Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

Boston Scientific Corporation is a global developer, manufacturer and marketer of medical devices that are used in a broad range of interventional medical specialties. Our mission is to transform lives through innovative medical solutions that improve the health of patients around the world. As a medical technology leader for more than 40 years, we have advanced the practice of less-invasive medicine by helping physicians and other medical professionals diagnose and treat a wide range of diseases and medical conditions and improve patients’ quality of life by providing alternatives to surgery and other medical procedures that are typically traumatic to the body. We advance science for life by providing a broad range of high performance solutions to address unmet patient needs and reduce the cost of healthcare. When used in this report, the terms "we," "us," "our" and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries.

Financial Summary

Three Months Ended September 30, 2023

Our net sales for the third quarter of 2023 were $3.527 billion, compared to $3.170 billion for the third quarter of 2022. This increase of $356 million, or 11.2 percent, included operational1 net sales growth of 11.1 percent and the positive impact of 10 basis points from foreign currency fluctuations. Operational net sales growth in the third quarter of 2023 included organic2 net sales growth of 10.2 percent and the positive impact of 90 basis points driven by our majority stake investment in Acotec Scientific Holdings Limited (Acotec) during the first quarter of 2023 and acquisition of Apollo Endosurgery, Inc. (Apollo) during the second quarter of 2023, for which there is less than a full period of comparable sales. The increase in our net sales was primarily driven by the diversity of our product portfolio and strong execution, coupled with growth in the underlying markets in which we compete. Refer to Quarterly Results and Business Overview for a discussion of our net sales by global business.

Our reported net income attributable to Boston Scientific common stockholders for the third quarter of 2023 was $505 million, or $0.34 per diluted share. Our reported results for the third quarter of 2023 included certain charges and/or credits totaling $227 million (after-tax), or $0.15 per diluted share. Excluding these items, adjusted net income attributable to Boston Scientific common stockholders3 was $732 million, or $0.50 per diluted share.

Our reported net income attributable to common stockholders for the third quarter of 2022 was $174 million, or $0.12 per diluted share. Our reported results for the third quarter of 2022 included certain charges and/or credits totaling $446 million (after-tax), or $0.31 per diluted share. Excluding these items, adjusted net income attributable to common stockholders3 was $620 million, or $0.43 per diluted share.

1Operational net sales growth excludes the impact of foreign currency fluctuations.

2Organic net sales growth excludes the impact of foreign currency fluctuations and net sales attributable to acquisitions and divestitures for which there are less than a full period of comparable net sales.

3Adjusted measures, including operational and organic net sales growth, exclude certain items required by generally accepted accounting principles in the United States (GAAP), are not prepared in accordance with GAAP and should not be considered in isolation from, or as a replacement for, the most directly comparable GAAP measure. Refer to Additional Information for a discussion of management’s use of these non-GAAP financial measures.

The following is a reconciliation of our results of operations prepared in accordance with GAAP to those adjusted results considered by management. Refer to Quarterly Results and Business Overview and Additional Information for a discussion of these reconciling items:

			Three Months Ended September 30, 2023
(in millions, except per share data)			Income (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Income (Loss)			Preferred Stock Dividends			Net Income (Loss) Attributable to Boston Scientific Common Stockholders			Impact per Share
Reported			$	610		$	105		$	504		$	—		$	505		$	0.34
Non-GAAP adjustments:
Amortization expense			208			28			179			—			177			0.12
Goodwill and other intangible asset impairment charges			1			0			0			—			0			0.00
Acquisition/divestiture-related net charges (credits)			66			10			56			—			56			0.04
Restructuring and restructuring-related net charges (credits)			47			6			41			—			41			0.03
Litigation-related net charges (credits)			(111)			(25)			(86)			—			(86)			(0.06)
Investment portfolio net losses (gains)			2			(0)			2			—			2			0.00
European Union (EU) Medical device regulation (MDR) implementation costs			17			2			14			—			14			0.01
Deferred tax expenses (benefits)			—			(23)			23			—			23			0.02
Discrete tax items			—			(0)			0			—			0			0.00
Adjusted			$	838		$	104		$	734		$	—		$	732		$	0.50

			Three Months Ended September 30, 2022
(in millions, except per share data)			Income (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Income (Loss)			Preferred Stock Dividends			Net Income (Loss) Attributable to Boston Scientific Common Stockholders			Impact per Share**(4)**
Reported			$	245		$	57		$	188		$	(14)		$	174		$	0.12
Non-GAAP adjustments:
Amortization expense			202			28			174			—			174			0.12
Goodwill and other intangible asset impairment charges			125			29			96			—			96			0.07
Acquisition/divestiture-related net charges (credits)			113			1			112			—			112			0.08
Restructuring and restructuring-related net charges (credits)			18			2			16			—			16			0.01
Litigation-related net charges (credits)			—			0			(0)			—			(0)			(0.00)
Investment portfolio net losses (gains)			(3)			0			(3)			—			(3)			(0.00)
European Union (EU) Medical device regulation (MDR) implementation costs			20			3			17			—			17			0.01
Debt extinguishment charges			—			0			0			—			0			(0.00)
Deferred tax expenses (benefits)			—			(35)			35			—			35			0.02
Adjusted			$	719		$	85		$	634		$	(14)		$	620		$	0.43

(4) On June 1, 2023, all outstanding shares of Mandatory Convertible Preferred Stock (MCPS) automatically converted into shares of common stock. For the third quarter of 2022, the effect of assuming the conversion of MCPS into shares of common stock was anti-dilutive, and therefore excluded from the calculation of earnings per share (EPS). Accordingly, GAAP Net income and Adjusted net income were reduced by cumulative Preferred stock dividends, as presented in our unaudited consolidated statements of operations, for purposes of calculating GAAP Net income attributable to Boston Scientific common stockholders.

Nine Months Ended September 30, 2023

Our net sales for the first nine months of 2023 were $10.515 billion, compared to $9.440 billion for the first nine months of 2022. This increase of $1.075 billion, or 11.4 percent, included operational1 net sales growth of 12.6 percent and the negative impact of 120 basis points from foreign currency fluctuations. Operational net sales growth included organic2 net sales growth of 11.9 percent and the positive impact of 70 basis points driven by our majority stake investment in Acotec and acquisition of Apollo during the first nine months of 2023 and our acquisition of Baylis Medical Company Inc. (Baylis Medical) in the first nine months of 2022, for which there is less than a full period of comparable sales. The increase in our net sales was primarily driven by the diversity of our product portfolio and strong execution, coupled with growth in the underlying markets in which we compete, as well as our recent acquisitions. Refer to Quarterly Results and Business Overview for a discussion of our net sales by global business.

Our reported net income attributable to Boston Scientific common stockholders for the first nine months of 2023 was $1.065 billion, or $0.73 per diluted share. Our reported results for the first nine months of 2023 included certain charges and/or credits totaling $1.116 billion (after-tax), or $0.76 per diluted share. Excluding these items, adjusted net income attributable to common stockholders3 for the first nine months of 2023 was $2.181 billion, or $1.50 per diluted share.

