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þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
DELAWARE
|
04-2695240
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Large accelerated filer
þ
|
Accelerated filer
o
|
Non-Accelerated filer
o
|
Smaller reporting company
o
|
|
|
(Do not check if a smaller reporting company)
|
|
|
|
Shares outstanding
|
Class
|
|
as of July 31, 2015
|
Common Stock, $.01 par value
|
|
1,343,956,583
|
|
|
Page No.
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
||
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
in millions, except per share data
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
|
|
|
|
|
|
|
||||||||
Net sales
|
$
|
1,843
|
|
|
$
|
1,873
|
|
|
$
|
3,611
|
|
|
$
|
3,647
|
|
Cost of products sold
|
540
|
|
|
563
|
|
|
1,060
|
|
|
1,100
|
|
||||
Gross profit
|
1,303
|
|
|
1,310
|
|
|
2,551
|
|
|
2,547
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Selling, general and administrative expenses
|
700
|
|
|
743
|
|
|
1,367
|
|
|
1,409
|
|
||||
Research and development expenses
|
220
|
|
|
206
|
|
|
412
|
|
|
397
|
|
||||
Royalty expense
|
18
|
|
|
25
|
|
|
36
|
|
|
65
|
|
||||
Amortization expense
|
116
|
|
|
109
|
|
|
229
|
|
|
218
|
|
||||
Intangible asset impairment charges
|
9
|
|
|
110
|
|
|
9
|
|
|
165
|
|
||||
Contingent consideration expense (benefit)
|
19
|
|
|
(96
|
)
|
|
46
|
|
|
(118
|
)
|
||||
Restructuring charges
|
3
|
|
|
15
|
|
|
9
|
|
|
35
|
|
||||
Litigation-related charges (credits)
|
(1
|
)
|
|
267
|
|
|
192
|
|
|
260
|
|
||||
Pension termination charges
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
||||
Gain on divestiture
|
—
|
|
|
—
|
|
|
—
|
|
|
(12
|
)
|
||||
|
1,084
|
|
|
1,379
|
|
|
2,308
|
|
|
2,419
|
|
||||
Operating income (loss)
|
219
|
|
|
(69
|
)
|
|
243
|
|
|
128
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(106
|
)
|
|
(53
|
)
|
|
(167
|
)
|
|
(108
|
)
|
||||
Other, net
|
(8
|
)
|
|
18
|
|
|
(22
|
)
|
|
22
|
|
||||
Income (loss) before income taxes
|
105
|
|
|
(104
|
)
|
|
54
|
|
|
42
|
|
||||
Income tax expense (benefit)
|
3
|
|
|
(108
|
)
|
|
(47
|
)
|
|
(95
|
)
|
||||
Net income (loss)
|
$
|
102
|
|
|
$
|
4
|
|
|
$
|
101
|
|
|
$
|
137
|
|
|
|
|
|
|
|
|
|
||||||||
Net income (loss) per common share — basic
|
$
|
0.08
|
|
|
$
|
0.00
|
|
|
$
|
0.08
|
|
|
$
|
0.10
|
|
Net income (loss) per common share — assuming dilution
|
$
|
0.08
|
|
|
$
|
0.00
|
|
|
$
|
0.07
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding
|
|
|
|
|
|
|
|
||||||||
Basic
|
1,341.3
|
|
|
1,323.2
|
|
|
1,337.5
|
|
|
1,322.4
|
|
||||
Assuming dilution
|
1,361.8
|
|
|
1,345.0
|
|
|
1,359.7
|
|
|
1,347.1
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Net income (loss)
|
$
|
102
|
|
|
$
|
4
|
|
|
$
|
101
|
|
|
$
|
137
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustment
|
5
|
|
|
(2
|
)
|
|
(30
|
)
|
|
(8
|
)
|
||||
Net change in unrealized gains and losses on derivative financial instruments, net of tax
|
(43
|
)
|
|
(28
|
)
|
|
(15
|
)
|
|
(55
|
)
|
||||
Net change in certain retirement plans
|
—
|
|
|
—
|
|
|
5
|
|
|
(1
|
)
|
||||
Total other comprehensive income (loss)
|
(38
|
)
|
|
(30
|
)
|
|
(40
|
)
|
|
(64
|
)
|
||||
Total comprehensive income (loss)
|
$
|
64
|
|
|
$
|
(26
|
)
|
|
$
|
61
|
|
|
$
|
73
|
|
|
As of
|
||||||
|
June 30,
|
|
December 31,
|
||||
in millions, except share and per share data
|
2015
|
|
2014
|
||||
|
(Unaudited)
|
|
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
903
|
|
|
$
|
587
|
|
Trade accounts receivable, net
|
1,195
|
|
|
1,183
|
|
||
Inventories
|
968
|
|
|
946
|
|
||
Deferred and prepaid income taxes
|
316
|
|
|
447
|
|
||
Other current assets
|
391
|
|
|
443
|
|
||
Total current assets
|
3,773
|
|
|
3,606
|
|
||
Property, plant and equipment, net
|
1,451
|
|
|
1,507
|
|
||
Goodwill
|
5,930
|
|
|
5,898
|
|
||
Other intangible assets, net
|
5,442
|
|
|
5,606
|
|
||
Other long-term assets
|
527
|
|
|
425
|
|
||
TOTAL ASSETS
|
$
|
17,123
|
|
|
$
|
17,042
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Current debt obligations
|
$
|
43
|
|
|
$
|
403
|
|
Accounts payable
|
191
|
|
|
262
|
|
||
Accrued expenses
|
1,401
|
|
|
1,950
|
|
||
Other current liabilities
|
302
|
|
|
231
|
|
||
Total current liabilities
|
1,937
|
|
|
2,846
|
|
||
Long-term debt
|
5,069
|
|
|
3,859
|
|
||
Deferred income taxes
|
899
|
|
|
1,214
|
|
||
Other long-term liabilities
|
2,638
|
|
|
2,666
|
|
||
|
|
|
|
||||
Commitments and contingencies
|
|
|
|
||||
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Preferred stock, $.01 par value - authorized 50,000,000 shares, none issued and outstanding
|
|
|
|
|
|
||
Common stock, $.01 par value - authorized 2,000,000,000 shares and issued 1,589,722,340 shares as of June 30, 2015 and 1,575,018,236 shares as of December 31, 2014
|
16
|
