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<div style="font-family: 'Times New Roman',Times,serif"> <div align="left"> </div>  <div align="justify" style="font-size: 10pt; margin-top: 0pt"><b></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>NOTE A — BASIS OF PRESENTATION</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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) for interim financial information 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 nine months ended September 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information, refer to the consolidated financial statements and footnotes thereto included in our 2008 Annual Report on Form 10-K. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We have evaluated events occurring after the date of our accompanying unaudited condensed consolidated balance sheets through the time of the filing of this Quarterly Report on Form 10-Q on November 6, 2009. On November 3, 2009, we reached an agreement in principle with the U.S. Department of Justice to pay $296 million in order to resolve the U.S. Government investigation of Guidant Corporation related to product advisories issued in 2005, discussed further in <i>Note L — Commitments and Contingencies</i>. This subsequent event provided additional evidence about conditions that existed as of the date of the balance sheet in our accompanying unaudited condensed consolidated financial statements, including the estimates inherent in the process of preparing financial statements and is, therefore, a ‘recognized subsequent event,’ as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification<sup>TM</sup> (ASC) Topic 855, <i>Subsequent Events</i>. Accordingly, we have recorded a loss of $294 million in the third quarter of 2009 in our accompanying unaudited condensed consolidated statements of operations, and increased our associated litigation-related reserves in our accompanying unaudited condensed consolidated balance sheets by $294 million as of September 30, 2009. Those items requiring disclosure (unrecognized subsequent events) in the financial statements have been disclosed accordingly. Refer to <i>Note L — Commitments and Contingencies </i>for more information. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Certain prior year amounts have been reclassified to conform to the current year presentation. See <i>Note M — Segment Reporting </i>for further details. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE B — FINANCIAL INSTRUMENTS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><b><i>Derivative Instruments and Hedging Activities</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 ASC Topic 815, <i>Derivatives and Hedging </i>(formerly FASB Statement No. 133, <i>Accounting for Derivative Instruments and Hedging Activities</i>). 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Currency Hedging</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 and balances. We use both derivative instruments (currency forward and option contracts), and non-derivatives (primarily European manufacturing 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Designated Foreign Currency Hedges</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">All of our designated currency hedge contracts outstanding as of September 30, 2009 and December 31, 2008 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 probable that it will not occur, we would 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 $2.762 billion as of September 30, 2009 and $2.587 billion as of December 31, 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We recognized in earnings net losses of less than $1 million on our cash flow hedges during the third quarter of 2009 and net gains of $23 million for the first nine months of 2009. All currency cash flow hedges outstanding as of September 30, 2009 mature within 36 months. As of September 30, 2009, $87 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 $6 million as of December 31, 2008. As of September 30, 2009, $52 million of net losses, net of tax, may be reclassified to earnings within the next twelve months. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Non-designated Foreign Currency Contracts</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We use currency forward contracts as a part of our strategy to manage exposure related to foreign currency denominated monetary assets and liabilities and certain short-term earnings and cash flow exposures related to our Japanese operations that do not qualify for hedge accounting under Topic 815. 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 $2.040 billion as of September 30, 2009 and $1.809 billion as of December 31, 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Interest Rate Hedging</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We designate these derivative instruments either as fair value or cash flow hedges under Topic 815. We record changes in the fair 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. All of our interest rate swap contracts outstanding as of September 30, 2009 and December 31, 2008 were designated as cash flow hedges in accordance with ASC Topic 815. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We had floating-to-fixed interest rate swap contracts indexed to three-month LIBOR outstanding in the notional amount of $4.000 billion as of September 30, 2009 and $4.900 billion as of December 31, 2008. The objective of these derivative instruments is to hedge against potential variability in our future interest payments on our expected LIBOR-indexed floating-rate loans as a result of changes in LIBOR. Three-month LIBOR approximated 0.29 percent as of September 30, 2009 and 1.43 percent as of December 31, 2008. These interest rate swap contracts fix the interest rate on $2.100 billion of our expected LIBOR-indexed floating-rate loans for the remainder of 2009 at approximately 2.75 percent, and $1.900 billion of our expected LIBOR-indexed floating-rate loans for 2010 at approximately 2.08 percent. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, in prior years we terminated certain interest rate derivative instruments, including fixed-to-floating interest rate swap contracts and floating-to-fixed treasury locks. We are amortizing the related gains and losses realized upon termination into earnings over the term of the hedged debt in accordance with Topic 815. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We recognized in earnings $13 million of net losses related to our currently outstanding and previously terminated interest rate derivative contracts for the third quarter of 2009, and $35 million of net losses in the first nine months of 2009. As of September 30, 2009, $12 million of net losses, net of tax, are recorded in AOCI to recognize the effective portion of our interest rate derivative contracts, as compared to $20 million of net losses as of December 31, 2008. As of September 30, 2009, $13 million of net losses, net of tax, may be reclassified to earnings within the next twelve months. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Counterparty Credit Risk</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We do not have significant concentrations of credit risk arising from our derivative financial instruments, whether from an individual counterparty or group of counterparties. We reduce 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 by each counterparty to $50 million, and by actively monitoring their credit ratings and outstanding positions on an on-going basis. Furthermore, none of our derivative transactions are subject to collateral or other security arrangements and do not contain provisions that are dependent on our credit ratings from any credit rating agency. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Fair Value of Derivative Instruments</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following tables present the effect of our derivative instruments designated as cash flow hedges and those not designated as hedging instruments under Topic 815 on our accompanying unaudited condensed consolidated statements of operations for the third quarter and first nine months of 2009 (in millions). </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center"> <table style="font-size: 8pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Gain</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Gain</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount of Gain (Loss)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Loss) Recognized</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Loss) Reclassified</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Recognized in Earnings</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>in OCI</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>from AOCI into</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>on Ineffective Portion and</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Effective</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Earnings</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location in Statement of</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Amount Excluded from</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Location in Statement of</b></td> <td> </td> </tr> <tr style="font-size: 7pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b>Cash Flow Hedges</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Portion)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>(Effective Portion)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Operations</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"><b>Effectiveness Testing(*)</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Operations</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="21" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td colspan="1" nowrap="nowrap" align="left"><b><u>Three Months Ended September 30, 2009</u></b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(10</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(11</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Interest expense **</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(1 </td> <td nowrap="nowrap">)***</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Interest expense</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(133</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Cost of products sold</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="3" align="center">Cost of products sold</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(143</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(12</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(1</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td colspan="1" nowrap="nowrap" align="left"><b><u>Nine Months Ended September 30, 2009</u></b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(18</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(31</td> <td nowrap="nowrap">)</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Interest expense **</td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(2 </td> <td nowrap="nowrap">)***</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Interest expense</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(106</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">23</td> <td> </td> <td> </td> <td colspan="3" align="center">Cost of products sold</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="3" align="center">Cost of products sold</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(124</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(8</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"><b>$</b></td> <td align="right"><b>(2</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">*</td> <td> </td> <td> <div align="justify">Other than described in *** the amount of gain (loss) recognized in earnings related to the ineffective portion of hedging relationships was de minimis in the third quarter and the first nine months of 2009. </div></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">**</td> <td> </td> <td> <div align="justify">We had $11 million of gains recorded in AOCI as of September 30, 2009 related to floating-to-fixed treasury locks terminated during 2005 and 2006. We recognized approximately $2 million as a reduction in interest expense during the first nine months of 2009. </div></td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">***</td> <td> </td> <td> <div align="justify">We prepaid $225 million of our term loan debt in the third quarter of 2009 and $725 million in the first nine months of 2009, and recognized ineffectiveness of $1 million in the third quarter of 2009 and $2 million for the first nine months of 2009 on interest rate swaps for which there is no longer an underlying exposure, in accordance with ASC Topic 815. </div></td> </tr> </table> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="24%"> </td> <td width="25%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="25%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Amount of Gain (Loss)</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>Recognized in Earnings</b> (in millions)</td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Location</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Three Months</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Nine Months</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><b>Derivatives Not Designated as</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>in Statement of</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 0px solid #000000">      <b>Hedging Instruments</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Operations</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>September 30, 2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>September 30, 2009</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" align="center">Other, net</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(41</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(8</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Cost of products sold</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(41</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(9</b></td> <td nowrap="nowrap"><b>)</b></td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Losses and gains on currency hedge contracts not designated as hedged instruments were substantially offset by $40 million in gains from foreign currency transaction exposures during the third quarter of 2009 and by $4 million in gains on foreign currency transaction exposures for the first nine months 2009. As a result, we recorded a net foreign currency loss of $1 million during the third quarter of 2009 and a net foreign currency loss of $4 million during the first nine months of 2009 within other, net in our accompanying unaudited condensed consolidated financial statements. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We did not have fair value hedges or net investment hedges outstanding as of September 30, 2009. However, prior to 2006, we entered into fixed-to-floating interest rate swaps, which we designated as fair value hedges under Topic 815. We terminated these hedges during 2006 and, as of September 30, 2009, the carrying amount of certain of our senior notes included $3 million of unamortized gains and $8 million of unamortized losses related to these interest rate swaps. We recognized approximately $1 million of interest expense during the third quarter of 2009 and approximately $2 million during the first nine months of 2009 related to these instruments. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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, <i>Fair Value Measurements and Disclosures </i>(formerly FASB Statement No. 157, <i>Fair Value Measurements</i>), 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, 2009, 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. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="39%"> </td> <td width="3%"> </td> <td width="50%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="1%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center"><b>Location in<br /> Balance Sheet (1)</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Balance as of<br /> September 30, 2009</b></td> <td> </td> </tr>   <tr style="font-size: 1px"> <td colspan="7" valign="top" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Derivative Assets:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Designated Hedging Instruments</u> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Prepaid and other current assets</td> <td> </td> <td align="left">$</td> <td align="right">20</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Other long-term assets</td> <td> </td> <td> </td> <td align="right">10</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td align="right">30</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Not-Designated Hedging Instruments</u> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Prepaid and other current assets</td> <td> </td> <td> </td> <td align="right">14</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total Derivative Assets</b> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>44</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Derivative Liabilities:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Designated Hedging Instruments</u> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Other current liabilities</td> <td> </td> <td align="left">$</td> <td align="right">96</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Other long-term liabilities</td> <td> </td> <td> </td> <td align="right">64</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td align="center" valign="top">Other current liabilities</td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td align="center" valign="top">Other long-term liabilities</td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td align="right">191</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px"><u>Not-Designated Hedging Instruments</u> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td align="center" valign="top">Other current liabilities</td> <td> </td> <td> </td> <td align="right">49</td> <td> </td> </tr> <tr> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total Derivative Liabilities</b> </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>240</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="center" valign="top"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>We classify derivative assets and liabilities as current when the remaining term of the derivative contract is one year or less.