• Results are In Line with Company Expectations
• Company Also Records $1.4 Million of Non-Recurring Spin-Off Expenses
Irvine, Calif., April 25, 2000 – Edwards Lifesciences Corporation (NYSE: EW) today reported that pro forma (a) net income for the quarter ended March 31, 2000 was $8.1 million, or $0.14 per diluted share, compared to $12.2 million, or $0.21 per diluted share for the same quarter a year earlier. The first quarter results include $1.4 million of non-recurring spin-off expenses. Cash earnings (net income plus goodwill amortization) were $16.7 million, or $0.29 per diluted share, compared to $20.8 million, or $0.36 per diluted share in the prior year period.
First quarter net sales were $197 million, up 0.3 percent from the same period last year. Excluding the impact of unfavorable foreign exchange, revenue growth would have totaled 2.4 percent. For the quarter, domestic and international sales were $125 million and $72 million, respectively. Earnings before interest, taxes, depreciation and amortization (EBITDA) were a strong $38.0 million.
“Our first quarter results were in line with our expectations despite the impact of unfavorable foreign currency and non-recurring spin-off expenses,” said Michael A. Mussallem, chairman and CEO. “Though presented with a challenging year over year comparison this quarter, our results set the stage for a successful 2000 in which we expect to achieve net income growth of 20 percent."
“Growth was strongest in our cardiac surgery product line led by our proprietary pericardial tissue heart valve and repair products,” Mussallem said. “Our pericardial heart valve continues to be the product of choice for leading cardiac surgeons and their patients due to its demonstrated durability and favorable clinical outcomes – qualities that are driving the ongoing market shift toward tissue valve replacements.
“Many of the products in our critical care, perfusion and vascular product lines are notable for their strong franchises and reputation,” Mussallem continued. “However, these strong positions are in generally mature businesses characterized by more modest growth rates. We are building upon our strengths by introducing new products and technologies in a number of these areas, and we remain confident in our ability to generate future growth.”
Cardiac Surgery
Cardiac Surgery is the Company’s fastest-growing product line and includes heart valve therapy products, mechanical cardiac assist systems, and cannulae and cardioplegia. Cardiac Surgery sales for the quarter were $76.6 million, a 3.7 percent increase over the $73.8 recorded last year. Excluding the effect of foreign exchange, Cardiac Surgery sales increased 6.4 percent. The growth in this product line resulted primarily from double-digit growth in pericardial tissue valves and heart valve repair products, offset primarily by a decline in porcine tissue valves. Later this year, Edwards anticipates receiving FDA approval of its Carpentier-Edwards PERIMOUNT mitral pericardial heart valve and its PRIMA Plus stentless heart valve – products that are expected to enable the Company to reinforce its leadership position in the tissue valve and repair products industry.
Critical Care
The Critical Care product line includes cardiac monitoring systems and disposables used to evaluate cardiac output and measure blood pressure. Critical Care sales for the quarter were $51.6 million, a 0.5 percent decrease from the $51.8 recorded last year. Excluding the effect of foreign exchange, Critical Care sales increased 2.1 percent. Growth in this product line was generated by sales in two new product areas: hemofiltration therapy products, systems for managing fluids and removing toxins from critically ill patients, and access products, which are central venous catheters and introducers.
Perfusion Products and Services
The Perfusion Products and Services product line comprises oxygenators and related disposables used during cardiopulmonary bypass, cardiopulmonary bypass hardware and perfusion services. Perfusion Products and Services sales for the quarter were $54.9 million, a 1.7 percent decrease from the $55.9 recorded last year. Excluding the effect of foreign exchange, sales in this product line declined 1.3 percent, and continue to be negatively impacted by the growth in “beating heart” coronary artery bypass surgeries.
Vascular
The Vascular product line includes products used in peripheral vascular surgery, surgical accessories, implantable grafts and Endovascular graft systems for treating aortic aneurysms. Vascular sales for the quarter were $13.7 million, a 3.5 percent decrease over the $14.2 recorded last year. Excluding the effect of foreign exchange, sales were virtually unchanged from the same period last year. The Company is currently developing new therapies and technologies in the Endovascular area that are expected to generate future sales growth. The Company also reported last week that it has temporarily suspended clinical trials and European sales of its Lifepath AAA Endovascular Graft System while it evaluates the two recently confirmed cases of wireform fracture.
