Irvine, Calif., August 3, 2000 – Edwards Lifesciences Corporation (NYSE: EW), in its first quarter as a stand-alone company, today reported the completion of an eventful quarter including the achievement of its net income goal.

Net income for the quarter ended June 30, 2000, excluding non-recurring items, was $12.0 million, or $0.20 per diluted share, compared to proforma net income of $13.7 million, or $0.24 per diluted share for the same quarter a year earlier. These results exclude $362.0 million of pretax charges relating to the write-down of certain goodwill and other intangible assets, fixed assets, inventory and other costs including non-recurring spin-off expenses, which were partially offset by a $35.0 million pretax gain from the company’s Novacor transaction.

Cash earnings (net income excluding non-recurring items, plus goodwill amortization) were $20.6 million, or $0.35 per diluted share, compared to proforma cash earnings of $22.5 million, or $0.39 per diluted share in the prior year period. Second quarter net sales were $204.6 million, down 3.0 percent from $210.9 million in the same period last year. Excluding the impact of unfavorable foreign exchange and a $5.0 million patent sale in the second quarter last year, sales increased by 2.0 percent. For the quarter, domestic and international sales were $124.4 million and $80.2 million, respectively. Earnings before interest, taxes, depreciation and amortization (EBITDA) excluding non-recurring items were $45.5 million, which were consistent with company expectations.

“In our first quarter as a stand-alone company, not only did we achieve our quarterly earnings objectives, we began the transformation of Edwards Lifesciences into a stronger, faster growing company,” said Michael A. Mussallem, chairman and CEO. “Sales growth this quarter was strongest in our cardiac surgery product line led by our pericardial tissue heart valve products,” Mussallem said. “We are continuing to see the market shift toward tissue valve replacements and we are confident that our Carpentier-Edwards PERIMOUNT mitral pericardial heart valve will help sustain this trend once it receives FDA approval.”

Product Line Results

Cardiac Surgery sales for the quarter were $81.1 million, a 4.3 percent increase over the proforma $77.8 million recorded last year. Excluding the effect of foreign exchange, Cardiac Surgery sales increased 6.7 percent to $83.3 million. The growth in this product line was driven primarily by continued double-digit sales of pericardial tissue valves offset by declines in porcine tissue valves and other non-valve products.
Critical Care sales were $53.0 million for the quarter, a 3.2 percent increase from the proforma $51.4 million recorded last year. Excluding the effect of foreign exchange, Critical Care sales increased 5.4 percent to $54.4 million. Growth in this product line was generated by solid sales of base hemodynamic monitoring products and strong sales in the newer access and hemofiltration product categories.
Perfusion Products and Services sales for the quarter were $54.8 million, a 4.8 percent decrease from the proforma $57.6 million recorded last year. Excluding the effect of foreign exchange, sales in this product line declined 3.3 percent to $55.7 million, and continue to be negatively impacted by the growth in “beating heart” coronary artery bypass surgeries, particularly in the U.S and Western Europe.
Vascular sales for the quarter were $13.6 million, an 8.6 percent decrease over the proforma $14.9 million recorded last year. Excluding the effect of foreign exchange, sales in this product line declined 6.0 percent to $14.1 million, caused primarily by lower unit sales in several surgery-based product categories.

Additional Operating Results

The gross profit margin for the quarter was 44.1 percent compared to an unusually strong 49.0 percent for the same period in 1999, which benefited from several non-recurring items. The remaining variance was a result of unfavorable foreign exchange, the company’s accounting for Japan and temporary manufacturing variances. Including the unfavorable impact of foreign exchange, the company expects its gross profit margin for the full year 2000 to be comparable to the 46.6 percent gross profit margin recorded in 1999. Research and development expenses were $14.3 million or 7.0 percent of sales in the second quarter, a significant increase from the $11.9 million spent in the prior year quarter. “We remain committed to growing our company by increasing our technology investments both inside and outside the organization,” Mussallem said.

Excluding pretax charges, selling, general and administrative costs as a percentage of sales were 24.4 percent for the quarter compared to the proforma 26.6 percent in the prior year period. “We believe we can continue to leverage our global infrastructure and will add necessary resources in a thoughtful and judicious manner as we take steps to transform our company into a faster growing enterprise,” said Mussallem.

Pretax Charges and Gain

The results for the second quarter include the following non-recurring items and special charges:
Bentley Cardiopulmonary Products – a $290.5 million pretax charge related to the sale of the Bentley line of cardiopulmonary products (perfusion products) to Jostra AG, consisting of the write-down of goodwill, inventory, and other tangible and intangible assets, offset by the estimated sale proceeds. In the quarter ending September 30, 2000, the company expects to record an additional estimated $10 million pretax charge for severance and other related costs.

