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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q

(Mark One)    

ý

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2010

or

o

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                             to                              

Commission file number 1-15525



EDWARDS LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)

Delaware   36-4316614
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer Identification No.)

One Edwards Way, Irvine, California

 

92614
(Address of principal executive offices)   (Zip Code)

(949) 250-2500
(Registrant's telephone number, including area code)

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý    No o

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(Do not check if a smaller
reporting company)
  Smaller Reporting Company o

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

        The number of shares outstanding of the registrant's common stock, $1.00 par value, as of July 31, 2010 was 113,350,552.


Table of Contents


EDWARDS LIFESCIENCES CORPORATION

FORM 10-Q
For the quarterly period ended June 30, 2010


TABLE OF CONTENTS

 
   
  Page
Number
 

Part I.

 

FINANCIAL INFORMATION

       

Item 1.

 

Financial Statements (Unaudited)

   
1
 

 

    Consolidated Condensed Balance Sheets

   
1
 

 

    Consolidated Condensed Statements of Operations

   
2
 

 

    Consolidated Condensed Statements of Cash Flows

   
3
 

 

    Notes to Consolidated Condensed Financial Statements

   
4
 

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

   
19
 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

   
29
 

Item 4.

 

Controls and Procedures

   
29
 

Part II.

 

OTHER INFORMATION

       

Item 1.

 

Legal Proceedings

   
30
 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

   
31
 

Item 6.

 

Exhibits

   
31
 

Signature

   
32
 

Exhibits

   
33
 

Table of Contents


Part I. Financial Information

Item 1.    Financial Statements


EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in millions, except par value; unaudited)

 
  June 30,
2010
  December 31,
2009
 

ASSETS

 

Current assets

             
 

Cash and cash equivalents

  $ 320.3   $ 334.1  
 

Accounts and other receivables, net of allowances of $10.7 and $12.4, respectively

    294.0     272.1  
 

Inventories, net

    182.3     165.9  
 

Deferred income taxes

    37.8     48.3  
 

Prepaid expenses

    49.0     33.7  
 

Other current assets

    35.5     35.1  
           
   

Total current assets

    918.9     889.2  

Property, plant and equipment, net

    249.8     252.0  

Goodwill

    315.2     315.2  

Other intangible assets, net

    74.3     86.7  

Investments in unconsolidated affiliates (Note 6)

    21.9     22.3  

Deferred income taxes

    50.0     37.1  

Other assets

    11.8     13.0  
           

  $ 1,641.9   $ 1,615.5  
           

LIABILITIES AND STOCKHOLDERS' EQUITY

 

Current liabilities

             
 

Accounts payable and accrued liabilities

  $ 247.7   $ 290.5  
           

Long-term debt

    177.5     90.3  
           

Other long-term liabilities

    98.9     76.8  
           

Commitments and contingencies (Note 11)

             

Stockholders' equity (Note 1)

             
 

Preferred stock, $.01 par value, authorized 50.0 shares, no shares outstanding

         
 

Common stock, $1.00 par value, 350.0 shares authorized, 115.1 and 76.1 shares issued, and 113.1 and 56.8 shares outstanding, respectively

    115.1     76.1  
 

Additional paid-in capital

    145.8     1,056.0  
 

Retained earnings

    1,011.2     906.0  
 

Accumulated other comprehensive loss

    (53.0 )   (7.9 )
 

Treasury stock, at cost, 2.0 and 19.3 shares, respectively

    (101.3 )   (872.3 )
           
   

Total stockholders' equity

    1,117.8     1,157.9  
           

  $ 1,641.9   $ 1,615.5  
           

The accompanying notes are an integral part of these
consolidated condensed financial statements.

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EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(in millions, except per share information; unaudited)

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   2010   2009  

Net sales

  $ 365.2   $ 335.5   $ 705.7   $ 649.0  
 

Cost of goods sold

    100.4     101.9     199.0     198.9  
                   

Gross profit

    264.8     233.6     506.7     450.1  
 

Selling, general and administrative expenses

    140.6     128.5     274.6     250.4  
 

Research and development expenses

    50.6     42.6     95.8     82.5  
 

Special charges (gains), net (Note 2)

    8.3     1.5     8.3     (29.3 )
 

Interest expense, net

    0.5     0.2     0.7     0.3  
 

Other income, net

    (1.6 )   (2.0 )   (4.6 )   (1.6 )
                   

Income before provision for income taxes

    66.4     62.8     131.9     147.8  
 

Provision for income taxes

    8.9     15.3     26.7     39.8  
                   

Net income

  $ 57.5   $ 47.5   $ 105.2   $ 108.0  
                   

Share information (Notes 1 and 13)

                         
 

Earnings per share:

                         
   

Basic

  $ 0.51   $ 0.42   $ 0.93   $ 0.96  
   

Diluted

  $ 0.48   $ 0.41   $ 0.88   $ 0.92  
 

Weighted-average number of common shares outstanding:

                         
   

Basic

    113.4     112.4     113.3     112.1  
   

Diluted

    118.8     117.0     118.9     117.0  

The accompanying notes are an integral part of these
consolidated condensed financial statements.

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EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

 
  Six Months Ended June 30,  
 
  2010   2009  

Cash flows from operating activities

             
 

Net income

  $ 105.2   $ 108.0  
 

Adjustments to reconcile net income to cash provided by operating activities:

             
   

Depreciation and amortization

    27.7     29.1  
   

Stock-based compensation (Note 10)

    13.8     12.6  
   

Excess tax benefit from stock plans

    (31.5 )   (10.3 )
   

Deferred income taxes

    (4.2 )   0.6  
   

Special charges (gains), net (Note 2)

    8.3     (25.9 )
   

Loss (gain) on trading securities

    0.2     (1.0 )
   

Other

    (3.4 )   3.2  
 

Changes in operating assets and liabilities:

             
   

Accounts and other receivables, net (Note 3)

    (41.1 )   (62.1 )
   

Inventories, net

    (27.6 )   (8.0 )
   

Accounts payable and accrued liabilities

    26.7     (13.4 )
   

Prepaid expenses and other current assets

    (10.6 )   (11.5 )
   

Other

    (2.5 )   6.6  
           
     

Net cash provided by operating activities

    61.0     27.9  

Cash flows from investing activities

             
 

Capital expenditures

    (23.7 )   (28.2 )
 

Proceeds from sale of assets

    3.6     30.5  
 

Investments in intangible assets

    (1.2 )    
 

Investments in unconsolidated affiliates, net

    (1.2 )   (3.5 )
 

Investments in trading securities, net

    (0.7 )   (0.3 )
 

Proceeds from investments

        4.2  
           
     

Net cash (used in) provided by investing activities

    (23.2 )   2.7  

Cash flows from financing activities

             
 

Proceeds from issuance of long-term debt

    188.2     99.3  
 

Payments on long-term debt

    (99.4 )   (157.7 )
 

Purchases of treasury stock

    (199.3 )   (54.5 )
 

Proceeds from stock plans

    53.4     33.2  
 

Excess tax benefit from stock plans

    31.5     10.3  
 

Other

    4.9      
           
     

Net cash used in financing activities

    (20.7 )   (69.4 )

Effect of currency exchange rate changes on cash and cash equivalents

    (30.9 )   3.2  
           
     

Net decrease in cash and cash equivalents

    (13.8 )   (35.6 )

Cash and cash equivalents at beginning of period

    334.1     218.7  
           

Cash and cash equivalents at end of period

  $ 320.3   $ 183.1  
           

Supplemental disclosures:

             

Non-cash transaction:

             
 

Distribution of treasury shares to effect stock split (Note 1)

  $ 970.3      

The accompanying notes are an integral part of these
consolidated condensed financial statements.

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1.     BASIS OF PRESENTATION

        The accompanying interim consolidated condensed financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in Edwards Lifesciences Corporation's Annual Report on Form 10-K for the year ended December 31, 2009. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles ("GAAP") have been condensed or omitted.

        In the opinion of management of Edwards Lifesciences Corporation (the "Company" or "Edwards Lifesciences"), the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year. Certain reclassifications of previously reported amounts have been made to conform to classifications used in the current year.

