10-QPeriod: Q2 FY2002

BOSTON SCIENTIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2002

Filed August 9, 2002For Securities:BSX

Summary

Boston Scientific Corporation (BSX) reported a net income of $25 million ($0.06 per diluted share) for the second quarter of 2002, a significant improvement from a net loss of $172 million ($0.43 per diluted share) in the same period of the prior year. For the first six months of 2002, net income was $107 million ($0.26 per diluted share), compared to a net loss of $177 million ($0.44 per diluted share) for the same period in 2001. Net sales increased by 5% to $708 million for the second quarter and by 4% to $1,383 million for the first six months, driven by growth in product lines outside of coronary stents and contributions from recent acquisitions, despite a continued decline in NIR(R) coronary stent sales. The company completed two strategic acquisitions in the second quarter: Enteric Medical Technologies, Inc. (EMT) for GERD treatment technology and BEI Medical Systems Company, Inc. for women's health solutions, reflecting a strategy of combining internal development with external acquisitions. The company also substantially completed its global operations plan aimed at optimizing manufacturing and R&D facilities, expecting significant cost savings.

Key Highlights

  • 1Positive shift to profitability: Reported net income of $25 million in Q2 2002, a substantial turnaround from a net loss of $172 million in Q2 2001. Year-to-date net income stands at $107 million compared to a net loss of $177 million in the prior year.
  • 2Revenue growth driven by diversification: Net sales increased by 5% to $708 million in Q2 2002, with growth primarily coming from product lines excluding coronary stents and from acquired businesses.
  • 3Strategic acquisitions bolster portfolio: Completed the acquisition of Enteric Medical Technologies (EMT) for GERD treatment and BEI Medical Systems for women's health, expanding the company's Endosurgery product offerings.
  • 4Global operations optimization nearing completion: Substantially completed the plant optimization initiative, expected to yield significant cost savings and improve operational efficiency.
  • 5Declining NIR stent sales continue: Acknowledged the ongoing decline in NIR(R) coronary stent sales, offset by growth in other product areas and the upcoming launch of the Express(TM) coronary stent.
  • 6Increased R&D investment: Research and development expenses increased, particularly in drug-eluting stent technology like the TAXUS(TM) program, positioning for future product launches.
  • 7Substantial debt and credit facilities: The company had $510 million in commercial paper outstanding and a $1.6 billion revolving credit facility available at quarter-end, indicating significant leverage but also access to funding.

Frequently Asked Questions

Boston Scientific has shown a significant positive trend in profitability. They moved from a net loss of $172 million in Q2 2001 to a net income of $25 million in Q2 2002. Year-to-date, they reported a net income of $107 million for the first six months of 2002, compared to a net loss of $177 million for the same period in 2001. This indicates a strong recovery and improvement in financial performance.

The acquisitions of Enteric Medical Technologies (EMT) and BEI Medical Systems are strategically aligned to expand Boston Scientific's Endosurgery product offerings. EMT provides technology for GERD treatment, and BEI offers less-invasive technology for women's health. These acquisitions are part of the company's strategy to grow through a combination of internal development and external M&A activity.

The company acknowledges that the worldwide coronary stent market is dynamic and competitive, with ongoing declines in market share for the NIR(R) coronary stent. However, they are actively managing this by focusing on other product lines and acquired businesses, and preparing for the launch of their internally developed Express(TM) coronary stent in new markets. The development of drug-eluting stents, such as the TAXUS(TM) program, is also a key focus for future growth in this segment.

The company has substantially completed its plant optimization initiative as part of its global operations strategy. This initiative aims to improve resource allocation and create a more effective network of manufacturing and R&D facilities. The company expects this plan to generate significant pre-tax operating savings and has incurred charges related to severance and transition costs. The initiative is seen as a key driver for cost reduction and operational efficiency.