CONSOLIDATED FINANCIAL STATEMENTS - Boston Scientific

NOTES to the consolidated financial statements
NOTE L – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue 50 million shares of preferred
stock in one or more series and to fix the powers, designations, preferences
and relative participating, option or other rights thereof,
including dividend rights, conversion rights, voting rights, redemption
terms, liquidation preferences and the number of shares constituting any
series, without any further vote or action by the Company’s stockholders.
At December 31, 2004 and December 31, 2003, the Company
had no shares of preferred stock outstanding.
Common Stock
The Company is authorized to issue 1,200 million shares of common
stock, $.01 par value per share. Holders of common stock are entitled
to one vote per share. Holders of common stock are entitled to
receive dividends if and when declared by the Board of Directors and
to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of liquidation. Holders of
common stock have no preemptive, subscription, redemption or conversion
rights. The holders of common stock do not have cumulative
voting rights. The holders of a majority of the shares of common
stock can elect all of the directors and can control the management
and affairs of the Company.
The Company paid a two-for-one stock split that was effected in the
form of a 100 percent stock dividend on November 5, 2003. All
historical share and per share amounts have been restated to reflect
the stock split except for share amounts presented in the consolidated
statements of stockholders’ equity, which reflect the actual
share amounts outstanding for each period presented.
The Company repurchased approximately 10 million shares of its
common stock at an aggregate cost of $360 million in 2004 and
22 million shares at an aggregate cost of $570 million in 2003. In
addition, during 2004, the Board of Directors approved the repurchase
of up to an additional 50 million shares of the Company’s common stock
at prevailing market prices on the open market or in privately negotiated
transactions. The new authorization is in addition to approximately
13 million shares remaining under previous share repurchase authorizations.
As of December 31, 2004, the Company has repurchased
approximately 107 million shares of its common stock under these
authorizations and has 9 million shares of common stock in its treasury
at year end. Repurchased shares are available for reissuance under
the Company’s equity incentive plans and for general corporate
purposes, including strategic alliances and acquisitions.
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NOTE M – STOCK OWNERSHIP PLANS
Employee and Director Stock Incentive Plans
The Company’s Long-Term Incentive Plans (Plans) provide for the
issuance of up to 150 million shares of common stock. Together, the
Plans cover officers, directors and employees of and consultants to
the Company and provide for the grant of various incentives, including
qualified and nonqualified options, deferred stock units, stock
grants, share appreciation rights and performance awards.
Nonqualified options granted to purchase shares of common stock
are either immediately exercisable or exercisable in installments as
determined by the Executive Compensation and Human Resources
Committee of the Board of Directors (Committee), consisting of
nonemployee directors and expire within ten years from date of grant.
In the case of qualified options, if an employee owns more than 10
percent of the voting power of all classes of stock, the option granted
will be at an exercise price of 110 percent of the fair market value
of the Company’s common stock on the date of grant and will expire
over a period not to exceed five years. The Committee may issue
shares of common stock and/or authorize cash awards under the Plans
in recognition of the achievement of long-term performance objectives
established by the Committee.
During the fourth quarter, the Company modified certain of its stock
option plans, principally for options granted prior to May 2001, to
change the definition of retirement to conform to the definition generally
used in the Company’s stock option plans subsequent to May
2001. As a result of these modifications, the Company recorded a
$90 million charge ($60 million after-tax) in 2004. The key assumptions
in estimating the charge were the anticipated retirement age and the
expected exercise patterns for the individuals whose options were
modified. If the assumptions used do not approximate actual retirement
behavior and exercise activity, the Company may need to
record adjustments through its statements of operations.
BOSTON SCIENTIFIC AND SUBSIDIARIES