UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2010		Commission File No. 1-11083

BOSTON SCIENTIFIC CORPORATION

(Exact Name of Registrant As Specified in Its Charter)

DELAWARE		04-2695240
(State of Incorporation)		(I.R.S. Employer Identification No.)

ONE BOSTON SCIENTIFIC PLACE, NATICK, MASSACHUSETTS 01760-1537
(Address of Principal Executive Offices)

(508) 650-8000
(Registrant’s Telephone Number)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)

Yes þ     No o

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o     No þ

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

		Shares outstanding
Class		as of October 31, 2010
Common Stock, $.01 par value		1,520,076,600

TABLE OF CONTENTS

						Page No.
PART I     FINANCIAL INFORMATION							3
		Item 1.		Condensed Consolidated Financial Statements			3
				Condensed Consolidated Statements of Operations			3
				Condensed Consolidated Balance Sheets			4
				Condensed Consolidated Statements of Cash Flows			5
				Notes to the Condensed Consolidated Financial Statements			6
		Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
		Item 3.		Quantitative and Qualitative Disclosures About Market Risk			82
		Item 4.		Controls and Procedures			82
PART II          OTHER INFORMATION							84
		Item 1.		Legal Proceedings			84
		Item 1A.		Risk Factors			84
		Item 6.		Exhibits			84
SIGNATURE							86
EX-10.5
EX-10.6
EX-10.7
EX-31.1
EX-31.2
EX-32.1
EX-32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I
FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
in millions, except per share data		2010				2009				2010				2009
Net sales		$	1,916			$	2,025			$	5,804			$	6,109
Cost of products sold			623				629				1,939				1,867
Gross profit			1,293				1,396				3,865				4,242
Operating expenses:
Selling, general and administrative expenses			634				665				1,897				1,987
Research and development expenses			230				258				714				778
Royalty expense			39				51				147				149
Loss on program termination															16
Amortization expense			129				126				381				381
Goodwill impairment charge											1,817
Intangible asset impairment charges			5								65				10
Purchased research and development															17
Acquisition-related milestone											(250	)
Restructuring charges			5				9				98				44
Litigation-related net charges							236								523
			1,042				1,345				4,869				3,905
Operating income (loss)			251				51				(1,004	)			337
Other income (expense):
Interest expense			(91	)			(91	)			(286	)			(285	)
Other, net			3				(4	)			(2	)			(13	)
Income (loss) before income taxes			163				(44	)			(1,292	)			39
Income tax (benefit) expense			(27	)			50				9				(12	)
Net income (loss)		$	190			$	(94	)		$	(1,301	)		$	51
Net income (loss) per common share — basic		$	0.13			$	(0.06	)		$	(0.86	)		$	0.03
Net income (loss) per common share — assuming dilution		$	0.12			$	(0.06	)		$	(0.86	)		$	0.03
Weighted-average shares outstanding
Basic			1,519.8				1,509.3				1,517.0				1,507.0
Assuming dilution			1,529.3				1,509.3				1,517.0				1,514.4

See notes to the unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
in millions, except share data		2010				2009
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	624			$	864
Trade accounts receivable, net			1,317				1,375
Inventories			923				920
Deferred income taxes			480				572
Prepaid expenses and other current assets			212				330
Total current assets			3,556				4,061
Property, plant and equipment, net			1,712				1,728
Goodwill			10,592				12,404
Other intangible assets, net			6,291				6,731
Other long-term assets			335				253
		$	22,486			$	25,177
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current debt obligations		$	904			$	3
Accounts payable			195				212
Accrued expenses			1,604				2,609
Other current liabilities			252				198
Total current liabilities			2,955				3,022
Long-term debt			5,133				5,915
Deferred income taxes			1,924				1,875
Other long-term liabilities			1,436				2,064
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $ .01 par value - authorized 50,000,000 shares, none issued and outstanding
Common stock, $ .01 par value - authorized 2,000,000,000 shares, issued 1,519,963,601 shares as of September 30, 2010 and 1,510,753,934 shares as of December 31, 2009			15				15
Additional paid-in capital			16,198				16,086
Accumulated deficit			(5,058	)			(3,757	)
Other stockholders’ deficit			(117	)			(43	)
Total stockholders’ equity			11,038				12,301
		$	22,486			$	25,177

See notes to the unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

		Nine Months Ended
		September 30,
(in millions)		2010				2009
Cash (used for) provided by operating activities		$	(124	)		$	1,164
Investing activities:
Purchases of property, plant and equipment			(209	)			(225	)
Proceeds from sales of publicly traded and privately held equity securities and collections of notes receivable			1				54
Payments for acquisitions of businesses, net of cash acquired							(4	)
Payments relating to prior period acquisitions			(4	)			(517	)
Payments for investments in companies and acquisitions of certain technologies			(5	)			(41	)
Cash used for investing activities			(217	)			(733	)
Financing activities:
Proceeds from borrowings on revolving credit facility			200
Payments on revolving credit facility borrowings			(200	)
Proceeds from long-term borrowings, net of debt issuance costs			973
Payments on long-term borrowings			(900	)			(725	)
Proceeds from issuances of shares of common stock			28				32
Cash provided by (used for) financing activities			101				(693	)
Effect of foreign exchange rates on cash							2
Net decrease in cash and cash equivalents			(240	)			(260	)
Cash and cash equivalents at beginning of period			864				1,641
Cash and cash equivalents at end of period		$	624			$	1,381
Supplemental Information
Non-cash financing activities:
Stock-based compensation expense		$	122			$	111

See notes to the unaudited condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE A – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the consolidated financial statements and footnotes thereto included in our 2009 Annual Report filed on Form 10-K.

