10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2018

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11083

BOSTON SCIENTIFIC CORPORATION

(Exact name of registrant as specified in its charter)

DELAWARE	04-2695240
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

300 BOSTON SCIENTIFIC WAY, MARLBOROUGH, MASSACHUSETTS 01752-1234

(Address of principal executive offices) (zip code)

(508) 683-4000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ	Accelerated filer o
Non-Accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o
	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

	Shares outstanding
Class	as of July 25, 2018
Common Stock, $0.01 par value	1,382,924,777

TABLE OF CONTENTS

		Page No.
PART I	FINANCIAL INFORMATION	3
ITEM 1.	Condensed Consolidated Financial Statements	3
	Condensed Consolidated Statements of Operations (Unaudited)	3
	Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	4
	Condensed Consolidated Balance Sheets (Unaudited as of June 30, 2018)	5
	Condensed Consolidated Statements of Cash Flows (Unaudited)	6
	Notes to the Condensed Consolidated Financial Statements (Unaudited)	7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	54
ITEM 4.	Controls and Procedures	55
PART II	OTHER INFORMATION	56
ITEM 1.	Legal Proceedings	56
ITEM 1A.	Risk Factors	56
ITEM 6.	Exhibits	56
SIGNATURE		57

2

PART I

FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions, except per share data)	2018			2017			2018			2017
Net sales	$	2,490		$	2,257		$	4,870		$	4,418
Cost of products sold	739			632			1,411			1,282
Gross profit	1,751			1,625			3,458			3,136
Operating expenses:
Selling, general and administrative expenses	886			815			1,746			1,609
Research and development expenses	275			244			536			480
Royalty expense	17			17			35			34
Amortization expense	147			142			288			285
Intangible asset impairment charges	34			—			35			—
Contingent consideration expense (benefit)	(4		)	(24		)	1			(74		)
Restructuring charges (credits)	5			1			18			5
Litigation-related net charges (credits)	—			205			—			208
	1,359			1,400			2,659			2,547
Operating income (loss)	392			225			799			589
Other income (expense):
Interest expense	(57		)	(58		)	(119		)	(115		)
Other, net	12			(76		)	(11		)	(78		)
Income (loss) before income taxes	347			91			670			396
Income tax expense (benefit)	(209		)	(55		)	(183		)	(40		)
Net income (loss)	$	555		$	146		$	853		$	436
Net income (loss) per common share — basic	$	0.40		$	0.11		$	0.62		$	0.32
Net income (loss) per common share — assuming dilution	$	0.40		$	0.11		$	0.61		$	0.31
Weighted-average shares outstanding
Basic	1,380.5			1,369.8			1,378.5			1,367.6
Assuming dilution	1,398.9			1,391.1			1,397.8			1,390.6

See notes to the unaudited condensed consolidated financial statements.

3

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Net income (loss)	$	555		$	146		$	853		$	436
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(45		)	13			(36		)	21
Net change in derivative financial instruments	158			(21		)	78			(76		)
Net change in available-for-sale securities	—			2			—			2
Net change in unrealized costs associated with certain retirement plans	—			(1		)	—			(1		)
Total other comprehensive income (loss)	112			(7		)	42			(54		)
Total comprehensive income (loss)	$	668		$	139		$	895		$	382

See notes to the unaudited condensed consolidated financial statements.

4

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	As of
(in millions, except share and per share data)	June 30, 2018			December 31, 2017
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	208		$	188
Trade accounts receivable, net	1,587			1,548
Inventories	1,087			1,078
Prepaid income taxes	46			66
Other current assets	1,001			942
Total current assets	3,929			3,822
Property, plant and equipment, net	1,715			1,697
Goodwill	7,242			6,998
Other intangible assets, net	5,934			5,837
Other long-term assets	796			688
TOTAL ASSETS	$	19,615		$	19,042
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current debt obligations	$	1,685		$	1,801
Accounts payable	403			530
Accrued expenses	2,266			2,456
Other current liabilities	399			867
Total current liabilities	4,753			5,654
Long-term debt	4,808			3,815
Deferred income taxes	364			191
Other long-term liabilities	1,945			2,370
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value - authorized 50,000,000 shares, none issued and outstanding
Common stock, $0.01 par value - authorized 2,000,000,000 shares - issued 1,628,876,252 shares as of June 30, 2018 and 1,621,062,898 shares as of December 31, 2017	16			16
Treasury stock, at cost - 247,566,270 shares as of June 30, 2018 and December 31, 2017	(1,717		)	(1,717		)
Additional paid-in capital	17,231			17,161
Accumulated deficit	(7,770		)	(8,390		)
Accumulated other comprehensive income (loss), net of tax	(16		)	(59		)
Total stockholders’ equity	7,744			7,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	19,615		$	19,042

See notes to the unaudited condensed consolidated financial statements.

5

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(in millions)	2018			2017
				(restated)†
Cash provided by (used for) operating activities	$	(210	)	$	290
Investing activities:
Purchases of property, plant and equipment	(134		)	(180		)
Payments for acquisitions of businesses, net of cash acquired	(418		)	(392		)
Payments for investments and acquisitions of certain technologies	(112		)	(47		)
Cash provided by (used for) investing activities	(664		)	(619		)
Financing activities:
Payment of contingent consideration amounts previously established in purchase accounting	(5		)	(18		)
Payments on long-term borrowings	(602		)	(600		)
Proceeds from long-term borrowings, net of debt issuance and extinguishment costs	989			—
Net increase (decrease) in commercial paper	472			1,013
Proceeds from borrowings on credit facilities	569			2,156
Payments on borrowings from credit facilities	(569		)	(2,216		)
Cash used to net share settle employee equity awards	(52		)	(62		)
Proceeds from issuances of shares of common stock	53			44
Cash provided by (used for) financing activities	856			317
Effect of foreign exchange rates on cash	(5		)	2
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	(23		)	(11		)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	1,017			487
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	994		$	476
Supplemental Information
Stock-based compensation expense	$	68		$	62
Fair value of contingent consideration recorded in purchase accounting	140			—

	As of
Reconciliation to amounts within the unaudited condensed consolidated balance sheets:	June 30, 2018		June 30, 2017
Cash and cash equivalents	$	208	$	195
Restricted cash and restricted cash equivalents included in Other current assets	756		255
Restricted cash equivalents included in Other long-term assets	31		27
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	$	994	$	476

^†Certain prior year balances related to restricted cash have been reclassified to reflect our adoption of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Update No. 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash in the fourth quarter of 2017. Please refer to our most recent annual report on Form 10-K for additional details.

See notes to the unaudited condensed consolidated financial statements.

6

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. When used in this report, the terms, "we," "us," "our," and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the consolidated financial statements and footnotes thereto included in Item 8 of our most recent Annual Report on Form 10-K.

Amounts reported in millions within this report are computed based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in dollars. Prior year balances were subject to rounding.

Revision of Reportable Segments

Effective January 1, 2018, following organizational changes to align the company's business and organization structure focused on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our Medical Surgical (MedSurg) segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk throughout *). There was no revision to operating segments or reporting units as a result of the organizational change. See Note C – Goodwill and Other Intangible Assets and Note K – Segment Reporting for further details.

Subsequent Events

We evaluate events occurring after the date of our most recent accompanying unaudited condensed consolidated balance sheet for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying unaudited condensed consolidated financial statements (recognized subsequent events) for the three and six months ended June 30, 2018. Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note B – Acquisitions and Strategic Investments and Note I – Commitments and Contingencies for more information.

Accounting Standards Implemented Since December 31, 2017

ASC Update No. 2014-09

In May 2014, the FASB issued FASB ASC Topic 606, Revenue from Contracts with Customers(Topic 606), which was subsequently updated. We adopted the standard as of January 1, 2018, using the modified retrospective method. Under this method, we applied FASB ASC Topic 606 to contracts that were not complete as of January 1, 2018 and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented in accordance with FASB ASC Topic 606. Prior period amounts are not adjusted and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 605, Revenue Recognition.

Due to the adoption of FASB ASC Topic 606, we recorded a net reduction to retained earnings of $177 million on January 1, 2018, primarily related to the cost of providing non-contractual post-implant support to certain customers, which we historically deemed immaterial in the context of the arrangement. Upon the adoption of FASB ASC Topic 606, when we sell a device with an implied non-contractual post-implant support obligation, we forward accrue the cost of the service within Selling, general and administrative expenses and recognize it at the point in time the associated revenue is earned. We release the accrual over the related service period. These costs were previously expensed as incurred due to such service obligation being non-contractual.

The impact of adopting FASB ASC Topic 606 on our unaudited condensed consolidated balance sheets resulted in an increase in Other current liabilities of $58 million and an increase in Other long-term liabilities of $205 million as of June 30, 2018, as a result of accruing for our post-implant support obligation. We also recorded deferred tax assets primarily related to post-implant

7

support, resulting in an increase in Other long-term assets of $12 million and a reduction in Deferred income taxes of $41 million. The remaining impact of adopting FASB ASC Topic 606 was not material to our financial position or results of operations.

Refer to Note L – Revenue for additional details.

ASC Update No. 2016-01

In January 2016, the FASB issued ASC Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose of Update No. 2016-01 is to improve financial reporting for financial instruments by reducing the number of items recorded to other comprehensive income. We adopted Update No. 2016-01 in the first quarter of 2018, using both the modified retrospective and prospective methods. For publicly-held securities, we used the modified retrospective approach. Unrealized gains and losses previously recorded to Other comprehensive income (loss) were reclassified to retained earningsand all future fair value changes will be recorded to Net income (loss). For privately-held securities, we elected the measurement alternative approach for our existing investments, which is applied prospectively upon adoption. This approach requires entities to measure their investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adoption of the standard did not have a material impact on our financial position or results of operations. The actual impact to future periods resulting from fair value changes of our equity investments is difficult to predict as it will depend on their future performance.

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2017-12

In August 2017, the FASB issued ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of Update No. 2017-12 is to simplify the application of hedge accounting and better align financial reporting of hedging relationships with risk management objectives. Update No. 2017-12 was effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We early adopted Update No. 2017-12 in the first quarter of 2018. The adoption of the standard had no impact on our financial position or results of operations.

NOTE B – ACQUISITIONS AND STRATEGIC INVESTMENTS

2018 Acquisitions

Claret Medical, Inc.

On July 20, 2018, we announced the signing of our agreement to acquire Claret Medical, Inc. (Claret Medical), a privately-held company that has developed and commercialized the Sentinel™ Cerebral Embolic Protection System. The device is used to protect the brain during certain interventional procedures, predominately in patients undergoing transcatheter aortic valve replacement (TAVR). The transaction price consists of an upfront cash payment of $220 million, as well as a potential reimbursement-based milestone payment of up to $50 million. The acquisition is projected to close during the third quarter of 2018, subject to customary closing conditions. Upon closing, Claret Medical will be integrated into our Interventional Cardiology business.

Cryterion Medical, Inc.

On July 5, 2018, we announced the closing of our acquisition of Cryterion Medical, Inc. (Cryterion), a privately-held company developing a single-shot cryoablation platform for the treatment of atrial fibrillation. We have been an investor in Cryterion since its inception in 2016 and the transaction price to acquire the approximately 65 percent we did not already own was an upfront cash payment of $202 million. We are in the process of integrating Cryterion into our Electrophysiology business.

8

NxThera, Inc.

On April 30, 2018, we announced the closing of our acquisition of NxThera, Inc. (NxThera), a privately-held company that developed the Rezûm™ System, a minimally invasive therapy in a growing category of treatment options for patients with benign prostatic hyperplasia (BPH). The transaction consists of an upfront cash payment of $306 million, and up to an additional $100 million in potential commercial milestone payments over the next four years. We had an existing minority investment in NxThera, which resulted in a net upfront cash payment of approximately $240 million upon closing and a potential additional milestone payment of up to approximately $85 million. We are in the process of integrating NxThera into our Urology and Pelvic Health business.

nVision Medical Corporation

On April 16, 2018, we announced the closing of our acquisition of nVision Medical Corporation (nVision), a privately-held company focused on women’s health. nVision developed the first and only device cleared by the U.S. Food and Drug Administration (FDA) to collect cells from the fallopian tubes, offering a potential platform for earlier diagnosis of ovarian cancer. The transaction consists of an upfront cash payment of $150 million, and up to an additional $125 million in potential clinical and commercial milestones over four years. We are in the process of integrating nVision into our Urology and Pelvic Health business.

In addition, we completed other individually immaterial acquisitions during the first six months of2018 for total consideration of $50 million in cash at closing plus aggregate contingent consideration of up to $10 million.

Purchase Price Allocation

We accounted for these acquisitions as business combinations, and in accordance with FASB ASC Topic 805, Business Combinations, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition dates. The components of the aggregate preliminary purchase prices are as follows:

(in millions)
Payments for acquisitions, net of cash acquired	$	419
Fair value of contingent consideration	140
Fair value of prior interests	81
	$	639

The following summarizes the preliminary purchase price allocations for the acquisitions as of June 30, 2018:

(in millions)
Goodwill	$	273
Amortizable intangible assets	418
Other assets acquired	53
Liabilities assumed	(5		)
Deferred tax liabilities	(99		)
	$	639

We allocated a portion of the preliminary purchase prices to specific intangible asset categories as follows:

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	410	10 - 13	17% - 23%
Other intangible assets	7		6 - 13	13% - 15%
	$	418

9

2017 Acquisitions

Symetis SA

On May 16, 2017, we announced the closing of our acquisition of Symetis SA (Symetis), a privately-held Swiss structural heart company focused on minimally-invasive transcatheter aortic valve replacement devices, for approximately $430 million in cash. We are in the process of integrating Symetis into our Interventional Cardiology business.

Purchase Price Allocation

We accounted for the acquisition of Symetis as a business combination, and in accordance with FASB ASC Topic 805, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The purchase price was comprised of the following component:

(in millions)
Payment for acquisition, net of cash acquired	$	391

The following summarizes the purchase price allocation for the Symetis acquisition as of June 30, 2018:

(in millions)
Goodwill	$	183
Amortizable intangible assets	278
Other assets acquired	25
Liabilities assumed	(95		)
	$	391

We allocated a portion of the purchase price to specific intangible asset categories as follows:

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	268	13	24%
Other intangible assets	10		2-13	24%
	$	278

Our technology-related intangible assets consist of technical processes, intellectual property and institutional understanding with respect to products and processes that we will leverage in future products or processes and will carry forward from one product generation to the next. We used the multi-period excess earnings method, a form of the income approach, to derive the fair value of the technology-related intangible assets and are amortizing them on a straight-line basis over their assigned estimated useful lives.

Goodwill was primarily established due to synergies expected to be gained from leveraging our existing operations as well as revenue and cash flow projections associated with future technologies and has been allocated to our reportable segments based on the relative expected benefit. Based on preliminary estimates updated for applicable regulatory changes, the goodwill recorded relating to our 2018 and 2017 acquisitions is not deductible for tax purposes.

Contingent Consideration

Within the Contingent consideration expense (benefit) caption of our accompanying unaudited condensed consolidated statements of operations, we recorded a net benefit of $4 million during the second quarter of 2018, a net benefit of $24 million during the second quarter of 2017, a net expense of $1 million during the first six months of2018 and a net benefit of $74 million during the first six months of2017 related to the changes in fair value of our contingent consideration liability. We made contingent consideration payments of $9 million during the first six months of 2018 and $28 million during the first six months of 2017.

10

Changes in the fair value of our contingent consideration liability were as follows:

(in millions)
Balance as of December 31, 2017	$	169
Amounts recorded related to new acquisitions	140
Purchase price adjustments related to prior acquisitions	(22		)
Contingent consideration expense (benefit)	1
Contingent consideration payments	(9		)
Balance as of June 30, 2018	$	279

As of June 30, 2018, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay was approximately $1.532 billion.

The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:

Contingent Consideration Liability	Fair Value as of June 30, 2018	Valuation Technique	Unobservable Input	Range
R&D and Commercialization-based Milestones	$159 million	Discounted Cash Flow	Discount Rate	3	%	-	4%
			Projected Year of Payment	2018		-	2022
Revenue-based Payments	$120 million	Discounted Cash Flow	Discount Rate	11	%	-	15%
			Projected Year of Payment	2018		-	2026

Projected contingent payment amounts related to some of our research and development (R&D), commercialization-based and revenue-based milestones are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and strategic plans. Increases or decreases in projected revenues, probabilities of payment, discount rates or the time until payment is made may result in significantly lower or higher fair value measurements.

Strategic Investments

On January 24, 2018, we closed an investment and entered into an acquisition option agreement with Millipede, Inc. (Millipede), a privately-held company that has developed the IRIS Transcatheter Annuloplasty Ring System for the treatment of severe mitral regurgitation. Under the terms of the agreements, we have purchased a portion of the outstanding shares of Millipede along with newly issued shares of the company for a total consideration of $90 million. We also have the option to acquire the remaining shares of the company at any time prior to the completion of a first-in-human clinical study that meets certain parameters. Upon the completion of the clinical study, Millipede has the option to compel us to acquire the remaining shares of the company. Each company’s option period expires by the end of 2019. Completion of this acquisition would result in an additional $325 million payment by us at closing with a further $125 million becoming payable upon achievement of a commercial milestone.

On November 1, 2017, we entered into a definitive agreement with an investee company where we could have been obligated to pay $145 million in cash up-front and a maximum of $130 million in contingent payments to acquire the investee. The agreement contained a provision, expiring October 31, 2019, allowing the investee company to sell the remaining equity interests of the investee company to us upon achievement of a regulatory milestone and an option allowing us to acquire the remaining equity interests. We sent a notice of termination to the investee company in the second quarter of 2018.

11

The aggregate carrying amount of our strategic investments were comprised of the following categories:

	As of
(in millions)	June 30, 2018		December 31, 2017
Equity method investments	$	281	$	209
Measurement alternative investments	82		81
Publicly-held securities	1		15
Notes receivable	18		47
	$	382	$	353

These investments are classified as Other long-term assets within our accompanying unaudited condensed consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies.

As of June 30, 2018, the book value of our equity method investments exceeded our share of the book value of the investees’ underlying net assets by approximately $328 million, which represents amortizable intangible assets, in-process research and development, deferred tax liabilities and goodwill.

NOTE C – GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill are as follows:

	As of June 30, 2018					As of December 31, 2017
(in millions)	Gross Carrying Amount		Accumulated Amortization/ Write-offs			Gross Carrying Amount		Accumulated Amortization/ Write-offs
Amortizable intangible assets
Technology-related	$	9,698	$	(5,032	)	$	9,386	$	(4,880	)
Patents	517		(384		)	517		(379		)
Other intangible assets	1,640		(897		)	1,633		(838		)
	$	11,855	$	(6,314	)	$	11,536	$	(6,097	)
Unamortizable intangible assets
Goodwill	$	17,142	$	(9,900	)	$	16,898	$	(9,900	)
In-process research and development (IPR&D)	273		—			278		—
Technology-related	120		—			120		—
	$	17,535	$	(9,900	)	$	17,295	$	(9,900	)

Effective January 1, 2018, we reclassified our Neuromodulation operating segment and associated goodwill balance from our Medsurg reportable segment to our Rhythm and Neuro reportable segment as discussed in Note A – Basis of Presentation. This change did not trigger a goodwill impairment assessment or impact our total goodwill carrying value. The following represents our goodwill balance by global reportable segment:

(in millions)	MedSurg			Rhythm and Neuro			Cardiovascular			Total
Balance as of December 31, 2017	$	2,877		$	417		$	3,704		$	6,998
Impact of reportable segment revisions	(1,379		)	1,379			—			—
Impact of foreign currency fluctuations and other changes in carrying amount	(2		)	(22		)	(5		)	(29		)
Goodwill acquired	248			25			—			273
Balance as of June 30, 2018	$	1,744		$	1,799		$	3,699		$	7,242

12

Goodwill Impairment Testing

In the second quarter of 2018, we performed our annual goodwill impairment test for all of our reporting units and concluded the fair value of each reporting unit exceeded its carrying value. Based on the criteria prescribed in FASB ASC Topic 350, Intangibles - Goodwill and Other, we assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. For our 2018 and 2017 annual impairment assessments, we identified seven reporting units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health and Neuromodulation. We aggregated the Cardiac Rhythm Management and Electrophysiology reporting units, components of the Rhythm Management operating segment, based on the criteria prescribed in FASB ASC Topic 350.

In performing the goodwill impairment assessment, we utilized both the optional qualitative assessment and the quantitative approach prescribed under FASB ASC Topic 350. In 2018, we performed a qualitative assessment for our Urology and Pelvic Health and Neuromodulation reporting units since their fair values have historically exceeded carrying value by greater than 100 percent. The remaining reporting units were quantitatively tested for impairment. For the reporting units subject to a qualitative assessment, if it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying value, the quantitative approach of the goodwill impairment test is necessary. In 2018, for all reporting units tested using the qualitative assessment, we concluded that it was unnecessary to perform the quantitative impairment test. For all reporting units tested using the quantitative approach, we concluded that the fair value of each reporting unit exceeded its carrying value. Refer to Critical Accounting Policies and Estimates within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our most recent Annual Report on Form 10-K for further discussion of our annual goodwill impairment testing.

NOTE D – HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

We address market risk from changes in foreign currency exchange rates and interest rates through risk management programs which include the use of derivative financial instruments. We operate these programs pursuant to documented corporate risk management policies and do not enter into derivative transactions for speculative purposes. Our derivative instruments do not subject our earnings to material risk, as the gains or losses on these derivatives generally offset losses or gains recognized on the hedged item.

We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to individual counterparties and by actively monitoring counterparty credit ratings and the amount of individual credit exposure. We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. Further, none of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.

Our risk from changes in currency exchange rates consists primarily of monetary assets and liabilities, forecast intercompany and third-party transactions and net investments in certain subsidiaries. We manage currency exchange rate risk at a consolidated level to reduce the cost of hedging by taking advantage of offsetting transactions. We employ derivative instruments, primarily forward currency contracts, to reduce the risk to our earnings and cash flows associated with changes in currency exchange rates.

The success of our currency risk management program depends, in part, on forecast transactions denominated primarily in British pound sterling, Euro and Japanese yen. We may experience unanticipated currency exchange gains or losses to the extent the actual activity is different than forecast. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows.

13

Certain of our currency derivative instruments are designated as cash flow hedges under FASB ASC Topic 815, Derivatives and Hedging and are intended to protect the U.S. dollar value of forecasted transactions. The gain or loss on a derivative instrument designated as a cash flow hedge is recorded in Other comprehensive income (loss), net of tax (OCI) and is included in the Accumulated other comprehensive income (loss), net of tax (AOCI) caption of our unaudited condensed consolidated balance sheets until the underlying third-party transaction occurs. When the related third-party transaction occurs, we recognize the gain or loss in earnings within the Cost of products sold caption of our unaudited condensed consolidated statements of operations. In the event the hedging relationship is no longer effective, or if the hedged forecast transaction becomes no longer probable of occurring, we reclassify the amount of gains or losses on the derivative instrument designated as a cash flow hedge to earnings at that time.

We also use forward currency contracts that are not part of designated hedging relationships under FASB ASC Topic 815 as a part of our strategy to manage our exposure to currency exchange rate risk related to monetary assets and liabilities and related forecast transactions. These non-designated currency forward contracts have an original time to maturity consistent with the hedged currency transaction exposures, generally less than one year, and are marked-to-market with changes in fair value recorded to earnings and reflected within the Other, net caption of our unaudited condensed consolidated statements of operations.

Our interest rate risk relates primarily to U.S. dollar borrowings partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. Under these agreements we and the counterparty, at specified intervals, exchange the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. We designate these derivative instruments either as fair value or cash flow hedges under FASB ASC Topic 815.

The changes in the fair value of interest rate derivatives designated as fair value hedges and the changes in the fair value of the underlying hedged debt instrument generally offset and are recorded within the Interest expense caption of our unaudited condensed consolidated statements of operations. We record the changes in the fair value of interest rate derivatives designated as cash flow hedges within OCI, which is included within the AOCI caption of our unaudited condensed consolidated balance sheets until the underlying hedged transaction occurs, at which time we recognize the gain or loss within Interest expense. In the event the hedging relationship is no longer effective, or if the hedged forecast transaction becomes no longer probable of occurring, we reclassify the amount of gains or losses on the interest rate derivative designated as a cash flow hedge to earnings at that time.

We are amortizing the realized gains or losses from interest rate derivative instruments previously designated as fair value or cash flow hedges into earnings as a component of Interest expense over the remaining term of the hedged item in accordance with FASB ASC Topic 815, so long as the hedge relationship remains effective. Prior to the adoption of ASC Update No. 2017-12, Derivatives and Hedging (Topic 815), the ineffective portion, if any, of our interest rate derivatives designated as either fair value or cash flow hedges was recognized in earnings in the period in which the hedging relationship exhibited ineffectiveness.

Certain of our currency forward contracts are designated as net investment hedges under FASB ASC Topic 815 and are intended to hedge a portion of our net investments in certain of our European, Swiss and Japanese operating entities. We have elected to use the spot method to assess effectiveness for our derivatives that are designated as net investment hedges. Under the spot method, the change in fair value attributable to changes in the spot rate is recorded in the Foreign currency translation adjustment (CTA), which is included within the AOCI caption of our unaudited condensed consolidated balance sheets. Therefore, the spot-forward difference is excluded from the assessment of effectiveness and accounted for separately.

Consistent with FASB ASC Topic 815, we have elected to amortize the excluded spot-forward difference associated with the currency forward contracts as calculated at the date of designation. Amortization will be recognized on a straight-line basis over the term of the currency forward contracts from the AOCI caption of our unaudited condensed consolidated balance sheets to reported earnings as a reduction of Interest expense.

The following table presents the contractual amounts of our derivative instruments outstanding:

(in millions)	FASB ASC Topic 815 Designation	As of
		June 30, 2018		December 31, 2017
Forward currency contracts	Cash flow hedge	$	4,205	$	3,252
Forward currency contracts	Net investment hedge	1,455		—
Forward currency contracts	Non-designated	2,635		2,671
Total Notional Outstanding		$	8,295	$	5,923

14

The remaining time to maturity as of June 30, 2018 is within 60 months for all designated forward currency contracts and generally less than one year for all non-designated forward currency contracts.

We had no interest rate derivative instruments outstanding as of June 30, 2018 and December 31, 2017.

The following presents the effect of our derivative instruments designated as cash flow hedges and net investment hedges under FASB ASC Topic 815 on our accompanying unaudited condensed consolidated statements of operations:

(in millions)	Unaudited Condensed Consolidated Statements of Operations				Effective Amount Recognized in OCI									Effective Amount Reclassified from AOCI into Earnings
	Location	Total			Pre-Tax Gain (Loss)			Tax Benefit (Expense)			Gain (Loss) Net of Tax			Pre-Tax (Gain) Loss			Tax (Benefit) Expense			(Gain) Loss Net of Tax
Three Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	739		$	194		$	(44	)	$	151		$	10		$	(2	)	$	7
Forward currency contracts	Interest expense	(57		)	21			(5		)	16			(7		)	2			(5		)
					$	215		$	(48	)	$	167		$	3		$	(1	)	$	2
Three Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	632		$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
					$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
Six Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	1,411		$	77		$	(17	)	$	59		$	25		$	(6	)	$	19
Forward currency contracts	Interest expense	(119		)	21			(5		)	16			(7		)	2			(5		)
					$	97		$	(22	)	$	76		$	18		$	(4	)	$	14
Six Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	1,282		$	(64	)	$	23		$	(41	)	$	(55	)	$	21		$	(34	)
Interest rate derivative contracts	Interest expense	(115		)	—			—			—			(1		)	—			(1		)
					$	(64	)	$	23		$	(41	)	$	(56	)	$	21		$	(35	)

For our outstanding net investment hedges, the net gain or loss reclassified from AOCI to earnings as a reduction of Interest expense represents the straight-line amortization of the excluded component as calculated at the date of designation. This initial value has been excluded from the assessment of effectiveness in accordance with FASB ASC Topic 815.

15

As of June 30, 2018, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as fair value and cash flow hedges under FASB ASC Topic 815 that may be reclassified to earnings within the next twelve months are presented below (in millions):

Designated Derivative Instrument	FASB ASC Topic 815 Designation	Location in Unaudited Condensed Consolidated Statements of Operations	Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings
Interest rate derivative contracts	Fair value hedge	Interest expense	$	12
Interest rate derivative contracts	Cash flow hedge	Interest expense	1
Forward currency contracts	Cash flow hedge	Cost of products sold	11
Forward currency contracts	Net investment hedge	Interest expense	41

Net gains and losses on currency hedge contracts not designated as hedging instruments offset by net gains and losses from currency transaction exposures are presented below:

	Location in Unaudited Condensed Consolidated Statements of Operations	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)		2018			2017			2018			2017
Net gain (loss) on currency hedge contracts	Other, net	$	32		$	5		$	8		$	(12	)
Net gain (loss) on currency transaction exposures	Other, net	(33		)	(13		)	(17		)	4
Net currency exchange gain (loss)		$	(1	)	$	(8	)	$	(9	)	$	(8	)

16

Fair Value Measurements

FASB ASC Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by FASB ASC Topic 820, Fair Value Measurements and Disclosures and considering the estimated amount we would receive or pay to transfer these instruments at the reporting date when taking into account current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and our own creditworthiness for unrealized loss positions. In certain instances, we may utilize financial models to measure fair value of our derivative instruments. In doing so, we use inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. The following are the balances of our derivative assets and liabilities:

	Location in Unaudited Condensed Consolidated Balance Sheets (1)	As of
(in millions)		June 30, 2018		December 31, 2017
Derivative Assets:
Designated Derivative Instruments
Forward currency contracts	Other current assets	$	24	$	7
Forward currency contracts	Other long-term assets	94		57
Net investment hedges	Other long-term assets	21		—
		139		64
Non-Designated Derivative Instruments
Forward currency contracts	Other current assets	64		18
Total Derivative Assets		$	202	$	82
Derivative Liabilities:
Designated Derivative Instruments
Forward currency contracts	Other current liabilities	$	9	$	37
Forward currency contracts	Other long-term liabilities	10		33
		19		69
Non-Designated Derivative Instruments
Forward currency contracts	Other current liabilities	26		21
Total Derivative Liabilities		$	45	$	90

(1) We classify derivative assets and liabilities as current when the settlement date of the derivative contract is one year or less.

Recurring Fair Value Measurements

On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. FASB ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The category of a financial asset or a financial liability within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

• 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.

17

Assets and liabilities measured at fair value on a recurring basis consist of the following:

	As of
	June 30, 2018								December 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market and government funds	$	49	$	—	$	—	$	49	$	21	$	—	$	—	$	21
Publicly-held securities	1		—		—		1		15		—		—		15
Forward currency contracts	—		202		—		202		—		82		—		82
	$	50	$	202	$	—	$	253	$	36	$	82	$	—	$	118
Liabilities
Forward currency contracts	$	—	$	45	$	—	$	45	$	—	$	90	$	—	$	90
Accrued contingent consideration	—		—		279		279		—		—		169		169
	$	—	$	45	$	279	$	324	$	—	$	90	$	169	$	259

Our investments in money market and government funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. These investments are classified as Cash and cash equivalents within our accompanying unaudited condensed consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies. In addition to $49 million invested in money market and government funds as of June 30, 2018, we had $159 million in interest bearing and non-interest bearing bank accounts. In addition to $21 million invested in money market and government funds as of December 31, 2017, we had $167 million in interest bearing and non-interest bearing bank accounts.

