News Release

Boston Scientific Announces Second Quarter 2012 Results
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Boston Scientific Announces Second Quarter 2012 Results

NATICK, Mass., July 26, 2012 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX) generated sales of $1.828 billion and adjusted earnings per share of $0.17 for the second quarter ended June 30, 2012.  The company reported a GAAP loss of $2.39 per share, lower than previous guidance due primarily to the impact of an estimated $3.405 billion ($3.427 billion pre-tax) goodwill impairment charge associated with the company's Europe, Middle East and Africa (EMEA) reporting unit.

Second quarter results:

  • Reported sales of $1.828 billion, a decline of 7 percent on a reported basis and 4 percent on a constant currency basis excluding divested businesses.
  • Delivered adjusted EPS of $0.17, at the high end of the company's adjusted EPS guidance range of $0.14 to $0.17.
  • Generated worldwide drug-eluting stent sales of $318 million resulting in an estimated market share of approximately 31 percent.
  • Increased second quarter worldwide Neuromodulation sales 10 percent, Endoscopy sales 7 percent, and Peripheral Interventions sales 7 percent, all on a constant currency basis.
  • Reported worldwide ICD revenues of $355 million and maintained an estimated market share of approximately 22 percent on a sequential basis.
  • Received U.S. Food and Drug Administration approvals for its INGENIO™ and ADVANTIO™ pacemakers and INVIVE™ cardiac resynchronization therapy pacemakers.
  • Completed the acquisition of Cameron Health, Inc. and its novel subcutaneous implantable cardioverter defibrillator (S-ICD) system.
  • Generated strong operating cash flow of $407 million and repurchased 18 million shares under the 2011 share repurchase authorization. 

"Despite increased competition, challenging market dynamics and disappointing results in certain businesses during the quarter, we delivered on our adjusted earnings and continued to generate strong cash flow," said Hank Kucheman, chief executive officer, Boston Scientific.  "As a team, we are committed to effectively executing on our cost optimization initiatives and key growth priorities and driving this organization back to revenue growth."

Second Quarter 2012

Sales for the second quarter of 2012 were $1.828 billion, compared to sales of $1.975 billion for the second quarter of 2011, a decrease of 7 percent.  Excluding the impact of foreign currency and sales from divested businesses, sales decreased 4 percent compared to the prior period.

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






Change



Three Months Ended


As Reported


Constant



June 30,


Currency


Currency

in millions

2012

2011


Basis


Basis










Interventional Cardiology

$                 549

$                 652


(16)%


(13)%










Cardiac Rhythm Management

488

544


(10)%


(8)%










Endoscopy

311

298


4 %


7 %










Peripheral Interventions

196

189


4 %


7 %










Urology/Women's Health

126

127


(1)%


0 %










Neuromodulation

91

84


9 %


10 %










Electrophysiology

37

38


(2)%


0 %









Subtotal Core Businesses

1,798

1,932


(7)%


(4)%










Divested Businesses

30

43


N/A


N/A









Worldwide

$            1,828

$            1,975


(7)%


(5)%

    Growth rates are based on actual, non-rounded amounts and may not recalculate precisely. 

During the second quarter, in conjunction with its annual goodwill impairment test, the company recorded a non-cash $3.405 billion ($3.427 billion pre-tax) estimated goodwill impairment charge associated with its EMEA reporting unit, primarily driven by slightly lower projected long-term growth rates due to macroeconomic factors and its performance in the European market.  As a result, GAAP EPS for the second quarter of 2012 was below previous guidance, and the company's updated full year GAAP EPS guidance reflects this charge.  The amount of the goodwill impairment charge is subject to finalization and is expected to be in a range of $3.1 billion to $3.7 billion.

On a GAAP basis, net loss for the second quarter of 2012 was $3.404 billion, or a loss of $2.39 per share.  These results included goodwill and other intangible asset impairment charges, acquisition-related net credits, divestiture-, restructuring- and litigation-related charges and amortization expense, of $3.643 billion, or $2.56 per share.  Adjusted net income for the second quarter of 2012, excluding these charges, was $239 million, or $0.17 per share. On an after-tax basis, the primary components of the adjustment made to GAAP net income are an estimated goodwill impairment charge of $3.405 billion ($3.427 billion pre-tax) as noted above, an intangible asset impairment charge of $110 million, and net litigation-related charges of $40 million

On a GAAP basis, net income for the second quarter of 2011 was $146 million, or $0.10 per share.  Reported results included an intangible asset impairment charge, acquisition- and divestiture-related expenses, restructuring-related charges and amortization expense, of $116 million, or $0.07 per share.  Adjusted net income for the second quarter of 2011, excluding these charges, was $262 million, or $0.17 per share.

