Boston Scientific Announces Results For First Quarter 2017

MARLBOROUGH, Mass., April 27, 2017 /PRNewswire/ -- Boston Scientific Corporation (NYSE: BSX) generated sales of $2.160 billion during the first quarter ended March 31, 2017. This represents growth of 10 percent compared to the prior year period on a reported and operational basis (calculated on a constant currency basis). The company reported GAAP earnings of $290 million or $0.21 per share (EPS), compared to GAAP earnings of $202 million or $0.15 a year ago and achieved adjusted earnings per share of $0.29 for the period, compared to $0.28 a year ago.

"We are pleased with our performance in the first quarter as we delivered excellent growth across our various businesses and geographies," said Mike Mahoney, chairman and chief executive officer, Boston Scientific. "At the same time, we are investing in innovation that will strengthen our category leadership strategy while aiming to deliver sustainable double digit adjusted earnings per share growth."

First quarter financial results and recent developments:

• Reported first quarter sales of $2.160 billion, compared to the company's guidance range for the quarter of $2.050 to $2.100 billion, representing an increase of 10 percent on a reported and  operational  basis, all compared to the prior year period.

• Grew organic revenue 9 percent in the first quarter over the prior year period. Organic revenue growth excludes the impact of changes in foreign currency exchange rates and sales from the acquisition of EndoChoice Holdings, Inc. (EndoChoice).

• Reported GAAP earnings of $0.21 per share compared to the company's guidance range of $0.18 to $0.21 per share and delivered adjusted earnings per share of $0.29 compared to the guidance range of $0.29 to $0.31 per share. These results include charges associated with the February voluntary removal of Lotus™ Valve devices¹ from global commercial and clinical sites.

• Achieved first quarter revenue growth in all segments, all compared to the prior year period:
• MedSurg: 15 percent reported and operational, 12 percent organic
• Cardiovascular: 8 percent reported, operational and organic
• Rhythm Management: 7 percent reported, 8 percent operational and organic

• Delivered strong regional revenue growth, all compared to the prior year period:
• U.S.: 13 percent reported and operational, 11 percent organic
• Europe: 2 percent reported, 7 percent operational and organic
• AMEA (Asia-Pacific, Middle East and Africa): 9 percent reported, 8 percent operational and organic
• Emerging markets:² 12 percent reported, operational and organic

• Entered into a definitive agreement to acquire Symetis SA, a privately-held Swiss structural heart company focused on minimally-invasive transcatheter aortic valve implantation (TAVI) devices, for $435 million in cash, to provide interventional cardiologists and cardiac surgeons with multiple TAVI offerings for varying patient pathologies and anatomy.

• Announced that the National Institute for Health and Care Excellence (NICE) recommended the use of Boston Scientific cardiac resynchronization therapy defibrillators (CRT-D) with EnduraLife™ Battery Technology for treating patients with heart failure and noted the extended battery life was likely to reduce the number of avoidable replacement procedures and could offer £6 million in savings to the National Health System of England in the first five years.

• Received CE Mark for and launched the RESONATE™ family of CRT-Ds³ in Europe, which provides physicians with new devices for treating heart failure patients featuring SmartCRT™ technology and EnduraLife Battery Technology.

• Presented results from the EVOLVE II three-year clinical trial at the American College of Cardiology Annual Scientific Sessions highlighting the excellent safety performance of the SYNERGY™ Bioabsorbable Polymer Stent, notably an exceptionally low stent thrombosis (ST) rate (0.2%) beyond the first 24 hours of device implantation until three years after the procedure.

• Completed enrollment of 465 patients in IMPERIAL, a head-to-head trial comparing the Eluvia™ Drug-Eluting Vascular Stent⁴ to the Zilver™ PTX Drug-Coated Stent (Cook Medical); data will be used to support regulatory submission in the U.S.

• Achieved two clinical milestones for the Ranger™ Paclitaxel-Coated PTA Balloon Catheter:⁴ presented 12-month results at the Charing Cross Symposium that demonstrated a high rate of primary patency and freedom from target lesion revascularization and commenced enrollment of the RANGER II SFA study, which is designed to support regulatory submissions in the U.S. and Japan.