Our recurring fair value measurements using Level 3 inputs relate solely to our contingent consideration liability. Refer to Note B – Acquisitions and Strategic Investmentsfor a discussion of the changes in the fair value of our contingent consideration liability.

Non-Recurring Fair Value Measurements

We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods subsequent to initial recognition. The fair value of a measurement alternative investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. Refer to Note B – Acquisitions and Strategic Investments for a discussion of our strategic investments.

Refer to Note C – Goodwill and Other Intangible Assets for a discussion of the fair values.

The fair value of our outstanding debt obligations was $6.702 billion as of June 30, 2018 and $5.945 billion as of December 31, 2017. We determined fair value by using quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy, amortized cost for commercial paper and face value for term loans and credit facility borrowings outstanding. Refer to Note E – Borrowings and Credit Arrangements for a discussion of our debt obligations.

18

NOTE E – BORROWINGS AND CREDIT ARRANGEMENTS

We had total debt of$6.493 billionas of June 30, 2018and $5.616 billion as of December 31, 2017. The debt maturity schedule for the significant components of our long-term debt obligations is presented below:

(in millions, except interest rates)	Issuance Date	Maturity Date	As of						Semi-annual Coupon Rate
			June 30, 2018			December 31, 2017
October 2018 Notes	August 2013	October 2018	—			††			2.650%
January 2020 Notes	December 2009	January 2020	850			850			6.000%
May 2020 Notes	May 2015	May 2020	600			600			2.850%
May 2022 Notes	May 2015	May 2022	500			500			3.375%
October 2023 Notes	August 2013	October 2023	450			450			4.125%
May 2025 Notes	May 2015	May 2025	750			750			3.850%
March 2028 Notes	February 2018	March 2028	1,000			—			4.000%
November 2035 Notes	November 2005	November 2035	350			350			7.000%
January 2040 Notes	December 2009	January 2040	300			300			7.375%
Unamortized Debt Issuance Discount and Deferred Financing Costs		2020 - 2040	(32		)	(24		)
Unamortized Gain on Fair Value Hedges		2020 - 2023	32			38
Capital Lease Obligation		Various	8			1
Long-term debt			$	4,808		$	3,815

^††As of December 31, 2017, $600 millionunder the October 2018 Notes was outstanding and classified as short-term debt.

Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.

Revolving Credit Facility

As of June 30, 2018 and December 31, 2017, we maintained a $2.250 billion revolving credit facility (the 2017 Facility) with a global syndicate of commercial banks that matures on August 4, 2022. This facility provides backing for the commercial paper program described below. There were no amounts borrowed under our revolving credit facility as of June 30, 2018 andDecember 31, 2017.

The 2017 Facility requires that we maintain certain financial covenants, as follows:

	Covenant Requirement	Actual
	as of June 30, 2018	as of June 30, 2018
Maximum leverage ratio (1)	3.5 times	2.4 times

(1) Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.

The 2017 Facility provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through maturity, of any non-cash charges and up to$500 million in restructuring charges and restructuring-related expenses related to our current or future restructuring plans. As of June 30, 2018, we had $400 millionof the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the 2017 Facility, are excluded from the calculation of consolidated EBITDA, as defined in the 2017 Facility, provided that the sum of any excluded net cash litigation payments does not exceed$2.624 billion in the aggregate. As of June 30, 2018, we had $1.526 billionof the legal exclusion remaining.

Any inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facility or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would agree to such new terms or grant such waivers on terms acceptable to us. In this case, all credit facility commitments would terminate and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our credit facility may negatively impact the credit ratings assigned to our commercial paper program which may impact our ability to refinance any then outstanding commercial paper as it becomes due and payable.

19

Commercial Paper

As of June 30, 2018, we had $1.685 billion of commercial paper outstanding and$1.197 billion outstanding as of December 31, 2017. Our commercial paper program is backed by the 2017 Facility, which allows us to have a maximum of $2.250 billion in commercial paper outstanding. Outstanding commercial paper directly reduces borrowing capacity available under the 2017 Facility. As of June 30, 2018, the commercial paper issued and outstanding had a weighted average maturity of 46days and a weighted average yield of2.58 percent. As of December 31, 2017, the commercial paper issued and outstanding had a weighted average maturity of 38days and a weighted average yield of1.85 percent.

Senior Notes

We had senior notes outstanding of $4.800 billion as ofJune 30, 2018 and$4.400 billionas ofDecember 31, 2017.

In February 2018, we completed an offering of$1.000 billion in aggregate principal amount of4.000%senior notes, due March 2028. We used a portion of the net proceeds from the offering to repay the $600 million plus accrued interest of our2.650%senior notes due in October 2018. The remaining proceeds were used to repay a portionof our outstanding commercial paper.

Our senior notes were issued in public offerings, are redeemable prior to maturity and are not subject to sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on parity with each other. These notes are effectively junior to borrowings under our credit and security facility, and to the extent borrowed by our subsidiaries, to liabilities of our subsidiaries (see Other Arrangements below).

Other Arrangements

As of June 30, 2018 and December 31, 2017, we maintained a $400 millioncredit and security facility secured by our U.S. trade receivables maturing in February 2019.We had no outstanding borrowings as of June 30, 2018and December 31, 2017 under our credit and security facility.

We have accounts receivable factoring programs in certain European countries and with commercial banks in Japan which include promissory notes discounting programs. We account for our factoring programs as sales under FASB ASC Topic 860, Transfers and Servicing. We have no retained interest in the transferred receivables, other than collection and administration, and once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net in the accompanying unaudited condensed consolidated balance sheets, are aggregated by contract denominated currency below (in millions):

	As of June 30, 2018						As of December 31, 2017
Factoring Arrangements	Capacity (1)		Amount De-recognized		Average Interest Rate		Capacity (1)		Amount De-recognized		Average Interest Rate
Euro denominated	$	442	$	161	1.5	%	$	456	$	171	1.8	%
Yen denominated (2)	$	470	$	216	0.5	%	$	195	$	157	1.3	%

(1) The capacities are translated from local currency to U.S. dollar using the spot rates on the last business day of each period.

(2) The factoring arrangements denominated in Japanese yen consist of two arrangements, one with a maximum capacity of 22.000 billionyen, which has been discontinued as of June 30, 2018, and a new arrangement with a maximum capacity of 30.000 billion yen entered into during March 2018.

Debt Covenants Compliance

As of and through June 30, 2018, we were in compliance with all the required covenants related to our debt obligations. For additional information regarding the terms of our debt agreements, refer to Note E - Borrowings and Credit Arrangements of the consolidated financial statements in our most recent Annual Report on Form 10-K.

NOTE F – RESTRUCTURING-RELATED ACTIVITIES

2016 Restructuring Plan

On June 6, 2016, our Board of Directors approved and we committed to a restructuring initiative (the 2016 Restructuring Plan). The 2016 Restructuring Plan is intended to develop global commercialization, technology and manufacturing capabilities in key growth markets and build on our Plant Network Optimization (PNO) strategy, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and expanding operational efficiencies in support of our

20

operating income margin goals. Key activities under the 2016 Restructuring Plan include strengthening global infrastructure through evolving global real estate assets and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions and continuing implementation of our PNO strategy. These activities were initiated in the second quarter of 2016 and are expected to be substantially complete by the end of 2018. We revised the original estimate for the costs and savings associated with the program in the first quarter of 2018, as approved by the Board of Directors.

The following table provides a summary of our estimates of costs associated with the 2016 Restructuring Plan by major type of cost:

Type of cost	Total Estimated Amount Expected to be Incurred
Restructuring charges:
Termination benefits	$105 million to $115 million
Other (1)	$35 million to $60 million
Restructuring-related expenses:
Other (2)	$135 million to $150 million
	$275 million to $325 million

(1)     Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to the 2016 Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities.

Approximately $250 million to $300 million of these charges are estimated to result in cash outlays.

The following presents these costs (credits) by major type and line item within our accompanying unaudited condensed consolidated statements of operations (in millions):

Three Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other			Total
Restructuring charges (credits)	$	2	$	—	$	2		$	5
Restructuring-related expenses:
Cost of products sold	—		16		—			16
Selling, general and administrative expenses	—		—		(5		)	(5		)
	—		16		(5		)	11
	$	2	$	16	$	(3	)	$	15

Three Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	—	$	—	$	1	$	1
Restructuring-related expenses:
Cost of products sold	—		12		—		12
Selling, general and administrative expenses	—		—		3		3
	—		12		3		15
	$	—	$	12	$	4	$	16

Six Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	15	$	—	$	3	$	18
Restructuring-related expenses:
Cost of products sold	—		23		—		23
Selling, general and administrative expenses	—		—		3		3
	—		23		3		26
	$	15	$	23	$	6	$	43

21

Six Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	3	$	—	$	2	$	5
Restructuring-related expenses:
Cost of products sold	—		24		—		24
Selling, general and administrative expenses	—		—		6		6
	—		24		6		30
	$	3	$	24	$	8	$	35

The following table presents cumulative restructuring and restructuring-related charges as of June 30, 2018, by major type:

(in millions)	2016 Restructuring Plan
Termination benefits	$	63
Other (1)	18
Total restructuring charges	82
Transfer costs	83
Other (2)	19
Restructuring-related expenses	102
	$	184

(1)    Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to our Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities.

Cash payments were made using cash generated from operations and are comprised of the following:

(in millions)	2016 Restructuring Plan
Six Months Ended June 30, 2018
Termination benefits	$	20
Transfer costs	23
Other	8
	$	51
Program to Date
Termination benefits	$	47
Transfer costs	82
Other	19
	$	148

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability, which is reported as a component of Accrued expenses included in our accompanying unaudited condensed consolidated balance sheets:

(in millions)	2016 Restructuring Plan
Accrued as of December 31, 2017	$	22
Charges (credits)	15
Cash payments	(20		)
Accrued as of June 30, 2018	$	18

22

NOTE G – SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of selected captions in our accompanying unaudited condensed consolidated balance sheets are as follows:

Cash, cash equivalents, restricted cash and restricted cash equivalents

	As of
(in millions)	June 30, 2018		December 31, 2017
Cash and cash equivalents	$	208	$	188
Restricted cash and restricted cash equivalents included in Other current assets	756		803
Restricted cash equivalents included in Other long-term assets	31		26
	$	994	$	1,017

Trade accounts receivable, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Accounts receivable	$	1,650		$	1,645
Allowance for doubtful accounts	(63		)	(68		)
Allowance for sales returns (1)	—			(30		)
	$	1,587		$	1,548

(1) Due to the adoption of FASB ASC Topic 606 effective January 1, 2018, the allowance for sales returns has been prospectively reclassified from Trade accounts receivable, net to Other current liabilities within the unaudited condensed consolidated balance sheets. Prior period balances remain unchanged.

The following is a rollforward of our allowance for doubtful accounts:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Beginning balance	$	67		$	75		$	68		$	73
Net charges to expenses	4			2			8			5
Utilization of allowances	(8		)	(3		)	(14		)	(4		)
Ending balance	$	63		$	74		$	63		$	74

Inventories

	As of
(in millions)	June 30, 2018		December 31, 2017
Finished goods	$	689	$	685
Work-in-process	102		110
Raw materials	296		284
	$	1,087	$	1,078

23

Property, plant and equipment, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Land	$	102		$	102
Buildings and improvements	1,124			1,120
Equipment, furniture and fixtures	3,255			3,183
Capital in progress	229			219
	4,709			4,625
Accumulated depreciation	(2,995		)	(2,928		)
	$	1,715		$	1,697

Depreciation expense was $70 million for the second quarter of 2018, $65 million for the second quarter of 2017, $137 million for the first six months of2018 and $127 million for the first six months of2017.

Accrued expenses

	As of
(in millions)	June 30, 2018		December 31, 2017
Legal reserves	$	1,043	$	1,176
Payroll and related liabilities	528		591
Accrued contingent consideration	52		36
Other	644		653
	$	2,266	$	2,456

Other long-term liabilities

	As of
(in millions)	June 30, 2018		December 31, 2017
Accrued income taxes	$	781	$	1,275
Legal reserves	221		436
Accrued contingent consideration	227		133
Other	716		525
	$	1,945	$	2,370

NOTE H – INCOME TAXES

Our effective tax rate from continuing operations is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Effective tax rate from continuing operations	(60.3	)%	(60.3	)%	(27.3	)%	(10.1	)%

The change in our reported tax rates for the first six months of 2018, as compared to the same period in 2017, relates primarily to the impact of certain receipts and charges that are taxed at different rates than our effective tax rate, including intangible asset impairment charges, acquisition-related items, restructuring items, litigation-related items, as well as certain discrete tax items including the effective settlement of our transfer pricing dispute with the Internal Revenue Service (IRS) for the 2001 through 2010 tax years and the impacts of the Tax Cuts and Jobs Act (TCJA), enacted on December 22, 2017.

On June 6, 2018, a decision was entered by the United States Tax Court resolving all disputes related to the transfer pricing issues for Guidant Corporation's 2001 through 2006 tax years and our 2006 and 2007 tax years as well as the tax issues related to our 2006 transaction with Abbott Laboratories. Additionally, on May 24, 2018, we resolved all issues with the IRS Office of Appeals for our 2008 through 2010 tax years, including the transfer pricing issue and other unrelated issues. The final settlement calculation included certain elections made in these relevant years and resulted in a final net tax payment of $303 million plus $307 million

24

of estimated interest, which was remitted to the IRS on June 15, 2018. Due to the final settlement of these disputes, we recorded a net tax benefit of $250 million as of June 30, 2018.

We currently expect to resolve the IRS examination of our 2011 through 2013 tax years before the end of 2018. We expect that the exam will be concluded utilizing the same transfer pricing methodologies employed in the 2001 through 2010 tax years. We believe we have recorded sufficient reserves with respect to these periods and therefore do not expect to recognize any additional charges related to the resolution of the 2011 through 2013 tax years.

As of June 30, 2018, we had $506 million of gross unrecognized tax benefits, of which a net $432 million, if recognized, would affect our effective tax rate. As of December 31, 2017, we had $1.238 billion of gross unrecognized tax benefits, of which a net $1.150 billion, if recognized, would affect our effective tax rate. The change in our gross unrecognized tax benefit is primarily related to reaching settlements with tax authorities.

We recognize interest and penalties related to income taxes as a component of income tax expense. We had $78 million accrued for gross interest and penalties as of June 30, 2018 and $655 million as of December 31, 2017. The change in our accrued interest and penalties is primarily related to reaching settlements with tax authorities. We recognized net tax expense related to interest and penalties of $2 million in the second quarter of 2018, $13 million in the second quarter of 2017, $19 million during the first six months of2018 and $26 million during the first six months of2017.

It is reasonably possible that within the next 12 months we will resolve multiple issues with foreign, federal and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to approximately $221 million.

There are a number of key provisions under the TCJA that impact us and we continue to monitor and analyze the ramifications of the new law as the implementation is executed. The final impact of the TCJA may differ from the estimates reported due to, among other things, changes in interpretations and assumptions made by us, additional guidance that may be issued by the U.S. Department of the Treasury and actions that we may take as a result. The TCJA reduces the US Federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. Due to insufficient guidance, as well as the availability of information to accurately analyze the impact of the TCJA, we have made a reasonable estimate of the effects, as described below, and in other cases we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under FASB ASC Topic 740, Income Taxes and the provisions of the tax laws that were in effect immediately prior to enactment. In the second quarter of 2018, we recognized an additional tax benefit of $28 million related to settling our transfer pricing dispute with the IRS. In the first six months of2018, we recognized an additional tax benefit of $37 million, resulting in a total provisional estimate of $824 million related to the TCJA.

We are required to record deferred tax assets and liabilities based on the enacted tax rates at which they are expected to reverse in the future. Therefore, any U.S. related deferred taxes were re-measured from 35 percent down to 21 percent based on the recorded balances as of December 31, 2017. The analysis included a preliminary assessment on the deductibility of certain amounts for which deferred tax assets may have been recorded. However, we are still analyzing certain aspects of the TCJA and refining our calculations based on the available information, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. As of June 30, 2018, we have not adjusted our provisional estimate related to re-measurement of our deferred tax balances. As of December 31, 2017, we recorded an estimated tax benefit of approximately $99 million.

We are required to calculate a one-time transition tax based on our total post-1986 foreign earnings and profits (E&P) that we previously deferred from U.S. income taxes. As a result of settling our various tax audits, the revised provisional amount of transition tax is approximately $866 million. We anticipate offsetting this liability against existing tax attributes reducing the required payment to approximately $506 million, which will be remitted over an eight-year period. We remitted the first estimated installment payment in the second quarter of 2018. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries, and we continue to refine the analysis. We expect that our undistributed foreign earnings as of December 31, 2017 will remain indefinitely reinvested in our foreign operations. Accordingly, no income taxes beyond the federal and state impact of the transition tax have been provided for these undistributed foreign earnings or any additional outside basis difference inherent in these entities. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings and additional outside basis difference in these entities is not practicable.

We are subject to a territorial tax system under the TCJA, in which we are required to provide for tax on Global Intangible Low Taxed Income (GILTI) earned by certain foreign subsidiaries. Additionally, we are required to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. As of June 30, 2018, we are still evaluating the

25

effects of the GILTI provisions as guidance and interpretations continue to emerge. Therefore, we have not determined our accounting policy on the GILTI provisions. However, Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 118 requires that we reflect the impact of the GILTI provisions as a period expense until the accounting policy is finalized. Therefore, we have included the provisional estimate of GILTI related to current-year operations in our estimated annual effective tax rate only and will be updating the impact and accounting policy as the analysis related to the GILTI provisions is completed.

NOTE I – COMMITMENTS AND CONTINGENCIES

The medical device market in which we primarily participate is largely technology driven. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. Over the years, there has been litigation initiated against us by others, including our competitors, claiming that our current or former product offerings infringe patents owned or licensed by them. Intellectual property litigation is inherently complex and unpredictable. In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. Although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.

During recent years, we successfully negotiated closure of several long-standing legal matters and have received favorable rulings in several other matters; however, there continues to be outstanding intellectual property litigation. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operations and/or liquidity.

In the normal course of business, product liability, securities and commercial claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We maintain an insurance policy providing limited coverage against securities claims and we are substantially self-insured with respect to product liability claims and fully self-insured with respect to intellectual property infringement claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and/or liquidity.

In addition, like other companies in the medical device industry, we are subject to extensive regulation by national, state and local government agencies in the U.S. and other countries in which we operate. From time to time we are the subject of qui tam actions and governmental investigations often involving regulatory, marketing and other business practices. These qui tam actions and governmental investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies and have a material adverse effect on our financial position, results of operations and/or liquidity.

In accordance with FASB ASC Topic 450, Contingencies, we accrue anticipated costs of settlement, damages, losses for product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range.

Our accrual for legal matters that are probable and estimable was $1.264 billion as of June 30, 2018 and $1.612 billion as of December 31, 2017 and includes certain estimated costs of settlement, damages and defense. A portion of our legal accrual is funded and included in our restricted cash and restricted cash equivalent balances of $787 million as of June 30, 2018 and $829 million as of December 31, 2017, as disclosed in Note G – Supplemental Balance Sheet Information. Litigation-related net charges (credits) were immaterial in the second quarter and first six months of2018. We recorded litigation-related net charges of $205 million in the second quarter of 2017 and $208 million in the first six months of2017. We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and/or our ability to comply with our debt covenants.

26

In management's opinion, we are not currently involved in any legal proceedings other than those disclosed in our most recent Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the period ended March 31, 2018 and those specifically identified below, which, individually or in the aggregate, could have a material adverse effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be estimated.

Patent Litigation

On November 20, 2017, The Board of Regents, University of Texas System (UT) and TissueGen. Inc., served a lawsuit against us in the Western District of Texas. The complaint against us alleges patent infringement of two U.S. patents owned by UT, relating to “Drug Releasing Biodegradable Fiber Implant” and “Drug Releasing Biodegradable Fiber for Delivery of Therapeutics,” and affects the manufacture, use and sale of our Synergy™ Stent System. On March 12, 2018, the court dismissed the action and transferred it to the United States District Court for the District of Delaware. UT has appealed the decision.

Product Liability Litigation

As of July 24, 2018, approximately 49,500 product liability cases or claims related to transvaginal surgical mesh products designed to treat stress urinary incontinence and pelvic organ prolapse have been asserted against us. The pending cases are in various federal and state courts in the U.S. and include eight putative class actions. There were also fewer than 25 cases in Canada, inclusive of one certified and three putative class actions and fewer than 25 claims in the United Kingdom. Generally, the plaintiffs allege personal injury associated with use of our transvaginal surgical mesh products. The plaintiffs assert design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. Over 3,100 of the cases have been specially assigned to one judge in state court in Massachusetts. On February 7, 2012, the Judicial Panel on Multi-District Litigation (MDL) established MDL-2326 in the U.S. District Court for the Southern District of West Virginia and transferred the federal court transvaginal surgical mesh cases to MDL-2326 for coordinated pretrial proceedings. During the fourth quarter of 2013, we received written discovery requests from certain state attorneys general offices regarding our transvaginal surgical mesh products. We have responded to those requests. As of July 24, 2018, we have entered into master settlement agreements in principle or are in the final stages of entering one with certain plaintiffs' counsel to resolve an aggregate of approximately 48,000 cases and claims. These master settlement agreements provide that the settlement and distribution of settlement funds to participating claimants are conditional upon, among other things, achieving minimum required claimant participation thresholds. Of the approximately 48,000 cases and claims, approximately 27,000 have met the conditions of the settlement and are final. All settlement agreements were entered into solely by way of compromise and without any admission or concession by us of any liability or wrongdoing.

We have established a product liability accrual for known and estimated future cases and claims asserted against us as well as with respect to the actions that have resulted in verdicts against us and the costs of defense thereof associated with our transvaginal surgical mesh products. While we believe that our accrual associated with this matter is adequate, changes to this accrual may be required in the future as additional information becomes available. While we continue to engage in discussions with plaintiffs’ counsel regarding potential resolution of pending cases and claims and intend to vigorously contest the cases and claims asserted against us, that do not settle, the final resolution of the cases and claims is uncertain and could have a material impact on our results of operations, financial condition and/or liquidity. Initial trials involving our transvaginal surgical mesh products have resulted in both favorable and unfavorable judgments for us. We do not believe that the judgment in any one trial is representative of potential outcomes of all cases or claims related to our transvaginal surgical mesh products.

Governmental Investigations and Qui Tam Matters

On February 23, 2015, a judge for the Court of Modena (Italy) ordered a trial for Boston Scientific SpA and three of its employees, as well as numerous other defendants charged in criminal proceedings. The charges arise from allegations that the defendants made improper donations to certain health care providers and other employees of the Hospital of Modena in order to induce them to conduct unauthorized clinical trials, as well as related government fraud in relation to the financing of such clinical trials. A trial began on February 24, 2016 and is ongoing. On November 10, 2017, the Court issued a ruling that convicted one Boston Scientific employee but acquitted two others, and levied a fine of €245 thousand against us and imposed joint and several civil damages of €620 thousand on all defendants. We continue to deny these allegations, timely appealed the decision on May 10, 2018 and intend to continue to defend ourselves vigorously.

27

Other Proceedings

On May 16, 2018, Arthur Rosenthal et al., filed a plenary summons against Boston Scientific Corporation and Boston Scientific Limited the High Court of Ireland alleging that payments are due pursuant a transaction agreement regarding Labcoat Limited.

Refer to Note H – Income Taxes for information regarding our tax litigation.

Matters Concluded Since December 31, 2017

On October 28, 2016, the Regents of the University of California filed a patent infringement action against us in the U.S. District Court for the Northern District of California alleging that two U.S. patents (Lesh) owned by the Regents of the University of California are infringed by certain of our catheters and other devices used to treat atrial fibrillation. The Company and the Regents settled the matter, and the case was dismissed on June 20, 2018.

NOTE J – WEIGHTED AVERAGE SHARES OUTSTANDING

	Three Months Ended June 30,		Six Months Ended June 30,
(in millions)	2018	2017	2018	2017
Weighted average shares outstanding - basic	1,380.5	1,369.8	1,378.5	1,367.6
Net effect of common stock equivalents	18.3	21.3	19.3	23.0
Weighted average shares outstanding - assuming dilution	1,398.9	1,391.1	1,397.8	1,390.6

The impact of stock options outstanding with exercise prices greater than the average fair market value of our common stock was immaterial for all periods presented.

We issued approximately two million shares of our common stock in the second quarter of 2018, one million shares of our common stock in the second quarter of 2017 and eight million shares of our common stock in the first six months of2018 and 2017, following the exercise of underlying stock options, vesting of deferred stock units or purchases under our employee stock purchase plan. We did not repurchase any shares of our common stock during the first six months of 2018 or 2017.

NOTE K – SEGMENT REPORTING

We have three reportable segments comprised of MedSurg, Rhythm and Neuro, and Cardiovascular, which represent an aggregation of our operating segments.

Each of our reportable segments generates revenues from the sale of medical devices. We measure and evaluate our reportable segments based on segment net sales and operating income, excluding intersegment profits. In 2017, we updated our presentation of segment net sales and operating income to include the impact of foreign currency fluctuations, since our chief operating decision maker (CODM) reviews operating results both including and excluding the impact of foreign currency fluctuations, and the following presentation more closely aligns to our unaudited condensed consolidated financial statements. We exclude from segment operating income certain corporate-related expenses and certain transactions or adjustments that our CODM considers to be non-operational, such as amounts related to amortization expense, intangible asset impairment charges, acquisition-related items, restructuring and restructuring-related items and litigation-related items. Although we exclude these amounts from segment operating income, they are included in reported Income (loss) before income taxes on the unaudited condensed consolidated statements of operations and are included in the reconciliation below.

28

Effective January 1, 2018, following organizational changes to align the company's business and organization structure focused on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our MedSurg segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk throughout *). There was no revision to operating segments or reporting units as a result of the organizational change.

A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying unaudited condensed consolidated statements of operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Net sales
MedSurg*	$	751		$	680		$	1,462		$	1,321
Rhythm and Neuro*	775			700			1,512			1,368
Cardiovascular	965			876			1,898			1,728
	$	2,490		$	2,257		$	4,870		$	4,418
Income (loss) before income taxes
MedSurg*	$	273		$	244		$	532		$	459
Rhythm and Neuro*	160			137			313			246
Cardiovascular	300			262			590			494
Operating income allocated to reportable segments	734			643			1,436			1,199
Corporate expenses, including hedging activities	(100		)	(56		)	(200		)	(115		)
Intangible asset impairment charges, acquisition-related, restructuring- and restructuring-related and litigation-related net credits (charges)	(95		)	(220		)	(149		)	(210		)
Amortization expense	(147		)	(142		)	(288		)	(285		)
Operating income (loss)	392			225			799			589
Other expense, net	(45		)	(134		)	(129		)	(193		)
Income (loss) before income taxes	$	347		$	91		$	670		$	396
Operating Income as a Percentage of Segment Net Sales
MedSurg*	36.4		%	35.8		%	36.4		%	34.7		%
Rhythm and Neuro*	20.6		%	19.6		%	20.7		%	18.0		%
Cardiovascular	31.1		%	29.8		%	31.1		%	28.6		%

29

NOTE L – REVENUE

We generate revenue primarily from the sale of single-use medical devices and present revenue net of sales taxes in our unaudited condensed consolidated statements of operations. The following tables disaggregate our revenue from contracts with customers by business and geographic region (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Businesses	2018		2017		2018		2017
Endoscopy
U.S.	$	245	$	225	$	477	$	439
International	197		175		384		341
Worldwide	442		400		861		780
Urology and Pelvic Health
U.S.	213		196		409		379
International	96		84		192		163
Worldwide	308		280		601		542
Cardiac Rhythm Management
U.S.	290		287		580		571
International	204		193		407		372
Worldwide	494		480		987		943
Electrophysiology
U.S.	39		34		74		66
International	40		33		79		64
Worldwide	79		67		154		130
Neuromodulation
U.S.	160		125		291		241
International	42		29		79		54
Worldwide	202		154		371		295
Interventional Cardiology
U.S.	296		280		577		558
International	366		323		730		636
Worldwide	662		603		1,307		1,194
Peripheral Interventions
U.S.	152		144		297		286
International	152		129		294		248
Worldwide	304		273		591		534
Total Company
U.S.	1,394		1,291		2,704		2,540
International	1,096		966		2,166		1,878
Net Sales	$	2,490	$	2,257	$	4,870	$	4,418

30

	Three Months Ended June 30,				Six Months Ended June 30,
Geographic Regions	2018		2017		2018		2017
U.S.	$	1,394	$	1,291	$	2,704	$	2,540
EMEA (Europe, Middle East and Africa)	558		482		1,121		937
APAC (Asia-Pacific)	442		393		857		764
LACA (Latin America and Canada)	96		90		188		173
	$	2,490	$	2,257	$	4,870	$	4,418
Emerging Markets (1)	$	276	$	226	$	531	$	434

(1) Emerging Markets is defined as certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we include 20 countries in our definition of Emerging Markets.

We sell our products primarily through a direct sales force. In certain international markets, we sell our products through independent distributors. We consider revenue to be earned when all of the following criteria are met:

• We have a contract with a customer that creates enforceable rights and obligations,

• Promised products or services are identified,

• The transaction price, or the amount we expect to receive, is determinable and

• We have transferred control of the promised items to the customer.

Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services. We treat shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and record these costs as a selling expense when incurred. We recognize revenue from consignment arrangements based on product usage, or implant, which indicates that the sale is complete. We recognize a receivable at the point in time we have an unconditional right to payment. Payment terms are typically 30 days in the U.S. but may be longer in international markets.

Deferred Revenue

We record a contract liability, or deferred revenue, when we have an obligation to provide a product or service to the customer and payment is received or due in advance of our performance. When we sell a device with a future service obligation, we defer revenue on the unfulfilled performance obligation and recognize this revenue over the related service period. Many of our Cardiac Rhythm Management (CRM) product offerings combine the sale of a device with our LATITUDE™ Patient Management System, which represents a future service obligation. Generally, we do not have observable evidence of the standalone selling price related to our future service obligations; therefore, we estimate the selling price using an expected cost plus a margin approach. We allocate the transaction price using the relative standalone selling price method. The use of alternative estimates could result in a different amount of revenue deferral.

Contract liabilities are classified within Other current liabilities and Other long-term liabilities on our accompanying unaudited condensed consolidated balance sheets. Our deferred revenue balance was $384 million as of June 30, 2018 and $411 million as of January 1, 2018. Our contractual liabilities are primarily composed of deferred revenue related to the LATITUDE Patient Management System. Revenue is recognized over the average service period which is based on device and patient longevity. We recognized revenue of $26 million during the second quarter of 2018 and $53 million during the first six months of2018 that was included in the above January 1, 2018 contract liability balance. We have elected not to disclose the transaction price allocated to unsatisfied performance obligations when the original expected contract duration is one year or less. In addition, we have not identified material unfulfilled performance obligations for which revenue is not currently deferred.

Variable Consideration

We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. We base our estimate for sales returns upon historical trends and record the amount as a reduction to revenue when we sell the initial product. In addition, we may allow customers to return previously purchased products for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount of product to be returned when the next-generation products are shipped to the customer. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to sales returns and could cause actual returns to differ from these estimates.

31

We also offer sales rebates and discounts to certain customers. We treat sales rebates and discounts as a reduction of revenue and classify the corresponding liability as current. We estimate rebates for products where there is sufficient historical information available to predict the volume of expected future rebates. If we are unable to reasonably estimate the expected rebates, we record a liability for the maximum rebate percentage offered. We have entered certain agreements with group purchasing organizations to sell our products to participating hospitals at negotiated prices. We recognize revenue from these agreements following the same revenue recognition criteria discussed above.

