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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 September 30, 2011March 31, 2012

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 October 31, 2011April 30, 2012 was 114,075,181.114,598,804.


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EDWARDS LIFESCIENCES CORPORATION

FORM 10-Q
For the quarterly period ended September 30, 2011March 31, 2012


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 Comprehensive Income


3



Consolidated Condensed Statements of Cash Flows

 

34


 

Notes to Consolidated Condensed Financial Statements

 

45

Item 2.

 

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

 

19

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

2826

Item 4.

 

Controls and Procedures

 

2926

Part II.

 

OTHER INFORMATION

 

 

Item 1.

 

Legal Proceedings

 

3028

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

3128

Item 6.

 

Exhibits

 

3129

Signature

 

3230

Exhibits

 

3331

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Part I. Financial Information

Item 1.    Financial Statements


EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(in millions, except par value; unaudited)



 September 30,
2011
 December 31,
2010
  March 31,
2012
 December 31,
2011
 

ASSETS

ASSETS

  

Current assets

Current assets

  

Cash and cash equivalents

 $213.3 $171.2 

Short-term investments

 196.2 279.3 

Accounts and other receivables, net of allowances of $8.7 and $14.8, respectively

 346.7 320.7 

Inventories, net (Note 2)

 268.3 261.3 

Deferred income taxes

 31.6 43.9 

Prepaid expenses

 41.7 35.0 

Other current assets

 90.2 57.1 

Cash and cash equivalents

 $451.1 $396.1      

Accounts and other receivables, net of allowances of $17.4 and $11.6, respectively

 346.8 302.5 

Inventories, net (Note 3)

 247.9 203.6 

Deferred income taxes

 25.3 32.3 

Prepaid expenses

 43.0 35.4 

Other current assets

 67.8 62.7 
     
 

Total current assets

 1,181.9 1,032.6 

Total current assets

 1,188.0 1,168.5 

Long-term accounts receivable, net of allowances of $6.2 and $4.2, respectively

 21.4 24.6 

Property, plant and equipment, net

Property, plant and equipment, net

 286.4 269.8  308.2 304.3 

Goodwill (Note 4)

 349.8 315.2 

Other intangible assets, net (Note 5)

 70.2 67.1 

Investments in unconsolidated affiliates (Note 6)

 21.4 25.0 

Goodwill

 349.8 349.8 

Other intangible assets, net (Note 3)

 65.1 66.9 

Investments in unconsolidated affiliates (Note 4)

 21.9 21.8 

Deferred income taxes

Deferred income taxes

 48.6 44.5  24.0 20.0 

Other assets

Other assets

 24.6 13.0  25.8 24.6 
          

 $1,982.9 $1,767.2  $2,004.2 $1,980.5 
          

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY

  

Current liabilities

Current liabilities

  

Accounts payable and accrued liabilities

 $265.2 $335.2 
     

Long-term debt

 179.4 150.4 
     

Other long-term liabilities

 169.3 157.0 
     

Commitments and contingencies (Note 10)

 

Stockholders' equity

 

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

   

Common stock, $1.00 par value, 350.0 shares authorized, 121.1 and 120.0 shares issued, and 114.0 and 114.1 shares outstanding, respectively

 121.1 120.0 

Additional paid-in capital

 363.3 300.5 

Retained earnings

 1,425.8 1,360.7 

Accumulated other comprehensive loss

 (24.6) (37.5)

Treasury stock, at cost, 7.1 and 5.9 shares, respectively

 (495.3) (405.8)
     

Total stockholders' equity

 1,390.3 1,337.9 

Accounts payable and accrued liabilities

 $302.0 $296.0      

Short-term debt

  41.8  $2,004.2 $1,980.5 
          
 

Total current liabilities

 302.0 337.8 
     

Long-term debt (Note 7)

 175.0  
     

Other long-term liabilities

 151.3 121.2 
     

Commitments and contingencies (Note 12)

 

Stockholders' equity

 

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

   

Common stock, $1.00 par value, 350.0 shares authorized, 119.5 and 117.0 shares issued, and 114.2 and 115.0 shares outstanding, respectively

 119.5 117.0 

Additional paid-in capital

 326.5 211.3 

Retained earnings

 1,297.6 1,124.0 

Accumulated other comprehensive loss

 (23.2) (42.1)

Treasury stock, at cost, 5.3 and 2.0 shares, respectively

 (365.8) (102.0)
     
 

Total stockholders' equity

 1,354.6 1,308.2 
     

 $1,982.9 $1,767.2 
     

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
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Net sales

