Boston Scientific (BSX) 10-Q 6 Aug 09 2009 Q2 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
In Millions, except Share data	6 Months Ended Jun. 30, 2009	Jul. 31, 2009	Jun. 30, 2008
Document and Company Information [Abstract]
Entity Registrant Name	Boston Scientific Corporation
Entity Central Index Key	0000885725
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$16,800
Entity Common Stock, Shares Outstanding		1,507,498,546

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009	3 Months Ended Jun. 30, 2008	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Net sales	$2,074	$2,024	$4,084	$4,071
Cost of products sold	630	604	1,237	1,185
Gross profit	1,444	1,420	2,847	2,886
Operating expenses:
Selling, general and administrative expenses	671	655	1,321	1,315
Research and development expenses	263	253	520	497
Royalty expense	53	48	98	94
Loss on program termination	16	0	16	0
Amortization expense	126	135	255	279
Intangible asset impairment charges	10	0	10	0
Purchased research and development	17	16	17	29
Gain on divestitures	0	0	0	(250)
Restructuring charges	13	10	36	39
Litigation-related charges	0	0	287	0
Total operating expenses	1,169	1,117	2,560	2,003
Operating income	275	303	287	883
Other income (expense):
Interest expense	(92)	(118)	(194)	(249)
Other, net	(3)	(85)	(10)	(72)
Income before income taxes	180	100	83	562
Income tax expense (benefit)	22	2	(62)	142
Net income	$158	$98	$145	$420
Net income per common share - basic	0.1	0.07	0.1	0.28
Net income per common share - assuming dilution	0.1	0.07	0.1	0.28
Weighted-average shares outstanding
Basic	1506.8	1497.6	1505.8	1495.8
Assuming dilution	1514.5	1505.2	1511.6	1502.6

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (USD $)
In Millions	Jun. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$1,194	$1,641
Trade accounts receivable, net	1,444	1,402
Inventories	878	853
Deferred income taxes	870	911
Prepaid expenses and other current assets	410	645
Total current assets	4,796	5,452
Property, plant and equipment, net	1,719	1,728
Goodwill	12,425	12,421
Other intangible assets, net	6,981	7,244
Other long-term assets	272	294
Total assets	26,193	27,139
Current liabilities:
Current debt obligations	330	2
Accounts payable	213	239
Accrued expenses	2,021	2,612
Other current liabilities	186	380
Total current liabilities	2,750	3,233
Long-term debt	5,920	6,743
Deferred income taxes	2,165	2,262
Other long-term liabilities	1,944	1,727
Stockholders' equity
Preferred stock, $ .01 par value - authorized 50,000,000 shares, none issued and outstanding	0	0
Common stock, $ .01 par value - authorized 2,000,000,000 shares and issued 1,507,258,301 shares as of June 30, 2009 and 1,501,635,679 shares as of December 31, 2008	15	15
Additional paid-in capital	16,009	15,944
Accumulated deficit	(2,588)	(2,732)
Other stockholders' deficit	(22)	(53)
Total stockholders' equity	13,414	13,174
Total liabilities and stockholders' equity	$26,193	$27,139

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
	Jun. 30, 2009	Dec. 31, 2008
Preferred stock, par value	0.01	0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	0.01	0.01
Common stock, shares authorized	2,000,000,000	2,000,000,000
Common stock, shares issued	1,507,258,301	1,501,635,679

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (USD $)
In Millions	6 Months Ended Jun. 30, 2009	6 Months Ended Jun. 30, 2008
Cash provided by operating activities	$680	$524
Investing activities:
Purchases of property, plant and equipment	(134)	(136)
Proceeds from sales of publicly traded and privately held equity securities and collections of notes receivable	50	47
Payments for acquisitions of businesses, net of cash acquired	(4)	(21)
Payments relating to prior period acquisitions	(517)	(669)
Proceeds from business divestitures	0	1,288
Payments for investments in companies and acquisitions of certain technologies	(35)	(11)
Cash (used for) provided by investing activities	(640)	498
Financing activities:
Payments on long-term borrowings	(500)	(912)
Proceeds from issuances of shares of common stock	13	48
Excess tax benefit from option excercises	0	4
Cash used for financing activities	(487)	(860)
Effect of foreign exchange rates on cash	0	2
Net (decrease) increase in cash and cash equivalents	(447)	164
Cash and cash equivalents at beginning of period	1,641	1,452
Cash and cash equivalents at end of period	$1,194	$1,616

