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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 11-K
(Mark One):
|X| Annual report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2003
OR
|_| Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission file number: 1-11083
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
Boston Scientific Corporation
401(k) Retirement Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Boston Scientific Corporation
One Boston Scientific Place
Natick, MA 01760-1537
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AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
BOSTON SCIENTIFIC CORPORATION
401(K) RETIREMENT SAVINGS PLAN
YEAR ENDED DECEMBER 31, 2003
BOSTON SCIENTIFIC CORPORATION 401(K) RETIREMENT SAVINGS PLAN
AUDITED FINANCIAL STATEMENTS
AND SUPPLEMENTAL SCHEDULE
YEAR ENDED DECEMBER 31, 2003
CONTENTS
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm... 1
AUDITED FINANCIAL STATEMENTS
Statements of Net Assets Available for Plan Benefits......................... 2
Statement of Changes in Net Assets Available for Plan Benefits............... 3
Notes to the Financial Statements............................................4-8
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)............... 9
Report of Ernst & Young LLP, Independent Registered Public Accounting Firm
401(k) Plan Administrative and Investment Committee and Participants
Boston Scientific Corporation 401(k) Retirement Savings Plan
We have audited the accompanying statements of net assets available for plan
benefits of the Boston Scientific Corporation 401(k) Retirement Savings Plan
(the Plan) as of December 31, 2003 and 2002, and the related statement of
changes in net assets available for plan benefits for the year ended December
31, 2003. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of the Plan at
December 31, 2003 and 2002, and the changes in its net assets available for plan
benefits for the year ended December 31, 2003, in conformity with U.S.generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule of
assets (held at end of year) as of December 31, 2003, is presented for purposes
of additional analysis and is not a required part of the financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Boston, Massachusetts
April 16, 2004
1
Boston Scientific Corporation 401(k) Retirement Savings Plan
Statements of Net Assets Available for Plan Benefits
December 31
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2003 2002
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ASSETS
Investments $ 499,525,054 $ 328,424,527
Receivables:
Participant contributions 6,628 857,790
Employer contribution 1,496,797 1,899,792
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Total receivables 1,503,425 2,757,582
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Net assets available for plan benefits $ 501,028,479 $ 331,182,109
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SEE NOTES TO THE FINANCIAL STATEMENTS.
2
Boston Scientific Corporation 401(k) Retirement Savings Plan
Statement of Changes in Net Assets Available for Plan Benefits
Year Ended December 31, 2003
Additions to net assets attributed to:
Investment Income:
Interest $ 2,430,792
Dividends 3,642,053
Net appreciation in fair value of investments 129,719,955
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135,792,800
Contributions:
Participants 37,517,527
Employer 14,285,581
Participant Rollovers 5,342,778
Transfer of funds from other 401(k) plans 144,052
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57,289,938
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Total additions 193,082,738
Deductions from net assets attributed to:
Benefits paid to participants 23,199,388
Service fees 36,980
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Total deductions 23,236,368
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Net increase 169,846,370
Net assets available for plan benefits:
Beginning of year 331,182,109
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End of year $ 501,028,479
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SEE NOTES TO THE FINANCIAL STATEMENTS.
3
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes to the Financial Statements
December 31, 2003
1. DESCRIPTION OF THE PLAN
The following description of the Boston Scientific Corporation (the Company)
401(k) Retirement Savings Plan (the Plan) provides only general information.
Participants should refer to the Summary Plan Description and the Plan for a
more complete description of the Plan's provisions, including defined terms.
Copies are available from the 401(k) Plan Administrative and Investment
Committee (the Committee).
GENERAL
The Plan is a defined contribution plan covering all eligible employees who have
completed thirty days of service and have attained twenty-one years of age. It
is subject to the provisions of the Employee Retirement Income Security Act of
1974 (ERISA).
CONTRIBUTIONS
During 2003, assets totaling $144,052 from the Company's 2002 acquisition of
SMART Therapeutics 401(k) Retirement Savings Plan were merged into the Plan.
