10-QPeriod: Q2 FY2012

BOSTON SCIENTIFIC CORP Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 7, 2012For Securities:BSX

Summary

Boston Scientific Corporation reported a significant net loss of $3.578 billion for the second quarter of 2012, primarily driven by a substantial $3.602 billion goodwill impairment charge related to its EMEA reporting unit. This impairment reflects a reassessment of future growth prospects in the European market due to macroeconomic factors. Excluding this charge and other one-time items, the company's adjusted net income was $239 million, or $0.17 per share, reflecting underlying operational performance. Net sales for the quarter decreased by 7% year-over-year to $1.828 billion, impacted by currency headwinds and divestitures, though constant currency sales showed a more moderate 5% decline. Key business segments like Endoscopy and Peripheral Interventions showed positive growth, while Interventional Cardiology and Cardiac Rhythm Management experienced sales declines. The company continues to execute on strategic initiatives, including product development and integration of recent acquisitions like Cameron Health, Inc. Despite the reported net loss, operating cash flow remained strong, providing funds for share repurchases and strategic investments. Management highlighted ongoing efforts in restructuring and cost optimization to improve operational effectiveness and competitiveness. Investors should closely monitor the impact of macroeconomic conditions on international sales, the performance of newly launched products, and the ongoing risk of potential future goodwill impairments in other reporting units.

Financial Highlights

50 data points
Beta

Revenue

$1.83B

68.4% Gross Margin

Net Income

-$3.58B

-195.7% Net Margin

EPS (Diluted)

$-2.51

Total Assets

$17.82B

Cash & Equivalents

$371.00M

Free Cash Flow

$355.00M

Financial Statements
Beta
Revenue$1.83B
Cost of Revenue$578.00M
Gross Profit$1.25B
SG&A Expenses$648.00M
Operating Expenses$4.84B
Operating Income-$3.59B
Interest Expense$64.00M
Net Income-$3.58B
EPS (Basic)$-2.51
EPS (Diluted)$-2.51
Shares Outstanding (Basic)1.42B
Shares Outstanding (Diluted)1.42B

Key Highlights

  • 1Reported a net loss of $3.578 billion for Q2 2012, largely due to a $3.602 billion goodwill impairment charge for the EMEA reporting unit.
  • 2Adjusted net income (excluding impairment charges and other items) was $239 million, or $0.17 per share, indicating underlying operational profitability.
  • 3Net sales decreased 7% to $1.828 billion in Q2 2012 compared to Q2 2011; constant currency sales decreased 5%.
  • 4Acquisition of Cameron Health, Inc. completed in June 2012 for potential total consideration of over $1.3 billion, focused on the subcutaneous implantable cardioverter defibrillator technology.
  • 5Strong operating cash flow of $619 million for the first half of 2012, enabling share repurchases and strategic investments.
  • 6Gross profit margin improved to 68.4% in Q2 2012 from 65.2% in Q2 2011, driven by the higher-margin PROMUS® Element™ stent system and cost reductions.
  • 7Significant litigation accrual of $375 million as of June 30, 2012, reflecting ongoing legal matters.

Frequently Asked Questions

The primary driver for the significant net loss of $3.578 billion was a substantial goodwill impairment charge of $3.602 billion recognized for the company's EMEA (Europe, Middle East, and Africa) reporting unit. This impairment reflects updated estimates of future growth and profitability in the European market due to macroeconomic factors and increased risk.

Net sales decreased by 7% to $1.828 billion in the second quarter of 2012 compared to the same period in 2011. Excluding the negative impact of foreign currency fluctuations and net sales from divested businesses, net sales decreased by 5%. Growth was observed in Endoscopy and Peripheral Interventions, while Interventional Cardiology and Cardiac Rhythm Management saw declines.

Boston Scientific completed the acquisition of Cameron Health, Inc. in June 2012, a company known for its subcutaneous implantable cardioverter defibrillator technology. This acquisition is part of the company's strategy to drive innovation and growth in the Cardiac Rhythm Management market.

Management highlighted the ongoing risk of future goodwill impairment charges, particularly for its U.S. CRM, U.S. Cardiovascular, and U.S. Neuromodulation reporting units, which hold significant goodwill. Other risks include competitive pressures in key markets like coronary stents and CRM, the impact of macroeconomic conditions, ongoing litigation, and regulatory uncertainties.