Capitalized Contract Costs

We capitalize commission fees related to contracts with customers when the associated revenue is expected to be earned over a period that exceeds one year. Deferred commissions are primarily related to the sale of devices enabled with our LATITUDE™ Patient Management System. We have elected to expense commission costs when incurred for contracts with an expected duration of one year or less. Capitalized commission fees are amortized over the period the associated products or services are transferred. Similarly, we capitalize certain recoverable costs related to the delivery of the LATITUDE Remote Monitoring Service. These fulfillment costs are amortized over the average service period. Our total capitalized contract costs are immaterial to our unaudited condensed consolidated financial statements.

NOTE M – CHANGES IN OTHER COMPREHENSIVE INCOME

The following tables provide the reclassifications out of Other comprehensive income (loss), net of tax:

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2018	$	(22	)	$	(79	)	$	(27	)	$	(128	)
Other comprehensive income (loss) before reclassifications	(40		)	151			—			111
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	7			—			2
Net current-period other comprehensive income (loss)	(45		)	158			—			112
Balance as of June 30, 2018	$	(68	)	$	79		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2017	$	(71	)	$	52		$	(6	)	$	(21	)	$	(46	)
Other comprehensive income (loss) before reclassifications	13			(4		)	—			—			9
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(17		)	2			(1		)	(16		)
Net current-period other comprehensive income (loss)	13			(21		)	2			(1		)	(7		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

32

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments		Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2017	$	(32	)	$	1	$	(1	)	$	(27	)	$	(59	)
Other comprehensive income (loss) before reclassifications	(31		)	59		—			—			28
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	19		1			—			15
Net current-period other comprehensive income (loss)	(36		)	78		—			—			42
Balance as of June 30, 2018	$	(68	)	$	79	$	—		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2016	$	(79	)	$	107		$	(6	)	$	(21	)	$	1
Other comprehensive income (loss) before reclassifications	21			(41		)	—			(2		)	(22		)
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(35		)	2			1			(32		)
Net current-period other comprehensive income (loss)	21			(76		)	2			(1		)	(54		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

Refer to Note D – Hedging Activities and Fair Value Measurements for further detail on the reclassifications related to derivatives.

We adopted Update No. 2016-01 in the first quarter of 2018, and as a result of adopting the standard, we recorded a cumulative effect adjustment to retained earnings for unrealized gains and losses for available-for-sale securities previously recorded to Accumulated other comprehensive income (loss), net of tax.

The gains and losses on defined benefit and pension related items before reclassifications and gains and losses on defined benefit and pension items reclassified from Accumulated other comprehensive income (loss), net of tax were reduced by immaterial income tax impacts in the second quarter and first six months of2018 and 2017.

NOTE N – NEW ACCOUNTING PRONOUNCEMENTS

Periodically, new accounting pronouncements are issued by the FASB or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, we evaluate the pronouncements to determine the potential effects of adoption on our unaudited condensed consolidated financial statements.

33

Standards to be Implemented

ASC Update No. 2016-02

In February 2016, the FASB issued ASC Update No. 2016-02, Leases (Topic 842). The purpose of Update No. 2016-02 is to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, including those previously classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. Update No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted and a modified retrospective approach is required. While we are still in the process of determining the effect that the new standard will have on our financial position and results of operations, we expect to recognize additional assets and corresponding liabilities on our consolidated balance sheets, as a result of our operating lease portfolio as it exists at the date we adopt the new standard. Please refer to Note F - Lease and Other Purchase Obligations in our most recent Annual Report on Form 10-K for information regarding our most current lease activity. Additionally, we are in the process of implementing a new lease administration and lease accounting system, and updating our controls and procedures for maintaining and accounting for our lease portfolio under the new standard. As a result, we anticipate adopting the new standard on January 1, 2019.

ASC Update No. 2016-13

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

ASC Update No. 2018-09

In July 2018, the FASB issued ASC Update No. 2018-09, Codification Improvements. The purpose of Update No. 2018-09 is to clarify, correct errors in or make minor improvements to the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in Update No. 2018-09 do not require transition guidance and are effective upon issuance. However, many of the amendments in Update No. 2018-09 do have transition guidance with an effective date of annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

No other new accounting pronouncements, issued or effective, during the period had or are expected to have a material impact on our unaudited condensed consolidated financial statements.

34

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Boston Scientific Corporation is a global developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. Our mission is to transform lives through innovative medical solutions that improve the health of patients around the world. Our products and technologies are used to diagnose or treat a wide range of medical conditions, including cardiovascular, digestive, respiratory, urological, pelvic health and neurological conditions. We continue to innovate in these areas and are intent on extending our innovations into new geographies and high-growth adjacency markets. When used in this report, the terms, "we," "us," "our," and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries.

Financial Summary

Three Months Ended June 30, 2018

Our net sales for the second quarter of 2018 were $2.490 billion, as compared to net sales of $2.257 billion for the second quarter of 2017, an increase of $233 million, or 10.3 percent. Our operational net sales, which exclude a 170 basis point impact of foreign currency fluctuations, increased$196 million, or 8.6 percent, as compared to the same period in the prior year.¹ This increase in the second quarter of 2018 included operational net sales of $15 million, with no prior year period related net sales, due to the acquisition of Symetis SA (Symetis) during the second quarter of 2017. Refer to Quarterly Results and Business Overview for a discussion of our net sales by global business.

Our reported net income for the second quarter of 2018 was $555 million, or $0.40 per diluted share. Our reported results for the second quarter of 2018 included certain charges and/or credits totaling $13 million (after-tax), or $0.01 per diluted share. Excluding these items, adjusted net income for the second quarter of 2018 was $568 million, or $0.41 per diluted share.¹

Our reported net income for the second quarter of 2017 was $146 million, or $0.11 per diluted share. Our reported results for the second quarter of 2017 included certain charges and/or credits totaling $298 million (after-tax), or $0.21 per diluted share. Excluding these items, adjusted net income for the second quarter of 2017 was $444 million, or $0.32 per diluted share.¹

¹Operational net sales, which exclude the impact of foreign currency fluctuations, and adjusted net income and adjusted net income per share, which exclude certain items required by generally accepted accounting principles in the United States (U.S. GAAP), are not prepared in accordance with U.S. GAAP and should not be considered in isolation from, or as a replacement for, the most directly comparable GAAP measure. Refer to Additional Information for a discussion of management’s use of these non-GAAP financial measures.

35

The following is a reconciliation of our results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management. Refer to Quarterly Results and Business Overview for a discussion of each reconciling item:

	Three Months Ended June 30, 2018
(in millions, except per share data)	Net income (loss)			Impact per share
GAAP net income (loss)	$	555		$	0.40
Non-GAAP adjustments:
Amortization expense	130			0.09
Intangible asset impairment charges	30			0.02
Acquisition-related net charges (credits)	9			0.01
Restructuring and restructuring-related net charges (credits)	13			0.01
Discrete tax items	(168		)	(0.12		)
Adjusted net income	$	568		$	0.41

	Three Months Ended June 30, 2017
(in millions, except per share data)	Net income (loss)			Impact per share
GAAP net income (loss)	$	146		$	0.11
Non-GAAP adjustments:
Amortization expense	121			0.09
Acquisition-related net charges (credits)	(1		)	0.00
Restructuring and restructuring-related net charges (credits)	13			0.01
Litigation-related net charges (credits)	131			0.09
Investment impairment charges	34			0.02
Adjusted net income	$	444		$	0.32

36

Six Months Ended June 30, 2018

Our net sales for the first six months of2018 were $4.870 billion, as compared to net sales of $4.418 billion for the first six months of2017, an increase of $452 million, or 10.2 percent. Our operational net sales, which exclude a 280 basis point impact of foreign currency fluctuations, increased $332 million, or 7.4 percent, as compared to the same period in the prior year.¹ This increase included operational net sales of approximately $36 million in the first six months of2018, with no prior year period related net sales, due to the acquisition of Symetis. Refer to Quarterly Results and Business Overview for a discussion of our net sales by global business.

Our reported net income for the first six months of2018 was $853 million, or $0.61 per diluted share. Our reported results for the first six months of2018 included certain charges and/or credits totaling $170 million (after-tax), or $0.12 per diluted share. Excluding these items, adjusted net income for the first six months of2018 was $1.023 billion, or $0.73 per diluted share.¹

Our reported net income for the first six months of2017 was $436 million, or $0.31 per diluted share. Our reported results for the first six months of2017 included certain charges and/or credits totaling $405 million (after-tax), or $0.29 per diluted share. Excluding these items, adjusted net income for the first six months of2017 was $841 million, or $0.60 per diluted share.¹

¹Operational net sales, which exclude the impact of foreign currency fluctuations, and adjusted net income and adjusted net income per share, which exclude certain items required by U.S. GAAP, are not prepared in accordance with U.S. GAAP and should not be considered in isolation from, or as a replacement for, the most directly comparable GAAP measure. Refer to Additional Information for a discussion of management’s use of these non-GAAP financial measures.

37

The following is a reconciliation of our results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management. Refer to Quarterly Results and Business Overview for a discussion of each reconciling item:

	Six Months Ended June 30, 2018
(in millions, except per share data)	Net income (loss)			Impact per share
GAAP net income (loss)	$	853		$	0.61
Non-GAAP adjustments:
Amortization expense	248			0.18
Intangible asset impairment charges	31			0.02
Acquisition-related net charges (credits)	29			0.02
Restructuring and restructuring-related net charges (credits)	35			0.02
Investment impairment charges	5			0.00
Discrete tax items	(177		)	(0.13		)
Adjusted net income	$	1,023		$	0.73

	Six Months Ended June 30, 2017
(in millions, except per share data)	Net income (loss)			Impact per share
GAAP net income (loss)	$	436		$	0.31
Non-GAAP adjustments:
Amortization expense	243			0.17
Acquisition-related net charges (credits)	(33		)	(0.02		)
Restructuring and restructuring-related net charges (credits)	28			0.02
Litigation-related net charges (credits)	133			0.10
Investment impairment charges	34			0.02
Adjusted net income	$	841		$	0.60

Cash used for operating activities was $210 million for the first six months of 2018. As of June 30, 2018, we had total debt of $6.493 billion, Cash and cash equivalents of $208 million and a working capital deficit of $825 million. Refer to Liquidity and Capital Resources for further discussion.

38

Quarterly Results and Business Overview

The following section describes an overview of our product offerings and results of operations by business unit. For additional information on our businesses and their product offerings, see Item 1. Business of our most recent Annual Report on Form 10-K.

Net Sales

The following table provides our net sales by business and the relative change in growth on a reported basis and operational basis.

	Three Months Ended June 30,				Change
(in millions)	2018		2017		Reported Basis		Less: Impact of Foreign Currency		Operational Basis
Endoscopy	$	442	$	400	10.6	%	1.7	%	8.9	%
Urology and Pelvic Health	308		280		10.1	%	1.0	%	9.1	%
MedSurg*	751		680		10.4	%	1.4	%	9.0	%
Cardiac Rhythm Management	494		480		3.0	%	1.8	%	1.2	%
Electrophysiology	79		67		18.5	%	2.7	%	15.8	%
Neuromodulation	202		154		31.5	%	0.9	%	30.6	%
Rhythm and Neuro*	775		700		10.8	%	1.8	%	9.0	%
Interventional Cardiology	662		603		9.6	%	2.0	%	7.6	%
Peripheral Interventions	304		273		10.8	%	2.1	%	8.7	%
Cardiovascular	965		876		10.0	%	2.0	%	8.0	%
Net Sales	$	2,490	$	2,257	10.3	%	1.7	%	8.6	%

	Six Months Ended June 30,				Change
(in millions)	2018		2017		Reported Basis		Less: Impact of Foreign Currency		Operational Basis
Endoscopy	$	861	$	780	10.4	%	2.8	%	7.6	%
Urology and Pelvic Health	601		542		11.0	%	1.9	%	9.1	%
MedSurg*	1,462		1,321		10.6	%	2.4	%	8.2	%
Cardiac Rhythm Management	987		943		4.7	%	2.9	%	1.8	%
Electrophysiology	154		130		17.8	%	4.1	%	13.7	%
Neuromodulation	371		295		25.6	%	1.4	%	24.2	%
Rhythm and Neuro*	1,512		1,368		10.5	%	2.8	%	7.7	%
Interventional Cardiology	1,307		1,194		9.5	%	3.3	%	6.2	%
Peripheral Interventions	591		534		10.4	%	3.0	%	7.4	%
Cardiovascular	1,898		1,728		9.8	%	3.2	%	6.6	%
Net Sales	$	4,870	$	4,418	10.2	%	2.8	%	7.4	%

Effective January 1, 2018, following organizational changes to align the company's business and organization structure focused on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our Medical Surgical (MedSurg) segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk throughout *). There was no revision to operating segments or reporting units as a result of the organizational change.

39

MedSurg

Endoscopy

Our Endoscopy business develops and manufactures devices to diagnose and treat a broad range of gastrointestinal (GI) and pulmonary conditions with innovative, less invasive technologies.

Our net sales of Endoscopy products of $442 million represented approximately 18 percent of our consolidated net sales for the second quarter of 2018. Our Endoscopy net sales increased $42 million, or 10.6 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 170 basis point impact of foreign currency fluctuations, increased 8.9 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by growth in our hemostasis franchise featuring our Resolution 360™ Clips, our biliary franchise with both our SpyGlass™ DS Direct Visualization System and AXIOS™ Stent and Electrocautery Enhanced Delivery System, and our infection prevention products and pathology services.

Urology and Pelvic Health

Our Urology and Pelvic Health business develops and manufactures devices to treat various urological and pelvic conditions for both male and female anatomies, including kidney stones, benign prostatic hyperplasia, erectile dysfunction, male incontinence, pelvic floor disorders, abnormal uterine bleeding and uterine fibroids and polyps.

Our net sales of Urology and Pelvic Health products of $308 million represented approximately 12 percent of our consolidated net sales for the second quarter of 2018. Urology and Pelvic Health net sales increased $28 million, or 10.1 percent in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 100 basis point impact of foreign currency fluctuations, increased 9.1 percent, as compared to the same period in the prior year. This year-over-year increase was primarily attributable to growth in sales of our kidney stone products, including our LithoVue™ Digital Flexible Ureteroscope, our men's health products, and our benign prostatic hyperplasia (BPH) business, including the Rezûm™ System purchased as part of our NxThera, Inc. acquisition on April 30, 2018.

Rhythm and Neuro

Cardiac Rhythm Management

Our Cardiac Rhythm Management (CRM) business develops and manufactures a variety of implantable devices that monitor the heart and deliver electricity to treat cardiac abnormalities.

Our net sales of CRM products of $494 million represented approximately 20 percent of our consolidated net sales for the second quarter of 2018. Our net sales of CRM products increased $15 million, or 3.0 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 180 basis point impact of foreign currency fluctuations, increased 1.2 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by strong growth across our defibrillator portfolio due to building momentum in the commercialization of our global HeartLogic™ Heart Failure (HF) Diagnostic and continued market penetration for our EMBLEM™ Subcutaneous Implantable Cardiac Defibrillator (S-ICD) System. Our defibrillator portfolio growth was partially offset by some market share loss in our pacemaker portfolio.

Electrophysiology

Our Electrophysiology business develops and manufactures less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart, including a broad portfolio of therapeutic and diagnostic catheters and variety of capital equipment used in the electrophysiology lab.

Our net sales of Electrophysiology products of $79 million represented approximately three percent of our consolidated net sales for the second quarter of 2018. Our Electrophysiology net sales increased $12 million, or 18.5 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 270 basis point impact of foreign currency fluctuations, increased 15.8 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by a continued global expansion of our next generation Rhythmia™ Mapping System, Rhythmia HDx™, along with Rhythmia-related therapeutic and diagnostic catheters, and accessories.

40

Neuromodulation

Our Neuromodulation business develops and manufactures devices to treat various neurological movement disorders and manage chronic pain.

Our net sales of Neuromodulation products of $202 million represented approximately eight percent of our consolidated net sales for the second quarter of 2018. Neuromodulation net sales increased $48 million, or 31.5 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 90 basis point impact of foreign currency fluctuations, increased 30.6 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by the launch of Spectra WaveWriter™ Spinal Cord Stimulator (SCS) Systems in conjunction with the expansion of the our Vercise™ Deep Brain Stimulation (DBS) System in the U.S. combined with an increase in international sales.

Cardiovascular

Interventional Cardiology

Our Interventional Cardiology business develops and manufactures technologies for diagnosing and treating coronary artery disease and other cardiovascular disorders including structural heart conditions.

Our net sales of Interventional Cardiology products of $662 million represented approximately 27 percent of our consolidated net sales for the second quarter of 2018. Our Interventional Cardiology net sales increased $58 million, or 9.6 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 200 basis point impact of foreign currency fluctuations, increased 7.6 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by sales of our WATCHMAN™ Left Atrial Appendage Closure (LAAC) Technology, and our ACURATE™ transcatheter aortic valve replacement (TAVR) platform acquired as part of the Symetis acquisition in May 2017, along with our complex percutaneous coronary interventions (PCI) product offerings. Growth in the quarter was partially offset by declines in sales of our drug-eluting coronary stent (DES) product offerings.

Peripheral Interventions

Our Peripheral Interventions business develops and manufactures products used to diagnose and treat peripheral arterial diseases, including a broad line of medical devices used in percutaneous transluminal angioplasty (PTA) and peripheral vascular diseases, as well as products to diagnose, treat and ease various forms of cancer.

Our net sales of Peripheral Interventions products of $304 million represented approximately 12 percent of our consolidated net sales for the second quarter of 2018. Our Peripheral Interventions net sales increased $29 million, or 10.8 percent, in the second quarter of 2018, as compared to the same period in the prior year. Our operational net sales, which exclude a 210 basis point impact of foreign currency fluctuations, increased 8.7 percent, as compared to the same period in the prior year. This year-over-year increase was primarily driven by growth in our drug-eluting products, PTA balloon catheters, atherectomy technologies and interventional oncology product solutions.

Emerging Markets

As part of our strategic imperatives to drive global expansion, we are seeking to grow net sales and market share by expanding our global presence, including in Emerging Markets. We define Emerging Markets as including 20 countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. We have increased our investment in infrastructure in these countries in order to maximize opportunities. Our Emerging Markets net sales represented 11.1 percent of our consolidated net sales in the second quarter of 2018 and 10.0 percent in the second quarter of 2017. In the second quarter of 2018, our Emerging Market net sales grew 22.0 percent on a reported basis and, excluding a 90 basis point impact of foreign currency fluctuations, grew 21.1 percent on an operational basis, both as compared to the same period in the prior year.

41

Gross Profit

Our Gross profit was $1.751 billion for the second quarter of 2018, $1.625 billion for the second quarter of 2017, $3.458 billion for the first six months of2018 and $3.136 billion for the first six months of2017. The following is a reconciliation of our gross profit margins and a description of the drivers of the change from period to period:

	Three Months	Six Months
Gross profit margin - period ended June 30, 2017	72.0%	71.0%
Manufacturing cost reductions	0.8	1.2
Sales pricing and mix	(0.3)	0.1
Net impact of foreign currency	(1.6)	(1.8)
All other, including inventory changes and other period expense	(0.6)	0.5
Gross profit margin - period ended June 30, 2018	70.3%	71.0%

The primary factors contributing to the decrease in our gross profit margin during the second quarter of 2018, as compared to the same period in 2017, were the negative impacts from foreign currency fluctuations partially offset by the positive impacts of cost reductions resulting from our process improvement programs and restructuring programs. Gross profit margin remained relatively flat during the first six months of2018, as compared to the same period in 2017.

Operating Expenses

The following table provides a summary of certain of our operating expenses:

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
(in millions)	$	% of Net Sales		$	% of Net Sales		$	% of Net Sales		$	% of Net Sales
Selling, general and administrative expenses	886	35.6	%	815	36.0	%	1,746	35.9	%	1,609	36.4	%
Research and development expenses	275	11.0	%	244	10.8	%	536	11.0	%	480	10.9	%
Royalty expense	17	0.7	%	17	0.8	%	35	0.7	%	34	0.8	%

Selling, General and Administrative (SG&A) Expenses

In the second quarter of 2018, our SG&A expensesincreased $71 million, or approximately nine percent, as compared to the second quarter of 2017 and were 40basis points lower as a percentage of net sales. In the first six months of2018, our SG&A expensesincreased $137 million, or approximately nine percent, as compared to the first six months of2017 and were 50basis points lower as a percentage of net sales. The decrease in SG&A as a percentage of sales was primarily driven by the benefit of our targeted initiatives focused on reducing SG&A, including end-to-end business process streamlining and automation, expansion of global shared services and leveraging global sourcing.

Research and Development (R&D) Expenses

We remain committed to advancing medical technologies and investing in meaningful R&D projects across our businesses. In the second quarter of 2018, our R&D expensesincreased $31 million, or approximately 13 percent, as compared to the second quarter of 2017. In the first six months of2018, our R&D expensesincreased $56 million, or approximately 12 percent, as compared to the first six months of2017. Our R&D expenses remained relatively flat at approximately 11 percent of net sales in the second quarter and first six months of2018 and 2017. R&D expensesincreased as a result of investments across our businesses in order to maintain a healthy pipeline of new products that we believe will contribute to profitable sales growth.

Royalty Expense

Our Royalty expense was $17 million in the second quarter of 2018 and 2017. In the first six months of2018, our Royalty expenseincreased $1 million, or approximately three percent, as compared to the first six months of2017. Our Royalty expense remained relatively flat at approximately one percent of net sales in the second quarters and first six months of2018 and 2017.

42

Amortization Expense

Our Amortization expense was $147 million in the second quarter of 2018, as compared to $142 million in the second quarter of 2017 and $288 million in the first six months of2018, as compared to $285 million in the first six months of2017. Amortization expense is excluded by management for purposes of evaluating operating performance.

Intangible Asset Impairment Charges

We incurred Intangible asset impairment charges for technology-related intangible assets of $34 million in the second quarter of 2018 and $35 million in the first six months of2018. We did not incur any Intangible asset impairment charges in the second quarter or first six months of2017. Intangible asset impairment charges are excluded by management for purposes of evaluating operating performance.

Contingent Consideration Expense (Benefit)

We recorded a net benefit of $4 million during the second quarter of 2018, a net benefit of $24 million during the second quarter of 2017, a net expense of $1 million during the first six months of2018 and a net benefit of $74 million during the first six months of2017 related to the change in fair value of our contingent consideration liability. Refer to Note B – Acquisitions and Strategic Investments to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for additional details related to our contingent consideration expenses. Contingent consideration expense (benefit) is excluded by management for purposes of evaluating operating performance.

Restructuring and Restructuring-related Activities

The following table provides a summary of our restructuring and restructuring-related charges:

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2018		2017		2018		2017
Total restructuring charges (credits)	$	5	$	1	$	18	$	5
Total restructuring-related charges (credits)	$	11	$	15	$	26	$	30

Restructuring and restructuring-related charges and credits are excluded by management for purposes of evaluating operating performance.

The 2016 Restructuring Plan is expected to result in total pre-tax charges of approximately $275 million to $325 million and reduce gross annual expenses by approximately $165 million to $175 million by the end of 2020 as plan benefits are realized. A substantial portion of these savings will be reinvested in strategic growth initiatives.

In association with our 2016 Restructuring Plan, we made cash payments of $51 million during the first six months of 2018 and cumulative cash payments of $148 million as of June 30, 2018.

Refer to Note F – Restructuring-related Activities to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for additional details related to our restructuring plans.

Litigation-related net charges (credits)

Litigation-related net charges (credits) were immaterial in the second quarter of and first six months of2018. We recorded litigation-related net charges of $205 million in the second quarter of 2017 and $208 million in the first six months of2017 primarily related to transvaginal surgical mesh product liability cases and claims. Litigation-related net charges (credits) are excluded by management for purposes of evaluating operating performance. Refer to Note I – Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for discussion of our material legal proceedings.

43

Interest Expense

The following table provides a summary of our Interest expense and average borrowing rate:

(in millions)	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Interest expense	$	(57	)	$	(58	)	$	(119	)	$	(115	)
Average borrowing rate	3.6		%	3.9		%	3.8		%	3.9		%

Refer to Liquidity and Capital Resources and Note D – Hedging Activities and Fair Value Measurements and Note E – Borrowings and Credit Arrangements to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for information regarding our debt obligations and related derivative instruments and hedging activities.

Other, net

The following are the components of Other, net:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Interest income	$	1		$	—		$	2		$	1
Net foreign currency gain (loss)	(1		)	(8		)	(9		)	(8		)
Net gains (losses) on investments	11			(58		)	(2		)	(58		)
Other income (expense), net	1			(10		)	(1		)	(13		)
	$	12		$	(76	)	$	(11	)	$	(78	)

Our net gains and losses on investments for second quarter and first six months of 2018 were immaterial. We recorded other-than-temporary impairment losses of $53 million during the second quarter and first six months of2017 equal to the difference between the carrying value of our investments and their fair value. The charges were recorded within the Other, net caption of our unaudited condensed consolidated statements of operations.

Tax Rates

Our effective tax rate from continuing operations is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Effective tax rate from continuing operations	(60.3	)%	(60.3	)%	(27.3	)%	(10.1	)%

The change in our reported tax rates for the first six months of 2018, as compared to the same period in 2017, relates primarily to the impact of certain receipts and charges that are taxed at different rates than our effective tax rate, including intangible asset impairment charges, acquisition-related items, restructuring items, litigation-related items, as well as certain discrete tax items including the effective settlement of our transfer pricing dispute with the Internal Revenue Service (IRS) for the 2001 through 2010 tax years and the impacts of the Tax Cuts and Jobs Act (TCJA), enacted on December 22, 2017.

On June 6, 2018, a decision was entered by the United States Tax Court resolving all disputes related to the transfer pricing issues for Guidant Corporation's 2001 through 2006 tax years and our 2006 and 2007 tax years as well as the tax issues related to our 2006 transaction with Abbott Laboratories. Additionally, on May 24, 2018, we resolved all issues with the IRS Office of Appeals for our 2008 through 2010 tax years, including the transfer pricing issue and other unrelated issues. The final settlement calculation included certain elections made in these relevant years and resulted in a final net tax payment of $303 million plus $307 million of estimated interest, which was remitted to the IRS on June 15, 2018. Due to the final settlement of these disputes, we recorded a net tax benefit of $250 million as of June 30, 2018.

44

We currently expect to resolve the IRS examination of our 2011 through 2013 tax years before the end of 2018. We expect that the exam will be concluded utilizing the same transfer pricing methodologies employed in the 2001 through 2010 tax years. We believe we have recorded sufficient reserves with respect to these periods and therefore do not expect to recognize any additional charges related to the resolution of the 2011 through 2013 tax years.

Refer to Note H – Income Taxesto our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for information regarding our tax litigation.

Critical Accounting Policies and Estimates

Our financial results are affected by the selection and application of accounting policies and methods. In the six months endedJune 30, 2018, there were no changes to the application of critical accounting policies previously disclosed in our most recent Annual Report on Form 10-K with the exception of our critical accounting policies related to the adoption of FASB ASC Topic 606, Revenue from Contracts with Customers effective January 1, 2018, as described below.

Revenue Recognition

Post Implant Services

We provide non-contractual services to customers to ensure the safe and effective use of certain implanted devices. These promises are immaterial in the context of the contract. In accordance with FASB ASC Topic 606, because the revenue related to the immaterial services is recognized before they are delivered, we forward accrue the costs to provide these services at the time the devices are sold. We record these costs to SG&A expenses. We estimate the amount of time spent by our representatives performing these services and their compensation throughout the device life to determine the service cost. Changes to our business practice or the use of alternative estimates could result in a different amount of accrued cost. Refer to Note L – Revenue to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for further information on our adoption of FASB ASC Topic 606.

Liquidity and Capital Resources

Based on our current business plan, we believe our existing balance of Cash and cash equivalents, future cash generated from operations, access to capital markets and existing credit facilities will be sufficient to fund our operations, invest in our infrastructure, pay our legal-related liabilities, pay taxes due, fund possible mergers and/or acquisitions and service and repay our existing debt for the next twelve months.

As of June 30, 2018, we had $208 million of Cash and cash equivalents on hand, comprised of $49 million invested in money market and government funds and $159 million in interest bearing and non-interest bearing bank accounts. We invest excess cash on hand in short-term financial instruments that earn market interest rates while mitigating principal risk through instrument and counterparty diversification, as well as what we believe to be prudent instrument selection. We limit our direct exposure to securities in any one industry or issuer. We also have full access to our $2.250 billion commercial paper program, which is backed by our 2017 revolving credit facility described below. As of June 30, 2018, we had $1.685 billion in commercial paper debt outstanding resulting in an additional $565 million of available liquidity and no amounts outstanding resulting in an additional $400 million of available liquidity under our credit facility secured by our U.S. trade receivables both described below.

The following provides a summary and description of our net cash inflows (outflows):

	Six Months Ended June 30,
(in millions)	2018			2017
				(restated)†
Cash provided by (used for) operating activities	$	(210	)	$	290
Cash provided by (used for) investing activities	(664		)	(619		)
Cash provided by (used for) financing activities	856			317

^†  Certain prior year balances related to restricted cash have been reclassified to reflect our adoption of FASB ASC Update No. 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash in the fourth quarter of 2017. Please refer to our most recent annual report on Form 10-K for additional details.

45

Operating Activities

During the first six months of 2018, cash used for operating activities was $210 million, as compared to cash provided by operating activities of $290 million during the first six months of 2017, a decrease of $500 million. The decrease was primarily due to payment of the IRS tax settlement.

Investing Activities

During the first six months of 2018, cash used for investing activities primarily included payments for acquisitions of businesses, net of cash acquired of $418 million, purchases of property, plant and equipment of $134 million and payments related to strategic investments and acquisitions of certain technologies of $112 million, primarily related to our $90 million investment in Millipede, Inc. During the first six months of 2017, cash used for investing activities primarily included payments for acquisitions of businesses, net of cash acquired of $392 million, purchases of property, plant and equipment of $180 million and payments related to strategic investments and acquisitions of certain technologies of $47 million.

Financing Activities

Our cash flows for financing activities reflect issuances and repayments of debt, along with cash used to net share settle employee equity awards and stock issuances related to our equity incentive programs.

Debt

We had total debt of$6.493 billionas of June 30, 2018and $5.616 billion as of December 31, 2017. The debt maturity schedule for the significant components of our long-term debt obligations is presented below:

(in millions, except interest rates)	Issuance Date	Maturity Date	As of						Semi-annual Coupon Rate
			June 30, 2018			December 31, 2017
October 2018 Notes	August 2013	October 2018	—			††			2.650%
January 2020 Notes	December 2009	January 2020	850			850			6.000%
May 2020 Notes	May 2015	May 2020	600			600			2.850%
May 2022 Notes	May 2015	May 2022	500			500			3.375%
October 2023 Notes	August 2013	October 2023	450			450			4.125%
May 2025 Notes	May 2015	May 2025	750			750			3.850%
March 2028 Notes	February 2018	March 2028	1,000			—			4.000%
November 2035 Notes	November 2005	November 2035	350			350			7.000%
January 2040 Notes	December 2009	January 2040	300			300			7.375%
Unamortized Debt Issuance Discount and Deferred Financing Costs		2020 - 2040	(32		)	(24		)
Unamortized Gain on Fair Value Hedges		2020 - 2023	32			38
Capital Lease Obligation		Various	8			1
Long-term debt			$	4,808		$	3,815

^††As of December 31, 2017, $600 millionunder the October 2018 Notes was outstanding and classified as short-term debt.

Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.

Revolving Credit Facility

As of June 30, 2018 and December 31, 2017, we maintained a $2.250 billion revolving credit facility (the 2017 Facility) with a global syndicate of commercial banks that matures on August 4, 2022. This facility provides backing for the commercial paper program described below. There were no amounts borrowed under our revolving credit facility as of June 30, 2018 andDecember 31, 2017.

46

The 2017 Facility requires that we maintain certain financial covenants, as follows:

	Covenant Requirement	Actual
	as of June 30, 2018	as of June 30, 2018
Maximum leverage ratio (1)	3.5 times	2.4 times

(1) Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.

The 2017 Facility provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through maturity, of any non-cash charges and up to$500 million in restructuring charges and restructuring-related expenses related to our current or future restructuring plans. As of June 30, 2018, we had $400 millionof the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the 2017 Facility, are excluded from the calculation of consolidated EBITDA, as defined in the 2017 Facility, provided that the sum of any excluded net cash litigation payments does not exceed$2.624 billion in the aggregate. As of June 30, 2018, we had $1.526 billionof the legal exclusion remaining.

Any inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facility or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would agree to such new terms or grant such waivers on terms acceptable to us. In this case, all credit facility commitments would terminate and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our credit facility may negatively impact the credit ratings assigned to our commercial paper program which may impact our ability to refinance any then outstanding commercial paper as it becomes due and payable.

Commercial Paper

As of June 30, 2018, we had $1.685 billion of commercial paper outstanding and$1.197 billion outstanding as of December 31, 2017. Our commercial paper program is backed by the 2017 Facility, which allows us to have a maximum of $2.250 billion in commercial paper outstanding. Outstanding commercial paper directly reduces borrowing capacity available under the 2017 Facility. As of June 30, 2018, the commercial paper issued and outstanding had a weighted average maturity of 46days and a weighted average yield of2.58 percent. As of December 31, 2017, the commercial paper issued and outstanding had a weighted average maturity of 38days and a weighted average yield of1.85 percent.

Senior Notes

We had senior notes outstanding of $4.800 billion as ofJune 30, 2018 and$4.400 billionas ofDecember 31, 2017.

In February 2018, we completed an offering of$1.000 billion in aggregate principal amount of4.000%senior notes, due March 2028. We used a portion of the net proceeds from the offering to repay the $600 million plus accrued interest of our2.650%senior notes due in October 2018. The remaining proceeds were used to repay a portionof our outstanding commercial paper.

Our senior notes were issued in public offerings, are redeemable prior to maturity and are not subject to sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on parity with each other. These notes are effectively junior to borrowings under our credit and security facility, and to the extent borrowed by our subsidiaries, to liabilities of our subsidiaries (see Other Arrangements below).

Other Arrangements

As of June 30, 2018 and December 31, 2017, we maintained a $400 millioncredit and security facility secured by our U.S. trade receivables maturing in February 2019.We had no outstanding borrowings as of June 30, 2018and December 31, 2017 under our credit and security facility.

47

We have accounts receivable factoring programs in certain European countries and with commercial banks in Japan which include promissory notes discounting programs. We account for our factoring programs as sales under FASB ASC Topic 860, Transfers and Servicing. We have no retained interest in the transferred receivables, other than collection and administration, and once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net in the accompanying unaudited condensed consolidated balance sheets, are aggregated by contract denominated currency below (in millions):

	As of June 30, 2018						As of December 31, 2017
Factoring Arrangements	Capacity (1)		Amount De-recognized		Average Interest Rate		Capacity (1)		Amount De-recognized		Average Interest Rate
Euro denominated	$	442	$	161	1.5	%	$	456	$	171	1.8	%
Yen denominated (2)	$	470	$	216	0.5	%	$	195	$	157	1.3	%

(1) The capacities are translated from local currency to U.S. dollar using the spot rates on the last business day of each period.

(2) The factoring arrangements denominated in Japanese yen consist of two arrangements, one with a maximum capacity of 22.000 billionyen, which has been discontinued as of June 30, 2018, and a new arrangement with a maximum capacity of 30.000 billion yen entered into during March 2018.

As of and through June 30, 2018, we were in compliance with all the required covenants related to our debt obligations.

Equity

We received $53 million during the first six months of 2018 and $44 million during the first six months of 2017 in proceeds from stock issuances related to our stock option and employee stock purchase plans. Proceeds from the exercise of employee stock options and employee stock purchases vary from period to period based upon, among other factors, fluctuations in the trading price of our common stock and in the exercise and stock purchase patterns of our employees.

We did not repurchase any shares of our common stock during the first six months of 2018 and 2017. As of June 30, 2018, the remaining authorization to repurchase shares under our 2013 share repurchase program was $535 million.

Stock-based compensation expense related to our stock ownership plans was approximately $68 million for the first six months of2018 and $62 million for the first six months of2017.

Contractual Obligations and Commitments

Certain of our acquisitions involve the payment of contingent consideration. See Note B – Acquisitions and Strategic Investmentsto our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for further details regarding the estimated potential amount of future contingent consideration we could be required to pay associated with our acquisitions. There have been no other material changes to our contractual obligations and commitments as reported in our most recent Annual Report filed on Form 10-K.

Legal Matters

For a discussion of our material legal proceedings see Note I – Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q and Note J – Commitments and Contingencies to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K.

Recent Accounting Pronouncements

Information regarding new accounting pronouncements implemented since December 31, 2017 is included in Note A – Basis of Presentation and information regarding new accounting pronouncements to be implemented is included in Note N – New Accounting Pronouncements to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q.

Additional Information

Cybersecurity

We have established controls and procedures to escalate enterprise level issues, including cybersecurity matters, to the appropriate management levels within our organization and to members of our Board of Directors as appropriate. Under our framework, cybersecurity issues are analyzed by subject matter experts and a crisis committee for potential financial, operational, and

48

reputational risks, based on, among other factors, the nature of the matter and breadth of impact. Matters determined to present potential material impacts to the Company’s financial results, operations, and/or reputation are immediately reported by management to one or more members of the Board of Directors in accordance with our escalation framework. In addition, we have established procedures to ensure that management responsible for overseeing the effectiveness of disclosure controls is informed in a timely manner of known cybersecurity risks and incidents that may materially impact our operations and that timely public disclosure is made as appropriate. 

Our directors and executive officers are subject to our Stock Trading Policy, which is designed to facilitate compliance with insider trading laws and governs transactions in our common stock and related derivative securities. Our policy designates certain regular periods, dictated by release of financial results, in which trading is restricted for individuals in information-sensitive positions, including directors and executive officers. In addition, additional periods of trading restriction may be imposed as determined by the President, General Counsel, or Chief Financial Officer in light of material pending developments. Further, during permitted windows, individuals in information-sensitive positions are required to seek pre-clearance for trades from the General Counsel, who assesses whether there are any important pending developments, including cybersecurity matters, which need to be made public before the individual may participate in the market.

Use of Non-GAAP Financial Measures

To supplement our unaudited condensed consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures, including adjusted net income (earnings) and adjusted net income (earnings) per share that exclude certain amounts and operational net sales growth that exclude the impact of foreign currency fluctuations. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United States and should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Further, other companies may calculate these non-GAAP financial measures differently than we do, which may limit the usefulness of those measures for comparative purposes.

To calculate adjusted net income (earnings) and adjusted net income (earnings) per share we exclude certain charges (credits) from GAAP net income, including amortization expense, intangible asset impairment charges, acquisition-related net charges (credits), restructuring and restructuring-related net charges (credits), litigation-related net charges (credits), certain investment impairment charges and certain discrete tax items. Amounts are tax effected at the company's effective tax rate, unless the amount is a significant unusual or infrequently occurring item in accordance with FASB ASC Topic 740-270-30, "General Methodology and Use of Estimated Annual Effective Tax Rate." Please refer to Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our most recent Annual Report filed on Form 10-K filed with the Securities and Exchange Commission (SEC) for an explanation of each of these adjustments and the reasons for excluding each item. The following is an explanation of each incremental or revised adjustment type that management excluded as part of these non-GAAP financial measures, since our most recent Annual Report on Form 10-K, as well as the reason for excluding each individual item:

• Discrete tax items - These items represent adjustments of certain tax positions including those which a) are estimates as a result of the TCJA, enacted in December 2017, and, or b) were a benefit resulting from the finalization of the IRS Stipulation of Settled Issues consistent with the manner in which the tax reserves were originally booked. These adjustments are not indicative of expected on-going operating results. We exclude the impact of this charge from management's assessment of operating performance and from our operating segments' measures of profit and loss used for making operating decisions and assessing performance. Accordingly, management excluded these amounts for the 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.

The GAAP financial measures most directly comparable to adjusted net income and adjusted net income per share are GAAP net income and GAAP net income per share.

To calculate operational net sales, which exclude the impact of foreign currency fluctuations, we convert actual net sales from local currency to U.S. dollars using constant foreign currency exchange rates in the current and prior period. The GAAP financial measure most directly comparable to operational net sales is net sales on a GAAP basis.

Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included in Item 2 of this Quarterly Report on Form 10-Q beginning with our Financial Summary.

49

Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors and to establish operational goals and forecasts that are used in allocating resources. In addition, management uses these non-GAAP financial measures to further its understanding of the performance of our operating segments. The adjustments excluded from our non-GAAP financial measures are consistent with those excluded from our operating segments’ measures of net sales and profit or loss. These adjustments are excluded from the segment measures reported to our chief operating decision maker that are used to make operating decisions and assess performance.

We believe that presenting adjusted net income, adjusted net income per share that exclude certain amounts and operational net sales growth that exclude the impact of changes in foreign currency exchange rates, in addition to the corresponding GAAP financial measures, provides investors greater transparency to the information used by management for its operational decision-making and allows investors to see our results “through the eyes” of management. We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance.

Safe Harbor for Forward-Looking Statements

Certain statements that we may make from time to time, including statements contained in this Quarterly Report on Form 10-Q and information incorporated by reference herein, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “may,” “estimate,” “intend” and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements. As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements. Except as required by law, we do not intend to update any forward-looking statements even if new information becomes available or other events occur in the future.

The forward-looking statements in this Quarterly Report on Form 10-Q are based on certain risks and uncertainties, including the risk factors described in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K and the specific risk factors discussed below and in connection with forward-looking statements throughout this Quarterly Report on Form 10-Q, which could cause actual results to vary materially from the expectations and projections expressed or implied by our forward-looking statements. These factors, in some cases, have affected and in the future could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the forward-looking statements. These additional factors include, among other things, future political, economic, competitive, reimbursement and regulatory conditions, new product introductions, demographic trends, intellectual property, litigation and governmental investigations, financial market conditions and future business decisions made by us and our competitors, all of which are difficult or impossible to predict accurately and many of which are beyond our control. We caution each reader of this Quarterly Report on Form 10-Q to consider carefully these factors.

The following are some of the important risk factors that could cause our actual results to differ materially from our expectations in any forward-looking statements. For further discussion of these and other risk factors, see Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K.

Our Businesses

• Our ability to increase net sales, expand the market, capture market share and adapt to market volatility,

• The ongoing impact on our business of physician alignment to hospitals, governmental investigations and audits of hospitals and other market and economic conditions on the overall number of procedures performed,

• Competitive offerings and related declines in average selling prices for our products,

• The performance of and physician and patient confidence in, our products and technologies or those of our competitors,

• The impact and outcome of ongoing and future 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 competitor's products,

50

• Our ability to acquire or develop, launch and supply new or next-generation products and technologies worldwide and in line with our commercialization strategies in a timely and successful manner and with respect to our recent acquisitions,

• 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 secure in a timely manner alternative manufacturing or additional or replacement components, materials or products,

• Our ability to retain and attract key personnel,

• The impact of enhanced requirements to obtain regulatory approval in the U.S. and around the world, including the associated timing and cost of product approval, and

• The impact of increased pressure on the availability and rate of third-party reimbursement for our products and procedures in the U.S. and around the world, including with respect to the timing and costs of creating and expanding markets for new products and technologies.

Regulatory Compliance, Litigation and Data Protection

• The impact of healthcare policy changes and legislative or regulatory efforts in the U.S. 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 U.S. 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 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,

• The possibility of failure to protect our intellectual property rights and the outcome of patent litigation, and

• Our ability to properly operate our information systems that support our business operations and protect our data integrity and products from a cyber-attack or other breach that has a material adverse effect on our business, reputation or results of operations.

Innovation and Certain Growth Initiatives

• 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 projects from in-process research and development,

51

• 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 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.

International Markets

• Our dependency on international net sales to achieve growth, including in emerging markets,

• The impact of changes in our international structure and leadership,

• The timing and collectability of customer payments, political and economic conditions (including the impact of the United Kingdom's exit from the EU, often referred to as "Brexit"), 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.

Liquidity

• 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 possibility of counterparty default on our derivative financial instruments,

• The impact of goodwill and other intangible asset impairment charges, including on our results of operations, and

52

• Our ability to collect outstanding and future receivables and/or sell receivables under our factoring programs.

Cost Reduction and Optimization Initiatives

• Risks associated with significant changes made or expected to be made to our organizational and operational structure, pursuant to our 2016 Restructuring Plan 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.

Rule 10b5-1 Trading Plans by Executive Officers

Periodically, certain of our executive officers adopt written stock trading plans in accordance with Rule 10b5-1 under the Exchange Act and our own Stock Trading Policy. A Rule 10b5-1 Trading Plan is a written document that pre-establishes the amount, prices and dates (or formulas for determining the amounts, prices and dates) of future purchases or sales of our stock, including shares issued upon exercise of stock options or vesting of deferred stock units. These plans are entered into at a time when the person is not in possession of material non-public information about our company. We disclose details regarding individual Rule 10b5-1 Trading Plans on the Investor Relations section of our website.

53

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments. We operate the program pursuant to documented corporate risk management policies. We do not enter derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset losses and gains on underlying hedged exposures. Furthermore, we manage our exposure to counterparty risk on derivative instruments by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.

Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We use both nonderivative (primarily European manufacturing operations) and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates. We had currency derivative instruments outstanding in the contract amount of $8.295 billion as of June 30, 2018 and $5.923 billion as of December 31, 2017. A ten percent appreciation in the U.S. dollar’s value relative to the hedged currencies would increase the derivative instruments’ fair value by $477 million as of June 30, 2018 as compared to $321 million as of December 31, 2017. A ten percent depreciation in the U.S. dollar’s value relative to the hedged currencies would decrease the derivative instruments’ fair value by $583 million as of June 30, 2018 as compared to $421 million as of December 31, 2017. Any increase or decrease in the fair value of our currency exchange rate sensitive derivative instruments would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying asset, liability or forecasted transaction, resulting in minimal impact on our unaudited condensed consolidated statements of operations.

Our interest rate risk relates primarily to U.S. dollar borrowings partially offset by U.S. dollar cash investments. We have historically used interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. We had no interest rate derivative instruments outstanding as of June 30, 2018 and December 31, 2017. As of June 30, 2018, $4.800 billion of our outstanding debt obligations were at fixed interest rates, representing approximately 74 percent of our total debt.

Refer to Note D – Hedging Activities and Fair Value Measurements to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q for further information regarding our derivative financial instruments.

54

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2018 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures are designed to ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such material information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation, our CEO and CFO concluded that, as of June 30, 2018, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

We implemented certain controls related to the adoption of FASB ASC Topic 606, effective January 1, 2018. These controls were designed and implemented to ensure the completeness and accuracy over financial reporting. With the exception of the controls implemented for FASB ASC Topic 606, there were no changes in our internal control over financial reporting during the three and six month period ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

55

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Note H – Income Taxes and Note I – Commitments and Contingencies to our unaudited condensed consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q, which is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the information set forth below and other information contained elsewhere in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our most recent Annual Report filed on Form 10-K, which could materially affect our business, financial condition or future results.

ITEM 6. EXHIBITS (* documents filed or furnished with this report, # compensatory plans or arrangements)

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 of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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, 2018 and 2017, (ii) the Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017, (iii) the Condensed Consolidated Balance Sheets as of June 30, 2018 and December 31, 2017, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 and (v) the notes to the Condensed Consolidated Financial Statements.

56

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on July 31, 2018.

BOSTON SCIENTIFIC CORPORATION
By:	/s/ Daniel J. Brennan
	Name:	Daniel J. Brennan
	Title:	Executive Vice President and Chief Financial Officer

57

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Michael F. Mahoney, certify that:

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:	July 31, 2018	/s/ Michael F. Mahoney
		Michael F. Mahoney
		President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Daniel J. Brennan, certify that:

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:	July 31, 2018	/s/ Daniel J. Brennan
		Daniel J. Brennan
		Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C.

SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Boston Scientific Corporation (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Executive Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

(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.

This certification shall not be deemed "filed" for any purpose, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 regardless of any general incorporation language in such filing.

By:	/s/ Michael F. Mahoney
	Michael F. Mahoney
	President and Chief Executive Officer
	July 31, 2018

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C.

SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Boston Scientific Corporation (the “Company”) for the period ended June 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned Chief Financial Officer of the Company hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on his knowledge:

(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.

This certification shall not be deemed "filed" for any purpose, nor shall it be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 regardless of any general incorporation language in such filing.

By:	/s/ Daniel J. Brennan
	Daniel J. Brennan
	Executive Vice President and Chief Financial Officer
	July 31, 2018

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Jul. 25, 2018
Document and Entity Information [Abstract]
Entity Registrant Name	BOSTON SCIENTIFIC CORPORATION
Entity Central Index Key	0000885725
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		1,382,924,777

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net sales	$ 2,490	$ 2,257	$ 4,870	$ 4,418
Cost of products sold	739	632	1,411	1,282
Gross profit	1,751	1,625	3,458	3,136
Operating expenses:
Selling, general and administrative expenses	886	815	1,746	1,609
Research and development expenses	275	244	536	480
Royalty expense	17	17	35	34
Amortization expense	147	142	288	285
Intangible asset impairment charges	34	0	35	0
Contingent consideration expense (benefit)	(4)	(24)	1	(74)
Restructuring charges (credits)	5	1	18	5
Litigation-related net charges (credits)	0	205	0	208
Operating expenses	1,359	1,400	2,659	2,547
Operating income (loss)	392	225	799	589
Other income (expense):
Interest expense	(57)	(58)	(119)	(115)
Other, net	12	(76)	(11)	(78)
Income (loss) before income taxes	347	91	670	396
Income tax expense (benefit)	(209)	(55)	(183)	(40)
Net income (loss)	$ 555	$ 146	$ 853	$ 436
Net income (loss) per common share — basic	$ 0.40	$ 0.11	$ 0.62	$ 0.32
Net income (loss) per common share — assuming dilution	$ 0.40	$ 0.11	$ 0.61	$ 0.31
Weighted-average shares outstanding
Basic	1,380.5	1,369.8	1,378.5	1,367.6
Assuming dilution	1,398.9	1,391.1	1,397.8	1,390.6

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Net income (loss)	$ 555	$ 146	$ 853	$ 436
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment	(45)	13	(36)	21
Other Comprehensive Income (Loss), Cash Flow Hedge, Gain (Loss), after Reclassification and Tax	158	(21)	78	(76)
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, before Reclassification Adjustments and Tax	0	2	0	2
Net change in unrealized costs associated with certain retirement plans	0	(1)	0	(1)
Total other comprehensive income (loss)	112	(7)	42	(54)
Total comprehensive income (loss)	$ 668	$ 139	$ 895	$ 382

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Current assets:
Cash and cash equivalents	$ 208	$ 188
Trade accounts receivable, net	1,587	1,548
Inventories	1,087	1,078
Prepaid income taxes	46	66
Other current assets	1,001	942
Total current assets	3,929	3,822
Property, plant and equipment, net	1,715	1,697
Goodwill	7,242	6,998
Other intangible assets, net	5,934	5,837
Other long-term assets	796	688
TOTAL ASSETS	19,615	19,042
Current liabilities:
Current debt obligations	1,685	1,801
Accounts payable	403	530
Accrued expenses	2,266	2,456
Other current liabilities	399	867
Total current liabilities	4,753	5,654
Long-term debt	4,808	3,815
Deferred income taxes	364	191
Other long-term liabilities	1,945	2,370
Commitments and contingencies
Stockholders’ equity
Preferred stock, $0.01 par value - authorized 50,000,000 shares, none issued and outstanding
Common stock, $0.01 par value - authorized 2,000,000,000 shares - issued 1,628,876,252 shares as of June 30, 2018 and 1,621,062,898 shares as of December 31, 2017	16	16
Treasury stock, at cost - 247,566,270 shares as of June 30, 2018 and December 31, 2017	(1,717)	(1,717)
Additional paid-in capital	17,231	17,161
Accumulated deficit	(7,770)	(8,390)
Accumulated other comprehensive income (loss), net of tax	(16)	(59)
Total stockholders’ equity	7,744	7,012
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 19,615	$ 19,042

XML

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
Condensed Consolidated Balance Sheet (Parenthetical) [Abstract]
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	2,000,000,000	2,000,000,000
Common Stock, Shares, Issued	1,628,876,252	1,621,062,898
Common Stock, Shares, Outstanding	1,381,309,982	1,373,496,628
Preferred Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	50,000,000	50,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Treasury Stock, Shares	247,566,270	247,566,270

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash provided by (used for) operating activities
Cash provided by (used for) operating activities	$ (210)	$ 290
Investing activities:
Purchases of property, plant and equipment	(134)	(180)
Payments for acquisitions of businesses, net of cash acquired	(418)	(392)
Payments for investments and acquisitions of certain technologies	(112)	(47)
Cash provided by (used for) investing activities	(664)	(619)
Financing activities:
Payment of contingent consideration amounts previously established in purchase accounting	(5)	(18)
Payments on long-term borrowings	(602)	(600)
Proceeds from long-term borrowings, net of debt issuance and extinguishment costs	989	0
Net increase (decrease) in commercial paper	472	1,013
Proceeds from borrowings on credit facilities	569	2,156
Payments on borrowings from credit facilities	(569)	(2,216)
Cash used to net share settle employee equity awards	(52)	(62)
Proceeds from issuances of shares of common stock	53	44
Cash provided by (used for) financing activities	856	317
Effect of foreign exchange rates on cash	(5)	2
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents	(23)	(11)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period	188
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period	208	195
Supplemental Information
Stock-based compensation expense	68	62
Fair value of contingent consideration recorded in purchase accounting	$ 140	$ 0

XML

Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statement of Cash Flows (Supplemental Disclosure) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017	Dec. 31, 2016
Cash and Cash Equivalents, at Carrying Value	$ 208	$ 188	$ 195
Restricted Cash and Cash Equivalents, Current	756	803	255
Restricted Cash and Cash Equivalents, Noncurrent	31	26	27
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 994	$ 1,017	$ 476	$ 487

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2018

Basis of Presentation [Abstract]

BASIS OF PRESENTATION

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. When used in this report, the terms, "we," "us," "our," and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. For further information, refer to the consolidated financial statements and footnotes thereto included in Item 8 of our most recent Annual Report on Form 10-K.

Amounts reported in millions within this report are computed based on the amounts in thousands. As a result, the sum of the components reported in millions may not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying numbers in dollars. Prior year balances were subject to rounding.

Revision of Reportable Segments

Effective January 1, 2018, following organizational changes to align the company's business and organization structure focused on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our Medical Surgical (MedSurg) segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk throughout *). There was no revision to operating segments or reporting units as a result of the organizational change. See Note C – Goodwill and Other Intangible Assets and Note K – Segment Reporting for further details.

Subsequent Events

We evaluate events occurring after the date of our most recent accompanying unaudited condensed consolidated balance sheet for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying unaudited condensed consolidated financial statements (recognized subsequent events) for the three and six months ended June 30, 2018. Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note B – Acquisitions and Strategic Investments and Note I – Commitments and Contingencies for more information.

Accounting Standards Implemented Since December 31, 2017

ASC Update No. 2014-09

In May 2014, the FASB issued FASB ASC Topic 606, Revenue from Contracts with Customers(Topic 606), which was subsequently updated. We adopted the standard as of January 1, 2018, using the modified retrospective method. Under this method, we applied FASB ASC Topic 606 to contracts that were not complete as of January 1, 2018 and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented in accordance with FASB ASC Topic 606. Prior period amounts are not adjusted and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 605, Revenue Recognition.

Due to the adoption of FASB ASC Topic 606, we recorded a net reduction to retained earnings of $177 million on January 1, 2018, primarily related to the cost of providing non-contractual post-implant support to certain customers, which we historically deemed immaterial in the context of the arrangement. Upon the adoption of FASB ASC Topic 606, when we sell a device with an implied non-contractual post-implant support obligation, we forward accrue the cost of the service within Selling, general and administrative expenses and recognize it at the point in time the associated revenue is earned. We release the accrual over the related service period. These costs were previously expensed as incurred due to such service obligation being non-contractual.

The impact of adopting FASB ASC Topic 606 on our unaudited condensed consolidated balance sheets resulted in an increase in Other current liabilities of $58 million and an increase in Other long-term liabilities of $205 million as of June 30, 2018, as a result of accruing for our post-implant support obligation. We also recorded deferred tax assets primarily related to post-implant support, resulting in an increase in Other long-term assets of $12 million and a reduction in Deferred income taxes of $41 million. The remaining impact of adopting FASB ASC Topic 606 was not material to our financial position or results of operations.

Refer to Note L – Revenue for additional details.

ASC Update No. 2016-01

In January 2016, the FASB issued ASC Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose of Update No. 2016-01 is to improve financial reporting for financial instruments by reducing the number of items recorded to other comprehensive income. We adopted Update No. 2016-01 in the first quarter of 2018, using both the modified retrospective and prospective methods. For publicly-held securities, we used the modified retrospective approach. Unrealized gains and losses previously recorded to Other comprehensive income (loss) were reclassified to retained earningsand all future fair value changes will be recorded to Net income (loss). For privately-held securities, we elected the measurement alternative approach for our existing investments, which is applied prospectively upon adoption. This approach requires entities to measure their investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adoption of the standard did not have a material impact on our financial position or results of operations. The actual impact to future periods resulting from fair value changes of our equity investments is difficult to predict as it will depend on their future performance.

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2017-12

In August 2017, the FASB issued ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of Update No. 2017-12 is to simplify the application of hedge accounting and better align financial reporting of hedging relationships with risk management objectives. Update No. 2017-12 was effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We early adopted Update No. 2017-12 in the first quarter of 2018. The adoption of the standard had no impact on our financial position or results of operations.

XML

Acquisitions and Strategic Investments

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

ACQUISITIONS AND STRATEGIC INVESTMENTS

NOTE B – ACQUISITIONS AND STRATEGIC INVESTMENTS

2018 Acquisitions

Claret Medical, Inc.

On July 20, 2018, we announced the signing of our agreement to acquire Claret Medical, Inc. (Claret Medical), a privately-held company that has developed and commercialized the Sentinel™ Cerebral Embolic Protection System. The device is used to protect the brain during certain interventional procedures, predominately in patients undergoing transcatheter aortic valve replacement (TAVR). The transaction price consists of an upfront cash payment of $220 million, as well as a potential reimbursement-based milestone payment of up to $50 million. The acquisition is projected to close during the third quarter of 2018, subject to customary closing conditions. Upon closing, Claret Medical will be integrated into our Interventional Cardiology business.

Cryterion Medical, Inc.

On July 5, 2018, we announced the closing of our acquisition of Cryterion Medical, Inc. (Cryterion), a privately-held company developing a single-shot cryoablation platform for the treatment of atrial fibrillation. We have been an investor in Cryterion since its inception in 2016 and the transaction price to acquire the approximately 65 percent we did not already own was an upfront cash payment of $202 million. We are in the process of integrating Cryterion into our Electrophysiology business.

NxThera, Inc.

On April 30, 2018, we announced the closing of our acquisition of NxThera, Inc. (NxThera), a privately-held company that developed the Rezûm™ System, a minimally invasive therapy in a growing category of treatment options for patients with benign prostatic hyperplasia (BPH). The transaction consists of an upfront cash payment of $306 million, and up to an additional $100 million in potential commercial milestone payments over the next four years. We had an existing minority investment in NxThera, which resulted in a net upfront cash payment of approximately $240 million upon closing and a potential additional milestone payment of up to approximately $85 million. We are in the process of integrating NxThera into our Urology and Pelvic Health business.

nVision Medical Corporation

On April 16, 2018, we announced the closing of our acquisition of nVision Medical Corporation (nVision), a privately-held company focused on women’s health. nVision developed the first and only device cleared by the U.S. Food and Drug Administration (FDA) to collect cells from the fallopian tubes, offering a potential platform for earlier diagnosis of ovarian cancer. The transaction consists of an upfront cash payment of $150 million, and up to an additional $125 million in potential clinical and commercial milestones over four years. We are in the process of integrating nVision into our Urology and Pelvic Health business.

In addition, we completed other individually immaterial acquisitions during the first six months of2018 for total consideration of $50 million in cash at closing plus aggregate contingent consideration of up to $10 million.

Purchase Price Allocation

We accounted for these acquisitions as business combinations, and in accordance with FASB ASC Topic 805, Business Combinations, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition dates. The components of the aggregate preliminary purchase prices are as follows:

(in millions)
Payments for acquisitions, net of cash acquired	$	419
Fair value of contingent consideration	140
Fair value of prior interests	81
	$	639

The following summarizes the preliminary purchase price allocations for the acquisitions as of June 30, 2018:

(in millions)
Goodwill	$	273
Amortizable intangible assets	418
Other assets acquired	53
Liabilities assumed	(5		)
Deferred tax liabilities	(99		)
	$	639

We allocated a portion of the preliminary purchase prices to specific intangible asset categories as follows:

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	410	10 - 13	17% - 23%
Other intangible assets	7		6 - 13	13% - 15%
	$	418

2017 Acquisitions

Symetis SA

On May 16, 2017, we announced the closing of our acquisition of Symetis SA (Symetis), a privately-held Swiss structural heart company focused on minimally-invasive transcatheter aortic valve replacement devices, for approximately $430 million in cash. We are in the process of integrating Symetis into our Interventional Cardiology business.

Purchase Price Allocation

We accounted for the acquisition of Symetis as a business combination, and in accordance with FASB ASC Topic 805, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The purchase price was comprised of the following component:

(in millions)
Payment for acquisition, net of cash acquired	$	391

The following summarizes the purchase price allocation for the Symetis acquisition as of June 30, 2018:

(in millions)
Goodwill	$	183
Amortizable intangible assets	278
Other assets acquired	25
Liabilities assumed	(95		)
	$	391

We allocated a portion of the purchase price to specific intangible asset categories as follows:

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	268	13	24%
Other intangible assets	10		2-13	24%
	$	278

Our technology-related intangible assets consist of technical processes, intellectual property and institutional understanding with respect to products and processes that we will leverage in future products or processes and will carry forward from one product generation to the next. We used the multi-period excess earnings method, a form of the income approach, to derive the fair value of the technology-related intangible assets and are amortizing them on a straight-line basis over their assigned estimated useful lives.

Goodwill was primarily established due to synergies expected to be gained from leveraging our existing operations as well as revenue and cash flow projections associated with future technologies and has been allocated to our reportable segments based on the relative expected benefit. Based on preliminary estimates updated for applicable regulatory changes, the goodwill recorded relating to our 2018 and 2017 acquisitions is not deductible for tax purposes.

