Full Press Release Details
NATICK, Mass. , April 29, 2014 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX ) generated sales of $1.774 billion during the first quarter ended March 31, 2014 . This represents 4 percent operational revenue growth (constant currency basis, excluding divested businesses) and 1 percent revenue growth on a reported basis, all compared to the prior year period. The company also achieved adjusted earnings per share of $0.20 in the period, compared to $0.16 a year ago, and GAAP earnings per share during the period of $0.10 , compared to a GAAP loss per share of $(0.26) a year ago.
"I am pleased with our overall performance in the first quarter as our team delivered accelerated EPS and consistent revenue growth," stated Mike Mahoney , president and chief executive officer, Boston Scientific Corporation. "Our international businesses performed very well in the quarter as we continued to diversify geographically. We remain confident in both our outlook for the year and in our strategy."
First quarter financial results and recent developments:
Worldwide sales for the first quarter:
| Three Months Ended | |||||||||||||||
| March 31, | % Change | ||||||||||||||
| in millions | 2014 | 2013 | As Reported Basis | Less: Impact of Foreign Currency | Constant Currency Basis | ||||||||||
| (restated) | |||||||||||||||
| Interventional Cardiology | $ | 497 | $ | 505 | (2)% | $ | (11) | (3)% | 1% | ||||||
| Peripheral Interventions | 203 | 196 | 3% | (4) | (2)% | 5% | |||||||||
| Cardiovascular | 700 | 701 | 0% | (15) | (2)% | 2% | |||||||||
| Cardiac Rhythm Management | 466 | 478 | (3)% | (1) | (1)% | (2)% | |||||||||
| Electrophysiology | 58 | 35 | 68% | (1) | 0% | 68% | |||||||||
| Rhythm Management | 524 | 513 | 2% | (2) | 0% | 3% | |||||||||
| Endoscopy | 314 | 304 | 3% | (6) | (2)% | 5% | |||||||||
| Urology and Women's Health | 125 | 118 | 6% | (2) | (2)% | 8% | |||||||||
| Neuromodulation | 109 | 89 | 23% | — | 0% | 23% | |||||||||
| MedSurg | 548 | 511 | 7% | (8) | (2)% | 9% | |||||||||
| Subtotal Core Businesses | 1,772 | 1,725 | 3% | (25) | (1)% | 4% | |||||||||
| Divested Businesses | 2 | 36 | (95)% | — | 0% | (95)% | |||||||||
| Worldwide Net Sales | $ | 1,774 | $ | 1,761 | 1% | $ | (25) | (1)% | 2% | ||||||
| Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. | |||||||||||||||
| The company restated worldwide sales for the three months ended March 31, 2013 to reflect the realignment of certain product lines from Endoscopy to Peripheral Interventions as of January 1, 2014. | |||||||||||||||
| Sales growth rates that exclude the impact of sales from divested businesses and/or 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 income for the first quarter of 2014 was $133 million , or $0.10 per share. These results included intangible asset impairment charges, acquisition- and divestiture- and litigation-related net credits, restructuring-related charges, discrete tax items, and amortization expense, of $135 million (after-tax) or $0.10 per share. Adjusted net income for the first quarter of 2014, excluding these net charges, was $268 million , or $0.20 per share.
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.
Guidance for Full Year and Second Quarter 2014
The company continues to estimate revenue for the full year 2014 to be in a range of $7.300 to $7.500 billion , which represents growth in a range of 2 to 5 percent on a reported basis and 3 to 5 percent on an operational basis. The company now estimates income on a GAAP basis in a range of $0.36 to $0.41 per share (compared to prior guidance of $0.35 to $0.40 ), and adjusted earnings, excluding intangible asset impairment charges, acquisition- and divestiture-, litigation-, and restructuring-related charges and credits, discrete tax items, and amortization expense, in a range of $0.77 to $0.82 per share (compared to prior guidance of $0.75 to $0.80 ).
The company estimates sales for the second quarter of 2014 in a range of $1.840 to $1.890 billion . The company estimates earnings on a GAAP basis in a range of $0.06 to $0.08 per share. Adjusted earnings, excluding acquisition- and divestiture- and restructuring-related charges and amortization expense, are estimated in a range of $0.18 to $0.20 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 www.bostonscientific.com and connect on Twitter and Facebook .