Stock Split

        On April 12, 2010, the Company's Board of Directors declared a two-for-one stock split of its outstanding shares of common stock effected in the form of a stock dividend, paid on May 27, 2010 to shareholders of record on May 14, 2010. The Company distributed treasury shares in addition to newly issued shares to effect the stock split. All applicable share and per-share amounts in the notes to consolidated condensed financial statements and the consolidated condensed statements of operations have been retroactively adjusted to reflect this stock split. The consolidated condensed balance sheet as of December 31, 2009 has not been retroactively adjusted to reflect the stock split. The following table presents the retroactive effect of the stock split on the consolidated condensed balance sheet as of December 31, 2009 (in millions):

 
  December 31, 2009  
 
  As Adjusted
for Stock Split
  As Reported  

Common stock

  $ 113.7   $ 76.1  

Additional paid-in capital

  $ 146.1   $ 1,056.0  

Treasury stock, at cost

  $   $ (872.3 )

Shares:

             
 

Common stock issued

    113.7     76.1  
 

Common stock outstanding

    113.7     56.8  
 

Treasury stock

        19.3  

Recently Adopted Accounting Standards

        In June 2009, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities ("VIEs"). This accounting guidance eliminates the exemption for qualifying special purpose entities and establishes a new approach for determining the primary beneficiary of a VIE based on whether the entity (a) has the power to direct the activities of the VIE that most significantly impact the entity's economic performance and (b) has the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. The guidance requires an ongoing reconsideration of the primary beneficiary, and amends the events that trigger a reassessment of whether an entity is a VIE. Enhanced disclosures are also required to provide information about an enterprise's involvement in a VIE. The guidance was effective for the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period, and

4


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for interim and annual reporting periods thereafter. The Company performed an evaluation and determined that there were no relationships with affiliates that represent variable interests requiring consolidation under this guidance.

New Accounting Standards Not Yet Adopted

        In October 2009, the FASB issued an amendment to the accounting guidance on revenue recognition to require companies to allocate revenue in arrangements involving multiple deliverables based on estimated selling price in the absence of vendor-specific objective evidence or third-party evidence of selling price for the deliverables. The guidance was also amended to eliminate the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the overall arrangement fee that is attributable to items that have already been delivered. The guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

        In January 2010, the FASB issued an amendment to the accounting guidance on fair value disclosures to require companies to (a) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for such transfers and (b) present separately in the Level 3 reconciliation information about purchases, sales, issuances and settlements. The guidance also clarifies the level of disaggregation to present and disclosures about inputs and valuation techniques. The guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The Company adopted this guidance as of January 1, 2010, other than those provisions related to the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation.

        In April 2010, the FASB issued an amendment to the accounting guidance on revenue recognition to provide guidance on defining a milestone and determining when it may be appropriate to apply the milestone method of revenue recognition for research and development transactions. Consideration that is contingent upon achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The guidance is effective for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

2.     SPECIAL CHARGES (GAINS), NET

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  
 
  (in millions)
 

MONARC program discontinuation

  $ 8.3   $   $ 8.3   $  

Loss (gain) on sale of product lines

        1.5         (25.5 )

Sale of distribution rights

                (2.8 )

Reserve reversal

                (1.0 )
                   
 

Special charges (gains), net

  $ 8.3   $ 1.5   $ 8.3   $ (29.3 )
                   

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        During the second quarter of 2010, the Company decided to discontinue its MONARC transcatheter mitral valve program due to slow enrollment in the EVOLUTION II trial. As a result, the Company recorded a $8.3 million charge consisting of a $7.6 million impairment of intangible assets associated with the program and $0.7 million of clinical trial costs that will continue to be incurred under a contractual obligation that existed prior to the discontinuation date.

        The Company recorded a $1.5 million charge in June 2009 for transaction costs and employee severance related to the sale of the hemofiltration product line, which was completed in September 2009.

        In January 2008, the Company sold certain assets related to the Edwards LifeStent peripheral vascular product line. In February 2009, under the terms of the sale agreement, the Company received a $27.0 million milestone payment associated with the LifeStent pre-market approval.

        In March 2009, the Company recorded a $2.8 million gain related to the sale of its distribution rights in Europe for a specialty vascular graft.

        In 2004, the Company discontinued its Lifepath AAA endovascular graft program. In March 2009, upon completion of its remaining clinical obligations related to this program, the Company reversed its remaining $1.0 million clinical reserve.

3.     ACCOUNTS RECEIVABLE SECURITIZATION

        The Company terminated its securitization program in Japan in February 2009. Previously, under the Japan Receivables Facility, the Company sold eligible accounts receivable directly to a financial institution, and the transactions were accounted for as sales of accounts receivable. Upon termination of the program, the Company paid the financial institution $39.0 million for the outstanding accounts receivable and February collections.

4.     INVENTORIES

        Inventories consisted of the following (in millions):

 
  June 30,
2010
  December 31,
2009
 

Raw materials

  $ 36.6   $ 32.8  

Work in process

    40.0     30.4  

Finished products

    105.7     102.7  
           

  $ 182.3   $ 165.9  
           

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5.     OTHER INTANGIBLE ASSETS

        Other intangible assets subject to amortization consisted of the following (in millions):

June 30, 2010
  Patents   Unpatented
Technology
  Other   Total  

Cost

  $ 201.9   $ 35.0   $ 12.4   $ 249.3  

Accumulated amortization

    (141.4 )   (28.5 )   (5.1 )   (175.0 )
                   
 

Net carrying value

  $ 60.5   $ 6.5   $ 7.3   $ 74.3  
                   

December 31, 2009

 

 


 

 


 

 


 

 


 

Cost

  $ 212.0   $ 35.0   $ 12.6   $ 259.6  

Accumulated amortization

    (141.3 )   (27.1 )   (4.5 )   (172.9 )
                   
 

Net carrying value

  $ 70.7   $ 7.9   $ 8.1   $ 86.7  
                   

        During the second quarter of 2010, the Company recorded a $7.6 million impairment of patents related to its MONARC transcatheter mitral valve program, which was discontinued due to slow enrollment in the EVOLUTION II trial (see Note 2).

        The net carrying value of patents includes $15.9 million of capitalized legal costs related to the defense and enforcement of issued patents and trademarks for which success is deemed probable as of June 30, 2010.

        Amortization expense related to other intangible assets was $4.1 million and $5.4 million for the three months ended June 30, 2010 and 2009, respectively, and $8.2 million and $10.7 million for the six months ended June 30, 2010 and 2009, respectively. Estimated amortization expense for each of the years ending December 31 is as follows (in millions):

2010

  $ 17.2  

2011

    14.8  

2012

    13.4  

2013

    13.4  

2014

    12.0  

        The Company expenses costs incurred to renew or extend the term of acquired intangible assets.

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6.     INVESTMENTS IN UNCONSOLIDATED AFFILIATES

        The Company has a number of equity investments in privately and publicly held companies, as follows:

 
  June 30,
2010
  December 31,
2009
 
 
  (in millions)
 

Available-for-sale investments

             
 

Cost

  $ 8.5   $ 8.5  
 

Unrealized losses

    (3.5 )   (0.9 )
           
   

Fair value of available-for-sale investments

    5.0     7.6  
           

Equity method investments

             
 

Cost

    10.2     10.7  
 

Equity in losses

    (0.8 )   (0.8 )
           
   

Carrying value of equity method investments

    9.4     9.9  
           

Cost method investments

             
 

Carrying value of cost method investments

    7.5     4.8  
           

Total investments in unconsolidated affiliates

  $ 21.9   $ 22.3  
           

        There were no sales of available-for-sale investments during the six months ended June 30, 2010 and 2009.

7.     FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

        The consolidated condensed financial statements include financial instruments for which the fair market value of such instruments may differ from amounts reflected on a historical cost basis. Financial instruments of the Company consist of cash deposits, accounts and other receivables, investments in unconsolidated affiliates, accounts payable, certain accrued liabilities and debt. The carrying value of these financial instruments generally approximates fair value due to their short-term nature.

        Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company prioritizes the inputs used to determine fair values in one of the following three categories:

    Level 1—   Quoted market prices in active markets for identical assets or liabilities.
    Level 2—   Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.
    Level 3—   Unobservable inputs that are not corroborated by market data.

        In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

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        The following table summarizes the Company's financial instruments which are measured at fair value on a recurring basis (in millions):

June 30, 2010
  Level 1   Level 2   Level 3   Total  

Assets

                         
 

Investments held for executive deferred compensation plan

  $ 15.5   $   $   $ 15.5  
 

Investments in unconsolidated affiliates

    5.0             5.0  
 

Derivatives

        12.1         12.1  
                   

  $ 20.5   $ 12.1   $   $ 32.6  
                   

December 31, 2009

 

 


 

 


 

 


 

 


 

Assets

                         
 

Investments held for executive deferred compensation plan

  $ 15.1   $   $   $ 15.1  
 

Investments in unconsolidated affiliates

    7.6             7.6  
                   

  $ 22.7   $   $   $ 22.7  
                   

Liabilities

                         
 

Derivatives

  $   $ 3.0   $   $ 3.0  
                   

  $   $ 3.0   $   $ 3.0  
                   

        The Company holds investments in trading securities related to its executive deferred compensation plan ("EDCP"). The amounts deferred under the EDCP are invested in a variety of stock and bond mutual funds. The fair values of these investments are based on quoted market prices and are categorized as Level 1.

