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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934

For the quarterly period ended: March 31, 2001

Commission file number: 1-11083

BOSTON SCIENTIFIC CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)

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

One Boston Scientific Place, Natick, Massachusetts 01760-1537
- -------------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (508) 650-8000
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Former name, former address and former fiscal year, if changed since last
report.

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 X No
----- -----

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.

Shares Outstanding
Class as of March 31, 2001
----- --------------------

Common Stock, $.01 Par Value 401,422,425
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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)

March 31, December 31,
In millions, except share and per share data 2001 2000
- ---------------------------------------------------------------------------------------------------------

Assets
Current assets:
Cash and cash equivalents $ 84 $ 54
Short-term investments 6
Trade accounts receivable, net 370 361
Inventories 361 354
Other current assets 246 217
----------------------------
Total current assets 1,061 992

Property, plant and equipment 958 942
Less: accumulated depreciation 393 375
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565 567

Excess of cost over net assets acquired, net 816 821
Technology - core and developed, net 527 507
Patents, trademarks and other intangibles, net 346 343
Other assets 210 197
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$ 3,525 $ 3,427
============================

See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (continued)
(Unaudited)

March 31, December 31,
In millions, except share and per share data 2001 2000
- ----------------------------------------------------------------------------------------------------------

Liabilities and Stockholders' Equity
Current liabilities:
Commercial paper $ 29 $ 56
Bank obligations 311 204
Accounts payable and accrued expenses 420 419
Other current liabilities 139 140
-----------------------------
Total current liabilities 899 819

Long-term debt 568 574
Other long-term liabilities 97 99

Commitments and contingencies

Stockholders' equity:
Preferred stock, $ .01 par value - authorized 50,000,000 shares,
none issued and outstanding
Common stock, $ .01 par value - authorized 600,000,000 shares,
414,922,050 shares issued at March 31, 2001 and December 31, 2000 4 4
Additional paid-in capital 1,215 1,210
Treasury stock, at cost - 13,499,625 shares at March 31, 2001 and
15,074,381 shares at December 31, 2000 (250) (282)
Deferred compensation (19) (15)
Retained earnings 1,100 1,116
Accumulated other comprehensive loss (89) (98)
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Total stockholders' equity 1,961 1,935
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$ 3,525 $ 3,427
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See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)

Three Months Ended
March 31
In millions, except per share data 2001 2000
- ----------------------------------------------------------------------------------------------------------

Net sales $ 654 $ 679
Cost of products sold 222 213
-----------------------------
Gross profit 432 466

Selling, general and administrative expenses 225 214
Amortization expense 23 23
Royalties 9 11
Research and development expenses 56 49
Purchased research and development 79
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392 297
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Operating income 40 169

Other income (expense):
Interest expense (14) (21)
Other, net 1 8
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Income before income taxes 27 156
Income taxes 32 50
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Net income (loss) $ (5) $ 106
=============================

Net income (loss) per common share - basic $ (0.01) $ 0.26
=============================

Net income (loss) per common share - assuming dilution $ (0.01) $ 0.26
=============================

See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)

In millions, except share data Three Months Ended March 31, 2001
- -----------------------------------------------------------------------------------------------------------
Common Stock
------------------------------ Additional
Shares Issued Par Paid-In Treasury
(In thousands) Value Capital Stock
-------------------------------------------------------------

Balance at December 31, 2000 414,922 $ 4 $ 1,210 $ (282)
Net loss
Foreign currency translation adjustment
Issuance of common stock 3 34
Cancellation of restricted stock (2)
Tax benefit relating to incentive stock option
and employee stock purchase plans 2
Amortization of deferred compensation
Unrealized gains on derivative
financial instruments, net
Unrealized gains on equity investments, net
-------------------------------------------------------------
Balance at March 31, 2001 414,922 $ 4 $ 1,215 $ (250)
=============================================================

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)(continued)

In millions, except share data Three Months Ended March 31, 2001
- -----------------------------------------------------------------------------------------------------------
Accumulated Other
Deferred Retained Comprehensive
Compensation Earnings Income (Loss) Total
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Balance at December 31, 2000 $ (15) $ 1,116 $ (98) $ 1,935
Net loss (5) (5)
Foreign currency translation adjustment (9) (9)
Issuance of common stock (7) (10) 20
Cancellation of restricted stock 1 (1) (2)
Tax benefit relating to incentive stock option
and employee stock purchase plans 2
Amortization of deferred compensation 2 2
Unrealized gains on derivative
financial instruments, net 20 20
Unrealized gains on equity investments, net (2) (2)
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Balance at March 31, 2001 $ (19) $ 1,100 $ (89) $ 1,961
============================================================

See notes to unaudited condensed consolidated financial statements.

BOSTON SCIENTIFIC CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

Three Months Ended
March 31
In millions 2001 2000
- ----------------------------------------------------------------------------------------------------------

Cash provided by operating activities $ 91 $ 148

Investing activities:
Purchases of property, plant and equipment, net (29) (16)
Acquisitions of businesses, net of cash acquired (104)
Payments for acquisitions of and/or investments in certain
technologies, net (16)
Other, net 1 4
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Cash used for investing activities (148) (12)

Financing activities:
Net (decrease) increase in commercial paper (27) 122
Net proceeds from (payments on) borrowings
on revolving credit facilities 105 (220)
Proceeds from issuances of shares of common stock 7 8
Acquisitions of treasury stock (57)
Other, net 3 5
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Cash provided by (used for) financing activities 88 (142)
Effect of foreign exchange rates on cash (1) (2)
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Net increase (decrease) in cash and cash equivalents 30 (8)
Cash and cash equivalents at beginning of period 54 64
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Cash and cash equivalents at end of period $ 84 $ 56
=============================

See notes to unaudited condensed consolidated financial statements.

Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 2001

Note A - Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Boston
Scientific Corporation (Boston Scientific or the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2001 are
not necessarily indicative of the results that may be expected for the year
ending December 31, 2001. For further information, refer to the consolidated
financial statements and footnotes thereto incorporated by reference in Boston
Scientific's Annual Report on Form 10-K for the year ended December 31, 2000.

Certain prior years' amounts have been reclassified to conform to the current
year presentation.

Note B - Comprehensive Income

For the three months ended March 31, 2001 and 2000, the Company's comprehensive
income was $4 million and $102 million, respectively.

Note C - Earnings Per Share

The following table sets forth the computations of basic and diluted earnings
per share:

Three Months
Ended March 31,
(In millions, except share and per share data) 2001 2000
- -------------------------------------------------------------------------------------------------

Basic:
Net income (loss) $ (5) $ 106
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Weighted average shares outstanding (in thousands) 399,186 408,178
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Net income (loss) per common share $ (0.01) $ 0.26
===========================

Assuming dilution:
Net income (loss) $ (5) $ 106
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Weighted average shares outstanding (in thousands) 399,186 408,178

Net effect of dilutive stock-based compensation (in thousands) 3,179
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Total (in thousands) 399,186 411,357
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Net income (loss) per common share $ (0.01) $ 0.26
===========================

During the first quarter of 2001, approximately 4 million potential common
shares were not included in the computation of earnings per share, assuming
dilution, as they would have been anti-dilutive.

Note D - Business Combinations

On March 5, 2001, the Company completed its acquisition of Catheter Innovations,
Inc. (CI). CI develops and manufactures catheter-based venous access products
used by clinicians to treat critically ill patients through the delivery of
chemotherapy drugs, antibiotics and nutritional support.

The cost for these three acquisitions, excluding future contingent payments,
amounted to approximately $103 million, consisting of approximately $90 million
in cash and the issuance of 969,459 Company shares. The Company's acquisitions
were accounted for using the purchase method of accounting. The condensed
consolidated financial statements include the operating results for each
acquired entity from their respective date of acquisition. Pro forma information
is not presented, as the acquired companies' results of operations prior to
their date of acquisition are not material to the Company.

