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Boston Scientific Announces Results for Fourth Quarter and Year Ended December 31, 2008
Date:1/28/2009

Q4 adjusted results in line with expectations; Company well positioned for 2009 and beyond

Company records $2.7 billion goodwill impairment charge

NATICK, Mass., Jan. 28 /PRNewswire-FirstCall/ -- Boston Scientific Corporation (NYSE: BSX) today announced financial results for the fourth quarter and full year ended December 31, 2008, as well as guidance for net sales and earnings per share (EPS) for the first quarter of 2009.

Fourth quarter highlights:

  • Sales of $2.002 billion and adjusted EPS of $0.21 (GAAP EPS loss per share of $1.62, including a $2.7 billion goodwill impairment charge)
  • Achieved third consecutive quarter of double-digit sales growth in our U.S. Cardiac Rhythm Management (CRM) business
  • Increased U.S. drug-eluting stent (DES) leadership with Q4 market share of 47 percent; exited the quarter with 49 percent (25 percent PROMUS and 24 percent TAXUS(R) stent systems)
  • Grew Neuromodulation sales 10 percent over prior year

"During the quarter, we continued to gain share in our cardiac rhythm management and drug-eluting stent businesses, driven by the approval and successful launch of important new products," said Jim Tobin, President and Chief Executive Officer of Boston Scientific. "Throughout the year, we made progress in critical areas across the Company and positioned ourselves well for the future. We've transformed quality, revitalized our pipeline, streamlined the organization, strengthened our financial fundamentals and diversified our product portfolio. We will build on this solid foundation in 2009 and beyond."

Fourth Quarter 2008

Net sales for the fourth quarter of 2008 were $2.002 billion, which included sales from divested businesses of $7 million, as compared to net sales of $2.152 billion for the fourth quarter of 2007, which included sales from divested businesses of $145 million. Excluding the impact of foreign currency and sales from divested businesses, net sales increased two percent over the prior period.

Worldwide sales of the Company's CRM products for the fourth quarter were as follows:


    (in millions)               U.S.      International     Worldwide
                           2008    2007  2008       2007 2008       2007
    ICD systems            $299    $266  $128       $130 $427       $396
    Pacemaker systems        84      81    60         67  144        148

    Total CRM products     $383    $347  $188       $197 $571       $544

Worldwide sales of the Company's coronary stent systems for the fourth quarter were as follows:


    (in millions)                  U.S.      International     Worldwide
                               2008    2007  2008      2007  2008       2007
    Drug-eluting               $231    $224  $198      $211  $429       $435
    Bare-metal                   18      26    29        35    47         61

    Total coronary stent
     Systems                   $249    $250  $227      $246  $476       $496

Despite the Company's strong financial performance, changes in CRM market demand since our acquisition of Guidant - coupled with the recent disruptions in the credit and equity markets - have caused us to write down $2.7 billion of goodwill associated with the acquisition. This is a non-cash charge that has no impact on our debt covenants. The amount of the charge is subject to finalization during the first quarter of 2009.

"This write-down in no way diminishes our confidence in our CRM business," said Tobin. "CRM is growing, it is taking market share, and it will be a key driver of the Company's sales and earnings growth going forward."

Reported net loss for the fourth quarter of 2008 was $2.430 billion, or $1.62 per share. Reported results included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related net charges, and amortization expense (after-tax) of $2.750 billion, or $1.83 per share, which consisted of:

  • $2.681 billion ($2.689 billion pre-tax) of intangible asset impairment charges, associated primarily with a write-down of goodwill;
  • $25 million ($22 million pre-tax) of purchased research and development charges, associated primarily with the Company's acquisition of Labcoat, Ltd.;
  • $27 million ($34 million pre-tax) of restructuring charges associated with the Company's on-going expense and head count reduction initiatives;
  • $109 million of discrete tax benefits related to certain tax positions associated with acquisition-, divestiture-, litigation- and restructuring-related charges; and
  • $126 million ($134 million pre-tax) of amortization expense.

Adjusted net income for the fourth quarter of 2008 excluding these charges was $320 million, or $0.21 per share.

Reported net loss for the fourth quarter of 2007 was $458 million, or $0.31 per share. Reported results included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges and amortization expense (after-tax) of $813 million, or $0.55 per share. Adjusted net income for the fourth quarter of 2007 excluding these charges was $355 million, or $0.24 per share.

