What caused the significant loss in the third quarter of 2002?

The primary driver of the net loss of $17.4 million in the third quarter of 2002 was a $67.4 million pretax charge recorded due to the impairment of the company's investment in preferred stock of World Heart Corporation. This write-down was necessitated by delays in WorldHeart's product development timelines.

How did the acquisition of the Japanese business impact the financials?

On October 1, 2002, Edwards Lifesciences acquired its cardiovascular business in Japan, previously a joint venture. This resulted in a $3.3 million charge for related expenses in the third quarter of 2002. Starting October 1, 2002, the results of this business will be fully consolidated. The pro forma statements indicate that this acquisition is expected to increase net sales and adjust other operational figures.

What is the status of the litigation with St. Jude Medical?

Edwards Lifesciences filed a lawsuit against St. Jude Medical, Inc. in June 2000, alleging infringement of three patents. The company amended its complaint in April 2002 to add a fourth patent. A claim construction decision was made regarding the first three patents on June 27, 2002, and a trial date has not yet been set. Management believes that while resolution could impact net income or cash flows, it will not have a material adverse effect on the company's consolidated financial position.

How has the adoption of SFAS No. 142 impacted the financial statements?

The adoption of SFAS No. 142 on January 1, 2002, changed the accounting for goodwill from an amortization method to an impairment-only approach. This means goodwill is no longer amortized, which eliminated goodwill amortization expenses starting in 2002. For the periods prior to adoption, restatement is not required, but the report provides pro forma figures showing that if SFAS No. 142 had been in effect in 2001, the reported net income and EPS would have been higher (less of a loss) due to the absence of goodwill amortization.

EW 10-Q Quarterly Report Q3 FY2002 — Revenue, Net Income, EPS

Summary

Edwards Lifesciences Corporation's 10-Q filing for the period ending September 30, 2002, reveals a mixed financial performance marked by increasing net sales and a significant non-recurring charge. While the company experienced a 12.2% increase in net sales for the third quarter compared to the prior year, driven by strong performance in Cardiac Surgery and Critical Care segments, the nine-month period showed a slight decline of 5.9%, impacted by the divestiture of the perfusion services business in the prior year. A substantial $67.4 million pretax charge was recorded for the impairment of an investment in World Heart Corporation, significantly impacting operating income and leading to a net loss for the quarter. The company also completed its spin-off from Baxter International Inc. by acquiring the cardiovascular business in Japan. This strategic move will lead to full consolidation of the Japanese business results starting October 1, 2002. Despite the challenges presented by the World Heart impairment, the company maintains a solid liquidity position, with ample cash on hand and available credit facilities to support its operations and growth initiatives. Investors should monitor the performance of the newly consolidated Japanese business and the ongoing litigation with St. Jude Medical.

Key Highlights

1Total net sales increased by 12.2% to $165.8 million for the three months ended September 30, 2002, compared to $147.8 million in the prior year.
2Cardiac Surgery and Critical Care segments showed robust growth, with Cardiac Surgery sales up 15.1% and Critical Care up 11.2% in the third quarter.
3A significant $67.4 million pretax charge was recorded for the impairment of an investment in World Heart Corporation.
4The company completed the acquisition of its Japanese cardiovascular business, previously operated as a joint venture, on October 1, 2002.
5Net income for the third quarter was a loss of $17.4 million, a significant decrease from a net income of $14.5 million in the prior year, largely due to the impairment charge.
6Total stockholders' equity remained stable at $458.8 million as of September 30, 2002, compared to $458.7 million as of December 31, 2001.
7The company is involved in ongoing patent infringement litigation against St. Jude Medical, Inc.

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2002

Summary

Key Highlights

Frequently Asked Questions