        Investments in unconsolidated affiliates are long-term, strategic equity investments in companies that are in various stages of development. Certain of the Company's investments in unconsolidated affiliates are designated as available-for-sale. These investments are carried at fair market value based on quoted market prices and are categorized as Level 1.

        The Company uses forward exchange contracts and option contracts to hedge a portion of its exposure to forecasted intercompany and third-party foreign currency transactions. All derivatives are recognized on the balance sheet at their fair value. The fair value for derivatives is determined based on indicative mid-market data levels for spot rate and forward points. All values are discounted to present from the expiry date. The values of options are calculated based on the forward implied volatilities to the expiry date. The models used for valuations are based upon well recognized financial principles, and the predominance of market inputs are actively quoted and can be validated through external sources. Although readily observable data is used in the valuations, different valuation methodologies could have an effect on the estimated fair value. The derivative instruments are categorized as Level 2.

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        The Company has assets that are subject to measurement at fair value on a non-recurring basis, including assets acquired in a business combination, such as goodwill and intangible assets, and other long-lived assets. The Company reviews the carrying value of intangible and other long-lived assets whenever events and circumstances indicate that the carrying amounts of the assets may not be recoverable. If it is determined that the assets are impaired, the carrying value would be reduced to estimated fair market value. During the six months ended June 30, 2010, the Company recorded a $7.6 million impairment of intangible assets related to the Company's MONARC transcatheter mitral valve program, which was discontinued due to slow enrollment in the EVOLUTION II trial (see Note 2). During the six months ended June 30, 2009, the Company had no impairments related to assets subject to measurement at fair value on a non-recurring basis.

8.     DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

        Edwards Lifesciences maintains an overall risk management strategy that may incorporate the use of a variety of derivative financial instruments, as summarized below, to mitigate its exposure to significant unplanned fluctuations in earnings and cash flow caused by volatility in interest rates and currency exchange rates. Derivative instruments that are used as part of the Company's interest and foreign exchange rate management strategy include option-based products and forward exchange contracts. As of June 30, 2010, all derivative instruments owned were designated as hedges of underlying exposures. Edwards Lifesciences does not use any of these instruments for trading or speculative purposes.

 
  June 30, 2010   December 31, 2009  
 
  Notional
Amount
  Fair Value
Asset
(Liability)
  Notional
Amount
  Fair Value
Asset
(Liability)
 
 
  (in millions)
 

Forward currency agreements

  $ 318.9   $ 6.6   $ 130.5   $ (1.7 )

Currency option contracts

    132.5     5.5     212.6     (1.3 )

        The Company utilizes forward currency agreements and option contracts to hedge a portion of its exposure to forecasted intercompany and third-party foreign currency transactions. These contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates. These contracts are entered into to reduce the risk that the Company's earnings and cash flows resulting from certain forecasted transactions will be adversely affected by changes in foreign currency exchange rates. These agreements have a maximum duration of one year.

        Derivative instruments used by Edwards Lifesciences involve, to varying degrees, elements of credit risk, in the event a counterparty should default, and market risk, as the instruments are subject to rate and price fluctuations. Credit risk is managed through the use of credit standard guidelines, counterparty diversification, monitoring of counterparty financial condition, and International Swap Dealers Association master-netting agreements in place with all derivative counterparties. The master-netting agreements reduce the Company's counterparty payment settlement risk on any given maturity date to the net amount of any receipts or payments due between the Company and the counterparty financial institution. Although these protections do not eliminate concentrations of credit, the Company does not consider the risk of counterparty default to be significant. All derivative financial instruments are with a diversified group of major financial institutions assigned investment grade ratings with national rating agencies. None of the Company's outstanding derivative instruments contain credit-risk related contingent features that may require the Company to post or permit the Company to call collateral from any counterparty.

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        All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, it designates the derivative as either (a) a hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a "cash flow" hedge), or (b) a hedge of an exposure to changes in the fair value of an asset, liability or an unrecognized firm commitment (a "fair value" hedge). Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge to the extent that the hedge is effective, are recorded in "Accumulated Other Comprehensive Loss" until earnings are affected by the variability of cash flows of the hedged transaction (e.g., until periodic settlements of a variable asset or liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current-period earnings. Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a fair value hedge, are recorded in current-period earnings.

        The following table presents the location and fair value amounts of derivative instruments reported in the consolidated condensed balance sheets (in millions):

 
   
  Fair Value  
 
  Balance Sheet
Location
  June 30,
2010
  December 31,
2009
 

Derivatives designated as hedging instruments

                 

Assets

                 
 

Foreign exchange contracts

  Prepaid expenses   $ 12.1   $  

Liabilities

                 
 

Foreign exchange contracts

  Accrued liabilities   $   $ 3.0  

        The following tables present the effect of derivative instruments on the consolidated condensed statements of operations (in millions):

 
   
  Amount of Gain or (Loss)
Recognized
in Income on Derivative
 
 
   
  Three Months Ended
June 30,
 
 
  Location of Gain or (Loss)
Recognized in Income
on Derivative
 
 
  2010   2009  

Derivatives in fair value hedging relationships

                 

Foreign exchange contracts

  Other income, net   $ (2.2 ) $ (1.2 )

 

 
   
  Amount of Gain or (Loss)
Recognized
in Income on Derivative
 
 
   
  Six Months Ended
June 30,
 
 
  Location of Gain or (Loss)
Recognized in Income
on Derivative
 
 
  2010   2009  

Derivatives in fair value hedging relationships

                 

Foreign exchange contracts

  Other income, net   $ (1.4 ) $ (0.4 )

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  Amount of Gain or
(Loss) Recognized in
Other Comprehensive
Income ("OCI") on
Derivative (Effective
Portion)
   
  Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
 
 
  Three Months Ended
June 30,
   
  Three Months Ended
June 30,
 
 
  Location of Gain or
(Loss) Reclassified
from Accumulated
OCI into Income
 
 
  2010   2009   2010   2009  

Derivatives in cash flow hedging relationships

                             

Foreign exchange contracts

  $ 10.3   $ (7.1 ) Cost of goods sold   $ (1.4 ) $ 4.8  

 

 
  Amount of Gain or
(Loss) Recognized in
OCI on Derivative
(Effective Portion)
   
  Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
 
 
  Six Months Ended
June 30,
   
  Six Months Ended
June 30,
 
 
  Location of Gain or
(Loss) Reclassified
from Accumulated
OCI into Income
 
 
  2010   2009   2010   2009  

Derivatives in cash flow hedging relationships

                             

Foreign exchange contracts

  $ 17.8   $ 5.0   Cost of goods sold   $ (5.0 ) $ 6.1  

        The Company expects that during the next twelve months it will reclassify to earnings a $4.0 million gain currently recorded in "Accumulated Other Comprehensive Loss." For the three and six months ended June 30, 2010, the Company did not record any expense related to the time value of option-based products and did not record any gains or losses due to hedge ineffectiveness. For both the three and six months ended June 30, 2009, the Company expensed $0.5 million related to the time value of option-based products and did not record any gains or losses due to hedge ineffectiveness.

9.     DEFINED BENEFIT PLANS

        The components of net periodic benefit costs for the three and six months ended June 30, 2010 and 2009 were as follows (in millions):

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Service cost

  $ 1.1   $ 1.3   $ 2.3   $ 2.7  

Employee contributions

                 

Interest cost

    0.4     0.5     0.9     0.9  

Expected return on plan assets

    (0.3 )   (0.2 )   (0.6 )   (0.4 )

Amortization of prior service cost and other

    0.1     0.2     0.1     0.3  
                   
 

Net periodic pension benefit cost

  $ 1.3   $ 1.8   $ 2.7   $ 3.5  
                   

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10.   STOCK-BASED COMPENSATION

        Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three and six months ended June 30, 2010 and 2009 was as follows (in millions):

 
  Three Months
Ended
June 30
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Cost of goods sold

  $ 0.6   $ 0.5   $ 1.2   $ 1.1  

Selling, general and administrative expenses

    4.7     4.3     10.4     9.5  

Research and development expenses

    1.0     0.9     2.2     2.0  
                   
 

Total stock-based compensation expense

  $ 6.3   $ 5.7   $ 13.8   $ 12.6  
                   

        At June 30, 2010, the total remaining compensation cost related to nonvested stock options, restricted stock units and employee stock purchase subscription awards amounted to $56.6 million, which will be amortized on a straight-line basis over the weighted-average remaining requisite service period of 32 months.