Guidance for Third Quarter and Full Year 2012

The company estimates sales for the third quarter of 2012 in a range of $1.725 billion to $1.825 billion.  The company estimates earnings on a GAAP basis in a range of $0.06 to $0.09 per share.  Adjusted earnings, excluding acquisition- and restructuring-related charges and amortization expense are estimated in a range of $0.14 to $0.17 per share.

The company estimates sales for the full year 2012 in a range of $7.2 billion to $7.4 billion.  The company estimates losses on a GAAP basis in a range of $2.16 to $2.09 per share.  Adjusted earnings, excluding goodwill and other intangible asset impairment charges, acquisition-, restructuring- and litigation-related charges and amortization expense are estimated in a range of $0.62 to $0.68 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. (EDT).  The company will webcast the call through the Investor Relations section of its website at www.bostonscientific.com/investors.  Details about how to access the webcast are available on the website.  The webcast will be available for approximately one year following the conference call.

About Boston Scientific

Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices that 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/losses and adjusted earnings for the third quarter and full year 2012; the write-down of our goodwill and other asset impairments; our financial performance; markets for our products and our market share; our cost-savings and growth initiatives; and our positioning for revenue 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.

Risks and uncertainties that may cause such differences include, among other things: future economic, political, competitive, reimbursement and regulatory conditions; new product introductions and the market acceptance of those products; markets for our products, including in EMEA; expected pricing environment; expected procedural volumes; clinical trial results; demographic trends; intellectual property rights; litigation; financial market conditions, including in EMEA; the finalization of our estimated goodwill impairment charge; the execution and effect of our business strategy, including our cost-savings and growth initiatives; and future business decisions made by us and our competitors. New risks and uncertainties may arise from time to time and are difficult to predict. 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 hereafter.  We disclaim any intention or obligation to publicly update or revise any forward-looking statement 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 press release.

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. 

                                     CONTACT:

Steven Campanini


508-652-5740 (office)


Media Relations


Boston Scientific Corporation


steven.campanini@bsci.com




Denise Kaigler


508-650-8330 (office)


Media Relations


Boston Scientific Corporation


denise.kaigler@bsci.com




Sean Wirtjes


508-652-5305 (office)


Investor Relations


Boston Scientific Corporation


investor_relations@bsci.com

 

 

BOSTON SCIENTIFIC CORPORATION

CONDENSED CONSOLIDATED GAAP RESULTS OF OPERATIONS

(Unaudited)

 



Three Months Ended


Six Months Ended



June 30,


June 30,

in millions, except per share data

2012

2011


2012

2011








Net sales

$              1,828

$              1,975


$              3,694

$              3,900

Cost of products sold

578

688


1,209

1,319

Gross profit

1,250

1,287


2,485

2,581








Operating expenses:







Selling, general and administrative expenses

648

642


1,306

1,237


Research and development expenses

213

223


428

435


Royalty expense

48

52


96

103


Amortization expense

99

96


195

228


Goodwill impairment charges

3,427



3,427

697


Intangible asset impairment charges

129

12


129

12


Contingent consideration expense

1

7


11

13


Restructuring charges

28

18


39

56


Litigation-related charges

69



69



Gain on divestiture





(760)



4,662

1,050


5,700

2,021

Operating (loss) income

(3,412)

237


(3,215)

560








Other (expense) income:







Interest expense

(64)

(73)


(132)

(148)


Other, net

33

(6)


27

19

(Loss) income before income taxes

(3,443)

158


(3,320)

431


Income tax (benefit) expense

(39)

12


(29)

239

Net (loss) income

$          (3,404)

$               146


$          (3,291)

$               192








Net (loss) income per common share - basic

$             (2.39)

$              0.10


$             (2.29)