The aggregate purchase price for each acquisition has been allocated on a
preliminary basis to the assets acquired and liabilities assumed based on their
fair values at date of acquisition. The estimated excess of purchase price over
the fair value of the net tangible assets acquired was allocated to identifiable

intangible assets, as valued by an independent appraiser using information and
assumptions provided by management. The Company expects to finalize the purchase
price allocation in the second quarter of 2001. Based upon these preliminary
valuations, the Company recorded a $79 million charge to account for purchased
research and development. The valuation of purchased research and development,
for which management is primarily responsible, represents the estimated fair
value at the date of acquisition related to in-process projects. As of the date
of acquisition, the in-process projects had not yet reached technological
feasibility and had no alternative future uses. The primary basis for
determining technological feasibility of these projects is obtaining Food and
Drug Administration (FDA) approval. Accordingly, the value attributable to these
projects, which have not yet obtained FDA approval, was immediately expensed at
acquisition. If the projects are not successful or completed in a timely manner,
the Company may not realize the financial benefits expected for these projects.
Other intangible assets recorded in connection with these acquisitions are being
amortized on a straight-line basis ranging from 9 to 20 years.

The income approach was used to establish the fair values of the purchased
research and development. This approach established the fair value of an asset
by estimating the after-tax cash flows attributable to the in-process project
over its useful life and then discounting these after-tax cash flows back to a
present value. Revenue estimates were based on estimates of relevant market
sizes, expected market growth rates, expected trends in technology and expected
product introductions by competitors. In arriving at the value of the in-process
research and development projects, the Company considered, among other factors,
the in-process project's stage of completion, the complexity of the work
completed as of the acquisition date, the costs already incurred, the projected
costs to complete, the contribution of core technologies and other acquired
assets, the expected introduction date, and the estimated useful life of the
technology. The discount rate used to arrive at a present value as of the date
of acquisition was based on the time value of money and medical technology
investment risk factors. For the purchased research and development programs,
risk-adjusted discount rates ranging from 20% to 28% were utilized to discount
the projected cash flows. The Company believes that the estimated purchased
research and development amounts so determined represent the fair value at the
date of acquisition and do not exceed the amount a third party would pay for the
projects.

The most significant projects, relative to the purchased research and
development charge recorded, are embolic protection devices acquired in
connection with the EPI transaction which represents over 78% of the in-process
value. The embolic protection devices are filters that are mounted on a
guidewire and are used to capture embolic material that is dislodged during
cardiovascular interventions. As of the date of acquisition, the projects were
expected to be completed and the products to be commercially available in Europe
and the U.S. within one to three years, with an estimated cost to complete of
approximately $20 to $30 million.

The Company is subject to contingent payments over the next four years based on
the acquired companies' reaching certain performance and other milestones. These
payments may be made in cash and/or Company stock and the amount would be
allocated to specific intangible asset categories with the remainder assigned to
excess of cost over net assets acquired on the basis that the consideration had
been paid as of the date of acquisition.

On April 2, 2001, the Company completed its acquisition of Interventional
Technologies, Inc. (IVT). IVT develops, manufactures and markets minimally
invasive devices for use in interventional cardiology, including the Cutting
Balloon(TM) catheter and the Infiltrator(R) transluminal drug delivery catheter.

The Company is obligated to pay approximately $345 million in cash plus
additional cash amounts contingent upon achieving performance and other
milestones. The transaction will be accounted for using the purchase method of
accounting.

Note E - Global Operations Strategy

At March 31, 2001, the Company had approximately $58 million of accrued
severance and related costs associated with the Company's 2000 plant
optimization initiative. The intent of the plant optimization initiative is to
better allocate the Company's resources by creating a more effective network of
manufacturing and research and development facilities. It will consolidate
manufacturing operations along product lines and shift significant amounts of
production to Company facilities in Miami and Ireland and to contract
manufacturing. The Company's plan includes the discontinuation of manufacturing
activities at three facilities in the U.S., and includes the planned
displacement of approximately 2,000 manufacturing, manufacturing support and
management employees. The Company expects that the plan will be substantially
completed over the next nine months. As of March 31, 2001, less than $1 million
had been charged against the restructuring accrual for the approximately 40
employees terminated pursuant to the plan.

Note F - Inventories

The components of inventory consist of the following:

March 31, December 31,
(In millions) 2001 2000
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Finished goods $ 200 $ 172
Work-in-process 63 59
Raw materials 98 123
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$ 361 $ 354
========================

At March 31, 2001, the Company had approximately $132 million of net NIR(R)
coronary stent inventory, which is supplied by Medinol Ltd. (Medinol), and was
committed to purchase approximately $25 million of NIR(R) stents from Medinol.
Delays, stoppages or interruptions in the supply and/or mix of NIR(R) stent
inventory could adversely affect the operating results and/or revenues of the
Company.

Note G - Derivative Instruments and Hedging Activities

Upon adoption of Statement 133, the Company initiated a program to hedge a
portion of its forecasted inter-company and third-party transactions with
foreign exchange forward and option contracts. These contracts are entered into
to reduce the risk that the Company's earnings and cash flows resulting from

certain forecasted transactions will be adversely affected by changes in foreign
currency exchange rates. However, the Company may be impacted by changes in
foreign currency exchange rates related to the unhedged portion. The success of
the hedging program depends, in part, on forecasts of transaction activity in
various currencies (currently the Japanese yen and the euro). The Company may
experience unanticipated foreign currency exchange gains or losses to the extent
that there are timing differences between forecasted and actual activity during
periods of currency volatility. However, since the critical terms of forward
contracts designated as cash flow hedging instruments are the same as the
underlying forecasted transaction, changes in the fair value of forward
contracts should be highly effective in offsetting the present value of changes
in the expected cash flows from the forecasted transaction. The ineffective
portion of any changes in the fair value of option contracts designated as cash
flow hedging instruments is recognized immediately in earnings. The Company did
not recognize material gains or losses resulting from either hedge
ineffectiveness or changes in forecast probability during the three months ended
March 31, 2001.

The effective portion of any changes in the fair value of the derivative
instruments, designated as cash flow hedges, is recorded in accumulated other
comprehensive income/(loss) (AOCI) until the third-party transaction associated
with the hedged forecasted transaction occurs. Once the third-party transaction
associated with the hedged forecasted transaction occurs, the effective portion
of any related gain or loss on the cash flow hedge is reclassified from AOCI to
earnings. In the event the hedged forecasted intercompany or third-party
transaction does not occur, or it becomes probable that it will not occur, the
effective portion of any gain or loss on the related cash flow hedge would be
reclassified from AOCI to earnings at that time.

The Company recognized a net gain of approximately $2 million in earnings from
derivative instruments designated as cash flow hedges of forecasted transactions
during the three months ended March 31, 2001. All of the derivative instruments,
designated as cash flow hedges, outstanding at December 31, 2000, mature within
the subsequent 24-month period. As of March 31, 2001, approximately $47 million
of unrealized net gains have been recorded in AOCI, net of tax, to recognize the
effective portion of any fair value of derivative instruments that are, or
previously were, designated as cash flow hedges. Based upon current exchange
rates, a gain of approximately $27 million, net of tax, may be reclassified to
earnings within the next twelve months to mitigate foreign exchange risk.

Furthermore, the Company continues to hedge its net recognized foreign currency
transactional exposures with forward foreign exchange contracts to reduce the
risk that the Company's earnings and cash flows will be adversely affected by
changes in foreign currency exchange rates. These foreign exchange contracts are
not designated as cash flow, fair value or net investment hedges under Statement
133. These derivative instruments do not subject the Company's earnings or cash
flows to material risk due to exchange rate movements because gains and losses
on these derivatives offset losses and gains on the assets and liabilities being
hedged. These forward foreign exchange contracts are entered into for periods
consistent with commitments, generally one to six months.

Note H - Commitments and Contingencies

On May 16, 2000, the Company entered into an agreement with Guidant Corporation
(Guidant) to settle all outstanding litigation between the two companies and
their affiliates. The Company and Guidant had pending a number of lawsuits in
the U.S. and Europe in which each had accused the other of patent infringement.

The litigation involves coronary stent delivery systems and dilatation
catheters. As part of the settlement, the companies agreed to license certain
patents to each other. In addition, the companies agreed to specified financial
terms depending upon the ultimate resolution of Guidant's August 12, 1998
lawsuit against the Company filed in Indiana related to the Company's NIR(R)
stent and of the Company's May 31, 1994 lawsuit against Guidant in California
related to Guidant's RX ELIPSE(TM) PTCA catheter and RX MULTILINK(TM) stent
delivery system (described below). All other disputes between the parties were
dismissed.

