Revenue

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [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 September 30,
	2020						2019
Businesses	U.S.		OUS		Total		U.S.		OUS		Total
Endoscopy	$	270	$	205	$	475	$	277	$	209	$	486
Urology and Pelvic Health	251		99		350		257		102		359
Cardiac Rhythm Management	275		190		465		284		194		478
Electrophysiology	33		43		76		38		43		81
Neuromodulation	176		41		216		183		39		222
Interventional Cardiology	255		331		586		327		373		700
Peripheral Interventions	236		179		416		195		163		358
Specialty Pharmaceuticals	65		10		74		19		4		23
Net Sales	$	1,560	$	1,098	$	2,659	$	1,580	$	1,126	$	2,707

	Nine Months Ended September 30,
	2020						2019
Businesses	U.S.		OUS		Total		U.S.		OUS		Total
Endoscopy	$	715	$	550	$	1,265	$	800	$	596	$	1,396
Urology and Pelvic Health	650		260		910		737		297		1,033
Cardiac Rhythm Management	738		515		1,253		860		607		1,467
Electrophysiology	86		116		202		113		132		245
Neuromodulation	426		103		529		487		125		612
Interventional Cardiology	741		973		1,714		942		1,126		2,067
Peripheral Interventions	649		499		1,148		507		482		989
Specialty Pharmaceuticals	162		21		183		19		4		23
Net Sales	$	4,167	$	3,037	$	7,204	$	4,462	$	3,369	$	7,831

	Three Months Ended September 30,				Nine Months Ended September 30,
Geographic Regions	2020		2019		2020		2019
U.S.	$	1,496	$	1,561	$	4,005	$	4,443
EMEA (Europe, Middle East and Africa)	540		535		1,507		1,667
APAC (Asia-Pacific)	472		485		1,292		1,403
LACA (Latin America and Canada)	77		102		217		294
Medical Devices	2,584		2,684		7,021		7,807
U.S.	65		19		162		19
OUS	10		4		21		4
Specialty Pharmaceuticals	74		23		183		23
Net Sales	$	2,659	$	2,707	$	7,204	$	7,831
Emerging Markets (1)	$	278	$	310	$	800	$	925

(1)    We define Emerging Markets as the 20 countries that we believe have strong growth potential based on their economic conditions, healthcare sectors and our global capabilities. Periodically, we assess our list of Emerging Markets, which is currently comprised of the following countries: Argentina, Brazil, Chile, China, Colombia, Czech Republic, India, Indonesia, Malaysia, Mexico, Philippines, Poland, Russia, Saudi Arabia, Slovakia, South Africa, South Korea, Thailand, Turkey and Vietnam.

Deferred Revenue

Contract liabilities are classified within Other current liabilities and Other long-term liabilities in our accompanying unaudited condensed consolidated balance sheets. Our deferred revenue balance was $405 million as of September 30, 2020 and $400 million as of December 31, 2019. 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 $28 million in the third quarter and $84 million in the first nine months of 2020 that was included in the above contract liability balance as of December 31, 2019. 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 and record the amount for estimated sales returns 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. We recently received FDA approval and began the U.S. launch of our next generation WATCHMAN FLX™ Left Atrial Appendage Closure (LAAC) Device within our Interventional Cardiology business. The next generation WATCHMAN FLX™ Device is indicated to reduce the risk of stroke in patients with non-valvular atrial fibrillation (NVAF) who need an alternative to oral anticoagulation therapy by permanently closing off the left atrial appendage. In the third quarter of 2020, we incurred $63 million in revenue charges primarily related to our conversion to a consignment inventory model for our LAAC franchise with the launch of our next-generation WATCHMAN FLX™ Device in the U.S.

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. 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.