Boston Scientific eliminates administrative jobs in Boston
Posted on July 30, 2011
Second quarter and other highlights include:
Achieved second quarter sales of $1.975 billion, at the higher end of the Company’s previous guidance range, and reported GAAP earnings of $0.10 per share, a 66 percent increase over the second quarter of 2010, and adjusted EPS of $0.17, a 42 percent increase over the second quarter of 2010, both exceeding previous guidance
Received FDA approval and launched in the U.S. the ION Paclitaxel-Eluting Platinum Chromium Coronary Stent System, the Companys third-generation drug-eluting stent (DES) technology, driving its U.S. DES market share to 50 percent and maintaining its worldwide DES market leadership at 36 percent
Launched the Companys next-generation ENERGEN and PUNCTUA cardiac resynchronization therapy defibrillator (CRT-D) systems and implantable cardioverter defibrillator (ICD) systems — the world’s smallest and thinnest high-energy devices to treat heart failure and sudden cardiac death — in Europe and other international markets
Increased Neuromodulation sales 16 percent, Peripheral Interventions sales 7 percent, Endoscopy sales 6 percent and Urology sales 6 percent, all on a worldwide constant currency basis, on the strength of new product introductions and continued adoption
Reduced gross debt to $4.2 billion, consistent with the target capital structure, with the prepayment of the remaining $750 million of term loan borrowings during the quarter on the strength of $390 million of cash generated from operations ($468 million on an adjusted free cash flow basis), bringing total debt prepayment to over $1.8 billion during the past year
Achieved investment grade status with Fitch Ratings and moved to positive outlook by Moodys Investor Services
Announced a new program to repurchase up to $1.0 billion shares of common stock, which is in addition to the approximately 37 million shares remaining under a previous share repurchase program
Announced a restructuring program aimed at increasing productivity, which is expected to generate gross annual savings of $225 million to $275 million exiting 2013, composed primarily of activities under the Companys corporate Zero-Based Budgeting Initiative and components of its Emerging Markets Initiative, and
Announced an additional five-year, $150 million investment in China to leverage critical growth drivers, which include developing local manufacturing capabilities and building a Boston Scientific training center. In addition, the Company expects to increase its employee base in China from approximately 200 to more than 1,200 during the period. These initiatives are expected to drive an expansion of Boston Scientifics current sales force to approximately 700 employees and the creation of a fully staffed manufacturing infrastructure. During the second quarter, Boston Scientific received registration approval for the PROMUS Element Everolimus-Eluting Platinum Chromium Coronary Stent from the State Food and Drug Administration of the Peoples Republic of China. The Company expects to launch the product in the fourth quarter of 2011.
Our POWER strategy is gaining traction and beginning to deliver tangible results, stated Ray Elliott, President and Chief Executive Officer of Boston Scientific Corporation. In addition to solid second quarter financial results, we have now announced the prepayment of our remaining term loan borrowings, a share buyback program, a productivity-focused restructuring program and an additional investment in China, all of which are key steps on the path to achieving our goals. Thats great news for our employees, shareholders and customers! We remain confident that Boston Scientific is POWERed for long-term, sustainable growth.
Net sales for the second quarter of 2011 were $1.975 billion, as compared to net sales of $1.928 billion for the second quarter of 2010, an increase of 2 percent. Excluding the impact of changes in foreign currency exchange rates and sales from divested businesses, net sales remained flat as compared to the prior period.
On a GAAP basis, net income for the second quarter of 2011 was $146 million, or $0.10 per share. These results included intangible asset impairment charges; acquisition-, divestiture-, and restructuring-related charges; and amortization expense, totaling $116 million, or $0.07 per share, which consisted primarily of:
$9 million ($12 million pre-tax) of intangible asset impairment charges associated with changes in the timing and amount of expected cash flows associated with certain acquired in-process research and development projects;
$6 million ($7 million pre-tax) of contingent consideration expense;
$21 million ($30 million pre-tax) of restructuring charges associated with the Companys 2010 Restructuring plan and Plant Network Optimization program, and
$79 million ($96 million pre-tax) of amortization expense.
Adjusted net income for the second quarter of 2011, excluding these net charges, was $262 million, or $0.17 per share.
On a GAAP basis, net income for the second quarter of 2010 was $98 million, or $0.06 per share. Reported results included goodwill impairment-related credits; restructuring-related charges; and amortization expense (after-tax) totaling $92 million, or $0.06 per share. Adjusted net income for the second quarter of 2010, excluding these net charges, was $190 million, or $0.12 per share.
Demonstrating further progress on its POWER strategy, Boston Scientific also announces a restructuring program designed to strengthen operational effectiveness and efficiencies, increase competitiveness and support new investments, thereby increasing shareholder value. Key activities under the program, of which the Companys Zero-Based Budgeting (ZBB) Initiative and components of the Emerging Markets Initiative (EMI) are a part, include standardizing and automating certain processes and activities; relocating select administrative and functional activities; rationalizing organizational reporting structures; leveraging preferred vendors, and taking other actions aimed at increasing overall productivity.
The Company estimates the program will reduce annual pre-tax operating expenses by approximately $225 million to $275 million exiting 2013, a portion of which will be reinvested in targeted areas necessary for future growth, including the previously announced Priority Growth Initiatives (PGI) and EMI.
Program activities will start to be initiated in the third quarter of 2011 and are expected to be substantially completed by the end of 2013. The Company anticipates the reduction of 1,200 to 1,400 positions worldwide through a combination of employee attrition and targeted headcount reductions as the program is implemented. Plans detailing specific employee impacts will be developed for each affected region and business, and the Company will consult in due course with relevant employee representative bodies, where required under local laws.
The Company estimates the program will result in total pre-tax charges of approximately $155 million to $210 million, and that approximately $150 million to $200 million of these charges will result in future cash outlays.
The Company anticipates that during the third quarter of 2011, it will record approximately $10 million of restructuring charges associated with the program. The Company will record the remaining expenses throughout the duration of the program when it identifies with more specificity the head count to be eliminated and as other program-related expenses are incurred.
The Company estimates net sales for the third quarter of 2011 in a range of $1.870 billion to $1.970 billion. Compared to net sales for the third quarter of 2010, this range assumes a $40 million negative impact from the divestiture of the Companys former Neurovascular business. The Company estimates earnings on a GAAP basis in a range of $0.03 to $0.08 per share. Adjusted earnings, excluding acquisition-, divestiture- and restructuring-related net charges and amortization expense, are estimated in a range of $0.11 to $0.14 per share. Recent acquisitions are expected to dilute third quarter 2011 adjusted earnings by approximately $0.01 per share as compared to the prior year, and the divestiture of the Neurovascular business is expected to dilute third quarter 2011 adjusted earnings by $0.01 per share.
The Company now estimates net sales for the full year 2011 in a range of $7.675 billion to $7.875 billion. Compared to full year 2010 net sales, this range now assumes a $201 million negative impact from the divestiture of the Neurovascular business. Recent acquisitions are not expected to contribute to 2011 sales. The Company now estimates earnings on a GAAP basis in a range of $0.22 to $0.30 per share for the full year 2011. Adjusted earnings, excluding goodwill and other intangible asset impairment charges; acquisition-, divestiture, and restructuring-related net credits; discrete tax items and amortization expense, are being raised from previous guidance of $0.58 to $0.68 per share to an estimated range of $0.64 to $0.70 per share for the full year 2011.
The company did not mention if administrative jobs in Florida would be affected as well.