On May 31, 1994, SCIMED Life Systems, Inc. (SCIMED), a subsidiary of the
Company, filed a suit for patent infringement against Advanced Cardiovascular
Systems, Inc. (ACS), a subsidiary of Guidant Corporation, alleging willful
infringement of two of SCIMED's U.S. patents by ACS's RX ELIPSE(TM) PTCA
catheter. The suit was filed in the U.S. District Court for the Northern
District of California seeking monetary and injunctive relief. In January 1998,
the Company added the ACS RX MULTILINK(TM) stent delivery system to its
complaint. On June 6, 1999, the Court granted summary judgment in favor of ACS
affirming that SCIMED'S patents were not infringed. SCIMED appealed the judgment
and a hearing was held on October 2, 2000. On March 14, 2001, the Court affirmed
the judgment in favor of ACS.

On August 12, 1998, ACS and an affiliate of ACS filed suit for patent
infringement against the Company and SCIMED alleging that the Company's NIR(R)
stent infringes five patents owned by ACS. The suit was filed in the U.S.
District Court for the Southern District of Indiana seeking injunctive and
monetary relief. On June 28, 2000, the Court granted the Company's motion to
dismiss the action. ACS has appealed the decision and a hearing on the appeal
was held on May 8, 2001.

On March 25, 1996, Cordis Corporation (Cordis), a subsidiary of Johnson &
Johnson Company (Johnson & Johnson), filed a suit for patent infringement
against SCIMED, alleging the infringement of five U.S. patents by SCIMED's
LEAP(TM) balloon material used in certain SCIMED catheter products, including
SCIMED's BANDIT(TM) and EXPRESS PLUS(TM) catheters. The suit was filed in the
U.S. District Court for the District of Minnesota and seeks monetary and
injunctive relief. SCIMED has answered, denying the allegations of the
complaint. A trial date has not yet been set.

On March 27, 1997, SCIMED filed suit for patent infringement against Cordis,
alleging willful infringement of several SCIMED U.S. patents by Cordis'
TRACKSTAR 14(TM), TRACKSTAR 18(TM), OLYMPIX(TM), POWERGRIP(TM), SLEEK(TM),
SLEUTH(TM), THOR(TM), TITAN(TM) and VALOR(TM) catheters. The suit was filed in
the U.S. District Court for the District of Minnesota, seeking monetary and
injunctive relief. The parties have agreed to add Cordis' CHARGER(TM) and
HELIX(TM) catheters to the suit. Cordis has answered, denying the allegations of
the complaint. A trial date has not yet been set.

On March 13, 1997, the Company (through its subsidiaries) filed suits against
Johnson & Johnson (through its subsidiaries) in The Netherlands, the United
Kingdom and Belgium, and on March 17, 1997 filed suit in France, seeking a
declaration of noninfringement for the NIR(R) stent relative to two European
patents licensed to Ethicon, Inc. (Ethicon), a Johnson & Johnson subsidiary, as
well as a declaration of invalidity with respect to those patents. After a trial
on the merits in the United Kingdom during March 1998, the court ruled on June
26, 1998 that neither of the patents is infringed by the NIR(R) stent, and that
both patents are invalid. Ethicon appealed, and on March 20, 2000, the appellate
court upheld the trial outcome. On October 28, 1998, the Company's motion for a

declaration of noninfringement in France was dismissed for failure to satisfy
statutory requirements; the French invalidity suits were not affected.

On March 20, 21 and 22, 1997, the Company (through its subsidiaries) filed
additional suits against Johnson & Johnson (through its subsidiaries) in Sweden,
Italy and Spain, respectively, seeking a declaration of noninfringement for the
NIR(R) stent relative to one of the European patents licensed to Ethicon in
Sweden, Italy and Spain and a declaration of invalidity in Italy and Spain. In
Italy, following a July 9, 1999 hearing, a technical expert was appointed by the
court. Ethicon and other Johnson & Johnson subsidiaries filed a cross-border
suit in The Netherlands on March 17, 1997, alleging that the NIR(R) stent
infringes one of the European patents licensed to Ethicon. In this action, the
Johnson & Johnson entities requested relief, including provisional relief (a
preliminary injunction), covering Austria, Belgium, France, Greece, Italy, The
Netherlands, Norway, Spain, Sweden, Switzerland and the United Kingdom. On April
2, 1997, the Johnson & Johnson entities filed a similar cross-border proceeding
in The Netherlands with respect to a second European patent licensed to Ethicon.
Johnson & Johnson subsequently withdrew its request for cross-border relief in
the United Kingdom. In October, 1997, Johnson & Johnson's request for
provisional cross-border relief on both patents was denied by the Dutch court,
on the ground that it is "very likely" that the NIR(R) stent will be found not
to infringe the patents. Johnson & Johnson appealed this decision with respect
to the second patent; the appeal has been denied on the ground that there is a
"ready chance" that the patent will be declared null and void. In January 1999,
Johnson & Johnson amended the claims of the second patent, changed the action
from a cross-border case to a Dutch national action, and indicated its intent
not to pursue its action on the first patent. On June 23, 1999, the Dutch Court
affirmed that there were no remaining infringement claims with respect to either
patent. In late 1999, Johnson & Johnson appealed this decision. A hearing on the
appeal has not yet been scheduled.

On May 6, 1997, Ethicon Endosurgery, Inc. sued the Company in Dusseldorf,
Germany, alleging that the Company's NIR(R) stent infringes one of Ethicon's
patents. On June 23, 1998, the case was stayed following a decision in an
unrelated nullity action in which the Ethicon patent was found to be invalid.

On August 22, 1997, Johnson & Johnson filed a suit for patent infringement
against the Company alleging that the sale of the NIR(R) stent infringes certain
Canadian patents owned by Johnson & Johnson. Suit was filed in the federal court
of Canada seeking a declaration of infringement, monetary damages and injunctive
relief. The Company has answered, denying the allegations of the complaint. A
trial is expected to begin in late 2002.

On October 22, 1997, Cordis filed a suit for patent infringement against the
Company and SCIMED alleging that the importation and use of the NIR(R) stent
infringes two patents owned by Cordis. On April 13, 1998, Cordis filed a suit
for patent infringement against the Company and SCIMED alleging that the
Company's NIR(R) stent infringes two patents owned by Cordis. The suits were
filed in the U.S. District Court for the District of Delaware seeking monetary
damages, injunctive relief and that the patents be adjudged valid, enforceable
and infringed. A trial on both actions was held in late November through early
December 2000. A jury found that the NIR(R) stent does not infringe three Cordis
patents, but does infringe one claim of one Cordis patent and awarded damages of
approximately $324 million to Cordis. A final decision has not yet been entered
by the Court pending post-trial motions scheduled through May 2001.

On June 7, 1999, the Company, SCIMED and Medinol filed suit for patent
infringement against Johnson & Johnson, Johnson & Johnson Interventional Systems
and Cordis, alleging two U.S. patents owned by Medinol and exclusively licensed
to the Company are infringed by at least Cordis' CROWN(TM), MINI CROWN(TM) and
CORINTHIAN(TM) stents. The suit was filed in the U.S. District Court for the
District of Minnesota seeking injunctive and monetary relief. The case has been
transferred to the U.S. District Court for the District of Delaware. A trial is
scheduled to begin in August 2001.

On March 24, 2000, the Company (through its subsidiaries) and Medinol filed a
cross-border suit against Johnson & Johnson, Cordis and certain of their foreign
subsidiaries in The Netherlands alleging Cordis' BX Velocity(TM) stent delivery
system infringes one of Medinol's European patents. In this action, the Company
and Medinol requested monetary and injunctive relief covering The Netherlands,
Austria, Belgium, Switzerland, Germany, Denmark, Spain, France, Greece, Ireland,
Italy, Liechtenstein, Luxembourg, Monaco, Portugal and Sweden. A hearing was
held January 12, 2001. On March 19, 2001, the Company's request for preliminary
injunction was denied by the Court. The Company intends to appeal this decision.

On March 30, 2000, the Company (through its subsidiary) filed suit for patent
infringement against two subsidiaries of Cordis alleging that Cordis' BX
Velocity stent delivery system infringes a published utility model owned by
Medinol and exclusively licensed to the Company. The complaint was filed in the
District Court of Dusseldorf, Germany seeking monetary and injunctive relief. A
hearing was held on March 15, 2001 and on May 15, 2001, the Court issued an oral
decision that Cordis' BX Velocity stent delivery system infringes the Medinol
published utility model.

