NATICK, Mass., July 20 /PRNewswire-FirstCall/ -- Boston Scientific Corporation today announced financial results for the second quarter ended June 30, 2007, as well as guidance for net sales and earnings per share (EPS) for the third quarter of 2007.
Highlights -- Recorded net sales of $2.071 billion, GAAP EPS of $0.08 and adjusted* EPS of $0.18 -- Delivered operating results in the upper half of the Company's sales and EPS ranges -- Achieved double-digit year-over-year sales growth in all three Endosurgery businesses -- Launched TAXUS(R) Express2(TM) in Japan -- Resolved CRM warning letter -- Reached agreement to settle Guidant Multi-District Litigation lawsuits -- Marked three years of DES market leadership in the U.S.
Net sales for the second quarter of 2007 were $2.071 billion as compared to $2.110 billion for the second quarter of 2006 and $2.086 billion for the first quarter of 2007. On a pro-forma basis - as though the Company had acquired Guidant on January 1, 2006 - net sales for the second quarter of 2006 were $2.213 billion. The second quarter 2007 operating results include the Company's Cardiac Rhythm Management (CRM) and Cardiac Surgery businesses, which were acquired as part of Guidant on April 21, 2006. Worldwide sales of the Company's CRM group for the second quarter of 2007 were $524 million, which included $377 million of implantable cardioverter defibrillator (ICD) sales, as compared to CRM sales of $539 million for the first quarter of 2007, which included $398 million of ICD sales. U.S. CRM sales for the second quarter of 2007 were $332 million, which included $253 million of ICD sales, as compared to U.S. CRM sales of $349 million for the first quarter of 2007, which included $273 million of ICD sales. International CRM sales for the second quarter of 2007 were $192 million, which included $124 million of ICD sales, as compared to International CRM sales of $190 million for the first quarter of 2007, which included $125 million of ICD sales.
On a pro-forma basis, worldwide CRM sales for the second quarter of 2006 were $529 million, which included $383 million of ICD sales. Pro-forma U.S. CRM sales for the second quarter of 2006 were $354 million, which included $273 million of ICD sales. Pro-forma International CRM sales for the second quarter of 2006 were $175 million, which included $110 million of ICD sales.
Worldwide sales of the Company's drug-eluting coronary stent systems for the second quarter of 2007 were $437 million as compared to $647 million for the second quarter of 2006 and $468 million for the first quarter of 2007. U.S. sales of drug-eluting coronary stent systems for the second quarter of 2007 were $249 million as compared to $429 million for the second quarter of 2006 and $293 million for the first quarter of 2007. International sales of drug-eluting stent systems for the second quarter of 2007 were $188 million as compared to $218 million for the second quarter of 2006 and $175 million for the first quarter of 2007. Worldwide sales of coronary stent systems for the second quarter of 2007 were $498 million as compared to $681 million for the second quarter of 2006 and $527 million for the first quarter of 2007. U.S. sales of coronary stent systems for the second quarter of 2007 were $275 million as compared to $440 million for the second quarter of 2006 and $317 million for the first quarter of 2007. International sales of coronary stent systems for the second quarter of 2007 were $223 million as compared to $241 million for the second quarter of 2006 and $210 million for the first quarter of 2007.
GAAP net income for the second quarter of 2007 was $115 million, or $0.08 per share, on 1.5 billion weighted average shares outstanding. GAAP results for the second quarter of 2007 included net special charges (after-tax) of $9 million, or less than $0.01 per share, which consisted primarily of charges attributable to investment portfolio activity, integration of the Guidant acquisition and discrete tax items. GAAP net loss for the second quarter of 2006 was $4.262 billion, or $3.21 per share. GAAP results for the second quarter of 2006 included net special charges (after-tax) of $4.541 billion, or $3.42 per share.
Adjusted net income for the quarter, excluding net special charges and amortization and stock compensation expense, was $271 million, or $0.18 per share. Adjusted net income for the second quarter of 2006, excluding net special charges and amortization and stock compensation expense, was $412 million, or $0.31 per share.
