Boston Scientific (BSX) 10-Q 6 Nov 09 2009 Q3 Quarterly report Financial data

Document and Company Informatio

Document and Company Information (USD $)
In Millions, except Share data	9 Months Ended Sep. 30, 2009	Oct. 31, 2009	Jun. 30, 2008
Document and Company Information [Abstract]
Entity Registrant Name	BOSTON SCIENTIFIC CORP
Entity Central Index Key	0000885725
Document Type	10-Q
Document Period End Date	2009-09-30
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		1,510,429,990

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Net sales	$2,025	$1,978	$6,109	$6,048
Cost of products sold	629	655	1,867	1,839
Gross profit	1,396	1,323	4,242	4,209
Operating expenses:
Selling, general and administrative expenses	665	610	1,987	1,925
Research and development expenses	258	252	778	749
Royalty expense	51	51	149	144
Loss on program termination	0	0	16	0
Amortization expense	126	131	381	410
Intangible asset impairment charges	0	155	10	155
Purchased research and development	0	(8)	17	21
Acquisition - related milestone	0	(250)	0	(250)
Gain on divestitures	0	0	0	(250)
Restructuring charges	9	20	44	59
Litigation-related net charges	236	334	523	334
Total operating expenses	1,345	1,295	3,905	3,297
Operating income	51	28	337	912
Other income (expense):
Interest expense	(91)	(112)	(285)	(361)
Other, net	(4)	16	(13)	(57)
(Loss) income before income taxes	(44)	(68)	39	494
Income tax expense (benefit)	50	(6)	(12)	136
Net (loss) income	($94)	($62)	$51	$358
Net (loss) income per common share - basic	-0.06	-0.04	0.03	0.24
Net (loss) income per common share - assuming dilution	-0.06	-0.04	0.03	0.24
Weighted-average shares outstanding
Basic	1509.3	1500.9	1,507	1497.5
Assuming dilution	1509.3	1500.9	1514.4	1504.4

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Millions	Sep. 30, 2009	Dec. 31, 2008
Current assets:
Cash and cash equivalents	$1,381	$1,641
Trade accounts receivable, net	1,431	1,402
Inventories	942	853
Deferred income taxes	825	911
Prepaid expenses and other current assets	383	645
Total current assets	4,962	5,452
Property, plant and equipment, net	1,731	1,728
Goodwill	12,432	12,421
Other intangible assets, net	6,855	7,244
Other long-term assets	249	294
Total assets	26,229	27,139
Current liabilities:
Current debt obligations	256	2
Accounts payable	225	239
Accrued expenses	2,431	2,612
Other current liabilities	264	380
Total current liabilities	3,176	3,233
Long-term debt	5,774	6,743
Deferred income taxes	2,133	2,262
Other long-term liabilities	1,849	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 1,510,249,821 shares as of September 30, 2009 and 1,501,635,679 shares as of December 31, 2008	15	15
Additional paid-in capital	16,056	15,944
Accumulated deficit	(2,681)	(2,732)
Other stockholders' deficit	(93)	(53)
Total stockholders' equity	13,297	13,174
Total liabilities and stockholders' equity	$26,229	$27,139

1_Condensed Consolidated Balanc

Condensed Consolidated Balance Sheets (Parenthetical) (Unaudited) (USD $)
	Sep. 30, 2009	Dec. 31, 2008
Stockholders' equity
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	1,510,249,821	1,501,635,679

2_Condensed Consolidated Statem

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Millions	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Cash provided by operating activities	$1,164	$1,162
Investing activities:
Purchases of property, plant and equipment	(225)	(208)
Proceeds from sales of publicly traded and privately held equity securities and collections of notes receivable	54	110
Payments for acquisitions of businesses, net of cash acquired	(4)	(21)
Payments relating to prior period acquisitions	(517)	(669)
Proceeds from business divestitures	0	1,286
Payments for investments in companies and acquisitions of certain technologies	(41)	(26)
Cash (used for) provided by investing activities	(733)	472
Financing activities:
Payments on credit and security facility and long-term borrowings	(725)	(1,425)
Proceeds from issuances of shares of common stock	32	68
Excess tax benefit from option excercises	0	4
Cash used for financing activities	(693)	(1,353)
Effect of foreign exchange rates on cash	2	1
Net (decrease) increase in cash and cash equivalents	(260)	282
Cash and cash equivalents at beginning of period	1,641	1,452
Cash and cash equivalents at end of period	$1,381	$1,734

