* Gross Profit Margin and Cash Flow Continue to Strengthen
* Special Items Include Charitable Fund Contribution and Repatriation Tax Expense
IRVINE, Calif., Oct. 25, 2005 -- Edwards Lifesciences Corporation (NYSE: EW), the world leader in products and technologies to treat advanced cardiovascular disease, today reported a net loss for the quarter ended September 30, 2005 of $4.4 million, or $0.07 per diluted share, compared to net income of $12.4 million, or $0.20 per diluted share, for the same period in 2004. Adjusted net income, which excludes the special items detailed in the reconciliation tables below, was $29.0 million compared to $23.5 million in the comparable period of the previous year. Adjusted earnings per diluted share grew 21.1 percent to $0.46 per share, compared to $0.38 per share for the same period last year.
Third quarter net sales increased 7.2 percent to $240.9 million, compared to $224.8 million in the same quarter last year. Foreign exchange (FX) contributed $1.5 million and was more than offset by discontinued businesses, resulting in underlying sales growth of 8.2 percent.
"We are pleased to report another solid quarter for Edwards Lifesciences, led by strong sales growth in our leading Heart Valve Therapy and Critical Care franchises," said Michael A. Mussallem, chairman and CEO. "Consistent performance around the globe, with particular strength in the U.S., continues to drive increased sales growth."
Sales Results
For the third quarter, the company reported Heart Valve Therapy sales of $112.9 million, an 11.8 percent increase compared to the same quarter last year. "Our innovative tissue heart valve and repair products continued to drive market share gains this quarter," said Mussallem. "In the U.S., Heart Valve Therapy sales grew 15 percent due to the continuing penetration of PERIMOUNT Magna and ThermaFix. Additionally this quarter, we introduced the Magna mitral heart valve in Europe and look forward to its U.S. market launch in the first half of 2006, pending regulatory approval."
Critical Care sales of $78.1 million grew 8.5 percent compared to last year's quarter. Growth was due primarily to strong pressure monitoring sales resulting from market share gains and sales of advanced technology catheters.
Cardiac Surgery Systems sales for the third quarter were $27.4 million compared to $27.5 million for the same period last year, as the expected difficult year-over-year comparison of TMR sales and the impact of discontinued businesses more than offset cannula sales growth and FX gains.
Vascular sales increased to $15.6 million and grew 9.1 percent compared to the same period in 2004. Third quarter sales of LifeStent products were slightly more than $2 million, and fourth quarter sales are expected to be $3 million.
Sales of Other Distributed Products declined to $6.9 million in the quarter compared to $10.0 million in the year ago period, due primarily to the discontinued pacemaker business in Japan.
Domestic and international sales for the third quarter were $113.0 million and $127.9 million, respectively.
Additional Operating Results
For the quarter, Edwards' gross profit margin increased to 62.3 percent from 60.9 percent in the same period last year, primarily due to the increase in sales of higher margin heart valve products.
Selling, general and administrative expenses were 35.7 percent of sales for the quarter, or $85.9 million, compared to 35.5 percent of sales in the year ago period. Research and development (R&D) expenses of $24.0 million increased 9.6 percent compared to the prior year's quarter, primarily attributable to increased investments in percutaneous valve programs.
During the quarter, the company recorded a $21.4 million net pretax special charge, primarily related to a previously announced $15.0 million contribution to the Edwards Lifesciences charitable fund, and a write-down of an investment in an unconsolidated affiliate. In addition to these special charges, the company also recorded a $15.8 million tax expense related to a distribution of approximately $260 million from its foreign affiliates, and a $1.2 million pretax charge for an in-process R&D expense associated with a technology acquisition.
Long-term debt at September 30 was $251.5 million, resulting in a debt-to-cap ratio of 27.6 percent. Free cash flow generated during the quarter was $43.2 million, which is defined as cash flow from operating activities of $39.0 million minus capital expenditures of $10.8 million, plus $15.0 million related to the charitable fund contribution.
In the quarter, the company repurchased approximately 460,000 shares of common stock for $20.4 million.
Nine-Month Results
For the nine months ended September 30, 2005, the company recorded net income of $40.7 million compared to a net loss of $24.2 million for the same period in 2004. Excluding special items detailed in the reconciliation tables below, net income was $91.4 million compared to $75.2 million for the same period last year. Adjusted earnings per diluted share grew 19.8 percent to $1.45 per share, compared to $1.21 per diluted share for the same period last year.