Net sales

 $412.7 $348.9 $1,248.4 $1,054.6  $459.2 $404.5 

Cost of goods sold

 125.6 95.8 370.2 294.8 

Cost of goods sold

 127.3 116.8 
              

Gross profit

Gross profit

 287.1 253.1 878.2 759.8  331.9 287.7 

Selling, general and administrative expenses

 165.5 133.0 479.0 407.6 

Research and development expenses

 61.7 52.7 185.6 148.5 

Special charges, net (Note 2)

  3.9 4.0 12.2 

Interest expense (income), net

  0.4 (0.3) 1.1 

Other expense (income), net

 2.3 (3.1) (5.1) (7.7)

Selling, general and administrative expenses

 177.2 150.3 

Research and development expenses

 68.6 59.0 

Other expense (income), net

 0.5 (6.2)
              

Income before provision for income taxes

Income before provision for income taxes

 57.6 66.2 215.0 198.1  85.6 84.6 

Provision for income taxes

 6.0 18.2 41.4 44.9 

Provision for income taxes

 20.5 20.7 
              

Net income

Net income

 $51.6 $48.0 $173.6 $153.2  $65.1 $63.9 
              

Share information (Note 14)

 

Earnings per share:

 
 

Basic

 $0.45 $0.42 $1.51 $1.35 
 

Diluted

 $0.43 $0.40 $1.45 $1.29 

Weighted-average number of common shares outstanding:

 
 

Basic

 114.6 113.6 114.8 113.4 
 

Diluted

 119.0 118.9 119.8 118.9 

Share information (Note 12)

 

Earnings per share:

 

Basic

 $0.57 $0.56 

Diluted

 $0.55 $0.53 

Weighted-average number of common shares outstanding:

 

Basic

 114.0 114.9 

Diluted

 118.0 120.5 

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


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EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

(in millions; unaudited)

 
 Three Months
Ended
March 31,
 
 
 2012 2011 

Net income

 $65.1 $63.9 
      

Other comprehensive income, net of tax (Note 11)

       

Foreign currency translation adjustments

  7.2  32.3 
      

Unrealized gain (loss) on cash flow hedges

  4.7  (7.1)
      

Unrealized gain on available-for-sale investments for the period

  0.7  1.4 

Reclassification of net realized investment loss to earnings

  0.3   
      

Unrealized gain on available-for-sale investments

  1.0  1.4 
      

Other comprehensive income

  12.9  26.6 
      

Comprehensive income

 $78.0 $90.5 
      

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EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(in millions; unaudited)

 Three Months Ended
March 31,
 


 Nine Months Ended
September 30,
  2012 2011 


 2011 2010   
 (as restated)
(Note 15)

 

Cash flows from operating activities

Cash flows from operating activities

  

Net income

 $65.1 $63.9 

Adjustments to reconcile net income to cash (used in) provided by operating activities:

 

Depreciation and amortization

 13.8 14.5 

Stock-based compensation (Note 8)

 9.2 7.7 

Excess tax benefit from stock plans

 (38.2) (15.2)

Deferred income taxes

 1.7 1.5 

Other

 (0.9) (4.5)

Changes in operating assets and liabilities:

 

Accounts and other receivables, net

 (24.9) (34.9)

Inventories, net

 (7.9) (5.9)

Accounts payable and accrued liabilities

 (52.3) (9.0)

Prepaid expenses and other current assets

 2.5 (5.6)

Other

 1.2 2.4 

Net income

 $173.6 $153.2      

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

 
 

Depreciation and amortization

 43.2 41.1 
 

Stock-based compensation (Note 11)

 26.0 22.4 
 

Excess tax benefit from stock plans

 (47.0) (42.0)
 

Deferred income taxes

 2.2 (6.8)
 

Special charges, net (Note 2)

 4.0 12.2 
 

Other

 (1.2) (5.3)

Changes in operating assets and liabilities:

 
 

Accounts and other receivables, net

 (38.5) (31.8)
 

Inventories, net

 (38.3) (43.5)
 

Accounts payable and accrued liabilities

 43.0 65.2 
 

Prepaid expenses and other current assets

 9.3 (11.7)
 

Other

 (4.9) 4.4 
     
 

Net cash provided by operating activities

 171.4 157.4 

Net cash (used in) provided by operating activities

 (30.7) 14.9 
          

Cash flows from investing activities

Cash flows from investing activities

  

Capital expenditures

 (18.0) (13.9)

Purchases of short-term investments

 (106.1) (105.6)

Proceeds from short-term investments

 190.3  

Proceeds from unconsolidated affiliates, net

 2.2 5.0 

Acquisition

  (42.6)