Basis of Presentation

Basis of Presentation
	6 Months Ended Jun. 30, 2009 USD / shares
Basis of Presentation [Abstract]
BASIS OF PRESENTATION	NOTE A BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Article10 of RegulationS-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the six months ended June30, 2009 are not necessarily indicative of the results that may be expected for the year ending December31, 2009. For further information, refer to the consolidated financial statements and footnotes thereto included in our 2008 Annual Report on Form 10-K. Certain prior year amounts have been reclassified to conform to the current year presentation. See Note M Segment Reporting for further details.

Financial Instruments

Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Financial Instruments [Abstract]
FINANCIAL INSTRUMENTS	NOTE B FINANCIAL INSTRUMENTS Derivative Instruments and Hedging Activities We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments, and operate the program pursuant to documented corporate risk management policies. We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with Financial Accounting Standards Board (FASB)Statement No.133, Accounting for Derivative Instruments and Hedging Activities. In accordance with Statement No.133, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Statement No.133. Currency Hedging We are exposed to currency risk consisting primarily of foreign currency denominated monetary assets and liabilities, forecasted foreign currency denominated intercompany and third party transactions and net investments in certain subsidiaries. We use non-derivatives (primarily European manufacturing operations) and derivatives (currency forward and option contracts) to reduce the risk that our earnings and cash flows associated with these foreign currency denominated balances and transactions will be adversely affected by currency exchange rate changes. Designated Foreign Currency Hedges All of our designated currency hedge contracts outstanding as of June30, 2009 and December31, 2008 were cash flow hedges under Statement No.133. We record the effective portion of any change in the fair value of foreign currency cash flow hedges in other comprehensive income (OCI)until the related third-party transaction occurs. Once the related third-party transaction occurs, we reclassify the effective portion of any related gain or loss on the foreign currency cash flow hedge to earnings. In the event the hedged forecasted transaction does not occur, or it becomes probable that it will not occur, we would reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. We had currency derivative instruments designated as cash flow hedges outstanding in the contract amount of $2.693billion as of June30, 2009 and $2.587billion as of December31, 2008. We recognized in earnings net gains of $8

Supplemental Balance Sheet Info

Supplemental Balance Sheet Information
	6 Months Ended Jun. 30, 2009 USD / shares
Supplemental Balance Sheet Information [Abstract]
Supplemental Balance Sheet Information	NOTE C SUPPLEMENTAL BALANCE SHEET INFORMATION The following are the components of various balance sheet items as of June30, 2009 and December 31, 2008. Inventories June 30, December 31, (in millions) 2009 2008 Finished goods $ 562 $ 555 Work-in-process 137 135 Raw materials 179 163 $ 878 $ 853 Sales of the PROMUS everolimus-eluting stent system represented approximately eight percent of our total net sales for the first half of 2009. We are reliant on Abbott Laboratories for our supply of everolimus-eluting stent systems, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval. Any production or capacity issues that affect Abbotts manufacturing capabilities or our process for forecasting, ordering and receiving shipments may impact the ability to increase or decrease our level of supply in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand, which could have an adverse effect on our operating results. At present, we believe that our supply of everolimus-eluting stent systems from Abbott and our current launch plans for our next-generation internally-manufactured everolimus-eluting stent system is sufficient to meet customer demand. Our supply agreement with Abbott for everolimus-eluting stent systems extends through the middle of the fourth quarter of 2009 in Europe, and is currently being reviewed by the European Commission for possible extension; and through the end of the second quarter of 2012 in the U.S. and Japan. We expect to launch our next-generation, internally-manufactured everolimus-eluting coronary stent system, the PROMUS Element stent system, in our Europe/Middle East/Africa (EMEA) region and certain Inter-Continental countries in the fourth quarter of 2009 and in the U.S. and Japan in mid-2012. In addition, the price we pay for our supply of everolimus-eluting stent systems from Abbott is determined by contracts with Abbott and is based, in part, on previously fixed estimates of Abbotts manufacturing costs for everolimus-eluting stent systems and third-party reports of our average selling price of these stent systems. Amounts paid pursuant to this pricing arrangement are subject to a retroactive adjustment at pre-determined intervals based on Abbotts actual costs to manufacture these stent systems for us and our average selling price of everolimus-eluting stent systems supplied to us by Abbott. During 2009, we may make a payment to or receive payment from Abbott based on the differences between their actual manufacturing costs and the contractually stipulated manufacturing costs, and differences between our actual average selling price and third-party reports of our average selling price, in each case, with respect to our purchases of PROMUS stent systems from Abbott during 2006, 2007 and a portion of 2008. Property, plant and equipment, net June 3