|
|
16
|
|
||
Treasury stock, at cost - 247,566,270 shares as of June 30, 2015 and 247,566,270 shares as of December 31, 2014
|
(1,717
|
)
|
|
(1,717
|
)
|
||
Additional paid-in capital
|
16,764
|
|
|
16,703
|
|
||
Accumulated deficit
|
(8,587
|
)
|
|
(8,689
|
)
|
||
Accumulated other comprehensive income (loss), net of tax
|
104
|
|
|
144
|
|
||
Total stockholders’ equity
|
6,580
|
|
|
6,457
|
|
||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
|
$
|
17,123
|
|
|
$
|
17,042
|
|
|
Six Months Ended
June 30, |
||||||
in millions
|
2015
|
|
2014
|
||||
|
|
|
|
||||
Cash provided by (used for) operating activities
|
$
|
(137
|
)
|
|
$
|
483
|
|
|
|
|
|
||||
Investing activities:
|
|
|
|
||||
Purchases of property, plant and equipment
|
(92
|
)
|
|
(124
|
)
|
||
Purchases of privately held securities
|
(140
|
)
|
|
(6
|
)
|
||
Purchases of notes receivable
|
—
|
|
|
(10
|
)
|
||
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
|
(63
|
)
|
|
(72
|
)
|
||
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
|
(297
|
)
|
|
(189
|
)
|
||
|
|
|
|
||||
Financing activities:
|
|
|
|
||||
Payments on long-term borrowings
|
(1,000
|
)
|
|
—
|
|
||
Proceeds from long-term borrowings, net of debt issuance costs
|
1,831
|
|
|
—
|
|
||
Payment of contingent consideration
|
(87
|
)
|
|
(15
|
)
|
||
Proceeds from borrowings on credit facilities
|
395
|
|
|
650
|
|
||
Payments on borrowings from credit facilities
|
(395
|
)
|
|
(650
|
)
|
||
Payments for acquisitions of treasury stock
|
—
|
|
|
(125
|
)
|
||
Cash used to net share settle employee equity awards
|
(62
|
)
|
|
(47
|
)
|
||
Proceeds from issuances of shares of common stock
|
70
|
|
|
33
|
|
||
|
|
|
|
||||
Cash provided by (used for) financing activities
|
752
|
|
|
(154
|
)
|
||
|
|
|
|
||||
Effect of foreign exchange rates on cash
|
(2
|
)
|
|
—
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
316
|
|
|
140
|
|
||
Cash and cash equivalents at beginning of period
|
587
|
|
|
217
|
|
||
Cash and cash equivalents at end of period
|
$
|
903
|
|
|
$
|
357
|
|
|
|
|
|
||||
Supplemental Information
|
|
|
|
||||
Stock-based compensation expense
|
$
|
53
|
|
|
$
|
53
|
|
Fair value of contingent consideration recorded in purchase accounting
|
31
|
|
|
3
|
|
Cash, net of cash acquired
|
$
|
63
|
|
Fair value of contingent consideration
|
31
|
|
|
|
$
|
94
|
|
Goodwill
|
$
|
30
|
|
Amortizable intangible assets
|
68
|
|
|
Other net assets
|
3
|
|
|
Deferred income taxes
|
(7
|
)
|
|
|
$
|
94
|
|
|
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
|
$
|
68
|
|
|
11
|
|
15
|
%
|
|
$
|
68
|
|
|
|
|
|
Cash, net of cash acquired
|
$
|
65
|
|
Fair value of prior interests
|
31
|
|
|
|
$
|
96
|
|
Goodwill
|
$
|
39
|
|
Amortizable intangible assets
|
72
|
|
|
Other net assets
|
(1
|
)
|
|
Deferred income taxes
|
(14
|
)
|
|
|
$
|
96
|
|
|
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
|
$
|
71
|
|
|
14
|
|
14
|
%
|
Other intangible assets
|
1
|
|
|
2
|
|
14
|
%
|
|
|
$
|
72
|
|
|
|
|
|
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
|
46
|
|
|
Payments made
|
(110
|
)
|
|
Balance as of June 30, 2015
|
$
|
241
|
|
Contingent Consideration Liability
|
Fair Value as of June 30, 2015
|
Valuation Technique
|
Unobservable Input
|
Range
|
R&D, Regulatory and Commercialization-based Milestones
|
$14 million
|
Probability Weighted Discounted Cash Flow
|
Discount Rate
|
0.9% - 1.2%
|
Probability of Payment
|
95% - 100%
|
|||
Projected Year of Payment
|
2015
|
|||
Revenue-based Payments
|
$70 million
|
Probability Weighted Discounted Cash Flow
|
Discount Rate
|
11.5% - 15%
|
Projected Year of Payment
|
2015 - 2018
|
|||
$157 million
|
Monte Carlo
|
Revenue Volatility
|
11% - 20%
|
|
Risk Free Rate
|
LIBOR Term Structure
|
|||
Projected Year of Payment
|
2015-2018
|
|
As of
|
||||||||||||||
|
June 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
|
$
|
8,546
|
|
|
$
|
(3,883
|
)
|
|
$
|
8,406
|
|
|
$
|
(3,697
|
)
|
Patents
|
521
|
|
|
(351
|
)
|
|
519
|
|
|
(342
|
)
|
||||
Other intangible assets
|
878
|
|
|
(561
|
)
|
|
875
|
|
|
(533
|
)
|
||||
|
$
|
9,945
|
|
|
$
|
(4,795
|
)
|
|
$
|
9,800
|
|
|
$
|
(4,572
|
)
|
Unamortizable intangible assets
|
|
|
|
|
|
|
|
||||||||
Goodwill
|
$
|
15,830
|
|
|
$
|
(9,900
|
)
|
|
$
|
15,798
|
|
|
$
|
(9,900
|
)
|
Technology-related
|
197
|
|
|
—
|
|
|
197
|
|
|
—
|
|
||||
|
$
|
16,027
|
|
|
$
|
(9,900
|
)
|
|
$
|
15,995
|
|
|
$
|
(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
|
—
|
|
|
—
|
|
|
30
|
|
|
30
|
|
||||
Balance as of June 30, 2015
|
$
|
3,426
|
|
|
$
|
292
|
|
|
$
|
2,212
|
|
|
$
|
5,930
|
|
•
|
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, increases in our market-participant tax rate, and/or changes in tax laws or macroeconomic conditions;
|
•
|
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.