        During the six months ended June 30, 2010, the Company granted 1.6 million stock options at a weighted-average exercise price of $50.83 and 0.2 million shares of restricted stock units at a weighted-average grant-date fair value of $49.46.

        The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the following periods:

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Risk-free interest rate

    2.0 %   1.9 %   2.0 %   1.9 %

Expected dividend yield

    None     None     None     None  

Expected volatility

    25.8 %   28.2 %   25.9 %   28.1 %

Expected term (years)

    4.5     4.6     4.5     4.6  

Fair value, per share

  $ 12.91   $ 8.50   $ 12.90   $ 8.49  

        The Black-Scholes option pricing model was used with the following weighted-average assumptions for employee stock purchase plan ("ESPP") subscriptions granted during the following periods:

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Risk-free interest rate

    0.3 %   0.5 %   0.3 %   0.4 %

Expected dividend yield

    None     None     None     None  

Expected volatility

    24.0 %   37.3 %   32.6 %   36.7 %

Expected term (years)

    0.6     0.7     0.6     0.7  

Fair value, per share

  $ 11.07   $ 8.28   $ 11.31   $ 8.18  

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11.   COMMITMENTS AND CONTINGENCIES

        In February 2008, Edwards Lifesciences filed a lawsuit against CoreValve, Inc. ("CoreValve") in the United States alleging that its ReValving System infringes three of the Company's U.S. Andersen patents, later narrowed to one patent. In April 2010, a federal jury found that patent to be valid and found that CoreValve willfully infringes it. The jury also awarded Edwards $73.9 million in damages, which may be increased by the judge by up to three times that amount because of the willfulness finding. The Company is seeking a permanent injunction against CoreValve's manufacture or sale of the infringing device in the United States. A second lawsuit is pending against CoreValve and Medtronic, Inc. alleging infringement of three U.S. Andersen patents.

        Earlier, in May 2007, the Company filed a lawsuit against CoreValve alleging infringement of the Company's European Andersen patent. The lawsuit was filed in the District Patent Court in Dusseldorf, Germany, seeking injunctive and declaratory relief. In October 2008, the Court rejected this assertion and dismissed the infringement lawsuit. In February 2010, a German Appeals Court affirmed. In May 2007 and June 2007, CoreValve filed separate lawsuits in London, United Kingdom, and Munich, Germany, respectively, alleging the patent to be invalid. The Company then asserted that CoreValve's ReValving System infringes the Andersen patent in the United Kingdom. In January 2009, the United Kingdom Court determined that the Andersen patent is valid but not infringed by CoreValve. In May 2010, a United Kingdom Appeals Court affirmed the lower court. In January 2010, a German Court also determined that the Andersen patent is valid.

        In February 2008, Cook, Inc. ("Cook") filed a lawsuit in the District Patent Court in Dusseldorf, Germany, against Edwards Lifesciences alleging that the Edwards SAPIEN transcatheter heart valve infringes on a Cook patent. Edwards Lifesciences subsequently filed lawsuits in London, United Kingdom, and in Munich, Germany, against Cook alleging that the patents were invalid. In the United Kingdom lawsuit, Cook counterclaimed, alleging infringement by Edwards. In March 2009, the German Courts ruled that the Company does not infringe the Cook patent. In June 2009, the United Kingdom Court also ruled that the Company does not infringe the Cook patent and, further, that the Cook patent is invalid. In June 2010, a United Kingdom Appeals Court affirmed. In April 2010, the German Courts also determined that the Cook patent is invalid.

        In addition, Edwards Lifesciences is or may be a party to, or may otherwise be responsible for, pending or threatened lawsuits related primarily to products and services currently or formerly manufactured or performed, as applicable, by Edwards Lifesciences. Such cases and claims raise difficult and complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any such legal matter or other claim, Edwards Lifesciences may incur charges in excess of established reserves. While any such charge could have a material adverse impact on Edwards Lifesciences' net income or cash flows in the period in which it is recorded or paid, management does not believe that any such charge relating to any currently pending lawsuit would have a material adverse effect on Edwards Lifesciences' financial position, results of operations or liquidity.

        Edwards Lifesciences is subject to various environmental laws and regulations both within and outside of the United States. The operations of Edwards Lifesciences, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. While it is difficult to quantify the potential impact of continuing compliance with environmental protection laws, management believes that such compliance will not have a material impact on Edwards Lifesciences' financial position, results of operations or liquidity.

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12.   COMPREHENSIVE INCOME

        Reconciliation of net income to comprehensive income is as follows (in millions):

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Net income

  $ 57.5   $ 47.5   $ 105.2   $ 108.0  

Other comprehensive income:

                         
 

Currency translation adjustments

    (33.0 )   15.1     (56.3 )   9.0  
 

Unrealized net (loss) gain on investments in unconsolidated affiliates, net of tax

    (2.1 )   2.2     (2.6 )   3.3  
 

Unrealized net gain (loss) on cash flow hedges, net of tax

    7.0     (7.2 )   13.8     (0.6 )
                   

Comprehensive income

  $ 29.4   $ 57.6   $ 60.1   $ 119.7  
                   

13.   EARNINGS PER SHARE

        Basic earnings per share is computed by dividing net income by the weighted-average common shares outstanding during a period. Employee equity share options, nonvested shares and similar equity instruments granted by the Company are treated as potential common shares in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of restricted stock units and in-the-money options. The dilutive impact of the restricted stock units and in-the-money options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of compensation expense for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in additional paid-in capital when the award becomes deductible are assumed to be used to repurchase shares. Potential common share equivalents have been excluded where their inclusion would be anti-dilutive.

        The table below presents the computation of basic and diluted earnings per share (in millions, except for per share information):

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Basic:

                         
 

Net income

  $ 57.5   $ 47.5   $ 105.2   $ 108.0  
                   
 

Weighted-average shares outstanding

    113.4     112.4     113.3     112.1  
                   
 

Basic earnings per share

  $ 0.51   $ 0.42   $ 0.93   $ 0.96  
                   

Diluted:

                         
 

Net income

  $ 57.5   $ 47.5   $ 105.2   $ 108.0  
                   
 

Weighted-average shares outstanding

    113.4     112.4     113.3     112.1  
 

Dilutive effect of stock plans

    5.4     4.6     5.6     4.9  
                   
 

Dilutive weighted-average shares outstanding

    118.8     117.0     118.9     117.0  
                   
 

Diluted earnings per share

  $ 0.48   $ 0.41   $ 0.88   $ 0.92  
                   

        Stock options and restricted stock units to purchase 1.8 million and 3.6 million shares for the three months ended June 30, 2010 and 2009, respectively, and 1.0 million and 2.8 million for the six months

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ended June 30, 2010 and 2009, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

14.   INCOME TAXES

        The Company's effective income tax rates were 13.4% and 20.2% for the three and six months ended June 30, 2010, respectively, and 24.4% and 26.9% for the three and six months ended June 30, 2009, respectively. The income tax rate for the three and six months ended June 30, 2010 included a $9.8 million tax benefit resulting from a partial settlement of a prior year tax audit. The income tax rate for the six months ended June 30, 2009 included the tax effect on the LifeStent milestone receipt. See Note 2 for further information.

        As of June 30, 2010 and December 31, 2009, the liability for income taxes associated with uncertain tax positions was $45.7 million and $47.1 million, respectively. These liabilities could be reduced by $3.1 million and $3.2 million, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amounts of $42.6 million and $44.0 million, respectively, if recognized, would favorably affect the Company's effective tax rate. Changes to potential interest expense upon settlement during the period were immaterial.

        All material state, local and foreign income tax matters have been concluded for years through 2003. The Company is currently under examination by the Internal Revenue Service ("IRS") for the 2007 and 2008 tax years. With respect to IRS examinations, all issues have been effectively settled through the 2008 tax year except for certain transfer pricing issues.

        The federal research credit expired on December 31, 2009 and has not been reinstated as of June 30, 2010. The effective income tax rate for the three and six months ended June 30, 2010 has been calculated without a benefit for the federal research credit. In 2009, the federal research credit favorably impacted the effective tax rate by approximately 1.5%.

