EX-99.1 2 pressreleaseq42015.htm EXHIBIT 99.1 PRESS RELEASE ISSUED FEBRUARY 4, 2016 Exhibit




FOR IMMEDIATE RELEASE

BOSTON SCIENTIFIC ANNOUNCES RESULTS FOR
FOURTH QUARTER AND FULL YEAR ENDED DECEMBER 31, 2015

Marlborough, Mass. (February 4, 2016) -- Boston Scientific Corporation (NYSE: BSX) generated sales of $1.978 billion during the fourth quarter ended December 31, 2015. This represents 10 percent operational revenue growth (constant currency basis, excluding divested businesses) and 5 percent revenue growth on a reported basis, all compared to the prior year period. The company achieved adjusted earnings per share of $0.26 for the period, compared to $0.22 a year ago, and reported a GAAP loss of $(0.11) per share, compared to a GAAP loss of $(0.23) a year ago.

For the year ended December 31, 2015, the company achieved full year sales of $7.477 billion, representing 8 percent operational revenue growth and 1 percent revenue growth on a reported basis. The company delivered full year adjusted earnings per share of $0.93, compared to $0.84 in 2014 and reported a GAAP loss of $(0.18) per share, compared to a GAAP loss of $(0.09) in the prior year period.

“Our accomplishments in 2015 demonstrate our continued momentum and track record of consistent performance across our businesses and geographies,” said Mike Mahoney, president and chief executive officer, Boston Scientific. “The products and programs we brought to market through organic development and acquisitions, complemented by our innovative pipeline and continued global expansion, will benefit even more patients in 2016 and beyond.”
  
Fourth quarter financial results and recent developments:

•
Achieved fourth quarter sales of $1.978 billion, compared to the company's guidance range of $1.970 to $2.010 billion, representing 10 percent operational revenue growth and 5 percent revenue growth on a reported basis, all compared to the prior year period.

•
Grew organic revenue 5 percent in the fourth quarter over the prior year period. Organic revenue growth excludes the impact of sales from divested businesses, changes in foreign currency exchange rates and sales from the acquisition of the American Medical Systems (AMS) male urology portfolio.

•
Delivered fourth quarter adjusted earnings per share of $0.26, compared to the guidance range of $0.23 to $0.25 per share, and reported a GAAP loss of $(0.11) per share compared to the company’s guidance range of $0.10 to $0.13 per share, primarily due to litigation-related charges.

•
Achieved fourth quarter operational revenue growth of 23 percent in MedSurg (7 percent organic), 7 percent operational and organic revenue growth in Cardiovascular, and flat sales on an operational and organic basis in Rhythm Management, all on a constant currency basis over the prior year period.





•
Delivered strong operational revenue growth across all three major regions. Achieved 12 percent growth in the U.S. (5 percent organic), 10 percent growth in Europe (5 percent organic) and 7 percent growth (6 percent organic) in AMEA (Asia, Middle East and Africa), all on a constant currency basis over the prior year period. Delivered 16 percent operational revenue growth (15 percent organic) in Emerging Markets.

•
Launched the SYNERGY™ Stent System in the United States and Japan and initiated the EVOLVE Short DAPT clinical trial to assess the duration of dual anti-platelet therapy (DAPT) in patients receiving a bioabsorbable polymer drug-eluting stent. Gained SYNERGY™ reimbursement in France, the largest drug-eluting stent market in Europe by revenue.

•
Completed enrollment in REPRISE-III, a randomized, controlled trial designed to support U.S. regulatory approval for the Lotus™ Valve System for Transcatheter Aortic Valve Replacement (TAVR).*

•
Acquired the interventional radiology portfolio of CeloNova Biosciences, including its portfolio of drug-eluting microspheres designed to be loaded with chemotherapy drugs for delivery to malignant tumors and other spherical embolic products for uterine fibroids, among other conditions.**

•
Launched the AngioJet™ ZelanteDVT™ Thrombectomy Catheter to treat deep vein thrombosis (DVT) in large-diameter upper and lower limb peripheral veins, in the United States and Europe.

•
Launched the LithoVue™ Single-Use Digital Flexible Ureteroscope for minimally invasive endoscopic procedures to diagnose and treat stones and other conditions of the kidney, ureter and bladder, in the U.S. and Europe.

