Boston Scientific fourth quarter net sales decrease 4% to $2.002 billion

Boston Scientific Corporation (NYSE: BSX) today announced financial results for the fourth quarter and full year ended December 31, 2010, as well as net sales and earnings per share (EPS) guidance for the full year and first quarter 2011.

Fourth quarter highlights:

  • Reported sales of $2.002 billion with GAAP earnings of $0.15 per diluted share and adjusted earnings per diluted share of $0.20.
  • Increased year-over-year International ICD reported sales 6 percent (including 3 points of unfavorable foreign exchange impact), supported by the introduction of several new technologies.
  • Received CE Mark approval for INCEPTA™, ENERGEN™ and PUNCTUA™, the Company's next-generation cardiac resynchronization therapy defibrillators (CRT-Ds) and implantable cardioverter defibrillators (ICDs).
  • Maintained leadership position in the global drug-eluting stent (DES) market with 35 percent share worldwide and U.S. share of 46 percent.  Rapidly increased growth in PROMUS® Element™ sales throughout 2010 with sales of $227 million, exiting the year with nearly a quarter of the European DES market.
  • Increased worldwide Neuromodulation sales 8 percent and Endoscopy sales 6 percent.
  • Executed on several Priority Growth Initiatives through the recently announced acquisitions of Asthmatx, Sadra Medical, Atritech and Intelect Medical.
  • Divested Neurovascular business in January 2011 for $1.5 billion, with expected after-tax proceeds of $1.2 billion.
  • Prepaid all $600 million of senior notes due in June 2011 and paid at maturity $250 million of senior notes in January 2011.

"We've made significant progress in our strategy to realign our portfolio through the execution of our Priority Growth Initiatives, with four targeted acquisitions and a divestiture," said Ray Elliott, President and Chief Executive Officer of Boston Scientific.  "These acquisitions add promising new technologies to our portfolio and bolster our internal pipeline, which we expect will deliver more than 150 new products through 2015.  Proceeds from the divestiture of our Neurovascular business provide us with increased flexibility to fund acquisitions and pay down debt.  Nevertheless, we expect 2011 to be a difficult but necessary transition year in part driven by a worsening pricing environment and uncertainty in procedural volumes."

Fourth Quarter 2010

Net sales for the fourth quarter of 2010 were $2.002 billion, as compared to net sales of $2.079 billion for the fourth quarter of 2009, a decrease of 4 percent on both a reported and constant currency basis.

On a GAAP basis, net income for the fourth quarter of 2010 was $236 million, or $0.15 per diluted share.  These results included acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items; and amortization expense (after-tax) of $77 million, or $0.05 per diluted share, which consisted primarily of:

  • $4 million ($5 million pre-tax) of acquisition-related charges, consisting of due diligence and other fees, an inventory step-up adjustment, and contingent consideration expense related to 2010 acquisitions;
  • a $77 million ($104 million pre-tax) gain associated with the settlement of a litigation matter with Medinol, Ltd.;
  • $23 million ($30 million pre-tax) of restructuring and restructuring-related net charges associated with the Company's 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan;
  • $9 million of discrete tax items related to certain tax positions taken in a prior period; and
  • $116 million ($132 million pre-tax) of amortization expense.

Adjusted net income for the fourth quarter of 2010, excluding these net charges, was $313 million, or $0.20 per diluted share.

On a GAAP basis, net loss for the fourth quarter of 2009 was $1.075 billion, or $0.71 per share, and was driven primarily by charges related to the Company's settlement of patent disputes with Johnson & Johnson. Reported results included intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after-tax) of $1.379 billion, or $0.91 per share. Adjusted net income for the fourth quarter of 2009, excluding these net charges, was $304 million, or $0.20 per share.

Full Year 2010

Net sales for the full year 2010 were $7.806 billion, as compared to net sales of $8.188 billion for the full year 2009, a decrease of 5 percent on both a reported and constant currency basis.

On a GAAP basis, net loss for the full year 2010 was $1.065 billion, or $0.70 per share, and was driven primarily by a goodwill impairment charge recorded in the first quarter of 2010.  Reported results included goodwill and intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after-tax) of $2.116 billion, or $1.39 per share, which consisted primarily of:

  • $1.817 billion (on both a pre-tax and after-tax basis) of goodwill impairment charges associated with the Company's U.S. CRM business unit;
  • $55 million ($65 million pre-tax) of intangible asset impairment charges;
  • $211 million ($245 million pre-tax) of acquisition-related net credits, consisting of a gain related to the receipt of an acquisition-related milestone payment from Abbott Laboratories; as well as due diligence and other fees, an inventory step-up adjustment and contingent consideration expense related to 2010 acquisitions;
  • a $77 million ($104 million pre-tax) gain associated with the settlement of a litigation matter with Medinol, Ltd.;
  • $121 million ($169 million pre-tax) of restructuring and restructuring-related net charges associated with the Company's 2010 Restructuring plan, Plant Network Optimization program and 2007 Restructuring plan;
  • $11 million of discrete tax items related to certain tax positions taken in a prior period; and
  • $420 million ($513 million pre-tax) of amortization expense.

Adjusted net income for the full year 2010, excluding these net charges, was $1.051 billion, or $0.69 per share.

On a GAAP basis, net loss for the full year 2009 was $1.025 billion, or $0.68 per share. Reported results included intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related net charges; discrete tax items and amortization expense (after-tax) of $2.207 billion, or $1.46 per share. Adjusted net income for the full year 2009, excluding these net charges, was $1.182 billion, or $0.78 per share.

Guidance for Full Year and First Quarter of 2011

The Company estimates net sales for the full year 2011 in a range of $7.5 to $7.9 billion.  Compared to full year 2010 net sales, this range assumes a $258 million negative impact from the divestiture of the Neurovascular business.  Recently announced acquisitions are not expected to contribute to 2011 sales.  The Company estimates earnings on a GAAP basis in a range of $0.53 to $0.68 per share. Adjusted earnings, excluding divestiture-related net credits, acquisition- and restructuring-related charges; and amortization expense, are estimated in a range of $0.50 to $0.60 per share. As previously disclosed, recently announced acquisitions are expected to dilute 2011 adjusted earnings by approximately $0.03 to $0.04 per share as compared to the prior year, and the divestiture of the Neurovascular business is expected to dilute 2011 adjusted earnings by approximately $0.06 per share.

The Company estimates net sales for the first quarter of 2011 in a range of $1.825 to $1.925 billion.  Compared to net sales for the first quarter of 2010, this range assumes a $62 million negative impact from the divestiture of the Neurovascular business.  The Company estimates earnings on a GAAP basis in a range of $0.30 to $0.38 per share. Adjusted earnings, excluding acquisition- and divestiture-related net credits, restructuring-related charges, and amortization expense, are estimated in a range of $0.07 to $0.10 per share. Recently announced acquisitions are expected to dilute first quarter 2011 adjusted earnings by approximately $0.01 per share as compared to the prior year, and the divestiture of the Neurovascular business is expected to dilute first quarter 2011 adjusted earnings by $0.01 per share.

Source:

Boston Scientific Corporation

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