
|
·
|
Achieved
net sales of $2.024 billion
|
|
·
|
Reported
adjusted EPS of $0.20, an increase of 25 percent over prior
year
|
|
·
|
Increased
Cardiac Rhythm Management (CRM) sales 10
percent
|
|
·
|
Endosurgery
sales growth of 12 percent
|
|
·
|
Received
FDA approval for COGNISTM
CRT-D and TELIGENTM
ICD
|
|
·
|
Obtained
US and European approval for ALTRUATM
family of pacemakers
|
|
·
|
Paid
down $300 million of debt
|
|
·
|
Reduced
SG&A and R&D expenses by $119 million below prior
year
|
|
·
|
$16
million of pre-tax charges ($19 million after-tax) related to purchased
research and development associated with the Company’s acquisition of
CryoCor, Inc.;
|
|
·
|
$96
million of pre-tax charges ($64 million after-tax), attributable to losses
in connection with the sale of the Company’s non-strategic investments,
which are expected to be partially offset by pre-tax gains of
approximately $30 million ($20 million after-tax) when the transactions
are completed in the second half of the
year;
|
|
·
|
$21
million of pre-tax charges ($15 million after-tax), associated with the
Company’s ongoing expense and head count reduction initiatives;
and
|
|
·
|
$135
million of pre-tax amortization expense ($108 million
after-tax).
|
|
CONTACT:
Paul
Donovan
508-650-8541
(office)
508-667-5165
(mobile)
Media
Relations
Boston
Scientific Corporation
Larry
Neumann
508-650-8696
(office)
Investor
Relations
Boston
Scientific Corporation
|
|
Three
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
In
millions, except per share data
|
2008
|
2007
|
||||||
|
Net
sales
|
$ | 2,024 | $ | 2,071 | ||||
|
Cost
of products sold
|
604 | 563 | ||||||
|
Gross
profit
|
1,420 | 1,508 | ||||||
|
Operating
expenses
|
||||||||
|
Selling,
general and administrative expenses
|
655 | 752 | ||||||
|
Research
and development expenses
|
253 | 275 | ||||||
|
Royalty
expense
|
48 | 51 | ||||||
|
Amortization
expense
|
135 | 158 | ||||||
|
Purchased
research and development
|
16 | (8 | ) | |||||
|
Restructuring
charges
|
10 | |||||||
| 1,117 | 1,228 | |||||||
|
Operating
income
|
303 | 280 | ||||||
|
Other
income (expense):
|
||||||||
|
Interest
expense
|
(118 | ) | (146 | ) | ||||
|
Other,
net
|
(85 | ) | (8 | ) | ||||
|
Income
before income taxes
|
100 | 126 | ||||||
|
Income
tax expense
|
2 | 11 | ||||||
|
Net
income
|
$ | 98 | $ | 115 | ||||
|
Net
income per common share - assuming dilution
|
$ | 0.07 | $ | 0.08 | ||||
|
Weighted
average shares outstanding - assuming dilution
|
1,505.2 | 1,499.9 | ||||||
|
Three
Months Ended
|
Three
Months Ended
|
|||||||||||||||
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||||
|
In
millions, except per share data
|
Net
income
|
Impact
per diluted share
|
|
Net
income
|
Impact
per diluted share
|
|||||||||||
|
GAAP
results
|
$ | 98 | $ | 0.07 | $ | 115 | $ | 0.08 | ||||||||
|
Non-GAAP
adjustments:
|
||||||||||||||||
|
Acquisition-related
charges
|
19 | 0.01 | 2 | — | ||||||||||||
|
Divestiture-related
losses
|
64 | 0.04 | ||||||||||||||
|
Restructuring-related
charges
|
15 | 0.01 | ||||||||||||||