•
Received CE mark for and began the European launch of the next-generation WATCHMAN FLX™ Left Atrial Appendage Closure Device, which is designed with a lower profile, a closed end and may be fully recaptured and repositioned.***

•
Unveiled data demonstrating a 70 percent greater reduction in back pain relief for patients using the Precision Spectra™ Spinal Cord Stimulator System compared to the previous generation Precision Plus™ system.

•
Announced a collaboration with Accenture Digital Health to offer hospitals ADVANTICS™ Care Pathway Transformation, a data-driven digital health solution to help improve outcomes and reduce costs to treat patients with chronic cardiovascular conditions.





* In the U.S., the Lotus Valve System is an investigational device and not available for sale.  It is CE marked in the European Union.
** Drug-eluting microspheres designed to be loaded with chemotherapy drugs for delivery to cancerous tumors are currently not available for sale in the U.S.
*** The WATCHMAN FLX Device is not available for sale in the U.S. It is CE marked in the European Union.






Worldwide sales for the fourth quarter:
 
 
 
 
 
 
 
 
Three Months Ended
 
Change
 
 
December 31,
 
As Reported Basis
 
Less: Impact of Foreign Currency
 
Constant Currency Basis
in millions
2015
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Interventional Cardiology
$
525

$
523

 
0

%
 
$
(33
)
(6
)
%
 
6

%
 
   Peripheral Interventions
231

222

 
4

%
 
(13
)
(6
)
%
 
10

%
 
Cardiovascular
756

745

 
1

%
 
(46
)
(6
)
%
 
7

%
 
   Cardiac Rhythm Management
440

468

 
(6
)
%
 
(24
)
(5
)
%
 
(1
)
%
 
   Electrophysiology
61

59

 
3

%
 
(3
)
(5
)
%
 
8

%
 
Rhythm Management
501

527

 
(5
)
%
 
(27
)
(5
)
%
 
0

%
 
   Endoscopy
343

340

 
1

%
 
(21
)
(6
)
%
 
7

%
 
   Urology and Pelvic Health
237

140

 
69

%
 
(14
)
(8
)
%
 
77

%
 
   Neuromodulation
141

134

 
5

%
 
(2
)
(2
)
%
 
7

%
 
MedSurg
721

614

 
18

%
 
(37
)
(5
)
%
 
23

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal Core Businesses
1,978

1,886

 
5

%
 
(110
)
(5
)
%
 
10

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Divested Businesses
—

1

 
N/A

 
 
—

N/A

 
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Worldwide Net Sales
$
1,978

$
1,887

 
5

%
 
$
(110
)
(5
)
%
 
10

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Growth rates are based on actual, non-rounded amounts and may not recalculate precisely.
 
Sales growth rates that exclude the impact of sales from divested businesses and/or changes in foreign currency exchange rates are not prepared in accordance with U.S. GAAP. An explanation of the company's use of these non-GAAP financial measures is included in the exhibits attached to this news release.

On a consolidated GAAP basis, net loss for the fourth quarter of 2015 was $142 million, or $(0.11) per share. These results included acquisition- and divestiture-, litigation-, and restructuring and restructuring-related net charges, discrete tax items and amortization expense of $504 million (after-tax) or $0.37 per share. Adjusted net income for the fourth quarter of 2015, excluding these net charges, was $362 million, or $0.26 per share.

On a consolidated GAAP basis, net loss for the fourth quarter of 2014 was $299 million, or $(0.23) per share. These results included intangible asset impairment charges, acquisition- and divestiture-, litigation-, and restructuring and restructuring-related net charges, discrete tax items and amortization expense, of $602 million (after-tax) or $0.45 per share. Adjusted net income for the fourth quarter of 2014, excluding these net charges, was $303 million, or $0.22 per share.





Worldwide sales for the full year:
 
 
 
 
 
 
 
 
Twelve Months Ended
 
Change
 
 
December 31,
 
As Reported Basis
 
Less: Impact of Foreign Currency
 
Constant Currency Basis
in millions
2015
2014
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   Interventional Cardiology
$
2,033

