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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-11083
BOSTON SCIENTIFIC CORPORATION
(Exact name of registrant as specified in its charter)

Delaware |  | 04-2695240
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

300 Boston Scientific Way, Marlborough, Massachusetts 01752-1234
(Address of Principal Executive Offices) (Zip Code)
508 683-4000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.01 per share |  | BSX |  | New York Stock Exchange
0.625% Senior Notes due 2027 |  | BSX27 |  | New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☑ | Accelerated filer | ☐
Non-accelerated filer | ☐ | Smaller reporting company | ☐
|  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
The number of shares outstanding of Common Stock, $0.01 par value per share, as of October 31, 2023 was 1,464,982,777.

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TABLE OF CONTENTS

|  | Page No.
PART I | FINANCIAL INFORMATION | 3
ITEM 1. | Consolidated Financial Statements | 3
| Consolidated Statements of Operations (Unaudited) | 3
| Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | 4
| Consolidated Balance Sheets (Unaudited) | 5
| Consolidated Statements of Stockholders' Equity (Unaudited) | 6
| Consolidated Statements of Cash Flows (Unaudited) | 7
| Notes to the Consolidated Financial Statements (Unaudited) | 9
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 38
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 57
ITEM 4. | Controls and Procedures | 58
PART II | OTHER INFORMATION | 59
ITEM 1. | Legal Proceedings | 59
ITEM 1A. | Risk Factors | 59
ITEM 5. | Other Information | 59
ITEM 6. | Exhibits | 59
SIGNATURE |  | 60

2

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PART I
FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions, except per share data) | 2023 |  | 2022 |  | 2023 |  | 2022
Net sales | $ | 3,527 |  |  | $ | 3,170 |  |  | $ | 10,515 |  |  | $ | 9,440 |
Cost of products sold | 1,101 |  |  | 979 |  |  | 3,198 |  |  | 2,945 |
Gross profit | 2,426 |  |  | 2,191 |  |  | 7,317 |  |  | 6,495 |
Operating expenses: |  |  |  |  |  |  |
Selling, general and administrative expenses | 1,242 |  |  | 1,132 |  |  | 3,811 |  |  | 3,357 |
Research and development expenses | 356 |  |  | 339 |  |  | 1,051 |  |  | 993 |
Royalty expense | 11 |  |  | 11 |  |  | 35 |  |  | 34 |
Amortization expense | 208 |  |  | 202 |  |  | 620 |  |  | 604 |
Intangible asset impairment charges | 1 |  |  | 125 |  |  | 58 |  |  | 132 |
Contingent consideration net expense (benefit) | 12 |  |  | 20 |  |  | 43 |  |  | 68 |
Restructuring net charges (credits) | 15 |  |  | 4 |  |  | 51 |  |  | 18 |
Litigation-related net charges (credits) | (111) |  |  | — |  |  | (111) |  |  | 42 |
| 1,733 |  |  | 1,833 |  |  | 5,558 |  |  | 5,248 |
Operating income (loss) | 693 |  |  | 358 |  |  | 1,759 |  |  | 1,247 |
Other income (expense): |  |  |  |  |  |  |
Interest expense | (66) |  |  | (63) |  |  | (200) |  |  | (406) |
Other, net | (18) |  |  | (51) |  |  | (78) |  |  | (96) |
Income (loss) before income taxes | 610 |  |  | 245 |  |  | 1,480 |  |  | 745 |
Income tax expense (benefit) | 105 |  |  | 57 |  |  | 392 |  |  | 188 |
Net income (loss) | 504 |  |  | 188 |  |  | 1,088 |  |  | 558 |
Preferred stock dividends | — |  |  | (14) |  |  | (23) |  |  | (42) |
Net income (loss) attributable to noncontrolling interests | (0) |  |  | — |  |  | (0) |  |  | — |
Net income (loss) attributable to Boston Scientific common stockholders | $ | 505 |  |  | $ | 174 |  |  | $ | 1,065 |  |  | $ | 516 |
Net income (loss) per common share — basic | $ | 0.34 |  |  | $ | 0.12 |  |  | $ | 0.74 |  |  | $ | 0.36 |
Net income (loss) per common share — diluted | $ | 0.34 |  |  | $ | 0.12 |  |  | $ | 0.73 |  |  | $ | 0.36 |
Weighted-average shares outstanding |  |  |  |  |  |  |
Basic | 1,464.5 |  |  | 1,431.6 |  |  | 1,448.8 |  |  | 1,429.7 |
Diluted | 1,475.0 |  |  | 1,440.0 |  |  | 1,459.1 |  |  | 1,438.7 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
3

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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Net income (loss) | $ | 504 |  |  | $ | 188 |  |  | $ | 1,088 |  |  | $ | 558 |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |
Foreign currency translation adjustment | 21 |  |  | 26 |  |  | (7) |  |  | 39 |
Net change in derivative financial instruments | 3 |  |  | 72 |  |  | (25) |  |  | 229 |
Net change in defined benefit pensions and other items | (0) |  |  | 1 |  |  | (5) |  |  | 1 |
Other comprehensive income (loss) | 23 |  |  | 99 |  |  | (37) |  |  | 269 |
Comprehensive income (loss) | $ | 528 |  |  | $ | 287 |  |  | $ | 1,051 |  |  | $ | 827 |
Comprehensive income attributable to noncontrolling interests | (16) |  |  | — |  |  | (16) |  |  | — |
Comprehensive income attributable to Boston Scientific common stockholders | $ | 511 |  |  | $ | 287 |  |  | $ | 1,035 |  |  | $ | 827 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

| As of
(in millions, except share and per share data) | September 30, 2023 |  | December 31, 2022
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 952 |  |  | $ | 928 |
Trade accounts receivable, net | 2,101 |  |  | 1,970 |
Inventories | 2,404 |  |  | 1,867 |
Prepaid income taxes | 307 |  |  | 264 |
Other current assets | 741 |  |  | 731 |
Total current assets | 6,504 |  |  | 5,760 |
Property, plant and equipment, net | 2,635 |  |  | 2,446 |
Goodwill | 13,608 |  |  | 12,920 |
Other intangible assets, net | 5,849 |  |  | 5,902 |
Deferred tax assets | 3,840 |  |  | 3,942 |
Other long-term assets | 1,605 |  |  | 1,500 |
TOTAL ASSETS | $ | 34,043 |  |  | $ | 32,469 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |
Current liabilities: |  |  |
Current debt obligations | $ | 513 |  |  | $ | 20 |
Accounts payable | 929 |  |  | 862 |
Accrued expenses | 2,255 |  |  | 2,160 |
Other current liabilities | 882 |  |  | 761 |
Total current liabilities | 4,579 |  |  | 3,803 |
Long-term debt | 8,386 |  |  | 8,915 |
Deferred income taxes | 91 |  |  | 144 |
Other long-term liabilities | 1,858 |  |  | 2,035 |
Commitments and contingencies |  |  |
Stockholders’ equity |  |  |
Preferred stock, $0.01 par value - authorized 50,000,000 shares - 0 shares issued as of September 30, 2023 and 10,062,500 shares as of December 31, 2022 | — |  |  | — |
Common stock, $0.01 par value - authorized 2,000,000,000 shares - issued 1,728,158,524 shares as of September 30, 2023 and 1,696,633,993 shares as of December 31, 2022 | 17 |  |  | 17 |
Treasury stock, at cost - 263,289,848 shares as of September 30, 2023 and December 31, 2022 | (2,251) |  |  | (2,251) |
Additional paid-in capital | 20,573 |  |  | 20,289 |
Retained earnings/(Accumulated deficit) | 315 |  |  | (750) |
Accumulated other comprehensive income (loss), net of tax | 231 |  |  | 269 |
Total stockholders’ equity | 18,886 |  |  | 17,573 |
Noncontrolling interests | 243 |  |  | — |
Total equity | 19,129 |  |  | 17,573 |
TOTAL LIABILITIES AND EQUITY | $ | 34,043 |  |  | $ | 32,469 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions, except share data) | 2023 |  | 2022 |  | 2023 |  | 2022
Preferred stock shares issued |  |  |  |  |  |  |
Beginning | — |  |  | 10,062,500 |  |  | 10,062,500 |  |  | 10,062,500 |
Conversion of mandatory convertible preferred stock to common stock | — |  |  | — |  |  | (10,062,500) |  |  | — |
Ending | — |  |  | 10,062,500 |  |  | — |  |  | 10,062,500 |
Common stock shares issued |  |  |  |  |  |  |
Beginning | 1,725,956,141 |  |  | 1,693,192,785 |  |  | 1,696,633,993 |  |  | 1,688,810,052 |
Impact of stock-based compensation plans | 2,202,383 |  |  | 2,204,851 |  |  | 7,541,629 |  |  | 6,587,584 |
Conversion of mandatory convertible preferred stock to common stock | — |  |  | — |  |  | 23,982,902 |  |  | — |
Ending | 1,728,158,524 |  |  | 1,695,397,636 |  |  | 1,728,158,524 |  |  | 1,695,397,636 |
Preferred stock |  |  |  |  |  |  |
Beginning | $ | — |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Conversion of mandatory convertible preferred stock to common stock | — |  |  | — |  |  | (0) |  |  | — |
Ending | $ | — |  |  | $ | 0 |  |  | — |  |  | $ | 0 |
Common stock |  |  |  |  |  |  |
Beginning | $ | 17 |  |  | $ | 17 |  |  | $ | 17 |  |  | $ | 17 |
Impact of stock-based compensation plans | 0 |  |  | 0 |  |  | 0 |  |  | 0 |
Conversion of mandatory convertible preferred stock to common stock | — |  |  | — |  |  | 0 |  |  | — |
Ending | $ | 17 |  |  | $ | 17 |  |  | $ | 17 |  |  | $ | 17 |
Treasury stock |  |  |  |  |  |  |
Beginning | $ | (2,251) |  |  | $ | (2,251) |  |  | $ | (2,251) |  |  | $ | (2,251) |
Repurchase of common stock | — |  |  | — |  |  | — |  |  | — |
Ending | $ | (2,251) |  |  | $ | (2,251) |  |  | $ | (2,251) |  |  | $ | (2,251) |
Additional paid-in capital |  |  |  |  |  |  |
Beginning | $ | 20,441 |  |  | $ | 20,103 |  |  | $ | 20,289 |  |  | $ | 19,986 |
Impact of stock-based compensation plans | 132 |  |  | 116 |  |  | 285 |  |  | 233 |
Ending | $ | 20,573 |  |  | $ | 20,219 |  |  | $ | 20,573 |  |  | $ | 20,219 |
Retained earnings/(Accumulated deficit) |  |  |  |  |  |  |
Beginning | $ | (189) |  |  | $ | (1,050) |  |  | $ | (750) |  |  | $ | (1,392) |
Net income (loss) | 504 |  |  | 188 |  |  | 1,088 |  |  | 558 |
Net income (loss) attributable to noncontrolling interests | 0 |  |  | — |  |  | 0 |  |  | — |
Preferred stock dividends | — |  |  | (14) |  |  | (23) |  |  | (42) |
Ending | $ | 315 |  |  | $ | (876) |  |  | $ | 315 |  |  | $ | (876) |
Accumulated other comprehensive income (loss), net of tax |  |  |  |  |  |  |
Beginning | $ | 208 |  |  | $ | 433 |  |  | $ | 269 |  |  | $ | 263 |
Changes in other comprehensive income (loss) | 23 |  |  | 99 |  |  | (37) |  |  | 269 |
Ending | $ | 231 |  |  | $ | 532 |  |  | $ | 231 |  |  | $ | 532 |
Total stockholders' equity | $ | 18,886 |  |  | $ | 17,640 |  |  | 18,886 |  |  | 17,640 |
Noncontrolling interests |  |  |  |  |  |  |
Beginning | $ | 259 |  |  | $ | — |  |  | — |  |  | — |
Net income (loss) attributable to noncontrolling interests | (0) |  |  | — |  |  | (0) |  |  | — |
Changes in other comprehensive income (loss) | (16) |  |  | — |  |  | (16) |  |  | — |
Changes to noncontrolling ownership interest | — |  |  | — |  |  | 259 |  |  | — |
Ending | $ | 243 |  |  | $ | — |  |  | 243 |  |  | — |
Total equity | $ | 19,129 |  |  | $ | 17,640 |  |  | 19,129 |  |  | 17,640 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

