Full Press Release Details
NATICK, Mass. , April 25, 2013 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX ) generated sales of $1.761 billion and adjusted earnings per share of $0.16 for the first quarter ended March 31 , 2013. The company reported a GAAP loss of $0.26 per share, primarily due to the impact of an estimated $422 million ( $423 million pre-tax) goodwill impairment charge.
First quarter results and recent developments:
"We continue to be encouraged but not satisfied with our operating performance," said Mike Mahoney , president and chief executive officer, Boston Scientific. "The company delivered adjusted results that are consistent with first-quarter and full-year guidance. We continue to make strong progress on our strategy to return to consistent sales and earnings-per-share growth."
Effective January 1, 2013 , the company reorganized its business from geographic regions to fully operationalized global business units. As a result, the company has three new global reportable segments consisting of Cardiovascular, Rhythm Management and MedSurg. In conjunction with interim goodwill impairment testing required following the change in composition of its segments and reporting units, the company recorded an estimated $422 million ( $423 million pre-tax) goodwill impairment charge, subject to finalization, associated with its new global Cardiac Rhythm Management reporting unit.
The company has included segment information for the period, restating prior period information to conform to the current year presentation, within the exhibits attached to this news release.
Worldwide sales for the first quarter:
| Three Months Ended | |||||||||||||||
| March 31, | % Change | ||||||||||||||
| in millions | 2013 | 2012 | As Reported Basis | Less: Impact of Foreign Currency | Constant Currency Basis | ||||||||||
| Interventional Cardiology | $ | 505 | $ | 603 | (16)% | $ | (14) | (2)% | (14)% | ||||||
| Peripheral Interventions | 191 | 190 | —% | (5) | (3)% | 3% | |||||||||
| Cardiovascular | 696 | 793 | (12)% | (19) | (2)% | (10)% | |||||||||
| Cardiac Rhythm Management | 478 | 501 | (5)% | (4) | (1)% | (4)% | |||||||||
| Electrophysiology | 35 | 37 | (6)% | — | (1)% | (5)% | |||||||||
| Rhythm Management | 513 | 538 | (5)% | (4) | (1)% | (4)% | |||||||||
| Endoscopy | 309 | 302 | 3% | (8) | (2)% | 5% | |||||||||
| Urology/Women's Health | 118 | 120 | (2)% | (3) | (2)% | —% | |||||||||
| Neuromodulation | 89 | 84 | 6% | (1) | —% | 6% | |||||||||
| MedSurg | 516 | 506 | 2% | (12) | (2)% | 4% | |||||||||
| Subtotal Core Businesses | 1,725 | 1,837 | (6)% | (35) | (2)% | (4)% | |||||||||
| Divested Businesses | 36 | 29 | n/a | n/a | n/a | n/a | |||||||||
| Worldwide Net Sales | $ | 1,761 | $ | 1,866 | (6)% | $ | (35) | (2)% | (4)% | ||||||
| Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. | |||||||||||||||
| Sales growth rates that exclude the impact of changes in foreign currency exchange rates are not prepared in accordance with U.S. GAAP. An explanation of the company's use of these non-GAAP financial measures is included in the exhibits attached to this news release. |
On a consolidated GAAP basis, net loss for the first quarter of 2013 was $354 million , or a loss of $0.26 per share. These results included a goodwill impairment charge, acquisition- and divestiture-related net credits, restructuring- and litigation-related charges, and amortization expense, of $578 million (after-tax) or $0.42 per share. Adjusted net income for the first quarter of 2013, excluding these net charges, was $224 million , or $0.16 per share.
On a consolidated GAAP basis, net income for the first quarter of 2012 was $113 million , or $0.08 per share. These results included acquisition- and divestiture-related expenses, restructuring-related charges and amortization expense, of $107 million (after-tax) or $0.07 per share. Adjusted net income for the first quarter of 2012, excluding these net charges, was $220 million , or $0.15 per share.
Guidance for Second Quarter and Full Year 2013
The company estimates sales for the second quarter of 2013 in a range of $1.740 to $1.800 billion . The company estimates earnings on a GAAP basis in a range of $0.07 to $0.10 per share. Adjusted earnings, excluding acquisition- and restructuring-related charges; and amortization expense, are estimated in a range of $0.14 to $0.17 per share.