15.   COLLABORATIVE AGREEMENT

        The Company has a collaboration agreement with DexCom, Inc. ("DexCom") to develop products for automated, real-time monitoring of blood glucose levels in patients hospitalized for a variety of conditions. The agreement provides Edwards Lifesciences with an exclusive license to all of DexCom's applicable intellectual property. Product development costs under this agreement are expensed to "Research and Development Expenses" as incurred, and regulatory approval milestones are recorded as "Other Intangible Assets" and amortized over the useful life of the product. The Company recorded $1.0 million and $2.0 million of product development costs for the three and six months ended June 30, 2010, respectively, and $1.1 million and $3.2 million for the three and six months ended June 30, 2009, respectively. At both June 30, 2010 and December 31, 2009, the Company had $0.9 million of capitalized regulatory milestone payments.

16.   SEGMENT INFORMATION

        Edwards Lifesciences conducts operations worldwide and is managed in four geographical regions: United States, Europe, Japan and Rest of World. All regions sell products that are used to treat advanced cardiovascular disease.

        The Company evaluates the performance of its segments based on net sales and income before provision for income taxes ("pre-tax income"). The accounting policies of the segments are substantially the same as those described in Note 2, "Summary of Significant Accounting Policies," in the Company's Annual Report on Form 10-K for the year ended December 31, 2009. Net sales and pre-tax income of reportable segments are based on internally derived standard foreign exchange rates, which may differ

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from year to year, and do not include inter-segment profits. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographical distribution that would occur if the segments were not interdependent.

        Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include net interest expense, global marketing expenses, corporate research and development expenses, United States manufacturing variances, corporate headquarters costs, in-process research and development, special gains and charges, stock-based compensation, foreign currency hedging activities, certain litigation costs and most of the Company's amortization expense. Although most of the Company's depreciation expense is included in segment pre-tax income, due to the Company's methodology for cost build-up, it is impractical to determine the amount of depreciation expense included in each segment, and therefore a portion is maintained at the corporate level. The Company neither discretely allocates assets to its operating segments, nor evaluates the operating segments using discrete asset information.

        The table below presents information about Edwards Lifesciences' reportable segments (in millions):

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Segment Net Sales

                         

United States

  $ 144.7   $ 143.5   $ 283.0   $ 278.4  

Europe

    119.9     102.2     224.0     203.1  

Japan

    55.6     46.0     106.2     87.3  

Rest of world

    42.8     39.5     80.0     73.5  
                   
 

Total segment net sales

  $ 363.0   $ 331.2   $ 693.2   $ 642.3  
                   

Segment Pre-Tax Income

                         

United States

  $ 80.1   $ 77.7   $ 157.2   $ 150.1  

Europe

    45.6     33.9     84.9     68.5  

Japan

    25.8     21.6     48.6     41.0  

Rest of world

    12.7     11.3     22.3     19.3  
                   
 

Total segment pre-tax income

  $ 164.2   $ 144.5   $ 313.0   $ 278.9  
                   

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Table of Contents

        The table below presents reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income (in millions):

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  

Net Sales Reconciliation

                         

Segment net sales

  $ 363.0   $ 331.2   $ 693.2   $ 642.3  

Foreign currency

    2.2     4.3     12.5     6.7  
                   

Consolidated net sales

  $ 365.2   $ 335.5   $ 705.7   $ 649.0  
                   

Pre-Tax Income Reconciliation

                         

Segment pre-tax income

  $ 164.2   $ 144.5   $ 313.0   $ 278.9  

Unallocated amounts:

                         
 

Corporate items

    (91.9 )   (88.0 )   (176.3 )   (173.3 )
 

Special (charges) gains, net

    (8.3 )   (1.5 )   (8.3 )   29.3  
 

Interest expense, net

    (0.5 )   (0.2 )   (0.7 )   (0.3 )
 

Foreign currency

    2.9     8.0     4.2     13.2  
                   

Consolidated pre-tax income

  $ 66.4   $ 62.8   $ 131.9   $ 147.8  
                   

Enterprise-Wide Information

        Enterprise-wide information is based on foreign exchange rates used in the Company's consolidated financial statements.

 
  Three Months
Ended
June 30,
  Six Months
Ended
June 30,
 
 
  2010   2009   2010   2009  
 
  (in millions)
 

Net Sales by Geographic Area

                         

United States

  $ 144.7   $ 143.5   $ 283.0   $ 278.4  

Other countries

    220.5     192.0     422.7     370.6  
                   

  $ 365.2   $ 335.5   $ 705.7   $ 649.0  
                   

Net Sales by Major Product and Service Area

                         

Heart Valve Therapy

  $ 214.8   $ 182.1   $ 411.5   $ 352.5  

Critical Care

    110.5     113.0     215.6     217.5  

Cardiac Surgery Systems

    26.5     24.1     51.3     46.6  

Vascular

    13.4     16.3     27.3     32.4  
                   

  $ 365.2   $ 335.5   $ 705.7   $ 649.0  
                   

 

 
  June 30,
2010
  December 31,
2009
 
 
  (in millions)
 

Long-Lived Tangible Assets by Geographic Area

             

United States

  $ 166.5   $ 163.0  

Other countries

    95.1     102.0  
           

  $ 261.6   $ 265.0  
           

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Table of Contents

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

        This report contains 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. The Company (as defined below in "Overview") intends the forward-looking statements contained in this report to be covered by the safe harbor provisions of such Acts. All statements other than statements of historical fact in this report or referred to or incorporated by reference into this report are "forward-looking statements" for purposes of these sections. These statements include, among other things, any predictions of earnings, revenues, expenses or other financial items, plans or expectations with respect to development activities, clinical trials or regulatory approvals, any statements of plans, strategies and objectives of management for future operations, any statements concerning the Company's future operations, financial conditions and prospects, and any statement of assumptions underlying any of the foregoing. These statements can sometimes be identified by the use of the forward-looking words such as "may," "believe," "will," "expect," "project," "estimate," "should," "anticipate," "plan," "goal," "continue," "seek," "pro forma," "forecast," "intend" or other similar words or expressions or the negative thereof. Investors are cautioned not to unduly rely on such forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause the Company's future business, financial condition, results of operations or performance to differ materially from the Company's historical results or those expressed or implied in any forward-looking statements contained in this report. Investors should carefully review the information contained in, or incorporated by reference into, the Company's annual report on Form 10-K for the year ended December 31, 2009 and subsequent filings on Form 10-Q for a description of certain of these risks and uncertainties. These forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If the Company does update or correct one or more of these statements, investors and others should not conclude that the Company will make additional updates or corrections.

Overview

        Edwards Lifesciences Corporation ("Edwards Lifesciences" or the "Company") is a global leader in products and technologies designed to treat advanced cardiovascular disease. The Company is focused specifically on technologies that treat structural heart disease and critically ill patients.

        The products and technologies provided by Edwards Lifesciences are categorized into four main areas: Heart Valve Therapy; Critical Care; Cardiac Surgery Systems; and Vascular.

        Edwards Lifesciences' Heart Valve Therapy portfolio is comprised of tissue heart valves and heart valve repair products. A pioneer in the development and commercialization of heart valve products, Edwards Lifesciences is the world's leading manufacturer of tissue heart valves and repair products used to replace or repair a patient's diseased or defective heart valve. In the Critical Care area, Edwards Lifesciences is a world leader in hemodynamic monitoring equipment used to measure a patient's cardiovascular function, and in disposable pressure transducers. Prior to September 2009, Edwards Lifesciences provided central venous access products for fluid and drug delivery ("hemofiltration product line"). The Company sold the hemofiltration product line effective September 1, 2009. The Company's Cardiac Surgery Systems portfolio comprises a diverse line of products for use during cardiac surgery including cannulae, EMBOL-X technologies and other disposable products used during cardiopulmonary bypass procedures. Cardiac Surgery Systems also includes the Company's minimally invasive surgery ("MIS") product line. Edwards Lifesciences' Vascular portfolio includes a line of balloon catheter-based products, surgical clips and inserts, and artificial implantable grafts. Edwards Lifesciences manufactured and sold LifeStent balloon-expandable and self-expanding non-coronary stents until the sale of this product line in January 2008. The Company continued to manufacture these products for the buyer until September 2009 when manufacturing was transferred to the buyer.

