þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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DELAWARE
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04-2695240
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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Large accelerated filer
þ
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Accelerated filer
o
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Non-Accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Shares outstanding
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Class
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as of October 30, 2015
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Common Stock, $.01 par value
|
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1,345,195,041
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Page No.
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||
in millions, except per share data
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2015
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2014
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2015
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2014
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||||||||
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||||||||
Net sales
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$
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1,888
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$
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1,846
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|
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$
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5,499
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$
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5,493
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Cost of products sold
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539
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550
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1,600
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1,651
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||||
Gross profit
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1,349
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1,296
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3,899
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3,842
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||||||||
Operating expenses:
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||||||||
Selling, general and administrative expenses
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729
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741
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2,095
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2,150
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||||
Research and development expenses
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221
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212
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632
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609
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||||
Royalty expense
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17
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21
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53
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86
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||||
Amortization expense
|
131
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|
109
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361
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327
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||||
Intangible asset impairment charges
|
10
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12
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19
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177
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||||
Contingent consideration expense (benefit)
|
40
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(4
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)
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86
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(122
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)
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||||
Restructuring charges
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7
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2
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16
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37
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||||
Litigation-related charges (credits)
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457
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139
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649
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399
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Pension termination charges
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36
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—
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44
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—
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||||
Gain on divestiture
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—
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—
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—
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(12
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)
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||||
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1,648
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1,232
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3,955
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3,651
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Operating income (loss)
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(299
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)
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64
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(56
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)
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191
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||||
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Other income (expense):
|
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Interest expense
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(58
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)
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(54
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)
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(225
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)
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(161
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)
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Other, net
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(10
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)
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(7
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)
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(31
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)
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15
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Income (loss) before income taxes
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(367
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)
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3
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(312
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)
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45
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Income tax expense (benefit)
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(169
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)
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(40
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)
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(215
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)
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(135
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)
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Net income (loss)
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$
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(198
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)
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$
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43
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$
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(97
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)
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$
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180
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|
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Net income (loss) per common share — basic
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$
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(0.15
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)
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$
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0.03
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$
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(0.07
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)
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$
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0.14
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Net income (loss) per common share — assuming dilution
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$
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(0.15
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)
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$
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0.03
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$
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(0.07
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)
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$
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0.13
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Weighted-average shares outstanding
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Basic
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1,344.0
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1,325.5
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1,339.7
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1,323.5
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Assuming dilution
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1,344.0
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1,347.6
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1,339.7
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1,347.3
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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(in millions)
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2015
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2014
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2015
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2014
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Net income (loss)
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$
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(198
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)
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$
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43
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$
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(97
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)
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$
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180
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Other comprehensive income (loss):
|
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Foreign currency translation adjustment
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(12
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)
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(15
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)
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(42
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)
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(23
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)
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Net change in unrealized gains and losses on derivative financial instruments, net of tax
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(27
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)
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83
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(42
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)
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28
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Net change in certain retirement plans, net of tax
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16
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—
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21
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|
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(1
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)
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Total other comprehensive income (loss)
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(23
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)
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68