| Nine Months Ended September 30,
(in millions) | 2023 |  | 2022
Net income (loss) | $ | 1,088 |  |  | $ | 558 |
Adjustments to reconcile net income (loss) to cash provided by (used for) operating activities |  |  |
Depreciation and amortization | 883 |  |  | 842 |
Deferred and prepaid income taxes | (74) |  |  | (70) |
Stock-based compensation expense | 174 |  |  | 165 |
Goodwill and other intangible asset impairment charges | 58 |  |  | 132 |
Net loss (gain) on investments and notes receivable | 48 |  |  | 46 |
Contingent consideration net expense (benefit) | 43 |  |  | 68 |
Inventory step-up amortization | 6 |  |  | 32 |
Debt extinguishment costs | — |  |  | 194 |
Other, net | 33 |  |  | 92 |
Increase (decrease) in operating assets and liabilities, excluding purchase accounting: |  |  |
Trade accounts receivable | (164) |  |  | (176) |
Inventories | (601) |  |  | (275) |
Other assets | (43) |  |  | (298) |
Accounts payable, accrued expenses and other liabilities | 95 |  |  | (590) |
Cash provided by (used for) operating activities | 1,546 |  |  | 719 |
Investing activities: |  |  |
Purchases of property, plant and equipment and internal use software | (444) |  |  | (376) |
Proceeds from sale of property, plant and equipment | 4 |  |  | 10 |
Payments for acquisitions of businesses, net of cash acquired | (1,018) |  |  | (1,542) |
Proceeds from (payments for) investments and acquisitions of certain technologies | (89) |  |  | (31) |
Proceeds from royalty rights | 23 |  |  | 54 |
Proceeds from (payments for) settlements of hedge contracts | 2 |  |  | 56 |
Cash provided by (used for) investing activities | (1,521) |  |  | (1,828) |
Financing activities: |  |  |
Payment of contingent consideration previously established in purchase accounting | (39) |  |  | (335) |
Payments for royalty rights | (50) |  |  | (75) |
Payments on short-term borrowings | — |  |  | (250) |
Net increase (decrease) in commercial paper | (4) |  |  | (1) |
Payments on long-term borrowings and debt extinguishment costs | — |  |  | (3,184) |
Proceeds from long-term borrowings, net of debt issuance costs | — |  |  | 3,270 |
Cash dividends paid on preferred stock | (28) |  |  | (42) |
Cash used to net share settle employee equity awards | (54) |  |  | (49) |
Proceeds from issuances of common stock pursuant to employee stock compensation and purchase plans | 165 |  |  | 117 |
Cash provided by (used for) financing activities | (10) |  |  | (549) |
Effect of foreign exchange rates on cash | (8) |  |  | (12) |
Net increase (decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents | 7 |  |  | (1,671) |
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period | 1,126 |  |  | 2,168 |
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | 1,132 |  |  | $ | 497 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
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BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(SUPPLEMENTAL INFORMATION)

| Nine Months Ended September 30,
(in millions) | 2023 |  | 2022
Supplemental Information |  |  |
Stock-based compensation expense | $ | 174 |  |  | $ | 165 |
Non-cash impact of transferred royalty rights | (23) |  |  | (54) |

| As of September 30,
Reconciliation to amounts within the unaudited consolidated balance sheets: | 2023 |  | 2022
Cash and cash equivalents | $ | 952 |  |  | $ | 338 |
Restricted cash and restricted cash equivalents included in Other current assets | 123 |  |  | 112 |
Restricted cash equivalents included in Other long-term assets | 58 |  |  | 48 |
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | $ | 1,132 |  |  | $ | 497 |

Refer to notes to the unaudited consolidated financial statements. Amounts may not foot due to rounding.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE A – BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Boston Scientific Corporation have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and with the instructions to Form 10-Q and Article 10 of Regulation S-X, and they do not include all of the information and footnotes required by GAAP for complete financial statements. When used in this report, the terms, "we," "us," "our," and "the Company" mean Boston Scientific Corporation and its divisions and subsidiaries. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for fair presentation have been included. Operating results for the three and nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. Accordingly, our unaudited consolidated financial statements and footnotes thereto should be read in conjunction with our audited consolidated financial statements and footnotes thereto included in Item 8 of our most recent Annual Report on Form 10-K.
The accompanying unaudited consolidated financial statements include the accounts of the Company's wholly owned- subsidiaries and entities for which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated in consolidation. In the first quarter of 2023, we acquired a majority stake investment in Acotec Scientific Holdings Limited (Acotec) and have elected to consolidate their financial statements on a one quarter lag.
Amounts reported in millions within this Quarterly Report on Form 10-Q are computed based on the amounts in thousands. As a result, the sum of the components may not equal the total amount reported in millions due to rounding. Certain columns and rows within tables may not add due to the use of rounded numbers. Percentages presented are calculated from the underlying unrounded amounts.
Subsequent Events
We evaluate events occurring after the date of our accompanying unaudited consolidated balance sheet for potential recognition or disclosure in our financial statements. Those items requiring recognition in the financial statements have been recorded and disclosed accordingly.
Those items requiring disclosure (non-recognized subsequent events) in the financial statements have been disclosed accordingly. Refer to Note H – Commitments and Contingencies for further details.
NOTE B – ACQUISITIONS, DIVESTITURES AND STRATEGIC INVESTMENTS
Our accompanying unaudited consolidated financial statements include the operating results for acquired entities from the respective dates of acquisition. We have not presented supplemental pro forma financial information for completed acquisitions or divestitures given their results are not material to our accompanying unaudited consolidated financial statements. Further, transaction costs were immaterial to our accompanying unaudited consolidated financial statements and were expensed as incurred.
On September 19, 2023, we announced our entry into a definitive agreement to acquire 100 percent of Relievant Medsystems, Inc. (Relievant Medsystems), a privately held medical technology company that developed and commercialized the Intracept® Intraosseous Nerve Ablation System to treat vertebrogenic pain, a form of chronic low back pain. The transaction price consists of an upfront cash payment of $850 million and additional contingent payments based on sales performance over the next three years. The transaction is expected to close in the first half of 2024, subject to customary closing conditions. Following the closing of the acquisition, we plan to integrate the Relievant Medsystems business into our Neuromodulation division.
2023 Acquisitions
On April 4, 2023, we completed our acquisition of 100 percent of the outstanding equity of Apollo Endosurgery, Inc. (Apollo), a public company which offers a portfolio of devices used during endoluminal procedures to close gastrointestinal defects, manage gastrointestinal complications and aid in weight loss for patients suffering from obesity. The transaction consisted of an upfront cash payment of $636 million, net of cash acquired. The Apollo business is being integrated into our Endoscopy division.
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On February 20, 2023, we completed the acquisition of a majority stake investment in Acotec, a publicly traded Chinese manufacturer of drug-coated balloons used in the treatment of vascular and other diseases. We acquired approximately 65 percent of the outstanding shares of Acotec, for an upfront cash payment of HK$20.00 per share, or $519 million at foreign currency exchange rates at closing. The Acotec portfolio complements our existing Peripheral Interventions portfolio.
Purchase Price Allocation
We accounted for these transactions as business combinations in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 805, Business Combinations (FASB ASC Topic 805). The preliminary purchase prices were comprised of the amounts presented below:

(in millions) | Acotec(1) | Apollo |  |
Payment for acquisition, net of cash acquired (2) | $ | 381 |  | $ | 636 |  |  |
| $ | 381 |  | $ | 636 |  |  |

(1) Excludes approximately $140 million of cash on hand at the closing of the transaction
(2) Represents majority stake investment in Acotec
We recorded the assets acquired, liabilities assumed and specific to Acotec, the noncontrolling interest, at their respective fair values as of the closing of the transaction. The preliminary purchase price allocations were comprised of the following components and the final determination of the fair value of certain assets and liabilities will be completed within the measurement period in accordance with FASB ASC Topic 805:

(in millions) | Acotec | Apollo
Goodwill | $ | 338 |  | $ | 379 |
Amortizable intangible assets | 334 |  | 248 |
Other assets acquired | 93 |  | 50 |
Liabilities assumed | (48) |  | (33) |
Net deferred tax liabilities | (77) |  | (7) |
Fair value of noncontrolling interest | (259) |  | — |
| $ | 381 |  | $ | 636 |

The fair value of Acotec's noncontrolling interest was based on the publicly traded market value of the remaining 35 percent of the outstanding shares we did not acquire as of the transaction date and is presented within Stockholders' equity within our accompanying unaudited consolidated balance sheets. Goodwill was primarily established for Acotec due to opportunities for collaboration in research and development, manufacturing and commercial strategies and for Apollo due to synergies expected to be gained from leveraging our existing operations, as well as revenue and cash flow projections associated with future technologies, none of which is deductible for tax purposes.
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We allocated a portion of the purchase price to the specific intangible asset categories as follows:

| Amount Assigned (in millions) |  | Weighted Average Amortization Period (in years) |  | Risk-Adjusted Discount Rates used in Purchase Price Allocation
Acotec: |  |  |  |  |
Amortizable intangible assets: |  |  |  |  |
Technology-related | $ | 308 |  |  | 11 |  | 14%
Customer relationships | 15 |  |  | 11 |  | 14%
Other intangible assets | 11 |  |  | 13 |  | 14%
| $ | 334 |  |  |  |  |
Apollo: |  |  |  |  |
Amortizable intangible assets: |  |  |  |  |
Technology-related | $ | 222 |  |  | 11 |  | 12%
Customer relationships | 26 |  |  | 11 |  | 12%
| $ | 248 |  |  |  |  |

2022 Acquisition
On February 14, 2022, we completed our acquisition of Baylis Medical Company Inc. (Baylis Medical), a privately-held company which developed the radiofrequency (RF) NRG™ and VersaCross™ Transseptal Platforms as well as a family of guidewires, sheaths and dilators used to support left heart access, which expanded our electrophysiology and structural heart product portfolios. The transaction consisted of an upfront cash payment of $1.463 billion, net of cash acquired, subject to closing adjustments. We are integrating the Baylis Medical business into our Cardiology division.
Purchase Price Allocation
We accounted for the acquisition of Baylis Medical as a business combination in accordance with FASB ASC Topic 805. The final purchase price was comprised of the amount presented below:

(in millions) |
Payment for acquisition, net of cash acquired | $ | 1,463 |
| $ | 1,463 |

We recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The final purchase price allocation was comprised of the following components:

(in millions) |  |
Goodwill | $ | 988 |  |
Amortizable intangible assets | 657 |  |
Other assets acquired | 112 |  |
Liabilities assumed | (287) |  |
Net deferred tax liabilities | (7) |  |
| $ | 1,463 |  |

Goodwill was primarily established due to synergies expected to be gained from leveraging our existing operations, as well as revenue and cash flow projections associated with future technologies, and was deductible for tax purposes.
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We allocated a portion of the purchase price to the specific intangible asset categories as follows:

| Amount Assigned (in millions) |  | Weighted Average Amortization Period (in years) |  | Risk-Adjusted Discount Rates used in Purchase Price Allocation
Amortizable intangible assets: |  |  |  |  |
Technology-related | $ | 622 |  |  | 11 |  | 11%
Other intangible assets | 36 |  |  | 11 |  | 11%
| $ | 657 |  |  |  |  |

Contingent Consideration
None of our acquisitions that closed during 2023 or 2022 contained contingent consideration arrangements. Changes in the fair value of our contingent consideration liability during the first nine months of 2023 associated with prior period acquisitions were as follows:

(in millions) |
Balance as of December 31, 2022 | $ | 149 |
Contingent consideration net expense (benefit) | 43 |
Contingent consideration payments | (73) |
Balance as of September 30, 2023 | $ | 119 |

The payments made during the first nine months of 2023 primarily related to our 2021 acquisition of Farapulse, Inc. As of September 30, 2023, the maximum amount of future contingent consideration (undiscounted) that we could be required to pay associated with our completed acquisitions was approximately $380 million. Refer to Note B – Acquisitions and Strategic Investments to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K for additional information.
The recurring Level 3 fair value measurements of our contingent consideration liability that we expect to be required to settle include the following significant unobservable inputs:

Contingent Consideration Liability | Fair Value as of September 30, 2023 | Valuation Technique | Unobservable Input | Range | Weighted Average(1) |  |
R&D, Regulatory and Commercialization-based Milestones | $13 million | Discounted Cash Flow | Discount Rate | 1% | - | 2% | 1% |  |
Probability of Payment | 10% | - | 25% | 22% |  |
Projected Year of Payment | 2023 | - | 2025 | 2024 |  |
Revenue-based Payments | $106 million | Discounted Cash Flow | Discount Rate | 6% | - | 14% | 6% |  |
Probability of Payment | 100% | 100% |  |
Projected Year of Payment | 2023 | - | 2024 | 2023 |  |

(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected year of payment, the amount represents the median of the inputs and is not a weighted average.
Projected contingent payment amounts related to research and development (R&D), regulatory and commercialization-based milestones and revenue-based payments are discounted back to the current period, primarily using a discounted cash flow model. Significant increases or decreases in projected revenues, probabilities of payment, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement as of September 30, 2023.
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Strategic Investments
The aggregate carrying amount of our strategic investments was comprised of the following:

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Equity method investments | $ | 220 |  |  | $ | 188 |
Measurement alternative investments(1, 2) | 207 |  |  | 219 |
| $ | 427 |  |  | $ | 407 |