Contingent Consideration

Within the Contingent consideration expense (benefit) caption of our accompanying unaudited condensed consolidated statements of operations, we recorded a net benefit of $4 million during the second quarter of 2018, a net benefit of $24 million during the second quarter of 2017, a net expense of $1 million during the first six months of2018 and a net benefit of $74 million during the first six months of2017 related to the changes in fair value of our contingent consideration liability. We made contingent consideration payments of $9 million during the first six months of 2018 and $28 million during the first six months of 2017.

Changes in the fair value of our contingent consideration liability were as follows:

(in millions)
Balance as of December 31, 2017	$	169
Amounts recorded related to new acquisitions	140
Purchase price adjustments related to prior acquisitions	(22		)
Contingent consideration expense (benefit)	1
Contingent consideration payments	(9		)
Balance as of June 30, 2018	$	279

As of June 30, 2018, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay was approximately $1.532 billion.

The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:

Contingent Consideration Liability	Fair Value as of June 30, 2018	Valuation Technique	Unobservable Input	Range
R&D and Commercialization-based Milestones	$159 million	Discounted Cash Flow	Discount Rate	3	%	-	4%
			Projected Year of Payment	2018		-	2022
Revenue-based Payments	$120 million	Discounted Cash Flow	Discount Rate	11	%	-	15%
			Projected Year of Payment	2018		-	2026

Projected contingent payment amounts related to some of our research and development (R&D), commercialization-based and revenue-based milestones are discounted back to the current period using a discounted cash flow model. Projected revenues are based on our most recent internal operational budgets and strategic plans. Increases or decreases in projected revenues, probabilities of payment, discount rates or the time until payment is made may result in significantly lower or higher fair value measurements.

Strategic Investments

On January 24, 2018, we closed an investment and entered into an acquisition option agreement with Millipede, Inc. (Millipede), a privately-held company that has developed the IRIS Transcatheter Annuloplasty Ring System for the treatment of severe mitral regurgitation. Under the terms of the agreements, we have purchased a portion of the outstanding shares of Millipede along with newly issued shares of the company for a total consideration of $90 million. We also have the option to acquire the remaining shares of the company at any time prior to the completion of a first-in-human clinical study that meets certain parameters. Upon the completion of the clinical study, Millipede has the option to compel us to acquire the remaining shares of the company. Each company’s option period expires by the end of 2019. Completion of this acquisition would result in an additional $325 million payment by us at closing with a further $125 million becoming payable upon achievement of a commercial milestone.

On November 1, 2017, we entered into a definitive agreement with an investee company where we could have been obligated to pay $145 million in cash up-front and a maximum of $130 million in contingent payments to acquire the investee. The agreement contained a provision, expiring October 31, 2019, allowing the investee company to sell the remaining equity interests of the investee company to us upon achievement of a regulatory milestone and an option allowing us to acquire the remaining equity interests. We sent a notice of termination to the investee company in the second quarter of 2018.

The aggregate carrying amount of our strategic investments were comprised of the following categories:

	As of
(in millions)	June 30, 2018		December 31, 2017
Equity method investments	$	281	$	209
Measurement alternative investments	82		81
Publicly-held securities	1		15
Notes receivable	18		47
	$	382	$	353

These investments are classified as Other long-term assets within our accompanying unaudited condensed consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies.

As of June 30, 2018, the book value of our equity method investments exceeded our share of the book value of the investees’ underlying net assets by approximately $328 million, which represents amortizable intangible assets, in-process research and development, deferred tax liabilities and goodwill.

XML

Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

NOTE C – GOODWILL AND OTHER INTANGIBLE ASSETS

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill are as follows:

	As of June 30, 2018					As of December 31, 2017
(in millions)	Gross Carrying Amount		Accumulated Amortization/ Write-offs			Gross Carrying Amount		Accumulated Amortization/ Write-offs
Amortizable intangible assets
Technology-related	$	9,698	$	(5,032	)	$	9,386	$	(4,880	)
Patents	517		(384		)	517		(379		)
Other intangible assets	1,640		(897		)	1,633		(838		)
	$	11,855	$	(6,314	)	$	11,536	$	(6,097	)
Unamortizable intangible assets
Goodwill	$	17,142	$	(9,900	)	$	16,898	$	(9,900	)
In-process research and development (IPR&D)	273		—			278		—
Technology-related	120		—			120		—
	$	17,535	$	(9,900	)	$	17,295	$	(9,900	)

Effective January 1, 2018, we reclassified our Neuromodulation operating segment and associated goodwill balance from our Medsurg reportable segment to our Rhythm and Neuro reportable segment as discussed in Note A – Basis of Presentation. This change did not trigger a goodwill impairment assessment or impact our total goodwill carrying value. The following represents our goodwill balance by global reportable segment:

(in millions)	MedSurg			Rhythm and Neuro			Cardiovascular			Total
Balance as of December 31, 2017	$	2,877		$	417		$	3,704		$	6,998
Impact of reportable segment revisions	(1,379		)	1,379			—			—
Impact of foreign currency fluctuations and other changes in carrying amount	(2		)	(22		)	(5		)	(29		)
Goodwill acquired	248			25			—			273
Balance as of June 30, 2018	$	1,744		$	1,799		$	3,699		$	7,242

Goodwill Impairment Testing

In the second quarter of 2018, we performed our annual goodwill impairment test for all of our reporting units and concluded the fair value of each reporting unit exceeded its carrying value. Based on the criteria prescribed in FASB ASC Topic 350, Intangibles - Goodwill and Other, we assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. For our 2018 and 2017 annual impairment assessments, we identified seven reporting units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health and Neuromodulation. We aggregated the Cardiac Rhythm Management and Electrophysiology reporting units, components of the Rhythm Management operating segment, based on the criteria prescribed in FASB ASC Topic 350.

In performing the goodwill impairment assessment, we utilized both the optional qualitative assessment and the quantitative approach prescribed under FASB ASC Topic 350. In 2018, we performed a qualitative assessment for our Urology and Pelvic Health and Neuromodulation reporting units since their fair values have historically exceeded carrying value by greater than 100 percent. The remaining reporting units were quantitatively tested for impairment. For the reporting units subject to a qualitative assessment, if it is determined that it is more likely than not that the fair value of the reporting unit is less than its carrying value, the quantitative approach of the goodwill impairment test is necessary. In 2018, for all reporting units tested using the qualitative assessment, we concluded that it was unnecessary to perform the quantitative impairment test. For all reporting units tested using the quantitative approach, we concluded that the fair value of each reporting unit exceeded its carrying value. Refer to Critical Accounting Policies and Estimates within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our most recent Annual Report on Form 10-K for further discussion of our annual goodwill impairment testing.

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE D – HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS

Derivative Instruments and Hedging Activities

We address market risk from changes in foreign currency exchange rates and interest rates through risk management programs which include the use of derivative financial instruments. We operate these programs pursuant to documented corporate risk management policies and do not enter into derivative transactions for speculative purposes. Our derivative instruments do not subject our earnings to material risk, as the gains or losses on these derivatives generally offset losses or gains recognized on the hedged item.

We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to individual counterparties and by actively monitoring counterparty credit ratings and the amount of individual credit exposure. We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. Further, none of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.

Our risk from changes in currency exchange rates consists primarily of monetary assets and liabilities, forecast intercompany and third-party transactions and net investments in certain subsidiaries. We manage currency exchange rate risk at a consolidated level to reduce the cost of hedging by taking advantage of offsetting transactions. We employ derivative instruments, primarily forward currency contracts, to reduce the risk to our earnings and cash flows associated with changes in currency exchange rates.

The success of our currency risk management program depends, in part, on forecast transactions denominated primarily in British pound sterling, Euro and Japanese yen. We may experience unanticipated currency exchange gains or losses to the extent the actual activity is different than forecast. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows.

Certain of our currency derivative instruments are designated as cash flow hedges under FASB ASC Topic 815, Derivatives and Hedging and are intended to protect the U.S. dollar value of forecasted transactions. The gain or loss on a derivative instrument designated as a cash flow hedge is recorded in Other comprehensive income (loss), net of tax (OCI) and is included in the Accumulated other comprehensive income (loss), net of tax (AOCI) caption of our unaudited condensed consolidated balance sheets until the underlying third-party transaction occurs. When the related third-party transaction occurs, we recognize the gain or loss in earnings within the Cost of products sold caption of our unaudited condensed consolidated statements of operations. In the event the hedging relationship is no longer effective, or if the hedged forecast transaction becomes no longer probable of occurring, we reclassify the amount of gains or losses on the derivative instrument designated as a cash flow hedge to earnings at that time.

We also use forward currency contracts that are not part of designated hedging relationships under FASB ASC Topic 815 as a part of our strategy to manage our exposure to currency exchange rate risk related to monetary assets and liabilities and related forecast transactions. These non-designated currency forward contracts have an original time to maturity consistent with the hedged currency transaction exposures, generally less than one year, and are marked-to-market with changes in fair value recorded to earnings and reflected within the Other, net caption of our unaudited condensed consolidated statements of operations.

Our interest rate risk relates primarily to U.S. dollar borrowings partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. Under these agreements we and the counterparty, at specified intervals, exchange the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. We designate these derivative instruments either as fair value or cash flow hedges under FASB ASC Topic 815.

The changes in the fair value of interest rate derivatives designated as fair value hedges and the changes in the fair value of the underlying hedged debt instrument generally offset and are recorded within the Interest expense caption of our unaudited condensed consolidated statements of operations. We record the changes in the fair value of interest rate derivatives designated as cash flow hedges within OCI, which is included within the AOCI caption of our unaudited condensed consolidated balance sheets until the underlying hedged transaction occurs, at which time we recognize the gain or loss within Interest expense. In the event the hedging relationship is no longer effective, or if the hedged forecast transaction becomes no longer probable of occurring, we reclassify the amount of gains or losses on the interest rate derivative designated as a cash flow hedge to earnings at that time.

We are amortizing the realized gains or losses from interest rate derivative instruments previously designated as fair value or cash flow hedges into earnings as a component of Interest expense over the remaining term of the hedged item in accordance with FASB ASC Topic 815, so long as the hedge relationship remains effective. Prior to the adoption of ASC Update No. 2017-12, Derivatives and Hedging (Topic 815), the ineffective portion, if any, of our interest rate derivatives designated as either fair value or cash flow hedges was recognized in earnings in the period in which the hedging relationship exhibited ineffectiveness.

Certain of our currency forward contracts are designated as net investment hedges under FASB ASC Topic 815 and are intended to hedge a portion of our net investments in certain of our European, Swiss and Japanese operating entities. We have elected to use the spot method to assess effectiveness for our derivatives that are designated as net investment hedges. Under the spot method, the change in fair value attributable to changes in the spot rate is recorded in the Foreign currency translation adjustment (CTA), which is included within the AOCI caption of our unaudited condensed consolidated balance sheets. Therefore, the spot-forward difference is excluded from the assessment of effectiveness and accounted for separately.

Consistent with FASB ASC Topic 815, we have elected to amortize the excluded spot-forward difference associated with the currency forward contracts as calculated at the date of designation. Amortization will be recognized on a straight-line basis over the term of the currency forward contracts from the AOCI caption of our unaudited condensed consolidated balance sheets to reported earnings as a reduction of Interest expense.

The following table presents the contractual amounts of our derivative instruments outstanding:

(in millions)	FASB ASC Topic 815 Designation	As of
		June 30, 2018		December 31, 2017
Forward currency contracts	Cash flow hedge	$	4,205	$	3,252
Forward currency contracts	Net investment hedge	1,455		—
Forward currency contracts	Non-designated	2,635		2,671
Total Notional Outstanding		$	8,295	$	5,923

The remaining time to maturity as of June 30, 2018 is within 60 months for all designated forward currency contracts and generally less than one year for all non-designated forward currency contracts.

We had no interest rate derivative instruments outstanding as of June 30, 2018 and December 31, 2017.

The following presents the effect of our derivative instruments designated as cash flow hedges and net investment hedges under FASB ASC Topic 815 on our accompanying unaudited condensed consolidated statements of operations:

(in millions)	Unaudited Condensed Consolidated Statements of Operations				Effective Amount Recognized in OCI									Effective Amount Reclassified from AOCI into Earnings
	Location	Total			Pre-Tax Gain (Loss)			Tax Benefit (Expense)			Gain (Loss) Net of Tax			Pre-Tax (Gain) Loss			Tax (Benefit) Expense			(Gain) Loss Net of Tax
Three Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	739		$	194		$	(44	)	$	151		$	10		$	(2	)	$	7
Forward currency contracts	Interest expense	(57		)	21			(5		)	16			(7		)	2			(5		)
					$	215		$	(48	)	$	167		$	3		$	(1	)	$	2
Three Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	632		$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
					$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
Six Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	1,411		$	77		$	(17	)	$	59		$	25		$	(6	)	$	19
Forward currency contracts	Interest expense	(119		)	21			(5		)	16			(7		)	2			(5		)
					$	97		$	(22	)	$	76		$	18		$	(4	)	$	14
Six Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	1,282		$	(64	)	$	23		$	(41	)	$	(55	)	$	21		$	(34	)
Interest rate derivative contracts	Interest expense	(115		)	—			—			—			(1		)	—			(1		)
					$	(64	)	$	23		$	(41	)	$	(56	)	$	21		$	(35	)

For our outstanding net investment hedges, the net gain or loss reclassified from AOCI to earnings as a reduction of Interest expense represents the straight-line amortization of the excluded component as calculated at the date of designation. This initial value has been excluded from the assessment of effectiveness in accordance with FASB ASC Topic 815.

As of June 30, 2018, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as fair value and cash flow hedges under FASB ASC Topic 815 that may be reclassified to earnings within the next twelve months are presented below (in millions):

Designated Derivative Instrument	FASB ASC Topic 815 Designation	Location in Unaudited Condensed Consolidated Statements of Operations	Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings
Interest rate derivative contracts	Fair value hedge	Interest expense	$	12
Interest rate derivative contracts	Cash flow hedge	Interest expense	1
Forward currency contracts	Cash flow hedge	Cost of products sold	11
Forward currency contracts	Net investment hedge	Interest expense	41

Net gains and losses on currency hedge contracts not designated as hedging instruments offset by net gains and losses from currency transaction exposures are presented below:

	Location in Unaudited Condensed Consolidated Statements of Operations	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)		2018			2017			2018			2017
Net gain (loss) on currency hedge contracts	Other, net	$	32		$	5		$	8		$	(12	)
Net gain (loss) on currency transaction exposures	Other, net	(33		)	(13		)	(17		)	4
Net currency exchange gain (loss)		$	(1	)	$	(8	)	$	(9	)	$	(8	)

Fair Value Measurements

FASB ASC Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by FASB ASC Topic 820, Fair Value Measurements and Disclosures and considering the estimated amount we would receive or pay to transfer these instruments at the reporting date when taking into account current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and our own creditworthiness for unrealized loss positions. In certain instances, we may utilize financial models to measure fair value of our derivative instruments. In doing so, we use inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. The following are the balances of our derivative assets and liabilities:

	Location in Unaudited Condensed Consolidated Balance Sheets (1)	As of
(in millions)		June 30, 2018		December 31, 2017
Derivative Assets:
Designated Derivative Instruments
Forward currency contracts	Other current assets	$	24	$	7
Forward currency contracts	Other long-term assets	94		57
Net investment hedges	Other long-term assets	21		—
		139		64
Non-Designated Derivative Instruments
Forward currency contracts	Other current assets	64		18
Total Derivative Assets		$	202	$	82
Derivative Liabilities:
Designated Derivative Instruments
Forward currency contracts	Other current liabilities	$	9	$	37
Forward currency contracts	Other long-term liabilities	10		33
		19		69
Non-Designated Derivative Instruments
Forward currency contracts	Other current liabilities	26		21
Total Derivative Liabilities		$	45	$	90

(1) We classify derivative assets and liabilities as current when the settlement date of the derivative contract is one year or less.

Recurring Fair Value Measurements

On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. FASB ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The category of a financial asset or a financial liability within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:

• 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.

Assets and liabilities measured at fair value on a recurring basis consist of the following:

	As of
	June 30, 2018								December 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market and government funds	$	49	$	—	$	—	$	49	$	21	$	—	$	—	$	21
Publicly-held securities	1		—		—		1		15		—		—		15
Forward currency contracts	—		202		—		202		—		82		—		82
	$	50	$	202	$	—	$	253	$	36	$	82	$	—	$	118
Liabilities
Forward currency contracts	$	—	$	45	$	—	$	45	$	—	$	90	$	—	$	90
Accrued contingent consideration	—		—		279		279		—		—		169		169
	$	—	$	45	$	279	$	324	$	—	$	90	$	169	$	259

Our investments in money market and government funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. These investments are classified as Cash and cash equivalents within our accompanying unaudited condensed consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies. In addition to $49 million invested in money market and government funds as of June 30, 2018, we had $159 million in interest bearing and non-interest bearing bank accounts. In addition to $21 million invested in money market and government funds as of December 31, 2017, we had $167 million in interest bearing and non-interest bearing bank accounts.

Our recurring fair value measurements using Level 3 inputs relate solely to our contingent consideration liability. Refer to Note B – Acquisitions and Strategic Investmentsfor a discussion of the changes in the fair value of our contingent consideration liability.

Non-Recurring Fair Value Measurements

We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods subsequent to initial recognition. The fair value of a measurement alternative investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. Refer to Note B – Acquisitions and Strategic Investments for a discussion of our strategic investments.

Refer to Note C – Goodwill and Other Intangible Assets for a discussion of the fair values.

The fair value of our outstanding debt obligations was $6.702 billion as of June 30, 2018 and $5.945 billion as of December 31, 2017. We determined fair value by using quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy, amortized cost for commercial paper and face value for term loans and credit facility borrowings outstanding. Refer to Note E – Borrowings and Credit Arrangements for a discussion of our debt obligations.

XML

Borrowings and Credit Arrangements

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

BORROWINGS AND CREDIT ARRANGEMENTS

NOTE E – BORROWINGS AND CREDIT ARRANGEMENTS

We had total debt of$6.493 billionas of June 30, 2018and $5.616 billion as of December 31, 2017. The debt maturity schedule for the significant components of our long-term debt obligations is presented below:

(in millions, except interest rates)	Issuance Date	Maturity Date	As of						Semi-annual Coupon Rate
			June 30, 2018			December 31, 2017
October 2018 Notes	August 2013	October 2018	—			††			2.650%
January 2020 Notes	December 2009	January 2020	850			850			6.000%
May 2020 Notes	May 2015	May 2020	600			600			2.850%
May 2022 Notes	May 2015	May 2022	500			500			3.375%
October 2023 Notes	August 2013	October 2023	450			450			4.125%
May 2025 Notes	May 2015	May 2025	750			750			3.850%
March 2028 Notes	February 2018	March 2028	1,000			—			4.000%
November 2035 Notes	November 2005	November 2035	350			350			7.000%
January 2040 Notes	December 2009	January 2040	300			300			7.375%
Unamortized Debt Issuance Discount and Deferred Financing Costs		2020 - 2040	(32		)	(24		)
Unamortized Gain on Fair Value Hedges		2020 - 2023	32			38
Capital Lease Obligation		Various	8			1
Long-term debt			$	4,808		$	3,815

^††As of December 31, 2017, $600 millionunder the October 2018 Notes was outstanding and classified as short-term debt.

Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.

Revolving Credit Facility

As of June 30, 2018 and December 31, 2017, we maintained a $2.250 billion revolving credit facility (the 2017 Facility) with a global syndicate of commercial banks that matures on August 4, 2022. This facility provides backing for the commercial paper program described below. There were no amounts borrowed under our revolving credit facility as of June 30, 2018 andDecember 31, 2017.

The 2017 Facility requires that we maintain certain financial covenants, as follows:

	Covenant Requirement	Actual
	as of June 30, 2018	as of June 30, 2018
Maximum leverage ratio (1)	3.5 times	2.4 times

(1) Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.

The 2017 Facility provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through maturity, of any non-cash charges and up to$500 million in restructuring charges and restructuring-related expenses related to our current or future restructuring plans. As of June 30, 2018, we had $400 millionof the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the 2017 Facility, are excluded from the calculation of consolidated EBITDA, as defined in the 2017 Facility, provided that the sum of any excluded net cash litigation payments does not exceed$2.624 billion in the aggregate. As of June 30, 2018, we had $1.526 billionof the legal exclusion remaining.

Any inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facility or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would agree to such new terms or grant such waivers on terms acceptable to us. In this case, all credit facility commitments would terminate and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our credit facility may negatively impact the credit ratings assigned to our commercial paper program which may impact our ability to refinance any then outstanding commercial paper as it becomes due and payable.

Commercial Paper

As of June 30, 2018, we had $1.685 billion of commercial paper outstanding and$1.197 billion outstanding as of December 31, 2017. Our commercial paper program is backed by the 2017 Facility, which allows us to have a maximum of $2.250 billion in commercial paper outstanding. Outstanding commercial paper directly reduces borrowing capacity available under the 2017 Facility. As of June 30, 2018, the commercial paper issued and outstanding had a weighted average maturity of 46days and a weighted average yield of2.58 percent. As of December 31, 2017, the commercial paper issued and outstanding had a weighted average maturity of 38days and a weighted average yield of1.85 percent.

Senior Notes

We had senior notes outstanding of $4.800 billion as ofJune 30, 2018 and$4.400 billionas ofDecember 31, 2017.

In February 2018, we completed an offering of$1.000 billion in aggregate principal amount of4.000%senior notes, due March 2028. We used a portion of the net proceeds from the offering to repay the $600 million plus accrued interest of our2.650%senior notes due in October 2018. The remaining proceeds were used to repay a portionof our outstanding commercial paper.

Our senior notes were issued in public offerings, are redeemable prior to maturity and are not subject to sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on parity with each other. These notes are effectively junior to borrowings under our credit and security facility, and to the extent borrowed by our subsidiaries, to liabilities of our subsidiaries (see Other Arrangements below).

Other Arrangements

As of June 30, 2018 and December 31, 2017, we maintained a $400 millioncredit and security facility secured by our U.S. trade receivables maturing in February 2019.We had no outstanding borrowings as of June 30, 2018and December 31, 2017 under our credit and security facility.

We have accounts receivable factoring programs in certain European countries and with commercial banks in Japan which include promissory notes discounting programs. We account for our factoring programs as sales under FASB ASC Topic 860, Transfers and Servicing. We have no retained interest in the transferred receivables, other than collection and administration, and once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net in the accompanying unaudited condensed consolidated balance sheets, are aggregated by contract denominated currency below (in millions):

	As of June 30, 2018						As of December 31, 2017
Factoring Arrangements	Capacity (1)		Amount De-recognized		Average Interest Rate		Capacity (1)		Amount De-recognized		Average Interest Rate
Euro denominated	$	442	$	161	1.5	%	$	456	$	171	1.8	%
Yen denominated (2)	$	470	$	216	0.5	%	$	195	$	157	1.3	%

(1) The capacities are translated from local currency to U.S. dollar using the spot rates on the last business day of each period.

(2) The factoring arrangements denominated in Japanese yen consist of two arrangements, one with a maximum capacity of 22.000 billionyen, which has been discontinued as of June 30, 2018, and a new arrangement with a maximum capacity of 30.000 billion yen entered into during March 2018.

Debt Covenants Compliance

As of and through June 30, 2018, we were in compliance with all the required covenants related to our debt obligations. For additional information regarding the terms of our debt agreements, refer to Note E - Borrowings and Credit Arrangements of the consolidated financial statements in our most recent Annual Report on Form 10-K.

XML

Restructuring Related Activities

6 Months Ended

Jun. 30, 2018

Restructuring and Related Activities [Abstract]

RESTRUCTURING-RELATED ACTIVITIES

NOTE F – RESTRUCTURING-RELATED ACTIVITIES

2016 Restructuring Plan

On June 6, 2016, our Board of Directors approved and we committed to a restructuring initiative (the 2016 Restructuring Plan). The 2016 Restructuring Plan is intended to develop global commercialization, technology and manufacturing capabilities in key growth markets and build on our Plant Network Optimization (PNO) strategy, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and expanding operational efficiencies in support of our operating income margin goals. Key activities under the 2016 Restructuring Plan include strengthening global infrastructure through evolving global real estate assets and workplaces, developing global commercial and technical competencies, enhancing manufacturing and distribution expertise in certain regions and continuing implementation of our PNO strategy. These activities were initiated in the second quarter of 2016 and are expected to be substantially complete by the end of 2018. We revised the original estimate for the costs and savings associated with the program in the first quarter of 2018, as approved by the Board of Directors.

The following table provides a summary of our estimates of costs associated with the 2016 Restructuring Plan by major type of cost:

Type of cost	Total Estimated Amount Expected to be Incurred
Restructuring charges:
Termination benefits	$105 million to $115 million
Other (1)	$35 million to $60 million
Restructuring-related expenses:
Other (2)	$135 million to $150 million
	$275 million to $325 million

(1)     Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to the 2016 Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities.

Approximately $250 million to $300 million of these charges are estimated to result in cash outlays.

The following presents these costs (credits) by major type and line item within our accompanying unaudited condensed consolidated statements of operations (in millions):

Three Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other			Total
Restructuring charges (credits)	$	2	$	—	$	2		$	5
Restructuring-related expenses:
Cost of products sold	—		16		—			16
Selling, general and administrative expenses	—		—		(5		)	(5		)
	—		16		(5		)	11
	$	2	$	16	$	(3	)	$	15

Three Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	—	$	—	$	1	$	1
Restructuring-related expenses:
Cost of products sold	—		12		—		12
Selling, general and administrative expenses	—		—		3		3
	—		12		3		15
	$	—	$	12	$	4	$	16

Six Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	15	$	—	$	3	$	18
Restructuring-related expenses:
Cost of products sold	—		23		—		23
Selling, general and administrative expenses	—		—		3		3
	—		23		3		26
	$	15	$	23	$	6	$	43

Six Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	3	$	—	$	2	$	5
Restructuring-related expenses:
Cost of products sold	—		24		—		24
Selling, general and administrative expenses	—		—		6		6
	—		24		6		30
	$	3	$	24	$	8	$	35

The following table presents cumulative restructuring and restructuring-related charges as of June 30, 2018, by major type:

(in millions)	2016 Restructuring Plan
Termination benefits	$	63
Other (1)	18
Total restructuring charges	82
Transfer costs	83
Other (2)	19
Restructuring-related expenses	102
	$	184

(1)    Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to our Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities.

Cash payments were made using cash generated from operations and are comprised of the following:

(in millions)	2016 Restructuring Plan
Six Months Ended June 30, 2018
Termination benefits	$	20
Transfer costs	23
Other	8
	$	51
Program to Date
Termination benefits	$	47
Transfer costs	82
Other	19
	$	148

Our restructuring liability is primarily comprised of accruals for termination benefits. The following is a rollforward of the termination benefit liability, which is reported as a component of Accrued expenses included in our accompanying unaudited condensed consolidated balance sheets:

(in millions)	2016 Restructuring Plan
Accrued as of December 31, 2017	$	22
Charges (credits)	15
Cash payments	(20		)
Accrued as of June 30, 2018	$	18

XML

Supplemental Balance Sheet Information

6 Months Ended

Jun. 30, 2018

Supplemental Balance Sheet Information [Abstract]

Supplemental Balance Sheet Disclosures

NOTE G – SUPPLEMENTAL BALANCE SHEET INFORMATION

Components of selected captions in our accompanying unaudited condensed consolidated balance sheets are as follows:

Cash, cash equivalents, restricted cash and restricted cash equivalents

	As of
(in millions)	June 30, 2018		December 31, 2017
Cash and cash equivalents	$	208	$	188
Restricted cash and restricted cash equivalents included in Other current assets	756		803
Restricted cash equivalents included in Other long-term assets	31		26
	$	994	$	1,017

Trade accounts receivable, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Accounts receivable	$	1,650		$	1,645
Allowance for doubtful accounts	(63		)	(68		)
Allowance for sales returns (1)	—			(30		)
	$	1,587		$	1,548

(1) Due to the adoption of FASB ASC Topic 606 effective January 1, 2018, the allowance for sales returns has been prospectively reclassified from Trade accounts receivable, net to Other current liabilities within the unaudited condensed consolidated balance sheets. Prior period balances remain unchanged.

The following is a rollforward of our allowance for doubtful accounts:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Beginning balance	$	67		$	75		$	68		$	73
Net charges to expenses	4			2			8			5
Utilization of allowances	(8		)	(3		)	(14		)	(4		)
Ending balance	$	63		$	74		$	63		$	74

Inventories

	As of
(in millions)	June 30, 2018		December 31, 2017
Finished goods	$	689	$	685
Work-in-process	102		110
Raw materials	296		284
	$	1,087	$	1,078

Property, plant and equipment, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Land	$	102		$	102
Buildings and improvements	1,124			1,120
Equipment, furniture and fixtures	3,255			3,183
Capital in progress	229			219
	4,709			4,625
Accumulated depreciation	(2,995		)	(2,928		)
	$	1,715		$	1,697

Depreciation expense was $70 million for the second quarter of 2018, $65 million for the second quarter of 2017, $137 million for the first six months of2018 and $127 million for the first six months of2017.

Accrued expenses

	As of
(in millions)	June 30, 2018		December 31, 2017
Legal reserves	$	1,043	$	1,176
Payroll and related liabilities	528		591
Accrued contingent consideration	52		36
Other	644		653
	$	2,266	$	2,456

Other long-term liabilities

	As of
(in millions)	June 30, 2018		December 31, 2017
Accrued income taxes	$	781	$	1,275
Legal reserves	221		436
Accrued contingent consideration	227		133
Other	716		525
	$	1,945	$	2,370

XML

Income Taxes

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE H – INCOME TAXES

Our effective tax rate from continuing operations is presented below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Effective tax rate from continuing operations	(60.3	)%	(60.3	)%	(27.3	)%	(10.1	)%

The change in our reported tax rates for the first six months of 2018, as compared to the same period in 2017, relates primarily to the impact of certain receipts and charges that are taxed at different rates than our effective tax rate, including intangible asset impairment charges, acquisition-related items, restructuring items, litigation-related items, as well as certain discrete tax items including the effective settlement of our transfer pricing dispute with the Internal Revenue Service (IRS) for the 2001 through 2010 tax years and the impacts of the Tax Cuts and Jobs Act (TCJA), enacted on December 22, 2017.

On June 6, 2018, a decision was entered by the United States Tax Court resolving all disputes related to the transfer pricing issues for Guidant Corporation's 2001 through 2006 tax years and our 2006 and 2007 tax years as well as the tax issues related to our 2006 transaction with Abbott Laboratories. Additionally, on May 24, 2018, we resolved all issues with the IRS Office of Appeals for our 2008 through 2010 tax years, including the transfer pricing issue and other unrelated issues. The final settlement calculation included certain elections made in these relevant years and resulted in a final net tax payment of $303 million plus $307 million of estimated interest, which was remitted to the IRS on June 15, 2018. Due to the final settlement of these disputes, we recorded a net tax benefit of $250 million as of June 30, 2018.

We currently expect to resolve the IRS examination of our 2011 through 2013 tax years before the end of 2018. We expect that the exam will be concluded utilizing the same transfer pricing methodologies employed in the 2001 through 2010 tax years. We believe we have recorded sufficient reserves with respect to these periods and therefore do not expect to recognize any additional charges related to the resolution of the 2011 through 2013 tax years.

