<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------
FORM 8-K/A2
(Amendment No. 2)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------
Date of report (Date of earliest event reported): SEPTEMBER 10, 1998
BOSTON SCIENTIFIC CORPORATION
--------------------------------------------------
(Exact name of registrant as specified in charter)
DELAWARE 1-11083 04-2695240
- --------------- ------------ -------------------
(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
ONE BOSTON SCIENTIFIC PLACE, NATICK, MASSACHUSETTS 01760-1537
- -------------------------------------------------- -------------------
Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (508) 650-8000
<PAGE> 2
This Current Report on Form 8-K/A2 amends and supplements the Current
Report on Form 8-K/A filed by Boston Scientific Corporation on November 24, 1998
(the "Amended Form 8-K") and the Current Report on Form 8-K filed by Boston
Scientific Corporation on September 25, 1998 (the "Initial Form 8-K") to include
financial statements and restated pro forma financial information.
On November 3, 1998, Boston Scientific Corporation (the "Company")
announced it had detected the occurrence of business irregularities in the
operations of its Japanese subsidiary. As a result, the Company has restated its
1997 results as well as its quarterly results for the first three quarters of
1998, which allows for more accurate period to period comparisons.
In addition, all historical share and per share amounts have been
restated to reflect the Company's November 30, 1998 two-for-one common stock
split in the form of a 100% stock dividend.
Financial statement information and related disclosures included in
this amended filing reflect, where appropriate, changes as a result of the
restatements.
All other information is presented as of the original filing date and
has not been updated in this amended filing.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 10, 1998, Boston Scientific Corporation (the "Company")
announced that it had completed its acquisition of Schneider Worldwide,
formerly a member of the Medical Technology Group of Pfizer Inc., for $2.1
billion in cash. The purchase price was funded by the issuance of commercial
paper.
The commercial paper issued will not be and has not been
registered under the Securities Act of 1933. Purchasers of the commercial paper
may not reoffer or resell it in the United States absent registration or an
applicable exemption from registration requirements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
*(a) FINANCIAL STATEMENTS OF THE BUSINESS ACQUIRED
Schneider Worldwide (A Business of Pfizer Inc.) Combined
Financial Statements for the Years Ended December 31, 1997,
1996 and 1995 and Independent Auditor's Report.
Schneider Worldwide (A Business of Pfizer Inc.) Unaudited
Combined Financial Statements for the Nine Months Ended
September 10, 1998 and September 14, 1997.
*(b) UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF
OPERATIONS (Restated)
Unaudited Pro Forma Combined Condensed Statements of
Operations of the Company and Schneider Worldwide for the year
ended December 31, 1997 and the nine months ended September 30,
1998.
<PAGE> 3
(c) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.1 Form of Second Amended and Restated Credit Agreement dated
September 4, 1998 among the Company, The Several Lenders and
certain other parties (Exhibit 10.1 to the Initial Form 8-K,
File No. 1-11083).
10.2 Form of Credit Agreement dated September 4, 1998 among the
Company, The Several Lenders and certain other parties
(Exhibit 10.2 to the Initial Form 8-K, File No. 1-11083).
10.3 Form of Credit Agreement dated September 9, 1998 among the
Company, The Several Lenders and Merrill Lynch Capital
Corporation (Exhibit 10.3 to the Initial Form 8-K, File No.
1-11083).
*23.1 Consent of KPMG LLP
* Filed Herewith
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: March 29, 1999 By: /s/ Lawrence C. Best
-----------------------------------
Lawrence C. Best
Senior Vice President - Finance
and Administration and Chief
Financial Officer
<PAGE> 5
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 1997, 1996 AND
1995 AND INDEPENDENT AUDITORS' REPORT
<PAGE> 6
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Pfizer Inc.
We have audited the accompanying combined balance sheets of Schneider Worldwide,
a Business of Pfizer Inc. ("the Company") as of December 31, 1997 and 1996, and
the combined statements of income and cash flows for each of the years in the
three-year period ended December 31, 1997. These combined financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these combined 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 combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the combined financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall combined
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects the financial position of Schneider Worldwide,
a Business of Pfizer Inc., as of December 31, 1997 and 1996 and the results of
its operations and its cash flow for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
May 22, 1998
<PAGE> 7
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 33,940 $ 40,399
Accounts receivable, less allowance for doubtful
accounts: 1997- $1,217; 1996- $1,229 71,715 66,571
Due from parent and affiliates 220,371 197,921
Inventories 45,823 28,871
Deferred taxes 22,151 23,986
Prepaid expenses and other assets 2,849 2,640
--------- ---------
Total current assets 396,849 360,388
Property, plant and equipment, less accumulated depreciation 101,484 113,030
Goodwill and other intangible assets, net 340,897 365,943
Other assets 4,494 4,375
--------- ---------
Total assets $ 843,724 $ 843,736
========= =========
LIABILITIES AND BUSINESS UNIT EQUITY
Current liabilities:
Accounts payable $ 23,678 $ 29,871
Short-term borrowings 30 231
Due to parent and affiliates 57,650 68,638
Income taxes payable 12,850 28,968
Deferred taxes 25,283 20,340
Accrued compensation and related items 20,664 19,304
Other current liabilities 13,521 20,357
--------- ---------
Total current liabilities 153,676 187,709
Long-term debt 498 928
Capital lease obligations 3,620 4,140
Deferred taxes 36,424 38,772
Other noncurrent liabilities 37 41
--------- ---------
Total liabilities 194,255 231,590
Business unit equity 668,199 603,958
Currency translation adjustment (18,730) 8,188
--------- ---------
Total business unit equity 649,469 612,146
--------- ---------
Total liabilities and business unit equity $ 843,724 $ 843,736
========= =========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 8
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Net sales $ 330,848 $ 342,919 $ 305,320
Costs and expenses
Cost of sales 89,813 96,172 87,498
Selling, informational and administrative expenses 106,073 102,358 91,877
Research and development expenses 33,966 31,310 21,785
Corporate and division overhead costs 10,571 9,089 8,032
Other (income)/deductions--net 15,160 29,963 (43,052)
--------- --------- ---------
Income before provision for taxes on income 75,265 74,027 139,180
Provision for taxes on income 23,085 29,152 45,801
--------- --------- ---------
Net income $ 52,180 $ 44,875 $ 93,379
========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 9
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 52,180 $ 44,875 $ 93,379
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of intangibles 26,295 25,521 20,416
Write-off acquired research and development in process -- 17,500 --
Loss on disposals of property, plant and equipment (14) 134 --
Deferred taxes 7,232 (1,147) 3,060
Other 450 319 --
Changes in assets and liabilities:
Accounts receivable (8,590) (1,489) (11,770)
Inventories (20,136) 1,384 2,567
Prepaid and other assets (560) (360) (1,755)
Accounts payable and accrued liabilities (24,184) 6,394 29,712
Other noncurrent liabilities (4) 8 9
Due from/to parent and affiliates (28,817) (45,224) (108,712)
--------- --------- ---------
Net cash provided by operating activities 3,852 47,915 26,906
--------- --------- ---------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (8,080) (13,802) (10,132)
Proceeds from sales of property, plant and equipment 167 652 --
--------- --------- ---------
Net cash used in investing activities (7,913) (13,150) (10,132)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from borrowings 277 --
Repayments of borrowings (357) (50) (120)
Dividends to parent company -- (19,905) (1,985)
Other (520) (183) (520)
--------- --------- ---------
Net cash used in financing activities (877) (19,861) (2,625)
--------- --------- ---------
Effect of exchange rate changes on cash (1,521) (2,204) (1,294)
--------- --------- ---------
Net increase/(decrease) in cash (6,459) 12,700 12,855
Cash at beginning of year 40,399 27,699 14,844
--------- --------- ---------
Cash at end of year $ 33,940 $ 40,399 $ 27,699
========= ========= =========
</TABLE>
See accompanying notes to combined financial statements.