Our reported net income attributable to common stockholders for the first nine months of 2022 was $516 million, or $0.36 per diluted share. Our reported results for the first nine months of 2022 included certain charges and/or credits totaling $1.300 billion (after-tax), or $0.90 per diluted share. Excluding these items, adjusted net income attributable to common stockholders3 for the first nine months of 2022 was $1.816 billion, or $1.26 per diluted share.

1Operational net sales growth excludes the impact of foreign currency fluctuations.

2Organic net sales growth excludes the impact of foreign currency fluctuations and net sales attributable to acquisitions and divestitures for which there are less than a full period of comparable net sales.

3Adjusted measures, including operational and organic net sales growth, exclude certain items required by generally accepted accounting principles in the United States (GAAP), are not prepared in accordance with GAAP and should not be considered in isolation from, or as a replacement for, the most directly comparable GAAP measure. Refer to Additional Information for a discussion of management’s use of these non-GAAP financial measures.

The following is a reconciliation of our results of operations prepared in accordance with GAAP to those adjusted results considered by management. Refer to Quarterly Results and Business Overview and Additional Information for a discussion of these reconciling items:

			Nine Months Ended September 30, 2023
(in millions, except per share data)			Income (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Income (Loss)			Preferred Stock Dividends			Net Income (Loss) Attributable to Boston Scientific Common Stockholders			Impact per Share**(5)**
Reported			$	1,480		$	392		$	1,088		$	(23)		$	1,065		$	0.73
Non-GAAP adjustments:
Amortization expense			620			84			536			—			534			0.37
Goodwill and other intangible asset impairment charges			58			4			54			—			54			0.04
Acquisition/divestiture-related net charges (credits)			244			(54)			298			—			298			0.20
Restructuring and restructuring-related net charges (credits)			133			21			112			—			112			0.08
Litigation-related net charges (credits)			(111)			(25)			(86)			—			(86)			(0.06)
Investment portfolio net losses (gains)			21			(2)			22			—			22			0.02
European Union (EU) Medical device regulation (MDR) implementation costs			53			7			45			—			45			0.03
Deferred tax expenses (benefits)			—			(111)			111			—			111			0.08
Discrete tax items			—			(26)			26			—			26			0.02
Adjusted			$	2,497		$	290		$	2,206		$	(23)		$	2,181		$	1.50

			Nine Months Ended September 30, 2022
(in millions, except per share data)			Income (Loss) Before Income Taxes			Income Tax Expense (Benefit)			Net Income (Loss)			Preferred Stock Dividends			Net Income (Loss) Attributable to Boston Scientific Common Stockholders			Impact per Share**(5)**
Reported			$	745		$	188		$	558		$	(42)		$	516		$	0.36
Non-GAAP adjustments:
Amortization expense			604			85			519			—			519			0.36
Goodwill and other intangible asset impairment charges			132			29			103			—			103			0.07
Acquisition/divestiture-related net charges (credits)			276			(3)			279			—			279			0.19
Restructuring and restructuring-related net charges (credits)			82			11			71			—			71			0.05
Litigation-related net charges (credits)			42			10			33			—			33			0.02
Investment portfolio net losses (gains)			8			4			4			—			4			0.00
European Union (EU) Medical device regulation (MDR) implementation costs			52			7			45			—			45			0.03
Debt extinguishment charges			194			45			149			—			149			0.10
Deferred tax expenses (benefits)			—			(98)			98			—			98			0.07
Discrete tax items			—			0			(0)			—			(0)			(0.00)
Adjusted			$	2,135		$	277		$	1,858		$	(42)		$	1,816		$	1.26

(5) For the first nine months of 2023 and 2022, the effect of assuming the conversion of MCPS into shares of common stock was anti-dilutive, and therefore excluded from the calculation of EPS. Accordingly, GAAP Net income and Adjusted net income were reduced by cumulative Preferred stock dividends, as presented in our unaudited consolidated statements of operations, for purposes of calculating GAAP Net income attributable to Boston Scientific common stockholders. On June 1, 2023, all outstanding shares of MCPS automatically converted into shares of common stock.

Quarterly Results and Business Overview

The following section describes our net sales and results of operations by reportable segment and business unit. For additional information on our businesses and product offerings, refer to Item 1. Business of our most recent Annual Report on Form 10-K.

			Three Months Ended September 30,
(in millions)			2023						2022						Increase/(Decrease)
Endoscopy			$	629					$	559					12.6%
Urology			483						433						11.5%
Neuromodulation			229						221						3.7%
MedSurg			1,341						1,213						10.6%
Cardiology			1,647						1,479						11.4%
Peripheral Interventions			538						479						12.3%
Cardiovascular			2,185						1,958						11.6%
Net Sales			$	3,527					$	3,170					11.2%
			Nine Months Ended September 30,
(in millions)			2023						2022						Increase/(Decrease)
Endoscopy			$	1,836					$	1,649					11.3%
Urology			1,437						1,296						10.9%
Neuromodulation			708						669						5.8%
MedSurg			3,981						3,614						10.2%
Cardiology			4,958						4,403						12.6%
Peripheral Interventions			1,577						1,423						10.8%
Cardiovascular			6,534						5,826						12.2%
Net Sales			$	10,515					$	9,440					11.4%

MedSurg

Endoscopy

Our Endoscopy business develops and manufactures devices to diagnose and treat a broad range of gastrointestinal (GI) and pulmonary conditions with innovative, less-invasive technologies. Net sales of Endoscopy products of $629 million for the third quarter and $1.836 billion for the first nine months of 2023 represented 18 percent and 17 percent of our consolidated net sales, respectively. Endoscopy net sales increased $70 million, or 12.6 percent, during the third quarter and $187 million, or 11.3 percent, during the first nine months of 2023, compared to the prior year periods. During the third quarter of 2023, this increase included operational net sales growth of 11.9 percent and a positive impact of 70 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, this increase included operational net sales growth of 12.3 percent and a negative impact of 100 basis points from foreign currency fluctuations, compared to the prior year period.

Operational net sales growth included organic net sales growth of 10.6 percent in the third quarter of 2023 and 11.2 percent for the first nine months of 2023, and the positive impact of 130 and 110 basis points, respectively, from our acquisition of Apollo and the divestiture of our pathology business in the second quarter of 2023. Organic net sales growth in both periods was primarily driven by our biliary franchise led by our AXIOS™ Stent and Delivery System, and our hemostasis and single use imaging franchises.

Urology

Our Urology business develops and manufactures devices to treat various urological and pelvic conditions for both male and female anatomies. Net sales of Urology products of $483 million for the third quarter and $1.437 billion for the first nine months of 2023 represented 14 percent of our consolidated net sales in both periods. Urology net sales increased $50 million, or 11.5 percent, during the third quarter and $141 million, or 10.9 percent, during the first nine months of 2023, compared to the prior year periods. During the third quarter of 2023, this increase included operational net sales growth of 11.1 percent and a positive impact of 50 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, this increase included operational net sales growth of 11.6 percent and a negative impact of 70 basis points from foreign currency fluctuations, compared to the prior year period. Operational net sales growth during both periods was driven by our stone management franchise led by our LithoVue™ Single-Use Digital Flexible Ureteroscope System and Laser Therapies, as well as growth in our prosthetic urology franchise.