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 and operational revenue growth rates, GAAP earnings and adjusted earnings for the second quarter and full year 2014; our financial performance; clinical trials; product performance; our business plans; and our positioning for revenue and earnings 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.
| CONTACT: | |
| Media: | Denise Kaigler |
| 508-650-8330 (office) | |
| Corporate Affairs & Communications | |
| Boston Scientific Corporation | |
| [email protected] |
| Investors: | Susan Lisa, CFA |
| 508-652-5345 (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 | 2014 | 2013 | ||||
| Net sales | $ | 1,774 | $ | 1,761 | ||
| Cost of products sold | 537 | 578 | ||||
| Gross profit | 1,237 | 1,183 | ||||
| Operating expenses: | ||||||
| Selling, general and administrative expenses | 666 | 631 | ||||
| Research and development expenses | 191 | 204 | ||||
| Royalty expense | 40 | 41 | ||||
| Amortization expense | 109 | 103 | ||||
| Goodwill impairment charge | — | 423 | ||||
| Intangible asset impairment charges | 55 | — | ||||
| Contingent consideration (benefit) expense | (22) | (23) | ||||
| Restructuring charges | 20 | 10 | ||||
| Divestiture-related (gains) charges | (12) | (6) | ||||
| Litigation-related (credits) charges | (7) | 130 | ||||
| 1,040 | 1,513 | |||||
| Operating (loss) income | 197 | (330) | ||||
| Other (expense) income: | ||||||
| Interest expense | (54) | (65) | ||||
| Other, net | 3 | 1 | ||||
| Income (loss) before income taxes | 146 | (394) | ||||
| Income tax expense (benefit) | 13 | (40) | ||||
| Net income (loss) | $ | 133 | $ | (354) | ||
| Net income (loss) per common share - basic | $ | 0.10 | $ | (0.26) | ||
| Net income (loss) per common share - assuming dilution | $ | 0.10 | $ | (0.26) | ||
| Weighted-average shares outstanding | ||||||
| Basic | 1,321.7 | 1,351.9 | ||||
| Assuming dilution | 1,349.2 | 1,351.9 |
| BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| As of | |||||||||
| March 31, | December 31, | ||||||||
| in millions, except share data | 2014 | 2013 | |||||||
| (Unaudited) | |||||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | $ | 191 | $ | 217 | |||||
| Trade accounts receivable, net | 1,217 | 1,307 | |||||||
| Inventories | 926 | 897 | |||||||
| Deferred income taxes | 279 | 288 | |||||||
| Prepaid expenses and other current assets | 323 | 302 | |||||||
| Total current assets | 2,936 | 3,011 | |||||||
| Property, plant and equipment, net | 1,539 | 1,546 | |||||||
| Goodwill | 5,697 | 5,693 | |||||||
| Other intangible assets, net | 5,802 | 5,950 | |||||||
| Other long-term assets | 361 | 371 | |||||||
| $ | 16,335 | $ | 16,571 | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| Current liabilities: | |||||||||
| Current debt obligations | $ | 4 | $ | 3 | |||||
| Accounts payable | 241 | 246 | |||||||
| Accrued expenses | 1,275 | 1,348 | |||||||
| Other current liabilities | 199 | 227 | |||||||
| Total current liabilities | 1,719 | 1,824 | |||||||
| Long-term debt | 4,245 | 4,237 | |||||||
| Deferred income taxes | 1,439 | 1,402 | |||||||
| Other long-term liabilities | 2,398 | 2,569 | |||||||
| 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 - issued 1,570,033,861 shares as of March 31, | |||||||||
| 2014 and 1,560,302,634 shares as of December 31, 2013 | 16 | 16 | |||||||
| Treasury stock, at cost - 247,566,270 shares as of March 31, | |||||||||
| 2014 and 238,006,570 shares as of December 31, 2013 | (1,717) | (1,592) | |||||||
| Additional paid-in capital | 16,599 | 16,579 | |||||||
| Accumulated deficit | (8,436) | (8,570) | |||||||
| Accumulated other comprehensive income (loss), net of tax | 72 | 106 | |||||||
| Total stockholders' equity | 6,534 | 6,539 | |||||||
| $ | 16,335 | $ | 16,571 |
| BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited) | |||||||||||||
| Three Months Ended March 31, 2014 | |||||||||||||
| in millions, except per share data | Pre-Tax | Tax Impact (a) | After-Tax | Impact per diluted share | |||||||||
| GAAP net income (loss) | $ | 146 | $ | (13) | $ | 133 | $ | 0.10 | |||||
| Non-GAAP adjustments: | |||||||||||||
| Intangible impairment charges | 55 | (6) | 49 | 0.04 | |||||||||