Investments in trading securities, net

  (0.7)

Investments in intangible assets

  (0.3)

Capital expenditures

 (50.6) (40.1)     

Acquisition (Note 4)

 (42.6)  

Proceeds from (investments in) unconsolidated affiliates, net

 6.9 (1.9)

Proceeds from sale of assets

 3.9 5.1 

Proceeds from (investments in) trading securities, net

 3.3 (0.3)

Investments in intangible assets

 (2.3) (1.2)
     
 

Net cash used in investing activities

 (81.4) (38.4)

Net cash provided by (used in) investing activities

 68.4 (158.1)
          

Cash flows from financing activities

Cash flows from financing activities

  

Proceeds from issuance of debt

 151.6 110.5 

Payments on debt

 (120.5) (5.2)

Purchases of treasury stock

 (89.5) (75.8)

Equity forward contract related to accelerated share repurchase agreement (Note 9)

 (10.8)  

Proceeds from stock plans

 24.9 13.2 

Excess tax benefit from stock plans

 38.2 15.2 

Other

 3.0 1.6 

Proceeds from issuance of debt

 505.5 216.8      

Payments on debt

 (376.7) (207.6)

Purchases of treasury stock

 (263.3) (200.0)

Proceeds from stock plans

 48.6 73.8 

Excess tax benefit from stock plans

 47.0 42.0 

Other

 0.7 (2.3)
     
 

Net cash used in financing activities

 (38.2) (77.3)

Net cash (used in) provided by financing activities

 (3.1) 59.5 
          

Effect of currency exchange rate changes on cash and cash equivalents

Effect of currency exchange rate changes on cash and cash equivalents

 3.2 (14.8) 7.5 12.8 
          
 

Net increase in cash and cash equivalents

 55.0 26.9 

Net increase (decrease) in cash and cash equivalents

 42.1 (70.9)

Cash and cash equivalents at beginning of period

Cash and cash equivalents at beginning of period

 396.1 334.1  171.2 396.1 
          

Cash and cash equivalents at end of period

Cash and cash equivalents at end of period

 $451.1 $361.0  $213.3 $325.2 
          

Supplemental disclosures:

 

Non-cash investing and financing transactions:

 

Distribution of treasury shares to effect stock split

  $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, 2010.2011. 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 ("Edwards Lifesciences" or the "Company"), 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.

Recently Adopted Accounting Standards

        In October 2009,May 2011, 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 was effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

        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 was effective for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.

        In December 2010, the FASB issued an amendment to the accounting guidance on business combinations to clarify the acquisition date that should be used for reporting pro forma financial information disclosures when comparative financial statements are presented. An entity is required to disclose pro forma revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. The guidance also expands the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. The guidance was effective prospectively for business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. The adoption of this guidance did not have an impact on the Company's consolidated financial statements.


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New Accounting Standards Not Yet Adopted

        In May 2011, the FASB issued an amendment to the accounting guidance on fair value measurements to ensure that United States GAAP and International Financial Reporting Standards have common requirements for fair value measurement and disclosures, including a consistent definition of fair value. The guidance iswas effective for interim and annual periods beginning on or after December 15, 2011. The Company does not expect the adoption of this guidance willdid not have a material impact on itsthe Company's consolidated financial statements.

        In June 2011, the FASB issued an amendment to the accounting guidance on the presentation of comprehensive income. The guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity, and instead requires that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance iswas effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted.2011. The Company elected to present two separate but consecutive statements.

        In September 2011, the FASB issued an amendment to the accounting guidance on goodwill to permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance iswas effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted.2011. The Company does not expectwill consider the adoptionuse of the qualitative factors in its annual goodwill impairment test this guidance will have a material impact on its consolidated financial statements.year.

2.     SPECIAL CHARGES, NET

 
 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
 
 
 2011 2010 2011 2010 
 
 (in millions)
 

Greece receivables reserve

 $ $ $4.0 $ 

Investment impairment

    3.9    3.9 

MONARC program discontinuation

        8.3 
          
 

Special charges, net

 $ $3.9 $4.0 $12.2 
          

        In June 2011, the Company recorded a $4.0 million charge to reflect the increased collection risk associated with its receivables in Greece.

        In December 2010, the Company recorded a $7.2 million charge related primarily to severance expenses associated with a global workforce realignment impacting 84 employees. As of September 30, 2011, the Company's remaining severance obligations of $1.5 million are expected to be substantially paid by March 2012.