Neuromodulation

Our Neuromodulation business develops and manufactures devices to treat various neurological movement disorders and manage chronic pain. Net sales of Neuromodulation products of $229 million for the third quarter and $708 million for the first nine months of 2023 represented 6 percent and 7 percent of our consolidated net sales, respectively. Neuromodulation net sales increased $8 million, or 3.7 percent during the third quarter and $39 million, or 5.8 percent during the first nine months of 2023, compared to the prior year periods. During the third quarter of 2023, this increase included operational net sales growth of 3.2 percent and a positive impact of 40 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, this increase included operational net sales growth of 6.4 percent and a negative impact of 50 basis points from foreign currency fluctuations, compared to the prior year period. Operational net sales growth during both periods was driven by our spinal cord stimulation (SCS) franchise led by our WaveWriter Alpha™ SCS System as well as growth within our deep brain stimulation franchise.

Cardiovascular

Cardiology

Our Cardiology business develops and manufactures devices and medical technologies for diagnosing and treating a variety of diseases and abnormalities of the heart. Net sales of Cardiology products of $1.647 billion for the third quarter and $4.958 billion for the first nine months of 2023 represented 47 percent of our consolidated net sales in both periods. Cardiology net sales increased $169 million, or 11.4 percent, during the third quarter and $554 million, or 12.6 percent during the first nine months of 2023, compared to the prior year periods. During the third quarter of 2023, this increase included operational net sales growth of 11.4 percent and a positive impact of 10 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, this increase included operational net sales growth of 14.0 percent and a negative impact of 140 basis points from foreign currency fluctuations, compared to the prior year period. Operational net sales growth for the first nine months of 2023 included organic net sales growth of 13.3 percent and the positive impact of 70 basis points from our acquisition of Baylis Medical in the first quarter of 2022.

Organic net sales growth during the third quarter and first nine months of 2023 was primarily driven by strong demand and continued market expansion of Left Atrial Appendage Closure (LAAC) procedures with our WATCHMAN FLX™ LAAC Device, as well as growth of our percutaneous coronary intervention guidance, cardiac diagnostics and access solutions franchises, and our single shot portfolio, led by our Farapulse™ Ablation System and our POLARx™ technologies.

Peripheral Interventions

Our Peripheral Interventions business develops and manufactures products to diagnose and treat peripheral arterial and venous diseases, as well as products to diagnose, treat and ease various forms of cancer. Net sales of Peripheral Interventions products of $538 million for the third quarter and $1.577 billion for the first nine months of 2023 represented 15 percent of our consolidated net sales in both periods. Peripheral Interventions net sales increased $59 million, or 12.3 percent, during the third quarter and $154 million, or 10.8 percent, during the first nine months of 2023, compared to the prior year periods. During the third quarter of 2023, this increase included operational net sales growth of 12.9 percent and a negative impact of 60 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, this increase included operational net sales growth of 12.7 percent and a negative impact of 190 basis points from foreign currency fluctuations, compared to the prior year period.

In the first quarter of 2023, we acquired a majority stake investment in Acotec and have elected to consolidate their results of operations on a one quarter lag. Operational net sales growth for the third quarter and first nine months of 2023 included organic net sales growth of 8.4 percent and 11.1 percent, respectively, and the positive impact of 450 and 160 basis points, respectively, from our majority stake investment in Acotec. Organic net sales growth during the third quarter and first nine months of 2023 was primarily driven by our interventional oncology franchise led by our Therasphere™ Y-90 Radioactive Glass Microspheres and our EMBOLD™ Fibered Coil, and our drug-eluting portfolio within our vascular franchise led by our Eluvia™ Drug-Eluting Stent System and Ranger™ Drug Coated Balloon.

Emerging Markets

As part of our strategic imperative to drive global expansion, we are seeking to grow net sales and market share by expanding our global presence, including in Emerging Markets. Periodically, we assess our list of Emerging Markets countries, and effective January 1, 2023, modified our list to include all countries except the United States, Western and Central Europe, Japan, Australia, New Zealand and Canada. We have revised prior year amounts to conform to the current year's presentation.

Our Emerging Markets net sales represented 17 percent and 16 percent of our consolidated net sales during the third quarter and first nine months of 2023, respectively, and 16 percent and 15 percent during the third quarter and first nine months of 2022, respectively. During the third quarter of 2023, our Emerging Markets net sales grew 14 percent on a reported basis, which included operational net sales growth of 19 percent and a negative impact of 460 basis points from foreign currency fluctuations, compared to the prior year period. During the first nine months of 2023, our Emerging Markets net sales grew 18 percent on a reported basis, which included operational net sales growth of 23 percent and a negative impact of 530 basis points from foreign currency fluctuations, compared to the prior year period. Operational growth in both periods was driven primarily by growth in China, fueled by the breadth of our portfolio.

Economic Trends

Our business has been impacted by global supply chain disruptions. In particular, we have experienced, and may continue to experience, increases in cost and limited availability of raw materials, components, and other inputs necessary to manufacture and distribute our products due to constraints and inflation within the global supply chain, as well as increases in wage costs and the cost and time to distribute our products. Uncertainty around inflationary pressures, higher interest rates, monetary policy and changes in tax laws could potentially cause new, or exacerbate existing, economic challenges that we may face, including the impact of foreign currency fluctuations on our results of operations. These conditions could worsen, or others could arise, if the U.S. and global economies were to enter recessionary periods, triggered or exacerbated by monetary policy designed to curb inflation. Existing and future potential geopolitical dynamics, including matters related to the Russia/Ukraine war, Israel/Hamas war, as well as the tension between China/Taiwan, may create economic, supply chain, energy, and other challenges, including disruptions to business operations, which impact, and may in the future negatively impact our business. In particular, international conflicts have and may further result in sanctions, tariffs, and other measures that restrict international trade and may negatively affect our business operations and results.

Gross Profit

Our Gross profit was $2.426 billion for the third quarter of 2023, $2.191 billion for the third quarter of 2022, $7.317 billion for the first nine months of 2023 and $6.495 billion for the first nine months of 2022. As a percentage of net sales, our Gross profit decreased to 68.8 percent during the third quarter of 2023, compared to 69.1 percent in the third quarter of 2022 and increased to 69.6 percent during the first nine months of 2023, compared to 68.8 percent during the first nine months of 2022. The following is a reconciliation of our gross profit margin and a description of the drivers of the changes from period to period:

			Percentage of Net Sales
			Three Months						Nine Months
Gross profit margin - period ended September 30, 2022			69.1%						68.8%
Sales pricing, volume and mix			1.7						1.6
Manufacturing and supply costs			1.7						1.8
Net impact of foreign currency fluctuations			(2.7)						(2.0)
All other, including other period expenses			(1.0)						(0.8)
Gross profit margin - period ended September 30, 2023			68.8%						69.6%

The primary factors contributing to the slight decrease in our gross profit margin in the third quarter of 2023, as compared to the same period in the prior year, were the impacts of foreign currency and period expenses. These impacts were partially offset by favorable sales mix and increased sales of higher margin products, improvements in manufacturing and supply costs and the realization of standard cost improvements. Despite the slight decrease in the third quarter of 2023, we experienced an increase in our gross profit margin in the first nine months of 2023, as compared to the same period in the prior year, due to increased sales of higher margin products, as well as improvements in manufacturing and supply costs. These impacts were partially offset by the unfavorable impact of foreign currency and period expenses. We expect our full year 2023 gross profit margin to slightly improve compared to 2022 due to our expectation that favorable trends noted in the first nine months of 2023 will continue and the impact of foreign currency will remain unfavorable in the fourth quarter of 2023.

