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 September 30, 2012
Our net sales for the third quarter of 2012 were $1.735 billion, as compared to net sales of $1.874 billion for the third quarter of 2011, a decrease of $139 million, or seven percent. Excluding the impact of changes in foreign currency exchange rates, which had a $47 million negative impact on our third quarter 2012 net sales as compared to the same period in the prior year, and the change in net sales from divested businesses of $2 million, our net sales decreased $90 million, or five percent.1 Refer to Business and Market Overview for a discussion of our net sales by business.
Our reported net loss for the third quarter of 2012 was $664 million, or $0.48 per share, driven primarily by a goodwill impairment charge related to our U.S. Cardiac Rhythm Management (CRM) business unit. Refer to Quarterly Results for a discussion of this charge. Our reported results for the third quarter of 2012 included goodwill and other intangible asset impairment charges, acquisition- and divestiture-related net credits, restructuring- and litigation-related charges, discrete tax items and amortization expense totaling $885 million (after-tax), or $0.64 per share. Excluding these items, net income for the third quarter of 2012 was $221 million, or $0.16 per share.1 Our reported net income for the third quarter of 2011 was $142 million, or $0.09 per share. Our reported results for the third quarter of 2011 included intangible asset impairment charges, acquisition-related charges, divestiture-related net credits, restructuring-related charges, discrete tax items and amortization expense totaling $81 million (after-tax), or $0.06 per share. Excluding these items, net income for the third quarter of 2011 was $223 million, or $0.15 per share.1

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.

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:

                                                                       Three Months Ended September 30, 2012
                                                                                Tax                                       Impact per
in millions, except per share data                  Pre-Tax                   Impact                  After-Tax              share
GAAP net loss                                $           (663 )         $           (1 )         $           (664 )     $       (0.48 )
Non-GAAP adjustments:
Goodwill impairment charge                                748                                                 748                0.54   *
Intangible asset impairment charge                         13                       (3 )                       10                0.01   *
Acquisition-related credits                               (20 )                                               (20 )             (0.01 ) *
Divestiture-related net credits                           (10 )                      2                         (8 )             (0.01 ) *
Restructuring-related charges                              58                      (19 )                       39                0.03   *
Litigation-related charges                                 50                      (18 )                       32                0.02   *
Discrete tax items                                                                   1                          1                0.00   *
Amortization expense                                       99                      (16 )                       83                0.06   *
Adjusted net income                          $            275           $          (54 )         $            221       $        0.16

* Assumes dilution of 6.8 million shares for the three months ended September 30, 2012 for all or a portion of these non-GAAP adjustments.

                                              Three Months Ended September 30, 2011
                                                        Tax                       Impact per
in millions, except per share data     Pre-Tax        Impact        After-Tax       share
GAAP net income                      $    111       $     31       $     142     $     0.09
Non-GAAP adjustments:
Intangible asset impairment charge          9             (2 )             7           0.01
Acquisition-related net charges             8             (1 )             7           0.01
Divestiture-related net credits            (7 )            2              (5 )         0.00
Restructuring-related charges              29            (10 )            19           0.01
Discrete tax items                                       (25 )           (25 )        (0.02 )
Amortization expense                       97            (19 )            78           0.05
Adjusted net income                  $    247       $    (24 )     $     223     $     0.15

Cash provided by operating activities was $271 million in the third quarter of 2012, as compared to $366 million in the third quarter of 2011. Our operating cash flows in the third quarter of 2012 included collections of approximately $28 million of our outstanding receivables in Spain as a result of a government-funded settlement. Our operating cash flows in the third quarter of 2011 included $82 million of proceeds related to our $850 million fixed-to-floating interest rate swaps, on certain of our public bonds, that we terminated in that quarter. Our cash generated from operations continued to be a significant source of available funds for investing in our future growth and buying back shares of our common stock pursuant to our share repurchase authorizations. We expect to continue to use our cash generated from operations to fund acquisition-related obligations throughout the remainder of 2012. During the third quarter of 2012, we used approximately $250 million of cash generated from operations to repurchase approximately 46 million shares of our common stock. As of September 30, 2012, we had total debt of $4.255 billion and working capital of $1.358 billion, including cash and cash equivalents of $352 million. Refer to Liquidity and Capital Resources for further discussion.

