net income per diluted share.

• Amortization expense and goodwill and other intangible asset impairment charges, though not directly affecting Boston Scientific's cash flows, represent a reduction in value of goodwill and other intangible assets. 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 effect of the reduction in value of those assets.

• 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 presenting 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 greater transparency to the information used by Boston Scientific management for 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.

SOURCE Boston Scientific Corporation