Boston Scientific Exceeds Third Quarter EPS Guidance, Repurchases 30 Million Shares Boston Scientific Corporation (NYSE: BSX) announces financial results for the third quarter ended September 30, 2011, as well as updated sales and...

NATICK, Mass. , Oct. 20, 2011 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX ) announces financial results for the third quarter ended September 30, 2011 , as well as updated sales and earnings per share (EPS) guidance for the fourth quarter and full year 2011.

Third quarter and other highlights:

"Boston Scientific's earnings performance remains strong, despite very challenging global economic and end-market conditions that adversely impacted revenue," stated Hank Kucheman , Chief Executive Officer of Boston Scientific Corporation. "The execution of the Company's POWER strategy is the right top priority for the entire leadership team."

Sales for the third quarter of 2011 were $1.874 billion , as compared to sales of $1.916 billion for the third quarter of 2010, a decrease of 2 percent. Excluding the impact of changes in foreign currency exchange rates and sales from divested businesses, sales decreased 3 percent as compared to the prior period.

Worldwide sales for the third quarter - on a constant currency and as reported basis - were as follows:

On a GAAP basis, net income for the third quarter of 2011 was $142 million , or $0.09 per share. These results included intangible asset impairment charges, acquisition-related charges, divestiture-related net credits, restructuring-related charges, discrete tax benefits and amortization expense totaling $81 million , or $0.06 per share, which consisted of:

Adjusted net income for the third quarter of 2011, excluding these net charges, was $223 million , or $0.15 per share.

On a GAAP basis, net income for the third quarter of 2010 was $190 million , or $0.12 per share. Reported results included intangible asset impairment charges, restructuring-related charges, discrete tax items, and amortization expense (after-tax) totaling $106 million , or $0.07 per share. Adjusted net income for the third quarter of 2010, excluding these net charges, was $296 million , or $0.19 per share.

Guidance for Fourth Quarter and Full Year 2011

The Company estimates sales for the fourth quarter of 2011 in a range of $1.850 to $1.950 billion . Compared to sales for the fourth quarter of 2010, this range assumes a $64 million negative impact from the divestiture of the Neurovascular business. Recent acquisitions are not expected to contribute significantly to fourth quarter sales. The Company estimates earnings on a GAAP basis in a range of $0.05 to $0.11 per share. Adjusted earnings, excluding restructuring-related net charges and amortization expense, are estimated in a range of $0.13 to $0.16 per share. Recent acquisitions are expected to dilute fourth quarter 2011 adjusted earnings by approximately $0.01 per share as compared to the prior year, and the divestiture of the Neurovascular business is expected to dilute fourth quarter 2011 adjusted earnings by $0.01 per share.

The Company now estimates sales for the full year 2011 in a range of $7.624 to $7.724 billion . Compared to full year 2010 sales, this range now assumes a $204 million negative impact from the divestiture of the Neurovascular business. Recent acquisitions are not expected to contribute significantly to 2011 sales. The Company now estimates earnings on a GAAP basis in a range of $0.27 to $0.33 per share. Adjusted earnings, excluding goodwill and other intangible asset impairment charges; acquisition-, divestiture-, and restructuring-related net credits; discrete tax items; and amortization expense, are being updated from previous guidance of $0.64 to $0.70 per share to an estimated range of $0.67 to $0.70 per share. Recent acquisitions are expected to dilute full year 2011 adjusted earnings by approximately $0.04 per share as compared to the prior year, and the divestiture of the Neurovascular business is expected to dilute full year 2011 adjusted earnings by $0.04 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 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.

About Boston Scientific

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 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 fourth quarter and full year 2011, including expected impacts of acquisitions and the Neurovascular divestiture; our financial performance; and our POWER strategy. 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 press release.

* Assumes dilution of 9.2 million shares for the nine months ended September 30, 2010 for all or a portion of these non-GAAP adjustments.

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

(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) Recorded to selling, general and administrative expenses.

(c) Recorded to cost of products sold.

(d) In the third quarter of 2011, recorded $1 million to cost of products sold. In the first nine months of 2011, recorded $2 million to cost of products sold, $1 million to selling, general and administrative expenses and $1 million to research and development expenses.

(e) Recorded to other, net.

(f) In the third quarter of 2011, recorded $7 million to cost of products sold. In the third quarter of 2010, recorded $12 million to cost of products sold and $1 million to selling, general and administrative expenses. In the first nine months of 2011, recorded $28 million to cost of products sold and $4 million to selling, general and administrative expenses. In the first nine months of 2010, recorded $38 million to cost of products sold and $3 million to 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.

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 financial 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 financial measures is provided at the end of this document.

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

An explanation of the Company's use of these non-GAAP financial 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 consolidated financial statements presented on a GAAP basis, the Company discloses certain non-GAAP financial measures, including adjusted net income and adjusted net income per share that exclude certain amounts and regional and divisional 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 regional and divisional revenue growth rates that exclude the impact of changes in foreign currency exchange rates, the Company converts 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 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 and nine months ended September 30, 2011 and 2010 and for the forecasted three month and full year periods ending December 31, 2011 , 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 - These amounts represent non-cash net write-downs of the Company's goodwill balance attributable to its U.S. Cardiac Rhythm Management business, as well as certain intangible asset balances. 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 invest in the Company's growth. 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 has excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance, particularly in terms of liquidity.

Acquisition-related charges (credits) - These adjustments consist of (a) acquisition-related gains on previously held equity interests, (b) contingent consideration expense, (c) a gain on an acquisition-related milestone receipt, (d) due diligence, other fees and exit costs, and (e) an inventory step-up adjustment. The acquisition-related gains on previously held equity interests is a non-recurring benefit associated with acquisitions completed in the first quarter of 2011. Contingent consideration expense is a non-cash charge representing 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. The gain on an acquisition-related milestone resulted from a 2010 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. 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. The inventory step-up adjustment is a non-cash charge related to acquired inventory directly attributable to prior acquisitions and is not indicative of the Company's on-going operations, or on-going cost of products sold. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance.

Divestiture-related (credits) charges - These amounts represent (a) gains resulting from business divestitures and (b) fees and separation costs associated with business divestitures. The Company completed the sale of its Neurovascular business in January 2011 and the resulting gain is not indicative of future operating performance and is not used by management to assess operating performance. Fees and separation costs represent those associated with the Company's divestiture of its Neurovascular business 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 the Company's current operating performance and a 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 intangible asset impairment charges; acquisition-, divestiture-, restructuring- or litigation-related charges (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 the Company's current operating performance and a 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 credit facility agreement. 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 invest in the Company's 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 the Company's current operating performance, particularly in terms of liquidity.

Regional and Divisional 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 regional and divisional revenue growth rates to facilitate an evaluation of the Company's current operating performance and a comparison to the Company's past operating performance.

Adjusted net income, adjusted net income per share and regional and divisional revenue growth rates that exclude the impact of changes in foreign currency exchange rates are not in accordance with generally accepted accounting principles in the United States 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 Boston Scientific does, which may limit the usefulness of those measures for comparative purposes.

SOURCE Boston Scientific Corporation