Full Year 2008

Net sales for the full year 2008 were $8.050 billion, which included sales from divested businesses of $69 million, as compared to net sales of $8.357 billion in 2007, which included sales from divested businesses of $553 million.

Worldwide sales of the Company's CRM products for the full year were as follows:


    (in millions)             U.S.        International        Worldwide
                         2008      2007  2008       2007    2008       2007
    ICD systems        $1,140    $1,053  $541       $489  $1,681     $1,542
    Pacemaker systems     340       318   265        264     605        582

    Total CRM products $1,480    $1,371  $806       $753  $2,286     $2,124

Worldwide sales of the Company's coronary stent systems for the full year were as follows:


    (in millions)               U.S.        International        Worldwide
                           2008      2007  2008       2007    2008       2007
    Drug-eluting           $833    $1,006  $801       $782  $1,634     $1,788
    Bare-metal               88       104   129        135     217        239

    Total coronary stent
     systems               $921    $1,110  $930       $917  $1,851     $2,027

Reported net loss for 2008 was $2.072 billion, or $1.38 per share. Reported results for 2008 included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges, and amortization expense (after-tax) of $3.289 billion, or $2.19 per share, which consisted of:

  • $2.810 billion ($2.844 billion pre-tax) of intangible asset impairment charges, associated primarily with a write-down of goodwill;
  • a $184 million gain ($250 million pre-tax) related to the receipt of an acquisition-related milestone payment from Abbott Laboratories;
  • $44 million ($43 million pre-tax) of net purchased research and development charges, associated primarily with the Company's acquisitions of CryoCor, Inc. and Labcoat, Ltd.;
  • $100 million of charges ($133 million pre-tax) associated with the Company's ongoing expense and head count reduction initiatives;
  • a $185 million gain ($250 million pre-tax), associated with the sale of certain non-strategic businesses;
  • $54 million of net losses ($80 million pre-tax) in connection with the sale of the Company's non-strategic investments;
  • $238 million of litigation-related charges ($334 million pre-tax) resulting primarily from a ruling by a federal judge in a patent infringement case brought against the Company by Johnson & Johnson;
  • $27 million of discrete tax benefits related to certain tax positions associated with prior period acquisition-, divestiture-, litigation- and restructuring-related charges; and
  • $439 million of amortization expense ($543 million pre-tax).

Adjusted net income for 2008, excluding these charges, was $1.217 billion, or $0.81 per share.

Reported net loss for 2007 was $495 million, or $0.33 per share. Reported results for 2007 included intangible asset impairments, acquisition-, divestiture-, litigation- and restructuring-related charges, and amortization expense (after-tax) of $1.652 billion, or $1.10 per share. Adjusted net income for 2007, excluding these charges was $1.157 billion, or $0.77 per share.

Guidance for First Quarter 2009

The Company estimates net sales for the first quarter of 2009 of between $1.950 billion and $2.070 billion. Adjusted earnings, excluding acquisition-, divestiture-, litigation- and restructuring-related charges and amortization expense, are estimated to range between $0.15 and $0.20 per share. The Company estimates net income on a GAAP basis of between $0.05 and $0.11 per share.

Full year 2009 sales and earnings per share guidance will be provided during the Company's conference call with analysts tomorrow.

Boston Scientific officials will be discussing these results with analysts on a conference call at 8:00 a.m. (ET) Thursday, January 29, 2009. The Company will webcast the call to all 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 one year on the Boston Scientific website.

Boston Scientific is a worldwide developer, manufacturer and marketer of medical devices whose products are used in a broad range of interventional medical specialties. For more information, please visit: www.bostonscientific.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of 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 financial performance, our programs to increase shareholder value, new product approvals, acquisitions and divestitures, our growth strategy, competitive offerings and our market position. 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 factors, in some cases, have affected and in the future (together with other factors) 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.

Factors that may cause such differences include, among other things: future economic, competitive, reimbursement and regulatory conditions; new product introductions; demographic trends; intellectual property; litigation; financial market conditions; and, future business decisions made by us and our competitors. 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 thereafter. We disclaim any intention or obligation to publicly update or revise any forward-looking statements 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 document.

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 measures, is included in the exhibits attached to this press release.