| Acquisition-related and divestiture-related net credits | (27) | (1) | (28) | (0.02) | |||||||||
| Restructuring and restructuring-related net charges (b) | 28 | (7) | 21 | 0.01 | |||||||||
| Discrete tax items | — | 2 | 2 | 0.00 | |||||||||
| Litigation-related credits | (7) | 1 | (6) | (0.00) | |||||||||
| Amortization expense | 109 | (12) | 97 | 0.07 | |||||||||
| Adjusted net income | $ | 304 | $ | (36) | $ | 268 | $ | 0.20 | |||||
| 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 and divestiture-related net credits | (28) | 2 | (26) | (0.02) | * | ||||||||
| Restructuring and restructuring-related net charges (c) | 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 | |||||
| * 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 2014, pre-tax restructuring charges were $20 million and pre-tax restructuring- related charges were $8 million, of which $2 million was recorded in cost of products sold and $6 million was recorded in selling, general and administrative expenses. | |||||||||||||
| (c) 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. | |||||||||||||
| An explanation of the company's 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 | 2014 | 2013 | Change | ||||||
| (restated) | |||||||||
| Interventional Cardiology | $ | 501 | $ | 498 | 1% | ||||
| Peripheral Interventions | 204 | 193 | 5% | ||||||
| Cardiovascular | 705 | 691 | 2% | ||||||
| Cardiac Rhythm Management | 464 | 475 | (2)% | ||||||
| Electrophysiology | 58 | 34 | 68% | ||||||
| Rhythm Management | 522 | 509 | 3% | ||||||
| Endoscopy | 316 | 300 | 5% | ||||||
| Urology and Women's Health | 126 | 117 | 8% | ||||||
| Neuromodulation | 109 | 89 | 23% | ||||||
| MedSurg | 551 | 506 | 9% | ||||||
| Subtotal Core Businesses | 1,778 | 1,706 | 4% | ||||||
| Divested Businesses | 2 | 36 | (95)% | ||||||
| Foreign Currency | (6) | 19 | N/A | ||||||
| Worldwide Net Sales | $ | 1,774 | $ | 1,761 | 1% | ||||
| Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. | |||||||||
| Three Months Ended | |||||||||
| SEGMENT OPERATING INCOME* | March 31, | ||||||||
| in millions | 2014 | 2013 | |||||||
| (restated) | |||||||||
| Segment operating income | |||||||||
| Cardiovascular | $ | 171 | $ | 158 | |||||
| Rhythm Management | 66 | 57 | |||||||
| MedSurg | 168 | 140 | |||||||
| Operating income allocated to reportable segments | 405 | 355 | |||||||
| Corporate expenses and currency exchange | (50) | (42) | |||||||
| Goodwill and other intangible asset impairment charges; and acquisition-, divestiture-, restructuring-, and litigation-related charges and credits | (49) | (540) | |||||||
| Amortization expense | (109) | (103) | |||||||
| Operating income (loss) | $ | 197 | $ | (330) | |||||
| *The company measures and evaluates reportable segments based on segment net sales and operating income, excluding the impact of changes in foreign currency and sales from divested businesses. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and corporate expenses, are based on internally-derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. Excluded from segment operating income are certain corporate-related expenses and certain transactions or adjustments that the company's 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- and divestiture-, restructuring- and litigation-related charges and credits; debt extinguishment charges; and amortization expense. Although these amounts are excluded from segment operating income, they are included in reported consolidated operating income (loss) and are included in the reconciliation above. | |||||||||
| The company restated segment information for the prior period based on standard currency exchange rates used for the current period in order to remove the impact of foreign currency exchange fluctuation, and for the realignment of certain product lines from Endoscopy to Peripheral Interventions as of January 1, 2014. | |||||||||
| An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document. |
| BOSTON SCIENTIFIC CORPORATION PRIOR YEAR RESTATED SEGMENT INFORMATION (Unaudited) | ||||||||||||||
| SEGMENT NET SALES* | Three Months Ended | |||||||||||||
| in millions | June 30, 2013 | September 30, 2013 | December 31, 2013 | Full Year 2013 | ||||||||||
