SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
(Mark One):
[x] Annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934 (No Fee Required, Effective October 7, 1996).
For the fiscal year ended December 31, 1996
OR
[ ] Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from _______________ to _______________
Commission file number: 1-11083
A. Full title of the plan and the address of the plan, if different
from that of the issuer named below:
Boston Scientific Corporation 401(k) Savings Plan
(f/k/a Boston Scientific Corporation
Long-Term Savings and Security Plan)
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
Audited Financial Statements
and Schedules
Boston Scientific Corporation
401(k) Savings Plan
Years ended December 31, 1996 and 1995
Boston Scientific Corporation 401(k) Savings Plan
Audited Financial Statements
and Schedules
Years ended December 31, 1996 and 1995
Contents
Report of Independent Auditors.................................... 1
Audited Financial Statements
Statements of Net Assets Available for Plan Benefits.............. 2
Statements of Changes in Net Assets Available for Plan Benefits... 3
Notes to Financial Statements..................................... 4
Schedules
Schedule of Assets Held for Investment Purposes................... 8
Schedule of Reportable Transactions............................... 9
Report of Independent Auditors
401(k) Plan Committee
Boston Scientific Corporation
401(k) Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of Boston Scientific Corporation 401(k) Savings Plan (the Plan) as of
December 31, 1996 and 1995, and the related statements of changes in net assets
available for plan benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the plan at
December 31, 1996 and 1995, and the changes in its net assets available for
plan benefits for the years then ended, in conformity with generally accepted
accounting principles.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedules
of assets held for investment purposes as of December 31, 1996, and reportable
transactions for the year then ended, are presented for purposes of complying
with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974, and are
not a required part of the financial statements. The Fund Information in the
statement of changes in net assets available for plan benefits is presented
for the purpose of additional analysis rather than to present the changes in
net assets available for plan benefits of each fund. The supplemental schedules
and fund information have been subjected to the auditing procedures applied in
our audit of the 1996 financial statements and, in our opinion, are fairly
stated in all material respects in relation to the financial statements taken
as a whole.
/s/ Ernst & Young LLP
-------------------------------------
Ernst & Young LLP
Boston, Massachusetts
June 3, 1997
Boston Scientific Corporation 401(k) Savings Plan
Statements of Net Assets Available for Plan Benefits
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------
<S> <C> <C>
Assets
Investments, at fair value:
Money market assets $ 81,038 $ 332,884
Investment funds 91,494,333 30,946,607
Participants' notes receivable 3,325,994 1,252,842
--------------------------
94,901,365 32,532,333
Receivables:
Contributions receivable from participants 800,332 198,815
Contributions receivable from Plan Sponsor 481,507 134,301
Due from Fidelity Capital Appreciation Fund -- 4,432,662
--------------------------
Total assets 96,183,204 37,298,111
Liabilities:
Accrued expenses 91,991 12,878
--------------------------
Total liabilities 91,991 12,878
--------------------------
Net assets available for plan benefits $96,091,213 $37,285,233
==========================
</TABLE>
See accompanying notes.