        In September 2010, the Company recorded a $3.9 million charge related to the other-than-temporary impairment of two non-strategic investments in unconsolidated affiliates. The


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Company concluded that the impairment of these investments was other-than-temporary based upon the continuing duration and severity of the impairment.

        During the second quarter of 2010, the Company decided to discontinue itsMONARC transcatheter mitral valve program due to slow enrollment in the EVOLUTION II trial. As a result, the Company recorded an $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.

3.     INVENTORIES, NET

        Inventories, net of reserves, consisted of the following (in millions):


 September 30,
2011
 December 31,
2010
  March 31,
2012
 December 31,
2011
 

Raw materials

 $47.6 $38.2  $52.9 $51.7 

Work in process

 70.3 39.0  71.1 66.6 

Finished products

 130.0 126.4  144.3 143.0 
          

 $247.9 $203.6  $268.3 $261.3 
          

4.     ACQUISITION

        On March 11, 2011, the Company acquired all the outstanding shares of Embrella Cardiovascular, Inc. ("Embrella"), including shares already owned by the Company, for an aggregate cash purchase price of $42.6 million. In connection with the acquisition, the Company placed $4.5 million of the purchase price into escrow to satisfy any claims for indemnification made in accordance with the terms of the merger agreement. Any remaining funds will be disbursed to Embrella's former shareholders one year after the acquisition date. As of September 30, 2011, no claims for indemnification had been made. Acquisition-related costs of $0.9 million were recorded in "Other Expense (Income), net" during the quarter ended March 31, 2011.

        Embrella is a start-up medical device company developing a device for cerebral embolic protection during cardiovascular procedures. The acquisition provides the Company with full rights to develop and commercialize Embrella's embolic deflector system, designed to be used as a protective shield during transcatheter heart valve procedures. The acquisition was accounted for as a business combination. Tangible and intangible assets acquired were recorded based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The following table summarizes the fair value of the assets acquired (in millions):

Goodwill

 $34.6 

In-process research and development ("IPR&D")

  6.3 

Unpatented technology

  5.8 

Deferred income taxes

  (4.1)
    

 $42.6 
    

        Goodwill includes expected synergies and other benefits the Company believes will result from the acquisition. Goodwill was assigned to the Europe segment and is partially deductible for tax purposes. IPR&D has been capitalized at fair value as an intangible asset with an indefinite life and will be assessed for impairment in subsequent periods. The fair value of the IPR&D was determined using the income approach. This approach determines fair value based on cash flow projections which are


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discounted to present value using a risk-adjusted rate of return. Upon completion of development, the underlying research and development intangible asset will be amortized over its estimated useful life. Developed technology assets are being amortized over a weighted-average useful life of 8 years.

        Prior to the acquisition date, the Company owned approximately 9% of the fully-diluted outstanding shares of Embrella. As a result of the acquisition, the Company remeasured its previously held ownership in Embrella, which had a carrying value of $1.3 million at the date of acquisition, at fair value and, accordingly, recognized a gain of $3.1 million. The gain was recorded in "Other Expense (Income), net" during the quarter ended March 31, 2011, and the cash received was recorded in "Proceeds from (Investments in) Unconsolidated Affiliates, net" on the consolidated condensed statements of cash flows. The fair value of the Company's previous ownership interest in Embrella was determined using a market approach considering the amounts paid to acquire the remaining outstanding shares of Embrella.

        The results of operations for Embrella have been included in the accompanying consolidated condensed financial statements from the date of acquisition. Pro forma results have not been presented as the results of Embrella are not material in relation to the consolidated financial statements of the Company.

5.3.     OTHER INTANGIBLE ASSETS

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



 September 30, 2011 December 31, 2010  March 31, 2012 December 31, 2011 


 Cost Accumulated
Amortization
 Net
Carrying
Value
 Cost Accumulated
Amortization
 Net
Carrying
Value
  Cost Accumulated
Amortization
 Net
Carrying
Value
 Cost Accumulated
Amortization
 Net
Carrying
Value
 

Amortizable intangible assets

Amortizable intangible assets

  

Patents

 $205.5 $(156.0)$49.5 $203.0 $(147.8)$55.2 

Unpatented technology

 40.0 (31.1) 8.9 35.0 (29.6) 5.4 

Other

 12.2 (6.7) 5.5 12.4 (5.9) 6.5 

Patents

 $207.2 $(161.0)$46.2 $205.9 $(158.4)$47.5 

Unpatented technology

 39.7 (31.8) 7.9 39.3 (31.3) 8.0 

Other

 12.1 (7.4) 4.7 12.0 (6.9) 5.1 
                          

 257.7 (193.8) 63.9 250.4 (183.3) 67.1  259.0 (200.2) 58.8 257.2 (196.6) 60.6 
                          

Unamortizable intangible assets

Unamortizable intangible assets

  

In-process research and development

 6.3  6.3 6.3  6.3 

IPR&D

 6.3  6.3                 
              $265.3 $(200.2)$65.1 $263.5 $(196.6)$66.9 

 $264.0 $(193.8)$70.2 $250.4 $(183.3)$67.1              
             

        In March 2011, the Company completed its acquisition of Embrella (see Note 4). This transaction resulted in a net increase to unpatented technology of $5.8 million and IPR&D of $6.3 million.