$
2,057

 
(1
)
%
 
$
(174
)
(8
)
%
 
7

%
 
   Peripheral Interventions
904

850

 
6

%
 
(60
)
(7
)
%
 
13

%
 
Cardiovascular
2,937

2,907

 
1

%
 
(234
)
(8
)
%
 
9

%
 
   Cardiac Rhythm Management
1,807

1,912

 
(5
)
%
 
(117
)
(6
)
%
 
1

%
 
   Electrophysiology
233

227

 
2

%
 
(14
)
(7
)
%
 
9

%
 
Rhythm Management
2,040

2,139

 
(5
)
%
 
(131
)
(6
)
%
 
1

%
 
   Endoscopy
1,306

1,323

 
(1
)
%
 
(96
)
(7
)
%
 
6

%
 
   Urology and Pelvic Health
693

535

 
30

%
 
(35
)
(6
)
%
 
36

%
 
   Neuromodulation
501

472

 
6

%
 
(9
)
(2
)
%
 
8

%
 
MedSurg
2,500

2,330

 
7

%
 
(140
)
(6
)
%
 
13

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal Core Businesses
7,477

7,376

 
1

%
 
(505
)
(7
)
%
 
8

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Divested Businesses
—

4

 
N/A

 
 
—

N/A

 
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Worldwide Net Sales
$
7,477

$
7,380

 
1

%
 
$
(505
)
(7
)
%
 
8

%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Growth rates are based on actual, non-rounded amounts and may not recalculate precisely.
 
Sales growth rates that exclude the impact of sales from divested businesses and/or changes in foreign currency exchange rates are not prepared in accordance with U.S. GAAP. An explanation of the company's use of these non-GAAP financial measures is included in the exhibits attached to this news release.

On a consolidated GAAP basis, net loss for the full year 2015 was $239 million, or $(0.18) per share. These results included intangible asset impairment charges, acquisition- and divestiture-, litigation-, restructuring and restructuring-related charges, pension termination charges, debt extinguishment charges, discrete tax items and amortization expense, of $1.506 billion (after-tax) or $1.11 per share. Adjusted net income for the full year 2015, excluding these net charges, was $1.267 billion, or $0.93 per share.

On a consolidated GAAP basis, net loss for the full year 2014 was $119 million, or $(0.09) per share. These results included intangible asset impairment charges, litigation-, restructuring and restructuring-related charges, acquisition- and divestiture-related net credits, discrete tax items and amortization expense, of $1.248 billion (after-tax) or $0.93 per share. Adjusted net income for the full year 2014, excluding these net charges, was $1.129 billion, or $0.84 per share.

Guidance for Full Year and First Quarter 2016

The company estimates revenue for the full year 2016 to be in a range of $7.900 to $8.100 billion, which versus the prior year period, represents a growth range of approximately 6 to 8 percent on a reported basis, a growth range of approximately 7 to 10 percent on an operational basis, and a growth range of approximately 4 to 7 percent on an organic basis. The company estimates income on a GAAP basis in a range of $0.62 to $0.67 per share, and adjusted earnings, excluding acquisition- and divestiture-, restructuring- and restructuring-related charges, and amortization expense, in a range of $1.03 to $1.07 per share.





The company estimates sales for the first quarter of 2016 in a range of $1.890 to $1.940 billion. The company estimates earnings on a GAAP basis in a range of $0.11 to $0.13 per share. Adjusted earnings, excluding acquisition- and divestiture-, restructuring- and restructuring-related charges, and amortization expense, are estimated in a range of $0.23 to $0.25 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" 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 first quarter and full year 2016; 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.

 




CONTACT:
 
Media:
Tom Keppeler
 
508-683-6585 (office)
 
Media Relations
 
Boston Scientific Corporation
 
tom.keppeler@bsci.com
Investors:
Susan Lisa, CFA
 
508-683-5565 (office)
 
Investor Relations
 
Boston Scientific Corporation
 
investor_relations@bsci.com






BOSTON SCIENTIFIC CORPORATION
CONDENSED CONSOLIDATED GAAP RESULTS OF OPERATIONS
(Unaudited)

 
Three Months Ended
December 31,
 
Year Ended
December 31,
in millions, except per share data
2015
2014
 
2015
2014
 
 
 
 
 
 
Net sales
$
1,978

$
1,887

 
$
7,477

$
7,380

Cost of products sold
573

560

 
2,173

2,210

Gross profit
1,405

1,327


5,304

5,170

 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
Selling, general and administrative expenses
777

752

 
2,873

2,902

Research and development expenses
244

208

 
876

817

Royalty expense
17

25

 
70

111

Amortization expense
135

111

 
495

438

Intangible asset impairment charges
—

18

 
19

195

Contingent consideration expense (benefit)
37

37

 
123

(85
)
Restructuring charges
10

32

 
26

69

Litigation-related charges (credits)
456

637

 
1,105

1,036

Pension termination charges
—

—

 
44

—

Gain on divestiture
—

—

 
—

(12
)
 