As of June 30, 2018, we had $506 million of gross unrecognized tax benefits, of which a net $432 million, if recognized, would affect our effective tax rate. As of December 31, 2017, we had $1.238 billion of gross unrecognized tax benefits, of which a net $1.150 billion, if recognized, would affect our effective tax rate. The change in our gross unrecognized tax benefit is primarily related to reaching settlements with tax authorities.

We recognize interest and penalties related to income taxes as a component of income tax expense. We had $78 million accrued for gross interest and penalties as of June 30, 2018 and $655 million as of December 31, 2017. The change in our accrued interest and penalties is primarily related to reaching settlements with tax authorities. We recognized net tax expense related to interest and penalties of $2 million in the second quarter of 2018, $13 million in the second quarter of 2017, $19 million during the first six months of2018 and $26 million during the first six months of2017.

It is reasonably possible that within the next 12 months we will resolve multiple issues with foreign, federal and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to approximately $221 million.

There are a number of key provisions under the TCJA that impact us and we continue to monitor and analyze the ramifications of the new law as the implementation is executed. The final impact of the TCJA may differ from the estimates reported due to, among other things, changes in interpretations and assumptions made by us, additional guidance that may be issued by the U.S. Department of the Treasury and actions that we may take as a result. The TCJA reduces the US Federal corporate income tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new taxes on certain foreign sourced earnings. Due to insufficient guidance, as well as the availability of information to accurately analyze the impact of the TCJA, we have made a reasonable estimate of the effects, as described below, and in other cases we have not been able to make a reasonable estimate and continue to account for those items based on our existing accounting under FASB ASC Topic 740, Income Taxes and the provisions of the tax laws that were in effect immediately prior to enactment. In the second quarter of 2018, we recognized an additional tax benefit of $28 million related to settling our transfer pricing dispute with the IRS. In the first six months of2018, we recognized an additional tax benefit of $37 million, resulting in a total provisional estimate of $824 million related to the TCJA.

We are required to record deferred tax assets and liabilities based on the enacted tax rates at which they are expected to reverse in the future. Therefore, any U.S. related deferred taxes were re-measured from 35 percent down to 21 percent based on the recorded balances as of December 31, 2017. The analysis included a preliminary assessment on the deductibility of certain amounts for which deferred tax assets may have been recorded. However, we are still analyzing certain aspects of the TCJA and refining our calculations based on the available information, which could potentially affect the measurement of these balances or give rise to new deferred tax amounts. As of June 30, 2018, we have not adjusted our provisional estimate related to re-measurement of our deferred tax balances. As of December 31, 2017, we recorded an estimated tax benefit of approximately $99 million.

We are required to calculate a one-time transition tax based on our total post-1986 foreign earnings and profits (E&P) that we previously deferred from U.S. income taxes. As a result of settling our various tax audits, the revised provisional amount of transition tax is approximately $866 million. We anticipate offsetting this liability against existing tax attributes reducing the required payment to approximately $506 million, which will be remitted over an eight-year period. We remitted the first estimated installment payment in the second quarter of 2018. We have not yet completed our calculation of the total post-1986 E&P for these foreign subsidiaries, and we continue to refine the analysis. We expect that our undistributed foreign earnings as of December 31, 2017 will remain indefinitely reinvested in our foreign operations. Accordingly, no income taxes beyond the federal and state impact of the transition tax have been provided for these undistributed foreign earnings or any additional outside basis difference inherent in these entities. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings and additional outside basis difference in these entities is not practicable.

We are subject to a territorial tax system under the TCJA, in which we are required to provide for tax on Global Intangible Low Taxed Income (GILTI) earned by certain foreign subsidiaries. Additionally, we are required to make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. As of June 30, 2018, we are still evaluating the effects of the GILTI provisions as guidance and interpretations continue to emerge. Therefore, we have not determined our accounting policy on the GILTI provisions. However, Securities and Exchange Commission (SEC) Staff Accounting Bulletin (SAB) No. 118 requires that we reflect the impact of the GILTI provisions as a period expense until the accounting policy is finalized. Therefore, we have included the provisional estimate of GILTI related to current-year operations in our estimated annual effective tax rate only and will be updating the impact and accounting policy as the analysis related to the GILTI provisions is completed.

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE I – COMMITMENTS AND CONTINGENCIES

The medical device market in which we primarily participate is largely technology driven. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. Over the years, there has been litigation initiated against us by others, including our competitors, claiming that our current or former product offerings infringe patents owned or licensed by them. Intellectual property litigation is inherently complex and unpredictable. In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. Although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.

During recent years, we successfully negotiated closure of several long-standing legal matters and have received favorable rulings in several other matters; however, there continues to be outstanding intellectual property litigation. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operations and/or liquidity.

In the normal course of business, product liability, securities and commercial claims are asserted against us. Similar claims may be asserted against us in the future related to events not known to management at the present time. We maintain an insurance policy providing limited coverage against securities claims and we are substantially self-insured with respect to product liability claims and fully self-insured with respect to intellectual property infringement claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and/or liquidity.

In addition, like other companies in the medical device industry, we are subject to extensive regulation by national, state and local government agencies in the U.S. and other countries in which we operate. From time to time we are the subject of qui tam actions and governmental investigations often involving regulatory, marketing and other business practices. These qui tam actions and governmental investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies and have a material adverse effect on our financial position, results of operations and/or liquidity.

In accordance with FASB ASC Topic 450, Contingencies, we accrue anticipated costs of settlement, damages, losses for product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range.

Our accrual for legal matters that are probable and estimable was $1.264 billion as of June 30, 2018 and $1.612 billion as of December 31, 2017 and includes certain estimated costs of settlement, damages and defense. A portion of our legal accrual is funded and included in our restricted cash and restricted cash equivalent balances of $787 million as of June 30, 2018 and $829 million as of December 31, 2017, as disclosed in Note G – Supplemental Balance Sheet Information. Litigation-related net charges (credits) were immaterial in the second quarter and first six months of2018. We recorded litigation-related net charges of $205 million in the second quarter of 2017 and $208 million in the first six months of2017. We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and/or our ability to comply with our debt covenants.

In management's opinion, we are not currently involved in any legal proceedings other than those disclosed in our most recent Annual Report on Form 10-K, our Quarterly Report on Form 10-Q for the period ended March 31, 2018 and those specifically identified below, which, individually or in the aggregate, could have a material adverse effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be estimated.

Patent Litigation

On November 20, 2017, The Board of Regents, University of Texas System (UT) and TissueGen. Inc., served a lawsuit against us in the Western District of Texas. The complaint against us alleges patent infringement of two U.S. patents owned by UT, relating to “Drug Releasing Biodegradable Fiber Implant” and “Drug Releasing Biodegradable Fiber for Delivery of Therapeutics,” and affects the manufacture, use and sale of our Synergy™ Stent System. On March 12, 2018, the court dismissed the action and transferred it to the United States District Court for the District of Delaware. UT has appealed the decision.

Product Liability Litigation

As of July 24, 2018, approximately 49,500 product liability cases or claims related to transvaginal surgical mesh products designed to treat stress urinary incontinence and pelvic organ prolapse have been asserted against us. The pending cases are in various federal and state courts in the U.S. and include eight putative class actions. There were also fewer than 25 cases in Canada, inclusive of one certified and three putative class actions and fewer than 25 claims in the United Kingdom. Generally, the plaintiffs allege personal injury associated with use of our transvaginal surgical mesh products. The plaintiffs assert design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. Over 3,100 of the cases have been specially assigned to one judge in state court in Massachusetts. On February 7, 2012, the Judicial Panel on Multi-District Litigation (MDL) established MDL-2326 in the U.S. District Court for the Southern District of West Virginia and transferred the federal court transvaginal surgical mesh cases to MDL-2326 for coordinated pretrial proceedings. During the fourth quarter of 2013, we received written discovery requests from certain state attorneys general offices regarding our transvaginal surgical mesh products. We have responded to those requests. As of July 24, 2018, we have entered into master settlement agreements in principle or are in the final stages of entering one with certain plaintiffs' counsel to resolve an aggregate of approximately 48,000 cases and claims. These master settlement agreements provide that the settlement and distribution of settlement funds to participating claimants are conditional upon, among other things, achieving minimum required claimant participation thresholds. Of the approximately 48,000 cases and claims, approximately 27,000 have met the conditions of the settlement and are final. All settlement agreements were entered into solely by way of compromise and without any admission or concession by us of any liability or wrongdoing.

We have established a product liability accrual for known and estimated future cases and claims asserted against us as well as with respect to the actions that have resulted in verdicts against us and the costs of defense thereof associated with our transvaginal surgical mesh products. While we believe that our accrual associated with this matter is adequate, changes to this accrual may be required in the future as additional information becomes available. While we continue to engage in discussions with plaintiffs’ counsel regarding potential resolution of pending cases and claims and intend to vigorously contest the cases and claims asserted against us, that do not settle, the final resolution of the cases and claims is uncertain and could have a material impact on our results of operations, financial condition and/or liquidity. Initial trials involving our transvaginal surgical mesh products have resulted in both favorable and unfavorable judgments for us. We do not believe that the judgment in any one trial is representative of potential outcomes of all cases or claims related to our transvaginal surgical mesh products.

Governmental Investigations and Qui Tam Matters

On February 23, 2015, a judge for the Court of Modena (Italy) ordered a trial for Boston Scientific SpA and three of its employees, as well as numerous other defendants charged in criminal proceedings. The charges arise from allegations that the defendants made improper donations to certain health care providers and other employees of the Hospital of Modena in order to induce them to conduct unauthorized clinical trials, as well as related government fraud in relation to the financing of such clinical trials. A trial began on February 24, 2016 and is ongoing. On November 10, 2017, the Court issued a ruling that convicted one Boston Scientific employee but acquitted two others, and levied a fine of €245 thousand against us and imposed joint and several civil damages of €620 thousand on all defendants. We continue to deny these allegations, timely appealed the decision on May 10, 2018 and intend to continue to defend ourselves vigorously.

Other Proceedings

On May 16, 2018, Arthur Rosenthal et al., filed a plenary summons against Boston Scientific Corporation and Boston Scientific Limited the High Court of Ireland alleging that payments are due pursuant a transaction agreement regarding Labcoat Limited.

Refer to Note H – Income Taxes for information regarding our tax litigation.

Matters Concluded Since December 31, 2017

On October 28, 2016, the Regents of the University of California filed a patent infringement action against us in the U.S. District Court for the Northern District of California alleging that two U.S. patents (Lesh) owned by the Regents of the University of California are infringed by certain of our catheters and other devices used to treat atrial fibrillation. The Company and the Regents settled the matter, and the case was dismissed on June 20, 2018.

XML

Weighted Average Shares Outstanding

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Weighted Average Number Of Shares Outstanding [Text Block]

NOTE J – WEIGHTED AVERAGE SHARES OUTSTANDING

	Three Months Ended June 30,		Six Months Ended June 30,
(in millions)	2018	2017	2018	2017
Weighted average shares outstanding - basic	1,380.5	1,369.8	1,378.5	1,367.6
Net effect of common stock equivalents	18.3	21.3	19.3	23.0
Weighted average shares outstanding - assuming dilution	1,398.9	1,391.1	1,397.8	1,390.6

The impact of stock options outstanding with exercise prices greater than the average fair market value of our common stock was immaterial for all periods presented.

We issued approximately two million shares of our common stock in the second quarter of 2018, one million shares of our common stock in the second quarter of 2017 and eight million shares of our common stock in the first six months of2018 and 2017, following the exercise of underlying stock options, vesting of deferred stock units or purchases under our employee stock purchase plan. We did not repurchase any shares of our common stock during the first six months of 2018 or 2017.

XML

Segment Reporting

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

SEGMENT REPORTING

NOTE K – SEGMENT REPORTING

We have three reportable segments comprised of MedSurg, Rhythm and Neuro, and Cardiovascular, which represent an aggregation of our operating segments.

Each of our reportable segments generates revenues from the sale of medical devices. We measure and evaluate our reportable segments based on segment net sales and operating income, excluding intersegment profits. In 2017, we updated our presentation of segment net sales and operating income to include the impact of foreign currency fluctuations, since our chief operating decision maker (CODM) reviews operating results both including and excluding the impact of foreign currency fluctuations, and the following presentation more closely aligns to our unaudited condensed consolidated financial statements. We exclude from segment operating income certain corporate-related expenses and certain transactions or adjustments that our CODM considers to be non-operational, such as amounts related to amortization expense, intangible asset impairment charges, acquisition-related items, restructuring and restructuring-related items and litigation-related items. Although we exclude these amounts from segment operating income, they are included in reported Income (loss) before income taxes on the unaudited condensed consolidated statements of operations and are included in the reconciliation below.

Effective January 1, 2018, following organizational changes to align the company's business and organization structure focused on active implantable devices, we revised our reportable segments, in accordance with FASB ASC Topic 280, Segment Reporting. The revision reflects a reclassification of our Neuromodulation business from our MedSurg segment to our newly created Rhythm and Neuro segment. We have revised prior year amounts to conform to the current year’s presentation (as denoted with an asterisk throughout *). There was no revision to operating segments or reporting units as a result of the organizational change.

A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying unaudited condensed consolidated statements of operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Net sales
MedSurg*	$	751		$	680		$	1,462		$	1,321
Rhythm and Neuro*	775			700			1,512			1,368
Cardiovascular	965			876			1,898			1,728
	$	2,490		$	2,257		$	4,870		$	4,418
Income (loss) before income taxes
MedSurg*	$	273		$	244		$	532		$	459
Rhythm and Neuro*	160			137			313			246
Cardiovascular	300			262			590			494
Operating income allocated to reportable segments	734			643			1,436			1,199
Corporate expenses, including hedging activities	(100		)	(56		)	(200		)	(115		)
Intangible asset impairment charges, acquisition-related, restructuring- and restructuring-related and litigation-related net credits (charges)	(95		)	(220		)	(149		)	(210		)
Amortization expense	(147		)	(142		)	(288		)	(285		)
Operating income (loss)	392			225			799			589
Other expense, net	(45		)	(134		)	(129		)	(193		)
Income (loss) before income taxes	$	347		$	91		$	670		$	396
Operating Income as a Percentage of Segment Net Sales
MedSurg*	36.4		%	35.8		%	36.4		%	34.7		%
Rhythm and Neuro*	20.6		%	19.6		%	20.7		%	18.0		%
Cardiovascular	31.1		%	29.8		%	31.1		%	28.6		%

XML

Revenue (Notes)

6 Months Ended

Jun. 30, 2017

Disaggregated Revenue [Abstract]

Revenue from Contract with Customer [Text Block]

NOTE L – REVENUE

We generate revenue primarily from the sale of single-use medical devices and present revenue net of sales taxes in our unaudited condensed consolidated statements of operations. The following tables disaggregate our revenue from contracts with customers by business and geographic region (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Businesses	2018		2017		2018		2017
Endoscopy
U.S.	$	245	$	225	$	477	$	439
International	197		175		384		341
Worldwide	442		400		861		780
Urology and Pelvic Health
U.S.	213		196		409		379
International	96		84		192		163
Worldwide	308		280		601		542
Cardiac Rhythm Management
U.S.	290		287		580		571
International	204		193		407		372
Worldwide	494		480		987		943
Electrophysiology
U.S.	39		34		74		66
International	40		33		79		64
Worldwide	79		67		154		130
Neuromodulation
U.S.	160		125		291		241
International	42		29		79		54
Worldwide	202		154		371		295
Interventional Cardiology
U.S.	296		280		577		558
International	366		323		730		636
Worldwide	662		603		1,307		1,194
Peripheral Interventions
U.S.	152		144		297		286
International	152		129		294		248
Worldwide	304		273		591		534
Total Company
U.S.	1,394		1,291		2,704		2,540
International	1,096		966		2,166		1,878
Net Sales	$	2,490	$	2,257	$	4,870	$	4,418

	Three Months Ended June 30,				Six Months Ended June 30,
Geographic Regions	2018		2017		2018		2017
U.S.	$	1,394	$	1,291	$	2,704	$	2,540
EMEA (Europe, Middle East and Africa)	558		482		1,121		937
APAC (Asia-Pacific)	442		393		857		764
LACA (Latin America and Canada)	96		90		188		173
	$	2,490	$	2,257	$	4,870	$	4,418
Emerging Markets (1)	$	276	$	226	$	531	$	434

(1) Emerging Markets is defined as certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we include 20 countries in our definition of Emerging Markets.

We sell our products primarily through a direct sales force. In certain international markets, we sell our products through independent distributors. We consider revenue to be earned when all of the following criteria are met:

• We have a contract with a customer that creates enforceable rights and obligations,

• Promised products or services are identified,

• The transaction price, or the amount we expect to receive, is determinable and

• We have transferred control of the promised items to the customer.

Transfer of control is evidenced upon passage of title and risk of loss to the customer unless we are required to provide additional services. We treat shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and record these costs as a selling expense when incurred. We recognize revenue from consignment arrangements based on product usage, or implant, which indicates that the sale is complete. We recognize a receivable at the point in time we have an unconditional right to payment. Payment terms are typically 30 days in the U.S. but may be longer in international markets.

Deferred Revenue

We record a contract liability, or deferred revenue, when we have an obligation to provide a product or service to the customer and payment is received or due in advance of our performance. When we sell a device with a future service obligation, we defer revenue on the unfulfilled performance obligation and recognize this revenue over the related service period. Many of our Cardiac Rhythm Management (CRM) product offerings combine the sale of a device with our LATITUDE™ Patient Management System, which represents a future service obligation. Generally, we do not have observable evidence of the standalone selling price related to our future service obligations; therefore, we estimate the selling price using an expected cost plus a margin approach. We allocate the transaction price using the relative standalone selling price method. The use of alternative estimates could result in a different amount of revenue deferral.

Contract liabilities are classified within Other current liabilities and Other long-term liabilities on our accompanying unaudited condensed consolidated balance sheets. Our deferred revenue balance was $384 million as of June 30, 2018 and $411 million as of January 1, 2018. Our contractual liabilities are primarily composed of deferred revenue related to the LATITUDE Patient Management System. Revenue is recognized over the average service period which is based on device and patient longevity. We recognized revenue of $26 million during the second quarter of 2018 and $53 million during the first six months of2018 that was included in the above January 1, 2018 contract liability balance. We have elected not to disclose the transaction price allocated to unsatisfied performance obligations when the original expected contract duration is one year or less. In addition, we have not identified material unfulfilled performance obligations for which revenue is not currently deferred.

Variable Consideration

We generally allow our customers to return defective, damaged and, in certain cases, expired products for credit. We base our estimate for sales returns upon historical trends and record the amount as a reduction to revenue when we sell the initial product. In addition, we may allow customers to return previously purchased products for next-generation product offerings. For these transactions, we defer recognition of revenue on the sale of the earlier generation product based upon an estimate of the amount of product to be returned when the next-generation products are shipped to the customer. Uncertain timing of next-generation product approvals, variability in product launch strategies, product recalls and variation in product utilization all affect our estimates related to sales returns and could cause actual returns to differ from these estimates.

We also offer sales rebates and discounts to certain customers. We treat sales rebates and discounts as a reduction of revenue and classify the corresponding liability as current. We estimate rebates for products where there is sufficient historical information available to predict the volume of expected future rebates. If we are unable to reasonably estimate the expected rebates, we record a liability for the maximum rebate percentage offered. We have entered certain agreements with group purchasing organizations to sell our products to participating hospitals at negotiated prices. We recognize revenue from these agreements following the same revenue recognition criteria discussed above.

Capitalized Contract Costs

We capitalize commission fees related to contracts with customers when the associated revenue is expected to be earned over a period that exceeds one year. Deferred commissions are primarily related to the sale of devices enabled with our LATITUDE™ Patient Management System. We have elected to expense commission costs when incurred for contracts with an expected duration of one year or less. Capitalized commission fees are amortized over the period the associated products or services are transferred. Similarly, we capitalize certain recoverable costs related to the delivery of the LATITUDE Remote Monitoring Service. These fulfillment costs are amortized over the average service period. Our total capitalized contract costs are immaterial to our unaudited condensed consolidated financial statements.

XML

Changes in Other Comprehensive Income

6 Months Ended

Jun. 30, 2018

Other Comprehensive Income (Loss) Net of Tax, Period Change [Abstract]

Comprehensive Income (Loss) Note [Text Block]

NOTE M – CHANGES IN OTHER COMPREHENSIVE INCOME

The following tables provide the reclassifications out of Other comprehensive income (loss), net of tax:

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2018	$	(22	)	$	(79	)	$	(27	)	$	(128	)
Other comprehensive income (loss) before reclassifications	(40		)	151			—			111
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	7			—			2
Net current-period other comprehensive income (loss)	(45		)	158			—			112
Balance as of June 30, 2018	$	(68	)	$	79		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2017	$	(71	)	$	52		$	(6	)	$	(21	)	$	(46	)
Other comprehensive income (loss) before reclassifications	13			(4		)	—			—			9
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(17		)	2			(1		)	(16		)
Net current-period other comprehensive income (loss)	13			(21		)	2			(1		)	(7		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments		Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2017	$	(32	)	$	1	$	(1	)	$	(27	)	$	(59	)
Other comprehensive income (loss) before reclassifications	(31		)	59		—			—			28
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	19		1			—			15
Net current-period other comprehensive income (loss)	(36		)	78		—			—			42
Balance as of June 30, 2018	$	(68	)	$	79	$	—		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2016	$	(79	)	$	107		$	(6	)	$	(21	)	$	1
Other comprehensive income (loss) before reclassifications	21			(41		)	—			(2		)	(22		)
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(35		)	2			1			(32		)
Net current-period other comprehensive income (loss)	21			(76		)	2			(1		)	(54		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

Refer to Note D – Hedging Activities and Fair Value Measurements for further detail on the reclassifications related to derivatives.

We adopted Update No. 2016-01 in the first quarter of 2018, and as a result of adopting the standard, we recorded a cumulative effect adjustment to retained earnings for unrealized gains and losses for available-for-sale securities previously recorded to Accumulated other comprehensive income (loss), net of tax.

The gains and losses on defined benefit and pension related items before reclassifications and gains and losses on defined benefit and pension items reclassified from Accumulated other comprehensive income (loss), net of tax were reduced by immaterial income tax impacts in the second quarter and first six months of2018 and 2017.

XML

New Accounting Pronouncements

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

Accounting Standards Implemented Since December 31, 2017

ASC Update No. 2014-09

In May 2014, the FASB issued FASB ASC Topic 606, Revenue from Contracts with Customers(Topic 606), which was subsequently updated. We adopted the standard as of January 1, 2018, using the modified retrospective method. Under this method, we applied FASB ASC Topic 606 to contracts that were not complete as of January 1, 2018 and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented in accordance with FASB ASC Topic 606. Prior period amounts are not adjusted and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 605, Revenue Recognition.

Due to the adoption of FASB ASC Topic 606, we recorded a net reduction to retained earnings of $177 million on January 1, 2018, primarily related to the cost of providing non-contractual post-implant support to certain customers, which we historically deemed immaterial in the context of the arrangement. Upon the adoption of FASB ASC Topic 606, when we sell a device with an implied non-contractual post-implant support obligation, we forward accrue the cost of the service within Selling, general and administrative expenses and recognize it at the point in time the associated revenue is earned. We release the accrual over the related service period. These costs were previously expensed as incurred due to such service obligation being non-contractual.

The impact of adopting FASB ASC Topic 606 on our unaudited condensed consolidated balance sheets resulted in an increase in Other current liabilities of $58 million and an increase in Other long-term liabilities of $205 million as of June 30, 2018, as a result of accruing for our post-implant support obligation. We also recorded deferred tax assets primarily related to post-implant support, resulting in an increase in Other long-term assets of $12 million and a reduction in Deferred income taxes of $41 million. The remaining impact of adopting FASB ASC Topic 606 was not material to our financial position or results of operations.

Refer to Note L – Revenue for additional details.

ASC Update No. 2016-01

In January 2016, the FASB issued ASC Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose of Update No. 2016-01 is to improve financial reporting for financial instruments by reducing the number of items recorded to other comprehensive income. We adopted Update No. 2016-01 in the first quarter of 2018, using both the modified retrospective and prospective methods. For publicly-held securities, we used the modified retrospective approach. Unrealized gains and losses previously recorded to Other comprehensive income (loss) were reclassified to retained earningsand all future fair value changes will be recorded to Net income (loss). For privately-held securities, we elected the measurement alternative approach for our existing investments, which is applied prospectively upon adoption. This approach requires entities to measure their investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adoption of the standard did not have a material impact on our financial position or results of operations. The actual impact to future periods resulting from fair value changes of our equity investments is difficult to predict as it will depend on their future performance.

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2017-12

In August 2017, the FASB issued ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of Update No. 2017-12 is to simplify the application of hedge accounting and better align financial reporting of hedging relationships with risk management objectives. Update No. 2017-12 was effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We early adopted Update No. 2017-12 in the first quarter of 2018. The adoption of the standard had no impact on our financial position or results of operations.

NOTE N – NEW ACCOUNTING PRONOUNCEMENTS

Periodically, new accounting pronouncements are issued by the FASB or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, we evaluate the pronouncements to determine the potential effects of adoption on our unaudited condensed consolidated financial statements.

Standards to be Implemented

ASC Update No. 2016-02

In February 2016, the FASB issued ASC Update No. 2016-02, Leases (Topic 842). The purpose of Update No. 2016-02 is to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, including those previously classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. Update No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted and a modified retrospective approach is required. While we are still in the process of determining the effect that the new standard will have on our financial position and results of operations, we expect to recognize additional assets and corresponding liabilities on our consolidated balance sheets, as a result of our operating lease portfolio as it exists at the date we adopt the new standard. Please refer to Note F - Lease and Other Purchase Obligations in our most recent Annual Report on Form 10-K for information regarding our most current lease activity. Additionally, we are in the process of implementing a new lease administration and lease accounting system, and updating our controls and procedures for maintaining and accounting for our lease portfolio under the new standard. As a result, we anticipate adopting the new standard on January 1, 2019.

ASC Update No. 2016-13

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

ASC Update No. 2018-09

In July 2018, the FASB issued ASC Update No. 2018-09, Codification Improvements. The purpose of Update No. 2018-09 is to clarify, correct errors in or make minor improvements to the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in Update No. 2018-09 do not require transition guidance and are effective upon issuance. However, many of the amendments in Update No. 2018-09 do have transition guidance with an effective date of annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

No other new accounting pronouncements, issued or effective, during the period had or are expected to have a material impact on our unaudited condensed consolidated financial statements.

XML

Basis of Presentation Standards Implemented Since Dec 31 (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Subsequent Events, Policy [Policy Text Block]

Subsequent Events

We evaluate events occurring after the date of our most recent accompanying unaudited condensed consolidated balance sheet for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying unaudited condensed consolidated financial statements (recognized subsequent events) for the three and six months ended June 30, 2018. Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note B – Acquisitions and Strategic Investments and Note I – Commitments and Contingencies for more information.

New Accounting Pronouncements, Policy [Policy Text Block]

Accounting Standards Implemented Since December 31, 2017

ASC Update No. 2014-09

In May 2014, the FASB issued FASB ASC Topic 606, Revenue from Contracts with Customers(Topic 606), which was subsequently updated. We adopted the standard as of January 1, 2018, using the modified retrospective method. Under this method, we applied FASB ASC Topic 606 to contracts that were not complete as of January 1, 2018 and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented in accordance with FASB ASC Topic 606. Prior period amounts are not adjusted and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 605, Revenue Recognition.

Due to the adoption of FASB ASC Topic 606, we recorded a net reduction to retained earnings of $177 million on January 1, 2018, primarily related to the cost of providing non-contractual post-implant support to certain customers, which we historically deemed immaterial in the context of the arrangement. Upon the adoption of FASB ASC Topic 606, when we sell a device with an implied non-contractual post-implant support obligation, we forward accrue the cost of the service within Selling, general and administrative expenses and recognize it at the point in time the associated revenue is earned. We release the accrual over the related service period. These costs were previously expensed as incurred due to such service obligation being non-contractual.

The impact of adopting FASB ASC Topic 606 on our unaudited condensed consolidated balance sheets resulted in an increase in Other current liabilities of $58 million and an increase in Other long-term liabilities of $205 million as of June 30, 2018, as a result of accruing for our post-implant support obligation. We also recorded deferred tax assets primarily related to post-implant support, resulting in an increase in Other long-term assets of $12 million and a reduction in Deferred income taxes of $41 million. The remaining impact of adopting FASB ASC Topic 606 was not material to our financial position or results of operations.

Refer to Note L – Revenue for additional details.

ASC Update No. 2016-01

In January 2016, the FASB issued ASC Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose of Update No. 2016-01 is to improve financial reporting for financial instruments by reducing the number of items recorded to other comprehensive income. We adopted Update No. 2016-01 in the first quarter of 2018, using both the modified retrospective and prospective methods. For publicly-held securities, we used the modified retrospective approach. Unrealized gains and losses previously recorded to Other comprehensive income (loss) were reclassified to retained earningsand all future fair value changes will be recorded to Net income (loss). For privately-held securities, we elected the measurement alternative approach for our existing investments, which is applied prospectively upon adoption. This approach requires entities to measure their investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adoption of the standard did not have a material impact on our financial position or results of operations. The actual impact to future periods resulting from fair value changes of our equity investments is difficult to predict as it will depend on their future performance.

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2017-12

In August 2017, the FASB issued ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of Update No. 2017-12 is to simplify the application of hedge accounting and better align financial reporting of hedging relationships with risk management objectives. Update No. 2017-12 was effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We early adopted Update No. 2017-12 in the first quarter of 2018. The adoption of the standard had no impact on our financial position or results of operations.

NOTE N – NEW ACCOUNTING PRONOUNCEMENTS

Periodically, new accounting pronouncements are issued by the FASB or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, we evaluate the pronouncements to determine the potential effects of adoption on our unaudited condensed consolidated financial statements.

Standards to be Implemented

ASC Update No. 2016-02

In February 2016, the FASB issued ASC Update No. 2016-02, Leases (Topic 842). The purpose of Update No. 2016-02 is to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, including those previously classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. Update No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted and a modified retrospective approach is required. While we are still in the process of determining the effect that the new standard will have on our financial position and results of operations, we expect to recognize additional assets and corresponding liabilities on our consolidated balance sheets, as a result of our operating lease portfolio as it exists at the date we adopt the new standard. Please refer to Note F - Lease and Other Purchase Obligations in our most recent Annual Report on Form 10-K for information regarding our most current lease activity. Additionally, we are in the process of implementing a new lease administration and lease accounting system, and updating our controls and procedures for maintaining and accounting for our lease portfolio under the new standard. As a result, we anticipate adopting the new standard on January 1, 2019.

ASC Update No. 2016-13

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

ASC Update No. 2018-09

In July 2018, the FASB issued ASC Update No. 2018-09, Codification Improvements. The purpose of Update No. 2018-09 is to clarify, correct errors in or make minor improvements to the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in Update No. 2018-09 do not require transition guidance and are effective upon issuance. However, many of the amendments in Update No. 2018-09 do have transition guidance with an effective date of annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

No other new accounting pronouncements, issued or effective, during the period had or are expected to have a material impact on our unaudited condensed consolidated financial statements.