(1) Measurement alternative investments are privately-held equity securities without readily determinable fair values that are measured at cost less impairment, if any, adjusted to fair value for any observable price changes in orderly transactions for the identical or a similar investment of the same issuer, recognized in Other, net within our accompanying unaudited consolidated statements of operations.
(2) Includes publicly-held securities and convertible notes measured at fair value with changes in fair value recognized in Other, net within our accompanying unaudited consolidated statements of operations.
These investments are classified as Other long-term assets within our accompanying unaudited consolidated balance sheets, in accordance with GAAP and our accounting policies.
As of September 30, 2023, the cost of our aggregated equity method investments exceeded our share of the underlying equity in net assets by $236 million, which represents amortizable intangible assets, in-process research and development (IPR&D), goodwill and deferred tax liabilities.
NOTE C – GOODWILL AND OTHER INTANGIBLE ASSETS
The gross carrying amount of goodwill and other intangible assets and the related accumulated amortization for intangible assets subject to amortization and accumulated goodwill impairment charges are as follows:

| As of September 30, 2023 |  | As of December 31, 2022
(in millions) | Gross Carrying Amount |  | Accumulated Amortization/ Write-offs |  | Gross Carrying Amount |  | Accumulated Amortization/ Write-offs
Technology-related | $ | 12,935 |  |  | $ | (7,916) |  |  | $ | 12,397 |  |  | $ | (7,378) |
Patents | 477 |  |  | (384) |  |  | 486 |  |  | (394) |
Other intangible assets | 2,036 |  |  | (1,472) |  |  | 1,960 |  |  | (1,400) |
Amortizable intangible assets | $ | 15,447 |  |  | $ | (9,772) |  |  | $ | 14,843 |  |  | $ | (9,173) |
Goodwill | $ | 23,508 |  |  | $ | (9,900) |  |  | $ | 22,820 |  |  | $ | (9,900) |
IPR&D | $ | 54 |  |  |  |  | $ | 112 |  |  |
Technology-related | 120 |  |  |  |  | 120 |  |  |
Indefinite-lived intangible assets | $ | 174 |  |  |  |  | $ | 232 |  |  |

The increase in our balance of goodwill and amortizable intangible assets is related primarily to our majority stake investment in Acotec completed in the first quarter of 2023 and our acquisition of Apollo completed in the second quarter of 2023.
The following represents a roll-forward of our goodwill balance by global reportable segment:

(in millions) | MedSurg |  | Cardiovascular |  |  |  | Total
As of December 31, 2022 | $ | 4,237 |  |  | $ | 8,684 |  |  |  |  | $ | 12,920 |
Goodwill acquired | 379 |  |  | 338 |  |  |  |  | 717 |
Impact of foreign currency fluctuations and purchase price adjustments | (4) |  |  | (25) |  |  |  |  | (29) |
As of September 30, 2023 | $ | 4,611 |  |  | $ | 8,997 |  |  |  |  | $ | 13,608 |

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Goodwill and Intangible Asset Impairments
We did not record any goodwill impairment charges in the first nine months of 2023 or 2022. We test our goodwill balances in the second quarter of each year as of April 1 for impairment, or more frequently if impairment indicators are present or changes in circumstances suggest an impairment may exist.
We assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. We identified the following reporting units for purposes of our annual goodwill impairment test: Interventional Cardiology, Rhythm Management, Peripheral Interventions, Endoscopy, Urology and Neuromodulation. Based on the criteria prescribed in FASB ASC Topic 350, we aggregated the Interventional Cardiology Therapies and Watchman components of our Cardiology operating segment into a single Interventional Cardiology reporting unit and aggregated the Cardiac Rhythm Management and Electrophysiology components of our Cardiology operating segment into a single Rhythm Management reporting unit.
In the second quarter of 2023, we performed our annual goodwill impairment test utilizing both the qualitative and quantitative approach described in FASB ASC Topic 350, Intangibles - Goodwill and Other (FASB ASC Topic 350). The qualitative approach was used for testing reporting units where fair value has historically exceeded carrying value by greater than 100 percent, and all other reporting units were tested using the quantitative approach. For the reporting units tested using the qualitative approach, after assessing the totality of events, it was determined that it was not more likely than not that the fair value of the reporting units was less than their carrying value, and it was not deemed necessary to proceed to the quantitative test. For the reporting unit tested using the quantitative approach, we determined that the fair value of the reporting unit exceeded the carrying value and concluded that goodwill was not impaired or at risk of impairment. There were no impairment indicators in the third quarter of 2023 that necessitated an interim impairment test.
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 Intangible asset impairment charges of $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 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.
We review intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life. We test our indefinite-lived intangible assets at least annually during the third quarter for impairment and reassess their classification as indefinite-lived assets. In addition, we review our indefinite-lived intangible assets for classification and impairment more frequently if impairment indicators exist. During the third quarter of 2023, we performed our annual IPR&D impairment test and evaluated our indefinite-lived core technology assets for impairment and concluded the assets were not impaired. We also verified that the classification of IPR&D projects and our indefinite-lived core technology assets recognized within our unaudited consolidated balance sheets continues to be appropriate.
Refer to Note A – Significant Accounting Policies to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K for further discussion of our annual goodwill and intangible asset impairment testing.
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NOTE D – HEDGING ACTIVITIES AND FAIR VALUE MEASUREMENTS
Derivative Instruments and Hedging Activities
We address market risk from changes in foreign currency exchange rates and interest rates through risk management programs which include the use of derivative and nonderivative financial instruments. We manage concentration of counterparty credit risk by limiting acceptable counterparties to major financial institutions with investment grade credit ratings, limiting the amount of credit exposure to individual counterparties and actively monitoring counterparty credit ratings. We also employ master netting arrangements that limit the risk of counterparty non-payment on a particular settlement date to the net gain that would have otherwise been received from the counterparty. Although not completely eliminated, we do not consider the risk of counterparty default to be significant as a result of these protections. Further, none of our derivative instruments are subject to collateral or other security arrangements, nor do they contain provisions that are dependent on our credit ratings from any credit rating agency.
Currency Hedging Instruments
Our risk from changes in currency exchange rates consists primarily of monetary assets and liabilities, forecasted intercompany and third-party transactions, and net investments in certain subsidiaries. We manage currency exchange rate risk at a consolidated level to reduce the cost of hedging by taking advantage of offsetting transactions. We employ derivative and nonderivative instruments, primarily forward currency contracts, to reduce the risk to our earnings and cash flows associated with changes in currency exchange rates.
The success of our currency risk management program depends, in part, on forecast transactions denominated primarily in euro, British pound sterling, Swiss franc, Japanese yen, Chinese renminbi and Australian dollar. We may experience unanticipated currency exchange gains or losses to the extent the actual activity is different than forecast. In addition, changes in currency exchange rates related to any unhedged transactions may impact our earnings and cash flows.
Certain of our currency derivative instruments are designated as cash flow hedges under FASB ASC Topic 815, Derivatives and Hedging (FASB ASC Topic 815), and are intended to protect the U.S. dollar value of forecasted transactions. The gain or loss on a derivative instrument designated as a cash flow hedge is recorded in the Net change in derivative financial instruments component of Other comprehensive income (loss), net of tax (OCI) within our unaudited consolidated statements of comprehensive income (loss) until the underlying third-party transaction occurs. When the underlying third-party transaction occurs, we recognize the gain or loss in earnings within Cost of products sold in our unaudited consolidated statements of operations. In the event the hedging relationship is no longer effective, or if the occurrence of the hedged forecast transaction becomes no longer probable, we reclassify the gains or losses within Accumulated other comprehensive income (loss), net of tax (AOCI) to earnings at that time. The cash flows related to the derivative instruments designated as cash flow hedges are reported as operating activities in our consolidated statements of cash flows.
We designate certain euro-denominated debt as net investment hedges to hedge a portion of our net investments in certain of our entities with functional currencies denominated in the euro. As of September 30, 2023 and December 31, 2022, we designated as a net investment hedge our €900 million in aggregate principal amount of 0.625% euro-denominated senior notes issued in November 2019 and due in 2027 (2027 Notes). For these nonderivative instruments, we defer recognition of the foreign currency remeasurement gains and losses within the Foreign currency translation adjustment (CTA) component of Other comprehensive income (loss), net of tax. We reclassify these gains and losses to current period earnings within Other, net in our accompanying unaudited consolidated statements of operations only when the hedged item affects earnings, which would occur upon disposal or substantial liquidation of the underlying foreign subsidiary.
We also use forward currency contracts that are not part of designated hedging relationships as a part of our strategy to manage our exposure to currency exchange rate risk related to monetary assets and liabilities and related forecast transactions. These non-designated currency forward contracts have an original time to maturity consistent with the hedged currency transaction exposures, generally less than one year, and are marked-to-market with changes in fair value recorded to earnings within Other, net within our accompanying unaudited consolidated statements of operations.
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Interest Rate Hedging Instruments
Our interest rate risk relates primarily to U.S. dollar and euro-denominated borrowings partially offset by U.S. dollar cash investments. We use interest rate derivative instruments to mitigate the risk to our earnings and cash flows associated with exposure to changes in interest rates. Under these agreements, we and the counterparty, at specified intervals, exchange the difference between fixed and floating interest amounts calculated by reference to an agreed-upon notional principal amount. We designate these derivative instruments either as fair value or cash flow hedges in accordance with FASB ASC Topic 815.
We had no interest rate derivative instruments designated as cash flow hedges outstanding as of September 30, 2023 or December 31, 2022. In the event that we designate outstanding interest rate derivative instruments as cash flow hedges, we record the changes in the fair value of the derivatives within OCI until the underlying hedged transaction occurs.
The following table presents the contractual amounts of our hedging instruments outstanding:

(in millions) |  | FASB ASC Topic 815 Designation |  | As of
| September 30, 2023 |  | December 31, 2022
Forward currency contracts |  | Cash flow hedge |  | $ | 2,343 |  |  | $ | 2,725 |
Forward currency contracts |  | Net investment hedge |  | 333 |  |  | 365 |
Foreign currency-denominated debt(1) |  | Net investment hedge |  | 997 |  |  | 997 |
Forward currency contracts |  | Non-designated |  | 3,328 |  |  | 4,235 |
Total Notional Outstanding |  |  |  | $ | 7,002 |  |  | $ | 8,321 |

(1) Foreign currency-denominated debt is the €900 million debt principal associated with our 2027 Notes designated as a net investment hedge.
As of September 30, 2023, the remaining time to maturity is within 36 months for all forward currency contracts designated as cash flow hedges and generally less than one year for all non-designated forward currency contracts. The forward currency contracts designated as net investment hedges generally mature between one and three years. The euro-denominated debt principal designated as a net investment hedge has a contractual maturity of December 1, 2027.
The following presents the effect of our derivative and nonderivative instruments designated as cash flow and net investment hedges under FASB ASC Topic 815 in our accompanying unaudited consolidated statements of operations. Refer to Note M – Changes in Other Comprehensive Income for the total amounts relating to derivative and nonderivative instruments presented within our accompanying unaudited consolidated statements of comprehensive income (loss).

| Effect of Hedging Relationships on Accumulated Other Comprehensive Income
| Amount Recognized in OCI on Hedges |  | Unaudited Consolidated Statements of Operations(1) |  | Amount Reclassified from AOCI into Earnings
(in millions) | Pre-Tax Gain (Loss) | Tax Benefit (Expense) | Gain (Loss) Net of Tax |  | Location of Amount Reclassified and Total Amount of Line Item |  | Pre-Tax (Gain) Loss | Tax (Benefit) Expense | (Gain) Loss Net of Tax
Three Months Ended September 30, 2023
Forward currency contracts |  |  |  |  |  |  |  |
Cash flow hedges | $ | 54 |  | $ | (12) |  | $ | 42 |  |  | Cost of products sold | $ | 1,101 |  |  | $ | (51) |  | $ | 11 |  | $ | (39) |
Net investment hedges(2) | 12 |  | (3) |  | 9 |  |  | Interest expense | 66 |  |  | (2) |  | 1 |  | (2) |
Foreign currency-denominated debt |  |  |  |  |  |  |  |
Net investment hedges(3) | 26 |  | (6) |  | 20 |  |  | Other, net | 18 |  |  | — |  | — |  | — |
Interest rate derivative contracts |  |  |  |  |  |  |  |
Cash flow hedges | — |  | — |  | — |  |  | Interest expense | 66 |  |  | 1 |  | (0) |  | 1 |