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(63
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)
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4
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Total comprehensive income (loss)
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$
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(221
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)
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$
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111
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$
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(160
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)
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$
|
184
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As of
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||||||
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September 30,
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December 31,
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in millions, except share and per share data
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2015
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2014
|
||||
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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350
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$
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587
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Trade accounts receivable, net
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1,274
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1,183
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Inventories
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1,086
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946
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Deferred and prepaid income taxes
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367
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447
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Other current assets
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385
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443
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Total current assets
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3,462
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3,606
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Property, plant and equipment, net
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1,479
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1,507
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Goodwill
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6,468
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5,898
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Other intangible assets, net
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6,228
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5,606
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Other long-term assets
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578
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425
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TOTAL ASSETS
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$
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18,215
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$
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17,042
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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||||
Current liabilities:
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||||
Current debt obligations
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$
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63
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$
|
403
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Accounts payable
|
210
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|
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262
|
|
||
Accrued expenses
|
1,605
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1,950
|
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||
Other current liabilities
|
360
|
|
|
231
|
|
||
Total current liabilities
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2,238
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2,846
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|
||
Long-term debt
|
5,796
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|
3,859
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|
||
Deferred income taxes
|
770
|
|
|
1,214
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|
||
Other long-term liabilities
|
3,001
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|
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2,666
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|
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Commitments and contingencies
|
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|
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Stockholders’ equity
|
|
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|
||||
Preferred stock, $.01 par value - authorized 50,000,000 shares,
none issued and outstanding
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Common stock, $.01 par value - authorized 2,000,000,000 shares -
issued 1,592,429,606 shares as of September 30, 2015 and
1,575,018,236 shares as of December 31, 2014
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16
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16
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||
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||||
Treasury stock, at cost - 247,566,270 shares as of September 30, 2015
and 247,566,270 shares as of December 31, 2014
|
(1,717
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)
|
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(1,717
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)
|
||
Additional paid-in capital
|
16,815
|
|
|
16,703
|
|
||
Accumulated deficit
|
(8,785
|
)
|
|
(8,689
|
)
|
||
Accumulated other comprehensive income (loss), net of tax
|
81
|
|
|
144
|
|
||
Total stockholders’ equity
|
6,410
|
|
|
6,457
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
18,215
|
|
|
$
|
17,042
|
|
|
Nine Months Ended
September 30, |
||||||
in millions
|
2015
|
|
2014
|
||||
|
|
|
|
||||
Cash provided by (used for) operating activities
|
$
|
271
|
|
|
$
|
829
|
|
|
|
|
|
||||
Investing activities:
|
|
|
|
||||
Purchases of property, plant and equipment
|
(162
|
)
|
|
(180
|
)
|
||
Purchases of privately held securities
|
(209
|
)
|
|
(6
|
)
|
||
Purchases of notes receivable
|
(1
|
)
|
|
(12
|
)
|
||
Proceeds from sales of publicly traded and privately held equity securities and collections of notes receivable
|
—
|
|
|
12
|
|
||
Payments for acquisitions of businesses, net of cash acquired
|
(1,642
|
)
|
|
(487
|
)
|
||
Payments for investments and acquisitions of certain technologies
|
(2
|
)
|
|
(1
|
)
|
||
Proceeds from business divestitures, net of costs
|
—
|
|
|
12
|
|
||
|
|
|
|
||||
Cash provided by (used for) investing activities
|
(2,016
|
)
|
|
(662
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
||||
Payments on long-term borrowings
|
(1,000
|
)
|
|
—
|
|
||
Proceeds from long-term borrowings, net of debt issuance costs
|
2,580
|
|
|
—
|
|
||
Payment of contingent consideration
|
(102
|
)
|
|
(15
|
)
|
||
Proceeds from borrowings on credit facilities
|
565
|
|
|
810
|
|
||
Payments on borrowings from credit facilities
|
(565
|
)
|
|
(810
|
)
|
||
Payments for acquisitions of treasury stock
|
—
|
|
|
(125
|
)
|
||
Cash used to net share settle employee equity awards
|
(62
|
)
|
|
(48
|
)
|
||
Proceeds from issuances of shares of common stock
|
97
|
|
|
52
|
|
||
|
|
|
|
||||
Cash provided by (used for) financing activities
|
1,513
|
|
|
(136
|
)
|
||
|
|
|
|
||||
Effect of foreign exchange rates on cash
|
(5
|
)
|
|
(2
|
)
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
(237
|
)
|
|
29
|
|
||
Cash and cash equivalents at beginning of period
|
587
|
|
|
217
|
|
||
Cash and cash equivalents at end of period
|
$
|
350
|
|
|
$
|
246
|
|
|
|
|
|
||||
Supplemental Information
|
|
|
|
||||
Stock-based compensation expense
|
$
|
79
|
|
|
$
|
79
|
|
Fair value of contingent consideration recorded in purchase accounting
|
31
|
|
|
—
|
|
Cash, net of cash acquired, including amounts payable as of September 30, 2015
|
$
|
1,659
|
|
Fair value of contingent consideration
|
31
|
|
|
|
$
|
1,690
|
|
Goodwill
|
$
|
568
|
|
Amortizable intangible assets
|
992
|
|
|
Inventory
|
102
|
|
|
Property, Plant and Equipment
|
42
|
|
|
Other net assets
|
39
|
|
|
Deferred income taxes
|
(53
|
)
|
|
|
$
|
1,690
|
|
|
Amount
Assigned
(in millions)
|
|
Weighted
Average Amortization Period
(in years)
|
|
Range of Risk-
Adjusted Discount Rates used in Purchase Price Allocation |
||
Amortizable intangible assets:
|
|
|
|
|
|
||
Technology-related
|
$
|
358
|
|
|
11-12
|
|
13.5% - 15%
|
Customer relationships
|
616
|
|
|
12
|
|
13.5%
|
|
Other intangible assets
|
18
|
|
|
13
|
|
13.5%
|
|
|
$
|
992
|
|
|
|
|
|
Cash, net of cash acquired
|
$
|
479
|
|
Fair value of prior interests
|
31
|
|
|
|
$
|
510
|
|
Goodwill
|
$
|
210
|
|
Amortizable intangible assets
|
263
|
|
|
Inventory
|
23
|
|
|
Property, Plant and Equipment
|
17
|
|
|
Prepaid Transaction Service Agreements
|
5
|
|
|
Other net assets
|
(1
|
)
|
|
Deferred income taxes
|
(7
|
)
|
|
|
$
|
510
|
|
|
Amount
Assigned
(in millions)
|
|
Weighted
Average Amortization Period
(in years)
|
|
Range of Risk-
Adjusted Discount Rates used in Purchase Price Allocation |
||
Amortizable intangible assets:
|
|
|
|
|
|
||
Technology-related
|
$
|
233
|
|
|
10 - 14
|
|
14 - 18 %
|
Customer relationships
|
29
|
|
|
10
|
|
18%
|
|
Other intangible assets
|
1
|
|
|
2
|
|
14%
|
|
|
$
|
263
|
|
|
|
|
|
Balance as of December 31, 2014
|
$
|
274
|
|
Amounts recorded related to new acquisitions
|
31
|
|
|
Other amounts recorded related to prior acquisitions
|
—
|
|
|
Net fair value adjustments
|
86
|
|
|
Payments made
|
(125
|
)
|
|
Balance as of September 30, 2015
|
$
|
266
|
|
Contingent Consideration Liability
|
Fair Value as of September 30, 2015
|
Valuation Technique
|
Unobservable Input
|
Range
|
Revenue-based Payments
|
$84 million
|
Probability Weighted Discounted Cash Flow
|
Discount Rate
|
11.5% - 15%
|
Projected Year of Payment
|
2015 - 2019
|
|||
$182 million
|
Monte Carlo
|
Revenue Volatility
|
11% - 20%
|
|
Risk Free Rate
|
LIBOR Term Structure
|
|||
Projected Year of Payment
|
2015 - 2018
|
|
As of
|
||||||||||||||
|
September 30, 2015
|
|
December 31, 2014
|
||||||||||||
|
Gross Carrying
|
|
Accumulated
Amortization/
|
|
Gross Carrying
|
|
Accumulated
Amortization/
|
||||||||
(in millions)
|
Amount
|
|
Write-offs
|
|
Amount
|
|
Write-offs
|
||||||||
Amortizable intangible assets
|
|
|
|
|
|
|
|
||||||||
Technology-related
|
$
|
8,874
|
|
|
$
|
(3,952
|
)
|
|
$
|
8,406
|
|
|
$
|
(3,697
|
)
|
Patents
|
519
|
|
|
(354
|
)
|
|
519
|
|
|
(342
|
)
|
||||
Other intangible assets
|
1,512
|
|
|
(584
|
)
|
|
875
|
|
|
(533
|
)
|
||||
|
$
|
10,905
|
|
|
$
|
(4,890
|
)
|
|
$
|
9,800
|
|
|
$
|
(4,572
|
)
|
Unamortizable intangible assets
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
$
|
16,368
|
|
|
$
|
(9,900
|
)
|
|
$
|
15,798
|
|
|
$
|
(9,900
|
)
|
In-process research and development (IPR&D)
|
93
|
|
|
—
|
|
|
181
|
|
|
—
|
|
||||
Technology-related
|
120
|
|
|
—
|
|
|
197
|
|
|
—
|
|
||||
|
$
|
16,581
|
|
|
$
|
(9,900
|
)
|
|
$
|
16,176
|
|
|
$
|
(9,900
|
)
|
(in millions)
|
Cardiovascular
|
|
Rhythm Management
|
|
MedSurg
|
|
Total
|
||||||||
Balance as of December 31, 2014
|
$
|
3,426
|
|
|
$
|
290
|
|
|
$
|
2,182
|
|
|
$
|
5,898
|
|
Purchase price adjustments
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||
Goodwill acquired
|
—
|
|
|
—
|
|
|
568
|
|
|
568
|
|
||||
Balance as of September 30, 2015
|
$
|
3,426
|
|
|
$
|
292
|
|
|
$
|
2,750
|
|
|
$
|
6,468
|
|
•
|
decreases in estimated market sizes or market growth rates due to greater-than-expected declines in procedural volumes, pricing pressures, reductions in reimbursement levels, product actions, and/or competitive technology developments;
|
•
|
declines in our market share and penetration assumptions due to increased competition, an inability to develop or launch new and next-generation products and technology features in line with our commercialization strategies, and market and/or regulatory conditions that may cause significant launch delays or product recalls;
|
•
|
decreases in our forecasted profitability due to an inability to successfully implement and achieve timely and sustainable cost improvement measures consistent with our expectations;
|
•
|
negative developments in intellectual property litigation that may impact our ability to market certain products or increase our costs to sell certain products;
|
•
|
the level of success of ongoing and future research and development efforts, including those related to recent acquisitions, and increases in the research and development costs necessary to obtain regulatory approvals and launch new products;
|
•
|
the level of success in managing the growth of acquired companies, achieving sustained profitability consistent with our expectations, establishing government and third-party payer reimbursement, supplying the market, and increases in the costs and time necessary to integrate acquired businesses into our operations successfully;
|
•
|
changes in our reporting units or in the structure of our business as a result of future reorganizations, acquisitions or divestitures of assets or businesses; and
|
•
|
increases in our market-participant risk-adjusted WACC, and increases in our market-participant tax rate, and/or changes in tax laws or macroeconomic conditions.