Boston Scientific Corporation 401(k) Savings Plan
Statements of Changes in Net Assets Available for Plan Benefits
Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996
--------------------------------------------------------------------------------------------
(Information by Fund)
--------------------------------------------------------------------------------
Fidelity Fidelity Scudder Vanguard BSC A/R, Loans
Combined Income Balanced Magellan Global Index Stock and Other
Total Fund Fund Fund Fund Trust Fund Balances
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed
to:
Investment income:
Interest and dividend income $ 5,145,355 $ 555,234 $ 233,580 $ 3,356,771 $ 501,235 $ 325,635 $ - $ 172,900
Net realized gains on sale of
investments 4,613,823 338,575 298,131 64,892 54,595 3,857,630
Net appreciation in fair value
of investments 2,959,002 543,711 2,415,291
--------------------------------------------------------------------------------------------
12,718,180 555,234 572,155 3,654,902 1,109,838 2,795,521 3,857,630 172,900
--------------------------------------------------------------------------------------------
Contribtuions:
Contributions and rollovers
from participants 49,563,545 8,324,280 2,277,434 11,463,010 3,912,739 7,048,370 16,068,685 469,027
Contributions from Plan Sponsor 3,291,869 345,977 217,787 1,017,469 309,318 570,462 830,856
--------------------------------------------------------------------------------------------
52,855,414 8,670,257 2,495,221 12,480,479 4,222,057 7,618,832 16,899,541 469,027
--------------------------------------------------------------------------------------------
Total additions 65,573,594 9,225,491 3,067,376 16,135,381 5,331,895 10,414,353 20,757,171 641,927
Deductions from net assets
attributed to:
Benefits paid to participants 5,800,969 1,886,553 272,643 1,431,333 262,555 504,249 1,297,375 146,261
Net depreciation in fair value of
investments 966,645 82,380 884,265
--------------------------------------------------------------------------------------------
Total deductions 6,767,614 1,886,553 355,023 2,315,598 262,555 504,249 1,297,375 146,261
--------------------------------------------------------------------------------------------
Net increase prior to loans,
transfers and other activity 58,805,980 7,338,938 2,712,353 13,819,783 5,069,340 9,910,104 19,459,796 495,666
Loans, transfers and other
activity, net (2,606,820) (165,607) (3,516,687) 1,338,283 3,029,405 343,940 1,577,486
--------------------------------------------------------------------------------------------
Net increase (decrease) 58,805,980 4,732,118 2,546,746 10,303,096 6,407,623 12,939,509 19,803,736 2,073,152
Net assets available for plan
benefits:
Beginning of year 37,285,233 6,805,350 3,136,970 13,203,539 2,684,877 4,573,814 5,627,841 1,252,842
--------------------------------------------------------------------------------------------
End of year $96,091,213 $11,537,468 $5,683,716 $23,506,635 $9,092,500 $17,513,323 $25,431,577 $3,325,994
============================================================================================
</TABLE>
<TABLE>
<CAPTION>
1995
-------------------------------------------------------------------------------------------------------
(Information by Fund)
-------------------------------------------------------------------------------------------
Fidelity
Fidelity Fidelity Capital Scudder Vanguard BSC A/R, Loans
Combined Income Balanced Magellan Appreciation Global Index Stock and Other
Total Fund Fund Fund Fund Fund Trust Fund Balances
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Additions to net assets
attributed to:
Investment income:
Interest and dividend
income $ 1,732,897 $ 337,447 $ 217,402 $ 768,516 $ 332,574 $ 76 $ 411 $ 3,799 $ 72,672
Net realized gains on
sale of investments 556,923 25,755 191,858 290,139 49,171
Net appreciation in
fair value of
investments 5,013,051 440,608 2,283,439 2,289,004
-------------------------------------------------------------------------------------------------------
7,302,871 337,447 683,765 3,243,813 622,713 76 411 2,341,974 72,672
-------------------------------------------------------------------------------------------------------
Contribtuions:
Contributions and
rollovers from
participants 6,485,343 1,130,224 944,006 2,250,209 949,283 25,729 46,366 1,123,605 15,921
Contributions from
Plan Sponsor 1,528,040 296,761 246,361 531,004 202,920 21,447 37,162 192,385
-------------------------------------------------------------------------------------------------------
8,013,383 1,426,985 1,190,367 2,781,213 1,152,203 47,176 83,528 1,315,990 15,921
-------------------------------------------------------------------------------------------------------
Total additions 15,316,254 1,764,432 1,874,132 6,025,026 1,774,916 47,252 83,939 3,657,964 88,593
-------------------------------------------------------------------------------------------------------
Deductions from net assets
attributed to:
Benefits paid to
participants 1,197,151 318,297 198,418 371,557 194,550 54,905 59,424
Net realized loss on
sale of
Net depreciation in fair
value of investments
-------------------------------------------------------------------------------------------------------
Total deductions 1,197,151 318,297 198,418 371,557 194,550 54,905 59,424
-------------------------------------------------------------------------------------------------------
Net increase prior to
loans, transfers and
other activity 14,119,103 1,446,135 1,675,714 5,653,469 1,580,366 47,252 83,939 3,603,059 29,169
Loans, transfers and
other activity, net (56,048) (2,973,120) (1,020,525) (4,693,408) 2,637,625 4,489,875 1,300,243 315,358
-------------------------------------------------------------------------------------------------------
Net increase
(decrease) 14,119,103 1,390,087 (1,297,406) 4,632,944 (3,113,042) 2,684,877 4,573,814 4,903,302 344,527
Net assets available for
plan benefits:
Beginning of year 23,166,130 5,415,263 4,434,376 8,570,595 3,113,042 724,539 908,315
-------------------------------------------------------------------------------------------------------
End of year $37,285,233 $6,805,350 $ 3,136,970 $13,203,539 $2,684,877 $4,573,814 $5,627,841 $1,252,842
=======================================================================================================
</TABLE>
Boston Scientific Corporation 401(k) Savings Plan
Notes To Financial Statements
December 31, 1996
1. Description of the Plan
The Plan was amended and restated effective January 1, 1996 and renamed the
Boston Scientific Corporation 401(k) Savings Plan (the Plan).
