ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934, or |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
☑ | Accelerated filer | ☐ | |||||||||
Non-accelerated filer | ☐ | Smaller reporting company | |||||||||
Emerging growth company |
Owned(1) | Leased(2) | Total | |||||||||||||||
U.S. | 4,043,041 | 1,257,706 | 5,300,747 | ||||||||||||||
International | 2,200,042 | 1,916,968 | 4,117,010 | ||||||||||||||
6,243,083 | 3,174,674 | 9,417,757 |
Year Ended December 31, 2021 | ||||||||||||||||||||
(in millions, except per share data) | Income (Loss) Before Income Taxes | Income Tax Expense (Benefit) | Net Income (Loss) | Preferred Stock Dividends | Net Income (Loss) Available to Common Stockholders | Impact per Share(3) | ||||||||||||||
Reported | $ | 1,076 | $ | 36 | $ | 1,041 | $ | (55) | $ | 985 | $ | 0.69 | ||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization expense | 741 | (65) | 676 | — | 676 | 0.47 | ||||||||||||||
Goodwill and other intangible asset impairment charges | 370 | (51) | 318 | — | 318 | 0.22 | ||||||||||||||
Acquisition/divestiture-related net charges (credits) | (450) | (2) | (453) | — | (453) | (0.32) | ||||||||||||||
Restructuring and restructuring-related net charges (credits) | 191 | (22) | 169 | — | 169 | 0.12 | ||||||||||||||
Litigation-related net charges (credits) | 430 | (98) | 331 | — | 331 | 0.23 | ||||||||||||||
Investment portfolio net losses (gains) | 181 | (43) | 137 | — | 137 | 0.10 | ||||||||||||||
European Union (EU) Medical device regulation (MDR) implementation costs | 49 | (4) | 45 | — | 45 | 0.03 | ||||||||||||||
Deferred tax expenses (benefits) | — | 132 | 132 | — | 132 | 0.09 | ||||||||||||||
Discrete tax items | — | (5) | (5) | — | (5) | (0.00) | ||||||||||||||
Adjusted | $ | 2,587 | $ | 196 | $ | 2,391 | $ | (55) | $ | 2,336 | $ | 1.63 |
Year Ended December 31, 2020 | ||||||||||||||||||||
(in millions, except per share data) | Income (Loss) Before Income Taxes | Income Tax Expense (Benefit) | Net Income (Loss) | Preferred Stock Dividends | Net Income (Loss) Available to Common Stockholders | Impact per Share(4) | ||||||||||||||
Reported | $ | (79) | $ | 2 | $ | (82) | $ | (33) | $ | (115) | $ | (0.08) | ||||||||
Non-GAAP adjustments: | ||||||||||||||||||||
Amortization expense | 789 | (88) | 701 | — | 701 | 0.49 | ||||||||||||||
Goodwill and other intangible asset impairment charges | 533 | (68) | 465 | — | 465 | 0.32 | ||||||||||||||
Acquisition/divestiture-related net charges (credits) | 196 | (81) | 115 | — | 115 | 0.08 | ||||||||||||||
Restructuring and restructuring-related net charges (credits) | 171 | (25) | 146 | — | 146 | 0.10 | ||||||||||||||
Litigation-related net charges (credits) | 278 | (17) | 261 | — | 261 | 0.18 | ||||||||||||||
Investment portfolio net losses (gains) | (429) | 98 | (331) | — | (331) | (0.23) | ||||||||||||||
European Union (EU) Medical device regulation (MDR) implementation costs | 29 | (3) | 25 | — | 25 | 0.02 | ||||||||||||||
Deferred tax expenses (benefits) | — | 41 | 41 | — | 41 | 0.03 | ||||||||||||||
Discrete tax items | — | 69 | 69 | — | 69 | 0.05 | ||||||||||||||
Adjusted | $ | 1,488 | $ | 77 | $ | 1,411 | $ | (33) | $ | 1,378 | 0.96 |
Year Ended December 31, | 2021 versus 2020 | 2020 versus 2019 | |||||||||||||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||
Endoscopy | $ | 2,141 | $ | 1,780 | $ | 1,894 | 20.3% | (6.0)% | |||||||||||||||||||||
Urology and Pelvic Health | 1,583 | 1,286 | 1,413 | 23.1% | (9.0)% | ||||||||||||||||||||||||
MedSurg | 3,724 | 3,066 | 3,307 | 21.4% | (7.3)% | ||||||||||||||||||||||||
Cardiac Rhythm Management | 2,019 | 1,704 | 1,939 | 18.5% | (12.1)% | ||||||||||||||||||||||||
Electrophysiology | 365 | 287 | 329 | 27.4% | (12.8)% | ||||||||||||||||||||||||
Neuromodulation | 909 | 761 | 873 | 19.5% | (12.8)% | ||||||||||||||||||||||||
Rhythm and Neuro | 3,293 | 2,752 | 3,140 | 19.7% | (12.4)% | ||||||||||||||||||||||||
Interventional Cardiology | 3,038 | 2,299 | 2,816 | 32.2% | (18.4)% | ||||||||||||||||||||||||
Peripheral Interventions | 1,820 | 1,577 | 1,392 | 15.4% | 13.3% | ||||||||||||||||||||||||
Cardiovascular | 4,858 | 3,876 | 4,208 | 25.3% | (7.9)% | ||||||||||||||||||||||||
Medical Devices | 11,875 | 9,694 | 10,654 | 22.5% | (9.0)% | ||||||||||||||||||||||||
Specialty Pharmaceuticals(5) | 13 | 219 | 81 | (93.9)% | 169.2% | ||||||||||||||||||||||||
Net Sales | $ | 11,888 | $ | 9,913 | $ | 10,735 | 19.9% | (7.7)% | |||||||||||||||||||||
Gross Profit Margin | |||||
Year Ended December 31, 2019 | 71.0% | ||||
Sales pricing, volume and mix | (1.4)% | ||||
Abnormal production variances | (1.5)% | ||||
WATCHMAN FLX™ transition | (0.5)% | ||||
LOTUS Edge™ discontinuation | (1.2)% | ||||
Inventory step-up amortization | (0.6)% | ||||
Net impact of foreign currency fluctuations | 0.2% | ||||
All other, including other period expense | (1.0)% | ||||
Year Ended December 31, 2020 | 65.0% | ||||
Sales pricing, volume and mix | 1.2% | ||||
Prior year abnormal production variances | 1.3% | ||||
Prior year LOTUS Edge™ discontinuation | 0.9% | ||||
Net impact of foreign currency fluctuations | (0.3)% | ||||
All other, including other period expense | 0.7% | ||||
Year Ended December 31, 2021 | 68.8% |
Year Ended December 31, | ||||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||
(in millions) | $ | % of Net Sales | $ | % of Net Sales | $ | % of Net Sales | ||||||||||||||||||||
Selling, general and administrative expenses | $ | 4,359 | 36.7 | % | $ | 3,787 | 38.2 | % | $ | 3,941 | 36.7 | % | ||||||||||||||
Research and development expenses | 1,204 | 10.1 | % | 1,143 | 11.5 | % | 1,174 | 10.9 | % | |||||||||||||||||
Royalty expense | 49 | 0.4 | % | 45 | 0.5 | % | 65 | 0.6 | % |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Amortization expense | $ | 741 | $ | 789 | $ | 699 | |||||||||||
Goodwill impairment charges | — | 73 | — | ||||||||||||||
Intangible asset impairment charges | 370 | 460 | 105 | ||||||||||||||
Contingent consideration net expense (benefit) | (136) | (100) | (35) | ||||||||||||||
Restructuring charges (credits) | 40 | 52 | 38 | ||||||||||||||
Litigation-related net charges (credits) | 430 | 278 | 115 | ||||||||||||||
Gain on disposal of businesses and assets | (78) | — | — |
(in millions) | Year Ended December 31, | ||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Interest expense | $ | (341) | $ | (361) | $ | (473) | |||||||||||
Weighted average borrowing rate | 3.6 | % | 3.6 | % | 4.8 | % |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Interest income | $ | 4 | $ | 3 | $ | 30 | |||||||||||
Net foreign currency gain (loss) | (27) | (32) | (358) | ||||||||||||||
Net gains (losses) on investments | 250 | 383 | (30) | ||||||||||||||
Other income (expense), net | (9) | 7 | (1) | ||||||||||||||
$ | 218 | $ | 362 | $ | (358) |
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
Reported tax rate | 3.3 | % | 2.9 | % | (584.0) | % | |||||||||||
Impact of certain receipts/charges(1) | 13.0 | % | 8.3 | % | 594.2 | % | |||||||||||
16.3 | % | 11.2 | % | 10.2 | % |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Cash provided by (used for) operating activities | $ | 1,870 | $ | 1,508 | $ | 1,836 | |||||||||||
Cash provided by (used for) investing activities | (1,597) | (411) | (5,041) | ||||||||||||||
Cash provided by (used for) financing activities | (95) | 293 | 2,973 |
As of | |||||||||||
(in millions) | December 31, 2021 | December 31, 2020 | |||||||||
Current debt obligations | $ | 261 | $ | 13 | |||||||
Long-term debt | 8,804 | $ | 9,130 | ||||||||
Total debt | $ | 9,065 | $ | 9,143 |
As of | |||||||||||
(in millions) | December 31, 2021 | December 31, 2020 | |||||||||
Fixed-rate debt instruments | $ | 9,048 | $ | 9,123 | |||||||
Variable rate debt instruments | 17 | 20 | |||||||||
Total debt | $ | 9,065 | $ | 9,143 |
(in millions) | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | Total | ||||||||||||||||||||||||||||||||||
Debt obligations(1) | $ | 250 | $ | 244 | $ | 850 | $ | 1,023 | $ | 850 | $ | 5,905 | $ | 9,121 | |||||||||||||||||||||||||||
Interest payments(2) | 325 | 321 | 296 | 267 | 234 | 2,232 | 3,676 | ||||||||||||||||||||||||||||||||||
Lease obligations | 86 | 69 | 56 | 49 | 40 | 228 | 528 | ||||||||||||||||||||||||||||||||||
Purchase obligations(2) | 631 | 82 | 58 | 31 | 11 | — | 812 | ||||||||||||||||||||||||||||||||||
Legal reserves(3) | 264 | — | — | — | — | — | 264 | ||||||||||||||||||||||||||||||||||
One-time transition tax | 40 | 75 | 100 | 125 | — | — | 340 | ||||||||||||||||||||||||||||||||||
$ | 1,597 | $ | 791 | $ | 1,360 | $ | 1,495 | $ | 1,135 | $ | 8,365 | $ | 14,741 |
/s/ Michael F. Mahoney | /s/ Daniel J. Brennan | |||||||||||||||||||
Michael F. Mahoney | Daniel J. Brennan | |||||||||||||||||||
Chief Executive Officer | Executive Vice President and Chief Financial Officer |
Description of the Matter | Business Combinations | ||||
As disclosed in Note B to the consolidated financial statements, during 2021, the Company completed four acquisitions for total aggregate purchase price of $3.3 billion, net of cash acquired. The transactions were accounted for as business combinations. In certain acquisitions, the Company has recognized a liability for acquisition consideration that is contingent upon achieving either research and development, commercialization, or sales-based milestones. The Company determines the fair value of these contingent consideration arrangements, both as part of the initial purchase price allocation, and on an ongoing basis each reporting period until the arrangements are settled. As of December 31, 2021, the amount accrued for future estimated contingent consideration is $486 million, which represents a Level 3 estimate in the fair value hierarchy due to the significant unobservable inputs used in determining the fair value and the use of management judgment about the assumptions that market participants would use in pricing the liabilities. Auditing the Company’s accounting for its acquisitions was complex due to the significant estimation required by management to determine the fair value of identified intangible assets, which totaled $1.2 billion and principally consisted of developed technology, and to determine the fair value of contingent consideration arrangements. A significant emphasis is placed on the appropriateness of the estimates used by management to determine the fair value of acquired intangible assets due to the sensitivity of the respective fair values to the underlying assumptions. The Company used an income approach to measure the technology-related intangible assets. The significant assumptions used to estimate the value of the intangible assets included discount rates and certain assumptions that form the basis of the forecasted results, including revenue growth rates, estimates of technological obsolescence, operating profit margin and market participant synergies. The significance of the estimations used by management to determine the fair value of contingent consideration was primarily due to the sensitivity of the respective fair values to the underlying assumptions. The significant assumptions include estimation of the probability and timing of payment, future sales forecasts, as well as the appropriate discount rate based on the estimated timing of payments. These significant assumptions are forward looking and could be affected by future economic and market conditions. | |||||
How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of the controls over the Company’s accounting for acquisitions. For example, we tested controls over the identification and valuation of intangible assets, including the valuation models and underlying assumptions used to develop such estimates. We also tested controls over the valuation of the contingent consideration liability, including the valuation models and underlying assumptions used to develop such estimates. For each of the Company's acquisitions, we read the purchase agreements, evaluated the significant assumptions and methods used in developing the fair value estimates, and tested the recognition of (1) the tangible assets acquired and liabilities assumed at fair value; (2) the identifiable intangible assets acquired at fair value; and (3) goodwill measured as a residual. To test the estimated fair value of the intangible assets, we performed audit procedures that included, among others, evaluating the Company's use of the income approach and testing the significant assumptions used in the model, as described above. In testing the valuation of contingent consideration, we assessed, among other things, the terms of the arrangements and the conditions that must be met for the amounts to become payable. We evaluated the completeness and accuracy of the underlying data used in the analyses. For example, we compared the significant assumptions to current industry, market and economic trends, to the assumptions used to value similar assets in other acquisitions, to the historical results of the acquired business and to other guideline companies within the same industry. We involved our valuation professionals to assist with our evaluation of the methodology used by the Company and significant assumptions included in the fair value estimates. |
Year Ended December 31, | |||||||||||||||||
(in millions, except per share data) | 2021 | 2020 | 2019 | ||||||||||||||
Net sales | $ | $ | $ | ||||||||||||||
Cost of products sold | |||||||||||||||||
Gross profit | |||||||||||||||||
Operating expenses: | |||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||
Research and development expenses | |||||||||||||||||
Royalty expense | |||||||||||||||||
Amortization expense | |||||||||||||||||
Goodwill impairment charges | |||||||||||||||||
Intangible asset impairment charges | |||||||||||||||||
Contingent consideration net expense (benefit) | ( | ( | ( | ||||||||||||||
Restructuring net charges (credits) | |||||||||||||||||
Litigation-related net charges (credits) | |||||||||||||||||
Gains on disposal of businesses and assets | ( | ||||||||||||||||
Operating income (loss) | ( | ||||||||||||||||
Other income (expense): | |||||||||||||||||
Interest expense | ( | ( | ( | ||||||||||||||
Other, net | ( | ||||||||||||||||
Income (loss) before income taxes | ( | ||||||||||||||||
Income tax (benefit) expense | ( | ||||||||||||||||
Net income (loss) | ( | ||||||||||||||||
Preferred stock dividends | ( | ( | |||||||||||||||
Net income (loss) available to common stockholders | $ | $ | ( | $ | |||||||||||||
Net income (loss) per common share — basic | $ | $ | ( | $ | |||||||||||||
Net income (loss) per common share — assuming dilution | $ | $ | ( | $ | |||||||||||||
Weighted-average shares outstanding | |||||||||||||||||
Basic | |||||||||||||||||
Assuming dilution |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Net income (loss) | $ | $ | ( | $ | |||||||||||||
Other comprehensive income (loss), net of tax: | |||||||||||||||||
Foreign currency translation adjustment | ( | ||||||||||||||||
Net change in derivative financial instruments | ( | ||||||||||||||||
Net change in defined benefit pensions and other items | ( | ( | |||||||||||||||
Total other comprehensive income (loss) | ( | ||||||||||||||||
Total comprehensive income (loss) | $ | $ | ( | $ |
As of December 31, | |||||||||||
(in millions, except share and per share data) | 2021 | 2020 | |||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Trade accounts receivable, net | |||||||||||
Inventories | |||||||||||
Prepaid income taxes | |||||||||||
Assets held for sale | |||||||||||
Other current assets | |||||||||||
Total current assets | |||||||||||
Property, plant and equipment, net | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
Deferred tax assets | |||||||||||
Other long-term assets | |||||||||||
TOTAL ASSETS | $ | $ | |||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current debt obligations | $ | $ | |||||||||
Accounts payable | |||||||||||
Accrued expenses | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Long-term debt | |||||||||||
Deferred tax liabilities | |||||||||||
Other long-term liabilities | |||||||||||
Commitments and contingencies | |||||||||||
Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, at cost - | ( | ( | |||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive income (loss), net of tax: | |||||||||||
Foreign currency translation adjustment | |||||||||||
Unrealized gain on derivative financial instruments | |||||||||||
Unrealized costs associated with defined benefit pensions and other items | ( | ( | |||||||||
Total stockholders’ equity | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions, except share data) | 2021 | 2020 | 2019 | ||||||||||||||
Preferred stock shares outstanding | |||||||||||||||||
Beginning | |||||||||||||||||
Preferred stock issuance | |||||||||||||||||
Ending | |||||||||||||||||
Common stock shares outstanding | |||||||||||||||||
Beginning | |||||||||||||||||
Common stock issuance | |||||||||||||||||
Impact of stock-based compensation plans | |||||||||||||||||
Ending | |||||||||||||||||
Preferred stock | |||||||||||||||||
Beginning | $ | $ | $ | ||||||||||||||
Preferred stock issuance | |||||||||||||||||
Ending | $ | ||||||||||||||||
Common stock | |||||||||||||||||
Beginning | $ | $ | $ | ||||||||||||||
Common stock issuance | |||||||||||||||||
Impact of stock-based compensation plans | |||||||||||||||||
Ending | $ | $ | $ | ||||||||||||||
Treasury Stock | |||||||||||||||||
Beginning | $ | ( | $ | ( | $ | ( | |||||||||||
Repurchase of common stock | ( | ||||||||||||||||
Ending | $ | ( | $ | ( | $ | ( | |||||||||||
Additional Paid-In Capital | |||||||||||||||||
Beginning | $ | $ | $ | ||||||||||||||
Preferred stock issuance | |||||||||||||||||
Common stock issuance | |||||||||||||||||
Impact of stock-based compensation plans | |||||||||||||||||
Ending | $ | $ | $ | ||||||||||||||
Accumulated Deficit | |||||||||||||||||
Beginning | $ | ( | $ | ( | $ | ( | |||||||||||
Net income (loss) | ( | ||||||||||||||||
Cumulative effect adjustment for adoption of ASU 2016-13 | ( | ||||||||||||||||
Preferred stock dividends | ( | ( | |||||||||||||||
Ending | $ | ( | $ | ( | $ | ( | |||||||||||
Accumulated Other Comprehensive Income (Loss), Net of Tax | |||||||||||||||||
Beginning | $ | $ | $ | ||||||||||||||
Changes in other comprehensive income (loss), net of tax: | |||||||||||||||||
Foreign currency translation adjustment | ( | ||||||||||||||||
Derivative financial instruments | ( | ||||||||||||||||
Defined benefit pensions and other items | ( | ( | |||||||||||||||
Ending | $ | $ | $ | ||||||||||||||
Total stockholders' equity | $ | $ | $ | ||||||||||||||
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Net income (loss) | $ | $ | ( | $ | |||||||||||||
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities | |||||||||||||||||
Gain on disposal of businesses and assets | ( | ||||||||||||||||
Depreciation and amortization | |||||||||||||||||
Deferred and prepaid income taxes | ( | ( | ( | ||||||||||||||
Stock-based compensation expense | |||||||||||||||||
Goodwill and other intangible asset impairment charges | |||||||||||||||||
Net loss (gain) on investments and notes receivable | ( | ( | |||||||||||||||
Contingent consideration net expense (benefit) | ( | ( | ( | ||||||||||||||
Inventory step-up amortization | |||||||||||||||||
Foreign exchange (gain) loss | |||||||||||||||||
Other, net | |||||||||||||||||
Increase (decrease) in operating assets and liabilities, excluding purchase accounting: | |||||||||||||||||
Trade accounts receivable | ( | ( | |||||||||||||||
Inventories | ( | ( | ( | ||||||||||||||
Other assets | ( | ( | |||||||||||||||
Accounts payable, accrued expenses and other liabilities | ( | ||||||||||||||||
Cash provided by (used for) operating activities | |||||||||||||||||
Purchases of property, plant and equipment and internal use software | ( | ( | ( | ||||||||||||||
Proceeds from sale of property, plant and equipment | |||||||||||||||||
Payments for acquisitions of businesses, net of cash acquired | ( | ( | ( | ||||||||||||||
Proceeds from divestiture of certain businesses | |||||||||||||||||
Proceeds from royalty rights | |||||||||||||||||
Proceeds from (payments for) settlements of hedge contracts | ( | ||||||||||||||||
Proceeds from (payments for) investments and acquisitions of certain technologies | ( | ( | |||||||||||||||
Cash provided by (used for) investing activities | ( | ( | ( | ||||||||||||||
Payment of contingent consideration previously established in purchase accounting | ( | ( | ( | ||||||||||||||
Payments for royalty rights | ( | ( | ( | ||||||||||||||
Proceeds from royalty rights transfer | |||||||||||||||||
Payments on short-term borrowings | ( | ( | |||||||||||||||
Proceeds from short-term borrowings, net of debt issuance costs | |||||||||||||||||
Net increase (decrease) in commercial paper | ( | ( | |||||||||||||||
Payments on borrowings from credit facilities | ( | ||||||||||||||||
Proceeds from borrowings on credit facilities | |||||||||||||||||
Payments on long-term borrowings and debt extinguishment costs | ( | ( | |||||||||||||||
Proceeds from long-term borrowings, net of debt issuance costs | |||||||||||||||||
Cash dividends paid on preferred stock | ( | ( | |||||||||||||||
Net proceeds from issuance of preferred stock in connection with public offering | |||||||||||||||||
Net proceeds from issuance of common stock in connection with public offering | |||||||||||||||||
Payments for repurchase of common stock | ( | ||||||||||||||||
Cash used to net share settle employee equity awards | ( | ( | ( | ||||||||||||||
Proceeds from issuances of shares of common stock pursuant to employee stock compensation and purchase plans | |||||||||||||||||
Cash provided by (used for) financing activities | ( | ||||||||||||||||
Effect of foreign exchange rates on cash | ( | ( | |||||||||||||||
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | ( | ||||||||||||||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period | |||||||||||||||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Supplemental Information | |||||||||||||||||
Cash (received) paid for income taxes, net | $ | $ | $ | ||||||||||||||
Cash paid for interest | |||||||||||||||||
Fair value of contingent consideration recorded in purchase accounting | |||||||||||||||||
Non-cash impact of transferred royalty rights | ( | ( | |||||||||||||||
As of December 31, | |||||||||||||||||
Reconciliation to amounts within the consolidated balance sheets: | 2021 | 2020 | 2019 | ||||||||||||||
Cash and cash equivalents | $ | $ | $ | ||||||||||||||
Restricted cash and restricted cash equivalents included in Other current assets | |||||||||||||||||
Restricted cash equivalents included in Other long-term assets | |||||||||||||||||
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | $ | $ |
(in millions) | Preventice | Lumenis | All Other | Total | ||||||||||||||||
Payment for acquisition, net of cash acquired | $ | $ | $ | $ | ||||||||||||||||
Fair value of contingent consideration | ||||||||||||||||||||
Fair value of prior interest | ||||||||||||||||||||
$ | $ | $ | $ |
(in millions) | Preventice | Lumenis | All Other | Total | ||||||||||||||||
Goodwill | $ | $ | $ | $ | ||||||||||||||||
Amortizable intangible assets | ||||||||||||||||||||
Indefinite-lived intangible assets | ||||||||||||||||||||
Other assets acquired | ||||||||||||||||||||
Liabilities assumed | ( | ( | ( | ( | ||||||||||||||||
Net deferred tax liabilities | ( | ( | ( | |||||||||||||||||
$ | $ | $ | $ |
Amount Assigned (in millions) | Weighted Average Amortization Period (in years) | Risk-Adjusted Discount Rates used in Purchase Price Allocation | |||||||||||||||||||||
Preventice: | |||||||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Technology-related | $ | ||||||||||||||||||||||
Other intangible assets | |||||||||||||||||||||||
$ | |||||||||||||||||||||||
Lumenis: | |||||||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Technology-related | $ | ||||||||||||||||||||||
Other intangible assets | |||||||||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||
In-process research and development (IPR&D) | N/A | ||||||||||||||||||||||
$ | |||||||||||||||||||||||
All Other: | |||||||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||
Technology-related | $ | - | |||||||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||||||||
In-process research and development (IPR&D) | N/A | ||||||||||||||||||||||
$ | |||||||||||||||||||||||
(in millions) | |||||
Payment for acquisition, net of cash acquired | $ |
(in millions) | |||||
Goodwill | $ | ||||
Trade accounts receivable, net | |||||
Inventories | |||||
Other current assets | |||||
Other intangible assets, net | |||||
Other long-term assets | |||||
Accrued expenses and other current liabilities | ( | ||||
Other long-term liabilities | ( | ||||
Deferred tax liability | ( | ||||
$ |
Amount Assigned (in millions) | Amortization Period (in years) | Risk-Adjusted Discount Rates used in Purchase Price Allocation | |||||||||||||||||||||||||||
Amortizable intangible assets: | |||||||||||||||||||||||||||||
Technology-related | $ | - | % | - | |||||||||||||||||||||||||
Other intangible assets | - | ||||||||||||||||||||||||||||
$ |
(in millions) | |||||
Payments for acquisitions, net of cash acquired | $ | ||||
Fair value of contingent consideration | |||||
Fair value of prior interests | |||||
$ |
(in millions) | |||||
Goodwill | $ | ||||
Amortizable intangible assets | |||||
Indefinite-lived intangible assets | |||||
Other assets acquired | |||||
Liabilities assumed | ( | ||||
Net deferred tax liabilities | ( | ||||
$ |
Amount Assigned (in millions) | Amortization Period (in years) | Risk-Adjusted Discount Rates used in Purchase Price Allocation | |||||||||||||||
Amortizable intangible assets: | |||||||||||||||||
Technology-related | $ | ||||||||||||||||
Other intangible assets | |||||||||||||||||
Indefinite-lived intangible assets: | |||||||||||||||||
In-process research and development | N/A | ||||||||||||||||
$ |
(in millions) | |||||
Balance as of December 31, 2019 | $ | ||||
Contingent consideration net expense (benefit) | ( | ||||
Contingent consideration payments | ( | ||||
Balance as of December 31, 2020 | $ | ||||
Amount recorded related to current year acquisitions | |||||
Contingent consideration net expense (benefit) | ( | ||||
Contingent consideration payments | ( | ||||
Balance as of December 31, 2021 | $ |
Contingent Consideration Liability | Fair Value as of December 31, 2021 | Valuation Technique | Unobservable Input | Range | Weighted Average(1) | ||||||||||||||||||
R&D, Regulatory and Commercialization-based Milestones | $ | Discounted Cash Flow | Discount Rate | ||||||||||||||||||||
Probability of Payment | |||||||||||||||||||||||
Projected Year of Payment | 2022 | 2024 | 2023 | ||||||||||||||||||||
Revenue-based Payments | $ | Discounted Cash Flow | Discount Rate | % | - | ||||||||||||||||||
Probability of Payment | % | - | |||||||||||||||||||||
Projected Year of Payment | 2021 | - | 2024 | 2022 | |||||||||||||||||||
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Equity method investments | $ | $ | |||||||||
Measurement alternative investments(1) | |||||||||||
Publicly-held securities(2) | |||||||||||
Notes receivable | |||||||||||
$ | $ |
(in millions) | As of December 31, 2020 | ||||
Cash | $ | ||||
Trade accounts receivable, net | |||||
Inventories | |||||
Other current assets | |||||
Goodwill | |||||
Other intangible assets, net | |||||
Other long-term assets | |||||
Assets held for sale | $ | ||||
Accrued expenses and other current liabilities | $ | ||||
Other long-term liabilities | |||||
Deferred tax liability | |||||
Liabilities held for sale included in Other current liabilities | $ |
As of December 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
(in millions) | Gross Carrying Amount | Accumulated Amortization/Write-offs(1) | Gross Carrying Amount | Accumulated Amortization/Write-offs | |||||||||||||||||||
Technology-related | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Patents | ( | ( | |||||||||||||||||||||
Other intangible assets | ( | ( | |||||||||||||||||||||
Amortizable intangible assets | $ | $ | ( | $ | $ | ( | |||||||||||||||||
Goodwill | $ | $ | ( | $ | $ | ( | |||||||||||||||||
IPR&D | |||||||||||||||||||||||
Technology-related | |||||||||||||||||||||||
Indefinite-lived intangible assets | $ | $ |
(in millions) | MedSurg | Rhythm and Neuro | Cardiovascular | Specialty Pharmaceuticals | Total | ||||||||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Foreign currency fluctuations and other changes | ( | ||||||||||||||||||||||||||||
Goodwill impairment charges | ( | ( | |||||||||||||||||||||||||||
Goodwill reclassified to Current assets held for sale | ( | ( | |||||||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
Foreign currency fluctuations and other changes | ( | ( | ( | ( | |||||||||||||||||||||||||
Goodwill acquired | |||||||||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | $ | $ |
Fiscal Year | |||||
2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 |
(in millions) | FASB ASC Topic 815 Designation | As of December 31, | ||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
Forward currency contracts | Cash flow hedge | $ | $ | |||||||||||||||||
Forward currency contracts | Net investment hedge | |||||||||||||||||||
Foreign currency-denominated debt(1) | Net investment hedge | |||||||||||||||||||
Forward currency contracts | Non-designated | |||||||||||||||||||
Total Notional Outstanding | $ | $ |
Effect of Hedging Relationships on Accumulated Other Comprehensive Income | ||||||||||||||||||||||||||||||||
Amount Recognized in OCI on Hedges | Consolidated Statements of Operations(1) | Amount Reclassified from AOCI into Earnings | ||||||||||||||||||||||||||||||
(in millions) | Pre-Tax Gain (Loss) | Tax Benefit (Expense) | Gain (Loss) Net of Tax | Location of Amount Reclassified and Total Amount of Line Item | Pre-Tax (Gain) Loss | Tax (Benefit) Expense | (Gain) Loss Net of Tax | |||||||||||||||||||||||||
Year Ended December 31, 2021 | ||||||||||||||||||||||||||||||||
Forward currency contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | $ | $ | ( | $ | Cost of products sold | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||
Net investment hedges(2) | ( | Interest expense | ( | ( | ||||||||||||||||||||||||||||
Foreign currency-denominated debt | ||||||||||||||||||||||||||||||||
Net investment hedges(3) | ( | Other, net | ( | |||||||||||||||||||||||||||||
Interest rate derivative contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | Interest expense | ( | ||||||||||||||||||||||||||||||
Year Ended December 31, 2020 | ||||||||||||||||||||||||||||||||
Forward currency contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | $ | ( | $ | $ | ( | Cost of products sold | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||
Net investment hedges(2) | ( | ( | Interest expense | ( | ( | |||||||||||||||||||||||||||
Foreign currency-denominated debt | ||||||||||||||||||||||||||||||||
Net investment hedges(3) | ( | ( | Other, net | ( | ||||||||||||||||||||||||||||
Interest rate derivative contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | Interest expense | ( | ||||||||||||||||||||||||||||||
Year Ended December 31, 2019 | ||||||||||||||||||||||||||||||||
Forward currency contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | $ | $ | ( | $ | Cost of products sold | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||
Net investment hedges(2) | ( | Interest expense | ( | ( | ||||||||||||||||||||||||||||
Foreign currency-denominated debt | ||||||||||||||||||||||||||||||||
Net investment hedges(3) | ( | ( | Other, net | ( | ||||||||||||||||||||||||||||
Interest rate derivative contracts | ||||||||||||||||||||||||||||||||
Cash flow hedges | Interest expense | ( |
Designated Hedging Instrument | FASB ASC Topic 815 Designation | Location on Consolidated Statements of Operations | Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings | |||||||||||||||||
Forward currency contracts | Cash flow hedge | Cost of products sold | $ | |||||||||||||||||
Forward currency contracts | Net investment hedge | Interest expense | ||||||||||||||||||
Interest rate derivative contracts | Cash flow hedge | Interest expense | ( |
(in millions) | Location on Consolidated Statements of Operations | Year Ended December 31, | ||||||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||||||
Net gain (loss) on currency hedge contracts | Other, net | $ | ( | $ | $ | ( | ||||||||||||||||||||