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        The healthcare marketplace continues to be competitive with strong global and local competitors. The Company competes with many companies, ranging from small start-up enterprises to companies that are larger and more established than Edwards Lifesciences with access to significant financial resources. Furthermore, rapid product development and technological change characterize the market in which the Company competes. Global demand for healthcare is increasing as the population ages. There is mounting pressure to contain healthcare costs in the face of this increasing demand, which has resulted in pricing and market share pressures. The cardiovascular segment of the medical device industry is dynamic, and technology, cost-of-care considerations, regulatory reform, industry and customer consolidation, and evolving patient needs are expected to continue to drive change.

        In March 2010, significant reforms to the healthcare system were adopted as law in the United States. The law includes provisions that, among other things, reduce or limit Medicare reimbursement, require all individuals to have health insurance (with limited exceptions) and impose increased taxes. Specifically, the law requires the medical device industry to subsidize healthcare reform in the form of a 2.3% excise tax on United States sales of most medical devices beginning in 2013. The excise tax will increase the Company's operating expenses. The new law or any future legislation could reduce medical procedure volumes, lower reimbursement for the Company's products, and impact the demand for the Company's products or the prices at which the Company sells its products.

        On April 12, 2010, the Company's Board of Directors declared a two-for-one stock split of its outstanding shares of common stock effected in the form of a stock dividend, paid on May 27, 2010 to shareholders of record on May 14, 2010. The Company distributed treasury shares in addition to newly issued shares to effect the stock split. All applicable share and per-share amounts in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" have been retroactively adjusted to give effect to this stock split.

New Accounting Standards Not Yet Adopted

        In October 2009, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on revenue recognition to require companies to allocate revenue in arrangements involving multiple deliverables based on estimated selling price in the absence of vendor-specific objective evidence or third-party evidence of selling price for the deliverables. The guidance was also amended to eliminate the requirement that all undelivered elements must have objective and reliable evidence of fair value before a company can recognize the portion of the overall arrangement fee that is attributable to items that have already been delivered. The guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

        In January 2010, the FASB issued an amendment to the accounting guidance on fair value disclosures to require companies to (a) disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for such transfers and (b) present separately in the Level 3 reconciliation information about purchases, sales, issuances and settlements. The guidance also clarifies the level of disaggregation to present and disclosures about inputs and valuation techniques. The guidance was effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation, which is effective for fiscal years beginning after December 15, 2010, and for interim periods within those years. The Company adopted this guidance as of January 1, 2010, other than those provisions related to the disclosures about purchases, sales, issuances and settlements in the Level 3 reconciliation.

        In April 2010, the FASB issued an amendment to the accounting guidance on revenue recognition to provide guidance on defining a milestone and determining when it may be appropriate to apply the

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milestone method of revenue recognition for research and development transactions. Consideration that is contingent upon achievement of a milestone in its entirety may be recognized as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The guidance is effective for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

Results of Operations

        The following is a summary of United States and international net sales (dollars in millions):

 
  Three Months
Ended
June 30,
   
   
  Six Months
Ended
June 30,
   
   
 
 
   
  Percent
Change
   
  Percent
Change
 
 
  2010   2009   Change   2010   2009   Change  

United States

  $ 144.7   $ 143.5   $ 1.2     0.8 % $ 283.0   $ 278.4   $ 4.6     1.7 %

International

    220.5     192.0     28.5     14.8 %   422.7     370.6     52.1     14.1 %
                                       
 

Total net sales

  $ 365.2   $ 335.5   $ 29.7     8.9 % $ 705.7   $ 649.0   $ 56.7     8.7 %
                                       

        In the United States, the $1.2 million and $4.6 million increases in net sales for the three and six months ended June 30, 2010, respectively, were due primarily to:

        partially offset by:

        International net sales increased $28.5 million and $52.1 million for the three and six months ended June 30, 2010, respectively, due primarily to:

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        partially offset by:

        The impact of foreign currency exchange rate fluctuations on net sales is not necessarily indicative of the impact on net income due to the corresponding effect of foreign currency exchange rate fluctuations on international manufacturing and operating costs and the Company's hedging activities. For more information see Item 3, "Quantitative and Qualitative Disclosures About Market Risk."

        The following table is a summary of net sales by product line (dollars in millions):

 
  Three Months
Ended
June 30,
   
   
  Six Months
Ended
June 30,
   
   
 
 
   
  Percent
Change
   
  Percent
Change
 
 
  2010   2009   Change   2010   2009   Change  

Heart Valve Therapy

  $ 214.8   $ 182.1   $ 32.7     18.0 % $ 411.5   $ 352.5   $ 59.0     16.7 %

Critical Care

    110.5     113.0     (2.5 )   (2.2 )%   215.6     217.5     (1.9 )   (0.9 )%

Cardiac Surgery Systems

    26.5     24.1     2.4     10.0 %   51.3     46.6     4.7     10.1 %

Vascular

    13.4     16.3     (2.9 )   (17.8 )%   27.3     32.4     (5.1 )   (15.7 )%
                                       
 

Total net sales

  $ 365.2   $ 335.5   $ 29.7     8.9 % $ 705.7   $ 649.0   $ 56.7     8.7 %
                                       

        Net sales of Heart Valve Therapy products for the three and six months ended June 30, 2010 increased by $32.7 million and $59.0 million, respectively, due primarily to:

        The Company expects that its SAPIEN transcatheter heart valve will continue to be a strong contributor to 2010 sales. The Company also expects that sales of its new products, such as the Magna Ease valve, the Magna Mitral Ease valve, and the Carpentier-Edwards Physio II ring, will increasingly drive growth and share gains for the remainder of 2010. The Company initiated a limited launch of its Magna Mitral Ease valve during the fourth quarter of 2009 and plans a broader introduction of Magna Mitral Ease in the United States and Europe during the third quarter of 2010. The Magna Mitral Ease will extend the Magna platform by providing improved MIS capabilities and ease of implantation. In January 2010, the Company completed first-in-man procedures and initiated a clinical feasibility study in Europe, called TRITON, for a novel minimally invasive aortic valve surgery system, called Project Odyssey. The Project Odyssey system leverages the design of the Carpentier-Edwards PERIMOUNT Magna Ease tissue heart valve to create a new valve platform with an innovative delivery and

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attachment system. It is designed to enable a faster procedure, shorter patient time on cardiopulmonary bypass and a smaller incision. In April 2010, the Company expanded the study into a CE Mark trial and expects to complete enrollment in TRITON by the end of 2010.

        Net sales of Critical Care products for the three and six months ended June 30, 2010 decreased by $2.5 million and $1.9 million, respectively, due primarily to:

        partially offset by:

        The Company expects worldwide sales of FloTrac systems will continue to be a significant contributor to 2010 Critical Care sales, and that it will continue to expand the market for minimally invasive hemodynamic monitoring. By the end of the third quarter of 2010, the Company expects to introduce on a limited basis a substantial upgrade designed to strengthen the FloTrac system's applicability in the medical intensive care unit and expects to launch a new hardware platform with a simpler, more intuitive informational display.

        The Company has a collaboration agreement with DexCom, Inc. ("DexCom") to develop products for continuously monitoring blood glucose levels in patients hospitalized for a variety of conditions. In the United States, the Company filed for regulatory approval of its first generation product in the second quarter of 2010, and is in the process of responding to questions from the Food and Drug Administration ("FDA"). In Europe, the Company is continuing its post-CE Mark trials to evaluate its continuous glucose monitor, and has made great progress to enhance its ease of use in the second generation product, which it expects to be commercially available in Europe in late 2011.

        Net sales of Cardiac Surgery Systems products for the three and six months ended June 30, 2010 increased by $2.4 million and $4.7 million, respectively, due to specialty cannula products, which increased net sales by $1.3 million and $1.8 million, respectively, and MIS products, which increased net sales by $0.8 million and $2.0 million, respectively. Foreign currency exchange rate fluctuations increased net sales by $0.3 million and $0.9 million, respectively.

        Net sales of Vascular products for the three and six months ended June 30, 2010 decreased by $2.9 million and $5.1 million, respectively, due primarily to the discontinuance of manufacturing in September 2009 of the divested LifeStent product line.

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  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   Change   2010   2009   Change  

Gross profit as a percentage of net sales

    72.5 %   69.6 %   2.9 pts.     71.8 %   69.4 %   2.4 pts.  

        The 2.9 and 2.4 percentage point increases in gross profit as a percentage of net sales for the three and six months ended June 30, 2010, respectively, were driven by:

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   Change   2010   2009   Change  
 
  (dollars in millions)
 

SG&A expenses

  $ 140.6   $ 128.5   $ 12.1   $ 274.6   $ 250.4   $ 24.2  

SG&A expenses as a percentage of net sales

    38.5 %   38.3 %   0.2 pts.     38.9 %   38.6 %   0.3 pts.  

