NATICK, Mass., Feb. 1 /PRNewswire-FirstCall/ -- Boston Scientific Corporation today announced financial results for the fourth quarter and full year ended December 31, 2006, as well as guidance for net sales and earnings per share for the first quarter of 2007.
Fourth Quarter 2006
Net sales for the fourth quarter of 2006 were $2.065 billion as compared to $1.540 billion for the fourth quarter of 2005.
Reported net income for the fourth quarter of 2006 was $277 million, or $0.19 per share, on approximately 1.5 billion weighted average shares outstanding. Reported results for the fourth quarter of 2006 included net special credits (after-tax) of $127 million, or approximately $0.09 per share, that consisted primarily of a $133 million one-time tax benefit for the reversal of tax accruals previously established for offshore unremitted earnings.
Reported net income for the fourth quarter of 2005 was $334 million, or $0.40 per share, on approximately 830 million weighted average shares outstanding.
Adjusted net income for the quarter, excluding net special credits and amortization and stock compensation expense, was $306 million, or $0.20 per share. Adjusted net income for the fourth quarter of 2005, excluding net special charges and amortization and stock compensation expense, was $373 million, or $0.45 per share. Operating cash flow for the fourth quarter of 2006 was approximately $365 million.
Full Year 2006
Net sales for the full year 2006 were $7.821 billion as compared to $6.283 billion in 2005.
Reported net loss for 2006 was $3.6 billion, or $2.81 per share, on approximately 1.3 billion weighted average shares outstanding. Reported results for 2006 included net special charges (after-tax) of approximately $4.5 billion, or approximately $3.55 per share, which consisted primarily of:
- $4.2 billion non-cash charge for purchased in-process research and development costs related to the Guidant acquisition; - $169 million charge resulting from a purchase accounting adjustment associated with the step-up value of acquired Guidant inventory sold; - $143 million in other charges related primarily to the Guidant acquisition; and - $133 million credit associated with the reversal of tax accruals previously established for offshore unremitted earnings.
Reported net income for 2005 was $628 million, or $0.75 per share, on approximately 838 million weighted average shares outstanding. Reported results for 2005 included special charges (after-tax) of $894 million, or approximately $1.07 per share, which related primarily to a $598 million litigation settlement with Medinol, Ltd. and $267 million in purchased research and development related to 2005 acquisitions.
Adjusted net income for the year, excluding net special charges and amortization and stock compensation expense, was $1.4 billion, or $1.12 per share. Adjusted net income for 2005, excluding net special charges and amortization and stock compensation expense, was $1.6 billion, or $1.96 per share. Operating cash flow for 2006 approximated $1.8 billion. The 2006 operating results include the Company's cardiac rhythm management and cardiac surgery businesses, which were acquired as part of Guidant on April 21, 2006.
Guidance for First Quarter 2007
For 2007, the Company has concluded that forecasting the rate of growth in the cardiac rhythm management market and the drug-eluting stent market will be difficult, given the events and volatility in both markets during 2006. Since these two markets are so significant to the Company's forecasted results of operations in 2007, the Company believes it is appropriate to provide guidance only for the first quarter. The ranges for earnings set forth below are driven largely by market growth, mix of product sales and resulting gross margin rates.
The Company estimates net sales for the first quarter of 2007 of between $2.0 billion and $2.1 billion. Adjusted earnings per share, excluding net special charges and amortization and stock compensation expense are estimated to range between $0.15 and $0.21 per share. The Company estimates earnings per share on a GAAP basis of between $0.04 and $0.10 per share.
"The past year was a transforming one for Boston Scientific and its vision for the future," said Jim Tobin, President and CEO of Boston Scientific. "I want to thank our employees for all their hard work. Over the past several years we have fundamentally diversified our company by entering the microelectronics device space through the acquisitions of Guidant and Advanced Bionics, two important growth engines. As we look forward, we are confident the growth story at Boston Scientific will continue."
Boston Scientific officials will be discussing these results with analysts on a conference call at 8:30 a.m. (ET) Thursday, February 1. 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
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.