Borrowings and Credit Arrangeme

Borrowings and Credit Arrangements
	6 Months Ended Jun. 30, 2009 USD / shares
Borrowings and Credit Arrangements [Abstract]
BORROWINGS AND CREDIT ARRANGEMENTS	NOTE D BORROWINGS AND CREDIT ARRANGEMENTS We had total debt of $6.250billion as of June30, 2009 at an average interest rate of 5.51 percent, as compared to total debt of $6.745billion as of December31, 2008 at an average interest rate of 5.65percent. The debt maturity schedule for the significant components of our debt obligations as of June30, 2009 is as follows: Payments due by Period (in millions) 2009 2010 2011 2012 2013 Thereafter Total Term loan $ 325 $ 2,000 $ 2,325 Abbott Laboratories loan 900 900 Senior notes 850 $ 2,200 3,050 $ 325 $ 3,750 $ 2,200 $ 6,275 Note: The table above does not include discounts associated with our Abbott loan and senior notes, or amounts related to certain interest rate swaps that were used to hedge the fair value of certain of our senior notes. In July2009, we made a prepayment of $225million towards our term loan. As a result, our next debt maturity is $100million due in April2010. In February2009, we amended our term loan and revolving credit facility agreement to increase flexibility under our financial covenants. The amendment provides for an exclusion from the calculation of consolidated EBITDA, as defined by the amended agreement, through the credit agreement maturity in April2011, of up to $346million in restructuring charges to support our Plant Network Optimization and other expense reduction initiatives, described in Note F - Restructuring-related Activities; an exclusion for any litigation-related charges and credits until such items are paid or received; and an exclusion of up to $1.137billion of any cash payments for litigation settlements or damage awards (net of any litigation payments received), and all cash payments (net of cash receipts) related to amounts that were recorded in the financial statements before January1, 2009. At the same time, we prepaid $500million of our term loan. In addition, the agreement provides for an increase in interest rates on our term loan borrowings from LIBOR plus 1.00percent to LIBOR plus 1.75percent at current credit ratings. Further, the interest rate on unused facilities increased from 0.175percent to 0.500percent. In connection with the amendment of our term loan and revolving credit facility, we reduced availability under our credit facility by $250million to $1.750billion. Further reducing our borrowing capacity, in 2008, we issued a $717million surety bond backed by a $702million letter of credit and $15million of cash to secure a damage award related to the Johnson Johnson patent infringement case pending appeal, described in Note L Commitments and Contingencies. We also maintain a $350million credit and security facility secured by our U.S. trade receivables. Use of the borrowings is unrestricted. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. Durin