        The $12.1 million and $24.2 million increases in SG&A expenses for the three and six months ended June 30, 2010, respectively, were due primarily to higher sales and marketing expenses, primarily to support the transcatheter heart valve sales, and the unfavorable impact of foreign currency (primarily the strengthening of the Japanese yen and the Australian dollar against the United States dollar) in the amount of $0.6 million and $5.3 million, respectively.

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   Change   2010   2009   Change  
 
  (dollars in millions)
 

Research and development expenses

  $ 50.6   $ 42.6   $ 8.0   $ 95.8   $ 82.5   $ 13.3  

Research and development expenses as a percentage of net sales

    13.9 %   12.7 %   1.2 pts.     13.6 %   12.7 %   0.9 pts.  

        The increase in research and development expenses for the three and six months ended June 30, 2010 were due primarily to additional investments in the transcatheter heart valve program.

        The following are the developments related to the Company's transcatheter aortic valve replacement program (formerly Percutaneous Valve Technologies, Inc.'s percutaneous aortic valve program):

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        The following are the developments related to the Company's transcatheter mitral valve program (formerly ev3, Inc.'s percutaneous mitral valve repair program):

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   2010   2009  
 
  (in millions)
 

MONARC program discontinuation

  $ 8.3   $   $ 8.3   $  

Loss (gain) on sale of product lines

        1.5         (25.5 )

Sale of distribution rights

                (2.8 )

Reserve reversal

                (1.0 )
                   
 

Special charges (gains), net

  $ 8.3   $ 1.5   $ 8.3   $ (29.3 )
                   

        During the second quarter of 2010, the Company decided to discontinue its MONARC transcatheter mitral valve program due to slow enrollment in the EVOLUTION II trial. As a result, the Company recorded a $8.3 million charge consisting of a $7.6 million impairment of intangible assets

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associated with the program and $0.7 million of clinical trial costs that will continue to be incurred under a contractual obligation that existed prior to the discontinuation date.

        The Company recorded a $1.5 million charge in June 2009 for transaction costs and employee severance related to the sale of the hemofiltration product line, which was completed in September 2009.

        In January 2008, the Company sold certain assets related to the Edwards LifeStent peripheral vascular product line. In February 2009, under the terms of the sale agreement, the Company received a $27.0 million milestone payment associated with the LifeStent pre-market approval.

        In March 2009, the Company recorded a $2.8 million gain related to the sale of its distribution rights in Europe for a specialty vascular graft.

        In 2004, the Company discontinued its Lifepath AAA endovascular graft program. In March 2009, upon completion of its remaining clinical obligations related to this program, the Company reversed its remaining $1.0 million clinical reserve.

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   Change   2010   2009   Change  
 
  (in millions)
 

Interest expense

  $ 0.7   $ 0.5   $ 0.2   $ 1.2   $ 1.3   $ (0.1 )

Interest income

    (0.2 )   (0.3 )   0.1     (0.5 )   (1.0 )   0.5  
                           
 

Interest expense, net

  $ 0.5   $ 0.2   $ 0.3   $ 0.7   $ 0.3   $ 0.4  
                           

        The increase in interest expense for the three months ended June 30, 2010 resulted primarily from a higher average debt balance as compared to the prior year period. The decrease in interest expense for the six months ended June 30, 2010 resulted primarily from lower interest rates as compared to the prior year period. The decrease in interest income resulted primarily from lower average interest rates, partially offset by higher cash and short-term investment balances as compared to the prior year period.

        The following is a summary of other income, net (in millions):

 
  Three Months
Ended June 30,
  Six Months
Ended June 30,
 
 
  2010   2009   2010   2009  

Earn-out payments

  $ (1.5 ) $   $ (3.0 ) $  

Foreign exchange losses (gains), net

    0.2     (2.0 )       (2.5 )

Loss (gain) on investments in unconsolidated affiliates

    0.1     0.1     (1.3 )   1.0  

Other

    (0.4 )   (0.1 )   (0.3 )   (0.1 )
                   
 

Other income, net

  $ (1.6 ) $ (2.0 ) $ (4.6 ) $ (1.6 )
                   

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        In September 2009, the Company sold its hemofiltration product line. In connection with the transaction, the Company is entitled to earn-out payments up to $9.0 million based on certain revenue objectives to be achieved by the buyer over the two years following the sale. During the three and six months ended June 30, 2010, the Company earned $1.5 million and $3.0 million, respectively.

        The foreign exchange losses (gains) for the three and six months ended June 30, 2010 relate to the foreign currency fluctuations in the Company's global trade and intercompany receivable and payable balances. Foreign exchange resulted in a net loss in 2010 compared to a net gain in 2009 due primarily to fluctuations in the Euro.

        The loss (gain) on investments in unconsolidated affiliates primarily represents the Company's share of gains and losses in investments accounted for under the equity method, and realized gains and losses on the Company's available-for-sale investments.

        The provision for income taxes consists of provisions for federal, state and foreign income taxes. The Company operates in an international environment with significant operations in various locations outside the United States, which have statutory tax rates lower than the United States tax rate. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates. The Company's effective income tax rates were 13.4% and 20.2% for the three and six months ended June 30, 2010, respectively, and 24.4% and 26.9% for the three and six months ended June 30, 2009, respectively. The income tax rate for the three and six months ended June 30, 2010 included a $9.8 million tax benefit resulting from a partial settlement of a prior year tax audit. The income tax rate for the six months ended June 30, 2009 included the tax effect on the LifeStent milestone receipt. See the "Special Charges (Gains), net" section for further information.

        As of June 30, 2010 and December 31, 2009, the liability for income taxes associated with uncertain tax positions was $45.7 million and $47.1 million, respectively. These liabilities could be reduced by $3.1 million and $3.2 million, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments. The net amounts of $42.6 million and $44.0 million, respectively, if recognized, would favorably affect the Company's effective tax rate. Changes to potential interest expense upon settlement during the period were immaterial.

        The federal research credit expired on December 31, 2009 and has not been reinstated as of June 30, 2010. The effective income tax rate for the three and six months ended June 30, 2010 has been calculated without a benefit for the federal research credit. In 2009, the federal research credit favorably impacted the effective tax rate by approximately 1.5%.

Liquidity and Capital Resources

        The Company's sources of cash liquidity include cash on hand and cash equivalents, amounts available under credit facilities and cash from operations. The Company believes that these sources are sufficient to fund the current requirements of working capital, capital expenditures and other financial commitments. The Company is not currently experiencing any limitation on access to its credit facility as a result of the conditions in global financial markets. The Company further believes that it has the financial flexibility to attract long-term capital to fund short-term and long-term growth objectives. However, no assurances can be given that such long-term capital will be available to Edwards Lifesciences on favorable terms, or at all.

        The Company has a Five-Year Unsecured Revolving Credit Agreement ("the Credit Agreement"), which matures on September 29, 2011. The Credit Agreement provides up to an aggregate of $500.0 million in one- to six-month borrowings in multiple currencies. Borrowings currently bear

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interest at the London interbank offering rate ("LIBOR") plus 0.40%, which includes a facility fee subject to adjustment for leverage ratio changes, as defined in the Credit Agreement. The Company pays a facility fee regardless of available or outstanding borrowings, currently at an annual rate of 0.075%. All amounts outstanding under the Credit Agreement have been classified as long-term obligations, as these borrowings are expected to be refinanced pursuant to the Credit Agreement. As of June 30, 2010, borrowings of $177.5 million were outstanding under the Credit Agreement. The Credit Agreement contains various financial and other covenants, all of which the Company was in compliance with at June 30, 2010.

        In July 2008, the Board of Directors approved a stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated transactions up to $250.0 million of the Company's common stock. In February 2010, the Board of Directors approved a new stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated transactions up to an additional $500.0 million of the Company's common stock. During the six months ended June 30, 2010, the Company repurchased 4.1 million shares (as adjusted to reflect the May 2010 two-for-one stock split) at an aggregate cost of $199.3 million and has remaining authority under the February 2010 program to purchase $398.7 million of the Company's common stock.

        At June 30, 2010, there had been no material changes in the Company's significant contractual obligations and commercial commitments as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2009.

        Net cash flows provided by operating activities of $61.0 million for the six months ended June 30, 2010 increased $33.1 million over the same period a year ago. This increase was due primarily to (1) a $39.0 million cash payment during the first quarter of 2009 to terminate the Company's accounts receivable securitization program in Japan and (2) lower supplier payments in the first six months of 2010 compared to the first six months of 2009. These increases were partially offset by higher inventory purchases in the first six months of 2010, primarily related to the transcatheter heart valve product line, decreased cash inflows from receivables due to the timing of sales and higher days sales outstanding, and the negative impact from increased excess tax benefits from stock plans due to the appreciation in the Company's stock price and increased exercises.

