10-QPeriod: Q2 FY2011

Edwards Lifesciences Corp Quarterly Report for Q2 Ended Jun 30, 2011

Filed August 8, 2011For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported solid financial results for the second quarter and first half of 2011, demonstrating robust top-line growth driven by its Heart Valve Therapy and Critical Care segments. Net sales increased by 18.1% in the quarter and 18.4% year-to-date, with notable contributions from both domestic and international markets, including favorable foreign currency impacts. The company continues to invest heavily in research and development, particularly in its promising transcatheter heart valve program, with expected US launch anticipated soon. While gross profit margins saw a slight decrease due to foreign currency impacts and manufacturing investments, operating expenses were well-managed, leading to improved profitability. The company also successfully integrated the Embrella Cardiovascular acquisition, adding a cerebral embolic protection device to its portfolio. Financially, Edwards Lifesciences maintained a strong cash position, bolstered by operating activities, and managed its debt effectively with a new credit facility established post-quarter. Despite ongoing legal proceedings and potential risks associated with international receivables, management remains optimistic about future performance and liquidity.

Financial Highlights

46 data points
Beta

Revenue

$431.20M

70.4% Gross Margin

Net Income

$58.10M

13.5% Net Margin

EPS (Diluted)

$0.08

Total Assets

$2.00B

Cash & Equivalents

$175.60M

Free Cash Flow

$67.30M

Financial Statements
Beta
Revenue$431.20M
Cost of Revenue$127.80M
Gross Profit$303.40M
R&D Expenses$64.90M
SG&A Expenses$163.20M
Net Income$58.10M
EPS (Basic)$0.09
EPS (Diluted)$0.08
Shares Outstanding (Basic)688.80M
Shares Outstanding (Diluted)720.00M

Key Highlights

  • 1Net sales grew 18.1% year-over-year to $431.2 million for the quarter ended June 30, 2011, and 18.4% to $835.7 million for the six months ended June 30, 2011.
  • 2Heart Valve Therapy sales increased by 22.5% in the quarter and 23.5% year-to-date, driven by transcatheter heart valves and surgical tissue valves.
  • 3Critical Care segment sales saw a 15.6% increase in the quarter and 15.2% year-to-date, supported by pressure monitoring and FloTrac systems.
  • 4The company acquired Embrella Cardiovascular for $42.6 million in March 2011, adding a cerebral embolic protection device to its portfolio.
  • 5Research and Development expenses increased significantly, reflecting continued investment in the transcatheter heart valve program, including trials and anticipated US launch.
  • 6Gross profit margin decreased by 2.1 percentage points to 70.4% for the quarter, primarily due to foreign currency impacts and manufacturing investments.
  • 7Net income for the quarter was $58.1 million, or $0.48 per diluted share, compared to $57.5 million, or $0.48 per diluted share, in the prior year quarter.

Frequently Asked Questions

Edwards Lifesciences is driving revenue growth through innovation and market expansion, particularly in its Heart Valve Therapy and Critical Care segments. Key strategies include the development and commercialization of new products like transcatheter heart valves (e.g., Edwards SAPIEN XT) and advancements in hemodynamic monitoring systems (e.g., FloTrac). Geographic expansion, especially in international markets, and strategic acquisitions, such as Embrella Cardiovascular, also contribute to revenue growth.

The company is significantly increasing its R&D investment, with a primary focus on its transcatheter heart valve program, including clinical trials (PARTNER II) and preparations for the US launch of the Edwards SAPIEN transcatheter heart valve. This increased R&D spending is aimed at advancing its product pipeline and securing regulatory approvals in key markets.

The company faces several financial risks, including foreign currency exchange rate fluctuations, which impact international sales and gross margins. It also manages credit risk related to international receivables, as highlighted by a specific charge for Greek receivables. Additionally, ongoing legal proceedings and potential litigation, particularly with competitors like Medtronic, represent a risk that could lead to charges and impact financial results, although management believes current proceedings will not have a material adverse effect.

Edwards Lifesciences has a strong liquidity position, supported by cash flow from operations and available credit facilities. In July 2011, the company entered into a new four-year $500 million credit facility, enhancing its financial flexibility. The company also actively manages its capital through share repurchases and strategic investments, such as the Embrella acquisition, funded by cash and debt.