We have reclassified certain prior year amounts to conform to the current year’s presentation. See Note L – Segment Reporting for further details.

Subsequent Events

We evaluate events occurring after the date of our accompanying unaudited condensed consolidated balance sheets for potential recognition or disclosure in our financial statements. We did not identify any material subsequent events requiring adjustment to our accompanying unaudited condensed consolidated financial statements (recognized subsequent events). Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note F – Acquisitions, Note K – Commitments and Contingencies, and Note N – Subsequent Events for more information.

NOTE B – GOODWILL AND OTHER INTANGIBLE ASSETS

We test our April 1 goodwill balances during the second quarter of each year for impairment, or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The ship hold and product removal actions associated with our U.S. implantable cardioverter defibrillator (ICD) and cardiac resynchronization therapy defibrillator (CRT-D) products announced on March 15, 2010, described in Item 2 of this Quarterly Report, and the expected corresponding financial impact on our operations created an indication of potential impairment of the goodwill balance attributable to our U.S. Cardiac Rhythm Management (CRM) reporting unit in the first quarter of 2010. Therefore, we performed an interim impairment test in accordance with our accounting policies described in our 2009 Annual Report filed on Form 10-K, and recorded a $1.848 billion, on both a pre-tax and after-tax basis, goodwill impairment charge associated with our U.S. CRM reporting unit in the first quarter of 2010. Due to the timing of the product actions and the procedures required to complete the two step goodwill impairment test, the goodwill impairment charge was an estimate, which we finalized in the second quarter of 2010. During the second quarter of 2010, we recorded a $31 million reduction of the charge, resulting in a final goodwill impairment charge of $1.817 billion. This charge does not impact our compliance with our debt covenants or our cash flows.

At the time we performed our interim goodwill impairment test, we estimated that our U.S. defibrillator market share would decrease approximately 400 basis points exiting 2010 as a result of the ship hold and product removal actions, as compared to our market share exiting 2009, and that these actions would negatively impact our 2010 U.S. CRM revenues by approximately $300 million. We are working with our physician and patient customers to recapture lost market share; however, our on-going U.S. CRM net sales and profitability will likely continue to be adversely impacted as a result of the ship hold and product removal actions. Therefore, as a result of these product actions, as well as lower expectations of market growth in new areas and increased competitive and pricing pressures, we lowered our estimated average U.S. CRM net sales growth rates within our 15-year discounted cash flow (DCF) model, as well as our terminal value growth rate, by approximately a couple of hundred basis points to derive the fair value of the

U.S. CRM reporting unit. The reduction in our forecasted 2010 U.S. CRM net sales, the change in our expected sales growth rates thereafter and the reduction in profitability as a result of the recently enacted excise tax on medical device manufacturers, discussed in Item 2 of this Quarterly Report, were several key factors contributing to the impairment charge. Partially offsetting these factors was a 50 basis point reduction in our estimated market participant risk-adjusted weighted-average cost of capital (WACC) used in determining our discount rate.

In the second quarter of 2010, we performed our annual goodwill impairment test for all of our reporting units. We updated our U.S. CRM assumptions to reflect our market share position at that time, our most recent operational budgets and long range strategic plans. In conjunction with our annual test, the fair value of each reporting unit exceeded its carrying value, with the exception of our U.S. CRM reporting unit. Based on the remaining book value of our U.S. CRM reporting unit following the goodwill impairment charge, the carrying value of our U.S. CRM reporting unit continued to exceed its fair value, due primarily to the book value of amortizable intangible assets allocated to this reporting unit. The remaining book value of our amortizable intangible assets which have been allocated to our U.S. CRM reporting unit is approximately $3.7 billion as of September 30, 2010. We tested these amortizable intangible assets for impairment on an undiscounted cash flow basis as of March 31, 2010, and determined that these assets were not impaired, and there have been no impairment indicators related to these assets subsequent to that test. The assumptions used in our annual goodwill impairment test related to our U.S. CRM reporting unit were substantially consistent with those used in our first quarter interim impairment test; therefore, it was not deemed necessary to proceed to step two of the impairment test in the second quarter of 2010.

We have identified a total of four reporting units with a material amount of goodwill that are at higher risk of potential failure of the first step of the impairment test in future reporting periods. These reporting units include our U.S. CRM unit, which holds $1.5 billion of allocated goodwill, our U.S. Cardiovascular unit, which holds $2.2 billion of allocated goodwill, our U.S. Neuromodulation unit, which holds $1.2 billion of allocated goodwill, and our Europe/Middle East/Africa (EMEA) region, which holds $4.1 billion of allocated goodwill. The level of excess fair value over carrying value for these reporting units (with the exception of the U.S. CRM reporting unit, whose carrying value continues to exceed its fair value) identified during our annual goodwill impairment test ranged from 14 percent to 23 percent. Future events that could have a negative impact on the fair value of the reporting units include, but are not limited to:

	•		decreases in estimated market sizes or market growth rates due to pricing pressures, product actions, disruptive technology developments, and/or other economic conditions;
	•		declines in our market share and penetration assumptions due to increased competition, an inability to develop or launch new products, and market and/or regulatory conditions that may cause significant launch delays or product recalls;
	•		declines in revenue as a result of loss of key members of our sales force and other key personnel;
	•		negative developments in intellectual property litigation that may impact our ability to market certain products;
	•		adverse legal decisions resulting in significant cash outflows;
	•		increases in the research and development costs necessary to obtain regulatory approvals and launch new products, and the level of success of on-going and future research and development efforts; and
	•		increases in our risk-adjusted WACC due to further instability or deterioration of the equity and credit markets.

Negative changes in one or more of these factors could result in additional impairment charges.