Net gain (loss) on currency transaction exposures | Other, net | ( | ( | ( | ||||||||||||||||||||||
Net currency exchange gain (loss) | $ | ( | $ | ( | $ | ( |
(in millions) | Location on Consolidated Balance Sheets(1) | As of December 31, | ||||||||||||||||||
2021 | 2020 | |||||||||||||||||||
Derivative and Nonderivative Assets: | ||||||||||||||||||||
Designated Hedging Instruments | ||||||||||||||||||||
Forward currency contracts | Other current assets | $ | $ | |||||||||||||||||
Forward currency contracts | Other long-term assets | |||||||||||||||||||
Non-Designated Hedging Instruments | ||||||||||||||||||||
Forward currency contracts | Other current assets | |||||||||||||||||||
Total Derivative and Nonderivative Assets | $ | $ | ||||||||||||||||||
Derivative and Nonderivative Liabilities: | ||||||||||||||||||||
Designated Hedging Instruments | ||||||||||||||||||||
Forward currency contracts | Other current liabilities | $ | $ | |||||||||||||||||
Forward currency contracts | Other long-term liabilities | |||||||||||||||||||
Foreign currency-denominated debt(2) | Other long-term liabilities | |||||||||||||||||||
Non-Designated Hedging Instruments | ||||||||||||||||||||
Forward currency contracts | Other current liabilities | |||||||||||||||||||
Total Derivative and Nonderivative Liabilities | $ | $ |
As of | |||||||||||||||||||||||||||||||||||||||||||||||
December 31, 2021 | December 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
Assets | |||||||||||||||||||||||||||||||||||||||||||||||
Money market funds and time deposits | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Publicly-held securities | |||||||||||||||||||||||||||||||||||||||||||||||
Hedging instruments | |||||||||||||||||||||||||||||||||||||||||||||||
Licensing arrangements | |||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||
Liabilities | |||||||||||||||||||||||||||||||||||||||||||||||
Hedging instruments | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
Contingent consideration liability | |||||||||||||||||||||||||||||||||||||||||||||||
Licensing arrangements | |||||||||||||||||||||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ |
Licensing Arrangements | Fair Value as of December 31, 2021 | Valuation Technique | Unobservable Input | Range | Weighted Average(1) | ||||||||||||||||||
Financial Asset | $ | Discounted Cash Flow | Discount Rate | ||||||||||||||||||||
Projected Year of Payment | 2022 | - | 2025 | 2023 | |||||||||||||||||||
Financial Liability | $ | Discounted Cash Flow | Discount Rate | - | |||||||||||||||||||
Projected Year of Payment | 2022 | - | 2026 | 2024 |
(in millions) | |||||
Balance as of December 31, 2019 | $ | ||||
Proceeds from royalty rights | ( | ||||
Fair value adjustment (expense) benefit | |||||
Balance as of December 31, 2020 | $ | ||||
Proceeds from royalty rights | ( | ||||
Fair value adjustment (expense) benefit | |||||
Balance as of December 31, 2021 | $ |
(in millions) | |||||
Balance as of December 31, 2019 | $ | ||||
Payments for royalty rights | ( | ||||
Fair value adjustment expense (benefit) | |||||
Balance as of December 31, 2020 | $ | ||||
Payments for royalty rights | ( | ||||
Fair value adjustment expense (benefit) | |||||
Balance as of December 31, 2021 | $ |
Issuance Date | Maturity Date | As of December 31, | Coupon Rate(1) | |||||||||||||||||||||||||||||
(in millions, except interest rates) | 2021 | 2020 | ||||||||||||||||||||||||||||||
May 2022 Notes(3) | May 2015 | May 2022 | $ | $ | ||||||||||||||||||||||||||||
October 2023 Notes | August 2013 | October 2023 | ||||||||||||||||||||||||||||||
March 2024 Notes | February 2019 | March 2024 | ||||||||||||||||||||||||||||||
May 2025 Notes | May 2015 | May 2025 | ||||||||||||||||||||||||||||||
June 2025 Notes | May 2020 | June 2025 | ||||||||||||||||||||||||||||||
March 2026 Notes | February 2019 | March 2026 | ||||||||||||||||||||||||||||||
December 2027 Notes(4) | November 2019 | December 2027 | ||||||||||||||||||||||||||||||
March 2028 Notes | February 2018 | March 2028 | ||||||||||||||||||||||||||||||
March 2029 Notes | February 2019 | March 2029 | ||||||||||||||||||||||||||||||
June 2030 Notes | May 2020 | June 2030 | ||||||||||||||||||||||||||||||
November 2035 Notes(2) | November 2005 | November 2035 | ||||||||||||||||||||||||||||||
March 2039 Notes | February 2019 | March 2039 | ||||||||||||||||||||||||||||||
January 2040 Notes | December 2009 | January 2040 | ||||||||||||||||||||||||||||||
March 2049 Notes | February 2019 | March 2049 | ||||||||||||||||||||||||||||||
Unamortized Debt Issuance Discount and Deferred Financing Costs | 2022 - 2049 | ( | ( | |||||||||||||||||||||||||||||
Unamortized Gain on Fair Value Hedges | 2023 | |||||||||||||||||||||||||||||||
Finance Lease Obligation | Various | |||||||||||||||||||||||||||||||
Long-term debt | $ | $ |
Covenant Requirement as of December 31, 2021 | Actual as of December 31, 2021 | ||||||||||
Maximum permitted leverage ratio(1) |
As of December 31, 2021 | As of December 31, 2020 | ||||||||||||||||||||||
Factoring Arrangements | Amount De-recognized | Weighted Average Interest Rate | Amount De-recognized | Weighted Average Interest Rate | |||||||||||||||||||
Euro denominated | $ | % | $ | % | |||||||||||||||||||
Yen denominated | % | % | |||||||||||||||||||||
Renminbi denominated | % | % |
Fiscal Year | Unrecorded Purchase Obligations | ||||
2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
$ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Assets | |||||||||||
Operating lease right-of-use assets in Other long-term assets | $ | $ | |||||||||
Liabilities | |||||||||||
Operating lease liabilities in Other current liabilities | |||||||||||
Operating lease liabilities in Other long-term liabilities |
As of December 31, | |||||||||||
2021 | 2020 | ||||||||||
Weighted average remaining lease term | |||||||||||
Weighted average discount rate |
Year Ended December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Cash paid for amounts included in the measurement of operating lease liabilities | |||||||||||
Operating cash flows from operating leases | $ | $ |
Fiscal year | Operating Leases | ||||
2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
Thereafter | |||||
Total future minimum operating lease payments | |||||
Less: imputed interest | ( | ||||
Present value of operating lease liabilities | $ |
Type of Cost (in millions) | Total Estimated Amount Expected to be Incurred | ||||||||||
Restructuring charges: | |||||||||||
Termination benefits | $ | - | $ | ||||||||
Other(1) | - | ||||||||||
Restructuring-related expenses: | |||||||||||
Other(2) | - | ||||||||||
$ | - | $ |
Type of cost (in millions) | Total Amount Incurred | ||||
Restructuring charges: | |||||
Termination benefits | $ | ||||
Other(1) | |||||
Restructuring-related expenses: | |||||
Other(2) | |||||
$ |
Year Ended December 31, 2021 | Termination Benefits | Transfer Costs | Other | Total | |||||||||||||||||||
Restructuring charges | $ | $ | $ | $ | |||||||||||||||||||
Restructuring-related expenses: | |||||||||||||||||||||||
Cost of products sold | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Research and development expenses | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Year Ended December 31, 2020 | Termination Benefits | Transfer Costs | Other | Total | |||||||||||||||||||
Restructuring charges | $ | $ | $ | $ | |||||||||||||||||||
Restructuring-related expenses: | |||||||||||||||||||||||
Cost of products sold | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
Research and development expenses | |||||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
$ | $ | $ | $ | ||||||||||||||||||||
Year Ended December 31, 2019 | Termination Benefits | Transfer Costs | Other | Total | |||||||||||||||||||
Restructuring charges | $ | $ | $ | $ | |||||||||||||||||||
Restructuring-related expenses: | |||||||||||||||||||||||
Cost of products sold | |||||||||||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||||||||
$ | $ | $ | $ |
(in millions) | 2016 Restructuring Plan | 2019 Restructuring Plan | Total | ||||||||||||||
Termination benefits | $ | $ | $ | ||||||||||||||
Other(1) | |||||||||||||||||
Total restructuring charges | |||||||||||||||||
Transfer costs | |||||||||||||||||
Other(2) | |||||||||||||||||
Restructuring-related charges | |||||||||||||||||
$ | $ | $ |
(in millions) | 2016 Restructuring Plan | 2019 Restructuring Plan | Total | ||||||||||||||
Termination benefits | $ | $ | $ | ||||||||||||||
Transfer costs | |||||||||||||||||
Other | |||||||||||||||||
$ | $ | $ | |||||||||||||||
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Trade accounts receivable | $ | $ | |||||||||
Allowance for credit losses | ( | ( | |||||||||
$ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Beginning balance | $ | $ | $ | ||||||||||||||
Cumulative effect adjustment for adoption of ASU 2016-13 | n/a | n/a | |||||||||||||||
Credit loss expense | |||||||||||||||||
Write-offs | ( | ( | ( | ||||||||||||||
Ending balance | $ | $ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Finished goods | $ | $ | |||||||||
Work-in-process | |||||||||||
Raw materials | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Restricted cash and restricted cash equivalents | $ | $ | |||||||||
Derivative assets | |||||||||||
Licensing arrangements | |||||||||||
Other | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Land | $ | $ | |||||||||
Buildings and improvements | |||||||||||
Equipment, furniture and fixtures | |||||||||||
Capital in progress | |||||||||||
Less: accumulated depreciation | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Restricted cash equivalents | $ | $ | |||||||||
Operating lease right-of-use assets | |||||||||||
Derivative assets | |||||||||||
Investments | |||||||||||
Licensing arrangements | |||||||||||
Other | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Legal reserves | $ | $ | |||||||||
Payroll and related liabilities | |||||||||||
Rebates | |||||||||||
Contingent consideration | |||||||||||
Other | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Deferred revenue | $ | $ | |||||||||
Licensing arrangements | |||||||||||
Taxes payable | |||||||||||
Liabilities held for sale | |||||||||||
Other | |||||||||||
$ | $ |
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Accrued income taxes | $ | $ | |||||||||
Legal reserves | |||||||||||
Contingent consideration | |||||||||||
Licensing arrangements | |||||||||||
Operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Other | |||||||||||
$ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Domestic | $ | ( | $ | ( | $ | ( | |||||||||||
Foreign | |||||||||||||||||
$ | $ | ( | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Current | |||||||||||||||||
Federal | $ | $ | ( | $ | |||||||||||||
State | ( | ||||||||||||||||
Foreign | |||||||||||||||||
Deferred | |||||||||||||||||
Federal | ( | ( | ( | ||||||||||||||
State | ( | ( | ( | ||||||||||||||
Foreign | ( | ( | |||||||||||||||
( | ( | ( | |||||||||||||||
$ | $ | $ | ( |
Year Ended December 31, | |||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
U.S. federal statutory income tax rate | % | ( | % | % | |||||||||||||
State income taxes, net of federal benefit | % | % | % | ||||||||||||||
Domestic taxes on foreign earnings | % | % | % | ||||||||||||||
Effect of foreign taxes | ( | % | ( | % | ( | % | |||||||||||
Acquisition-related | ( | % | ( | % | % | ||||||||||||
Research credit | ( | % | ( | % | ( | % | |||||||||||
Valuation allowance | % | ( | % | % | |||||||||||||
Goodwill impairment charges | % | % | % | ||||||||||||||
Compensation-related | ( | % | ( | % | ( | % | |||||||||||
Non-deductible expenses | % | % | % | ||||||||||||||
Uncertain tax positions | % | ( | % | % | |||||||||||||
Intra-entity asset transfers | % | % | ( | % | |||||||||||||
Return to provision | ( | % | ( | % | ( | % | |||||||||||
Change in tax rates | % | % | ( | % | |||||||||||||
Other, net | % | % | ( | % | |||||||||||||
% | % | ( | % | ||||||||||||||
As of December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Deferred Tax Assets: | (reclassified)(1) | ||||||||||
Inventory costs and related reserves | $ | $ | |||||||||
Tax benefit of net operating losses and credits | |||||||||||
Reserves and accruals | |||||||||||
Restructuring-related charges | |||||||||||
Litigation and product liability reserves | |||||||||||
Investment write-down | |||||||||||
Compensation related | |||||||||||
Federal benefit of uncertain tax positions | |||||||||||
Intangible assets | |||||||||||
Capitalized R&D | |||||||||||
Property, plant and equipment | |||||||||||
Other | ( | ||||||||||
Less: valuation allowance | ( | ( | |||||||||
Deferred Tax Liabilities: | |||||||||||
Property, plant and equipment | |||||||||||
Unrealized gains and losses on derivative financial instruments | |||||||||||
Investment write-up | |||||||||||
Net Deferred Tax Assets | |||||||||||
Prepaid on intercompany profit | |||||||||||
Net Deferred Tax Assets and Prepaid on Intercompany Profit | $ | $ |
Location on Consolidated Balance Sheets | As of December 31, | |||||||||||||
Component | 2021 | 2020 | ||||||||||||
Prepaid on intercompany profit | Prepaid income taxes | $ | $ | |||||||||||
Non-current deferred tax asset | Assets held for sale | |||||||||||||
Non-current deferred tax asset | Deferred tax assets | |||||||||||||
Deferred Tax Assets and Prepaid on Intercompany Profit | ||||||||||||||
Non-current deferred tax liability | Deferred tax liabilities | |||||||||||||
Non-current deferred tax liability | Liabilities held for sale in Other current liabilities | |||||||||||||
Deferred Tax Liabilities | ||||||||||||||
Net Deferred Tax Assets and Prepaid on Intercompany Profit | $ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Beginning Balance | $ | $ | $ | ||||||||||||||
Additions based on positions related to the current year | |||||||||||||||||
Additions based on positions related to prior years | |||||||||||||||||
Reductions for tax positions of prior years | ( | ( | ( | ||||||||||||||
Settlements with taxing authorities | ( | ( | ( | ||||||||||||||
Statute of limitation expirations | ( | ( | ( | ||||||||||||||
Ending Balance | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions, except per share data) | 2021 | 2020 | 2019 | ||||||||||||||
Cost of products sold | $ | $ | $ | ||||||||||||||
Selling, general and administrative expenses | |||||||||||||||||
Research and development expenses | |||||||||||||||||
Income tax (benefit) expense | ( | ( | ( | ||||||||||||||
$ | $ | $ | |||||||||||||||
Net impact per common share - basic | $ | $ | $ | ||||||||||||||
Net impact per common share - assuming dilution | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||||||||||||||||
Options granted (in thousands) | |||||||||||||||||||||||||||||||||||
Weighted-average exercise price | $ | $ | $ | ||||||||||||||||||||||||||||||||
Weighted-average grant-date fair value | $ | $ | $ | ||||||||||||||||||||||||||||||||
Black-Scholes Assumptions | |||||||||||||||||||||||||||||||||||
Expected volatility | % | % | % | ||||||||||||||||||||||||||||||||
Expected term (in years, weighted) | |||||||||||||||||||||||||||||||||||
Risk-free interest rate | - | - | - |
Stock Options (in thousands) | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate Intrinsic Value (in millions) | ||||||||||||||||||||
Outstanding as of December 31, 2018 | $ | ||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Exercised | ( | ||||||||||||||||||||||
Cancelled/forfeited | ( | ||||||||||||||||||||||
Outstanding as of December 31, 2019 | $ | ||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Exercised | ( | ||||||||||||||||||||||
Cancelled/forfeited | ( | ||||||||||||||||||||||
Outstanding as of December 31, 2020 | $ | ||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Exercised | ( | ||||||||||||||||||||||
Cancelled/forfeited | ( | ||||||||||||||||||||||
Outstanding as of December 31, 2021 | $ | ||||||||||||||||||||||
Exercisable as of December 31, 2021 | |||||||||||||||||||||||
Expected to vest as of December 31, 2021 | |||||||||||||||||||||||
Total vested and expected to vest as of December 31, 2021 | $ | $ |
Non-Vested Stock Award Units (in thousands) | Weighted Average Grant-Date Fair Value | |||||||||||||
Balance as of December 31, 2018 | $ | |||||||||||||
Granted | ||||||||||||||
Vested(1) | ( | |||||||||||||
Forfeited | ( | |||||||||||||
Balance as of December 31, 2019 | $ | |||||||||||||
Granted | ||||||||||||||
Vested(1) | ( | |||||||||||||
Forfeited | ( | |||||||||||||
Balance as of December 31, 2020 | $ | |||||||||||||
Granted | $ | |||||||||||||
Vested(1) | ( | $ | ||||||||||||
Forfeited | ( | |||||||||||||
Balance as of December 31, 2021 | $ |
2021 | 2020 | 2019 | |||||||||||||||
Awards | Awards | Awards | |||||||||||||||
Stock price on date of grant | $ | $ | $ | ||||||||||||||
Measurement period (in years) | |||||||||||||||||
Risk-free rate | % | % | % |
2021 AFCF | 2020 AFCF | 2019 AFCF | |||||||||||||||
Fair value, net of forfeitures to date (in millions) | $ | $ | $ | ||||||||||||||
Achievement of target payout | % | % | % | ||||||||||||||
Year-end stock price used in determining fair value | $ | $ | $ |
Unrecognized Compensation Cost (in millions) (1) | Weighted Average Remaining Vesting Period (in years) | ||||||||||
Stock options | $ | ||||||||||
Non-vested stock awards | |||||||||||
$ |
Year Ended December 31, | |||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||||||||||||||||
Shares issued or to be issued (in thousands) | |||||||||||||||||||||||||||||||||||
Range of purchase prices | $ | - | $ | $ | $ | - | $ | ||||||||||||||||||||||||||||
Expense recognized (in millions) | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Weighted average shares outstanding - basic | |||||||||||||||||
Net effect of common stock equivalents | |||||||||||||||||
Weighted average shares outstanding - assuming dilution |
Year Ended December 31, | |||||||||||||||||
(in millions) | 2021 | 2020 | 2019 | ||||||||||||||
Common stock equivalents(1) | n/a | n/a | |||||||||||||||
Stock options outstanding(2) | |||||||||||||||||
MCPS(3) | n/a |
Year Ended December 31, | |||||||||||||||||
Net sales | 2021 | 2020 | 2019 | ||||||||||||||
MedSurg | $ | $ | $ | ||||||||||||||
Rhythm and Neuro | |||||||||||||||||
Cardiovascular | |||||||||||||||||
Total net sales of reportable segments | |||||||||||||||||
All other (Specialty Pharmaceuticals) | $ | ||||||||||||||||
Consolidated net sales | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
Depreciation expense | 2021 | 2020 | 2019 | ||||||||||||||
MedSurg | $ | $ | $ | ||||||||||||||
Rhythm and Neuro | |||||||||||||||||
Cardiovascular | |||||||||||||||||
Total depreciation expense of reportable segments | |||||||||||||||||
All other (Specialty Pharmaceuticals) | $ | $ | |||||||||||||||
Consolidated depreciation expense | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
Income (loss) before income taxes | 2021 | 2020 | 2019 | ||||||||||||||
MedSurg | $ | $ | $ | ||||||||||||||
Rhythm and Neuro | |||||||||||||||||
Cardiovascular | |||||||||||||||||
Total operating income of reportable segments | |||||||||||||||||
All other (Specialty Pharmaceuticals) | |||||||||||||||||
Unallocated amounts: | |||||||||||||||||
Corporate expenses, including hedging activities | ( | ( | ( | ||||||||||||||
Goodwill and other intangible asset impairment charges, acquisition/divestiture-related net charges (credits), restructuring and restructuring-related net charges (credits), certain litigation-related net charges (credits) and EU Medical Device Regulation (MDR) implementation costs | ( | ( | ( | ||||||||||||||
Amortization expense | ( | ( | ( | ||||||||||||||
Operating income (loss) | ( | ||||||||||||||||
Other income (expense), net | ( | ( | |||||||||||||||
Income (loss) before income taxes | $ | $ | ( | $ |
Operating income of reportable segments as a percentage of net sales of reportable segments | Year Ended December 31, | ||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||
MedSurg | % | % | % | ||||||||||||||
Rhythm and Neuro | % | % | % | ||||||||||||||
Cardiovascular | % | % | % |
As of December 31, | |||||||||||
Total assets | 2021 | 2020 | |||||||||
MedSurg | $ | $ | |||||||||
Rhythm and Neuro | |||||||||||
Cardiovascular | |||||||||||
Total assets of reportable segments | |||||||||||
All other (Specialty Pharmaceuticals) | |||||||||||
Goodwill | |||||||||||
Other intangible assets, net | |||||||||||
All other corporate assets | |||||||||||
$ | $ |
As of December 31, | |||||||||||||||||
Long-lived assets | 2021 | 2020 | 2019 | ||||||||||||||
U.S. | $ | $ | $ | ||||||||||||||
Ireland | |||||||||||||||||
Other countries | |||||||||||||||||
Property, plant and equipment, net | |||||||||||||||||
Goodwill | |||||||||||||||||
Other intangible assets, net | |||||||||||||||||
Operating lease right-of-use assets in Other long-term assets | |||||||||||||||||
$ | $ | $ |
Year Ended December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2021 | 2020 | 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Businesses | U.S. | OUS | Total | U.S. | OUS | Total | U.S. | OUS | Total | ||||||||||||||||||||||||||||||||||||||||||||
Endoscopy | $ | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||
Urology and Pelvic Health | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Cardiac Rhythm Management | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Electrophysiology | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Neuromodulation | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Interventional Cardiology | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Peripheral Interventions | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Specialty Pharmaceuticals | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Sales | $ | $ | $ | $ | $ | $ | $ | $ | $ |
Year Ended December 31, | |||||||||||||||||
Geographic Regions | 2021 | 2020 | 2019 | ||||||||||||||
U.S. | $ | $ | $ | ||||||||||||||
EMEA (Europe, Middle East and Africa) | |||||||||||||||||
APAC (Asia-Pacific) | |||||||||||||||||
LACA (Latin America and Canada) | |||||||||||||||||
Medical Devices | |||||||||||||||||
U.S. | |||||||||||||||||
International | |||||||||||||||||
Specialty Pharmaceuticals | |||||||||||||||||
Net Sales | $ | $ | $ | ||||||||||||||
Emerging Markets(1) | $ | $ | $ |
(in millions) | Foreign Currency Translation Adjustments | Net Change in Derivative Financial Instruments | Net Change in Defined Benefit Pensions and Other Items | Total | |||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | ( | $ | ||||||||||||||||||
Other comprehensive income (loss) before reclassifications | |||||||||||||||||||||||
(Income) loss amounts reclassified from accumulated other comprehensive income | ( | ( | ( | ||||||||||||||||||||
Total other comprehensive income (loss) | ( | ||||||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | ( | $ |
(in millions) | Foreign Currency Translation Adjustments | Net Change in Derivative Financial Instruments | Net Change in Defined Benefit Pensions and Other Items | Total | |||||||||||||||||||
Balance as of December 31, 2019 | $ | $ | $ | ( | $ | ||||||||||||||||||
Other comprehensive income (loss) before reclassifications | ( | ( | |||||||||||||||||||||
(Income) loss amounts reclassified from accumulated other comprehensive income | ( | ( | ( | ||||||||||||||||||||
Total other comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | ( | $ |
Discount Rate | Expected Return on Plan Assets | Rate of Compensation Increase | |||||||||||||||
U.K. Plan |
(in millions) | |||||
Fair value of plan assets | $ | ||||
Benefit obligation | ( | ||||
Funded status | $ | ( |
As of December 31, 2021 | |||||||||||||||||||||||
(in millions) | Accumulated Benefit Obligation (ABO) | Projected Benefit Obligation (PBO) | Fair value of Plan Assets | Unfunded/Underfunded PBO Recognized | |||||||||||||||||||
Domestic Retirement Plans | $ | $ | $ | $ | |||||||||||||||||||
U.K. Plan | |||||||||||||||||||||||
Other International Retirement Plans | |||||||||||||||||||||||
$ | $ | $ | $ |
As of December 31, 2020 | |||||||||||||||||||||||
(in millions) | Accumulated Benefit Obligation (ABO) | Projected Benefit Obligation (PBO) | Fair value of Plan Assets | Unfunded/Underfunded PBO Recognized | |||||||||||||||||||
Domestic Retirement Plans | $ | $ | $ | $ | |||||||||||||||||||
U.K. Plan | |||||||||||||||||||||||
Other International Retirement Plans | |||||||||||||||||||||||
$ | $ | $ | $ |
Year Ended December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Beginning obligations | $ | $ | |||||||||
Acquired plans | |||||||||||
Service costs | |||||||||||
Interest costs | |||||||||||
Actuarial (gain) loss | ( | ||||||||||
Plan amendments and assumption changes | ( | ( | |||||||||
Benefits paid | ( | ( | |||||||||
Impact of foreign currency fluctuations | ( | ||||||||||
Ending obligation | $ | $ |
Weighted Average Discount Rate | Weighted Average Expected Return on Plan | Weighted Average Rate of Compensation Increase(1) | |||||||||||||||
Domestic Retirement Plans | n/a | ||||||||||||||||
U.K. Plan | n/a | ||||||||||||||||
Other International Retirement Plans |
Weighted Average Discount Rate | Weighted Average Expected Return on Plan | Weighted Average Rate of Compensation Increase(1) | |||||||||||||||
Domestic Retirement Plans | n/a | ||||||||||||||||
U.K. Plan | n/a | ||||||||||||||||
Other International Retirement Plans |
Year Ended December 31, | |||||||||||
(in millions) | 2021 | 2020 | |||||||||
Beginning fair value | $ | $ | |||||||||
Acquired plans | |||||||||||
Actual return on plan assets | |||||||||||
Employer contributions | |||||||||||
Participant contributions | |||||||||||
Actuarial gain (loss) | ( | ||||||||||
Benefits paid | ( | ( | |||||||||
Impact of foreign currency fluctuations | ( | ||||||||||
Ending fair value | $ | $ |
As of | |||||||||||||||||||||||
December 31, 2021 | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
Buy-in contracts | $ | $ | $ | $ | |||||||||||||||||||
Total assets | $ | $ | $ | $ |
As of | |||||||||||||||||||||||
December 31, 2020 | |||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||
Buy-in contracts | $ | $ | $ | $ | |||||||||||||||||||
Total assets | $ | $ | $ | $ |
(in millions) | Buy-in Contracts | ||||
Balance as of December 31, 2020 | $ | ||||
Actual return on plan assets | |||||
Actuarial gain (loss) | ( | ||||
Transfers out for benefits paid | ( | ||||
Impact of foreign currency fluctuations | ( | ||||
Balance as of December 31, 2021 | $ |
(in millions) | Post Retirement Benefits | ||||
2022 | $ | ||||
2023 | |||||
2024 | |||||
2025 | |||||
2026 | |||||
2027-2031 | |||||
EXHIBIT NO. | TITLE | |||||||
2.1 | ||||||||
3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
4.1 | Specimen Certificate for shares of the Company's Common Stock (incorporated herein by reference to Exhibit 4.1, Registration No. 33-46980). | |||||||
4.2* | ||||||||
4.3 | ||||||||
4.4 | ||||||||
4.5 | ||||||||
4.6 | ||||||||
4.7 | ||||||||
4.8 | ||||||||
4.9 | ||||||||
4.10 | ||||||||
4.11 | ||||||||
4.12 | ||||||||
4.13 | ||||||||
4.14 | ||||||||
4.15 | ||||||||
4.16 | ||||||||
4.17 | ||||||||
4.18 | ||||||||
4.19 | ||||||||
4.20 | ||||||||
4.21 | ||||||||
4.22 | ||||||||
4.23 |
4.24 | ||||||||
10.1 | ||||||||
10.2 | ||||||||
10.3 | ||||||||
10.4 | ||||||||
10.5 | ||||||||
10.6 | ||||||||
10.7 | ||||||||
10.8 | Transaction Agreement, dated as of January 8, 2006, as amended, between the Company and Abbott Laboratories (incorporated herein by reference to Exhibit 10.47, Exhibit 10.48, Exhibit 10.49 and Exhibit 10.50, Annual Report on Form 10-K for year ended December 31, 2005 and Exhibit 10.1, Current Report on Form 8-K dated April 7, 2006, File No. 1-11083). | |||||||
10.9 | ||||||||
10.10 | ||||||||
10.11 | ||||||||
10.12 | ||||||||
10.13 | Form of Boston Scientific Corporation Excess Benefit Plan, as amended (incorporated herein by reference to Exhibit 10.1, Current Report on Form 8-K dated June 29, 2005 and Exhibit 10.4, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).# | |||||||
10.14 | ||||||||
10.15 | ||||||||
10.16 | ||||||||
10.17 | ||||||||
10.18 | ||||||||
10.19 | ||||||||
10.20 | Boston Scientific Corporation 2000 Long-Term Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.20, Annual Report on Form 10-K for the year ended December 31, 1999, Exhibit 10.18, Annual Report on Form 10-K for the year ended December 31, 2001, Exhibit 10.1, Current Report on Form 8-K dated December 22, 2004, Exhibit 10.3, Current Report on Form 8-K dated May 9, 2005, and Exhibit 10.3, Current Report on Form 8-K dated December 16, 2008, File No. 1-11083).# | |||||||
10.21 | ||||||||
10.22 | ||||||||
10.23 | ||||||||
10.24 | ||||||||
10.25 | ||||||||
10.26 |
10.27 | ||||||||
10.28 | ||||||||
10.29 | ||||||||
10.30 | ||||||||
10.31 | ||||||||
10.32 | ||||||||
10.33 | ||||||||
10.34 | ||||||||
10.35 | ||||||||
10.36 | ||||||||
10.37 | ||||||||
10.38 | ||||||||
10.39 | ||||||||
10.40 | ||||||||
10.41 | ||||||||
10.42 | ||||||||
10.43 | ||||||||
10.44 | ||||||||
10.45 | ||||||||
10.46 | ||||||||
10.47 | ||||||||
10.48 | ||||||||
10.49 | ||||||||
10.50 | ||||||||
10.51 | ||||||||
10.52 | ||||||||
10.53 | ||||||||
10.54 | ||||||||
10.55 | ||||||||
10.56 | ||||||||
10.57 | ||||||||
10.58 | ||||||||
10.59 | ||||||||
10.60 | ||||||||
10.61 | ||||||||
10.62 | ||||||||
10.63 | ||||||||
10.64 | ||||||||
10.65 | ||||||||
10.66 | ||||||||
10.67 | ||||||||
10.68 | ||||||||
10.69 | ||||||||
10.70 | ||||||||
10.71 | ||||||||
10.72 | ||||||||
10.73 | ||||||||
10.74 | ||||||||
10.75 | ||||||||
10.76 | ||||||||
10.77 | ||||||||
10.78 | ||||||||
10.79 | ||||||||
10.80 | ||||||||
10.81 | ||||||||
10.82 | ||||||||
10.83 | ||||||||
10.84 | ||||||||
10.85 | ||||||||
10.86 | ||||||||
10.87 | ||||||||
10.88 | ||||||||
10.89 | ||||||||
10.90 | ||||||||
10.91 | ||||||||
10.92 | ||||||||
10.93 | ||||||||
10.94 | ||||||||
10.95 | ||||||||
10.96 | ||||||||
10.97 | ||||||||
10.98 | ||||||||
10.99 | ||||||||
10.100 | ||||||||
10.101 | ||||||||
10.102 | ||||||||
10.103 | ||||||||
10.104 | ||||||||
10.105 | ||||||||
10.106 | ||||||||
10.107 | ||||||||
10.108 | ||||||||
10.109 | ||||||||
10.110 | ||||||||
10.111 | ||||||||
10.112 | ||||||||
10.113 | ||||||||
10.114 | ||||||||
10.115 | ||||||||
10.116 | ||||||||
10.117 | ||||||||
10.118 | ||||||||
10.119 | ||||||||
10.120 | ||||||||
10.121 | ||||||||
10.122 | ||||||||
10.123 | ||||||||
10.124 | ||||||||
10.125 | ||||||||
10.126 | ||||||||
10.127 | ||||||||
10.128 | ||||||||
10.129 | ||||||||
10.130 | ||||||||
10.131 | ||||||||
10.132 | ||||||||
10.133 | ||||||||
10.134 | ||||||||
10.135 | ||||||||
10.136 | ||||||||
10.137 | ||||||||
21* | ||||||||
23* | ||||||||
31.1* | ||||||||
31.2* | ||||||||
32.1* | ||||||||
32.2* | ||||||||
101.SCH* | XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document. | |||||||
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101) | |||||||
Dated: February 23, 2022 | Boston Scientific Corporation | |||||||||||||
By: | /s/ Daniel J. Brennan | |||||||||||||
Daniel J. Brennan | ||||||||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||||
(duly authorized officer and principal financial officer) |
Dated: February 23, 2022 | By: | /s/ Daniel J. Brennan | ||||||||||||
Daniel J. Brennan | ||||||||||||||
Executive Vice President and Chief Financial Officer | ||||||||||||||
(Principal Financial Officer) |
Dated: February 23, 2022 | By: | /s/ Michael F. Mahoney | ||||||||||||
Michael F. Mahoney | ||||||||||||||
Director, Chairman of the Board, President and Chief Executive Officer | ||||||||||||||
(Principal Executive Officer) |
Dated: February 23, 2022 | By: | /s/ Jonathan R. Monson | ||||||||||||
Jonathan R. Monson | ||||||||||||||
Vice President, Global Controller and Chief Accounting Officer | ||||||||||||||
(Principal Accounting Officer) |
Dated: February 23, 2022 | By: | /s/ Nelda J. Connors | ||||||||||||
Nelda J. Connors | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ Charles J. Dockendorff | ||||||||||||
Charles J. Dockendorff | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ Yoshiaki Fujimori | ||||||||||||
Yoshiaki Fujimori | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ Donna A. James | ||||||||||||
Donna A. James | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ Edward J. Ludwig | ||||||||||||
Edward J. Ludwig | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ David J. Roux | ||||||||||||
David J. Roux | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ John E. Sununu | ||||||||||||
John E. Sununu | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ David S. Wichmann | ||||||||||||