| (restated) | (restated) | (restated) | (restated) | |||||||||||
| Interventional Cardiology | $ | 521 | $ | 474 | $ | 501 | $ | 1,994 | ||||||
| Peripheral Interventions | 204 | 200 | 208 | 805 | ||||||||||
| Cardiovascular | 725 | 674 | 709 | 2,799 | ||||||||||
| Cardiac Rhythm Management | 476 | 465 | 466 | 1,882 | ||||||||||
| Electrophysiology | 36 | 35 | 50 | 155 | ||||||||||
| Rhythm Management | 512 | 500 | 516 | 2,037 | ||||||||||
| Endoscopy | 320 | 319 | 338 | 1,277 | ||||||||||
| Urology and Women's Health | 124 | 131 | 133 | 505 | ||||||||||
| Neuromodulation | 111 | 116 | 138 | 454 | ||||||||||
| MedSurg | 555 | 566 | 609 | 2,236 | ||||||||||
| Subtotal Core Businesses | 1,792 | 1,740 | 1,834 | 7,072 | ||||||||||
| Divested Businesses | 19 | 2 | 2 | 59 | ||||||||||
| Foreign Currency | (2) | (7) | 2 | 12 | ||||||||||
| Worldwide Net Sales | $ | 1,809 | $ | 1,735 | $ | 1,838 | $ | 7,143 | ||||||
| SEGMENT OPERATING INCOME* | Three Months Ended | |||||||||||||
| in millions | June 30, 2013 | September 30, 2013 | December 31, 2013 | Full Year 2013 | ||||||||||
| (restated) | (restated) | (restated) | (restated) | |||||||||||
| Segment operating income | ||||||||||||||
| Cardiovascular | $ | 182 | $ | 175 | $ | 150 | $ | 665 | ||||||
| Rhythm Management | 56 | 63 | 35 | 211 | ||||||||||
| MedSurg | 171 | 176 | 192 | 679 | ||||||||||
| Operating income allocated to reportable segments | 409 | 414 | 377 | 1,555 | ||||||||||
| Corporate expenses and currency exchange | (48) | (78) | (34) | (203) | ||||||||||
| Goodwill and other intangible asset impairment charges; and acquisition-, divestiture-, restructuring-, and litigation-related charges and credits | (40) | (132) | (110) | (822) | ||||||||||
| Amortization expense | (101) | (101) | (106) | (410) | ||||||||||
| Operating income (loss) | $ | 220 | $ | 103 | $ | 127 | $ | 120 | ||||||
| *The company measures and evaluates reportable segments based on segment net sales and operating income, excluding the impact of changes in foreign currency and sales from divested businesses. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and corporate expenses, are based on internally-derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. Excluded from segment operating income are certain corporate-related expenses and certain transactions or adjustments that the company's 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- and divestiture-, restructuring- and litigation-related charges and credits; debt extinguishment charges; and amortization expense. Although these amounts are excluded from segment operating income, they are included in reported consolidated operating income (loss) and are included in the reconciliation above. | ||||||||||||||
| The company restated segment information for the prior period based on standard currency exchange rates used for the current period in order to remove the impact of foreign currency exchange fluctuation, and for the realignment of certain product lines from Endoscopy to Peripheral Interventions as of January 1, 2014. | ||||||||||||||
| 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 2014 | Q1 2013 | Q1 2014 | Q1 2013 | Q1 2014 | Q1 2013 | ||||||||||||||||
| Defibrillator systems | $ | 208 | $ | 221 | $ | 131 | $ | 129 | $ | 339 | $ | 350 | |||||||||
| Pacemaker systems | 62 | 62 | 65 | 66 | 127 | 128 | |||||||||||||||
| Total CRM products | $ | 270 | $ | 283 | $ | 196 | $ | 195 | $ | 466 | $ | 478 | |||||||||
| in millions | U.S. | International | Worldwide | ||||||||||||||||||
| Q1 2014 | Q1 2013 | Q1 2014 | Q1 2013 | Q1 2014 | Q1 2013 | ||||||||||||||||
| Drug-eluting stent systems | $ | 118 | $ | 117 | $ | 158 | $ | 175 | $ | 276 | $ | 292 | |||||||||
| Bare-metal stent systems | 4 | 5 | 9 | 13 | 13 | 18 | |||||||||||||||
| Total Coronary Stent Systems | $ | 122 | $ | 122 | $ | 167 | $ | 188 | $ | 289 | $ | 310 |
| BOSTON SCIENTIFIC CORPORATION INTERNATIONAL AND EMERGING MARKETS* NET SALES (Unaudited) | |||
| Q1 2014 International Net Sales as compared to Q1 2013 | |||
| Estimated | |||
| As Reported | Constant | Impact of | |
| Currency | Currency | Foreign | |
| Basis | Basis | Currency | |
