Boston Scientific (NYSE:BSX) swung to the black in 2014, shares of the company’s stock are hitting highs not seen since pre-recession days, and investments the company made in new products look to be bearing fruit. But company officials said today that Boston Scientific is looking to trim its spending habits, vowing a "culture shift" on spending for everything from travel to suppliers.
CFO Dan Brennan told analysts during a conference call that the Marlborough, Mass.-based company spent too much money in 2014 on sales, general & administrative costs, the line item on an income statement that accounts for all direct and indirect selling expenses. Those expenses rose nearly 9% compared to 2013*, Boston Scientific said today.
"So, clearly as we look at 2014, 37.9% [of sales] is higher than we wanted to it be, so we’re redoubling our efforts on SG&A in ’15," he said.
Some of the higher spend last year had to do with rollouts of new products like the Lotus heart valve and the Watchman anti-stroke heart implant, Brennan noted. But some of the spending may be cultural, he added.
“We are doing some things around challenging our global team to really focus on reducing spending with a variety of new initiatives and programs, I’d say undergoing a cultural shift to focus more directly on spending, everything from travel to meetings to suppliers to royalties," Brennan explained. "No stone left unturned there, and then a continuation of what we’ve done in the past, which is the G&A competitive benchmarking and making sure that all of our G&A functions have competitive benchmarks and time horizons to get to best-in-class against those benchmarks."
Fourth-quarter profits slid 19.4% to $87 million during the 3 months ended Dec. 31, 2014. But Boston Scientific still managed to impress investors with its strong annual performance, with share prices hitting a 52-week high of $15.28 on Wall Street before falling back slightly in end-of-day trading.
BSX officials said revenues rose 2.7% to $1.89 billion, just shy of the average analyst estimate of $1.9 billion. For 2015, the company forecast revenue of $7.3 billion to $7.5 billion, below the average analyst estimate of $7.59 billion.
Boston Scientific said it expects to earn an adjusted profit in the range of 88¢ to 92¢ per share for the year. Analysts on average estimate 90¢ per share.
For the full year, Boston swung to black ink, posting profits of $267 million, or 20¢ per share, on 3.3% sales growth to $7.38 billion. Adjusted EPS were 84¢, again a penny ahead of The Street.
*Correction, Feb. 5, 2015: Due to a transcription error, this article originally quoted CFO Dan Brennan as saying that Boston Scientific spent $379 million more on SG&A costs during the year. That figure was actually 37.9% of sales.