The following is a summary of our other intangible asset balances as of September 30, 2010 and December 31, 2009:

		September 30,				December 31,
(in millions)		2010				2009
Core technology		$	6,854			$	6,854
Other intangible assets			2,369				2,384
			9,223				9,238
Less: accumulated amortization			(2,932	)			(2,507	)
		$	6,291			$	6,731

During the first quarter of 2010, due to lower than anticipated net sales of one of our Peripheral Interventions technology offerings, as well as changes in our expectations of future market acceptance of this technology, we lowered our sales forecasts associated with the product. In addition, during the third quarter of 2010, as part of our initiatives to reprioritize and diversify our product portfolio, we discontinued one of our internal research and development programs to focus on those with a higher likelihood of success. As a result of these factors, and in accordance with our accounting policies described in our 2009 Annual Report filed on Form 10-K, we tested the related intangible assets for impairment and recorded a $60 million intangible asset impairment charge in the first quarter of 2010 and a $5 million intangible asset impairment charge in the third quarter of 2010 to write down the balance of these intangible assets to their fair values. We have recorded these amounts in the intangible asset impairment charges caption in our accompanying unaudited condensed consolidated statements of operations.

NOTE C – FINANCIAL INSTRUMENTS

Derivative Instruments and Hedging Activities

We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments, and operate the program pursuant to documented corporate risk management policies. We recognize all derivative financial instruments in our consolidated financial statements at fair value in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification™ (ASC) Topic 815, Derivatives and Hedging (formerly FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities). In accordance with 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 (i.e. gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, further, on the type of hedging relationship. Our derivative instruments do not subject our earnings or cash flows to material risk, as gains and losses on these derivatives generally offset losses and gains on the item being hedged. We do not enter into derivative transactions for speculative purposes and we do not have any non-derivative instruments that are designated as hedging instruments pursuant to Topic 815.

Currency Hedging

We are exposed to currency risk consisting primarily of foreign currency denominated monetary assets and liabilities, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We manage our exposure to changes in foreign currency on a consolidated basis to take advantage of offsetting transactions. We use both derivative instruments (currency forward and option contracts), and non-derivative transactions (primarily European manufacturing and distribution operations) to reduce the risk that our earnings and cash flows associated with these foreign

currency denominated balances and transactions will be adversely affected by currency exchange rate changes.

Designated Foreign Currency Hedges

All of our designated currency hedge contracts outstanding as of September 30, 2010 and December 31, 2009 were cash flow hedges under Topic 815 intended to protect the U.S. dollar value of our forecasted foreign currency denominated transactions. We record the effective portion of any change in the fair value of foreign currency cash flow hedges in other comprehensive income (OCI) until the related third-party transaction occurs. Once the related third-party transaction occurs, we reclassify the effective portion of any related gain or loss on the foreign currency cash flow hedge to earnings. In the event the hedged forecasted transaction does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to earnings at that time. We had currency derivative instruments designated as cash flow hedges outstanding in the contract amount of $2.669 billion as of September 30, 2010 and $2.760 billion as of December 31, 2009.

We recognized net gains of $5 million in earnings on our cash flow hedges during the third quarter of 2010 and net losses of $22 million for the first nine months of 2010, as compared to net losses of less than $1 million during the third quarter of 2009 and net gains $23 million for the first nine months of 2009. All currency cash flow hedges outstanding as of September 30, 2010 mature within 36 months. As of September 30, 2010, $66 million of net losses, net of tax, were recorded in accumulated other comprehensive income (AOCI) to recognize the effective portion of the fair value of any currency derivative instruments that are, or previously were, designated as foreign currency cash flow hedges, as compared to net losses of $44 million as of December 31, 2009. As of September 30, 2010, $41 million of net losses, net of tax, may be reclassified to earnings within the next twelve months.

The success of our hedging program depends, in part, on forecasts of transaction activity in various currencies (primarily Japanese yen, Euro, British pound sterling, Australian dollar and Canadian dollar). We may experience unanticipated currency exchange gains or losses to the extent that there are differences between forecasted and actual activity during periods of currency volatility. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows.

Non-designated Foreign Currency Contracts

We use currency forward contracts as a part of our strategy to manage exposure related to foreign currency denominated monetary assets and liabilities. These currency forward contracts are not designated as cash flow, fair value or net investment hedges under Topic 815; are marked-to-market with changes in fair value recorded to earnings; and are entered into for periods consistent with currency transaction exposures, generally one to six months. We had currency derivative instruments not designated as hedges under Topic 815 outstanding in the contract amount of $1.928 billion as of September 30, 2010 and $1.982 billion as of December 31, 2009.

Interest Rate Hedging

Our interest rate risk relates primarily to U.S. dollar borrowings, partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates by converting floating-rate debt into fixed-rate debt or fixed-rate debt into floating-rate debt.

We designate these derivative instruments either as fair value or cash flow hedges under Topic 815. We record changes in the value of fair value hedges in interest expense, which is generally offset by changes in the fair value of the hedged debt obligation. Interest payments made or received related to our interest rate derivative instruments are included in interest expense. We record the effective portion of any change in the fair value of derivative instruments designated as cash flow hedges as unrealized gains or losses in OCI, net

of tax, until the hedged cash flow occurs, at which point the effective portion of any gain or loss is reclassified to earnings. We record the ineffective portion of our cash flow hedges in interest expense. In the event the hedged cash flow does not occur, or it becomes no longer probable that it will occur, we reclassify the amount of any gain or loss on the related cash flow hedge to interest expense at that time. We had no interest rate derivative instruments outstanding as of September 30, 2010 or December 31, 2009.

