Introduction
Boston Scientific Corporation is a worldwide developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. Our mission is to improve the quality of patient care and the productivity of health care delivery through the development and advocacy of less-invasive medical devices and procedures. This is accomplished through the continuing refinement of existing products and procedures and the investigation and development of new technologies that are least- or less-invasive, reducing risk, trauma, procedure time and the need for aftercare; cost- and comparatively-effective and, where possible, reduce or eliminate refractory drug use. Our strategy is to lead global markets for less-invasive medical devices by developing and marketing innovative products, services and therapies that address unmet patient needs, provide superior clinical outcomes and demonstrate proven economic value.
Financial Summary
Three Months Ended June 30, 2012
Our net sales for the second quarter of 2012 were $1.828 billion, as compared to net sales of $1.975 billion for the second quarter of 2011, a decrease of $147 million, or seven percent. Excluding the impact of changes in foreign currency exchange rates, which had a $51 million negative impact on our second quarter 2012 net sales as compared to the same period in the prior year, and net sales from divested businesses of $11 million, our net sales decreased $85 million, or four percent.1 Refer to Business and Market Overview for a discussion of our net sales by business.
Our reported net loss for the second quarter of 2012 was $3.578 billion, or $2.51 per share, driven primarily by a goodwill impairment charge related to our Europe, Middle East and Africa (EMEA) business unit. Refer to Quarterly Results for a discussion of this charge. Our reported results for the second quarter of 2012 included goodwill and other intangible asset impairment charges, acquisition-related credits, divestiture-, restructuring-, and litigation-related charges and amortization expense totaling $3.817 billion, or $2.68 per share. Excluding these items, net income for the second quarter of 2012 was $239 million, or $0.17 per share.1 Our reported net income for the second quarter of 2011 was $146 million, or $0.10 per share. Our reported results for the second quarter of 2011 included an intangible asset impairment charge, acquisition- and divestiture-related charges, restructuring-related charges and amortization expense totaling $116 million, or $0.07 per share. Excluding these items, net income for the second quarter of 2011 was $262 million, or $0.17 per share.1 The following is a reconciliation of results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management. Refer to Quarterly Results for a discussion of each reconciling item:

1 Sales growth rates that exclude the impact of changes in foreign currency exchange rates and net income and net income per share excluding certain items required by GAAP are not prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Refer to Additional Information for a discussion of management's use of these non-GAAP financial measures.

                                                                    Three Months Ended June 30, 2012
                                                                         Tax                                   Impact per
in millions, except per share data                 Pre-Tax              Impact             After-Tax             share
GAAP net (loss) income                       $         (3,618 )     $        40       $         (3,578 )     $      (2.51 )
Non-GAAP adjustments:
Goodwill impairment charge                              3,602               (23 )                3,579               2.50   *
Intangible asset impairment charge                        129               (19 )                  110               0.08   *
Acquisition-related credits                               (34 )              13                    (21 )            (0.01 ) *
Divestiture-related charges                                 1                                        1               0.00   *
Restructuring-related charges                              33                (9 )                   24               0.02   *
Litigation-related net charges                             69               (29 )                   40               0.03   *
Amortization expense                                       99               (15 )                   84               0.06   *
Adjusted net income                          $            281       $       (42 )     $            239       $       0.17

* Assumes dilution of 5.8 million shares for the three months ended June 30, 2012 for all or a portion of these non-GAAP adjustments.

                                                        Three Months Ended June 30, 2011
                                                              Tax                        Impact per
in millions, except per share data            Pre-Tax       Impact        After-Tax         share
GAAP net income                             $     158     $     (12 )   $       146     $      0.10
Non-GAAP adjustments:
Intangible asset impairment charge                 12            (3 )             9            0.01
Acquisition-related net charges                     7            (1 )             6            0.00
Divestiture-related charges                         1                             1            0.00
Restructuring-related charges                      30            (9 )            21            0.01
Amortization expense                               96           (17 )            79            0.05
Adjusted net income                         $     304     $     (42 )   $       262     $      0.17

Cash provided by operating activities was $407 million in the second quarter of 2012, as compared to $390 million in the second quarter of 2011. Our operating cash flows in the second quarter of 2012 included collections of approximately $60 million of our outstanding receivables in Spain as a result of a government-funded settlement. Our cash generated from operations continues to be a significant source of available funds for investing in our growth and buying back shares of our common stock pursuant to our share repurchase authorizations. During the second quarter of 2012, we used approximately $110 million of cash generated from operations to repurchase approximately 18 million shares of our common stock. We also paid $134 million, net of cash acquired, related to our acquisition of Cameron Health. As of June 30, 2012, we had total debt of $4.257 billion, cash and cash equivalents of $371 million and working capital of $1.317 billion. Refer to Liquidity and Capital Resources for further discussion.