David S. Wichmann | ||||||||||||||
Director | ||||||||||||||
Dated: February 23, 2022 | By: | /s/ Ellen M. Zane | ||||||||||||
Ellen M. Zane | ||||||||||||||
Director | ||||||||||||||
Description | Balance at Beginning of Year | Cumulative effect adjustment for adoption of ASU 2016-13 (a) | Credit loss exposure (a) | Write-offs (c) | Balance at End of Year | ||||||||||||||||||||||||
Year Ended December 31, 2021: | |||||||||||||||||||||||||||||
Allowances for credit losses | $ | n/a | ( | $ | |||||||||||||||||||||||||
Year Ended December 31, 2020: | |||||||||||||||||||||||||||||
Allowances for credit losses (b) | $ | 10 | ( | $ | |||||||||||||||||||||||||
Year Ended December 31, 2019: | |||||||||||||||||||||||||||||
Allowances for uncollectible accounts | $ | n/a | ( | $ |
Assumed Applicable Market Value of our common stock | Number of shares of our common stock to be received upon mandatory conversion | Assumed conversion value (calculated as Applicable Market Value multiplied by the number of shares of our common stock to be received upon mandatory conversion) | ||||||||||||
$20.00 | 2.9197 | $58.39 | ||||||||||||
$25.00 | 2.9197 | $72.99 | ||||||||||||
$30.00 | 2.9197 | $87.59 | ||||||||||||
$34.25 | 2.9197 | $100.00 | ||||||||||||
$35.00 | 2.8571 | $100.00 | ||||||||||||
$37.50 | 2.6667 | $100.00 | ||||||||||||
$40.00 | 2.5000 | $100.00 | ||||||||||||
$41.96 | 2.3834 | $100.01 | ||||||||||||
$45.00 | 2.3834 | $107.25 | ||||||||||||
$50.00 | 2.3834 | $119.17 | ||||||||||||
$55.00 | 2.3834 | $131.09 | ||||||||||||
$60.00 | 2.3834 | $143.00 |
Fundamental Change Effective Date | Fundamental Change Share Price | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$10.00 | $15.00 | $20.00 | $25.00 | $30.00 | $34.25 | $37.50 | $40.00 | $41.96 | $45.00 | $50.00 | $55.00 | $60.00 | $75.00 | $100.00 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
May 27, 2020 | 2.8542 | 2.7933 | 2.7095 | 2.6255 | 2.5532 | 2.5037 | 2.4729 | 2.4529 | 2.4394 | 2.4214 | 2.3988 | 2.3828 | 2.3715 | 2.3544 | 2.3477 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 1, 2021 | 2.8856 | 2.8539 | 2.7863 | 2.6998 | 2.6145 | 2.5520 | 2.5122 | 2.4863 | 2.4687 | 2.4455 | 2.4169 | 2.3973 | 2.3842 | 2.3660 | 2.3601 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 1, 2022 | 2.9050 | 2.9007 | 2.8724 | 2.8033 | 2.7052 | 2.6193 | 2.5610 | 2.5225 | 2.4965 | 2.4633 | 2.4248 | 2.4014 | 2.3878 | 2.3739 | 2.3716 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
June 1, 2023 | 2.9197 | 2.9197 | 2.9197 | 2.9197 | 2.9197 | 2.9197 | 2.6667 | 2.5000 | 2.3834 | 2.3834 | 2.3834 | 2.3834 | 2.3834 | 2.3834 | 2.3834 |
1 | I have reviewed this Annual Report on Form 10-K 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: February 23, 2022 | /s/ Michael F. Mahoney | ||||||||||||||||
Michael F. Mahoney | |||||||||||||||||
Chief Executive Officer |
1 | I have reviewed this Annual Report on Form 10-K 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: February 23, 2022 | /s/ Daniel J. Brennan | ||||||||||||||||
Daniel J. Brennan | |||||||||||||||||
Executive Vice President and Chief Financial Officer |
(1) | the Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and | |||||||
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Boston Scientific Corporation. |
By: | /s/ Michael F. Mahoney | |||||||
Michael F. Mahoney | ||||||||
Chief Executive Officer | ||||||||
February 23, 2022 |
(1) | the Report fully complies with the requirements of Section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and | |||||||
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Boston Scientific Corporation. |
By: | /s/ Daniel J. Brennan | |||||||
Daniel J. Brennan | ||||||||
Executive Vice President and Chief Financial Officer | ||||||||
February 23, 2022 |
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Audit Information |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Audit Information [Abstract] | |
Auditor Name | Ernst & Young LLP |
Auditor Firm ID | 42 |
Auditor Location | Boston, Massachusetts |
Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Net income (loss) | $ 1,041 | $ (82) | $ 4,700 |
Other comprehensive income (loss), net of tax: | |||
Foreign currency translation adjustment | (125) | 76 | 195 |
Net change in derivative financial instruments | 170 | (137) | 62 |
Net change in defined benefit pensions and other items | 11 | (1) | (20) |
Total other comprehensive income (loss) | 56 | (63) | 237 |
Total comprehensive income (loss) | $ 1,096 | $ (145) | $ 4,937 |
Consolidated Balance Sheet Paranthetical - $ / shares |
Dec. 31, 2021 |
Dec. 31, 2020 |
---|---|---|
Consolidated Balance Sheet (Parenthetical) [Abstract] | ||
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 | 10,062,500 | 10,062,500 |
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 | 1,688,810,052 | 1,679,911,918 |
Treasury Stock, Shares | 263,289,848 | 263,289,848 |
Consolidated Statements of Cash Flows Consolidated Statement of Cash Flows (Supplemental Disclosure) - USD ($) |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Cash and cash equivalents | $ 1,925,000,000 | $ 1,734,000,000 | $ 217,000,000 | |
Restricted cash and restricted cash equivalents included in Other current assets | 188,000,000 | 208,000,000 | 346,000,000 | |
Restricted cash equivalents included in Other long-term assets | 55,000,000 | 52,000,000 | 43,000,000 | |
Cash, cash equivalents, restricted cash and restricted cash equivalents | $ 2,168,000,000 | $ 1,995,000,000 | $ 607,000,000 | $ 829,000,000 |
Significant Accounting Policies |
12 Months Ended |
---|---|
Dec. 31, 2021 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies [Text Block] | NOTE A – SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation Our consolidated financial statements include the accounts of Boston Scientific Corporation and our wholly-owned subsidiaries, after the elimination of intercompany transactions. When used in this report, the terms "we," "us," "our" and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. We assess the terms of our investment interests to determine if any of our investees meet the definition of a variable interest entity (VIE). For any VIEs, we perform an analysis to determine whether our variable interests give us a controlling financial interest. The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Based on our assessments under the applicable guidance, we did not have controlling financial interests in any VIEs and, therefore, did not consolidate any VIEs during 2021, 2020 or 2019. Basis of Presentation The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-K and Regulation S-X. 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. Subsequent Events We evaluate events occurring after the date of our accompanying consolidated balance sheets for potential recognition or disclosure in our consolidated financial statements. Those items requiring recognition in the financial statements have been recorded and disclosed accordingly. Those items requiring disclosure (non-recognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note B – Acquisitions and Strategic Investments, Note H – Restructuring-related Activities, Note K – Commitments and Contingencies, Note L – Stockholders' Equity and Note O – Segment Reporting for further details. Accounting Estimates To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our consolidated financial statements and the reported amounts of our revenues and expenses during the reporting period. Our actual results may differ from these estimates. Refer to Critical Accounting Estimates included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for further discussion. Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Cash and Cash Equivalents We record Cash and cash equivalents in our consolidated balance sheets at cost, which approximates fair value. Our policy is to invest excess cash in short-term marketable securities earning a market rate of interest without assuming undue risk of loss of principal amounts invested and we limit our direct exposure to securities in any one industry or issuer. We consider to be cash equivalents all short-term marketable securities with remaining days to maturity of 90 days or less from the purchase date that can be readily converted to cash. Restricted Cash Amounts included in restricted cash represent cash on hand required to be set aside by a contractual agreement related to receivable factoring arrangements and deferred compensation plans and are included in the Other current assets caption within our consolidated balance sheets. Generally, the restrictions related to the factoring arrangements lapse at the time we remit the customer payments collected by us for servicing previously sold customer receivables to the purchaser. Restrictions for deferred compensation lapse when amounts are paid to the employee. Restricted Cash Equivalents Restricted cash equivalents primarily represent amounts paid into various qualified settlement funds related to our ongoing transvaginal surgical mesh litigation and current amounts related to our non-qualified pension plan and are included in the Other current assets caption within our consolidated balance sheets. The restrictions related to the various qualified settlement funds will lapse as we approve amounts payable to claimants, at which time we no longer have rights to a return of the amounts paid into the various qualified settlement funds. Restricted cash equivalents included in the Other long-term assets caption within our consolidated balance sheets are related to deferred compensation plans. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, derivative financial instruments and accounts and notes receivable. Our investment policy limits exposure to concentrations of credit risk and changes in market conditions. Counterparties to financial instruments expose us to credit-related losses in the event of nonperformance. We transact our financial instruments with a diversified group of major financial institutions with investment grade credit ratings and actively monitor their credit ratings and our outstanding positions to limit our credit exposure. In the normal course, our payment terms with customers, including hospitals, healthcare agencies, clinics, doctors' offices and other private and governmental institutions, are typically 30 days in the U.S. but may be longer in international markets and generally do not require collateral. We record credit loss reserves to Allowance for credit losses when we establish Trade accounts receivable if credit losses are expected over the asset's contractual life. We base our estimates of credit loss reserves on historical experience and adjust, as necessary, to reflect current conditions using reasonable and supportable forecasts not already reflected in the historical loss information. We utilize an accounts receivable aging approach to determine the reserve to record at accounts receivable commencement for certain customers, applying country or region-specific factors. In performing the assessment of outstanding accounts receivable, regardless of country or region, we may consider significant factors relevant to collectability, including those specific to a customer such as bankruptcy, lengthy average payment cycles and type of account. We write-off amounts determined to be uncollectible against this reserve. We are not dependent on any single institution, and no single customer accounted for more than ten percent of our net sales in 2021, 2020 and 2019; however, large group purchasing organizations, hospital networks, international distributors and dealers and other buying groups have become increasingly important to our business and represent a substantial portion of our net sales. We closely monitor outstanding receivables for potential collection risks, including those that may arise from economic conditions, in both the U.S. and international economies. Our sales to government-owned or supported customers, particularly in southern Europe, are subject to an increased number of days outstanding prior to payment relative to other countries. More recently, the COVID-19 pandemic has accelerated an ongoing site-of-service trend of shifting procedure volumes in the U.S. toward non-hospital settings, particularly ambulatory surgery centers and office-based labs. Many of these customers are smaller than those we have historically done business with and may have more limited liquidity. We have adjusted our estimates of credit loss reserves for these customers, regions and conditions, as appropriate. We believe our Allowance for credit losses is adequate as of December 31, 2021; however, if significant changes were to occur in the payment practices of government customers, or if there is an increase in bankruptcies among our ambulatory surgery center customers, we may not be able to collect on receivables due to us from these customers, and our write-offs of uncollectible accounts may increase. Revenue Recognition We sell our products primarily through a direct sales force. In certain international markets, we sell our products through independent distributors or dealers. We consider revenue to be earned when all of the following criteria are met in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers: •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 consolidated balance sheets. 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. Our contractual liabilities also include deferred revenue related to the LUX-Dx™ Insertable Cardiac Monitor (ICM) system, also within our CRM business, for which revenue is recognized over the average service period based on device longevity and usage. 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. Post-Implant Services We provide non-contractual services to customers, where necessary, to ensure the safe and effective use of certain implanted devices. 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 Selling, general and administrative expenses within our consolidated statements of operations. 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. Warranty Obligations We offer warranties on certain of our product offerings. The majority of our warranty liability relates to implantable devices offered by our CRM business, which include implantable defibrillator and pacemaker systems. These products come with a standard limited warranty covering the replacement of these devices. We offer a full warranty for a portion of the period post-implant and a partial warranty for a period of time thereafter. We estimate the costs that we may incur under our warranty programs based on the number of units sold, historical and anticipated rates of warranty claims and cost per claim and record a liability equal to these estimated costs as cost of products sold at the time the product sale occurs. We assess the adequacy of our recorded warranty liabilities on a quarterly basis and adjust these amounts as necessary. Inventories We state inventories at the lower of first-in, first-out cost or net realizable value. We utilize a standard costing system, capitalizing variances between estimated and actual production costs during periods of normal production, and amortize to Cost of products sold over inventory turns. We expense manufacturing variances during periods of abnormal production, or less than 75 percent of manufacturing capacity. During 2020, we recorded $149 million of abnormal manufacturing variances attributable to lower production levels resulting from the COVID-19 pandemic and lower than forecasted demand for our products. We did not record any abnormal production variances during the years ended December 31, 2021 or 2019. We base our provisions for excess, expired and obsolete inventory primarily on our estimates of forecasted net sales. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. Further, the industry in which we participate is characterized by rapid product development and frequent new product introductions. 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 excess, expired and obsolete inventory. Property, Plant and Equipment We state property, plant, equipment and leasehold improvements at historical cost. We charge expenditures for maintenance and repairs to expense and capitalize additions and improvements that extend the life of the underlying asset. We provide for depreciation using the straight-line method at rates that approximate the estimated useful lives of the assets. We depreciate buildings over a maximum life of 40 years; building improvements over the remaining useful life of the building structure; equipment, furniture and fixtures over a three to seven year life; and leasehold improvements over the shorter of the useful life of the improvement or the term of the related lease. Valuation of Business Combinations We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the date of acquisition, including identifiable intangible assets and in-process research and development (IPR&D), which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including IPR&D, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate to goodwill any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Transaction costs associated with these acquisitions are expensed as incurred through Selling, general and administrative expenses. In cases where we acquire a company in which we previously held an equity stake, we attribute a portion of the purchase price to the previously-held equity interest, which is implied based on the total purchase consideration allocable to each of the shareholders, including Boston Scientific, according to priority of equity interests. We record a gain or loss in Other, net equal to the difference between the implied fair value of our prior ownership and the book value immediately prior to the acquisition. Where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the fair value of the contingent payments we expect to make as of the acquisition date. We re-measure this liability each reporting period and record changes in the fair value through Contingent consideration net expense (benefit) on our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue or timing or likelihood of achieving regulatory, revenue or commercialization-based milestones. Payment of additional consideration is generally contingent on the acquired company reaching certain performance milestones after the acquisition date, including attaining specified revenue levels, achieving product development targets and/or obtaining regulatory approvals for products in development at the date of the acquisition. Indefinite-lived Intangibles and IPR&D Our indefinite-lived intangible assets, which are not subject to amortization, include acquired balloon and other technology, which are foundational to our ongoing operations within our Cardiovascular and MedSurg businesses, as well as IPR&D intangible assets acquired in a business combination. Our IPR&D represents intangible assets that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility or completion of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. We classify IPR&D as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Upon completion of the associated research and development efforts, we will determine the useful life of the technology and begin amortizing the assets to reflect their use over their remaining lives. Upon permanent abandonment, we write-off the remaining carrying amount of the associated IPR&D intangible asset. We test our indefinite-lived intangible assets at least annually during the third quarter for impairment and reassess their classification as indefinite-lived assets. In addition, we review our indefinite-lived intangible assets for classification and impairment more frequently if impairment indicators exist. We assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that our indefinite-lived intangible assets are impaired. If we conclude that it is more likely than not that the asset is impaired, we then determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other. If the carrying value exceeds the fair value of the indefinite-lived intangible asset, we write the carrying value down to the fair value. We use the income approach to determine the fair values of our IPR&D. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected levels of market share. In arriving at the value of the in-process projects, we consider, among other factors, the in-process projects’ stage of completion, the complexity of the work completed as of the acquisition date, the costs already incurred, the projected costs to complete, the contribution of other acquired assets, the expected regulatory path and introduction dates by region and the estimated useful life of the technology. See Note D – Goodwill and Other Intangible Assets for more information related to indefinite-lived intangibles, including IPR&D. For asset purchases outside of business combinations, we expense any purchased research and development assets as of the acquisition date. Amortization and Impairment of Intangible Assets We record definite-lived intangible assets at historical cost and amortize them over their estimated useful lives. We use a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. The approximate useful lives for amortization of our intangible assets are as follows: patents and licenses, two to 20 years; amortizable technology-related and customer relationships, five to 25 years; other intangible assets, various. We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator. If we determine it is more likely than not that the asset is impaired based on our qualitative assessment of impairment indicators, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset or asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset or asset group, we will write the carrying value down to fair value in the period impairment is identified. We calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset or asset group. See Note D – Goodwill and Other Intangible Assets for more information related to impairments of intangible assets. For patents developed internally, we capitalize costs incurred to obtain patents, including attorney fees, registration fees, consulting fees and other expenditures directly related to securing the patent. Goodwill Valuation We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our goodwill balances in the second quarter of each year as of April 1 for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist. 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 2021 annual impairment assessment, we identified the following reporting units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health and Neuromodulation. For purposes of the goodwill impairment test, 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, Intangibles - Goodwill and Other. In the second quarter of 2021, we performed our annual goodwill impairment test utilizing the quantitative assessment approach to test all of our reporting units. We determined that the fair value of each reporting unit exceeded its carrying value and concluded that goodwill was not impaired or at risk of impairment. Investments in Publicly Traded and Privately-Held Entities For publicly-held equity securities for which we do not have the ability to exercise significant influence, we measure at fair value with changes in fair value recognized currently in Other, net within our accompanying consolidated statements of operations. For privately-held equity securities for which we do not have the ability to exercise significant influence, we apply the measurement alternative approach and measure these investments at cost minus impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We account for investments in entities for which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary in accordance with FASB ASC Topic 323, Investments - Equity Method and Joint Ventures. We record these investments initially at cost and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. Lastly, we have notes receivable from certain companies that we account for in accordance with FASB ASC Topic 320, Investments - Debt and Equity Securities. Refer to Note B – Acquisitions and Strategic Investments for additional details on our investment balances. Each reporting period, we evaluate our investments to determine if there are any events or circumstances that are likely to have a significant adverse effect on the fair value of the investment. Examples of such impairment indicators include, but are not limited to, a significant deterioration in earnings performance, recent financing rounds at reduced valuations, a significant adverse change in the regulatory, economic or technological environment of an investee or a significant doubt about an investee’s ability to continue as a going concern. If we identify an impairment indicator, we will estimate the fair value of the investment and compare it to its carrying value. Our estimation of fair value considers financial information related to the investee available to us, including valuations based on recent third-party equity investments in the investee. For our investments for which we apply the measurement alternative, if the fair value of the investment is less than its carrying value, the investment is impaired and we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. For our equity method investments, if we determine an impairment is other-than-temporary, we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. We deem an impairment to be other-than-temporary unless available evidence indicates that the valuation is more likely than not to recover up to the carrying value of the investment in a reasonable period of time, and we have both the ability and intent to hold the investment for at least the period of time needed to recover the value. Net gains and losses and impairments associated with our investment portfolio are included in Other, net in our consolidated statements of operations. Income Taxes We utilize the asset and liability method of accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on differences between the financial reporting and tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as estimates of the impact of future taxable income and available prudent and feasible tax-planning strategies. We recognize interest and penalties related to income taxes as a component of income tax expense. As part of the Tax Cuts and Jobs Act (TCJA), we are subject to a territorial tax system in which we are required to establish an accounting policy in providing for tax on Global Intangible Low Taxed Income (GILTI) earned by certain foreign subsidiaries. We have elected to treat the impact of GILTI as a period cost and report it as part of continuing operations. See Note J – Income Taxes for further information and discussion of our income tax provision and balances including a discussion of the impacts of the TCJA. Legal and Product Liability Costs In the normal course of business, we are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities and product liability litigation. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures or impact our ability to sell our products. We are also the subject of certain governmental investigations, which could result in substantial fines, penalties and administrative remedies. 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. 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. We analyze litigation settlements to identify each element of the arrangement. We allocate arrangement consideration to patent licenses received based on estimates of fair value and capitalize these amounts as assets if the license will provide an ongoing future benefit. We record certain legal and product liability charges, credits and costs of defense, which we consider to be unusual or infrequent and significant as Litigation-related charges (credits) in our consolidated statements of operations; all other legal and product liability charges, credits and costs are recorded within Selling, general and administrative expenses within our consolidated statements of operations. See Note K – Commitments and Contingencies for discussion of our individual material legal proceedings. Costs Associated with Exit Activities We record employee termination costs in accordance with FASB ASC Topic 712, Compensation - Nonretirement and Postemployment Benefits, if we pay the benefits as part of an ongoing benefit arrangement, which includes benefits provided as part of our established severance policies or that we provide in accordance with international statutory requirements. We accrue employee termination costs associated with an ongoing benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested, the payment is probable and we can reasonably estimate the liability. We account for involuntary employee termination benefits that represent a one-time benefit in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations. We record such costs into expense over the employee’s future service period, if any. Other costs associated with exit activities may include contract termination costs and consulting fees, which are expensed in accordance with FASB ASC Topic 420 and are included in Restructuring net charges (credits) in our consolidated statements of operations. Additionally, costs directly related to our active restructuring initiatives, including program management costs, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities are included within Costs of products sold and Selling, general and administrative expenses within our consolidated statements of operations. Impairment of right of use lease assets and lease termination costs directly related to our active restructuring initiatives are expensed in accordance with FASB ASC Topic 842 and included within Costs of products sold or Selling, general and administrative expenses in our consolidated statements of operations. See Note H – Restructuring-related Activities for further information and discussion of our restructuring plans. Translation of Foreign Currency We translate all assets and liabilities of foreign subsidiaries from the functional currency, which is generally the local currency, into U.S. dollars using the year-end exchange rate. We show the net effect of these translation adjustments in our consolidated financial statements as a component of Accumulated other comprehensive income (loss), net of tax. We translate revenues and expenses at the average exchange rates in effect during the year. For any significant foreign subsidiaries located in highly inflationary economies, we would re-measure their financial statements as if the functional currency were the U.S. dollar. Foreign currency transaction gains and losses are included in Other, net in our consolidated statements of operations, net of losses and gains from any related derivative financial instruments. Financial Instruments We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with FASB ASC Topic 815, Derivatives and Hedging, and we present assets and liabilities associated with our derivative financial instruments on a gross basis in our financial statements. In accordance with FASB ASC Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value of a derivative instrument depends on whether it qualifies for, and has been designated as part of a hedging relationship, as well as on the type of hedging relationship. Our derivative instruments do not subject our earnings to material risk, as gains and losses on these derivatives generally offset gains and losses on the item being hedged, and we do not enter into derivative transactions for speculative purposes. Refer to Note E – Hedging Activities and Fair Value Measurements for more information on our hedging instruments. Shipping and Handling Costs We generally do not bill customers for shipping and handling of our products. We treat shipping costs incurred after a customer obtains control of the good as a fulfillment cost and record in Selling, general and administrative expenses within our consolidated statements of operations. Shipping costs were $194 million in 2021, $146 million in 2020 and $144 million in 2019. Research and Development We expense research and development (R&D) costs, including new product development programs, regulatory compliance and clinical research as incurred. Refer to Indefinite-lived Intangibles and IPR&D above for our policy regarding R&D projects acquired in connection with our business combinations and asset purchases.