|
Amortization
expense
|
108 | 0.07 | 125 | 0.08 | ||||||||||||
|
Adjusted
results
|
$ | 304 | $ | 0.20 | $ | 242 | $ | 0.16 | ||||||||
|
Three
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Acquisition-related
charges:
|
||||||||
|
Purchased
research and development
|
$ | 16 | $ | (8 | ) | |||
|
Integration
costs (a)
|
12 | |||||||
| 16 | 4 | |||||||
|
Income
tax expense (benefit) (d)
|
3 | (2 | ) | |||||
|
Acquisition-related
charges, net of tax
|
$ | 19 | $ | 2 | ||||
|
Divestiture-related
losses:
|
||||||||
|
Loss
on sale of non-strategic investments (b)
|
$ | 96 | ||||||
|
Income
tax benefit (d)
|
(32 | ) | ||||||
|
Divestiture-related
losses, net of tax
|
$ | 64 | ||||||
|
Restructuring-related
charges:
|
||||||||
|
Restructuring-related
charges (c)
|
$ | 21 | ||||||
|
Income
tax benefit (d)
|
(6 | ) | ||||||
|
Restructuring-related
charges, net of tax
|
$ | 15 | ||||||
|
Amortization
expense:
|
||||||||
|
Amortization
expense
|
$ | 135 | $ | 158 | ||||
|
Income
tax benefit (d)
|
(27 | ) | (33 | ) | ||||
|
Amortization
expense, net of tax
|
$ | 108 | $ | 125 | ||||
|
(a) Recorded expenses of
$8 million to selling, general and administrative expenses, $2 million to
cost of products sold, and $2 million to research and development
expenses.
|
||
|
(b) Recorded to other,
net.
|
||
|
(c) Recorded $10 million
to restructuring charges, $6 million to selling, general and
administrative expenses, $3 million to cost of products sold, and $2
million to research and development expenses.
|
||
|
(d) Amounts are tax
effected at the Company's effective tax rate, unless the amount is a
significant unusual or infrequently occurring item in accordance with FASB
Interpretation No. 18, "Accounting for Income Taxes in Interim
Periods."
|
||
|
Six
Months Ended
|
||||||||
|
June
30,
|
||||||||
|
In
millions, except per share data
|
2008
|
2007
|
||||||
|
Net
sales
|
$ | 4,071 | $ | 4,157 | ||||
|
Cost
of products sold
|
1,185 | 1,131 | ||||||
|
Gross
profit
|
2,886 | 3,026 | ||||||
|
Operating
expenses
|
||||||||
|
Selling,
general and administrative expenses
|
1,315 | 1,487 | ||||||
|
Research
and development expenses
|
497 | 564 | ||||||
|
Royalty
expense
|
94 | 103 | ||||||
|
Amortization
expense
|
279 | 312 | ||||||
|
Purchased
research and development
|
29 | (3 | ) | |||||
|
Restructuring
charges
|
39 | |||||||
|
Gain
on divestitures
|
(250 | ) | ||||||
| 2,003 | 2,463 | |||||||
|
Operating
income
|
883 | 563 | ||||||
|
Other
income (expense):
|
||||||||
|
Interest
expense
|
(249 | ) | (287 | ) | ||||
|
Other,
net
|
(72 | ) | 10 | |||||
|
Income
before income taxes
|
562 | 286 | ||||||
|
Income
tax expense
|
142 | 51 | ||||||
|
Net
income
|
$ | 420 | $ | 235 | ||||
|
Net
income per common share - assuming dilution
|
$ | 0.28 | $ | 0.16 | ||||
|
Weighted
average shares outstanding - assuming dilution
|
1,502.6 | 1,498.9 | ||||||
|
Six
Months Ended
|
Six
Months Ended
|
|||||||||||||||
|
June
30, 2008
|
June
30, 2007
|
|||||||||||||||
|
In
millions, except per share data
|
Net
income
|
