10-QPeriod: Q3 FY2013

BOSTON SCIENTIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 5, 2013For Securities:BSX

Summary

Boston Scientific Corporation (BSX) reported mixed financial results for the third quarter and first nine months of 2013. While net sales remained flat for the third quarter compared to the prior year, there was a reported net loss of $5 million. However, when excluding certain charges and adjustments, adjusted net income was $230 million. For the nine-month period, net sales decreased by 2% year-over-year, and the company reported a net loss of $229 million. On an adjusted basis, net income was $701 million. Significant one-time charges related to goodwill and intangible asset impairments, restructuring, litigation, and debt extinguishment impacted the reported net income. The company highlighted strong performance in its MedSurg segment, particularly in Endoscopy and Neuromodulation, and saw positive constant currency growth in Peripheral Interventions and Rhythm Management. The company also announced a new "2014 Restructuring plan" aimed at further improving operational effectiveness and efficiency.

Financial Highlights

53 data points
Beta

Revenue

$1.74B

70.6% Gross Margin

Net Income

-$5.00M

-0.3% Net Margin

EPS (Diluted)

$0.00

Total Assets

$16.92B

Cash & Equivalents

$571.00M

Free Cash Flow

$194.00M

Financial Statements
Beta
Revenue$1.74B
Cost of Revenue$510.00M
Gross Profit$1.23B
SG&A Expenses$658.00M
Operating Expenses$1.12B
Operating Income$103.00M
Interest Expense$137.00M
Net Income-$5.00M
Shares Outstanding (Basic)1.34B
Shares Outstanding (Diluted)1.34B

Key Highlights

  • 1Net sales for Q3 2013 were $1.735 billion, flat compared to Q3 2012. Excluding currency impacts and divested businesses, net sales increased by 4%.
  • 2The company reported a net loss of $5 million ($0.00 per diluted share) for Q3 2013, but an adjusted net income of $230 million ($0.17 per diluted share) excluding significant charges.
  • 3For the nine months ended September 30, 2013, net sales were $5.305 billion, a 2% decrease from the prior year. The reported net loss was $229 million ($0.17 per diluted share), with adjusted net income of $701 million ($0.51 per diluted share).
  • 4Significant charges impacting reported results include goodwill and intangible asset impairments ($423 million in Q1 2013 for CRM segment), debt extinguishment charges ($70 million), and restructuring charges ($19 million in Q3 2013).
  • 5The company announced a new "2014 Restructuring plan" estimated to cost $175-$225 million to improve operational effectiveness and efficiency.
  • 6Gross profit margin improved to 70.6% in Q3 2013 from 67.8% in Q3 2012, driven by cost reductions from restructuring programs.
  • 7The Rhythm Management segment, particularly the S-ICD system launch, and the MedSurg segment, with strong growth in Endoscopy and Neuromodulation, showed positive performance trends.

Frequently Asked Questions

For the third quarter of 2013, Boston Scientific reported net sales of $1.735 billion, flat year-over-year, with a reported net loss of $5 million. However, excluding significant charges, adjusted net income was $230 million. For the first nine months of 2013, net sales decreased by 2% to $5.305 billion, and the company reported a net loss of $229 million. Adjusted net income for the nine-month period was $701 million.

The reported net income was significantly impacted by several non-recurring items. These included a $423 million goodwill impairment charge related to the Cardiac Rhythm Management (CRM) segment, intangible asset impairment charges, restructuring charges totaling $19 million in Q3, litigation-related charges of $76 million in Q3, and debt extinguishment charges of $70 million in Q3. These charges, along with others, contributed to the difference between reported and adjusted net income.

The company reorganized into three global business units: Cardiovascular, Rhythm Management, and MedSurg. The MedSurg segment showed strong growth, particularly in Endoscopy and Neuromodulation. The Rhythm Management segment saw a slight increase in net sales, with progress in the S-ICD system launch. The Cardiovascular segment experienced a slight decline in net sales, mainly due to lower coronary stent system sales, though new product launches like the SYNERGY™ stent system offer future potential.

Boston Scientific announced a "2014 Restructuring plan" aimed at improving operational effectiveness and efficiency, with an estimated cost of $175-$225 million. The company continues to focus on innovation, expanding its global presence, particularly in emerging markets, and managing its product portfolio for profitable growth. They are also managing significant ongoing litigation and regulatory matters.