10-QPeriod: Q3 FY2011

BOSTON SCIENTIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:BSX

Summary

Boston Scientific Corporation (BSX) reported its third-quarter and nine-month results for the period ending September 29, 2011. The company saw a slight decrease in net sales for both periods compared to the prior year, with Q3 sales at $1.874 billion (down 2% year-over-year) and year-to-date sales at $5.774 billion (down 1% year-over-year). This decline was partially attributed to the divestiture of the Neurovascular business and currency fluctuations, though excluding these, core business net sales also saw a modest decline. Profitability was significantly impacted by a substantial goodwill impairment charge of $697 million recorded in the first quarter related to the Cardiac Rhythm Management (CRM) business, driven by market contraction and competitive pressures. Despite this, the company reported net income of $142 million for Q3 ($0.09 per share) and $334 million year-to-date ($0.22 per share). Excluding the impact of impairment charges, acquisition-related costs, and restructuring activities, adjusted net income was $223 million for Q3 and $822 million year-to-date. The company also highlighted strategic acquisitions in structural heart, deep-brain stimulation, and peripheral vascular disease areas, as well as ongoing restructuring efforts to improve operational efficiency.

Financial Highlights

50 data points
Beta

Revenue

$1.87B

63.7% Gross Margin

Net Income

$142.00M

7.6% Net Margin

EPS (Diluted)

$0.09

Total Assets

$21.50B

Cash & Equivalents

$276.00M

Free Cash Flow

$297.00M

Financial Statements
Beta
Revenue$1.87B
Cost of Revenue$680.00M
Gross Profit$1.19B
SG&A Expenses$629.00M
Operating Expenses$1.02B
Operating Income$174.00M
Interest Expense$62.00M
Net Income$142.00M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)1.51B
Shares Outstanding (Diluted)1.52B

Key Highlights

  • 1Net sales for Q3 2011 were $1.874 billion, a 2% decrease compared to $1.916 billion in Q3 2010.
  • 2Year-to-date net sales were $5.774 billion, a 1% decrease compared to $5.804 billion in the prior year's period.
  • 3A significant goodwill impairment charge of $697 million was recorded in Q1 2011 related to the U.S. Cardiac Rhythm Management (CRM) business.
  • 4The company reported net income of $142 million ($0.09 per diluted share) for Q3 2011, compared to $190 million ($0.12 per diluted share) in Q3 2010.
  • 5Cash flow from operations improved significantly, generating $659 million for the first nine months of 2011, compared to a use of $124 million in the same period of 2010.
  • 6The company completed several strategic acquisitions in Q1 2011, including Sadra Medical, Inc., Intelect Medical, Inc., ReVascular Therapeutics, Inc., and Atritech, Inc., to expand its portfolio in key growth areas.
  • 7Total debt decreased to $4.263 billion as of September 30, 2011, from $5.438 billion as of December 31, 2010, reflecting debt repayments.

Frequently Asked Questions

Boston Scientific reported net sales of $1.874 billion for the third quarter of 2011, a decrease of 2% compared to $1.916 billion in the third quarter of 2010. Excluding the impact of foreign currency fluctuations and sales from divested businesses, core business net sales decreased by 3% on a constant currency basis.

The company recorded a substantial $697 million goodwill impairment charge in the first quarter of 2011 primarily related to its U.S. Cardiac Rhythm Management (CRM) business. This was driven by a reduction in the estimated size of the U.S. ICD market, lower projected CRM results, physician reactions to study findings, and increased competitive and pricing pressures.

In the first quarter of 2011, Boston Scientific completed several strategic acquisitions in areas like structural heart therapy, deep-brain stimulation, and peripheral vascular disease. These acquisitions resulted in the recognition of $271 million in goodwill and $565 million in intangible assets. The company incurred contingent consideration liabilities totaling $287 million for these acquisitions, which are subject to future milestone achievements.

Boston Scientific significantly reduced its total debt to $4.263 billion as of September 30, 2011, down from $5.438 billion at the end of 2010. This reduction was primarily due to the repayment of $1.0 billion of its term loan and $250 million of senior notes. The company also secured an upgrade to an investment-grade rating from Fitch Ratings, reflecting improved financial fundamentals.