CONTACT: Paul Donovan Dan Brennan 508-650-8541 (office) 508-650-8538 (office) 508-667-5165 (mobile) 617-459-2703 (mobile) Media Relations Investor Relations Boston Scientific Corporation Boston Scientific Corporation BOSTON SCIENTIFIC CORPORATION GAAP RESULTS OF OPERATIONS (Unaudited) Three Months Ended December 31, In millions, except per share data 2006 2005 Net sales 2,065 $1,540 Cost of products sold 526 342 Gross profit 1,539 1,198 Selling, general and administrative expenses 758 468 Research and development expenses 267 174 Royalty expense 54 53 Amortization expense 174 38 Purchased research and development 2 1,255 733 Operating income 284 465 Other income/(expense): Interest expense (144) (32) Other, net 29 5 Income before income taxes 169 438 Income tax (benefit)/expense (108) 104 Net income $277 $334 Net income per common share - assuming dilution $0.19 $0.40 Weighted average shares outstanding - assuming dilution 1,493.6 829.6 BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATION (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 Ended Three Months Ended December 31, December 31, 2006 2005 Impact Impact per per Net diluted Net diluted In millions, except per share data income share income share GAAP results $277 $0.19 $334 $0.40 Non-GAAP adjustments: Purchase accounting adjustments (6) (0.01) Merger-related and other costs 23 0.02 6 0.01 Certain tax benefits (144) (0.10) Amortization and stock compensation expense 156 0.10 33 0.04 Adjusted results $306 $0.20 $373 $0.45 Three Months Ended December 31, 2006 2005 Purchase accounting adjustments: Purchased research and development $2 Step-up value of inventory sold (a) (12) (10) Income tax expense 4 Purchase accounting adjustments, net of tax $(6) Merger-related and other costs: Integration costs (b) $19 Fair-value adjustment for the sharing of proceeds feature of the Abbott stock purchase (c) (5) Business optimization charges (d) 19 $11 $33 $11 Income tax benefit (10) (5) Merger-related and other costs, net of tax $23 $6 Amortization and stock compensation expense: Amortization expense $174 $38 Stock compensation expense (e) 24 6 198 44 Income tax benefit (42) (11) Amortization and stock compensation expense, net of tax $156 $33 (a) Recorded to cost of products sold. (b) Recorded $2 million to cost of products sold, $7 million to selling, general and administrative expenses, and $10 million to research and development expenses. (c) Recorded to other, net. (d) In 2006, recorded $19 million to selling, general and administrative expenses; in 2005, recorded $1 million to cost of products sold and $10 million to selling, general and administrative expenses. (e) In 2006, recorded $3 million to cost of products sold, $15 million to selling, general and administrative expenses, and $6 million to research and development expenses; in 2005, recorded $6 million to selling, general and administrative expenses. BOSTON SCIENTIFIC CORPORATION GAAP RESULTS OF OPERATIONS (Unaudited) Year Ended December 31, In millions, except per share data 2006 2005 Net sales 7,821 $6,283 Cost of products sold 2,207 1,386 Gross profit 5,614 4,897 Selling, general and administrative expenses 2,675 1,814 Research and development expenses 1,008 680 Royalty expense 231 227 Amortization expense 530 152 Litigation-related charges 780 Purchased research and development 4,119 276 8,563 3,929 Operating (loss)/income (2,949) 968 Other income/(expense): Interest expense (435) (90) Other, net (151) 13 (Loss)/income before income taxes (3,535) 891 Income tax expense 42 263 Net (loss)/income $(3,577) $628 Net (loss)/income per common share - assuming dilution $(2.81) $0.75 Weighted average shares outstanding - assuming dilution 1,273.7 837.6 BOSTON SCIENTIFIC