Nine Months Ended September 30, 2012
Our net sales for the first nine months of 2012 were $5.428 billion, as compared to net sales of $5.774 billion for the first nine months of 2011, a decrease of $346 million, or six percent. Excluding the impact of changes in foreign currency exchange rates, which had a $105 million negative impact on our net sales for the nine months ended September 30, 2012 as compared to the same period in the prior year, and the change in net sales from divested businesses of $19 million, our net sales decreased $222 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 nine months of 2012 was $4.129 billion, or $2.91 per share, driven primarily by goodwill impairment charges related to our U.S. CRM and Europe, Middle East, and Africa (EMEA) business units. Refer to Quarterly Results for a discussion of these charges. Our reported results for the first nine months of 2012 include goodwill and other intangible asset impairment charges, acquisition- and divestiture-related net credits, restructuring-, and litigation-related charges, discrete tax items and amortization expense totaling $4.809 billion (after-tax), or $3.39 per share. Excluding these items, net income for the first nine months of 2012 was $680 million, or $0.48 per share.1 Our reported net income for the first nine months of 2011 was $334 million, or $0.22 per share. Our reported results for the first nine months of 2011 included a non-deductible goodwill impairment charge, intangible asset impairment charges, acquisition- and divestiture-related net credits, restructuring-related charges, discrete tax items and amortization expense totaling $488 million (after-tax), or $0.32 per share. Excluding these items, net income for the first nine months of 2011 was $822 million, or $0.54 per share.1

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.

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:

                                                                 Nine Months Ended September 30, 2012
                                                                        Tax                                   Impact per
in millions, except per share data               Pre-Tax               Impact             After-Tax             share
GAAP net loss                                $    (4,159 )         $        30       $         (4,129 )     $      (2.91 )
Non-GAAP adjustments:
Goodwill impairment charge                         4,350                   (23 )                4,327               3.05   *
Intangible asset impairment charges                  142                   (23 )                  119               0.09   *
Acquisition-related net credits                      (41 )                  11                    (30 )            (0.02 ) *
Divestiture-related net credits                       (7 )                   2                     (5 )             0.00   *
Restructuring-related charges                        108                   (32 )                   76               0.05   *
Litigation-related net charges                       119                   (47 )                   72               0.05   *
Discrete tax items                                                           1                      1               0.00   *
Amortization expense                                 294                   (45 )                  249               0.17   *
Adjusted net income                          $       806           $      (126 )     $            680       $       0.48

* Assumes dilution of 7.2 million shares for the nine months ended September 30, 2012 for all or a portion of these non-GAAP adjustments.

                                                        Nine Months Ended September 30, 2011
                                                                Tax                         Impact per
in millions, except per share data            Pre-Tax          Impact        After-Tax         share
GAAP net income                             $     542       $    (208 )     $      334     $      0.22
Non-GAAP adjustments:
Goodwill impairment charge                        697                              697            0.45
Intangible asset impairment charge                 21              (5 )             16            0.01
Acquisition-related net credits                   (15 )            (2 )            (17 )        (0.01)
Divestiture-related net credits                  (764 )           231             (533 )        (0.35)
Restructuring-related charges                     109             (34 )             75            0.05
Discrete tax items                                                (21 )            (21 )        (0.01)
Amortization expense                              325             (54 )            271            0.18
Adjusted net income                         $     915       $     (93 )     $      822     $      0.54