Acquisitions

Acquisitions
	6 Months Ended Jun. 30, 2009 USD / shares
Acquisitions [Abstract]
ACQUISITIONS	NOTE E ACQUISITIONS Purchased Research and Development Our policy is to record certain costs associated with strategic alliances as purchased research and development. Our adoption of FASB Statement No.141(R), Business Combinations, as of January1, 2009, did not change this policy with respect to asset purchases. In accordance with this policy, we recorded purchased research and development charges of $17million in the second quarter and first half of 2009, and $13million in the first half of 2008, associated with entering certain licensing and development arrangements. Since the technology purchases did not involve the transfer of processes or outputs as defined by Statement No.141(R), the transaction did not qualify as a business combination. We did not consummate any material business combinations in the first half of 2009. For any future business combinations that we enter, we will recognize purchased research and development as an intangible asset, in accordance with Statement No.141(R). In the second quarter of 2008, we completed the acquisition of 100percent of the fully diluted equity of CryoCor, Inc., and paid a cash purchase price of $21million. In connection with the acquisition, we recorded pre-tax purchased research and development charges of $16million. Payments Related to Prior Period Acquisitions Certain of our acquisitions involve the payment of contingent consideration. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels, achieving product development targets or obtaining regulatory approvals. In August2007, we entered an agreement to amend our 2004 merger agreement with the principal former shareholders of Advanced Bionics Corporation. Previously, we were obligated to pay future consideration contingent primarily on the achievement of future performance milestones. The amended agreement provided a new schedule of consolidated, fixed payments, consisting of $650million that was paid in 2008, and a final $500million payment, which we made during the first quarter of 2009. During the first half of 2009, including the $500 million payment to the former shareholders of Advanced Bionics, we made total payments of $517 million related to prior period acquisitions. As of June30, 2009, the estimated maximum potential amount of future contingent consideration (undiscounted)that we could be required to make associated with our prior acquisitions is approximately $730million. The milestones associated with the contingent consideration must be reached in certain future periods ranging from 2009 through 2025. The estimated cumulative specified revenue level associated with these maximum future contingent payments is approximately $2.8billion.

Restructuring Related Activitie

Restructuring Related Activities
	6 Months Ended Jun. 30, 2009 USD / shares
Restructuring-Related Activities [Abstract]
RESTRUCTURING-RELATED ACTIVITIES	NOTE F RESTRUCTURING-RELATED ACTIVITIES In October2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan), which resulted in the elimination of approximately 2,300 positions worldwide. We are providing affected employees with severance packages, outplacement services and other appropriate assistance and support. The plan is intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan include the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain RD projects; and the transfer of certain production lines among facilities. We initiated these activities in the fourth quarter of 2007 and expect to be substantially complete in 2010. We expect that the execution of this plan will result in total pre-tax expenses of approximately $425million to $450million. We are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. We expect the plan to result in cash payments of approximately $390million to $405 million. The following provides a summary of our expected total costs associated with the plan by major type of cost: Total estimated amount expected to Type of cost be incurred Restructuring charges: Termination benefits $215 million to $225 million Fixed asset write-offs $20 million to $25 million Other (1) $70 million to $75 million Restructuring-related expenses: Retention incentives $70 million Accelerated depreciation $15 million to $20 million Transfer costs (2) $35 million $425 million to $450 million (1) Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs. (2) Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations. In addition, in January2009, our Board of Directors approved, and we committed to, a Plant Network Optimization plan, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The plan is a complement to our 2007 Restructuring plan, and is intended to improve overall gross profit margins. Activities under the Plant Network Optimization plan were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2011. We estimate that the execution of this plan will result in total pre-tax charges of approximately $135million to $150million, and that approximately $120million to $130million of these charges will result in future cash outlays. The following provides a summary of our estimates of costs associated with the Plant Network Optimization plan by

Divestitures

Divestitures
	6 Months Ended Jun. 30, 2009 USD / shares
Divestitures [Abstract]
DIVESTITURES	NOTE G DIVESTITURES During 2007, we determined that our Auditory, Vascular Surgery, Cardiac Surgery, Venous Access and Fluid Management businesses were no longer strategic to our on-going operations. We completed the sale of these businesses in the first quarter of 2008, receiving pre-tax proceeds of approximately $1.3billion. During the first quarter of 2008, we recorded a $250 million gain in connection with the sale of our Fluid Management and Venous Access businesses and our TriVascular Endovascular Aortic Repair (EVAR) program. In February 2008, we completed the sale of our Fluid Management and Venous Access businesses to Navylist Medical (affiliated with Avista Capital Partners) for net cash proceeds of approximately $400 million. We recorded a pre-tax gain of $234 million ($161 million after-tax) during the first quarter of 2008 associated with this transaction. We acquired the Fluid Management business as part of our acquisition of Schneider Worldwide in 1998. The Venous Access business was previously a component of our former Oncology business. In March 2008, we sold our EVAR program obtained in connection with our 2005 acquisition of TriVascular, Inc. for $30 million in cash. We discontinued our EVAR program in 2006. In connection with the sale, we recorded a pre-tax gain of $16 million ($36 million after-tax) during 2008. During 2007, we announced our intent to monetize those investments in our portfolio determined to be non-strategic. During 2008, we entered transactions to sell the majority of our investments in, and notes receivable from, certain publicly traded and privately held entities, and received pre-tax proceeds for investments sold of $149million. During the first quarter of 2009, we substantially completed the sale of our non-strategic investments, and received additional proceeds and collections of notes receivable of approximately $50million. We recognized a net gain of $3million associated with these transactions in the first half of 2009, and a net loss of $96million during the first half of 2008.