<PAGE> 10
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND BUSINESS DESCRIPTION
ORGANIZATION
Schneider Worldwide is a business unit within the Medical Technology Group
("MTG") of Pfizer Inc. ("Pfizer"). Schneider Worldwide is comprised of the
following wholly-owned subsidiaries of Pfizer -- Schneider (Europe) GmbH;
Schneider (USA) Inc.; Schneider NAMIC U.S.A. Corporation; Corvita Corporation;
Schneider Belgium N.V. and Schneider Holland B.V. In addition, Schneider
Worldwide includes certain net assets used exclusively in its business at
Howmedica France S.C.A.; Howmedica GmbH; Pfizer Canada Inc.; Pfizer Seiyaku
Kabushiki Kaisha (Japan); Pfizer Laboratories (Proprietary) Limited (South
Africa); Pfizer Pty. Ltd. (Australia); Nilo Holding S.A. and AMS Medinvent S.A.
(collectively, the "Asset Selling Corporations" and together with the
wholly-owned subsidiaries, "Schneider").
BUSINESS DESCRIPTION
Schneider manufactures, markets, sells and distributes diagnostic and
therapeutic products for use in interventional cardiology and radiology.
Schneider has a global direct sales and distribution presence with primary
markets and manufacturing operations in the United States and Europe. The raw
materials for its products are readily available and Schneider is not dependent
on a single supplier or only a few suppliers for its raw materials.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying combined financial statements present the financial position,
results of operations and cash flows for Schneider as if it were a separate
legal entity. All significant intercompany transactions and balances have been
eliminated. Operations outside of the U.S. are included on a fiscal year basis
ending November 30. The combined financial statements include the accounts
specifically attributed to Schneider, including allocations of certain assets,
liabilities and expenses relating to shared services and administrative
functions incurred at the corporate and business segment operating levels of
Pfizer. Cash from Schneider's domestic operations is not included in cash in the
accompanying combined balance sheet at December 31, 1997 and 1996 since this
cash is included in Pfizer's centralized cash management system. Accordingly,
Schneider's cash at December 31, 1997 and 1996 may not be representative of an
independent company.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant accounting estimates used include depreciation, amortization and
estimates used in allocating certain assets, liabilities and the costs of shared
services and administrative functions. Management believes that it exercised
reasonableness in deriving these amounts. Schneider is subject to risks and
uncertainties that may cause actual results to differ from estimated results,
such as changes in the healthcare environment, competition, foreign exchange and
legislation.
<PAGE> 11
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DUE FROM/TO PARENT AND AFFILIATES - Due from/to parent and affiliates reflects
balances and transactions among Schneider, Pfizer and other Pfizer entities.
Schneider participates in Pfizer's centralized cash management system and, as
such, its cash funding requirements are met by and generally all excess cash
from Schneider's domestic operations is transferred to Pfizer.
INVENTORIES - Inventories are valued at the lower of cost or market, with cost
determined for finished goods and work-in-process at average actual cost and raw
materials and supplies at average or latest actual cost.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is carried at cost
less accumulated depreciation. Major improvements are capitalized while
maintenance and repairs are expensed when incurred. Depreciation is computed
generally on a straight-line basis over the following estimated useful lives:
Buildings 33 1/3 years
Machinery and equipment 8 - 12 years
Furniture, fixtures and other 3 - 12 years
GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill represents the excess of
purchase price over fair value of the net tangible and identified intangible
assets acquired in purchase transactions. Goodwill is being amortized on a
straight-line basis over 40 years. Other intangible assets are amortized on a
straight-line basis over their estimated useful lives. Amortization expense of
goodwill and other intangible assets is included in "Other (income)/
deductions--net" in the accompanying combined statement of income. The carrying
values of goodwill and other intangible assets are reviewed for impairment
whenever events or changes in business conditions indicate they may not be
recoverable. Schneider considers assets to be impaired and writes them down to
fair value if expected associated cash flows are less than their carrying
amounts.
FOREIGN CURRENCY TRANSLATION - The financial statements of operations outside of
the U.S. are maintained in their local currency. Schneider translates assets and
liabilities to their U.S. dollar equivalents at rates in effect at the balance
sheet date. Income and expense items are translated into their U.S. dollar
equivalents at average rates of exchange for the period. Translation gains and
losses are accumulated in a separate component of business unit equity. Gains
and losses on foreign currency transactions which were not material are included
in earnings.
FINANCIAL INSTRUMENTS - The carrying values of Schneider's financial instruments
approximate their estimated fair values. At December 31, 1997 and 1996, the cost
of each type of financial instrument, primarily accounts receivable, an
affiliate note and other due from/to parent and affiliates and accounts payable,
approximates fair value because of the short maturity period of these
instruments.