On April 14, 2000, the Company (through its subsidiaries) and Medinol filed suit
for patent infringement against Johnson & Johnson, Cordis, and a subsidiary of
Cordis alleging that Cordis' BX Velocity stent delivery system infringes a
patent owned by Medinol and exclusively licensed to the Company. The complaint
was filed in the U.S. District Court for the District of Delaware seeking
monetary and injunctive relief. Trial is expected to begin in August 2001.

On August 13, 1998, Arterial Vascular Engineering, Inc., now named Medtronic AVE
Inc. (AVE), filed a suit for patent infringement against the Company and SCIMED
alleging that the Company's NIR(R) stent infringes two patents owned by AVE. The
suit was filed in the U.S. District Court for the District of Delaware seeking
injunctive and monetary relief. On May 25, 2000, AVE amended the complaint to
include a third patent. The Company and SCIMED have answered, denying the
allegations of the complaint. The parties have filed a stipulation requesting
the Court stay the case until the third quarter of 2002.

On December 15, 1998, the Company and SCIMED filed a cross-border suit against
AVE in The Netherlands alleging that AVE's AVE GFX(TM), AVE GFX 2(TM), AVE
LTX(TM) and USCI CALYPSO(TM) rapid exchange catheters and stent delivery systems
infringe one of the Company's European patents. In this action, the Company
requested relief covering The Netherlands, the United Kingdom, France, Germany
and Italy. A hearing on the merits was held on October 22, 1999. The Court
delayed its decision pending advice from the Dutch Patent Office, which has been
received. A final hearing has been scheduled for November 23, 2001.

On December 18, 1998, AVE filed a suit for patent infringement against the
Company and SCIMED alleging that the Company's MAXXUM(TM), VIVA!(TM), ADANTE(TM)
and NIR(R) PRIMO(R) catheters infringe a patent owned by AVE. The suit was filed
in the U.S. District Court for the District of Delaware seeking injunctive and
monetary relief. The suit has been amended to add infringement allegations
relating to two other AVE patents. The Company and SCIMED have answered, denying
the allegations of the complaint.

On March 10, 1999, the Company (through its subsidiary Schneider (Europe) AG)
filed suit against AVE alleging that AVE's AVE GFX, AVE GFX2, AVE LTX, CALYPSO
RELY(TM), PRONTO SAMBA(TM) and SAMBA RELY(TM) rapid-exchange catheters and stent
delivery systems infringe one of the Company's German patents. The suit was
filed in the District Court of Dusseldorf, Germany seeking injunctive and
monetary relief. A hearing was held on January 27, 2000. The Court has delayed
its decision pending expert advice and on May 15, 2000, the Court appointed a
technical expert.

On April 6, 1999, AVE filed suit against SCIMED and another subsidiary of the
Company alleging that the Company's NIR(R) stent infringes one of AVE's European
patents. The suit was filed in the District Court of Dusseldorf, Germany seeking
injunctive and monetary relief. A hearing was held in Germany on September 23,
1999, and on November 4, 1999, the court dismissed the complaint. On December
21, 1999, AVE appealed the dismissal. The appeal is stayed pending the outcome
of a related nullity action.

On May 14, 1999, Medtronic, Inc. (Medtronic) filed suit against the Company and
SCIMED alleging that a variety of the Company's NIR(R) stent products infringe a
Medtronic patent. The suit was filed in the U.S. District Court for the Fourth
District of Minnesota seeking injunctive and monetary relief. In February 2000,
the court found that the NIR(R) stent products do not infringe Medtronic's
patent and the suit was dismissed. Medtronic appealed the decision. A hearing on
the appeal was held on January 9, 2001 and on April 23, 2001, the Appeals Court
affirmed the district court's judgment that the Company's NIR(R) stent products
do not infringe the Medtronic patent.

On July 7, 1999, Medtronic filed suit against the Company and SCIMED, alleging
that SCIMED's RADIUS(TM) stent infringes two patents owned by Medtronic. The
suit was filed in the U.S. District Court for the Fourth District Court of
Minnesota seeking injunctive and monetary relief. The Company has answered,
denying allegations of the complaint. A trial is expected in late 2001.

On March 28, 2000, the Company and certain subsidiaries filed suit for patent
infringement against AVE alleging that AVE's S670(TM) rapid exchange coronary
stent system infringes a patent licensed to the Company. The suit was filed in
the U.S. District Court for the Northern District of California seeking monetary
and injunctive relief. In July 2000, this matter was sent to arbitration. An
arbitration hearing was held in April 2001 to determine whether AVE's S670 and
S660(TM) rapid exchange coronary stent delivery systems and the R1 rapid
exchange catheter are licensed pursuant to the terms of a settlement agreement.
A decision is expected in June or July of 2001.

On December 6, 2000, the Company and SCIMED filed suit for patent infringement
against AVE alleging that AVE's S660 and S670 coronary stent delivery systems
and RI rapid exchange catheter infringe a patent owned by the Company. The suit
was filed in the United Stated District court for the District of Delaware
seeking monetary and injunctive relief. AVE has answered, denying the
allegations of the complaint.

On March 7, 1996, Cook Inc. (Cook) filed suit in the Regional Court, Munich
Division for Patent Disputes, in Munich, Germany against MinTec, Inc. Minimally
Invasive Technologies alleging that the Cragg EndoPro(TM) System I and
Stentor(TM) endovascular device infringe a certain Cook patent. Following the
purchase of the assets of the Endotech/MinTec companies by the Company, the
Company assumed control of the litigation. A final hearing was held on May 12,
1999, and the court held no infringement of the Cook patents. The case was
dismissed in June 1999. Cook has appealed the decision. A hearing was held on
May 4, 2000. On July 27, 2000, the Court stayed the action pending the outcome
of a nullity action filed by the Company against the patent.

On June 30, 1998, Cook filed suit in the Regional Court, Dusseldorf Division for
Patent Disputes, in Dusseldorf, Germany against the Company alleging that the
Company's PASSAGER(TM) peripheral vascular stent graft and VANGUARD(TM)
endovascular aortic graft products infringe the same Cook patent. A hearing was
held on July 22, 1999 and a decision was received in September 1999 finding the
Company's products infringe the Cook patent. The Company appealed the decision.
A hearing is expected in August 2001.

On March 18, 1999, Cook filed suit against the Company and SCIMED, alleging that
SCIMED's RADIUS(TM) coronary stent infringes a certain U.S. patent owned by
Cook. The suit was filed in the U.S. District Court for the Southern District of
Indiana seeking monetary damages and injunctive relief. On July 14, 1999, Cook
filed an amended complaint adding Meadox Medicals, Inc. (Meadox), a wholly owned
subsidiary of the Company, as a party to the suit, and adding a breach of
contract claim. The Company, SCIMED and Meadox have answered, denying the
allegations of the complaint. A trial is expected in June 2002.

On May 19, 2000, the Company and SCIMED filed suit against a subsidiary of Cook
alleging that Cook's MBL-4(TM), MBL-6(TM), MBL-4-XL(TM) and MBL-6-OV(TM)
ligating devices infringe three of the Company's patents. The suit was filed in
the U.S. District Court for the District of Massachusetts seeking monetary
damages and injunctive relief. Cook counterclaimed seeking declaratory judgment
that the Company's patents are invalid and unenforceable and Cook's products do
not infringe the Company's patents. The Company filed a motion requesting a
preliminary injunction which was denied in September 2000. The Company has filed
a notice of appeal of the court's decision. A hearing on the appeal has not yet
been scheduled.

On February 3, 1999, the Company filed suit against Influence, Inc. (Influence)
alleging that Influence infringes certain of the Company's patents covering the
treatment of female urinary incontinence. The suit was filed in the Northern
District of California. Influence counterclaimed, alleging that the Company
infringes certain Influence patents, also relating to the treatment of female
urinary incontinence. On January 31, 2001, the Company and Influence entered
into an agreement to settle the litigation. Pursuant to the terms of the
agreement, both parties cross licensed patents relating to certain treatment for
female urinary incontinence.