|
(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 June 30, 2015
|
$
|
(1,479
|
)
|
|
$
|
(6,960
|
)
|
|
$
|
(1,461
|
)
|
|
$
|
(9,900
|
)
|
Intangible Asset
|
Valuation Date
|
Fair Value
|
Valuation Technique
|
Unobservable Input
|
Rate
|
In-Process R&D
|
June 30, 2015
|
$6 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 June 30, 2015
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
(25
|
)
|
|
$
|
53
|
|
|
Cost of products sold
|
Interest rate derivative contracts
|
$
|
10
|
|
|
$
|
1
|
|
|
Interest Expense
|
|
$
|
(15
|
)
|
|
$
|
54
|
|
|
|
Three Months Ended June 30, 2014
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
(20
|
)
|
|
$
|
22
|
|
|
Cost of products sold
|
|
$
|
(20
|
)
|
|
$
|
22
|
|
|
|
Six Months Ended June 30, 2015
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
68
|
|
|
$
|
102
|
|
|
Cost of products sold
|
Interest rate derivative contracts
|
$
|
11
|
|
|
$
|
2
|
|
|
Interest Expense
|
|
$
|
79
|
|
|
$
|
104
|
|
|
|
Six Months Ended June 30, 2014
|
|
|
|
|
|
||||
Currency hedge contracts
|
$
|
(40
|
)
|
|
$
|
43
|
|
|
Cost of products sold
|
|
$
|
(40
|
)
|
|
$
|
43
|
|
|
|
in millions
|
|
Location in Statement of Operations
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
June 30,
|
|
June 30,
|
||||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||
Gain (loss) on currency hedge contracts
|
|
Other, net
|
|
$
|
(9
|
)
|
|
$
|
(17
|
)
|
|
$
|
14
|
|
|
$
|
(20
|
)
|
Gain (loss) on foreign currency transaction exposures
|
|
Other, net
|
|
4
|
|
|
14
|
|
|
(28
|
)
|
|
14
|
|
||||
Net foreign currency gain (loss)
|
|
Other, net
|
|
$
|
(5
|
)
|
|
$
|
(3
|
)
|
|
$
|
(14
|
)
|
|
$
|
(6
|
)
|
|
|
As of
|
||||||
|
|
June 30,
|
|
December 31,
|
||||
(in millions)
|
Location in Balance Sheet (1)
|
2015
|
|
2014
|
||||
Derivative Assets:
|
|
|
|
|
||||
Currently or Previously Designated Hedging Instruments
|
|
|
|
|||||
Currency hedge contracts
|
Other current assets
|
$
|
171
|
|
|
$
|
178
|
|
Currency hedge contracts
|
Other long-term assets
|
114
|
|
|
141
|
|
||
Interest rate contracts
|
Other current assets
|
—
|
|
|
3
|
|
||
Interest rate contracts
|
Other long-term assets
|
—
|
|
|
22
|
|
||
|
|
285
|
|
|
344
|
|
||
Non-Designated Hedging Instruments
|
|
|
|
|
||||
Currency hedge contracts
|
Other current assets
|
44
|
|
|
100
|
|
||
Total Derivative Assets
|
|
$
|
329
|
|
|
$
|
444
|
|
|
|
|
|
|
||||
Derivative Liabilities:
|
|
|
|
|
||||
Currently or Previously Designated Hedging Instruments
|
|
|
|
|||||
Currency hedge contracts
|
Other current liabilities
|
$
|
1
|
|
|
$
|
1
|
|
|
|
1
|
|
|
1
|
|
||
Non-Designated Hedging Instruments
|
|
|
|
|
||||
Currency hedge contracts
|
Other current liabilities
|
26
|
|
|
35
|
|
||
Total Derivative Liabilities
|
|
$
|
27
|
|
|
$
|
36
|
|
(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.
|
|
June 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
|
$
|
371
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
371
|
|
|
$
|
151
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
151
|
|
Currency hedge contracts
|
—
|
|
|
329
|
|
|
—
|
|
|
329
|
|
|
—
|
|
|
419
|
|
|
—
|
|
|
419
|
|
||||||||
Interest rate contracts
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
25
|
|
||||||||
|
$
|
371
|
|
|
$
|
329
|
|
|
$
|
—
|
|
|
$
|
700
|
|
|
$
|
151
|
|
|
$
|
444
|
|
|
$
|
—
|
|
|
$
|
595
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Currency hedge contracts
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
—
|
|
|
$
|
36
|
|
Accrued contingent consideration
|
—
|
|
|
—
|
|
|
241
|
|
|
241
|
|
|
—
|
|
|
—
|
|
|
274
|
|
|
274
|
|
||||||||
|
$
|
—
|
|
|
$
|
27
|
|
|
$
|
241
|
|
|
$
|
268
|
|
|
$
|
—
|
|
|
$
|
36
|
|
|
$
|
274
|
|
|
$
|
310
|
|
|
|
|
|
||||||||||||||||||||||||
(in millions)
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
Senior notes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
4,650
|
|
Term loan
|
—
|
|
|
80
|
|
|
80
|
|
|
240
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||||
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
330
|
|
|
$
|
840
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
5,050
|
|
|
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 June 30, 2015
|
|
Actual as of
June 30, 2015
|
Maximum leverage ratio (1)
|
3.5 times
|
|
2.3 times
|
Minimum interest coverage ratio (2)
|
3.0 times
|
|
6.6 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 June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
Restructuring charges
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||||
Selling, general and administrative expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
4
|
|
||||||
|
—
|
|
|
1
|
|
|
8
|
|
|
—
|
|
|
3
|
|
|
12
|
|
||||||
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
2014 Restructuring plan
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