The company estimates sales for the full year 2013 in a range of $6.950 to $7.150 billion . The company estimates (losses) earnings on a GAAP basis in a range of ($0.06) to $0.01 per share. Adjusted earnings, excluding goodwill impairment charges, acquisition-, restructuring-, and litigation-related charges, divestiture-related net credits and amortization expense; are estimated in a range of $0.65 to $0.70 per share.
Conference Call Information
Boston Scientific management will be discussing these results with analysts on a conference call today at 8:00 a.m. (ET) . The company will webcast the call to interested parties through its website: www.bostonscientific.com . Please see the website for details on how to access the webcast. The webcast will be available for approximately one year on the Boston Scientific website.
About Boston Scientific
Boston Scientific transforms lives through innovative medical solutions that improve the health of patients around the world. As a global medical technology leader for more than 30 years, we advance science for life by providing a broad range of high performance solutions that address unmet patient needs and reduce the cost of healthcare. For more information, visit us at www.bostonscientific.com .
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like "anticipate," "expect," "project," "believe," "plan," "estimate," "intend" and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. These forward-looking statements include, among other things, statements regarding our expected net sales, GAAP earnings and adjusted earnings for the second quarter and full year 2013; our financial performance; our business plans; our growth initiatives and expected impact; our positioning for revenue and earnings per share growth. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. These risks and uncertainties, in some cases, have affected and in the future could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this press release. As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements.
Use of Non-GAAP Financial Information
A reconciliation of the company's non-GAAP financial measures to the corresponding GAAP measures, and an explanation of the company's use of these non-GAAP financial measures, is included in the exhibits attached to this news release.
Denise Kaigler 508-650-8330 (office) Global Corporate Communications Boston Scientific Corporation [email protected]
Steven Campanini 508-652-5740 (office) Global Media Relations Boston Scientific Corporation [email protected]
Michael Campbell 508-650-8023 (office) Investor Relations Boston Scientific Corporation [email protected]
| BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED GAAP RESULTS OF OPERATIONS (Unaudited) | ||||||
| Three Months Ended | ||||||
| March 31, | ||||||
| in millions, except per share data | 2013 | 2012 | ||||
| Net sales | $ | 1,761 | $ | 1,866 | ||
| Cost of products sold | 578 | 631 | ||||
| Gross profit | 1,183 | 1,235 | ||||
| Operating expenses: | ||||||
| Selling, general and administrative expenses | 631 | 659 | ||||
| Research and development expenses | 204 | 215 | ||||
| Royalty expense | 41 | 48 | ||||
| Amortization expense | 103 | 97 | ||||
| Goodwill impairment charge | 423 | — | ||||
| Contingent consideration expense (benefit) | (23) | 10 | ||||
| Restructuring charges | 10 | 10 | ||||
| Gain on divestiture | (6) | — | ||||
| Litigation-related charges | 130 | — | ||||
| 1,513 | 1,039 | |||||
| Operating income (loss) | (330) | 196 | ||||
| Other income (expense): | ||||||
| Interest expense | (65) | (69) | ||||
| Other, net | 1 | (4) | ||||
| Income (loss) before income taxes | (394) | 123 | ||||
| Income tax expense (benefit) | (40) | 10 | ||||
| Net income (loss) | $ | (354) | $ | 113 | ||
| Net income (loss) per common share - basic | $ | (0.26) | $ | 0.08 | ||
| Net income (loss) per common share - assuming dilution | $ | (0.26) | $ | 0.08 | ||
| Weighted-average shares outstanding | ||||||
| Basic | 1,351.9 | 1,445.2 | ||||
| Assuming dilution | 1,351.9 | 1,454.1 |
| BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| As of | |||||||||
| March 31, | December 31, | ||||||||
| in millions, except share data | 2013 | 2012 | |||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 268 | $ | 207 | |||||
| Trade accounts receivable, net | 1,232 | 1,217 | |||||||
| Inventories | 851 | 884 | |||||||
| Deferred income taxes | 431 | 433 | |||||||
| Prepaid expenses and other current assets | 320 | 281 | |||||||
| Total current assets | 3,102 | 3,022 | |||||||
| Property, plant and equipment, net | 1,537 | 1,564 | |||||||
| Goodwill | 5,552 | 5,973 | |||||||