"We made progress in a number of key areas during the quarter," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "Most important, we made progress on quality throughout the organization, including the resolution of the CRM warning letter. Both the DES and CRM markets showed signs of stabilizing, but neither has returned to the level we believe they eventually will. We launched TAXUS Express2 in Japan, and we are off to a strong start in that market with impressive sales. Our Endosurgery group posted another solid quarter, with double-digit growth in all three of its businesses. Overall, we continue to move in the right direction."
Guidance for Third Quarter 2007
The Company estimates net sales for the third quarter of 2007 of between $2.0 billion and $2.1 billion. The Company estimates EPS on a GAAP basis of between $0.03 and $0.08 per share. In the past, the reconciliation between GAAP and adjusted EPS has excluded net special charges, amortization and stock compensation expense. Beginning in the third quarter, the Company will exclude only acquisition-related charges and amortization expense. Using this definition, the Company estimates adjusted EPS to range between $0.12 and $0.17 per share for the third quarter. Using this definition, adjusted EPS for the second quarter would have been $0.16 per share.
Boston Scientific officials will be discussing these results with analysts on a conference call at 8:30 am. (ET) Friday, July 20, 2007. 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.
This press release contains forward-looking statements. The Company wishes to caution the reader of this press release that actual results may differ from those discussed in the forward-looking statements and may be adversely affected by, among other things, risks associated with new product development and introduction, clinical trials, regulatory approvals, competitive offerings, intellectual property, litigation, integration of acquired companies, the Company's overall business strategy, and other factors described in the Company's filings with the Securities and Exchange Commission.
Use of non-GAAP Financial Information
* In the past, the reconciliation between GAAP and adjusted EPS has excluded net special charges, amortization and stock compensation expense. Beginning in the third quarter, the Company will exclude only acquisition- related charges and amortization expense.
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 accompanying schedules. 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 in the exhibit labeled "Use of Non-GAAP Financial Measures". 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.
CONTACT: Paul Donovan 508-650-8541 (office) 508-667-5165 (mobile) Media Relations Boston Scientific Corporation Dan Brennan 508-650-8538 (office) 617-459-2703 (mobile) Investor Relations Boston Scientific Corporation BOSTON SCIENTIFIC CORPORATION CONDENSED GAAP RESULTS OF OPERATIONS (Unaudited) Three Months Ended June 30, In millions, except per share data 2007 2006 Net sales $2,071 $2,110 Cost of products sold 563 677 Gross profit 1,508 1,433 Selling, general and administrative expenses 752 728 Research and development expenses 275 283 Royalty expense 51 65 Amortization expense 158 165 Purchased research and development (8) 4,117 1,228 5,358 Operating income/(loss) 280 (3,925) Other income/(expense): Interest expense (146) (111) Other, net (8) (150) Income/(loss) before income taxes 126 (4,186) Income taxes 11 76 Net income/(loss) $115 $(4,262) Net income/(loss) per common share - assuming dilution $0.08 $(3.21) Weighted average shares outstanding - assuming dilution 1,499.9 1,326.8 BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited)
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."
