-Growth Led by Robust Heart Valve Sales
-Management Reaffirms Strong 2003 Outlook
IRVINE, Calif., Feb. 3 -- Edwards Lifesciences Corporation (NYSE: EW), a global leader in products and technologies to treat advanced cardiovascular disease, today reported net income for the quarter ended December 31, 2002 of $21.7 million, or $0.36 per diluted share, an increase of 26.2 percent compared to $17.2 million, or $0.28 per diluted share for the same quarter of 2001.
"We are proud to report a very robust fourth quarter, which completes another year of strong results," said Michael A. Mussallem, Edwards Lifesciences' chairman and CEO. "Solid sales performance across all geographies contributed to significant bottom line growth while we substantially increased R&D investment."
Net sales for the fourth quarter were $203.1 million, an increase of 26.9 percent compared to the same quarter of last year, and benefited from the October 1 acquisition of the Japan cardiovascular business (the "Japan Consolidation") previously operated as a joint venture with Baxter International Inc. Underlying net sales growth for the fourth quarter increased 9.0 percent, which excludes the impact of the Japan Consolidation, foreign exchange (FX) and changes in distribution arrangements (see footnote 1). This increase was driven by strong growth in all key product lines, particularly Cardiac Surgery. For the quarter, domestic and international sales were $97.8 million and $105.3 million, respectively.
Product Line Results (Sales Growth Rates Reflect Underlying Performance-- See Footnote 1)
In the fourth quarter, the Company reported robust Cardiac Surgery sales of $96.9 million, a 15.5 percent increase compared to the same quarter last year. "Cardiac Surgery's significant increase was a result of strong performance in Japan and the U.S.," said Mussallem. "Additionally, high-teens sales growth of PERIMOUNT tissue heart valves and our heart valve repair products, as well as solid results from our CO2 TMR initiative, drove performance."
Critical Care sales were $67.7 million for the quarter, a 6.9 percent increase compared to the same quarter in 2001. This growth was a result of strong performance across all regions and in all key Critical Care products.
Vascular sales for the fourth quarter were $13.7 million. Sales grew 6.6 percent from the year ago period, primarily as a result of the Company's Lifepath AAA endovascular graft launch. "Our Lifepath AAA program recently reached an important milestone with the enrollment of the 150th patient in our U.S. clinical trial," said Mussallem. "This program, coupled with the launch of our peripheral stent initiative in mid-2003, will continue to drive higher Vascular sales."
Fourth quarter Perfusion sales of $13.8 million declined 10.9 percent from the fourth quarter of 2001. The decline in this product line continues to result primarily from the planned reduction in distributed product sales.
Sales of Other Distributed Products (formerly Other) were $11.0 million in the quarter, a 4.8 percent increase compared to last year. This product line now includes sales of intra-aortic balloon pumps, pacemakers, PTCA systems and other products sold through the company's strong distribution network in Japan.
Additional Operating Results
For the fourth quarter, Edwards' gross profit margin was 57.8 percent versus 57.5 percent recorded for the same period last year. The improvement in gross margin over the year ago period was due primarily to the sales of higher margin products, partially offset by the impact of FX.
Selling, general and administrative expenses were $68.7 million for the quarter, or 33.8 percent of sales, an increase compared to the fourth quarter of last year resulting primarily from the Japan Consolidation, as well as increased spending on heart valve growth opportunities and the impact of FX. Research and development investments increased 23.8 percent to $17.7 million compared to the prior year quarter.
During the quarter, the Company used its cash flow from operations to reduce debt by approximately $34 million and repurchase approximately 90,000 shares of its common stock under its stock repurchase plan. At December 31, the Company's total debt was $245.5 million and debt to total capital was 31 percent.
Twelve-Month Results
Net income for the full year 2002 was $55.7 million compared to a net loss of $9.9 million for 2001. Excluding the non-recurring items in both years, net income for 2002 was $82.9 million, or $1.35 per diluted share, an increase of 31.8 percent compared to net income of $62.9 million, or $1.03 per diluted share for 2001 (see attached Statements of Operations Reconciliation).