In prior years we terminated certain interest rate derivative instruments, including fixed-to-floating interest rate contracts, designated as fair value hedges, and floating-to-fixed treasury locks, designated as cash flow hedges. In accordance with Topic 815, we are amortizing the gains and losses of these derivative instruments upon termination into earnings over the term of the hedged debt. The carrying amount of certain of our senior notes included unamortized gains of $2 million as of September 30, 2010 and $3 million as of December 31, 2009, and unamortized losses of $6 million as of September 30, 2010 and $8 million as of December 31, 2009, related to the fixed-to-floating interest rate contracts. In addition, we had pre-tax net gains within AOCI related to terminated floating-to-fixed treasury locks of $9 million as of September 30, 2010 and $11 million as of December 31, 2009.

During the third quarter and first nine months of 2010, we recognized in earnings an immaterial amount of net gains related to our previously terminated interest rate derivative contracts. As of September 30, 2010, $6 million of net gains, net of tax, are recorded in AOCI to recognize the effective portion of these instruments, as compared to $7 million of net gains as of December 31, 2009. As of September 30, 2010, an immaterial amount of net gains, net of tax, may be reclassified to earnings within the next twelve months from amortization of our previously terminated interest rate derivative instruments.

Counterparty Credit Risk

We do not have significant concentrations of credit risk arising from our derivative financial instruments, whether from an individual counterparty or related group of counterparties. We manage our concentration of counterparty credit risk on our derivative instruments by limiting acceptable counterparties to a diversified group of major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to each counterparty, and by actively monitoring their credit ratings and outstanding fair values on an on-going basis. Furthermore, none of our derivative transactions are subject to collateral or other security arrangements and none contain provisions that are dependent on our credit ratings from any credit rating agency.

We also employ master netting arrangements that reduce our counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between us and the counterparty financial institution. Thus, the maximum loss due to credit risk by counterparty is limited to the unrealized gains in such contracts net of any unrealized losses should any of these counterparties fail to perform as contracted. Although these protections do not eliminate concentrations of credit, as a result of the above considerations, we do not consider the risk of counterparty default to be significant.

Fair Value of Derivative Instruments

The following presents the effect of our derivative instruments designated as cash flow hedges under Topic 815 on our accompanying unaudited condensed consolidated statements of operations during the third quarter and first nine months of 2010 and 2009 (in millions):

						Amount of Gain
		Amount of Gain				(Loss)
		(Loss)				Reclassified from						Amount of Gain (Loss)
		Recognized in				AOCI into						Recognized in Earnings on
		OCI				Earnings						Ineffective Portion and
		(Effective				(Effective				Location in Statement of		Amount Excluded from				Location in Statement of
Cash Flow Hedges		Portion)				Portion)				Operations		Effectiveness Testing*				Operations
Three Months Ended September 30, 2010
Interest rate contracts						$	1			Interest expense
Currency hedge contracts		$	(173	)			5			Cost of products sold
		$	(173	)		$	6
Three Months Ended September 30, 2009
Interest rate contracts		$	(10	)		$	(11	)		Interest expense		$	(1	)		Interest expense	**
Currency hedge contracts			(133	)			(1	)		Cost of products sold
		$	(143	)		$	(12	)				$	(1	)
Nine Months Ended September 30, 2010
Interest rate contracts						$	2			Interest expense
Currency hedge contracts		$	(56	)			(22	)		Cost of products sold
		$	(56	)		$	(20	)
Nine Months Ended September 30, 2009
Interest rate contracts		$	(18	)		$	(31	)		Interest expense		$	(2	)		Interest expense	**
Currency hedge contracts			(106	)			23			Cost of products sold
		$	(124	)		$	(8	)				$	(2	)

				Amount of Gain (Loss) Recognized
		Location		in Earnings (in millions)
Derivatives Not Designated as		in Statement of		Three Months Ended September 30,								Nine Months Ended September 30,
Hedging Instruments		Operations		2010				2009				2010				2009
Currency hedge contracts		Other, net		$	(40	)		$	(41	)		$	(67	)		$	(8	)
Currency hedge contracts		Cost of products sold															(1	)
				$	(40	)		$	(41	)		$	(67	)		$	(9	)

Losses and gains on currency hedge contracts not designated as hedged instruments were substantially offset by $43 million in net gains from foreign currency transaction exposures during the third quarter of 2010, $40 million during the third quarter of 2009, $59 million for the first nine months of 2010, and $4 million for the first nine months of 2009. As a result, we recorded a net foreign currency gain of $3 million during the third quarter of 2010, a $1 million loss during the third quarter of 2009, an $8 million loss for the first nine months of 2010, and a $4 million loss for the first nine months of 2009, within other, net in our accompanying unaudited condensed consolidated financial statements.

Topic 815 requires all derivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative instruments using the framework prescribed by ASC Topic 820, Fair Value Measurements and Disclosures (formerly FASB Statement No. 157, Fair Value Measurements), by considering the estimated amount we would receive to sell or transfer these instruments at the reporting date and by taking into account current interest rates, currency exchange rates, the creditworthiness of the counterparty for assets, and our creditworthiness for liabilities. In certain instances, we may utilize financial models to measure fair value. Generally, 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. As of September 30, 2010, we have classified all of our derivative assets and liabilities within Level 2 of the fair value hierarchy prescribed by Topic 820, as discussed below, because these observable inputs are available for substantially the full term of our derivative instruments.

