10-QPeriod: Q1 FY2013

BOSTON SCIENTIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2013

Filed May 7, 2013For Securities:BSX

Summary

Boston Scientific Corporation (BSX) reported a net loss of $354 million, or $0.26 per share, for the first quarter of 2013, a significant decrease compared to a net income of $113 million, or $0.08 per share, in the prior year's quarter. This loss was heavily influenced by a substantial $423 million goodwill impairment charge related to the Cardiac Rhythm Management (CRM) reporting unit, stemming from a recent business reorganization. Excluding this and other non-recurring charges, adjusted net income was $224 million, or $0.16 per share. Net sales saw a decline of 6% to $1.761 billion, impacted by foreign currency headwinds and divestitures. However, excluding these factors, net sales decreased by 4%. Gross profit margin improved to 67.2% from 66.2% year-over-year, driven by manufacturing efficiencies and the favorable product mix from newer stent technologies, partially offset by pricing pressures. The company continues to manage its debt effectively and maintain compliance with its credit facility covenants.

Financial Highlights

51 data points
Beta

Revenue

$1.76B

67.2% Gross Margin

Net Income

-$354.00M

-20.1% Net Margin

EPS (Diluted)

$-0.26

Total Assets

$16.76B

Cash & Equivalents

$268.00M

Free Cash Flow

$134.00M

Financial Statements
Beta
Revenue$1.76B
Cost of Revenue$578.00M
Gross Profit$1.18B
SG&A Expenses$631.00M
Operating Expenses$1.51B
Operating Income-$330.00M
Interest Expense$65.00M
Net Income-$354.00M
EPS (Basic)$-0.26
EPS (Diluted)$-0.26
Shares Outstanding (Basic)1.35B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Reported a net loss of $354 million for Q1 2013, primarily due to a $423 million goodwill impairment charge related to the CRM segment following business reorganization.
  • 2Net sales decreased by 6% to $1.761 billion, with a 4% decrease on a constant currency basis, excluding divestitures.
  • 3Gross profit margin improved to 67.2% from 66.2% in the prior year's quarter, driven by cost efficiencies and product mix.
  • 4Company's adjusted net income (excluding impairment charges and other one-time items) was $224 million, or $0.16 per share.
  • 5Total debt remained stable at $4.25 billion, with strong compliance with credit facility covenants.
  • 6Significant contingent consideration liabilities exist, with a maximum potential future payment of approximately $2.3 billion.
  • 7The company is actively managing ongoing litigation, including a significant accrual of $648 million for legal matters.

Frequently Asked Questions

The primary driver of the net loss was a $423 million non-cash goodwill impairment charge recognized in the Cardiac Rhythm Management (CRM) reporting unit. This charge resulted from a company-wide reorganization into global business units, which altered the composition and structure of reporting units for impairment testing purposes.

Net sales decreased by 6% to $1.761 billion compared to the prior year. Excluding the impact of foreign currency fluctuations and divestitures, net sales declined by 4%. This decrease was attributed to competitive pressures in key markets and average selling price declines.

Boston Scientific maintained a total debt of approximately $4.25 billion as of March 31, 2013. The company had $268 million in cash and cash equivalents. They are in compliance with their credit facility covenants and have access to a $2.0 billion revolving credit facility, indicating a stable liquidity position.

Yes, the company has significant contingent consideration liabilities related to past acquisitions, with a maximum potential future payment of approximately $2.3 billion. Additionally, there is a substantial accrual of $648 million for ongoing litigation and legal matters, highlighting potential future financial impacts.