ADVERTISING EXPENSE - Advertising costs are expensed as incurred. Advertising
expenses were $10.9, $8.9 and $8.0 million for 1997, 1996 and 1995,
respectively.
<PAGE> 12
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
CONCENTRATION OF CREDIT RISK - Schneider does not have significant
concentrations of credit risk from its customers. Periodically, Schneider
reviews the credit quality of its customers' financial condition. In general,
there is no requirement for collateral from customers.
INCOME TAXES - As an operating unit of Pfizer, Schneider does not file separate
U. S. Federal or certain foreign tax returns but rather is included as part of
the various returns filed by Pfizer or its subsidiaries. For reporting purposes,
Schneider's tax provision is computed as if it were a separate company. For
jurisdictions that Schneider is included in Pfizer's or its subsidiaries' tax
returns, allocated domestic income taxes are settled with Pfizer on a current
basis. Deferred tax assets and liabilities are recognized for the expected
future tax consequences of differences between the financial reporting and tax
bases of assets and liabilities using enacted tax rates and laws. No provision
is made for taxes on overseas retained earnings that are deemed to be
permanently reinvested.
3. CORPORATE AND DIVISION OVERHEAD COSTS
Pfizer allocates certain corporate service and employee benefit expenses (based
on actual costs incurred) to Schneider on the basis of number of personnel,
occupied office space and third party sales. Pfizer does not allocate various
other corporate overhead expenses to its operating divisions. However, for
purposes of the accompanying combined financial statements, an allocation of
such expenses has been included in the accompanying combined statement of income
and is summarized as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pfizer corporate overhead costs $ 4,924 $ 5,763 $ 5,322
MTG division overhead costs 5,647 3,326 2,710
------- ------- -------
$10,571 $ 9,089 $ 8,032
======= ======= =======
</TABLE>
Pfizer corporate overhead costs represent a portion of corporate functions such
as personnel, legal, accounting, treasury and information systems which are
primarily allocated based on sales of Schneider compared to total Pfizer
revenues.
MTG division overhead costs represent personnel, quality control, regulatory
compliance, finance and business development which are primarily allocated based
on sales to third party customers of Schneider compared to total MTG sales.
Management believes that all allocations are made on a reasonable basis;
however, these costs are not necessarily representative of the costs that would
have been or will be incurred by Schneider as an independent company.
4. PATENT SETTLEMENT AGREEMENT
During 1995, Schneider received $51,726 net of expenses related to the
completion of all appeals in a patent infringement case with Scimed Life Systems
Inc., which is included in "Other (income)/deductions--net" in the accompanying
combined statement of income for the year ended December 31, 1995.
<PAGE> 13
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
5. INVENTORY
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Finished goods $ 30,284 $ 14,239
Work-in-process 14,311 13,005
Raw materials 9,487 7,290
-------- --------
54,082 34,534
Less: allowance for obsolescence (8,259) (5,663)
-------- --------
$ 45,823 $ 28,871
======== ========
</TABLE>
6. ACQUISITIONS
On June 30, 1996, Pfizer acquired all of the outstanding capital stock of the
Corvita Corporation ("Corvita") for approximately $75 million in cash and
contributed the net assets of Corvita to Schneider. In addition, Pfizer loaned
Schneider approximately $13 million which was primarily used to purchase the
remaining Corvita subsidiary interests that were not previously acquired.
Corvita develops, manufactures and markets self-expanding endovascular stent
grafts and synthetic vascular grafts used in the treatment of severely diseased
arteries. In connection with this acquisition, in-process research and
development of $17.5 million was written off and is included in "Other
(income)/deductions--net" in the accompanying combined statement of income for
the year ended December 31, 1996. The purchase price exceeded the fair value of
the net assets acquired by approximately $58 million.
On March 17, 1995, Pfizer acquired NAMIC U.S.A. Corporation ("NAMIC") for 8.8
million shares of Pfizer common stock valued at approximately $170.5 million and
contributed the net assets of NAMIC to Schneider. NAMIC is a leader in fluid
management, custom kits and accessories. The purchase price exceeded the fair
value of the net assets acquired by approximately $122 million.
The acquisitions were recorded under the purchase method of accounting. The
financial statements of Schneider include the operating results of these
acquired businesses subsequent to their respective dates of acquisition. If the
1996 acquisition had occurred on January 1, the results of operations would not
have been materially different than the reported amounts.
7. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Land and buildings $ 68,575 $ 71,688
Machinery and equipment 52,405 47,226
Furniture, fixtures and other 30,988 36,619
Construction in progress 1,889 5,186
--------- ---------
153,857 160,719
Less: Accumulated depreciation (52,373) (47,689)
--------- ---------
Net property, plant and equipment $ 101,484 $ 113,030
========= =========
</TABLE>
Depreciation expense totaled $11,855, $12,173 and $10,166 for the years ended
December 31, 1997, 1996 and 1995, respectively.
<PAGE> 14
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
8. GOODWILL AND OTHER INTANGIBLE ASSETS
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Goodwill $ 325,385 $ 337,386
Patents 80,751 80,751
Trademarks 352 1,232
Other 212 5,521
--------- ---------
406,700 424,890
Less: Accumulated amortization (65,803) (58,947)
--------- ---------
Net goodwill and other intangible assets $ 340,897 $ 365,943
========= =========
</TABLE>
Amortization expense totaled $14,440, $13,348 and $10,250 for the years ended
December 31, 1997, 1996 and 1995, respectively, which is included in "Other
(income)/deductions--net" in the accompanying combined statement of income.