1,676

1,820


5,631

5,471

Operating income (loss)
(271
)
(493
)

(327
)
(301
)
 
 
 
 
 
 
Other income (expense):
 
 
 
 
 
Interest expense
(59
)
(54
)
 
(284
)
(216
)
Other, net
(8
)
(7
)
 
(39
)
8

Income (loss) before income taxes
(338
)
(554
)

(650
)
(509
)
Income tax expense (benefit)
(196
)
(255
)
 
(411
)
(390
)
Net income (loss)
$
(142
)
$
(299
)

$
(239
)
$
(119
)
 
 
 
 
 
 
Net income (loss) per common share - basic
$
(0.11
)
$
(0.23
)
 
$
(0.18
)
$
(0.09
)
Net income (loss) per common share - assuming dilution
$
(0.11
)
$
(0.23
)
 
$
(0.18
)
$
(0.09
)
 
 
 
 
 
 
Weighted-average shares outstanding
 
 
 
 
 
Basic
1,345.9

1,326.8

 
1,341.2

1,324.3

Assuming dilution
1,345.9

1,326.8

 
1,341.2

1,324.3






BOSTON SCIENTIFIC CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
 
As of
 
December 31,
 
December 31,
in millions, except share data
2015
 
2014
 
(unaudited)
 
(restated*)
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
319

 
$
587

Trade accounts receivable, net
1,275

 
1,183

Inventories
1,016

 
946

Deferred and prepaid income taxes
496

 
447

Other current assets
365

 
443

Total current assets
3,471


3,606

 
 
 
 
Property, plant and equipment, net
1,490

 
1,507

Goodwill
6,473

 
5,898

Other intangible assets, net
6,194

 
5,606

Other long-term assets
505

 
407

TOTAL ASSETS
$
18,133


$
17,024

 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current liabilities:
 
 
 
Current debt obligations
$
3

 
$
403

Accounts payable
209

 
262

Accrued expenses
1,970

 
1,950

Other current liabilities
248

 
231

Total current liabilities
2,430


2,846

 
 
 
 
Long-term debt
5,674

 
3,841

Deferred income taxes
735

 
1,214

Other long-term liabilities
2,974

 
2,666

 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
Stockholders' equity
 
 
 
Preferred stock, $.01 par value - authorized 50,000,000 shares,
 
 
 
 none issued and outstanding
 
 
 
Common stock, $.01 par value - authorized 2,000,000,000 shares -
 
 
 
issued 1,594,213,786 shares as of December 31, 2015 and
 
 
 
1,575,018,236 shares as of December 31, 2014
16

 
16

Treasury stock, at cost - 247,566,270 shares as of December 31, 2015
 
 
 
and 247,566,270 shares as of December 31, 2014
(1,717
)
 
(1,717
)
Additional paid-in capital
16,860

 
16,703

Accumulated deficit
(8,927
)
 
(8,689
)
Accumulated other comprehensive income (loss), net of tax
88

 
144

Total stockholders' equity
6,320


6,457

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
18,133


$
17,024


*Certain prior year balances related to debt issuance costs have been restated to reflect our adoption of Accounting Standards Codification Update No. 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs.  Amounts reclassified from other long-term assets to long-term debt were not material.




BOSTON SCIENTIFIC CORPORATION
NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS
(Unaudited)
 
 
Three Months Ended December 31, 2015
 
in millions, except per share data
 
Pre-Tax
 
Tax
Impact (a)
 
After-Tax
 
Impact per Share
 
GAAP net income (loss)
 
$
(338
)
 
$
196

 
$
(142
)
 
$
(0.11
)
 
Non-GAAP adjustments:
 
 
 
 
 
  
 
 
 
Acquisition- and divestiture-related net charges (b)
 
83

 
(16
)
 
67

 
0.05

*
Restructuring and restructuring-related net charges (c)
 
26

 
(4
)
 
22

 
0.02

*
Litigation-related net charges
 
456

 
(165
)
 
291

 
0.21

*
Discrete tax items
 
—

 
(9
)
 
(9
)
 
(0.01
)
*
Amortization expense
 
135

 
(2
)
 
133

 
0.10

*
Adjusted net income
 
$
362

 
$
—

 
$
362

 
$
0.26

 
 