Impact
per diluted share
|
Net
income
|
Impact
per diluted share
|
||||||||||||
|
GAAP
results
|
$ | 420 | $ | 0.28 | $ | 235 | $ | 0.16 | ||||||||
|
Non-GAAP
adjustments:
|
||||||||||||||||
|
Acquisition-related
charges
|
27 | 0.02 | 22 | 0.01 | ||||||||||||
|
Divestiture-related
gains
|
(51 | ) | (0.04 | ) | ||||||||||||
|
Restructuring-related
charges
|
47 | 0.03 | ||||||||||||||
|
Amortization
expense
|
218 | 0.15 | 247 | 0.17 | ||||||||||||
|
Adjusted
results
|
$ | 661 | $ | 0.44 | $ | 504 | $ | 0.34 | ||||||||
|
Six Months
Ended
|
||||||||
|
June
30,
|
||||||||
|
2008
|
2007
|
|||||||
|
Acquisition-related
charges:
|
||||||||
|
Purchased
research and development
|
$ | 29 | $ | (3 | ) | |||
|
Integration
costs (a)
|
24 | |||||||
|
Fair-value
adjustment for the sharing of proceeds feature of the Abbott stock
purchase (b)
|
8 | |||||||
| 29 | 29 | |||||||
|
Income
tax benefit (d)
|
(2 | ) | (7 | ) | ||||
|
Acquisition-related
charges, net of tax
|
$ | 27 | $ | 22 | ||||
|
Divestiture-related
gains:
|
||||||||
|
Gain
on divestitures
|
$ | (250 | ) | |||||
|
Loss
on sale of non-strategic investments (b)
|
96 | |||||||
| (154 | ) | |||||||
|
Income
tax expense (d)
|
103 | |||||||
|
Divestiture-related
gains, net of tax
|
$ | (51 | ) | |||||
|
Restructuring-related
charges:
|
||||||||
|
Restructuring-related
charges (c)
|
$ | 65 | ||||||
|
Income
tax benefit (d)
|
(18 | ) | ||||||
|
Restructuring-related
charges, net of tax
|
$ | 47 | ||||||
|
Amortization
expense:
|
||||||||
|
Amortization
expense
|
$ | 279 | $ | 312 | ||||
|
Income
tax benefit (d)
|
(61 | ) | (65 | ) | ||||
|
Amortization
expense, net of tax
|
$ | 218 | $ | 247 | ||||
|
(a) Recorded expenses of
$17 million to selling, general and administrative expenses, $4 million to
cost of products sold, and $3 million to research and development
expenses.
|
||
|
(b) Recorded to other,
net.
|
||
|
(c) Recorded $39 million
to restructuring charges, $15 million to selling, general and
administrative expenses, $7 million to cost of products sold, and $4
million to research and development expenses.
|
||
|
(d) Amounts are tax
effected at the Company's effective tax rate, unless the amount is a
significant unusual or infrequently occurring item in accordance with FASB
Interpretation No. 18, "Accounting for Income Taxes in Interim
Periods."
|
||
|
June
30,
|
December
31,
|
|||||||
|
In
millions
|
2008
|
2007
|
||||||
|
(Unaudited)
|
||||||||
|
Assets
|
||||||||
|
Current
assets:
|
||||||||
|
Cash
and cash equivalents
|
$ | 1,616 | $ | 1,452 | ||||
|
Trade
accounts receivable, net
|
1,416 | 1,502 | ||||||
|
Inventories
|
812 | 725 | ||||||
|
Deferred
income taxes
|
931 | 679 | ||||||
|
Assets
held for sale
|
1,099 | |||||||
|
Other
current assets
|
393 | 464 | ||||||
|
Total
current assets
|
5,168 | 5,921 | ||||||
|
Property,
plant and equipment, net
|
1,738 | 1,735 | ||||||
|
Investments
|
122 | 317 | ||||||
|
Other
assets
|
113 | 157 | ||||||
|
Intangible
assets, net
|
22,760 | 23,067 | ||||||
| $ | 29,901 | $ | 31,197 | |||||
|
