10-QPeriod: Q2 FY2020

Edwards Lifesciences Corp Quarterly Report for Q2 Ended Jun 30, 2020

Filed July 27, 2020For Securities:EW

Summary

Edwards Lifesciences Corporation reported a net loss of $121.9 million for the second quarter of 2020, a significant downturn from a net income of $242.3 million in the same period of the prior year. This loss was largely attributable to a substantial pre-tax charge of $367.9 million related to the settlement of patent litigation with Abbott Laboratories. Excluding this litigation charge, the company's operational performance saw a decrease in net sales, down 14.9% to $925.0 million for the quarter, primarily impacted by the COVID-19 pandemic's disruption to healthcare procedures and supply chains. While Transcatheter Aortic Valve Replacement (TAVR) sales showed resilience for the year-to-date period, they were down for the quarter. Other segments, including Surgical Structural Heart and Critical Care, experienced notable declines in sales due to the pandemic's effects. The company's balance sheet remains solid, though cash and cash equivalents decreased to $903.5 million from $1,179.1 million at the end of 2019. The company is managing its cash flow effectively, with net cash provided by operating activities increasing year-over-year for the six-month period, partly due to a prior year litigation settlement payment. Despite the quarterly loss and sales decline, the company continues its strategic investments in R&D and share repurchases, signaling a focus on long-term growth amidst ongoing global uncertainties.

Financial Statements
Beta

Key Highlights

  • 1Reported a net loss of $121.9 million for Q2 2020, compared to a net income of $242.3 million in Q2 2019, primarily due to a $367.9 million pre-tax litigation settlement charge.
  • 2Net sales decreased by 14.9% to $925.0 million in Q2 2020, impacted by the COVID-19 pandemic reducing procedural volumes.
  • 3Transcatheter Aortic Valve Replacement (TAVR) sales for the six months ended June 30, 2020, increased by 4.8% to $1,336.5 million, driven by the Edwards SAPIEN 3 Ultra System, though quarterly TAVR sales declined.
  • 4Surgical Structural Heart sales saw a significant decrease of 26.1% to $160.9 million in Q2 2020.
  • 5Cash and cash equivalents decreased to $903.5 million as of June 30, 2020, from $1,179.1 million as of December 31, 2019.
  • 6Net cash provided by operating activities increased for the six months ended June 30, 2020, to $438.2 million from $342.7 million in the prior year, aided by a significant litigation settlement payment in 2019.
  • 7The company repurchased $623.8 million of treasury stock in the first six months of 2020, demonstrating commitment to returning capital to shareholders.

Frequently Asked Questions

The net loss of $121.9 million in the second quarter of 2020 was primarily driven by a $367.9 million pre-tax charge related to the settlement of patent litigation with Abbott Laboratories. This charge significantly impacted the company's profitability for the quarter.

The COVID-19 pandemic has negatively impacted sales across most product lines due to disruptions in healthcare procedures and supply chains. While TAVR sales for the year-to-date period showed growth, quarterly TAVR sales, as well as sales for Surgical Structural Heart and Critical Care products, declined as hospitals and patients focused on the pandemic, leading to deferred elective procedures.

As of June 30, 2020, Edwards Lifesciences had $903.5 million in cash and cash equivalents, a decrease from $1,179.1 million at the end of 2019. Despite this decrease, the company reported an increase in net cash provided by operating activities for the first six months of the year, indicating a healthy cash generation from operations.

Edwards Lifesciences actively continued its share repurchase program. In the first six months of 2020, the company repurchased $623.8 million of treasury stock. As of June 30, 2020, there was approximately $625.0 million in remaining authorization for future share repurchases.