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 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 nine months ended September30, 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. We have evaluated events occurring after the date of our accompanying unaudited condensed consolidated balance sheets through the time of the filing of this Quarterly Report on Form 10-Q on November6, 2009. On November 3, 2009, we reached an agreement in principle with the U.S. Department of Justice to pay $296 million in order to resolve the U.S. Government investigation of Guidant Corporation related to product advisories issued in 2005, discussed further in Note L Commitments and Contingencies. This subsequent event provided additional evidence about conditions that existed as of the date of the balance sheet in our accompanying unaudited condensed consolidated financial statements, including the estimates inherent in the process of preparing financial statements and is, therefore, a recognized subsequent event, as defined by Financial Accounting Standards Board (FASB) Accounting Standards CodificationTM (ASC) Topic 855, Subsequent Events. Accordingly, we have recorded a loss of $294 million in the third quarter of 2009 in our accompanying unaudited condensed consolidated statements of operations, and increased our associated litigation-related reserves in our accompanying unaudited condensed consolidated balance sheets by $294 million as of September 30, 2009. Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note L Commitments and Contingencies for more information. 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
	9 Months Ended Sep. 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 ASCTopic 815, Derivatives and Hedging (formerly FASB Statement No.133, Accounting for Derivative Instruments and Hedging Activities). In accordance with Topic 815, 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 Topic 815. 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 manage our exposure to changes in foreign currency on a consolidated basis to take advantage of offsetting transactions and balances. We use both derivative instruments (currency forward and option contracts), and non-derivatives (primarily European manufacturing operations) 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 September30, 2009 and December31, 2008 were cash flow hedges under Topic 815 intended to protect the U.S. dollar value of our forecasted foreign currency denominated transactions. 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 ear

Supplemental Balance Sheet Info

Supplemental Balance Sheet Information
	9 Months Ended Sep. 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 September30, 2009 and December31, 2008. Inventories September 30, December 31, (in millions) 2009 2008 Finished goods $ 634 $ 555 Work-in-process 134 135 Raw materials 174 163 $ 942 $ 853 Sales of the PROMUS everolimus-eluting stent system represented approximately eight percent of our total net sales for the first nine months of 2009. We are currently reliant on Abbott Laboratories for our supply of everolimus-eluting stent systems in the U.S. and Japan, 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. In November 2009, we announced receipt of CE Mark approval to market our next-generation internally-manufactured everolimus-eluting stent system, the PROMUS Element stent system, and simultaneously launched this stent system in our EMEA region and certain Inter-Continental countries. We expect to launch our PROMUS Element stent system 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 approximately every two years 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 the fourth quarter of 2009 or soon thereafter, 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 res

Borrowings and Credit Arrangeme

Borrowings and Credit Arrangements
	9 Months Ended Sep. 30, 2009 USD / shares
Borrowings and Credit Arrangements [Abstract]
BORROWINGS AND CREDIT ARRANGEMENTS	NOTE D BORROWINGS AND CREDIT ARRANGEMENTS We had total debt of $6.030billion as of September30, 2009 and $6.745billion as of December31, 2008. The debt maturity schedule for the significant components of our debt obligations as of September30, 2009 is as follows: Payments due by Period (in millions) 2009 2010 2011 2012 2013 Thereafter Total Term loan $ 100 $ 2,000 $ 2,100 Abbott Laboratories loan 900 900 Senior notes 850 $ 2,200 3,050 $ 100 $ 3,750 $ 2,200 $ 6,050 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 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; 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. 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. In 2008, we issued a $717million surety bond backed by a $702million letter of credit under our revolving credit facility, and $15million of cash to secure a damage award related to the Johnson Johnson patent infringement case described in Note L Commitments and Contingencies. In October2009, we satisfied the related obligation of $716million using cash generated from operations, and now have full access to our $1.750billion credit facility. 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. During the third quarter of 2009, we extended the maturity of this facility to August2010. There were no amounts borrowed under this facility as of September30, 2009 or December31, 2008. Further, we have uncommitted credit facilities with two commercial Japanese banks that provide for borrowings and promissory n

Acquisitions

Acquisitions
	9 Months Ended Sep. 30, 2009 USD / shares
Acquisitions [Abstract]
ACQUISITIONS	NOTE E ACQUISITIONS Purchased Research and Development In May2008, 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, during the second quarter of 2008, we recorded purchased research and development charges of $16million, based on the best information available at the time. In the third quarter of 2008, we made certain purchase accounting adjustments related to changes in deferred taxes and other accruals, which resulted in a credit of $8million to amounts allocated to purchased research and development. As of January1, 2009, we adopted FASB Statement No.141(R), Business Combinations (codified within ASC Topic 805, Business Combinations), a replacement for Statement No.141. Additionally, Statement No.141(R) superseded 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) (Topic 805) 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. During the first nine months of 2009, we did not consummate any material business combinations. For any future business combinations that we enter, we will recognize purchased research and development as an intangible asset. Our policy is to record certain costs associated with strategic alliances as purchased research and development. Our adoption of Statement No.141(R) (Topic 805) 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 first nine months of 2009 and $13million in the first nine months of 2008, associated with entering certain licensing and development arrangements. Since the 2009 technology purchases did not involve the transfer of processes or outputs as defined by Statement No.141(R) (Topic 805), the transactions did not qualify as business combinations. 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 nine months of 200