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Fair Value Measurements</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div align="justify">Level 1 — Inputs to the valuation methodology are quoted market prices for identical assets or liabilities. </div></td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div align="justify">Level 2 — Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs. </div></td> </tr> </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td> <div align="justify">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. </div></td> </tr> </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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, as these funds are highly liquid and readily convertible to known amounts of cash. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Financial assets and financial liabilities measured at fair value on a recurring basis consist of the following as of September 30, 2009: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Level 1</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Level 2</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Level 3</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="17" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Assets</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Money market funds </div></td> <td> </td> <td align="right">$</td> <td align="right">873</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">873</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">44</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>873</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>44</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>917</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Liabilities</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Currency hedge contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">209</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">209</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Interest rate swap contracts </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>240</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>240</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="15" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition to $873 million invested in money market funds as of September 30, 2009, we had $414 million of cash invested in short-term time deposits, and $94 million in interest bearing and non-interest bearing bank accounts. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 $69 million as of September 30, 2009 and $67 million as of December 31, 2008. As of September 30, 2009, 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). </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The fair value of our debt obligations was $6.008 billion as of September 30, 2009 and $6.184 billion as of December 31, 2008. The change in fair value reflects debt prepayments of $725 million partially offset by an increase in the fair market value of our remaining debt obligations. Refer to <i>Note D — Borrowings and Credit Arrangements </i>for a discussion of our debt obligations. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE C — SUPPLEMENTAL BALANCE SHEET INFORMATION</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following are the components of various balance sheet items as of September 30, 2009 and December 31, 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Inventories</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Finished goods </div></td> <td> </td> <td align="left">$</td> <td align="right">634</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">555</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Work-in-process </div></td> <td> </td> <td> </td> <td align="right">134</td> <td> </td> <td> </td> <td> </td> <td align="right">135</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Raw materials </div></td> <td> </td> <td> </td> <td align="right">174</td> <td> </td> <td> </td> <td> </td> <td align="right">163</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>942</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>853</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Sales of the PROMUS® everolimus-eluting stent system represented approximately eight percent of our total net sales for the first nine months of 2009. We are currently reliant on Abbott Laboratories for our supply of everolimus-eluting stent systems in the U.S. and Japan, including any improvements or iterations approved for sale during the term of the applicable supply arrangements and of the type that could be approved by a supplement to an approved FDA pre-market approval. Any production or capacity issues that affect Abbott’s manufacturing capabilities or our process for forecasting, ordering and receiving shipments may impact the ability to increase or decrease our level of supply in a timely manner; therefore, our supply of everolimus-eluting stent systems supplied to us by Abbott may not align with customer demand, which could have an adverse effect on our operating results. At present, we believe that our supply of everolimus-eluting stent systems from Abbott and our current launch plans for our next-generation internally-manufactured everolimus-eluting stent system is sufficient to meet customer demand. Our supply agreement with Abbott for everolimus-eluting stent systems extends through the middle of the fourth quarter of 2009 in Europe, and is currently being reviewed by the European Commission for possible extension; and through the end of the second quarter of 2012 in the U.S. and Japan. In November 2009, we announced receipt of CE Mark approval to market our next-generation internally-manufactured everolimus-eluting stent system, the PROMUS® Element™ stent system, and simultaneously launched this stent system in our EMEA region and certain Inter-Continental countries. We expect to launch our PROMUS® Element™ stent system in the U.S. and Japan in mid-2012. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, the price we pay for our supply of everolimus-eluting stent systems from Abbott is determined by contracts with Abbott and is based, in part, on previously fixed estimates of Abbott’s manufacturing costs for everolimus-eluting stent systems and third-party reports of our average selling price of these stent systems. Amounts paid pursuant to this pricing arrangement are subject to a retroactive adjustment approximately every two years based on Abbott’s actual costs to manufacture these stent systems for us and our average selling price of everolimus-eluting stent systems supplied to us by Abbott. During the fourth quarter of 2009 or soon thereafter, we may make a payment to or receive payment from Abbott based on the differences between their actual manufacturing costs and the contractually stipulated manufacturing costs, and differences between our actual average selling price and third-party reports of our average selling price, in each case, with respect to our purchases of PROMUS® stent systems from Abbott during 2006, 2007 and the first quarter of 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Property, plant and equipment, net</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Property, plant and equipment </div></td> <td> </td> <td align="left">$</td> <td align="right">3,226</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">3,110</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less: accumulated depreciation </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,495</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,382</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,731</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,728</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Depreciation expense was $85 million for the third quarter of 2009, $79 million for the third quarter of 2008, and $237 million for the first nine months of 2009 and 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Other intangible assets, net</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Core technology </div></td> <td> </td> <td align="left">$</td> <td align="right">6,855</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">6,855</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other intangible assets </div></td> <td> </td> <td> </td> <td align="right">2,381</td> <td> </td> <td> </td> <td> </td> <td align="right">2,381</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right"><b>9,236</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>9,236</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Less: accumulated amortization </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2,381</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(1,992</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>6,855</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>7,244</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 their remaining useful life. In addition, we review our indefinite-lived intangible assets at least annually for impairment and reassess their classification as indefinite-lived assets. During the second quarter of 2009, due to lower than anticipated market penetration of one of our Urology technology offerings, we lowered our sales forecasts associated with the product. As a result, we tested the related intangible assets for impairment in accordance with the provisions of ASC Topic 360, <i>Property, Plant, and Equipment</i> (formerly FASB Statement No. 144, <i>Accounting for the Impairment or Disposal of Long-Lived Assets),</i> and recorded a $10 million charge to write off the balance of these intangible assets. We recorded pre-tax intangible asset impairment charges of $155 million in the third quarter of 2008, as described in our 2008 Annual Report on Form 10-K. We recorded these amounts in the intangible asset impairment charges caption in our accompanying unaudited condensed consolidated financial statements, and these amounts have been excluded from the determination of segment income considered by management. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Accrued Expenses</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Legal reserves </div></td> <td> </td> <td align="left">$</td> <td align="right">1,221</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">924</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Acquisition-related obligations </div></td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td> </td> <td align="right">520</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Payroll and related liabilities </div></td> <td> </td> <td> </td> <td align="right">440</td> <td> </td> <td> </td> <td> </td> <td align="right">438</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Restructuring liabilities </div></td> <td> </td> <td> </td> <td align="right">49</td> <td> </td> <td> </td> <td> </td> <td align="right">42</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrual for program termination </div></td> <td> </td> <td> </td> <td align="right">16</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">692</td> <td> </td> <td> </td> <td> </td> <td align="right">688</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>2,431</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>2,612</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2009, we cancelled one of our internal research and development (R&D) programs in order to focus on those with a higher likelihood of success. As a result, we recorded a pre-tax loss of $16 million in accordance with ASC Topic 420, <i>Exit or Disposal Cost Obligations</i> (formerly FASB Statement No. 146, <i>Accounting for Costs Associated with Exit or Disposal Activities), </i>associated with future payments that we believe we remain contractually obligated to make. This obligation is included in accrued expenses within our accompanying unaudited condensed consolidated financial statements as of September 30, 2009, and presented above. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><u>Other Long-term Liabilities</u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="72%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>September 30,</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Accrued income taxes </div></td> <td> </td> <td align="left">$</td> <td align="right">1,121</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">1,100</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Legal reserves </div></td> <td> </td> <td> </td> <td align="right">341</td> <td> </td> <td> </td> <td> </td> <td align="right">165</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other litigation-related accruals </div></td> <td> </td> <td> </td> <td align="right">23</td> <td> </td> <td> </td> <td> </td> <td align="right">78</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Other long-term liabilities </div></td> <td> </td> <td> </td> <td align="right">364</td> <td> </td> <td> </td> <td> </td> <td align="right">384</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,849</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1,727</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During the third quarter of 2009, we reduced our June 30, 2009 balance of other litigation-related accruals by $58 million, following certain favorable court rulings during the third quarter. The remaining $23 million accrual represents our best estimate of the amount that we may pay related to this matter. The $58 million reduction in the accrual was recorded as a litigation-related credit in our accompanying unaudited condensed consolidated financial statements. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u>Accrued Warranties</u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Changes in our product warranty accrual during the first nine months of 2009 and 2008 consisted of the following (in millions): </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31 - prior year</b> </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>62</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>66</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Provision </div></td> <td> </td> <td> </td> <td align="right">21</td> <td> </td> <td> </td> <td> </td> <td align="right">43</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Settlements/ reversals </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(28</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(43</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of September 30 - current year</b> </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>55</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>66</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE D — BORROWINGS AND CREDIT ARRANGEMENTS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We had total debt of $6.030 billion as of September 30, 2009 and $6.745 billion as of December 31, 2008. The debt maturity schedule for the significant components of our debt obligations as of September 30, 2009 is as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="23" style="border-bottom: 1px solid #000000"><b>Payments due by Period</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2010</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2011</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2012</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2013</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Thereafter</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="1" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Term loan </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">100</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,000</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,100</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Abbott Laboratories loan </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">900</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>900</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Senior notes </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">850</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2,200</td> <td> </td> <td> </td> <td> </td> <td align="right"><b>3,050</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>100</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3,750</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,200</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6,050</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="3%"></td> <td width="93"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">Note:</td> <td> </td> <td>The table above does not include discounts associated with our Abbott loan and senior notes, or amounts related to certain interest rate swaps that were used to hedge the fair value of certain of our senior notes.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In February 2009, we amended our term loan and revolving credit facility agreement to increase flexibility under our financial covenants. The amendment provides for an exclusion from the calculation of consolidated EBITDA, as defined by the amended agreement, through the credit agreement maturity in April 2011, of up to $346 million in restructuring charges; an exclusion for any litigation-related charges and credits until such items are paid or received; and an exclusion of up to $1.137 billion of any cash payments for litigation settlements or damage awards (net of any litigation payments received), and all cash payments (net of cash receipts) related to amounts that were recorded in the financial statements before January 1, 2009. In addition, the agreement provides for an increase in interest rates on our term loan borrowings from LIBOR plus 1.00 percent to LIBOR plus 1.75 percent at current credit ratings. Further, the interest rate on unused facilities increased from 0.175 percent to 0.500 percent. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In connection with the amendment of our term loan and revolving credit facility, we reduced availability under our credit facility by $250 million to $1.750 billion. In 2008, we issued a $717 million surety bond backed by a $702 million letter of credit under our revolving credit facility, and $15 million of cash to secure a damage award related to the Johnson & Johnson patent infringement case described in <i>Note L — Commitments and Contingencies. </i>In October 2009, we satisfied the related obligation of $716 million using cash generated from operations, and now have full access to our $1.750 billion credit facility. We also maintain a $350 million credit and security facility secured by our U.S. trade receivables. Use of the borrowings is unrestricted. Borrowing availability under this facility changes based upon the amount of eligible receivables, concentration of eligible receivables and other factors. During the third quarter of 2009, we extended the maturity of this facility to August 2010. There were no amounts borrowed under this facility as of September 30, 2009 or December 31, 2008. Further, we have uncommitted credit facilities with two commercial Japanese banks that provide for borrowings and promissory notes discounting of up to 18.5 billion Japanese yen (translated to approximately $205 million as of September 30, 2009 and December 31, 2008). We discounted notes receivable of $200 million as of September 30, 2009 and $190 million as of December 31, 2008. Discounted notes receivable are excluded from accounts receivable in the accompanying unaudited condensed consolidated balance sheets. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We prepaid $225 million of our term loan during the third quarter of 2009 and $725 million during the first nine months of 2009. We prepaid $250 million of our term loan during the third quarter of 2008 and $1.175 billion in the first nine months of 2008. In October 2009, we prepaid an additional $250 million of our term loan. As a result, our next debt maturity is in 2011. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Our term loan and revolving credit facility agreement requires that we maintain certain financial covenants, as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="55%">  <tr valign="bottom"> <td width="76%"> </td> <td width="5%"> </td> <td width="7%"> </td> <td width="5%">       </td> <td width="7%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Covenant</b></td> <td> </td> <td nowrap="nowrap" align="center"><b>Actual as of</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Requirement</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>September 30, 2009</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Maximum leverage ratio (1) </div></td> <td> </td> <td align="center" valign="top">3.5 times</td> <td> </td> <td align="center" valign="top">2.6 times</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Minimum interest coverage ratio (2) </div></td> <td> </td> <td align="center" valign="top">3.0 times</td> <td> </td> <td align="center" valign="top">5.9 times</td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Ratio of total debt to EBITDA, as defined by the agreement, as amended, for the preceding four consecutive fiscal quarters.</td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(2)</td> <td> </td> <td>Ratio of EBITDA, as defined by the agreement, as amended, to interest expense for the preceding four consecutive fiscal quarters.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2009, we were in compliance with the required covenants. Our inability to maintain 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. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE E — ACQUISITIONS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><i>Purchased Research and Development</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In May 2008, we completed the acquisition of 100 percent of the fully diluted equity of CryoCor, Inc., and paid a cash purchase price of $21 million. In connection with the acquisition, during the second quarter of 2008, we recorded purchased research and development charges of $16 million, based on the best information available at the time. In the third quarter of 2008, we made certain purchase accounting adjustments related to changes in deferred taxes and other accruals, which resulted in a credit of $8 million to amounts allocated to purchased research and development. As of January 1, 2009, we adopted FASB Statement No. 141(R), <i>Business Combinations </i>(codified within ASC Topic 805, <i>Business Combinations</i>), a replacement for Statement No. 141. Additionally, Statement No. 141(R) superseded FASB Interpretation No. 4, <i>Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method</i>, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Statement No. 141(R) (Topic 805) requires that purchased research and development be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. During the first nine months of 2009, we did not consummate any material business combinations. For any future business combinations that we enter, we will recognize purchased research and development as an intangible asset. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Our policy is to record certain costs associated with strategic alliances as purchased research and development. Our adoption of Statement No. 141(R) (Topic 805) 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 and $13 million in the first nine months of 2008, associated with entering certain licensing and development arrangements. Since the 2009 technology purchases did not involve the transfer of processes or outputs as defined by Statement No. 141(R) (Topic 805), the transactions did not qualify as business combinations. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Payments Related to Prior Period Acquisitions</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Certain of our acquisitions involve the 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. In August 2007, we entered an agreement to amend our 2004 merger agreement with the principal former shareholders of Advanced Bionics Corporation. Previously, we were obligated to pay future consideration contingent primarily on the achievement of future performance milestones. The amended agreement provided a new schedule of consolidated, fixed payments, consisting of $650 million that was paid in 2008, and a final $500 million payment, which we made during the first quarter of 2009. During the first nine months of 2009, including the $500 million payment to the former shareholders of Advanced Bionics, we made total payments of $517 million related to prior period acquisitions. As of September 30, 2009, the estimated maximum potential amount of future contingent consideration (undiscounted) that we could be required to make associated with our prior acquisitions is approximately $720 million. The milestones associated with the contingent consideration must be reached in certain future periods ranging from 2009 through 2026. The estimated cumulative specified revenue level associated with these maximum future contingent payments is approximately $2.8 billion. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE F — RESTRUCTURING-RELATED ACTIVITIES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In October 2007, our Board of Directors approved, and we committed to, an expense and head count reduction plan (the 2007 Restructuring plan), which resulted in the elimination of approximately 2,300 positions worldwide. We are providing affected employees with severance packages, outplacement services and other appropriate assistance and support. The plan is 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 include 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 R&D projects; and the transfer of certain production lines among facilities. We initiated these activities in the fourth quarter of 2007 and expect to be substantially complete in the first half of 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We expect that the execution of this plan will result in total pre-tax expenses of approximately $425 million to $450 million. We 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 plan to result in cash payments of approximately $385 million to $405 million. The following provides a summary of our expected total costs associated with the plan by major type of cost: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="7%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Total estimated amount expected to</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Type of cost</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>be incurred</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring charges:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Termination benefits </div></td> <td> </td> <td align="center" valign="top">$220 million to $225 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Fixed asset write-offs </div></td> <td> </td> <td align="center" valign="top">$25 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Other (1) </div></td> <td> </td> <td align="center" valign="top">$65 million to $70 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Retention incentives </div></td> <td> </td> <td align="center" valign="top">$65 million to $70 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Accelerated depreciation </div></td> <td> </td> <td align="center" valign="top">$15 million to $20 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Transfer costs (2) </div></td> <td> </td> <td align="center" valign="top">$35 million to $40 million</td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"><b>$425 million to $450 million</b></td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Consists primarily of consulting fees, contractual cancellations, relocation costs and other costs.</td> </tr> <tr style="font-size: 3pt"> <td> </td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(2)</td> <td> </td> <td>Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight and product line validations.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 estimate 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 future cash outlays. The following provides a summary of our estimates of costs associated with the Plant Network Optimization program by major type of cost:<br /> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="88%"> </td> <td width="5%"> </td> <td width="7%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center"><b>Total estimated amount expected to</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>Type of cost</b></td> <td> </td> <td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>be incurred</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring charges:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Termination benefits </div></td> <td> </td> <td align="center" valign="top">$40 million to $45 million</td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td align="center" valign="top"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Accelerated depreciation </div></td> <td> </td> <td align="center" valign="top">$20 million to $25 million</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">Transfer costs (1) </div></td> <td> </td> <td align="center" valign="top">$75 million to $80 million</td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top"><b>$135 million to $150 million</b></td> </tr> <tr style="font-size: 1px"> <td valign="top"> <div style="margin-left:0px; text-indent:-0px">  </div></td> <td> </td> <td align="center" valign="top" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">(1)</td> <td> </td> <td>Consists primarily of costs to transfer product lines among facilities, including costs of transfer teams, freight, idle facility and product line validations.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We recorded restructuring charges of $9 million in the third quarter of 2009 and $20 million in the third quarter of 2008. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $19 million in the third quarter of 2009 and $14 million in the third quarter of 2008. The following presents these costs by major type and line item within our accompanying unaudited condensed consolidated statements of operations: </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b>Three Months Ended September 30, 2009</b></u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring charges</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">9</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"> </td> <td align="right"><b> </b></td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"> </td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"><b> </b></td> <td> </td> <td> </td> <td align="right"><b> </b></td> <td align="right"><b>19</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000">  </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>28</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Restructuring and restructuring-related costs recorded in the third quarter of 2009 by plan were as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2007 Restructuring plan </div></td> <td> </td> <td align="right">$</td> <td align="right">2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">21</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">Plant Network Optimization program </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>5</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>3</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>28</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b>Three Months Ended September 30, 2008 </b></u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring charges</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>12</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>20</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">1</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>12</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>14</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>12</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>12</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>34</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We recorded restructuring charges of $44 million in the first nine months of 2009 and $59 million in the first nine months of 2008. In addition, we recorded expenses within other lines of our accompanying unaudited condensed consolidated statements of operations related to our restructuring initiatives of $50 million in the first nine months of 2009 and $40 million in the first nine months of 2008. The following presents these costs by major type and line item within our accompanying unaudited condensed consolidated statements of operations: </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><u><b>Nine Months Ended September 30, 2009</b></u> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring charges</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>44</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">25</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">36</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">9</td> <td> </td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">3</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>16</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>50</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>16</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>94</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Restructuring and restructuring-related costs recorded in the first nine months of 2009 by plan were as follows: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">2007 Restructuring plan </div></td> <td> </td> <td align="right">$</td> <td align="right">6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">16</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">17</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">6</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">13</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">62</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:15px; text-indent:-15px">Plant Network Optimization program </div></td> <td> </td> <td> </td> <td align="right">19</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">8</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">32</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>16</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>9</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>25</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>94</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><u>Nine Months Ended September 30, 2008</u></b> </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="23%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="4%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Termination</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Retention</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Accelerated</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Transfer</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Fixed Asset</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Benefits</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Incentives</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Depreciation</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Costs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Write-offs</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Other</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="29" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring charges</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>32</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>27</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>59</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring-related expenses:</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">7</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">11</td> <td> </td> </tr> <tr valign="bottom"> <td nowrap="nowrap"> <div style="margin-left:30px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>32</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>40</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>32</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>32</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>8</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>27</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>99</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="27" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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, <i>Compensation — Non-retirement Postemployment Benefits </i>(formerly FASB Statement No. 112, <i>Employer’s Accounting for Postemployment Benefits) </i>and Topic 420, <i>Exit or Disposal Cost Obligations </i>(formerly FASB Statement No. 146, <i>Accounting for Costs Associated with Exit or Disposal Activities). </i>We expect to record the additional termination benefits throughout the remainder of 2009 and into 2010 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 are being recorded over the service period during which eligible employees must remain employed with us in order to retain the payment. Other restructuring costs, which represent primarily consulting fees, are being recognized and measured at their fair value in the period in which the liability is 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We have incurred cumulative restructuring charges of $298 million and restructuring-related costs of $113 million since we committed to each plan. The following presents these costs by major type and by plan: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2007</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Plant</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Restructuring</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Network</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Plan</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Optimization</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Total</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="13" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Termination benefits </div></td> <td> </td> <td align="right">$</td> <td align="right">198</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">19</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">217</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Fixed asset write-offs </div></td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other </div></td> <td> </td> <td> </td> <td align="right">57</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">57</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Total restructuring charges</b> </div></td> <td> </td> <td> </td> <td align="right"><b>279</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>19</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>298</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Retention incentives </div></td> <td> </td> <td> </td> <td align="right">65</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">65</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Accelerated depreciation </div></td> <td> </td> <td> </td> <td align="right">15</td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Transfer costs </div></td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> <td> </td> <td> </td> <td align="right">8</td> <td> </td> <td> </td> <td> </td> <td align="right">28</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Restructuring-related expenses</b> </div></td> <td> </td> <td> </td> <td align="right"><b>100</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>13</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>113</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>379</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>32</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>411</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In the third quarter of 2009, we made cash payments of $13 million associated with restructuring initiatives pursuant to our 2007 Restructuring plan, which related to termination benefits, production line transfer costs and other restructuring costs. We have made cumulative cash payments of $283 million since we committed to the 2007 Restructuring plan. These payments were made using cash generated from our operations. We expect to record the remaining costs associated with the 2007 Restructuring plan during the remainder of 2009 and 2010 and make future cash payments throughout the remainder of 2009 and 2010 using cash generated from operations. In the third quarter of 2009, we made cash payments of $3 million associated with our Plant Network Optimization program, which related to production line transfer costs. We have made cumulative cash payments of $8 million since committing to the Plant Network Optimization program. These payments were made using cash generated from our operations. We expect to record the remaining costs associated with the Plant Network Optimization program through 2011, and make future cash payments through 2012 using cash generated from operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following is a rollforward of the liability associated with our restructuring initiatives, since the inception of the respective plan, which is reported as a component of accrued expenses included in our accompanying unaudited condensed consolidated balance sheets. </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="40%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Plant</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Network</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>2007 Restructuring Plan</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Optimization</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"><b>Termination</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2"> </td> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Benefits</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Other</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Subtotal</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Benefits</b></td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Total</b></td> <td> </td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Charges </div></td> <td> </td> <td align="left">$</td> <td align="right">158</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">10</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">168</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">168</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash payments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(23</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(8</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2007</b> </div></td> <td> </td> <td> </td> <td align="right"><b>135</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>2</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>137</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>137</b></td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Charges </div></td> <td> </td> <td> </td> <td align="right">34</td> <td> </td> <td> </td> <td> </td> <td align="right">34</td> <td> </td> <td> </td> <td> </td> <td align="right">68</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">68</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cash payments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(128</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(35</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(163</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(163</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of December 31, 2008</b> </div></td> <td> </td> <td> </td> <td align="right"><b>41</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>42</b></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right"><b>42</b></td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Charges </div></td> <td> </td> <td> </td> <td align="right">6</td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td> </td> <td align="right">19</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">19</td> <td> </td> <td> </td> <td> </td> <td align="right">38</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Cash payments </div></td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(18</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(13</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(31</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000; border-top: 1px solid #000000"> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Balance as of September 30, 2009</b> </div></td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>29</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>1</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>30</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>19</b></td> <td> </td> <td> </td> <td align="left"><b>$</b></td> <td align="right"><b>49</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="11" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td> <td> </td> <td> </td> <td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000; border-top: 3px double #000000"> </td> <td> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition to the amounts in the rollforward above, we have incurred cumulative charges of $124 million associated with retention incentives, asset write-offs, accelerated depreciation and transfer costs pursuant to our 2007 Restructuring plan, and made cumulative cash payments of approximately $38 million associated with retention incentives and $20 million associated with transfer costs. We have also incurred cumulative charges of $13 million associated with accelerated depreciation and transfer costs pursuant to our Plant Network Optimization program and made cumulative cash payments of $8 million. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE G — DIVESTITURES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During 2007, we determined that our Auditory, Vascular Surgery, Cardiac Surgery, Venous Access and Fluid Management businesses were no longer strategic to our on-going operations. We completed the sale of these businesses in the first quarter of 2008, receiving pre-tax proceeds of approximately $1.3 billion, and eliminated 2,000 positions in connection with these divestitures. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2008, we recorded a $250 million gain in connection with the sale of our Fluid Management and Venous Access businesses and our TriVascular Endovascular Aortic Repair (EVAR) program. In February 2008, we completed the sale of our Fluid Management and Venous Access businesses to Navylist Medical (affiliated with Avista Capital Partners) and recorded a pre-tax gain of $234 million associated with this transaction. The Venous Access business was previously a component of our former Oncology business. In March 2008, we sold our EVAR program obtained in connection with our 2005 acquisition of TriVascular, Inc. and recorded a pre-tax gain of $16 million associated with this transaction. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During 2007, we announced our intent to monetize those investments in our portfolio determined to be non-strategic. During 2008, we entered transactions to sell the majority of our investments in, and notes receivable from, certain publicly traded and privately held entities, and received pre-tax proceeds for investments sold of $149 million. During the first nine months of 2009, we completed the sale of our non-strategic investments, and received additional proceeds from sales of investments and collections of notes receivable of $54 million. We recognized a net gain of $3 million associated with these transactions in the first nine months of 2009, and a net loss of $80 million during the first nine months of 2008. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE H — COMPREHENSIVE INCOME</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following table provides a summary of our comprehensive (loss) income: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="60%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Nine Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net (loss) income </div></td> <td> </td> <td align="right">$</td> <td align="right">(94</td> <td>)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(62</td> <td nowrap="nowrap">)</td> <td> </td> <td align="right">$</td> <td align="right">51</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">358</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustment </div></td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(38</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">33</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(7</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Net change in unrealized gains and losses on derivative financial instruments, <br /> net of tax </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(82</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">111</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(73</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td align="right">83</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Net change in unrealized gains or losses on equity investments, net of tax </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(7</td> <td nowrap="nowrap">)</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(16</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Other, net of tax </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Comprehensive (loss) income</b> </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>(165</b></td> <td><b>)</b></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>4</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>11</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>416</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE I — WEIGHTED-AVERAGE SHARES OUTSTANDING</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following is a reconciliation of weighted-average shares outstanding for basic and diluted earnings per share computations: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Nine Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Weighted average shares outstanding — basic </div></td> <td> </td> <td> </td> <td align="right">1,509.3</td> <td> </td> <td> </td> <td> </td> <td align="right">1,500.9</td> <td> </td> <td> </td> <td> </td> <td align="right">1,507.0</td> <td> </td> <td> </td> <td> </td> <td align="right">1,497.5</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net effect of common stock equivalents </div></td> <td> </td> <td> </td> <td align="right"> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td align="right">7.4</td> <td> </td> <td> </td> <td> </td> <td align="right">6.9</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Weighted average shares outstanding — assuming dilution</b> </div></td> <td> </td> <td> </td> <td align="right"><b>1,509.3</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,500.9</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,514.4</b></td> <td> </td> <td> </td> <td> </td> <td align="right"><b>1,504.4</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr>  </table> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Weighted-average shares outstanding, assuming dilution, excludes the impact of 10.9 million common stock equivalents for the third quarter of 2009, and 7.0 million common stock equivalents for the third quarter of 2008 due to our net loss position in those periods. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Additionally, weighted-average shares outstanding, assuming dilution, excludes the impact of 46 million stock options for the third quarter of 2009, 45 million for the third quarter of 2008, 54 million for the first nine months of 2009, and 48 million for the first nine months of 2008, due to the exercise prices of these stock options being greater than the average market price of our common stock during those periods. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We issued approximately three million shares of our common stock in the third quarter of 2009, two million in the third quarter of 2008, nine million during the first nine months of 2009, and 10 million during the first nine months of 2008 following the exercise or vesting of the underlying stock options or deferred stock units, or purchase under our employee stock purchase plan. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE J — STOCK-BASED COMPENSATION</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following presents the impact of stock-based compensation expense on our accompanying unaudited condensed consolidated statements of operations: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Nine Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2009</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>2008</b></td> </tr>   <tr style="font-size: 1px"> <td colspan="9" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Cost of products sold </div></td> <td> </td> <td align="right">$</td> <td align="right">5</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">4</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">17</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">16</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Selling, general and administrative expenses </div></td> <td> </td> <td> </td> <td align="right">21</td> <td> </td> <td> </td> <td> </td> <td align="right">20</td> <td> </td> <td> </td> <td> </td> <td align="right">70</td> <td> </td> <td> </td> <td> </td> <td align="right">69</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Research and development expenses </div></td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td align="right">7</td> <td> </td> <td> </td> <td> </td> <td align="right">24</td> <td> </td> <td> </td> <td> </td> <td align="right">21</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">33</td> <td> </td> <td> </td> <td> </td> <td align="right">31</td> <td> </td> <td> </td> <td> </td> <td align="right">111</td> <td> </td> <td> </td> <td> </td> <td align="right">106</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Income tax benefit </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(10</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(9</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(35</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(32</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000"> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>23</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>22</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>76</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>74</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000"> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Net (loss) income per common share — basic </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.02</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.01</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.05</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.05</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net (loss) income per common share — assuming dilution </div></td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.02</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.01</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.05</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right">$</td> <td align="right">(0.05</td> <td nowrap="nowrap">)</td> </tr>  </table> </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>NOTE K — INCOME TAXES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt"><b><i>Tax Rate</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The following table provides a summary of our reported tax rate: </div> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="75%">  <tr valign="bottom"> <td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Percentage</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 0px solid #000000"><b>Point</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Increase (Decrease)</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Reported tax rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(113.6</td> <td nowrap="nowrap">)%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">8.8 </td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(122.4</td> <td nowrap="nowrap">)%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Impact of certain charges* </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">128.9</td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">18.7 </td> <td nowrap="nowrap">%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">110.2</td> <td nowrap="nowrap">%</td> </tr> <tr style="font-size: 10pt"> <td> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b> </b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Nine Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Percentage</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3"><b>Point</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>Increase (Decrease)</b></td> </tr>   <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Reported tax rate </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(30.8</td> <td nowrap="nowrap">)%</td> <td> </td> <td> </td> <td align="right"> 27.5</td> <td>% </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"> (58.3</td> <td nowrap="nowrap">)%</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Impact of certain charges* </div></td> <td> </td> <td> </td> <td align="right">49.1</td> <td>% </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"> (4.2</td> <td nowrap="nowrap">)%</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right"> 53.3</td> <td nowrap="nowrap">%</td> </tr>  </table> </div> <div align="left"> <div style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">  </div> </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr> <td width="3%"></td> <td width="1%"></td> <td width="96"></td> </tr> <tr valign="top"> <td nowrap="nowrap" align="left">*</td> <td> </td> <td>These charges are taxed at different rates than our effective tax rate.