The Plan is a defined contribution plan covering all eligible employees who
have completed 30 days of service and have attained 21 years of age. It is
subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA). A participant may contribute between 1% and 15% of his or her
pretax annual compensation each year. Boston Scientific Corporation's (the
Company) matching contribution is the lesser of 50% of the participant's
elective contribution or 2% of eligible compensation, as defined.
At the discretion of the Boston Scientific Corporation Board of Directors (the
Board), the Company may also make an additional discretionary contribution.
Employees with three or more years of credited service on December 31, 1992
will be fully vested in such amounts and all other employees will become fully
vested in such amounts after five years of credited service. No additional
discretionary contribution was made in 1996 or 1995.
A participant can allocate his or her account among various alternative
investment funds. Each participant's account is credited with the
participant's contribution, the Company's contribution and an allocation of
Plan earnings. The allocations of earnings are based upon each participant's
account balance in relation to all participants' account balances. Each
participant is immediately fully vested in his or her account, except as
discussed above regarding discretionary contributions. The benefit to which a
participant is entitled is the benefit included in the participant's account.
Vested balances related to terminated participants approximated $9,051,000 and
$5,052,000, respectively, at December 31, 1996 and 1995.
A participant may borrow from his or her fund account a minimum of $1,000 up to
a maximum equal to the lesser of $50,000 or 50% of his or her account balance.
Loan terms range up to 5 years or up to 10 years for the purchase of a primary
residence. However, participants of the defined contribution plans of the
acquired companies (refer to Note 2) may retain the loan terms granted under
their respective plans. Loan terms related to these participants range up to 5
years or up to 10 years for the purchase of a primary residence. The loan is
secured by the balance in the participant's account and bears interest at a
rate commensurate with local prevailing rates as determined by New York Life
Benefit Services, Inc. (the Plan Administrator). Interest rates on loans
outstanding at December 31, 1996 ranged from 6.3% to 10.5%. Principal and
interest are paid ratably through payroll deductions.
Upon retirement or termination of service, a participant either receives a
lump-sum amount equal to the value of his or her account or, if a participant's
balance is greater than $3,500, he or she has the option of leaving the funds
invested in the Plan. A participant may withdraw all or a portion of his or
her contributions to the extent necessary to meet a financial hardship.
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate
the Plan subject to the provisions of ERISA.
The foregoing description of the Plan provides only general information.
Participants should refer to the "Summary Plan Description" for a more complete
description of the Plan's provisions. Copies are available from the 401(k)
Administrative Committee.
2. Boston Scientific Corporation Mergers and Acquisitions
During 1995, the Company completed five strategic acquisitions. The Company
merged one of the defined contribution plans of the acquired companies into the
Plan during 1995, one during 1996, and two in January 1997. The defined
contribution plan of the other acquired company was terminated in 1996.
During 1996, the Company completed two additional strategic acquisitions. The
Company merged the defined contribution plan of one of the acquired companies
into the Plan on May 31, 1996. The defined contribution plan of the other
acquired company was merged into the Plan in January 1997.