Comprehensive Income

Comprehensive Income
	6 Months Ended Jun. 30, 2009 USD / shares
Comprehensive Income [Abstract]
COMPREHENSIVE INCOME	NOTE H COMPREHENSIVE INCOME The following table provides a summary of our comprehensive income: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2009 2008 2009 2008 Net income $ 158 $ 98 $ 145 $ 420 Foreign currency translation adjustment 26 20 20 30 Net change in unrealized gains and losses on derivative financial instruments, net of tax (66 ) 65 9 (28 ) Net change in unrealized gains or losses on equity investments, net of tax (1 ) 1 (8 ) Other (2 ) Comprehensive income $ 118 $ 182 $ 175 $ 412

Weighted Average Shares Outstan

Weighted Average Shares Outstanding
	6 Months Ended Jun. 30, 2009 USD / shares
Weighted-Average Shares Outstanding [Abstract]
WEIGHTED-AVERAGE SHARES OUTSTANDING	NOTE I WEIGHTED-AVERAGE SHARES OUTSTANDING The following is a reconciliation of weighted-average shares outstanding for basic and diluted earnings per share computations: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2009 2008 2009 2008 Weighted average shares outstanding basic 1,506.8 1,497.6 1,505.8 1,495.8 Net effect of common stock equivalents 7.7 7.6 5.8 6.8 Weighted average shares outstanding assuming dilution 1,514.5 1,505.2 1,511.6 1,502.6 Weighted-average shares outstanding, assuming dilution, excludes the impact of 51million stock options for the second quarter of 2009, 41million for the second quarter of 2008, 58million for the first half of 2009, and 49million for the first half of 2008, due to the exercise prices of these stock options being greater than the average market price of our common stock during those periods. We issued approximately 1.0million shares of our common stock in the second quarter of 2009, 3.3 million in the second quarter of 2008, 5.6million during the first half of 2009, and 7.5million during the first half of 2008 following the exercise or vesting of the underlying stock options or deferred stock units, or purchase under our employee stock purchase plan.

Stock Based Compensation

Stock Based Compensation
	6 Months Ended Jun. 30, 2009 USD / shares
Stock Based Compensation [Abstract]
STOCK-BASED COMPENSATION	NOTE J STOCK-BASED COMPENSATION The following presents the impact of stock-based compensation expense on our unaudited condensed consolidated statements of operations: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2009 2008 2009 2008 Cost of products sold $ 6 $ 6 $ 12 $ 12 Selling, general and administrative expenses 20 21 49 49 Research and development expenses 7 7 17 14 33 34 78 75 Income tax benefit (10 ) (11 ) (25 ) (23 ) $ 23 $ 23 $ 53 $ 52 Impact on net income per common share basic $ (0.02 ) $ (0.02 ) $ (0.04 ) $ (0.03 ) Impact on net income per common share assuming dilution $ (0.02 ) $ (0.02 ) $ (0.04 ) $ (0.03 )