• Began patient enrollment in two clinical trials examining the WATCHMAN™ Left Atrial Appendage Closure (LAAC) Device: ASAP TOO, a study evaluating the use of the device in warfarin-ineligible patients, which could lead to expanded labeling in the U.S. and SALUTE, a trial specifically designed to pursue regulatory approval in Japan.

Net sales for the first quarter:

Guidance for Full Year and Second Quarter 2017

The company now estimates revenue for the full year 2017 to be in a range of $8.800 to $8.900 billion (compared to prior guidance of $8.675 to $8.875 billion), which versus the prior year period, represents a growth range of approximately 5 to 6 percent on a reported basis and a growth range of approximately 6 to 7 percent on an operational basis including contribution of approximately 70 basis points from EndoChoice. The company now estimates income on a GAAP basis in a range of $0.81 to $0.86 per share (compared to prior guidance of $0.86 to $0.91 per share) and continues to estimate adjusted earnings, excluding acquisition-related net charges, restructuring and restructuring-related net charges, and amortization expense, in a range of $1.22 to $1.26 per share.

The company estimates sales for the second quarter of 2017 to be in a range of $2.185 to $2.215 billion, which versus the prior year period represents a growth range of approximately 3 to 4 percent on a reported basis and a growth range of approximately 5 to 6 percent on an operational basis including contribution of approximately 70 basis points from EndoChoice. The company estimates earnings on a GAAP basis in a range of $0.18 to $0.21 per share. Adjusted earnings, excluding acquisition-related net charges, restructuring and restructuring-related net charges and amortization expense, are estimated in a range of $0.30 to $0.32 per share.

Conference Call Information

Boston Scientific management will be discussing these results with analysts on a conference call today at 8:00 a.m. (ET). The company will webcast the call to interested parties through its website: www.bostonscientific.com. Please see the website for details on how to access the webcast. The webcast will be available for approximately one year on the Boston Scientific website.

About Boston Scientific
Boston Scientific transforms lives through innovative medical solutions that improve the health of patients around the world.  As a global medical technology leader for more than 35 years, we advance science for life by providing a broad range of high performance solutions that address unmet patient needs and reduce the cost of healthcare. For more information, visit www.bostonscientific.com and connect on Twitter and Facebook.

Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like "anticipate," "expect," "project," "believe," "plan," "estimate," "intend," "aiming" and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. These forward-looking statements include, among other things, statements regarding our expected net sales, GAAP, operational and organic revenue growth rates, GAAP earnings and adjusted earnings for the second quarter and full year 2017, our financial performance, our business plans and our positioning for revenue and earnings growth. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. These risks and uncertainties, in some cases, have affected and in the future could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this press release. As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements.

Risks and uncertainties that may cause such differences include, among other things: future economic, political, competitive, reimbursement and regulatory conditions, new product introductions and the market acceptance of those products, markets for our products, expected pricing environment, expected procedural volumes, the closing and integration of acquisitions, clinical trial results, demographic trends, intellectual property rights, litigation, financial market conditions, the execution and effect of our restructuring program, the execution and effect of our business strategy, including our cost-savings and growth initiatives and future business decisions made by us and our competitors. New risks and uncertainties may arise from time to time and are difficult to predict. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control.  For a further list and description of these and other important risks and uncertainties that may affect our future operations, see Part I, Item IA - Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A - Risk Factors in Quarterly Reports on Form 10-Q we have filed or will file hereafter. We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions, or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. This cautionary statement is applicable to all forward-looking statements contained in this press release.

Use of Non-GAAP Financial Information

A reconciliation of the company's non-GAAP financial measures to the corresponding GAAP measures and an explanation of the company's use of these non-GAAP financial measures, is included in the exhibits attached to this news release.

An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.

An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.

Use of Non-GAAP Financial Measures

To supplement our financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures, including adjusted net income (earnings) and adjusted net income (earnings) per share that exclude certain amounts and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impact of recent acquisitions with significant sales. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United States.

The GAAP financial measure most directly comparable to adjusted net income is GAAP net income and the GAAP financial measure most directly comparable to adjusted net income per share is GAAP net income per share. To calculate adjusted net sales that exclude the impact of changes in foreign currency exchange rates, we convert actual net sales from local currency to U.S. dollars using constant foreign currency exchange rates in the current and prior period. The GAAP financial measure most directly comparable to this constant currency growth rate and/or growth rates excluding the impacts of recent acquisitions with significant sales is growth rate percentages using net sales on a GAAP basis. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included in the accompanying schedules.

Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors and to establish operational goals and forecasts that are used in allocating resources. In addition, management uses these non-GAAP financial measures to further its understanding of the performance of our operating segments. With the exception of the impact of recent acquisitions with significant sales, the adjustments excluded from our non-GAAP financial measures are consistent with those excluded from our operating segments' measures of net sales and profit or loss. These adjustments are excluded from the segment measures that are reported to our chief operating decision maker that are used to make operating decisions and assess performance.

We believe that presenting adjusted net income and adjusted net income per share that exclude certain amounts and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impact of recent acquisitions with significant sales, in addition to the corresponding GAAP financial measures, provides investors greater transparency to the information used by management for its operational decision-making and allows investors to see our results "through the eyes" of management. We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance.

The following is an explanation of each of the adjustments that management excluded as part of these non-GAAP financial measures for the three months ended March 31, 2017 and 2016 and for the forecasted three month period ending June 30, 2017 and full year ending December 31, 2017, as well as reasons for excluding each of these individual items:

Adjusted Net Income and Adjusted Net Income per Share:

• Acquisition-related net charges (credits) - These adjustments may consist of (a) contingent consideration fair value adjustments, (b) gains on previously held investments, (c) purchased and/or funded in-process research and development expenses incurred outside of a business combination and (d) due diligence, other fees, inventory step-up amortization and integration and exit costs. The contingent consideration adjustments represent accounting adjustments to state contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood and amount of future contingent consideration payments. Due diligence, other fees, inventory step-up amortization and integration and exit costs include legal, tax, severance and other expenses associated with prior and potential future acquisitions that can be highly variable and not representative of ongoing operations. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

• Restructuring and restructuring-related net charges (credits) - These adjustments represent severance and other direct costs associated with our restructuring plans. These restructuring plans each consist of distinct initiatives that are fundamentally different from our ongoing, core cost reduction initiatives in terms of, among other things, the frequency with which each action is performed and the required planning, resourcing, cost and timing. Examples of such initiatives include the movement of business activities, facility consolidations and closures and the transfer of product lines between manufacturing facilities, which, due to the highly regulated nature of our industry, requires a significant investment in time and cost to create duplicate manufacturing lines, run product validations and seek regulatory approvals. Restructuring initiatives generally take approximately two years to complete and have a distinct project timeline that begins subsequent to approval by our Board of Directors. In contrast to our ongoing cost reduction initiatives, restructuring initiatives typically result in duplicative cost and exit costs over this period of time, are one-time shut downs or transfers and are not considered part of our core, ongoing operations. Because these restructuring plans are incremental to the core activities that arise in the ordinary course of our business, management excluded these costs for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

• Litigation-related net charges (credits) - These adjustments include certain significant product liability and other litigation-related charges and credits. We record these charges and credits, which we consider to be unusual or infrequent and significant, within the litigation-related charges line in our consolidated statement of operations; all other legal and product liability charges, credits and costs are recorded within selling general and administrative expenses. These amounts are excluded by management in assessing our operating performance, as well as from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

• Amortization expense - We record intangible assets at historical cost and amortize them over their estimated useful lives. Amortization expense is excluded from management's assessment of operating performance and is also excluded from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management has excluded amortization expense for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

Adjusted Net Sales Excluding the Impact of Changes in Foreign Currency Exchange Rates and/or the Impact of Recent Acquisitions with Significant Sales

• The impact of changes in foreign currency exchange rates is highly variable and difficult to predict. The impact of recent acquisitions with significant sales in the current period and no prior period equivalent may distort our presentation of organic growth. Accordingly, management excludes the impact of changes in foreign currency exchange rates and/or the impacts of recent acquisitions with significant sales for purposes of reviewing the net sales and growth rates to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.

Adjusted net income and adjusted net income per share that exclude certain amounts and adjusted net sales that exclude the impact of changes in foreign currency exchange rates and/or the impacts of recent acquisitions with significant sales, are not in accordance with U.S. GAAP and should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Further, other companies may calculate these non-GAAP financial measures differently than we do, which may limit the usefulness of those measures for comparative purposes.

SOURCE Boston Scientific Corporation