|
(in millions)
|
Cardiovascular
|
|
Rhythm Management
|
|
MedSurg
|
|
Total
|
||||||||
Accumulated write-offs as of December 31, 2014
|
$
|
(1,479
|
)
|
|
$
|
(6,960
|
)
|
|
$
|
(1,461
|
)
|
|
$
|
(9,900
|
)
|
Goodwill written off
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Accumulated write-offs as of September 30, 2015
|
$
|
(1,479
|
)
|
|
$
|
(6,960
|
)
|
|
$
|
(1,461
|
)
|
|
$
|
(9,900
|
)
|
Intangible Asset
|
Valuation Date
|
Fair Value
|
Valuation Technique
|
Unobservable Input
|
Rate
|
Core Technology
|
September 30, 2015
|
$8 million
|
Income Approach -Excess Earnings Method
|
Discount Rate
|
10%
|
In-Process R&D
|
June 30, 2015
|
$6 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
16.5 - 20%
|
In-Process R&D
|
September 30, 2014
|
$16 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
16.5 - 20%
|
In-Process R&D
|
June 30, 2014
|
$83 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
16.5 - 20%
|
Core Technology
|
June 30, 2014
|
$8 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
15%
|
In-Process R&D
|
March 31, 2014
|
$6 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
20%
|
Core Technology
|
March 31, 2014
|
$64 million
|
Income Approach - Excess Earnings Method
|
Discount Rate
|
15%
|
|
Amount of Pre-tax
Gain (Loss)
Recognized in OCI
(Effective Portion)
|
|
Amount of Pre-tax Gain (Loss) Reclassified from AOCI into Earnings
(Effective Portion)
|
|
Location in Statement of
Operations
|
||||
Three Months Ended September 30, 2015
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
13
|
|
|
$
|
54
|
|
|
Cost of products sold
|
|
$
|
13
|
|
|
$
|
54
|
|
|
|
Three Months Ended September 30, 2014
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
156
|
|
|
$
|
25
|
|
|
Cost of products sold
|
|
$
|
156
|
|
|
$
|
25
|
|
|
|
Nine Months Ended September 30, 2015
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
81
|
|
|
$
|
156
|
|
|
Cost of products sold
|
Interest rate derivative contracts
|
11
|
|
|
2
|
|
|
Interest Expense
|
||
|
$
|
92
|
|
|
$
|
158
|
|
|
|
Nine Months Ended September 30, 2014
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
115
|
|
|
$
|
68
|
|
|
Cost of products sold
|
|
$
|
115
|
|
|
$
|
68
|
|
|
|
in millions
|
|
Location in Statement of Operations
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
September 30,
|
|
September 30,
|
||||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||
Gain (loss) on currency hedge contracts
|
|
Other, net
|
|
$
|
32
|
|
|
$
|
40
|
|
|
$
|
46
|
|
|
$
|
20
|
|
Gain (loss) on foreign currency transaction exposures
|
|
Other, net
|
|
(36
|
)
|
|
(45
|
)
|
|
(64
|
)
|
|
(31
|
)
|
||||
Net foreign currency gain (loss)
|
|
Other, net
|
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
|
$
|
(18
|
)
|
|
$
|
(11
|
)
|
(1)
|
We classify derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less.
|
•
|
Level 1 – Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.
|
•
|
Level 2 – Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.
|
•
|
Level 3 – Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.
|
|
September 30, 2015
|
|
As of December 31, 2014
|
||||||||||||||||||||||||||||
(in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Money market and government funds
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
151
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
151
|
|
Currency hedge contracts
|
—
|
|
|
290
|
|
|
—
|
|
|
290
|
|
|
—
|
|
|
419
|
|
|
—
|
|
|
419
|
|
||||||||
Interest rate contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||||||
|
$
|
27
|
|
|
$
|
290
|
|
|
$
|
—
|
|
|
$
|
317
|
|
|
$
|
151
|
|
|
$
|
444
|
|
|
$
|
—
|
|
|
$
|
595
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Currency hedge contracts
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
36
|
|
Accrued contingent consideration
|
—
|
|
|
—
|
|
|
266
|
|
|
266
|
|
|
—
|
|
|
—
|
|
|
274
|
|
|
274
|
|
||||||||
|
$
|
—
|
|
|
$
|
30
|
|
|
$
|
266
|
|
|
$
|
296
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
274
|
|
|
$
|
310
|
|
|
|
|
|
||||||||||||||||||||||||
(in millions)
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
Senior notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
4,650
|
|
Term loan
|
—
|
|
|
80
|
|
|
155
|
|
|
390
|
|
|
150
|
|
|
375
|
|
|
1,150
|
|
|||||||
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
405
|
|
|
$
|
990
|
|
|
$
|
150
|
|
|
$
|
4,175
|
|
|
$
|
5,800
|
|
|
Note:
|
The table above does not include unamortized discounts associated with our senior notes, or amounts related to interest rate contracts used to hedge the fair value of certain of our senior notes.
|
|
Covenant Requirement
as of September 30, 2015
|
|
Actual as of
September 30, 2015
|
Maximum leverage ratio (1)
|
4.5 times
|
|
3.1 times
|
Minimum interest coverage ratio (2)
|
3.0 times
|
|
6.7 times
|
(1)
|
Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.
|
(2)
|
Ratio of consolidated EBITDA, as defined by the credit agreement, to interest expense for the preceding four consecutive fiscal quarters.
|
Type of cost
|
Total estimated amount expected to
be incurred
|
Restructuring charges:
|
|
Termination benefits
|
$115 million to $135 million
|
Other (1)
|
$25 million to $35 million
|
Restructuring-related expenses:
|
|
Other (2)
|
$110 million to $130 million
|
|
$250 million to $300 million
|
Type of cost
|
Total amounts incurred
|
Restructuring charges:
|
|
Termination benefits
|
$135 million
|
Other (1)
|
$112 million
|
Restructuring-related expenses:
|
|
Other (2)
|
$39 million
|
|
$286 million
|
(1)
|
Includes primarily consulting fees, gains and losses on disposals of fixed assets and costs associated with contract cancellations.
|
(2)
|
Comprised of other costs directly related to the 2011 Restructuring plan, including the Expansion, such as program management, accelerated depreciation, retention and infrastructure-related costs.
|
Three Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
Restructuring charges
|
$
|
5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
7
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|||||
Selling, general and administrative expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
8
|
|
|
9
|
|
|||||
|
—
|
|
|
1
|
|
|
5
|
|
|
8
|
|
|
14
|
|
|||||
|
$
|
5
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
10
|
|
|
$
|
21
|
|
Three Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
Restructuring charges
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