Income Taxes

Income Taxes
	6 Months Ended Jun. 30, 2009 USD / shares
Income Taxes [Abstract]
INCOME TAXES	NOTE K INCOME TAXES The following table provides a summary of our reported tax rate: Three Months Ended Percentage June 30, Point 2009 2008 Increase (Decrease) Reported tax rate 12.2 % 2.0 % 10.2 % Impact of certain charges* 6.5 % 18.1 % (11.6 )% Six Months Ended Percentage June 30, Point 2009 2008 Increase (Decrease) Reported tax rate (74.7 )% 25.3 % (100.0 )% Impact of certain charges* 94.5 % (3.3 )% 97.8 % * These charges are taxed at different rates than our effective tax rate. The change in our reported tax rate for the second quarter and first half of 2009, as compared to the same periods in 2008, relates primarily to the impact of certain charges that are taxed at different rates than our effective tax rate. In 2009, these charges included intangible asset impairment charges, purchased research and development charges, restructuring- and litigation-related charges, and a favorable tax ruling on a divestiture-related gain recognized in a prior period. Our reported tax rate was also affected by discrete items, associated primarily with resolutions of uncertain tax positions and a favorable adjustment as a result of a state law change, resulting in tax benefits of $13million for the second quarter of 2009 and $87million for the first half of 2009. In 2008, these charges included purchased research and development charges, a gain on the divestiture of certain non-strategic businesses, restructuring-related charges, and discrete tax items associated with the resolution of various tax matters. As of January1, 2009, we adopted FASB Statement No.141(R), Business Combinations, which requires that we recognize changes in acquired income tax uncertainties (applied to acquisitions before and after the adoption date) as income tax expense or benefit. As of June30, 2009, we had $1.082 billion of gross unrecognized tax benefits, $959million of which, if recognized, would affect our effective tax rate. As of December31, 2008, we had $1.107billion of gross unrecognized tax benefits, $978million of which, if recognized, would affect our effective tax rate. The net reduction in our unrecognized tax benefits is attributable primarily to the resolution of certain unrecognized tax positions related to audit settlements of $59million in the first half of 2009. We recognize interest and penalties related to income taxes as a component of income tax expense. We recognized income tax related interest and penalties of $8million in the second quarter of 2009, $13million in the second quarter of 2008, $20million in the first half of 2009 and $11 million in the first half of 2008, including a net release in the first quarter. We had $296 million accrued for gross interest and penalties as of June30, 2009 and $268million as of December31, 2008. We are subject to U.S. federal income tax as well as income tax of multiple state and foreign jurisdictions. We have concluded all U.S. federal income tax matters through 2000 and substantially all material sta

Commitments and Contingencies

Commitments and Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Commitments and Contingencies [Abstract]
COMMITMENTS AND CONTINGENCIES	NOTE L COMMITMENTS AND CONTINGENCIES The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation to defend or create market advantage is inherently complex and unpredictable. Furthermore, appellate courts frequently overturn lower court patent decisions. In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the proceedings and are frequently modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies. Several third parties have asserted that our current and former stent systems infringe patents owned or licensed by them. We have similarly asserted that stent systems or other products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain stent products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial position, results of operations or liquidity. In particular, we are engaged in significant patent litigation with Johnson Johnson relating to stent systems, balloon catheters and stent delivery systems. We have each asserted that products of the other infringe patents owned or exclusively licensed by each of us. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operation or liquidity. In the normal course of business, product liability and securities claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We are substantially self-insured with respect to product liability claims, and maintain an insurance policy providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, product recalls, securities litigation, and other legal proceedings in the future, regardl