        The net carrying value of patents includes $16.2$16.5 million of capitalized legal costs related to the defense and enforcement of issued patents and trademarks for which success is deemed probable as of September 30, 2011.March 31, 2012.

        Amortization expense related to other intangible assets was $2.4$3.3 million and $4.2 million for the three months ended September 30,March 31, 2012 and 2011, and 2010, respectively, and $10.8 million and $12.4 million for


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the nine months ended September 30, 2011 and 2010, respectively. Estimated amortization expense for each of the years ending December 31 is as follows (in millions):

2011

 $13.0 

2012

 12.1  $13.2 

2013

 12.0  13.2 

2014

 10.8  11.5 

2015

 9.6  10.3 

2016

 10.2 

        The Company expenses costs incurred to renew or extend the term of acquired intangible assets. In September 2011, the Company extended the estimated benefit period


Table of one of its patents through February 2017.Contents

6.4.     INVESTMENTS IN UNCONSOLIDATED AFFILIATES

        The Company has a number of equity investments in privately and publicly held companies. Investments in these unconsolidated affiliates are as follows:



 September 30,
2011
 December 31,
2010
  March 31,
2012
 December 31,
2011
 


 (in millions)
  (in millions)
 

Available-for-sale investments

Available-for-sale investments

  

Cost

 $0.4 $2.0 

Unrealized gains

 2.7 1.3 

Cost

 $2.0 $4.1      

Unrealized gains

 0.9 3.6 
     
 

Fair value of available-for-sale investments

 2.9 7.7 

Fair value of available-for-sale investments

 3.1 3.3 
          

Equity method investments

Equity method investments

  

Cost

 12.9 12.6 

Equity in losses

 (0.7) (0.7)

Cost

 12.4 11.5      

Equity in losses

 (0.5) (1.5)
     
 

Carrying value of equity method investments

 11.9 10.0 

Carrying value of equity method investments

 12.2 11.9 
          

Cost method investments

Cost method investments

  

Carrying value of cost method investments

 6.6 7.3 

Carrying value of cost method investments

 6.6 6.6 
          

Total investments in unconsolidated affiliates

Total investments in unconsolidated affiliates

 $21.4 $25.0  $21.9 $21.8 
          

        ProceedsFor the three months ended March 31, 2012, proceeds from sales of available-for-sale investments were $3.6$2.1 million, forand the three and nine months ended September 30, 2011, and $0.3 million for the three and nine months ended September 30, 2010. The Company realized pre-tax gains from these sales of $1.4 million for$0.4 million. There were no sales of available-for-sale investments during the three and nine months ended September 30, 2011, and $0.2 million for the three and nine months ended September 30, 2010. In March 2011, the Company acquired all of the outstanding shares of Embrella, which was accounted for as a cost method investment prior to the acquisition. As a result, the Company has consolidated Embrella as of the acquisition date. See Note 4 for additional information.

7.     DEBT

        In July 2011, Edwards Lifesciences entered into a Four-Year Credit Agreement ("the Credit Facility") which matures on July 29, 2015. The proceeds of the Credit Facility were used to refinance the Company's previous Five-Year Unsecured Revolving Credit Agreement. The Credit Facility provides up to an aggregate of $500.0 million in borrowings in multiple currencies. Borrowings generally bear interest at the London interbank offering rate ("LIBOR") plus 0.875%, subject to adjustment for leverage ratio changes as defined in the Credit Facility. The Company also pays a facility fee of 0.125% on the entire $500.0 million facility whether or not drawn. The facility fee is also subject to adjustment for leverage ratio changes. All amounts outstanding under the Credit Facility


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have been classified as long-term obligations as these borrowings are expected to be refinanced pursuant to the Credit Facility. Issuance costs of $1.8 million are being amortized to interest expense over 4 years. As of September 30, 2011, borrowings of $175.0 million were outstanding under the Credit Facility. The Credit Facility is unsecured and contains various financial and other covenants, including a maximum leverage ratio and a minimum interest coverage ratio, as defined in the Credit Facility. The Company was in compliance with all covenants at September 30,31, 2011.