        Net cash used in investing activities of $23.2 million for the six months ended June 30, 2010 consisted primarily of capital expenditures of $23.7 million.

        Net cash provided by investing activities of $2.7 million for the six months ended June 30, 2009 consisted primarily of $27.0 million of cash received for a milestone achievement associated with the LifeStent pre-market approval and a $3.5 million cash advance related to the sale of the hemofiltration product line, partially offset by capital expenditures of $28.2 million.

        Net cash used in financing activities of $20.7 million for the six months ended June 30, 2010 consisted primarily of purchases of treasury stock of $199.3 million, partially offset by net proceeds from long-term debt of $88.8 million, proceeds from stock plans of $53.4 million, and the excess tax benefit from stock plans of $31.5 million, which increased compared to the prior year due to the appreciation in the Company's stock price and increased exercises.

        Net cash used in financing activities of $69.4 million for the six months ended June 30, 2009 consisted primarily of net payments on long-term debt of $58.4 million and purchases of treasury stock of $54.5 million, partially offset by the proceeds from stock plans of $33.2 million and the excess tax benefit from stock plans of $10.3 million.

Critical Accounting Policies

        The consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States which require the Company to make

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estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. Information with respect to the Company's critical accounting policies which the Company believes could have the most significant effect on the Company's reported results and require subjective or complex judgments by management is contained on pages 38-42 in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Company's Annual Report on Form 10-K for the year ended December 31, 2009. Management believes that at June 30, 2010, there had been no material changes to this information.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

        For a complete discussion of the Company's exposure to interest rate, foreign currency and credit risk, refer to Item 7A "Quantitative and Qualitative Disclosures About Market Risk" on pages 43-45 of the Company's Annual Report on Form 10-K for the year ended December 31, 2009. There have been no significant changes from the information discussed therein.

        In the normal course of business, Edwards Lifesciences provides credit to customers in the healthcare industry, performs credit evaluations of these customers and maintains allowances for potential credit losses which have historically been adequate compared to actual losses.

        Edwards Lifesciences is exposed to investment risks related to changes in the fair values of its investments. The Company invests in equity instruments of public and private companies. These investments are classified in "Investments in Unconsolidated Affiliates" on the consolidated condensed balance sheets.

        As of June 30, 2010, Edwards Lifesciences had $21.9 million of investments in equity instruments of other companies and had recorded unrealized losses of $3.6 million on these investments in "Accumulated Other Comprehensive Loss," net of tax. Should these companies experience a decline in financial condition or fail to meet certain development milestones, the decline in the investments' value may be considered other-than-temporary and impairment charges may be necessary.

Item 4.    Controls and Procedures

        The Company's management, including the Chief Executive Officer and the Chief Financial Officer, conducted an evaluation of the effectiveness of the Company's disclosure controls and procedures as of June 30, 2010. Based on their evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that such controls and procedures are designed at a reasonable assurance level and are effective in providing reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to the Company's management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. There have been no changes in the Company's internal controls over financial reporting that were identified during this evaluation that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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Part II. Other Information

Item 1.    Legal Proceedings

        In February 2008, Edwards Lifesciences filed a lawsuit against CoreValve, Inc. ("CoreValve") in the United States alleging that its ReValving System infringes three of the Company's U.S. Andersen patents, later narrowed to one patent. In April 2010, a federal jury found that patent to be valid and found that CoreValve willfully infringes it. The jury also awarded Edwards $73.9 million in damages, which may be increased by the judge by up to three times that amount because of the willfulness finding. The Company is seeking a permanent injunction against CoreValve's manufacture or sale of the infringing device in the United States. A second lawsuit is pending against CoreValve and Medtronic, Inc. alleging infringement of three U.S. Andersen patents.

        Earlier, in May 2007, the Company filed a lawsuit against CoreValve alleging infringement of the Company's European Andersen patent. The lawsuit was filed in the District Patent Court in Dusseldorf, Germany, seeking injunctive and declaratory relief. In October 2008, the Court rejected this assertion and dismissed the infringement lawsuit. In February 2010, a German Appeals Court affirmed. In May 2007 and June 2007, CoreValve filed separate lawsuits in London, United Kingdom, and Munich, Germany, respectively, alleging the patent to be invalid. The Company then asserted that CoreValve's ReValving System infringes the Andersen patent in the United Kingdom. In January 2009, the United Kingdom Court determined that the Andersen patent is valid but not infringed by CoreValve. In May 2010, a United Kingdom Appeals Court affirmed the lower court. In January 2010, a German Court also determined that the Andersen patent is valid.

        In February 2008, Cook, Inc. ("Cook") filed a lawsuit in the District Patent Court in Dusseldorf, Germany, against Edwards Lifesciences alleging that the Edwards SAPIEN transcatheter heart valve infringes on a Cook patent. Edwards Lifesciences subsequently filed lawsuits in London, United Kingdom, and in Munich, Germany, against Cook alleging that the patents were invalid. In the United Kingdom lawsuit, Cook counterclaimed, alleging infringement by Edwards. In March 2009, the German Courts ruled that the Company does not infringe the Cook patent. In June 2009, the United Kingdom Court also ruled that the Company does not infringe the Cook patent and, further, that the Cook patent is invalid. In June 2010, a United Kingdom Appeals Court affirmed. In April 2010, the German Courts also determined that the Cook patent is invalid.

        In addition, Edwards Lifesciences is or may be a party to, or may otherwise be responsible for, pending or threatened lawsuits related primarily to products and services currently or formerly manufactured or performed, as applicable, by Edwards Lifesciences. Such cases and claims raise difficult and complex factual and legal issues and are subject to many uncertainties, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any such legal matter or other claim, Edwards Lifesciences may incur charges in excess of established reserves. While any such charge could have a material adverse impact on Edwards Lifesciences' net income or cash flows in the period in which it is recorded or paid, management does not believe that any such charge relating to any currently pending lawsuit would have a material adverse effect on Edwards Lifesciences' financial position, results of operations or liquidity.

        Edwards Lifesciences is subject to various environmental laws and regulations both within and outside of the United States. The operations of Edwards Lifesciences, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. While it is difficult to quantify the potential impact of continuing compliance with environmental protection laws, management believes that such compliance will not have a material impact on Edwards Lifesciences' financial position, results of operations or liquidity.

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Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        The information set forth in the following table has been adjusted to reflect the two-for-one stock split effected in the form of a stock dividend, paid on May 27, 2010 to shareholders of record on May 14, 2010:

Period
  Total Number
of Shares
(or Units)
Purchased
  Average
Price Paid
per Share
(or Unit)
  Total Number
of Shares (or
Units) Purchased
as Part of Publicly
Announced Plans
or Programs
  Maximum Number
(or Approximate
Dollar Value) of
Shares that
May Yet Be
Purchased
Under the Plans
or Programs
(in millions)(a)
 

April 1, 2010 through April 30, 2010

    560,000   $ 51.38     560,000   $ 471.2  

May 1, 2010 through May 31, 2010

    720,000     50.44     720,000     434.9  

June 1, 2010 through June 30, 2010

    680,000     53.17     680,000     398.7  
                       

Total

    1,960,000     51.66     1,960,000        
                       

(a)
On February 11, 2010, the Board of Directors approved a stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated transactions up to $500.0 million of the Company's common stock.

Item 6.    Exhibits

        Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index hereto and include the following:

  31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  101 * The following financial statements from Edwards Lifesciences' Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Cash Flows, and (iv) Notes to Consolidated Condensed Financial Statements.

*
XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities and Exchange Act of 1933, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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SIGNATURE

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    EDWARDS LIFESCIENCES CORPORATION
(Registrant)

Date: August 6, 2010

 

By:

 

/s/ THOMAS M. ABATE

Thomas M. Abate
Corporate Vice President,
Chief Financial Officer and Treasurer
(Chief Accounting Officer)

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EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION

Exhibit No.   Description
  31.1   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2   Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32   Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  101*   The following financial statements from Edwards Lifesciences' Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Condensed Balance Sheets, (ii) the Consolidated Condensed Statements of Operations, (iii) the Consolidated Condensed Statements of Cash Flows, and (iv) Notes to Consolidated Condensed Financial Statements.

*
XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities and Exchange Act of 1933, is deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is not subject to liability under these sections.

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