9. INCOME TAXES
The components of the income tax provision (benefit) are:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
United States:
Taxes currently payable:
Federal $ 5,260 $ 1,995 $ 14,776
State and local 328 1,281 1,846
Deferred income taxes 899 (5,495) (2,239)
-------- -------- --------
Total U.S. tax provision (benefit) 6,487 (2,219) 14,383
-------- -------- --------
International:
Taxes currently payable 13,067 30,160 24,218
Deferred income taxes 3,531 1,211 7,200
-------- -------- --------
Total International tax provision 16,598 31,371 31,418
-------- -------- --------
Total provision for taxes on income $ 23,085 $ 29,152 $ 45,801
======== ======== ========
</TABLE>
Reconciliations of the U.S. income tax rate to Schneider's effective rate is as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax rate 35.0% 35.0% 35.0%
Effect of foreign operations (8.1)% (7.8)% (4.5)%
Nondeductible permanent items 3.2% 2.2% 1.4%
Write-off acquired research and
development in process -- 9.4% --
Other 0.6% 0.6% 1.0%
---- ---- ----
Effective income tax rate 30.7% 39.4% 32.9%
==== ==== ====
</TABLE>
<PAGE> 15
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of Schneider's assets and
liabilities. Deferred tax assets and liabilities are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
Assets Liabilities Assets Liabilities
------- ------- ------- -------
<S> <C> <C> <C> <C>
Prepaid/deferred items $ 5,975 $36,382 $ 5,898 $34,615
Note receivable -- 15,072 -- 15,250
Inventories 17,701 3,437 14,264 1,622
Employee benefits 799 3 1,009 --
Property, plant and equipment 2,976 13,171 2,736 13,059
State and local taxes 1,262 -- 2,234 --
Tax carryforwards -- 460 -- 460
Other 2,528 2,272 6,880 3,141
------- ------- ------- -------
Total deferred taxes $31,241 $70,797 $33,021 $68,147
------- ------- ------- -------
Net deferred tax liability $39,556 $35,126
======= =======
</TABLE>
The deferred tax assets and liabilities at December 31, 1997 and 1996 are
disclosed separately on the accompanying combined balance sheet.
10. PENSION AND POSTRETIREMENT BENEFITS
Schneider participates in Pfizer's pension plans for employees. Plan benefits
depend on years of service and employee final average earnings. Participants
vest in their benefits after as few as five years of service. Pfizer has not
made a contribution to their U.S. Plan during 1997, 1996 or 1995 since that Plan
is overfunded. For the years ended December 31, 1997, 1996 and 1995, a pension
cost of $155, $332 and $1,236, respectively, was allocated to Schneider.
Pfizer does not fund other postretirement plans, but contributes to the plans as
benefits are paid. As of December 31, 1997 and 1996, the postretirement benefit
obligation related to Schneider was $1,827 and $1,686, respectively, and is
included in "Accrued compensation and related items" in the accompanying
combined balance sheet.
<PAGE> 16
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
11. BUSINESS UNIT EQUITY
The changes in business unit equity during the years ended December 31, 1995,
1996 and 1997 were as follows:
<TABLE>
<CAPTION>
Business Unit
Equity
Exclusive of Accumulated
Translation Translation Business Unit
Adjustment Adjustment Equity
--------- --------- ---------
<S> <C> <C> <C>
Balance at January 1, 1995 $ 235,910 $ 19,637 $ 255,547
Net income 93,379 -- 93,379
Dividend to parent company (1,985) -- (1,985)
Translation adjustment -- 18,101 18,101
Contributed net assets of NAMIC 170,527 -- 170,527
Net activity with Pfizer 6,824 -- 6,824
--------- --------- ---------
Balance at December 31, 1995 504,655 37,738 542,393
Net income 44,875 -- 44,875
Dividend to parent company (19,905) -- (19,905)
Translation adjustment -- (29,550) (29,550)
Contributed net assets of Corvita 75,123 -- 75,123
Net activity with Pfizer (790) -- (790)
--------- --------- ---------
Balance at December 31, 1996 603,958 8,188 612,146
Net income 52,180 -- 52,180
Translation adjustment -- (26,918) (26,918)
Net activity with Pfizer 12,061 -- 12,061
--------- --------- ---------
Balance at December 31, 1997 $ 668,199 $ (18,730) $ 649,469
========= ========= =========
</TABLE>
12. STOCK OPTION AWARDS
Stock options are granted to Schneider employees under the Pfizer Inc. Stock and
Incentive Plan. Options are exercisable after five years or less, subject to
continuous employment and certain other conditions and expire 10 years after the
grant date. Once exercisable, the employee can purchase shares of Pfizer common
stock at the market price on the date the option was granted. The weighted-
average fair value per stock option granted was $16.77, $10.90 and $6.46 for the
options granted in 1997, 1996 and 1995, respectively. The fair values were
estimated using the Black-Scholes option pricing model, modified for dividends
and using the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Expected dividend yield 1.76% 1.97% 2.85%
Risk-free interest rate 6.23% 6.38% 6.26%
Expected stock price volatility 25.56% 25.45% 26.00%
Expected term until exercise (years) 5.50 5.25 5.25
</TABLE>
<PAGE> 17
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Compensation expense was not recognized for the issuance of employee stock
options. If Pfizer had recorded compensation expense for option grants,
Schneider's pro forma net income for 1997, 1996 and 1995 reflecting the
compensation cost for the fair value of stock options awarded to Schneider
employees in 1997, 1996 and 1995 would have been as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income:
As reported $52,180 $44,875 $93,379
Pro forma $49,689 $43,589 $93,199
</TABLE>
In 1997, 231,700 options were granted to Schneider employees with a weighted
average exercise price of $55.04; in 1996, 489,572 options were granted with a
weighted average exercise price of $37.25 and in 1995, 227,600 options were
granted with a weighted average exercise price of $24.50. Information regarding
outstanding options and exercisability for Schneider employees is not available.
In the opinion of Pfizer management, this information is not significant to the
presentation of the financial statements.
13. CONTINGENT LIABILITIES AND COMMITMENTS
On April 8, 1998, Schneider (USA) Inc. filed a suit against Boston Scientific
Corporation ("BSC") for a declaratory judgment that Schneider is not infringing
any valid claim of BSC's self-expanding stent patent. BSC subsequently filed a
counterclaim in the same suit for patent infringement. The suit was filed in the
U.S. District and the counterclaim seeks monetary damages, declaratory judgment
that Schneider infringed BSC's patent and injunctive relief. Schneider denies
the allegations in the counterclaim and believes it has a meritorious defense
against the claim of patent infringement. However, there can be no assurance
that Schneider will prevail in this case.
C.R. Bard, Inc. ("Bard") is in a dispute with Schneider over royalties due to
Bard under an agreement with Schneider. Schneider believes the royalties it has
paid to Bard are in compliance with the terms of their agreement.