$              0.12

Net (loss) income per common share - assuming dilution

$             (2.39)

$              0.10


$             (2.29)

$              0.12








Weighted-average shares outstanding






Basic

1,423.2

1,528.6


1,434.2

1,527.5

Assuming dilution

1,423.2

1,535.8


1,434.2

1,536.0








BOSTON SCIENTIFIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 




As of




June 30,


December 31,

in millions, except share and per share data

2012


2011




(Unaudited)



ASSETS




Current assets:





Cash and cash equivalents

$                     371


$                     267


Trade accounts receivable, net

1,243


1,246


Inventories

898


931


Deferred income taxes

406


458


Prepaid expenses and other current assets

193


203

Total current assets

3,111


3,105







Property, plant and equipment, net

1,632


1,670

Goodwill

6,649


9,761

Other intangible assets, net

6,249


6,473

Other long-term assets

353


281




$              17,994


$              21,290







LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:





Current debt obligations

$                         4


$                         4


Accounts payable

263


203


Accrued expenses

1,325


1,327


Other current liabilities

202


273

Total current liabilities

1,794


1,807







Long-term debt

4,253


4,257

Deferred income taxes

1,805


1,865

Other long-term liabilities

2,240


2,008







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 and issued 1,538,999,069 shares as of June 30, 2012

15


15



and 1,531,006,390 shares as of December 31, 2011





Treasury stock, at cost, 122,463,958 shares as of June 30, 2012 

(742)


(492)



and 81,950,716 shares as of December 31, 2011





Additional paid-in capital

16,388


16,349


Accumulated deficit

(7,672)


(4,381)


Accumulated other comprehensive loss, net of tax

(87)


(138)

Total stockholders' equity

7,902


11,353




$              17,994


$              21,290







 

BOSTON SCIENTIFIC CORPORATION

NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS

(Unaudited)




Three Months Ended June 30,



2012


2011



Net

Impact



Impact



(loss)

per diluted


Net

per diluted

in millions, except per share data

income

share


income

share

GAAP net (loss) income

$          (3,404)

$             (2.39)


$               146

$              0.10

Non-GAAP adjustments:







Goodwill impairment charge

3,405

2.38

*




Intangible asset impairment charges

110

0.08

*

9

0.01


Acquisition-related net (credits) charges

(21)

(0.01)

*

6

0.00


Divestiture-related charges

1

0.00

*

1

0.00


Restructuring-related charges

24

0.02

*

21

0.01


Litigation-related charges

40

0.03

*




Amortization expense

84

0.06

*

79

0.05

Adjusted net income

$               239

$              0.17


$               262

$              0.17








* Assumes dilution of 5.8 million shares for the three months ended June 30, 2012 for all or a portion of these non-GAAP
  adjustments.

 



Six Months Ended June 30,



2012


2011



Net

Impact



Impact



(loss)

per diluted


Net

per diluted

in millions, except per share data

income

share


income

share

GAAP net (loss) income

$          (3,291)

$             (2.29)


$               192

$              0.12

Non-GAAP adjustments:







Goodwill impairment charges

3,405

2.36

*

697

0.45


Intangible asset impairment charges

110

0.08

*

9

0.00


Acquisition-related net credits

(10)

(0.01)

*

(23)

(0.01)


Divestiture-related net charges (credits)

2

0.00

*

(530)

(0.34)


Restructuring-related charges

37

0.03

*

56

0.04


Litigation-related charges

40

0.03

*




Discrete tax items




4

0.00


Amortization expense

166

0.12

*

193

0.13

Adjusted net income

$               459

$              0.32


$               598

$              0.39








* Assumes dilution of 7.3 million shares for the six months ended June 30, 2012 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.

 

BOSTON SCIENTIFIC CORPORATION

NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS (CONT.)