9
|
|
|||||
Selling, general and administrative expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
5
|
|
|
6
|
|
|||||
|
—
|
|
|
1
|
|
|
9
|
|
|
5
|
|
|
15
|
|
|||||
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
2014 Restructuring plan
|
$
|
(1
|
)
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
7
|
|
|
$
|
16
|
|
2011 Restructuring plan (including the Expansion)
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
|
$
|
7
|
|
|
$
|
17
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
Restructuring charges
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
16
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
20
|
|
|
—
|
|
|
20
|
|
|||||
Selling, general and administrative expenses
|
—
|
|
|
3
|
|
|
—
|
|
|
19
|
|
|
22
|
|
|||||
|
—
|
|
|
3
|
|
|
20
|
|
|
19
|
|
|
42
|
|
|||||
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
2014 Restructuring plan
|
$
|
17
|
|
|
$
|
3
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
62
|
|
2011 Restructuring plan (including the Expansion)
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||
|
$
|
13
|
|
|
$
|
3
|
|
|
$
|
20
|
|
|
$
|
22
|
|
|
$
|
58
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Nine Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
Restructuring charges
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
37
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
|||||
Selling, general and administrative expenses
|
—
|
|
|
3
|
|
|
—
|
|
|
15
|
|
|
18
|
|
|||||
|
—
|
|
|
3
|
|
|
15
|
|
|
15
|
|
|
33
|
|
|||||
|
$
|
19
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
33
|
|
|
$
|
70
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Other
|
|
Total
|
||||||||||
2014 Restructuring plan
|
$
|
18
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
30
|
|
|
$
|
66
|
|
2011 Restructuring plan (including the Expansion)
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
4
|
|
|||||
|
$
|
19
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
$
|
33
|
|
|
$
|
70
|
|
(in millions)
|
2014
Restructuring plan |
|
2011
Restructuring plan (including the Expansion) |
|
Total
|
||||||
Termination benefits
|
$
|
86
|
|
|
$
|
135
|
|
|
$
|
221
|
|
Net loss (gain) on fixed asset disposals
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Other
|
28
|
|
|
113
|
|
|
141
|
|
|||
Total restructuring charges
|
114
|
|
|
247
|
|
|
361
|
|
|||
Accelerated depreciation
|
8
|
|
|
5
|
|
|
13
|
|
|||
Transfer costs
|
45
|
|
|
—
|
|
|
45
|
|
|||
Other
|
37
|
|
|
34
|
|
|
71
|
|
|||
Restructuring-related expenses
|
90
|
|
|
39
|
|
|
129
|
|
|||
|
$
|
204
|
|
|
$
|
286
|
|
|
$
|
490
|
|
(in millions)
|
2014
Restructuring plan |
|
2011
Restructuring plan
(including the Expansion)
|
|
Total
|
||||||
Three Months Ended September 30, 2015
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
6
|
|
Transfer costs
|
5
|
|
|
—
|
|
|
5
|
|
|||
Other
|
9
|
|
|
—
|
|
|
9
|
|
|||
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
|
|
|
|
|
||||||
Nine Months Ended September 30, 2015
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
24
|
|
|
$
|
—
|
|
|
$
|
24
|
|
Transfer costs
|
20
|
|
|
—
|
|
|
20
|
|
|||
Other
|
22
|
|
|
—
|
|
|
22
|
|
|||
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
66
|
|
|
|
|
|
|
|
||||||
Program to Date
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
55
|
|
|
$
|
133
|
|
|
$
|
188
|
|
Transfer costs
|
45
|
|
|
—
|
|
|
45
|
|
|||
Other
|
59
|
|
|
154
|
|
|
213
|
|
|||
|
$
|
159
|
|
|
$
|
287
|
|
|
$
|
446
|
|
(in millions)
|
2014
Restructuring plan |
|
2011
Restructuring plan
(including the Expansion)
|
|
Total
|
||||||
Accrued as of December 31, 2014
|
$
|
39
|
|
|
$
|
4
|
|
|
$
|
43
|
|
Charges (credits)
|
17
|
|
|
(4
|
)
|
|
13
|
|
|||
Cash payments
|
(24
|
)
|
|
—
|
|
|
(24
|
)
|
|||
Accrued as of September 30, 2015
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
|
As of
|
||||||
(in millions)
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Accounts receivable
|
|
$
|
1,390
|
|
|
$
|
1,288
|
|
Less: allowance for doubtful accounts
|
|
(77
|
)
|
|
(76
|
)
|
||
Less: allowance for sales returns
|
|
(39
|
)
|
|
(29
|
)
|
||
|
|
$
|
1,274
|
|
|
$
|
1,183
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Beginning balance
|
|
$
|
77
|
|
|
$
|
80
|
|
|
$
|
76
|
|
|
$
|
81
|
|
Charges to expenses
|
|
3
|
|
|
—
|
|
|
11
|
|
|
4
|
|
||||
Utilization of allowances
|
|
(3
|
)
|
|
(5
|
)
|
|
(10
|
)
|
|
(10
|
)
|
||||
Ending balance
|
|
$
|
77
|
|
|
$
|
75
|
|
|
$
|
77
|
|
|
$
|
75
|
|
|
|
As of
|
||||||
(in millions)
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Finished goods
|
|
$
|
751
|
|
|
$
|
649
|
|
Work-in-process
|
|
110
|
|
|
97
|
|
||
Raw materials
|
|
225
|
|
|
200
|
|
||
|
|
$
|
1,086
|
|
|
$
|
946
|
|
|
|
As of
|
||||||
(in millions)
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Land
|
|
$
|
87
|
|
|
$
|
80
|
|
Buildings and improvements
|
|
965
|
|
|
944
|
|
||
Equipment, furniture and fixtures
|
|
2,787
|
|
|
2,633
|
|
||
Capital in progress
|
|
195
|
|
|
189
|
|
||
|
|
4,034
|
|
|
3,846
|
|
||
Less: accumulated depreciation
|
|
2,555
|
|
|
2,339
|
|
||
|
|
$
|
1,479
|
|
|
$
|
1,507
|
|
|
|
As of
|
||||||
(in millions)
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Legal reserves
|
|
$
|
383
|
|
|
$
|
694
|
|
Payroll and related liabilities
|
|
469
|
|
|
512
|
|
||
Accrued contingent consideration
|
|
164
|
|
|
158
|
|
||
Other
|
|
589
|
|
|
586
|
|
||
|
|
$
|
1,605
|
|
|
$
|
1,950
|
|
|
|
As of
|
||||||
(in millions)
|
|
September 30, 2015
|
|
December 31, 2014
|
||||
Accrued income taxes
|
|
$
|
1,287
|
|
|
$
|
1,231
|
|
Legal reserves
|
|
1,176
|
|
|
883
|
|
||
Accrued contingent consideration
|
|
102
|
|
|
116
|
|
||
Other long-term liabilities
|
|
436
|
|
|
436
|
|
||
|
|
$
|
3,001
|
|
|
$
|
2,666
|
|
|
|
Nine Months Ended
September 30, |
||||||
|
|
2015
|
|
2014
|
||||
Beginning Balance
|
|
$
|
25
|
|
|
$
|
28
|
|
Provision
|
|
11
|
|
|
6
|
|
||
Settlements/reversals
|
|
(11
|
)
|
|
(9
|
)
|
||
Ending Balance
|
|
$
|
25
|
|
|
$
|
25
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Weighted average shares outstanding - basic
|
|
1,344.0
|
|
|
1,325.5
|
|
|
1,339.7
|
|
|
1,323.5
|
|
Net effect of common stock equivalents
|
|
—
|
|
*
|
22.1
|
|
|
—
|
|
*
|
23.8
|
|
Weighted average shares outstanding - assuming dilution
|
|
1,344.0
|
|
|
1,347.6
|
|
|
1,339.7
|
|
|
1,347.3
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
|
|
|
|
|
|
|
||||||||