The following are the balances of our derivative assets and liabilities as of September 30, 2010 and December 31, 2009:

						September 30,				December 31,
(in millions)		Location in Balance Sheet (1)				2010				2009
Derivative Assets:
Designated Hedging Instruments
Currency hedge contracts		Prepaid and other current assets				$	32			$	20
Currency hedge contracts		Other long-term assets					21				12
							53				32
Non-Designated Hedging Instruments
Currency hedge contracts		Prepaid and other current assets					16				24
Total Derivative Assets						$	69			$	56
Derivative Liabilities:
Designated Hedging Instruments
Currency hedge contracts		Other current liabilities				$	83			$	64
Currency hedge contracts		Other long-term liabilities					64				29
							147				93
Non-Designated Hedging Instruments
Currency hedge contracts		Other current liabilities					55				17
Total Derivative Liabilities						$	202			$	110

(1)

We classify derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less.

Other Fair Value Measurements

On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices, where available. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The categorization of financial assets and financial liabilities 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.

Our investments in money market funds are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Our money market funds are classified as cash and cash equivalents within our accompanying unaudited condensed consolidated balance sheets, in accordance with our accounting policies.

Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of September 30, 2010:

(in millions)		Level 1				Level 2				Level 3				Total
Assets
Money market funds		$	310											$	310
Currency hedge contracts						$	69								69
		$	310			$	69							$	379
Liabilities
Currency hedge contracts						$	202							$	202
						$	202							$	202

In addition to $310 million invested in money market funds as of September 30, 2010, we had $220 million of cash invested in short-term time deposits, and $94 million in interest bearing and non-interest bearing bank accounts.

We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods subsequent to initial recognition. The fair value of a cost method 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. The aggregate carrying amount of our cost method investments was $54 million as of September 30, 2010 and $58 million as of December 31, 2009. As of September 30, 2010, we had no material assets or liabilities measured at fair value on either a recurring or non-recurring basis using significant unobservable inputs (Level 3).

During the first nine months of 2010, we recorded $1.882 billion of losses to adjust our goodwill and certain intangible assets to their fair values, and $5 million of losses to write down certain cost method investments to their fair values, because we deemed the decline in the values of the investments to be other-than-temporary. We wrote down goodwill attributable to our U.S. CRM reporting unit, discussed in Note B – Goodwill and Other Intangible Assets, with a carrying amount of $3.296 billion to its implied fair value of $1.479 billion, resulting in a write-down of $1.817 billion. In addition, we recorded a loss of $60 million in the first quarter of 2010 to write down certain of our Peripheral Interventions intangible assets, discussed in Note B, to their estimated fair values of $14 million; a loss of $5 million in the third quarter of 2010, discussed in Note B, to write off the remaining value associated with certain other intangible assets; and losses of $4 million in the second quarter of 2010 and $1 million in the third quarter of 2010 to write down certain of our privately-held cost method investments to their fair values. These adjustments fall within Level 3 of the fair value hierarchy, due to the use of significant unobservable inputs to determine fair value. The fair value measurements were calculated using unobservable inputs, primarily using the income approach, specifically the discounted cash flow method. The amount and timing of future cash flows within our analysis was based on our most recent operational budgets, long range strategic plans and other estimates.

The fair value of our outstanding debt obligations was $6.353 billion as of September 30, 2010 and $6.111 billion as of December 31, 2009. Refer to Note E – Borrowings and Credit Arrangements for a discussion of our debt obligations.

NOTE D – SUPPLEMENTAL BALANCE SHEET INFORMATION

The following are the components of various balance sheet items as of September 30, 2010 and December 31, 2009:

Inventories

		September 30,				December 31,
(in millions)		2010				2009
Finished goods		$	652			$	671
Work-in-process			94				69
Raw materials			177				180
		$	923			$	920

Property, plant and equipment, net

		September 30,				December 31,
(in millions)		2010				2009
Property, plant and equipment		$	3,145			$	3,266
Less: accumulated depreciation			(1,433)				(1,538)
		$	1,712			$	1,728

Capital expenditures of $209 million during the first nine months of 2010 were offset by depreciation and the write-off of fully depreciated assets no longer in use. Depreciation expense was $221 million for the first nine months of 2010, and $237 million for the first nine months of 2009.

Accrued expenses

		September 30,				December 31,
(in millions)		2010				2009
Legal reserves		$	413			$	1,453
Payroll and related liabilities			439				472
Other			752				684
		$	1,604			$	2,609

Other long-term liabilities

		September 30,				December 31,
(in millions)		2010				2009
Accrued income taxes		$	927			$	857
Legal reserves			149				863
Retirement plan obligations			102				111
Other long-term liabilities			258				233
		$	1,436			$	2,064

Accrued warranties

We offer warranties on certain of our product offerings. Approximately 90 percent of our warranty liability as of September 30, 2010 related to implantable devices offered by our CRM business, which include defibrillator and pacemaker systems. Our CRM 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 over the remainder of the useful life of the product. 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 reassess the key assumptions underlying our warranty liability calculation and evaluate the adequacy of our recorded warranty liabilities on a quarterly basis and adjust the amounts as necessary. Changes in our product warranty accrual during the first nine months of 2010 and 2009 consisted of the following (in millions):

		2010				2009
Balance as of December 31 - prior year		$	55			$	62
Provision			12				21
Settlements/ reversals			(22	)			(28	)
Balance as of September 30 - current year		$	45			$	55

NOTE E – BORROWINGS AND CREDIT ARRANGEMENTS

We had total debt of $6.037 billion as of September 30, 2010 and $5.918 billion as of December 31, 2009. During the second quarter of 2010, we refinanced the majority of our 2011 debt obligations, including the establishment of a new $1.0 billion three-year, senior unsecured term loan facility, and used $900 million of the proceeds to prepay in full our loan due to Abbott Laboratories without any premium or penalty. Term loan borrowings bear interest at LIBOR plus an interest margin of between 1.75 percent and 3.25 percent, based on our corporate credit ratings (currently 2.75 percent). The term loan facility requires quarterly principal payments of $50 million commencing in the third quarter of 2011, with the remaining principal amount due at the credit facility maturity date, currently June 2013, with up to two one-year extension options subject to certain conditions. The debt maturity schedule for the significant components of our debt obligations as of September 30, 2010 is as follows:

		Payments due by Period
(in millions)		2010				2011				2012				2013				2014				Thereafter				Total
Term loan						$	100			$	200			$	700											$	1,000
Senior notes							850											$	600			$	3,600				5,050
						$	950			$	200			$	700			$	600			$	3,600			$	6,050

Note:		The table above does not include discounts associated with our senior notes, or amounts related to certain interest rate swaps that were used to hedge the fair value of certain of our senior notes.