 
 
 
 
 
 
 
 
 
*Assumes dilution of 21.3 million shares for the three months ended December 31, 2015 for all or a portion of these non-GAAP Adjustments
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended December 31, 2014
 
in millions, except per share data
 
Pre-Tax
 
Tax
Impact (a)
 
After-Tax
 
Impact per Share
 
GAAP net income (loss)
 
$
(554
)
 
$
255

 
$
(299
)
 
$
(0.23
)
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
Intangible asset impairment charges
 
18

 
(3
)
 
15

 
0.01

**
Acquisition- and divestiture-related net charges (d)
 
69

 
(8
)
 
61

 
0.05

**
Restructuring and restructuring-related net charges (e)
 
48

 
(11
)
 
37

 
0.03

**
Litigation-related net charges
 
637

 
(228
)
 
409

 
0.30

**
Discrete tax items
 
—

 
(17
)
 
(17
)
 
(0.01
)
**
Amortization expense
 
111

 
(14
)
 
97

 
0.07

**
Adjusted net income
 
$
329

 
$
(26
)
 
$
303

 
$
0.22

 
 
 
 
 
 
 
 
 
 
 
**Assumes dilution of 23.3 million shares for the three months ended December 31, 2014 for all or a portion of these non-GAAP Adjustments
 
 
 
 
 
 
 
 
 
 
(a) 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 Accounting Standards Codification section 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate."
(b) In the three months ended December 31, 2015, pre-tax acquisition- and divestiture-related net charges were $83 million, of which $25 million was recorded in cost of products sold, $15 million was recorded in selling, general and administrative expenses, $6 million was recorded in research and development, and $37 million was recorded as contingent consideration expense.
(c) In the three months ended December 31, 2015, pre-tax restructuring charges were $10 million and pre-tax restructuring- related charges were $16 million, of which $11 million was recorded in cost of products sold and $5 million was recorded in selling, general and administrative expenses.
(d) In the three months ended December 31, 2014, pre-tax acquisition- and divestiture-related net charges were $69 million, of which charges of $11 million were recorded in cost of products sold, charges of $21 million were recorded in selling, general and administrative expenses and $37 million was recorded as contingent consideration expense.
(e) In the three months ended December 31, 2014, pre-tax restructuring charges were $32 million and pre-tax restructuring- related charges were $16 million, of which $9 million was recorded in cost of products sold and $7 million was recorded in selling, general and administrative expenses.
An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.







BOSTON SCIENTIFIC CORPORATION
NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS
(Unaudited)
 
 
Year Ended December 31, 2015
 
in millions, except per share data
 
Pre-Tax
 
Tax
Impact (a)
 
After-Tax
 
Impact per Share
 
GAAP net income (loss)
 
$
(650
)
 
$
411

 
$
(239
)
 
$
(0.18
)
 
Non-GAAP adjustments:
 
 
 
 
 
  
 
 
 
Intangible asset impairment charges
 
19

 
(3
)
 
16

 
0.01

*
Acquisition- and divestiture-related net charges (b)
 
255

 
(33
)
 
222

 
0.17

*
Restructuring and restructuring-related net charges (c)
 
83

 
(14
)
 
69

 
0.05

*
Litigation-related net charges
 
1,105

 
(400
)
 
705

 
0.52

*
Pension termination charges
 
44

 
(16
)
 
28

 
0.02

*
Debt extinguishment charges (d)
 
45

 
(16
)
 
29

 
0.02

*
Discrete tax items
 
—

 
(9
)
 
(9
)
 
(0.01
)
*
Amortization expense
 
495

 
(49
)
 
446

 
0.33

*
Adjusted net income
 
$
1,396

 
$
(129
)
 
$
1,267

 
$
0.93

 
 
 
 
 
 
 
 
 
 
 
*Assumes dilution of 21.5 million shares for the twelve months ended December 31, 2015 for all or a portion of these non-GAAP Adjustments
 
 
 
 
 
 
 
 
 
 
 
 
Year Ended December 31, 2014
 
in millions, except per share data
 
Pre-Tax
 
Tax
Impact (a)
 
After-Tax
 
Impact per Share
 
GAAP net income (loss)
 
$
(509
)
 
$
390

 
$
(119
)
 
$
(0.09
)
 
Non-GAAP adjustments:
 
 
 
 
 
 
 
 
 