8.5.     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, bank time deposits, accounts and other receivables, investments in unconsolidated affiliates, accounts payable, certain accrued liabilities and borrowings under a revolving credit agreement. 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:

        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):

September 30, 2011
 Level 1 Level 2 Level 3 Total 
March 31, 2012
 Level 1 Level 2 Level 3 Total 

Assets

Assets

  

Investments held for executive deferred compensation plan

 $10.8 $ $ $10.8 

Investments in unconsolidated affiliates

 2.9   2.9 

Derivatives

  1.6  1.6 

Investments held for executive deferred compensation plan

 $12.4 $ $ $12.4 

Investments in unconsolidated affiliates

 3.1   3.1 

Derivatives

  15.9  15.9 
                  

 $13.7 $1.6 $ $15.3  $15.5 $15.9 $ $31.4 
                  

Liabilities

Liabilities

  

Executive deferred compensation plan

 $12.4 $ $ $12.4 

Executive deferred compensation plan

 $8.6 $ $ $8.6          
         

December 31, 2010

 

 


 

 


 

 


 

 


 

December 31, 2011

 

 


 

 


 

 


 

 


 

Assets

Assets

  

Investments held for executive deferred compensation plan

 $18.3 $ $ $18.3 

Investments in unconsolidated affiliates

 7.7   7.7 

Investments held for executive deferred compensation plan

 $11.5 $ $ $11.5 

Investments in unconsolidated affiliates

 3.3   3.3 

Derivatives

  12.7  12.7 
                  

 $26.0 $ $ $26.0  $14.8 $12.7 $ $27.5 
                  

Liabilities

Liabilities

  

Executive deferred compensation plan

 $9.9 $ $ $9.9 

Derivatives

 $ $14.7 $ $14.7          

Executive deferred compensation plan

 13.1   13.1 
         

 $13.1 $14.7 $ $27.8 
         

        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 and the corresponding liabilities are based on quoted market prices and are categorized as Level 1.

        Investments in unconsolidated affiliates are long-term 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 derivative financial instruments in the form of foreign currency forward exchange contracts and foreign currency option contracts to manage foreign currency exposures. All derivatives contracts are recognized on the balance sheet at their fair value. The fair value for derivatives is determined based on quoted spot and foreign currency exchange rates discounted to present as appropriate. The fair value of options also takes into account forward implied volatility. The valuation procedures are based upon well recognized financial principles. Although readily observable data is used in the valuations, different valuation methods 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


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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 ninethree months ended September 30, 2011,March 31, 2012, the Company had no impairments related to assets subject to measurement at fair value on a non-recurring basis. In March 2011, the Company acquired Embrella.Embrella Cardiovascular, Inc. This transaction resulted in an increase to "Goodwill" and "Other Intangible Assets, net" of $34.6 million and $12.1 million, respectively. See Note 4 for additional information. During the nine months ended September 30, 2010, the Company recorded a $7.6 million impairment of intangible assets related to the Company'sMONARC transcatheter mitral valve program, which was discontinued due to slow enrollment in the EVOLUTION II trial (see Note 2).

9.6.     DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

        The Company uses derivative financial instruments to manage its currency exchange rate risk as summarized below. Notional amounts are stated in United States dollar equivalents at spot exchange rates at the respective dates.

 
 September 30, 2011 December 31, 2010 
 
 Notional
Amount
 Fair Value
Asset
(Liability)
 Notional
Amount
 Fair Value
Asset
(Liability)
 
 
 (in millions)
 

Foreign currency forward exchange contracts

 $781.5 $1.6 $486.0 $(12.5)

Foreign currency option contracts

      53.2  (2.2)
 
 March 31, 2012 December 31, 2011 
 
 Notional
Amount
 Fair Value
Asset
(Liability)
 Notional
Amount
 Fair Value
Asset
(Liability)
 
 
 (in millions)
 

Foreign currency forward exchange contracts

 $762.5 $15.9 $759.5 $12.7 

        The Company uses foreign currency forward exchange contracts and foreign currency option contracts to offset the changes due to currency rate movements in the amount of future cash flows associated with intercompany transactions and certain third-party expenses expected to occur within the next thirteen months. These foreign currency forward exchange contracts and foreign currency option contracts are designated as cash flow hedges. Certain of the Company's locations have assets and liabilities denominated in currencies other than their functional currencies resulting from intercompany and third-party transactions. The Company uses foreign currency forward exchange contracts that are not designated as hedging instruments to offset the transaction gains and losses associated with certain of these assets and liabilities. All foreign currency forward exchange contracts and foreign currency option contracts are denominated in currencies of major industrial countries, principally the Euro and the Japanese yen. It is the Company's policy not to enter into derivative financial instruments for speculative purposes.