On March 27, 2000, American Medical Systems, Inc. (AMS) filed suit against the
Company alleging that the Company induces infringement of an AMS patent covering
a certain treatment for female urinary incontinence. The complaint also alleges
misappropriation of trade secrets and breach of contract. The suit was filed in
the U.S. District Court for the District of Minnesota seeking monetary and
injunctive relief. On January 31, 2001 the company and AMS entered into an
agreement to settle the litigation. Pursuant to the terms of the agreement, both
parties cross licensed patents relating to certain treatment for female urinary
incontinence.

On October 31, 2000, the Federal Trade Commission (FTC) filed suit against the
Company for alleged violations of a Consent Order dated May 5, 1995, pursuant to
which the Company had licensed certain intravascular ultrasound technology to
Hewlett-Packard Company (HP). The suit was filed in the U.S. District Court for
the District of Massachusetts seeking civil penalties and injunctive relief. The
Company has filed a motion to dismiss the complaint and the FTC has filed a
motion for summary judgment. The motions are scheduled to be heard on June 21,
2001.

Beginning November 4, 1998, a number of shareholders of the Company, on behalf
of themselves and all others similarly situated, filed purported stockholders'
class action suits in the U.S. District Court for the District of Massachusetts
alleging that the Company and certain of its officers violated certain sections
of the Securities Exchange Act of 1934. The complaints principally alleged that
as a result of certain accounting irregularities involving the improper
recognition of revenue by the Company's subsidiary in Japan, the Company's
previously issued financial statements were materially false and misleading. In
August 1999, lead plaintiffs and lead counsel filed a purported consolidated
class action complaint adding allegations that the Company issued false and
misleading statements with respect to the launch of its NIR ON(R) Ranger(TM)
with Sox(TM) coronary stent delivery system and the system's subsequent recall.
The Company and its officers have filed a motion to dismiss the consolidated
complaint. The Plaintiffs have opposed the Company's motion to dismiss the
consolidated complaint.

On July 28, 2000, Dr. Tassilo Bonzel filed a complaint naming certain of the
Company's Schneider Worldwide subsidiaries and Pfizer Inc. ("Pfizer") and
certain of its affiliates as defendants, alleging that Pfizer failed to pay Dr.
Bonzel amounts owed under a license agreement involving Dr. Bonzel's patented
Rapid Exchange technology. The suit was filed in the District Court for the
State of Minnesota seeking monetary relief. Dr. Bonzel has also provided a
notice of breach of the agreement which could lead to its termination. On
September 5, 2000, the Company and Boston Scientific Scimed, Inc. (formerly
known as Schneider (USA), Inc.) filed suit against Dr. Bonzel in the U.S.
District Court for the District of Massachusetts seeking declaratory judgment of
non-infringement because the Company has not breached the terms of the license
agreement and that Dr. Bonzel is stopped from asserting infringement. Dr. Bonzel
filed a motion to dismiss or stay the Massachusetts action and in February 2001,
the Court dismissed the Massachusetts case.

On April 5, 2001, Medinol filed a complaint against the Company and certain of
its current and former employees alleging breaches of contract, fraud and other
claims. Medinol supplies NIR(R) stents exclusively to the Company. The suit was
filed in the U.S. District Court for the Southern District of New York seeking
monetary and injunctive relief. On April 26, 2001, Medinol amended its complaint
to add claims alleging misappropriation of trade secrets in relation to the
Company's internal Express(TM) stent development program. Medinol seeks monetary
and injunctive relief, as well as an end to the Company's right to distribute
Medinol stents and access to certain Company intellectual property. On April 30,
2001, the Company answered and countersued Medinol and its principals, Judith
and Jacob Richter, alleging multiple breaches of contract, fraud and deceptive
practices, and defamation. The Company seeks monetary and injunctive relief.

The Company is aware that the U.S. Department of Justice is conducting an
investigation of matters that include the Company's NIR ON(R) Ranger(TM) with
Sox(TM) coronary stent delivery system which was voluntarily recalled by the
Company in October 1998 following reports of balloon leaks. The Company is
cooperating fully in the investigation.

The Company is involved in various other lawsuits from time to time. In
management's opinion, the Company is not currently involved in any legal
proceedings other than those specifically identified above which, individually
or in the aggregate, could have a material effect on the financial condition,
operations or cash flows of the Company. As of March 31, 2001, the potential
exposure for litigation-related accruable costs is estimated to range from $15
million to $24 million. As of March 31, 2001, the range of loss for reasonably
possible contingencies that can be estimated is $0 to $344 million, plus
interest, and additional damages for sales occurring after the jury verdict
related to the Cordis suit for patent infringement filed on October 22, 1997.

The Company believes that it has meritorious defenses against claims that it has
infringed patents of others. However, there can be no assurance that the Company
will prevail in any particular case. An adverse outcome in one or more cases in
which the Company's products are accused of patent infringement could have a
material adverse effect on the Company. Further, product liability claims may be
asserted in the future relative to events not known to management at the present
time. The Company has insurance coverage which management believes is adequate
to protect against product liability losses as could otherwise materially affect
the Company's financial position.

Note I - Segment Reporting

Boston Scientific is a worldwide developer, manufacturer and marketer of medical
devices for less invasive procedures. The Company has four reportable operating
segments based on geographic regions: the United States, Europe, Japan and
Inter-Continental. Each of the Company's reportable segments generates revenues
from the sale of less invasive medical devices. The reportable segments
represent an aggregate of operating divisions.

Sales and operating results of reportable segments are based on internally
derived standard foreign exchange rates, which may differ from year to year and
do not include inter-segment profits. The segment information presented for 2000
has been restated based on the Company's standard foreign exchange rates used
for 2001. Because of the interdependence of the reportable segments, the
operating profit as presented may not be representative of the geographic
distribution that would occur if the segments were not interdependent.

Inter-
(In millions) United States Europe Japan Continental Total
- ------------------------------------------------------------------------------------------------------------------------------

Three months ended March 31, 2001
Net sales $391 $ 93 $136 $ 43 $663
Operating income excluding purchased research and development 147 27 81 1 256

Three months ended March 31, 2000
Net sales $391 $ 93 $138 $ 43 $665
Operating income excluding purchased research and development 166 29 93 3 291
==========================================================

A reconciliation of the totals reported for the reportable segments to the
applicable line items in the consolidated financial statements is as follows:

Three Months Ended
March 31,
- -----------------------------------------------------------------------------------------------------

( In millions) 2001 2000
Net sales:
Total net sales for reportable segments $ 663 $ 665
Foreign exchange (9) 14
----------------------
$ 654 $ 679
Income before income taxes:
Total operating income for reportable segments
excluding purchased research and development $ 256 $ 291
Manufacturing operations (26) (30)
Corporate expenses and foreign exchange (111) (92)
Purchased research and development (79)
----------------------
40 169

Other expense, net (13) (13)
----------------------
$ 27 $ 156
======================

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

RESULTS OF OPERATIONS

Net sales for the first quarter of 2001 were $654 million as compared to $679
million in the first quarter of 2000, a decline of 4 percent. Without the
adverse impact of $24 million due to foreign currency fluctuations, net sales in
the first quarter of 2001 totaled $678 million. The reported net loss for the
first quarter of 2001 was $5 million, or $0.01 per share, as compared to net
income of $106 million, or $0.26 per share (diluted), in the first quarter of
2000. The first quarter results for 2001 include a $79 million charge, net of
tax, for purchased research and development and expenses of $13 million ($9
million, net of tax) associated with the Company's global operations plan.

United States (U.S.) revenues were approximately $391 million during the first
quarter of 2001 and 2000, while international revenues decreased approximately
9% to $263 million. Worldwide coronary stent revenues and worldwide coronary
balloon revenues were approximately $100 million and $75 million, respectively,
during the first quarter of 2001, compared to $113 million and $101 million,
respectively, during the first quarter of 2000. The reduction in the Company's
coronary stent and coronary balloon revenues was partially offset by revenue
growth in the Company's other products.

The worldwide coronary stent market is dynamic and highly competitive, with
significant market share volatility. In addition, technology and competitive
offerings in the market are constantly changing. In the first quarter of 2001,
the Company received approval from the U.S. Food and Drug Administration (FDA)
to market four NIR(R) coronary stent systems as well as the over-the-wire
version of its Maverick(R) balloon dilatation catheter. The Company believes the
launch of these new products will enable the Company to compete in these
markets. However, stent revenues for 2001 will be negatively impacted by
continued volatility in the worldwide coronary stent market and by competitive
offerings. Delays in product development and the timing of submission for and
receipt of regulatory approvals to market next generation coronary and
peripheral stent platforms in the U.S. and international markets will influence
the Company's ability to offer competitive stent products. Stent revenues for
2001 may be negatively impacted by a reduction in average selling prices due to
competitive pressures.