While it is not possible to predict the outcome of patent or other legal actions
brought against Schneider, Schneider believes the liability, if any, resulting
from all pending lawsuits and claims, individually or in the aggregate, other
than those specifically identified above, would not have a material adverse
effect on its results of operations, cash flows or financial position.
<PAGE> 18
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
Schneider leases facilities under capital leases and vehicles and office
equipment under various noncancelable operating leases. Net assets held under
capital lease are included in property, plant and equipment and were $1,755 and
$1,963 at December 31, 1997 and 1996, respectively. The current obligation under
capital leases was $520 at December 31, 1997 and 1996 and is included in "Other
current liabilities" in the accompanying combined balance sheet. Total rent
expense under operating leases was approximately $3,524, $3,703 and $2,677 for
the years ended December 31, 1997, 1996 and 1995, respectively.
At December 31, 1997, future minimum lease payments in years ending December 31
are:
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
------- -------
<S> <C> <C>
1998 $ 1,122 $ 1,340
1999 955 1,340
2000 693 1,140
2001 591 1,140
2002 428 1,140
Later years -- 3,780
------- -------
Total minimum lease payments $ 3,789 9,880
=======
Less amounts representing interest (5,740)
-------
Net present value of minimum lease
payments $ 4,140
=======
</TABLE>
******
<PAGE> 19
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED FINANCIAL STATEMENTS FOR THE
NINE MONTHS ENDED SEPTEMBER 10, 1998 AND
SEPTEMBER 14, 1997
<PAGE> 20
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
PAGE
COMBINED FINANCIAL STATEMENTS
Combined Balance Sheet as of September 10, 1998,
September 14, 1997 and December 31, 1997 1
Combined Statement of Income for the three months
and nine months ended September 10, 1998 and
September 14, 1997 2
Combined Statement of Cash Flows for the nine months
ended September 10, 1998 and September 14, 1997 3
Notes to Combined Financial Statements 4-6
<PAGE> 21
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
September 10,* September 14,* December 31,**
1998 1997 1997
------------- -------------- --------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 49,999 $ 31,297 $ 33,940
Accounts receivable, less allowance for doubtful
accounts: 9/98 - $1,932; 9/97 - $1,192; 12/97- $1,217 65,993 67,449 71,715
Due from parent and affiliates 3,291 204,575 220,371
Inventories 47,223 41,347 45,823
Deferred taxes 26,185 28,129 22,151
Prepaid expenses and other assets 1,944 2,576 2,849
--------- --------- ---------
Total current assets 194,635 375,373 396,849
Property, plant and equipment, less accumulated depreciation 97,480 100,454 101,484
Goodwill and other intangible assets, net 330,031 340,039 340,897
Other assets 4,592 4,990 4,494
--------- --------- ---------
Total assets $ 626,738 $ 820,856 $ 843,724
========= ========= =========
LIABILITIES AND BUSINESS UNIT EQUITY
Current liabilities:
Accounts payable $ 7,137 $ 17,130 $ 23,678
Short-term borrowings 351 579 30
Due to parent and affiliates 43,763 69,663 57,650
Income taxes payable 13,302 40,055 12,850
Deferred taxes 26,365 -- 25,283
Accrued compensation and related items 14,818 16,026 20,664
Other current liabilities 9,807 12,548 13,521
--------- --------- ---------
Total current liabilities 115,543 156,001 153,676
Long-term debt 501 466 498
Capital lease obligations 3,620 4,140 3,620
Deferred taxes 28,772 36,627 36,424
Other noncurrent liabilities -- 45 37
--------- --------- ---------
Total liabilities 148,436 197,279 194,255
Business unit equity 504,108 654,710 668,199
Accumulated other comprehensive expense (25,806) (31,133) (18,730)
--------- --------- ---------
Total business unit equity 478,302 623,577 649,469
--------- --------- ---------
Total liabilities and business unit equity $ 626,738 $ 820,856 $ 843,724
========= ========= =========
</TABLE>
* unaudited
** derived from audited financial statements
See accompanying notes to combined financial statements.
1
<PAGE> 22
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
-------------------------- --------------------------
September 10, September 14, September 10, September 14,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $94,207 $81,842 $260,147 $232,219
Costs and expenses:
Cost of sales 27,129 21,436 71,827 62,597
Selling, informational and administrative expenses 31,106 26,352 84,810 78,944
Research and development expenses 10,120 8,210 23,583 23,226
Corporate and division overhead costs 3,992 2,155 11,113 6,689
Other deductions--net 4,237 4,249 10,912 12,259
------- ------- -------- --------
Income before provision for taxes on income 17,623 19,440 57,902 48,504
Provision for taxes on income 6,329 5,038 19,257 15,860
------- ------- -------- --------
Net income $11,294 $14,402 $ 38,645 $ 32,644
======= ======= ======== ========
</TABLE>
See accompanying notes to combined financial statements.
2
<PAGE> 23
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
COMBINED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
---------------------------
September 10, September 14,
1998 1997
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 38,645 $ 32,644
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization of intangibles 18,881 18,899
Deferred taxes (5,413) (5,833)
Other 806 812
Changes in assets and liabilities:
Accounts receivable 4,712 (3,334)
Inventories (2,506) (14,980)
Prepaid and other assets (3,348) (6,101)
Accounts payable and accrued liabilities (24,719) (17,131)
Other noncurrent liabilities 715 (1,528)
Due from/to parent and affiliates 227,146 (2,640)
--------- --------
Net cash provided by operating activities 254,919 808
--------- --------
INVESTING ACTIVITIES
Purchases of property, plant and equipment (5,939) (8,064)
--------- --------
Net cash used in investing activities (5,939) (8,064)
--------- --------
FINANCING ACTIVITIES
Dividends to parent (232,762) (462)
--------- --------
Net cash used in financing activities (232,762) (462)
--------- --------
Effect of exchange rate changes on cash (159) (1,384)
--------- --------
Net increase/(decrease) in cash 16,059 (9,102)
Cash at beginning of year 33,940 40,399
--------- --------
Cash at end of year $ 49,999 $ 31,297
========= ========
</TABLE>
See accompanying notes to combined financial statements.