| Other intangible assets, net | 6,177 | 6,289 | |||||||
| Other long-term assets | 395 | 306 | |||||||
| $ | 16,763 | $ | 17,154 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Current debt obligations | $ | 4 | $ | 4 | |||||
| Accounts payable | 206 | 232 | |||||||
| Accrued expenses | 1,186 | 1,284 | |||||||
| Other current liabilities | 240 | 252 | |||||||
| Total current liabilities | 1,636 | 1,772 | |||||||
| Long-term debt | 4,250 | 4,252 | |||||||
| Deferred income taxes | 1,710 | 1,713 | |||||||
| Other long-term liabilities | 2,664 | 2,547 | |||||||
| Commitments and contingencies | |||||||||
| Stockholders' equity | |||||||||
| Preferred stock, $.01 par value - authorized 50,000,000 | |||||||||
| shares, none issued and outstanding | |||||||||
| Common stock, $.01 par value - authorized 2,000,000,000 | |||||||||
| shares and issued 1,550,162,126 shares as of March 31, | |||||||||
| 2013 and 1,542,347,188 shares as of December 31, 2012 | 16 | 15 | |||||||
| Treasury stock, at cost 199,748,332 shares as of March 31, 2013 | |||||||||
| and 186,635,532 shares as of December 31, 2012 | (1,192) | (1,092) | |||||||
| Additional paid-in capital | 16,437 | 16,429 | |||||||
| Accumulated deficit | (8,803) | (8,449) | |||||||
| Accumulated other comprehensive income (loss), net of tax | 45 | (33) | |||||||
| Total stockholders' equity | 6,503 | 6,870 | |||||||
| $ | 16,763 | $ | 17,154 |
| BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited) | |||||||||||||
| Three Months Ended March 31, 2013 | |||||||||||||
| in millions, except per share data | Pre-Tax | Tax Impact (a) | After-Tax | Impact per diluted share | |||||||||
| GAAP net income (loss) | $ | (394) | $ | 40 | $ | (354) | $ | (0.26) | |||||
| Non-GAAP adjustments: | |||||||||||||
| Goodwill impairment charge | 423 | (1) | 422 | 0.31 | * | ||||||||
| Acquisition-related net charges (credits) | (23) | — | (23) | (0.02) | * | ||||||||
| Divestiture-related charges (credits) | (5) | 2 | (3) | — | * | ||||||||
| Restructuring and restructuring-related net charges (b) | 15 | (4) | 11 | 0.01 | * | ||||||||
| Litigation-related charges | 130 | (48) | 82 | 0.06 | * | ||||||||
| Amortization expense | 103 | (14) | 89 | 0.06 | * | ||||||||
| Adjusted net income | $ | 249 | $ | (25) | $ | 224 | $ | 0.16 | |||||
| Three Months Ended March 31, 2012 | |||||||||||||
| in millions, except per share data | Pre-Tax | Tax Impact (a) | After-Tax | Impact per diluted share | |||||||||
| GAAP net income (loss) | $ | 123 | $ | (10) | $ | 113 | $ | 0.08 | |||||
| Non-GAAP adjustments: | |||||||||||||
| Acquisition-related net charges (credits) | 12 | (1) | 11 | — | |||||||||
| Divestiture-related charges (credits) | 1 | — | 1 | — | |||||||||
| Restructuring and restructuring-related charges (c ) | 17 | (4) | 13 | 0.01 | |||||||||
| Amortization expense | 97 | (15) | 82 | 0.06 | |||||||||
| Adjusted net income | $ | 250 | $ | (30) | $ | 220 | $ | 0.15 | |||||
| * Assumes dilution of 12.8 million shares for the three months ended March 31, 2013 for all or a portion of these non-GAAP adjustments. | |||||||||||||
| (a) - Amounts are tax effected at the Company's effective tax rate, unless the amount is a significant unusual or infrequently occurring item in accordance with FASB Accounting Standards Codification section 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate." | |||||||||||||
| (b) In the first quarter of 2013, pre-tax restructuring charges were $10 million and pre-tax restructuring-related charges were $5 million recorded in selling, general and administrative expenses. | |||||||||||||
| (c) In the first quarter of 2012, pre-tax restructuring charges were $10 million and pre-tax restructuring-related charges were $7 million, of which $4 million was recorded in cost of products sold and $3 million was recorded in selling, general and administrative expenses. | |||||||||||||
| An explanation of our use of these non-GAAP financial measures is provided at the end of this document. |
| BOSTON SCIENTIFIC CORPORATION SEGMENT INFORMATION (Unaudited) | |||||||||||
| Three Months Ended | |||||||||||
| SEGMENT NET SALES* | March 31, | ||||||||||
| in millions | 2013 | 2012 | ** | Change % | |||||||
| Interventional Cardiology | $ | 514 | $ | 598 | (14)% | ||||||
| Peripheral Interventions | 194 | 188 | 3% | ||||||||
| Cardiovascular | 708 | 786 | (10)% | ||||||||
| Cardiac Rhythm Management | 485 | 504 | (4)% | ||||||||
| Electrophysiology | 35 | 37 | (5)% | ||||||||
| Rhythm Management | 520 | 541 | (4)% | ||||||||
| Endoscopy | 313 | 298 | 5% | ||||||||
| Urology/Women's Health | 119 | 118 | —% | ||||||||
| Neuromodulation | 89 | 83 | 6% | ||||||||
| MedSurg | 521 | 499 | 4% | ||||||||