Additional Operating Results
Research and development expenses were $13.1 million in the first quarter, a 9.2 percent increase from the $12.0 million spent in the prior year quarter. “We are committed to increasing our R&D investments with the goal of generating additional sources of revenue growth in future years,” Mussallem said. “We expect spending in this area to increase by approximately 10 percent over 1999 levels.”
Pro forma selling, general and administrative costs as a percentage of sales were 26.6 percent for the quarter compared to 27.6 percent in the prior year period. “We believe we can continue to leverage our global infrastructure and expect selling, general and administrative costs as a percentage of sales to be modestly lower this year compared to 1999,” Mussallem continued. The quarterly results include $1.4 million of expenses related to the spin-off from Baxter International. The Company expects to record additional spin-off expenses in the quarter ending June 30, 2000.
First Quarter Activities
“We are actively identifying and investing in new products and technologies that we believe can benefit patients suffering from late-stage cardiovascular disease,” said Mussallem. “During the quarter we formed a strategic alliance with A-Med Systems and received exclusive rights to distribute the A-Med A-Syst circulatory support system in Europe. This innovative product is used in “beating heart” coronary artery bypass surgeries, a surgical technique that is gaining increasing acceptance worldwide.”
The Company also strengthened its investment in the field of angiogenesis by entering into a collaboration with Sangamo BioSciences Inc. Under the terms of the agreement, Edwards has obtained an exclusive, worldwide license to develop and commercialize Sangamo’s proprietary zinc finger DNA binding proteins for the activation of vascular endothelial growth factors (“VEGFs”) and VEGF receptors in the treatment of cardiovascular and other vascular diseases.
Outlook for 2000 Remains Optimistic
“With our first quarter behind us, Edwards is well on its way to achieving our 2000 operating and financial goals,” Mussallem said. “We believe our targeted net income growth rate of 20 percent can be achieved by growing sales in the low to mid-single digits, achieving an increasingly favorable product mix, leveraging our global infrastructure and using our strong operating cash flows to lower our interest expense.”
Commenting on the recent spin-off from Baxter International, Mussallem added, “I’m excited to see Edwards Lifesciences begin a new chapter as a free-standing company. Our employees are committed to transforming Edwards into a stronger, faster-growing leader in the late-stage cardiovascular disease business.”
Edwards Lifesciences designs, develops and markets a comprehensive line of products and services to treat late-stage cardiovascular disease.
Headquartered in Irvine, California, 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 pro forma 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.
This news release includes forward-looking statements that involve risks and uncertainties, including those related to targeted financial and operating objectives, the success of Edwards as an independent company, 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 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.
Carpentier-Edwards PERIMOUNT, PRIMA Plus and Lifepath AAA are trademarks of Edwards Lifesciences Corporation, registered in the U.S. Office of Trademarks and Patents.
A-Syst is a trademark of A-Med Systems Inc.
(a) On April 20, 2000, Baxter International Inc. reported financial results for Edwards Lifesciences for the quarter ended March 31, 2000 using its historical bases in the assets and liabilities and the historical results of operations for Edwards Lifesciences, which was a division of Baxter until April 1, 2000. For this period, as reported by Baxter, Edwards Lifesciences’ net sales, net income and earnings were $226 million, $12 million and $0.21 per diluted share, respectively. In the Securities and Exchange Commission Form 10-Q for the quarter ended March 31, 2000, Edwards Lifesciences will report net sales of $226 million, net income of $17 million and earnings of $0.30 per diluted share, which excludes the after tax impact of estimated interest expense associated with the Company’s future debt facility.
The pro forma information provided in this release is unaudited and presents the combined results of Edwards Lifesciences and its financial position assuming that the spin-off from Baxter International had been completed as of January 1, 1999 for Income Statement purposes. It does not purport to be indicative of the results of operations of Edwards Lifesciences had Edwards been a separate, stand-alone entity during the periods shown. Please refer to filings made by Edwards Lifesciences with the Securities and Exchange Commission for additional information about the pro forma adjustments.
View First Quarter Financials
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