Boston Scientific Q2 profit down15% hurt by charges, Sets Q3 Target - Update

(RTTNews) - Monday after the bell, Boston Scientific Corp. (BSX | Quote | Chart | News | PowerRating), a manufacturer of medical devices, announced a 14.8% fall in its net income for the second quarter hurt by charges for restructuring, acquisitions and divestitures. But adjusted profit recorded a 25% growth despite a 2.3% fall in sales. The primary factor that helped the company to record higher adjusted profit was the effective control over its operating expenses. Meanwhile, the company issued earnings forecast for the third quarter.

Second Quarter Results

The Natick, Massachusetts-based Boston Scientific reported net income of $98 million or $0.07 per share, down from $115 million or $0.08 per share in the same quarter last year. The results included $206 million after tax charges for divestiture, restructuring, amortization and acquisition compared to $127 million in the prior year quarter.

Excluding charges, net income for the most recent quarter would have been $304 million or $0.20 per share, higher than $242 million or $0.16 per share in the year-ago quarter. On average, 12 analysts polled by First Call/Thomson Financial predicted the company to report earnings of $0.11 per share.

Net sales slackened 2.3% to $2.024 billion from $2.071 billion in the previous year quarter. Thirteen Wall Street analysts had a consensus revenue estimate of $2.01 billion.

Boston Scientific's competitor, the St. Paul, Minnesota-based St. Jude Medical revealed recently its net earnings of $201 million, or $0.58 per share for the second quarter, higher than $135 million, or $0.39 per share in the year-ago quarter. The latest quarter results exclude any benefit from the federal research and development tax credit, which has yet to be extended for 2008. Including gains of adjustment, which the Company expects to be approved later this year, adjusted net earnings were $209 million, or $0.60 per share versus $0.45 per share in the prior year quarter.

Net sales increased 20% to $1.136 billion from $947 million in the previous year quarter. The company added that positive foreign currency translation increased its sales by about $64 million, which was within its previous guidance range in connection with the impact of foreign currency.

Boston Scientific disclosed that its net sales included sales from divested units of $19 million, which was more than offset by a $22 million reduction in revenue due to increase in its sales return reserve in anticipation of its new drug-eluting stent platforms, while the 2007-second quarter results were positively impacted by $139 million from divested businesses.

Boston Scientific's drug-eluting coronary stent systems' worldwide sales slipped to $382 million from $437 million due to lower sales in the U.S. at $175 million versus $249 million. International sales of drug-eluting coronary stent systems fetched revenue of $207 million, up from $188 million in the comparable 2007 period.

Similarly, worldwide sales of coronary stent systems dropped to $440 million from $498 million. Of this, U.S. sales accounted for $200 million, lower than $275 million and International sales of these systems grew to $240 million from $223 million in the corresponding period last year.

But, the company's CRM products' worldwide sales increased to $578 million from $524 million in the preceding year quarter. This includes $420 million of implantable cardioverter defibrillator or ICD sales, up from $377 million in the year-ago quarter.

While CRM sales in the U.S. rose to $364 million from $332 million, International CRM sales grew to $214 million from $192 million in the prior year quarter. Of these, ICD sales were $276 million in the U.S., up from $253 million, whereas International ICD sales increased to $144 million from $124 million in the previous year quarter.

Operating expenses slipped to 9% to $1.117 billion from $1.228 billion. Of this, selling, general and administrative costs were $655 million, down from $752 million and research and development costs fell to $253 million from $275 million in the year earlier quarter. Cost of products sold rose to $604 million from $563 million in the prior year quarter. The company closed the quarter with cash and cash equivalents of $1.62 billion.

Six-Months Results

For the first half, Boston Scientific revealed net income of $420 million or $0.28 per share, higher than $235 million or $0.16 per share in the year-ago six-months period. Results included various charges. Excluding charges, net income would have been $661 million or $0.44 per share, up from $504 million or $0.34 per share in the corresponding period last year.

Net sales fell to $4.07 billion from $4.16 billion in the previous year first half period.

Expectations

Moving ahead, Boston Scientific expects earnings of $0.18-$0.23 per share and adjusted earnings of $0.14-$0.19 per share on revenues of $1.95-$2.06 billion. Wall Street analysts are looking for earnings of $0.12 per share on revenues of $1.99 billion.

Stock Movement

Shares of Boston Scientific closed down by 9 cents of 0.65% at $13.80 during the regular trading session. Following the earnings results, the stock extended its loss by another 74 cents or 5.36% at $13.06 in the extended hours trading.

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