3
<PAGE> 24
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(unaudited)
1. ORGANIZATION AND BUSINESS DESCRIPTION
ORGANIZATION
Schneider Worldwide is a business unit within the Medical Technology Group
("MTG") of Pfizer Inc. ("Pfizer"). Schneider Worldwide is comprised of the
following wholly-owned subsidiaries of Pfizer -- Schneider (Europe) GmbH;
Schneider (USA) Inc.; Schneider NAMIC U.S.A. Corporation; Corvita Corporation;
Schneider Belgium N.V. and Schneider Holland B.V. In addition, Schneider
Worldwide includes certain net assets used exclusively in its business at
Howmedica France S.C.A.; Howmedica GmbH; Pfizer Canada Inc.; Pfizer Seiyaku
Kabushiki Kaisha (Japan); Pfizer Laboratories (Proprietary) Limited (South
Africa); Pfizer Pty. Ltd. (Australia); Nilo Holding S.A. and AMS Medinvent S.A.
(collectively, the "Asset Selling Corporations" and together with the
wholly-owned subsidiaries, "Schneider").
BUSINESS DESCRIPTION
Schneider manufactures, markets, sells and distributes diagnostic and
therapeutic products for use in interventional cardiology and radiology.
Schneider has a global direct sales and distribution presence with primary
markets and manufacturing operations in the United States and Europe. The raw
materials for its products are readily available and Schneider is not dependent
on a single supplier or only a few suppliers for its raw materials.
2. BASIS OF PRESENTATION
BASIS OF PRESENTATION
The combined financial information presented herein is unaudited. Schneider is
responsible for the unaudited financial statements included in this document.
The financial statements include all normal and recurring adjustments that are
considered necessary for the fair presentation of the financial position and
operating results. Revenues, expenses, assets and liabilities can vary during
each quarter of the year. Therefore, the results and trends in these interim
financial statements may not be the same as those for the full year. The interim
financial statements and notes thereto do not include all disclosures required
by generally accepted accounting principles and should be read in conjunction
with Schneider's annual audited financial statements for 1997.
The accompanying combined financial statements present the financial position,
results of operations and cash flows for Schneider as if it were a separate
legal entity. All significant intercompany transactions and balances have been
eliminated. Operating results for the nine months reflect domestic operations
for the periods January 1, 1998 through September 10, 1998 and January 1, 1997
through September 14, 1997. International operations are for the periods
December 1, 1997 through September 10, 1998 and December 1, 1996 through August
24, 1997. These financial statements do not include any income or expenses
related to the divestiture of the Schneider Worldwide business, which was
completed on September 10, 1998. The combined financial statements include the
accounts specifically attributed to Schneider, including allocations of certain
assets, liabilities and expenses relating to shared services and administrative
functions incurred at the corporate and business segment operating levels of
Pfizer. Cash from Schneider's domestic operations is not included in cash in the
accompanying combined balance sheets at September 10, 1998 and September 14,
1997 since this cash is included in Pfizer's centralized cash management system.
Accordingly, Schneider's cash at September 10, 1998 and September 14, 1997 may
not be representative of an independent company.
4
<PAGE> 25
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(unaudited)
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the combined financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant accounting estimates used include depreciation, amortization and
estimates used in allocating certain assets, liabilities and the costs of shared
services and administrative functions. Management believes that it exercised
reasonableness in deriving these amounts. Schneider is subject to risks and
uncertainties that may cause actual results to differ from estimated results,
such as changes in the healthcare environment, competition, foreign exchange and
legislation.
3. COMPREHENSIVE INCOME/(EXPENSE)
Effective January 1, 1998, Schneider adopted Statement of Financial Accounting
Standards (SFAS) No. 130, "Reporting Comprehensive Income." This Statement
establishes standards for reporting and display of comprehensive income, which
consists of all changes in equity from nonshareholder sources. Prior year
financial statements have been conformed to the requirements of SFAS No. 130.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- ---------------------
Sept. 10, Sept. 14, Sept.10, Sept. 14,
1998 1997 1998 1997
-------- --------- -------- --------
<S> <C> <C> <C> <C>
Net income $11,294 $ 14,402 $ 38,645 $ 32,644
Other comprehensive income(expense)-
Currency translation adjustment 7,301 (19,853) (7,076) (39,321)
------- -------- -------- --------
Total comprehensive income/(expense) $18,595 $ (5,451) $ 31,569 $ (6,677)
======= ======== ======== ========
</TABLE>
4. CORPORATE AND DIVISION OVERHEAD COSTS
Pfizer allocates certain corporate service and employee benefit expenses (based
on actual costs incurred) to Schneider on the basis of number of personnel,
occupied office space and third party sales. Pfizer does not allocate various
other corporate overhead expenses to its operating divisions. However, for
purposes of the accompanying combined financial statements, an allocation of
such expenses has been included in the accompanying combined statement of income
and is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
---------------------- --------------------
Sept. 10, Sept. 14, Sept.10, Sept. 14,
1998 1997 1998 1997
--------- --------- -------- ---------
<S> <C> <C> <C> <C>
Pfizer corporate overhead costs $2,022 $ 848 $ 5,291 $2,955
MTG division overhead costs 1,970 1,307 5,822 3,734
------ ------- ------- ------
$3,992 $ 2,155 $11,113 $6,689
====== ======= ======= ======
</TABLE>
Pfizer corporate overhead costs represent a portion of corporate functions such
as personnel, legal, accounting, treasury and information systems which are
primarily allocated based on sales of Schneider compared to total Pfizer
revenues.
5
<PAGE> 26
SCHNEIDER WORLDWIDE
(A BUSINESS OF PFIZER INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
(unaudited)
MTG division overhead costs represent personnel, quality control, regulatory
compliance, finance and business development which are primarily allocated based
on sales to third party customers of Schneider compared to total MTG sales.
Management believes that all allocations are made on a reasonable basis;
however, these costs are not necessarily representative of the costs that would
have been or will be incurred by Schneider as an independent company.
5. INVENTORY
<TABLE>
<CAPTION>
Sept. 10, Sept. 14, December 31,
1998 1997 1997*
-------- -------- -----------
<S> <C> <C> <C>
Finished goods $ 29,635 $ 29,919 $ 30,284
Work-in-process 13,168 9,942 14,311
Raw materials 11,223 9,633 9,487
-------- -------- --------
54,026 49,494 54,082
Less: allowance for obsolescence (6,803) (8,147) (8,259)
-------- -------- --------
$ 47,223 $ 41,347 $ 45,823
======== ======== ========
</TABLE>
* derived from audited financial statements
******
6
<PAGE> 27
BOSTON SCIENTIFIC CORPORATION AND SCHNEIDER WORLDWIDE
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS (Restated)
On September 10, 1998, Boston Scientific Corporation (Boston Scientific or the
Company) consummated its acquisition of Schneider Worldwide (Schneider),
formerly a member of the Medical Technology Group of Pfizer Inc. (Pfizer), for
$2.1 billion in cash (the Schneider Acquisition). The Schneider Acquisition was
accounted for using the purchase method of accounting.