Interventional Cardiology
|
|
$
|
551
|
|
|
$
|
514
|
|
|
$
|
1,659
|
|
|
$
|
1,543
|
|
Peripheral Interventions
|
|
246
|
|
|
217
|
|
|
723
|
|
|
631
|
|
||||
Cardiovascular
|
|
797
|
|
|
731
|
|
|
2,382
|
|
|
2,174
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Cardiac Rhythm Management
|
|
483
|
|
|
482
|
|
|
1,456
|
|
|
1,441
|
|
||||
Electrophysiology
|
|
61
|
|
|
54
|
|
|
182
|
|
|
167
|
|
||||
Rhythm Management
|
|
544
|
|
|
536
|
|
|
1,638
|
|
|
1,608
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Endoscopy
|
|
362
|
|
|
340
|
|
|
1,042
|
|
|
990
|
|
||||
Urology and Pelvic Health
|
|
207
|
|
|
138
|
|
|
479
|
|
|
397
|
|
||||
Neuromodulation
|
|
128
|
|
|
115
|
|
|
369
|
|
|
338
|
|
||||
MedSurg
|
|
697
|
|
|
593
|
|
|
1,890
|
|
|
1,725
|
|
||||
Net sales allocated to reportable segments
|
|
2,038
|
|
|
1,860
|
|
|
5,910
|
|
|
5,507
|
|
||||
Sales generated from divested businesses
|
|
—
|
|
|
1
|
|
|
—
|
|
|
4
|
|
||||
Impact of foreign currency fluctuations
|
|
(150
|
)
|
|
(15
|
)
|
|
(411
|
)
|
|
(18
|
)
|
||||
|
|
$
|
1,888
|
|
|
$
|
1,846
|
|
|
$
|
5,499
|
|
|
$
|
5,493
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
||||||||
Cardiovascular
|
|
$
|
249
|
|
|
$
|
201
|
|
|
$
|
732
|
|
|
$
|
565
|
|
Rhythm Management
|
|
97
|
|
|
76
|
|
|
252
|
|
|
209
|
|
||||
MedSurg
|
|
235
|
|
|
192
|
|
|
590
|
|
|
535
|
|
||||
Operating income allocated to reportable segments
|
|
581
|
|
|
469
|
|
|
1,574
|
|
|
1,309
|
|
||||
Corporate expenses and currency exchange
|
|
(145
|
)
|
|
(90
|
)
|
|
(334
|
)
|
|
(205
|
)
|
||||
Intangible asset impairment charges; pension termination charges; acquisition-, divestiture-, restructuring-, and litigation-related net charges and credits
|
|
(604
|
)
|
|
(206
|
)
|
|
(935
|
)
|
|
(586
|
)
|
||||
Amortization expense
|
|
(131
|
)
|
|
(109
|
)
|
|
(361
|
)
|
|
(327
|
)
|
||||
Operating income (loss)
|
|
(299
|
)
|
|
64
|
|
|
(56
|
)
|
|
191
|
|
||||
Other expense, net
|
|
(68
|
)
|
|
(61
|
)
|
|
(256
|
)
|
|
(146
|
)
|
||||
Income (loss) before income taxes
|
|
$
|
(367
|
)
|
|
$
|
3
|
|
|
$
|
(312
|
)
|
|
$
|
45
|
|
Three Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of June 30, 2015
|
|
$
|
(68
|
)
|
|
$
|
204
|
|
|
$
|
(32
|
)
|
|
$
|
104
|
|
Other comprehensive income (loss) before reclassifications
|
|
(12
|
)
|
|
8
|
|
|
—
|
|
|
(4
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(35
|
)
|
|
16
|
|
|
(19
|
)
|
||||
Net current-period other comprehensive income
|
|
(12
|
)
|
|
(27
|
)
|
|
16
|
|
|
(23
|
)
|
||||
Balance as of September 30, 2015
|
|
$
|
(80
|
)
|
|
$
|
177
|
|
|
$
|
(16
|
)
|
|
$
|
81
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of June 30, 2014
|
|
$
|
(24
|
)
|
|
$
|
86
|
|
|
$
|
(20
|
)
|
|
$
|
42
|
|
Other comprehensive income (loss) before reclassifications
|
|
(15
|
)
|
|
99
|
|
|
—
|
|
|
84
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
(16
|
)
|
||||
Net current-period other comprehensive income
|
|
(15
|
)
|
|
83
|
|
|
—
|
|
|
68
|
|
||||
Balance as of September 30, 2014
|
|
$
|
(39
|
)
|
|
$
|
169
|
|
|
$
|
(20
|
)
|
|
$
|
110
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2015
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of December 31, 2014
|
|
$
|
(38
|
)
|
|
$
|
219
|
|
|
$
|
(37
|
)
|
|
$
|
144
|
|
Other comprehensive income (loss) before reclassifications
|
|
(42
|
)
|
|
59
|
|
|
—
|
|
|
17
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(101
|
)
|
|
21
|
|
|
(80
|
)
|
||||
Net current-period other comprehensive income
|
|
(42
|
)
|
|
(42
|
)
|
|
21
|
|
|
(63
|
)
|
||||
Balance as of September 30, 2015
|
|
$
|
(80
|
)
|
|
$
|
177
|
|
|
$
|
(16
|
)
|
|
$
|
81
|
|
|
|
|
|
|
|
|
|
|
||||||||
Nine Months Ended September 30, 2014
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of December 31, 2013
|
|
$
|
(16
|
)
|
|
$
|
141
|
|
|
$
|
(19
|
)
|
|
$
|
106
|
|
Other comprehensive income (loss) before reclassifications
|
|
(23
|
)
|
|
72
|
|
|
(1
|
)
|
|
48
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(44
|
)
|
|
—
|
|
|
(44
|
)
|
||||
Net current-period other comprehensive income
|
|
(23
|
)
|
|
28
|
|
|
(1
|
)
|
|
4
|
|
||||
Balance as of September 30, 2014
|
|
$
|
(39
|
)
|
|
$
|
169
|
|
|
$
|
(20
|
)
|
|
$
|
110
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Three Months Ended September 30, 2015
|
|
||||||||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
|
Impact per share
|
|
||||||||
GAAP net income (loss)
|
|
$
|
(367
|
)
|
|
$
|
169
|
|
|
$
|
(198
|
)
|
|
$
|
(0.15
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
10
|
|
|
(1
|
)
|
|
9
|
|
|
0.01
|
|
*
|
||||
Acquisition- and divestiture-related net charges
|
|
80
|
|
|
(12
|
)
|
|
68
|
|
|
0.05
|
|
*
|
||||
Restructuring and restructuring-related net charges
|
|
21
|
|
|
(3
|
)
|
|
18
|
|
|
0.01
|
|
*
|
||||
Litigation-related net charges
|
|
457
|
|
|
(165
|
)
|
|
292
|
|
|
0.22
|
|
*
|
||||
Pension termination charges
|
|
36
|
|
|
(13
|
)
|
|
23
|
|
|
0.02
|
|
*
|
||||
Amortization expense
|
|
131
|
|
|
(17
|
)
|
|
114
|
|
|
0.08
|
|
*
|
||||
Adjusted net income
|
|
$
|
368
|
|
|
$
|
(42
|
)
|
|
$
|
326
|
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2014
|
||||||||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Tax Impact
|
|
After-Tax
|
|
Impact per share
|
||||||||
GAAP net income (loss)
|
|
$
|
3
|
|
|
$
|
40
|
|
|
$
|
43
|
|
|
$
|
0.03
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
12
|
|
|
(2
|
)
|
|
10
|
|
|
0.01
|
|
||||
Acquisition- and divestiture-related net charges
|
|
38
|
|
|
(15
|
)
|
|
23
|
|
|
0.02
|
|
||||
Restructuring and restructuring-related net charges
|
|
17
|
|
|
(3
|
)
|
|
14
|
|
|
0.01
|
|
||||
Litigation-related net charges
|
|
139
|
|
|
(50
|
)
|
|
89
|
|
|
0.06
|
|
||||
Amortization expense
|
|
109
|
|
|
(15
|
)
|
|
94
|
|
|
0.07
|
|
||||
Adjusted net income
|
|
$
|
318
|
|
|
$
|
(45
|
)
|
|
$
|
273
|
|
|
$
|
0.20
|
|
|
|
Nine Months Ended September 30, 2015
|
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
|
||||||||
GAAP net income (loss)
|
|
$
|
(312
|
)
|
|
$
|
215
|
|
|
$
|
(97
|
)
|
|
$
|
(0.07
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
19
|
|
|
(3
|
)
|
|
16
|
|
|
0.01
|
|
*
|
||||
Acquisition- and divestiture-related net charges
|
|
169
|
|
|
(17
|
)
|
|
152
|
|
|
0.11
|
|
*
|
||||
Restructuring and restructuring-related net charges
|
|
58
|
|
|
(10
|
)
|
|
48
|
|
|
0.04
|
|
*
|
||||
Litigation-related net charges
|
|
649
|
|
|
(235
|
)
|
|