As of January 1, 2003, a non-highly compensated participant may contribute
between 1% and 25% (1% and 15% for highly compensated participants) of his or
her pretax annual compensation, as defined in the Plan document, up to
established federal limits. In addition, a participant may contribute between 1%
and 10% of his or her compensation on an after-tax basis each year.
The Company's matching contribution is equal to (i) 100% of the elective pretax
contributions made on behalf of the participant for the period which do not
exceed 2% of the participant's compensation for such period, plus (ii) 50% of
the elective pretax contributions made on behalf of the participant for the
period which exceed 2% but do not exceed 4% of the participant's compensation.
Effective January 1, 2004, the Plan was amended to increase the Company's
matching contribution to (i) 200% of the elective pretax contributions made on
behalf of the participant for the period which do not exceed 1% of the
participant's compensation for such period, plus (ii) 100% of the elective
pretax contributions made on behalf of the participant for the period which
exceed 1% but do not exceed 2% of the participant's compensation plus (iii) 50%
of the elective pretax contributions made on behalf of the participant for the
period, which exceed 2% but do not exceed 4% of the participant's compensation.
The Plan also provides for an investment fund to hold shares of Pfizer Inc.
(Pfizer) common stock transferred from the Pfizer Savings and Investment Plan
for former Schneider employees. The Company acquired Schneider Worldwide in
September 1998. No contributions can be made to this fund and any earnings on
this fund will be allocated to a participant's current investment elections
under the Plan. A participant can transfer amounts out of the Pfizer stock fund
to other investment funds within the Plan.
4
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes to the Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
At the discretion of the Board of Directors of the Company, the Company may make
an additional discretionary contribution. Employees with three or more years of
credited service on December 31, 1992 will be fully vested in such amounts and
all other employees will become fully vested in such amounts after five years of
credited service (20% vesting after each year). No additional discretionary
contribution was made in 2003.
PARTICIPANT ACCOUNTS AND VESTING
A participant can allocate his or her account among various investment funds.
Each participant's account is credited with the participant's contribution, the
Company's contribution and an allocation of Plan earnings. Each participant is
fully vested in his or her account, except as discussed above regarding
discretionary contributions. The benefit to which a participant is entitled is
the benefit included in the participant's account.
PARTICIPANT LOANS
A participant may borrow from his or her account a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of his or her account
balance. Loan terms range up to 5 years or up to 10 years for the purchase of a
primary residence. However, participants of the defined contribution plans of
acquired companies may retain the loan terms granted under their former plans.
Loans are secured by the balance in the participant's account and bear interest
at a rate commensurate with local prevailing rates as determined by the
Committee. Principal and interest are repaid ratably through payroll deductions.
PAYMENT OF BENEFITS
All benefit payments are made in the form of a lump-sum amount equal to the
value of the participant's account, whether as cash distributions or rollovers.
The Plan does not allow annuity and installment forms of distributions for
participants who terminated employment on or after May 1, 2002 or terminated
their employment before May 1, 2002, but had not yet begun receiving their Plan
benefits by that date. If a terminated participant's account is valued at and
remains in excess of $5,000 (less any rollover amounts), the participant has the
option of leaving the funds invested in the Plan until attaining the age of 62.
While employed at the Company, a participant may withdraw all or a portion of
his or her 401(k) account to the extent necessary to meet a financial hardship,
as defined in the Plan.
The Plan also allows withdrawals from after-tax and rollover accounts, for any
reason, and allows disabled participants, as defined in the Company's group
long-term disability contract, to take withdrawals at any time regardless of
age. Participants may also make withdrawals for any reason after attaining age
59 1/2.
5
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes to the Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accounting records of the Plan are maintained on the accrual basis.