3. Significant Accounting Policies
The accounting records of the Plan are maintained on the accrual basis.
Investments are stated at fair value. Shares of mutual funds are valued at
quoted market prices which represent the net asset value of shares held by the
fund. Securities listed on a registered stock exchange are valued by the Plan
Administrator, at the last reported sales price on the last business day of the
Plan year. Any unlisted securities are valued at their closing bid price. The
participant notes receivable are valued at cost which approximates fair value.
The net appreciation or depreciation on investments represents the difference
between the current value and cost of investments in the aggregate. The
realized gain or loss on investments is the difference between the proceeds
received and the cost of investments sold.
The income fund includes guaranteed investment contracts issued by banks,
insurance companies or other financial institutions pursuant to amounts
deposited and interest at such fixed, variable or other rates specified under
the terms of the agreement. Assets are valued at fair market value. A unit
method is used to determine the equitable share of each participating trust in
the fund. The crediting interest rate as of December 31, 1996 and the average
yield for the year then ended were 5.9%.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from these estimates.
4. Investments
PNC Bank (the Trustee) holds the funds to manage, invest and reinvest in
accordance with the provisions of the trustee's agreements.
The fair values of individual investments that represent 5% or more of the
Plan's net assets are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------
Number Number
of Shares Fair Value of Shares Fair Value
---------------------------------------------------
<S> <C> <C> <C> <C>
Investments at fair value as determined
by quoted market price:
Bankers Trust Income Fund 6,962,458 $ 6,962,458 6,592,690 $ 6,592,690
Fidelity Balanced Fund 400,625 5,640,802 411,576 5,564,507
Fidelity Magellan Fund 295,553 23,836,362 157,552 13,546,287
BSC Stock Fund 418,393 25,103,676 106,458 5,243,123
Scudder Global Fund 305,428 8,796,313 -- --
Vanguard Index Trust - 500 Fund 246,841 17,071,554 -- --
</TABLE>
The balances per the Statements of Changes in Net Assets Available for Plan
Benefits reflect participant balances, by fund, and do not necessarily reflect
invested balances due to pending transfers.
5. Transactions with Parties-In-Interest
Fees for legal, accounting and other services rendered during the year by
parties-in-interest were paid by the Company. These fees were based on
customary and reasonable rates for such services. During 1996 and 1995, the
Company did not declare any dividends and accordingly, the Plan did not
receive common stock dividends as a result of its BSC Stock Fund investment.
6. Income Tax Status
The Internal Revenue Service has determined and informed the Company by letter
dated July 9, 1992, that the Plan and related trust are designed in accordance
with applicable sections of the Internal Revenue Code (IRC). The Company
intends to file for a new determination letter during the 1997 plan year
following the mergers of the defined contribution plans described in Footnote
2. The Plan's management believes that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
7. Reconciliation of Financial Statements to Form 5500
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles, whereas the Form 5500 was prepared in
accordance with the rules of ERISA. ERISA requires the calculation of realized
gains (losses) to be based upon the difference between the proceeds from the
asset sale and the fair value at the beginning of the year (or the purchase
price if acquired during the year), whereas generally accepted accounting
principles requires the calculation to be based on historical cost. The table
below sets forth a reconciliation of the differences.
<TABLE>
<CAPTION>
Net Appreciation
Net in Fair Value of
Realized Gain Investments
---------------------------------
<S> <C> <C>
Balance per the Form 5500 $ 1,565,130 $ 5,041,050
Adjustments to reflect different calculation methods 3,048,693 (3,048,693)
-------------------------------
Balance per accompanying financial statements $ 4,613,823 $ 1,992,357
===============================
</TABLE>
The above difference has no impact on the Plan's net assets available for plan
benefits as it represents a reclassification within investment income only.
8. Subsequent Events
During the second quarter of 1997, the Company completed a strategic
acquisition. The Company presently intends to merge the defined contribution
plan of the acquired company into the Plan during the 1998 Plan year.
