Boston Scientific Corporation — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the supplied text does not provide a separate fourth-quarter results summary. Boston Scientific develops and sells medical devices across MedSurg, Rhythm and Neuro, and Cardiovascular.
Financial performance
| Metric | FY2021 | FY2020 |
|---|---|---|
| Net sales | $11.888 billion | $9.913 billion |
| GAAP gross profit / margin | $8.177 billion / 68.8% | $6.448 billion / 65.0% |
| GAAP operating income (loss) | $1.199 billion | $(80) million |
| GAAP net income (loss) | $1.041 billion | $(82) million |
| Net income (loss) available to common stockholders | $985 million | $(115) million |
| Diluted GAAP EPS | $0.69 | $(0.08) |
| Operating cash flow | $1.870 billion | $1.508 billion |
| Cash and cash equivalents at year-end | $1.925 billion | $1.734 billion |
| Total debt | $9.065 billion | $9.143 billion |
Sales increased 19.9% reported (18.7% operational, excluding currency effects), largely reflecting recovery in procedure volumes from pandemic-related disruption. Adjusted net income available to common stockholders, a non-GAAP measure, was $2.336 billion, or $1.63 per diluted share, versus $1.378 billion, or $0.96, in 2020. Adjusted results exclude significant items and are not a substitute for GAAP results.
Revenue rose in all three reportable segments: MedSurg to $3.724 billion (up 21.4%), Rhythm and Neuro to $3.293 billion (up 19.7%), and Cardiovascular to $4.858 billion (up 25.3%). Cardiovascular growth included strong WATCHMAN FLX and interventional cardiology sales. Emerging Markets accounted for 12% of sales, versus 11% in 2020.
Liquidity, debt and capital allocation
- Year-end cash was $1.925 billion; the company also had no commercial paper outstanding and an undrawn $2.750 billion revolving credit facility maturing in 2026.
- Debt was predominantly fixed-rate. The company reported a 2.71x leverage ratio against a 3.75x covenant maximum and stated it was in compliance at year-end.
- Investing cash outflow was $1.597 billion, including $2.258 billion of acquisition payments and $554 million for property, plant, equipment and internal-use software; divestiture proceeds included $826 million net from Specialty Pharmaceuticals.
- The company did not repurchase common shares in 2021; $1.0 billion remained authorized. It paid no common-stock dividend. Mandatory convertible preferred stock carries a 5.50% cumulative dividend and is scheduled to convert in June 2023, subject to its terms.
Material changes, outlook and notable items
- Gross margin improved 3.8 percentage points year over year, mainly from higher volumes and favorable product mix. Price declines, foreign exchange, raw-material and labor inflation, freight costs, and COVID-related operating measures were offsets. Management expects gross margin to remain pressured in 2022 while these factors persist.
- Four acquisitions were completed in 2021, including Preventice, Farapulse, Lumenis’s global surgical business and Devoro Medical. The company reported approximately $3.3 billion of aggregate purchase price, including contingent consideration and previously held interests. It sold Specialty Pharmaceuticals on March 1, 2021 for approximately $800 million.
- GAAP results included $370 million of intangible-asset impairment charges, $430 million of litigation-related net charges, $191 million of restructuring and restructuring-related charges, and a $78 million gain on disposal of businesses and assets. The company also recorded $475 million of gains on previously held interests in acquired companies; these were reflected within other income and excluded from adjusted results.
- Management expects available cash, operating cash generation, capital-market access and credit facilities to fund operations and commitments for at least the next 12 months. No numerical 2022 sales or EPS guidance is stated in the supplied filing text. Management identified COVID-19 recovery and procedure volumes as continuing uncertainties.
- Material risks include renewed pandemic disruption and deferred procedures; supply constraints, inflation and labor shortages; pricing and reimbursement pressure; regulatory transition costs under EU MDR; product quality and approval risks; acquisition integration and impairment risk; cybersecurity; and litigation.
- Transvaginal mesh litigation drove substantial expense: the company accrued $548 million for probable and estimable legal matters at year-end. It reported approximately 54,500 U.S. and 2,700 non-U.S. mesh cases or claims as of January 26, 2022; settlement activity and remaining claims could affect future cash flows and results. The company is substantially self-insured for product liability and fully self-insured for intellectual-property infringement claims.
Important facts for investors to verify
- How much of the 2021 sales rebound reflects durable underlying growth versus recovery from pandemic-depressed 2020 procedure volumes, acquisition contributions and the 2020 WATCHMAN FLX reserve comparison.
- Whether gross-margin pressure from pricing, inflation, freight and supply-chain constraints persists, and how it affects operating profitability in 2022.
- The cash cost, timing and potential range of mesh and other legal claims, including whether additional accruals or settlements are required.
- Acquisition integration, contingent consideration and the commercial prospects of acquired technologies; goodwill and intangible assets totaled approximately $18.1 billion at year-end.
- Debt covenant headroom and liquidity after the subsequent $1.750 billion Baylis Medical acquisition, completed February 14, 2022 using cash on hand.
- Progress and costs of EU MDR implementation and the restructuring plan; management estimated total restructuring charges of $425 million to $525 million, with most activity expected to be substantially complete by the end of 2022.