Boston Scientific to Cut Jobs
NATICK, Mass., Oct. 17, 2007 -- Medical device maker Boston Scientific Corp. announced today it will eliminate about 2300 positions worldwide, or approximately 13 percent of an 18,000-person, "non-direct labor workforce baseline" as of June 30, 2007. In addition, another approximately 2000 employees are expected to leave the company in connection with previously announced business divestitures.
The company said in a statement that the move is part of cost-cutting initiatives that include the restructuring or sale of several business units and that it is making "good progress" toward the execution of its previously announced plans to sell non-strategic assets and monetize the majority of its public and private investment portfolio. The initiatives will help provide better focus on businesses priorities and sales growth, it said.
"The expense and head count reductions we are announcing today are intended to bring our expenses back in line with our revenues, while preserving our ability to make investments in quality, R&D, capital and our people that are essential to our long-term success," said Jim Tobin, Boston Scientific President and CEO. "While difficult, these reductions are in the best interest of the company and will create greater value for our customers and their patients, as well as for our employees and shareholders. These actions will enable us to institute meaningful change that will create lasting benefits."
The company plans to reduce its operating expenses (exclusive of amortization and royalty expenses) against a 2007 baseline of approximately $4.1 billion by an estimated $475 million to $525 million in 2008, representing a reduction of 12 to 13 percent, with a further reduction of an estimated $25 million to $50 million in 2009. It also plans to restructure several businesses and product franchises: its Peripheral Interventions and Interventional Cardiology businesses will be combined to focus on interventional specialists; its Electrophysiology business will be integrated with its Cardiac Rhythm Management business to better serve the needs of electrophysiologists; and the Oncology business and its four franchises will be restructured. Three will be integrated into other businesses within Boston Scientific, and the Oncology Venous Access franchise will be combined with the Fluid Management business.
The company said it is seeking buyers for the combined Fluid Management/Oncology Venous Access business and for the Cardiac Surgery and Vascular Surgery businesses. It also announced it has entered into a definitive agreement to sell its Auditory business. Collectively, these businesses represent approximately $550 million in 2007 sales.
The International group will be consolidated from three regions to two. The existing three regions are: Europe, Asia Pacific/Japan and Inter-Continental; the two new regions will be Europe/Middle East/Africa, and Canada/Latin America/Asia Pacific/Japan.
The job cuts will result in total pre-tax charges of approximately $450 million to $475 million, or $0.20 to $0.22 per diluted share, the company said These mostly cash charges will be recorded primarily as restructuring expenses, with a portion recorded through other lines of the income statement. Approximately $275 million to $300 million will be recorded in the fourth quarter of 2007, with the remainder expected to be recorded throughout 2008 and 2009.
Eligible employees affected by the job reductions will be offered severance packages, outplacement services and other appropriate assistance and support, the company said. The reduction activities will be initiated this month and are expected to be substantially completed worldwide by the end of 2008. Reductions outside the United States will be initiated following completion of information sharing and consultations with required bodies.
"We understand the impact these reductions will have on our employees, and we are committed to helping ease the transition," said Tobin. "We will treat everyone with respect and dignity, and we will provide support to affected employees."
Boston Scientific officials will be discussing these announcements with analysts and investors on its third quarter earnings webcast scheduled for Oc. 19 at 8:00 a.m. The call will be hosted by Jim Tobin; Paul LaViolette, COO; and Sam Leno, executive vice president and chief financial officer.
The live webcast and an archived replay of the call will be available at www.bostonscientific.com in the Investor Relations section.