Six Months Ended June 30, 2012
Our net sales for the first half of 2012 were $3.694 billion, as compared to net sales of $3.900 billion for the first half of 2011, a decrease of $206 million, or five percent. Excluding the impact of changes in foreign currency exchange rates, which had a $56 million negative impact on our net sales for the six months ended June 30, 2012 as compared to the same period in the prior year, and net sales from divested businesses of $17 million, our net sales decreased $133 million, or four percent.1 Refer to Business and Market Overview for a discussion of our net sales by business.
Our reported net loss for the first half of 2012 was $3.465 billion, or $2.42 per share, driven primarily by a goodwill impairment charge related to our EMEA business unit. Refer to Quarterly Results for a discussion of this charge. Our reported results for the first half of 2012 included goodwill and other intangible asset impairment charges, acquisition-related credits, divestiture-, restructuring-, and litigation-related charges and amortization expense totaling $3.924 billion, or $2.74 per share. Excluding these items, net income for the first half of 2012 was $459 million, or $0.32 per share.1 Our reported net income for the first half of 2011 was $192 million, or $0.12 per share. Our reported results for the first half of 2011 included goodwill and other intangible asset impairment charges, acquisition- and divestiture-related net credits, restructuring-related charges, discrete tax items and amortization expense totaling $406 million, or $0.27 per share. Excluding these items, net income for the first half of 2011 was $598 million, or $0.39 per share.1 The following is a reconciliation of results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management. Refer to Quarterly Results for a discussion of each reconciling item:

1 Sales growth rates that exclude the impact of changes in foreign currency exchange rates and net income and net income per share excluding certain items required by GAAP are not prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP). Refer to Additional Information for a discussion of management's use of these non-GAAP financial measures.

                                                                    Six Months Ended June 30, 2012
                                                                       Tax                                   Impact per
in millions, except per share data                Pre-Tax             Impact             After-Tax             share
GAAP net (loss) income                       $       (3,495 )     $        30       $         (3,465 )     $      (2.42 )
Non-GAAP adjustments:
Goodwill impairment charge                            3,602               (23 )                3,579               2.49   *
Intangible asset impairment charge                      129               (19 )                  110               0.08   *
Acquisition-related credits                             (21 )              11                    (10 )            (0.01 ) *
Divestiture-related charges                               2                                        2               0.00   *
Restructuring-related charges                            50               (13 )                   37               0.03   *
Litigation-related net charges                           69               (29 )                   40               0.03   *
Amortization expense                                    195               (29 )                  166               0.12   *
Adjusted net income                          $          531       $       (72 )     $            459       $       0.32

* Assumes dilution of 7.3 million shares for the six months ended June 30, 2012 for all or a portion of these non-GAAP adjustments.

                                                Six Months Ended June 30, 2011
                                                      Tax                      Impact per
in millions, except per share data    Pre-Tax        Impact      After-Tax       share
GAAP net income                      $   431       $   (239 )   $     192     $      0.12
Non-GAAP adjustments:
Goodwill impairment charge               697                          697            0.45
Intangible asset impairment charge        12             (3 )           9            0.00
Acquisition-related net credits          (22 )           (1 )         (23 )        (0.01)
Divestiture-related net credits         (758 )          228          (530 )        (0.34)
Restructuring-related charges             80            (24 )          56            0.04
Discrete tax items                                        4             4            0.00
Amortization expense                     228            (35 )         193            0.13
Adjusted net income                  $   668       $    (70 )   $     598     $      0.39

Cash provided by operating activities was $619 million in the first half of 2012, as compared to $293 million in the first half of 2011. Our 2012 operating cash flows included collections of approximately $60 million of our outstanding receivables in Spain as a result of a government-funded settlement. Our 2011 operating cash flows included approximately $300 million of litigation-related payments in the first quarter of 2011. Our cash generated from operations continues to be a significant source of available funds for investing in growth and buying back shares of our common stock pursuant to our share repurchase authorizations. During the first half of 2012, we used approximately $250 million of cash generated from operations to repurchase approximately 41 million shares of our common stock, and $134 million of cash generated from operations to purchase Cameron Health, Inc.