ASC Update No. 2014-09, Revenue from Contracts with Customers (Topic 606) [Policy Text Block]

ASC Update No. 2014-09

In May 2014, the FASB issued FASB ASC Topic 606, Revenue from Contracts with Customers(Topic 606), which was subsequently updated. We adopted the standard as of January 1, 2018, using the modified retrospective method. Under this method, we applied FASB ASC Topic 606 to contracts that were not complete as of January 1, 2018 and recognized the cumulative effect of initially applying the standard as an adjustment to the opening balance of retained earnings. Results for reporting periods beginning after January 1, 2018 are presented in accordance with FASB ASC Topic 606. Prior period amounts are not adjusted and are reported in accordance with legacy GAAP requirements in FASB ASC Topic 605, Revenue Recognition.

Due to the adoption of FASB ASC Topic 606, we recorded a net reduction to retained earnings of $177 million on January 1, 2018, primarily related to the cost of providing non-contractual post-implant support to certain customers, which we historically deemed immaterial in the context of the arrangement. Upon the adoption of FASB ASC Topic 606, when we sell a device with an implied non-contractual post-implant support obligation, we forward accrue the cost of the service within Selling, general and administrative expenses and recognize it at the point in time the associated revenue is earned. We release the accrual over the related service period. These costs were previously expensed as incurred due to such service obligation being non-contractual.

The impact of adopting FASB ASC Topic 606 on our unaudited condensed consolidated balance sheets resulted in an increase in Other current liabilities of $58 million and an increase in Other long-term liabilities of $205 million as of June 30, 2018, as a result of accruing for our post-implant support obligation. We also recorded deferred tax assets primarily related to post-implant support, resulting in an increase in Other long-term assets of $12 million and a reduction in Deferred income taxes of $41 million. The remaining impact of adopting FASB ASC Topic 606 was not material to our financial position or results of operations.

ASC Update No. 2016-01, Financial Instruments [Policy Text Block]

ASC Update No. 2016-01

In January 2016, the FASB issued ASC Update No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The purpose of Update No. 2016-01 is to improve financial reporting for financial instruments by reducing the number of items recorded to other comprehensive income. We adopted Update No. 2016-01 in the first quarter of 2018, using both the modified retrospective and prospective methods. For publicly-held securities, we used the modified retrospective approach. Unrealized gains and losses previously recorded to Other comprehensive income (loss) were reclassified to retained earningsand all future fair value changes will be recorded to Net income (loss). For privately-held securities, we elected the measurement alternative approach for our existing investments, which is applied prospectively upon adoption. This approach requires entities to measure their investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. The adoption of the standard did not have a material impact on our financial position or results of operations. The actual impact to future periods resulting from fair value changes of our equity investments is difficult to predict as it will depend on their future performance.

ASU Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory [Policy Text Block]

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities [Policy Text Block]

ASC Update No. 2017-12

In August 2017, the FASB issued ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of Update No. 2017-12 is to simplify the application of hedge accounting and better align financial reporting of hedging relationships with risk management objectives. Update No. 2017-12 was effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. We early adopted Update No. 2017-12 in the first quarter of 2018. The adoption of the standard had no impact on our financial position or results of operations.

XML

Fair Value Measurements Fair Value Measurements (Policies)

6 Months Ended

Jun. 30, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurement, Policy [Policy Text Block]

FASB ASC Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by FASB ASC Topic 820, Fair Value Measurements and Disclosures

Derivatives, Policy [Policy Text Block]

Our derivative instruments do not subject our earnings to material risk, as the gains or losses on these derivatives generally offset losses or gains recognized on the hedged item.

We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to individual counterparties and by actively monitoring counterparty credit ratings and the amount of individual credit exposure. We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. Further, none of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.

XML

Commitments and Contingencies Commitments and Contingencies (Policies)

6 Months Ended

Jun. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Legal Costs, Policy [Policy Text Block]

In accordance with FASB ASC Topic 450, Contingencies, we accrue anticipated costs of settlement, damages, losses for product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range.

XML

New Accounting Pronouncements (Policies)

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

ASU Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory [Policy Text Block]

ASC Update No. 2016-16

In October 2016, the FASB issued ASC Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. The purpose of Update No. 2016-16 is to allow an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs, as opposed to waiting until the asset is sold to a third party, or impaired. Update No. 2016-16 was effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. We adopted Update No. 2016-16 prospectively in the first quarter of 2018 and recognized a net reduction to opening retained earnings of $55 million for income tax consequences not previously recognized for intra-entity transfers of assets other than inventories. All future income tax consequences of intra-entity transfers of assets other than inventories will be recognized through Income tax expense (benefit).

ASC Update No. 2016-02, Leases (Topic 842) [Policy Text Block]

ASC Update No. 2016-02

In February 2016, the FASB issued ASC Update No. 2016-02, Leases (Topic 842). The purpose of Update No. 2016-02 is to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet, including those previously classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. Update No. 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods. Early adoption is permitted and a modified retrospective approach is required. While we are still in the process of determining the effect that the new standard will have on our financial position and results of operations, we expect to recognize additional assets and corresponding liabilities on our consolidated balance sheets, as a result of our operating lease portfolio as it exists at the date we adopt the new standard. Please refer to Note F - Lease and Other Purchase Obligations in our most recent Annual Report on Form 10-K for information regarding our most current lease activity. Additionally, we are in the process of implementing a new lease administration and lease accounting system, and updating our controls and procedures for maintaining and accounting for our lease portfolio under the new standard. As a result, we anticipate adopting the new standard on January 1, 2019.

ASC Update No. 2016-13 [Policy Text Block]

ASC Update No. 2016-13

In June 2016, the FASB issued ASC Update No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The purpose of Update No. 2016-13 is to replace the current incurred loss impairment methodology for financial assets measured at amortized cost with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information, including forecasted information, to develop credit loss estimates. Update No. 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those annual periods. Early adoption is permitted for annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

ASC Update No. 2018-09, Codification Improvements [Policy Text Block]

ASC Update No. 2018-09

In July 2018, the FASB issued ASC Update No. 2018-09, Codification Improvements. The purpose of Update No. 2018-09 is to clarify, correct errors in or make minor improvements to the Codification. The amendments make the Codification easier to understand and apply by eliminating inconsistencies and providing clarifications. The transition and effective date guidance is based on the facts and circumstances of each amendment. Some of the amendments in Update No. 2018-09 do not require transition guidance and are effective upon issuance. However, many of the amendments in Update No. 2018-09 do have transition guidance with an effective date of annual periods beginning after December 15, 2018. We are in the process of determining the effect that the adoption will have on our financial position and results of operations.

XML

Acquisitions and Strategic Investments (Tables)

6 Months Ended

Jun. 30, 2018

Business Acquisition [Line Items]

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

The purchase price was comprised of the following component:

(in millions)
Payment for acquisition, net of cash acquired	$	391

The components of the aggregate preliminary purchase prices are as follows:

(in millions)
Payments for acquisitions, net of cash acquired	$	419
Fair value of contingent consideration	140
Fair value of prior interests	81
	$	639

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

(in millions)
Goodwill	$	273
Amortizable intangible assets	418
Other assets acquired	53
Liabilities assumed	(5		)
Deferred tax liabilities	(99		)
	$	639

(in millions)
Goodwill	$	183
Amortizable intangible assets	278
Other assets acquired	25
Liabilities assumed	(95		)
	$	391

Rollforward of Fair Value of Contingent Consideration [Table Text Block]

Changes in the fair value of our contingent consideration liability were as follows:

(in millions)
Balance as of December 31, 2017	$	169
Amounts recorded related to new acquisitions	140
Purchase price adjustments related to prior acquisitions	(22		)
Contingent consideration expense (benefit)	1
Contingent consideration payments	(9		)
Balance as of June 30, 2018	$	279

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block]

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	410	10 - 13	17% - 23%
Other intangible assets	7		6 - 13	13% - 15%
	$	418

	Amount Assigned (in millions)		Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related	$	268	13	24%
Other intangible assets	10		2-13	24%
	$	278

We allocated a portion of the preliminary purchase prices to specific intangible asset categories as follows:

	Amortization Period (in years)	Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets:
Technology-related - minimum	10	17%
Technology-related - maximum	13	23%
Other intangible assets - minimum	6	13%
Other intangible assets - maximum	13	15%

We allocated a portion of the purchase price to specific intangible asset categories as follows:

	Amortization Period (in years)
Amortizable intangible assets:
Other intangible assets - minimum	2
Other intangible assets - maximum	13

Description of unobservable inputs used in Level 3 fair value measurements [Table Text Block]

The recurring Level 3 fair value measurements of our contingent consideration liability include the following significant unobservable inputs:

Contingent Consideration Liability	Fair Value as of June 30, 2018	Valuation Technique	Unobservable Input	Range
R&D and Commercialization-based Milestones	$159 million	Discounted Cash Flow	Discount Rate	3	%	-	4%
			Projected Year of Payment	2018		-	2022
Revenue-based Payments	$120 million	Discounted Cash Flow	Discount Rate	11	%	-	15%
			Projected Year of Payment	2018		-	2026

XML

Acquisitions and Strategic Investments Strategic Investments (Tables)

6 Months Ended

Jun. 30, 2018

Strategic Investments [Abstract]

Investment [Table Text Block]

The aggregate carrying amount of our strategic investments were comprised of the following categories:

	As of
(in millions)	June 30, 2018		December 31, 2017
Equity method investments	$	281	$	209
Measurement alternative investments	82		81
Publicly-held securities	1		15
Notes receivable	18		47
	$	382	$	353

XML

Goodwill and Other Intangible Assets Goodwill (Tables)

6 Months Ended

Jun. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill [Table Text Block]

The following represents our goodwill balance by global reportable segment:

(in millions)	MedSurg			Rhythm and Neuro			Cardiovascular			Total
Balance as of December 31, 2017	$	2,877		$	417		$	3,704		$	6,998
Impact of reportable segment revisions	(1,379		)	1,379			—			—
Impact of foreign currency fluctuations and other changes in carrying amount	(2		)	(22		)	(5		)	(29		)
Goodwill acquired	248			25			—			273
Balance as of June 30, 2018	$	1,744		$	1,799		$	3,699		$	7,242

The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated write-offs of goodwill are as follows:

	As of June 30, 2018					As of December 31, 2017
(in millions)	Gross Carrying Amount		Accumulated Amortization/ Write-offs			Gross Carrying Amount		Accumulated Amortization/ Write-offs
Amortizable intangible assets
Technology-related	$	9,698	$	(5,032	)	$	9,386	$	(4,880	)
Patents	517		(384		)	517		(379		)
Other intangible assets	1,640		(897		)	1,633		(838		)
	$	11,855	$	(6,314	)	$	11,536	$	(6,097	)
Unamortizable intangible assets
Goodwill	$	17,142	$	(9,900	)	$	16,898	$	(9,900	)
In-process research and development (IPR&D)	273		—			278		—
Technology-related	120		—			120		—
	$	17,535	$	(9,900	)	$	17,295	$	(9,900	)

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2018

Derivative [Line Items]

Schedule of Derivative Instruments [Table Text Block]

The following table presents the contractual amounts of our derivative instruments outstanding:

(in millions)	FASB ASC Topic 815 Designation	As of
		June 30, 2018		December 31, 2017
Forward currency contracts	Cash flow hedge	$	4,205	$	3,252
Forward currency contracts	Net investment hedge	1,455		—
Forward currency contracts	Non-designated	2,635		2,671
Total Notional Outstanding		$	8,295	$	5,923

Gains (losses) recognized in earnings for derivatives designed as hedging instruments

As of June 30, 2018, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as fair value and cash flow hedges under FASB ASC Topic 815 that may be reclassified to earnings within the next twelve months are presented below (in millions):

Designated Derivative Instrument	FASB ASC Topic 815 Designation	Location in Unaudited Condensed Consolidated Statements of Operations	Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings
Interest rate derivative contracts	Fair value hedge	Interest expense	$	12
Interest rate derivative contracts	Cash flow hedge	Interest expense	1
Forward currency contracts	Cash flow hedge	Cost of products sold	11
Forward currency contracts	Net investment hedge	Interest expense	41

The following presents the effect of our derivative instruments designated as cash flow hedges and net investment hedges under FASB ASC Topic 815 on our accompanying unaudited condensed consolidated statements of operations:

(in millions)	Unaudited Condensed Consolidated Statements of Operations				Effective Amount Recognized in OCI									Effective Amount Reclassified from AOCI into Earnings
	Location	Total			Pre-Tax Gain (Loss)			Tax Benefit (Expense)			Gain (Loss) Net of Tax			Pre-Tax (Gain) Loss			Tax (Benefit) Expense			(Gain) Loss Net of Tax
Three Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	739		$	194		$	(44	)	$	151		$	10		$	(2	)	$	7
Forward currency contracts	Interest expense	(57		)	21			(5		)	16			(7		)	2			(5		)
					$	215		$	(48	)	$	167		$	3		$	(1	)	$	2
Three Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	632		$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
					$	(6	)	$	2		$	(4	)	$	(27	)	$	10		$	(17	)
Six Months Ended June 30, 2018
Forward currency contracts	Cost of products sold	$	1,411		$	77		$	(17	)	$	59		$	25		$	(6	)	$	19
Forward currency contracts	Interest expense	(119		)	21			(5		)	16			(7		)	2			(5		)
					$	97		$	(22	)	$	76		$	18		$	(4	)	$	14
Six Months Ended June 30, 2017
Forward currency contracts	Cost of products sold	$	1,282		$	(64	)	$	23		$	(41	)	$	(55	)	$	21		$	(34	)
Interest rate derivative contracts	Interest expense	(115		)	—			—			—			(1		)	—			(1		)
					$	(64	)	$	23		$	(41	)	$	(56	)	$	21		$	(35	)

Net foreign currency gain (loss) [Table Text Block]

Net gains and losses on currency hedge contracts not designated as hedging instruments offset by net gains and losses from currency transaction exposures are presented below:

	Location in Unaudited Condensed Consolidated Statements of Operations	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)		2018			2017			2018			2017
Net gain (loss) on currency hedge contracts	Other, net	$	32		$	5		$	8		$	(12	)
Net gain (loss) on currency transaction exposures	Other, net	(33		)	(13		)	(17		)	4
Net currency exchange gain (loss)		$	(1	)	$	(8	)	$	(9	)	$	(8	)

Classification of derivative assets and liabilities within level 2

The following are the balances of our derivative assets and liabilities:

	Location in Unaudited Condensed Consolidated Balance Sheets (1)	As of
(in millions)		June 30, 2018		December 31, 2017
Derivative Assets:
Designated Derivative Instruments
Forward currency contracts	Other current assets	$	24	$	7
Forward currency contracts	Other long-term assets	94		57
Net investment hedges	Other long-term assets	21		—
		139		64
Non-Designated Derivative Instruments
Forward currency contracts	Other current assets	64		18
Total Derivative Assets		$	202	$	82
Derivative Liabilities:
Designated Derivative Instruments
Forward currency contracts	Other current liabilities	$	9	$	37
Forward currency contracts	Other long-term liabilities	10		33
		19		69
Non-Designated Derivative Instruments
Forward currency contracts	Other current liabilities	26		21
Total Derivative Liabilities		$	45	$	90

(1) We classify derivative assets and liabilities as current when the settlement date of the derivative contract is one year or less.

Assets and liabilities measured at fair value on a recurring basis

Assets and liabilities measured at fair value on a recurring basis consist of the following:

	As of
	June 30, 2018								December 31, 2017
(in millions)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Money market and government funds	$	49	$	—	$	—	$	49	$	21	$	—	$	—	$	21
Publicly-held securities	1		—		—		1		15		—		—		15
Forward currency contracts	—		202		—		202		—		82		—		82
	$	50	$	202	$	—	$	253	$	36	$	82	$	—	$	118
Liabilities
Forward currency contracts	$	—	$	45	$	—	$	45	$	—	$	90	$	—	$	90
Accrued contingent consideration	—		—		279		279		—		—		169		169
	$	—	$	45	$	279	$	324	$	—	$	90	$	169	$	259

XML

Borrowings and Credit Arrangements (Tables)

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Schedule of debt maturities

(in millions, except interest rates)	Issuance Date	Maturity Date	As of						Semi-annual Coupon Rate
			June 30, 2018			December 31, 2017
October 2018 Notes	August 2013	October 2018	—			††			2.650%
January 2020 Notes	December 2009	January 2020	850			850			6.000%
May 2020 Notes	May 2015	May 2020	600			600			2.850%
May 2022 Notes	May 2015	May 2022	500			500			3.375%
October 2023 Notes	August 2013	October 2023	450			450			4.125%
May 2025 Notes	May 2015	May 2025	750			750			3.850%
March 2028 Notes	February 2018	March 2028	1,000			—			4.000%
November 2035 Notes	November 2005	November 2035	350			350			7.000%
January 2040 Notes	December 2009	January 2040	300			300			7.375%
Unamortized Debt Issuance Discount and Deferred Financing Costs		2020 - 2040	(32		)	(24		)
Unamortized Gain on Fair Value Hedges		2020 - 2023	32			38
Capital Lease Obligation		Various	8			1
Long-term debt			$	4,808		$	3,815

^††As of December 31, 2017, $600 millionunder the October 2018 Notes was outstanding and classified as short-term debt.

Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges.

Summary Of Term Loan And Revolving Credit Facility Agreement Compliance With Debt Covenants [Table Text Block]

	Covenant Requirement	Actual
	as of June 30, 2018	as of June 30, 2018
Maximum leverage ratio (1)	3.5 times	2.4 times

(1) Ratio of total debt to consolidated EBITDA, as defined by the credit agreement, for the preceding four consecutive fiscal quarters.

Quantitative Information about Transferred Financial Assets that have been Derecognized and Other Financial Assets Managed Together [Table Text Block]

	As of June 30, 2018						As of December 31, 2017
Factoring Arrangements	Capacity (1)		Amount De-recognized		Average Interest Rate		Capacity (1)		Amount De-recognized		Average Interest Rate
Euro denominated	$	442	$	161	1.5	%	$	456	$	171	1.8	%
Yen denominated (2)	$	470	$	216	0.5	%	$	195	$	157	1.3	%

(1) The capacities are translated from local currency to U.S. dollar using the spot rates on the last business day of each period.

(2) The factoring arrangements denominated in Japanese yen consist of two arrangements, one with a maximum capacity of 22.000 billionyen, which has been discontinued as of June 30, 2018, and a new arrangement with a maximum capacity of 30.000 billion yen entered into during March 2018.

XML

Restructuring Related Activities (Tables)

6 Months Ended

Jun. 30, 2018

Restructuring and Related Cost [Line Items]

Restructuring and related costs

The following presents these costs (credits) by major type and line item within our accompanying unaudited condensed consolidated statements of operations (in millions):

Three Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other			Total
Restructuring charges (credits)	$	2	$	—	$	2		$	5
Restructuring-related expenses:
Cost of products sold	—		16		—			16
Selling, general and administrative expenses	—		—		(5		)	(5		)
	—		16		(5		)	11
	$	2	$	16	$	(3	)	$	15

Three Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	—	$	—	$	1	$	1
Restructuring-related expenses:
Cost of products sold	—		12		—		12
Selling, general and administrative expenses	—		—		3		3
	—		12		3		15
	$	—	$	12	$	4	$	16

Six Months Ended June 30, 2018	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	15	$	—	$	3	$	18
Restructuring-related expenses:
Cost of products sold	—		23		—		23
Selling, general and administrative expenses	—		—		3		3
	—		23		3		26
	$	15	$	23	$	6	$	43

Six Months Ended June 30, 2017	Termination Benefits		Transfer Costs		Other		Total
Restructuring charges (credits)	$	3	$	—	$	2	$	5
Restructuring-related expenses:
Cost of products sold	—		24		—		24
Selling, general and administrative expenses	—		—		6		6
	—		24		6		30
	$	3	$	24	$	8	$	35

Cumulative Restructuring Charges [Text Block]

The following table presents cumulative restructuring and restructuring-related charges as of June 30, 2018, by major type:

(in millions)	2016 Restructuring Plan
Termination benefits	$	63
Other (1)	18
Total restructuring charges	82
Transfer costs	83
Other (2)	19
Restructuring-related expenses	102
	$	184

(1)    Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to our Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities.

Cash payments associated with restructuring initiatives

Cash payments were made using cash generated from operations and are comprised of the following:

(in millions)	2016 Restructuring Plan
Six Months Ended June 30, 2018
Termination benefits	$	20
Transfer costs	23
Other	8
	$	51
Program to Date
Termination benefits	$	47
Transfer costs	82
Other	19
	$	148

Summary of accrued expenses within accompanying unaudited condensed consolidated balance sheets

The following is a rollforward of the termination benefit liability, which is reported as a component of Accrued expenses included in our accompanying unaudited condensed consolidated balance sheets:

(in millions)	2016 Restructuring Plan
Accrued as of December 31, 2017	$	22
Charges (credits)	15
Cash payments	(20		)
Accrued as of June 30, 2018	$	18

2016 Restructuring Plan [Member]

Restructuring and Related Cost [Line Items]

Restructuring and related costs

The following table provides a summary of our estimates of costs associated with the 2016 Restructuring Plan by major type of cost:

Type of cost	Total Estimated Amount Expected to be Incurred
Restructuring charges:
Termination benefits	$105 million to $115 million
Other (1)	$35 million to $60 million
Restructuring-related expenses:
Other (2)	$135 million to $150 million
	$275 million to $325 million

(1)     Consists primarily of consulting fees and costs associated with contract cancellations.

(2) Comprised of other costs directly related to the 2016 Restructuring Plan, including program management, accelerated depreciation, fixed asset write-offs and costs to transfer product

XML

Supplemental Balance Sheet Information (Tables)

6 Months Ended

Jun. 30, 2018

Supplemental Balance Sheet Information [Abstract]

Restrictions on Cash and Cash Equivalents [Table Text Block]

	As of
(in millions)	June 30, 2018		December 31, 2017
Cash and cash equivalents	$	208	$	188
Restricted cash and restricted cash equivalents included in Other current assets	756		803
Restricted cash equivalents included in Other long-term assets	31		26
	$	994	$	1,017

Trade accounts receivable, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Accounts receivable	$	1,650		$	1,645
Allowance for doubtful accounts	(63		)	(68		)
Allowance for sales returns (1)	—			(30		)
	$	1,587		$	1,548

(1) Due to the adoption of FASB ASC Topic 606 effective January 1, 2018, the allowance for sales returns has been prospectively reclassified from Trade accounts receivable, net to Other current liabilities within the unaudited condensed consolidated balance sheets. Prior period balances remain unchanged.

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Beginning balance	$	67		$	75		$	68		$	73
Net charges to expenses	4			2			8			5
Utilization of allowances	(8		)	(3		)	(14		)	(4		)
Ending balance	$	63		$	74		$	63		$	74

Inventory Disclosure [Text Block]

	As of
(in millions)	June 30, 2018		December 31, 2017
Finished goods	$	689	$	685
Work-in-process	102		110
Raw materials	296		284
	$	1,087	$	1,078

Property, plant and equipment, net

	As of
(in millions)	June 30, 2018			December 31, 2017
Land	$	102		$	102
Buildings and improvements	1,124			1,120
Equipment, furniture and fixtures	3,255			3,183
Capital in progress	229			219
	4,709			4,625
Accumulated depreciation	(2,995		)	(2,928		)
	$	1,715		$	1,697

Schedule of Accrued Liabilities

	As of
(in millions)	June 30, 2018		December 31, 2017
Legal reserves	$	1,043	$	1,176
Payroll and related liabilities	528		591
Accrued contingent consideration	52		36
Other	644		653
	$	2,266	$	2,456

Other long-term liabilities

	As of
(in millions)	June 30, 2018		December 31, 2017
Accrued income taxes	$	781	$	1,275
Legal reserves	221		436
Accrued contingent consideration	227		133
Other	716		525
	$	1,945	$	2,370

XML

Income Taxes (Tables)

6 Months Ended

Jun. 30, 2018

Schedule of Income Tax Rate Reconciliation [Line Items]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Effective tax rate from continuing operations	(60.3	)%	(60.3	)%	(27.3	)%	(10.1	)%

XML

Weighted Average Shares Outstanding (Tables)

6 Months Ended

Jun. 30, 2018

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares [Table Text Block]

	Three Months Ended June 30,		Six Months Ended June 30,
(in millions)	2018	2017	2018	2017
Weighted average shares outstanding - basic	1,380.5	1,369.8	1,378.5	1,367.6
Net effect of common stock equivalents	18.3	21.3	19.3	23.0
Weighted average shares outstanding - assuming dilution	1,398.9	1,391.1	1,397.8	1,390.6

XML

Segment Reporting (Tables)

6 Months Ended

Jun. 30, 2018

Segment Reporting [Abstract]

Segment Reporting Information By Segment

A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying unaudited condensed consolidated statements of operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2018			2017			2018			2017
Net sales
MedSurg*	$	751		$	680		$	1,462		$	1,321
Rhythm and Neuro*	775			700			1,512			1,368
Cardiovascular	965			876			1,898			1,728
	$	2,490		$	2,257		$	4,870		$	4,418
Income (loss) before income taxes
MedSurg*	$	273		$	244		$	532		$	459
Rhythm and Neuro*	160			137			313			246
Cardiovascular	300			262			590			494
Operating income allocated to reportable segments	734			643			1,436			1,199
Corporate expenses, including hedging activities	(100		)	(56		)	(200		)	(115		)
Intangible asset impairment charges, acquisition-related, restructuring- and restructuring-related and litigation-related net credits (charges)	(95		)	(220		)	(149		)	(210		)
Amortization expense	(147		)	(142		)	(288		)	(285		)
Operating income (loss)	392			225			799			589
Other expense, net	(45		)	(134		)	(129		)	(193		)
Income (loss) before income taxes	$	347		$	91		$	670		$	396
Operating Income as a Percentage of Segment Net Sales
MedSurg*	36.4		%	35.8		%	36.4		%	34.7		%
Rhythm and Neuro*	20.6		%	19.6		%	20.7		%	18.0		%
Cardiovascular	31.1		%	29.8		%	31.1		%	28.6		%

XML

Revenue (Tables) - USD ($)
$ in Millions

3 Months Ended

6 Months Ended

Jun. 30, 2018

Jun. 30, 2018

Jan. 01, 2018

Disaggregation of Revenue [Line Items]

Deferred Revenue

$ 384

$ 384

$ 411

Deferred Revenue, Revenue Recognized

$ 26

$ 53

Disaggregation of Revenue [Table Text Block]

The following tables disaggregate our revenue from contracts with customers by business and geographic region (in millions):

	Three Months Ended June 30,				Six Months Ended June 30,
Businesses	2018		2017		2018		2017
Endoscopy
U.S.	$	245	$	225	$	477	$	439
International	197		175		384		341
Worldwide	442		400		861		780
Urology and Pelvic Health
U.S.	213		196		409		379
International	96		84		192		163
Worldwide	308		280		601		542
Cardiac Rhythm Management
U.S.	290		287		580		571
International	204		193		407		372
Worldwide	494		480		987		943
Electrophysiology
U.S.	39		34		74		66
International	40		33		79		64
Worldwide	79		67		154		130
Neuromodulation
U.S.	160		125		291		241
International	42		29		79		54
Worldwide	202		154		371		295
Interventional Cardiology
U.S.	296		280		577		558
International	366		323		730		636
Worldwide	662		603		1,307		1,194
Peripheral Interventions
U.S.	152		144		297		286
International	152		129		294		248
Worldwide	304		273		591		534
Total Company
U.S.	1,394		1,291		2,704		2,540
International	1,096		966		2,166		1,878
Net Sales	$	2,490	$	2,257	$	4,870	$	4,418

	Three Months Ended June 30,				Six Months Ended June 30,
Geographic Regions	2018		2017		2018		2017
U.S.	$	1,394	$	1,291	$	2,704	$	2,540
EMEA (Europe, Middle East and Africa)	558		482		1,121		937
APAC (Asia-Pacific)	442		393		857		764
LACA (Latin America and Canada)	96		90		188		173
	$	2,490	$	2,257	$	4,870	$	4,418
Emerging Markets (1)	$	276	$	226	$	531	$	434

(1) Emerging Markets is defined as certain countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Currently, we include 20 countries in our definition of Emerging Markets.