Segment Reporting

Segment Reporting
	6 Months Ended Jun. 30, 2009 USD / shares
Segment Reporting [Abstract]
SEGMENT REPORTING	NOTE M SEGMENT REPORTING During the first quarter of 2009, we reorganized our international structure to provide more direct sales focus in the marketplace. Accordingly, we have revised our reportable segments to reflect the way we currently manage and view our business. Each of our reportable segments generates revenues from the sale of medical devices. As of June30, 2009, we had four reportable segments based on geographic regions: the United States; EMEA, consisting of Europe, the Middle East and Africa; Japan; and Inter-Continental, consisting of Asia Pacific and the Americas. The reportable segments represent an aggregate of all operating divisions within each segment. We measure and evaluate our reportable segments based on segment net sales and operating income. We exclude from segment operating income certain corporate and manufacturing-related expenses, as our corporate and manufacturing functions do not meet the definition of a segment, as defined by FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information. In addition, certain transactions or adjustments that our Chief Operating Decision Maker considers to be non-recurring and/or non-operational, such as amounts related to intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related activities; as well as amortization expense, are excluded from segment operating income. Although we exclude these amounts from segment operating income, they are included in reported consolidated operating income and are included in the reconciliation below. We manage our international operating segments on a constant currency basis. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and expenses from manufacturing operations, are based on internally derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. We have reclassified previously reported segment results to be consistent with the 2009 presentation. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographic distribution that would occur if the segments were not interdependent. A reconciliation of the totals reported for the reportable segments to the applicable line items in our unaudited condensed consolidated statements of operations is as follows: Three Months Ended Six Months Ended June 30, June 30, (in millions) 2009 2008 2009 2008 Net sales United States $ 1,194 $ 1,088 $ 2,364 $ 2,205 EMEA 475 464 948 922 Japan 215 196 421 408 Inter-Continental 182 168 349 323 Net sales allocated to reportable segments 2,066 1,916 4,082 3,858 Sales generated from divested businesses 1 18 5 49 Impact of foreign currency fluctuations 7 90 (3 ) 164 $ 2,074 $

New Accounting Pronouncements

New Accounting Pronouncements
	6 Months Ended Jun. 30, 2009 USD / shares
New Accounting Pronouncements [Abstract]
NEW ACCOUNTING PRONOUNCEMENTS	NOTE N NEW ACCOUNTING PRONOUNCEMENTS Statement No.141(R) In December2007, the FASB issued Statement No.141(R), Business Combinations, a replacement for Statement No.141. Statement No.141(R) retains the fundamental requirements of Statement No.141, but requires the recognition of all assets acquired and liabilities assumed in a business combination at their fair values as of the acquisition date. It also requires the recognition of assets acquired and liabilities assumed arising from contractual contingencies at their acquisition date fair values. Additionally, Statement No.141(R) supersedes FASB Interpretation No.4, Applicability of FASB Statement No.2 to Business Combinations Accounted for by the Purchase Method, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Statement No.141(R) now requires that purchased research and development be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. We were required to adopt Statement No.141(R) prospectively for any acquisitions on or after January1, 2009. During the first half of 2009, we did not consummate any material business combinations. Statement No.161 In March2008, the FASB issued Statement No.161, Disclosures about Derivative Instruments and Hedging Activities, which amends Statement No.133, Accounting for Derivative Instruments and Hedging Activities, by requiring expanded disclosures about an entitys derivative instruments and hedging activities. Statement No.161 requires increased qualitative, quantitative, and credit-risk disclosures, including (a)how and why an entity uses derivative instruments, (b)how derivative instruments and related hedged items are accounted for under Statement No.133 and its related interpretations, and (c)how derivative instruments and related hedged items affect an entitys financial position and financial performance. We adopted Statement No.161 as of our first quarter ended March31, 2009. Refer to Note B Financial Instruments for more information. Statement No.165 In May2009, the FASB issued Statement No.165, Subsequent Events, which establishes general standards of accounting for and disclosure of events occurring after the balance sheet date, but before the financial statements are issued or available to be issued. Statement No.165 also requires entities to disclose the date through which it has evaluated subsequent events and the basis for that date. We adopted Statement No.165 for our second quarter ended June30, 2009. Its adoption did not impact our results of operations or financial condition. Refer to Note O Subsequent Events for more information regarding our evaluation of subsequent events. Statement No.168 In June2009, the FASB issued Statement No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which establishes the FASB Accounting Standards Codification as the single source of authoritative U.S. GAAP. The Codification will supersede

Subsequent Events

Subsequent Events
	6 Months Ended Jun. 30, 2009 USD / shares
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	NOTE O SUBSEQUENT EVENTS We have evaluated events occurring after the date of our accompanying unaudited condensed consolidated balance sheets through August6, 2009, the date of the filing of this Quarterly Report on Form 10-Q. We did not identify any material subsequent events requiring adjustment to our accompanying unaudited condensed consolidated financial statements (recognized subsequent events). Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note D Borrowings and Credit Arrangements, and Note L Commitments and Contingencies for more information.