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Acquisitions and Strategic Investments |
Aug. 06, 2021 |
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ACQUISITIONS AND STRATEGIC INVESTMENTS | NOTE B – ACQUISITIONS AND STRATEGIC INVESTMENTS Our consolidated financial statements include the operating results for acquired entities from the respective dates of acquisition. We completed four acquisitions and one divestiture in 2021 and did not complete any material acquisitions during 2020. We have not presented supplemental pro forma financial information for any of our recent acquisitions given their results are not material to our consolidated financial statements. On February 14, 2022, we completed our acquisition of Baylis Medical Company Inc. (Baylis Medical), a privately-held company which has developed the radiofrequency (RF) NRG™ and VersaCross™ Transseptal Platforms as well as a family of guidewires, sheaths and dilators used to support left heart access, which will expand our electrophysiology and structural heart product portfolios. The transaction consisted of an upfront cash payment using cash on hand of $1.750 billion subject to closing adjustments. We plan to integrate the Baylis Medical business into our Electrophysiology division, supported by our structural heart sales force. 2021 Acquisitions On March 1, 2021, we completed our acquisition of the remaining shares of Preventice Solutions, Inc. (Preventice), a privately-held company which offers a full portfolio of mobile cardiac health solutions and services, ranging from ambulatory cardiac monitors, to cardiac event monitors and mobile cardiac telemetry. The transaction consisted of an upfront cash payment of $925 million and up to an additional $300 million in a potential commercial milestone payment. We had been an investor in Preventice since 2015 and held an equity stake of approximately 22 percent immediately prior to the acquisition date. We remeasured the fair value of our previously-held investment based on the allocation of the purchase price according to priority of equity interests, which resulted in a $196 million gain recognized within Other, net. The transaction price for the remaining stake consisted of an upfront cash payment of $706 million, net of cash acquired, and up to approximately $230 million in future milestone payments. The Preventice business is being managed by our Cardiac Rhythm Management division. On August 6, 2021, we completed our acquisition of the remaining shares of Farapulse, Inc. (Farapulse), a privately-held company that has developed a non-thermal ablation system for the treatment of atrial fibrillation (AF) and other cardiac arrhythmias. The transaction consisted of an upfront cash payment of $450 million, up to $125 million upon achievement of certain clinical and regulatory milestones and additional revenue-based payments over the next three years. We had been an investor in Farapulse since 2014 and held an equity stake of approximately 27 percent immediately prior to the acquisition date. We remeasured the fair value of our previously-held investment based on the allocation of the purchase price according to priority of equity interests which resulted in a $222 million gain recognized within Other, net. The transaction price for the remaining stake consisted of an upfront cash payment of $268 million, net of cash acquired, and up to approximately $92 million in future milestone payments. The Farapulse business is being integrated into our Electrophysiology division. On September 1, 2021, we completed our acquisition of the global surgical business of Lumenis LTD. (Lumenis), a privately-held company that develops and commercializes energy-based medical solutions, including innovative laser systems, fibers and accessories used for urology and otolaryngology procedures. The transaction consisted of an upfront cash payment of $1.032 billion, net of cash acquired. The Lumenis business is being integrated into our Urology and Pelvic Health division. On November 8, 2021, we completed our acquisition of the remaining shares of Devoro Medical, Inc. (Devoro Medical), a privately-held company which has developed the WOLF Thrombectomy® Platform, a non-console and lytic-free platform designed to rapidly capture and extract blood clots in arterial, venous and pulmonary embolism procedures. The transaction consisted of an upfront cash payment of $320 million and up to $80 million upon achievement of certain clinical and regulatory milestones. We had been an investor in Devoro Medical since 2019 and held an equity stake of approximately 16 percent. We remeasured the fair value of our previously held investment based on the allocation of the purchase price according to priority of equity interests which resulted in a $57 million gain recognized within Other, net. The transaction price for the remaining stake consisted of an upfront cash payment of $251 million, net of cash acquired, and up to approximately $67 million in future milestone payments. The Devoro Medical business is being integrated into our Peripheral Interventions division. Purchase Price Allocation The preliminary purchase price for the acquisitions completed during 2021 were comprised of the components presented below, which represent the preliminary determination of the fair value of identifiable assets acquired and liabilities assumed. The final determination of the fair value of certain assets and liabilities will be completed within the measurement period in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations.
The preliminary purchase price allocation for these acquisitions was comprised of the following components:
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 is not deductible for tax purposes. We allocated a portion of the preliminary purchase price to the specific intangible asset categories as follows:
2021 Divestiture On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business to Stark International Lux S.A.R.L., and SERB SAS, affiliates of SERB, a European specialty pharmaceutical group, for a purchase price of approximately $800 million. The agreement included the transfer of five facilities and approximately 280 employees globally. We classified the assets and liabilities of the Specialty Pharmaceuticals business (disposal group) as held for sale within our consolidated balance sheet as of December 31, 2020 at their respective carrying values, which approximated fair value, less costs to sell. Assets within the disposal group are presented within Assets held for sale and liabilities are presented within Other current liabilities within our consolidated balance sheet as of December 31, 2020. Refer to Note C – Assets and Liabilities Held for Sale for additional information. 2019 Acquisitions BTG plc On August 19, 2019, we completed our acquisition of BTG plc (BTG), a public company organized under the laws of England and Wales. BTG had three key portfolios, the largest of which is its interventional medicine portfolio (Interventional Medicine) that encompasses interventional oncology therapeutic technologies for patients with liver and kidney cancers, as well as a vascular portfolio for treatment of deep vein thrombosis, pulmonary embolism, deep venous obstruction and superficial venous disease. Following the closing of the acquisition, we integrated BTG's Interventional Medicine business into our Peripheral Interventions division. In addition to the Interventional Medicine product lines, the BTG portfolio also included the Specialty Pharmaceuticals business, comprised of acute care antidotes to treat overexposure to certain medications and toxins. On March 1, 2021, we completed the divestiture of Specialty Pharmaceuticals for a purchase price of approximately $800 million. Refer to Note C – Assets and Liabilities Held for Sale for additional information. The BTG portfolio further included a licensing portfolio (Licensing arrangements) that generated net royalties related to BTG intellectual property and product license agreements. In connection with the acquisition, we acquired rights to future royalties associated with the Zytiga™ Drug used to treat certain forms of prostate cancer. In the fourth quarter of 2019, we sold our rights to these royalties for $256 million in cash, included in Proceeds from royalty rights transfer in our consolidated statements of cash flows. Refer to Note E – Hedging Activities and Fair Value Measurements for additional information. The transaction price for the acquisition of BTG consisted of upfront cash in the aggregate amount of £3.312 billion (or $4.023 billion based on the exchange rate at closing on August 19, 2019) for the entire issued ordinary share capital of BTG, whereby BTG stockholders received 840 pence (or $10.20 based on the exchange rate at closing) in cash for each BTG share. The transaction price included $404 million of cash and cash equivalents acquired. We implemented our acquisition of BTG by way of a court-sanctioned scheme of arrangement under Part 26 of the United Kingdom Companies Act 2006, as amended. Purchase Price Allocation We accounted for the acquisition of BTG as a business combination, and in accordance with FASB ASC Topic 805, Business Combinations, (FASB ASC Topic 805), we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The final purchase price was comprised of the following components:
The final purchase price allocation was comprised of the following components:
We allocated a portion of the purchase price to the specific intangible asset categories as follows:
We recognized goodwill of $1.635 billion, which is attributable to the synergies expected to arise from the acquisition and revenue and cash flow projections associated with future technologies. We allocated $1.399 billion to our Peripheral Interventions reporting unit and $236 million to the Specialty Pharmaceuticals reporting unit. In 2020, we recorded Goodwill impairment charges of $73 million related to the execution of a definitive agreement to sell our Specialty Pharmaceuticals business. Refer to Note D – Goodwill and Other Intangible Assets for additional information. Vertiflex, Inc. On June 11, 2019, we completed our acquisition of Vertiflex, Inc. (Vertiflex), a privately-held company which developed and commercialized the Superion™ Indirect Decompression System, a minimally-invasive device used to improve physical function and reduce pain in patients with lumbar spinal stenosis (LSS). The transaction price consisted of an upfront cash payment of $465 million and contingent payments that are based on a percentage of Vertiflex sales growth in the first three years following the acquisition close. At the time of acquisition, we estimated the sales-based contingent payments to be in a range of zero to $100 million; however, the payments are uncapped over the three year earn-out period. Through December 31, 2021, we have made incremental payments of $20 million to the prior shareholders of Vertiflex in accordance with the terms of the agreement. Following the closing of the acquisition, we integrated the Vertiflex business into our Neuromodulation division. Millipede, Inc. On January 29, 2019, we completed our acquisition of Millipede, Inc. (Millipede), a privately-held company that has developed the IRIS Transcatheter Annuloplasty Ring System for the treatment of severe mitral regurgitation. We were an investor in Millipede since the first quarter of 2018 as part of an investment and acquisition option agreement, whereby we purchased a portion of the outstanding shares of Millipede, along with newly issued shares of the company, for an upfront cash payment of $90 million. In the fourth quarter of 2018, upon the successful completion of a first-in-human clinical study, we exercised our option to acquire the remaining shares of Millipede. We held an interest of approximately 20 percent immediately prior to the acquisition date. We remeasured the fair value of our previously-held investment based on the implied enterprise value and allocation of purchase price consideration according to priority of equity interests. The transaction price for the remaining stake consisted of an upfront cash payment of $325 million and up to an additional $125 million payment upon achievement of a commercial milestone. During 2021, we cancelled the Millipede mitral valve IPR&D program, recording intangible asset impairment charges of $242 million, and a contingent consideration benefit of $104 million for milestones that would not be achieved due to the cancellation of the program due to the time and financial investment required to commercialize the platform. Purchase Price Allocation We accounted for the acquisitions of Vertiflex and Millipede as business combinations, 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 dates. The final purchase prices were comprised of the following components:
The final combined purchase price allocation was comprised of the following components:
We allocated a portion of the combined purchase price to the specific intangible asset categories as follows:
Our technology-related intangible assets consist of technical processes, intellectual property and institutional understanding with respect to products and processes that we intend to 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. The goodwill recorded relating to our acquisitions is not deductible for tax purposes. Contingent Consideration Changes in the fair value of our contingent consideration liability were as follows:
As of December 31, 2021, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay associated with our prior acquisitions was $986 million, which includes amounts related to our recently completed acquisitions of Preventice, Farapulse and Devoro Medical. The net benefits of $136 million and $100 million recorded in 2021 and 2020, respectively, related to a reduction in the contingent consideration liability for certain prior acquisitions for which we reduced the probability of achievement of associated revenue and/or regulatory milestones upon which payment is conditioned, or, in the case of Millipede and nVision, for milestones that would not be achieved due to management's discontinuation of the associated R&D program. The recurring Level 3 fair value measurements of our contingent consideration liability that we expect to be required to settle include the following significant unobservable inputs:
(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected year of payment, the amount represents the median of the inputs and is not a weighted average. Projected contingent payment amounts related to our R&D, regulatory and commercialization-based and revenue-based milestones are discounted back to the current period, primarily using a discounted cash flow model. Significant increases or decreases in projected revenues, probabilities of payment, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement as of December 31, 2021. Strategic Investments The aggregate carrying amount of our strategic investments was comprised of the following:
(1) Measurement alternative investments are privately-held equity securities without readily determinable fair values that are measured at cost less impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer, recognized in Other, net within our accompanying consolidated statements of operations. (2) Publicly-held equity securities are measured at fair value with changes in fair value recognized in Other, net within our consolidated statements of operations. These investments are classified as Other long-term assets within our consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies. We recorded a $178 million loss in 2021 and a $363 million gain in 2020 on our investment in Pulmonx Corporation presented in Other, net associated with the remeasurement of our investment during the period to fair value based on observable market prices, as well as the disposition of our remaining ownership during 2021. As of December 31, 2021, the cost of our aggregated equity method investments exceeded our share of the underlying equity in net assets by $289 million, which represents amortizable intangible assets, IPR&D, goodwill and deferred tax liabilities.
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Assets and Liabilities Held for Sale |
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ASSETS AND LIABILITIES HELD FOR SALE | NOTE C – ASSETS AND LIABILITIES HELD FOR SALE On December 1, 2020, we announced the execution of a definitive agreement pursuant to which we agreed to sell our Specialty Pharmaceuticals business to Stark International Lux S.A.R.L., and SERB SAS, affiliates of SERB, a European specialty pharmaceutical group. On March 1, 2021, we completed the divestiture for a purchase price of approximately $800 million, which was subject to certain adjustments including cash on hand at the closing of the transaction. The agreement included the transfer of five facilities and approximately 280 employees globally. We classified the assets and liabilities of the Specialty Pharmaceuticals business (disposal group) as held for sale within our consolidated balance sheet as of December 31, 2020 at their respective carrying values, which approximated fair value, less costs to sell. Assets within the disposal group are presented within Assets held for sale and liabilities are presented within Other current liabilities within our consolidated balance sheet as of December 31, 2020. The carrying amounts of the major classes of assets and liabilities of the disposal group as of December 31, 2020 are presented below:
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Goodwill and Other Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE D – 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 goodwill impairment charges are as follows:
(1) In the fourth quarter of 2020, we recorded goodwill impairment charges of $73 million related to the Specialty Pharmaceuticals business and classified the remaining assets and liabilities as held for sale as of December 31, 2020. On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business. The goodwill impairment charges of $73 million related to the Specialty Pharmaceuticals business are no longer presented within accumulated write-offs above as of December 31, 2021. Intangible asset impairment charges were $370 million in 2021, $460 million in 2020 and $105 million in 2019. The impairment charges recorded in 2021 were primarily associated with intangible assets established in connection with our acquisition of Millipede, Inc. and VENITI, Inc. The impairment charges recorded in 2020 were primarily associated with intangible assets established in connection with our acquisitions of Sadra Medical, Inc., Apama Medical Inc. and nVision Medical Corporation (nVision). Each of these impairment charges were recorded following management’s decision to cancel the programs due to the length of time, and remaining cost to complete and commercialize the technology, the cost to remediate quality issues or, specific to nVision, our understanding of the clinical evidence necessary to commercialize the technology. The following represents our goodwill balance by global reportable segment and our separately presented Specialty Pharmaceuticals operating segment:
In 2021, we did not record any Goodwill impairment charges. In 2020, we recorded Goodwill impairment charges of $73 million related to our Specialty Pharmaceuticals business and classified the remaining assets and liabilities as held for sale as of December 31, 2020. We did not record any Goodwill impairment charges in 2019. Refer to Note A – Significant Accounting Policies for further discussion of our goodwill and intangible asset impairment testing. Estimated Amortization expense for each of the five succeeding fiscal years based upon our amortizable intangible asset portfolio as of December 31, 2021 is as follows (in millions):
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Hedging Activities and Fair Value Measurements |
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HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS | NOTE E – 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 and nonderivative 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. Currency Hedging Instruments Risk Management Strategy Our risk from changes in currency exchange rates consists primarily of monetary assets and liabilities; forecasted intercompany and third-party transactions; net investments in certain subsidiaries; and, during 2019 prior to our acquisition of BTG, the purchase price of BTG, which was denominated in a currency other than the U.S. dollar. 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 and nonderivative 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 euro, Japanese yen, Chinese renminbi and Australian dollar. We may experience unanticipated currency exchange gains or losses to the extent the actual activity is different than forecasted. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows. Hedge Designations and Relationships Certain of our currency derivative instruments are designated as cash flow hedges under FASB ASC Topic 815, Derivatives and Hedging (FASB ASC Topic 815), 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 the Net change in derivative financial instruments component of Other comprehensive income (loss), net of tax (OCI) within our consolidated statements of comprehensive income (loss) until the underlying third-party transaction occurs. When the underlying third-party transaction occurs, we recognize the gain or loss in earnings within Cost of products sold in our consolidated statements of operations. In the event the hedging relationship is no longer effective, or if the occurrence of the hedged forecast transaction becomes no longer probable, we reclassify the gains or losses within AOCI to earnings at that time. We also designate certain forward currency contracts as net investment hedges to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the Swiss franc, Japanese yen, British pound sterling, South Korean won and Taiwan dollar. For these derivative instruments, we elected to use the spot method to assess hedge effectiveness. We also elected to exclude the spot-forward difference, referred to as the excluded component, from the assessment of hedge effectiveness and are amortizing this amount separately, as calculated at the date of designation, on a straight-line basis over the term of the currency forward contracts. As such, we defer recognition of foreign currency gains and losses within the Foreign currency translation adjustment (CTA) component of OCI, and we reclassify amortization of the excluded component from AOCI to current period earnings within Interest expense in our consolidated statements of operations. We designate certain euro-denominated debt as net investment hedges to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the Euro. As of December 31, 2021 and 2020, we designated as a net investment hedge a portion of our €900 million in aggregate principal amount of 0.625% senior notes issued in November 2019 and due in 2027. For these nonderivative instruments, we defer recognition of the foreign currency remeasurement gains and losses within the CTA component of OCI. We reclassify these gains and losses to current period earnings within Other, net in our consolidated statements of operations only when the hedged item affects earnings, which would occur upon disposal or substantial liquidation of the underlying foreign subsidiary. 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 within Other, net in our consolidated statements of operations. Certain of our non-designated forward currency contracts were entered into for the purpose of managing our exposure to currency exchange rate risk related to the British pound sterling-denominated purchase price of BTG. In 2019, we settled all outstanding contracts, for $294 million, which is presented within Payments for settlements of hedge contracts in our consolidated statements of cash flows. Upon settlement in 2019, we received £3.312 billion of cash to fund our acquisition of BTG, which translated into $4.303 billion based on hedged currency exchange rates. We recognized a $323 million loss in 2019 in Other, net due to changes in fair value of the contracts. Interest Rate Hedging Instruments Risk Management Strategy Our interest rate risk relates primarily to U.S. dollar and euro-denominated borrowings partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to mitigate the risk to our earnings and cash flows associated with 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 in accordance with FASB ASC Topic 815. Hedge Designations and Relationships We had no interest rate derivative instruments designated as cash flow hedges outstanding as of December 31, 2021 and December 31, 2020. Prior to 2020, we terminated interest rate derivative instruments that were designated as cash flow hedges and are continuing to recognize the amortization of the gains or losses originally recorded within AOCI to earnings as a component of Interest expense over the same period that the hedged item affects earnings, provided the hedge relationship remains effective. If we determine the hedge relationship is no longer effective, or if the occurrence of the hedged forecast transaction becomes no longer probable, we reclassify the amount of gains or losses from AOCI to earnings at that time. In the event that we designate outstanding interest rate derivative instruments as cash flow hedges, we record the changes in the fair value of the derivatives within OCI until the underlying hedged transaction occurs. The balance of the deferred amounts on our terminated cash flow hedges within AOCI was a $24 million loss as of December 31, 2021 and a $29 million loss as of December 31, 2020. We had no interest rate derivative instruments designated as fair value hedges outstanding as of December 31, 2021 and December 31, 2020. Prior to 2018, we terminated interest rate derivative instruments that were designated as fair value hedges and are continuing to recognize the amortization of the gains or losses originally recorded within Long-term debt in our consolidated balance sheets into earnings as a component of Interest expense over the same period that the discount or premium associated with the hedged items affects earnings. In the event that we designate outstanding interest rate derivative instruments as fair value hedges, we record the changes in the fair values of interest rate derivatives designated as fair value hedges and of the underlying hedged debt instruments in Interest expense, which generally offset. The following table presents the contractual amounts of our hedging instruments outstanding:
(1) Foreign currency-denominated debt is the portion of the €900 million debt principal designated as a net investment hedge. The remaining time to maturity as of December 31, 2021 is within 60 months for all forward currency contracts designated as cash flow hedges and generally less than one year for all non-designated forward currency contracts. The forward currency contracts designated as net investment hedges generally mature within the next year. The euro-denominated debt principal designated as a net investment hedge has a contractual maturity of December 1, 2027. The following presents the effect of our derivative and nonderivative instruments designated as cash flow and net investment hedges under FASB ASC Topic 815 in our accompanying consolidated statements of operations. Refer to Note Q – Changes in Other Comprehensive Income for the total amounts relating to derivative and nonderivative instruments presented within our consolidated statements of comprehensive income (loss).
(1) In all periods presented in the table above, the pre-tax (gain) loss amounts reclassified from AOCI to earnings represent the effect of the hedging relationships on earnings. (2) For our outstanding forward currency contracts designated as 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 of the excluded component has been excluded from the assessment of effectiveness in accordance with FASB ASC Topic 815. In the current and prior period, we did not recognize any gains or losses on the components included in the assessment of hedge effectiveness in earnings. (3) For our outstanding euro-denominated debt principal designated as a net investment hedge, the change in fair value attributable to changes in the spot rate is recorded in the CTA component of OCI. No amounts were reclassified from AOCI to current period earnings. As of December 31, 2021, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as cash flow and net investment hedges under FASB ASC Topic 815 that may be reclassified from AOCI to earnings within the next twelve months are presented below (in millions):
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:
Fair Value Measurements FASB ASC Topic 815 requires all derivative and nonderivative 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 and nonderivative 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 with respect to 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 and nonderivative 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 and nonderivative assets and liabilities:
(1)We classify derivative and nonderivative assets and liabilities as current when the settlement date of the contract is one year or less. (2)Foreign currency-denominated debt is the portion of the €900 million debt principal designated as a net investment hedge. A portion of this notional is subject to de-designation and re-designation based on changes in the underlying hedged item. 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:
Our investments in money market funds and time deposits 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 consolidated balance sheets, in accordance with U.S. GAAP and our accounting policies. In addition to $1.632 billion invested in money market funds and time deposits as of December 31, 2021 and $1.584 billion as of December 31, 2020, we held $293 million in interest-bearing and non-interest-bearing bank accounts as of December 31, 2021 and $150 million as of December 31, 2020. Our recurring fair value measurements using Level 3 inputs include those related to our contingent consideration liability. Refer to Note B – Acquisitions and Strategic Investments for a discussion of the changes in the fair value of our contingent consideration liability. In addition, our recurring fair value measurements using Level 3 inputs related to our licensing arrangements, including the contractual right to receive future royalty payments related to the Zytiga™ Drug. We recognized a financial asset and associated liability for our licensing arrangements at fair value in our consolidated balance sheets using the fair value option in accordance with FASB ASC Topic 825, Financial Instruments. We own the contractual right to receive 50 percent of the future ZytigaTM Drug royalty payments from the licensee and remit such payments to the inventors associated with the intellectual property. Royalty payments we receive reduce the fair value of the financial asset and are presented within Proceeds from royalty rights, and payments we remit to inventors reduce the fair value of the financial liability and are presented within Payments for royalty rights within our consolidated statements of cash flows. We sold our right to receive and retain the other 50 percent of the future royalty payments in 2019 for an upfront cash payment, which we accounted for as a secured borrowing in accordance with FASB ASC Topic 860, Transfers and Servicing. Although we sold these rights, we continue to recognize at fair value the future royalty payments as a financial asset and associated liability. Royalty payments associated with the rights we sold no longer impact our cash flows, and we present this activity as Non-cash impact of transferred royalty rights in the supplemental information to our consolidated statements of cash flows. We reduce the fair value of the financial asset and associated liability when such non-cash activity occurs. We have recorded the fair value of the financial asset and associated liability using a discounted cash flow approach considering the probability-weighted expected future cash flows to be generated by the royalty stream. The fair value of the financial liability also considers the related contractual provisions that govern our payment obligations. Significant increases or decreases in projected cash flows of the royalty stream and the related contractual provisions that govern our payment obligations, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement of the licensing arrangements' financial asset and liability as of December 31, 2021. However, increases or decreases in the financial asset would be offset by increases or decreases in the financial liability, other than for timing of receipt and remittance; as such our earnings are not subject to material gains and losses from the licensing arrangement. The recurring Level 3 fair value measurements of our licensing arrangements recognized in our consolidated balance sheets as of December 31, 2021 include the following significant unobservable inputs:
(1) Unobservable inputs relate to a single financial asset and liability. As such, unobservable inputs were not weighted by the relative fair value of the instruments. For projected year of payment, the amount represents the median of the inputs and is not a weighted average. Changes in the fair value of our licensing arrangements' financial asset were as follows:
Changes in the fair value of our licensing arrangements' financial liability were as follows:
Non-Recurring Fair Value Measurements We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods after 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 and Note D – Goodwill and Other Intangible Assets for a discussion of the fair values of our intangible assets including goodwill. The fair value of our outstanding debt obligations was $10.196 billion as of December 31, 2021, including $1.020 billion relating to our euro-denominated December 2027 Notes, and $10.774 billion as of December 31, 2020, including $1.118 billion relating to our euro-denominated December 2027 Notes. We determined fair value by using quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy, and face value for commercial paper, term loans and credit facility borrowings outstanding. Refer to Note F – Contractual Obligations and Commitments for a discussion of our debt obligations.