414
|
|
|
0.31
|
|
*
|
||||
Pension termination charges
|
|
44
|
|
|
(16
|
)
|
|
28
|
|
|
0.02
|
|
*
|
||||
Debt extinguishment charges
|
|
45
|
|
|
(16
|
)
|
|
29
|
|
|
0.02
|
|
*
|
||||
Amortization expense
|
|
361
|
|
|
(46
|
)
|
|
315
|
|
|
0.23
|
|
*
|
||||
Adjusted net income
|
|
$
|
1,033
|
|
|
$
|
(128
|
)
|
|
$
|
905
|
|
|
$
|
0.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2014
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
||||||||
GAAP net income (loss)
|
|
$
|
45
|
|
|
$
|
135
|
|
|
$
|
180
|
|
|
$
|
0.13
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
177
|
|
|
(27
|
)
|
|
150
|
|
|
0.11
|
|
||||
Acquisition- and divestiture-related net credits
|
|
(80
|
)
|
|
(16
|
)
|
|
(96
|
)
|
|
(0.07
|
)
|
||||
Restructuring and restructuring-related net charges
|
|
70
|
|
|
(16
|
)
|
|
54
|
|
|
0.04
|
|
||||
Litigation-related net charges
|
|
399
|
|
|
(149
|
)
|
|
250
|
|
|
0.19
|
|
||||
Amortization expense
|
|
327
|
|
|
(39
|
)
|
|
288
|
|
|
0.21
|
|
||||
Adjusted net income
|
|
$
|
938
|
|
|
$
|
(112
|
)
|
|
$
|
826
|
|
|
$
|
0.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
||||||||||
|
Three Months Ended
September 30, |
|
As Reported
Currency
Basis
|
|
Constant
Currency
Basis
|
|||||||||
(in millions)
|
2015
|
2014
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||
Interventional Cardiology
|
$
|
500
|
|
$
|
508
|
|
|
(2
|
)
|
%
|
|
7
|
|
%
|
Peripheral Interventions
|
227
|
|
215
|
|
|
6
|
|
%
|
|
13
|
|
%
|
||
Cardiovascular
|
727
|
|
723
|
|
|
0
|
|
%
|
|
9
|
|
%
|
||
Cardiac Rhythm Management
|
451
|
|
480
|
|
|
(6
|
)
|
%
|
|
0
|
|
%
|
||
Electrophysiology
|
57
|
|
54
|
|
|
6
|
|
%
|
|
13
|
|
%
|
||
Rhythm Management
|
508
|
|
534
|
|
|
(5
|
)
|
%
|
|
2
|
|
%
|
||
Endoscopy
|
331
|
|
336
|
|
|
(1
|
)
|
%
|
|
7
|
|
%
|
||
Urology and Pelvic Health
|
198
|
|
137
|
|
|
44
|
|
%
|
|
50
|
|
%
|
||
Neuromodulation
|
124
|
|
115
|
|
|
8
|
|
%
|
|
11
|
|
%
|
||
MedSurg
|
653
|
|
588
|
|
|
11
|
|
%
|
|
17
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Subtotal Core Businesses
|
1,888
|
|
1,845
|
|
|
2
|
|
%
|
|
9
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Divested Businesses
|
—
|
|
1
|
|
|
N/A
|
|
%
|
|
N/A
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Worldwide
|
$
|
1,888
|
|
$
|
1,846
|
|
|
2
|
|
%
|
|
9
|
|
%
|
|
|
|
|
Change
|
||||||||||
|
Nine Months Ended
September 30, |
|
As Reported
Currency
Basis
|
|
Constant
Currency
Basis
|
|||||||||
(in millions)
|
2015
|
2014
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
||||||
Interventional Cardiology
|
$
|
1,510
|
|
$
|
1,533
|
|
|
(2
|
)
|
%
|
|
7
|
|
%
|
Peripheral Interventions
|
672
|
|
629
|
|
|
7
|
|
%
|
|
15
|
|
%
|
||
Cardiovascular
|
2,182
|
|
2,162
|
|
|
1
|
|
%
|
|
9
|
|
%
|
||
Cardiac Rhythm Management
|
1,367
|
|
1,443
|
|
|
(5
|
)
|
%
|
|
1
|
|
%
|
||
Electrophysiology
|
172
|
|
168
|
|
|
2
|
|
%
|
|
9
|
|
%
|
||
Rhythm Management
|
1,539
|
|
1,611
|
|
|
(5
|
)
|
%
|
|
2
|
|
%
|
||
Endoscopy
|
962
|
|
983
|
|
|
(2
|
)
|
%
|
|
6
|
|
%
|
||
Urology and Pelvic Health
|
456
|
|
395
|
|
|
15
|
|
%
|
|
21
|
|
%
|
||
Neuromodulation
|
360
|
|
338
|
|
|
7
|
|
%
|
|
8
|
|
%
|
||
MedSurg
|
1,778
|
|
1,716
|
|
|
4
|
|
%
|
|
10
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Subtotal Core Businesses
|
5,499
|
|
5,489
|
|
|
0
|
|
%
|
|
7
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Divested Businesses
|
—
|
|
4
|
|
|
N/A
|
|
%
|
|
N/A
|
|
%
|
||
|
|
|
|
|
|
|
|
|
||||||
Worldwide
|
$
|
5,499
|
|
$
|
5,493
|
|
|
0
|
|
%
|
|
7
|
|
%
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
(in millions)
|
|
September 30, 2015
|
|
September 30, 2014
|
||||||||||||||||||||
|
|
U.S.
|
|
International
|
|
Total
|
|
U.S.
|
|
International
|
|
Total
|
||||||||||||
Defibrillator systems
|
|
$
|
216
|
|
|
$
|
110
|
|
|
$
|
326
|
|
|
$
|
222
|
|
|
$
|
126
|
|
|
$
|
348
|
|
Pacemaker systems
|
|
63
|
|
|
62
|
|
|
125
|
|
|
64
|
|
|
68
|
|
|
132
|
|
||||||
CRM products
|
|
$
|
279
|
|
|
$
|
172
|
|
|
$
|
451
|
|
|
$
|
286
|
|
|
$
|
194
|
|
|
$
|
480
|
|
|
||||
|
Three Months
|
Nine Months
|
||
Gross profit margin - period ended September 30, 2014
|
70.2
|
%
|
69.9
|
%
|
Manufacturing cost reductions
|
2.1
|
|
1.9
|
|
Sales pricing and mix
|
(0.4
|
)
|
(1.0
|
)
|
Inventory step-up due to acquisition accounting
|
(0.7
|
)
|
(0.3
|
)
|
Net impact of foreign currency
|
0.3
|
|
0.7
|
|
All other, including other inventory charges and other period expense
|
—
|
|
(0.3
|
)
|
Gross profit margin - period ended September 30, 2015
|
71.5
|
%
|
70.9
|
%
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||
|
|
|
% of Net
|
|
|
% of Net
|
|
|
% of Net
|
|
|
% of Net
|
||||||||
(in millions)
|
|
$
|
Sales
|
|
$
|
Sales
|
|
$
|
Sales
|
|
$
|
Sales
|
||||||||
Selling, general and administrative expenses
|
|
729
|
|
38.6
|
%
|
|
741
|
|
40.1
|
%
|
|
2,095
|
|
38.1
|
%
|
|
2,150
|
|
39.1
|
%
|
Research and development expenses
|
|
221
|
|
11.7
|
%
|
|
212
|
|
11.5
|
%
|
|
632
|
|
11.5
|
%
|
|
609
|
|
11.1
|
%
|
Royalty expense
|
|
17
|
|
0.9
|
%
|
|
21
|
|
1.1
|
%
|
|
53
|
|
1.0
|
%
|
|
86
|
|
1.6
|
%
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
|
|
||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Interest income
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Foreign currency losses
|
|
(4
|
)
|
|
(5
|
)
|
|
(18
|
)
|
|
(11
|
)
|
||||
Net gains (losses) on investments
|
|
(5
|
)
|
|
(2
|
)
|
|
(6
|
)
|
|
27
|
|
||||
Other income (expense), net
|
|
(2
|
)
|
|
(1
|
)
|
|
(9
|
)
|
|
(4
|
)
|
||||
|
|
$
|
(10
|
)
|
|
$
|
(7
|
)
|
|
$
|
(31
|
)
|
|
$
|
15
|
|
|
|
Nine Months Ended
September 30, |
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Cash provided by (used for) operating activities
|
|
$
|
271
|
|
|
$
|
829
|
|
Cash used for investing activities
|
|
(2,016
|
)
|
|
(662
|
)
|
||
Cash provided by (used for) financing activities
|
|
1,513
|
|
|
(136
|
)
|
(in millions)
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
Senior notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
4,650
|
|
Term Loan
|
|
—
|
|
|
80
|
|
|
155
|
|
|
390
|
|
|
150
|
|
|
375
|
|
|
1,150
|
|
|||||||
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
405
|
|
|
$
|
990
|
|
|
$
|
150
|
|
|
$
|
4,175
|
|
|
$
|
5,800
|
|
Note:
|
The table above does not include unamortized discounts associated with our senior notes, or amounts related to interest rate contracts used to hedge the fair value of certain of our senior notes.