(Unaudited)

 



Three Months Ended


Six Months Ended

in millions

June 30,


June 30,



2012

2011


2012

2011

Goodwill impairment charges:







Goodwill impairment charges

$              3,427



$              3,427

$                 697


Income tax benefit (a)

(22)



(22)


Goodwill impairment charges, net of tax

$              3,405



$              3,405

$                 697








Intangible asset impairment charges:







Intangible asset impairment charges

$                 129

$                   12


$                 129

$                   12


Income tax benefit (a)

(19)

(3)


(19)

(3)

Intangible asset impairment charges, net of tax

$                 110

$                     9


$                 110

$                     9








Acquisition-related net (credits) charges:







Contingent consideration expense

$                     1

$                     7


$                   11

$                   13


Acquisition-related costs (b)

4



7

2


Inventory step-up adjustment(c)





1


Gain on previously held investments (d)

(39)



(39)

(38)



(34)

7


(21)

(22)


Income tax expense (benefit) (a)

13

(1)


11

(1)

Acquisition-related net (credits) charges, net of tax

$                 (21)

$                     6


$                 (10)

$                 (23)








Divestiture-related net charges (credits):







Gain on divestiture





$               (760)


Divestiture-related costs (c)

$                     1

$                     1


$                     2

2



1

1


2

(758)


Income tax expense (a)





228

Divestiture-related net charges (credits), net of tax

$                     1

$                     1


$                     2

$               (530)








Restructuring-related charges:







Restructuring charges

$                   28

$                   18


$                   39

$                   56


Restructuring-related charges (e)

5

12


11

24



33

30


50

80


Income tax benefit (a)

(9)

(9)


(13)

(24)

Restructuring-related charges, net of tax

$                   24

$                   21


$                   37

$                   56








Litigation-related net charges:







Litigation-related net charges

$                   69



$                   69



Income tax benefit (a)

(29)



(29)


Litigation-related net charges, net of tax

$                   40



$                   40









Discrete tax items:






Income tax expense (a)





$                     4








Amortization expense:







Amortization expense

$                   99

$                   96


$                 195

$                 228


Income tax benefit (a)

(15)

(17)


(29)

(35)

Amortization expense, net of tax

$                   84

$                   79


$                 166

$                 193








(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)  

Recorded to other, net.

(e)   

In the second quarter of 2012, recorded $2 million to cost of products sold and $3 million to selling, general and administrative expenses. In the second quarter of 2011, recorded $10 million to cost of products sold and $2 million to selling, general and administrative expenses. In the first half of 2012, recorded $6 million to cost of products sold and $5 million to selling, general and administrative expenses. In the first half of 2011, recorded $22 million to cost of products sold and $2 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.

 


















 

BOSTON SCIENTIFIC CORPORATION

WORLDWIDE SALES

(Unaudited)

 








Change



Three Months Ended


As Reported


Constant



June 30,


Currency


Currency

in millions

2012

2011


Basis


Basis




(restated) *





United States

$               947

$            1,040


(9)%


(9)%










EMEA

402

452


(11)%


(2)%


Japan

235

235


0 %


(2)%


Inter-Continental

214

205


4 %


11 %

International

851

892


(5)%


1 %









Subtotal Core Businesses

1,798

1,932


(7)%


(4)%










Divested Businesses

30

43


N/A


N/A









Worldwide

$            1,828

$            1,975


(7)%


(5)%






































Change



Three Months Ended


As Reported


Constant



June 30,


Currency


Currency

in millions

2012

2011


Basis


Basis










Interventional Cardiology

$                 549

$                 652


(16)%


(13)%










Cardiac Rhythm Management

488

544


(10)%


(8)%










Endoscopy

311

298


4 %


7 %










Peripheral Interventions

196

189


4 %


7 %










Urology/Women's Health

126

127


(1)%


0 %










Neuromodulation

91

84


9 %


10 %










Electrophysiology

37

38


(2)%


0 %









Subtotal Core Businesses

1,798

1,932


(7)%


(4)%










Divested Businesses

30

43


N/A


N/A









Worldwide

$            1,828

$            1,975


(7)%


(5)%









* We have restated prior year regional detail to conform to current year presentation, reflecting the movement of one country from our EMEA region to our Inter-Continental region.

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.