| Percentage change in net sales | 5% | 8% | (3)% |
| Q1 2014 Emerging Markets Net Sales as compared to Q1 2013 | |||
| Estimated | |||
| As Reported | Constant | Impact of | |
| Currency | Currency | Foreign | |
| Basis | Basis | Currency | |
| Percentage change in net sales | 14% | 22% | (8)% |
| Percentage of total company sales | 9% | 9% | 0% |
| * The company defines Emerging Markets as including certain developing countries that it believes have strong growth potential based on their economic conditions, healthcare sectors, and our global capabilities. Currently, the company includes 20 countries, in which it is seeking to expand its presence and strengthen relationships in order to grow net sales and market share. |
An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.
| BOSTON SCIENTIFIC CORPORATION ESTIMATED NON-GAAP NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited) | ||||||||||||||||||||
| Q2 and Full Year 2014 EPS Guidance | ||||||||||||||||||||
| Q2 2014 Estimate | Full Year 2014 Estimate | Prior Full Year 2014 Estimate | ||||||||||||||||||
| (Low) | (High) | (Low) | (High) | (Low) | (High) | |||||||||||||||
| GAAP results | $ | 0.06 | $ | 0.08 | $ | 0.36 | $ | 0.41 | $ | 0.35 | $ | 0.40 | ||||||||
| Intangible asset impairment charges | — | — | 0.04 | 0.04 | — | — | ||||||||||||||
| Estimated acquisition- and divestiture-related net charges | 0.03 | 0.03 | 0.03 | 0.03 | 0.06 | 0.06 | ||||||||||||||
| Estimated restructuring-related charges | 0.02 | 0.02 | 0.06 | 0.06 | 0.06 | 0.06 | ||||||||||||||
| Litigation-related (credits) charges | — | — | (0.00) | (0.00) | — | — | ||||||||||||||
| Estimated amortization expense | 0.07 | 0.07 | 0.28 | 0.28 | 0.28 | 0.28 | ||||||||||||||
| Discrete tax items | — | — | 0.00 | 0.00 | — | — | ||||||||||||||
| Adjusted results | $ | 0.18 | $ | 0.20 | $ | 0.77 | $ | 0.82 | $ | 0.75 | $ | 0.80 |
An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.
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 sales from divested businesses and/or 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 and the non-GAAP financial measure that excludes sales from divested businesses 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 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, 2014 and 2013, and for the forecasted three month period ending June 30, 2014 and full year ending December 31, 2014 , as well as reasons for excluding each of these individual items:
Adjusted Net Income and Adjusted Net Income per Share:
Goodwill and other intangible asset impairment charges - This amount represents (a) non-cash write-downs of certain intangible asset balances in the first quarter of 2014; and (b) 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, these charges are excluded from management's assessment of operating performance and are 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- and divestiture-related charges (credits) - These adjustments consist of (a) contingent consideration fair value adjustments; (b) due diligence, other fees and exit costs; and (c) separation costs and gains primarily associated with the sale of our Neurovascular business in January 2011. 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 and potential future acquisitions and divestitures that can be highly variable and not representative of on-going operations. Separation costs and gains on the sale of a business unit primarily represent those associated with the Neurovascular 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.
Revenue Growth Rates Excluding the Impact of Sales from Divested Businesses and/or Changes in Foreign Currency Exchange Rates
Sales from divested businesses and/or changes in foreign currency exchange rates - Sales from divested businesses are primarily associated with the Neurovascular divestiture and are not representative of on-going operations. The impact of changes in foreign currency exchange rates is highly variable and difficult to predict. Accordingly, management excludes the impact of sales from divested businesses and/or 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, such as the sales from divested businesses 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