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BOSTON SCIENTIFIC CORP Annual Report (Amendment), Year Ended Dec 31, 1997

Filing Date
Filed March 31, 1999
Period End
December 31, 1997
Security
BSX
In the record · 2016–202610-K1310-Q328-K181

BSX filed 13 annual reports (10-K), 32 quarterly reports (10-Q) and 181 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Aug ’17Aug ’17
  2. Material agreement8-K · Nov ’19Nov ’19
  3. Leadership change8-K · Nov ’21Nov ’21
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K/A filed March 31, 1999. Cited figures are marked; the original filing is the authoritative source.

Boston Scientific's amended 1997 Form 10-K/A (filed March 1999) centers on a restatement triggered by business irregularities discovered in its Japanese subsidiary in November 1998.

Restated 1997 net sales were $1,831 milliona, down from $1,872 million previously reported, and net income was $110 million versus $139 million previously. The restatement also reduced quarterly 1998 comparisons, so investors should treat the restated figures as the reliable baseline for period-to-period analysis. Reported 1997 results were also weighed down by $259 million in merger-related and special charges, tied largely to the Target Therapeutics pooling merger and inventory write-downs, which kept excluding-charges net income growth to roughly 2%.

Underlying operations showed strong top-line momentum: net sales rose 18%b (about 23% excluding currency), international sales reached 41% of the total, and vascular and nonvascular sales grew 16% and 26%. However, profitability pressures were visible. Gross margin fell to 70.2% from 72.4%, mainly due to inventory write-downs and pricing pressure, and SG&A rose 35% to 38% of sales.

Working capital fell from $335 million to $227 millionc, operating cash flow dropped from $142 million to $80 million, and inventory grew $155 million, largely to stock the NIR stent ahead of its planned U.S. and Japan launch. The company also issued $500 million of public debt in March 1998 to repay commercial paper.

Key forward-looking risks include the timing of NIR stent FDA approval, ongoing patent litigation (including suits with Johnson & Johnson, Cordis, and Advanced Cardiovascular Systems), completion of Target integration by end-1998, foreign currency exposure, and healthcare cost-containment pressure from managed care and group purchasing organizations. The restatement itself raises governance and internal-control questions that investors should weigh alongside the operating picture.

02—Key points

Key Highlights

  1. Restated 1997 net sales of $1,830.8 million (up 18% YoY) and net income of $110.4 million ($0.28 diluted EPS), versus previously reported $1,872 million and $139 million after the Japanese subsidiary irregularities.
  2. Merger-related and special charges totaled $259 million pre-tax in 1997; excluding them, net income rose about 2% to $302 million.
  3. Gross margin declined to 70.2% from 72.4%, driven by $19 million of inventory write-downs, lower average selling prices, and currency headwinds.
  4. International sales reached 41% of net sales; U.S. revenue grew 16% to $1,076 million and international grew about 20% to $755 million.
  5. Operating cash flow fell to $80 million from $142 million, while inventory rose $155 million, largely to build NIR stent stock ahead of its planned 1998 U.S. and Japan launch.
  6. Working capital dropped to $227 million from $335 million; $500 million of public debt issued in March 1998 to refinance commercial paper.
  7. Ongoing patent litigation with Johnson & Johnson, Cordis, ACS, and others, plus pending FDA approval of the NIR stent, represents key near-term risk and opportunity.

03—Questions

Frequently Asked Questions

  1. Why did Boston Scientific restate its 1997 results?

    In November 1998 the company detected business irregularities in the operations of its Japanese subsidiary. As a result, it restated 1997 revenue down from $1,872 million to $1,831 million and net income down from $139 million to $110 million, along with restating the first three quarters of 1998 for period-to-period comparability.

  2. How much did one-time charges affect 1997 results?

    The company recorded $259 million of merger-related and special charges pre-tax ($192 million after tax) in 1997. These included $146 million in merger-related expenses, $29 million of purchased R&D, $19 million of inventory write-downs, $34 million of litigation reserves, and $31 million from a required accounting change for business process reengineering costs.

  3. What is driving growth and what are the main margin pressures?

    Growth was led by vascular and nonvascular product lines and expanded international direct sales, with net sales up 18% reported and about 23% excluding currency. Margin pressure came from inventory write-downs, declining average selling prices driven by managed care and group purchasing consolidation, higher SG&A from expanded sales organizations, and a roughly $77 million currency drag on international sales.

  4. What are the key risks investors should monitor?

    Key risks include timing and approval of the NIR stent in the U.S. and Japan, the outcome of numerous patent suits (including Johnson & Johnson, Cordis, and ACS), completion of Target Therapeutics integration by end of 1998, inventory levels and supply chain execution, foreign currency fluctuations, and the broader governance implications of the Japanese subsidiary irregularities.

04—Continue

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