The aggregate Schneider Acquisition purchase price has been allocated on a
preliminary basis to the assets acquired and liabilities assumed based on their
estimated fair values at date of acquisition, as valued by an independent
appraiser using information and assumptions provided by management. The excess
of purchase price over the fair value of net tangible assets acquired was
allocated to specific intangible asset categories as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Excess of cost over net assets acquired $ 734,475
Purchased research and development 671,000
Core technology 420,960
Developed technology 126,940
Assembled workforce, customer lists, trademarks and patents 194,040
----------
$2,147,415
==========
</TABLE>
The Company recorded an adjustment to the Schneider Acquisition purchase price
of approximately $179 million related primarily to an estimate of additional
payments due to Pfizer as part of the purchase transaction and estimated costs
to be incurred in integrating the separate operating businesses of Schneider
with businesses of Boston Scientific. Certain severance and other exit costs of
the acquired Schneider businesses that relate to events occurring as of the
consummation date will be accounted for as additional costs of the acquisition
at the time the formal plan of integration is completed. The Company expects
integration related plans to be finalized no later than the third quarter of
1999. Further, the Company recorded a deferred tax liability of approximately
$19 million representing the tax effect of timing differences recorded as part
of the acquisition.
During the third quarter of 1998, the Company recorded a $671 million ($524
million, net-of-tax) charge to account for purchased research and development
acquired. The valuation of purchased research and development was based upon an
analysis of those projects which had not reached technological feasibility and
had no alternative use. The valuation considered expected future cash flows and
was discounted for risks and uncertainties related to target markets and
completion of products. The other intangible assets recorded in connection with
the Schneider acquisition will be amortized over their estimated period of
benefit.
On November 3, 1998, Boston Scientific Corporation (the "Company") announced it
had detected the occurrence of business irregularities in the operations of its
Japanese subsidiary. As a result, the Company has restated its 1997 results as
well as its quarterly results for the first three quarters of 1998, which
allows for more accurate period to period comparisons.
In addition, all historical share and per share amounts have been restated to
reflect the Company's November 30, 1998 two-for-one common stock in the form of
a 100% stock dividend.
Financial statement information and related disclosures included in this
amended filing reflect, where appropriate, changes as a result of the
restatements.
The Unaudited Condensed Consolidated Financial Statements included in the
Company's report on Form 10-Q/A for the quarterly period ended September 30,
1998, include the combined results of Boston Scientific and Schneider for the
period from the date of acquisition (September 10, 1998) to September 30, 1998,
as restated, and the combined financial position at September 30, 1998. An
Unaudited Pro Forma Combined Condensed Balance Sheet has not been presented
since the acquisition is fully reflected in the Unaudited Condensed Consolidated
Balance Sheet included in the Company's Form 10-Q/A for the quarter ended
September 30, 1998.
The Unaudited Pro Forma Combined Condensed Statements of Operations are based on
the historical Consolidated Financial Statements of Boston Scientific and the
historical Combined Financial Statements of Schneider under the assumptions and
adjustments set forth in the accompanying Notes to Unaudited Pro Forma Combined
Condensed Statements of Operations. The Unaudited Pro Forma Combined Condensed
<PAGE> 28
Statements of Operations assume that the Schneider Acquisition was consummated
on January 1, 1997, and do not give effect to the purchased research and
development charge recorded in connection with the Schneider Acquisition.
The Unaudited Pro Forma Combined Condensed Statements of Operations may not be
indicative of the results that actually would have occurred if the Schneider
Acquisition had been in effect on the dates indicated or which may be obtained
in the future. The Unaudited Pro Forma Combined Condensed Statements of
Operations should be read in conjunction with the historical Consolidated
Financial Statements of Boston Scientific and the historical Combined Financial
Statements of Schneider and the notes accompanying both statements.
<PAGE> 29
<TABLE>
<CAPTION>
BOSTON SCIENTIFIC AND SCHNEIDER
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (Restated)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------------------------------
PRO FORMA
PRO FORMA BOSTON SCIENTIFIC
ADJUSTMENTS AND AND SCHNEIDER
BOSTON SCIENTIFIC SCHNEIDER RECLASSIFICATIONS COMBINED
----------------- --------- ----------------- ------------------
<S> <C> <C> <C> <C>
Net sales $ 1,830,778 $ 330,848 $ 2,161,626
Cost of products sold 545,541 89,813 $ (2,125)(2) 633,229
----------- --------- ----------- -----------
Gross profit 1,285,237 241,035 2,125 1,528,397
Selling, general and administrative expenses 662,647 116,644 779,291
Amortization expense 32,398 63,018 (3) 95,416
Royalties 22,177 2,125 (2) 24,302
Research and development expenses 167,194 33,966 201,160
Purchased research and development 29,475 29,475
Merger-related charges 145,891 145,891
----------- --------- ----------- -----------
1,059,782 150,610 65,143 1,275,535
----------- --------- ----------- -----------
Operating income (loss) 225,455 90,425 (63,018) 252,862
Interest expense (14,285) (126,378)(5) (140,663)
Other income (expense), net 3,961 (15,160) 14,440 (6) 3,241
----------- --------- ----------- -----------
Income (loss) before income taxes and
cumulative effect of change in accounting 215,131 75,265 (174,956) 115,440
Income tax provision (benefit) 83,651 23,085 (66,077)(7) 40,659
----------- --------- ----------- -----------
Income (loss) before cumulative effect
of change in accounting $ 131,480 $ 52,180 $ (108,879) $ 74,781
=========== ========= =========== ===========
Income (loss) before cumulative effect of
change in accounting per common share:
Basic $ 0.34 $ 0.19
=========== ===========
Assuming dilution $ 0.33 $ 0.19
=========== ===========
Weighted average shares outstanding:
Basic 389,146 389,146
Assuming dilution 399,776 399,776
=========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of Operations.