|
|
Covenant Requirement
as of September 30, 2015 |
|
Actual as of
September 30, 2015 |
Maximum leverage ratio (1)
|
4.5 times
|
|
3.1 times
|
Minimum interest coverage ratio (2)
|
3.0 times
|
|
6.7 times
|
(1)
|
Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.
|
(2)
|
Ratio of consolidated EBITDA, as defined by the credit agreement, to interest expense for the preceding four consecutive fiscal quarters.
|
•
|
Intangible asset impairment charges -
This amount represents non-cash write-downs of certain intangible asset balances in the first nine months of 2015 and 2014. We remove the impact of non-cash impairment charges from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for us in measuring our ability to generate cash and invest in our growth. Therefore, these charges are excluded from management's assessment of operating performance and are also excluded for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance, particularly in terms of liquidity.
|
•
|
Acquisition and divestiture-related net charges (credits) -
These adjustments consist of (a) contingent consideration fair value adjustments; (b) gains on previously held investments; (c) purchased and/or funded in-process research and development expenses incurred outside of a business combination; (d) due diligence, other fees and exit costs; and (e) separation costs and gains primarily associated with the sale of our Neurovascular business in January 2011. The contingent consideration adjustments represent accounting adjustments to state contingent consideration liabilities at their estimated fair value. These adjustments can be highly variable depending on the assessed likelihood and amount of future contingent consideration payments. Due diligence, other fees and exit costs include legal, tax, severance and other expenses associated with prior and potential future acquisitions and divestitures that can be highly variable and not representative of ongoing operations. Separation costs and gains on the sale of a business unit primarily represent those associated with the Neurovascular divestiture and are not representative of ongoing operations. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
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•
|
Restructuring and restructuring-related net charges (credits) -
These adjustments represent primarily severance and other direct costs associated with our 2014 Restructuring program. These costs are excluded by management in assessing our operating performance, as well as from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these costs for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
|
•
|
Litigation-related net charges (credits) -
These adjustments include certain significant product liability and other litigation-related charges and credits. These amounts are excluded by management in assessing our operating performance, as well as from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
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•
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Debt extinguishment charges -
This item represents premiums, accelerated amortization of debt issuance costs and investor discount costs net of interest rate hedge gains related to the early extinguishment of $1.0 billion of public senior notes during the second quarter of 2015. These adjustments are not expected to recur and do not reflect expected ongoing operating results. Accordingly, management excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
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•
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Pension termination charges -
This item represents charges associated with the termination of the Guidant Retirement Plan, a frozen defined benefit plan. These charges are not expected to recur after 2015 and do not reflect expected ongoing operating results. Accordingly, management has excluded these amounts for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
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•
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Amortization expense -
Amortization expense is a non-cash expense and does not impact our liquidity or compliance with the financial covenants included in our credit facility or our term loan facility agreements. Management removes the impact of amortization from our operating performance to assist in assessing our cash generated from operations. We believe this is a critical metric for measuring our ability to generate cash and invest in our growth. Therefore, amortization expense is excluded from management's assessment of operating performance and is also excluded from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management has excluded amortization expense for purposes of calculating these non-GAAP financial measures to facilitate an evaluation of our current operating performance, particularly in terms of liquidity.
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•
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Sales from divested businesses are primarily associated with the Neurovascular divestiture and are not representative of ongoing operations. The impact of changes in foreign currency exchange rates is highly variable and difficult to predict. Accordingly, management excludes the impact of sales from divested businesses and/or changes in foreign currency exchange rates for purposes of reviewing revenue growth rates to facilitate an evaluation of our current operating performance and a comparison to our past operating performance.
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•
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Our ability to increase CRM net sales, including for both new and replacement units, expand the market and capture market share;
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•
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The volatility of the coronary stent market and our ability to increase our drug-eluting stent systems net sales, including with respect to our SYNERGY™, Promus PREMIER™ and PROMUS® Element™ stent systems, and capture market share;
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•
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The ongoing impact on our business, including CRM and coronary stent businesses, of physician alignment to hospitals, governmental investigations and audits of hospitals, and other market and economic conditions on the overall number of procedures performed, including with respect to the drug-eluting coronary stent market the average number of stents used per procedure, and average selling prices;
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•
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Competitive offerings and related declines in average selling prices for our products, particularly our drug-eluting coronary stent systems and our CRM products;
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•
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The performance of, and physician and patient confidence in, our products and technologies, including our coronary drug-eluting stent systems, CRM, and spinal cord stimulation products, or those of our competitors;
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•
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The impact and outcome of ongoing and future clinical trials, including Interventional Cardiology and CRM clinical trials, and market studies undertaken by us, our competitors or other third parties, or perceived product performance of our or our competitors' products;
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•
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Variations in clinical results, reliability or product performance of our and our competitors' products;
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•
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Our ability to acquire or develop, launch and supply new or next-generation products and technologies worldwide and across our businesses in line with our commercialization strategies in a timely and successful manner, including our S-ICD® system and the acquisition and integration of the Interventional Division of Bayer AG and Xlumena, Inc. and the American Medical Systems male urology portfolio;
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•
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The effect of consolidation and competition in the markets in which we do business, or plan to do business;
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•
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Disruption in the manufacture or supply of certain components, materials or products, or the failure to timely secure alternative manufacturing or additional or replacement components, materials or products;
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•
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Our ability to retain and attract key personnel, including in our cardiology and CRM sales force and other key cardiology and CRM personnel;
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•
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The impact of enhanced requirements to obtain regulatory approval in the United States and around the world, including the associated timing and cost of product approval;
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•
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The impact of increased pressure on the availability and rate of third-party reimbursement for our products and procedures in the United States and around the world, including with respect to the timing and costs of creating and expanding markets for new products and technologies; and
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•
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Risk associated with counterparty default on our derivative financial instruments.
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•
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The impact of healthcare policy changes and legislative or regulatory efforts in the United States and around the world to modify product approval or reimbursement processes, including a trend toward demonstrating clinical outcomes, comparative effectiveness and cost efficiency, as well as the impact of other healthcare reform legislation;
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•
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Risks associated with our regulatory compliance and quality systems and activities in the United States and around the world, including meeting regulatory standards applicable to manufacturing and quality processes;
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•
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Our ability to minimize or avoid future field actions or FDA warning letters relating to our products and processes and the ongoing inherent risk of potential physician advisories related to medical devices;
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•
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The impact of increased scrutiny of and heightened global regulatory enforcement facing the medical device industry arising from political and regulatory changes, economic pressures or otherwise, including under U.S. Anti-Kickback Statute, U.S. False Claims Act and similar laws in other jurisdictions; U.S. Foreign Corrupt Practices Act (FCPA) and/or similar laws in other jurisdictions, and U.S. and foreign export control, trade embargo and customs laws;
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•
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Costs and risks associated with litigation;
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•
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The effect of our litigation and risk management practices, including self-insurance, and compliance activities on our loss contingencies, legal provision and cash flows;
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•
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The impact of, diversion of management attention as a result of, and costs to cooperate with, litigate and/or resolve, governmental investigations and our class action, product liability, contract and other legal proceedings; and
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•
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Risks associated with a failure to protect our intellectual property rights and the outcome of patent litigation.