Liabilities and
Stockholders' Equity
|
||||||||
|
Current
liabilities:
|
||||||||
|
Borrowings
due within one year
|
$ | 271 | $ | 256 | ||||
|
Accounts
payable and accrued expenses
|
2,421 | 2,680 | ||||||
|
Liabilities
associated with assets held for sale
|
39 | |||||||
|
Other
current liabilities
|
343 | 275 | ||||||
|
Total
current liabilities
|
3,035 | 3,250 | ||||||
|
Long-term
debt
|
7,014 | 7,933 | ||||||
|
Deferred
income taxes
|
2,252 | 2,284 | ||||||
|
Other
long-term liabilities
|
1,965 | 2,633 | ||||||
|
Stockholders'
equity
|
15,635 | 15,097 | ||||||
| $ | 29,901 | $ | 31,197 | |||||
|
Three
Months Ended
|
||||||||||||||||
|
June
30,
|
Change
|
|||||||||||||||
|
As
Reported
|
Constant
|
|||||||||||||||
|
Currency
|
Currency
|
|||||||||||||||
|
In
millions
|
2008
|
2007
|
Basis
|
Basis
|
||||||||||||
|
DOMESTIC
|
$ | 1,088 | $ | 1,118 | (3%) | (3%) | ||||||||||
|
EMEA
|
531 | 457 | 16% | 3% | ||||||||||||
|
INTER-CONTINENTAL
|
386 | 357 | 8% | (3%) | ||||||||||||
|
INTERNATIONAL
|
917 | 814 | 13% | 0% | ||||||||||||
|
DIVESTED
BUSINESSES
|
19 | 139 | N/A | N/A | ||||||||||||
|
WORLDWIDE
|
$ | 2,024 | $ | 2,071 | (2%) | (7%) | ||||||||||
|
Three
Months Ended
|
||||||||||||||||
|
June
30,
|
Change
|
|||||||||||||||
|
As
Reported
|
Constant
|
|||||||||||||||
|
Currency
|
Currency
|
|||||||||||||||
|
In
millions
|
2008
|
2007
|
Basis
|
Basis
|
||||||||||||
|
INTERVENTIONAL
CARDIOLOGY
|
$ | 707 | $ | 741 | (5%) | (11%) | ||||||||||
|
PERIPHERAL
INTERVENTION
|
154 | 153 | 0% | (4%) | ||||||||||||
|
CARDIOVASCULAR
|
861 | 894 | (4%) | (9%) | ||||||||||||
|
NEUROVASCULAR
|
92 | 88 | 4% | (5%) | ||||||||||||
|
PERIPHERAL
EMBOLIZATION
|
23 | 25 | (2%) | (8%) | ||||||||||||
|
NEUROVASCULAR
|
115 | 113 | 2% | (5%) | ||||||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
578 | 524 | 10% | 5% | ||||||||||||
|
ELECTROPHYSIOLOGY
|
38 | 36 | 5% | 1% | ||||||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
616 | 560 | 10% | 5% | ||||||||||||
|
ENDOSCOPY
|
243 | 214 | 13% | 7% | ||||||||||||
|
UROLOGY
|
109 | 100 | 9% | 7% | ||||||||||||
|
ENDOSURGERY
|
352 | 314 | 12% | 7% | ||||||||||||
|
NEUROMODULATION
|
61 | 51 | 20% | 19% | ||||||||||||
|
DIVESTED
BUSINESSES
|
19 | 139 | N/A | N/A | ||||||||||||
|
WORLDWIDE
|
$ | 2,024 | $ | 2,071 | (2%) | (7%) | ||||||||||
|
Six
Months Ended
|
||||||||||||||||
|
June
30,
|
Change
|
|||||||||||||||
|
As
Reported
|
Constant
|
|||||||||||||||
|
Currency
|
Currency
|
|||||||||||||||
|
In
millions
|
2008
|
2007
|
Basis
|
Basis
|
||||||||||||
|
DOMESTIC
|
$ | 2,205 | $ | 2,287 | (4%) | (4%) | ||||||||||
|
EMEA
|
1,039 | 926 | 12% | (1%) | ||||||||||||
|
INTER-CONTINENTAL
|
776 | 670 | 16% | 4% | ||||||||||||
|
INTERNATIONAL
|
1,815 | 1,596 | 14% | 1% | ||||||||||||
|
DIVESTED
BUSINESSES
|
51 | 274 | N/A | N/A | ||||||||||||
|
WORLDWIDE
|
$ | 4,071 | $ | 4,157 | (2%) | (7%) | ||||||||||
|
Six
Months Ended
|
||||||||||||||||
|
June
30,
|
Change
|
|||||||||||||||
|
As
Reported
|
Constant
|
|||||||||||||||
|
Currency
|
Currency
|
|||||||||||||||
|
In
millions