        All derivative financial instruments are recognized at fair value in the consolidated condensed balance sheets. The Company reports in "Other Comprehensive Income" ("OCI") the effective portion of the gain or loss on derivative financial instruments that are designated and that qualify as cash flow hedges. The Company reclassifies these gains and losses into earnings in the same period in which the underlying hedged transactions affect 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. For the three months ended March 31, 2012 and 2011, the Company did not record any gains or losses due to hedge ineffectiveness. The gains and losses on derivative financial instruments for which the Company does not elect hedge accounting treatment are recognized in the consolidated condensed statements of operations in each period, based upon the change in the fair value of the derivative financial instrument. Cash flows from derivative financial instruments are reported as operating activities in the consolidated condensed statements of cash flows.


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        Derivative financial instruments involve credit risk in the event the counterparty should default. It is the Company's policy to execute such instruments with global financial institutions that the Company believes to be creditworthy. The Company diversifies its derivative financial instruments among counterparties to minimize exposure to any one of these entities. The Company also uses International Swap Dealers Association master-netting agreements. Under the master-netting agreements, the


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Company's counterparty settlement risk is the net amount of any receipts or payments due between the Company and the counterparty financial institution.

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



  
 Fair Value   
 Fair Value 
Derivatives designated as hedging instruments
Derivatives designated as hedging instruments
 Balance Sheet
Location
 September 30,
2011
 December 31,
2010
  Balance Sheet
Location
 March 31,
2012
 December 31,
2011
 

Assets

Assets

  

Foreign currency contracts

 Prepaid expenses $1.6 $ 

Liabilities

 

Foreign currency contracts

 Accrued liabilities $ $14.7 

Foreign currency contracts

 Prepaid expenses $15.9 $12.7 

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


 Amount of Gain or (Loss)
Recognized in
OCI on Derivative
(Effective Portion)
  
 Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
  Amount of Gain or (Loss)
Recognized in
OCI on Derivative
(Effective Portion)
  
 Amount of Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
 

 Three Months Ended
September 30,
  
 Three Months Ended
September 30,
  Three Months Ended
March 31,
  
 Three Months Ended
March 31,
 

 Location of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income
  Location of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income
 
Derivatives in cash flow hedging relationships
 2011 2010 2011 2010  2012 2011 2012 2011 

Foreign currency contracts

 $17.3 $(24.9)Cost of goods sold $(11.6)$4.0  $3.6 $(15.1)Cost of goods sold $(3.7)$(3.2)

 

 
 Amount of Gain or (Loss)
Recognized in OCI on
Derivative
(Effective Portion)
  
 Amount of Gain or (Loss)
Reclassified from
Accumulated
OCI into Income
 
 
 Nine Months Ended
September 30,
  
 Nine Months Ended
September 30,
 
 
 Location of Gain or
(Loss) Reclassified from
Accumulated OCI into
Income
 
Derivatives in cash flow hedging relationships
 2011 2010 2011 2010 

Foreign currency contracts

 $(9.5)$(7.1)Cost of goods sold $(21.5)$(1.0)


 
  
 Amount of Gain or (Loss)
Recognized in Income on
Derivative
 
 
  
 Three Months Ended
September 30,
 
 
 Location of Gain or (Loss)
Recognized in Income on
Derivative
 
Derivatives not designated as hedging instruments
 2011 2010 

Foreign currency contracts

 Other expense (income), net $(1.9)$(3.0)



  
 Amount of Gain or (Loss)
Recognized in Income on
Derivative
   
 Amount of Gain or (Loss)
Recognized in Income on
Derivative
 

  
 Nine Months Ended
September 30,
   
 Three Months Ended
March 31,
 

 Location of Gain or (Loss)
Recognized in Income on
Derivative
  Location of Gain or (Loss)
Recognized in Income on
Derivative
 
Derivatives not designated as hedging instruments
 2011 2010  2012 2011 

Foreign currency contracts

 Other expense (income), net $(6.2)$(4.4) Other expense (income), net $4.7 $(3.6)

        The Company expects that during the next twelve months it will reclassify to earnings a $7.5$0.3 million lossgain currently recorded in "Accumulated Other Comprehensive Loss." For the nine months


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ended September 30, 2011 and 2010, the Company did not record any gains or losses due to hedge ineffectiveness.