15
|
|
2011 Restructuring plan (including the Expansion)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
Restructuring charges
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
|
$
|
15
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
||||||
Selling, general and administrative expenses
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
6
|
|
||||||
|
—
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
5
|
|
|
10
|
|
||||||
|
$
|
8
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
2014 Restructuring plan
|
$
|
10
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
27
|
|
2011 Restructuring plan (including the Expansion)
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||||
|
$
|
8
|
|
|
$
|
1
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
Restructuring charges
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
9
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
16
|
|
||||||
Selling, general and administrative expenses
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
12
|
|
||||||
|
—
|
|
|
2
|
|
|
16
|
|
|
—
|
|
|
10
|
|
|
28
|
|
||||||
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
2014 Restructuring plan
|
$
|
11
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
40
|
|
2011 Restructuring plan (including the Expansion)
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||||
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
11
|
|
|
$
|
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
Restructuring charges
|
$
|
19
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
16
|
|
|
$
|
35
|
|
Restructuring-related expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of products sold
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
||||||
Selling, general and administrative expenses
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
12
|
|
||||||
|
—
|
|
|
2
|
|
|
6
|
|
|
—
|
|
|
10
|
|
|
18
|
|
||||||
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
Termination
Benefits
|
|
Accelerated
Depreciation
|
|
Transfer
Costs
|
|
Fixed Asset
Write-offs
|
|
Other
|
|
Total
|
||||||||||||
2014 Restructuring plan
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
23
|
|
|
$
|
50
|
|
2011 Restructuring plan (including the Expansion)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
3
|
|
||||||
|
$
|
19
|
|
|
$
|
2
|
|
|
$
|
6
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
$
|
53
|
|
(in millions)
|
2014
Restructuring
plan
|
|
2011
Restructuring
plan (including the Expansion)
|
|
Total
|
||||||
Termination benefits
|
$
|
81
|
|
|
$
|
135
|
|
|
$
|
216
|
|
Net loss (gain) on fixed asset disposals
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Other
|
26
|
|
|
113
|
|
|
139
|
|
|||
Total restructuring charges
|
107
|
|
|
247
|
|
|
354
|
|
|||
Accelerated depreciation
|
7
|
|
|
5
|
|
|
12
|
|
|||
Transfer costs
|
40
|
|
|
—
|
|
|
40
|
|
|||
Other
|
29
|
|
|
34
|
|
|
63
|
|
|||
Restructuring-related expenses
|
76
|
|
|
39
|
|
|
115
|
|
|||
|
$
|
183
|
|
|
$
|
286
|
|
|
$
|
469
|
|
(in millions)
|
2014
Restructuring
plan
|
|
2011
Restructuring
plan (including the Expansion)
|
|
Total
|
||||||
Three Months Ended June 30, 2015
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
Transfer costs
|
8
|
|
|
—
|
|
|
8
|
|
|||
Other
|
3
|
|
|
—
|
|
|
3
|
|
|||
|
$
|
20
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
|
|
|
|
|
||||||
Six Months Ended June 30, 2015
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
18
|
|
|
$
|
—
|
|
|
$
|
18
|
|
Transfer costs
|
16
|
|
|
—
|
|
|
16
|
|
|||
Other
|
12
|
|
|
—
|
|
|
12
|
|
|||
|
$
|
46
|
|
|
$
|
—
|
|
|
$
|
46
|
|
|
|
|
|
|
|
||||||
Program to Date
|
|
|
|
|
|
||||||
Termination benefits
|
$
|
49
|
|
|
$
|
133
|
|
|
$
|
182
|
|
Transfer costs
|
40
|
|
|
—
|
|
|
40
|
|
|||
Other
|
50
|
|
|
154
|
|
|
204
|
|
|||
|
$
|
139
|
|
|
$
|
287
|
|
|
$
|
426
|
|
(in millions)
|
2014
Restructuring
plan
|
|
2011
Restructuring
plan (including the Expansion)
|
|
Total
|
||||||
Accrued as of December 31, 2014
|
$
|
39
|
|
|
$
|
4
|
|
|
$
|
43
|
|
Charges (credits)
|
11
|
|
|
(3
|
)
|
|
8
|
|
|||
Cash payments
|
(18
|
)
|
|
—
|
|
|
(18
|
)
|
|||
Other
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|||
Accrued as of June 30, 2015
|
$
|
32
|
|
|
$
|
—
|
|
|
$
|
32
|
|
|
|
As of
|
||||||
(in millions)
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Accounts receivable
|
|
$
|
1,313
|
|
|
$
|
1,288
|
|
Less: allowance for doubtful accounts
|
|
(77
|
)
|
|
(76
|
)
|
||
Less: allowance for sales returns
|
|
(41
|
)
|
|
(29
|
)
|
||
|
|
$
|
1,195
|
|
|
$
|
1,183
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Beginning balance
|
|
$
|
72
|
|
|
$
|
75
|
|
|
$
|
76
|
|
|
$
|
81
|
|
Charges to expenses
|
|
6
|
|
|
6
|
|
|
8
|
|
|
4
|
|
||||
Utilization of allowances
|
|
(1
|
)
|
|
(1
|
)
|
|
(7
|
)
|
|
(5
|
)