INVESTMENT VALUATION AND INCOME RECOGNITION
The Plan's investments are stated at fair value. Shares of registered investment
companies are valued at quoted market prices, which represent the net asset
value of shares held by the Plan at year-end. Units of the Retirement Savings
Trust are valued at net asset value at year-end. Securities listed on a
registered stock exchange are valued by the Plan Administrator at the last
reported sales price on the last business day of the Plan year. Participant
notes receivable are valued at cost, which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest
income is accrued when earned. Dividend income is recorded on the ex-dividend
date. Capital gain distributions are included in dividend income.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of additions and deductions during the
reporting period. Actual results could differ from those estimates.
6
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes to the Financial Statements (continued)
3. INVESTMENTS
The following investments represent five percent or more of the Plan's net
assets.
December 31,
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2003 2002
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Boston Scientific Corporation
Common Stock Fund $ 203,858,448 $ 125,927,566
Vanguard 500 Index Fund 73,104,883 45,208,343
Vanguard Retirement Savings Trust 46,113,439 39,867,734
Vanguard U.S. Growth Fund 38,479,019 25,837,900
Vanguard Wellington Fund 33,428,254 21,594,882
During 2003, the Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) appreciated in value by
$129,719,955 as follows:
Mutual funds $ 37,945,706
Common stock 91,774,249
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$ 129,719,955
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4. TRANSACTIONS WITH PARTIES-IN-INTEREST
The Plan invests in shares of mutual funds managed by an affiliate of Vanguard
Fiduciary Trust Company (Vanguard). Vanguard acts as trustee for only those
investments as defined by the Plan. Transactions in such investments qualify as
party-in-interest transactions, which are exempt from the prohibited transaction
rules.
Fees for legal, accounting and other services rendered during the year by
parties-in-interest were paid by the Company.
7
Boston Scientific Corporation 401(k) Retirement Savings Plan
Notes to the Financial Statements (continued)
5. RISKS AND UNCERTAINTIES
The Plan invests in various investment securities. Investment securities are
exposed to various risks such as interest rate, market and credit risks. Due to
the level of risk associated with certain investment securities, it is at least
reasonably possible that changes in the values of investment securities will
occur in the near term and that such changes could materially affect
participants' account balances and the amounts reported in the statements of net
assets available for benefits.
6. INCOME TAX STATUS
The Plan has received a determination letter from the Internal Revenue Service
dated March 4, 2002, stating that the Plan is qualified under Section 401(a) of
the Internal Revenue Code (the Code) and, therefore, the related trust is exempt
from taxation. Subsequent to this determination by the Internal Revenue Service,
the Plan was amended. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Committee believes
the Plan is being operated in compliance with the applicable requirements of the
Code, and therefore, believes that the Plan, as amended, is qualified and the
related trust is exempt.
8
Boston Scientific Corporation 401(k) Retirement Savings Plan
EIN #04-2695240
Plan #001
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2003
Current
Identity of Issue Shares or Units Value
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INVESCO:
Dynamics Fund 945,011 $ 13,929,467
*Vanguard Group:
500 Index Fund 712,037 73,104,883
Total Bond Market Index Fund 1,824,809 18,813,785
International Growth Fund 1,283,267 20,699,103
U.S. Growth Fund 2,538,194 38,479,019
Wellington Fund 1,160,300 33,428,254
Windsor II Fund 851,990 22,569,209
Retirement Savings Trust 46,113,439 46,113,439
*Boston Scientific Corporation Common
Stock Fund 5,545,660 203,858,448
Pfizer Common Stock Fund 412,510 14,573,988
T. Rowe Price Small-Cap Stock Fund-
Advisor Class 120,077 3,347,733
*Participants' notes receivable 5.00% - 12.01% 10,607,726
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$ 499,525,054
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*Indicates party-in-interest to the Plan.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Boston Scientific Corporation
401(k) Retirement Savings Plan
Date: June 28, 2004 By: /s/ Lawrence C. Best
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Lawrence C. Best
Member, 401(k) Plan Administrative
and Investment Committee
10
EXHIBIT INDEX
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Exhibit
Number Description
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23.1 Consent of Ernst & Young LLP
11