Gross profit as a percentage of net sales decreased from 68.6% in the first
quarter of 2000 to 66.1% in the first quarter of 2001. The decrease in gross
margin is primarily driven by expenses of $13 million ($9 million, net of tax)
associated with the Company's global operations plan. Gross margins were also
negatively impacted due to sales of the higher costing coronary stent systems
launched in the U.S. in the first quarter of 2001, partially offset by
operational cost improvements. The Company's ability to effectively manage its
mix and levels of inventory, including consignment inventory, until new products
are available and as the Company transitions to new products will be critical in
minimizing excess inventories.

Medinol Ltd. (Medinol), an Israeli company, is the supplier of the NIR(R) stent.
Any unforeseen delays, stoppages or interruptions in the supply and/or mix of
NIR(R) stent inventory could adversely affect the operating results and/or
revenues of the Company. Generally, the Company has less control over inventory
manufactured by third parties as compared to inventory manufactured internally.
Furthermore, the purchase price of NIR(R) coronary stents, the amount of NIR(R)
coronary stent sales as a percentage of worldwide sales and the mix of coronary
stent platforms could significantly impact gross margins. At March 31, 2001, the
Company had approximately $132 million of net NIR(R) coronary stent inventory
and was committed to purchase approximately $25 million of NIR(R) stents from
Medinol. Worldwide NIR(R) coronary stent sales as a percentage of worldwide
sales were approximately 15% in the first quarter of 2001 and 2000.

On April 5, 2001, Medinol filed a lawsuit against the Company and a number of
its current and former employees, alleging fraud, breaches of contract, and
other claims. On April 26, 2001, Medinol amended its complaint to add claims
alleging misappropriation of trade secrets. In the suit, Medinol is seeking,
among other things, to end the Company's right to distribute Medinol stents and
to access certain Company intellectual property. On April 30, 2001, the Company
answered and counter sued Medinol and its principals charging them with fraud,
multiple breaches of contract, unfair and deceptive practices and defamation.
The Company's ability to manage its relationship with Medinol during the
pendency of the litigation and the outcome of the litigation with Medinol could
impact the future operating results of the Company.

During 2000, the Company approved and committed to a global operations plan that
encompasses a series of strategic initiatives designed to increase productivity
and enhance innovation. The plan includes manufacturing process and supply chain
programs and a plant optimization initiative. The manufacturing process and
supply chain programs are designed to lower inventory levels and the cost of
manufacturing and to minimize inventory write-downs. Gross margin benefits will
not be fully realized until manufacturing processes are improved and historical
inventories are sold.

The intent of the plant optimization initiative is to better allocate the
Company's resources by creating a more effective network of manufacturing and
research and development facilities. It will consolidate manufacturing
operations along product lines and shift significant amounts of production to
Company facilities in Miami and Ireland and to contract manufacturing. The
Company's plan includes the discontinuation of manufacturing activities at three
facilities in the U.S., and includes the planned displacement of approximately
2,000 manufacturing, manufacturing support and management employees. The Company
expects that the plan will be substantially completed over the next nine months.
As of March 31, 2001, less than $1 million had been charged against the
restructuring accrual for the approximately 40 employees terminated pursuant to
the plan. During the first quarter of 2001, the Company recorded pre-tax costs
of $13 million as cost of sales related to transition costs associated with the
plant optimization plan and accelerated depreciation on fixed assets whose
useful lives have been reduced as a result of the initiative. During the
remainder of 2001, the Company estimates that it will record pre-tax expenses of
approximately $50 million as cost of sales related to the plant optimization
initiative, primarily for transition costs, accelerated depreciation and
abnormal production variances related to underutilized plant capacity.

The Company expects that it will make total cash outlays, net of proceeds from
building and fixed asset sales, of approximately $115 million for the plant
optimization initiative, $70 million of which the Company expects to make during
the remainder of 2001. Cash outlays to be made beyond 2001 primarily represent
severance costs for employees terminated during 2001 but paid out in 2002. The
Company anticipates that these cash outlays will be funded from cash flows from
operating activities and from the Company's borrowing capacity. The cash outlays
include severance and outplacement costs, transition costs and capital
expenditures related to the plan. The success of the initiative may be dependent
on the Company's ability to retain existing employees and attract new employees
during the transition period. The Company's ability to effectively manage the
inventories during the transition period may impact the operating results of the
Company.

The Company estimates that the global operations plan will achieve pre-tax
operating savings, relative to the base year of 1999, of approximately $100
million in 2001, $220 million in 2002 and $250 million in annualized savings
thereafter. Incremental pre-tax savings expected to be realized in 2001 relative
to 2000 are estimated to be approximately $30 million. These savings will be
realized primarily as reduced cost of sales and are expected to help mitigate
gross margin pressures resulting from the launch of higher costing stents and
stent delivery systems. Additionally, the Company intends to use a portion of
these savings to increase its investment in research and development.

Selling, general and administrative expenses as a percentage of sales increased
from 32% of sales in the first quarter of 2000 to 34% in the first quarter of
2001 and increased approximately $11 million from the first quarter of 2000 to
$225 million. The increase as a percentage of sales in 2001 is primarily
attributable to the reduction in sales combined with an increase in selling
expenses. The increase in expense dollars is primarily attributable to costs
incurred to strengthen and retain the Company's field sales force. The Company's
ability to retain its established sales force and to control operating expenses
may impact the operating results of the Company.

Amortization expense was approximately $23 million during the first quarters of
2001 and 2000. Amortization expense relates primarily to intangible assets
recorded in connection with the acquisition of Schneider Worldwide.

Royalties decreased slightly from $11 million in the first quarter of 2000 to $9
million in the first quarter of 2001. The Company continues to enter into
strategic technological alliances, some of which include royalty commitments.

Research and development expenses were approximately $56 million and 9% of net
sales during the first quarter of 2001, and approximately $49 million and 7% of
net sales during the first quarter of 2000. The increase in research and
development expenses is primarily due to increased funding for the development
of new products and clinical trials, including the Company's internal
drug-coated stent program, the carotid program and an internally developed stent
platform. The investment in research and development dollars reflects spending
on new product development programs as well as regulatory compliance and
clinical research. The Company continues to be committed to refining existing
products and procedures and to developing new technologies that can reduce risk,
trauma, cost, procedure time and the need for aftercare.

On February 27, 2001, the Company completed its acquisition of Embolic
Protection, Inc. (EPI). EPI develops and manufactures embolic protection filters
for use in interventional stent and interventional cardiovascular procedures.
This acquisition will allow the Company to accelerate its entry into the embolic
protection market, a promising growth segment in interventional medicine.

On March 30, 2001, the Company completed its acquisition of Quanam Medical
Corporation (Quanam). Quanam develops medical devices using novel polymer
technology, with a concentration on drug-delivery stent systems for use in
cardiovascular applications. Quanam's technology will help the Company broaden
its drug delivery portfolio. On April 20, 2001, the Company announced its
decision to discontinue further enrollment in Quanam's previously suspended
clinical trial but to continue collection of follow-up data on the current study
group. The decision was based on a review of interim trial results by a panel of
clinical experts.

The aggregate purchase price for each acquisition has been allocated on a
preliminary basis to the assets acquired and liabilities assumed based on their
fair values at the date of acquisition. The estimated excess of purchase price
over the fair value of the net tangible assets acquired was allocated to
identifiable intangible assets, as valued by an independent appraiser using
information and assumptions provided by management. The Company expects to
finalize the purchase price allocation in the second quarter of 2001. Based upon
these preliminary valuations, the Company recorded a $79 million charge to
account for purchased research and development. The valuation of purchased
research and development, for which management is primarily responsible,
represents the estimated fair value at the date of acquisition related to
in-process projects. As of the date of acquisition, the in-process projects had
not yet reached technological feasibility and had no alternative future uses.
The primary basis for determining technological feasibility of these projects is
obtaining FDA approval. Accordingly, the value attributable to these projects,
which have not yet obtained FDA approval, was immediately expensed at
acquisition. If the projects are not successful or completed in a timely manner,
the Company may not realize the financial benefits expected for these projects.
Other intangible assets recorded in connection with these acquisitions are being
amortized on a straight-line basis ranging from 9 to 20 years.