Operating Expenses

The following table provides a summary of certain of our operating expenses:

			Three Months Ended September 30,																		Nine Months Ended September 30,
			2023									2022									2023									2022
(in millions)			$			% of Net Sales						$			% of Net Sales						$			% of Net Sales						$			% of Net Sales
Selling, general and administrative expenses			$	1,242		35.2		%				$	1,132		35.7		%				$	3,811		36.2		%				$	3,357		35.6		%
Research and development expenses			356			10.1		%				339			10.7		%				1,051			10.0		%				993			10.5		%

Selling, general and administrative expenses (SG&A Expenses)

During the third quarter of 2023, SG&A expenses increased $110 million, or 10 percent, compared to the prior year period and were 50 basis points lower as a percentage of net sales. During the first nine months of 2023, SG&A expenses increased $454 million, or 14 percent, compared to the prior year period and were 60 basis points higher as a percentage of net sales. The increase in SG&A expenses in both periods was primarily due to higher selling costs driven by higher global net sales and in the first nine months of 2023, was also due to comparatively higher acquisition-related and restructuring-related expenses.

Research and development expenses (R&D Expenses)

We remain committed to advancing medical technologies and investing in meaningful R&D projects across our businesses. During the third quarter of 2023, R&D expenses increased $16 million, or 5 percent, compared to the prior year period and were 60 basis points lower as a percentage of net sales. During the first nine months of 2023, R&D expenses increased $58 million, or 6 percent, compared to the prior year period, and were 50 basis points lower as a percentage of net sales. R&D expenses

increased in both periods as a result of investments across our businesses in order to maintain a pipeline of new products that we believe will contribute to profitable sales growth.

Other Operating Expenses

The following provides a summary of certain of our other operating expenses, which are excluded by management for purposes of evaluating operating performance; refer to Additional Information for a further description.

Amortization Expense

During the third quarter of 2023, Amortization expense increased $5 million, or 3 percent, compared to the prior year period. In the first nine months of 2023, Amortization expense increased $16 million, or 3 percent, compared to the first nine months of 2022. The increase in Amortization expense during both periods was driven by the addition of amortizable intangible assets associated with our recent acquisitions.

Intangible Asset Impairment Charges

In 2023, we recorded Intangible asset impairment charges of less than $1 million in the third quarter and recorded $58 million in the first nine months. In 2022, we recorded $125 million in the third quarter and $132 million in the first nine months. The impairment charges recorded in the first nine months of 2023 were primarily associated with the cancellation of an in-process research and development (IPR&D) program due to the incremental time and cost to complete the program and bring the technology to market. The impairment charges recorded in the third quarter and first nine months of 2022 were primarily associated with amortizable technology-related intangible assets that were initially established following our acquisition of Vertiflex, Inc., which was integrated into our Neuromodulation business, resulting from lower revenue projections due to reimbursement challenges. Refer to Note C – Goodwill and Other Intangible Assets to our unaudited consolidated financial statements contained in Item 1 of this Quarterly Report on Form 10-Q and Critical Accounting Policies and Estimates contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our most recent Annual Report on Form 10-K for additional details and a discussion of key assumptions used in our goodwill and intangible asset impairment testing and future events that could have a negative impact on the recoverability of our goodwill and intangible assets.

Contingent Consideration Net Expense (Benefit)

To recognize changes in the fair value of our contingent consideration liability, we recorded net charges of $12 million in the third quarter of 2023, $20 million in the third quarter of 2022, $43 million in the first nine months of 2023 and $68 million in the first nine months of 2022. The net charges recorded in the first nine months of 2023 and 2022 related to an increase in expected payments for achievement of commercialization-based milestones and revenue-based payments as a result of over-performance. In addition, we made payments of $73 million and $371 million associated with prior acquisitions during the first nine months of 2023 and 2022, following the achievement of revenue and/or regulatory milestones. Refer to Note B – Acquisitions, Divestitures and Strategic Investments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details related to our contingent consideration arrangements.

Restructuring Charges (Credits)

On February 22, 2023, our Board of Directors approved, and we committed to, a new global restructuring program (the 2023 Restructuring Plan). The 2023 Restructuring Plan is intended to meet evolving global market demands and conditions by ensuring that we are structured and resourced to support our strategic imperatives and deliver sustainable value. For more information, refer to 2023 Restructuring Plan contained in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our most recent Annual Report on Form 10-K.

Pursuant to the 2023 Restructuring Plan, we recorded restructuring charges in accordance with FASB ASC Topic 420, Exit or Disposal Cost Obligations of $15 million and $51 million in the third quarter and first nine months of 2023. In addition, we recorded restructuring-related charges of $32 million and $82 million in the third quarter and first nine months of 2023 primarily within Cost of products sold and SG&A Expenses. During the third quarter and first nine months of 2022, we recorded restructuring charges of $4 million and $18 million, respectively, and restructuring-related charges of $14 million and $64 million, respectively, all associated with our 2019 Restructuring Plan, which was substantially completed as of December 31, 2022.

Litigation-related net charges (credits)

We recorded litigation-related net credits of $111 million during the third quarter and first nine months of 2023 related to the settlement of offensive patent litigation. We did not record any litigation-related net charges (credits) during the third quarter of 2022 and recorded $42 million during the first nine months of 2022. We record certain legal and product liability charges, credits and costs of defense, which we consider to be unusual or infrequent and significant as Litigation-related net charges (credits) within our accompanying unaudited consolidated financial statements. All other legal and product liability charges, credits and costs are recorded within SG&A expenses.

We continue to assess certain litigation and claims to determine the amounts, if any, that management believes will be paid as a result of such claims and litigation, and therefore, additional losses may be accrued and paid in the future, which could materially adversely impact our operating results, cash flows and/or our ability to comply with the financial covenant required by our credit arrangements. Refer to Note H – Commitments and Contingencies to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for discussion of our material legal proceedings.