Other Charges – a $54.5 million pretax charge consisting of the write-down of selected goodwill and intangible assets, and other miscellaneous expenses, of which $9.5 million has been included in selling, general and administrative expenses.

Novacor – a $35.0 million pretax gain on sale of the Novacor left ventricular assist business to WorldHeart, which was completed on June 30, 2000. Spin-off Expenses – a $17.0 million pretax charge consisting of non-recurring expenses related to the company’s spin-off from Baxter International earlier this year.

A total of $289 million of the pretax charge is related to the write-down of goodwill and other intangible assets.

Six-Month Results

Edwards’ proforma net income for the six months ended June 30, 2000, excluding the non-recurring items recorded in both periods, was $21.1 million, or $0.36 per diluted share, compared to proforma net income of $25.9 million, or $0.44 per diluted share for the same period a year ago. EBITDA for the first half of 2000 was $86.5 million.

Cash earnings (net income excluding non-recurring items, plus goodwill amortization) were $38.3 million, or $0.65 per diluted share, compared to proforma cash earnings of $43.3 million, or $0.74 per diluted share in the prior year period.

Sales for the first six months totaled $401.7 million, down 1.4 percent from $407.3 million reported for the same period last year. Excluding the impact of unfavorable foreign exchange and the patent sale, sales were 2.2 percent higher than the same period a year ago. Domestic sales for the six months declined 2.7 percent to $249.7 million while international sales grew 0.9 percent to $152.0 million.

Recent Highlights

“This quarter Edwards took two decisive steps on our path to transforming the company into a faster growing, more successful organization,” said Mussallem, referring to the completion of the Novacor transaction and the recently announced sale of the company’s Bentley cardiopulmonary product line to Jostra AG. “Both of these transactions will allow us to redeploy assets more productively elsewhere in the organization, and each is expected to be accretive to earnings both this year and next.”
During the quarter Edwards also announced it had received approval to begin selling two new innovative products in the U.S.: the Thrombex PMT System, a self-contained, disposable and cost-effective device for removing blood clots from the access grafts of hemodialysis patients; and the Vantex central venous catheter, the first such product to be made with a patented antimicrobial polymer material for reducing a patient’s risk of infection. “Both Thrombex and Vantex are being well received by the market and we are committed to developing additional products to improve the quality of life for patients suffering from late-stage cardiovascular disease,” Mussallem continued.

Outlook for 2000 Remains Optimistic

“Looking ahead, we remain convinced we can achieve our 2000 operating and financial goals and are looking forward to reporting much stronger year-over-year comparisons in the second half,” Mussallem said. “Over the next two quarters, we intend to focus our efforts on the successful transition of the Novacor and Bentley businesses to their new owners. At the same time, we will execute our plans to capture the anticipated cost savings we expect to derive from these transactions. In turn, part of these savings will be reinvested back into our business to fund future growth opportunities, which I believe will ultimately result in a more robust sales growth rate.”

Edwards Lifesciences designs, develops and markets a comprehensive line of products and services to treat late-stage cardiovascular disease.

Headquartered in Irvine, Calif., Edwards serves the cardiac surgery, critical care, vascular systems and perfusion products and services markets, and is the worldwide leader in tissue replacement heart valves and heart valve repair products. With proforma sales of more than $800 million in 1999, the company has a strong international presence in over 80 countries and generates more than 35 percent of its sales outside of the United States.

Edwards’ extensive manufacturing operations are located in North America, Europe, Japan (through a contractual joint venture with Baxter International) and Latin America.

Additional information about Edwards Lifesciences can be found at www.edwards.com.
Edwards Lifesciences will be hosting an analyst conference call on Thursday, August 3, 2000 at 12:00 p.m. EDT to discuss this press release. The dial-in number for this call is 847-413-3751. A telephonic replay can be accessed for 72 hours by dialing 630-652-3000 and using passcode 2558760. Additionally, the call will be archived on the company’s website.

This news release includes forward-looking statements that involve risks and uncertainties, including those related to targeted financial and operating objectives, efforts aimed at achieving cost savings and stimulating sales growth, the successful completion of pending transactions, timing or results of pending or future clinical trials, actions by the U.S. Food and Drug Administration and European Union, technological advances in the medical field, product demand and market acceptance, the effect of economic conditions and foreign exchange, and other risks detailed in the company's filings with the Securities and Exchange Commission. These forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though are inherently uncertain and difficult to predict. Actual results or experience could differ materially from the forward-looking statements.

The listing requirements of the New York Stock Exchange require that Edwards Lifesciences disclose that additional information is available upon which the New York Stock Exchange relied to list the company, and is included in Edwards Lifesciences’ original listing application. Such information is available to the public upon request.

Bentley, Carpentier-Edwards PERIMOUNT, Thrombex PMT and Vantex are trademarks of Edwards Lifesciences Corporation, registered in the U.S. Office of Trademarks and Patents.


View Second Quarter Financials