10-QPeriod: Q1 FY2012

Edwards Lifesciences Corp Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 9, 2012For Securities:EW

Summary

Edwards Lifesciences Corporation (EW) reported its first-quarter 2012 financial results, demonstrating solid revenue growth driven significantly by its Transcatheter Heart Valves segment. Net sales increased by 13.5% year-over-year, reaching $459.2 million. This growth was predominantly fueled by the U.S. launch of the Edwards SAPIEN transcatheter heart valve and continued international expansion of the Edwards SAPIEN XT. The company also saw modest growth in its Surgical Heart Valve Therapy and Critical Care segments. Profitability showed improvement, with gross profit margin increasing by 1.2 percentage points to 72.3%, attributed to a more favorable product mix, particularly from higher-margin transcatheter valves. However, Selling, General, and Administrative (SG&A) expenses and Research & Development (R&D) expenses also increased, reflecting investments in sales and marketing for the transcatheter valve program and ongoing product development. Despite these investments, net income saw a slight increase to $65.1 million from $63.9 million in the prior year's comparable quarter, with diluted earnings per share improving to $0.55.

Financial Highlights

43 data points
Beta

Revenue

$459.20M

72.3% Gross Margin

Net Income

$65.10M

14.2% Net Margin

EPS (Diluted)

$0.09

Total Assets

$2.00B

Cash & Equivalents

$213.30M

Free Cash Flow

-$48.70M

Financial Statements
Beta
Revenue$459.20M
Cost of Revenue$127.30M
Gross Profit$331.90M
R&D Expenses$68.60M
SG&A Expenses$177.20M
Net Income$65.10M
EPS (Basic)$0.09
EPS (Diluted)$0.09
Shares Outstanding (Basic)684.00M
Shares Outstanding (Diluted)708.00M

Key Highlights

  • 1Net sales grew 13.5% to $459.2 million, driven by strong performance in Transcatheter Heart Valves.
  • 2Transcatheter Heart Valves segment sales surged 67.2% to $121.5 million, largely due to the U.S. launch of the Edwards SAPIEN valve.
  • 3Gross profit margin improved to 72.3% from 71.1%, benefiting from a richer product mix, especially transcatheter valves.
  • 4Increased investment in SG&A and R&D, up by $26.9 million and $9.6 million respectively, to support transcatheter valve commercialization and product development.
  • 5Net income rose to $65.1 million ($0.55 diluted EPS) from $63.9 million ($0.53 diluted EPS) in the prior year's quarter.
  • 6The company entered into an Accelerated Share Repurchase (ASR) agreement for $54.0 million, demonstrating a commitment to returning capital to shareholders.
  • 7The company is actively involved in several patent litigations, primarily with Medtronic, related to heart valve technologies, with outcomes pending appeal or reexamination.

Frequently Asked Questions

The primary driver for the 13.5% increase in net sales to $459.2 million was the outstanding performance of the Transcatheter Heart Valves segment. This segment's sales grew by 67.2% to $121.5 million, heavily influenced by the successful U.S. launch of the Edwards SAPIEN transcatheter heart valve in late 2011 and increased sales of the Edwards SAPIEN XT internationally.

Profitability saw a modest improvement. Gross profit margin increased by 1.2 percentage points to 72.3%, primarily due to a more favorable product mix with higher sales of higher-margin transcatheter heart valves. While net income increased slightly to $65.1 million, the company also increased its investments in Sales, General & Administrative (SG&A) expenses and Research & Development (R&D) to support growth initiatives.

Edwards Lifesciences is engaged in several ongoing patent litigations, primarily with Medtronic, concerning various heart valve technologies. Decisions from appeals and patent reexaminations are pending in several of these cases. While these legal matters present risks, management stated that they do not believe the resolution of any currently pending lawsuit would have a material adverse effect on the company's financial position, results of operations, or liquidity.

The company ended the quarter with $213.3 million in cash and cash equivalents. It also entered into an accelerated share repurchase (ASR) agreement for $54.0 million, demonstrating a commitment to share buybacks. Additionally, it had $179.4 million in long-term debt outstanding under its credit facility, of which it was in compliance with all covenants. The company's cash flow from operations was negative for the quarter ($30.7 million), but this was influenced by timing of payments and a significant year-over-year swing in the tax benefit from stock plans.