Restructuring Related Activitie

Restructuring Related Activities
	9 Months Ended Sep. 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 the first half of 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 $385million to $405million. 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 $220million to $225million Fixed asset write-offs $25million Other (1) $65million to $70million Restructuring-related expenses: Retention incentives $65million to $70million Accelerated depreciation $15million to $20million Transfer costs (2) $35million to $40million $425million to $450million (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 program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, and is intended to improve overall gross profit margins. Activities under the Plant Network Optimization program 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 the Plant Network Optimization program will result in total pre-tax charges of approximately $135million to $150million, and that approximately $115million to $125million of these charges will result in future cash outlays. The following provides a summary of our estimates of costs associated

Divestitures

Divestitures
	9 Months Ended Sep. 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, and eliminated 2,000 positions in connection with these divestitures. During the first quarter of 2008, we recorded a $250million gain in connection with the sale of our Fluid Management and Venous Access businesses and our TriVascular Endovascular Aortic Repair (EVAR)program. In February2008, we completed the sale of our Fluid Management and Venous Access businesses to Navylist Medical (affiliated with Avista Capital Partners) and recorded a pre-tax gain of $234million associated with this transaction. The Venous Access business was previously a component of our former Oncology business. In March2008, we sold our EVAR program obtained in connection with our 2005 acquisition of TriVascular, Inc. and recorded a pre-tax gain of $16 million associated with this transaction. 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 nine months of 2009, we completed the sale of our non-strategic investments, and received additional proceeds from sales of investments and collections of notes receivable of $54million. We recognized a net gain of $3million associated with these transactions in the first nine months of 2009, and a net loss of $80million during the first nine months of 2008.

Comprehensive Income

Comprehensive Income
	9 Months Ended Sep. 30, 2009 USD / shares
Comprehensive Income [Abstract]
COMPREHENSIVE INCOME	NOTE H COMPREHENSIVE INCOME The following table provides a summary of our comprehensive (loss) income: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2009 2008 2009 2008 Net (loss) income $ (94 ) $ (62 ) $ 51 $ 358 Foreign currency translation adjustment 12 (38 ) 33 (7 ) Net change in unrealized gains and losses on derivative financial instruments, net of tax (82 ) 111 (73 ) 83 Net change in unrealized gains or losses on equity investments, net of tax (1 ) (7 ) (16 ) Other, net of tax (2 ) Comprehensive (loss) income $ (165 ) $ 4 $ 11 $ 416

Weighted Average Shares Outstan

Weighted Average Shares Outstanding
	9 Months Ended Sep. 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 Nine Months Ended September 30, September 30, (in millions) 2009 2008 2009 2008 Weighted average shares outstanding basic 1,509.3 1,500.9 1,507.0 1,497.5 Net effect of common stock equivalents 7.4 6.9 Weighted average shares outstanding assuming dilution 1,509.3 1,500.9 1,514.4 1,504.4 Weighted-average shares outstanding, assuming dilution, excludes the impact of 10.9 million common stock equivalents for the third quarter of 2009, and 7.0million common stock equivalents for the third quarter of 2008 due to our net loss position in those periods. Additionally, weighted-average shares outstanding, assuming dilution, excludes the impact of 46million stock options for the third quarter of 2009, 45million for the third quarter of 2008, 54million for the first nine months of 2009, and 48million for the first nine months 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 threemillion shares of our common stock in the third quarter of 2009, two million in the third quarter of 2008, ninemillion during the first nine months of 2009, and 10million during the first nine months 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
	9 Months Ended Sep. 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 accompanying unaudited condensed consolidated statements of operations: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2009 2008 2009 2008 Cost of products sold $ 5 $ 4 $ 17 $ 16 Selling, general and administrative expenses 21 20 70 69 Research and development expenses 7 7 24 21 33 31 111 106 Income tax benefit (10 ) (9 ) (35 ) (32 ) $ 23 $ 22 $ 76 $ 74 Net (loss) incomeper common share basic $ (0.02 ) $ (0.01 ) $ (0.05 ) $ (0.05 ) Net (loss) incomeper common share assuming dilution $ (0.02 ) $ (0.01 ) $ (0.05 ) $ (0.05 )