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| Effect of Hedging Relationships on Accumulated Other Comprehensive Income
| Amount Recognized in OCI on Hedges |  | Unaudited Consolidated Statements of Operations(1) |  | Amount Reclassified from AOCI into Earnings
(in millions) | Pre-Tax Gain (Loss) | Tax Benefit (Expense) | Gain (Loss) Net of Tax |  | Location of Amount Reclassified and Total Amount of Line Item |  | Pre-Tax (Gain) Loss | Tax (Benefit) Expense | (Gain) Loss Net of Tax
Three Months Ended September 30, 2022
Forward currency contracts |  |  |  |  |  |  |  |
Cash flow hedges | $ | 153 |  | $ | (34) |  | $ | 119 |  |  | Cost of products sold | $ | 979 |  |  | $ | (61) |  | $ | 14 |  | $ | (47) |
Net investment hedges(2) | 14 |  | (16) |  | (2) |  |  | Interest expense | 63 |  |  | (3) |  | 1 |  | (2) |
Foreign currency-denominated debt |  |  |  |  |  |  |
Net investment hedges(3) | 56 |  | (13) |  | 43 |  |  | Other, net | 51 |  |  | — |  | — |  | — |
Interest rate derivative contracts |  |  |  |  |  |  |  |
Cash flow hedges | — |  | — |  | — |  |  | Interest Expense | 63 |  |  | 1 |  | — |  | 1 |

| Effect of Hedging Relationships on Accumulated Other Comprehensive Income
| Amount Recognized in OCI on Hedges |  | Unaudited Consolidated Statements of Operations(1) |  | Amount Reclassified from AOCI into Earnings
(in millions) | Pre-Tax Gain (Loss) | Tax Benefit (Expense) | Gain (Loss) Net of Tax |  | Location of Amount Reclassified and Total Amount of Line Item |  | Pre-Tax (Gain) Loss | Tax (Benefit) Expense | (Gain) Loss Net of Tax
Nine Months Ended September 30, 2023
Forward currency contracts |  |  |  |  |  |  |  |
Cash flow hedges | $ | 141 |  | $ | (32) |  | $ | 109 |  |  | Cost of products sold | $ | 3,198 |  |  | $ | (176) |  | $ | 40 |  | $ | (136) |
Net investment hedges (2) | 40 |  | (9) |  | 31 |  |  | Interest expense | 200 |  |  | (7) |  | 2 |  | (6) |
Foreign currency-denominated debt |  |  |  |  |  |  |  |
Net investment hedges (3) | 8 |  | (2) |  | 6 |  |  | Other, net | 78 |  |  | — |  | — |  | — |
Interest rate derivative contracts |  |  |  |  |  |  |  |
Cash flow hedges |  |  | — |  |  | Interest expense | 200 |  |  | 2 |  | (0) |  | 2 |

| Effect of Hedging Relationships on Accumulated Other Comprehensive Income
| Amount Recognized in OCI on Hedges |  | Unaudited Consolidated Statements of Operations(1) |  | Amount Reclassified from AOCI into Earnings
(in millions) | Pre-Tax Gain (Loss) | Tax Benefit (Expense) | Gain (Loss) Net of Tax |  | Location of Amount Reclassified and Total Amount of Line Item |  | Pre-Tax (Gain) Loss | Tax (Benefit) Expense | (Gain) Loss Net of Tax
Nine Months Ended September 30, 2022
Forward currency contracts |  |  |  |  |  |  |  |
Cash flow hedges | $ | 412 |  | $ | (93) |  | $ | 319 |  |  | Cost of products sold | $ | 2,945 |  |  | $ | (132) |  | $ | 30 |  | $ | (102) |
Net investment hedges (2) | 63 |  | (14) |  | 48 |  |  | Interest expense | 406 |  |  | (7) |  | 2 |  | (6) |
Foreign currency-denominated debt |  |  |  |  |  |  |
Net investment hedges (3) | 142 |  | (32) |  | 110 |  |  | Other, net | 96 |  |  | — |  | — |  | — |
Interest rate derivative contracts |  |  |  |  |  |  |  |
Cash flow hedges | — |  | — |  | — |  |  | Interest expense | 406 |  |  | 15 |  | (3) |  | 12 |

(1) In all periods presented in the table above, the pre-tax (gain) loss amounts reclassified from AOCI to earnings represent the effect of the hedging relationships on earnings.
(2) For our outstanding forward currency contracts designated as net investment hedges, the net gain or loss reclassified from AOCI to earnings as a reduction of Interest expense represents the straight-line amortization of the excluded component as calculated at the date of designation. This initial value of the excluded component has been excluded from the assessment of effectiveness in accordance with FASB ASC Topic 815. In the current and prior period, we did not recognize any gains or losses on the components included in the assessment of hedge effectiveness in earnings.
(3) For our outstanding euro-denominated debt principal designated as a net investment hedge, the change in fair value attributable to changes in the spot rate is recorded in the CTA component of OCI. No amounts were reclassified from AOCI to current period earnings.
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As of September 30, 2023, pre-tax net gains or losses for our derivative instruments designated, or previously designated, as cash flow and net investment hedges under FASB ASC Topic 815 that may be reclassified from AOCI to earnings within the next twelve months are presented below:

(in millions) |  | FASB ASC Topic 815 Designation |  | Location on Unaudited Consolidated Statements of Operations |  | Amount of Pre-Tax Gain (Loss) that may be Reclassified to Earnings
Designated Hedging Instrument |  |  |
Forward currency contracts |  | Cash flow hedge |  | Cost of products sold |  | $ | 221 |
Forward currency contracts |  | Net investment hedge |  | Interest expense |  | 9 |
Interest rate derivative contracts |  | Cash flow hedge |  | Interest expense |  | (2) |

Net gains and losses on currency hedge contracts not designated as hedging instruments offset by net gains and losses from currency transaction exposures are presented below:

|  | Location on Unaudited Consolidated Statements of Operations |  | Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) |  |  | 2023 |  | 2022 |  | 2023 |  | 2022
Net gain (loss) on currency hedge contracts |  | Other, net |  | $ | 10 |  |  | $ | (29) |  |  | $ | 13 |  |  | $ | (93) |
Net gain (loss) on currency transaction exposures |  | Other, net |  | (16) |  |  | (8) |  |  | (42) |  |  | 48 |
Net currency exchange gain (loss) |  |  |  | $ | (6) |  |  | $ | (38) |  |  | $ | (30) |  |  | $ | (45) |

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Fair Value Measurements
FASB ASC Topic 815 requires all derivative and nonderivative instruments to be recognized at their fair values as either assets or liabilities on the balance sheet. We determine the fair value of our derivative and nonderivative instruments using the framework prescribed by FASB ASC Topic 820, Fair Value Measurements and Disclosures (FASB ASC Topic 820) and considering the estimated amount we would receive or pay to transfer these instruments at the reporting date with respect to current currency exchange rates, interest rates, the creditworthiness of the counterparty for unrealized gain positions and our own creditworthiness for unrealized loss positions. In certain instances, we may utilize financial models to measure fair value of our derivative and nonderivative instruments. In doing so, we use inputs that include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, other observable inputs for the asset or liability and inputs derived principally from, or corroborated by, observable market data by correlation or other means. The following are the balances of our derivative and nonderivative assets and liabilities:

|  | Location on Unaudited Consolidated Balance Sheets(1) |  | As of
(in millions) |  |  | September 30, 2023 |  | December 31, 2022
Derivative and Nonderivative Assets: |  |  |  |  |  |
Designated Hedging Instruments |  |  |  |  |  |
Forward currency contracts |  | Other current assets |  | $ | 198 |  |  | $ | 196 |
Forward currency contracts |  | Other long-term assets |  | 155 |  |  | 149 |
|  |  |  | 353 |  |  | 345 |
Non-Designated Hedging Instruments |  |  |  |  |  |
Forward currency contracts |  | Other current assets |  | 43 |  |  | 36 |
Total Derivative and Nonderivative Assets |  |  |  | $ | 396 |  |  | $ | 381 |
Derivative and Nonderivative Liabilities: |  |  |  |  |  |
Designated Hedging Instruments |  |  |  |  |  |
Forward currency contracts |  | Other current liabilities |  | $ | 1 |  |  | $ | — |
Forward currency contracts |  | Other long-term liabilities |  | 1 |  |  | 1 |
Foreign currency-denominated debt(2) |  | Long-term debt |  | 946 |  |  | 952 |
|  |  |  | 947 |  |  | 953 |
Non-Designated Hedging Instruments |  |  |  |  |  |
Forward currency contracts |  | Other current liabilities |  | 30 |  |  | 52 |
Total Derivative and Nonderivative Liabilities |  |  |  | $ | 977 |  |  | $ | 1,005 |

(1) We classify derivative and nonderivative assets and liabilities as current when the settlement date of the contract is one year or less.
(2) Foreign currency-denominated debt is the €900 million debt principal associated with our 2027 Notes designated as a net investment hedge. A portion of this notional is subject to de-designation and re-designation based on changes in the underlying hedged item.
Recurring Fair Value Measurements
On a recurring basis, we measure certain financial assets and financial liabilities at fair value based upon quoted market prices. Where quoted market prices or other observable inputs are not available, we apply valuation techniques to estimate fair value. FASB ASC Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. The category of a financial asset or a financial liability within the valuation hierarchy is based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
•Level 1 – Inputs to the valuation methodology are quoted market prices for identical assets or liabilities.
•Level 2 – Inputs to the valuation methodology are other observable inputs, including quoted market prices for similar assets or liabilities and market-corroborated inputs.
•Level 3 – Inputs to the valuation methodology are unobservable inputs based on management’s best estimate of inputs market participants would use in pricing the asset or liability at the measurement date, including assumptions about risk.
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Assets and liabilities measured at fair value on a recurring basis consist of the following:

| As of
| September 30, 2023 |  | December 31, 2022
(in millions) | Level 1 |  | Level 2 |  | Level 3 |  | Total |  | Level 1 |  | Level 2 |  | Level 3 |  | Total
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds and time deposits | $ | 569 |  |  | $ | — |  |  | $ | — |  |  | $ | 569 |  |  | $ | 673 |  |  | $ | — |  |  | $ | — |  |  | $ | 673 |
Publicly-held equity securities | 23 |  |  | — |  |  | — |  |  | 23 |  |  | 2 |  |  | — |  |  | — |  |  | 2 |
Hedging instruments | — |  |  | 396 |  |  | — |  |  | 396 |  |  | — |  |  | 381 |  |  | — |  |  | 381 |
Licensing arrangements | — |  |  | — |  |  | 89 |  |  | 89 |  |  | — |  |  | — |  |  | 127 |  |  | 127 |
| $ | 592 |  |  | $ | 396 |  |  | $ | 89 |  |  | $ | 1,078 |  |  | $ | 674 |  |  | $ | 381 |  |  | $ | 127 |  |  | $ | 1,182 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hedging instruments | $ | — |  |  | $ | 977 |  |  | $ | — |  |  | $ | 977 |  |  | $ | — |  |  | $ | 1,005 |  |  | $ | — |  |  | $ | 1,005 |
Contingent consideration liability | — |  |  | — |  |  | 119 |  |  | 119 |  |  | — |  |  | — |  |  | 149 |  |  | 149 |
Licensing arrangements | — |  |  | — |  |  | 95 |  |  | 95 |  |  | — |  |  | — |  |  | 159 |  |  | 159 |
| $ | — |  |  | $ | 977 |  |  | $ | 214 |  |  | $ | 1,191 |  |  | $ | — |  |  | $ | 1,005 |  |  | $ | 308 |  |  | $ | 1,313 |

Our investments in money market funds and time deposits are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. These investments are classified as Cash and cash equivalents within our accompanying unaudited consolidated balance sheets, in accordance with GAAP and our accounting policies. In addition to $569 million invested in money market funds and time deposits as of September 30, 2023 and $673 million as of December 31, 2022, we held $382 million in interest-bearing and non-interest-bearing bank accounts as of September 30, 2023 and $256 million as of December 31, 2022.
Our recurring fair value measurements using Level 3 inputs include those related to our contingent consideration liability. Refer to Note B – Acquisitions, Divestitures and Strategic Investments for a discussion of the changes in the fair value of our contingent consideration liability. In addition, our recurring fair value measurements using Level 3 inputs related to our licensing arrangements, including the contractual right to receive future royalty payments related to the Zytiga™ Drug. We maintain a financial asset and associated liability for our licensing arrangements measured at fair value in our accompanying unaudited consolidated balance sheets in accordance with FASB ASC Topic 825, Financial Instruments. We elected the fair value option to measure the financial asset and associated liability as it provides for consistency and comparability of these financial instruments with others. Refer to Note D – Hedging Activities and Fair Value Measurements to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K for additional information.
The recurring Level 3 fair value measurements of our licensing arrangements recognized in our accompanying unaudited consolidated balance sheets as of September 30, 2023 include the following significant unobservable inputs:

Licensing Arrangements | Fair Value as of September 30, 2023 | Valuation Technique | Unobservable Input | Range | Weighted Average (1)
Financial Asset | $89 million | Discounted Cash Flow | Discount Rate | 15% | 15%
Projected Year of Payment | 2023 | - | 2025 | 2024
Financial Liability | $95 million | Discounted Cash Flow | Discount Rate | 12 | % | - | 15% | 13%
Projected Year of Payment | 2023 | - | 2026 | 2024

(1) Unobservable inputs relate to a single financial asset and liability. As such, unobservable inputs were not weighted by the relative fair value of the instruments. For projected year of payment, the amount represents the median of the inputs and is not a weighted average.
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Changes in the fair value of our licensing arrangements' financial asset were as follows:

(in millions) |
Balance as of December 31, 2022 | $ | 127 |
Proceeds from royalty rights | (47) |
Fair value adjustment (expense) benefit | 9 |
Balance as of September 30, 2023 | $ | 89 |

Changes in the fair value of our licensing arrangements' financial liability were as follows:

(in millions) |
Balance as of December 31, 2022 | $ | 159 |
Payments for royalty rights | (73) |
Fair value adjustment expense (benefit) | 9 |
Balance as of September 30, 2023 | $ | 95 |