|
||||
Ending balance
|
|
$
|
77
|
|
|
$
|
80
|
|
|
$
|
77
|
|
|
$
|
80
|
|
|
|
As of
|
||||||
(in millions)
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Finished goods
|
|
$
|
657
|
|
|
$
|
649
|
|
Raw materials
|
|
214
|
|
|
200
|
|
||
Work-in-process
|
|
97
|
|
|
97
|
|
||
|
|
$
|
968
|
|
|
$
|
946
|
|
|
|
As of
|
||||||
(in millions)
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Land
|
|
$
|
80
|
|
|
$
|
80
|
|
Buildings and improvements
|
|
934
|
|
|
944
|
|
||
Equipment, furniture and fixtures
|
|
2,738
|
|
|
2,633
|
|
||
Capital in progress
|
|
185
|
|
|
189
|
|
||
|
|
3,937
|
|
|
3,846
|
|
||
Less: accumulated depreciation
|
|
2,486
|
|
|
2,339
|
|
||
|
|
$
|
1,451
|
|
|
$
|
1,507
|
|
|
|
As of
|
||||||
(in millions)
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Legal reserves
|
|
$
|
283
|
|
|
$
|
694
|
|
Payroll and related liabilities
|
|
415
|
|
|
512
|
|
||
Accrued contingent consideration
|
|
145
|
|
|
158
|
|
||
Other
|
|
558
|
|
|
586
|
|
||
|
|
$
|
1,401
|
|
|
$
|
1,950
|
|
|
|
As of
|
||||||
(in millions)
|
|
June 30, 2015
|
|
December 31, 2014
|
||||
Accrued income taxes
|
|
$
|
1,264
|
|
|
$
|
1,231
|
|
Legal reserves
|
|
834
|
|
|
883
|
|
||
Accrued contingent consideration
|
|
96
|
|
|
116
|
|
||
Other long-term liabilities
|
|
444
|
|
|
436
|
|
||
|
|
$
|
2,638
|
|
|
$
|
2,666
|
|
|
|
Six Months Ended
June 30, |
||||||
|
|
2015
|
|
2014
|
||||
Beginning Balance
|
|
$
|
25
|
|
|
$
|
28
|
|
Provision
|
|
10
|
|
|
2
|
|
||
Settlements/reversals
|
|
(9
|
)
|
|
(6
|
)
|
||
Ending Balance
|
|
$
|
26
|
|
|
$
|
24
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Weighted average shares outstanding - basic
|
|
1,341.3
|
|
|
1,323.2
|
|
|
1,337.5
|
|
|
1,322.4
|
|
Net effect of common stock equivalents
|
|
20.5
|
|
|
21.8
|
|
|
22.2
|
|
|
24.7
|
|
Weighted average shares outstanding - assuming dilution
|
|
1,361.8
|
|
|
1,345.0
|
|
|
1,359.7
|
|
|
1,347.1
|
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
|
|
|
|
|
|
|
|
|
||||||||
Net sales
|
|
|
|
|
|
|
|
|
||||||||
Interventional Cardiology
|
|
$
|
567
|
|
|
$
|
528
|
|
|
$
|
1,108
|
|
|
$
|
1,029
|
|
Peripheral Interventions
|
|
245
|
|
|
210
|
|
|
477
|
|
|
414
|
|
||||
Cardiovascular
|
|
812
|
|
|
738
|
|
|
1,585
|
|
|
1,443
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Cardiac Rhythm Management
|
|
490
|
|
|
495
|
|
|
973
|
|
|
959
|
|
||||
Electrophysiology
|
|
60
|
|
|
55
|
|
|
121
|
|
|
113
|
|
||||
Rhythm Management
|
|
550
|
|
|
550
|
|
|
1,094
|
|
|
1,072
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Endoscopy
|
|
352
|
|
|
334
|
|
|
680
|
|
|
650
|
|
||||
Urology and Women's Health
|
|
142
|
|
|
133
|
|
|
272
|
|
|
259
|
|
||||
Neuromodulation
|
|
125
|
|
|
114
|
|
|
241
|
|
|
223
|
|
||||
MedSurg
|
|
619
|
|
|
581
|
|
|
1,193
|
|
|
1,132
|
|
||||
Net sales allocated to reportable segments
|
|
1,981
|
|
|
1,869
|
|
|
3,872
|
|
|
3,647
|
|
||||
Sales generated from divested businesses
|
|
—
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||
Impact of foreign currency fluctuations
|
|
(138
|
)
|
|
3
|
|
|
(261
|
)
|
|
(3
|
)
|
||||
|
|
$
|
1,843
|
|
|
$
|
1,873
|
|
|
$
|
3,611
|
|
|
$
|
3,647
|
|
|
|
|
|
|
|
|
|
|
||||||||
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
||||||||
Cardiovascular
|
|
$
|
247
|
|
|
$
|
193
|
|
|
$
|
483
|
|
|
$
|
364
|
|
Rhythm Management
|
|
78
|
|
|
67
|
|
|
155
|
|
|
133
|
|
||||
MedSurg
|
|
188
|
|
|
175
|
|
|
355
|
|
|
343
|
|
||||
Operating income allocated to reportable segments
|
|
513
|
|
|
435
|
|
|
993
|
|
|
840
|
|
||||
Corporate expenses and currency exchange
|
|
(105
|
)
|
|
(64
|
)
|
|
(188
|
)
|
|
(115
|
)
|
||||
Intangible asset impairment charges; pension termination charges; acquisition-, divestiture-, restructuring-, and litigation-related net charges and credits
|
|
(73
|
)
|
|
(331
|
)
|
|
(333
|
)
|
|
(379
|
)
|
||||
Amortization expense
|
|
(116
|
)
|
|
(109
|
)
|
|
(229
|
)
|
|
(218
|
)
|
||||
Operating income (loss)
|
|
219
|
|
|
(69
|
)
|
|
243
|
|
|
128
|
|
||||
Other expense, net
|
|
(114
|
)
|
|
(35
|
)
|
|
(189
|
)
|
|
(86
|
)
|
||||
Income (loss) before income taxes
|
|
$
|
105
|
|
|
$
|
(104
|
)
|
|
$
|
54
|
|
|
$
|
42
|
|
Three Months Ended June 30, 2015
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of March 31, 2015
|
|
$
|
(73
|
)
|
|
$
|
247
|
|
|
$
|
(32
|
)
|
|
$
|
142
|
|
Other comprehensive income (loss) before reclassifications
|
|
5
|
|
|
(8
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
(35
|
)
|
||||
Net current-period other comprehensive income
|
|
5
|
|
|
(43
|
)
|
|
—
|
|
|
(38
|
)
|
||||
Balance as of June 30, 2015
|
|
$
|
(68
|
)
|
|
$
|
204
|
|
|
$
|
(32
|
)
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
||||||||
Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
||||||||
(in millions)
|
|