Cash provided by operating activities was $891 million in the first nine months of 2012, as compared to $659 million in the first nine months of 2011. Our 2012 operating cash flows included collections of approximately $88 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 partially offset by an $82 million benefit related to our $850 million fixed to floating interest rate swaps, on certain of our public bonds, that we terminated in the third quarter of 2011. Our cash generated from operations continued to be a significant source of available funds for investing in our future growth and buying back shares of our common stock pursuant to our share repurchase authorizations. We expect to continue to use our cash generated from operations to fund acquisition-related obligations throughout the remainder of 2012. During the first nine months of 2012, we used approximately $500 million of cash generated from operations to repurchase approximately 87 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 $310 million in the third quarter of 2012, as compared to $298 million in the third quarter of 2011, an increase of $12 million, or four percent. U.S. net sales of our Endoscopy products were $149 million for the third quarter of 2012, as compared to $141 million for the same period in the prior year. Our international net sales were $161 million for the third quarter of 2012, as compared to $157 million for the third quarter of 2011, and included an $8 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 third quarter of 2012, as compared to the third quarter of 2011. This performance was primarily 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 Conformite Europeenne (CE) Mark and U.S. Food and Drug Administration (FDA) approval and is the first device-based asthma treatment approved by the FDA. In the third quarter of 2012, the America Medical Association (AMA) Current Procedural Terminology (CPT) editorial panel assigned category I CPT codes specifically for bronchial thermoplasty beginning January 1, 2013. The Category I CPT procedure codes are recognized by all public and private health insurance payers in the United States, which will allow physicians and hospitals to seek reimbursement for bronchial thermoplasty procedures. We believe these codes will provide greater access to treatment for patients with poorly controlled severe asthma, help facilitate claims processing and help private payers' approve coverage for this form of treatment. 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 $189 million in the third quarter of 2012, as compared to $182 million in the third quarter of 2011, an increase of $7 million, or four percent. Our U.S. net sales of these products were $86 million in the third quarter of 2012, as compared to $77 million in the third quarter of 2011. Our international net sales were $103 million in the third quarter of 2012, as compared to $105 million in the third quarter of 2011, and included a $6 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 $13 million, or seven percent, in the third quarter of 2012, as compared to the third quarter of 2011. The year-over-year increase in worldwide PI net sales was primarily 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, the Carotid WALLSTENT® stent system in Japan, and the recent launch of the Innova™ self-expanding bare metal stent system in EMEA and certain other international markets.
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 nine months of 2012, we began the launch our TRUEPATH™ intraluminal CTO device in the U.S., EMEA and other international markets. We also recently announced the U.S. and European launch of our Victory™ guidewire, which is designed to facilitate crossing of resistant lesions and the placement and exchange of balloon catheters or other interventional devices within the peripheral vasculature. 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 $88 million in the third quarter of 2012, as compared to $84 million in the third quarter of 2011, an increase of $4 million, or five percent. Our U.S. net sales of Neuromodulation products were $82 million for the third quarter of 2012, as compared to $79 million in the same period in the prior year, and our international net sales of these products were $6 million in the third quarter of 2012 and $5 million in the third quarter of 2011. Changes in foreign currency exchange rates did not materially affect our Neuromodulation net sales in the third quarter of 2012, as compared to the same period in the prior year. 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. During the third quarter of 2012, we received CE Mark approval for use of our Vercise™ Deep Brain Stimulation (DBS) System for the treatment of Parkinson's disease in Europe. The Vercise DBS System is the first and only commercially available DBS system to incorporate multiple independent current controls, which is designed to selectively stimulate targeted areas in the brain. We expect this innovative technology, designed to provide physicians fine control of stimulation and allow them to customize the field design to precisely stimulate the target without extraneous stimulation of adjacent areas that may cause unwanted side effects, will allow us to expand our presence in this market.
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 $125 million in the third quarter of 2012, as compared to $124 million in the third quarter of 2011, an increase of approximately $1 million, or less than one percent. Our U.S. net sales were $89 million for the third quarter of 2012, as compared to $91 million in the third quarter of 2011. Our international net sales were $36 million in the third quarter of 2012, as compared to $33 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 increased $2 million, or one percent, in the third quarter of 2012, as compared to the third quarter of 2011. Our Urology business grew approximately five percent on strong sales execution and the continued expansion of the commercial launch of ourBackStop® gels. However, our Women's Health business declined 11 percent primarily due to continued pressures on elective procedures and lower sales levels 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.
Despite the current performance of the Urology/Women's Health division, we believe the business has opportunity for growth as a result of our recent product launches of Accutrac and Flexiva ™ Tractip laser fibers, which are designed to improve the scope trackability of the laser fiber during kidney stone lithrotripsy procedures. In addition, we continue to expand the commercial launch of our BackStop® gel, designed to prevent stone migration during stone management procedures.
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 International countries, which represents our latest radiofrequency ablation catheter designed to treat a variety of arrhythmias. Worldwide net sales of our Electrophysiology products were $35 million in the third quarter of 2012, as compared to $36 million in the third quarter of 2011, a decrease of $1 million, or two percent. Our U.S. net sales of these products were $26 million in the third quarter of 2012 and 2011. Our international net sales of these products were $9 million in the third quarter of 2012, as compared to $10 million for the same period in the prior year. Changes in foreign currency exchange rates did not materially affect our Electrophysiology net sales in the third quarter of 2012, as compared to the same period in the prior year.

During 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. Additionally, on October 9, 2012, we acquired Rhythmia Medical, Inc., a developer of next-generation mapping and navigation solutions for use in cardiac catheter ablations and other electrophysiology procedures, including atrial fibrillation and atrial flutter. We believe that this acquisition, as well as the recent and expected product launches, will help to position us to competitively participate in the fast-growing 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. Worldwide net sales of our CRM products of $462 million represented approximately 27 percent of our consolidated net sales for the third quarter of 2012. Our worldwide CRM net sales decreased $41 million, or eight percent, in the third quarter of 2012, as compared to the third quarter of 2011. Excluding the impact of changes in foreign currency exchange rates, which had a $12 million negative impact on our third quarter 2012 CRM net sales as compared to the same period in the prior year, our CRM net sales decreased $29 million, or six percent. Our U.S. CRM net sales decreased $23 million, or eight percent, in the third quarter of 2012 as compared to the third quarter of 2011. Our international CRM net sales decreased $18 million, or nine percent, in the third quarter of 2012, as compared to the third quarter of 2011. Excluding the impact . . .