Interest Expense

The following table provides a summary of our Interest expense and average borrowing rate:

			Three Months Ended September 30,												Nine Months Ended September 30,
2023						2022						2023						2022
Interest expense (in millions)			$	(66)					$	(63)					$	(200)					$	(406)
Average borrowing rate			2.8		%				2.7		%				2.8		%				5.7		%

Interest expense and our average borrowing rate increased during the third quarter of 2023 compared to the prior year period, primarily due to higher utilization of our factoring programs as well as rising global interest rates. Interest expense and our average borrowing rate decreased during the first nine months of 2023 compared to the prior year period, primarily due to $194 million of charges associated with the early extinguishment of $3.275 billion of certain of our senior notes, including payment of tender premiums and the acceleration of unamortized debt issuance costs, as well as the issuance of euro-denominated bonds, which carry lower interest rates, during the first quarter of 2022. For the first nine months of 2022, the weighted average borrowing rates associated with our outstanding senior notes were 2.3 percent. Refer to Liquidity and Capital Resources and Note E – Contractual Obligations and Commitments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for information regarding our debt obligations.

Tax Rate

Our effective tax rate from continuing operations is presented below:

			Three Months Ended September 30,												Nine Months Ended September 30,
			2023						2022						2023						2022
Effective tax rate from continuing operations			17.3		%				23.3		%				26.5		%				25.2		%

The changes in our reported tax rates for the third quarter and first nine months of 2023, compared to the same periods in 2022, relate primarily to the impact of certain receipts and charges that are taxed at different rates than our effective tax rate. These include litigation-related net credits, acquisition-related charges, debt extinguishment charges, as well as certain discrete tax items primarily related to unrecognized tax benefits and provision-to-return adjustments recorded in the third quarter of 2023.

On August 16, 2022, the Inflation Reduction Act of 2022 (Inflation Reduction Act) was enacted into law by the U.S. government and includes a new corporate alternative minimum tax (CAMT) of 15 percent on the adjusted financial statement income (AFSI) of corporations with average AFSI exceeding $1.000 billion over a three-year period. Additionally, the Inflation Reduction Act includes a 1 percent excise tax on the fair market value of net corporate stock repurchases. It is possible that in certain circumstances CAMT could result in an additional tax liability in a particular year due to temporary differences between book and taxable income. Based on our evaluation, we currently do not anticipate the Inflation Reduction Act will have a material impact on our financial position, results of operations, or cash flows.

Critical Accounting Policies and Estimates

Our financial results are affected by the selection and application of accounting policies and methods. During the third quarter and first nine months of 2023, there were no material changes to the application of critical accounting policies previously disclosed in our most recent Annual Report on Form 10-K.

Liquidity and Capital Resources

Based on our current business plan, we believe our existing balance of Cash and cash equivalents, future cash generated from operations, access to capital markets and existing credit facilities will be sufficient to fund our operations, invest in our infrastructure, pay our legal-related liabilities, pay taxes due, service and repay our existing debt and fund possible acquisitions for the next 12 months and for the foreseeable future.

As of September 30, 2023, we had $952 million of unrestricted Cash and cash equivalents on hand, including approximately $130 million held by Acotec, a less than wholly owned entity of which we acquired a majority stake investment during the first quarter of 2023. The balance is comprised of $569 million invested in money market funds and time deposits and $382 million in interest bearing and non-interest-bearing bank accounts. We invest excess cash on hand in short-term financial instruments that earn at market interest rates while mitigating principal risk through instrument and counterparty diversification, as well as what we believe to be prudent instrument selection. We limit our direct exposure to securities in any one industry or issuer.

In 2021, we entered into our $2.750 billion revolving credit facility (2021 Revolving Credit Facility) with a global syndicate of commercial banks scheduled to mature on May 10, 2026, with one-year extension options, subject to certain conditions. On March 1, 2023, we entered into an amendment of the 2021 Revolving Credit Facility credit agreement, which provided for an extension of the scheduled maturity date to May 10, 2027 and replaced the London Interbank Offered Rate (LIBOR) with the Secured Overnight Financing Rate (SOFR) as the Eurocurrency Rate for Dollars, including applicable credit spread adjustments and relevant SOFR benchmark provisions, as well as modification to the calculation of consolidated EBITDA, described under Financial Covenant below. This facility provides backing for our commercial paper program, and outstanding commercial paper directly reduces borrowing capacity under the 2021 Revolving Credit Facility. As of September 30, 2023, we had no commercial paper debt outstanding, resulting in an additional $2.750 billion of available liquidity under the 2021 Revolving Credit Facility.

For additional details related to our debt obligations, including our financial covenant requirement, refer to Note E – Contractual Obligations and Commitments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q.

The following provides a summary and description of our net cash inflows (outflows):

			Nine Months Ended September 30,
(in millions)			2023						2022
Cash provided by (used for) operating activities			$	1,546					$	719
Cash provided by (used for) investing activities			(1,521)						(1,828)
Cash provided by (used for) financing activities			(10)						(549)

Operating Activities

During the first nine months of 2023, cash provided by (used for) operating activities increased $827 million as compared to the prior year period primarily due to comparatively higher net sales and operating income and changes in operating assets and liabilities.

Investing Activities

During the first nine months of 2023, cash provided by (used for) investing activities included cash payments of $1.018 billion, net of cash acquired, for the acquisition of Apollo and a majority stake investment in Acotec, as well as purchases of property, plant and equipment and internal use software of $444 million. During the first nine months of 2022, cash used for investing activities included a net cash payment of $1.542 billion for the acquisition of Baylis Medical. For more information, refer to Note B – Acquisitions, Divestitures and Strategic Investments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q. In addition, we made purchases of property, plant and equipment and internal use software of $376 million during the first nine months of 2022.

Financing Activities

Cash provided by (used for) financing activities in the first nine months of 2023 included proceeds from issuances of common stock pursuant to employee stock compensation and purchase plans of $165 million, cash used to net share settle employee equity awards of $54 million, payments of contingent consideration previously established in purchase accounting of $39 million and payments for royalty rights of $50 million. In the first nine months of 2022, we completed a public offering (the Offering) of €3.000 billion in aggregate principal amount of euro-dominated senior notes. The Offering resulted in cash proceeds of $3.270 billion, net of investor discounts and issuance costs. We used the net proceeds from the Offering to fund the tender offer and early redemption of combined aggregate principal amount of $3.275 billion of certain of our outstanding senior notes, as well as to pay accrued interest, tender premiums, fees and expenses. Additionally, cash provided by (used for) financing activities in the first nine months of 2022 included payments of contingent consideration previously established in purchase accounting of $335 million.

Financial Covenant

As of September 30, 2023, we were in compliance with the financial covenant required by the 2021 Revolving Credit Facility, as amended, as described below.

The 2021 Revolving Credit Facility includes the financial covenant requirement for all of our credit arrangements that we maintain the maximum permitted leverage ratio of 3.75 times through the remaining term. The agreement provides for higher leverage ratios, at our election, for the period following a qualified acquisition for which consideration exceeds $1.000 billion. In the event of such an acquisition, for the four succeeding quarters immediately following, including the quarter in which the acquisition occurs, the maximum permitted leverage ratio is 4.75 times. The maximum permitted ratio steps down for the fifth, sixth and seventh succeeding quarters to 4.50 times, 4.25 times and 4.00 times, respectively. Thereafter, a maximum leverage ratio of 3.75 times is required through the remaining term of the 2021 Revolving Credit Facility. We have not elected to increase the maximum permitted leverage ratio for any qualified acquisitions due to the funding of these acquisitions using cash on hand or commercial paper. We believe that we have the ability to comply with the financial covenant for the next 12 months.