In addition, during the second quarter of 2010, we syndicated a new $2.0 billion revolving credit facility, maturing in June 2013, with up to two one-year extension options subject to certain conditions, to replace our existing $1.75 billion revolving credit facility maturing in April 2011. Any revolving credit facility borrowings bear interest at LIBOR plus an interest margin of between 1.55 percent and 2.625 percent, based on our corporate credit ratings (currently 2.25 percent). In addition, we are required to pay a facility fee based on our credit ratings and the total amount of revolving credit commitments, regardless of usage, under the agreement (currently 0.50 percent per year). Any borrowings under the revolving credit facility are unrestricted and unsecured. There were no amounts borrowed under our revolving credit facilities as of September 30, 2010 or December 31, 2009. In connection with our patent litigation settlement with Johnson & Johnson discussed in our 2009 Annual Report filed on Form 10-K, we borrowed $200 million against our revolving credit facility during the first quarter of 2010 to fund a portion of the settlement, and subsequently repaid these borrowings during the quarter without any premium or penalty. Further, in February 2010, we posted a $745 million letter of credit under our credit facility as collateral for the remaining Johnson &

Johnson obligation. In August 2010, we prepaid the remaining Johnson & Johnson obligation of $725 million, plus interest, using cash on hand and cancelled the related letter of credit. We now have full access to our $2.0 billion revolving credit facility to support operational needs. We also maintain a $350 million credit and security facility secured by our U.S. trade receivables. Use of any borrowed funds is unrestricted. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. In August 2010, we extended the maturity of this facility to August 2011. There were no amounts borrowed under this facility as of September 30, 2010 or December 31, 2009.

Our new revolving credit facility agreement requires that we maintain certain financial covenants, as follows:

		Current		Actual as of
		Requirement		September 30, 2010
Maximum leverage ratio (1)		3.85 times		2.6 times
Minimum interest coverage ratio (2)		3.0 times		5.7 times

	(1)		Ratio of total debt to consolidated EBITDA, as defined by the agreement, for the preceding four consecutive fiscal quarters. Requirement decreases to 3.5 times after March 31, 2011.
	(2)		Ratio of consolidated EBITDA, as defined by the agreement, to interest expense for the preceding four consecutive fiscal quarters.

The credit agreement provides for an exclusion from the calculation of consolidated EBITDA, as defined by the agreement, through the credit agreement maturity, of up to $258 million in restructuring charges and restructuring-related expenses related to our previously-announced restructuring plans, plus an additional $300 million for any future restructuring initiatives. As of September 30, 2010, we had $500 million of the restructuring charge exclusion remaining. In addition, any litigation-related charges and credits are excluded from the calculation of consolidated EBITDA until such items are paid or received; as well as up to $1.5 billion of any future cash payments for future litigation settlements or damage awards (net of any litigation payments received); and litigation-related cash payments (net of cash receipts) of up to $1.310 billion related to amounts that were recorded in the financial statements as of March 31, 2010. As of September 30, 2010, we had $2.056 billion of the legal payment exclusion remaining. As of September 30, 2010, we were in compliance with the required covenants. Our inability to maintain compliance with these covenants could require us to seek to renegotiate the terms of our credit facilities or seek waivers from compliance with these covenants, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would grant such waivers.

NOTE F – ACQUISITIONS

On October 27, 2010, we completed the acquisition of 100 percent of the fully diluted equity of Asthmatx, Inc. Asthmatx designs, manufactures and markets a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. We paid approximately $194 million at the closing of the transaction using cash on hand, and may be required to pay future consideration of up to $250 million that is contingent upon the achievement of certain revenue-based milestones. We will account for the acquisition of Asthmatx as a business combination and, in accordance with ASC Topic 805, Business Combinations (formerly FASB Statement No. 141(R), Business Combinations), will record the assets acquired, liabilities assumed and estimated future consideration obligation at their respective fair values as of the acquisition date. The final purchase price and estimates and assumptions used in the allocation of the purchase price will be finalized in the fourth quarter of 2010.

The acquisition was intended to broaden and diversify our product portfolio by expanding into the area of endoscopic pulmonary intervention. We will integrate the operations of the Asthmatx business into our Endoscopy division.

Payments Related to Prior Period Acquisitions

Certain of our acquisitions involve the potential payment of contingent consideration. Payment of the additional consideration is generally contingent on the acquired company reaching certain performance milestones, including attaining specified revenue levels, achieving product development targets or obtaining regulatory approvals. We made payments related to prior period acquisitions of $4 million during the first nine months of 2010, and $517 million for the first nine months of 2009, associated primarily with a final fixed payment of $500 million related to our 2004 acquisition of Advanced Bionics Corporation. As of September 30, 2010, the estimated maximum potential amount of future contingent consideration (undiscounted) that we could be required to make associated with our prior acquisitions, excluding Asthmatx, is $263 million, some of which may be payable in shares of our common stock. The estimated cumulative specified revenue level associated with these maximum future contingent payments is approximately $600 million, and the milestones associated with the contingent consideration must be reached in certain future periods ranging from 2010 through 2027. In accordance with accounting guidance applicable at the time we consummated these acquisitions, we do not recognize a liability until the contingency is resolved and consideration is issued or becomes issuable. Included in the accompanying unaudited condensed consolidated balance sheets is accrued contingent consideration of $9 million as of September 30, 2010 and $6 million as of December 31, 2009.