Intangible asset impairment charges
 
195

 
(30
)
 
165

 
0.12

**
Acquisition- and divestiture-related net credits (e)
 
(10
)
 
(24
)
 
(34
)
 
(0.03
)
**
Restructuring and restructuring-related net charges (f)
 
117

 
(27
)
 
90

 
0.07

**
Litigation-related net charges
 
1,036

 
(377
)
 
659

 
0.49

**
Discrete tax items
 
—

 
(17
)
 
(17
)
 
(0.01
)
**
Amortization expense
 
438

 
(53
)
 
385

 
0.29

**
Adjusted net income
 
$
1,267

 
$
(138
)
 
$
1,129

 
$
0.84

 
 
 
 
 
 
 
 
 
 
 
**Assumes dilution of 23.7 million shares for the twelve months ended December 31, 2014 for all or a portion of these non-GAAP Adjustments
 
 
 
 
 
 
 
 
 
 
(a) 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 Accounting Standards Codification section 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate."
(b) In the twelve months ended December 31, 2015, pre-tax acquisition- and divestiture-related net charges were $255 million, of which $49 million was recorded in cost of products sold, $53 million was recorded in selling, general and administrative expenses, $26 million was recorded in research and development, $123 million was recorded as contingent consideration expense, and $4 million was recorded as interest expense.
(c) In the twelve months ended December 31, 2015, pre-tax restructuring charges were $26 million and pre-tax restructuring- related charges were $57 million, of which $31 million was recorded in cost of products sold and $26 million was recorded in selling, general and administrative expenses.
(d) Debt extinguishment charges are recorded in interest expense.
(e) In the twelve months ended December 31, 2014, pre-tax acquisition- and divestiture-related net credits were $10 million, of which charges of $23 million were recorded in cost of products sold, charges of $83 million were recorded in selling, general and administrative expenses, $85 million was recorded as a contingent consideration benefit, $12 million was recorded as a gain on divestiture and $19 million was recorded as gains on previously held equity interests within Other, net.
(f) In the twelve months ended December 31, 2014, pre-tax restructuring charges were $69 million and pre-tax restructuring- related charges were $48 million, of which $24 million was recorded in cost of products sold and $24 million was recorded in selling, general and administrative expenses.
An explanation of the company's use of these non-GAAP financial measures is provided at the end of this document.
 





BOSTON SCIENTIFIC CORPORATION
SEGMENT INFORMATION
(Unaudited)
SEGMENT NET SALES*
 
Three Months Ended
December 31,
 
Year Ended
December 31,
 
in millions
 
2015
2014
 
Change
 
2015
2014
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
        Interventional Cardiology
 
$
584

$
549

 
6

%
 
$
2,242

$
2,092

 
7

%
        Peripheral Interventions
 
252

230

 
10

%
 
975

861

 
13

%
Cardiovascular
 
836

779

 
7

%
 
3,217

2,953

 
9

%
 
 
 
 
 
 
 
 
 
 
 
 
 
        Cardiac Rhythm Management
 
477

481

 
(1
)
%
 
1,934

1,922

 
1

%
        Electrophysiology
 
66

61

 
8

%
 
248

228

 
9

%
Rhythm Management
 
543

542

 
0

%
 
2,182

2,150

 
1

%
 
 
 
 
 
 
 
 
 
 
 
 
 
        Endoscopy
 
378

354

 
7

%
 
1,422

1,343

 
6

%
        Urology and Pelvic Health
 
256

145

 
77

%
 
735

542

 
36

%
        Neuromodulation
 
144

135

 
7

%
 
512

474

 
8

%
MedSurg
 
778

634

 
23

%
 
2,669

2,359

 
13

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Subtotal Core Businesses
 
2,157

1,955

 
10

%
 
8,068

7,462

 
8

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Divested Businesses
 
—

1

 
N/A

 
 
—

4

 
N/A

 
Foreign Currency
 
(179
)
(69
)
 
N/A

 
 
(591
)
(86
)
 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Worldwide Net Sales
 
$
1,978

$
1,887

 
5

%
 
$
7,477

$
7,380

 
1

%
 
 
 
 
 
 
 
 
 
 
 
 
 
Growth rates are based on actual, non-rounded amounts and may not recalculate precisely.
 