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CONTRACTUAL OBLIGATIONS AND COMMITMENTS | NOTE F – CONTRACTUAL OBLIGATIONS AND COMMITMENTS Borrowings and Credit Arrangements We had total debt outstanding of $9.065 billion as of December 31, 2021 and $9.143 billion as of December 31, 2020, with current maturities of $261 million as of December 31, 2021 and $13 million as of December 31, 2020. The debt maturity schedule for our long-term debt obligations is presented below:
Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges. (1) Coupon rates are semi-annual, except for the December 2027 Notes, which bear an annual coupon. (2) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Effective November 15, 2021, the interest rate payable decreased by 0.25 percent and began accruing at a rate of 6.75 percent following recent upgrades to our credit ratings. (3) As of December 31, 2021 the outstanding balance is presented within Current Debt Obligations within our consolidated balance sheet. (4) The December 2027 notes are euro-denominated and presented in U.S. dollars based on the exchange rate in effect as of December 31, 2021 and December 31, 2020. Revolving Credit Facility On May 10, 2021, we entered into a new $2.750 billion revolving credit facility (2021 Revolving Credit Facility) with a global syndicate of commercial banks and terminated our previous facility (2018 Revolving Credit Facility). The 2021 Revolving Credit Facility will mature on May 10, 2026, with one-year extension options, subject to certain conditions. This facility provides backing for our commercial paper program, and outstanding commercial paper directly reduces borrowing capacity under the 2021 Revolving Credit Facility. There were no amounts outstanding under the Revolving Credit Facility as of December 31, 2021 or December 31, 2020. Term Loans On April 21, 2020, in a proactive step to offset the potential impact of the COVID-19 pandemic on our short-term liquidity, we entered into a $1.250 billion term loan credit agreement scheduled to mature on April 20, 2021 (April 2021 Term Loan). We used proceeds from the April 2021 Term Loan to repay a portion of the amounts outstanding under the 2018 Revolving Credit Facility and the remaining amount under the December 2020 Term Loan described below. In May 2020, as described in further detail below, we used a portion of the proceeds from the May 2020 senior notes offering to prepay $500 million of amounts outstanding under the April 2021 Term Loan, and a portion of the combined net proceeds from our Mandatory Convertible Preferred Stock (MCPS) and common stock offerings to repay in full the remaining $750 million outstanding under the April 2021 Term Loan and to pay related fees, expenses and premiums, after which it was terminated. On February 27, 2020, we entered into a $1.000 billion term loan credit agreement scheduled to mature on February 25, 2021 (February 2021 Term Loan). We used the proceeds from the February 2021 Term Loan to repay the remaining amounts outstanding on the Three-Year Delayed Draw Term Loan, described below. On May 28, 2020, we entered into an amendment of the credit agreement to permit payment of regularly scheduled quarterly cash dividends and other limited cash payments on our issued MCPS and other capital stock issued by us, which is or becomes mandatorily convertible into or exchangeable for shares of our common stock. The February 2021 Term Loan bears interest at an annual rate of LIBOR plus a margin of 0.85%. The credit agreement is subject to a financial covenant described below under Financial Covenant, and also contains customary events of default, which may result in the acceleration of any outstanding commitments. We used a portion of the proceeds from our May 2020 senior notes offering, described below, to prepay $750 million of amounts outstanding under the February 2021 Term Loan in the second quarter of 2020. In the third quarter of 2020, we prepaid the remaining $250 million and terminated the February 2021 Term Loan. On December 5, 2019, we entered into a $700 million term loan credit agreement, which was scheduled to mature on December 3, 2020 (December 2020 Term Loan). As of December 31, 2019, we had $700 million outstanding under the December 2020 Term Loan, and we used the proceeds to repay a portion of the Two-Year Delayed Draw Term Loan, described below. In January 2020, we repaid $300 million of the outstanding balance of the December 2020 Term Loan with proceeds from our commercial paper program. In April 2020, we used the proceeds from the April 2021 Term Loan to repay the remaining amounts outstanding under the December 2020 Term Loan and terminated the December 2020 Term Loan. On December 19, 2018, we entered into a $2.000 billion senior unsecured delayed-draw term loan facility consisting of a $1.000 billion two-year delayed draw term loan credit facility maturing in two years from the date of the closing of the acquisition of BTG (Two-Year Delayed Draw Term Loan) and a $1.000 billion three-year delayed draw term loan credit facility maturing in three years from the date of the closing of the acquisition of BTG (Three-Year Delayed Draw Term Loan). On August 19, 2019, for the purpose of funding the acquisition of BTG, we borrowed $1.000 billion under the Two-Year Delayed Draw Term Loan and $1.000 billion under the Three-Year Delayed Draw Term Loan. In 2019, we repaid all amounts outstanding on the Two-Year Delayed Draw Term Loan with proceeds from the sale of the Zytiga-related royalty interests, the December 2020 Term Loan and commercial paper and terminated the facility. As of December 31, 2019, we had $1.000 billion outstanding under the Three-Year Delayed Draw Term Loan. In the first quarter of 2020, we repaid all amounts outstanding on the Three-Year Delayed Draw Term Loan with proceeds from the February 2021 Term Loan and terminated the facility. As of December 31, 2021, we had no amounts outstanding under the Two and Three-Year Delayed Draw Term Loans and the facilities were terminated. Financial Covenant As of and through December 31, 2021, we were in compliance with the financial covenant required by our credit facilities described above.
(1) Ratio of total debt to deemed consolidated EBITDA, as defined by the credit agreements, as amended. The 2021 Revolving Credit Facility includes the following financial covenant requirement for all of our credit arrangements (i) maintain the maximum permitted leverage ratio of 4.50 times for the first quarter of 2021, with a step-down for each succeeding fiscal quarter end to 4.25 times, 4.00 times, and ultimately 3.75 times for the fourth quarter of 2021 and through the remaining term of the 2021 Revolving Credit Facility. The agreement provides for higher leverage ratios for the period following a qualified acquisition, at our election, for which consideration exceeds $1.000 billion. In the event of such an acquisition, for the four succeeding quarters immediately following, including the quarter in which the acquisition occurs, the maximum permitted leverage ratio is 4.75 times. It steps down for the fifth, sixth and seventh succeeding quarters to 4.50 times, 4.25 times and 4.00 times, respectively. Thereafter, a maximum leverage ratio of 3.75 times is required through the remaining term of the 2021 Revolving Credit Facility. The financial covenant requirement 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 December 31, 2021, we had $376 million of the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the agreements, are excluded from the calculation of consolidated EBITDA, as defined by the agreements, provided that the sum of any excluded net cash litigation payments do not exceed $1.455 billion in the aggregate. As of December 31, 2021, we had $1.122 billion of the litigation exclusion remaining. Any inability to maintain compliance with this covenant could require us to seek to further renegotiate the terms of our credit arrangements or seek waivers from compliance with this covenant, 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 2021 Revolving Credit Facility commitments would terminate, and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our 2021 Revolving 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 Our commercial paper program is backed by the 2021 Revolving Credit Facility, as discussed above, and outstanding commercial paper directly reduces borrowing capacity under the 2021 Revolving Credit Facility. We did not have any commercial paper outstanding as of December 31, 2021 and December 31, 2020. Senior Notes We had senior notes outstanding of $9.121 billion as of December 31, 2021 and $9.205 billion as of December 31, 2020. On December 29, 2020, we redeemed $250 million of our $500 million 3.375% senior notes due 2022 (May 2022 Notes) at a redemption price calculated in accordance with the terms of the May 2022 Notes and its indenture, plus accrued and unpaid interest through, but excluding, the date of redemption. In May 2020, we completed an offering of $1.700 billion in aggregate principal amount of senior notes comprised of $500 million of 1.900% senior notes due June 2025 and $1.200 billion of 2.650% senior notes due June 2030. We used the net proceeds from the offering to refinance $450 million of amounts outstanding under the 2018 Revolving Credit Facility, prepay $750 million of amounts outstanding under the $1.000 billion February 2021 Term Loan, prepay $500 million of amounts outstanding under the $1.250 billion April 2021 Term Loan and pay related fees, expenses and premiums. In November 2019, we completed an offering of €900 million (approximately $1.000 billion) in aggregate principal amount of 0.625% senior notes due in 2027 (December 2027 Notes). The euro-denominated debt principal is a nonderivative instrument designated as a net investment hedge of our net investments in certain of our euro functional entities. Refer to Note E – Hedging Activities and Fair Value Measurements for additional information. We used a portion of the net proceeds from our November 2019 senior notes offering to repay certain outstanding principal amounts of our senior notes including $206 million of our $450 million 4.125% senior notes due 2023, $566 million of our $1.000 billion 4.000% senior notes due 2028 and $227 million of our $750 million 3.850% senior notes due 2025 and pay accrued and unpaid interest, premiums, fees and expenses in connection with the transaction. In 2019, we incurred associated debt extinguishment charges of $86 million presented in Interest expense in our consolidated statements of operations. In February 2019, we completed an offering of $4.300 billion in aggregate principal amount of senior notes comprised of $850 million of 3.450% senior notes due March 2024, $850 million of 3.750% senior notes due March 2026, $850 million of 4.000% senior notes due March 2029, $750 million of 4.550% senior notes due March 2039 and $1.000 billion of 4.700% senior notes due March 2049. We used a portion of the net proceeds from the offering to repay the $850 million plus accrued interest and premium of our 6.000% senior notes due in January 2020, the $600 million plus accrued interest and premium of our 2.850% senior notes due in May 2020 and the $1.000 billion plus accrued interest of our August 2019 Term Loan. In 2019, the remaining proceeds were used to finance a portion of our acquisition of BTG. 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 liabilities of our subsidiaries (see Other Arrangements below). Certain of our senior notes contain a change-in-control provision, which provides that each holder of the senior notes may require us to repurchase all or a portion of the notes at a price equal to 101 percent of the aggregate repurchased principal, plus accrued and unpaid interest, if a rating event, as defined in the indenture, occurs as a result of a change-in-control, as defined in the indenture. Any other credit rating changes may impact our borrowing cost, but do not require us to repay any borrowings. Other Arrangements We have accounts receivable factoring programs in certain European countries and with commercial banks in China and 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 our accompanying consolidated balance sheets, are aggregated by contract denominated currency below (in millions):
Other Contractual Obligations and Commitments We had outstanding letters of credit of $134 million as of December 31, 2021 and $124 million as of December 31, 2020, which consisted primarily of bank guarantees and collateral for workers' compensation insurance arrangements. As of December 31, 2021 and December 31, 2020, none of the beneficiaries had drawn upon the letters of credit or guarantees, accordingly, we have not recognized a related liability for our outstanding letters of credit in our consolidated balance sheets as of December 31, 2021 and December 31, 2020. Future minimum purchase obligations, relating primarily to non-cancellable inventory commitments and capital expenditures entered in the normal course of business, were as of December 31, 2021 (in millions):
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Leases |
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Lessee, Operating Leases | NOTE G – LEASES We have operating and finance leases for real estate including corporate offices, land, warehouse space, and vehicles and certain equipment. Leases with an initial term of 12 months or less are generally not recorded on the balance sheet, unless the arrangement includes an option to purchase the underlying asset, or an option to renew the arrangement, that we are reasonably certain to exercise (short-term leases). We recognize lease expense on a straight-line basis over the lease term for short-term leases that we do not record on our balance sheet. If there is a change in our assessment of the lease term and, as a result, the remaining lease term extends more than 12 months from the end of the previously determined lease term, or we subsequently become reasonably certain that we will exercise an option to purchase the underlying asset, the lease no longer meets the definition of a short-term lease and is accounted for as either an operating or finance lease and recognized on the balance sheet. In accordance with FASB ASC Topic 842, Leases, we account for the lease components and the non-lease components as a single lease component, with the exception of our warehouse leases. Our leases have remaining lease terms of less than 1 year to approximately 55 years, some of which may include options to extend the leases for up to 15 years. If we are reasonably certain we will exercise an option to extend the lease, the time period covered by the extension option is included in the lease term. We determine whether an arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement. Operating lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received. Our operating lease right-of-use assets are presented within Other long-term assets and corresponding liabilities are presented within Other current liabilities and Other long-term liabilities on our consolidated balance sheets. Refer to Note F – Contractual Obligations and Commitments for information regarding our finance leases. The following table presents supplemental balance sheet information related to our operating leases:
The following table presents the weighted average remaining lease term and discount rate information related to our operating leases:
Our operating lease cost under FASB ASC Topic 842 was $90 million in 2021, $92 million in 2020 and $80 million in 2019. The following table presents supplemental cash flow information related to our operating leases:
Right-of-use assets obtained in exchange for operating lease obligations were $68 million as of December 31, 2021 and $202 million as of December 31, 2020. The following table presents the maturities of our operating lease liabilities as of December 31, 2021 (in millions):
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Activities Disclosure [Text Block] | NOTE H – RESTRUCTURING-RELATED ACTIVITIES 2019 Restructuring Plan On November 15, 2018, our Board of Directors approved, and we committed to a global restructuring program (the 2019 Restructuring Plan). The 2019 Restructuring Plan is intended to support our effort to improve operating performance and meet anticipated market demands by ensuring that we are appropriately structured and resourced to deliver sustainable value to patients and customers. Key activities under the 2019 Restructuring Plan include supply chain network optimization intended to maximize our global manufacturing and distribution network capacity and building functional capabilities that support business growth. These activities were initiated in 2019, with the majority of activity expected to be complete by the end of 2022, following a one-year extension approved by our Board of Directors on February 22, 2021. On February 22, 2021, our Board of Directors approved an extension and expansion of the 2019 Restructuring Plan to include additional cost optimization activities, including the centralization of certain functional capabilities within the international regions in which we operate, and a one-year extension of the program to complete these activities along with certain other initiatives that were delayed in 2020 due to restrictions related to the COVID-19 pandemic. In addition, on February 22, 2022, we increased and our Board of Directors approved cost estimates to complete additional activities identified under the program. We continue to expect the majority of activity associated with our 2019 Restructuring Plan, including the recent expansion, to be substantially complete by the end of 2022. The following table provides a summary of our estimates of total pre-tax charges associated with the 2019 Restructuring Plan, by major type of cost, of which approximately $375 million to $475 million are expected to result in cash outlays:
(1) Consists primarily of consulting fees and costs associated with contractual cancellations. (2) Comprised of other costs directly related to the restructuring program, including program management, accelerated depreciation, fixed asset write-offs, and costs to transfer product lines among facilities. 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 was intended to develop global commercialization, technology and manufacturing capabilities in key growth markets, 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 expand operational efficiencies in support of our operating income margin goals. Key activities under the 2016 Restructuring Plan included 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 substantially completed in 2019. The following table provides a summary of total pre-tax charges associated with the 2016 Restructuring Plan by major type of cost, of which approximately $255 million resulted in cash outlays:
(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. The following presents the restructuring and restructuring-related net charges (credits) by major type and line item within our accompanying consolidated statements of operations (in millions):
The following table presents cumulative restructuring and restructuring-related net charges incurred as of December 31, 2021, related to our ongoing Restructuring Plans by major type:
(1) Consists primarily of consulting fees and costs associated with contract cancellations. (2) Comprised of other costs directly related to our Restructuring Plans, including program management, accelerated depreciation, and fixed asset write-offs. Cumulative cash payments associated with our ongoing Restructuring Plans were made using cash generated from operations and are comprised of the following:
LOTUS Discontinuation On November 17, 2020, we announced a global, voluntary recall of all unused inventory of our LOTUS Edge™ Aortic Valve System, and our decision to retire the entire LOTUS™ Valve platform. We recorded restructuring and restructuring-related net charges associated with the product discontinuation of $20 million in 2021 and $55 million in 2020, which are included in the tables above for the year ended December 31, 2021 and December 31, 2020. The restructuring activities were completed in 2021 and resulted in total pre-tax restructuring and restructuring-related net charges of approximately $80 million. In addition, during 2020 we recorded $119 million of inventory charges within Cost of products sold and $8 million of Intangible asset impairment charges associated with the product discontinuation.
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Supplemental Balance Sheet Information |
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SUPPLEMENTAL BALANCE SHEET INFORMATION | NOTE I – SUPPLEMENTAL BALANCE SHEET INFORMATION Components of selected captions in our accompanying consolidated balance sheets are as follows: Trade accounts receivable, net
The following is a rollforward of our Allowance for credit losses:
Note: Effective January 1, 2020, we adopted FASB ASC Topic 326 using the modified retrospective method, which requires that we recognize credit loss reserves when financial assets are established if credit losses are expected over the asset’s contractual life. Prior period amounts have not been restated and are presented in accordance with FASB ASC Topic 310. Inventories
Approximately 30 percent of our finished goods inventory as of December 31, 2021 and approximately 33 percent as of December 31, 2020 was at customer locations pursuant to consignment arrangements or held by sales representatives. Other current assets
Property, plant and equipment, net
Depreciation expense was $352 million in 2021, $333 million in 2020 and $311 million in 2019. Other long-term assets
Accrued expenses
Other current liabilities
Other long-term liabilities
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
INCOME TAXES | NOTE J – INCOME TAXES Our Income (loss) before income taxes consisted of the following:
The related expense (benefit) for income taxes consisted of the following:
The reconciliation of income taxes at the federal statutory rate to the actual expense (benefit) for income taxes is as follows:
Significant components of our deferred tax assets and liabilities are as follows:
(1) Due to the disclosure of additional deferred items in 2021, we have reclassified select items in prior years to align with the new categories disclosed in the current year. Our deferred tax assets, deferred tax liabilities and prepaid on intercompany profit, are included in the following locations within our accompanying consolidated balance sheets (in millions):
As of December 31, 2021, we had U.S. federal and state tax net operating loss carryforwards and tax credits, the tax effect of which was $560 million. As of December 31, 2020, we had U.S. federal and state tax net operating loss carryforwards and tax credits, the tax effect of which was $474 million. In addition, we had foreign tax net operating loss carryforwards and tax credits, the tax effect of which was $60 million as of December 31, 2021, as compared to $83 million as of December 31, 2020. These tax attributes expire periodically beginning in 2022. During the fourth quarter of 2019, we completed intra-entity asset transfers of certain intellectual property rights among various wholly owned subsidiaries. These transactions occurred to more closely align the global economic ownership of our intellectual property rights with our current and future business operations. These transactions did not result in a taxable gain in any jurisdiction, however, some of the transactions did create a step-up in the tax-deductible basis in the transferred intellectual property rights in certain jurisdictions. As a result, we recorded deferred tax assets in the amount of $4.102 billion, which represents the book and tax basis differences measured at applicable statutory tax rates, net of a valuation allowance of $542 million. After consideration of all positive and negative evidence, we believe that it is more likely than not that a portion of our deferred tax assets will not be realized. As a result, we recorded a valuation allowance of $1,014 million as of December 31, 2021 and $887 million as of December 31, 2020, representing an increase of $127 million. The increase in the valuation allowance as of December 31, 2021, as compared to December 31, 2020, is primarily due to an increase of US state loss carryforwards and the concurrent build of the related valuation allowance. The income tax impact of the unrealized gain or loss component of other comprehensive income and stockholders' equity was a charge of $81 million in 2021, a benefit of $78 million in 2020 and a charge of $13 million in 2019. We obtain tax incentives through Free Trade Zone Regime offered in Costa Rica which allows 100.0 percent exemption from income tax in the first eight years of operations and 50.0 percent exemption in the following four years. This tax incentive resulted in income tax savings of $149 million for 2021, $64 million for 2020 and $173 million for 2019. The tax incentive for 100.0 percent exemption from income tax was renewed during 2019 and is expected to expire in 2027. The impact on Net income (loss) per common share - assuming dilution was $0.10 for 2021, $0.04 for 2020 and $0.12 for 2019. Additionally, we benefit from tax incentives in Puerto Rico resulting in income tax savings of $27 million for 2021, $30 million for 2020 and immaterial amounts for 2019. The impact on Net income (loss) per common share - assuming dilution was $0.02 for 2021 and 2020, and less than $0.01 for 2019. As of December 31, 2021, we had $255 million of gross unrecognized tax benefits, of which a net $177 million, if recognized, would affect our effective tax rate. As of December 31, 2020, we had $261 million of gross unrecognized tax benefits, of which a net $183 million, if recognized, would affect our effective tax rate. As of December 31, 2019, we had $455 million of gross unrecognized tax benefits, of which a net $355 million, if recognized, would affect our effective tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
We are subject to U.S. Federal income tax as well as income tax of multiple state and foreign jurisdictions. We have concluded all U.S. federal income tax matters through 2016 and substantially all material state and local income tax matters through 2010. We have concluded all foreign income tax matters through 2013, with the exception of issues for Italy, which have concluded through 2002. In 2020, we received notification from the IRS regarding the examination of our 2014 through 2016 tax years stating that the Joint Committee on Taxation completed its review, and the IRS examination was resolved. Due to the resolution of these tax years, we recorded a net tax benefit of $91 million to release the reserves related to these years. We received a refund of $62 million from the IRS reflecting the net balance of amounts owed to us by the IRS after consideration of tax and interest due for these years. We recognize interest and penalties related to income taxes as a component of income tax expense. We had $43 million accrued for gross interest and penalties as of December 31, 2021 and $41 million as of December 31, 2020. Net tax expense related to interest and penalties was immaterial in 2021, 2020 and 2019. The increase in our net tax expense related to interest and penalties as of December 31, 2021, as compared to December 31, 2020, is related to reaching settlements with the taxing authorities. It is reasonably possible that within the next 12 months we will resolve transactional-related issues with foreign and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to approximately $54 million. For the year ended December 31, 2017, we were required under the TCJA to calculate a one-time transition tax based on our total post-1986 foreign subsidiaries' earnings and profits (E&P) that we previously deferred from U.S. income taxes. As a result of various audit activities, the revised amount of transition tax was approximately $938 million as of December 31, 2021 as compared to $939 million as of December 31, 2020. We anticipate offsetting this liability against existing tax attributes reducing the required payment to approximately $590 million, which will be remitted over an eight-year period. We have begun remitting the required installment payments, with a balance remaining of $430 million as of December 31, 2021. In addition, we have provided for U.S. state income taxes of $19 million on all U.S. dollar-denominated E&P accumulated through December 31, 2017, which constitutes the preponderance of our foreign subsidiaries' accumulated E&P through December 31, 2017. We intend to indefinitely reinvest the unremitted foreign earnings of all other subsidiaries as of December 31, 2017, as well as all subsequent earnings generated by all of our foreign subsidiaries. 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. We have established an accounting policy election to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense. Economic stimulus legislation has been enacted in many countries in response to the COVID-19 pandemic. In the U.S., the CARES Act was signed into law on March 27, 2020 and provided an estimated $2.2 trillion in COVID-19 pandemic related relief, and included tax relief and government loans, subsidies and other relief for entities in affected industries. While we did not apply for government loans, we took advantage of the benefits offered in multiple jurisdictions, including the U.S. provision allowing taxpayers to defer payment of the employer portion of certain payroll taxes through the end of 2020. This allowed us to preserve cash generated from operations to service our debt obligations and other near-term commitments.