                                              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

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

                                                          Three Months Ended
                                                              December 31,
    In millions, except per share data                     2008          2007

    Net sales                                            $2,002        $2,152
    Cost of products sold                                   630           635
    Gross profit                                          1,372         1,517

    Operating expenses:
     Selling, general and administrative expenses           640           704
     Research and development expenses                      257           256
     Royalty expense                                         59            51
     Amortization expense                                   134           153
     Intangible asset impairments                         2,689            21
     Purchased research and development                      22            13
     Loss on assets held for sale                                         208
     Restructuring charges                                   19           176
     Litigation-related charges                                           365
                                                          3,820         1,947
    Operating loss                                       (2,448)         (430)

    Other income (expense):
     Interest expense                                      (107)         (137)
     Other, net                                              (2)          (29)

    Loss before income taxes                             (2,557)         (596)
     Income tax benefit                                    (127)         (138)
    Net loss                                            $(2,430)        $(458)


    Net loss per common share - basic                    $(1.62)       $(0.31)
    Net loss per common share - assuming dilution        $(1.62)       $(0.31)

    Weighted average shares outstanding -basic          1,501.5       1,490.8
    Weighted average shares outstanding -
     assuming dilution                                  1,501.5       1,490.8



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

                                                             Year Ended
                                                             December 31,
    In millions, except per share data                    2008           2007

    Net sales                                           $8,050         $8,357
    Cost of products sold                                2,469          2,342
    Gross profit                                         5,581          6,015

    Operating expenses:
     Selling, general and administrative
      expenses                                           2,566          2,909
     Research and development expenses                   1,006          1,091
     Royalty expense                                       203            202
     Amortization expense                                  543            620
     Intangible asset impairments                        2,844             21
     Acquisition-related milestone                        (250)
     Purchased research and development                     43             85
     Gain on divestitures                                 (250)
     Loss on assets held for sale                                         560
     Restructuring charges                                  78            176
     Litigation-related charges                            334            365
                                                         7,117          6,029
    Operating loss                                      (1,536)           (14)

    Other income (expense):
     Interest expense                                     (468)          (570)
     Other, net                                            (58)            15

    Loss before income taxes                            (2,062)          (569)
     Income tax expense (benefit)                           10            (74)
    Net loss                                           $(2,072)         $(495)


    Net loss per common share - basic                   $(1.38)        $(0.33)
    Net loss per common share - assuming
     dilution                                           $(1.38)        $(0.33)

    Weighted average shares outstanding - basic        1,498.5        1,486.9
    Weighted average shares outstanding -
     assuming dilution                                 1,498.5        1,486.9



                            BOSTON SCIENTIFIC CORPORATION
                       CONDENSED CONSOLIDATED BALANCE SHEETS

                                                            December 31,
    In millions                                          2008          2007
                                                      (Unaudited)
    ASSETS
    ------
    Current assets:
     Cash and cash equivalents                          $1,641        $1,452
     Trade accounts receivable, net                      1,402         1,502
     Inventories                                           853           725
     Deferred income taxes                                 931           679
     Assets held for sale                                   13         1,119
     Other current assets                                  607           464
     Total current assets                                5,447         5,941

    Property, plant and equipment, net                   1,728         1,715
    Investments                                            113           317
    Other assets                                           181           157
    Intangible assets, net                              19,611        23,067
                                                       $27,080       $31,197

    LIABILITIES AND STOCKHOLDERS' EQUITY
    ------------------------------------
    Current liabilities:
     Short-term debt                                        $2          $256
     Accounts payable and accrued expenses               2,828         2,680
     Liabilities associated with assets held for
      sale                                                                39
     Other current liabilities                             380           275
     Total current liabilities                           3,210         3,250

    Long-term debt                                       6,743         7,933
    Deferred income taxes                                2,262         2,284
    Other long-term liabilities                          1,727         2,633

    Stockholders' equity                                13,138        15,097
                                                       $27,080       $31,197



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

                                             Three Months Ended December 31,
                                              2008                    2007
    In millions, except
     per share data                 Net (loss)  Impact  Net (loss)  Impact
                                     income      per     income      per
                                               diluted             diluted
                                                share*              share*

    GAAP results                     $(2,430)  $(1.62)   $(458)    $(0.31)
    Non-GAAP adjustments:
     Intangible asset impairments      2,681     1.78       18       0.01
     Acquisition-related net charges      25     0.02       10       0.01
     Divestiture-related losses                            201       0.13
     Restructuring-related charges        27     0.02      131       0.09
     Litigation-related charges                            294       0.20
     Discrete tax items                 (109)   (0.07)
     Amortization expense                126     0.08      159       0.11
    Adjusted results                    $320    $0.21     $355      $0.24


    * Assumes dilution of 2.7 million shares for the quarter ended December
      31, 2008 and 9.0 million shares for the quarter ended December 31, 2007
      for all or a portion of these non-GAAP adjustments.


