10-KPeriod: FY2013

Edwards Lifesciences Corp Annual Report, Year Ended Dec 31, 2013

Filed February 28, 2014For Securities:EW

Summary

Edwards Lifesciences Corporation's (EW) 2013 10-K filing highlights robust growth, particularly in its Transcatheter Heart Valve (THV) segment, which saw sales increase by 28.2% year-over-year, driven by strong performance in both the US and international markets. This growth in THV, coupled with modest increases in Surgical Heart Valve Therapy, helped offset a slight decline in Critical Care sales. The company's overall net sales increased by 7.7% to $2.05 billion. Financially, EW demonstrated improved profitability, with diluted EPS growing by 38.7% to $3.44. This was bolstered by a favorable product mix, increased sales volume, and a significant one-time gain of $52.3 million (net of tax) from a litigation award against Medtronic. The company continues to invest heavily in research and development, with R&D expenses rising to 15.8% of net sales, underscoring its commitment to innovation in structural heart disease and critical care monitoring. Looking ahead, EW faces increasing competition in the transcatheter valve market but is well-positioned due to its established leadership and ongoing development of next-generation products like the SAPIEN 3 valve. The company's financial position remains strong, supported by healthy operating cash flow and a significant share repurchase program.

Financial Highlights

53 data points
Beta

Revenue

$2.05B

74.7% Gross Margin

Net Income

$389.10M

19.0% Net Margin

EPS (Diluted)

$0.57

Total Assets

$2.71B

Cash & Equivalents

$420.40M

Free Cash Flow

$363.70M

Financial Statements
Beta
Revenue$2.05B
Cost of Revenue$516.60M
Gross Profit$1.53B
R&D Expenses$323.00M
SG&A Expenses$733.40M
Interest Expense$9.80M
Net Income$389.10M
EPS (Basic)$0.58
EPS (Diluted)$0.57
Shares Outstanding (Basic)670.20M
Shares Outstanding (Diluted)682.80M

Key Highlights

  • 1Net sales grew 7.7% to $2.05 billion in 2013, driven by strong performance in Transcatheter Heart Valves (+28.2%).
  • 2Transcatheter Heart Valves now represent 35% of total net sales, up from 20% in 2011, indicating a significant shift in product mix.
  • 3Diluted EPS increased by 38.7% to $3.44, reflecting improved operational performance and a significant litigation award.
  • 4Research and Development (R&D) spending increased by 10.9% to $323.0 million, representing 15.8% of net sales, highlighting a focus on innovation.
  • 5The company received FDA approval for the SAPIEN 3 valve in Europe in January 2014 and initiated US studies, signaling continued investment in next-generation transcatheter technologies.
  • 6A significant litigation award of $83.6 million from Medtronic was received in February 2013, positively impacting net income.
  • 7The company repurchased $495.1 million of its common stock in 2013, demonstrating a commitment to returning capital to shareholders.

Frequently Asked Questions

Edwards Lifesciences operates in three main segments: Surgical Heart Valve Therapy, Transcatheter Heart Valves (THV), and Critical Care. In 2013, THV showed the strongest growth, with sales increasing by 28.2% to $707.7 million. Surgical Heart Valve Therapy sales grew modestly by 1.7% to $801.2 million. Critical Care sales decreased by 4.2% to $536.6 million.

In 2013, Edwards Lifesciences reported a 7.7% increase in net sales to $2.05 billion, compared to $1.90 billion in 2012. Net income rose significantly by 33.6% to $391.7 million, with diluted earnings per share growing by 38.7% to $3.44. This performance was boosted by strong THV sales and a $52.3 million net litigation award.

Edwards Lifesciences continues to prioritize R&D, investing $323.0 million in 2013, representing 15.8% of net sales. A significant portion of this investment is directed towards developing next-generation transcatheter heart valve technologies, including the SAPIEN 3 valve, and enhancing its surgical heart valve and critical care portfolios. The company aims to maintain its leadership in structural heart disease and critical care monitoring through these innovation efforts.

Key risks include intense competition, particularly in the transcatheter heart valve market, the need for timely new product introductions to avoid obsolescence, potential product liability claims, reliance on a complex supply chain, and the impact of government regulation and healthcare cost containment measures. The company also faces risks associated with international operations and currency fluctuations.