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Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE K – COMMITMENTS AND CONTINGENCIES The medical device market in which we 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 dynamics 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 ability to sell certain products and on our operating margins, 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 $548 million as of December 31, 2021 and $569 million as of December 31, 2020 and includes certain estimated costs of settlement, damages and defense. We recorded litigation-related net charges of $430 million in 2021, primarily related to ongoing litigation associated with our transvaginal surgical mesh products principally in the U.S. and Australia, as well as anticipated legal fees to defend certain other legal matters. We increased the accrual associated with transvaginal mesh claims to account for increased settlement and litigation activity related to the remaining cases and claims we face, our revision of the per-case settlement amount for these cases based on recent settlement and litigation activity and changes to our expectations regarding the rate of incoming cases and claims. These increases were partially offset by settlement payments, primarily associated with a coalition of state attorneys general. A portion of our legal accrual for transvaginal surgical mesh product claims is already funded through our qualified settlement fund (QSF), which is included in restricted cash and restricted cash equivalents in Other current assets of $188 million as of December 31, 2021 and $208 million as of December 31, 2020. Refer to Note A – Significant Accounting Policies for additional information. We recorded litigation-related net charges of $278 million in 2020, primarily related to transvaginal surgical mesh product litigation, inclusive of a reserve related to claims made by a coalition of state attorneys general, which has since been settled. We recorded litigation-related net charges of $115 million in 2019, which included a net charge of $223 million, primarily related to litigation with Channel Medsystems, Inc., net charges of $40 million primarily related to transvaginal surgical mesh product liability litigation, and a gain of $148 million, which represents a portion of the total $180 million one-time settlement payment received from Edwards Lifesciences Corporation (Edwards) in January 2019. We record certain legal and product liability charges, credits and costs of defense, which we consider to be unusual or infrequent and significant as Litigation-related net charges (credits) in our consolidated financial statements. All other legal and product liability charges, credits and costs are recorded within Selling, general and administrative expenses. As such, a portion of the related gain from this settlement was recorded in Selling, general and administrative expenses in our consolidated statements of operations. 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 financial covenant. In management's opinion, we are not currently involved in any legal proceedings other than 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 reasonably estimated. Patent Litigation On October 28, 2015, the Company filed suit against Cook Group Limited and Cook Medical LLC (collectively, Cook) in the United States District Court for the District of Delaware (1:15-cv-00980) alleging infringement of certain Company patents regarding Cook’s Instinct™ Endoscopic Hemoclip. The Company seeks lost profits, a reasonable royalty and a permanent injunction. The case was transferred to the District Court for the Southern District of Indiana. Cook filed seven Inter Partes Review (IPR) requests with the U.S. Patent and Trademark Office (USPTO) against the four asserted patents. All IPRs have concluded, and Cook and the Company both appealed the Patent Office’s IPR decisions to the Federal Circuit Court of Appeals. On April 30, 2020, the U.S. Court of Appeals ruled that claims from two of the Company's patents remain valid, remanding two of the patents for further review by the USPTO's Patent Trial and Appeal Board. In November 2020, the Patent Office issued remand rulings invalidating several additional claims. The district court stayed the case pending the appeals court decision on the IPRs, which is now complete. The case is proceeding before the United States District Court for the Southern District of Indiana, with the Company asserting three patents against Cook. Trial is anticipated in February 2023. On December 9, 2016, the Company and Boston Scientific Neuromodulation Corporation filed a patent infringement action against Nevro Corp. (Nevro) in United States District Court for the District of Delaware (16-cv-1163) alleging that ten U.S. patents owned by Boston Scientific Neuromodulation Corporation are infringed by Nevro's Senza™ Spinal Cord Stimulation (SCS) System. The company seeks lost profits, a reasonable royalty and a permanent injunction. At a trial held in October and November 2021 regarding six of Boston Scientific's originally asserted patent claims, a jury granted Boston Scientific a monetary award, finding that each asserted claim is valid, that four of the six claims are infringed by Nevro, and that two of the claims are willfully infringed by Nevro. On April 21, 2018, the Company and Boston Scientific Neuromodulation Corporation filed a patent infringement, theft of trade secrets and tortious interference with a contract action against Nevro in United States District Court for the District of Delaware (18-cv-664), and amended the complaint on July 18, 2018, alleging that nine U.S. patents owned by Boston Scientific Neuromodulation Corporation are infringed by Nevro’s Senza™ I and Senza™ II SCS Systems. On December 9, 2019, Nevro filed an answer and counterclaims, in which it alleged that our SCS systems infringe five Nevro patents. Nevro seeks lost profits, a reasonable royalty and a permanent injunction. No trial date has been set for the theft of trade secrets and patent counterclaims. The patent infringement claims from case 18-cv-664 were stayed pending IPRs. On January 6, 2021, the court stayed one of the patent infringement claims from case 16-cv-1163, such that it will proceed with the stayed patent infringement claims from case 18-cv-664. On February 23, 2021, Nevro filed a complaint against the Company in the United States District Court for the District of Delaware (21-cv-258). The complaint alleges infringement of five Nevro patents by certain of the Company’s spinal cord stimulation systems. Nevro seeks lost profits, a reasonable royalty and a permanent injunction. 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. UT seeks a reasonable royalty. On March 12, 2018, the District Court for the Western District of Texas dismissed the action and transferred it to the United States District Court for the District of Delaware. On September 5, 2019, the Court of Appeals for the Federal Circuit affirmed the dismissal of the District Court for the Western District of Texas. In April 2020, the United States Supreme Court denied the UT’s Petition for Certiorari. UT is proceeding with its case against BSC in Delaware. Trial is scheduled for November 14, 2022. Product Liability Litigation As of January 26, 2022, in the United States, approximately 54,500 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. Outside the United States, approximately 2,700 cases or claims have been asserted, predominantly in Canada, the United Kingdom, Ireland and Australia. Plaintiffs generally seek monetary damages based on allegations of personal injury associated with the use of our transvaginal surgical mesh products, including design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. As of January 26, 2022, 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 52,500 cases and claims in the United States, adjusted to reflect the Company's analysis of expected non-participation and duplicate 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 52,500 cases and claims, approximately 51,000 have met the conditions of the settlement and are final. In Canada, we have settled approximately 300 claims. All settlement agreements were entered into solely by way of compromise and without any admission or concession by us of any liability or wrongdoing. As of January 26, 2022, the company is facing fewer than 300 pending cases and claims asserted in various jurisdictions in the United States. Outside the United States, the company is facing fewer than 90 cases and claims in the United Kingdom, Ireland and Canada. In Australia, two class actions were filed against the Company in in the first quarter of 2021. In the second quarter of 2021, one of these class actions was permanently stayed, while the other was allowed to proceed. The registration process for this Australian action closed on January 28, 2022. Complete registration information is not yet available but preliminary information indicates that approximately 2,250 women have completed registration forms alleging they received and were injured by Boston Scientific implants in Australia. In April 2021 the Company's Board of Directors received a shareholder demand under section 220 of the Delaware General Corporation Law, for inspection of books and records. The Company has notified our insurer and retained counsel to respond to the demand. On April 16, 2019, the U.S. Food and Drug Administration (FDA) ordered that all manufacturers of surgical mesh products indicated for the transvaginal repair of pelvic organ prolapse stop selling and distributing their products in the United States immediately, stemming from the FDA’s 2016 reclassification of these devices to class III (high risk) devices, and as a result, the Company ceased global sales and distribution of surgical mesh products indicated for transvaginal pelvic organ prolapse. In February 2021, the Multi-District Litigation (MDL) established in February 2012 by the United States Federal Courts was closed after all pending cases were dismissed or remanded to courts of primary jurisdiction. 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. We continue to engage in discussions with plaintiffs’ counsel regarding potential resolution of pending cases and claims. We continue to vigorously contest the cases and claims asserted against us that do not settle, and expect that more cases will go to trial through 2023. 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. 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. We are currently named a defendant in 67 filed product liability cases involving our Greenfield Vena Cava Filter, which we discontinued marketing and actively selling in the fourth quarter of 2018. The plaintiffs assert they are entitled to monetary damages related to alleged injuries, including perforation of the vena cava, post-implant deep vein thrombosis, fracture, and other injuries. Most of the filed cases are part of a consolidated matter in Middlesex County, Massachusetts. We have received notice of an additional 377 claims, none of which have been filed. As of January 26, 2022, we have entered into master settlement agreements in principle or are in the final stages of entering with certain plaintiffs' counsel to resolve approximately 200 cases. Governmental Investigations and Qui Tam Matters On December 1, 2015, the Brazilian governmental entity known as CADE (the Administrative Council of Economic Defense), served a search warrant on the offices of our Brazilian subsidiary, as well as on the Brazilian offices of several other major medical device makers who do business in Brazil, in furtherance of an investigation into alleged anti-competitive activity with respect to certain tender offers for government contracts. On June 20, 2017, CADE, through the publication of a “technical note,” announced that it was launching a formal administrative proceeding against Boston Scientific’s Brazilian subsidiary, Boston Scientific do Brasil Ltda. (BSB), as well as against the Brazilian operations of Medtronic, Biotronik and St. Jude Medical, two Brazilian associations, ABIMED and AMBIMO and 29 individuals for alleged anti-competitive behavior. Under applicable guidance, BSB could be fined a percentage of BSB’s 2016 gross revenues. In August 2021, the investigating commissioner issued a preliminary recommendation of liability against all of the involved companies, and also recommended that CADE impose fines and penalties. However, on October 25, 2021, the CADE Attorney General's office recommended dismissal of the charges and allegations against BSB and the individual BSB employees who were still individual defendants. The full Commission is considering this recommendation but has not yet issued its decision. We continue to deny the allegations, intend to defend ourselves vigorously and will appeal any decision of liability by the full Commission to the Brazilian courts. During such an appeal, the decision would have no force and effect, and the Court would consider the case without being bound by CADE’s decision. Other Proceedings On May 16, 2018, Arthur Rosenthal et al., filed a plenary summons against Boston Scientific Corporation and Boston Scientific Limited with the High Court of Ireland alleging that payments are due pursuant a transaction agreement regarding Labcoat Limited, a company Boston Scientific purchased in 2008 that provided coating technology for drug-eluting stents. Labcoat seeks monetary damages related to an earn-out provision. On December 4, 2020 Enrique Jevons, individually and on behalf of all others similarly situated, filed a class action complaint against the Company, Michael F. Mahoney and Daniel J. Brennan, stemming from the recall and retirement of the LOTUS Edge™ Aortic Valve System (LOTUS System) in United States District Court for the Eastern District of New York. On December 14, 2020, the parties agreed to transfer the case to the United States District Court for the District of Massachusetts. On December 16, 2020, Mariano Errichiello, individually and on behalf of all others similarly situated, filed a second, materially similar class action complaint against the Company, Michael F. Mahoney, Joseph M. Fitzgerald, and Daniel J. Brennan in the United States District Court for the District of Massachusetts. Subsequently, on March 30, 2021, the Court consolidated the two actions, and appointed Mariano Errichiello as the lead plaintiff. Under the terms of the Court-approved Scheduling Order, Counsel for Mr. Errichiello was required to file an Amended Complaint on or before June 4, 2021, which they did. The Amended Complaint seeks unspecified compensatory damages in favor of the alleged class as well as unspecified equitable relief. In response, the Company brought a Motion to Dismiss the Amended Complaint which it filed on July 19, 2021, and argued on November 19, 2021. On December 15, 2020, the Securities and Exchange Commission’s Boston Regional Office (Boston SEC) notified the Company that it was conducting an investigation related to the Company’s decision to retire the LOTUS System, and issued a voluntary request for documents and information related to that decision. On February 10, 2021, the Boston SEC issued a second voluntary request for additional documents and information. The Company cooperated fully with the requests, and on January 3, 2022, the SEC informed us that it was concluding its investigation and that it did not intend to recommend an enforcement action. On February 8, 2021, the Company received a letter from The Vladimir Gusinsky Revocable Trust, a shareholder, demanding that the Company’s Board of Directors conduct an investigation into actions by the Company’s directors and executive officers regarding statements made about the effectiveness and commercial viability of the LOTUS System. The Trust subsequently agreed to stay its demand, pending the outcome of any dispositive motion against the Amended Complaint in the class action complaint described above. The Company received letters on behalf of the Union Excavators Local 731 Pension Fund and Diane Nachbaur, two stockholders of the Company, on July 26, 2021, and July 29, 2021, respectively, each demanding access to certain books and records of the Company, pursuant to 8 Delaware Section 220, regarding the business, operations, effectiveness and commercial viability of the LOTUS system, and related items. Matters Concluded Since December 31, 2020 On February 23, 2015, a judge for the Court of Modena (Italy) ordered a trial for Boston Scientific and three of its employees, as well as numerous other defendants charged in criminal proceedings. The charges arose from allegations that the defendants made improper donations to certain healthcare 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. 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 continued to deny these allegations, and timely appealed the decision on May 10, 2018. On November 9, 2020, the Court of Appeal in Bologna reversed the judgements against Boston Scientific and its employee and acquitted them of all charges. This judgment of acquittal became final as to the Company and its employee on April 15, 2021 when the prosecution chose not to appeal. During the fourth quarter of 2013, we received written discovery requests from certain state attorneys general regarding our transvaginal surgical mesh products and related alleged violations of states’ consumer protection statutes. On December 12, 2019, the Mississippi Attorney General filed suit against us in a Mississippi state court alleging violations of the Mississippi Consumer Protection Act. In the fourth quarter of 2020 and the first quarter of 2021, we reached settlements with 48 states, including Mississippi, and the District of Columbia. These settlements were finalized in March of 2021. On September 6, 2019, Boston Scientific Corporation, Boston Scientific Scimed, Inc., and Fortis Advisors, LLC, as a Securityholder Representative for the former Securityholders of nVision Medical Corp. filed a declaratory judgment action against BioCardia, Inc. in the United States District Court for the Northern District of California to address threats and allegations by BioCardia challenging inventorship and ownership of various patents that Boston Scientific Corporation acquired through an April 13, 2018 merger with nVision as well as related threats and allegations by BioCardia of trade secret misappropriation and unjust enrichment. On December 11, 2019, BioCardia filed an amended answer and counterclaims. On April 23, 2020, BioCardia filed a complaint against nVision, which had not been named as a defendant in the original case. On May 22, 2020, BioCardia amended its complaint against nVision to add twenty former nVision shareholders as defendants. On August 20, 2020, BioCardia again amended its complaint against Boston Scientific Corporation/Boston Scientific Scimed, Inc./Fortis Advisors, LLC and its complaint against nVision/nVision shareholders. On April 8, 2021, the parties settled the dispute, and, on April 12, 2021, the parties filed stipulations with the court to dismiss the remaining legal proceedings. The settlement did not result in any material benefit or liability to the Company. On May 5, 2014, we were served with a subpoena from the U.S. Department of Health and Human Services, Office of the Inspector General. The subpoena sought information related to the launch of the Cognis™ CRT-D and Teligen™ ICD line of devices in 2008, the performance of those devices from 2007 to 2009 and the operation of our Physician Guided Learning Program. We cooperated with this request. On May 6, 2016, a qui tam lawsuit in this matter was unsealed in the United States District Court for the District of Minnesota. At the same time, we learned that the U.S. federal government and the State of California had earlier declined to intervene in that lawsuit on April 15, 2016. The complaint was served on us on July 21, 2016. On October 7, 2016, the plaintiff/relator served an amended complaint that dropped the allegations relating to our Physician Guided Learning Program. We filed a motion to dismiss the amended complaint on December 7, 2016 and the court heard our motion to dismiss on April 5, 2017. On August 29, 2017, the Court granted the motion to dismiss, without prejudice and on September 19, 2017, the relator filed a Second Amended Complaint. We filed a motion to dismiss the Second Amended Complaint on October 10, 2017 and the Court denied that motion on December 13, 2017. On July 31, 2018, the relator filed a motion seeking leave to file a Third Amended Complaint. The Court denied the motion on October 30, 2018. In February 2021, we filed a motion for summary judgment, which the relator opposed, and on August 13, 2021, the Court granted the motion in its entirety. Subsequently, the parties resolved the matter, effective October 4, 2021, and the matter is now concluded. The resolution did not result in any material liability to the Company. On November 2, 2020, Koninklijke Philips N.V. and IP2IPO Innovations, Ltd. (Philips) served a complaint against the Company in the United States District Court for the District of Delaware. The complaint alleged that certain BSC cardiovascular diagnostic devices infringed six Philips patents. The parties have settled the dispute through a confidential settlement agreement. On April 18, 2019, Blue Cross & Blue Shield of Louisiana and HMO Louisiana, Inc., alleged indirect purchasers of ZYTIGA™, filed a class action complaint against Janssen Biotech, Inc, Janssen Oncology, Inc, Janssen Research & Development, LLC and BTG International Limited in the United States District Court for the Eastern District of Virginia. The complaint alleges that the defendants violated the Sherman Act and the antitrust and consumer protections laws of several states by pursuing patent litigation relating to ZYTIGA™ in order to delay generic entry. On June 21, 2019, the case was transferred to the United States District Court for the District of New Jersey and has been consolidated with similar complaints. On October 27, 2021, the court granted BTG and Janssen's motion to dismiss all claims in the indirect purchaser action. On December 21, 2017, Janssen Biotech, Inc., Janssen Oncology, Inc, Janssen Research & Development, LLC, and Johnson & Johnson (collectively, Janssen) were served with a qui tam complaint filed on behalf of the United States, 29 states, and the District of Columbia. The complaint, which was filed in the United States District Court for the Northern District of California, alleges that Janssen violated the federal False Claims Act and state law when providing pricing information for ZYTIGA to the government in connection with direct government sales and government-funded drug reimbursement programs. The case has been transferred to United States District Court for the District of New Jersey. On June 20, 2019, the complaint was amended to include BTG International Limited as a defendant. In May 2020, a class action complaint was filed in New Jersey federal court against Janssen and BTG by a direct purchaser of Zytiga on behalf of similarly situated entities. The complaint was amended in February 2021 and alleges that BTG and Janssen violated antitrust laws by attempting to enforce certain patents against potential generic competitors. On October 12, 2021, the court granted BTG and Janssen’s motion to compel arbitration in the direct purchaser action and stayed all direct purchaser proceedings. On December 17, 2021, the court granted BTG’s motion to dismiss the qui tam action. On January 10, 2022, the court granted the parties’ stipulation of dismissal with prejudice as to the claims of the direct purchaser plaintiff, whose claims had been stayed in the October 12, 2021, order compelling arbitration.
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Stockholders' Equity |
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Stockholders' Equity Note [Abstract] | |
STOCKHOLDER'S EQUITY | NOTE L – STOCKHOLDERS' EQUITY Preferred Stock We are authorized to issue 50 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by our stockholders. On May 27, 2020, we completed an offering of 10,062,500 shares of 5.50% Mandatory Convertible Preferred Stock (MCPS), Series A at a price to the public and liquidation preference of $100 per share. The net proceeds from the MCPS offering were approximately $975 million after deducting underwriting discounts and commissions and offering expenses. As of December 31, 2021, our MCPS had an aggregate liquidation preference of $1.006 billion. Holders of MCPS will be entitled to receive, when, as and if declared by our Board of Directors, or an authorized committee thereof, out of funds legally available for payment, cumulative dividends at the annual rate of 5.50% of the liquidation preference of $100 per share, payable in cash or, subject to certain limitations, by delivery of shares of common stock or any combination of cash and shares of common stock, at our election; provided, however, that any unpaid dividends on the MCPS will continue to accumulate as described in the Certificate of Designations. Subject to certain exceptions, no dividend or distribution will be declared or paid on shares of our common stock, and no common stock will be purchased, redeemed or otherwise acquired for consideration by us or any of our subsidiaries unless, in each case, all accumulated and unpaid dividends for all preceding dividend periods have been declared and paid, or a sufficient amount of cash or number of shares of common stock has been set apart for the payment of such dividends, on all outstanding shares of MCPS. In the event of our voluntary or involuntary liquidation, winding-up or dissolution, no distribution of our assets may be made to holders of our common stock until we have paid holders of our MCPS, each of which will be entitled to receive a liquidation preference in the amount of $100 per share plus accumulated and unpaid dividends. Unless earlier converted, each share of MCPS will automatically convert on June 1, 2023, subject to postponement for certain market disruption events, into between 2.3834 and 2.9197 shares of common stock, subject to customary anti-dilution adjustments. The number of shares of common stock issuable upon conversion will be determined based on the average volume-weighted average price per share of common stock over the 20 consecutive trading day period beginning on, and including, the 21st scheduled trading day immediately preceding June 1, 2023. The MCPS is not subject to any redemption, sinking fund or other similar provisions. However, at our option, we may purchase or exchange the MCPS from time to time in the open market, by tender or exchange offer or otherwise, without the consent of, or notice to, holders of MCPS. The holders of the MCPS will not have any voting rights, with limited exceptions. During 2021, the Audit Committee of our Board of Directors (the Committee), pursuant to authority delegated to such committee by our Board of Directors, declared and we paid quarterly cash dividends of $1.3750 per MCPS share to holders, representing dividend periods through November 2021. On February 1, 2022, the Committee declared a cash dividend of $1.3750 per MCPS share to holders of our MCPS as of February 15, 2022, representing a dividend period from December 2021 through February 2022. We have presented cumulative, unpaid dividends within Accrued expenses within our consolidated balance sheets as of December 31, 2021. Common Stock We are authorized to issue 2.000 billion shares of common stock, $0.01 par value per share. Holders of common stock are entitled to one vote per share. Holders of common stock are entitled to receive dividends, if and when declared by our Board of Directors, and to share ratably in our assets legally available for distribution to our stockholders in the event of liquidation. Holders of common stock have no preemptive, subscription, redemption, or conversion rights. The holders of common stock do not have cumulative voting rights. The holders of a majority of the shares of common stock can elect all of the directors and can control our management and affairs. Holders of common stock are junior to holders of MCPS in terms of liquidation preference. On May 27, 2020, we completed an offering of 29,382,500 shares of common stock at a public offering price of $34.25 per share. The net proceeds from the common stock offering were approximately $975 million after deducting underwriting discounts and commissions and offering expenses. We used a portion of the net proceeds from the May 27, 2020 MCPS and common stock offerings to repay remaining amounts outstanding under the April 2021 Term Loan and to pay related fees, expenses and premiums as discussed in Note F – Contractual Obligations and Commitments. The remaining proceeds were used for general corporate purposes. On January 25, 2013, our Board of Directors approved and on January 29, 2013, we announced a program authorizing the repurchase of up to $1.000 billion of our common stock (2013 share repurchase program). In the fourth quarter of 2020, we repurchased approximately 15.7 million shares of our common stock pursuant to the 2013 share repurchase program for a total of approximately $535 million in cash, which represented the full amount remaining under that authorization. On December 14, 2020, our Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $1.000 billion of our common stock (2020 share repurchase program) and as of December 31, 2021, we had the full amount remaining available under the 2020 share repurchase program. We did not repurchase any shares of our common stock during 2021. There were approximately 263 million shares in treasury as of December 31, 2021 and December 31, 2020.
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Stock Incentive and Purchase Plans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | NOTE M – STOCK INCENTIVE AND PURCHASE PLANS Employee and Director Stock Incentive Plans In 2020, our Board of Directors and stockholders approved amendments to our 2011 Long-Term Incentive Plan effective October 1, 2020 (Amended and Restated 2011 LTIP), authorizing for issuance up to 171 million shares of our common stock. The Amended and Restated 2011 LTIP covers officers, directors, employees and consultants and provides for the grant of restricted or unrestricted common stock, restricted stock units (RSUs), options to acquire our common stock, stock appreciation rights, performance awards (market-based and performance-based RSUs) and other stock and non-stock awards. Shares reserved under our current and former stock incentive plans totaled approximately 180 million as of December 31, 2021. The Executive Compensation and Human Resources Committee (the Committee) of the Board of Directors, consisting of independent, non-employee directors may authorize the issuance of common stock and cash awards under the Amended and Restated 2011 LTIP in recognition of the achievement of long-term performance objectives established by the Committee. Non-qualified options issued to employees are generally granted with an exercise price equal to the market price of our stock on the grant date, vest over a four-year service period and have a ten-year contractual life. In the case of qualified options, if the recipient owns more than ten percent of the voting power of all classes of stock, the option granted will be at an exercise price of 110 percent of the fair market value of our common stock on the date of grant and will expire over a period not to exceed five years. Non-vested stock awards, including restricted stock awards (RSAs), RSUs and deferred stock units (DSUs) issued to employees are generally granted with an exercise price of zero and typically vest in four or five equal annual installments. These awards represent our commitment to issue shares to recipients after the vesting period. Upon each vesting date, such awards are no longer subject to risk of forfeiture and we issue shares of our common stock to the recipient. The following presents the impact of stock-based compensation on our consolidated statements of operations:
Stock Options We use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock options granted to employees under our stock incentive plans. We calculated the fair value for options granted using the following estimated weighted-average assumptions:
Expected Volatility We use our historical volatility and implied volatility as a basis to estimate expected volatility in our valuation of stock options. Expected Term We estimate the expected term of options using historical exercise and forfeiture data. We believe that this historical data provides the best estimate of the expected term of new option grants. Risk-Free Interest Rate We use yield rates on U.S. Treasury securities for a period approximating the expected term of the award to estimate the risk-free interest rate in our grant-date fair value assessment. Expected Dividend Yield We have not historically paid cash dividends on our common stock and currently we do not intend to pay cash dividends on our common stock. Therefore, we have assumed an expected dividend yield of zero in our grant-date fair value assessment. Information related to stock options under stock incentive plans are as follows:
The total intrinsic value of stock options exercised was $137 million in 2021, $84 million in 2020 and $140 million in 2019. Non-Vested Stock We value RSAs, RSUs and DSUs based on the closing trading value of our shares on the date of grant. Information related to non-vested stock awards is as follows:
(1)The number of shares vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements. The total vesting date fair value of shares that vested was approximately $148 million in 2021, $172 million in 2020 and $193 million in 2019. Market-based RSU and DSU Awards During 2021, we granted market-based RSU awards, and in 2020 and 2019, we granted market-based DSU awards to certain members of our senior management team. The number of shares ultimately issued to the recipient is based on the total stockholder return (TSR) of our common stock as compared to the TSR of the common stock of the other companies in the S&P 500 Healthcare Index over a three-year performance period. The number of RSUs and DSUs ultimately granted under this program range from 0 percent to 200 percent of the target number awarded to the participant as determined by achievement of the performance criteria of the program. In addition, in general, award recipients must remain employed by us throughout the three-year performance period to attain the full amount of the market-based RSU's and DSUs that satisfied the market performance criteria. We determined the fair value of the market-based RSU and DSU awards to be approximately $11 million for 2021, $8 million for 2020 and $10 million for 2019. We determined these fair values based on Monte Carlo simulations as of the date of grant, utilizing the following assumptions:
We recognize the expense on these awards in our consolidated statements of operations on a straight-line basis over the three-year measurement period. Free Cash Flow Performance-based RSU and DSU Awards During 2021, we granted free-cash flow performance-based RSU awards, and in 2020 and 2019, we granted free-cash flow performance-based DSU awards to certain members of our senior management team. The attainment of these performance-based RSUs and DSUs is based on our adjusted free cash flow (AFCF) measured against our goal set by the Executive Compensation and Human Resources Committees of our Board, based on our internal annual financial plan performance for AFCF. AFCF is measured over a one-year performance period beginning January 1st of each year and ending December 31st. The number of RSUs and DSUs ultimately granted under this program range from 0 percent to 150 percent of the target number of performance-based RSUs and DSUs awarded to the participant as determined by achievement of the performance criteria of the program. In addition, in general, award recipients must remain employed by us throughout a three-year service period (inclusive of the one-year performance period) to attain the full amount of the performance-based RSUs and DSUs that satisfied the performance criteria. The following table presents our assumptions used in determining the fair value of our AFCF awards currently expected to vest as of December 31, 2021:
We recognize the expense on these awards in our consolidated statements of operations over the vesting period which is three years after the date of grant. Expense Attribution We recognize compensation expense for our stock incentive plan using a straight-line method over the substantive vesting period. Most of our stock awards provide for immediate vesting upon death or disability of the participant. In addition, our stock grants to employees provide for accelerated vesting of our stock-based awards, other than performance-based and market-based awards, upon retirement, if the stock award has been held for at least one year by the recipient. In accordance with the terms of our stock grants, for employees who will become retirement eligible prior to the vest date we expense stock-based awards, other than performance-based and market-based awards, over the greater of one year or the period between grant date and retirement-eligibility. The performance-based and market-based awards discussed above do not contain provisions that would accelerate the full vesting of the awards upon retirement-eligibility. We recognize stock-based compensation expense for the value of the portion of awards that are ultimately expected to vest. FASB ASC Topic 718, Compensation – Stock Compensation allows forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinct from “cancellations” or “expirations” and represents only the unvested portion of the surrendered stock-based award. We have applied, based on an analysis of our historical forfeitures, a weighted-average annual forfeiture rate of approximately five percent to all unvested stock-based awards as of December 31, 2021, which represents the portion that we expect will be forfeited each year over the vesting period. We re-evaluate this analysis annually or more frequently if there are significant changes in circumstances and adjust the forfeiture rate as necessary. Ultimately, we will only recognize expense for those shares that vest. Unrecognized Compensation Cost We expect to recognize the following future expense for awards outstanding as of December 31, 2021:
(1)Amounts presented represent compensation cost, net of estimated forfeitures. Employee Stock Purchase Plans Our global employee stock purchase plan provides for the granting of options to purchase up to 50 million shares of our common stock to all eligible employees. Under the global employee stock purchase plan, we grant each eligible employee, at the beginning of each six-month offering period, an option to purchase shares of our common stock equal to not more than ten percent of the employee’s eligible compensation or the statutory limit under the U.S. Internal Revenue Code. Such options may be exercised only to the extent of accumulated payroll deductions at the end of the offering period, at a purchase price equal to 85 percent of the fair market value of our common stock at the beginning or end of each offering period, whichever is less. As of December 31, 2021, there were approximately 4 million shares available for future issuance under the employee stock purchase plan. We temporarily suspended our global employee stock purchase plan for the offering period for the second half of 2020 due to cost-savings initiatives in response to the COVID-19 pandemic and resumed the plan beginning with the offering period for the first half of 2021. Information related to shares issued or to be issued in connection with the employee stock purchase plan based on employee contributions and the range of purchase prices is as follows:
We use the Black-Scholes option-pricing model to calculate the grant-date fair value of shares issued under the employee stock purchase plan. We recognize expense related to shares purchased through the employee stock purchase plan ratably over the offering period.