|
2008
|
2007
|
Basis
|
Basis
|
||||||||||||
|
INTERVENTIONAL
CARDIOLOGY
|
$ | 1,463 | $ | 1,518 | (4%) | (9%) | ||||||||||
|
PERIPHERAL
INTERVENTION
|
309 | 299 | 3% | (2%) | ||||||||||||
|
CARDIOVASCULAR
|
1,772 | 1,817 | (2%) | (8%) | ||||||||||||
|
NEUROVASCULAR
|
184 | 179 | 3% | (5%) | ||||||||||||
|
PERIPHERAL
EMBOLIZATION
|
46 | 46 | 0% | (6%) | ||||||||||||
|
NEUROVASCULAR
|
230 | 225 | 2% | (5%) | ||||||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
1,143 | 1,062 | 8% | 3% | ||||||||||||
|
ELECTROPHYSIOLOGY
|
76 | 73 | 5% | 2% | ||||||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
1,219 | 1,135 | 7% | 3% | ||||||||||||
|
ENDOSCOPY
|
472 | 420 | 12% | 6% | ||||||||||||
|
UROLOGY
|
209 | 195 | 7% | 5% | ||||||||||||
|
ENDOSURGERY
|
681 | 615 | 11% | 6% | ||||||||||||
|
NEUROMODULATION
|
118 | 91 | 29% | 28% | ||||||||||||
|
DIVESTED
BUSINESSES
|
51 | 274 | N/A | N/A | ||||||||||||
|
WORLDWIDE
|
$ | 4,071 | $ | 4,157 | (2%) | (7%) | ||||||||||
|
Q2
2008 Net Sales as compared to Q2 2007
|
||||||||||||
|
Change
|
Estimated
Impact
|
|||||||||||
|
In
millions
|
As
Reported Currency Basis
|
Constant
Currency Basis
|
of
Foreign Currency
|
|||||||||
|
DOMESTIC
|
$ | (30 | ) | $ | (30 | ) | $ | — | ||||
|
EMEA
|
74 | 12 | 62 | |||||||||
|
INTER-CONTINENTAL
|
29 | (12 | ) | 41 | ||||||||
|
INTERNATIONAL
|
103 | — | 103 | |||||||||
|
DIVESTED
BUSINESSES
|
(120 | ) | (122 | ) | 2 | |||||||
|
WORLDWIDE
|
$ | (47 | ) | $ | (152 | ) | $ | 105 | ||||
|
Q2
2008 Net Sales as compared to Q2 2007
|
||||||||||||
|
Change
|
Estimated
Impact
|
|||||||||||
|
In
millions
|
As
Reported Currency Basis
|
Constant
Currency Basis
|
of
Foreign Currency
|
|||||||||
|
INTERVENTIONAL
CARDIOLOGY
|
$ | (34 | ) | $ | (77 | ) | $ | 43 | ||||
|
PERIPHERAL
INTERVENTIONS
|
1 | (6 | ) | 7 | ||||||||
|
CARDIOVASCULAR
|
(33 | ) | (83 | ) | 50 | |||||||
|
NEUROVASCULAR
|
4 | (3 | ) | 7 | ||||||||
|
PERIPHERAL
EMBOLIZATION
|
(2 | ) | (4 | ) | 2 | |||||||
|
NEUROVASCULAR
|
2 | (7 | ) | 9 | ||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
54 | 28 | 26 | |||||||||
|
ELECTROPHYSIOLOGY
|
2 | 1 | 1 | |||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
56 | 29 | 27 | |||||||||
|
ENDOSCOPY
|
29 | 15 | 14 | |||||||||
|
UROLOGY
|
9 | 6 | 3 | |||||||||
|
ENDOSURGERY
|
38 | 21 | 17 | |||||||||
|
NEUROMODULATION
|
10 | 10 | — | |||||||||
|
DIVESTED
BUSINESSES
|
(120 | ) | (122 | ) | 2 | |||||||
|
WORLDWIDE
|
$ | (47 | ) | $ | (152 | ) | $ | 105 | ||||
|
Q2
2008 YTD Net Sales as compared to Q2 2007
|
||||||||||||
|
Change
|
Estimated
Impact
|
|||||||||||
|
In
millions
|
As
Reported Currency Basis
|
Constant
Currency Basis
|
of Foreign
Currency
|
|||||||||
|
DOMESTIC
|
$ | (82 | ) | $ | (82 | ) | $ | — | ||||
|
EMEA
|
113 | (4 | ) | 117 | ||||||||
|
INTER-CONTINENTAL
|
106 | 23 | 83 | |||||||||
|
INTERNATIONAL
|
219 | 19 | 200 | |||||||||
|
DIVESTED
BUSINESSES
|
(223 | ) | (227 | ) | 4 | |||||||
|
WORLDWIDE
|
$ | (86 | ) | $ | (290 | ) | $ | 204 | ||||
|
Q2
2008 YTD Net Sales as compared to Q2 2007
|
||||||||||||