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


                        BOSTON SCIENTIFIC CORPORATION
     NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS
                                   (CONT.)
                                 (Unaudited)

                                                    Three Months Ended
                                                        December 31,
                                                    2008          2007
    Intangible asset impairments:
     Intangible asset impairments                 $2,689           $21
       Less: Income tax benefit (a)                   (8)           (3)
    Intangible asset impairments, net of tax      $2,681           $18

    Acquisition-related charges (credits):
     Purchased research and development              $22           $13
     Integration costs (b)                                          (5)
                                                      22             8
       Less: Income tax expense (a)                    3             2
    Acquisition-related net charges, net of tax      $25           $10

    Divestiture-related losses:
     Loss on assets held for sale                                 $208
       Less: Income tax benefit (a)                                 (7)
    Divestiture-related losses, net of tax                        $201

    Restructuring-related charges:
     Restructuring-related charges (c)               $34          $184
       Less: Income tax benefit (a)                   (7)          (53)
    Restructuring-related charges, net of tax        $27          $131

    Litigation-related charges:
     Litigation-related charges                                   $365
       Less: Income tax benefit (a)                                (71)
    Litigation-related charges, net of tax                        $294

    Discrete tax items:
     Income tax benefit (a)                        $(109)

    Amortization expense:
     Amortization expense                           $134          $153
       Less: Income tax (benefit) expense (a)         (8)            6
    Amortization expense, net of tax                $126          $159


    (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 Interpretation No. 18, "Accounting for
         Income Taxes in Interim Periods."
    (b)  Recorded credits of $4 million to selling, general and
         administrative expenses and $1 million to research and development
         expenses.
    (c)  In 2008, recorded $6 million to cost of products sold; $7 million
         to selling, general and administrative expenses; $2 million to
         research and development expenses; and $19 million to restructuring
         charges. In 2007, recorded $4 million to cost of products sold; $2
         million to selling, general and administrative expenses; $2 million
         to research and development expenses; and $176 million to
         restructuring charges.

    An explanation of the Company's use of these non-GAAP 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,
                                          2008                   2007
    In millions, except per share     Net      Impact       Net       Impact
     data                           (loss)      per       (loss)       per
                                    income    diluted     income     diluted
                                               share*                 share*
    GAAP results                   $(2,072)   $(1.38)     $(495)     $(0.33)
    Non-GAAP adjustments:
     Intangible asset impairments    2,810      1.87         18        0.01
     Acquisition-related net
      (credits) charges               (140)    (0.09)       114        0.08
     Divestiture-related net
      (gains) losses                  (131)    (0.09)       553        0.36
     Restructuring-related charges     100      0.07        131        0.09
     Litigation-related charges        238      0.16        294        0.20
     Discrete tax items                (27)    (0.02)
     Amortization expense              439      0.29        542        0.36
    Adjusted results                $1,217     $0.81     $1,157       $0.77


    * Assumes dilution of 5.8 million shares for the year ended December
      31, 2008 and  13.1 million shares for the year ended December 31, 2007
      for all or a portion of these non-GAAP adjustments.



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


                           BOSTON SCIENTIFIC CORPORATION
        NON-GAAP NET INCOME AND NET INCOME PER COMMON SHARE RECONCILIATIONS
                                      (CONT.)
                                    (Unaudited)

                                                       Year Ended
                                                       December 31,
                                                    2008        2007
    Intangible asset impairments:
     Intangible asset impairments                 $2,844         $21
       Less: Income tax benefit (a)                  (34)         (3)
    Intangible asset impairments, net of tax      $2,810         $18