Three Months Three Months Ended Ended June 30, 2007 June 30, 2006 Impact Impact per Net per Net diluted income/ diluted In millions, except per share data income share (loss) share GAAP results $115 $0.08 $(4,262) $(3.21) Non-GAAP adjustments: Purchase accounting adjustments 4,424 3.33 Acquisition-related and other costs 9 96 0.07 * AAA program cancellation charges (31) (0.02)* Investment portfolio activity 14 0.01 52 0.04 * Amortization and stock-based compensation expense 147 0.10 133 0.10 * Discrete income tax items (14) (0.01) Adjusted results $271 $0.18 $412 0.31 * * Calculated by assuming option dilution of 19.8 million shares Three Months Ended June 30, 2007 2006 Purchase accounting adjustments Purchased research and development $4,184 Step-up value of inventory sold (a) 185 4,369 Income tax expense (f) 55 Purchase accounting adjustments, net of tax $4,424 Acquisition-related and other costs: Integration costs (b) $12 $33 Fair-value adjustment for the sharing of proceeds feature of the Abbott stock purchase (c) 87 Charitable donation (c) 5 12 125 Income tax benefit (f) (3) (29) Acquisition-related and other costs, net of tax $9 $96 AAA program cancellation charges: Purchased research and development $(67) Facility costs and severance (d) 31 Amortization expense 23 (13) Income tax benefit (f) (18) AAA program cancellation charges, net of tax $(31) Investment portfolio activity Investment portfolio activity (c) $23 $67 Amortization expense 4 Purchased research and development (8) 19 67 Income tax benefit (f) (5) (15) Investment portfolio activity, net of tax $14 $52 Amortization and stock-based compensation expense: Amortization expense $154 $142 Stock-based compensation expense (e) 32 31 186 173 Income tax benefit (f) (39) (40) Amortization and stock-based compensation expense, net of tax $147 $133 (a) Recorded to cost of products sold. (b) Recorded $8 million in 2007 to selling, general and administrative expenses, $2 million to cost of products sold and $2 million to research and development expenses; recorded $32 million in 2006 to selling, general and administrative expenses, and $1 million to research and development expenses. (c) Recorded to other, net. (d) Recorded to research and development expenses. (e) Recorded $21 million in 2007 to selling, general and administrative expenses, $7 million to research and development expenses and $4 million to cost of products sold; recorded $23 million in 2006 to selling, general and administrative expenses, $6 million to research and development expenses and $2 million to cost of products sold. (f) Charges are tax effected at the Company's anticipated effective tax rate, unless the item is unusual or infrequently occurring in accordance with APB No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." BOSTON SCIENTIFIC CORPORATION CONDENSED GAAP RESULTS OF OPERATIONS (Unaudited) Six Months Ended June 30, In millions, except per share data 2007 2006 Net sales $4,157 $3,730 Cost of products sold 1,131 1,051 Gross profit 3,026 2,679 Selling, general and administrative expenses 1,487 1,198 Research and development expenses 564 469 Royalty expense 103 120 Amortization expense 312 203 Purchased research and development (3) 4,117 2,463 6,107 Operating income/(loss) 563 (3,428) Other income/(expense): Interest expense (287) (148) Other, net 10 (179) Income/(loss) before income taxes 286 (3,755) Income taxes 51 175 Net income/(loss) $235 $(3,930) Net income/(loss) per common share - assuming dilution $0.16 $(3.66) Weighted average shares outstanding - assuming dilution 1,498.9 1,074.0 BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS (Unaudited)
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."
Six Months Six Months Ended Ended June 30, 2007 June 30, 2006 Impact Impact per Net per Net diluted income/ diluted In millions, except per share data income share (loss) share GAAP results $235 $0.16 $(3,930) $(3.66) Non-GAAP adjustments: Purchase accounting adjustments $4,424 4.12 Acquisition-related and other costs 24 0.02 96 0.09 ** AAA program cancellation charges (31) (0.03)** Investment portfolio activity 19 0.01 81 0.07 ** Amortization and stock-based compensation expense 296 0.20 187 0.17 ** Discrete income tax items (8) (0.01) Adjusted results $566 $0.38 $827 $0.76 ** ** Calculated by assuming option dilution of 14.5 million shares Six Months Ended June 30, 2007 2006 Purchase accounting adjustments Purchased research and development $4,184 Step-up value of inventory sold (a) 185 4,369 Income tax expense (f) 55 Purchase accounting adjustments, net of