CORPORATION NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATION (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." Year Ended Year Ended December 31, 2006 December 31, 2005 Impact Impact per per Net diluted diluted In millions, except per share data income share Net income share GAAP results $(3,577) $(2.81) $628 $0.75 Non-GAAP adjustments: Purchase accounting adjustments 4,477 3.51 267 0.32 Merger-related and other costs 143 0.11 * 29 0.04 AAA program cancellation charges (31) (0.03)* Investment portfolio activity 81 0.06 * Litigation-related charges 598 0.71 Certain tax benefits (133) (0.10)* Amortization and stock compensation expense 487 0.38 * 122 0.14 Adjusted results $1,447 $1.12 $1,644 $1.96 * Calculated by assuming dilution from stock equivalents of 15.6 million. Year Ended December 31, 2006 2005 Purchase accounting adjustments: Purchased research and development $4,186 $276 Step-up value of inventory sold (a) 267 4,453 276 Income tax expense/(benefit) 24 (9) Purchase accounting adjustments, net of tax $4,477 $267 Merger-related and other costs: Integration costs (b) $61 Fair-value adjustment for the sharing of proceeds feature of the Abbott stock purchase (c) 95 Charitable donation (c) 5 CRM technology offering charge (a) 31 Certain retirement benefits (d) $17 Business optimization charges (e) 19 39 211 56 Income tax benefit (68) (27) Merger-related and other costs, net of tax $143 $29 AAA program cancellation charges: Purchased research and development $(67) Facility costs and severance (f) 31 Amortization expense 23 (13) Income tax benefit (18) AAA program cancellation charges, net of tax $(31) Investment portfolio activity: Investment portfolio activity (c) $105 Income tax benefit (24) Investment portfolio activity, net of tax $81 Litigation-related charges: Litigation-related charges $780 Income tax benefit (182) Litigation-related charges, net of tax $598 Amortization and stock compensation expense: Amortization expense $507 $142 Stock compensation expense (g) 113 19 620 161 Income tax benefit (133) (39) Amortization and stock compensation expense, net of tax $487 $122 (a) Recorded to cost of products sold. (b) Recorded $2 million to cost of products sold, $46 million to selling, general and administrative expenses and $13 million to research and development expenses. (c) Recorded to other, net. (d) Recorded to selling, general and administrative expenses. (e) In 2006, recorded $19 million to selling, general and administrative expenses; in 2005, recorded $1 million to cost of products sold, $21 million to selling, general and administrative expenses, $7 million to research and development expenses, and $10 million to amortization expense. (f) Recorded to research and development expense. (g) In 2006, recorded $15 million to cost of products sold, $74 million to selling, general and administrative expenses, and $24 million to research and development expenses; in 2005, recorded $19 million to selling, general and administrative expenses. BOSTON SCIENTIFIC CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) December 31, In millions 2006 2005 Assets Current assets: Cash, cash equivalents and short-term investments $1,668 $848 Trade accounts receivable, net 1,424 932 Inventories 749 418 Deferred income taxes 583 152 Other current assets 477 281 $4,901 $2,631 Property, plant and equipment, net 1,726 1,011 Intangible assets, net 23,636 3,735 Investments 596 594 Other assets 237 225 $31,096 $8,196 Liabilities and Stockholders' Equity Current liabilities: Borrowings due within one year $7 $156 Accounts payable and accrued expenses 2,067 1,229 Other current liabilities 556 94 $2,630 $1,479 Long-term debt 8,895 1,864 Deferred income taxes 2,784 262 Other