| Subtotal Core Businesses | 1,749 | 1,826 | (4)% | ||||||||
| Divested Businesses | 36 | 29 | N/A | ||||||||
| Foreign Currency | (24) | 11 | N/A | ||||||||
| Worldwide Net Sales | $ | 1,761 | $ | 1,866 | (6)% | ||||||
| Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. | |||||||||||
| SEGMENT OPERATING INCOME* | Three Months Ended | ||||||||||
| March 31, | |||||||||||
| in millions | 2013 | 2012 | ** | ||||||||
| Segment operating income | |||||||||||
| Cardiovascular | $ | 170 | $ | 191 | |||||||
| Rhythm Management | 63 | 83 | |||||||||
| MedSurg | 150 | 133 | |||||||||
| Operating income allocated to reportable segments | 383 | 407 | |||||||||
| Corporate expenses and currency exchange | (70) | (84) | |||||||||
| Goodwill and other intangible asset impairment charges; and acquisition-; divestiture-, restructuring-, and litigation-related net charges and credits | (540) | (30) | |||||||||
| Amortization expense | (103) | (97) | |||||||||
| Operating income (loss) | $ | (330) | $ | 196 | |||||||
| *We measure and evaluate our reportable segments based on segment net sales and operating income, excluding the impact of changes in foreign currency. Sales generated from reportable segments and divested businesses are based on internally-derived standard currency exchange rates, which may differ from year to year. We restate segment information for the prior period based on standard currency exchange rates used for the current period in order to remove the impact of currency fluctuations. We exclude from segment operating income certain corporate-related expenses and the impacts of foreign currency exchange fluctuations. In addition, transactions or adjustments that our chief operating decision maker considers to be non-recurring and/or non-operational, such as amounts related to goodwill and other intangible asset impairment charges; acquisition-, divestiture-, restructuring- and litigation-related charges and credits, as well as amortization expense, are excluded from segment operating income. | |||||||||||
| ** We have restated prior year information to conform to current year presentation. | |||||||||||
| An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document. |
| BOSTON SCIENTIFIC CORPORATION WORLDWIDE CARDIAC RHYTHM MANAGEMENT (CRM) AND CORONARY STENT SYSTEM SALES (Unaudited) | |||||||||||||||||||||
| Three Months Ended March 31 | |||||||||||||||||||||
| in millions | U.S. | International | Worldwide | ||||||||||||||||||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | ||||||||||||||||
| Defibrillator systems | $ | 221 | $ | 229 | $ | 129 | $ | 139 | $ | 350 | $ | 368 | |||||||||
| Pacemaker systems | 62 | 63 | 66 | 70 | 128 | 133 | |||||||||||||||
| Total CRM products | $ | 283 | $ | 292 | $ | 195 | $ | 209 | $ | 478 | $ | 501 | |||||||||
| in millions | U.S. | International | Worldwide | ||||||||||||||||||
| Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | Q1 2013 | Q1 2012 | ||||||||||||||||
| Drug-eluting stent systems | $ | 117 | $ | 176 | $ | 175 | $ | 187 | $ | 292 | $ | 363 | |||||||||
| Bare-metal stent systems | 5 | 7 | 13 | 17 | 18 | 24 | |||||||||||||||
| Total Coronary Stent Systems | $ | 122 | $ | 183 | $ | 188 | $ | 204 | $ | 310 | $ | 387 |
| BOSTON SCIENTIFIC CORPORATION BRIC* NET SALES (Unaudited) | ||
| Q1 2013 Percentage change in BRIC Net Sales as compared to Q1 2012 | ||
| Change | Estimated | |
| As Reported | Constant | Impact of |
| Currency | Currency | Foreign |
| Basis | Basis | Currency |
| 29% | 35% | (6)% |
| *BRIC - Countries comprised of Brazil, Russia, India and China |
| BOSTON SCIENTIFIC CORPORATION ESTIMATED NON-GAAP NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited) | |||||||||||||
| Q2 and Full Year 2013 EPS Guidance | |||||||||||||
| Q2 2013 Estimate | Full Year 2013 Estimate | ||||||||||||
| (Low) | (High) | (Low) | (High) | ||||||||||
| GAAP results | $ | 0.07 | $ | 0.10 | $ | (0.06) | $ | 0.01 | |||||
| Goodwill impairment charge | — | — | 0.31 | 0.31 | |||||||||
| Estimated acquisition-related net charges (credits) | 0.01 | 0.01 | 0.01 | 0.01 | |||||||||
| Estimated divestiture-related net credits | (0.03) | (0.03) | (0.03) | (0.03) | |||||||||
| Estimated restructuring-related charges | 0.02 | 0.02 | 0.09 | 0.07 | |||||||||
| Litigation-related charges | — | — | 0.06 | 0.06 | |||||||||
| Estimated amortization expense | 0.07 | 0.07 | 0.27 | 0.27 | |||||||||
| Adjusted results | $ | 0.14 | $ | 0.17 | $ | 0.65 | $ | 0.70 |
Use of Non-GAAP Financial Measures