Foreign currency translation adjustments
|
|
Unrealized gains/losses on derivative financial instruments
|
|
Defined benefit pension items / Other
|
|
Total
|
||||||||
Balance as of March 31, 2014
|
|
$
|
(22
|
)
|
|
$
|
114
|
|
|
$
|
(20
|
)
|
|
$
|
72
|
|
Other comprehensive income (loss) before reclassifications
|
|
(2
|
)
|
|
(13
|
)
|
|
—
|
|
|
(15
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
(15
|
)
|
||||
Net current-period other comprehensive income
|
|
(2
|
)
|
|
(28
|
)
|
|
—
|
|
|
(30
|
)
|
||||
Balances as of June 30, 2014
|
|
$
|
(24
|
)
|
|
$
|
86
|
|
|
$
|
(20
|
)
|
|
$
|
42
|
|
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 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
|
|
(30
|
)
|
|
51
|
|
|
(3
|
)
|
|
18
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(66
|
)
|
|
8
|
|
|
(58
|
)
|
||||
Net current-period other comprehensive income
|
|
(30
|
)
|
|
(15
|
)
|
|
5
|
|
|
(40
|
)
|
||||
Balance as of June 30, 2015
|
|
$
|
(68
|
)
|
|
$
|
204
|
|
|
$
|
(32
|
)
|
|
$
|
104
|
|
|
|
|
|
|
|
|
|
|
||||||||
Six Months Ended June 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
|
|
(8
|
)
|
|
(27
|
)
|
|
(1
|
)
|
|
(36
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
(28
|
)
|
|
—
|
|
|
(28
|
)
|
||||
Net current-period other comprehensive income
|
|
(8
|
)
|
|
(55
|
)
|
|
(1
|
)
|
|
(64
|
)
|
||||
Balances as of June 30, 2014
|
|
$
|
(24
|
)
|
|
$
|
86
|
|
|
$
|
(20
|
)
|
|
$
|
42
|
|
ITEM 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
|
Three Months Ended June 30, 2015
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
||||||||
GAAP net income (loss)
|
|
$
|
105
|
|
|
$
|
(3
|
)
|
|
$
|
102
|
|
|
$
|
0.08
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charge
|
|
9
|
|
|
(2
|
)
|
|
7
|
|
|
0.01
|
|
||||
Acquisition- and divestiture-related net charges
|
|
49
|
|
|
(7
|
)
|
|
42
|
|
|
0.03
|
|
||||
Restructuring and restructuring-related net charges
|
|
16
|
|
|
(2
|
)
|
|
14
|
|
|
0.01
|
|
||||
Litigation-related net credits
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
0.00
|
|
||||
Debt extinguishment charges
|
|
45
|
|
|
(16
|
)
|
|
29
|
|
|
0.02
|
|
||||
Amortization expense
|
|
116
|
|
|
(15
|
)
|
|
101
|
|
|
0.07
|
|
||||
Adjusted net income
|
|
$
|
339
|
|
|
$
|
(45
|
)
|
|
$
|
294
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2014
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
||||||||
GAAP net income (loss)
|
|
$
|
(104
|
)
|
|
$
|
108
|
|
|
$
|
4
|
|
|
$
|
0.00
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
110
|
|
|
(19
|
)
|
|
91
|
|
|
0.07
|
|
||||
Acquisition- and divestiture-related net credits
|
|
(91
|
)
|
|
(1
|
)
|
|
(92
|
)
|
|
(0.07
|
)
|
||||
Restructuring and restructuring-related net charges
|
|
25
|
|
|
(6
|
)
|
|
19
|
|
|
0.01
|
|
||||
Discrete tax items
|
|
—
|
|
|
(2
|
)
|
|
(2
|
)
|
|
0.00
|
|
||||
Litigation-related net charges
|
|
267
|
|
|
(100
|
)
|
|
167
|
|
|
0.13
|
|
||||
Amortization expense
|
|
109
|
|
|
(11
|
)
|
|
98
|
|
|
0.07
|
|
||||
Adjusted net income
|
|
$
|
316
|
|
|
$
|
(31
|
)
|
|
$
|
285
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2015
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
||||||||
GAAP net income (loss)
|
|
$
|
54
|
|
|
$
|
47
|
|
|
$
|
101
|
|
|
$
|
0.07
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charge
|
|
9
|
|
|
(2
|
)
|
|
7
|
|
|
0.01
|
|
||||
Acquisition- and divestiture-related net charges
|
|
91
|
|
|
(5
|
)
|
|
86
|
|
|
0.07
|
|
||||
Restructuring and restructuring-related net charges
|
|
37
|
|
|
(6
|
)
|
|
31
|
|
|
0.02
|
|
||||
Litigation-related net charges
|
|
192
|
|
|
(70
|
)
|
|
122
|
|
|
0.09
|
|
||||
Pension termination charges
|
|
8
|
|
|
(3
|
)
|
|
5
|
|
|
0.00
|
|
||||
Debt extinguishment charges
|
|
45
|
|
|
(16
|
)
|
|
29
|
|
|
0.02
|
|
||||
Amortization expense
|
|
229
|
|
|
(30
|
)
|
|
199
|
|
|
0.15
|
|
||||
Adjusted net income
|
|
$
|
665
|
|
|
$
|
(85
|
)
|
|
$
|
580
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2014
|
||||||||||||||
|
|
|
|
Tax
|
|
|
|
Impact per
|
||||||||
in millions, except per share data
|
|
Pre-Tax
|
|
Impact
|
|
After-Tax
|
|
share
|
||||||||
GAAP net income (loss)
|
|
$
|
42
|
|
|
$
|
95
|
|
|
$
|
137
|
|
|
$
|
0.10
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
||||||||
Intangible asset impairment charges
|
|
165
|
|
|
(25
|
)
|
|
140
|
|
|
0.10
|
|
||||
Acquisition- and divestiture-related net credits
|
|
(118
|
)
|
|
(2
|
)
|
|
(120
|
)
|
|
(0.09
|
)
|
||||
Restructuring and restructuring-related net charges
|
|
53
|
|
|
(13
|
)
|
|
40
|
|
|
0.03
|
|
||||
Discrete tax items
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.00
|
|
||||
Litigation-related net charges
|
|
260
|
|
|
(99
|
)
|
|
161
|
|
|
0.12
|
|
||||
Amortization expense
|
|
218
|
|
|
(23
|
)
|
|
195
|
|
|
0.15
|
|
||||
Adjusted net income
|
|