Income Taxes

Income Taxes
	9 Months Ended Sep. 30, 2009 USD / shares
Income Taxes [Abstract]
INCOME TAXES	NOTE K INCOME TAXES Tax Rate The following table provides a summary of our reported tax rate: Three Months Ended Percentage September 30 Point 2009 2008 Increase (Decrease) Reported tax rate (113.6 )% 8.8 % (122.4 )% Impact of certain charges* 128.9 % 18.7 % 110.2 % Nine Months Ended Percentage September 30 Point 2009 2008 Increase (Decrease) Reported tax rate (30.8 )% 27.5 % (58.3 )% Impact of certain charges* 49.1 % (4.2 )% 53.3 % * These charges are taxed at different rates than our effective tax rate. The change in our reported tax rate for the third quarter and the first nine months of 2009, as compared to the same periods in 2008, relates primarily to the impact of certain items that are taxed at different rates than our effective tax rate. In 2009, these items included intangible asset impairment charges, purchased research and development, 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 related to audit settlements and changes in estimates for tax benefits claimed related to prior periods, resulting in a net tax expense of $2 million for the third quarter of 2009 and a net tax benefit of $85 million for the first nine months of 2009. In 2008, these items included purchased research and development, amounts recorded for 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 (codified within ASC Topic 805, 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 September30, 2009, we had $1.075billion of gross unrecognized tax benefits, $952million of which, if recognized, would affect our effective tax rate. As of December31, 2008, we had $1.107 billion 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 $63million in the first nine months of 2009. We recognize interest and penalties related to income taxes as a component of income tax expense. We recognized a net release of interest and penalties of $2million in the third quarter of 2009, and we recognized $17million of interest expense in the first nine months of 2009. In 2008, we recognized $21million of interest expense in the third quarter and $32million in the first nine months of 2008, including a net release of interest and penalties in the first quarter. We had $293million accrued for gross interest and penalt

Commitments and Contingencies

Commitments and Contingencies
	9 Months Ended Sep. 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, although our recent settlement with Johnson Johnson resolved 14 litigation matters, as discussed below, we continue to be involved 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. Pr

Segment Reporting

Segment Reporting
	9 Months Ended Sep. 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 and have reclassified below previously reported segment results to be consistent with the 2009 presentation. Each of our reportable segments generates revenues from the sale of medical devices. As of September30, 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 ASC Topic 280, Segment Reporting (formerly 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. 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 accompanying unaudited condensed consolidated statements of operations is as follows: Three Months Ended Nine Months Ended September 30, September 30, (in millions) 2009 2008 2009 2008 Net sales United States $ 1,167 $ 1,125 $ 3,530 $ 3,330 EMEA 423 427 1,368 1,344 Japan 207 194 626 600 Inter-Continental 182 165 537 494 Net sales allocated to reportable segments 1,979 1,911 6,061 5,768 Sales generated from divested businesses 2 12 5 58 Impact of foreign currency flu

New Accounting Pronouncements

New Accounting Pronouncements
	9 Months Ended Sep. 30, 2009 USD / shares
New Accounting Pronouncements [Abstract]
NEW ACCOUNTING PRONOUNCEMENTS	NOTE N NEW ACCOUNTING PRONOUNCEMENTS In June2009, the FASB issued Statement No.168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles (codified within ASC Topic 105, Generally Accepted Accounting Principles), which establishes the FASB Accounting Standards Codification (ASC)as the single source of authoritative U.S. GAAP. The Codification supersedes all previous non-SEC accounting and reporting standards. We adopted Statement No.168 for our third quarter ended September30, 2009 and have conformed all references to accounting literature in this Quarterly Report to the appropriate reference within the Codification. All new authoritative guidance is issued in the form of ASC Updates. We have provided dual-referencing for those standards that we adopted prior to the issuance of the Codification. The adoption of this standard did not have any impact on our financial position or results of operations. ASC Update No.2009-13 In October2009, the FASB issued ASC Update No.2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. The consensus in Update No.2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No.00-21, Multiple-Element Arrangements) and requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. The consensus eliminates the use of the residual method of allocation and requires the use of the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables subject to ASC 605-25. We are required to adopt Update No.2009-13 as of January1, 2011 and are in the process of determining the impact that the adoption of Update No.2009-13 will have on our future results of operations or financial position. Statement No.167 (not yet codified) In June2009, the FASB issued Statement No.167, Amendments to FASB Interpretation No.46(R) (to be codified within ASC Topic 810, Consolidation), which amends Interpretation No.46(R) to replace the quantitative-based analysis for determining which enterprise, if any, has a controlling financial interest in a variable interest entity (VIE). The revised approach is primarily qualitative and is focused on identifying which enterprise has both the power to direct activities of a VIE that most significantly impact the entitys economic performance and 1) the obligation to absorb losses of the entity or 2) the rights to receive benefits from the entity. We are required to adopt Statement No.167 for our first quarter ending March31, 2010. We do not believe the adoption of Statement No.167 will have a significant impact on our future results of operations or financial position. Statement No.165 (codified within ASC Topic 855) In May2009, the FASB issued Statement No.165, Subsequent Events (codified within ASC Topic 855, 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. State