As discussed above, we may be required to make additional contingent consideration payments of up to $250 million associated with our October 2010 acquisition of Asthmatx. In accordance with Topic 805, we will record the estimated fair value of the $250 million of contingent consideration, which includes the use of certain judgments and estimates regarding the probability of future payment, as a liability in the balance sheet as of the acquisition date and will re-measure this liability each reporting period, and report changes in the fair value through a separate line item within our consolidated statements of operations.

Purchased Research and Development

Our policy is to record certain costs associated with strategic alliances as purchased research and development. Our adoption of FASB Statement No. 141(R), Business Combinations (codified within FASB ASC Topic 805, Business Combinations) as of January 1, 2009, did not change this policy with respect to asset purchases. In accordance with this policy, we recorded purchased research and development charges of $17 million in the first nine months of 2009 associated with entering certain licensing and development arrangements. Since the technology purchases did not involve the transfer of processes or outputs as defined by Statement No. 141(R), the transaction did not qualify as a business combination. We did not consummate any material business combinations in the first nine months of 2010 or 2009. For any future business combinations that we enter, including our October 2010 acquisition of Asthmatx, we will recognize purchased research and development as an intangible asset, in accordance with ASC Topic 805.

Acquisition-related Milestone

In connection with Abbott Laboratories’ 2006 acquisition of Guidant Corporation’s vascular intervention and endovascular solutions businesses, Abbott agreed to pay us a milestone payment of $250 million upon receipt of an approval from the Japanese Ministry of Health, Labor and Welfare (MHLW) to market the XIENCE V^® stent system in Japan. The MHLW approved the XIENCE V^® stent system in the first quarter of 2010 and we received the milestone payment from Abbott, which is recorded as a gain in the accompanying unaudited condensed consolidated statements of operations.

NOTE G – RESTRUCTURING-RELATED ACTIVITIES

On an on-going basis, we monitor the dynamics of the economy, the healthcare industry, and the markets in which we compete; and we continue to assess opportunities for improved operational effectiveness and

efficiency, and better alignment of expenses with revenues, while preserving our ability to make the investments in research and development projects, capital and our people that are essential to our long-term success. As a result of these assessments, we have undertaken various restructuring initiatives to focus our business, diversify and reprioritize our product portfolio, reallocate research and development and other spending toward products with higher returns, as well as to redirect administrative costs, in order to enhance our growth potential. These initiatives are described below.

In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan). The plan was intended to bring expenses in line with revenues as part of our initiatives to enhance short- and long-term shareholder value. Key activities under the plan included the restructuring of several businesses, corporate functions and product franchises in order to better utilize resources, strengthen competitive positions, and create a more simplified and efficient business model; the elimination, suspension or reduction of spending on certain research and development projects; and the transfer of certain production lines among facilities. We initiated these activities in the fourth quarter of 2007. The transfer of certain production lines contemplated under the 2007 Restructuring plan will continue through the end of 2010; all other major activities under the plan were completed as of December 31, 2009.

We expect that the execution of this plan will result in total pre-tax expenses of approximately $425 million to $435 million, and that approximately $375 million to $385 million of these charges will result in cash outlays, of which we have made payments of $362 million to date. We have recorded related costs of $424 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. The following provides a summary of our expected total costs associated with the plan by major type of cost:

		Total estimated amount expected to
Type of cost		be incurred
Restructuring charges:
Termination benefits		$205 million to $207 million
Fixed asset write-offs		$31 million
Other (1)		$65 million
Restructuring-related expenses:
Retention incentives		$66 million
Accelerated depreciation		$16 million to $18 million
Transfer costs (2)		$42 million to $48 million
		$425 million to $435 million

	(1)		Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs.
	(2)		Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations.

In addition, in January 2009, our Board of Directors approved, and we committed to, a Plant Network Optimization program, which is intended to simplify our manufacturing plant structure by transferring certain production lines among facilities and by closing certain other facilities. The program is a complement to our 2007 Restructuring plan, and is intended to improve overall gross profit margins. Activities under the Plant Network Optimization program were initiated in the first quarter of 2009 and are expected to be substantially complete by the end of 2011.

We expect that the execution of the Plant Network Optimization program will result in total pre-tax charges of approximately $135 million to $150 million, and that approximately $115 million to $125 million of these charges will result in cash outlays, of which we have made payments of $32 million to date. We have recorded related costs of $70 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated

statements of operations. The following provides a summary of our estimates of costs associated with the Plant Network Optimization program by major type of cost:

		Total estimated amount expected to
Type of cost		be incurred
Restructuring charges:
Termination benefits		$30 million to $35 million
Restructuring-related expenses:
Accelerated depreciation		$20 million to $25 million
Transfer costs (1)		$85 million to $90 million
		$135 million to $150 million

(1)

Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.

Further, on February 6, 2010, our Board of Directors approved, and we committed to, a series of management changes and restructuring initiatives (the 2010 Restructuring plan) designed to strengthen and position us for long-term success. Key activities under the plan include the integration of our Cardiovascular and CRM businesses, as well as the restructuring of certain other businesses and corporate functions; the centralization of our research and development organization; the re-alignment of our international structure to reduce our administrative costs and invest in expansion opportunities including significant investments in emerging markets; and the reprioritization and diversification of our product portfolio, in order to drive innovation, accelerate profitable growth and increase both accountability and shareholder value. Activities under the 2010 Restructuring plan were initiated in the first quarter of 2010 and are expected to be substantially complete by the end of 2011.