$
|
620
|
|
|
$
|
(67
|
)
|
|
$
|
553
|
|
|
$
|
0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
|
||||||||||
|
|
Three Months Ended
June 30, |
|
As Reported
Currency
Basis
|
|
Constant
Currency
Basis
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
Interventional Cardiology
|
|
$
|
515
|
|
|
$
|
528
|
|
|
(3
|
)
|
%
|
|
7
|
|
%
|
Peripheral Interventions
|
|
228
|
|
|
211
|
|
|
8
|
|
%
|
|
16
|
|
%
|
||
Cardiovascular
|
|
743
|
|
|
739
|
|
|
—
|
|
%
|
|
10
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Cardiac Rhythm Management
|
|
460
|
|
|
497
|
|
|
(7
|
)
|
%
|
|
(1
|
)
|
%
|
||
Electrophysiology
|
|
57
|
|
|
56
|
|
|
2
|
|
%
|
|
9
|
|
%
|
||
Rhythm Management
|
|
517
|
|
|
553
|
|
|
(6
|
)
|
%
|
|
—
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Endoscopy
|
|
326
|
|
|
333
|
|
|
(2
|
)
|
%
|
|
6
|
|
%
|
||
Urology and Women’s Health
|
|
135
|
|
|
133
|
|
|
2
|
|
%
|
|
7
|
|
%
|
||
Neuromodulation
|
|
122
|
|
|
114
|
|
|
7
|
|
%
|
|
9
|
|
%
|
||
MedSurg
|
|
583
|
|
|
580
|
|
|
1
|
|
%
|
|
7
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Subtotal Core Businesses
|
|
1,843
|
|
|
1,872
|
|
|
(2
|
)
|
%
|
|
6
|
|
%
|
||
Divested Businesses
|
|
—
|
|
|
1
|
|
|
N/A
|
|
%
|
|
N/A
|
|
%
|
||
Worldwide
|
|
$
|
1,843
|
|
|
$
|
1,873
|
|
|
(2
|
)
|
%
|
|
6
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
Change
|
||||||||||
|
|
Six Months Ended
June 30, |
|
As Reported
Currency
Basis
|
|
Constant
Currency
Basis
|
||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||
Interventional Cardiology
|
|
$
|
1,010
|
|
|
$
|
1,025
|
|
|
(2
|
)
|
%
|
|
7
|
|
%
|
Peripheral Interventions
|
|
445
|
|
|
414
|
|
|
8
|
|
%
|
|
15
|
|
%
|
||
Cardiovascular
|
|
1,455
|
|
|
1,439
|
|
|
1
|
|
%
|
|
10
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Cardiac Rhythm Management
|
|
916
|
|
|
963
|
|
|
(5
|
)
|
%
|
|
2
|
|
%
|
||
Electrophysiology
|
|
115
|
|
|
114
|
|
|
—
|
|
%
|
|
7
|
|
%
|
||
Rhythm Management
|
|
1,031
|
|
|
1,077
|
|
|
(4
|
)
|
%
|
|
2
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Endoscopy
|
|
631
|
|
|
647
|
|
|
(3
|
)
|
%
|
|
5
|
|
%
|
||
Urology and Women’s Health
|
|
258
|
|
|
258
|
|
|
—
|
|
%
|
|
5
|
|
%
|
||
Neuromodulation
|
|
236
|
|
|
223
|
|
|
6
|
|
%
|
|
7
|
|
%
|
||
MedSurg
|
|
1,125
|
|
|
1,128
|
|
|
—
|
|
%
|
|
5
|
|
%
|
||
|
|
|
|
|
|
|
|
|
|
|
||||||
Subtotal Core Businesses
|
|
3,611
|
|
|
3,644
|
|
|
(1
|
)
|
%
|
|
6
|
|
%
|
||
Divested Businesses
|
|
—
|
|
|
3
|
|
|
N/A
|
|
%
|
|
N/A
|
|
%
|
||
Worldwide
|
|
$
|
3,611
|
|
|
$
|
3,647
|
|
|
(1
|
)
|
%
|
|
6
|
|
%
|
|
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||||||||||
(in millions)
|
|
June 30, 2015
|
|
June 30, 2014
|
||||||||||||||||||||
|
|
U.S.
|
|
International
|
|
Total
|
|
U.S.
|
|
International
|
|
Total
|
||||||||||||
Defibrillator systems
|
|
$
|
218
|
|
|
$
|
117
|
|
|
$
|
335
|
|
|
$
|
223
|
|
|
$
|
132
|
|
|
$
|
355
|
|
Pacemaker systems
|
|
61
|
|
|
64
|
|
|
125
|
|
|
67
|
|
|
75
|
|
|
142
|
|
||||||
CRM products
|
|
$
|
279
|
|
|
$
|
181
|
|
|
$
|
460
|
|
|
$
|
290
|
|
|
$
|
207
|
|
|
$
|
497
|
|
|
Three Months
|
Six Months
|
|
|
Gross profit margin - period ended June 30, 2014
|
69.9
|
%
|
69.8
|
%
|
Manufacturing cost reductions
|
1.5
|
|
1.7
|
|
Sales pricing and mix
|
(1.2
|
)
|
(1.3
|
)
|
All other, including other inventory charges, other period expense and net impact of foreign currency
|
0.5
|
|
0.4
|
|
Gross profit margin - period ended June 30, 2015
|
70.7
|
%
|
70.6
|
%
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||||||||||
|
|
|
|
% of Net
|
|
|
|
% of Net
|
|
|
|
% of Net
|
|
|
|
% of Net
|
||||||||
(in millions)
|
|
$
|
|
Sales
|
|
$
|
|
Sales
|
|
$
|
|
Sales
|
|
$
|
|
Sales
|
||||||||
Selling, general and administrative expenses
|
|
700
|
|
|
38.0
|
%
|
|
743
|
|
|
39.7
|
%
|
|
1,367
|
|
|
37.9
|
%
|
|
1,409
|
|
|
38.6
|
%
|
Research and development expenses
|
|
220
|
|
|
11.9
|
%
|
|
206
|
|
|
11.0
|
%
|
|
412
|
|
|
11.4
|
%
|
|
397
|
|
|
10.9
|
%
|
Royalty expense
|
|
18
|
|
|
1.0
|
%
|
|
25
|
|
|
1.3
|
%
|
|
36
|
|
|
1.0
|
%
|
|
65
|
|
|
1.8
|
%
|
|
|
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
||||||||||||
|
|
|
||||||||||||||
(in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||||
Interest income
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
2
|
|
Foreign currency losses
|
|
(5
|
)
|
|
(3
|
)
|
|
(14
|
)
|
|
(6
|
)
|
||||
Net gains (losses) on investments
|
|
—
|
|
|
23
|
|
|
(1
|
)
|
|
29
|
|
||||
Other income (expense), net
|
|
(3
|
)
|
|
(3
|
)
|
|
(8
|
)
|
|
(3
|
)
|
||||
|
|
$
|
(8
|
)
|
|
$
|
18
|
|
|
$
|
(22
|
)
|
|
$
|
22
|
|
•
|
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, increases in our market-participant tax rate, and/or changes in tax laws or macroeconomic conditions;
|
•
|
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.