    Acquisition-related (credits) charges:
     Acquisition-related milestone                 $(250)
     Purchased research and development               43         $85
     Integration costs (b)                                        29
     Fair value adjustment for the sharing of
      proceeds feature of the Abbott Laboratories
      stock purchase (c)                                           8
                                                    (207)        122
       Less: Income tax expense (benefit) (a)         67          (8)
    Acquisition-related net (credits) charges,
     net of tax                                    $(140)       $114

    Divestiture-related (gains) losses:
     Gain on divestitures                          $(250)
     Net loss on sale of investments (c)              80
     Loss on assets held for sale                               $560
                                                    (170)        560
       Less: Income tax expense (benefit) (a)         39          (7)
    Divestiture-related net (gains) losses, net
     of tax                                        $(131)       $553

    Restructuring-related charges:
     Restructuring-related charges (d)              $133        $184
       Less: Income tax benefit (a)                  (33)        (53)
    Restructuring-related charges, net of tax       $100        $131

    Litigation-related charges:
     Litigation-related charges                     $334        $365
       Less: Income tax benefit (a)                  (96)        (71)
    Litigation-related charges, net of tax          $238        $294

    Discrete tax items:
     Income tax benefit (a)                         $(27)

    Amortization expense:                           $543        $620
       Less: Income tax benefit (a)                 (104)        (78)
    Amortization expense, net of tax                $439        $542


    (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 Interpretation No. 18, "Accounting for
         Income Taxes in Interim Periods."
    (b)  Recorded $6 million to cost of products sold, $20 million to
         selling, general and administrative expenses and $3 million to
         research and development expenses.
    (c)  Recorded to other, net.
    (d)  In 2008, recorded $17 million to cost of products sold; $31
         million to selling, general and administrative expenses; $7 million
         to research and development expenses; and $78 million to
         restructuring charges. In 2007, recorded $4 million to cost of
         products sold; 2 million to selling, general and administrative
         expenses; $2 million to research and development expenses; and $176
         million to restructuring charges.


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


                          BOSTON SCIENTIFIC CORPORATION
                                 WORLDWIDE SALES
                                   (Unaudited)

                                                           Change
                             Three Months Ended  As Reported    Constant
                                December 31,      Currency      Currency
    In millions              2008         2007     Basis          Basis

    United States          $1,156       $1,125         3%          3%

     EMEA                     451          481        (6)%         5%
     Inter-Continental        388          401        (4)%         (5)%
    International             839          882        (5)%          - %

    Subtotal                1,995        2,007        (1)%          2%

     Divested Businesses        7          145     N/A           N/A

    Worldwide              $2,002       $2,152        (7)%         (5)%

                                                            Change
                             Three Months Ended   As Reported    Constant
                                 December 31,      Currency      Currency
    In millions              2008         2007      Basis          Basis

     Interventional
      Cardiology             $721         $759        (5)%         (3)%
     Peripheral
      Interventions           138          152        (9)%         (9)%
    Cardiovascular            859          911        (6)%         (4)%

     Neurovascular             91           92        (2)%          1%
     Peripheral Embolization   24           24         3%         (1)%
    Neurovascular             115          116        (1)%          1%

     Cardiac Rhythm
      Management              571          544         5%          8%
     Electrophysiology         37           38        (5)%        (4)%
    Cardiac Rhythm
     Management               608          582         4%          7%

     Endoscopy                234          229         3%          5%
     Urology                  112          108         4%          5%
    Endosurgery               346          337         3%          5%

    Neuromodulation            67           61        10%         11%

    Subtotal                1,995        2,007        (1)%          2%

     Divested Businesses        7          145       N/A           N/A

    Worldwide              $2,002       $2,152        (7)%         (5)%


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



                              BOSTON SCIENTIFIC CORPORATION
                 NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
                                     (Unaudited)

                            Q4 2008 Net Sales as compared to Q4 2007

                                                           Estimated
                                     Change                Impact of
    In millions          As Reported         Constant       Foreign
                       Currency Basis     Currency Basis   Currency

    United States           $31                 $31            $-

     EMEA                   (30)                 24           (54)
     Inter-Continental      (13)                (21)            8
    International           (43)                  3           (46)

    Subtotal                (12)                 34           (46)

     Divested Businesses   (138)               (138)            -

    Worldwide             $(150)              $(104)         $(46)


                                Q4 2008 Net Sales as compared to Q4 2007

                                                               Estimated
                                          Change               Impact of
    In millions                As Reported        Constant      Foreign
                             Currency Basis    Currency Basis  Currency