The most significant projects, relative to the purchased research and
development charge recorded, are embolic protection devices acquired in
connection with the EPI transaction which represents over 78% of the in-process
value. The embolic protection devices are filters that are mounted on guidewires
and are used to capture embolic material that is dislodged during cardiovascular
interventions. As of the date of acquisition, the projects were expected to be
completed and the products to be commercially available in Europe and the U.S.
within one to three years, with an estimated cost to complete of approximately
$20 to $30 million.

Interest expense decreased from $21 million in the first quarter of 2000 to $14
million in the first quarter of 2001. The overall decrease in interest expense
is primarily attributable to a lower average debt balance. Other income
(expense), net, changed from income of approximately $8 million in the first
quarter of 2000 to income of approximately $1 million in the first quarter of
2001. The change is primarily due to a net gain of approximately $7 million
recognized on sales of available-for-sale securities recorded in the first
quarter of 2000.

The Company's effective tax rate, excluding the impact of purchased research and
development, decreased from 32% in the first quarter of 2000 to 30% in the first
quarter of 2001. The decrease is primarily attributable to a shift in the mix of
the Company's U.S. and international businesses.

Uncertainty remains with regard to future changes within the health care
industry. The trend toward managed care and economically motivated and more
sophisticated buyers in the U.S. may result in continued pressure on selling
prices of certain products and resulting compression on gross margins. In
addition to impacting selling prices, the trend to managed care in the U.S. has
also resulted in more complex billing and collection procedures. The Company's
ability to react effectively to the changing environment may impact its bad debt
and sales allowances in the future. Further, the U.S. marketplace is
increasingly characterized by consolidation among health care providers and
purchasers of medical devices that prefer to limit the number of suppliers from

which they purchase medical products. There can be no assurance that these
entities will continue to purchase products from the Company.

International markets are also being affected by economic pressure to contain
reimbursement levels and health care costs. The Company's ability to benefit
from its international expansion may be limited by risks and uncertainties
related to economic conditions in these regions, regulatory and reimbursement
approvals, competitive offerings, infrastructure development, rights to
intellectual property and the ability of the Company to implement its overall
business strategy. Any significant changes in the competitive, political,
regulatory or economic environment where the Company conducts international
operations may have a material impact on revenues and profits, especially in
Japan given its high profitability relative to its contribution to revenues.
Deterioration in the Japanese and/or emerging markets economies may impact the
Company's ability to grow its business and to collect its accounts receivable.
Additionally, the trend in countries around the world toward more stringent
regulatory requirements for product clearance and more vigorous enforcement
activities has generally caused or may cause medical device manufacturers to
experience more uncertainty, greater risk and higher expenses. These factors may
impact the rate at which Boston Scientific can grow. In addition, the impact of
selling higher costing stents, the cost of maintaining the Company's sales force
and increasing its investment in research and development is expected to result
in lower operating margins throughout 2001 as compared to 2000. However,
management believes that it is positioning the Company to take advantage of
opportunities that exist in the markets it serves.

LIQUIDITY AND CAPITAL RESOURCES

Cash and short-term investments totaled $84 million at March 31, 2001, compared
to $60 million at December 31, 2000. Working capital decreased slightly from
$173 million at December 31, 2000 to $162 million at March 31, 2001. Cash
proceeds during the first quarter were primarily generated from operating
activities and through the Company's short-term borrowings. Cash proceeds were
primarily used to fund the Company's strategic acquisitions and capital
expenditures during the period.

At March 31, 2001, the Company had approximately $292 million in revolving
credit facility borrowings outstanding at a weighted-average interest rate of
4.10% compared to approximately $187 million of outstanding revolving credit
facility borrowings at a weighted-average interest rate of 4.54% at December 31,
2000. In addition, the Company had approximately $29 million of commercial paper
outstanding at a weighted-average interest rate of 6.30% at March 31, 2001
compared to $56 million of commercial paper outstanding at a weighted-average
interest rate of 8.00% at December 31, 2000.

The Company has recognized net deferred tax assets aggregating $209 million at
March 31, 2001, and $226 million at December 31, 2000. The assets relate
principally to the establishment of inventory and product-related reserves and
purchased research and development. In light of the Company's historical
financial performance, the Company believes that these assets will be
substantially recovered.

In December 2000, a jury found that the Company's NIR(R) coronary stent
infringed one claim of a patent owned by Johnson & Johnson. A final decision has
not yet been entered pending post trial motions. The Company could be found
liable and owe damages of approximately $324 million for past sales, plus
interest, and additional damages for sales occurring after the jury verdict. The
Company expects to appeal any adverse determination and post the necessary bond
pending appeal.

On April 2, 2001, the Company completed its acquisition of Interventional
Technologies, Inc. (IVT). IVT develops, manufactures and markets less invasive
devices for use in interventional cardiology, including the Cutting Balloon(TM)
catheter and the Infiltrator(R) transluminal drug delivery catheter. The Company
is obligated to pay approximately $345 million in cash plus additional cash
amounts contingent upon achieving performance and other milestones. The
transaction will be accounted for using the purchase method of accounting.

The IVT, EPI, CI and Quanam acquisition transactions involve payments based on
earn-out provisions. The Company expects to make earn-out payments in 2001 of
approximately $100 million to $200 million for performance and other milestones
achieved in connection with these transactions.

Management believes it is developing a sound plan to integrate these businesses.
The failure to successfully integrate these businesses effectively could impair
the Company's ability to realize the strategic and financial objectives of these
transactions. As the health care environment continues to undergo rapid change,
management expects that it will continue to focus on strategic initiatives
and/or make additional investments in existing relationships. In connection with
these and other acquisitions consummated during the last five years, the Company
has acquired numerous in-process research and development projects. As the
Company continues to build its research base, it is reasonable to assume that it
will acquire additional research and development platforms.

Additionally, the Company expects to incur capital expenditures of approximately
$70 million during the remainder of 2001. The Company expects that its cash and
cash equivalents, marketable securities, cash flows from operating activities
and borrowing capacity will be sufficient to meet its projected operating cash
needs, including capital expenditures, tax payments, restructuring initiatives,
and the above-mentioned acquisitions and integration of businesses.

Until Medinol filed suit against the Company, the Company was engaged in
negotiations to acquire Medinol. Were that to occur, the Company would need
additional financing capacity to consummate the transaction. Although the
Company believes it would be able to obtain additional financing, there are no
assurances that additional financing could or would be obtained, or that an
acquisition could or would be negotiated.

EURO CONVERSION

On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates among existing sovereign currencies and the
euro. On January 1, 2001, Greece became the twelfth member of the participating
countries that have agreed to adopt the euro as their common legal currency.
Fixed conversion rates among the participating countries' existing currencies
(the legacy currencies) and the euro have been established. The legacy
currencies are scheduled to remain legal tender as denominations of the euro
until at least January 1, 2002 (but not later than July 1, 2002). During this
transition period, parties may settle transactions using either the euro or a
participating country's legacy currency. The Company has addressed and/or
continues to address the potential impact resulting from the euro conversion,
including competitive implications related to pricing and foreign currency
considerations, and is expected to convert its information technology systems to
be euro compatible in the third quarter of 2001.

Management currently believes that the euro conversion will not have a material
impact related to its overall business in Europe or elsewhere. The increased
price transparency resulting from the use of a single currency in the twelve
participating countries may affect the ability of the Company to price its
products differently in the various European markets. A possible result of this
is price harmonization at lower average prices for products sold in some
markets. However, uncertainty exists as to the effects the euro will have on the
marketplace.

LITIGATION

The Company is involved in various lawsuits, including patent infringement and
product liability suits, from time to time in the normal course of business. In
management's opinion, the Company is not currently involved in any legal
proceeding other than those specifically identified in the notes to the
condensed consolidated financial statements which, individually or in the
aggregate, could have a material effect on the financial condition, operations
and cash flows of the Company. Additionally, legal costs associated with
asserting the Company's patent portfolio and defending against claims that the
Company's products infringe the intellectual property of others are significant,
and legal costs associated with non-patent litigation and compliance activities
are rising. Depending upon the prevalence, significance and complexity of these
matters, the Company's legal provision could be adversely affected in the
future.

