Boston Scientific (NYSE:BSX) dropped a couple of bombshells along with its 3rd-quarter earnings, saying it plans to lay off up to 1,500 workers by the end of 2015 and that long-time CFO Jeff Capello plans to step down at the end of the year.
Capello will stay on until Dec. 31 and serve as a "senior advisor" until mid-May 2014, according to a press release. Dan Brennan, the Natick, Mass.-based medical device company’s corporate controller, will replace Capello as CFO effective Jan. 1, 2014, according to the release.
Capello told analysts this morning during a conference call that he’s making the move in part because of his confidence in the turnaround for Boston Scientific that he helped engineer.
"If I felt that the company wasn’t in in a good position I wouldn’t be leaving. We’re having a terrific year. We’re going to finish up the year strong. I feel very confident of the trajectory of the company," Capello said. "In terms of the timing, I’m entering pretty much the 10th year of being a public company CFO and my aspirations are to have a broader role. [CEO Mike Mahoney] and I talked about it over the past little while and the opportunity to do that in the next phase of my career is something I was focused on. The company’s made a lot of progress over the last 5 years and the natural point would be a new year, right before the new year’s start."
"We have a very deep financial bench at Boston Scientific. Dan’s been with the company for a long time and will do an excellent job as CFO," Mahoney added. "This transition is planned. … This will be done very well."
The news nevertheless seemed to shake investors, as BSX shares were trading at $11.80 apiece in pre-market trading, down 4.0%.
Third-quarter results smash expectations on The Street
Boston Scientific reported losses of $5 million and no earnings per share on sales of $1.74 billion for the 3 months ended Sept. 30, for flat top-line growth and a nearly 100$% reduction in losses. Adjusted to exclude 1-time items, EPS were 17¢, almost double the 9¢ expected by Wall Street analysts.
The company narrowed its full-year sales forecast to the $7.09 to $7.14 billion range, down from $7.05 billion to $7.17 billion. Adjusted EPS are pegged at 69¢-71¢, compared with prior guidance of 67¢-71¢.
Boston Scientific’s outlook for 4th-quarter sales includes adjusted EPS of 18¢-20¢ on sales of $1.78 billion to $1.83 billion, the company said.
Another round of layoffs ahead
Late yesterday Boston Scientific revealed its plans for the layoffs, saying they’re part of a plan to streamline operations, including efforts to "eliminate bureaucracy, increase productivity and better align resources to business strategies and marketplace dynamics." Today Mahoney said the move is the latest plank of a strategic plan to improve operating margins from their current "19ish%" level to 25%.
The move, expected to save $115 million to $200 million by the end of 2015, will also involve plant closures, Capello added.
"The lions share of the benefit will be coming through rationalizing a number of plants," he said. "We still have a heavy number of plants. This will allow us to take some plants out of the network."