tax $4,424 Acquisition-related and other costs: Integration costs (b) $24 $33 Fair-value adjustment for the sharing of proceeds feature of the Abbott stock purchase (c) 8 87 Charitable donation (c) 5 32 125 Income tax benefit (f) (8) (29) Acquisition-related and other costs, net of tax $24 $96 AAA program cancellation charges: Purchased research and development $(67) Facility costs and severance (d) 31 Amortization expense 23 (13) Income tax benefit (f) (18) AAA program cancellations charges, net of tax $(31) Investment portfolio activity Investment portfolio activity (c) $23 $105 Amortization expense 4 Purchased research and development (3) 24 105 Income tax benefit (f) (5) (24) Investment portfolio activity, net of tax $19 $81 Amortization and stock-based compensation expense: Amortization expense $308 $180 Stock-based compensation expense (e) 66 63 374 243 Income tax benefit (f) (78) (56) Amortization and stock-based compensation expense, net of tax $296 $187 (a) Recorded to cost of products sold. (b) Recorded $17 million in 2007 to selling, general and administrative expenses, $4 million to cost of products sold and $3 million to research and development expenses; recorded $32 million in 2006 to selling, general and administrative expenses, and $1 million to research and development (c) Recorded to other, net. (d) Recorded to research and development expenses. (e) Recorded $44 million in 2007 to selling, general and administrative expenses, $14 million to research and development expenses and $8 million to cost of products sold; recorded $43 million in 2006 to selling, general and administrative expenses, $12 million to research and development expenses and $8 million to cost of products sold. (f) Charges are tax effected at the Company's anticipated effective tax rate, unless the item is unusual or infrequently occurring in accordance with APB No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, Dec. 31, In millions 2007 2006 Assets Current assets: Cash and cash equivalents $1,514 $1,668 Trade accounts receivable, net 1,508 1,424 Inventories 837 749 Deferred income taxes 607 583 Other current assets 470 477 Total current assets 4,936 4,901 Property, plant and equipment, net 1,779 1,726 Investments 535 596 Other assets 199 237 Intangible assets, net 23,816 23,636 $31,265 $31,096 Liabilities and Stockholders' Equity Current liabilities: Borrowings due within one year $654 $7 Accounts payable and accrued expenses 1,888 2,067 Other current liabilities 427 556 Total current liabilities 2,969 2,630 Long-term debt 8,250 8,895 Deferred income taxes 2,683 2,784 Other long-term liabilities 1,561 1,489 Stockholders' equity 15,802 15,298 $31,265 $31,096 BOSTON SCIENTIFIC CORPORATION WORLDWIDE SALES (Unaudited) Three Months Ended June 30 Change As Reported Constant Currency Currency In millions 2007 2006 Basis Basis DOMESTIC $1,220 $1,315 (7%) (7%) Europe 451 431 5% (2%) Japan 192 149 28% 36% Inter-Continental 208 215 (3%) (8%) INTERNATIONAL 851 795 7% 4% WORLDWIDE $2,071 $2,110 (2%) (3%) Three Months Ended June 30 Change As Reported Constant Currency Currency In millions 2007 2006 Basis Basis Interventional Cardiology $767 $964 (20%) (21%) Peripheral Interventions / Vascular Surgery 161 168 (5%) (6%) Electrophysiology 36 33 12% 11% Neurovascular 88 82 6% 5% Cardiac Surgery 48 38 27% 27% Cardiac Rhythm Management 524 436 20% 18% CARDIOVASCULAR 1,624 1,721 (6%) (7%) Oncology 59 52 12% 11% Endoscopy 208 189 10% 9% Urology 100 90 11% 11% ENDOSURGERY 367 331 11% 10% NEUROMODULATION 80 58 36% 34% WORLDWIDE $2,071 $2,110 (2%) (3%) Certain amounts in the tables above may not sum or recalculate due to rounding of individual components. BOSTON SCIENTIFIC CORPORATION WORLDWIDE SALES (Unaudited) Six Months Ended June 30 Change As Reported Constant Currency Currency In millions 2007 2006 Basis Basis DOMESTIC $2,490 $2,306 8% 8% Europe 914 745 23% 14% Japan 351 283 24% 29% Inter-Continental 402 396 1% (2%) INTERNATIONAL 1,667 1,424 17% 12% WORLDWIDE $4,157 $3,730 11% 10% Six Months Ended June 30 Change As Reported Constant Currency Currency In millions 2007 2006 Basis Basis Interventional Cardiology $1,570 $1,913 (18%) (19%) Peripheral Interventions / Vascular Surgery 315 352 (11%) (12%) Electrophysiology 73 67 9% 8% Neurovascular 179 162 10% 8% Cardiac Surgery 97 38 159% 158% Cardiac Rhythm Management 1,062 436 144% 139% CARDIOVASCULAR 3,296 2,968 11% 9% Oncology 115 106 8% 7% Endoscopy 409 369 11% 9% Urology 195 180 9% 8% ENDOSURGERY 719 655 10% 8% NEUROMODULATION 142 107 32% 31% WORLDWIDE $4,157 $3,730 11% 10% Certain
