10-QPeriod: Q3 FY2011

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 8, 2011For Securities:EW

Summary

Edwards Lifesciences Corporation reported a strong third quarter for 2011, with net sales increasing by 18.3% to $412.7 million compared to the same period in 2010. This growth was primarily driven by a significant increase in Heart Valve Therapy sales, particularly from transcatheter heart valves like the Edwards SAPIEN XT, and continued strength in the Critical Care segment. International sales also saw robust growth, benefiting from favorable foreign currency exchange rates. The company's focus on innovation in structural heart disease and critical care continues to yield positive financial results, with net income rising to $51.6 million for the quarter, up from $48.0 million in the prior year. Despite the strong sales performance, gross profit margin slightly decreased due to the impact of foreign currency hedging and investments in international manufacturing capacity. However, the company's strategic investments in research and development, particularly for its transcatheter heart valve programs, are progressing well, with key clinical trials moving forward and FDA approvals being sought and received for new delivery systems and patient populations. The company also ended the quarter with a solid cash position and access to a $500 million credit facility, indicating strong liquidity.

Financial Highlights

45 data points
Beta

Revenue

$412.70M

69.6% Gross Margin

Net Income

$51.60M

12.5% Net Margin

EPS (Diluted)

$0.07

Total Assets

$1.98B

Cash & Equivalents

$244.00M

Free Cash Flow

$95.90M

Financial Statements
Beta
Revenue$412.70M
Cost of Revenue$125.60M
Gross Profit$287.10M
R&D Expenses$61.70M
SG&A Expenses$165.50M
Net Income$51.60M
EPS (Basic)$0.07
EPS (Diluted)$0.07
Shares Outstanding (Basic)687.60M
Shares Outstanding (Diluted)714.00M

Key Highlights

  • 1Net sales increased 18.3% year-over-year to $412.7 million for the third quarter of 2011.
  • 2Heart Valve Therapy segment sales grew 22.7% driven by transcatheter heart valves and surgical tissue valves.
  • 3Critical Care segment sales increased 14.2% due to pressure monitoring and advanced monitoring systems.
  • 4International sales grew significantly, up 25.6%, aided by favorable currency movements.
  • 5Net income rose to $51.6 million ($0.43 per diluted share) from $48.0 million ($0.40 per diluted share) in the prior year's third quarter.
  • 6The company acquired Embrella Cardiovascular, Inc. for $42.6 million to bolster its cerebral embolic protection technology.
  • 7A new $500 million credit facility was established in July 2011, enhancing financial flexibility.

Frequently Asked Questions

Revenue growth was primarily driven by strong performance in the Heart Valve Therapy segment, particularly from transcatheter heart valves like the Edwards SAPIEN XT, and continued sales increases in the Critical Care segment, including pressure monitoring and advanced monitoring systems. Geographic growth was robust across both the United States and international markets.

Edwards Lifesciences acquired Embrella for $42.6 million. The acquisition added $34.6 million in goodwill and $12.1 million in intangible assets. Embrella's technology for cerebral embolic protection is expected to complement Edwards' cardiovascular procedures portfolio. The results of Embrella have been included in the consolidated financial statements since the acquisition date in March 2011.

The company sees its transcatheter heart valves as a strong contributor to future sales. Significant investments are being made in clinical trials and development for products like the Edwards SAPIEN XT. The company received FDA approval for transfemoral delivery of the Edwards SAPIEN for inoperable patients and is advancing clinical trials for both inoperable and high-risk surgical patients. They anticipate potential approval for the SAPIEN XT in Japan as early as 2013.

The company maintains strong liquidity through cash on hand, cash flow from operations, and a $500 million credit facility established in July 2011. As of September 30, 2011, borrowings under the credit facility were $175.0 million. The company also has an active stock repurchase program, demonstrating its commitment to returning value to shareholders while maintaining operational flexibility.