</td> </tr> </table> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The change in our reported tax rate for the third quarter and the first nine months of 2009, as compared to the same periods in 2008, relates primarily to the impact of certain items that are taxed at different rates than our effective tax rate. In 2009, these items included intangible asset impairment charges, purchased research and development, restructuring and litigation- related charges and a favorable tax ruling on a divestiture-related gain recognized in a prior period. Our reported tax rate was also affected by discrete items, associated primarily with resolutions of uncertain tax positions related to audit settlements and changes in estimates for tax benefits claimed related to prior periods, resulting in a net tax expense of $2 million for the third quarter of 2009 and a net tax benefit of $85 million for the first nine months of 2009. In 2008, these items included purchased research and development, amounts recorded for the divestiture of certain non-strategic businesses, restructuring-related charges, and discrete tax items associated with the resolution of various tax matters. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">As of January 1, 2009, we adopted FASB Statement No. 141(R), <i>Business Combinations </i>(codified within ASC Topic 805, <i>Business Combinations</i>)<i>, </i>which requires that we recognize changes in acquired income tax uncertainties (applied to acquisitions before and after the adoption date) as income tax expense or benefit. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">As of September 30, 2009, we had $1.075 billion of gross unrecognized tax benefits, $952 million of which, if recognized, would affect our effective tax rate. As of December 31, 2008, we had $1.107 billion of gross unrecognized tax benefits, $978 million of which, if recognized, would affect our effective tax rate. The net reduction in our unrecognized tax benefits is attributable primarily to the resolution of certain unrecognized tax positions related to audit settlements of $63 million in the first nine months of 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We recognize interest and penalties related to income taxes as a component of income tax expense. We recognized a net release of interest and penalties of $2 million in the third quarter of 2009, and we recognized $17 million of interest expense in the first nine months of 2009. In 2008, we recognized $21 million of interest expense in the third quarter and $32 million in the first nine months of 2008, including a net release of interest and penalties in the first quarter. We had $293 million accrued for gross interest and penalties as of September 30, 2009 and $268 million as of December 31, 2008. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">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 2000 and substantially all material state, local, and foreign income tax matters through 2001. During the first nine months of 2009, we resolved various federal and foreign jurisdictions matters. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In the second quarter of 2009, we received the Revenue Agent’s Report for our federal tax examination covering years 2004 and 2005, which contained proposed adjustments, related primarily to transfer pricing and transaction-related issues. We agreed on certain adjustments and made associated payments of $64 million, inclusive of interest, in the second quarter of 2009. In the third quarter of 2009, we filed amended tax returns with the state authorities and released any excess reserves. We continue to disagree with certain positions contained in the Report and intend to contest these positions through applicable IRS and judicial procedures, as appropriate. We also continue to disagree with and contest the significant proposed adjustment, related primarily to the allocation of income between our U.S. and foreign affiliates, contained in the Revenue Agent’s Report for Guidant Corporation’s federal tax examination covering years 2001 through 2003, which we received in 2008. Although the final resolution associated with these matters is uncertain, we believe that our income tax reserves are adequate and that the resolution will not have a material adverse impact on our results of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">It is reasonably possible that within the next 12 months we will resolve multiple issues including transfer pricing, research and development tax credit and various transactional related issues, with foreign, federal and state taxing authorities, in which case we could record a reduction in our balance of unrecognized tax benefits of up to $123 million. </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE L — COMMITMENTS AND CONTINGENCIES</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">The medical device market in which we primarily participate is largely technology driven. Physician customers, particularly in interventional cardiology, have historically moved quickly to new products and new technologies. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. However, intellectual property litigation to defend or create market advantage is inherently complex and unpredictable. Furthermore, appellate courts frequently overturn lower court patent decisions. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These forces frequently drive settlement not only of individual cases, but also of a series of pending and potentially related and unrelated cases. In addition, although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the proceedings and are frequently 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Several third parties have asserted that our current and former stent systems infringe patents owned or licensed by them. We have similarly asserted that stent systems or other products sold by our competitors infringe patents owned or licensed by us. Adverse outcomes in one or more of the proceedings against us could limit our ability to sell certain stent products in certain jurisdictions, or reduce our operating margin on the sale of these products and could have a material adverse effect on our financial position, results of operations or liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In particular, although our recent settlement with Johnson & Johnson resolved 14 litigation matters, as discussed below, we continue to be involved in significant patent litigation with Johnson & Johnson relating to stent systems, balloon catheters and stent delivery systems. We have each asserted that products of the other infringe patents owned or exclusively licensed by each of us. 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 operation or liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In the normal course of business, product liability and securities 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 are substantially self-insured with respect to product liability claims, and maintain an insurance policy providing limited coverage against securities claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, product recalls, securities litigation, and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our financial position, results of operations and liquidity. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In addition, the medical device industry is the subject of numerous governmental investigations often involving marketing and other business practices. These investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies, divert the attention of our management and have an adverse effect on our financial position, results of operations and liquidity. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We generally record losses for claims in excess of the limits of purchased insurance in earnings at the time and to the extent they are probable and estimable. In accordance with ASC Topic 450, <i>Contingencies </i>(formerly FASB Statement No. 5, <i>Accounting for Contingencies), </i>we accrue anticipated costs of settlement, damages losses for general 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. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Our accrual for legal matters that are probable and estimable was $1.562 billion as of September 30, 2009 and $1.089 billion as of December 31, 2008, and includes estimated costs of settlement, damages and defense. The increase in our accrual is due primarily to third quarter 2009 charges of $294 million associated with an agreement in principle reached with the U.S. Department of Justice, and first quarter charges of $237 million as a result of a ruling in a patent infringement case brought against us by Johnson & Johnson, described below. We continue to assess certain litigation and claims to determine the amounts that management believes will be paid as a result of such claims and litigation and, therefore, additional losses may be accrued in the future, which could materially adversely impact our operating results, cash flows and our ability to comply with our debt covenants. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In management’s opinion, we are not currently involved in any legal proceedings other than those specifically identified below or as disclosed in our 2008 Annual Report on Form 10-K, which, individually or in the aggregate, could have a material effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be estimated. Except as disclosed below, there have been no material developments with regard to the litigation or other proceedings disclosed in our 2008 Annual Report on Form 10-K. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Litigation with Johnson & Johnson</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On April 13, 1998, Cordis filed suit for patent infringement against Boston Scientific Scimed and us in the U.S. District Court for the District of Delaware, alleging that our NIR stent infringes three claims of two patents owned by Cordis. On May 2, 2005, the District Court entered judgment that none of the three asserted claims was infringed and that one of the claims was invalid. The District Court also found the two patents unenforceable for inequitable conduct. On June 29, 2006, the Court of Appeals upheld the finding that the claim was not invalid, remanded the case to the District Court for additional factual findings related to inequitable conduct, and did not address the finding that the claim was not infringed. On August 10, 2009, the District Court reversed its finding that the two patents were unenforceable for inequitable conduct. On August 24, 2009, we asked the District Court to reconsider. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On January 13, 2003, Cordis filed suit for patent infringement against Boston Scientific Scimed and us alleging that our Express 2® coronary stent infringes a U.S. patent owned by Cordis. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. We filed a counterclaim alleging that certain Cordis products infringe a patent owned by us. On August 4, 2004, the Court granted a Cordis motion to add our Liberté® coronary stent and two additional patents to the complaint. On June 21, 2005, a jury found that our TAXUS® Express 2®, Express 2®, Express® Biliary, and Liberté® stents infringe a Johnson & Johnson patent and that the Liberté® stent infringes a second Johnson & Johnson patent. With respect to our counterclaim, a jury found on July 1, 2005, that Johnson & Johnson’s Cypher®, Bx Velocity®, Bx Sonic® and Genesis™ stents infringe our patent. On March 31, 2009, the Court of Appeals upheld the District Court’s decision that Johnson & Johnson’s Cypher®, Bx Velocity®, Bx Sonic® and Genesis™ stent systems infringe our patent and that the patent is valid. The Court of Appeals instructed the District Court to dismiss with prejudice the infringement claims against our TAXUS Liberté® stent. The Court of Appeals affirmed the District Court’s ruling that our TAXUS® Express 2®, Express 2®, Express® Biliary, and Liberté® stents infringe one Johnson & Johnson patent and that the patent is valid. The Court of Appeals also affirmed that our Liberté® stent infringes a second Johnson & Johnson patent and that the patent is valid. In conjunction with the March 31, 2009 Court of Appeals decision, we recorded a litigation-related charge of $237 million during the first quarter of 2009 and are accruing interest quarterly. This amount represents an estimate of the low end of the range of potential outcomes related to this matter. The range is subject to substantial estimation, including attempting to determine the possible future findings of a jury. As such, the high end of the range cannot be reasonably estimated at this time. Both parties filed a request for a rehearing and a rehearing en banc with the Court of Appeals, and on June 26, 2009, the Court of Appeals denied both petitions. On September 24, 2009, both parties filed Petitions for Writ of Certiorari before the U.S. Supreme Court. Trials on damages are scheduled to begin on February 1, 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 25, 2006, Johnson & Johnson filed a lawsuit against us, Guidant and Abbott in the U.S. District Court for the Southern District of New York. The complaint alleges that Guidant breached certain provisions of the amended merger agreement between Johnson & Johnson and Guidant (Merger Agreement) as well as the implied duty of good faith and fair dealing. The complaint further alleges that Abbott and we tortiously interfered with the Merger Agreement by inducing Guidant’s breach. The complaint seeks certain factual findings, damages in an amount no less than $5.5 billion and attorneys’ fees and costs. On August 29, 2007, the judge dismissed the tortious interference claims against us and Abbott and the implied duty of good faith and fair dealing claim against Guidant. On February 20, 2009, Johnson & Johnson filed a motion to amend its complaint to reinstate its tortious interference claims against us and Abbott and to add additional breach allegations against Guidant. On March 27, 2009, we filed an opposition to the motion. A trial date has not yet been scheduled. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On each of May 25, June 1, June 22 and November 27, 2007, Boston Scientific Scimed and we filed suit against Johnson & Johnson and Cordis in the U.S. District Court for the District of Delaware seeking a declaratory judgment of invalidity of four U.S. patents owned by them and of non-infringement of the patents by our PROMUS® coronary stent system. On February 21, 2008, Cordis filed counterclaims for infringement seeking an injunction and a declaratory judgment of validity. On June 25, 2009, we amended our complaints to allege that the four patents owned by Johnson & Johnson and Cordis are unenforceable. A liability trial on all four suits is scheduled to begin on February 4, 2010. The Court has bifurcated damages and our unenforceability defenses. A separate trial on these issues will be scheduled after a final decision on any appeal following the liability trial. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On October 17, 2008, Cordis Corporation filed a complaint for patent infringement against us alleging that our TAXUS® Liberté® stent product, when launched in the United States, will infringe a U.S. patent owned by them. The suit was filed in the United States District Court of Delaware seeking monetary and injunctive relief. On November 10, 2008, Cordis filed a motion for summary judgment and on May 1, 2009, we filed a motion to dismiss the case. On May 26, 2009, Cordis dismissed its request for injunctive relief. On July 21, 2009, the District Court denied both parties’ motions. A trial is scheduled to begin in September 2010. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 22, 2009, Cordis Corporation, Cordis LLC and Wyeth Corporation filed a complaint for patent infringement against Abbott Laboratories, Abbott Cardiovascular Systems, Inc., Boston Scientific Scimed and us alleging that our PROMUS® coronary stent system infringes a patent owned by Cordis and Wyeth that issued on September 22, 2009. The suit was filed in the United States District Court for the District of New Jersey seeking monetary and injunctive relief. On the same day, we filed a declaratory judgment action in the U.S. District Court for the District of Minnesota against Cordis and Wyeth seeking a declaration that the patent is invalid and not infringed by our PROMUS® coronary stent system. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Litigation with St. Jude Medical, Inc.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Guidant Sales Corp., Cardiac Pacemakers, Inc. and Mirowski Family Ventures L.L.C. are plaintiffs in a patent infringement suit originally filed against St. Jude Medical, Inc. and its affiliates in November 1996 in the District Court in Indianapolis. On March 1, 2006, the District Court issued a ruling related to damages which granted St. Jude’s motion to limit damages to a subset of the accused products but which denied their motion to limit damages to only U.S. sales. On March 26, 2007, the District Court issued a ruling which found the patent infringed but invalid. On December 18, 2008, the Court of Appeals upheld the District Court’s ruling of infringement and overturned the invalidity ruling. On January 21, 2009, St. Jude and we filed requests for rehearing and rehearing en banc with the Court of Appeals. On March 6, 2009 the Court of Appeals granted St. Jude’s request for a rehearing en banc on a damages issue and denied our requests. On August 19, 2009, the en banc Court of Appeals held that damages are limited to U.S. sales only. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Litigation with Medinol Ltd.</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 25, 2002, we filed suit against Medinol alleging Medinol’s NIRFlex™ and NIRFlex™ Royal products infringe a patent owned by us. The suit was filed in the District Court of The Hague, The Netherlands seeking cross-border, monetary and injunctive relief. On September 10, 2003, the Dutch Court ruled that the patent was invalid. On December 14, 2006, an appellate decision was rendered upholding the trial court ruling. On March 6, 2009, the Dutch Supreme Court reversed the appellate court decision and sent the case back to the appellate court for further proceedings. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On December 12, 2008, we submitted a request for arbitration against Medinol with the American Arbitration Association in New York. We are asking the Arbitration panel to enforce a contract between Medinol and us to have Medinol contribute to any final damage award owed to Johnson & Johnson for damages related to the sales of the NIR stent supplied to us by Medinol. A panel of three arbitrators has been constituted to hear the Arbitration. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Stent System Patent Litigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On May 19, 2005, G. David Jang, M.D. filed suit against us alleging breach of contract relating to certain patent rights covering stent technology. The suit was filed in the U.S. District Court, Central District of California seeking monetary damages and rescission of the contract. After a Markman ruling relating to the Jang patent rights, Dr. Jang stipulated to the dismissal of certain claims alleged in the complaint with a right to appeal. In February 2007, the parties agreed to settle the other claims of the case. On May 23, 2007, Jang filed an appeal with respect to the remaining patent claims. On July 11, 2008, the Court of Appeals vacated the District Court’s consent judgment and remanded the case back to the District Court for further clarification. On June 11, 2009, the District Court ordered a stay of the action pursuant to the parties’ joint stipulation. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On March 16, 2009, OrbusNeich Medical, Inc. filed suit against us in the U.S. District Court for the Eastern District of Virginia alleging that our Liberté® coronary stent system infringes two U.S. patents owned by them. The complaint also alleges breach of contract and misappropriation of trade secrets and seeks monetary and injunctive relief. On April 13, 2009, we answered denying the allegations and filed a motion to transfer the case to Minnesota as well as a motion to dismiss the state law claims. On June 8, 2009, the case was transferred to the U.S. District Court for the District of Massachusetts. On September 11, 2009, OrbusNeich filed an amended complaint against us. On October 2, 2009, we filed a motion to dismiss the suit. On October 20, 2009, we filed an amended answer to the amended complaint and counterclaim for patent infringement by an OrbusNeich coronary stent system of three U.S. patents owned by us. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Cardiac Rhythm Management (CRM) Litigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Approximately 15 product liability class action lawsuits and more than 234 individual lawsuits involving approximately 328 individual plaintiffs remain pending in various state and federal jurisdictions against Guidant alleging personal injuries associated with defibrillators or pacemakers involved in certain 2005 and 2006 product communications. The majority of the cases in the United States are pending in federal court but approximately 32 cases are currently pending in state courts. On November 7, 2005, the Judicial Panel on Multi-District Litigation established MDL-1708 (MDL) in the United States District Court for the District of Minnesota and appointed a single judge to preside over all the cases in the MDL. In April 2006, the personal injury plaintiffs and certain third-party payors served a Master Complaint in the MDL asserting claims for class action certification, alleging claims of strict liability, negligence, fraud, breach of warranty and other common law and/or statutory claims and seeking punitive damages. The majority of claimants allege no physical injury, but sue for medical monitoring and anxiety. On July 12, 2007, we reached an agreement to settle certain claims, including those associated with the 2005 and 2006 product communications, which was amended on November 19, 2007. Under the terms of the amended agreement, subject to certain conditions, we will pay a total of up to $240 million covering up to 8,550 patient claims, including almost all of the claims that have been consolidated in the MDL as well as other filed and unfiled claims throughout the United States. On June 13, 2006, the Minnesota Supreme Court appointed a single judge to preside over all Minnesota state court lawsuits involving cases arising from the product communications. The plaintiffs in those cases are eligible to participate in the settlement, and activities in all Minnesota State court cases are currently stayed pending individual plaintiff’s decisions whether to participate in the settlement. Through the end of the third quarter, more than 8,160 claims have been approved for participation in the MDL settlement. As a result, through the end of the third quarter, we have made payments of approximately $232 million related to the MDL settlement and, if certain agreed-upon requirements are met, may make substantially all of the remaining $8 million payment during the fourth quarter of 2009. On April 6, 2009 and on September 24, 2009, the judge in the MDL issued orders dismissing with prejudice most of the plaintiffs’ claims which have been resolved through the settlement agreement. Further dismissal orders are expected as additional claimants are approved for participation in the settlement. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We are aware of more than 18 Guidant product liability lawsuits pending internationally associated with defibrillators or pacemakers, including devices involved in the 2005 and 2006 product communications. Six of those suits pending in Canada are putative class actions, four of which are stayed pending the outcome of two lead class actions. On April 10, 2008, the Court certified a class of persons in whom defibrillators were implanted in Canada and a class of family members with derivative claims. On May 8, 2009, the Court certified a class of persons in whom pacemakers were implanted in Canada. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Securities Related Litigation</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 23, 2005, Srinivasan Shankar, on behalf of himself and all others similarly situated, filed a purported securities class action suit in the U.S. District Court for the District of Massachusetts on behalf of those who purchased or otherwise acquired our securities during the period March 31, 2003 through August 23, 2005, alleging that we and certain of our officers violated certain sections of the Securities Exchange Act of 1934. Four other plaintiffs, on behalf of themselves and all others similarly situated, each filed additional purported securities class action suits in the same Court on behalf of the same purported class. On February 15, 2006, the Court ordered that the five class actions be consolidated and appointed the Mississippi Public Employee Retirement System Group as lead plaintiff. A consolidated amended complaint was filed on April 17, 2006. The consolidated amended complaint alleges that we made material misstatements and omissions by failing to disclose the supposed merit of the Medinol litigation and DOJ investigation relating to the 1998 NIR ON® Ranger with Sox stent recall, problems with the TAXUS® drug-eluting coronary stent systems that led to product recalls, and our ability to satisfy FDA regulations concerning medical device quality. The consolidated amended complaint seeks unspecified damages, interest, and attorneys’ fees. The defendants filed a motion to dismiss the consolidated amended complaint on June 8, 2006, which was granted by the Court on March 30, 2007. On April 16, 2008, the First Circuit reversed the dismissal of only plaintiff’s TAXUS® stent recall related claims and remanded the matter for further proceedings. On February 25, 2009, the Court certified a class of investors who acquired our securities during the period November 30, 2003 through July 15, 2004. A trial has not yet been scheduled. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On January 19, 2006, George Larson filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of participants and beneficiaries of our 401(k) Retirement Savings Plan and GESOP alleging that we and certain of our officers and employees violated certain provisions under the Employee Retirement Income Security Act of 1974, as amended (ERISA), and Department of Labor Regulations. Other similar actions were filed in early 2006. On April 3, 2006, the Court issued an order consolidating the actions. On August 23, 2006, plaintiffs filed a consolidated purported class action complaint on behalf of all participants and beneficiaries of our 401(k) Plan during the period May 7, 2004 through January 26, 2006 alleging that we, our 401(k) Administrative and Investment Committee (the Committee), members of the Committee, and certain directors violated certain provisions of ERISA (the “Consolidated ERISA Complaint”). The Consolidated ERISA Complaint alleges, among other things, that the defendants breached their fiduciary duties to the 401(k) Plan’s participants because they knew or should have known that the value of the Company’s stock was artificially inflated and was not a prudent investment for the 401(k) Plan (the “First ERISA Action”). The Consolidated ERISA Complaint seeks equitable and monetary relief. On June 30, 2008, Robert Hochstadt (who previously had withdrawn as an interim lead plaintiff) filed a motion to intervene to serve as a proposed class representative. On November 3, 2008, the Court denied Plaintiffs’ motion to certify a class, denied Hochstadt’s motion to intervene, and dismissed the action. On December 2, 2008, plaintiffs filed a notice of appeal. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On December 24, 2008, Robert Hochstadt and Edward Hazelrig, Jr. filed a purported class action complaint in the U.S. District Court for the District of Massachusetts on behalf of all participants and beneficiaries of our 401(k) Plan during the period May 7, 2004 through January 26, 2006 (the “Second ERISA Action”). This new complaint repeats the allegations of the August 23, 2006, Consolidated ERISA Complaint. On September 30, 2009, we and certain of the proposed class representatives in the First and Second ERISA Actions entered into a memorandum of understanding reflecting an agreement-in-principle to settle the First and Second ERISA Actions in their entirety. The proposed settlement has not yet been finalized or submitted to the District Court for approval. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In July 2005, a purported class action complaint was filed on behalf of participants in Guidant’s employee pension benefit plans. This action was filed in the U.S. District Court for the Southern District of Indiana against Guidant and its directors. The complaint alleges breaches of fiduciary duty under ERISA. Specifically, the complaint alleges that Guidant fiduciaries concealed adverse information about Guidant’s defibrillators and imprudently made contributions to Guidant’s 401(k) plan and employee stock ownership plan in the form of Guidant stock. The complaint seeks class certification, declaratory and injunctive relief, monetary damages, the imposition of a constructive trust, and costs and attorneys’ fees. In September 2007, we filed a motion to dismiss the complaint for failure to state a claim. In June 2008, the District Court dismissed the complaint in part, but ruled that certain of the plaintiffs’ claims may go forward to discovery. On October 29, 2008, the Magistrate Judge ruled that discovery should be limited, in the first instance, to alleged damages-related issues. On October 8, 2009, we reached a resolution with the plaintiffs in this matter. The proposed settlement has not yet been finalized or submitted to the District Court for approval. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On November 3, 2005, a securities class action complaint was filed on behalf of purchasers of Guidant stock between December 1, 2004 and October 18, 2005, in the U.S. District Court for the Southern District of Indiana, against Guidant and several of its officers and directors. The complaint alleges that the defendants concealed adverse information about Guidant’s defibrillators and pacemakers and sold stock in violation of federal securities laws. The complaint seeks a declaration that the lawsuit can be maintained as a class action, monetary damages, and injunctive relief. Several additional, related securities class actions were filed in November 2005 and January 2006. The Court issued an order consolidating the complaints and appointed the Iron Workers of Western Pennsylvania Pension Plan and David Fannon as lead plaintiffs. In August 2006, the defendants moved to dismiss the complaint. On February 27, 2008, the District Court granted the motion to dismiss and entered final judgment in favor of all defendants. On March 13, 2008, the plaintiffs filed a motion seeking to amend the final judgment to permit the filing of a further amended complaint. On May 21, 2008, the District Court denied plaintiffs motion to amend the judgment. On June 6, 2008, plaintiffs appealed the judgment to the United States Court of Appeals for the Seventh Circuit. On January 16, 2009, the appeal was argued before a panel of the Court. On October 21, 2009, the Court of Appeals affirmed the decision of the District Court granting our motion to dismiss the case with prejudice. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Governmental Proceedings — Guidant</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In October 2005, Guidant received an administrative subpoena from the U.S. Department of Justice U.S. Attorney’s office in Boston, issued under the Health Insurance Portability & Accountability Act of 1996. The subpoena requests documents concerning certain marketing practices for pacemakers, implantable cardioverter defibrillators, leads and related products arising prior to our acquisition of Guidant in 2006. Guidant is cooperating with the request, including producing a significant volume of documents. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In October 2005, Guidant received an administrative subpoena from the U.S. Department of Justice U.S. Attorney’s office in Minneapolis, issued under the Health Insurance Portability & Accountability Act of 1996. The subpoena requests documents relating to alleged violations of the Food, Drug, and Cosmetic Act occurring prior to our acquisition of Guidant involving Guidant’s VENTAK PRIZM® 2 and CONTAK RENEWAL® and CONTAK RENEWAL 2 devices. Guidant is cooperating with the request, including producing a significant volume of documents and providing witnesses for grand jury proceedings. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On November 3, 2009, Guidant and the Department of Justice reached an agreement in principle to resolve the matters raised in the Minneapolis subpoena. Under the terms of the agreement, Guidant will plead to two misdemeanor charges related to failure to include information in reports to the FDA and Boston Scientific will pay approximately $296 million in fines and civil forfeitures on behalf of Guidant. We expect to execute a definitive agreement during the fourth quarter of 2009 or early 2010. We have recorded a charge of $294 million in the third quarter as a result of the agreement in principle, which represents the $296 million charge associated with the agreement, net of a $2 million reversal of a related accrual. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On October 24, 2008, we received a letter from the U.S. Department of Justice (DOJ) informing us of an investigation relating to alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. We have divested the surgical cardiac ablation business and the devices at issue are no longer sold by us. We are cooperating with the government’s investigation. On July 13, 2009, we became aware that a judge in Texas partially unsealed a <i>qui tam</i> whistleblower complaint which is the basis for the DOJ investigation. In August 2009, the government which has the right to intervene and take over the conduct of the <i>qui tam </i>case, filed a notice indicating that it has elected not to intervene in this matter at this time. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">Following the unsealing of the whistleblower complaint, we received in August 2009 shareholder letters demanding that our Board of Directors take action against certain directors and executive officers as a result of the alleged off-label promotion of surgical cardiac ablation system devices to treat atrial fibrillation. The matter was referred to a special committee of the Board to investigate and then to make a recommendation to the full Board. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On November 7, 2008, Guidant/Boston Scientific received a request from the Department of Defense (DOD), Defense Criminal Investigative Service and the Department of the Army, Criminal Investigation Command seeking information concerning sales and marketing interactions with physicians at Madigan Army Medical Center in Tacoma, Washington. Since that date, we have been cooperating with the DOD and the Department of Justice to review CRM’s financial interactions with military personnel. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 25, 2009, we received a subpoena from the U.S. Department of Health and Human Services, Office of Inspector General, requesting certain information relating to contributions made by CRM to charities with ties to physicians or their families. We are currently working with the government to understand the scope of the subpoena. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Other Proceedings</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of our Schneider Worldwide subsidiaries and Pfizer Inc. and certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr. Bonzel amounts owed under a license agreement involving Dr. Bonzel’s patented Monorail® balloon catheter technology. This and similar suits were dismissed in state and federal courts in Minnesota. On April 24, 2007, we received a letter from Dr. Bonzel’s counsel alleging that the 1995 license agreement with Dr. Bonzel may have been invalid under German law. On October 5, 2007, Dr. Bonzel filed a complaint against us and Pfizer in Kassel, Germany, alleging the 1995 license agreement is invalid under German law and seeking monetary damages. On June 12, 2009, the Court dismissed all but one of Dr. Bonzel’s claims. On October 16, 2009, Dr. Bonzel made an additional filing in support of his remaining claim. Our response is due on December 23, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>FDA Warning Letters</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In January 2006, legacy Boston Scientific received a corporate warning letter from the FDA notifying us of serious regulatory problems at three of our facilities and advising us that our corporate-wide corrective action plan relating to three site-specific warning letters issued to us in 2005 was inadequate. We have identified solutions to the quality system issues cited by the FDA and have made significant progress in transitioning our organization to implement those solutions. During 2008, the FDA reinspected a number of our facilities and, in October 2008, informed us that our quality system is now in substantial compliance with its Quality System Regulations. The FDA has approved all of our requests for final approval of Class III product submissions previously on hold due to the corporate warning letter and has approved all currently eligible requests for Certificates to Foreign Governments. The corporate warning letter remains in place pending final remediation of certain Medical Device Report filing issues, which we are actively working with the FDA to resolve. We have informed the FDA that we are ready for reinspection of the impacted sites. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, we acquired a third-party sterilization facility currently subject to a warning letter from the FDA. The FDA had requested documentation and explanation regarding various corrective actions related to the facility. This information has been provided to the FDA and we are currently working with them to resolve remaining issues. During September 2009, the FDA inspected the facility and issued no observations. We do not expect this warning letter to have an impact on the resolution of our corporate warning letter. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b><i>Matters Concluded Since January 1, 2009</i></b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On April 2, 1997, Ethicon and other Johnson & Johnson subsidiaries filed a cross-border proceeding in The Netherlands alleging that the NIR® stent infringes a European patent licensed to Ethicon. In January 1999, Johnson & Johnson amended the claims of the patent and changed the action from a cross-border case to a Dutch national action. The Dutch Court asked the Dutch Patent Office for technical advice on the validity of the amended patent. On August 31, 2005, the Dutch Patent Office issued its technical advice that the amended patent was valid and on October 8, 2008, the Dutch Court found the patent valid. In light of a prior finding of noninfringement, we have determined not to appeal the finding. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On March 1, 2006, Medtronic Vascular, Inc. filed suit against Boston Scientific Scimed and us, alleging that our balloon products infringe four U.S. patents owned by Medtronic Vascular. The suit was filed in the U.S. District Court for the Eastern District of Texas seeking monetary and injunctive relief. On January 23, 2009, the parties executed a settlement and stand-still agreement settling the action. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On April 4, 2005, Angiotech and we filed suit against Sahajanand Medical Technologies Pvt. Ltd. in The Hague, The Netherlands seeking a declaration that Sahajanand’s drug-eluting stent products infringe patents owned by Angiotech and licensed to us. On May 3, 2006, the Court found that the asserted patents were infringed and valid, and provided for injunctive and monetary relief. On January 27, 2009, the Court of Appeals affirmed that the patent was valid and infringed by Sahajanand. On October 23, 2009, the parties agreed to settle this suit. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 12, 2008, we filed suit for patent infringement against Medtronic, Inc. and certain of its subsidiaries alleging that the sale of certain balloon catheters and stent delivery systems infringe four U.S. patents owned by us. The complaint was filed in the United States District Court for the Northern District of California seeking monetary and injunctive relief. On January 23, 2009, the parties executed a settlement and stand-still agreement and the case was dismissed on January 29, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On July 25, 2007, the U.S. District Court for the Northern District of California granted our motion to intervene in an action filed February 15, 2006 by Medtronic Vascular and certain of its affiliates against Advanced Cardiovascular Systems, Inc. and Abbott Laboratories. As a counterclaim plaintiff in this litigation, we were seeking a declaratory judgment of patent invalidity and of non-infringement by our PROMUS® coronary stent system relating to two U.S. patents owned by Medtronic. On January 23, 2009, the parties executed a settlement and stand-still agreement and the case was dismissed with respect to Boston Scientific on January 30, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 12, 2008, we and Endovascular Technologies, Inc. filed suit for patent infringement against Medtronic, Inc. and certain of its subsidiaries alleging that the sale of Medtronic’s AAA products infringe ten U.S. patents owned by us. The complaint was filed in the United States District Court for the Eastern District of Texas, Tyler Division, seeking monetary and injunctive relief. On January 23, 2009, the parties executed a settlement and stand-still agreement and the case was dismissed with respect to the Boston Scientific entities on February 2, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 13, 2008, Medtronic, Inc. and certain of its subsidiaries filed suit for patent infringement against us, Boston Scientific Scimed, Inc., Abbott and certain of Abbott’s subsidiaries alleging infringement of one U.S. patent owned by them. The complaint was filed in the United States District Court for the Eastern District of Texas, Marshall Division, seeking monetary and injunctive relief. On January 23, 2009, the parties executed a settlement and stand-still agreement and the case was dismissed on February 2, 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On March 26, 2002, we and our wholly owned subsidiary, Target Therapeutics, Inc., filed suit for patent infringement against Cordis alleging that certain detachable coil delivery systems infringe three U.S. patents, owned by or exclusively licensed to Target. The complaint was filed in the U.S. District Court for the Northern District of California seeking monetary and injunctive relief. On February 27, 2009, the parties executed a definitive settlement agreement and on March 11, 2009, the case was formally dismissed. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On December 16, 2005, Bruce N. Saffran, M.D., Ph.D. filed suit against us alleging that our TAXUS® Express® coronary stent system infringes a patent owned by Dr. Saffran. The suit was filed in the U.S. District Court for the Eastern District of Texas and seeks monetary and injunctive relief. On February 11, 2008, the jury found that our TAXUS® Express® and TAXUS® Liberté® stent products infringe Dr. Saffran’s patent and that the patent is valid. No injunction was requested, but the jury awarded damages of $431 million. The District Court awarded Dr. Saffran $69 million in pre-judgment interest and entered judgment in his favor. On March 16, 2009, Bruce N. Saffran, M.D., PhD. and we agreed to settle all outstanding litigation between us. As a result of this agreement, we recorded a litigation-related charge of $50 million during the first quarter of 2009, and have made related payments of $45 million. A joint motion to dismiss the appeal with prejudice was granted on March 20, 2009. On April 3, 2009, a related complaint was also dismissed. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On April 19, 2007, SciCo Tec GmbH, filed suit against us and our subsidiary, Boston Scientific Medizintechnik GmbH, alleging certain of our balloon catheters infringe a German patent owned by SciCo Tec GmbH. The suit was filed in Mannheim, Germany. On February 7, 2009, the parties settled this suit and on April 21, 2009, the parties executed a definitive settlement agreement. We made the associated payment during the second quarter of 2009. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On January 16, 2007, the French Competition Council (Conseil de la Concurrence which is one of the bodies responsible for the enforcement of antitrust/competition law in France) issued a Statement of Objections alleging that Guidant France SAS had agreed with the four other main suppliers of implantable cardioverter defibrillators (ICDs) in France to collectively refrain from responding to a 2001 tender for ICDs conducted by a group of seventeen (17) University Hospital Centers in France. This alleged collusion is alleged to be contrary to the French Commercial Code and Article 81 of the European Community Treaty. On December 19, 2007, the Council found that the suppliers had violated competition law and assessed monetary fines, however, each of the suppliers were fined amounts considerably less than originally recommended. The French Ministry of the Economy and Finance filed an incidental recourse seeking aggravated sanctions against all defendants. On April 8, 2009, the Paris Court of Appeals dismissed the Minister’s request for increased sanctions and confirmed the monetary fines previously assessed. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">With respect to ANCURE System claims, Guidant litigated coverage claims with its insurers in the Circuit Court of DuPage County Illinois and the Superior Court of Marion County, Indiana. Three of the insurers settled in 2008 and Guidant settled with the other insurers in March 2009. In April 2009, both the Illinois and the Indiana lawsuits were dismissed. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On April 4, 2007, SciCo Tec GmbH filed suit against us alleging certain of our balloon catheters infringe a U.S. patent owned by SciCo Tec GmbH. The suit was filed in the U. S. District Court for the Eastern District of Texas seeking monetary and injunctive relief. On May 10, 2007, SciCo Tec filed an amended complaint alleging certain additional balloon catheters and stent delivery systems infringe the same patent. On February 7, 2009, the parties settled this suit and on April 20, 2009, the parties executed a definitive settlement agreement. On May 6, 2009, the District Court dismissed the case with prejudice. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 3, 2007, Medinol submitted a request for arbitration against us, and our wholly owned subsidiaries Boston Scientific Ltd. and Boston Scientific Scimed, Inc., under the Arbitration Rules of the World Intellectual Property Organization pursuant to a settlement agreement between Medinol and us dated September 21, 2005. The request for arbitration alleges that the PROMUS® coronary stent system, supplied to us by Abbott, infringes five U.S. patents, three European patents and two German patents owned by Medinol. Medinol is seeking to have the patents declared valid and enforceable and a reasonable royalty. The September 2005 settlement agreement provides, among other things, that Medinol may only seek reasonable royalties and is specifically precluded from seeking injunctive relief. On June 29, 2008, the parties agreed that we can sell PROMUS® stent systems in the United States supplied to us by Abbott. A hearing on the European and German patents was scheduled to begin May 11, 2009. On May 21, 2009, the parties reached a confidential settlement agreement and on June 15, 2009, a Stipulation and Order was filed terminating the proceedings.<u> </u> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 6, 2008, Boston Scientific Scimed and we filed suit against Wall Cardiovascular Technologies, in the U.S. District Court for the District of Delaware seeking a declaratory judgment of invalidity and unenforceability due to inequitable conduct and prosecution history laches of a U.S. patent owned by them, and of non-infringement of the patent by the PROMUS® coronary stent system, supplied to us by Abbott. On January 2, 2009, we filed an amended complaint to include noninfringement of the patent by our TAXUS® Liberté® stent delivery system and to add Cardio Holdings LLC as a defendant. On February 27, 2009, Wall and Cardio Holdings filed a motion to dismiss. On August 24, 2009, the District Court dismissed the case. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On October 22, 1997, Cordis Corporation, a subsidiary of Johnson & Johnson, filed a suit for patent infringement against us and Boston Scientific Scimed, Inc. (f/k/a SCIMED Life Systems, Inc.), our wholly owned subsidiary, alleging that the importation and use of the NIR® stent infringes two patents owned by Cordis. A jury trial found that the NIR® stent infringed one claim of one Cordis patent and awarded damages of approximately $324 million to Cordis. On May 16, 2002, the Court set aside the verdict of infringement, requiring a new trial. On March 24, 2005, in a second trial, a jury found that a single claim of a Cordis patent was valid and infringed. Our appeals of the infringement decision were denied. On September 30, 2008, the District Court entered final judgment against us and awarded Cordis $702 million in damages and interest. As a result of the Court’s ruling, we increased our accrual for litigation-related matters by $334 million in the third quarter of 2008. This accrual is in addition to $368 million of previously established accruals related to this matter. On October 10, 2008, we appealed the damage award and the oral argument was held on June 5, 2009. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. In connection with the settlement, we made a payment of $716 million to Johnson & Johnson on October 1, 2009. The settlement payment was within our reserve for the NIR® suit. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 22, 1997, Johnson & Johnson filed a suit for patent infringement against us alleging that the sale of the NIR® stent infringes certain Canadian patents owned by Johnson & Johnson. Suit was filed in the federal court of Canada seeking a declaration of infringement, monetary damages and injunctive relief. On April 30, 2008, the Court found that the NIR® stent did not infringe one patent of Johnson & Johnson and that the other Johnson & Johnson patent was invalid. On May 30, 2008, Cordis filed an appeal. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On February 14, 2002, we, and certain of our subsidiaries, filed suit for patent infringement against Johnson & Johnson and Cordis alleging that certain balloon catheters and stent delivery systems sold by Johnson & Johnson and Cordis infringe five U.S. patents owned by us. The complaint was filed in the U.S. District Court for the Northern District of California seeking monetary and injunctive relief. On October 15, 2002, Cordis filed a counterclaim alleging that certain balloon catheters and stent delivery systems sold by us infringe three U.S. patents owned by Cordis and seeking monetary and injunctive relief. On December 6, 2002, we filed an amended complaint alleging that two additional patents owned by us are infringed by the Cordis’ products. On October 31, 2007, a jury found that we infringe a patent of Cordis. The jury also found four of our patents invalid and infringed by Cordis. No damages were determined because the judge found that Cordis failed to submit evidence sufficient to enable a jury to make a damage assessment. On April 9, 2009, the District Court awarded Cordis a post judgment royalty on certain sales after November 2007. On July 24, 2009, we appealed the decisions of the District Court and, on July 30, 2009, Cordis cross appealed. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On March 13, 2003, Boston Scientific Scimed and we filed suit for patent infringement against Johnson & Johnson and Cordis, alleging that its Cypher® drug-eluting stent infringes one of our patents. The suit was filed in the U.S. District Court for the District of Delaware seeking monetary and injunctive relief. Cordis filed a counterclaim against us alleging that the patent is not valid and is unenforceable. On July 1, 2005, a jury found that Johnson & Johnson’s Cypher® drug-eluting stent infringes the patent and upheld the validity of the patent. On January 15, 2009, the U.S. Court of Appeals reversed the lower Court’s decision and found the patent invalid. On February 12, 2009, we filed a request for a rehearing and a rehearing en banc with the U.S. Court of Appeals and on March 24, 2009, our request was denied. On July 22, 2009, we filed a Petition of Writ of Certiorari before the Supreme Court. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On May 12, 2004, we filed suit against two of Johnson & Johnson’s Dutch subsidiaries, alleging that Cordis’ Bx Velocity® stent, Bx Sonic® stent, Cypher® stent, Cypher® Select stent, and Aqua T3 balloon delivery systems for those stents, and U-Pass angioplasty balloon catheters infringe one of our European patents. The suit was filed in the District Court of The Hague in The Netherlands seeking injunctive and monetary relief. On June 8, 2005, the Court found the Johnson & Johnson products infringe our patent and enjoined the sale of certain products. An appeal decision was received on March 15, 2007, finding the patent valid but not infringed. We appealed the finding and on March 6, 2009, the Dutch Supreme Court dismissed our appeal. On August 3, 2009, Johnson & Johnson filed a motion seeking damages for the wrongful enforcement of the injunction. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On August 5, 2004, we (through our subsidiary Schneider Europe GmbH) filed suit in the District Court of Brussels, Belgium against the Belgian subsidiaries of Johnson & Johnson, Cordis and Janssen Pharmaceutica alleging that Cordis’ Bx Velocity® stent, Bx Sonic® stent, Cypher® stent, Cypher® Select stent, Aqua T3™ balloon and U-Pass balloon infringe one of our European patents and seeking injunctive and monetary relief. On September 12, 2008, the District Court issued a decision and ruled that a technical expert be appointed. On December 1, 2008, we filed a partial appeal of the decision in the Brussels Court of Appeals. In December 2005, the Johnson & Johnson subsidiaries filed a nullity action in France. On January 25, 2008, we filed a counterclaim infringement action in France, and a hearing is scheduled for December 1, 2009. In January 2006, the same Johnson & Johnson subsidiaries filed nullity actions in Italy and Germany. On October 23, 2007, the German Federal Patent Court found the patent valid. We then filed a counterclaim infringement action in Italy and an infringement action in Germany. On February 10, 2009, the District Court of Dusseldorf issued a decision dismissing the German infringement action. On March 24, 2009, we filed an appeal with the Court of Appeals in Dusseldorf, Germany. A hearing was held in Italy on July 8, 2009. On September 29, 2009, the parties executed a settlement of these suits and 10 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On September 27, 2004, Boston Scientific Scimed filed suit against a German subsidiary of Johnson & Johnson alleging the Cypher® drug-eluting stent infringes one of our European patents. The suit was filed in Mannheim, Germany seeking monetary and injunctive relief. A hearing was held on September 21, 2007, in Mannheim, Germany, and a further hearing was held on August 7, 2009. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On November 29, 2007, Boston Scientific Scimed filed suit against a German subsidiary of Johnson & Johnson alleging the Cypher® and Cypher® Select drug-eluting stents infringe one of our European patents. The suit was filed in Mannheim, Germany seeking monetary and injunctive relief. On October 17, 2008, the Court ruled that a technical expert be appointed to evaluate infringement. A hearing was held on August 7, 2009. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">On January 15, 2008, Johnson & Johnson Inc. filed a suit for patent infringement against us alleging that the sale of the Express®, Express 2 ® and TAXUS® Express 2 ® stent delivery systems infringe two Canadian patents owned by Johnson & Johnson. Suit was filed in The Federal Court of Canada seeking a declaration of infringement, monetary damages and injunctive relief. On September 29, 2009, the parties executed a settlement of this suit and 13 other intellectual property lawsuits. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><b>NOTE M — SEGMENT REPORTING</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">During the first quarter of 2009, we reorganized our international structure to provide more direct sales focus in the marketplace. Accordingly, we have revised our reportable segments to reflect the way we currently manage and view our business and have reclassified below previously reported segment results to be consistent with the 2009 presentation. Each of our reportable segments generates revenues from the sale of medical devices. As of September 30, 2009, we had four reportable segments based on geographic regions: the United States; EMEA, consisting of Europe, the Middle East and Africa; Japan; and Inter-Continental, consisting of Asia Pacific and the Americas. The reportable segments represent an aggregate of all operating divisions within each segment. We measure and evaluate our reportable segments based on segment net sales and operating income. We exclude from segment operating income certain corporate and manufacturing-related expenses, as our corporate and manufacturing functions do not meet the definition of a segment, as defined by ASC Topic 280, <i>Segment Reporting </i>(formerly FASB Statement No. 131, <i>Disclosures about Segments of an Enterprise and Related Information). </i>In addition, certain transactions or adjustments that our Chief Operating Decision Maker considers to be non-recurring and/or non-operational, such as amounts related to intangible asset impairment charges; acquisition-, divestiture-, litigation- and restructuring-related activities; as well as amortization expense, are excluded from segment operating income. Although we exclude these amounts from segment operating income, they are included in reported consolidated operating income and are included in the reconciliation below. </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">We manage our international operating segments on a constant currency basis. Sales generated from reportable segments and divested businesses, as well as operating results of reportable segments and expenses from manufacturing operations, are based on internally derived standard currency exchange rates, which may differ from year to year, and do not include intersegment profits. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographic distribution that would occur if the segments were not interdependent. A reconciliation of the totals reported for the reportable segments to the applicable line items in our accompanying unaudited condensed consolidated statements of operations is as follows: </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="center"> <table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">  <tr valign="bottom"> <td width="52%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Three Months Ended</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7"><b>Nine Months Ended</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td> </td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="7" style="border-bottom: 1px solid #000000"><b>September 30,</b></td> </tr> <tr style="font-size: 8pt" valign="bottom"> <td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><i>(in millions)</i></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> <td> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2009</b></td> <td style="border-bottom: 1px solid #000000"> </td> <td nowrap="nowrap" align="center" colspan="3" style="border-bottom: 1px solid #000000"><b>2008</b></td> </tr>   <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px"><b>Net sales</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">United States </div></td> <td> </td> <td align="right">$</td> <td align="right">1,167</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">1,125</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,530</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">3,330</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">EMEA </div></td> <td> </td> <td> </td> <td align="right">423</td> <td> </td> <td> </td> <td> </td> <td align="right">427</td> <td> </td> <td> </td> <td> </td> <td align="right">1,368</td> <td> </td> <td> </td> <td> </td> <td align="right">1,344</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Japan </div></td> <td> </td> <td> </td> <td align="right">207</td> <td> </td> <td> </td> <td> </td> <td align="right">194</td> <td> </td> <td> </td> <td> </td> <td align="right">626</td> <td> </td> <td> </td> <td> </td> <td align="right">600</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Inter-Continental </div></td> <td> </td> <td> </td> <td align="right">182</td> <td> </td> <td> </td> <td> </td> <td align="right">165</td> <td> </td> <td> </td> <td> </td> <td align="right">537</td> <td> </td> <td> </td> <td> </td> <td align="right">494</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Net sales allocated to reportable segments </div></td> <td> </td> <td> </td> <td align="right">1,979</td> <td> </td> <td> </td> <td> </td> <td align="right">1,911</td> <td> </td> <td> </td> <td> </td> <td align="right">6,061</td> <td> </td> <td> </td> <td> </td> <td align="right">5,768</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Sales generated from divested businesses </div></td> <td> </td> <td> </td> <td align="right">2</td> <td> </td> <td> </td> <td> </td> <td align="right">12</td> <td> </td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">58</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Impact of foreign currency fluctuations </div></td> <td> </td> <td> </td> <td align="right">44</td> <td> </td> <td> </td> <td> </td> <td align="right">55</td> <td> </td> <td> </td> <td> </td> <td align="right">43</td> <td> </td> <td> </td> <td> </td> <td align="right">222</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>2,025</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>1,978</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6,109</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>6,048</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px"><b>(Loss) income before income taxes</b> </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">United States </div></td> <td> </td> <td align="right">$</td> <td align="right">248</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">244</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">790</td> <td> </td> <td> </td> <td align="right">$</td> <td align="right">778</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">EMEA </div></td> <td> </td> <td> </td> <td align="right">189</td> <td> </td> <td> </td> <td> </td> <td align="right">206</td> <td> </td> <td> </td> <td> </td> <td align="right">641</td> <td> </td> <td> </td> <td> </td> <td align="right">644</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:30px; text-indent:-15px">Japan </div></td> <td> </td> <td> </td> <td align="right">111</td> <td> </td> <td> </td> <td> </td> <td align="right">109</td> <td> </td> <td> </td> <td> </td> <td align="right">348</td> <td> </td> <td> </td> <td> </td> <td align="right">345</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:30px; text-indent:-15px">Inter-Continental </div></td> <td> </td> <td> </td> <td align="right">81</td> <td> </td> <td> </td> <td> </td> <td align="right">76</td> <td> </td> <td> </td> <td> </td> <td align="right">242</td> <td> </td> <td> </td> <td> </td> <td align="right">232</td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> <td> </td> <td colspan="7" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Operating income allocated to reportable segments </div></td> <td> </td> <td> </td> <td align="right">629</td> <td> </td> <td> </td> <td> </td> <td align="right">635</td> <td> </td> <td> </td> <td> </td> <td align="right">2,021</td> <td> </td> <td> </td> <td> </td> <td align="right">1,999</td> <td> </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Manufacturing operations </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(90</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(99</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(292</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(290</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Corporate expenses and currency exchange </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(98</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(112</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(367</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(278</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">Intangible asset impairment charges; acquisition-, divestiture-, litigation-, and restructuring- related net charges </div></td> <td> </td> <td> </td> <td align="right">(264</td> <td>)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(265</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(644</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(109</td> <td nowrap="nowrap">)</td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Amortization expense </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(126</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(131</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(381</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(410</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">   </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td> </td> <td align="right">51</td> <td> </td> <td> </td> <td> </td> <td align="right">28</td> <td> </td> <td> </td> <td> </td> <td align="right">337</td> <td> </td> <td> </td> <td> </td> <td align="right">912</td> <td> </td> </tr> <tr valign="bottom" style="background: #cceeff"> <td> <div style="margin-left:15px; text-indent:-15px">Other expense, net </div></td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(95</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(96</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(298</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(418</td> <td nowrap="nowrap">)</td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">   </td> <td> </td> <td colspan="7" nowrap="nowrap" align="left" style="border-top: 1px solid #000000">   </td> </tr> <tr valign="bottom"> <td> <div style="margin-left:15px; text-indent:-15px">  </div></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>(44</b></td> <td><b>)</b></td> <td> </td> <td nowrap="nowrap" align="right"><b>$</b></td> <td align="right"><b>(68</b></td> <td nowrap="nowrap"><b>)</b></td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>39</b></td> <td> </td> <td> </td> <td align="right"><b>$</b></td> <td align="right"><b>494</b></td> <td> </td> </tr> <tr style="font-size: 1px"> <td> </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> <td> </td> <td colspan="7" align="left" style="border-top: 3px double #000000">   </td> </tr>  </table> </div> </div>

<div style="font-family: 'Times New Roman',Times,serif"> <div align="justify" style="font-size: 10pt; margin-top: 18pt"><b>NOTE N— NEW ACCOUNTING PRONOUNCEMENTS</b> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In June 2009, the FASB issued Statement No. 168, <i>The FASB Accounting Standards Codification<font style="font-family: Symbol">Ô</font> and the Hierarchy of Generally Accepted Accounting Principles </i>(codified within ASC Topic 105, <i>Generally Accepted Accounting Principles</i>)<i>, </i>which establishes the FASB Accounting Standards Codification<font style="font-family: Symbol">Ô</font> (ASC) as the single source of authoritative U.S. GAAP. The Codification<font style="font-family: Symbol">Ô</font> supersedes all previous non-SEC accounting and reporting standards. We adopted Statement No. 168 for our third quarter ended September 30, 2009 and have conformed all references to accounting literature in this Quarterly Report to the appropriate reference within the Codification<font style="font-family: Symbol">Ô</font>. All new authoritative guidance is issued in the form of ASC Updates. We have provided dual-referencing for those standards that we adopted prior to the issuance of the Codification.<font style="font-family: Symbol">Ô</font> The adoption of this standard did not have any impact on our financial position or results of operations. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>ASC Update No. 2009-13</i> </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In October 2009, the FASB issued ASC Update No. 2009-13, <i>Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. </i>The consensus in Update No. 2009-13 supersedes certain guidance in Topic 605 (formerly EITF Issue No. 00-21, <i>Multiple-Element Arrangements</i>) and requires an entity to allocate arrangement consideration at the inception of an arrangement to all of its deliverables based on their relative selling prices. The consensus eliminates the use of the residual method of allocation and requires the use of the relative-selling-price method in all circumstances in which an entity recognizes revenue for an arrangement with multiple deliverables subject to ASC 605-25. We are required to adopt Update No. 2009-13 as of January 1, 2011 and are in the process of determining the impact that the adoption of Update No. 2009-13 will have on our future results of operations or financial position. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Statement No. 167 </i>(not yet codified) </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In June 2009, the FASB issued Statement No. 167, <i>Amendments to FASB Interpretation No. 46(R) </i>(to be codified within ASC Topic 810, <i>Consolidation</i>)<i>, </i>which amends Interpretation No. 46(R) to replace the quantitative-based analysis for determining which enterprise, if any, has a controlling financial interest in a variable interest entity (VIE). The revised approach is primarily qualitative and is focused on identifying which enterprise has both the power to direct activities of a VIE that most significantly impact the entity’s economic performance and 1) the obligation to absorb losses of the entity or 2) the rights to receive benefits from the entity. We are required to adopt Statement No. 167 for our first quarter ending March 31, 2010. We do not believe the adoption of Statement No. 167 will have a significant impact on our future results of operations or financial position. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Statement No. 165 </i>(codified within ASC Topic 855) </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In May 2009, the FASB issued Statement No. 165, <i>Subsequent Events </i>(codified within ASC Topic 855, <i>Subsequent Events</i>)<i>, </i>which establishes general standards of accounting for and disclosure of events occurring after the balance sheet date, but before the financial statements are issued or available to be issued. Statement No. 165 also requires entities to disclose the date through which it has evaluated subsequent events and the basis for that date. We adopted Statement No. 165 for our second quarter ended June 30, 2009. Its adoption did not impact our results of operations or financial condition. Refer to <i>Note A — Basis of Presentation </i>for more information regarding our evaluation of subsequent events. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Statement No. 161 </i>(codified within ASC Topic 815) </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In March 2008, the FASB issued Statement No. 161, <i>Disclosures about Derivative Instruments and Hedging Activities</i>, (codified within ASC Topic 815, <i>Derivatives and Hedging</i>), which amends Statement No. 133, <i>Accounting for Derivative Instruments and Hedging Activities</i>, by requiring expanded disclosures about an entity’s derivative instruments and hedging activities. Statement No. 161 requires increased qualitative, quantitative, and credit-risk disclosures, including (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under Statement No. 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position and financial performance. We adopted Statement No. 161 as of our first quarter ended March 31, 2009. Refer to <i>Note B — Financial Instruments </i>for more information. </div> <div align="justify" style="font-size: 10pt; margin-top: 12pt"><i>Statement No. 141(R) </i>(codified within ASC Topic 805) </div> <div align="justify" style="font-size: 10pt; margin-top: 6pt">In December 2007, the FASB issued Statement No. 141(R), <i>Business Combinations </i>(codified within ASC Topic 805, <i>Business Combinations</i>), a replacement for Statement No. 141. Statement No. 141(R) retains the fundamental requirements of Statement No. 141, but requires the recognition of all assets acquired and liabilities assumed in a business combination at their fair values as of the acquisition date. It also requires the recognition of assets acquired and liabilities assumed arising from contractual contingencies at their acquisition date fair values. Additionally, Statement No. 141(R) supersedes FASB Interpretation No. 4, <i>Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method</i>, which required research and development assets acquired in a business combination that had no alternative future use to be measured at their fair values and expensed at the acquisition date. Statement No. 141(R) now requires that purchased research and development be recognized as an indefinite-lived intangible asset until the completion or abandonment of the associated research and development efforts. We were required to adopt Statement No. 141(R) prospectively for any acquisitions on or after January 1, 2009. During the first nine months of 2009, we did not consummate any material business combinations. </div> </div>

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