 



















BOSTON SCIENTIFIC CORPORATION
WORLDWIDE SALES
(Unaudited)

 








Change




Six Months Ended


As Reported


Constant




June 30,


Currency


Currency


in millions

2012

2011


Basis


Basis





(restated) *






United States

$            1,926

$            2,063


(7)%


(7)%












EMEA

817

900


(9)%


(3)%



Japan

474

470


1 %


(2)%



Inter-Continental

418

390


7 %


10 %


International

1,709

1,760


(3)%


0 %











Subtotal Core Businesses

3,635

3,823


(5)%


(4)%












Divested Businesses

59

77


N/A


N/A











Worldwide

$            3,694

$            3,900


(5)%


(4)%











































Change




Six Months Ended


As Reported


Constant




June 30,


Currency


Currency


in millions

2012

2011


Basis


Basis












Interventional Cardiology

$              1,153

$              1,288


(11)%


(9)%












Cardiac Rhythm Management

989

1,103


(10)%


(9)%












Endoscopy

612

585


5 %


6 %












Peripheral Interventions

386

365


6 %


7 %












Urology/Women's Health

246

247


0 %


0 %












Neuromodulation

175

161


9 %


9 %












Electrophysiology

74

74


(1)%


0 %











Subtotal Core Businesses

3,635

3,823


(5)%


(4)%












Divested Businesses

59

77


N/A


N/A











Worldwide

$            3,694

$            3,900


(5)%


(4)%











* We have restated prior year regional detail to conform to current year presentation, reflecting the movement of one country from our EMEA region to our Inter-Continental region.

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.

BOSTON SCIENTIFIC CORPORATION
NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
(Unaudited)









Q2 2012 Net Sales as compared to Q2 2011



Change

Estimated



As Reported

Constant

Impact of



Currency

Currency

Foreign

in millions

Basis

Basis

Currency










United States

$                        (93)

$                       (93)








EMEA

(50)

(8)

$                        (42)


Japan

0

(4)

4


Inter-Continental

9

20

(11)

International

(41)

8

(49)






Subtotal Core Businesses

(134)

(85)

(49)







Divested Businesses

(13)

(11)

(2)






Worldwide

$                      (147)

$                       (96)

$                        (51)























Q2 2012 Net Sales as compared to Q2 2011



Change

Estimated



As Reported

Constant

Impact of



Currency

Currency

Foreign

in millions

Basis

Basis

Currency







Interventional Cardiology

$                      (103)

$                       (85)

$                       (18)







Cardiac Rhythm Management

(56)

(40)

(16)







Endoscopy

13

20

(7)







Peripheral Interventions

7

12

(5)







Urology/Women's Health

(1)

0

(1)







Neuromodulation

7

8

(1)







Electrophysiology

(1)

0

(1)






Subtotal Core Businesses

(134)

(85)

(49)







Divested Businesses

(13)

(11)

(2)






Worldwide

$                       (147)

$                      (96)

$                      (51)






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

 

BOSTON SCIENTIFIC CORPORATION
NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
(Unaudited)

 









Q2 2012 YTD Net Sales as compared to Q2 2011 YTD




Change

Estimated




As Reported

Constant

Impact of




Currency

Currency

Foreign


in millions

Basis

Basis

Currency








United States

$                        (137)

$                        (137)










EMEA

(83)

(25)

$                           (58)



Japan

4

(7)

11



Inter-Continental

28

36

(8)


International

(51)

4

(55)








Subtotal Core Businesses

(188)

(133)

(55)









Divested Businesses

(18)

(17)

(1)








Worldwide

$                        (206)

$                        (150)

$                          (56)




























Q2 2012 YTD Net Sales as compared to Q2 2011 YTD




Change

Estimated




As Reported

Constant

Impact of




Currency

Currency

Foreign


in millions

Basis

Basis

Currency









Interventional Cardiology

$                         (135)

$                         (113)

$                           (22)









Cardiac Rhythm Management

(114)

(96)

(18)









Endoscopy

27

36

(9)









Peripheral Interventions

21

26

(5)









Urology/Women's Health

(1)

0

(1)









Neuromodulation

14

14

0









Electrophysiology

0

0

0








Subtotal Core Businesses

(188)

(133)

(55)









Divested Businesses

(18)

(17)

(1)








Worldwide

$                        (206)

$                        (150)

$                          (56)








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 AND CORONARY STENT SYSTEM SALES
(Unaudited)























Three Months Ended June 30
































in millions


U.S.


International


Worldwide




Q2 2012

Q2 2011


Q2 2012

Q2 2011


Q2 2012

Q2 2011

Defibrillator systems


$              220

$              243


$              135

$              150


$              355

$                  393

Pacemaker systems


64

72


69

79


133

151

Total CRM products


$             284

$             315


$             204

$             229


$             488

$                 544


































in millions


U.S.