 
 
 
 
 
 
 
 
 
 
 
 

SEGMENT OPERATING INCOME*
 
Three Months Ended
December 31,
 
Year Ended
December 31,
in millions
 
2015
 
2014
 
2015
 
2014
 
 
 
 
 
 
 
 
 
Segment operating income
 
 
 
 
 
 
 
 
Cardiovascular
 
$
240

 
$
202

 
$
972

 
$
767

Rhythm Management
 
76

 
80

 
328

 
289

MedSurg
 
266

 
210

 
856

 
746

Operating income allocated to reportable segments
 
582

 
492

 
2,156

 
1,802

Corporate expenses and currency exchange
 
(153
)
 
(102
)
 
(486
)
 
(308
)
Intangible asset impairment charges; pension termination charges; acquisition-, divestiture-, restructuring-, and litigation-related net charges and credits
 
(565
)
 
(772
)
 
(1,502
)
 
(1,357
)
Amortization expense
 
(135
)
 
(111
)
 
(495
)
 
(438
)
Operating income (loss)
 
$
(271
)
 
$
(493
)
 
$
(327
)
 
$
(301
)
 
 
 
 
 
 
 
 
 
*We measure and evaluate our reportable segments based on segment net sales and operating income, excluding the impact of changes in foreign currency and sales from divested businesses. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and corporate expenses, are based on internally-derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. We exclude from segment operating income certain corporate-related expenses and certain transactions or adjustments that our chief operating decision maker considers to be non-recurring and/or non-operational, such as amounts related to intangible asset impairment charges; acquisition and divestiture-, restructuring- and litigation-related net charges and credits; pension termination charges; and amortization expense. Although we exclude these amounts from segment operating income, they are included in reported consolidated operating income (loss) and are included in the reconciliation above.





BOSTON SCIENTIFIC CORPORATION
WORLDWIDE CARDIAC RHYTHM MANAGEMENT (CRM) SALES
(Unaudited)


Three Months Ended

 
 
Three Months Ended
 
Three Months Ended
(in millions)
 
December 31, 2015
 
December 31, 2014
 
 
U.S.
 
International
 
Total
 
U.S.
 
International
 
Total
Defibrillator systems
 
$
202

 
$
114

 
$
316

 
$
215

 
$
124

 
$
339

Pacemaker systems
 
58

 
66

 
124

 
60

 
69

 
129

CRM products
 
$
260

 
$
180

 
$
440

 
$
275

 
$
193

 
$
468



Year Ended

 
 
Year Ended
 
Year Ended
(in millions)
 
December 31, 2015
 
December 31, 2014
 
 
U.S.
 
International
 
Total
 
U.S.
 
International
 
Total
Defibrillator systems
 
$
858

 
$
455

 
$
1,313

 
$
867

 
$
513

 
$
1,380

Pacemaker systems
 
239

 
255

 
494

 
255

 
277

 
532

CRM products
 
$
1,097

 
$
710

 
$
1,807

 
$
1,122

 
$
790

 
$
1,912






BOSTON SCIENTIFIC CORPORATION
SEGMENT AND REGIONAL NET SALES
(Unaudited)



Q4 2015 Segment Revenue Growth as compared to Q4 2014
 
MedSurg
Cardiovascular
Rhythm Management
Total BSC
Percentage change in net sales, as reported
18
 %
1
 %
(5
)%
5
 %
Less: Impact of Foreign Currency Fluctuations
(5
)%
(6
)%
(5
)%
(5
)%
Percentage change in net sales, constant currency
23
 %
7
 %
0
 %
10
 %
Less: Impact of AMS acquisition
16
 %
0
 %
0
 %
5
 %
Percentage change in net sales, organic
7
 %
7
 %
0
 %
5
 %


Q4 2015 Regional Revenue Growth as compared to Q4 2014
 
U.S.
Europe
AMEA
Emerging Markets*
Percentage change in net sales, as reported
12
%
(2
)%
(1
)%
3
 %
Less: Impact of Foreign Currency Fluctuations
—
%
(12
)%
(8
)%
(13
)%
Percentage change in net sales, constant currency
12
%
10
 %
7
 %
16
 %
Less: Impact of AMS acquisition
7
%
5
 %
1
 %
1
 %
Percentage change in net sales, organic
5
%
5
 %
6
 %
15
 %


*We define Emerging Markets as including certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors, and our global capabilities. Currently, we include 20 countries in our definition of Emerging Markets.