     Interventional Cardiology    $(38)             $(20)        $(18)
     Peripheral Interventions      (14)              (13)          (1)
    Cardiovascular                 (52)              (33)         (19)

     Neurovascular                  (1)                1           (2)
     Peripheral Embolization         -                 -            -
    Neurovascular                   (1)                1           (2)

     Cardiac Rhythm Management      27                44          (17)
     Electrophysiology              (1)               (2)           1
    Cardiac Rhythm Management       26                42          (16)

     Endoscopy                       5                12           (7)
     Urology                         4                 6           (2)
    Endosurgery                      9                18           (9)

    Neuromodulation                  6                 6            -

    Subtotal                       (12)               34          (46)

     Divested Businesses          (138)             (138)           -

    Worldwide                    $(150)            $(104)        $(46)


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


                             BOSTON SCIENTIFIC CORPORATION
                                    WORLDWIDE SALES
                                      (Unaudited)

                                                      Change
                              Year Ended    As Reported     Constant
                             December 31,    Currency       Currency
    In millions            2008        2007    Basis          Basis

    United States        $4,487      $4,522      (1)%         (1)%

     EMEA                 1,960       1,833       7%           2%
     Inter-Continental    1,534       1,449       6%          (2)%
    International         3,494       3,282       6%           -%

    Subtotal              7,981       7,804       2%           -%

     Divested Businesses     69         553     N/A           N/A

    Worldwide            $8,050      $8,357      (4)%         (6)%


                                                          Change
                                 Year Ended      As Reported    Constant
                                December 31,      Currency      Currency
    In millions               2008       2007       Basis         Basis

     Interventional
      Cardiology             $2,879    $3,016        (5)%          (7)%
     Peripheral
      Interventions             589       597        (1)%          (5)%
    Cardiovascular            3,468     3,613        (4)%          (7)%

     Neurovascular              360       352         2%           (2)%
     Peripheral Embolization     95        95         1%           (4)%
    Neurovascular               455       447         2%           (3)%

     Cardiac Rhythm
      Management              2,286     2,124         8%            5%
     Electrophysiology          153       147         4%            2%
    Cardiac Rhythm
     Management               2,439     2,271         7%            5%

     Endoscopy                  943       866         9%            6%
     Urology                    431       403         7%            6%
    Endosurgery               1,374     1,269         8%            6%

    Neuromodulation             245       204        20%           20%

    Subtotal                  7,981     7,804         2%            -%

     Divested Businesses         69       553       N/A            N/A

    Worldwide                $8,050    $8,357        (4)%          (6)%

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



                            BOSTON SCIENTIFIC CORPORATION
                NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
                                   (Unaudited)

                            2008 YTD Net Sales as compared to 2007

                                       Change              Estimated
                                                           Impact of
    In millions            As Reported        Constant       Foreign
                         Currency Basis    Currency Basis   Currency

    United States             $(35)             $(35)           $-

     EMEA                      127                32            95
     Inter-Continental          85               (28)          113
    International              212                 4           208

    Subtotal                   177               (31)          208

     Divested Businesses      (484)             (489)            5

    Worldwide                $(307)            $(520)         $213


                             2008 YTD Net Sales as compared to 2007

                                       Change              Estimated
                                                           Impact of
    In millions            As Reported        Constant       Foreign
                         Currency Basis    Currency Basis   Currency

    Interventional Cardiology  $(137)          $(219)          $82
     Peripheral Interventions     (8)            (28)           20
    Cardiovascular              (145)           (247)          102

     Neurovascular                 8              (8)           16
     Peripheral Embolization       -              (5)            5
    Neurovascular                  8             (13)           21

     Cardiac Rhythm Management   162             114            48
     Electrophysiology             6               3             3
    Cardiac Rhythm Management    168             117            51

     Endoscopy                    77              49            28
     Urology                      28              23             5
    Endosurgery                  105              72            33

    Neuromodulation               41              40             1

    Subtotal                     177             (31)          208

     Divested Businesses        (484)           (489)            5

    Worldwide                  $(307)          $(520)         $213

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



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

                                    Q1 2009 Estimate   Q1 2009 Estimate
                                          (Low)              (High)
    GAAP results                          $0.05              $0.11

    Estimated restructuring-related
     charges                               0.03               0.02
    Estimated amortization expense         0.07               0.07

    Adjusted results                      $0.15              $0.20




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


Use of Non-GAAP Financial Measures

To supplement Boston Scientific's condensed consolidated financial statements presented on a GAAP basis; the Company discloses certain non-GAAP measures that exclude certain amounts, including non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange. These non-GAAP measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States.