|
Change
|
Estimated
Impact
|
|||||||||||
|
In
millions
|
As
Reported Currency Basis
|
Constant
Currency Basis
|
of Foreign
Currency
|
|||||||||
|
INTERVENTIONAL
CARDIOLOGY
|
$ | (55 | ) | $ | (137 | ) | $ | 82 | ||||
|
PERIPHERAL
INTERVENTIONS
|
10 | (6 | ) | 16 | ||||||||
|
CARDIOVASCULAR
|
(45 | ) | (143 | ) | 98 | |||||||
|
NEUROVASCULAR
|
5 | (9 | ) | 14 | ||||||||
|
PERIPHERAL
EMBOLIZATION
|
— | (3 | ) | 3 | ||||||||
|
NEUROVASCULAR
|
5 | (12 | ) | 17 | ||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
81 | 30 | 51 | |||||||||
|
ELECTROPHYSIOLOGY
|
3 | 1 | 2 | |||||||||
|
CARDIAC
RHYTHM MANAGEMENT
|
84 | 31 | 53 | |||||||||
|
ENDOSCOPY
|
52 | 25 | 27 | |||||||||
|
UROLOGY
|
14 | 9 | 5 | |||||||||
|
ENDOSURGERY
|
66 | 34 | 32 | |||||||||
|
NEUROMODULATION
|
27 | 27 | — | |||||||||
|
DIVESTED
BUSINESSES
|
(223 | ) | (227 | ) | 4 | |||||||
|
WORLDWIDE
|
$ | (86 | ) | $ | (290 | ) | $ | 204 | ||||
|
Q3
2008 Estimate
|
Q3
2008 Estimate
|
|||||||
|
(Low)
|
(High)
|
|||||||
|
GAAP
results
|
$ | 0.18 | $ | 0.23 | ||||
|
Estimated
acquisition-related gains
|
(0.12 | ) | (0.12 | ) | ||||
|
Estimated
divestiture-related gains
|
(0.01 | ) | (0.01 | ) | ||||
|
Estimated
restructuring-related charges
|
0.02 | 0.02 | ||||||
|
Estimated
amortization expense
|
0.07 | 0.07 | ||||||
|
Adjusted
results
|
$ | 0.14 | $ | 0.19 | ||||
|
·
|
Acquisition-related
(gains) charges - These adjustments consist of purchased
research and development, integration costs associated with the Company’s
acquisition of Guidant, a fair value adjustment related to the sharing of
proceeds feature of the Abbott stock purchase, and a gain associated with
the receipt of an acquisition-related milestone payment. Purchased
research and development is a highly variable charge based on valuation
assumptions. Management removes the impact of purchased research and
development from the Company's operating results to assist in assessing
the Company's operating performance and cash generated from
operations. The integration costs associated with the Company’s
acquisition of Guidant do not reflect expected on-going future operating
expenses. The fair value adjustment related to the sharing of proceeds
feature of the Abbott stock purchase is a non-cash adjustment and is not
indicative of the Company's on-going operations. The
gain on the acquisition-related milestone payment, recorded in the third
quarter of 2008, is not indicative of future operating performance and
will not be used by management in assessing the Company’s operating
performance. Accordingly, management excluded these amounts for
purposes of calculating these non-GAAP measures to facilitate an
evaluation of the Company's current operating performance and a comparison
to the Company's past operating
performance.
|
|
·
|
Divestiture-related
(gains) losses – These amounts represent gains and losses that the Company
recognized related to the sale of non-strategic assets, including the sale
of certain businesses, development programs and non-strategic investments.