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





BOSTON SCIENTIFIC CORPORATION
ESTIMATED REVENUE NON-GAAP GROWTH RATES AND NON-GAAP NET INCOME PER COMMON SHARE RECONCILIATIONS
(Unaudited)

Full Year 2016 Estimated Revenue Growth Rates

 
Full Year 2016 Estimate
 
(Low)
(High)
Estimated GAAP sales growth
6
 %
8
 %
Less: Estimated Impact of Foreign Currency Fluctuations
(1
)%
(2
)%
Estimated sales growth, constant currency
7
 %
10
 %
Less: Impact of AMS acquisition
3
 %
3
 %
Estimated sales growth, organic
4
 %
7
 %


Q1 and Full Year 2016 EPS Guidance

 
Q1 2016 Estimate
 
Full Year 2016 Estimate
 
(Low)
(High)
 
(Low)
(High)
GAAP results
$
0.11

$
0.13

 
$
0.62

$
0.67

 
 
 
 
 
 
Estimated acquisition and divestiture-related net charges
0.02

0.02

 
0.05

0.04

Estimated restructuring and restructuring-related charges
0.01

0.01

 
0.02

0.02

Estimated amortization expense
0.09

0.09

 
0.34

0.34

 
 
 
 
 
 
Adjusted results
$
0.23

$
0.25

 
$
1.03

$
1.07

 
 
 
 
 
 

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 and adjusted net income per share that exclude certain amounts, and revenue growth rates that exclude the impact of sales from divested businesses, 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 revenue growth rates 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 non-GAAP financial measure and the non-GAAP financial measures that excludes sales from divested businesses and/or 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 revenue growth rates that exclude the impact of sales from divested businesses, 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 financial and 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 and twelve months ended December 31, 2015 and 2014, and for the forecasted three month period ending March 31, 2016 and for the full year ending December 31, 2016, as well as reasons for excluding each of these individual items:

Adjusted Net Income and Adjusted Net Income per Share:

•
Intangible asset impairment charges - These charges represent non-cash write-downs of certain intangible asset balances during 2015 and 2014. We remove the impact of non-cash impairment charges from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for us in measuring our ability to generate cash and invest in our growth. Therefore, these charges are excluded from management's assessment of operating performance and are also excluded 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, particularly in terms of liquidity.

•
Acquisition- and divestiture-related net charges (credits) - These adjustments 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; (d) due diligence, other fees, inventory step-up amortization, and integration and exit costs; and (e) separation costs and gains primarily associated with the sale of our Neurovascular business in January 2011. 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 and divestitures that can be highly variable and not representative of ongoing operations. Separation costs and gains on the sale of a business unit primarily represent those associated with the Neurovascular divestiture and are 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 primarily severance and other direct costs associated with our 2014 Restructuring program. These costs 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 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. 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.

•
Debt extinguishment charges - This item represents premiums, accelerated amortization of debt issuance costs and investor discount costs net of interest rate hedge gains related to the early extinguishment of $1.0 billion of public senior notes during the second quarter of 2015. These adjustments are not expected to recur and do not reflect expected ongoing operating results. 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.

•
Pension termination charges - This item represents charges associated with the termination of the Guidant Retirement Plan, a frozen defined benefit plan. These charges are not expected to recur after 2015 and do not reflect expected ongoing operating results. Accordingly, management has 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 - Amortization expense is a non-cash expense and does not impact our liquidity or compliance with the financial covenants included in our credit facility or our term loan facility agreements. Management removes the impact of amortization from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for measuring our ability to generate cash and invest in our growth. Therefore, 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, particularly in terms of liquidity.

•
Discrete tax items - These items represent adjustments of certain tax positions, which were initially established in prior periods in conjunction with the purchase accounting for an acquisition or as a result of intangible asset impairment charges; acquisition-, divestiture-, restructuring- or litigation-related charges or credits. These adjustments do not reflect expected on-going operating results.




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.

Revenue Growth Rates Excluding the Impact of Sales from Divested Businesses, Changes in Foreign Currency Exchange Rates and/or the Impact of Recent Acquisitions with Significant Sales

•
Sales from divested businesses are primarily associated with the Neurovascular divestiture and are not representative of ongoing operations. 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 operating performance. Accordingly, management excludes the impact of sales from divested businesses, changes in foreign currency exchange rates and/or the impacts of recent acquisitions with significant sales for purposes of reviewing revenue 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 revenue growth rates that exclude the impact of sales from divested businesses, 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.