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Transforming Lives 2013 Annual Report Transforming Lives. 44699.indd 3 3/15/14 11:11 AM Transforming Lives Boston Scientifi c is dedicated to transforming lives through innovative medical solutions that improve the health of patients around the world. Boston Scientifi c Products Treat 1: patients 35 each minute 52,000 each day 365,000 each week 19,000,000 each year Pictured above and on the cover are Laura and her family. Like so many other patients, her life has been transformed by a Boston Scientifi c product. Throughout this Annual Report, unless otherwise noted, all revenue and growth rates represent 2013 growth compared to 2012 and all market sizes and Company market shares are Company estimates as of December 31, 2013. Information on or connected to our website (or the website of any third party) referenced in this Annual Report is in addition to and not a part of or incorporated by reference into this Annual Report. 1 Numbers are rounded averages based on Company sales and estimated usage patterns as of December 31, 2013. 444699.indd4699.indd 4 33/17/14/17/14 110:130:13 AM 2013 Financial Highlights 2013 Sales by Product Category (Dollars in millions) 2013 % 23,000 Rhythm Management employees worldwide Cardiac Rhythm Management $1,886 27% Electrophysiology 155 2% Cardiovascular Interventional Cardiology 1,997 28% manufacturing Peripheral Interventions 789 11% facilities worldwide MedSurg 12 Neuromodulation 453 6% Endoscopy 1,300 18% Urology & Women’s Health 505 7% 7,085 99% Market Divested Businesses2 58 1% presence in $7,143 100% 100 countries 2013 Sales by Geographic Segment (Dollars in millions) 2013 % $ U.S. $3,743 52% 861M Japan 744 10% invested in R&D Other Countries 2,598 37% 7,085 99% Divested Businesses2 58 1% $7,143 100% $7.143B in revenue Increased Operational Net Sales 3 (Dollars in millions) Repurchased 2% $ 500M $7,241 in stock $7,127 Employee and country numbers are approximate. 2012 2013 Icon denotes additional information online at bostonscientifi c.com/2013ar 2 Sales from divested businesses include those generated from the Company’s former Neurovascular business, sold to Stryker Corporation in January 2011. 3 Operational sales/revenue and growth rates are non-GAAP measures that exclude the impact of sales from divested businesses and changes in foreign currency exchange rates; see reconciliation to GAAP sales/revenue and growth rates on page 17. 2013 Annual Report Page 1 444699.indd4699.indd 5 33/17/14/17/14 110:130:13 AM In 2013, we realized consolidated revenue of $7.143 billion. This represents a two percent increase in operational revenue and a one percent revenue decline on a reported basis3. We delivered full-year adjusted earnings per share of $0.734. We improved gross profi t margin to 69.6 percent from 67.6 percent in 2012—driven primarily from our standard cost reductions and process improvements. We continued to invest in meaningful innovation. Our Research & Development (R&D) expense was $861 million in 2013 or 12 percent of sales. We continued to pursue effi ciencies in our R&D approach by leveraging Pete Nicholas, Michael Mahoney, innovation across the company. We deployed a Chairman of the Board President and balanced capital allocation strategy, which included Chief Executive Offi cer repurchasing approximately $500 million of our common stock. To improve our global effectiveness, we reorganized our business units in 2013 to operate and measure them from a global perspective along three reporting segments: MedSurg, which consists of our Neuro- Dear Stockholders: modulation, Endoscopy, and Urology and Women’s Health businesses; Rhythm Management, which In 2013, Boston Scientifi c continued consists of our Cardiac Rhythm Management and our legacy of delivering meaningful Electrophysiology businesses; and Cardiovascular, which consists of our Interventional Cardiology and innovation and executed on key fi nancial Peripheral Interventions businesses. and strategic goals. We are pleased with For 2013, the MedSurg segment grew revenue at our performance and believe that we nine percent on a constant currency basis and faster than its underlying markets, with each business are well positioned to accelerate our performing well—led by growth of 24 percent in growth and increase stockholder value. Neuromodulation, seven percent in Endoscopy, and three percent in Urology and Women’s Health5. The In 2013, we delivered on our full year revenue and Rhythm Management segment showed encouraging adjusted earnings growth goals and executed against results with improved revenue in 2013. The sales within our fi ve strategic imperatives that include growing our Cardiovascular segment were down three percent market share, expanding into high-growth adjacencies on a constant currency basis in 2013, primarily due and global markets, driving margin improvements and to softness in our sales of coronary drug-eluting developing talent and capabilities to lead in a dynamic stents (DES) offset, in part, by continued strength in global healthcare market. We believe that this our other cardiology products, such as guide wires execution helped to drive value for our stockholders. and atherectomy devices5. 