Non-Recurring Fair Value Measurements
We hold certain assets and liabilities that are measured at fair value on a non-recurring basis in periods after initial recognition. The fair value of a measurement alternative investment is not estimated if there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment. Refer to Note B – Acquisitions, Divestitures and Strategic Investments for a discussion of our strategic investments and Note C – Goodwill and Other Intangible Assets for a discussion of the fair values of our intangible assets including goodwill.
The fair value of our outstanding debt obligations excluding finance leases was $8.067 billion as of September 30, 2023 and $8.203 billion as of December 31, 2022. We determined fair value by using quoted market prices for our publicly registered senior notes, classified as Level 1 within the fair value hierarchy, and face value for commercial paper, term loans and credit facility borrowings outstanding. Refer to Note E – Contractual Obligations and Commitments for a discussion of our debt obligations.
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NOTE E – CONTRACTUAL OBLIGATIONS AND COMMITMENTS
Borrowings and Credit Arrangements
We had total debt outstanding of $8.900 billion as of September 30, 2023 and $8.935 billion as of December 31, 2022, with current obligations of $513 million as of September 30, 2023 and $20 million as of December 31, 2022. The debt maturity schedule for our long-term debt obligations is presented below:

(in millions, except interest rates) |  | Issuance Date |  | Maturity Date |  | As of |  | Coupon Rate(1)
| September 30, 2023 |  | December 31, 2022 |
March 2024 Senior Notes |  | February 2019 |  | March 2024 |  | — |  |  | 504 |  |  | 3.450%
March 2025 Senior Notes(3) |  | March 2022 |  | March 2025 |  | 1,058 |  |  | 1,067 |  |  | 0.750%
June 2025 Senior Notes |  | May 2020 |  | June 2025 |  | 500 |  |  | 500 |  |  | 1.900%
March 2026 Senior Notes |  | February 2019 |  | March 2026 |  | 255 |  |  | 255 |  |  | 3.750%
December 2027 Senior Notes(3) |  | November 2019 |  | December 2027 |  | 953 |  |  | 960 |  |  | 0.625%
March 2028 Senior Notes(3) |  | March 2022 |  | March 2028 |  | 794 |  |  | 800 |  |  | 1.375%
March 2028 Senior Notes |  | February 2018 |  | March 2028 |  | 344 |  |  | 344 |  |  | 4.000%
March 2029 Senior Notes |  | February 2019 |  | March 2029 |  | 272 |  |  | 272 |  |  | 4.000%
June 2030 Senior Notes |  | May 2020 |  | June 2030 |  | 1,200 |  |  | 1,200 |  |  | 2.650%
March 2031 Senior Notes(3) |  | March 2022 |  | March 2031 |  | 794 |  |  | 800 |  |  | 1.625%
March 2034 Senior Notes(3) |  | March 2022 |  | March 2034 |  | 529 |  |  | 534 |  |  | 1.875%
November 2035 Senior Notes(2) |  | November 2005 |  | November 2035 |  | 350 |  |  | 350 |  |  | 6.500%
March 2039 Senior Notes |  | February 2019 |  | March 2039 |  | 450 |  |  | 450 |  |  | 4.550%
January 2040 Senior Notes |  | December 2009 |  | January 2040 |  | 300 |  |  | 300 |  |  | 7.375%
March 2049 Senior Notes |  | February 2019 |  | March 2049 |  | 650 |  |  | 650 |  |  | 4.700%
Unamortized Debt Issuance Discount and Deferred Financing Costs |  |  |  | 2023 - 2049 |  | (67) |  |  | (76) |  |  |
Finance Lease Obligation |  |  |  | Various |  | 4 |  |  | 5 |  |  |
Long-term debt |  |  |  |  |  | $ | 8,386 |  |  | $ | 8,915 |  |  |

(1) Coupon rates are semi-annual, except for the euro-denominated senior notes, which bear an annual coupon.
(2) Corporate credit rating improvements may result in a decrease in the adjusted interest rate on our November 2035 Notes to the extent that our lowest credit rating is above BBB- or Baa3. The interest rates on our November 2035 Notes will be permanently reinstated to the issuance rate if the lowest credit ratings assigned to these senior notes is either A- or A3 or higher.
(3) These notes are euro-denominated and presented in U.S. dollars based on the exchange rate in effect as of September 30, 2023 and December 31, 2022, respectively.
Revolving Credit Facility
On May 10, 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, among other things 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. There were no amounts outstanding under the 2021 Revolving Credit Facility as of September 30, 2023 or December 31, 2022.
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Financial Covenant
As of September 30, 2023, we were in compliance with the financial covenant required by the 2021 Revolving Credit Facility, as amended.

|  | Covenant Requirement |  | Actual
|  | as of September 30, 2023 |  | as of September 30, 2023
Maximum permitted leverage ratio(1) |  | 3.75 times |  | 2.34 times

(1)Ratio of total debt to consolidated EBITDA, as defined by the credit agreements, as amended.
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 our funding of these acquisitions using cash on hand or commercial paper.
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.
Any inability to maintain compliance with this covenant could require us to seek to renegotiate the terms of our credit arrangements or seek waivers from compliance with this covenant, both of which could result in additional borrowing costs. Further, there can be no assurance that our lenders would agree to such new terms or grant such waivers on terms acceptable to us. In this case, all 2021 Revolving Credit Facility commitments would terminate, and any amounts borrowed under the facility would become immediately due and payable. Furthermore, any termination of our 2021 Revolving Credit Facility may negatively impact the credit ratings assigned to our commercial paper program, which may impact our ability to refinance any then outstanding commercial paper as it becomes due and payable.
Commercial Paper
Our commercial paper program is backed by the 2021 Revolving Credit Facility. We did not have any commercial paper outstanding as of September 30, 2023 and December 31, 2022.
Senior Notes
We had senior notes outstanding of $8.953 billion as of September 30, 2023 and $8.986 billion as of December 31, 2022. Our senior notes were issued in public offerings, are redeemable prior to maturity and are not subject to sinking fund requirements. Our senior notes are unsecured, unsubordinated obligations and rank on parity with each other. These notes are effectively junior to liabilities of our subsidiaries (refer to Other Arrangements below).
In March 2022, American Medical Systems Europe B.V. (AMS Europe), an indirect, wholly owned subsidiary of Boston Scientific, completed a registered public offering (the Offering) of €3.000 billion in aggregate principal amount of euro-dominated senior notes comprised of €1.000 billion of 0.750% Senior Notes due 2025, €750 million of 1.375% Senior Notes due 2028, €750 million of 1.625% Senior Notes due 2031 and €500 million of 1.875% Senior Notes due 2034 (collectively, the Eurobonds). Boston Scientific has fully and unconditionally guaranteed all of AMS Europe's obligations under the Eurobonds, and no other subsidiary of Boston Scientific will guarantee these obligations. AMS Europe is a “finance subsidiary” as defined in Rule 13-01(a)(4)(vi) of Regulation S-X. The financial condition, results of operations and cash flows of AMS Europe are
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consolidated in the financial statements of Boston Scientific. 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. We recorded associated debt extinguishment charges of $194 million during the first quarter of 2022 presented in Interest expense within our accompanying unaudited consolidated statements of operations.
Other Arrangements
We have accounts receivable factoring programs in certain European countries and with commercial banks in China and Japan which include promissory notes discounting programs. We account for our factoring programs as sales under FASB ASC Topic 860, Transfers and Servicing. We have no retained interest in the transferred receivables, other than collection and administration, and once sold, the accounts receivable are no longer available to satisfy creditors in the event of bankruptcy. Amounts de-recognized for accounts and notes receivable, which are excluded from Trade accounts receivable, net within our accompanying unaudited consolidated balance sheets, are aggregated by contract denominated currency below (in millions):

Factoring Arrangements | As of September 30, 2023 |  | As of December 31, 2022
Amount De-recognized |  | Weighted Average Interest Rate |  | Amount De-recognized |  | Weighted Average Interest Rate
Euro denominated | $ | 218 |  |  | 4.9 | % |  | $ | 161 |  |  | 2.4 | %
Yen denominated | 188 |  |  | 0.7 | % |  | 194 |  |  | 0.6 | %
Renminbi denominated | 22 |  |  | 2.9 | % |  | 13 |  |  | 3.1 | %

Other Contractual Obligations and Commitments
We had outstanding letters of credit of $151 million as of September 30, 2023 and $135 million as of December 31, 2022, which consisted primarily of bank guarantees and collateral for workers' compensation insurance arrangements. As of September 30, 2023 and December 31, 2022 we had not recognized a related liability for any outstanding letters of credit within our accompanying unaudited consolidated balance sheets.
We have a supplier financing program offered primarily in the U.S. where our suppliers can opt to receive early payment at a nominal discount, while allowing us to lengthen our payment terms and optimize working capital. Our standard payment term in the U.S. is 90 days. All outstanding payables related to the supplier finance program are classified within Accounts Payable within our unaudited consolidated balance sheets and were $148 million as of September 30, 2023 and $129 million as of December 31, 2022.
Refer to Note E – Contractual Obligations and Commitments to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K for additional information on our borrowings and credit agreements.
NOTE F – SUPPLEMENTAL BALANCE SHEET INFORMATION
Components of selected captions within our accompanying unaudited consolidated balance sheets are as follows:
Trade accounts receivable, net

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Trade accounts receivable | $ | 2,226 |  |  | $ | 2,079 |
Allowance for credit losses | (126) |  |  | (109) |
| $ | 2,101 |  |  | $ | 1,970 |

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The following is a roll forward of our Allowance for credit losses:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Beginning balance | $ | 127 |  |  | $ | 117 |  |  | $ | 109 |  |  | $ | 108 |
Credit loss expense | 10 |  |  | 7 |  |  | 44 |  |  | 26 |
Write-offs | (11) |  |  | (9) |  |  | (27) |  |  | (20) |
Ending balance | $ | 126 |  |  | $ | 114 |  |  | $ | 126 |  |  | $ | 114 |

In accordance with FASB ASC Topic 326, Financial Instruments - Credit Losses (FASB ASC Topic 326), we record credit loss reserves to Allowance for credit losses when we establish Trade accounts receivable if credit losses are expected over the asset's contractual life. We base our estimates of credit loss reserves on historical experience and adjust, as necessary, to reflect current conditions using reasonable and supportable forecasts not already reflected in the historical loss information. We utilize an accounts receivable aging approach, applying country or region-specific factors, to determine the reserve to record at accounts receivable commencement for certain customers. In performing the assessment of outstanding accounts receivable, regardless of country or region, we may consider significant factors relevant to collectability, including those specific to a customer such as bankruptcy, lengthy average payment cycles and type of account.
We closely monitor outstanding receivables for potential collection risks, including those that may arise from economic and geopolitical conditions. Our sales to government-owned or supported customers, particularly in southern Europe, are subject to an increased number of days outstanding prior to payment relative to other entities, and, in southern Europe, relative to those in other countries. In addition, we have seen an increase in the volume of our U.S. business conducted in ambulatory surgery centers and office-based laboratories. Many of these customers are smaller than those we have historically done business with and may have more limited liquidity. We have adjusted our estimates of credit loss reserves for these customers, regions and conditions based on collection trends.
Inventories

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Finished goods | $ | 1,466 |  |  | $ | 1,171 |
Work-in-process | 187 |  |  | 147 |
Raw materials | 752 |  |  | 548 |
| $ | 2,404 |  |  | $ | 1,867 |

Other current assets

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Restricted cash and restricted cash equivalents | $ | 123 |  |  | $ | 149 |
Derivative assets | 241 |  |  | 232 |
Licensing arrangements | 49 |  |  | 60 |
Other | 328 |  |  | 290 |
| $ | 741 |  |  | $ | 731 |

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Property, plant and equipment, net

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Land | $ | 139 |  |  | $ | 137 |
Buildings and improvements | 1,801 |  |  | 1,695 |
Equipment, furniture and fixtures | 3,451 |  |  | 3,297 |
Capital in progress | 691 |  |  | 598 |
| 6,082 |  |  | 5,728 |
Less: accumulated depreciation | 3,446 |  |  | 3,282 |
| $ | 2,635 |  |  | $ | 2,446 |

Depreciation expense was $93 million for the third quarter of 2023, $82 million for the third quarter of 2022, $263 million for the first nine months of 2023 and $238 million for the first nine months of 2022.
Other long-term assets

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Restricted cash equivalents | $ | 58 |  |  | $ | 48 |
Operating lease right-of-use assets | 446 |  |  | 386 |
Derivative assets | 155 |  |  | 149 |
Investments | 427 |  |  | 407 |
Licensing arrangements | 40 |  |  | 67 |
Indemnification asset | 165 |  |  | 172 |
Other | 314 |  |  | 271 |
| $ | 1,605 |  |  | $ | 1,500 |

Accrued expenses

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Legal reserves | $ | 246 |  |  | $ | 231 |
Payroll and related liabilities | 912 |  |  | 830 |
Rebates | 369 |  |  | 352 |
Contingent consideration | 109 |  |  | 74 |
Other | 619 |  |  | 674 |
| $ | 2,255 |  |  | $ | 2,160 |