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Weighted Average Shares Outstanding |
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EARNINGS PER SHARE | NOTE N – WEIGHTED AVERAGE SHARES OUTSTANDING
The following securities were excluded from the calculation of weighted average shares outstanding - assuming dilution because their effect in the periods presented below would have been antidilutive:
(1) Represents common stock equivalents pursuant to our employee stock-based compensation plans, which are anti-dilutive in 2020 due to our Net loss position in this period. (2) Represents stock options outstanding pursuant to our employee stock-based compensation plans with exercise prices that were greater than the average fair market value of our common stock for the related periods. (3) Represents common stock issuable upon the conversion of MCPS. Refer to Note L – Stockholders' Equity for additional information. We base Net income (loss) per common share - assuming dilution upon the weighted-average number of common shares and common stock equivalents outstanding during each year. Potential common stock equivalents are determined using the treasury stock method. We exclude stock options, stock awards and MCPS from the calculation if the effect would be anti-dilutive. The dilutive effect of MCPS is calculated using the if-converted method. The if-converted method assumes that these securities were converted to shares of common stock at the beginning of the reporting period to the extent that the effect is dilutive. In 2021 and 2020, the effect of assuming the conversion of MCPS into shares of common stock was anti-dilutive, and therefore excluded from the calculation of earnings per share (EPS). Accordingly, Net income (loss) was reduced by cumulative Preferred stock dividends, as presented in our consolidated statements of operations, for purposes of calculating Net income (loss) available to common stockholders.
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Segment Reporting |
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SEGMENT REPORTING | NOTE O – SEGMENT REPORTING Our core businesses are organized into three reportable segments: MedSurg, Rhythm and Neuro, and Cardiovascular, which represent an aggregation of our operating segments that generate revenues from the sale of medical devices. We measure and evaluate our reportable segments based on net sales of reportable segments, operating income of reportable segments, excluding intersegment profits, and operating income of reportable segments as a percentage of net sales of reportable segments. We exclude from operating income of reportable segments certain corporate-related expenses and certain transactions or adjustments that our chief operating decision maker (CODM) considers to be non-operational, such as amounts related to amortization expense, goodwill and other intangible asset impairment charges, acquisition/divestiture-related net charges (credits), restructuring and restructuring-related net charges (credits), certain litigation-related net charges (credits), certain investment portfolio net losses (gains) and EU Medical Device Regulation (MDR) implementation costs. Although we exclude these amounts from operating income of reportable segments, they are included in reported Income (loss) before income taxes in our consolidated statements of operations and are included in the reconciliation below. On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business. Our consolidated net sales and income (loss) before income taxes include Specialty Pharmaceuticals up to the date of the closing of the transaction. In the first quarter of 2022, we are reorganizing our operational structure in order to strengthen our category leadership in the markets we serve, and, in particular, benefit our Cardiology customers and patients. Following the reorganization, we will aggregate our core businesses into two reportable segments: MedSurg and Cardiovascular. A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying consolidated statements of operations is as follows (in millions, except percentages):
Following the announcement of our plan to sell our Specialty Pharmaceuticals business, as of December 31, 2020, we classified the assets and liabilities of our Specialty Pharmaceuticals business (disposal group) as held for sale within our consolidated balance sheet at their respective carrying values, which approximated fair value, less costs to sell. Accordingly, the total assets of the Specialty Pharmaceuticals business as of December 31, 2020 reflected above include goodwill and intangible assets attributable to the disposal group that were not previously allocated to our reportable segments.
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Revenue |
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Revenue from Contract with Customer [Text Block] | NOTE P – REVENUE We generate revenue primarily from the sale of single-use medical devices and present revenue net of sales taxes in our consolidated statements of operations. The following tables disaggregate our revenue from contracts with customers by business and geographic region (in millions):
On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business. Our consolidated net sales and income (loss) before income taxes include Specialty Pharmaceuticals up to the date of the closing of the transaction.
(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 countries, and effective January 1, 2021, modified our list to include the following countries: Brazil, Chile, China, Colombia, Czech Republic, India, Indonesia, Malaysia, Mexico, Philippines, Poland, Russia, Saudi Arabia, Slovakia, South Africa, South Korea, Taiwan, Thailand, Turkey and Vietnam. We have revised prior period amounts to conform to the current year's presentation. Contract liabilities are classified within Other current liabilities and Other long-term liabilities in our accompanying consolidated balance sheets. Our deferred revenue balance was $484 million as of December 31, 2021 and $395 million as of December 31, 2020. Our contractual liabilities are primarily composed of deferred revenue related to the LATITUDE™ Patient Management System within our Cardiac Rhythm Management (CRM) business, for which revenue is recognized over the average service period based on device and patient longevity. Our contractual liabilities also include deferred revenue related to the LUX-Dx™ Insertable Cardiac Monitor (ICM) system, also within our CRM business, for which revenue is recognized over the average service period based on device longevity and usage. We recognized revenue of $159 million in 2021 that was included in the above contract liability balance as of December 31, 2020. 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. We capitalize sales force commissions 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. We received FDA approval in mid-2020 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 2020, we recorded $179 million in revenue reserves primarily related to our conversion to a consignment commercial model for our LAAC franchise with the launch of our next-generation WATCHMAN FLX™ Device in the U.S. In connection with the conversion, we repurchased customer-owned inventory and will recognize revenue for consigned units as they are consumed by customers. Refer to Note A – Significant Accounting Policies for additional information on our accounting policies relating to revenue recognition.
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Changes in Other Comprehensive Income |
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Comprehensive Income (Loss) Note [Text Block] | NOTE Q – CHANGES IN OTHER COMPREHENSIVE INCOME The following table provides the reclassifications out of Other comprehensive income, net of tax:
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New Accounting Pronouncements |
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Accounting Standards Update and Change in Accounting Principle [Abstract] | |
New Accounting Pronouncements, Policy | NOTE R – 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 consolidated financial statements. Accounting Standards Implemented in 2021 ASC Update No. 2021-08 In October 2021, the FASB issued ASC Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in Update No. 2021-08 improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. Update No. 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. We adopted Update No. 2021-08 in the fourth quarter of 2021. We applied the amendments retroactively to all business combinations that we completed during 2021. The adoption did not have a material impact on our financial position or results of operations. ASC Update No. 2020-10 In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged. We adopted Update No. 2020-10 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations. ASC Update No. 2020-06 In August 2020, the FASB issued ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. We adopted Update No. 2020-06 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations. ASC Update No. 2019-12 In December 2019, the FASB issued ASC Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The purpose of Update No. 2019-12 is to continue the FASB’s Simplification Initiative to reduce complexity in accounting standards. The amendments in Update No. 2019-12 simplify the accounting for income taxes by removing certain exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize or derecognize deferred tax liabilities related to equity method investments that are also foreign subsidiaries, and the methodology for calculating income taxes in an interim period. In addition to removing these exceptions, Update No. 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. We adopted Update No. 2019-12 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations. Standards to be Implemented ASC Update No. 2021-05 In July 2021, the FASB issued ASC Update No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in Update No. 2021-05 revise lessor lease classification guidance and require accounting for certain leases with variable lease payments that do not depend on a reference index or rate as operating leases. Such classification is required if the lease would have been classified as a sales-type or direct financing lease in accordance with guidance in FASB ASC Topic 842 and the lessor would have otherwise recognized a day-one loss. Update No. 2021-05 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We have the option to apply the amendments retrospectively to leases that commenced or were modified on or after the adoption of FASB ASC Topic 842, or prospectively. The adoption did not have a material impact on our financial position or results of operations. No other new accounting pronouncements, issued or effective, during the period had, or is expected to have, a material impact on our consolidated financial statements.
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Employee Retirement Plans (Notes) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Compensation and Employee Benefit Plans [Text Block] | NOTE S – EMPLOYEE RETIREMENT PLANS Defined Benefit Pension Plans Domestic Retirement Plans Following our 2006 acquisition of Guidant, we assumed the Guidant Supplemental Retirement Plan, a frozen, non-qualified defined benefit plan for certain former officers and employees of Guidant. The Guidant Supplemental Retirement Plan was partially funded through a Rabbi Trust that contains segregated company assets within restricted cash used to pay the benefit obligations related to the plan. We also maintain an Executive Retirement Plan, a defined benefit plan covering executive officers and other key contributors. Participants may retire with benefits once retirement conditions have been satisfied. U.K. Plan As a result of our acquisition of BTG, we assumed a benefit obligation related to a defined benefit pension plan sponsored by BTG for eligible United Kingdom (U.K.) employees (U.K. Plan). The U.K. Plan was closed to new entrants as of June 1, 2004. Prior to the acquisition close date of August 19, 2019, the Trustees of the U.K. Plan executed buy-in arrangements (Buy-in Contracts), which effectively, as structured under the Buy-in Contracts, are intended to provide payments designed to equal all future designated contractual benefit payments to covered participants. The benefit obligation of the pension plan is not transferred to the insurers, and we remain responsible for paying pension benefits. We do not anticipate any additional material contributions or payments to the U.K. Plan or the insurer. In connection with the final purchase price allocation of BTG, we recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following assumptions were used to measure the fair value of the benefit obligation and associated plan assets as of the August 19, 2019 measurement date:
As of the measurement date of August 19, 2019, the funded status was as follows:
Refer to Note B – Acquisitions and Strategic Investments for additional information on our acquisition of BTG. Information about the U.K. Plan presented below is as of the December 31, 2021 and 2020 measurement dates. Other International Retirement Plans In addition, we maintain retirement plans covering certain international employees. We use a December 31 measurement date for these plans and record the net unfunded and underfunded portion as a liability within non-current liabilities, with the current portion within accrued expenses, on the consolidated balance sheets, recognizing changes primarily through OCI. As of December 31, 2021 and 2020, the funded status of our plans were unfunded or underfunded in aggregate. The outstanding obligation is as follows:
A rollforward of the changes in the PBO for our retirement plans is as follows:
The critical assumptions associated with our employee retirement plans for 2021 are as follows:
(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average. The critical assumptions associated with our employee retirement plans for 2020 are as follows:
(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average. A rollforward of the changes in the fair value of plan assets for our funded retirement plans is as follows:
For our defined benefit plans excluding our U.K. Plan, we base our discount rate on the rates of return available on high-quality bonds with maturities approximating the expected period over which benefits will be paid. The rate of compensation increase is based on historical and expected rate increases. We base our rate of expected return on plan assets on historical experience, our investment guidelines and expectations for long-term rates of return. Our assets are invested in a variety of securities, primarily equity securities and government bonds. These securities are considered Level 1 and Level 2 investments. For our U.K. Plan, we utilize the insurance buy-in methodology and base our discount rate on a yield curve reflective of the market pricing obtained in the most recent buy-in transaction, which occurred prior to the acquisition of BTG, and movements in market-observed buy-in pricing as of December 31, 2021. We believe this is a reasonable proxy for an effective settlement rate of the buy-in assets. The discount rate is calculated as the single equivalent assumption that gives the same value of the liabilities as if the figures were calculated using the full yield curve. We assume that all pension increases will continue to be linked to the Retail Price Inflation (RPI), both before and after retirement, for all members, with the exception of post-88 Guaranteed Minimum Pensions (GMP), which will be based on Consumer Price Inflation (CPI). We base our rate of expected return on plan assets as equal to the discount rate used to value the buy-in assets. The U.K. Plan assets' investment policy is to invest in fully matching assets. This has been achieved through the purchase of two buy-in policies (Buy-in contracts), which provide payments designed to equal all future benefit payments due from the fund. As of December 31, 2021, the Buy-in contracts represented 100 percent of the total plan assets, as compared to the target percentage of 100 percent, and are considered Level 3 investments. As of December 31, 2020, the Buy-in contracts represented 100 percent of the total plan assets. The following table presents the fair value hierarchy of the U.K. Plan assets measured at fair value as of December 31, 2021:
The following table presents the fair value hierarchy of the U.K. Plan assets measured at fair value as of December 31, 2020:
Changes in the fair value of the U.K. Plan Level 3 assets were as follows:
Expected benefit payments are estimated based on the same assumptions used in determining our benefit obligation as of December 31, 2021. Actual benefit payments will depend on future employment and compensation, average years employed and average life spans, in addition to other factors. Changes in any of these factors could significantly impact these estimated future benefit payments. Benefit payments expected to be paid during the next ten years for our Domestic Retirement Plans, our U.K. Plan and our Other International Retirement Plans are as follows:
Defined Contribution Plan We also sponsor a voluntary 401(k) Retirement Savings Plan for eligible employees. We match 200 percent of employee elective deferrals for the first two percent of employee eligible compensation and 50 percent of employee elective deferrals greater than two percent, but not exceeding six percent, of employee eligible compensation. Total expense for our matching contributions to the plan was $118 million in 2021, $102 million in 2020 and $98 million in 2019.
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Schedule II |
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SEC Schedule, 12-09, Schedule of Valuation and Qualifying Accounts Disclosure [Text Block] |
(a) Following the adoption of FASB ASC Topic 326 as of January 1, 2020, we record credit loss reserves to Allowance for credit losses when we establish Trade accounts receivable if credit losses are expected over the asset's contractual life. As a result of the adoption of FASB ASC Topic 326, we recorded a net reduction to opening retained earnings on January 1, 2020 related to the establishment of credit loss reserves on Trade accounts receivable and recorded a corresponding increase in the Allowance for credit losses, a contra Trade accounts receivable account. Prior period amounts have not been restated and are presented in accordance with FASB ASC Topic 310. Amounts shown within credit loss exposure above were established through selling, general and administrative expense. (b) Beginning in 2020, Allowance for uncollectible accounts are referred to as Allowance for credit losses within our consolidated balance sheets. (c) Represents actual write-offs of uncollectible accounts.
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Significant Accounting Policies Significant Accounting Policies (Policies) |
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Significant Accounting Policies [Abstract] | ||
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block] | Principles of Consolidation Our consolidated financial statements include the accounts of Boston Scientific Corporation and our wholly-owned subsidiaries, after the elimination of intercompany transactions. When used in this report, the terms "we," "us," "our" and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. We assess the terms of our investment interests to determine if any of our investees meet the definition of a variable interest entity (VIE). For any VIEs, we perform an analysis to determine whether our variable interests give us a controlling financial interest. The analysis identifies the primary beneficiary of a VIE as the enterprise that has both 1) the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 2) the obligation to absorb losses of the entity or the right to receive benefits from the entity. Based on our assessments under the applicable guidance, we did not have controlling financial interests in any VIEs and, therefore, did not consolidate any VIEs during 2021, 2020 or 2019. Basis of Presentation The accompanying consolidated financial statements and notes thereto have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-K and Regulation S-X. 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.
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Subsequent Events, Policy [Policy Text Block] | Subsequent Events We evaluate events occurring after the date of our accompanying consolidated balance sheets for potential recognition or disclosure in our consolidated financial statements. Those items requiring recognition in the financial statements have been recorded and disclosed accordingly. Those items requiring disclosure (non-recognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note B – Acquisitions and Strategic Investments, Note H – Restructuring-related Activities, Note K – Commitments and Contingencies, Note L – Stockholders' Equity and Note O – Segment Reporting for further details.
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Use of Estimates, Policy [Policy Text Block] | Accounting Estimates To prepare our consolidated financial statements in accordance with U.S. GAAP, management makes estimates and assumptions that may affect the reported amounts of our assets and liabilities, the disclosure of contingent liabilities as of the date of our consolidated financial statements and the reported amounts of our revenues and expenses during the reporting period. Our actual results may differ from these estimates. Refer to Critical Accounting Estimates included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for further discussion.
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Cash and Cash Equivalents, Policy [Policy Text Block] | Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents Cash and Cash Equivalents We record Cash and cash equivalents in our consolidated balance sheets at cost, which approximates fair value. Our policy is to invest excess cash in short-term marketable securities earning a market rate of interest without assuming undue risk of loss of principal amounts invested and we limit our direct exposure to securities in any one industry or issuer. We consider to be cash equivalents all short-term marketable securities with remaining days to maturity of 90 days or less from the purchase date that can be readily converted to cash. Restricted Cash Amounts included in restricted cash represent cash on hand required to be set aside by a contractual agreement related to receivable factoring arrangements and deferred compensation plans and are included in the Other current assets caption within our consolidated balance sheets. Generally, the restrictions related to the factoring arrangements lapse at the time we remit the customer payments collected by us for servicing previously sold customer receivables to the purchaser. Restrictions for deferred compensation lapse when amounts are paid to the employee. Restricted Cash Equivalents Restricted cash equivalents primarily represent amounts paid into various qualified settlement funds related to our ongoing transvaginal surgical mesh litigation and current amounts related to our non-qualified pension plan and are included in the Other current assets caption within our consolidated balance sheets. The restrictions related to the various qualified settlement funds will lapse as we approve amounts payable to claimants, at which time we no longer have rights to a return of the amounts paid into the various qualified settlement funds. Restricted cash equivalents included in the Other long-term assets caption within our consolidated balance sheets are related to deferred compensation plans.
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Concentration Risk Disclosure [Text Block] | Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, derivative financial instruments and accounts and notes receivable. Our investment policy limits exposure to concentrations of credit risk and changes in market conditions. Counterparties to financial instruments expose us to credit-related losses in the event of nonperformance. We transact our financial instruments with a diversified group of major financial institutions with investment grade credit ratings and actively monitor their credit ratings and our outstanding positions to limit our credit exposure. In the normal course, our payment terms with customers, including hospitals, healthcare agencies, clinics, doctors' offices and other private and governmental institutions, are typically 30 days in the U.S. but may be longer in international markets and generally do not require collateral. We record credit loss reserves to Allowance for credit losses when we establish Trade accounts receivable if credit losses are expected over the asset's contractual life. We base our estimates of credit loss reserves on historical experience and adjust, as necessary, to reflect current conditions using reasonable and supportable forecasts not already reflected in the historical loss information. We utilize an accounts receivable aging approach to determine the reserve to record at accounts receivable commencement for certain customers, applying country or region-specific factors. In performing the assessment of outstanding accounts receivable, regardless of country or region, we may consider significant factors relevant to collectability, including those specific to a customer such as bankruptcy, lengthy average payment cycles and type of account. We write-off amounts determined to be uncollectible against this reserve. We are not dependent on any single institution, and no single customer accounted for more than ten percent of our net sales in 2021, 2020 and 2019; however, large group purchasing organizations, hospital networks, international distributors and dealers and other buying groups have become increasingly important to our business and represent a substantial portion of our net sales. We closely monitor outstanding receivables for potential collection risks, including those that may arise from economic conditions, in both the U.S. and international economies. Our sales to government-owned or supported customers, particularly in southern Europe, are subject to an increased number of days outstanding prior to payment relative to other countries. More recently, the COVID-19 pandemic has accelerated an ongoing site-of-service trend of shifting procedure volumes in the U.S. toward non-hospital settings, particularly ambulatory surgery centers and office-based labs. Many of these customers are smaller than those we have historically done business with and may have more limited liquidity. We have adjusted our estimates of credit loss reserves for these customers, regions and conditions, as appropriate. We believe our Allowance for credit losses is adequate as of December 31, 2021; however, if significant changes were to occur in the payment practices of government customers, or if there is an increase in bankruptcies among our ambulatory surgery center customers, we may not be able to collect on receivables due to us from these customers, and our write-offs of uncollectible accounts may increase.
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Revenue Recognition, Policy [Policy Text Block] | Revenue Recognition We sell our products primarily through a direct sales force. In certain international markets, we sell our products through independent distributors or dealers. We consider revenue to be earned when all of the following criteria are met in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers: •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 consolidated balance sheets. 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. Our contractual liabilities also include deferred revenue related to the LUX-Dx™ Insertable Cardiac Monitor (ICM) system, also within our CRM business, for which revenue is recognized over the average service period based on device longevity and usage. 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. Post-Implant Services We provide non-contractual services to customers, where necessary, to ensure the safe and effective use of certain implanted devices. 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 Selling, general and administrative expenses within our consolidated statements of operations. 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.
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Inventory, Policy [Policy Text Block] | Inventories We state inventories at the lower of first-in, first-out cost or net realizable value. We utilize a standard costing system, capitalizing variances between estimated and actual production costs during periods of normal production, and amortize to Cost of products sold over inventory turns. We expense manufacturing variances during periods of abnormal production, or less than 75 percent of manufacturing capacity. During 2020, we recorded $149 million of abnormal manufacturing variances attributable to lower production levels resulting from the COVID-19 pandemic and lower than forecasted demand for our products. We did not record any abnormal production variances during the years ended December 31, 2021 or 2019. We base our provisions for excess, expired and obsolete inventory primarily on our estimates of forecasted net sales. A significant change in the timing or level of demand for our products as compared to forecasted amounts may result in recording additional provisions for excess, expired and obsolete inventory in the future. Further, the industry in which we participate is characterized by rapid product development and frequent new product introductions. 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 excess, expired and obsolete inventory.
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Property, Plant and Equipment, Policy [Policy Text Block] | Property, Plant and Equipment We state property, plant, equipment and leasehold improvements at historical cost. We charge expenditures for maintenance and repairs to expense and capitalize additions and improvements that extend the life of the underlying asset. We provide for depreciation using the straight-line method at rates that approximate the estimated useful lives of the assets. We depreciate buildings over a maximum life of 40 years; building improvements over the remaining useful life of the building structure; equipment, furniture and fixtures over a three to seven year life; and leasehold improvements over the shorter of the useful life of the improvement or the term of the related lease.
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Business Combinations Policy [Policy Text Block] | Valuation of Business Combinations We allocate the amounts we pay for each acquisition to the assets we acquire and liabilities we assume based on their fair values at the date of acquisition, including identifiable intangible assets and in-process research and development (IPR&D), which either arise from a contractual or legal right or are separable from goodwill. We base the fair value of identifiable intangible assets acquired in a business combination, including IPR&D, on detailed valuations that use information and assumptions provided by management, which consider management’s best estimates of inputs and assumptions that a market participant would use. We allocate to goodwill any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired. Transaction costs associated with these acquisitions are expensed as incurred through Selling, general and administrative expenses. In cases where we acquire a company in which we previously held an equity stake, we attribute a portion of the purchase price to the previously-held equity interest, which is implied based on the total purchase consideration allocable to each of the shareholders, including Boston Scientific, according to priority of equity interests. We record a gain or loss in Other, net equal to the difference between the implied fair value of our prior ownership and the book value immediately prior to the acquisition. Where an acquisition involves a contingent consideration arrangement, we recognize a liability equal to the fair value of the contingent payments we expect to make as of the acquisition date. We re-measure this liability each reporting period and record changes in the fair value through Contingent consideration net expense (benefit) on our consolidated statements of operations. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue or timing or likelihood of achieving regulatory, revenue or commercialization-based milestones. Payment of additional consideration is generally contingent on the acquired company reaching certain performance milestones after the acquisition date, including attaining specified revenue levels, achieving product development targets and/or obtaining regulatory approvals for products in development at the date of the acquisition.
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In Process Research and Development, Policy [Policy Text Block] | Indefinite-lived Intangibles and IPR&D Our indefinite-lived intangible assets, which are not subject to amortization, include acquired balloon and other technology, which are foundational to our ongoing operations within our Cardiovascular and MedSurg businesses, as well as IPR&D intangible assets acquired in a business combination. Our IPR&D represents intangible assets that are used in research and development activities but have not yet reached technological feasibility, regardless of whether they have alternative future use. The primary basis for determining the technological feasibility or completion of these projects is obtaining regulatory approval to market the underlying products in an applicable geographic region. We classify IPR&D as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. Upon completion of the associated research and development efforts, we will determine the useful life of the technology and begin amortizing the assets to reflect their use over their remaining lives. Upon permanent abandonment, we write-off the remaining carrying amount of the associated IPR&D intangible asset. We test our indefinite-lived intangible assets at least annually during the third quarter for impairment and reassess their classification as indefinite-lived assets. In addition, we review our indefinite-lived intangible assets for classification and impairment more frequently if impairment indicators exist. We assess qualitative factors to determine whether the existence of events and circumstances indicate that it is more likely than not that our indefinite-lived intangible assets are impaired. If we conclude that it is more likely than not that the asset is impaired, we then determine the fair value of the intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying value in accordance with FASB ASC Topic 350, Intangibles - Goodwill and Other. If the carrying value exceeds the fair value of the indefinite-lived intangible asset, we write the carrying value down to the fair value. We use the income approach to determine the fair values of our IPR&D. We base our revenue assumptions on estimates of relevant market sizes, expected market growth rates, expected trends in technology and expected levels of market share. In arriving at the value of the in-process projects, we consider, among other factors, the in-process projects’ stage of completion, the complexity of the work completed as of the acquisition date, the costs already incurred, the projected costs to complete, the contribution of other acquired assets, the expected regulatory path and introduction dates by region and the estimated useful life of the technology. See Note D – Goodwill and Other Intangible Assets for more information related to indefinite-lived intangibles, including IPR&D. For asset purchases outside of business combinations, we expense any purchased research and development assets as of the acquisition date.
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Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block] | Amortization and Impairment of Intangible Assets We record definite-lived intangible assets at historical cost and amortize them over their estimated useful lives. We use a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. The approximate useful lives for amortization of our intangible assets are as follows: patents and licenses, two to 20 years; amortizable technology-related and customer relationships, five to 25 years; other intangible assets, various. We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall or an adverse action or assessment by a regulator. If we determine it is more likely than not that the asset is impaired based on our qualitative assessment of impairment indicators, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities. If the carrying value of the intangible asset or asset group exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset or asset group, we will write the carrying value down to fair value in the period impairment is identified. We calculate fair value of our intangible assets as the present value of estimated future cash flows we expect to generate from the asset. In determining our estimated future cash flows associated with our intangible assets, we use estimates and assumptions about future revenue contributions, cost structures and remaining useful lives of the asset or asset group. See Note D – Goodwill and Other Intangible Assets for more information related to impairments of intangible assets. For patents developed internally, we capitalize costs incurred to obtain patents, including attorney fees, registration fees, consulting fees and other expenditures directly related to securing the patent.
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Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill Valuation We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill. We test our goodwill balances in the second quarter of each year as of April 1 for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist. 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 2021 annual impairment assessment, we identified the following reporting units: Interventional Cardiology, Peripheral Interventions, Cardiac Rhythm Management, Electrophysiology, Endoscopy, Urology and Pelvic Health and Neuromodulation. For purposes of the goodwill impairment test, 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, Intangibles - Goodwill and Other. In the second quarter of 2021, we performed our annual goodwill impairment test utilizing the quantitative assessment approach to test all of our reporting units. We determined that the fair value of each reporting unit exceeded its carrying value and concluded that goodwill was not impaired or at risk of impairment.
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Income Tax, Policy [Policy Text Block] | Income Taxes We utilize the asset and liability method of accounting for income taxes. Under this method, we determine deferred tax assets and liabilities based on differences between the financial reporting and tax bases of our assets and liabilities. We measure deferred tax assets and liabilities using the enacted tax rates and laws that will be in effect when we expect the differences to reverse. We reduce our deferred tax assets by a valuation allowance if, based upon the weight of available evidence, it is more likely than not that we will not realize some portion or all of the deferred tax assets. We consider relevant evidence, both positive and negative, to determine the need for a valuation allowance. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as estimates of the impact of future taxable income and available prudent and feasible tax-planning strategies. We recognize interest and penalties related to income taxes as a component of income tax expense. As part of the Tax Cuts and Jobs Act (TCJA), we are subject to a territorial tax system in which we are required to establish an accounting policy in providing for tax on Global Intangible Low Taxed Income (GILTI) earned by certain foreign subsidiaries. We have elected to treat the impact of GILTI as a period cost and report it as part of continuing operations. See Note J – Income Taxes for further information and discussion of our income tax provision and balances including a discussion of the impacts of the TCJA
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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. | Legal and Product Liability Costs In the normal course of business, we are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities and product liability litigation. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures or impact our ability to sell our products. We are also the subject of certain governmental investigations, which could result in substantial fines, penalties and administrative remedies. 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. 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. We analyze litigation settlements to identify each element of the arrangement. We allocate arrangement consideration to patent licenses received based on estimates of fair value and capitalize these amounts as assets if the license will provide an ongoing future benefit. We record certain legal and product liability charges, credits and costs of defense, which we consider to be unusual or infrequent and significant as Litigation-related charges (credits) in our consolidated statements of operations; all other legal and product liability charges, credits and costs are recorded within Selling, general and administrative expenses within our consolidated statements of operations. See Note K – Commitments and Contingencies for discussion of our individual material legal proceedings.