Net sales for the first nine months of 2005 totaled $748.2 million, an increase of 7.7 percent over the same period last year. Foreign exchange contributed $12.0 million to the growth and was more than offset by discontinued businesses, resulting in an underlying year-to-date sales growth rate of 8.7 percent.
Domestic and international sales for the nine months were $343.2 million and $405.0 million, respectively.
Free cash flow generated in the first nine months was $103.7 million, calculated as cash flow from operating activities of $92.5 million minus capital expenditures of $26.6 million, plus special items totaling $37.8 million.
2005 Outlook
"Based on our strong year-to-date performance, we expect to meet or exceed all of our financial goals this year," said Mussallem. "For 2005, we now expect total sales of approximately $1 billion, gross profit margin to be slightly above 62 percent of sales, net income growth of more than 18 percent excluding the impact of special items, and free cash flow of substantially more than $125 million. And, at current FX levels and excluding special items, we are comfortable with the First Call mean EPS estimates for both the fourth quarter and full year 2005.
"The sales growth in our leading franchises demonstrates the underlying strength of Edwards' base businesses, and together with our near-term initiatives, moves us closer to achieving consistent double-digit sales growth," concluded Mussallem. "Additionally, the potential of our innovative percutaneous valve technologies to address the needs of a large, untreated patient population suffering from heart valve disease represents a truly transformational growth opportunity for Edwards Lifesciences. We look forward to providing additional details about our growth strategy and 2006 outlook at our upcoming Investor Conference next month."
2005 Investor Conference
Edwards Lifesciences will be hosting its 2005 Investor Conference on November 29 and 30, 2005 at its corporate headquarters in Irvine, California. Additional information about this event is available at http://www.edwards.com/investorconference.
About Edwards Lifesciences
Edwards Lifesciences, a leader in advanced cardiovascular disease treatments, is the number-one heart valve company in the world and the global leader in acute hemodynamic monitoring. Headquartered in Irvine, Calif., Edwards focuses on specific cardiovascular opportunities including heart valve disease, peripheral vascular disease and critical care technologies. The company's global brands, which are sold in approximately 100 countries, include Carpentier-Edwards, Cosgrove-Edwards, Fogarty, LifeStent, PERIMOUNT and Swan-Ganz. Additional company information can be found at www.edwards.com.
Conference Call and Webcast Information
Edwards Lifesciences will be hosting a conference call today at 5:00 p.m. EDT to discuss its third quarter results. To participate in the conference call, dial (877) 407-8037 or (201) 689-8037. For 72 hours following the call, an audio replay can be accessed by dialing (877) 660-6853 or (201) 612-7415 and using account number 2995 and conference number 172895. The call will also be available via live or archived webcast on the "Investor Relations" section of the Edwards' web site at www.edwards.com or www.edwards.com/InvestorRelations.
This news release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are subject to substantial risks and uncertainties including, but not limited to, the ability to sustain strong sales growth and/or drive market share gains in the Heart Valve Therapy and Critical Care franchises; the continuing penetration of Magna and ThermaFix; the introduction of the Magna mitral heart valve in Europe and the U.S.; the expectation of fourth quarter LifeStent sales of $3 million; the ability to meet or exceed 2005 financial goals including $1 billion in sales, a gross profit margin above 62 percent of sales, net income growth of more than 18 percent excluding the impact of special items, and free cash flow of substantially more than $125 million; the ability to achieve the First Call mean EPS estimates for both the fourth quarter and full year 2005; the ability to achieve consistent double-digit sales growth; the potential of the company's innovative percutaneous valve technologies to address a large, untreated patient population and the transformational growth opportunity these technologies represent; and more generally, the ability to obtain regulatory approvals for and market new products; the ability to generate and maintain sufficient cash resources to increase investments in the company's business and repay debt; the success and timing of new product launches; the impact of currency exchange rates; the 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; changing conditions in the economy in general and in the healthcare industry; and other risks detailed in the company's filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2004. These forward-looking statements are based on estimates and assumptions made by management of the company and are believed to be reasonable, though they are inherently uncertain and difficult to predict. Actual results or experience could differ materially from that expressed or implied by forward-looking statements.
Edwards, PERIMOUNT Magna, Magna and ThermaFix are trademarks of Edwards Lifesciences Corporation. Edwards Lifesciences, Carpentier-Edwards, Cosgrove-Edwards, Fogarty and Swan-Ganz are trademarks of Edwards Lifesciences Corporation and are registered in the U.S. Patent and Trademark Office. LifeStent is a trademark of Edwards Lifesciences AG and is registered in the United States Patent and Trademark Office.
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