International


Worldwide




Q2 2012

Q2 2011


Q2 2012

Q2 2011


Q2 2012

Q2 2011

Drug-eluting stent systems


$              140

$              208


$              178

$              192


$              318

$                  400

Bare-metal stent systems


6

8


16

20


22

28

Total coronary stent systems


$             146

$             216


$             194

$             212


$             340

$                 428













































Six Months Ended June 30
































in millions


U.S.


International


Worldwide




YTD 2012

YTD 2011


YTD 2012

YTD 2011


YTD 2012

YTD 2011

Defibrillator systems


$              449

$              509


$              274

$              301


$              723

$                  810

Pacemaker systems


127

145


139

148


266

293

Total CRM products


$             576

$             654


$             413

$             449


$             989

$              1,103


































in millions


U.S.


International


Worldwide




YTD 2012

YTD 2011


YTD 2012

YTD 2011


YTD 2012

YTD 2011

Drug-eluting stent systems


$              315

$              392


$              366

$              387


$              681

$                  779

Bare-metal stent systems


13

17


33

41


46

58

Total coronary stent systems


$             328

$             409


$             399

$             428


$             727

$                 837



















BOSTON SCIENTIFIC CORPORATION
SUPPLEMENTAL NON-GAAP RECONCILIATIONS, CONT.
(Unaudited)







Q3 and Full Year 2012 EPS Guidance








Q3 2012 Estimate


Full Year 2012 Estimate



(Low)

(High)


(Low)

(High)


GAAP results

$               0.06

$               0.09


$              (2.16)

$              (2.09)









Goodwill impairment charge




2.36

2.36


Other intangible asset impairment charge




0.08

0.08


Estimated acquisition-related net charges

0.01

0.01


0.01

0.01


Estimated restructuring-related charges

0.01

0.01


0.06

0.05


Estimated litigation-related charges




0.03

0.03


Estimated amortization expense

0.06

0.06


0.24

0.24









Adjusted results

$               0.14

$               0.17


$               0.62

$               0.68









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.

Management uses these supplemental non-GAAP financial 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 financial measures to further its understanding of the performance of the Company's operating segments. The adjustments excluded from the Company's non-GAAP financial measures are consistent with those excluded from its operating segments' measures of profit or loss. These adjustments are excluded from the segment measures that are reported to the Company's chief operating decision maker that are used to make operating decisions and assess performance.

The Company believes that presenting 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, in addition to the corresponding GAAP financial 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 assists Boston Scientific's investors in understanding the Company's operating performance and the methodology used by management to evaluate and measure such performance.

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 six months ended June 30, 2012 and 2011 and for the forecasted three month period ending September 30, 2012 and full year ending December 31, 2012, 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 represents a) a non-cash write-down of the Company's goodwill balance attributable to its Europe/Middle East/Africa (EMEA) reporting unit recorded in the second quarter of 2012, b) a non-cash write-down of the Company's goodwill balance attributable to its U.S. Cardiac Rhythm Management reporting unit recorded in the first quarter of 2011 and c) non-cash write-downs of certain intangible asset balances.  Management removes the impact of non-cash impairment 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 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 investments, (b) contingent consideration fair value adjustments,  (c) due diligence, other fees and exit costs, and (d) an inventory step-up adjustment. The acquisition-related gains on previously held investments are non-recurring benefits associated with acquisitions completed in the second quarter of 2012 and the first quarter of 2011. The contingent consideration adjustments are non-cash charges 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. 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 charges (credits) - 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.

 


Restructuring and restructuring-related costs - These adjustments represent primarily severance, costs to transfer production lines from one facility to another, and other direct costs associated with the Company's 2011 Restructuring plan, 2010 Restructuring plan and Plant Network Optimization program. These expenses are excluded by management in assessing the Company's operating performance, as well as from the Company's operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these charges 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.

 


Litigation-related net charges - These adjustments include certain significant product liability and other litigation-related charges and credits. These amounts are excluded by management in assessing the Company's operating performance, as well as from the Company's operating segments' measures of profit and loss used for making operating decisions and assessing performance.  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