The financial covenant requirement, as amended on March 1, 2023, provides for an exclusion from the calculation of consolidated EBITDA, as defined by the credit agreement, through maturity, of certain charges and expenses. The credit agreement amendment reset the starting date for purposes of calculating such permitted exclusions in each case from March 31, 2021 to December 31, 2022. Permitted exclusions include any non-cash charges and up to $500 million in restructuring charges and restructuring-related expenses associated with our current or future restructuring plans. As of September 30, 2023, we had $369 million of the restructuring charge exclusion remaining. In addition, any cash litigation payments (net of any cash litigation receipts), as defined by the agreement, are excluded from the calculation of consolidated EBITDA, as defined by the agreement, provided that the sum of any excluded net cash litigation payments do not exceed $1.000 billion plus all accrued legal liabilities as of December 31, 2022 for a total of $1.443 billion. As of September 30, 2023, we had $1.494 billion of the litigation exclusion remaining.

Contractual Obligations and Commitments

On September 19, 2023, we announced our entry into a definitive agreement to acquire 100 percent of Relievant Medsystems, Inc. for approximately $850 million and additional contingent payments based on sales performance over the next three years, which is expected to close in the first half of 2024, subject to customary closing conditions. Refer to Note B – Acquisitions, Divestitures and Strategic Investments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for more information.

Certain of our acquisitions involve the payment of contingent consideration. Refer to Note B – Acquisitions, Divestitures and Strategic Investments to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for further details regarding the estimated potential amount of future contingent consideration we could be required to pay associated with our acquisitions. There have been no other material changes to our contractual obligations and commitments as of September 30, 2023.

Equity

On June 1, 2023, all outstanding shares of MCPS automatically converted into shares of common stock. No action by the holders of the MCPS was required in connection with the mandatory conversion. The conversion rate for each share of MCPS was 2.3834 shares of common stock. Cash was paid in lieu of fractional shares in accordance with the terms of the MCPS. An aggregate of approximately 24 million shares of common stock, including shares of common stock issued to holders of MCPS that elected to convert prior to the Mandatory Conversion Date, were issued upon conversion of the MCPS. Following the mandatory conversion of the MCPS, there were no outstanding shares of MCPS, resulting in the retirement of the annualized approximately $55 million cash dividend payment on the MCPS.

We received $165 million during the first nine months of 2023 and $117 million during the first nine months of 2022 in proceeds from stock issuances related to our stock option and employee stock purchase plans. Proceeds from the exercise of employee stock options and employee stock purchases vary from period to period based upon, among other factors, fluctuations in the trading price of our common stock and in the exercise and stock purchase patterns of our employees.

We did not repurchase any shares of our common stock during the first nine months of 2023 or 2022. On December 14, 2020, our Board of Directors approved a new stock repurchase program authorizing the repurchase of up to $1.000 billion of our common stock. As of September 30, 2023, we had the full amount remaining available under the authorization.

Legal Matters

For a discussion of our material legal proceedings refer to Note H – Commitments and Contingencies to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and Note I – Commitments and Contingencies to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K.

Recent Accounting Pronouncements

Information regarding new accounting pronouncements implemented since December 31, 2022, and relevant accounting pronouncements to be implemented in the future are included in Note N – New Accounting Pronouncements to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Additional Information

Corporate Responsibility

Our sustainable environmental, social and governance (ESG) practices underpin all aspects of our global business. Our approach is aligned with the United Nations Sustainable Development Goals and our material topics and practices are informed by a broad range of internal and external stakeholders – locally, nationally and globally. Our employees around the world work with suppliers and other organizations that share our commitment to these practices that help address issues related to health inequity, economic disparity, climate change and environmental protection. Our global ESG vision and strategy is led by our ESG Executive Steering Committee and our vice president of ESG, who provides regular updates to the Board of Directors. Our ESG team works closely with subject matter experts and key advisors from across the business to implement our ESG practices and determine how we measure and share progress. These efforts are supported by our cross-functional teams, our Environmental Health and Safety teams and policies, our Global Council for Inclusion, as well as our local, regional and

national employee and community engagement programs. In addition, since 2021, our annual bonus plan has included performance measured against certain ESG goals. For additional information on our sustainability efforts, as well as our Diversity, Equity and Inclusion initiatives, refer to our most recent Annual Report on Form 10-K. For additional information on our annual bonus plan, refer to our Proxy Statement for the 2023 Annual Meeting of Shareholders.

Cybersecurity

We have established controls and procedures to escalate enterprise level issues, including cybersecurity matters, to the appropriate management levels within our organization and our Board of Directors, or members or committees thereof, as appropriate. Under our framework, cybersecurity issues are analyzed by subject matter experts and a crisis committee for potential financial, operational, and reputational risks, based on, among other factors, the nature of the matter and breadth of impact. Matters determined to present potential material impacts to the Company’s financial results, operations, and/or reputation are immediately reported by management to the Board of Directors, or individual members or committees thereof, as appropriate, in accordance with our escalation framework. In addition, we have established procedures to ensure that management responsible for overseeing the effectiveness of disclosure controls is informed in a timely manner of known cybersecurity risks and incidents that may materially impact our operations and that timely public disclosure is made or updated, as appropriate.

International conflicts, including, but not limited to the Russia/Ukraine war, Israel/Hamas war and tension between China/Taiwan, have heightened cybersecurity risks on a global basis. While there is significant uncertainty around implications of cybersecurity attacks resulting from the conflict, we have taken steps to better understand our readiness, including the resilience of our critical business functions, with the goal of reducing the impact if such an event were to occur.

Stock Trading Policy

Our directors and executive officers are subject to our Stock Trading Policy, which is designed to facilitate compliance with insider trading laws and governs transactions in our common stock and related derivative securities. Our policy designates certain regular periods, dictated by release of financial results, in which trading is restricted for individuals in information-sensitive positions, including directors and executive officers. In addition, additional periods of trading restriction may be imposed as determined by the President and Chief Executive Officer, General Counsel, or Chief Financial Officer in light of material pending developments. Further, during permitted windows, certain individuals in information-sensitive positions are required to seek pre-clearance for trades from the General Counsel, who assesses whether there are any important pending developments which need to be made public before the individual may participate in the market.

Periodically, certain of our executive officers adopt written stock trading plans in accordance with Rule 10b5-1 under the Exchange Act and our own Stock Trading Policy. A Rule 10b5-1 Trading Plan is a written document that pre-establishes the amount, prices and dates (or formulas for determining the amounts, prices and dates) of future purchases or sales of our stock, including shares issued upon exercise of stock options or vesting of deferred stock units. These plans are entered into at a time when the person is not in possession of material non-public information about the Company. In addition to any plans described in Part II, Item 5 of this Quarterly Report on Form 10-Q, we disclose details regarding individual Rule 10b5-1 Trading Plans on the Investor Relations section of our website.

Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a GAAP basis, we disclose certain non-GAAP financial measures, including adjusted net income (loss), adjusted net income (loss) attributable to Boston Scientific common stockholders and adjusted net income (loss) per share (EPS) that exclude certain charges (credits); operational net sales, which exclude the impact of foreign currency fluctuations; and organic net sales, which exclude the impact of foreign currency fluctuations as well as the impact of acquisitions and divestitures with less than a full period of comparable net sales. These non-GAAP financial measures are not in accordance with generally accepted accounting principles in the United States and should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. Further, other companies may calculate these non-GAAP financial measures differently than we do, which may limit the usefulness of those measures for comparative purposes.

To calculate adjusted net income (loss), adjusted net income (loss) attributable to Boston Scientific common stockholders and adjusted net income (loss) per share we exclude certain charges (credits) from GAAP net income and GAAP net income attributable to Boston Scientific common stockholders, which include amortization expense, goodwill and intangible asset impairment charges, acquisition/divestiture-related net charges (credits), investment portfolio gains and losses, restructuring and restructuring-related net charges (credits), certain litigation-related net charges (credits), EU MDR implementation costs, debt extinguishment charges, deferred tax expenses (benefits) and discrete tax items. Amounts are presented after-tax using our effective tax rate, unless the amount is a significant unusual or infrequently occurring item in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 740-270-30, “General Methodology and Use of Estimated Annual Effective Tax Rate.” Please refer to Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations in our most recent Annual Report filed on Form 10-K filed with the Securities and Exchange Commission for an explanation of each of these adjustments and the reasons for excluding each item.

The GAAP financial measures most directly comparable to adjusted net income (loss), adjusted net income (loss) attributable to Boston Scientific common stockholders and adjusted net income (loss) per share are GAAP net income (loss), GAAP net income (loss) attributable to Boston Scientific common stockholders and GAAP net income (loss) per common share – diluted, respectively.

To calculate operational net sales growth rates, which exclude the impact of foreign currency fluctuations, we convert actual net sales from local currency to U.S. dollars using constant foreign currency exchange rates in the current and prior periods. To calculate organic net sales growth rates, we also remove the impact of acquisitions and divestitures with less than a full period of comparable net sales. The GAAP financial measure most directly comparable to operational net sales and organic net sales is net sales on a GAAP basis.

Reconciliations of each of these non-GAAP financial measures to the corresponding GAAP financial measure are included in the relevant sections of this Quarterly Report on Form 10-Q.

Management uses these supplemental non-GAAP financial measures to evaluate performance period over period, to analyze the underlying trends in our business, to assess our performance relative to our competitors and to establish operational goals and forecasts that are used in allocating resources. In addition, management uses these non-GAAP financial measures to further its understanding of the performance of our operating segments. The adjustments excluded from our non-GAAP financial measures are consistent with those excluded from our operating segments’ measures of net sales and profit or loss. These adjustments are excluded from the segment measures reported to our chief operating decision maker that are used to make operating decisions and assess performance.

We believe that presenting adjusted net income (loss), adjusted net income (loss) attributable to Boston Scientific common stockholders, adjusted net income (loss) per share, operational net sales and organic net sales growth rates, in addition to the corresponding GAAP financial measures, provides investors greater transparency to the information used by management for its operational decision-making and allows investors to see our results “through the eyes” of management. We further believe that providing this information assists our investors in understanding our operating performance and the methodology used by management to evaluate and measure such performance.

Safe Harbor for Forward-Looking Statements

Certain statements that we may make from time to time, including statements contained in this Quarterly Report on Form 10-Q and information incorporated by reference herein, constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “estimate,” “intend,” “aim,” "goal," "target," "continue," "hope," "may" and similar words. These forward-looking statements are based on our beliefs, assumptions and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. If our underlying assumptions turn out to be incorrect, or if certain risks or uncertainties materialize, actual results could vary materially from the expectations and projections expressed or implied by our forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q are based on certain risks and uncertainties, including the risk factors described in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K and the specific risk factors discussed herein and in connection with forward-looking statements throughout this Quarterly Report on Form 10-Q, which could cause actual results to vary materially from the expectations and projections expressed or implied by our forward-looking statements. These risks and uncertainties, in some cases, have affected and in the future could affect our ability to implement our business strategy and may cause actual results to differ materially from those contemplated by the statements expressed in this Quarterly Report on Form 10-Q. As a result, readers are cautioned not to place undue reliance on any of our forward-looking statements. Risks and uncertainties that may cause such differences include, among other things: the impact of foreign currency fluctuations, future U.S. and global economic, political, competitive, reimbursement and regulatory conditions; manufacturing, distribution and supply chain disruptions and cost increases; disruptions caused by cybersecurity events; the impact of pandemics on our operations and financial results; disruptions caused by extreme weather or other climate change-related events; labor shortages and increases in labor costs; new product introductions and the market acceptance of those products; markets for our products; expected pricing environment; expected procedural volumes; the closing and integration of acquisitions; clinical trial results; demographic trends; intellectual property rights; litigation; financial market conditions; the execution and effect of our restructuring program; the execution and effect of our business strategy, including our cost-savings and growth initiatives; our ability to achieve environmental, social and governance goals and commitments; and future business decisions made by us and our competitors. New risks and uncertainties may arise from time to time and are difficult to predict. All of these factors are difficult or impossible to predict accurately and many of them are beyond our control. For a further list and description of these and other important risks and uncertainties that may affect our future operations, refer to Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission, which we may update in Part II, Item 1A. Risk Factors in subsequent Quarterly Reports on Form 10-Q that we will file hereafter. We disclaim any intention or obligation to publicly update or revise any forward-looking statement to reflect any change in our expectations or in events, conditions, or circumstances on which those expectations may be based, or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. This cautionary statement is applicable to all forward-looking statements contained in this Quarterly Report.

The following are some of the important risk factors that could cause our actual results to differ materially from our expectations in any forward-looking statements. For further discussion of these and other risk factors, refer to Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K.