Other current liabilities

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Deferred revenue | $ | 246 |  |  | $ | 220 |
Licensing arrangements | 50 |  |  | 79 |
Taxes payable | 352 |  |  | 232 |
Other | 234 |  |  | 230 |
| $ | 882 |  |  | $ | 761 |

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Other long-term liabilities

| As of
(in millions) | September 30, 2023 |  | December 31, 2022
Accrued income taxes | $ | 487 |  |  | $ | 597 |
Legal reserves | 161 |  |  | 212 |
Contingent consideration | 10 |  |  | 75 |
Licensing arrangements | 45 |  |  | 80 |
Operating lease liabilities | 400 |  |  | 347 |
Deferred revenue | 301 |  |  | 289 |
Other | 454 |  |  | 434 |
| $ | 1,858 |  |  | $ | 2,035 |

NOTE G – INCOME TAXES
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.
As of September 30, 2023, we had $475 million of gross unrecognized tax benefits, of which a net $419 million, if recognized, would affect our effective tax rate. As of December 31, 2022, we had $492 million of gross unrecognized tax benefits, of which a net $410 million, if recognized, would affect our effective tax rate. The change in our gross unrecognized tax benefit is primarily related to remeasurement of historic positions after tax law changes and audit activities.
It is reasonably possible that within the next 12 months, we will resolve multiple issues with foreign, federal and state taxing authorities, resulting in a reduction in our balance of unrecognized tax benefits of up to $64 million.
NOTE H – COMMITMENTS AND CONTINGENCIES
The medical device market in which we participate is largely technology driven. As a result, intellectual property rights, particularly patents and trade secrets, play a significant role in product development and differentiation. Over the years, there has been litigation initiated against us by others, including our competitors, claiming that our current or former product offerings infringe patents owned or licensed by them. Intellectual property litigation is inherently complex and unpredictable. In addition, competing parties frequently file multiple suits to leverage patent portfolios across product lines, technologies and geographies and to balance risk and exposure between the parties. In some cases, several competitors are parties in the same proceeding, or in a series of related proceedings, or litigate multiple features of a single class of devices. These dynamics frequently drive settlement not only for individual cases, but also for a series of pending and potentially related and unrelated cases. Although monetary and injunctive relief is typically sought, remedies and restitution are generally not determined until the conclusion of the trial court proceedings and can be modified on appeal. Accordingly, the outcomes of individual cases are difficult to time, predict or quantify and are often dependent upon the outcomes of other cases in other geographies.
During recent years, we successfully negotiated closure of several long-standing legal matters and have received favorable rulings in several other matters; however, there continues to be outstanding litigation. Adverse outcomes in one or more of these matters could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operations and/or liquidity.
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In addition, product liability, securities and commercial claims have been asserted against us and similar claims may be asserted against us in the future related to events not known to management at the present time. We maintain an insurance policy providing limited coverage against securities claims and we are substantially self-insured with respect to product liability claims and fully self-insured with respect to intellectual property infringement claims. The absence of significant third-party insurance coverage increases our potential exposure to unanticipated claims or adverse decisions. Product liability claims, securities and commercial litigation and other legal proceedings in the future, regardless of their outcome, could have a material adverse effect on our ability to sell certain products and on our operating margins, financial position, results of operations and/or liquidity.
In addition, like other companies in the medical device industry, we are subject to extensive regulation by national, state and local government agencies in the U.S. and other countries in which we operate. From time to time we are the subject of qui tam actions and governmental investigations often involving regulatory, marketing and other business practices. These qui tam actions and governmental investigations could result in the commencement of civil and criminal proceedings, substantial fines, penalties and administrative remedies and have a material adverse effect on our financial position, results of operations and/or liquidity. For additional information, refer to Note I – Commitments and Contingencies to our audited financial statements contained in Item 8 of our most recent Annual Report on Form 10-K.
In accordance with FASB ASC Topic 450, Contingencies, we accrue anticipated costs of settlement, damages, losses for product liability claims and, under certain conditions, costs of defense, based on historical experience or to the extent specific losses are probable and estimable. Otherwise, we expense these costs as incurred. If the estimate of a probable loss is a range and no amount within the range is more likely, we accrue the minimum amount of the range. 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 Selling, general and administrative expenses within our accompanying unaudited consolidated statements of operations.
Our accrual for legal matters that are probable and estimable was $407 million as of September 30, 2023 and $443 million as of December 31, 2022 and includes certain estimated costs of settlement, damages and defense primarily related to product liability cases or claims related to our transvaginal surgical mesh products. A portion of this accrual is already funded through our qualified settlement fund, which is included in restricted cash and restricted cash equivalents in Other current assets of $123 million as of September 30, 2023 and $149 million as of December 31, 2022. Refer to Note F – Supplemental Balance Sheet Information for additional information. In 2023, we recorded litigation-related net credits of $111 million during the third quarter and first nine months related to the settlement of offensive patent litigation. In 2022, we did not record litigation-related net charges (credits) in the third quarter and recorded net charges of $42 million during the first nine months.
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 our financial covenant.
In management's opinion, we are not currently involved in any legal proceedings other than those disclosed in our most recent Annual Report on Form 10-K and those specifically identified below, which, individually or in the aggregate, could have a material adverse effect on our financial condition, operations and/or cash flows. Unless included in our legal accrual or otherwise indicated below, a range of loss associated with any individual material legal proceeding cannot be reasonably estimated.
Patent Litigation
On October 28, 2015, the Company filed suit against Cook Group Limited and Cook Medical LLC (collectively, Cook) in the United States District Court for the District of Delaware (1:15-cv-00980) alleging infringement of certain Company patents regarding Cook’s Instinct™ Endoscopic Hemoclip. The Company seeks lost profits, a reasonable royalty and a permanent injunction. The case was transferred to the District Court for the Southern District of Indiana. Cook filed Inter Partes Review (IPR) requests with the U.S. Patent and Trademark Office (USPTO) against four then-asserted patents, which resulted in the court staying the case until 2020. All IPRs concluded and confirmed the validity of certain claims of each challenged patent. In February 2023, the District Court issued summary judgment rulings dismissing certain claims and defenses. Trial on the remaining two asserted patents took place in May and June 2023 and the jury found that the Company’s patents are both valid
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and infringed and awarded the Company $158 million as lost profits. On August 4, 2023, the parties entered into a settlement to resolve all claims, and the case was dismissed on August 22, 2023.
On November 20, 2017, The Board of Regents, University of Texas System and TissueGen. Inc. (collectively, UT), served a lawsuit against us in the Western District of Texas. The complaint against the Company alleges patent infringement of two U.S. patents owned by UT, relating to “Drug Releasing Biodegradable Fiber Implant” and “Drug Releasing Biodegradable Fiber for Delivery of Therapeutics,” and affects the manufacture, use and sale of our Synergy™ Stent System. UT primarily seeks a reasonable royalty. On March 12, 2018, the District Court for the Western District of Texas dismissed the action and transferred it to the United States District Court for the District of Delaware. On September 5, 2019, the Court of Appeals for the Federal Circuit affirmed the dismissal of the District Court for the Western District of Texas. In April 2020, the United States Supreme Court denied the UT’s Petition for Certiorari. UT proceeded with its case against us in Delaware. In January 2023, a jury trial was held on the issue of whether the one UT patent still asserted in the case was valid and whether it was infringed by the Company. On January 31, 2023, a jury concluded that UT’s patent was valid and willfully infringed by the Company, and awarded UT $42 million in damages. Following the trial, UT has filed a motion seeking prejudgment interest and enhanced damages. The Company has filed a motion seeking judgment as a matter of law in its favor or alternatively a new trial.
Product Liability Litigation
Multiple product liability cases or claims related to transvaginal surgical mesh products designed to treat stress urinary incontinence and pelvic organ prolapse have been asserted against us, predominantly in the United States, Canada, the United Kingdom, Scotland, Ireland, and Australia. Plaintiffs generally seek monetary damages based on allegations of personal injury associated with the use of our transvaginal surgical mesh products, including design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. We have entered into individual and master settlement agreements in principle or are in the final stages of entering agreements with certain plaintiffs' counsel, to resolve the majority of these cases and claims. All settlement agreements were entered into solely by way of compromise and without any admission or concession by us of any liability or wrongdoing. In addition, in April 2021 the Company's Board of Directors received a shareholder demand under section 220 of the Delaware General Corporation Law, for inspection of books and records related to mesh settlements. The Company has notified our insurer and retained counsel to respond to the demand.
We have established a product liability accrual for remaining claims asserted against us associated with our transvaginal surgical mesh products and the costs of defense thereof. We continue to engage in discussions with plaintiffs’ counsel regarding potential resolution of pending cases and claims. We continue to vigorously contest these cases and claims. The final resolution of the cases and claims is uncertain and could have a material impact on our results of operations, financial condition and/or liquidity. Trials involving our transvaginal surgical mesh products have resulted in both favorable and unfavorable judgments for us. We do not believe that the judgment in any one trial is representative of potential outcomes of all cases or claims related to our transvaginal surgical mesh products.
Governmental Investigations and Qui Tam Matters
On December 1, 2015, the Brazilian governmental entity known as CADE (the Administrative Council of Economic Defense), served a search warrant on the offices of our Brazilian subsidiary, as well as on the Brazilian offices of several other major medical device makers who do business in Brazil, in furtherance of an investigation into alleged anti-competitive activity with respect to certain tender offers for government contracts. On June 20, 2017, CADE, through the publication of a “technical note,” announced that it was launching a formal administrative proceeding against Boston Scientific’s Brazilian subsidiary, Boston Scientific do Brasil Ltda. (BSB), as well as against the Brazilian operations of Medtronic, Biotronik and St. Jude Medical, two Brazilian associations, ABIMED and AMBIMO and 29 individuals for alleged anti-competitive behavior. Under applicable guidance, BSB could be fined a percentage of BSB’s 2016 gross revenues. In August 2021, the investigating commissioner issued a preliminary recommendation of liability against all of the involved companies, and also recommended that CADE impose fines and penalties. However, on October 25, 2021, the CADE Attorney General's office recommended dismissal of the charges and allegations against BSB and the individual BSB employees who were still individual defendants. Subsequently, on March 30, 2022, the Federal Prosecutor’s office issued a non-binding recommendation that is contrary to the Attorney General’s recommendation. The full Commission is considering both of these recommendations but has not yet issued its decision. We continue to deny the allegations, intend to defend ourselves vigorously and will appeal any decision of liability by the full Commission to the Brazilian courts. During such an appeal, the decision would have no force and effect, and the Court would consider the case without being bound by CADE’s decision.
In March 2022, the Company received a whistleblower letter alleging Foreign Corrupt Practices Act violations in Vietnam. The Company has received related subpoenas for documents from the Office of the U.S. Attorney for the District of Massachusetts
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and the Securities and Exchange Commission. The Company is cooperating with government agencies while investigating these allegations.
On April 5, 2023, the Company received a subpoena from the U.S. Department of Justice (DOJ) that seeks documents and information relating to its ambulatory electrocardiography monitoring (AECG) business. The Company is cooperating with the DOJ in responding to this subpoena.
Other Proceedings
On December 4, 2020, Enrique Jevons, individually and on behalf of all others similarly situated, filed a class action complaint against the Company, Michael F. Mahoney and Daniel J. Brennan, stemming from the recall and retirement of the LOTUS Edge™ Aortic Valve System (LOTUS System) in United States District Court for the Eastern District of New York. On December 14, 2020, the parties agreed to transfer the case to the United States District Court for the District of Massachusetts. On December 16, 2020, Mariano Errichiello, individually and on behalf of all others similarly situated, filed a second, materially similar class action complaint against the Company, Michael F. Mahoney, Joseph M. Fitzgerald, and Daniel J. Brennan in the United States District Court for the District of Massachusetts. Subsequently, on March 30, 2021, the Court consolidated the two actions, and appointed Mariano Errichiello as the lead plaintiff. The plaintiffs filed an Amended Complaint in June 2021 that seeks unspecified compensatory damages in favor of the alleged class as well as unspecified equitable relief. The Company filed a Motion to Dismiss in July 2021, which, in December 2022, the Court granted in part and denied in part. The Company intends to vigorously defend itself against the surviving allegations. On October 23, 2023, the Company reached an agreement in principle with the lead plaintiff to settle the case. The settlement in principle is subject to execution of definitive settlement documents and is subject to approval of the Court. On December 15, 2020, the Securities and Exchange Commission’s Boston Regional Office (Boston SEC) notified the Company that it was conducting an investigation related to the Company’s decision to retire the LOTUS System and issued a voluntary request for documents and information related to that decision. On February 10, 2021, the Boston SEC issued a second voluntary request for additional documents and information. The Company cooperated fully with the requests, and on January 3, 2022, the SEC informed us that it was concluding its investigation and that it did not intend to recommend an enforcement action. On February 8, 2021, the Company received a letter from The Vladimir Gusinsky Revocable Trust, a shareholder, demanding that the Company’s Board of Directors conduct an investigation into actions by the Company’s directors and executive officers regarding statements made about the effectiveness and commercial viability of the LOTUS System. The Trust subsequently agreed to stay its demand, pending the outcome of any dispositive motion against the Amended Complaint in the class action complaint described above. The Company received letters on behalf of the Union Excavators Local 731 Pension Fund, Diane Nachbaur, and Frank Tripson, three stockholders of the Company, on July 26, 2021, July 29, 2021, and February 13, 2023, respectively, each demanding access to certain books and records of the Company, pursuant to Section 220 of the Delaware General Corporation Law, regarding the business, operations, effectiveness and commercial viability of the LOTUS system, and related items. On April 7, 2023, Diane Nachbaur filed a shareholder derivative complaint in the United States District Court for the District of Massachusetts against the Company, Michael F. Mahoney, Nelda J. Connors, Charles J. Dockendorff, Yoshiaki Fujimori, Donna A. James, Edward J. Ludwig, David Roux, John E. Sununu, Ellen M. Zane, Joseph M. Fitzgerald, Daniel J. Brennan, Shawn McCarthy, Ian Meredith, Kevin Ballinger, and Susan Vissers Lisa. On May 8, 2023, the Court stayed the case until the conclusion of the consolidated class action case. On October 18, 2023, Frank Tripson filed a shareholder derivative complaint in the Court of Chancery of the State of Delaware against the Company, Michael F. Mahoney, Daniel J. Brennan, Joseph M. Fitzgerald, Shawn McCarthy, Kevin Ballinger, Ian Meredith, Susan Vissers Lisa, Nelda J. Connors, Charles J. Dockendorff, Yoshiaki Fujimori, Donna A. James, Edward J. Ludwig, Stephen P. MacMillan, David Roux, John E. Sununu, and Ellen M. Zane.
NOTE I – STOCKHOLDERS' EQUITY
Preferred Stock
We are authorized to issue 50 million shares of preferred stock in one or more series and to fix the powers, designations, preferences and relative participating, option or other rights thereof, including dividend rights, conversion rights, voting rights, redemption terms, liquidation preferences and the number of shares constituting any series, without any further vote or action by our stockholders.
On May 27, 2020, we completed an offering of 10,062,500 shares of 5.50% Mandatory Convertible Preferred Stock, Series A (MCPS) at a price to the public and liquidation preference of $100 per share. The net proceeds from the MCPS offering were approximately $975 million after deducting underwriting discounts and commissions and offering expenses.
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On June 1, 2023, (the Mandatory Conversion Date), all outstanding shares of MCPS automatically converted into shares of common stock. The conversion rate for each share of MCPS was 2.3834 shares of common stock. No action by the holders of the MCPS was required in connection with the mandatory conversion. 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.
Refer to Note J – Stockholders' Equity to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K for information on the pertinent rights and privileges of our outstanding common stock.
NOTE J – WEIGHTED AVERAGE SHARES OUTSTANDING