Further, product liability claims may be asserted in the future relative to
events not known to management at the present time. The Company has insurance
coverage that management believes is adequate to protect against such product
liability losses as could otherwise materially affect the Company's financial
position.

CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995

This report contains forward-looking statements. The Company desires to take
advantage of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and is including this statement for the express purpose of
availing itself of the protections of the safe harbor with respect to all
forward-looking statements. Forward-looking statements discussed in this report
include, but are not limited to, statements with respect to, and the Company's
performance may be affected by: (a) the Company's ability to timely implement
the global operations plan within its cost estimates, to retain and attract
employees as it implements its plant optimization initiative and to achieve
estimated operating savings; (b) the Company's ability to achieve manufacturing
cost declines, gross margin benefits and inventory reductions from its
manufacturing process and supply chain programs; (c) the Company's ability to
realize benefits from the EPI, CI, Quanam and IVT acquisitions, including
purchased research and development; (d) the ability of the Company to manage
accounts receivable, manufacturing costs and inventory levels and mix, and to
react effectively to the changing managed care environment, reimbursement levels
and worldwide economic and political conditions; (e) the potential impacts of
continued consolidation among health care providers, trends toward managed care,
disease state management and economically motivated buyers, health care cost
containment, the financial viability of health care providers, more stringent
regulatory requirements and more vigorous enforcement activities; (f)
management's ability to position the Company to take advantage of opportunities
that exist in the markets it serves; (g) the Company's ability to retain its
established sales force; (h) the Company's continued commitment to refine
existing products and procedures and to develop new technologies that can reduce
risk, trauma, cost, procedure time, and the need for aftercare; (i) the
Company's ability to develop, trial and launch products on a timely basis,
including products resulting from purchased research and development; (j) risks
associated with international operations; (k) the potential effect of foreign
currency fluctuations on revenues, expenses and resulting margins and the trend
toward increasing sales and expenses denominated in foreign currencies; (l) the
Company's ability to maintain its effective tax rate for 2001 and to
substantially recover its net deferred tax assets; (m) the ability of the
Company to meet its projected cash needs and obtain additional financing, if
necessary; (n) the ability of the Company to manage its relationship with
Medinol during the pendency of the litigation and the outcome of the Medinol
litigation; (o) unforeseen delays, stoppages or interruptions in the supply
and/or mix of NIR(R) coronary stent inventory, difficulties in managing
inventory relating to new product introductions and the Company's cost to
purchase the NIR(R) coronary stent; (p) NIR(R) coronary stent sales as a
percentage of worldwide sales and the mix of coronary stent platforms; (q)
volatility in the coronary stent market, competitive offerings, delays in
product development and the timing of submission for and receipt of regulatory
approvals to market new coronary and peripheral stent platforms; (r) the
Company's ability to compete in the coronary stent and balloon markets; (s) the
development of competing or technologically advanced products by the Company's
competitors; (t) the Company's ability to develop a sound integration plan,
effectively integrate newly acquired businesses and realize their strategic and
financial objectives; (u) the effect of litigation and compliance activities on
the Company's legal provision and cash flow; (v) the impact of stockholder class
action, patent, product liability, Federal Trade Commission, Medinol and other
litigation, as well as the outcome of the U.S. Department of Justice
investigation and the adequacy of the Company's product liability insurance;

(w) the potential impact resulting from the euro conversion, including
adaptation of information technology systems, competitive implications related
to pricing, and foreign currency considerations; and (x) the timing, size and
nature of strategic initiatives and research and development platforms available
to the Company.

Several important factors, in addition to the specific factors discussed in
connection with such forward-looking statements individually, could affect the
future results and growth rates of the Company and could cause those results and
rates to differ materially from those expressed in the forward-looking
statements contained herein. Such additional factors include, among other
things, future economic, competitive and regulatory conditions, demographic
trends, third-party intellectual property, financial market conditions and
future business decisions of Boston Scientific and its competitors, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of Boston Scientific. Therefore, the Company wishes to caution each
reader of this report to consider carefully these factors as well as the
specific factors discussed with each forward-looking statement in this report
and as disclosed in the Company's filings with the Securities and Exchange
Commission as such factors, in some cases, have affected, and in the future
(together with other factors) could affect, the ability of the Company to
implement its business strategy and may cause actual results to differ
materially from those contemplated by the statements expressed herein.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the normal course of business, the Company is exposed to market risk from
changes in interest rates and foreign currency exchange rates. The Company
addresses these risks through a risk management program that includes the use of
derivative financial instruments. The program is operated pursuant to documented
corporate risk management policies. The Company does not enter into any
derivative transactions for speculative purposes.

The Company's floating and fixed-rate investments and debt obligations are
subject to interest rate risk. As of March 31, 2001, a 100-basis-point increase
in interest rates, assuming the amounts invested and borrowed remained constant,
would not result in a material increase in the Company's then current net
interest.

The Company enters into foreign exchange forward contracts to hedge its net
recognized foreign currency transaction exposures for periods consistent with
commitments, generally one to six months. In addition, on January 1, 2000, the
Company initiated a program to hedge a portion of its forecasted intercompany
and third-party transactions with foreign exchange forward and option contracts
upon adoption of the Financial Accounting Standards Board Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." Hedging activity
is intended to offset the impact of currency fluctuations on forecasted earnings
and cash flow. However, the Company may be impacted by changes in foreign
currency exchange rates related to the unhedged portion. The success of the
hedging program depends, in part, on forecasts of transaction activity in
various currencies (currently the Japanese yen and the euro). The Company may
experience unanticipated foreign currency exchange gains or losses to the extent
that there are timing differences between forecasted and actual activity during

periods of currency volatility. The Company had foreign exchange forward and
option contracts outstanding in the total notional amounts of $507 million and
$452 million as of March 31, 2001, and December 31, 2000, respectively. The
Company has recorded approximately $64 million of assets and $1 million of
liabilities to recognize the fair value of its contracts outstanding on March
31, 2001, as compared to approximately $37 million of assets and $1 million of
liabilities on December 31, 2000. Foreign exchange contracts that hedge net
recognized foreign currency transaction exposures should not subject the
Company's earnings and cash flows to material risk due to exchange rate
movements because gains and losses on these contracts should offset losses and
gains on the transactions being hedged. Hedges of anticipated transactions may
subject the income statement to volatility.

A sensitivity analysis of changes in the fair value of foreign exchange
contracts outstanding at March 31, 2001 indicates that, if the U.S. dollar
uniformly weakened by 10% against all currencies, the fair value of these
contracts would decrease by $44 million as compared to a $37 million decrease on
foreign exchange contracts outstanding at December 31, 2000. While these hedging
instruments are subject to fluctuations in value, such fluctuations are
generally offset by changes in the value of the underlying exposures being
hedged. As the Company has expanded its international operations, its sales and
expenses denominated in foreign currencies have expanded, and that trend is
expected to continue. Therefore, most international sales and expenses have
been, and are expected to be, subject to the effect of foreign currency
fluctuations, and these fluctuations may have an impact on margins. The
Company's sensitivity analysis of the effects of changes in foreign currency
exchange rates does not factor in a potential change in sales levels or local
currency selling prices.

Although the Company engages in hedging transactions that may offset the effect
of fluctuations in foreign currency exchange rates on foreign currency
denominated assets, liabilities, earnings and cash flows, financial exposure may
nonetheless result, primarily from the timing of transactions, forecast
volatility and the movement of exchange rates.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Note H - Commitments and Contingencies to the Company's unaudited condensed
consolidated financial statements contained elsewhere in this Quarterly Report
is incorporated herein by reference.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

None.

(b) The following reports were filed during the quarter ended
March 31, 2001:

Form 8-K Date of Event Description
-------- ------------- -----------

Item 2 February 15, 2001 Execution of Agreement and Plan of
Merger dated as of February 15, 2001
between Interventional Technologies,
Inc. and Boston Scientific Corporation

Item 5 April 5, 2001 Press Releases describing the Medinol
litigation

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 May 15, 2001.

BOSTON SCIENTIFIC CORPORATION

By: /s/ Lawrence C. Best
--------------------------------------
Name: Lawrence C. Best
Title: Chief Financial Officer and
Senior Vice President - Finance
and Administration