The 401(k) Administrative Committee voted to transfer administrative
responsibilities from New York Life Benefit Services to The Vanguard Group
effective July 1, 1997. Due to the conversion, Plan funds will be transferred
to similar funds under the Vanguard administration. Participants will be given
the opportunity to self direct these transfers if desired.
Boston Scientific Corporation 401(k) Savings Plan
Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Current
Shares or Units Cost Value
--------------------------------------------
<S> <C> <C> <C>
Bankers Trust:
Income Fund 6,962,458 $ 6,962,458 $ 6,962,458
Fidelity Funds:
Balanced Fund 400,625 5,361,207 5,640,802
Magellan Fund 295,553 22,571,433 23,836,362
Scudder Funds:
Global Fund 305,428 8,423,657 8,796,313
Vanguard Funds:
Index Trust 500 Portfolio Fund 246,841 14,795,226 17,071,554
Money Market Reserves Prime Portfolio 4,083,168 4,083,168 4,083,168
Boston Scientific Corporation:*
Stock Fund 418,393 12,717,739 25,103,676
PNC Bank: Money Market
Money Market Account Account 81,038 81,038
Participants' notes receivable with
terms up to 10 years at interest
rates of 6.3% to 10.5% 3,325,994 3,325,994
-------------------------
$78,321,920 $94,901,365
=========================
<F*> Indicates party-in-interest to the Plan.
</TABLE>
Boston Scientific Corporation 401(k) Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Purchase Selling Cost of Fair Value on Net
Identity of Party Involved Description of Assets Price Price Asset Transaction Date Realized Gain
- -----------------------------------------------------------------------------------------------------------------------------
Category (i)--A single transaction in excess of 5%
- --------------------------------------------------
of plan assets
--------------
<S> <S> <C> <C> <C> <C> <C>
Fidelity Investments Fidelity Balanced Fund $3,281,407 $3,035,301 $3,281,407 $246,106
Fidelity Investments Fidelity Balanced Fund $3,281,407 $3,281,407 $3,281,407
</TABLE>
There were no category (ii) or (iv) reportable transactions during 1996.
- ------------------------------------------------------------------------
Boston Scientific Corporation 401(k) Savings Plan
Schedule of Reportable Transactions
Year Ended December 31, 1996
<TABLE>
<CAPTION>
Total Number
of Transactions
Made by the Plan Total Dollar Total Dollar
During the Year Value of Value of Net
Identity of Party Involved Description of Assets Purchases Sales Purchases Sales Gain(Loss)
- -------------------------------------------------------------------------------------------------------------------------------
Category (iii)--Series of transactions in excess of 5%
- ------------------------------------------------------
of plan assets
--------------
<S> <S> <C> <C> <C> <C> <C>
Vanguard Money Market Reserves Income Fund 34 41 $10,581,036 $6,497,868 $
Fidelity Investments Fidelity Balanced Fund 37 33 4,952,705 5,107,648 338,575
Fidelity Investments Fidelity Magellan Fund 37 34 16,402,171 5,323,517 298,131
Vanguard Funds Vanguard Index Trust 500 Fund 48 23 15,315,597 574,967 54,595
Scudder Funds Scudder Global Fund 45 25 9,539,741 1,180,976 64,892
Boston Scientific Corporation* BSC Stock Fund 132 138 24,112,902 7,594,910 3,857,630
<F*> Indicates a party-in-interest.
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
Boston Scientific Corporation 401(k) Savings Plan
(f/k/a Boston Scientific Corporation
Long-Term Savings and Security Plan)
Date: June 30, 1997 By: /s/ Lawrence C. Best
---------------------------------------------
Lawrence C. Best
Plan Administrator and Senior Vice President -
Finance and Administration and Chief Financial
Officer of Boston Scientific Corporation
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-89772) pertaining to the Boston Scientific Corporation
401(k) Savings Plan of our report dated June 3, 1997, with respect to the
financial statements and schedules of the Boston Scientific Corporation
401(k) Savings Plan included in this Annual Report (Form 11-K) for the year
ended December 31, 1996.
/s/ Ernst & Young LLP
---------------------------------
ERNST & YOUNG LLP
Boston, Massachusetts
June 25, 1997