To supplement our unaudited condensed consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures, including adjusted net income and adjusted net income per share that exclude certain amounts, and revenue growth rates that exclude the impact of changes in foreign currency exchange rates. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United States .
The GAAP financial measure most directly comparable to adjusted net income is GAAP net income and the GAAP financial measure most directly comparable to adjusted net income per share is GAAP net income per share. To calculate revenue growth rates that exclude the impact of changes in foreign currency exchange rates, we convert actual net sales from local currency to U.S. dollars using constant foreign currency exchange rates in the current and prior period. The GAAP financial measure most directly comparable to this non-GAAP financial measure is growth rate percentages using net sales on a GAAP basis. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included elsewhere in the accompanying schedules.
The following is an explanation of each of the adjustments that management excluded as part of these non-GAAP financial measures for the three months ended March 31, 2013 and 2012, and for the forecasted three month period ending June 30, 2013 and full year ending December 31, 2013 , as well as reasons for excluding each of these individual items:
Adjusted Net Income and Adjusted Net Income per Share:
Goodwill impairment charge - This amount represents a non-cash write-down of our goodwill balance attributable to our global Cardiac Rhythm Management reporting unit in the first quarter of 2013. We remove the impact of non-cash impairment charges from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for us in measuring our ability to generate cash and invest in our growth. Therefore, this charge is excluded from management's assessment of operating performance and is also excluded for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance, particularly in terms of liquidity.
Acquisition-related charges (credits) - These adjustments consist of (a) contingent consideration fair value adjustments, and (b) due diligence, other fees and exit costs. The contingent consideration adjustments represent accounting adjustments to state contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood and amount of future contingent consideration payments. Due diligence, other fees and exit costs include legal, tax, severance and other expenses associated with prior acquisitions that are not representative of on-going operations. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
Divestiture-related expenses (gains) - These amounts represent separation costs or recognized gains associated with the sale of our Neurovascular business in January 2011. Separation costs and gains on the sale represent those associated with the divestiture and are not representative of on-going operations. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
Discrete tax items - These items represent adjustments of certain tax positions, which were initially established in prior periods as a result of intangible asset impairment charges; acquisition-, divestiture-, restructuring- or litigation-related charges or credits. These adjustments do not reflect expected on-going operating results. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
Amortization expense - Amortization expense is a non-cash charge and does not impact our liquidity or compliance with the covenants included in our credit facility agreement. Management removes the impact of amortization from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for measuring our ability to generate cash and invest in our growth. 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 has excluded amortization expense for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance, particularly in terms of liquidity.
Revenue Growth Rates Excluding the Impact of Changes in Foreign Currency Exchange Rates
Changes in foreign currency exchange rates - The impact of changes in foreign currency exchange rates is highly variable and difficult to predict. Accordingly, management excludes the impact of changes in foreign currency exchange rates for purposes of reviewing revenue growth rates to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
Adjusted net income, adjusted net income per share and revenue growth rates that exclude certain amounts and/or the impact of changes in foreign currency exchange rates are not in accordance with U.S. GAAP and should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Further, other companies may calculate these non-GAAP financial measures differently than we do, which may limit the usefulness of those measures for comparative purposes.
SOURCE Boston Scientific Corporation