10-QPeriod: Q1 FY2003

Edwards Lifesciences Corp Quarterly Report for Q1 Ended Mar 31, 2003

Filed May 15, 2003For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported its first quarter results for the period ending March 31, 2003. The company demonstrated significant top-line growth, with net sales increasing by 30.9% year-over-year to $212.5 million. This growth was driven by strong performance across its key segments, particularly Cardiac Surgery and Critical Care, with notable contributions from the recently consolidated Japanese business. While revenue increased substantially, net income decreased to $14.5 million from $20.8 million in the prior year, primarily due to an $11.8 million pretax charge for purchased in-process research and development related to an acquisition. The company also saw a significant increase in cash used in operating activities, largely influenced by the aforementioned R&D charge and changes in working capital. However, financing activities provided a substantial boost in cash, mainly from long-term debt borrowings. Edwards Lifesciences raised $125 million in convertible senior debentures subsequent to the quarter, indicating a strategic move to bolster its financial flexibility. The company maintains a strong liquidity position with access to significant credit facilities.

Key Highlights

  • 1Net sales surged by 30.9% to $212.5 million in Q1 2003 compared to Q1 2002.
  • 2Gross profit margin improved slightly to 58.1% from 57.4% in the prior year.
  • 3A significant $11.8 million pretax charge for purchased in-process R&D impacted net income.
  • 4Net income decreased to $14.5 million ($0.24/share diluted) from $20.8 million ($0.34/share diluted) in the prior year.
  • 5Cash flow from operations was negative at ($8.6 million), a significant decrease from the prior year's ($0.9 million), impacted by R&D charges and working capital changes.
  • 6The company issued $125 million in convertible senior debentures shortly after the quarter end to enhance financial flexibility.
  • 7The consolidated Japanese business significantly contributed to international sales growth.

Frequently Asked Questions

The substantial increase in net sales was primarily driven by strong performance in the Cardiac Surgery and Critical Care segments, a 2.3% increase in U.S. sales, and a significant 71.1% increase in international sales. The latter was largely due to the full consolidation of the Japanese business starting October 1, 2002, which was previously accounted for under a joint venture agreement.

Net income decreased year-over-year due to an $11.8 million pretax charge for purchased in-process research and development expenses related to the acquisition of Jomed N.V.'s endovascular mitral valve repair program. This charge, combined with other factors, led to a lower net income despite robust revenue growth.

Edwards Lifesciences has a strong liquidity position, supported by cash and cash equivalents, cash from operations, and access to significant credit facilities totaling $530 million. Additionally, the company recently issued $125 million in convertible senior debentures, which, along with proceeds from securitization programs, provides further financial flexibility for working capital, capital expenditures, and growth initiatives.

The acquisition of Jomed N.V.'s endovascular mitral valve repair program resulted in an $11.8 million pretax charge for purchased in-process research and development expenses in the first quarter of 2003. This impacted profitability but is expected to contribute to the company's future growth in heart valve therapy.