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
BOSTON SCIENTIFIC AND SCHNEIDER
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS (Restated)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------------------------------
PRO FORMA
PRO FORMA BOSTON SCIENTIFIC
ADJUSTMENTS AND AND SCHNEIDER
BOSTON SCIENTIFIC SCHNEIDER RECLASSIFICATIONS COMBINED
----------------- --------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 1,516,887 $ 260,147 $ (10,914)(1) $ 1,766,120
Cost of products sold 492,865 71,827 (1,439)(2) 560,317
(2,936)(1)
----------- --------- --------- -----------
Gross profit 1,024,022 188,320 (6,539) 1,205,803
Selling, general and administrative expenses 523,932 95,923 (2,870)(1) 616,985
Amortization expense 26,829 44,111 (3) 70,940
Royalties 21,324 1,439 (2) 22,676
(87)(1)
Research and development expenses 143,007 23,583 (960)(1) 165,630
Purchased research and development 681,952 (671,000)(4) 10,952
Merger-related charges (20,314) (20,314)
----------- --------- --------- -----------
1,376,730 119,506 (629,367) 866,869
----------- --------- --------- -----------
Operating income (loss) (352,708) 68,814 622,828 338,934
Interest expense (29,947) (83,567)(5) (113,514)
Other income (expense), net 2,180 (10,912) 10,148 (6) 1,416
----------- --------- --------- -----------
Income (loss) before income taxes (380,475) 57,902 549,409 226,836
Income tax provision (benefit) (45,648) 19,257 100,977 (7) 74,586
----------- --------- --------- -----------
Net income (loss) $ (334,827) $ 38,645 $ 448,432 $ 152,250
=========== ========= ========= ===========
Net income (loss) per common share:
Basic $ (0.86) $ 0.39
=========== ===========
Assuming dilution $ (0.86) $ 0.38
=========== ===========
Weighted average shares outstanding:
Basic 390,087 390,087
=========== ===========
Assuming dilution 390,087 399,639
=========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of Operations.
</TABLE>
<PAGE> 31
BOSTON SCIENTIFIC AND SCHNEIDER
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED STATEMENTS OF OPERATIONS
The Unaudited Pro Forma Combined Condensed Statements of Operations have been
prepared to reflect the Schneider Acquisition accounted for under the purchase
method of accounting and assumes that the Schneider Acquisition was consummated
on January 1, 1997. The Unaudited Pro Forma Combined Condensed Statement of
Operations for the nine months ended September 30, 1998 combines the results for
the nine months ended September 30, 1998 for Boston Scientific (including the
results of Schneider for the period from the date of acquisition to September
30, 1998), as restated, and Schneider for the nine months ended September 10,
1998.
The Unaudited Pro Forma Combined Condensed Statements of Operations are based on
the historical Consolidated Financial Statements of Boston Scientific and the
historical Combined Financial Statements of Schneider. For purposes of the
historical Combined Financial Statements of Schneider, Pfizer allocated certain
corporate and division overhead costs to Schneider. These allocated costs
totaled $10,571,000 and $11,113,000 for the year ended December 31, 1997 and for
the nine months ended September 10, 1998, respectively.
The excess of the Schneider Acquisition purchase price over the fair value of
the net tangible assets acquired was allocated to specific intangible asset
categories and is being amortized over the estimated periods of benefits
associated with these specific intangible asset categories. The Unaudited Pro
Forma Combined Condensed Statements of Operations exclude any benefits from
synergies that may result from the Schneider Acquisition.
Following is a description of pro forma adjustments reflected in the Unaudited
Pro Forma Combined Condensed Statements of Operations:
(1) Represents an adjustment to conform the reporting period of Schneider for
the nine months ended September 10, 1998 to be consistent with the
reporting period of Boston Scientific for the nine months ended September
30, 1998.
(2) Represents the reclassification of Schneider's royalty expenses to conform
with Boston Scientific's presentation.
(3) Represents the amortization of the excess of the Schneider Acquisition
purchase price over the fair value of net tangible assets acquired from
Schneider by Boston Scientific. This amortization is based on the
preliminary allocation to specific intangible asset categories of the
excess of the purchase price over the fair value of net tangible assets
using estimated periods of benefits associated with these specific
intangible asset categories. The aggregate purchase price has been
allocated on a preliminary basis to the assets acquired and liabilities
assumed based on their estimated fair values at date of acquisition, as
valued by an independent appraiser using information and assumptions
provided by management.
(4) Represents the elimination of the $671 million charge recorded by Boston
Scientific in the nine months ended September 30, 1998 to account for
purchased research and development acquired in the Schneider Acquisition.
<PAGE> 32
(5) Represents the estimated increase in interest expense and amortization of
financing fees resulting from the financing obtained by Boston Scientific
in connection with the Schneider Acquisition. The estimated increase in
interest expense and amortization of financing fees assumes the initial
financing obtained in connection with the Schneider Acquisition remained
outstanding during the periods presented.
(6) Represents the elimination of amounts recorded by Schneider for
amortization of intangible assets.
(7) Represents the estimated tax effect of the Unaudited Pro Forma Combined
Condensed Statements of Operations' pro forma adjustments based on rates
applicable to those adjustments.
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Pfizer Inc.:
We consent to the incorporation by reference in the following registration
statements:
* File No. 33-57242 on Form S-8,
* File No. 33-89772 on Form S-8,
* File No. 33-93790 on Form S-8,
* File No. 33-99766 on Form S-8,
* File No. 33-80265 on Form S-8,
* File No. 333-02256 on Form S-8,
* File No. 333-25033 on Form S-8,
* File No. 333-25037 on Form S-8,
* File No. 333-37255 on Form S-3,
* File No. 333-64887 on Form S-3, and
* File No. 333-64991 on Form S-3
of Boston Scientific Corporation of our report dated May 22, 1998, with respect
to the combined balance sheets of Schneider Worldwide, a Business of Pfizer Inc.
as of December 31, 1997 and 1996, and the related combined statements of income
and cash flows for each of the years in the three-year period ended December 31,
1997, which report appears in the Form 8-K/A2 of Boston Scientific Corporation
dated March 29, 1999.
/s/ KPMG LLP
New York, New York
March 29, 1999