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Weighted average shares outstanding — basic | 1,464.5 |  |  | 1,431.6 |  |  | 1,448.8 |  |  | 1,429.7 |
Net effect of common stock equivalents | 10.5 |  |  | 8.4 |  |  | 10.2 |  |  | 9.0 |
Weighted average shares outstanding - diluted | 1,475.0 |  |  | 1,440.0 |  |  | 1,459.1 |  |  | 1,438.7 |

The following securities were excluded from the calculation of diluted weighted average shares outstanding because their effect in the periods presented below would have been anti-dilutive:

| Three Months Ended September 30, |  | Nine Months Ended September 30,
(in millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Stock options outstanding(1) | 0 |  | 9 |  | 0 |  | 6
MCPS(2) | — |  | 24 |  | 13 |  | 24

(1) Represents stock options outstanding pursuant to our employee stock-based compensation plans with exercise prices that were greater than the average fair market value of our common stock for the related periods.
(2) Represents common stock issuable upon the conversion of MCPS. Refer to Note I – Stockholders' Equity for additional information.
We base Net income (loss) per common share - diluted upon the weighted-average number of common shares and common stock equivalents outstanding during each year. Potential common stock equivalents are determined using the treasury stock method. We exclude stock options, stock awards and, prior to the Mandatory Conversion Date, our MCPS, from the calculation if the effect would be anti-dilutive. The dilutive effect of MCPS is calculated using the if-converted method. The if-converted method assumes that these securities were converted to shares of common stock at the beginning of the reporting period to the extent that the effect is dilutive.
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 earnings per share (EPS). Accordingly, Net income was reduced by cumulative Preferred stock dividends, as presented within our accompanying unaudited consolidated statements of operations, for purposes of calculating Net income attributable to Boston Scientific common stockholders. On June 1, 2023, all outstanding shares of MCPS automatically converted into shares of common stock.
We issued approximately two million shares of our common stock in the third quarter of 2023, approximately 32 million shares in the first nine months of 2023, approximately two million shares in the third quarter of 2022, and approximately seven million shares in the first nine months of 2022. Shares were issued following the automatic conversion of the MCPS, the exercise of stock options, vesting of restricted stock units or purchases under our employee stock purchase plan. We did not repurchase any shares of our common stock in the first nine months of 2023 or 2022. On December 14, 2020, our Board of Directors approved a 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.
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NOTE K – SEGMENT REPORTING
We aggregate our core businesses into two reportable segments: MedSurg and Cardiovascular, each of which generates revenues from the sale of medical devices. In accordance with FASB ASC Topic 280, Segment Reporting, we identified our reportable segments based on the nature of our products, production processes, type of customer, selling and distribution methods and regulatory environment, as well as the economic characteristics of each of our operating segments.
We measure and evaluate our reportable segments based on their respective net sales, operating income, excluding intersegment profits, and operating income as a percentage of net sales, all based on internally-derived standard currency exchange rates to exclude the impact of foreign currency, which may be updated from year to year. We exclude from operating income of reportable segments certain corporate-related expenses and certain transactions or adjustments that our chief operating decision maker (CODM) considers to be non-operational, such as amounts related to amortization expense, goodwill and other intangible asset impairment charges, acquisition/divestiture-related net charges (credits), restructuring and restructuring-related net charges (credits); and certain litigation-related net charges (credits) and European Union (EU) Medical Device Regulation (MDR) implementation costs. Although we exclude these amounts from operating income of reportable segments, they are included in reported Income (loss) before income taxes within our accompanying unaudited consolidated statements of operations and are included in the reconciliation below. Refer to Note L – Revenue for net sales by reportable segment presented in accordance with GAAP.
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A reconciliation of the totals reported for the reportable segments to the applicable line items within our accompanying unaudited consolidated statements of operations is as follows (in millions, except percentages). Prior period amounts have been restated at constant currency to conform to current year presentation.

| Three Months Ended September 30, |  | Nine Months Ended September 30,
Net Sales | 2023 |  | 2022 |  | 2023 |  | 2022
MedSurg | $ | 1,318 |  |  | $ | 1,199 |  | $ | 3,900 |  |  | $ | 3,521
Cardiovascular | 2,149 |  |  | 1,925 |  | 6,378 |  |  | 5,620
Total net sales of reportable segments | 3,468 |  |  | 3,124 |  | 10,277 |  |  | 9,141
Impact of foreign currency fluctuations | 59 |  |  | 46 |  | 238 |  |  | 300
| $ | 3,527 |  |  | $ | 3,170 |  | $ | 10,515 |  |  | $ | 9,440

Income (loss) before income taxes |  |  |  |  |  |  |
MedSurg | $ | 446 |  |  | $ | 359 |  | $ | 1,293 |  |  | $ | 1,048
Cardiovascular | 570 |  |  | 451 |  | 1,677 |  |  | 1,294
Total operating income of reportable segments | 1,016 |  |  | 810 |  | 2,970 |  |  | 2,342
Unallocated amounts: |  |  |  |  |  |  |
Corporate expenses, including hedging activities and impact of foreign currency fluctuations on operating income of reportable segments | (97) |  |  | (1) |  | (221) |  |  | 67
Goodwill and intangible asset impairment charges, acquisition/divestiture-related net charges (credits), restructuring and restructuring-related net charges (credits), certain litigation-related net charges (credits) and EU MDR implementation costs | (19) |  |  | (249) |  | (370) |  |  | (558)
Amortization expense | (208) |  |  | (202) |  | (620) |  |  | (604)
Operating income (loss) | 693 |  |  | 358 |  | 1,759 |  |  | 1,247
Other expense, net | (83) |  |  | (114) |  | (279) |  |  | (502)
Income (loss) before income taxes | $ | 610 |  |  | $ | 245 |  | $ | 1,480 |  |  | $ | 745

| Three Months Ended September 30, |  | Nine Months Ended September 30,
Operating income margin of reportable segments | 2023 |  | 2022 |  | 2023 |  | 2022
MedSurg | 33.8 | % |  | 30.0 | % |  | 33.2 | % |  | 29.8 | %
Cardiovascular | 26.5 | % |  | 23.4 | % |  | 26.3 | % |  | 23.0 | %

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NOTE L – REVENUE
We generate revenue primarily from the sale of single-use medical devices and present revenue net of sales taxes within our accompanying unaudited consolidated statements of operations. Our business structure is organized into five operating segments. The following tables disaggregate our revenue from contracts with customers by component and geographic region (in millions). We allocate revenue from contracts with customers to geographic regions based on the location where the sale originated.

| Three Months Ended September 30, |  |
| 2023 |  | 2022 |  |  |  |
Businesses | U.S. |  | Int'l |  | Total |  | U.S. |  | Int'l |  | Total |  |  |  |  |  |  |  |
Endoscopy | $ | 382 |  |  | $ | 247 |  |  | $ | 629 |  |  | $ | 342 |  |  | $ | 217 |  |  | $ | 559 |  |  |  |  |  |  |  |  |
Urology | 341 |  |  | 142 |  |  | 483 |  |  | 315 |  |  | 118 |  |  | 433 |  |  |  |  |  |  |  |  |
Neuromodulation | 175 |  |  | 55 |  |  | 229 |  |  | 173 |  |  | 48 |  |  | 221 |  |  |  |  |  |  |  |  |
MedSurg | 898 |  |  | 443 |  |  | 1,341 |  |  | 830 |  |  | 383 |  |  | 1,213 |  |  |  |  |  |  |  |  |
Interventional Cardiology Therapies | 182 |  |  | 401 |  |  | 583 |  |  | 190 |  |  | 359 |  |  | 549 |  |  |  |  |  |  |  |  |
Watchman | 291 |  |  | 31 |  |  | 323 |  |  | 234 |  |  | 28 |  |  | 262 |  |  |  |  |  |  |  |  |
Cardiac Rhythm Management | 355 |  |  | 197 |  |  | 552 |  |  | 338 |  |  | 181 |  |  | 519 |  |  |  |  |  |  |  |  |
Electrophysiology | 89 |  |  | 101 |  |  | 190 |  |  | 73 |  |  | 75 |  |  | 148 |  |  |  |  |  |  |  |  |
Cardiology | 918 |  |  | 730 |  |  | 1,647 |  |  | 836 |  |  | 643 |  |  | 1,479 |  |  |  |  |  |  |  |  |
Peripheral Interventions | 283 |  |  | 255 |  |  | 538 |  |  | 269 |  |  | 210 |  |  | 479 |  |  |  |  |  |  |  |  |
Cardiovascular | 1,201 |  |  | 984 |  |  | 2,185 |  |  | 1,104 |  |  | 853 |  |  | 1,958 |  |  |  |  |  |  |  |  |
Total Net Sales | $ | 2,099 |  |  | $ | 1,427 |  |  | $ | 3,527 |  |  | $ | 1,934 |  |  | $ | 1,236 |  |  | $ | 3,170 |  |  |  |  |  |  |  |  |

| Nine Months Ended September 30,
| 2023 |  | 2022
Businesses | U.S. |  | Int'l |  | Total |  | U.S. |  | Int'l |  | Total
Endoscopy | $ | 1,118 |  |  | $ | 719 |  |  | $ | 1,836 |  |  | $ | 992 |  |  | $ | 657 |  |  | $ | 1,649 |
Urology | 1,007 |  |  | 430 |  |  | 1,437 |  |  | 921 |  |  | 375 |  |  | 1,296 |
Neuromodulation | 530 |  |  | 177 |  |  | 708 |  |  | 519 |  |  | 150 |  |  | 669 |
MedSurg | 2,655 |  |  | 1,326 |  |  | 3,981 |  |  | 2,432 |  |  | 1,182 |  |  | 3,614 |
Interventional Cardiology Therapies | 554 |  |  | 1,248 |  |  | 1,803 |  |  | 568 |  |  | 1,099 |  |  | 1,667 |
Watchman | 843 |  |  | 87 |  |  | 930 |  |  | 662 |  |  | 76 |  |  | 738 |
Cardiac Rhythm Management | 1,057 |  |  | 609 |  |  | 1,665 |  |  | 1,005 |  |  | 575 |  |  | 1,580 |
Electrophysiology | 259 |  |  | 300 |  |  | 560 |  |  | 196 |  |  | 222 |  |  | 418 |
Cardiology | 2,714 |  |  | 2,244 |  |  | 4,958 |  |  | 2,431 |  |  | 1,972 |  |  | 4,403 |
Peripheral Interventions | 844 |  |  | 733 |  |  | 1,577 |  |  | 782 |  |  | 641 |  |  | 1,423 |
Cardiovascular | 3,557 |  |  | 2,977 |  |  | 6,534 |  |  | 3,213 |  |  | 2,613 |  |  | 5,826 |
Total Net Sales | $ | 6,212 |  |  | $ | 4,303 |  |  | $ | 10,515 |  |  | $ | 5,645 |  |  | $ | 3,795 |  |  | $ | 9,440 |