3 Operational sales/revenue and growth rates are non-GAAP measures that exclude the impact of sales from divested businesses and changes in foreign currency exchange rates; see reconciliation to GAAP sales/revenue and growth rates on page 17. 4 Adjusted earnings per share is a non-GAAP measure; see reconciliation to GAAP earnings per share on page 17. 5 Constant currency sales/revenue and growth rates are non-GAAP measures that exclude the impact of changes in foreign currency exchange rates; see reconciliation to GAAP sales/revenue and growth rates on page 17. 444699.indd4699.indd 6 3/17/14 2:00 PPMM Performance that Counts that will enable us to better serve the rapidly We estimate that we grew faster than or at the growing global EP market. market growth rate in fi ve of seven of our businesses • Excluding DES, our Interventional Cardiology in 2013. Highlights of our 2013 performance: business delivered solid constant currency sales • We continued to strengthen our market position in growth as we continued to offer physicians the Neuromodulation, particularly in the U.S. where we broadest array of tools to treat the most complex estimate that the Precision Spectra™ Spinal Cord lesions, from imaging catheters to atherectomy to 5 Stimulation (SCS) System took signifi cant market devices designed to treat chronic total occlusions . share and accelerated overall market growth. • Peripheral Interventions demonstrated strong, • In Endoscopy, our solid sales growth was driven consistent performance in 2013 by delivering primarily by our hemostasis franchise, biliary devices above market constant currency growth, driven 5 and metal stents. Our Alair® Bronchial Thermoplasty by our leading balloon and stent franchises . System, an innovative medical device for the treatment of severe asthma, delivered double-digit sales growth as we surpassed 350 treatment sites A year ago, we introduced our new Company worldwide. Our Endoscopy business experienced mission, six core values and brand declaration. strong international sales in 2013 as well, driven Collectively, these words became our compass by expansion of our commercial capabilities, the registration of existing products, as well as to guide us on our journey to return to growth. continued investments in new products. “Advancing science for life” now serves as our • In our Urology and Women’s Health business, sales rallying cry, and our values of caring, diversity, in 2013 were driven by our global expansion and winning spirit, meaningful innovation, global several new product launches. International sales strength in 2013 stemmed from registration of collaboration and high performance are a new products and a shift to a direct sales model barometer against which we measure our actions. in several European countries. • Within our Cardiac Rhythm Management business, we estimate that we exited the year with sequential Innovation that Matters worldwide market share gains. Our pacemaker Boston Scientifi c’s meaningful innovations are franchise continued to see strong adoption of our aimed at fueling our growth and meeting patient INGENIO® family of pacemaker systems. And needs around the world. As the market shift toward in our defi brillation franchise there was broad value-based healthcare continues, customers, physician interest in our S-ICD® System, the only payers and patients are increasingly expecting subcutaneous implantable defi brillator available solutions that deliver improvements in both clinical for the treatment of at-risk sudden cardiac and economic outcomes. We see opportunities to death patients. meet the evolving needs of our changing market, • The acquisition of C.R. Bard Inc.’s electrophysiology to drive more value from our pipeline and to offer business enhanced our overall electrophysiology solutions that can ultimately transform the lives of (EP) business by differentiating and expanding more patients while enhancing overall value to the our commercial presence and product portfolio, healthcare system. including catheter and recording device technologies 5 Constant currency sales/revenue and growth rates are non-GAAP measures that exclude the impact of changes in foreign currency exchange rates; see reconciliation to GAAP sales/revenue and growth rates on page 17. 2013 Annual Report Page 2 | 3 444699.indd4699.indd 7 3/17/14 2:26 PPMM We believe that our portfolio and pipeline are
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