Business and Market Overview
Endoscopy
Our Endoscopy division develops and manufactures devices to treat a variety of medical conditions including diseases of the digestive and pulmonary systems. Our worldwide net sales of these products were $311 million in the second quarter of 2012, as compared to $298 million in the second quarter of 2011, an increase of $13 million, or four percent. U.S. net sales of our Endoscopy products were $151 million for the second quarter of 2012, as compared to $141 million for the same period in the prior year. Our international net sales were $160 million for the second quarter of 2012, as compared to $157 million for the second quarter of 2011, and included a $7 million negative impact from changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, our worldwide Endoscopy net sales increased $20 million, or seven percent, in the second

quarter of 2012, as compared to the second quarter of 2011. This performance was the result of growth across several of our key product franchises, including our biopsy business; our biliary device franchise driven by continued growth in our Expect™ Endoscopic Ultrasound Aspiration Needle; our metal stent franchise driven by our industry-leading WallFlex® product family, which now includes our WallFlex® Biliary Transhepatic stent system for treatment of biliary strictures, launched in the first quarter of 2012; and our hemostasis franchise on the continued adoption and utilization of our Resolution Clip for gastrointestinal bleeding.
In October 2010, we completed our acquisition of Asthmatx, Inc. Through Asthmatx, we design, manufacture and market a less-invasive, catheter-based bronchial thermoplasty procedure for the treatment of severe persistent asthma. The Alair® Bronchial Thermoplasty System, developed by Asthmatx, has both CE Mark and U.S. Food and Drug Administration (FDA) approval and is the first device-based asthma treatment approved by the FDA. We continue to focus on driving commercialization and increased awareness of the Alair® System. We expect this technology to strengthen our existing offering of pulmonary devices and contribute to future sales growth and diversification of the Endoscopy business.
Peripheral Interventions (PI)
Our PI product offerings include stents, balloon catheters, wires, peripheral embolization devices and other devices used to diagnose and treat peripheral vascular disease. Our worldwide net sales of these products were $196 million in the second quarter of 2012, as compared to $189 million in the second quarter of 2011, an increase of $7 million, or four percent. Our U.S. net sales of these products were $86 million in the second quarter of 2012, as compared to $80 million in the second quarter of 2011. Our international net sales were $110 million in the second quarter of 2012, as compared to $109 million in the second quarter of 2011, and included a $5 million negative impact from changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, our worldwide PI net sales increased $12 million, or seven percent, in the second quarter of 2012, as compared to the second quarter of 2011. The year over year increase in worldwide PI net sales was driven by growth in our core PI franchise following the recent launches of our next-generation Mustang™ percutaneous transluminal angioplasty (PTA) balloon; our Coyote™ balloon catheter, a highly deliverable and ultra-low profile balloon dilatation catheter designed for a wide range of peripheral angioplasty procedures; our Charger™ PTA Balloon Catheter, launched in the U.S. in December 2011; and our Gladiator™ Balloon Dilatation Catheter. In addition, our PI stent systems continued to grow on the strength of the EPIC™ self-expanding nitinol stent system in the U.S. and certain international markets and the Carotid WALLSTENT® stent system in Japan. We launched the INNOVA™ self-expanding bare metal stent system in certain international markets in the second quarter of 2012, and we believe this launch, in addition to a number of new PI products expected to launch throughout the second half of 2012, will help to drive future growth in this business.
In February 2011, we announced the acquisitions of S.I. Therapies and ReVascular Therapeutics, Inc., which added to our PI portfolio a re-entry catheter and intraluminal chronic total occlusion (CTO) crossing device, enabling endovascular treatment in cases that typically cannot be treated with standard endovascular devices. We commenced a limited market release of our OFFROAD™ re-entry catheter system in certain international markets, and in the first half of 2012, we began the launch our TRUEPATH™ intraluminal CTO device in the U.S., EMEA and other international markets. We intend to expand the launch of our OFFROAD™ system in certain international markets throughout 2012. We believe that offering these devices will enhance our position in assisting physicians in addressing the challenges of treating complex peripheral lesions. Neuromodulation
Our worldwide net sales of Neuromodulation products were $91 million in the second quarter of 2012, as compared to $84 million in the second quarter of 2011, an increase of $7 million, or nine percent. Our U.S. net sales of Neuromodulation products were $85 million for the second quarter of 2012, as compared to $78 million in the same period in the prior year, and our international net sales of these products were $6 million in the second quarters of 2012 and 2011. Changes in foreign currency exchange rates contributed a negative $1 million to our Neuromodulation net sales in the second quarter of 2012, as compared to the same period in the prior year. Excluding the impact of changes in foreign currency exchange rates, our worldwide Neuromodulation net sales increased $8 million, or ten percent, in the second quarter of 2012, as compared to the second quarter of 2011.The increase in U.S. net sales was due primarily to higher procedural volumes and positive momentum from recent product launches, including our Infinion™ lead. Within our Neuromodulation business, we market the Precision® Plus™ Spinal Cord Stimulation (SCS) system, the world's first rechargeable SCS device for chronic pain management. In the fourth quarter of 2011, we received FDA approval for and launched the Infinion™ 16 Percutaneous Lead, the world's first and only 16-contact percutaneous lead. With the addition of the Infinion™ lead to our family of Linear percutaneous leads, the Precision SCS® system offers physicians the broadest range of percutaneous lead configurations in the industry for treating chronic pain patients. We believe that we continue to have a technology advantage over our competitors with our unique Smoothwave™ technology platform and proprietary features such as Multiple Independent Current Control, which is intended to allow the physician to target specific areas of pain more precisely.
We are looking to increase the clinical evidence supporting our spinal cord stimulation technology and are committed to studies designed to demonstrate cost effectiveness or demonstrate the value of proprietary features in our SCS system. We expect to