Refer to Note K- Segment Reporting for information on our reportable segments.
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| Three Months Ended September 30, |  | Nine Months Ended September 30,
Geographic Regions | 2023 |  | 2022 |  | 2023 |  | 2022
U.S. | $ | 2,099 |  |  | $ | 1,934 |  |  | $ | 6,212 |  |  | $ | 5,645 |
Europe, Middle East and Africa | 671 |  |  | 585 |  |  | 2,107 |  |  | 1,869 |
Asia-Pacific | 611 |  |  | 532 |  |  | 1,784 |  |  | 1,579 |
Latin America and Canada | 146 |  |  | 119 |  |  | 412 |  |  | 347 |
Total Net Sales | $ | 3,527 |  |  | $ | 3,170 |  |  | $ | 10,515 |  |  | $ | 9,440 |
Emerging Markets(1) | $ | 594 |  |  | $ | 519 |  |  | $ | 1,715 |  |  | $ | 1,457 |

(1)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.
Deferred Revenue
Contract liabilities are classified within Other current liabilities and Other long-term liabilities within our accompanying unaudited consolidated balance sheets. Our deferred revenue balance was $547 million as of September 30, 2023 and $509 million as of December 31, 2022. Our contractual liabilities are primarily composed of deferred revenue related to the LATITUDE™ Patient Management System within our Cardiology business, for which revenue is recognized over the average service period based on device and patient longevity. Our contractual liabilities also include deferred revenue related to the LUX-Dx™ Insertable Cardiac Monitor system, also within our Cardiology business, for which revenue is recognized over the average service period based on device longevity and usage. We recognized revenue of $52 million in the third quarter and $164 million in the first nine months of 2023 that was included in the above contract liability balance as of December 31, 2022. We have elected not to disclose the transaction price allocated to unsatisfied performance obligations when the original expected contract duration is one year or less. In addition, we have not identified material unfulfilled performance obligations for which revenue is not currently deferred.
Variable Consideration
For additional information on variable consideration, refer to Note A – Significant Accounting Policies to our audited financial statements contained in Item 8. Financial Statements and Supplementary Data of our most recent Annual Report on Form 10-K.
NOTE M – CHANGES IN OTHER COMPREHENSIVE INCOME
The following tables provide the reclassifications out of Other comprehensive income (loss), net of tax:

(in millions) | Foreign Currency Translation Adjustments |  | Net Change in Derivative Financial Instruments |  |  |  | Net Change in Defined Benefit Pensions and Other Items |  |  |  | Total
Balance as of June 30, 2023 | $ | (28) |  |  | $ | 241 |  |  |  |  | $ | (4) |  |  |  |  | $ | 208 |
Other comprehensive income (loss) before reclassifications | 23 |  |  | 42 |  |  |  |  | — |  |  |  |  | 64 |
(Income) loss amounts reclassified from accumulated other comprehensive income | (2) |  |  | (39) |  |  |  |  | (0) |  |  |  |  | (41) |
Total other comprehensive income (loss) | 21 |  |  | 3 |  |  |  |  | (0) |  |  |  |  | 23 |
Balance as of September 30, 2023 | $ | (8) |  |  | $ | 243 |  |  |  |  | $ | (4) |  |  |  |  | $ | 231 |

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(in millions) | Foreign Currency Translation Adjustments |  | Net Change in Derivative Financial Instruments |  |  |  | Net Change in Defined Benefit Pensions and Other Items |  | Total
Balance as of June 30, 2022 | $ | 106 |  |  | $ | 363 |  |  |  |  | $ | (36) |  |  | $ | 433 |
Other comprehensive income (loss) before reclassifications | 28 |  |  | 119 |  |  |  |  | 1 |  |  | 148 |
(Income) loss amounts reclassified from accumulated other comprehensive income | (2) |  |  | (47) |  |  |  |  | 0 |  |  | (49) |
Total other comprehensive income (loss) | 26 |  |  | 72 |  |  |  |  | 1 |  |  | 99 |
Balance as of September 30, 2022 | $ | 133 |  |  | $ | 434 |  |  |  |  | $ | (35) |  |  | $ | 532 |

(in millions) | Foreign Currency Translation Adjustments |  | Net Change in Derivative Financial Instruments |  |  |  | Net Change in Defined Benefit Pensions and Other Items |  | Total
Balance as of December 31, 2022 | $ | (1) |  |  | $ | 269 |  |  |  |  | $ | 1 |  |  | $ | 269 |
Other comprehensive income (loss) before reclassifications | (1) |  |  | 109 |  |  |  |  | (5) |  |  | 103 |
(Income) loss amounts reclassified from accumulated other comprehensive income | (6) |  |  | (134) |  |  |  |  | (1) |  |  | (141) |
Total other comprehensive income (loss) | (7) |  |  | (25) |  |  |  |  | (5) |  |  | (37) |
Balance as of September 30, 2023 | $ | (8) |  |  | $ | 243 |  |  |  |  | $ | (4) |  |  | $ | 231 |

(in millions) | Foreign Currency Translation Adjustments |  | Net Change in Derivative Financial Instruments |  |  |  | Net Change in Defined Benefit Pensions and Other Items |  | Total
Balance as of December 31, 2021 | $ | 93 |  |  | $ | 206 |  |  |  |  | $ | (36) |  |  | $ | 263 |
Other comprehensive income (loss) before reclassifications | 45 |  |  | 319 |  |  |  |  | 2 |  |  | 366 |
(Income) loss amounts reclassified from accumulated other comprehensive income | (6) |  |  | (90) |  |  |  |  | 0 |  |  | (96) |
Total other comprehensive income (loss) | 39 |  |  | 229 |  |  |  |  | 1 |  |  | 269 |
Balance as of September 30, 2022 | $ | 133 |  |  | $ | 434 |  |  |  |  | $ | (35) |  |  | $ | 532 |

Refer to Note D – Hedging Activities and Fair Value Measurements for further detail on our net investment hedges recorded in Foreign currency translation adjustment and our cash flow hedges recorded in Net change in derivative financial instruments.
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NOTE N – NEW ACCOUNTING PRONOUNCEMENTS
Periodically, new accounting pronouncements are issued by the FASB or other standard setting bodies. Recently issued standards typically do not require adoption until a future effective date. Prior to their effective date, we evaluate the pronouncements to determine the potential effects of adoption on our accompanying unaudited consolidated financial statements. During the first nine months of 2023, we implemented the following standards on a prospective basis, none of which had a material impact on our financial position or results of operations.
ASC Update No. 2022-01
ASC Update No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method. Update No. 2022-01 expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method, among other updates to these methods.
ASC Update No. 2022-02
ASC Update No. 2022-02, Financial Instruments- Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures makes amendments related to troubled debt restructurings for entities that have adopted Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as well as amendments related to vintage disclosures for entities with investments in financing receivables that have adopted Update No. 2016-13.
ASC Update No. 2022-04
ASC Update No. 2022-04, Liabilities— Supplier Finance Programs (Subtopic 405-50) enhances the transparency of supplier finance programs by requiring that a buyer in a supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program's nature, activity during the period, changes from period to period, and potential magnitude.
Standards to be Implemented
In June 2022, the FASB issued ASC Update No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. Update No. 2022-03 clarifies the guidance in Topic 820 related to measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security, as well as introduces new disclosure requirements for these types of equity securities. Update No. 2022-03 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. We do not expect the adoption to have a material impact on our financial position or results of operations.
No other new accounting pronouncements issued or effective in the period had or are expected to have a material impact on our accompanying unaudited consolidated financial statements.
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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 operational 1 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 organic 2 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 stockholders 3 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 stockholders 3 was $620 million, or $0.43 per diluted share.
1 Operational net sales growth excludes the impact of foreign currency fluctuations.
2 Organic 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.
3 Adjusted 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.
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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.
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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 operational 1 net sales growth of 12.6 percent and the negative impact of 120 basis points from foreign currency fluctuations. Operational net sales growth included organic 2 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 stockholders 3 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 stockholders 3 for the first nine months of 2022 was $1.816 billion, or $1.26 per diluted share.
1 Operational net sales growth excludes the impact of foreign currency fluctuations.
2 Organic 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.
3 Adjusted 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.
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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 |

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(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.
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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.
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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.
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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
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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,
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•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,
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•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,
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•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.
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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We develop, manufacture and sell medical devices globally and our earnings and cash flows are exposed to market risk from changes in currency exchange rates and interest rates. We address these risks through a risk management program that includes the use of derivative financial instruments. We operate the program pursuant to documented corporate risk management policies. We do not enter derivative transactions for speculative purposes. Gains and losses on derivative financial instruments substantially offset losses and gains on underlying hedged exposures. Furthermore, we manage our exposure to counterparty risk on derivative instruments by entering into contracts with a diversified group of major financial institutions and by actively monitoring outstanding positions.
Our currency risk consists primarily of foreign currency denominated firm commitments, forecasted foreign currency denominated intercompany and third-party transactions and net investments in certain subsidiaries. We use both nonderivative (primarily European manufacturing operations) and derivative instruments to manage our earnings and cash flow exposure to changes in currency exchange rates. We had currency derivative instruments outstanding in the contract amount of $6.005 billion as of September 30, 2023 and $7.324 billion as of December 31, 2022. A ten percent appreciation in the U.S. dollar’s value relative to the hedged currencies would increase the derivative instruments’ fair value by $255 million as of September 30, 2023 as compared to $208 million as of December 31, 2022. A ten percent depreciation in the U.S. dollar’s value relative to the hedged currencies would decrease the derivative instruments’ fair value by $311 million as of September 30, 2023 as compared to $254 million as of December 31, 2022. Any increase or decrease in the fair value of our currency exchange rate sensitive derivative instruments would be substantially offset by a corresponding decrease or increase in the fair value of the hedged underlying asset, liability or forecasted transaction, resulting in minimal impacts on our unaudited consolidated statements of operations.
Our interest rate risk relates primarily to U.S. dollar borrowings partially offset by U.S. dollar cash investments. We have historically used interest rate derivative instruments to manage our earnings and cash flow exposure to changes in interest rates. We had no interest rate derivative instruments outstanding as of September 30, 2023 and December 31, 2022. As of September 30, 2023, $8.953 billion in aggregate principal amount of our outstanding debt obligations was at fixed interest rates, representing approximately 100 percent of our total debt, on an amortized cost basis. As of September 30, 2023, our outstanding debt obligations at fixed interest rates were comprised of senior notes.
Refer to Note D – Hedging Activities and Fair Value Measurements to our unaudited consolidated financial statements contained in Item 1 of Part I of this Quarterly Report on Form 10-Q for further information regarding our derivative financial instruments.
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ITEM 4.CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer (CEO) and our Chief Financial Officer (CFO), evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2023 pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the Exchange Act). Disclosure controls and procedures are designed to ensure that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such material information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation, our CEO and CFO concluded that, as of September 30, 2023, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
During 2022, we began a multi-year implementation of a new global enterprise resource planning (ERP) system, which will replace our existing system. The implementation is expected to occur in phases over the next several years. The portion of the transition to the new ERP system which we have completed to date resulted in changes in our internal control over financial reporting during the first nine months of 2023. As future phases are implemented, we expect the changes to have a material impact on our internal controls over financial reporting and we will evaluate whether these process changes necessitate further changes in the design of and testing for effectiveness of internal controls over financial reporting.
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PART II
OTHER INFORMATION
ITEM 1. 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, which is incorporated herein by reference.
ITEM 1A. RISK FACTORS
In addition to other information contained elsewhere in this report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our most recent Annual Report on Form 10-K, which could materially affect our business, financial condition or future results.
ITEM 5. OTHER INFORMATION
(c)
No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended September 30, 2023.
ITEM 6. EXHIBITS (* documents filed or furnished with this report; # compensatory plans or arrangements)

3.1 |  | Certificate of Elimination relating to the 5.50% Mandatory Convertible Preferred Stock, Series A (incorporated herein by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed on August 3, 2023, File No 1-1083). |
22 |  | Subsidiary Issuer of Guaranteed Securities (incorporated herein by reference to Exhibit 22 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed on May 4, 2023, File No. 1-11083). |
31.1* |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2* |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1* |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2* |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document. |
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document. |
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document. |
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document. |
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document. |
104 |  | Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101). |

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on November 1, 2023.

| BOSTON SCIENTIFIC CORPORATION
| By: | /s/ Daniel J. Brennan
|  | Name: | Daniel J. Brennan
|  | Title: | Executive Vice President and Chief Financial Officer

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