We estimate that the 2010 Restructuring plan will result in total pre-tax charges of approximately $180 million to $200 million, and that approximately $170 million to $180 million of these charges will result in cash outlays, of which we have made payments of $48 million to date. We have recorded related costs of $92 million since the inception of the plan, and are recording a portion of these expenses as restructuring charges and the remaining portion through other lines within our consolidated statements of operations. We expect the execution of the plan will result in the elimination of approximately 1,000 to 1,300 positions by the end of 2011. The following provides a summary of our expected total costs associated with the plan by major type of cost:

		Total estimated amount expected
Type of Cost		to be incurred
Restructuring charges:
Termination benefits		$110 million to $115 million
Asset write-offs		$5 million to $10 million
Other (1)		$45 million to $50 million
Restructuring-related expenses:
Other (2)		$20 million to $25 million
		$180 million to $200 million

	(1)		Includes primarily consulting fees and costs associated with contractual cancellations.
	(2)		Comprised of other costs directly related to restructuring plan, including accelerated depreciation and infrastructure-related costs.

We recorded restructuring charges pursuant to these plans of $5 million in the third quarter of 2010, $9 million in the third quarter of 2009, $98 million in the first nine months of 2010, and $44 million in the first nine months of 2009. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $13 million in the third quarter of 2010, $19 million the third quarter of 2009, $41 million for the first nine months of 2010, and $50 million for the first nine months of 2009. The following presents these costs by major type and line item within our accompanying unaudited condensed consolidated statements of operations, as well as by program:

Three Months Ended September 30, 2010

		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Restructuring charges		$	2															$	1			$	2			$	5
Restructuring-related expenses:
Cost of products sold										$	2			$	10												12
Selling, general and administrative expenses																							1				1
Research and development expenses
											2				10								1				13
		$	2							$	2			$	10			$	1			$	3			$	18
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
2010 Restructuring plan		$	2															$	1			$	3			$	6
Plant Network Optimization program			2							$	2			$	8												12
2007 Restructuring plan			(2	)											2												-
		$	2							$	2			$	10			$	1			$	3			$	18
Three Months Ended September 30, 2009
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Restructuring charges		$	4															$	3			$	2			$	9
Restructuring-related expenses:
Cost of products sold						$	1			$	3			$	9												13
Selling, general and administrative expenses							3				2																5
Research and development expenses							1																				1
							5				5				9												19
		$	4			$	5			$	5			$	9			$	3			$	2			$	28
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Plant Network Optimization program		$	2							$	2			$	3											$	7
2007 Restructuring plan			2			$	5				3				6			$	3			$	2				21
		$	4			$	5			$	5			$	9			$	3			$	2			$	28

Nine Months Ended September 30, 2010

		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Restructuring charges		$	66															$	8			$	24			$	98
Restructuring-related expenses:
Cost of products sold										$	6			$	32												38
Selling, general and administrative expenses																							3				3
Research and development expenses
											6				32								3				41
		$	66							$	6			$	32			$	8			$	27			$	139
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
2010 Restructuring plan		$	61															$	8			$	23			$	92
Plant Network Optimization program			4							$	6			$	20												30
2007 Restructuring plan			1												12								4				17
		$	66							$	6			$	32			$	8			$	27			$	139
Nine Months Ended September 30, 2009
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Restructuring charges		$	25															$	6			$	13			$	44
Restructuring-related expenses:
Cost of products sold						$	4			$	7			$	25												36
Selling, general and administrative expenses							9				2																11
Research and development expenses							3																				3
							16				9				25												50
		$	25			$	16			$	9			$	25			$	6			$	13			$	94
		Termination				Retention				Accelerated				Transfer				Fixed Asset
(in millions)		Benefits				Incentives				Depreciation				Costs				Write-offs				Other				Total
Plant Network Optimization program		$	19							$	5			$	8											$	32
2007 Restructuring plan			6			$	16				4				17			$	6			$	13				62
		$	25			$	16			$	9			$	25			$	6			$	13			$	94

Termination benefits represent amounts incurred pursuant to our on-going benefit arrangements and amounts for “one-time” involuntary termination benefits, and have been recorded in accordance with ASC Topic 712, Compensation – Non-retirement Postemployment Benefits (formerly FASB Statement No. 112, Employer’s Accounting for Postemployment Benefits) and ASC Topic 420, Exit or Disposal Cost Obligations (formerly FASB Statement 146, Accounting for Costs Associated with Exit or Disposal Activities). We expect to record additional termination benefits in 2010 and 2011 when we identify with more specificity the job classifications, functions and locations of the remaining head count to be eliminated. Retention incentives represent cash incentives, which were recorded over the service period during which eligible employees remained employed with us in order to retain the payment. Other restructuring costs, which represent primarily consulting fees, are being recorded as incurred in accordance

with Topic 420. Accelerated depreciation is being recorded over the adjusted remaining useful life of the related assets, and production line transfer costs are being recorded as incurred.

We have incurred cumulative restructuring charges of $416 million and restructuring-related costs of $170 million since we committed to each plan. The following presents these costs by major type and by plan:

		2010				Plant				2007
		Restructuring				Network				Restructuring
(in millions)		Plan				Optimization				Plan				Total
Termination benefits		$	61			$	26			$	205			$	292
Fixed asset write-offs			8								31				39
Other			20								65				85
Total restructuring charges			89				26				301				416
Retention incentives											66				66
Accelerated depreciation							12				16				28
Transfer costs							32				41				73
Other			3												3
Restructuring-related expenses			3				44				123				170
		$	92			$	70			$	424			$	586