The GAAP measure most comparable to non-GAAP net income is GAAP net income and the GAAP measure most comparable to non-GAAP net income per diluted share is GAAP net income per diluted share. Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP measure are included in the accompanying schedules.

To calculate regional and divisional revenue growth rates that exclude the impact of foreign exchange, the Company converts actual current-period net sales from local currency to U.S. dollars using constant foreign exchange rates. The GAAP measure most comparable to this non-GAAP measure is growth rate percentages based on GAAP revenue. A reconciliation of this non-GAAP financial measure to the corresponding GAAP measure is included in the accompanying schedules.

Use and Economic Substance of Non-GAAP Financial Measures Used by Boston Scientific

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

The following is an explanation of each of the adjustments that management excluded as part of its non-GAAP measures for the three months and year ended December 31, 2008 and 2007 and for the forecasted three month period ending March 31, 2009, as well as reasons for excluding each of these individual items:

  • Intangible asset impairment charges - These amounts represent non-cash write-downs of certain of the Company's intangible assets. Following the Company's acquisition of Guidant in 2006, 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 these charges 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, these charges are excluded from management's assessment of operating performance and are 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.

  • Acquisition-related (credits) charges - These adjustments consist of a gain resulting from the receipt of an acquisition-related milestone payment, purchased research and development, integration costs associated with the Company's acquisition of Guidant, and a fair value adjustment related to the sharing of proceeds feature of the Abbott stock purchase. The acquisition-related milestone payment is one of two payments the Company expects to receive as a result of Guidant's sale of its vascular intervention and endovascular solutions businesses to Abbott and are not indicative of future operating results. 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. Accordingly, management excluded these charges and gains 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, and related tax impacts, 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 were 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 severance, employee-related retention incentives, asset write-offs and accelerated depreciation 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.

  • Litigation-related charges - These charges are attributable to estimated potential losses associated with patent litigation. These amounts represent significant charges during the third quarter of 2008 and fourth quarter of 2007, and do not reflect expected on-going operating expenses. 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 for comparison to the Company's past operating performance.

  • Discrete tax items - These items represent current period adjustments of certain tax positions, which were initially recorded in prior periods associated with the Company's acquisition-, divestiture-, litigation- and restructuring related charges. These adjustments do not reflect expected on-going operating results. 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 for 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. 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 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 amortization expense 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.

Material Limitations Associated with the Use of Non-GAAP Financial Measures

Non-GAAP net income, non-GAAP net income per diluted share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange may have limitations as analytical tools, and these non-GAAP measures should not be considered in isolation from or as a replacement for GAAP financial measures. Some of the limitations associated with the use of these non-GAAP financial measures are:

  • Items such as purchased research and development, divestiture-related gains and losses, gains on acquisition-related milestones 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, restructuring-related expenses and discrete tax items 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 expense and intangible asset impairment charges, though not directly affecting Boston Scientific's cash flow position, represent a reduction in value of intangible assets. 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.

Compensation for Limitations Associated with Use of Non-GAAP Financial Measures

Boston Scientific compensates for the limitations on its non-GAAP financial measures by relying upon its GAAP results to gain a complete picture of the Company's performance. The non-GAAP numbers focus instead upon the core business of the Company, which is only a subset, albeit a critical one, of the Company's performance.

The Company provides detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure in the accompanying schedules, and Boston Scientific encourages investors to review these reconciliations.

Usefulness of Non-GAAP Financial Measures to Investors

The Company believes that presenting non-GAAP net income, non-GAAP net income per share, and regional and divisional revenue growth rates that exclude the impact of foreign exchange in addition to the related GAAP measures provides investors greater transparency to the information used by Boston Scientific management for its financial and operational decision-making and allows investors to see Boston Scientific's results "through the eyes" of management. The Company further believes that providing this information better enables Boston Scientific's investors to understand the Company's operating performance and to evaluate the methodology used by management to evaluate and measure such performance.


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SOURCE Boston Scientific Corporation
Copyright©2009 PR Newswire.
All rights reserved


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