Our Businesses

• Labor shortages and the impact of inflation on the cost of raw materials and direct labor,

• Risks associated with challenging or uncertain domestic and international economic conditions, including those related to rising interest rates, inflation, supply chain disruptions and constraints, adverse developments and volatility in the banking industry, currency devaluations or economies entering into periods of recession,

• The impact of the COVID-19 pandemic and economic conditions created in part by the pandemic on worldwide economies, financial markets, manufacturing and distribution systems, including disruption in the manufacture or supply of certain components, materials or products, and business operations,

• The impact of natural disasters, climate change, additional future public health crises and other catastrophic events on our ability to manufacture, distribute and sell our products,

• The impact of competitive offerings, value-based procurement practices, government-imposed payback provisions and changes in reimbursement practices and policies on average selling prices for our products,

• The ongoing impact on our business of physician alignment to hospitals, governmental investigations and audits of hospitals and other market and economic conditions on the overall number of procedures performed,

• The performance of, and physician and patient confidence in, our products and technologies or those of our competitors,

• The impact and outcome of ongoing and future clinical trials and market studies undertaken by us, our competitors or other third parties or perceived product performance of our or our competitors' products,

• Variations in clinical results, reliability or product performance of our and our competitors' products,

• Our ability to acquire or develop, launch and supply new or next-generation products and technologies worldwide and in line with our commercialization strategies in a timely and successful manner and with respect to our recent acquisitions,

• The effect of consolidation and competition in the markets in which we do business or plan to do business,

• Our ability to achieve our projected level or mix of product sales, as some of our products are more profitable than others,

• Our ability to attract and retain talent, including key personnel associated with recent acquisitions, and to maintain our robust corporate culture,

• The impact of enhanced requirements to obtain and maintain regulatory approval in the U.S. and around the world, including EU MDR and the associated timing and cost of product approval,

• The impact of increased pressure on the availability and rate of third-party reimbursement for our products and procedures in the U.S. and around the world, including with respect to the timing and costs of creating and expanding markets for new products and technologies,

• The issuance of new or revised accounting standards by the Financial Accounting Standards Board or the Securities and Exchange Commission, and

• The impact of potential goodwill and intangible asset impairment charges on our results of operations.

Regulatory Compliance, Litigation and Data Protection

• The impact of healthcare policy changes and legislative or regulatory efforts in the U.S., the EU and around the world to modify product approval or reimbursement processes, including a trend toward demonstrating clinical outcomes, comparative effectiveness and cost efficiency, as well as the impact of other healthcare reform legislation,

• Risks associated with our regulatory compliance and quality systems and activities in the U.S., the EU and around the world, including meeting regulatory standards applicable to manufacturing and quality processes,

• The effect of global legal, regulatory or market responses to climate change, including increased compliance burdens and costs to meet regulatory obligations,

• Our ability to minimize or avoid future field actions or FDA warning letters relating to our products and processes and the ongoing inherent risk of potential physician advisories related to our or our competitors' products,

• The impact of increased scrutiny of and heightened global regulatory enforcement facing the medical device industry arising from political and regulatory changes, economic pressures or otherwise, including under U.S. Anti-Kickback Statute, U.S. False Claims Act and similar laws in other jurisdictions, U.S. Foreign Corrupt Practices Act (FCPA) and similar laws in other jurisdictions, and U.S. and foreign export control, trade embargo and customs laws,

• Costs and risks associated with current and future asserted litigation,

• The effect of our litigation and risk management practices, including self-insurance and compliance activities on our loss contingencies, legal provisions and cash flows,

• The impact of, diversion of management attention as a result of, and costs to cooperate with, litigate and/or resolve governmental investigations and our class action, product liability, contract and other legal proceedings,

• The possibility of failure to protect our intellectual property rights and the outcome of patent litigation,

• Our ability to operate properly our information systems that support our business operations and protect our data integrity and products from a cyber-attack or other breach that has a material adverse effect on our business, reputation or results of operations, including increased risks as an indirect result of the ongoing Russia/ Ukraine war and/or Israel/Hamas war, and

• The potential impact to internal control over financial reporting relating to potential restrictions to access to consigned inventory at customer locations for our inventory count procedures.

Innovation and Certain Growth Initiatives

• The timing, size and nature of our strategic growth initiatives and market opportunities, including with respect to our internal research and development platforms and externally available research and development platforms and technologies and the ultimate cost and success of those initiatives and opportunities,

• Our ability to complete planned clinical trials successfully, obtain regulatory approvals and launch new and next generation products in a timely manner consistent with cost estimates, including the successful completion of projects from in-process research and development,

• Our ability to identify and prioritize our internal research and development project portfolio and our external investment portfolio on profitable net sales growth opportunities as well as to maintain the estimated timing and costs of such projects and expected revenue levels for the resulting products and technologies,

• Our ability to develop, manufacture and market new products and technologies successfully and in a timely manner and the ability of our competitors and other third parties to develop products or technologies that render our products or technologies noncompetitive or obsolete,

• Our ability to execute appropriate decisions to discontinue, write-down or reduce the funding of any of our research and development projects, including projects from in-process research and development from our acquisitions, in our growth adjacencies or otherwise,

• Our dependence on acquisitions, alliances or investments to introduce new products or technologies and to enter new or adjacent growth markets and our ability to fund them or to fund contingent payments with respect to those acquisitions, alliances and investments, and

• The potential failure to complete, successfully integrate and/or realize the expected benefits, including cost synergies, from the strategic acquisitions, alliances and investments we have consummated or may consummate in the future.

International Markets

• Our dependency on international net sales to achieve growth, and our ability to maintain or expand our worldwide market positions in the various markets in which we compete or seek to compete, including through investments in Emerging Markets such as Brazil, India and China,

• The timing and collectability of customer payments, as well as our ability to continue factoring customer receivables where we have factoring arrangements, or to enter new factoring arrangements with favorable terms,

• The impact on pricing due to national and regional tenders, including value-based procurement practices and government-imposed payback provisions,

• Geopolitical and economic conditions, including civil unrest, terrorist activity, governmental changes, restrictions on the ability to transfer capital across borders, tariffs and other protectionist measures,

• The impact of the Russia/Ukraine war, Israel/Hamas war, tension between China/Taiwan, and related, downstream effects thereof, including the impact of sanctions on U.S. manufacturers doing business in these regions,

• Protection of our intellectual property,

• Our ability to comply with established and developing U.S. and foreign legal and regulatory requirements, including FCPA, EU MDR and similar laws in other jurisdictions,

• Our ability to comply with U.S. and foreign export control, trade embargo and customs laws,

• The impact of significant developments or uncertainties stemming from changes in the U.S. government following congressional elections, including changes in U.S. trade policies, tariffs and the reaction of other countries thereto, particularly China, and

• The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, operating expenses and resulting profit margins.

Liquidity

• Our ability to generate sufficient cash flow to fund operations, capital expenditures, global expansion initiatives, any litigation settlements and judgments, share repurchases and strategic investments and acquisitions as well as maintaining our investment grade ratings and managing our debt levels and financial covenant compliance,

• Our ability to access the public and private capital markets when desired and to issue debt or equity securities on terms reasonably acceptable to us,

• The unfavorable resolution of open tax matters, exposure to additional tax liabilities and the impact of changes in U.S. and international tax laws,

• The unfavorable resolution of open litigation matters, exposure to additional loss contingencies and legal provisions,

• The impact of examinations and assessments by domestic and international taxing authorities on our tax provisions, financial condition or results of operations,

• The possibility of counterparty default on our derivative financial instruments, and

• Our ability to collect outstanding and future receivables and/or sell receivables under our factoring programs.

Cost Reduction and Optimization Initiatives

• Risks associated with changes made or expected to be made to our organizational and operational structure, pursuant to our restructuring plans as well as any further restructuring or optimization plans we may undertake in the future and our ability to recognize benefits and cost reductions from such programs, and

• Business disruption and employee distraction as we execute our global compliance program, restructuring and optimization plans and divestitures of assets or businesses and implement our other strategic and cost reduction initiatives.