10-QPeriod: Q1 FY2017

BOSTON SCIENTIFIC CORP Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 3, 2017For Securities:BSX

Summary

Boston Scientific Corporation (BSX) reported strong top-line growth in the first quarter of 2017, with net sales increasing by 10% year-over-year to $2.16 billion. This growth was broad-based across its key segments, including Interventional Cardiology, Urology and Pelvic Health, and Endoscopy. The company's net income also saw a significant increase to $290 million, or $0.21 per diluted share, up from $202 million in the prior year quarter. Despite the positive sales and profit performance, the company incurred charges related to product recalls (Lotus Valve Devices, FUSE System) and ongoing litigation. However, management highlighted adjusted net income, which excludes these one-time items, demonstrating underlying operational strength. The company also announced a definitive agreement to acquire Symetis SA, a structural heart company, for $435 million, signaling continued strategic investment in growth areas. BSX maintained compliance with its debt covenants and believes its liquidity is sufficient for the next twelve months.

Financial Highlights

51 data points
Beta

Revenue

$2.16B

69.9% Gross Margin

Net Income

$290.00M

13.4% Net Margin

EPS (Diluted)

$0.21

Total Assets

$17.94B

Cash & Equivalents

$156.00M

Free Cash Flow

-$119.00M

Financial Statements
Beta
Revenue$2.16B
Cost of Revenue$650.00M
Gross Profit$1.51B
SG&A Expenses$794.00M
Operating Expenses$1.15B
Operating Income$364.00M
Interest Expense$57.00M
Net Income$290.00M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)1.37B
Shares Outstanding (Diluted)1.39B

Key Highlights

  • 1Net sales increased by 10% to $2.16 billion, driven by strong performance across multiple business segments.
  • 2Net income rose to $290 million ($0.21 per diluted share) from $202 million in the prior year quarter.
  • 3The company announced a $435 million acquisition of Symetis SA, a Swiss structural heart company, expected to close in Q2 2017.
  • 4Divisional performance was robust, with notable double-digit growth in Endoscopy (14%), Urology and Pelvic Health (15%), and Neuromodulation (17%).
  • 5A voluntary removal of Lotus Valve Devices from global commercial and clinical sites was initiated in February 2017, impacting gross profit margin.
  • 6The company remains compliant with its financial covenants under its credit facilities.
  • 7Cash provided by operating activities was $114 million, while investing activities used $140 million.

Frequently Asked Questions

Revenue growth was driven by strong performance across several segments. Key contributors included sales of the WATCHMAN Device, drug-eluting stents like the SYNERGY™ Stent, Atherectomy and Thrombectomy systems, pacemakers, and growth in the Endoscopy, Urology and Pelvic Health, and Neuromodulation businesses. The acquisition of EndoChoice also contributed to the Endoscopy segment's performance.

The acquisition of Symetis SA for $435 million in cash is a strategic move to strengthen Boston Scientific's position in the structural heart market, specifically in transcatheter aortic valve implantation (TAVI) devices. This acquisition is expected to close in the second quarter of 2017 and will be integrated into the Interventional Cardiology business.

The voluntary removal of Lotus Valve Devices from global commercial and clinical sites in February 2017 negatively impacted the company's gross profit margin. This was cited as a primary factor contributing to the decrease in gross profit margin percentage from 70.8% in Q1 2016 to 69.9% in Q1 2017. The company expects to bring the Lotus Valve platform back to market in Europe and other regions in the fourth quarter of 2017.

As of March 31, 2017, Boston Scientific had total debt of $5.514 billion and cash and cash equivalents of $156 million. The company had $464 million working capital deficit. Management believes its current cash balance, operational cash flow, and access to its $2.000 billion revolving credit facility and $400 million receivables facility are sufficient to fund operations for the next twelve months. The company also confirmed compliance with its debt covenants.