XML

Changes in Other Comprehensive Income (Tables)

6 Months Ended

Jun. 30, 2018

Other Comprehensive Income (Loss) Net of Tax, Period Change [Abstract]

Changes in Other Comprehensive Income [Table Text Block]

The following tables provide the reclassifications out of Other comprehensive income (loss), net of tax:

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2018	$	(22	)	$	(79	)	$	(27	)	$	(128	)
Other comprehensive income (loss) before reclassifications	(40		)	151			—			111
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	7			—			2
Net current-period other comprehensive income (loss)	(45		)	158			—			112
Balance as of June 30, 2018	$	(68	)	$	79		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of March 31, 2017	$	(71	)	$	52		$	(6	)	$	(21	)	$	(46	)
Other comprehensive income (loss) before reclassifications	13			(4		)	—			—			9
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(17		)	2			(1		)	(16		)
Net current-period other comprehensive income (loss)	13			(21		)	2			(1		)	(7		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments		Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2017	$	(32	)	$	1	$	(1	)	$	(27	)	$	(59	)
Other comprehensive income (loss) before reclassifications	(31		)	59		—			—			28
(Income) loss amounts reclassified from accumulated other comprehensive income	(5		)	19		1			—			15
Net current-period other comprehensive income (loss)	(36		)	78		—			—			42
Balance as of June 30, 2018	$	(68	)	$	79	$	—		$	(27	)	$	(16	)

(in millions)	Foreign Currency Translation Adjustments			Unrealized Gains/Losses on Derivative Financial Instruments			Unrealized Gains/Losses on Available-for-Sale Securities			Defined Benefit Pension Items/Other			Total
Balance as of December 31, 2016	$	(79	)	$	107		$	(6	)	$	(21	)	$	1
Other comprehensive income (loss) before reclassifications	21			(41		)	—			(2		)	(22		)
(Income) loss amounts reclassified from accumulated other comprehensive income	—			(35		)	2			1			(32		)
Net current-period other comprehensive income (loss)	21			(76		)	2			(1		)	(54		)
Balance as of June 30, 2017	$	(58	)	$	31		$	(4	)	$	(22	)	$	(53	)

XML

Basis of Presentation ASUs Implemented (Details) - USD ($) $ in Millions	3 Months Ended
	Jun. 30, 2018	Jan. 01, 2018
Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption		$ 177
Accounting Standards Update 2016-16 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Cumulative Effect of New Accounting Principle in Period of Adoption	$ 55
Other Current Liabilities [Member] | Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description of Prior-period Information Retrospectively Adjusted	58
Other Noncurrent Liabilities [Member] | Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description of Prior-period Information Retrospectively Adjusted	205
Other Noncurrent Assets [Member] | Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description of Prior-period Information Retrospectively Adjusted	12
Deferred Income Tax Charge [Member] | Accounting Standards Update 2014-09 [Member]
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description of Prior-period Information Retrospectively Adjusted	41

XML

Acquisitions and Strategic Investments (Details) - USD ($) $ in Millions						3 Months Ended		6 Months Ended
	Jul. 20, 2018	Jul. 05, 2018	Apr. 30, 2018	Apr. 16, 2018	May 16, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Nov. 01, 2017
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Change in Amount of Contingent Consideration, Liability						$ (4)	$ (24)	$ 1	$ (74)
Adjustments to accrued contingent consideration								(22)
Contingent consideration expense (benefit)								1
Other Nonoperating Income (Expense)						12	$ (76)	(11)	(78)
Goodwill						7,242		7,242		$ 6,998
Business Combination, Contingent Consideration, Liability						279		279		$ 169
Business Acquisition, Transaction Costs						140		140
Payments for acquisitions of businesses, net of cash acquired								418	392
Payment of contingent consideration								(9)	$ (28)
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High						1,532		1,532			$ 130
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination								391
revenue-based payments [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration, Liability						120		120
R&D and Commercialization-based Milestone [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration, Liability						159		$ 159
Minimum [Member] | revenue-based payments [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
contingent consideration liability, projected year of payment								2018
Minimum [Member] | R&D and Commercialization-based Milestone [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
contingent consideration liability, projected year of payment								2018
Maximum [Member] | revenue-based payments [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
contingent consideration liability, projected year of payment								2026
Maximum [Member] | R&D and Commercialization-based Milestone [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
contingent consideration liability, projected year of payment								2022
2017 Acquisitions [Member]
Business Acquisition [Line Items]
Goodwill						183		$ 183
Payments for acquisitions of businesses, net of cash acquired								391
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles						278		278
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Other Noncurrent Assets						25		25
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities						$ (95)		(95)
2017 Acquisitions [Member] | Technology-Based Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired								$ 268
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								13 years
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						24.00%		24.00%
2017 Acquisitions [Member] | Other Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired								$ 10
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						24.00%		24.00%
2017 Acquisitions [Member] | Other Intangible Assets [Member] | Minimum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								2 years
2017 Acquisitions [Member] | Other Intangible Assets [Member] | Maximum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								13 years
2017 Acquisitions [Member] | Finite-Lived Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired								$ 278
2018 Acquisitions [Member]
Business Acquisition [Line Items]
Goodwill						$ 273		273
Business Combination, Contingent Consideration, Liability						140		140
Business Combination, Step Acquisition, Equity Interest in Acquiree, Fair Value								81
Payments for acquisitions of businesses, net of cash acquired								419
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles						418		418
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Other Noncurrent Assets						53		53
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Liabilities						(5)		(5)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Deferred Tax Liabilities						(99)		(99)
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill						$ 418		418
Business Combination, Consideration Transferred, Including Equity Interest in Acquiree Held Prior to Combination								639
2018 Acquisitions [Member] | Technology-Based Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired								$ 410
2018 Acquisitions [Member] | Technology-Based Intangible Assets [Member] | Minimum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								10 years
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						17.00%		17.00%
2018 Acquisitions [Member] | Technology-Based Intangible Assets [Member] | Maximum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								13 years
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						23.00%		23.00%
2018 Acquisitions [Member] | Other Intangible Assets [Member]
Business Acquisition [Line Items]
Finite-lived Intangible Assets Acquired								$ 7
2018 Acquisitions [Member] | Other Intangible Assets [Member] | Minimum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								6 years
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						13.00%		13.00%
2018 Acquisitions [Member] | Other Intangible Assets [Member] | Maximum [Member]
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life								13 years
Range of Risk Adjusted Discount Rates used in Purchase Price Allocation						15.00%		15.00%
NxThera [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross			$ 306
Potential Payments based on certain milestones gross amount			100
Payments for acquisitions of businesses, net of cash acquired			240
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High			$ 85
nVision [Member]
Business Acquisition [Line Items]
Payments for acquisitions of businesses, net of cash acquired				$ 150
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High				$ 125
Other 2018 Acquisitions [Member]
Business Acquisition [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High						$ 10		$ 10
Business Combination, Consideration Transferred								$ 50
Symetis [Member]
Business Acquisition [Line Items]
Payments for acquisitions of businesses, net of cash acquired					$ 430
Subsequent Event [Member] | Claret [Member]
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross	$ 220
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 50
Subsequent Event [Member] | Cryterion [Member]
Business Acquisition [Line Items]
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable		65.00%
Payments for acquisitions of businesses, net of cash acquired		$ 202
Measurement Input, Discount Rate [Member] | Minimum [Member] | revenue-based payments [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Discount Rate, Fair Value Input								11.00%
Measurement Input, Discount Rate [Member] | Minimum [Member] | R&D and Commercialization-based Milestone [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Discount Rate, Fair Value Input								3.00%
Measurement Input, Discount Rate [Member] | Maximum [Member] | revenue-based payments [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Discount Rate, Fair Value Input								15.00%
Measurement Input, Discount Rate [Member] | Maximum [Member] | R&D and Commercialization-based Milestone [Member] | Valuation Technique, Discounted Cash Flow [Member]
Business Acquisition [Line Items]
Discount Rate, Fair Value Input								4.00%

XML

Strategic Investments (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended
	Jan. 24, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Nov. 01, 2017
Schedule of Investments [Line Items]
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High		$ 1,532		$ 1,532			$ 130
Equity Method Investment, Difference Between Carrying Amount and Underlying Equity		328		328
potential up-front cash payment							$ 145
Other Nonoperating Income (Expense)		12	$ (76)	(11)	$ (78)
Equity Method Investments		281		281		$ 209
Cost Method Investments		82		82		81
Available-for-sale Securities		1		1		15
Notes Receivable From Portfolio Companies		18		18		47
Investments		$ 382		$ 382		$ 353
Millipede [Member]
Schedule of Investments [Line Items]
Business Combination, Consideration Transferred	$ 90
Closing payment	325
Business Combination, Contingent Consideration Arrangements, Range of Outcomes, Value, High	$ 125

XML

Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	$ 11,855	$ 11,536
Finite-Lived Intangible Assets, Accumulated Amortization	(6,314)	(6,097)
Indefinite-lived intangible assets, including goodwill	17,535	17,295
Indefinite-lived intangible assets, accumulated write-offs	(9,900)	(9,900)
Goodwill	7,242	6,998
Goodwill, Period Increase (Decrease)	0
Goodwill, Purchase Accounting Adjustments	(29)
Goodwill, Acquired During Period	273
Rhythm Management [Member]
Goodwill [Line Items]
Goodwill	1,799	417
Goodwill, Period Increase (Decrease)	1,379
Goodwill, Purchase Accounting Adjustments	(22)
Goodwill, Acquired During Period	25
Cardiovascular [Member]
Goodwill [Line Items]
Goodwill	3,699	3,704
Goodwill, Period Increase (Decrease)	0
Goodwill, Purchase Accounting Adjustments	(5)
Goodwill, Acquired During Period	0
MedSurg [Member]
Goodwill [Line Items]
Goodwill	1,744	2,877
Goodwill, Period Increase (Decrease)	(1,379)
Goodwill, Purchase Accounting Adjustments	(2)
Goodwill, Acquired During Period	248
Unclassified Indefinite-lived Intangible Assets [Member]
Goodwill [Line Items]
Goodwill, Gross	17,142	16,898
Goodwill, Impaired, Accumulated Impairment Loss	(9,900)	(9,900)
Technology-related [Member]
Goodwill [Line Items]
Indefinite-lived Intangible Assets (Excluding Goodwill)	120	120
In-process research and development [Member]
Goodwill [Line Items]
Indefinite-lived Intangible Assets (Excluding Goodwill)	273	278
Technology-Based Intangible Assets [Member]
Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	9,698	9,386
Finite-Lived Intangible Assets, Accumulated Amortization	(5,032)	(4,880)
Patents [Member]
Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	517	517
Finite-Lived Intangible Assets, Accumulated Amortization	(384)	(379)
Other Intangible Assets [Member]
Goodwill [Line Items]
Finite-Lived Intangible Assets, Gross	1,640	1,633
Finite-Lived Intangible Assets, Accumulated Amortization	$ (897)	$ (838)

XML

Fair Value Measurements Fair Value Measurements (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Derivative Instruments, Gain (Loss) [Line Items]
Cost of Goods and Services Sold	$ 739	$ 632	$ 1,411	$ 1,282
Interest Expense	57	58	119	115
Derivative Assets	202		202		$ 82
Derivative Liabilities	45		45		90
Available-for-sale Securities	1		1		15
Cash	159		159		167
Cost-method Investments, Aggregate Carrying Amount	82		82		81
Debt Instrument, Fair Value Disclosure	6,702		6,702		5,945
Derivative, Notional Amount	8,295		8,295		5,923
Fair Value, Measurements, Recurring [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Money Market Funds, at Carrying Value	49		49		21
Available-for-sale Securities	1		1		15
Foreign Currency Contract, Asset, Fair Value Disclosure	202		202		82
Assets, Fair Value Disclosure	253		253		118
Foreign Currency Contracts, Liability, Fair Value Disclosure	45		45		90
Accrued Contingent Consideration	279		279		169
Liabilities, Fair Value Disclosure	324		324		259
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Money Market Funds, at Carrying Value	49		49		21
Available-for-sale Securities	1		1		15
Foreign Currency Contract, Asset, Fair Value Disclosure	0		0		0
Assets, Fair Value Disclosure	50		50		36
Foreign Currency Contracts, Liability, Fair Value Disclosure	0		0		0
Accrued Contingent Consideration	0		0		0
Liabilities, Fair Value Disclosure	0		0		0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Money Market Funds, at Carrying Value	0		0		0
Available-for-sale Securities	0		0		0
Foreign Currency Contract, Asset, Fair Value Disclosure	202		202		82
Assets, Fair Value Disclosure	202		202		82
Foreign Currency Contracts, Liability, Fair Value Disclosure	45		45		90
Accrued Contingent Consideration	0		0		0
Liabilities, Fair Value Disclosure	45		45		90
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Money Market Funds, at Carrying Value	0		0		0
Available-for-sale Securities	0		0		0
Foreign Currency Contract, Asset, Fair Value Disclosure	0		0		0
Assets, Fair Value Disclosure	0		0		0
Foreign Currency Contracts, Liability, Fair Value Disclosure	0		0		0
Accrued Contingent Consideration	279		279		169
Liabilities, Fair Value Disclosure	279		279		169
Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Assets, at Fair Value	139		139		64
Derivative Instruments in Hedges, Liabilities, at Fair Value	19		19		69
Designated as Hedging Instrument [Member] | Prepaid And Other Current Assets [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Assets, at Fair Value	24		24		7
Designated as Hedging Instrument [Member] | Other Noncurrent Assets [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Assets, at Fair Value	94		94		57
Designated as Hedging Instrument [Member] | Other current liabilities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Liabilities, at Fair Value	9		9		37
Designated as Hedging Instrument [Member] | Other Noncurrent Liabilities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Liabilities, at Fair Value	10		10		33
Not Designated as Hedging Instrument [Member] | Prepaid And Other Current Assets [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Asset, at Fair Value	64		64		18
Not Designated as Hedging Instrument [Member] | Other current liabilities [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments Not Designated as Hedging Instruments, Liability, at Fair Value	26		26		21
Not Designated as Hedging Instrument [Member] | Other, net [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Gain (Loss) on Foreign Currency Derivative Instruments Not Designated as Hedging Instruments	32	5	8	(12)
Foreign Currency Transaction Gain (Loss), before Tax	(33)	(13)	(17)	4
Net currency exchange gain (loss)	(1)	(8)	(9)	(8)
Net Investment Hedging [Member] | Other Noncurrent Assets [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments in Hedges, Assets, at Fair Value	21		21
Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net	(215)	6	97	64
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax	48	(2)	22	(23)
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax	(167)	4	76	41
Derivative Instruments, Gain Reclassified from Accumulated OCI into Income, Effective Portion	(3)	(27)	(18)	(56)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	(2)	17	(14)	35
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	(1)	10	(4)	21
Foreign Exchange Forward [Member] | Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Notional Amount	2,635		2,635		2,671
Foreign Exchange Forward [Member] | Net Investment Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Notional Amount	1,455		1,455		0
Foreign Exchange Forward [Member] | Cash Flow Hedging [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative, Notional Amount	4,205		4,205		$ 3,252
Net Investment Hedging [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	41		41
Fair Value Hedging [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	12		12
Cash Flow Hedging [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	1		1
Cash Flow Hedging [Member] | Cost of Goods, Product Line [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Interest Rate Cash Flow Hedge Gain (Loss) to be Reclassified During Next 12 Months, Net	11		11
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Interest Expense [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net	21		21	0
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax	(5)		(5)	0
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax	16		16	0
Derivative Instruments, Gain Reclassified from Accumulated OCI into Income, Effective Portion	(7)		(7)	(1)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	5		5	1
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	2		2	0
Foreign Exchange Contract [Member] | Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Cost of Sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Other Comprehensive Income (Loss), Effective Portion, Net	194	(6)	77	(64)
Other Comprehensive Income (Loss), Derivatives Qualifying as Hedges, Tax	(44)	2	(17)	23
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax	151	(4)	59	(41)
Derivative Instruments, Gain Reclassified from Accumulated OCI into Income, Effective Portion	(10)	(27)	(25)	(55)
Derivative Instruments, Gain (Loss) Reclassified from Accumulated OCI into Income, Effective Portion, Net	(7)	17	(19)	34
Other Comprehensive Income (Loss), Reclassification Adjustment from AOCI on Derivatives, Tax	$ (2)	$ 10	$ (6)	$ 21

XML

Borrowings and Credit Arrangements (Details) ¥ in Millions, $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2018 USD ($)	Dec. 31, 2017 USD ($)	Jun. 30, 2018 JPY (¥)	Mar. 31, 2018 JPY (¥)	Feb. 26, 2018 USD ($)	Aug. 04, 2017 USD ($)
Debt Instrument [Line Items]
Total debt	$ 6,493	$ 5,616
Debt, Current	1,685	$ 1,801
Line of Credit Facility, Maximum Borrowing Capacity	$ 400
Average interest rate of de-recognized receivables	1.50%	1.80%
Maximum Amount Of Proceeds From Sale Of Finance Receivables	$ 442	$ 456
De-recognized receivables	161	171
Long-term Debt	$ (4,808)	(3,815)
October 2018 Notes [Member]
Debt Instrument [Line Items]
Debt, Current		$ 600
Debt Instrument, Interest Rate, Stated Percentage	2.65%	2.65%	2.65%
Long-term Debt	$ 0
January 2020 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	6.00%	6.00%	6.00%
Long-term Debt	$ (850)	$ (850)
May 2020 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	2.85%	2.85%	2.85%
Long-term Debt	$ (600)	$ (600)
May 2022 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	3.375%	3.375%	3.375%
Long-term Debt	$ (500)	$ (500)
May 2025 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	3.85%	3.85%	3.85%
Long-term Debt	$ (750)	$ (750)
March 2028 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	4.00%	4.00%	4.00%		4.00%
Long-term Debt	$ (1,000)	$ 0			$ (1,000)
October 2023 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	4.125%	4.125%	4.125%
Long-term Debt	$ (450)	$ (450)
November 2035 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	7.00%	7.00%	7.00%
Long-term Debt	$ (350)	$ (350)
January 2040 Notes [Member]
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage	7.375%	7.375%	7.375%
Long-term Debt	$ (300)	$ (300)
Senior Notes [Member]
Debt Instrument [Line Items]
Long-term Debt	(4,800)	(4,400)
Premiums, accelerated amortization of debt issuance costs & investor discount costs [Member]
Debt Instrument [Line Items]
Long-term Debt	(32)	(24)
Interest Rate Swap [Member]
Debt Instrument [Line Items]
Long-term Debt	(32)	(38)
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
Long-term Debt	(8)	(1)
Line of Credit [Member]
Debt Instrument [Line Items]
Commercial Paper	2,250
Commercial Paper, Not Included with Cash and Cash Equivalents [Member]
Debt Instrument [Line Items]
Commercial Paper	$ 1,685	$ 1,197
Commercial Paper [Member]
Debt Instrument [Line Items]
Short-term Debt, Weighted Average Interest Rate, at Point in Time	2.58%	1.85%	2.58%
the 2017 Facility [Member]
Debt Instrument [Line Items]
Exclusion from EBITDA for Restructuring Charges						$ 500
Line of Credit Facility, Maximum Borrowing Capacity	$ 2,250
Restructuring charges remaining to be excluded from calculation of consolidated EBITDA	400
Litigation and Debt Exclusion from EBITDA						$ 2,624
Legal payments remaining to be excluded from calculation of consolidated EBITDA	$ 1,526
Actual, Covenant [Member]
Debt Instrument [Line Items]
Maximum Leverage Ratio	2.4		2.4
Current Requirement [Member]
Debt Instrument [Line Items]
Maximum Leverage Ratio	3.5		3.5
Japanese Factoring Program [Member]
Debt Instrument [Line Items]
Maximum Amount Of Proceeds From Sale Of Finance Receivables | ¥			¥ 22,000
March 2018 Yen Factoring Program Max Capacity [Member]
Debt Instrument [Line Items]
Maximum Amount Of Proceeds From Sale Of Finance Receivables | ¥				¥ 30,000
Uncommitted Credit Facilities With A Commercial Japanese Banks [Member]
Debt Instrument [Line Items]
Average interest rate of de-recognized receivables	0.50%	1.30%
Maximum Amount Of Proceeds From Sale Of Finance Receivables	$ 470	$ 195
De-recognized receivables	$ 216	$ 157

XML

Restructuring Related Activities (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		25 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Incurred Cost	$ 15	$ 16	$ 43	$ 35
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	11	15	26	30
Restructuring Charges	5	1	18	5
2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Incurred Cost					$ 102
Estimated costs of restructuring program by major type of cost
Restructuring and Related Cost, Cost Incurred to Date	184		184		184
Payments for Restructuring			(51)		(148)
Other Restructuring Costs					19
Restructuring Charges					82
Termination Benefits [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Incurred Cost	2	0	15	3
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	0	0	0	0
Restructuring Charges	2	0	15	3
Termination Benefits [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring Reserve	18		18		18	$ 22
Estimated costs of restructuring program by major type of cost
Payments for Restructuring			(20)		(47)
Restructuring Charges			15		63
Transfer costs [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Incurred Cost	16	12	23	24
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	16	12	23	24
Restructuring Charges	0	0	0	0
Transfer costs [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring-related Costs Incurred to Date					83
Estimated costs of restructuring program by major type of cost
Payments for Restructuring			(23)		(82)
Other [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Incurred Cost	(3)	4	6	8
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	(5)	3	3	6
Restructuring Charges	2	1	3	2
Other [Member] | 2016 Restructuring Plan [Member]
Estimated costs of restructuring program by major type of cost
Payments for Restructuring			(8)		(19)
Restructuring Charges					18
Minimum [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	275		275		275
Estimated costs of restructuring program by major type of cost
Restructuring plan estimated future cash outflow			250
Minimum [Member] | Termination Benefits [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	105		105		105
Minimum [Member] | Restructuring Plan [Member] | Other [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	35		35		35
Minimum [Member] | Restructuring Related To Plan [Member] | Other [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	135		135		135
Maximum [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	325		325		325
Estimated costs of restructuring program by major type of cost
Restructuring plan estimated future cash outflow			300
Maximum [Member] | Termination Benefits [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	115		115		115
Maximum [Member] | Restructuring Plan [Member] | Other [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	60		60		60
Maximum [Member] | Restructuring Related To Plan [Member] | Other [Member] | 2016 Restructuring Plan [Member]
Restructuring and Related Cost [Line Items]
Restructuring and Related Cost, Expected Cost	150		150		$ 150
Selling, General and Administrative Expenses [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	(5)	3	3	6
Selling, General and Administrative Expenses [Member] | Termination Benefits [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	0	0	0	0
Selling, General and Administrative Expenses [Member] | Transfer costs [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	0	0	0	0
Selling, General and Administrative Expenses [Member] | Other [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	(5)	3	3	6
Cost of Sales [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	16	12	23	24
Cost of Sales [Member] | Termination Benefits [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	0	0	0	0
Cost of Sales [Member] | Transfer costs [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	16	12	23	24
Cost of Sales [Member] | Other [Member]
Estimated costs of restructuring program by major type of cost
Other Restructuring Costs	$ 0	$ 0	$ 0	$ 0

XML

Supplemental Balance Sheet Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017	Dec. 31, 2016
Cash and Cash Equivalents, at Carrying Value	$ 208	$ 195	$ 208	$ 195	$ 188
Restricted Cash and Cash Equivalents, Current	756	255	756	255	803
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	994	476	994	476	1,017	$ 487
Trade accounts receivable, net
Accounts receivable	1,650		1,650		1,645
Less: allowance for doubtful accounts	(63)		(63)		(68)
Less: allowance for sales returns	0		0		(30)
Trade accounts receivable, net	1,587		1,587		1,548
Allowance for doubtful accounts
Beginning balance	67	75	68	73
Charges to expenses	4	2	8	5
Utilization of allowances	(8)	(3)	(14)	(4)
Ending balance	63	74	63	74
Inventories
Finished goods	689		689		685
Work-in-process	102		102		110
Raw materials	296		296		284
Inventories	1,087		1,087		1,078
Prepaid Expense and Other Assets, Current
Restricted Cash and Cash Equivalents, Noncurrent	31	27	31	27	26
prepaid and other current assets	1,001		1,001		942
Property, plant and equipment, net
Land	102		102		102
Buildings and improvements	1,124		1,124		1,120
Equipment, furniture and fixtures	3,255		3,255		3,183
Capital in progress	229		229		219
Property, plant and equipment	4,709		4,709		4,625
Less: accumulated depreciation	(2,995)		(2,995)		(2,928)
Property, plant and equipment, net	1,715		1,715		1,697
Supplemental Balance Sheet Information
Depreciation expense	70	$ 65	137	$ 127
Accrued expenses
Legal reserves	1,043		1,043		1,176
Payroll and related liabilities	528		528		591
Business Combination, Contingent Consideration, Liability, Current	52		52		36
Other	644		644		653
Accrued expenses	2,266		2,266		2,456
Other long-term liabilities
Accrued income taxes	781		781		1,275
Legal reserves	221		221		436
Business Combination, Contingent Consideration, Liability, Noncurrent	227		227		133
Other Accrued Liabilities, Noncurrent	716		716		525
Other long-term liabilities	$ 1,945		$ 1,945		$ 2,370

XML

Income Taxes (Details) - USD ($) $ in Millions		3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 15, 2018	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2019	Dec. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Unrecognized Tax Benefits		$ 506		$ 506				$ 1,238
Unrecognized Tax Benefits that Would Impact Effective Tax Rate		$ 432		432				1,150
Payments for Legal Settlements	$ 303
Litigation Settlement Interest	$ 307
Tax Adjustments, Settlements, and Unusual Provisions				$ 250
Reported tax rate		(60.30%)	(60.30%)	(27.30%)	(10.10%)
Unrecognized Tax Benefits, Income Tax Penalties and Interest Accrued, Total		$ 78		$ 78				$ 655
Unrecognized Tax Benefits, Income Tax Penalties and Interest Expense		2	$ 13	19	$ 26
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent								35.00%
Tax Cuts and Jobs Act, Measurement Period Adjustment, Income Tax Expense (Benefit)		$ 28		37
Tax Cuts and Jobs Act, Incomplete Accounting, Change in Tax Rate, Provisional Income Tax Expense (Benefit)								$ 99
Tax Cuts and Jobs Act, Incomplete Accounting, Provisional Income Tax Expense (Benefit)				824
Tax Cuts and Jobs Act, Incomplete Accounting, Transition Tax for Accumulated Foreign Earnings, Provisional Liability				866
Tax Cuts and Jobs Act, Incomplete Accounting, Transition Tax for Accumulated Foreign Earnings, Provisional Liability Net Existing				$ 506
Subsequent Event [Member]
Effective Income Tax Rate Reconciliation, Percent [Abstract]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent							21.00%
Unrecognized Tax Benefits, Decrease Resulting from Settlements with Taxing Authorities						$ 221

XML

Commitments and Contingencies (Details) € in Thousands, $ in Millions		3 Months Ended		6 Months Ended
	Nov. 10, 2017 EUR (€)	Jun. 30, 2018 USD ($) patents	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) patents	Jun. 30, 2017 USD ($)	Jul. 24, 2018 claims	Dec. 31, 2017 USD ($)
Commitments and Contingencies (Textuals) [Abstract]
Accrual for legal matters that are probable and estimable | $		$ 1,264		$ 1,264			$ 1,612
Restricted Cash and Cash Equivalents | $		787		787			$ 829
Litigation Settlement, Expense | $		$ 0	$ 205	$ 0	$ 208
Loss Contingency, Damages Paid, Value | €	€ 245
Loss Contingency, Damages Awarded, Value | €	€ 620
Patents Allegedly Infringed, Number | patents		2		2
Subsequent Event [Member]
Commitments and Contingencies (Textuals) [Abstract]
Product liability cases or claims related to mesh product						49,500
Putative class actions in the U.S., Mesh						8
Product liability cases or claims related to mesh product - Canada						25
Certified class actions in Canada, Mesh						1
Putative class actions in Canada, Mesh						3
Product liability cases or claims related to mesh product - United Kingdom						25
Assigned to one judge in MA [Member] | Subsequent Event [Member]
Commitments and Contingencies (Textuals) [Abstract]
Product liability cases or claims related to mesh product						3,100
Settled Litigation [Member] | Subsequent Event [Member]
Commitments and Contingencies (Textuals) [Abstract]
Product liability cases or claims related to mesh product						48,000
Total Product liability cases and claims settled related to Mesh product						27,000

XML

Weighted Average Shares Outstanding (Details) - shares shares in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Weighted average shares outstanding - basic	1,380.5	1,369.8	1,378.5	1,367.6
Weighted Average Number Diluted Shares Outstanding Adjustment	18.3	21.3	19.3	23.0
Weighted average shares outstanding - assuming dilution	1,398.9	1,391.1	1,397.8	1,390.6
Stock Issued During Period, Shares, New Issues	2.0	1.0	8.0	8.0

XML

Segment Reporting (Details) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018 USD ($)	Jun. 30, 2017 USD ($)	Jun. 30, 2018 USD ($) reportablesegments	Jun. 30, 2017 USD ($)
Segment Reporting (Textuals) [Abstract]
Number of reportable segments | reportablesegments			3
Net sales
Revenue from Contract with Customer, Excluding Assessed Tax	$ 2,490	$ 2,257	$ 4,870	$ 4,418
Operating Income Allocated to Reportable Segments	734	643	1,436	1,199
Amortization expense	(147)	(142)	(288)	(285)
Operating income (loss)	392	225	799	589
Other expense, net	(45)	(134)	(129)	(193)
Income (loss) before income taxes	347	91	670	396
Cardiovascular [Member]
Net sales
Net sales allocated to reportable segments	965	876	1,898	1,728
Operating Income Allocated to Reportable Segments	$ 300	$ 262	$ 590	$ 494
Segment Operating Income as a Percentage of Net Sales	31.10%	29.80%	31.10%	28.60%
Rhythm and Neuro [Member]
Net sales
Net sales allocated to reportable segments	$ 775	$ 700	$ 1,512	$ 1,368
Operating Income Allocated to Reportable Segments	$ 160	$ 137	$ 313	$ 246
Segment Operating Income as a Percentage of Net Sales	20.60%	19.60%	20.70%	18.00%
MedSurg [Member]
Net sales
Net sales allocated to reportable segments	$ 751	$ 680	$ 1,462	$ 1,321
Operating Income Allocated to Reportable Segments	$ 273	$ 244	$ 532	$ 459
Segment Operating Income as a Percentage of Net Sales	36.40%	35.80%	36.40%	34.70%
Corporate expenses and currency exchange [Member]
Net sales
Reconciliation of Operating Profit (Loss) from Segments to Consolidated	$ (100)	$ (56)	$ (200)	$ (115)
Special Charges [Member]
Net sales
Reconciliation of Operating Profit (Loss) from Segments to Consolidated	$ (95)	$ (220)	$ (149)	$ (210)

XML

Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 2,490	$ 2,257	$ 4,870	$ 4,418
UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	1,394	1,291	2,704	2,540
Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	1,096	966	2,166	1,878
EMEA [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	558	482	1,121	937
Asia Pacific [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	442	393	857	764
Latin America [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	96	90	188	173
Emerging Markets [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	276	226	531	434
Global Endoscopy (Endo) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	442	400	861	780
Global Endoscopy (Endo) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	245	225	477	439
Global Endoscopy (Endo) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	197	175	384	341
Global Urology (Uro) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	308	280	601	542
Global Urology (Uro) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	213	196	409	379
Global Urology (Uro) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	96	84	192	163
Global CRM Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	494	480	987	943
Global CRM Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	290	287	580	571
Global CRM Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	204	193	407	372
Global Electrophysiology (EP) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	79	67	154	130
Global Electrophysiology (EP) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	39	34	74	66
Global Electrophysiology (EP) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	40	33	79	64
Global Neuromodulation (NM) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	202	154	371	295
Global Neuromodulation (NM) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	160	125	291	241
Global Neuromodulation (NM) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	42	29	79	54
Global Interventional Cardiology (IC) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	662	603	1,307	1,194
Global Interventional Cardiology (IC) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	296	280	577	558
Global Interventional Cardiology (IC) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	366	323	730	636
Global Peripheral Interventions (PI) Reporting Unit [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	304	273	591	534
Global Peripheral Interventions (PI) Reporting Unit [Member] | UNITED STATES
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	152	144	297	286
Global Peripheral Interventions (PI) Reporting Unit [Member] | Non-US [Member]
Disaggregation of Revenue [Line Items]
Revenue from Contract with Customer, Excluding Assessed Tax	$ 152	$ 129	$ 294	$ 248

XML

Changes in Other Comprehensive Income (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Other Comprehensive Income (Loss) Net of Tax, Period Change [Abstract]
Accumulated Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Net of Tax	$ (68)	$ (58)	$ (68)	$ (58)	$ (22)	$ (32)	$ (71)	$ (79)
AOCI, Cash Flow Hedge, Cumulative Gain (Loss), after Tax	79	31	79	31	(79)	1	52	107
Accumulated Other Comprehensive Income (Loss), Debt Securities, Available-for-sale, Adjustment, after Tax	0	(4)	0	(4)		(1)	(6)	(6)
Accumulated Other Comprehensive (Income) Loss, Defined Benefit Plan, after Tax	(27)	(22)	(27)	(22)	(27)	(27)	(21)	(21)
Accumulated Other Comprehensive Income (Loss), Net of Tax	(16)	(53)	(16)	(53)	$ (128)	$ (59)	$ (46)	$ 1
Cumulative Translation Adjustment, Net of Tax, Period Increase (Decrease)	(40)	13	(31)	21
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Before Reclassifications, Net of Tax	151	(4)	59	(41)
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, before Reclassification Adjustments, after Tax		0	0	0
Other Comprehensive (Income) Loss, Defined Benefit Plan, before Reclassification Adjustment, after Tax	0	0	0	(2)
Other Comprehensive Income (Loss), before Reclassifications, Net of Tax	111	9	28	(22)
Reclassification from Accumulated Other Comprehensive Income, Current Period, Net of Tax	(5)	0	(5)	0
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Reclassified from OCI, Net of Tax	7	(17)	19	(35)
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, after Tax		2	1	2
Other Comprehensive (Income) Loss, Defined Benefit Plan, Reclassification Adjustment from AOCI, after Tax	0	(1)	0	1
Other Comprehensive Income (Loss), Reclassifications out of OCI, Net of Tax	2	(16)	15	(32)
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax	(45)	13	(36)	21
Other Comprehensive Income (Loss), Unrealized Gain (Loss) on Derivatives Arising During Period, Net of Tax	158	(21)	78	(76)
Other Comprehensive Income (Loss), Securities, Available-for-sale, Adjustment, before Reclassification Adjustments and Tax	0	2	0	2
Other Comprehensive (Income) Loss, Defined Benefit Plan, after Reclassification Adjustment, after Tax	0	(1)	0	(1)
Other Comprehensive Income (Loss), Net of Tax	$ 112	$ (7)	$ 42	$ (54)