complete our VANTAGE Study, a European clinical trial for the treatment of Parkinson's Disease using our Vercise™ Deep Brain Stimulation (DBS) System, in 2013. We believe we have an exciting opportunity in DBS with our ability to customize the field designed to precisely stimulate the target without extraneous stimulation of adjacent areas that may cause unwanted side effects. Urology/Women's Health
Our Urology/Women's Health division develops and manufactures devices to treat various urological and gynecological disorders. Our worldwide net sales of these products were $126 million in the second quarter of 2012, as compared to $127 million in the second quarter of 2011, a decrease of $1 million, or one percent. Our U.S. net sales were $89 million for the second quarter of 2012, as compared to $93 million in the second quarter of 2011. Our international net sales were $37 million in the second quarter of 2012, as compared to $34 million for the same period in the prior year, and included a $1 million negative impact from changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, our worldwide Urology/Women's Health net sales remained flat in the second quarter of 2012, as compared to the second quarter of 2011.
Our Urology business continued to experience strong growth in the United States and internationally due to the strength of our Stone Management franchise. During the first quarter of 2012, we began a full launch in the U.S. and certain international markets of our BackStop® gel, designed to prevent stone migration during stone management procedures.
In the second quarter of 2012, as compared to the same period in the prior year, our Women's Health business continued to be negatively impacted by elective procedural softness and reduced sales following the FDA release of a Public Health Notice update in July 2011 regarding complications related to the use of urogynecologic surgical mesh for pelvic organ prolapse and stress urinary incontinence.
Electrophysiology
We develop less-invasive medical technologies used in the diagnosis and treatment of rate and rhythm disorders of the heart. Our leading products include the Blazer™ line of ablation catheters, designed to deliver enhanced performance, responsiveness and durability. Our Blazer™ line includes our next-generation Blazer™ Prime ablation catheter, and our Blazer™ Open-Irrigated Catheter, launched in select European countries, which represents our latest radiofrequency ablation catheter designed to treat a variety of arrhythmias. Worldwide net sales of our Electrophysiology products were $37 million in the second quarter of 2012, as compared to $38 million in the second quarter of 2011, a decrease of $1 million, or two percent. Our U.S. net sales of these products were $28 million in the second quarters of 2012 and 2011. Our international net sales of these products were $9 million in the second quarter of 2012, as compared to $10 million for the same period in the prior year, and included a $1 million negative impact from changes in foreign currency exchange rates. Excluding the impact of changes in foreign currency exchange rates, our worldwide Electrophysiology net sales remained flat in the second quarter of 2012, as compared to the second quarter of 2011.
In the first half of 2012, we launched in the U.S. and our EMEA region our HeartSpan™ fixed sheath and Z Flex-270™ steerable sheath, both designed to facilitate the introduction and placement of catheters for atrial fibrillation within the heart. We believe these and other upcoming product launches, as well as increasing adoption of our Blazer™ line of ablation catheters positions us well within the Electrophysiology market. Cardiac Rhythm Management (CRM)
Our CRM division develops, manufactures and markets a variety of implantable devices including implantable cardioverter defibrillator (ICD) systems and pacemaker systems that monitor the heart and deliver electricity to treat cardiac abnormalities. In 2011, we began the U.S. and EMEA launches of our next-generation line of defibrillators, INCEPTA™, ENERGEN™ and PUNCTUA™, which are among the world's smallest and thinnest high-energy devices and deliver excellent longevity. This tiered product line includes new features designed to improve functionality, diagnostic capability and ease of use and allows us to compete in all segments of the market. Additionally, this next-generation of defibrillators includes models with our 4-SITE lead delivery system which is built off our highly reliable RELIANCE® lead platform. We received CE Mark and FDA approval for our INGENIO™ family of pacemaker systems in the second quarter of 2012 and began to launch this line in the U.S. and EMEA. These launches represent our first new major pacemaker system technology introduction in over ten years and we expect it to be the foundation for a series of low-voltage pacemaker launches. The INGENIO™ system is designed for use with our LATITUDE® remote patient monitoring system and includes features for advanced heart failure diagnostics. In July 2012, we received CE Mark approval for use of our INGENIO™ and ADVANTIO™ pacemakers in patients in need of a magnetic resonance imaging (MRI) scan, which we believe represents a significant advancement to our family of pacemaker devices. In the second quarter of 2012, we received FDA approval for our INVIVE™ cardiac resynchronization therapy pacemakers (CRT-Ps). INVIVE™ is built on the same platform as our high voltage CRT-Ds, is enabled for remote patient monitoring, and includes features that promote ease of use. Our product offerings also include our COGNIS® cardiac resynchronization therapy defibrillator (CRT-D) and TELIGEN® ICD systems and our ALTRUA® family of pacemaker systems.