long-term liabilities 1,489 309 Stockholders' equity 15,298 4,282 $31,096 $8,196 BOSTON SCIENTIFIC CORPORATION WORLDWIDE SALES REGIONAL SUMMARY (Unaudited) Three Months Ended December 31, Change As Reported Constant In millions 2006 2005 Currency Currency Basis Basis DOMESTIC $1,261 $928 36% 36% Europe 427 290 47% 36% Japan 163 139 17% 18% Inter-Continental 214 183 17% 14% INTERNATIONAL 804 612 31% 25% WORLDWIDE $2,065 $1,540 34% 32% Year Ended December 31, Change As Reported Constant In millions 2006 2005 Currency Currency Basis Basis DOMESTIC $4,840 $3,852 26% 26% Europe 1,574 1,161 36% 34% Japan 594 579 3% 8% Inter-Continental 813 691 18% 16% INTERNATIONAL 2,981 2,431 23% 22% WORLDWIDE $7,821 $6,283 24% 24% BOSTON SCIENTIFIC CORPORATION WORLDWIDE SALES DIVISIONAL SUMMARY (Unaudited) Three Months Ended December 31, Change As Reported Constant In millions 2006 2005 Currency Currency Basis Basis Interventional Cardiology $831 $892 (7%) (9%) Peripheral Interventions/Vascular Surgery 160 178 (10%) (12%) Electrophysiology 35 35 0% (2%) Neurovascular 83 71 17% 14% Cardiac Surgery 49 Cardiac Rhythm Management 489 CARDIOVASCULAR 1,647 1,176 40% 37% Oncology 55 53 4% 3% Endoscopy 198 178 11% 9% Urology 98 86 14% 14% ENDOSURGERY 351 317 11% 9% NEUROMODULATION 67 47 43% 41% WORLDWIDE $2,065 $1,540 34% 32% Year Ended December 31, Change As Reported Constant In millions 2006 2005 Currency Currency Basis Basis Interventional Cardiology $3,612 $3,783 (5%) (5%) Peripheral Interventions/Vascular Surgery 666 715 (7%) (7%) Electrophysiology 134 132 2% 2% Neurovascular 326 277 18% 18% Cardiac Surgery 132 Cardiac Rhythm Management 1,371 CARDIOVASCULAR 6,241 4,907 27% 27% Oncology 221 207 7% 7% Endoscopy 754 697 8% 9% Urology 371 324 15% 15% ENDOSURGERY 1,346 1,228 10% 10% NEUROMODULATION 234 148 58% 58% WORLDWIDE $7,821 $6,283 24% 24% BOSTON SCIENTIFIC CORPORATION Non-GAAP Constant Currency - Net Sales Reconciliation (Unaudited) Three Months Ended Year Ended December 31, 2006 December 31, 2006 As Reported Impact of Constant As Reported Impact of Constant Currency Foreign Currency Currency Foreign Currency In millions Basis Currency Basis Basis Currency Basis DOMESTIC $1,261 $1,261 $4,840 $4,840 Europe 427 $(32) 395 1,574 $(21) 1,553 Japan 163 1 164 594 30 624 Inter -Continental 214 (6) 208 813 (13) 800 INTERNATIONAL 804 (37) 767 2,981 (4) 2,977 WORLDWIDE $2,065 $(37) $2,028 $7,821 $(4) $7,817 Three Months Ended Year Ended December 31, 2006 December 31, 2006 As Reported Impact of Constant As Reported Impact of Constant Currency Foreign Currency Currency Foreign Currency In millions Basis Currency Basis Basis Currency Basis Interven -tional Cardiology $831 $(17) $814 $3,612 $(5) $3,607 Peripheral Interventions /Vascular Surgery 160 (4) 156 666 1 667 Electro -physiology 35 (1) 34 134 1 135 Neurovascular 83 (2) 81 326 1 327 Cardiac Surgery 49 49 132 132 Cardiac Rhythm Management 489 (7) 482 1,371 (5) 1,366 CARDIOVASCULAR 1,647 (31) 1,616 6,241 (7) 6,234 Oncology 55 (1) 54 221 1 222 Endoscopy 198 (4) 194 754 2 756 Urology 98 98 371 1 372 ENDOSURGERY 351 (5) 346 1,346 4 1,350 NEUROMODULATION 67 (1) 66 234 (1) 233 WORLDWIDE $2,065 $(37) $2,028 $7,821 $(4) $7,817 Actual calculation of changes in net sales on a constant currency basis may differ slightly due to rounding of amounts in the tables above. 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." BOSTON SCIENTIFIC CORPORATION Estimated Q1 2007 Non-GAAP Net Income per Share Reconciliation (Unaudited) Net Income per Share - Assuming Dilution Q1 Low Q1 High GAAP estimated results $0.04 $0.10 Estimated net Guidant integration charges 0.01 0.01 Estimated amortization and stock compensation expense 0.10 0.10 Adjusted estimated results $0.15 $0.21 NOTE
