What were the primary reasons for the decrease in net sales?

The decrease in net sales for the periods ended June 30, 2001, compared to the prior year, was primarily attributed to a change in accounting for sales in Japan, where the company now recognizes its shipments into a joint venture on an equity basis. Additionally, the divestiture of the US perfusion services business contributed to the sales decline.

How did the company's profitability change compared to the previous year?

While net sales decreased, the company's profitability, as measured by gross profit percentage, improved significantly. This was due to a favorable shift in product mix towards higher-margin cardiac surgery products and the divestiture of lower-margin product lines in the prior year. The reported net loss for the current period is also smaller than the net loss reported in the comparable periods of 2000, which were heavily impacted by substantial non-recurring charges and spin-off expenses.

What is the company's current cash position and outlook?

As of June 30, 2001, the company had $61.6 million in cash and cash equivalents, an increase from $28.1 million at the end of 2000. Cash flow from operating activities for the first six months of 2001 was $26.0 million. The company believes its liquidity sources are sufficient to fund its current working capital and capital expenditure requirements and that it has the financial flexibility for future growth, supported by available credit facilities.

What major accounting changes were adopted?

Effective January 1, 2001, Edwards Lifesciences adopted SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities.' This change requires derivatives to be recorded on the balance sheet at fair value, with accounting for gains or losses depending on whether the derivative qualifies as a hedge. The adoption resulted in a one-time after-tax reduction in net income of $1.5 million.

EW 10-Q Quarterly Report Q2 FY2001 — Revenue, Net Income, EPS

Summary

Edwards Lifesciences Corporation (EW) reported its second quarter and first half results for 2001. The company experienced a decrease in net sales for both periods compared to 2000, primarily due to changes in accounting for Japanese operations and the divestiture of its perfusion services business in the United States. Despite lower sales, gross profit percentage improved due to a favorable product mix, particularly from higher-margin cardiac surgery products and the divestiture of lower-margin lines. Financially, the company reported a net loss for both the three and six months ended June 30, 2001, which is an improvement from the significantly larger net loss reported in the prior year's comparable periods, partly due to substantial non-recurring charges and spin-off expenses in 2000. Cash flow from operations remained positive, bolstered by the sale of the perfusion services business. The company also highlighted its continued investment in research and development and its strategic focus on its core cardiac surgery and critical care product lines.

Key Highlights

1Net sales decreased by 6.0% to $192.4 million for the three months ended June 30, 2001, and by 10.8% to $384.3 million for the six months ended June 30, 2001, compared to the prior year periods.
2Gross profit percentage improved to 50.5% for the quarter and 50.2% for the six months ended June 30, 2001, up from 44.1% and 45.9% respectively in the prior year, driven by product mix and divestitures of lower-margin lines.
3The company reported a net loss of $55.7 million ($0.95 per share) for the three months and $43.0 million ($0.73 per share) for the six months ended June 30, 2001, representing an improvement from the larger losses in the comparable 2000 periods.
4Significant non-recurring charges and spin-off expenses heavily impacted the prior year's results; for instance, the six months ended June 30, 2000, included $300.5 million in 'Disposition of assets and other non-recurring charges' and $18.4 million in 'Non-recurring spin-off expenses'.
5Cash flow from operating activities was $26.0 million for the six months ended June 30, 2001, a decrease from $44.6 million in the prior year, but was positively impacted by a $45 million cash inflow from the sale of the US perfusion services business.
6The company adopted SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities,' effective January 1, 2001, resulting in a one-time after-tax reduction of $1.5 million to net income and adjustments to Accumulated Other Comprehensive Income.
7Long-term debt decreased from $367.0 million at December 31, 2000, to $339.0 million at June 30, 2001.

Edwards Lifesciences Corp Quarterly Report for Q2 Ended Jun 30, 2001

Summary

Key Highlights

Frequently Asked Questions