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Costs Associated with Exit or Disposal Activity or Restructuring [Policy Text Block] | Costs Associated with Exit Activities We record employee termination costs in accordance with FASB ASC Topic 712, Compensation - Nonretirement and Postemployment Benefits, if we pay the benefits as part of an ongoing benefit arrangement, which includes benefits provided as part of our established severance policies or that we provide in accordance with international statutory requirements. We accrue employee termination costs associated with an ongoing benefit arrangement if the obligation is attributable to prior services rendered, the rights to the benefits have vested, the payment is probable and we can reasonably estimate the liability. We account for involuntary employee termination benefits that represent a one-time benefit in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations. We record such costs into expense over the employee’s future service period, if any. Other costs associated with exit activities may include contract termination costs and consulting fees, which are expensed in accordance with FASB ASC Topic 420 and are included in Restructuring net charges (credits) in our consolidated statements of operations. Additionally, costs directly related to our active restructuring initiatives, including program management costs, accelerated depreciation, fixed asset write-offs and costs to transfer product lines among facilities are included within Costs of products sold and Selling, general and administrative expenses within our consolidated statements of operations. Impairment of right of use lease assets and lease termination costs directly related to our active restructuring initiatives are expensed in accordance with FASB ASC Topic 842 and included within Costs of products sold or Selling, general and administrative expenses in our consolidated statements of operations. See Note H – Restructuring-related Activities for further information and discussion of our restructuring plans.
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Foreign Currency Transactions and Translations Policy [Policy Text Block] | Translation of Foreign Currency We translate all assets and liabilities of foreign subsidiaries from the functional currency, which is generally the local currency, into U.S. dollars using the year-end exchange rate. We show the net effect of these translation adjustments in our consolidated financial statements as a component of Accumulated other comprehensive income (loss), net of tax. We translate revenues and expenses at the average exchange rates in effect during the year. For any significant foreign subsidiaries located in highly inflationary economies, we would re-measure their financial statements as if the functional currency were the U.S. dollar. Foreign currency transaction gains and losses are included in Other, net in our consolidated statements of operations, net of losses and gains from any related derivative financial instruments.
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ASC Update No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities [Policy Text Block] | ||
Research and Development Expense, Policy [Policy Text Block] | Research and Development We expense research and development (R&D) costs, including new product development programs, regulatory compliance and clinical research as incurred. Refer to Indefinite-lived Intangibles and IPR&D above for our policy regarding R&D projects acquired in connection with our business combinations and asset purchases.
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Investment, Policy | Investments in Publicly Traded and Privately-Held Entities For publicly-held equity securities for which we do not have the ability to exercise significant influence, we measure at fair value with changes in fair value recognized currently in Other, net within our accompanying consolidated statements of operations. For privately-held equity securities for which we do not have the ability to exercise significant influence, we apply the measurement alternative approach and measure these investments at cost minus impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer. We account for investments in entities for which we have the ability to exercise significant influence under the equity method if we hold 50 percent or less of the voting stock and the entity is not a VIE in which we are the primary beneficiary in accordance with FASB ASC Topic 323, Investments - Equity Method and Joint Ventures. We record these investments initially at cost and adjust the carrying amount to reflect our share of the earnings or losses of the investee, including all adjustments similar to those made in preparing consolidated financial statements. Lastly, we have notes receivable from certain companies that we account for in accordance with FASB ASC Topic 320, Investments - Debt and Equity Securities. Refer to Note B – Acquisitions and Strategic Investments for additional details on our investment balances. Each reporting period, we evaluate our investments to determine if there are any events or circumstances that are likely to have a significant adverse effect on the fair value of the investment. Examples of such impairment indicators include, but are not limited to, a significant deterioration in earnings performance, recent financing rounds at reduced valuations, a significant adverse change in the regulatory, economic or technological environment of an investee or a significant doubt about an investee’s ability to continue as a going concern. If we identify an impairment indicator, we will estimate the fair value of the investment and compare it to its carrying value. Our estimation of fair value considers financial information related to the investee available to us, including valuations based on recent third-party equity investments in the investee. For our investments for which we apply the measurement alternative, if the fair value of the investment is less than its carrying value, the investment is impaired and we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. For our equity method investments, if we determine an impairment is other-than-temporary, we recognize an impairment loss equal to the difference between an investment’s carrying value and its fair value. We deem an impairment to be other-than-temporary unless available evidence indicates that the valuation is more likely than not to recover up to the carrying value of the investment in a reasonable period of time, and we have both the ability and intent to hold the investment for at least the period of time needed to recover the value. Net gains and losses and impairments associated with our investment portfolio are included in Other, net in our consolidated statements of operations.
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Standard Product Warranty, Policy | Warranty Obligations We offer warranties on certain of our product offerings. The majority of our warranty liability relates to implantable devices offered by our CRM business, which include implantable defibrillator and pacemaker systems. These products come with a standard limited warranty covering the replacement of these devices. We offer a full warranty for a portion of the period post-implant and a partial warranty for a period of time thereafter. We estimate the costs that we may incur under our warranty programs based on the number of units sold, historical and anticipated rates of warranty claims and cost per claim and record a liability equal to these estimated costs as cost of products sold at the time the product sale occurs. We assess the adequacy of our recorded warranty liabilities on a quarterly basis and adjust these amounts as necessary.
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Selling, General and Administrative Expenses, Policy | Shipping and Handling CostsWe generally do not bill customers for shipping and handling of our products. We treat shipping costs incurred after a customer obtains control of the good as a fulfillment cost and record in Selling, general and administrative expenses within our consolidated statements of operations. Shipping costs were $194 million in 2021, $146 million in 2020 and $144 million in 2019 |
Fair Value Measures and Disclosures (Policies) |
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Dec. 31, 2021 | |
Fair Value Disclosures [Abstract] | |
Derivatives, Policy [Policy Text Block] | Financial Instruments We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with FASB ASC Topic 815, Derivatives and Hedging, and we present assets and liabilities associated with our derivative financial instruments on a gross basis in our financial statements. In accordance with FASB ASC Topic 815, for those derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated, based upon the exposure being hedged, as a fair value hedge, cash flow hedge, or a hedge of a net investment in a foreign operation. The accounting for changes in the fair value of a derivative instrument depends on whether it qualifies for, and has been designated as part of a hedging relationship, as well as on the type of hedging relationship. Our derivative instruments do not subject our earnings to material risk, as gains and losses on these derivatives generally offset gains and losses on the item being hedged, and we do not enter into derivative transactions for speculative purposes. Refer to Note E – Hedging Activities and Fair Value Measurements for more information on our hedging instruments.
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Fair Value Measurement, Policy [Policy Text Block] | FASB ASC Topic 815 requires all derivative and nonderivative 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 and nonderivative 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 with respect to 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 and nonderivative 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. |
Commitment and Contingencies (Policies) |
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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. | Legal and Product Liability Costs In the normal course of business, we are involved in various legal and regulatory proceedings, including intellectual property, breach of contract, securities and product liability litigation. In some cases, the claimants seek damages, as well as other relief, which, if granted, could require significant expenditures or impact our ability to sell our products. We are also the subject of certain governmental investigations, which could result in substantial fines, penalties and administrative remedies. 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. 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. We analyze litigation settlements to identify each element of the arrangement. We allocate arrangement consideration to patent licenses received based on estimates of fair value and capitalize these amounts as assets if the license will provide an ongoing future benefit. We record certain legal and product liability charges, credits and costs of defense, which we consider to be unusual or infrequent and significant as Litigation-related charges (credits) in our consolidated statements of operations; all other legal and product liability charges, credits and costs are recorded within Selling, general and administrative expenses within our consolidated statements of operations. See Note K – Commitments and Contingencies for discussion of our individual material legal proceedings.
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New Accounting Pronouncements (Policies) |
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Dec. 31, 2021 | |
Accounting Standards Update and Change in Accounting Principle [Abstract] | |
ASC Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers | ASC Update No. 2021-08 In October 2021, the FASB issued ASC Update No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The amendments in Update No. 2021-08 improve the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to recognition of an acquired contract liability and payment terms and their effect on subsequent revenue recognized by the acquirer. Update No. 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. We adopted Update No. 2021-08 in the fourth quarter of 2021. We applied the amendments retroactively to all business combinations that we completed during 2021. The adoption did not have a material impact on our financial position or results of operations.
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ASC Update No. 2020-10 Codification Improvements | ASC Update No. 2020-10 In October 2020, the FASB issued ASC Update No. 2020-10, Codification Improvements. Update No. 2020-10 amends a wide variety of Topics in the Codification in order to improve the consistency of the Codification and the application thereof, while leaving Generally Accepted Accounting Principles unchanged. We adopted Update No. 2020-10 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations.
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ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) | ASC Update No. 2020-06 In August 2020, the FASB issued ASC Update No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments in Update No. 2020-06 simplify the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. We adopted Update No. 2020-06 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations.
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ASC Update No. 2019-12, Income Taxes (Topic 740) | ASC Update No. 2019-12 In December 2019, the FASB issued ASC Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The purpose of Update No. 2019-12 is to continue the FASB’s Simplification Initiative to reduce complexity in accounting standards. The amendments in Update No. 2019-12 simplify the accounting for income taxes by removing certain exceptions related to the incremental approach for intraperiod tax allocation, the requirement to recognize or derecognize deferred tax liabilities related to equity method investments that are also foreign subsidiaries, and the methodology for calculating income taxes in an interim period. In addition to removing these exceptions, Update No. 2019-12 also clarifies and simplifies other aspects of the accounting for income taxes. We adopted Update No. 2019-12 in the first quarter of 2021. The adoption did not have a material impact on our financial position or results of operations.
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ASC Update No. 2021-05, Leases (Topic 842): Lessors - Certain Leases with Variable Lease Payments | ASC Update No. 2021-05 In July 2021, the FASB issued ASC Update No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payments. The amendments in Update No. 2021-05 revise lessor lease classification guidance and require accounting for certain leases with variable lease payments that do not depend on a reference index or rate as operating leases. Such classification is required if the lease would have been classified as a sales-type or direct financing lease in accordance with guidance in FASB ASC Topic 842 and the lessor would have otherwise recognized a day-one loss. Update No. 2021-05 is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. We have the option to apply the amendments retrospectively to leases that commenced or were modified on or after the adoption of FASB ASC Topic 842, or prospectively. The adoption did not have a material impact on our financial position or results of operations.
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Employee Retirement Plans Employee Retirement Plans (Policies) |
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Dec. 31, 2021 | |
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items] | |
Pension and Other Postretirement Plans, Pensions, Policy [Policy Text Block] | We use a December 31 measurement date for these plans and record the net unfunded and underfunded portion as a liability within non-current liabilities, with the current portion within accrued expenses, on the consolidated balance sheets, recognizing changes primarily through OCI. |
Acquisitions and Strategic Investments (Tables) |
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Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | We allocated a portion of the preliminary purchase price to the specific intangible asset categories as follows:
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block] | Changes in the fair value of our contingent consideration liability were as follows:
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Fair Value Measurement Inputs and Valuation Techniques [Table Text Block] | The recurring Level 3 fair value measurements of our contingent consideration liability that we expect to be required to settle include the following significant unobservable inputs:
(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected year of payment, the amount represents the median of the inputs and is not a weighted average.
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Investment [Table Text Block] | The aggregate carrying amount of our strategic investments was comprised of the following:
(1) Measurement alternative investments are privately-held equity securities without readily determinable fair values that are measured at cost less impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer, recognized in Other, net within our accompanying consolidated statements of operations. (2) Publicly-held equity securities are measured at fair value with changes in fair value recognized in Other, net within our consolidated statements of operations.
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BTG Acquisition [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The final purchase price was comprised of the following components:
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The final purchase price allocation was comprised of the following components:
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | We allocated a portion of the purchase price to the specific intangible asset categories as follows:
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2019 Acquisitions (Vertiflex and Millipede) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The final purchase prices were comprised of the following components:
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The final combined purchase price allocation was comprised of the following components:
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Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination [Table Text Block] | We allocated a portion of the combined purchase price to the specific intangible asset categories as follows:
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2021 Acquisitions | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Business Acquisitions, by Acquisition [Table Text Block] | The final determination of the fair value of certain assets and liabilities will be completed within the measurement period in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations.
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block] | The preliminary purchase price allocation for these acquisitions was comprised of the following components:
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Assets and Liabilities Held for Sale (Tables) |
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Disposal Groups, Including Discontinued Operations [Table Text Block] | The carrying amounts of the major classes of assets and liabilities of the disposal group as of December 31, 2020 are presented below:
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Goodwill and Other Intangible Assets Goodwill and Other Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Intangible Assets and Goodwill [Table Text Block] | The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated goodwill impairment charges are as follows:
(1) In the fourth quarter of 2020, we recorded goodwill impairment charges of $73 million related to the Specialty Pharmaceuticals business and classified the remaining assets and liabilities as held for sale as of December 31, 2020. On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business. The goodwill impairment charges of $73 million related to the Specialty Pharmaceuticals business are no longer presented within accumulated write-offs above as of December 31, 2021.
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Schedule of Goodwill [Table Text Block] | The following represents our goodwill balance by global reportable segment and our separately presented Specialty Pharmaceuticals operating segment:
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Schedule of Expected Amortization Expense [Table Text Block] | Estimated Amortization expense for each of the five succeeding fiscal years based upon our amortizable intangible asset portfolio as of December 31, 2021 is as follows (in millions):
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Hedging Activities and Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Derivative [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Notional Amounts of Outstanding Derivative Positions (Table Text Block) | The following table presents the contractual amounts of our hedging instruments outstanding:
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Derivative Instruments, Gain (Loss) [Table Text Block] | The following presents the effect of our derivative and nonderivative instruments designated as cash flow and net investment hedges under FASB ASC Topic 815 in our accompanying consolidated statements of operations. Refer to Note Q – Changes in Other Comprehensive Income for the total amounts relating to derivative and nonderivative instruments presented within our consolidated statements of comprehensive income (loss).
(1) In all periods presented in the table above, the pre-tax (gain) loss amounts reclassified from AOCI to earnings represent the effect of the hedging relationships on earnings. (2) For our outstanding forward currency contracts designated as 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 of the excluded component has been excluded from the assessment of effectiveness in accordance with FASB ASC Topic 815. In the current and prior period, we did not recognize any gains or losses on the components included in the assessment of hedge effectiveness in earnings. (3) For our outstanding euro-denominated debt principal designated as a net investment hedge, the change in fair value attributable to changes in the spot rate is recorded in the CTA component of OCI. No amounts were reclassified from AOCI to current period earnings.
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Derivative Instruments, Gain (Loss) that may be Reclassified from AOCI to Earnings within Twelve Months [Table Text Block] | As of December 31, 2021, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as cash flow and net investment hedges under FASB ASC Topic 815 that may be reclassified from AOCI to earnings within the next twelve months are presented below (in millions):
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Derivatives Not Designated as Hedging Instruments (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:
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Schedule of Derivative Instruments in Statement of Financial Position, Fair Value (Table Text Block) | The following are the balances of our derivative and nonderivative assets and liabilities:
(1)We classify derivative and nonderivative assets and liabilities as current when the settlement date of the contract is one year or less. (2)Foreign currency-denominated debt is the portion of the €900 million debt principal designated as a net investment hedge. A portion of this notional is subject to de-designation and re-designation based on changes in the underlying hedged item.
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Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | Assets and liabilities measured at fair value on a recurring basis consist of the following:
The recurring Level 3 fair value measurements of our licensing arrangements recognized in our consolidated balance sheets as of December 31, 2021 include the following significant unobservable inputs:
(1) Unobservable inputs relate to a single financial asset and liability. As such, unobservable inputs were not weighted by the relative fair value of the instruments. For projected year of payment, the amount represents the median of the inputs and is not a weighted average. Changes in the fair value of our licensing arrangements' financial asset were as follows:
Changes in the fair value of our licensing arrangements' financial liability were as follows:
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Contractual Obligations and Commitments (Tables) |
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Short-term Debt [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-term Debt Instruments [Table Text Block] |
Note: The table above does not include unamortized amounts related to interest rate contracts designated as cash flow hedges. (1) Coupon rates are semi-annual, except for the December 2027 Notes, which bear an annual coupon. (2) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher. Effective November 15, 2021, the interest rate payable decreased by 0.25 percent and began accruing at a rate of 6.75 percent following recent upgrades to our credit ratings. (3) As of December 31, 2021 the outstanding balance is presented within Current Debt Obligations within our consolidated balance sheet. (4) The December 2027 notes are euro-denominated and presented in U.S. dollars based on the exchange rate in effect as of December 31, 2021 and December 31, 2020.
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Transfer of Financial Assets Accounted for as Sales [Table Text Block] | Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net in our accompanying consolidated balance sheets, are aggregated by contract denominated currency below (in millions):
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Long-term Purchase Commitment |
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Summary Of Term Loan And Revolving Credit Facility Agreement Compliance With Debt Covenants [Table Text Block] | As of and through December 31, 2021, we were in compliance with the financial covenant required by our credit facilities described above.
(1) Ratio of total debt to deemed consolidated EBITDA, as defined by the credit agreements, as amended.
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Commercial Paper [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Schedule of Short-term Debt [Table Text Block] | Commercial Paper Our commercial paper program is backed by the 2021 Revolving Credit Facility, as discussed above, and outstanding commercial paper directly reduces borrowing capacity under the 2021 Revolving Credit Facility. We did not have any commercial paper outstanding as of December 31, 2021 and December 31, 2020.
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Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Cash Flow Information Related to Leases | The following table presents supplemental balance sheet information related to our operating leases:
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Lease, Cost | The following table presents the weighted average remaining lease term and discount rate information related to our operating leases:
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Supplemental Cash Flow Information Related to Leases | The following table presents supplemental cash flow information related to our operating leases:
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Maturities of Lease Liabilities | The following table presents the maturities of our operating lease liabilities as of December 31, 2021 (in millions):
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Restructuring Related Activities (Tables) |
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Impact of restructuring costs on the accompanying financial statements | The following presents the restructuring and restructuring-related net charges (credits) by major type and line item within our accompanying consolidated statements of operations (in millions):
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Cumulative Restructuring Charges [Text Block] | The following table presents cumulative restructuring and restructuring-related net charges incurred as of December 31, 2021, related to our ongoing Restructuring Plans by major type:
(1) Consists primarily of consulting fees and costs associated with contract cancellations. (2) Comprised of other costs directly related to our Restructuring Plans, including program management, accelerated depreciation, and fixed asset write-offs.
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Amount Of Cash Paid In Period To Fully Or Partially Settle Specified Type Of Restructuring Cost [Text Block] | Cumulative cash payments associated with our ongoing Restructuring Plans were made using cash generated from operations and are comprised of the following:
LOTUS Discontinuation On November 17, 2020, we announced a global, voluntary recall of all unused inventory of our LOTUS Edge™ Aortic Valve System, and our decision to retire the entire LOTUS™ Valve platform. We recorded restructuring and restructuring-related net charges associated with the product discontinuation of $20 million in 2021 and $55 million in 2020, which are included in the tables above for the year ended December 31, 2021 and December 31, 2020. The restructuring activities were completed in 2021 and resulted in total pre-tax restructuring and restructuring-related net charges of approximately $80 million. In addition, during 2020 we recorded $119 million of inventory charges within Cost of products sold and $8 million of Intangible asset impairment charges associated with the product discontinuation.
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2019 Restructuring Plan [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Cost [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of restructuring costs on the accompanying financial statements | The following table provides a summary of our estimates of total pre-tax charges associated with the 2019 Restructuring Plan, by major type of cost, of which approximately $375 million to $475 million are expected to result in cash outlays:
(1) Consists primarily of consulting fees and costs associated with contractual cancellations. (2) Comprised of other costs directly related to the restructuring program, including program management, accelerated depreciation, fixed asset write-offs, and costs to transfer product lines among facilities.
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2016 Restructuring Plan [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Cost [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Impact of restructuring costs on the accompanying financial statements | The following table provides a summary of total pre-tax charges associated with the 2016 Restructuring Plan by major type of cost, of which approximately $255 million resulted in cash outlays:
(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.
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Supplemental Balance Sheet Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Balance Sheet Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Trade accounts receivable, net [Table Text Block] | Trade accounts receivable, net
The following is a rollforward of our Allowance for credit losses: Note: Effective January 1, 2020, we adopted FASB ASC Topic 326 using the modified retrospective method, which requires that we recognize credit loss reserves when financial assets are established if credit losses are expected over the asset’s contractual life. Prior period amounts have not been restated and are presented in accordance with FASB ASC Topic 310.
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Schedule of Inventory, Current | Inventories
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Schedule of Other Current Assets [Table Text Block] | Other current assets
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Property, plant and equipment, net [Table Text Block] | Property, plant and equipment, net
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Schedule of Other Assets [Table Text Block] | Other long-term assets
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Schedule of Accrued Liabilities [Table Text Block] | Accrued expenses
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Other Current Liabilities [Table Text Block] | Other current liabilities
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Other long-term liabilities [Table Text Block] | Other long-term liabilities
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tax rate | The reconciliation of income taxes at the federal statutory rate to the actual expense (benefit) for income taxes is as follows:
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Summary of Income Tax Contingencies [Table Text Block] | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
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Schedule of Income before Income Tax, Domestic and Foreign [Table Text Block] | Our Income (loss) before income taxes consisted of the following:
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Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | Significant components of our deferred tax assets and liabilities are as follows:
Our deferred tax assets, deferred tax liabilities and prepaid on intercompany profit, are included in the following locations within our accompanying consolidated balance sheets (in millions):
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Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The related expense (benefit) for income taxes consisted of the following:
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Stock Incentive and Purchase Plans (Tables) |
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Free Cash Flow Performance-based DSU Awards, Fair Value Assumptions [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Free Cash Flow Performance-based DSU Awards, Fair Value Assumptions [Table Text Block] | The following table presents our assumptions used in determining the fair value of our AFCF awards currently expected to vest as of December 31, 2021:
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Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block] | The following presents the impact of stock-based compensation on our consolidated statements of operations:
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Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block] | We use the Black-Scholes option-pricing model to calculate the grant-date fair value of stock options granted to employees under our stock incentive plans. We calculated the fair value for options granted using the following estimated weighted-average assumptions:
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Schedule of Share-based Compensation, Restricted Stock Units Award Activity [Table Text Block] | Information related to non-vested stock awards is as follows:
(1)The number of shares vested includes shares withheld on behalf of employees to satisfy statutory tax withholding requirements.
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Schedule of Share-based Compensation, Employee Stock Purchase Plan, Activity [Table Text Block] | Information related to shares issued or to be issued in connection with the employee stock purchase plan based on employee contributions and the range of purchase prices is as follows:
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Schedule of Unrecognized Compensation Cost, Nonvested Awards [Table Text Block] | We expect to recognize the following future expense for awards outstanding as of December 31, 2021:
(1)Amounts presented represent compensation cost, net of estimated forfeitures.
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Market-based awards, valuation assumptions [Table Text Block] | We determined the fair value of the market-based RSU and DSU awards to be approximately $11 million for 2021, $8 million for 2020 and $10 million for 2019. We determined these fair values based on Monte Carlo simulations as of the date of grant, utilizing the following assumptions:
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Share-based Compensation, Stock Options, Activity [Table Text Block] | Information related to stock options under stock incentive plans are as follows:
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Weighted Average Shares Outstanding (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Weighted Average Number of Shares [Table Text Block] |
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following securities were excluded from the calculation of weighted average shares outstanding - assuming dilution because their effect in the periods presented below would have been antidilutive:
(1) Represents common stock equivalents pursuant to our employee stock-based compensation plans, which are anti-dilutive in 2020 due to our Net loss position in this period. (2) Represents stock options outstanding pursuant to our employee stock-based compensation plans with exercise prices that were greater than the average fair market value of our common stock for the related periods. (3) Represents common stock issuable upon the conversion of MCPS. Refer to Note L – Stockholders' Equity for additional information.
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Revenue from Segments to Consolidated [Table Text Block] | A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying consolidated statements of operations is as follows (in millions, except percentages):
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Reconciliation of depreciation by reportable segment to total [Table Text Block] |
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Reconciliation of Operating Profit (Loss) from Segments to Consolidated [Table Text Block] |
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Segment operating income as percentage of net sales [Table Text Block] |
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Reconciliation of Assets from Segment to Consolidated [Table Text Block] |
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Schedule of Disclosure on Geographic Areas, Long-Lived Assets in Individual Foreign Countries by Country [Table Text Block] |
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Revenue (Tables) |
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Disaggregation of Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue [Table Text Block] | The following tables disaggregate our revenue from contracts with customers by business and geographic region (in millions):
On March 1, 2021, we completed the divestiture of the Specialty Pharmaceuticals business. Our consolidated net sales and income (loss) before income taxes include Specialty Pharmaceuticals up to the date of the closing of the transaction.
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Changes in Other Comprehensive Income (Tables) |
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Other Comprehensive Income (Loss) Net of Tax, Period Change [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block] | The following table provides the reclassifications out of Other comprehensive income, net of tax:
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Employee Retirement Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pension and Other Postretirement Plans, Policy [Policy Text Block] | We also sponsor a voluntary 401(k) Retirement Savings Plan for eligible employees. We match 200 percent of employee elective deferrals for the first two percent of employee eligible compensation and 50 percent of employee elective deferrals greater than two percent, but not exceeding six percent, of employee eligible compensation. Total expense for our matching contributions to the plan was $118 million in 2021, $102 million in 2020 and $98 million in 2019. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Benefit Obligations in Excess of Fair Value of Plan Assets [Table Text Block] | The outstanding obligation is as follows:
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Schedule of Changes in Projected Benefit Obligations [Table Text Block] | A rollforward of the changes in the PBO for our retirement plans is as follows:
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Schedule of Defined Benefit Plans Disclosures [Table Text Block] | The following assumptions were used to measure the fair value of the benefit obligation and associated plan assets as of the August 19, 2019 measurement date:
As of the measurement date of August 19, 2019, the funded status was as follows:
The critical assumptions associated with our employee retirement plans for 2021 are as follows:
(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average. The critical assumptions associated with our employee retirement plans for 2020 are as follows:
(1) Rates of compensation increase were not weighted by relative fair value. As such, the amount represents the median of the inputs and is not a weighted average.
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Schedule of Allocation of Plan Assets | The following table presents the fair value hierarchy of the U.K. Plan assets measured at fair value as of December 31, 2021:
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Schedule of Changes in Fair Value of Plan Assets [Table Text Block] | A rollforward of the changes in the fair value of plan assets for our funded retirement plans is as follows:
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Schedule of Expected Benefit Payments | Benefit payments expected to be paid during the next ten years for our Domestic Retirement Plans, our U.K. Plan and our Other International Retirement Plans are as follows:
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Significant Accounting Policies Significant Accounting Policies (Details) - USD ($) $ in Millions |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
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Significant Accounting Policies [Line Items] | |||
Selling, general and administrative expenses | $ 4,359 | $ 3,787 | $ 3,941 |
Production Related Impairments or Charges | 149 | ||
Shipping and Handling [Member] | |||
Significant Accounting Policies [Line Items] | |||
Selling, general and administrative expenses | $ 194 | $ 146 | $ 144 |
Strategic Investments (Details) - USD ($) $ in Millions |
12 Months Ended | |
---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
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Schedule of Investments [Line Items] | ||
Equity Method Investment, Difference Between Carrying Amount and Underlying Equity | $ 289 | |
Equity Method Investments | 259 | $ 319 |
Measurement alternative investments (1) | 142 | 183 |
Equity Securities, FV-NI | 10 | 414 |
Notes receivable | 0 | 2 |
Investments | 412 | 918 |
Unrealized Gain (Loss) on Investments | $ (178) | $ 363 |
Schedule II (Details) - USD ($) $ in Millions |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
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SEC Schedule, 12-09, Valuation and Qualifying Accounts [Abstract] | ||||
Accounts Receivable, Allowance for Credit Loss (beginning balance) | $ 105 | $ 74 | $ 68 | |
Cumulative effect adjustment for adoption of ASC 2016-13 | 10 | |||
Net (credits) charges to expenses | 28 | 49 | 23 | |
Utilization of allowances | (25) | (27) | (17) | |
Accounts Receivable, Allowance for Credit Loss (ending balance) | $ 108 | $ 105 | 74 | |
SEC Schedule, 12-09, Valuation Allowances and Reserves, Amount | $ 74 | $ 68 |
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