10-QPeriod: Q3 FY2014

BOSTON SCIENTIFIC CORP Quarterly Report for Q3 Ended Sep 30, 2014

Filed November 5, 2014For Securities:BSX

Summary

Boston Scientific Corporation reported net sales of $1.846 billion for the third quarter of 2014, an increase of 6% compared to the prior year quarter. This growth was driven by strong performance across several segments, including Cardiovascular, Rhythm Management, and MedSurg, with notable contributions from the Interventional Cardiology and Electrophysiology divisions. The company also completed two strategic acquisitions during the period: the Interventional Division of Bayer AG and IoGyn, Inc., aimed at enhancing its product portfolio and market reach. While the company reported a net income of $43 million ($0.03 per diluted share) for the quarter, this figure was impacted by significant charges including intangible asset impairment, litigation-related costs, and restructuring expenses. On an adjusted basis, excluding these items, net income was $273 million ($0.20 per diluted share), reflecting the underlying operational profitability. The company generated $829 million in cash from operating activities for the first nine months of 2014, demonstrating solid cash flow generation.

Financial Highlights

53 data points
Beta

Revenue

$1.86B

69.7% Gross Margin

Net Income

$43.00M

2.3% Net Margin

EPS (Diluted)

$0.03

Total Assets

$16.72B

Cash & Equivalents

$246.00M

Free Cash Flow

$290.00M

Financial Statements
Beta
Revenue$1.86B
Cost of Revenue$550.00M
Gross Profit$1.30B
SG&A Expenses$741.00M
Operating Expenses$1.23B
Operating Income$64.00M
Interest Expense$54.00M
Net Income$43.00M
EPS (Basic)$0.03
EPS (Diluted)$0.03
Shares Outstanding (Basic)1.33B
Shares Outstanding (Diluted)1.35B

Key Highlights

  • 1Net sales increased 6% year-over-year to $1.846 billion in Q3 2014.
  • 2Completed two strategic acquisitions: Bayer's Interventional Division and IoGyn, Inc. to expand product offerings.
  • 3Reported net income of $43 million ($0.03/share), with adjusted net income of $273 million ($0.20/share) excluding significant one-time charges.
  • 4Generated $829 million in cash from operating activities for the nine months ended September 30, 2014.
  • 5Cardiovascular and Rhythm Management segments showed strong growth, with notable double-digit increases in Electrophysiology (driven by acquisition) and Interventional Cardiology.
  • 6The company maintained a strong liquidity position with $246 million in cash and cash equivalents and significant unused credit facilities.
  • 7Continued restructuring efforts aimed at improving operational effectiveness and efficiency, with an estimated $150-200 million in gross annual pre-tax operating expense reductions exiting 2015.

Frequently Asked Questions

Revenue growth was driven by an overall increase in net sales of 6% to $1.846 billion. Key contributors included the Interventional Cardiology segment, driven by Promus PREMIER™ Stent System sales and structural heart products, and the Electrophysiology segment, significantly boosted by the recent acquisition of C.R. Bard's EP business. The Peripheral Interventions segment also saw growth, aided by the acquisition of Bayer's Interventional Division.

The acquisition of Bayer's Interventional Division for $414 million aimed to enhance the company's portfolio for treating vascular conditions by adding products like the AngioJet® Thrombectomy System. The acquisition of IoGyn, Inc. provided the Symphion™ System for intrauterine tissue removal, complementing the Urology and Women's Health division. These acquisitions are expected to strengthen Boston Scientific's market position and product offerings.

The company recorded significant intangible asset impairment charges ($12 million in Q3 2014, and larger amounts in prior quarters) and a goodwill impairment charge in 2013. These are non-cash charges and do not affect cash flow or liquidity. Management excludes these items when evaluating operating performance and calculating adjusted non-GAAP financial measures to provide a clearer view of the underlying business performance.

Boston Scientific maintained a solid financial position, with $246 million in cash and cash equivalents as of September 30, 2014. The company generated $829 million in operating cash flow for the first nine months of the year. It also has significant unused credit facilities, including a $2.0 billion revolving credit facility, indicating strong liquidity and financial flexibility.