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•
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The timing, size and nature of our strategic growth initiatives and market opportunities, including with respect to our internal research and development platforms and externally available research and development platforms and technologies, and the ultimate cost and success of those initiatives and opportunities;
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•
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Our ability to complete planned clinical trials successfully, obtain regulatory approvals and launch new and next generation products in a timely manner consistent with cost estimates, including the successful completion of in-process projects from in-process research and development;
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•
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Our ability to identify and prioritize our internal research and development project portfolio and our external investment portfolio on profitable revenue growth opportunities as well as to keep them in line with the estimated timing and costs of such projects and expected revenue levels for the resulting products and technologies;
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•
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Our ability to successfully develop, manufacture and market new products and technologies in a timely manner and the ability of our competitors and other third parties to develop products or technologies that render our products or technologies noncompetitive or obsolete;
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•
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The impact of our failure to succeed at or our decision to discontinue, write-down or reduce the funding of any of our research and development projects, including in-process projects from in-process research and development, in our growth adjacencies or otherwise;
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•
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Dependence on acquisitions, alliances or investments to introduce new products or technologies and to enter new or adjacent growth markets, and our ability to fund them or to fund contingent payments with respect to those acquisitions, alliances and investments; and
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•
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The failure to successfully integrate and realize the expected benefits from the strategic acquisitions, alliances and investments we have consummated or may consummate in the future.
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•
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Our dependency on international net sales to achieve growth, including in emerging markets;
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•
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The impact of changes in our international structure and leadership;
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•
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Risks associated with international operations and investments, including the timing and collectibility of customer payments, political and economic conditions, protection of our intellectual property, compliance with established and developing U.S. and foreign legal and regulatory requirements, including FCPA and similar laws in other jurisdictions and U.S. and foreign export control, trade embargo and customs laws, as well as changes in reimbursement practices and policies;
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•
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Our ability to maintain or expand our worldwide market positions in the various markets in which we compete or seek to compete, including through investments in product diversification and emerging markets such as Brazil, Russia, India and China;
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•
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Our ability to execute and realize anticipated benefits from our investments in emerging markets; and
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•
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The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins.
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•
|
Our ability to generate sufficient cash flow to fund operations, capital expenditures, global expansion initiatives, any litigation settlements and judgments, share repurchases and strategic investments and acquisitions as well as maintaining our investment grade ratings and managing our debt levels and covenant compliance;
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•
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Our ability to access the public and private capital markets when desired and to issue debt or equity securities on terms reasonably acceptable to us;
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•
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The unfavorable resolution of open tax matters, exposure to additional tax liabilities and the impact of changes in U.S. and international tax laws;
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•
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The impact of examinations and assessments by domestic and international taxing authorities on our tax provision, financial condition or results of operations;
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•
|
The impact of goodwill and other intangible asset impairment charges, including on our results of operations; and
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•
|
Our ability to collect outstanding and future receivables and/or sell receivables under our factoring programs.
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•
|
Risks associated with significant changes made or expected to be made to our organizational and operational structure, pursuant to our 2014 Restructuring plan, 2011 Restructuring plan as expanded, as well as any further restructuring or optimization plans we may undertake in the future, and our ability to recognize benefits and cost reductions from such programs; and
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•
|
Business disruption and employee distraction as we execute our global compliance program, restructuring and optimization plans and divestitures of assets or businesses and implement our other strategic and cost reduction initiatives.
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ITEM 3.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4.
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CONTROLS AND PROCEDURES
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10.1
|
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Boston Scientific Corporation 2016 Annual Bonus Plan, effective as of January 1, 2016 (incorporated herein by reference to Exhibit 10.1, Current Report on Form 8-K filed October 5, 2015, File No. 001-11083)#
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10.2
|
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Boston Scientific Corporation 2016 Total Shareholder Return Performance Share Program (incorporated herein by reference to Exhibit 10.2, Current Report on Form 8-K filed October 5, 2015, File No. 001-11083)#
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10.3
|
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Boston Scientific Corporation 2016 Free Cash Flow Performance Share Program (incorporated herein by reference to Exhibit 10.3, Current Report on Form 8-K filed October 5, 2015, File No. 001-11083)#
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10.4*
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Form of Performance Share Unit Award Agreement under the 2011 Long-Term Incentive Plan (Total Shareholder Return) #
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10.5*
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Form of Performance Share Unit Award Agreement under the 2011 Long-Term Incentive Plan (Free Cash Flow) #
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31.1*
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Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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31.2*
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Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1*
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Chief Executive Officer
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32.2*
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Executive Vice President and Chief Financial Officer
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101*
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Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2015 and 2014, (ii) the Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2015 and 2014, (iii) the Condensed Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2015 and 2014 and (v) the notes to the Condensed Consolidated Financial Statements.
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BOSTON SCIENTIFIC CORPORATION
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||
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By:
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/s/ Daniel J. Brennan
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Name:
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Daniel J. Brennan
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Title:
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Executive Vice President and
Chief Financial Officer
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Boston Scientific Corporation
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Participant:
|
Employee ID:
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Award Type: Performance Share Unit Award Agreement
|
Plan Name: Total Shareholder Return Performance Share Program
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|
|
Award Date: [__]-Feb-2016
|
|
TSR Performance
Percentile Rank
|
Performance Share Units
as a Percent of Target |
90th Percentile or above
|
200%
|
80th Percentile
|
150%
|
50th Percentile
|
100%
|
30th Percentile
|
40%
|
Below 30
th
Percentile
|
0%
|
Boston Scientific Corporation
|
|
|
Participant:
|
Employee ID:
|
Award Type: Performance Share Unit Award Agreement
|
Plan Name: Free Cash Flow Performance Share Program
|
|
|
Award Date: [__]-Feb-2016
|
|
|
Total Granted:
|
Performance
Percent to Plan
|
Units Vesting
|
125% or above
|
150%
|
110%
|
120%
|
100%
|
100%
|
90%
|
80%
|
50%
|
25%
|
Less than 50%
|
0%
|
1
|
I have reviewed this Quarterly Report on Form 10-Q of Boston Scientific Corporation;
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|
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2
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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|
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3
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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|
|
|
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a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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|
|
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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|
|
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
November 4, 2015
|
|
/s/ Michael F. Mahoney
|
|
|
|
Michael F. Mahoney
|
||
|
|
President and Chief Executive Officer
|
1
|
I have reviewed this Quarterly Report on Form 10-Q of Boston Scientific Corporation;
|
|
|
|
|
2
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
|
|
|
3
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
|
|
|
4
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
|
|
|
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
|
|
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
|
|
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
|
|
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
|
|
|
5
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
|
|
|
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
November 4, 2015
|
|
/s/ Daniel J. Brennan
|
|
|
|
Daniel J. Brennan
|
||
|
|
Executive Vice President and Chief Financial Officer
|
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Boston Scientific Corporation.
|
|
|
|
By:
|
/s/ Michael F. Mahoney
|
|
|
Michael F. Mahoney
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
November 4, 2015
|
|
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Boston Scientific Corporation.
|
|
|
|
By:
|
/s/ Daniel J. Brennan
|
|
|
Daniel J. Brennan
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
November 4, 2015
|
|