|
|
|
Six Months Ended
June 30, |
||||||
(in millions)
|
|
2015
|
|
2014
|
||||
Cash provided by (used for) operating activities
|
|
$
|
(137
|
)
|
|
$
|
483
|
|
Cash used for investing activities
|
|
(297
|
)
|
|
(189
|
)
|
||
Cash provided by (used for) financing activities
|
|
752
|
|
|
(154
|
)
|
(in millions)
|
|
2015
|
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
Thereafter
|
|
Total
|
||||||||||||||
Senior notes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
250
|
|
|
$
|
600
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
4,650
|
|
Term Loan
|
|
—
|
|
|
80
|
|
|
80
|
|
|
240
|
|
|
—
|
|
|
—
|
|
|
400
|
|
|||||||
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
330
|
|
|
$
|
840
|
|
|
$
|
—
|
|
|
$
|
3,800
|
|
|
$
|
5,050
|
|
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 June 30, 2015
|
|
Actual as of
June 30, 2015
|
Maximum leverage ratio (1)
|
3.5 times
|
|
2.3 times
|
Minimum interest coverage ratio (2)
|
3.0 times
|
|
6.6 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 half of 2014 and the second quarter of 2015. 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.
|
•
|
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.
|
•
|
Discrete tax items - These items represent adjustments of certain tax positions, which were initially established in prior periods as a result of intangible asset impairment charges; acquisition-, divestiture-, restructuring- or litigation-related charges or credits. These adjustments 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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
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.
|
•
|
Our ability to increase CRM net sales, including for both new and replacement units, expand the market and capture market share;
|
•
|
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® Element™ and Promus PREMIER™ stent systems, and capture market share;
|
•
|
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;
|
•
|
Competitive offerings and related declines in average selling prices for our products, particularly our drug-eluting coronary stent systems and our CRM products;
|
•
|
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;
|
•
|
The impact and outcome of ongoing and future clinical trials, including coronary stent 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;
|
•
|
Variations in clinical results, reliability or product performance of our and our competitors' products;
|
•
|
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 IoGyn, Inc. and the American Medical Systems male urology portfolio;
|
•
|
The effect of consolidation and competition in the markets in which we do business, or plan to do business;
|
•
|
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;
|
•
|
Our ability to retain and attract key personnel, including in our cardiology and CRM sales force and other key cardiology and CRM personnel;
|
•
|
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;
|
•
|
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
|
•
|
Risk associated with counterparty default on our derivative financial instruments.
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
Costs and risks associated with litigation;
|
•
|
The effect of our litigation and risk management practices, including self-insurance, and compliance activities on our loss contingencies, legal provision and cash flows;
|
•
|
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
|
•
|
Risks associated with a failure to protect our intellectual property rights and the outcome of patent litigation.
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
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;
|
•
|
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
|
•
|
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.
|
•
|
Our dependency on international net sales to achieve growth, including in emerging markets;
|
•
|
The impact of changes in our international structure and leadership;
|
•
|
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;
|
•
|
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;
|
•
|
Our ability to execute and realize anticipated benefits from our investments in emerging markets; and
|
•
|
The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins.
|
•
|
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;
|
•
|
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;
|
•
|
The unfavorable resolution of open tax matters, exposure to additional tax liabilities and the impact of changes in U.S. and international tax laws;
|
•
|
The impact of examinations and assessments by domestic and international taxing authorities on our tax provision, financial condition or results of operations;
|
•
|
The impact of goodwill and other intangible asset impairment charges, including on our results of operations; and
|
•
|
Our ability to collect outstanding and future receivables and/or sell receivables under our factoring programs.
|
•
|
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
|
•
|
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.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
|
|
|
|
|
3.1
|
|
Restated By-laws of the Company (incorporated herein by reference to Exhibit 3.1, Current Report on Form 8-K dated September 18, 2011, File No. 1-11083).
|
|
|
|
3.2
|
|
Third Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.2, Annual Report on Form 10-K for the year ended December 31, 2007, File No. 1-11083).
|
|
|
|
4.1
|
|
2.850% Senior Notes due 2020 (incorporated herein by reference to Exhibit 4.2, Current Report on Form 8-K dated May 12, 2015, File No. 1-11083).
|
|
|
|
4.2
|
|
3.375% Senior Notes due 2022 (incorporated herein by reference to Exhibit 4.3, Current Report on Form 8-K dated May 12, 2015, File No. 1-11083).
|
|
|
|
4.3
|
|
3.850% Senior Notes due 2025 (incorporated herein by reference to Exhibit 4.4, Current Report on Form 8-K dated May 12, 2015, File No. 1-11083).
|
|
|
|
4.4
|
|
Indenture dated as of May 29, 2013, between Boston Scientific Corporation and U.S. National Bank Association, as trustee (filed as Exhibit 4.1 to the Registrant's Registration Statement on Form S-3 (File No 333-188918) filed on May 29, 2013 and incorporated herein by reference).
|
|
|
|
10.1
|
|
Credit Agreement dated as of April 10, 2015 by and among Boston Scientific Corporation, the several lenders parties thereto, Bank of America, N.A., as Syndication Agent and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated herein by reference to Exhibit 10.1, Current Report on Form 8-K dated April 14, 2015, File No. 1-11083).
|
|
|
|
31.1*
|
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
31.2*
|
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
|
32.1*
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Chief Executive Officer
|
|
|
|
32.2*
|
|
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Executive Vice President and Chief Financial Officer
|
|
|
|
101*
|
|
Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014, (ii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014, (iii) the Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014 and (v) the notes to the Condensed Consolidated Financial Statements.
|
|
BOSTON SCIENTIFIC CORPORATION
|
||
|
By:
|
/s/ Daniel J. Brennan
|
|
|
|
|
|
|
|
Name:
|
Daniel J. Brennan
|
|
|
Title:
|
Executive Vice President and
Chief Financial Officer
|
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
---|
DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
---|
No information found
Customers
Customer name | Ticker |
---|---|
AmerisourceBergen Corporation | ABC |
AmerisourceBergen Corporation | ABC |
Becton, Dickinson and Company | BDX |
McKesson Corporation | MCK |
Price
Yield
Owner | Position | Direct Shares | Indirect Shares |
---|