Sales for the 12 months totaled $704.0 million and increased 1.7 percent from the $692.1 million reported for the full year 2001. Underlying(1) net sales for the year increased 7.0 percent compared to the previous year. Domestic and international sales for the 12 months were $383.3 million and $320.7 million, respectively.
"Our sales results demonstrate the continuing trend of improved top line growth, consistent with our transformation strategy," continued Mussallem. "In 2002, we achieved our challenging sales and net income growth goals. Additionally, we significantly increased our investment in research and development by 18.5 percent, and generated $163.8 million of earnings before interest, taxes, depreciation and amortization."
2003 Outlook
"We expect 2003 to build on the strong results we reported for 2002, which keeps us on track to achieve our long-term aspirations. We also expect several new product launches to contribute to another strong year for Edwards Lifesciences," concluded Mussallem. "We remain committed to our previously stated 2003 financial goals of growing underlying sales 7 to 9 percent, increasing research and development investments at or above the sales growth rate, growing net income 14 to 16 percent, and generating free cash flow of $85 to $90 million. Additionally, we are comfortable with the analysts' consensus estimates for the first quarter and full year 2003."
About Edwards Lifesciences
Edwards Lifesciences is a leader in advanced cardiovascular disease treatments and the number-one heart valve company in the world. Headquartered in Irvine, Calif., Edwards focuses on four main cardiovascular disease states: heart valve disease, coronary artery disease, peripheral vascular disease and congestive heart failure. The company's global brands, which are sold in over 80 countries, include Carpentier-Edwards, Cosgrove-Edwards, Swan-Ganz and Fogarty. Additional company information can be found at http://www.edwards.com/ .
Conference Call, Web Cast and Supplemental Financial Information
Edwards Lifesciences will be hosting a conference call today at 5:00 p.m. EST to discuss the results of the fourth quarter and full year 2002. To participate in the conference call, dial 800-328-1391 or 706-645-9218. Additionally, the call can be accessed via live Web cast on the "Investor Information" section of the Edwards' Web site at http://www.edwards.com/. A telephonic replay can be accessed for 72 hours by dialing 800-642-1687 or 706-645-9291 and using passcode 7553651. The call will also be archived on the Web site listed above. Supplemental financial information for this quarter's results, including sales by product lines and regions, is available at http://ir.edwards.com/.
This news release includes forward-looking statements that involve risks and uncertainties including those related to sales growth, including tissue heart valve sales growth; R&D investment, net income, earnings per share and free cash flow goals for 2003; the ability for Lifepath AAA Endovascular Graft System and the peripheral stent initiative to drive higher Vascular sales; the achievement of long-term aspirations; the ability to generate and maintain sufficient cash resources to increase investment in growth opportunities, repay debt or repurchase shares; the contribution of new product launches; the impact of foreign exchange; and more generally, timing or results of pending or future clinical trials, actions by the U.S. Food and Drug Administration and other regulatory agencies, technological advances in the medical field, product demand and market acceptance, the effect of changing 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.
Edwards Lifesciences and Edwards are trademarks of Edwards Lifesciences Corporation. Carpentier-Edwards, Cosgrove-Edwards, Fogarty, PERIMOUNT, Lifepath AAA and Swan-Ganz are trademarks of Edwards Lifesciences Corporation and are registered in the U.S. Patent and Trademark Office.
(1) Growth rates are adjusted for the impact of the Japan Consolidation,
foreign exchange (FX), and the assumption of direct sales responsibility
and the associated buy-back of inventory in the remaining countries where
Baxter International Inc. was the Company's distributor. Additionally,
the full year growth rate excludes the impact of the June 2001 U.S.
Perfusion Services divestiture.
View the financial tables (PDF)
Contact Information :
Media, Barry R. Liden, +1-949-250-5070, or Investors, David K. Erickson, +1-949-250-6826, both of Edwards Lifesciences Corporation