The sale and transfer of these non-strategic assets are expected to be
substantially completed during 2008. These gains and losses are not
indicative of future operating performance and are not used by management
to assess operating performance. Accordingly, management excluded these
amounts for purposes of calculating these non-GAAP measures to facilitate
an evaluation of the Company's current operating performance and a
comparison to the Company's past operating
performance.
|
|
·
|
Restructuring-related
charges – These adjustments primarily represent employee-related
termination benefits, employee-related retention costs, asset
write-downs and other costs associated with the Company’s restructuring
initiatives. These expenses are not indicative of the Company’s on-going
operating performance and are excluded by management in assessing the
Company’s operating performance, and are also excluded from the Company’s
operating segments’ measures of profit and loss used for making operating
decisions and assessing performance. Accordingly, management excluded
these charges for purposes of calculating these non-GAAP measures to
facilitate an evaluation of the Company's current operating performance
and a comparison to the Company's past operating
performance.
|
|
·
|
Amortization
expense - Amortization expense is a non-cash charge and does not impact
the Company’s liquidity or compliance with the covenants included in its
debt agreements. Following the Company’s acquisition of Guidant, and the
related increase in the Company’s debt, management has heightened its
focus on cash generation and debt pay down. Management removes the impact
of amortization from the Company’s operating performance to assist in
assessing the Company’s cash generated from operations. Management
believes this is a critical metric for the Company in measuring the
Company’s ability to generate cash and pay down debt. Therefore,
amortization expense is excluded from management’s assessment of operating
performance, including the Company's operating segments' measure of profit
and loss, and is also excluded from the measures management uses to
set employee compensation. Accordingly, management believes this may be
useful information to users of its financial statements and therefore has
excluded these charges for purposes of calculating these non-GAAP measures
to facilitate an evaluation of the Company’s current operating
performance, particularly in terms of
liquidity.
|
|
·
|
Foreign
exchange on net sales - The impact of foreign exchange is highly variable
and difficult to predict. Accordingly, management excludes the impact of
foreign exchange for purposes of reviewing regional and divisional revenue
growth rates to facilitate an evaluation of the Company’s current
operating performance and comparison to the Company’s past operating
performance.
|
|
·
|
Items
such as purchased research and development, divestiture-related gains and
losses, and the fair value adjustment related to the sharing of proceeds
feature of the Abbott stock purchase reflect economic costs to the Company
and are not reflected in non-GAAP net income and non-GAAP net income per
diluted share.
|
|
·
|
Items
such as Guidant integration costs and restructuring-related expenses that
are excluded from non-GAAP net income and non-GAAP net income per diluted
share can have a material impact on cash flows and GAAP net income and net
income per diluted share.
|
|
·
|
Items
such as amortization of purchased intangible assets, though not directly
affecting Boston Scientific’s cash flow position, represent a reduction in
value of intangible assets over time. The expense associated with this
reduction in value is not included in Boston Scientific’s non-GAAP net
income or non-GAAP net income per diluted share and therefore these
measures do not reflect the full economic effect of the reduction in value
of those intangible assets.
|
|
·
|
Revenue
growth rates stated on a constant currency basis, by their nature, exclude
the impact of foreign exchange, which may have a material impact on GAAP
net sales.
|
|
·
|
Other
companies may calculate non-GAAP net income, non-GAAP net income per
diluted share, or regional and divisional revenue growth rates that
exclude the impact of foreign exchange differently than Boston Scientific
does, limiting the usefulness of those measures for comparative
purposes.
|