Boston Scientific Corporation Posts $272M Loss

Published: Oct 19, 2007

NATICK, Mass., Oct. 19 /PRNewswire-FirstCall/ -- Boston Scientific Corporation today announced financial results for the third quarter ended September 30, 2007, as well as guidance for net sales and earnings per share (EPS) for the fourth quarter of 2007.

Net sales for the third quarter of 2007 were $2.048 billion as compared to $2.026 billion for the third quarter of 2006. Worldwide sales of the Company's drug-eluting coronary stent systems for the third quarter of 2007 were $448 million as compared to $572 million for the third quarter of 2006. U.S. sales of drug-eluting coronary stent systems for the third quarter of 2007 were $240 million as compared to $384 million for the third quarter of 2006. International sales of drug-eluting coronary stent systems were $208 million for the third quarter of 2007 as compared to $188 million for the third quarter of 2006. Worldwide sales of coronary stent systems for the third quarter of 2007 were $507 million as compared to $607 million for the third quarter of 2006. U.S. sales of coronary stent systems for the third quarter of 2007 were $268 million as compared to $397 million for the third quarter of 2006. International sales of coronary stent systems were $239 million for the third quarter of 2007 as compared to $210 million for the third quarter of 2006.

Worldwide sales of the Company's CRM group for the third quarter of 2007 were $517 million, which included $372 million of ICD sales, as compared to worldwide CRM sales of $446 million for the third quarter of 2006, which included $315 million of ICD sales. U.S. CRM sales for the third quarter of 2007 were $343 million, which included $261 million of ICD sales, as compared to U.S. CRM sales of $296 million for the third quarter of 2006, which included $221 million of ICD sales. International CRM sales for the third quarter of 2007 were $174 million, which included $111 million of ICD sales, as compared to International CRM sales of $150 million for the third quarter of 2006, which included $94 million of ICD sales.

Reported net loss for the third quarter of 2007 was $272 million, or $0.18 per share. Reported results for the third quarter of 2007 included acquisition- and divestiture-related charges (after-tax) of $435 million, or $0.29 per share, which included a previously disclosed and expected loss of approximately $352 million, primarily associated with the impairment of goodwill in connection with the anticipated sale of our auditory and drug pump businesses and $75 million of in-process research and development related to the acquisition of Remon Medical Technologies, Inc. Adjusted net income for the quarter, excluding acquisition- and divestiture-related charges and amortization expense, was $299 million, or $0.20 per share. Reported net income for the third quarter of 2006 was $76 million, or $0.05 per share. Reported results for the third quarter of 2006 included acquisition-related charges (after-tax) of $77 million, or $0.05 per share. Adjusted net income for the third quarter of 2006, excluding acquisition-related charges and amortization expense, was $271 million, or $0.18 per share.

"The quarter represented something of a turn for us, with a number of positive developments, including our attaining the number one position in worldwide drug-eluting stent sales, significant market share growth in drug-eluting stents, strong year-over-year cardiac rhythm management growth and continued solid growth in Endosurgery," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "Going forward, the restructuring initiatives we announced earlier this week will help us better focus on our core businesses and priorities, to strengthen the Company for the future and should lead to improved, long-term, profitable sales growth."

Guidance for Fourth Quarter 2007

The Company estimates net sales for the fourth quarter of 2007 between $2.05 billion and $2.15 billion. Adjusted earnings -- excluding charges related to acquisitions, divestitures and restructuring, and amortization expense -- are estimated to be in a range of $0.14 and $0.19 per share. The Company estimates a net loss on a GAAP basis between $0.09 and $0.02 per share. GAAP guidance excludes any potential gains or losses related to disposition of previously announced business divestitures.

Boston Scientific officials will be discussing these results with analysts on a conference call at 8:00 a.m. (ET) Friday, October 19, 2007. The Company will webcast the call to all interested parties through its website: http://www.bostonscientific.com. Please see the website for details on how to access the webcast. The webcast will be available for one year on the Boston Scientific website.

Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a broad range of interventional medical specialties. For more information, please visit: http://www.bostonscientific.com.

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 and flexibility, our restructuring plan, our growth strategy, market recovery and our market position. 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 have filed or will file thereafter. 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

To supplement Boston Scientific's consolidated condensed financial statements presented on a GAAP basis, the Company discloses certain non-GAAP measures that exclude certain charges, including non-GAAP net income/loss and non-GAAP net income/loss per diluted share. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. A reconciliation of the non-GAAP financial measures to the corresponding GAAP measures is included in the tables below. In addition, an explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included under "Use of Non-GAAP Financial Measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for financial information prepared in accordance with GAAP.

NOTE - An explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non-GAAP measures provide useful information to investors is included in the exhibit labeled "Use of Non-GAAP Financial Measures."

An explanation of the ways in which Boston Scientific management uses these non-GAAP measures to evaluate its business, the substance behind Boston Scientific management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which Boston Scientific management compensates for those limitations, and the substantive reasons why Boston Scientific management believes that these non- GAAP measures provide useful information to investors is included in the exhibit labeled "Use of Non-GAAP Financial Measures."

Use of Non-GAAP Financial Measures

To supplement Boston Scientific's consolidated condensed financial statements presented on a GAAP basis; the Company discloses certain non-GAAP measures that exclude certain charges, including non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.

The GAAP measure most comparable to non-GAAP net income is GAAP net income and the GAAP measure most comparable to non-GAAP net income per diluted share is GAAP net income per diluted share. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measure are included in the accompanying schedules.

To calculate regional and divisional revenue growth rates that exclude the impact of foreign exchange, the Company converts actual current-period net sales from local currency to U.S. dollars using constant foreign exchange rates. The GAAP measure most comparable to this non-GAAP measure is growth rate percentages based on GAAP revenue. A reconciliation of this non-GAAP financial measure to the corresponding GAAP measure is included in the 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 and nine month periods ending September 30, 2007 and September 30, 2006 and for the forecasted three month period ending December 31, 2007, as well as reasons for excluding each of these individual items:

Material Limitations Associated with the Use of Non-GAAP Financial Measures

Non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are:

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. Disclosure of these non-GAAP financial measures may also facilitate comparisons of Boston Scientific's operating performance with the performance of other companies that supplement their GAAP results with non-GAAP financial measures.

CONTACT: Media Relations, Paul Donovan, +1-508-650-8541 (office), or
+1-508-667-5165 (mobile), or Investor Relations, Dan Brennan,
+1-508-650-8538 (office), or +1-617-459-2703 (mobile), both of Boston
Scientific Corporation

Web site: http://www.bostonscientific.com/

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Boston Scientific Corporation Posts $272M Loss

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