Worldwide net sales of our CRM products of $488 million represented approximately 27 percent of our consolidated net sales for the second quarter of 2012. Our worldwide CRM net sales decreased $56 million, or ten percent, in the second quarter of 2012, as compared to the second quarter of 2011. Excluding the impact of changes in foreign currency exchange rates, which had a $16 million negative impact on our second quarter 2012 CRM net sales as compared to the same period in the prior year, our CRM net sales decreased $40 million, or eight percent. Our U.S. CRM net sales decreased $31 million, or 10 percent, in the second quarter of 2012 as compared to the second quarter of 2011. The reduction in our CRM net sales during the second quarter of 2012 is primarily due to the impact of lower procedural volumes as a result of the contraction in the U.S. ICD market in 2011, due to the factors discussed in our 2011 Annual Report filed on Form 10-K. Although we believe many of these factors are subsiding and we believe procedural volumes are beginning to stabilize, there can be no assurance we won't experience additional market declines in the future. However, we believe that the recent launches of our next-generation line of defibrillators, and the U.S. launches of our INGENIO™ pacemaker system and INVIVE™ CRT-Ps in the second quarter of 2012, will help enhance our position in the U.S. CRM market. Our international CRM net sales decreased $25 million, or 11 percent, in the second quarter of 2012, as compared to the second quarter of 2011. Excluding the impact of changes in foreign currency exchange rates, which had a $16 million negative impact on net sales in the second quarter of 2012, as compared to the . . .