10.7.     DEFINED BENEFIT PLANS

        The components of net periodic benefit costs for the three and nine months ended September 30,March 31, 2012 and 2011 and 2010 were as follows (in millions):



 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
  Three months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Service cost

Service cost

 $1.5 $1.2 $4.6 $3.5  $1.8 $1.5 

Employee contributions

Employee contributions

        

Interest cost

Interest cost

 0.5 0.5 1.5 1.4  0.6 0.5 

Expected return on plan assets

Expected return on plan assets

 (0.3) (0.3) (1.0) (0.9) (0.4) (0.3)

Amortization of actuarial loss, prior service credit and other

Amortization of actuarial loss, prior service credit and other

 0.1  0.3 0.1  0.2 0.1 
              

Net periodic pension benefit cost

 $2.2 $1.8 

Net periodic pension benefit cost

 $1.8 $1.4 $5.4 $4.1      
         

11.Table of Contents

8.     STOCK-BASED COMPENSATION

        Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three and nine months ended September 30,March 31, 2012 and 2011 and 2010 was as follows (in millions):



 Three Months
Ended
September 30
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Cost of goods sold

Cost of goods sold

 $1.3 $0.9 $3.0 $2.1  $1.1 $0.8 

Selling, general and administrative expenses

Selling, general and administrative expenses

 7.5 6.4 18.7 16.8  6.8 5.6 

Research and development expenses

Research and development expenses

 1.7 1.3 4.3 3.5  1.3 1.3 
              

Total stock-based compensation expense

 $9.2 $7.7 

Total stock-based compensation expense

 $10.5 $8.6 $26.0 $22.4      
         

        At September 30, 2011,March 31, 2012, the total remaining compensation cost related to nonvested stock options, restricted stock units and employee stock purchase subscription awards amounted to $61.7$52.3 million, which will be amortized on a straight-line basis over the weighted-average remaining requisite service period of 3128 months.

        During the nine months ended September 30, 2011, the Company granted 1.1 million stock options at a weighted-average exercise price of $88.80 and 0.2 million shares of restricted stock units at a weighted-average grant-date fair value of $87.83.


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


 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 

 2011 2010 2011 2010  2012 2011 

Risk-free interest rate

 1.4% 1.7% 1.7% 2.0% 0.7% 2.3%

Expected dividend yield

 None None None None  None None 

Expected volatility

 27.2% 25.7% 27.3% 25.9% 27.2% 25.7%

Expected term (years)

 4.7 4.8 4.5 4.6  4.7 4.8 

Fair value, per share

 $21.72 $14.25 $22.81 $12.98  $18.70 $23.45 

        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
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 

 2011 2010 2011 2010  2012 2011 

Risk-free interest rate

 0.1% 0.3% 0.2% 0.3% 0.1% 0.2%

Expected dividend yield

 None None None None  None None 

Expected volatility

 29.8% 24.0% 27.6% 27.5% 29.7% 24.1%

Expected term (years)

 0.6 0.6 0.6 0.6  0.6 0.6 

Fair value, per share

 $21.06 $12.61 $20.02 $12.09  $16.99 $18.28 

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9.     ACCELERATED SHARE REPURCHASE

        In February 2012, the Company entered into an accelerated share repurchase ("ASR") agreement with an investment bank to repurchase $54.0 million of the Company's common stock. The ASR agreement provides for the repurchase of the Company's common stock based on the volume-weighted average price ("VWAP") of the Company's common stock during the term of the agreement, less a discount, and is subject to collar provisions that establish minimum and maximum number of shares to be repurchased. In March 2012, the Company paid the $54.0 million purchase price and received an initial delivery of 0.6 million shares, representing the minimum number of shares to be repurchased under the agreement. The initial shares were valued at $72.40 per share based on the VWAP of the Company's common stock on March 1, 2012, which was the date the major terms of the ASR agreement were finalized, and represented approximately 80 percent of the shares expected to be repurchased. At the conclusion of the ASR agreement, the Company may receive additional shares, up to a maximum of 1.0 million shares. If the agreement had been settled on March 31, 2012, the investment bank would have been required to deliver 0.2 million additional shares to the Company based on an average VWAP, less the discount, of $69.45 per share for the period March 1 to March 31, 2012. The ASR agreement has a termination date of May 31, 2012, although the termination date may be accelerated at the investment bank's option.

        The ASR was accounted for as two separate transactions: (a) the $43.2 million value of the initial delivery of shares was recorded as shares of common stock acquired in a treasury stock transaction on the acquisition date and (b) the remaining $10.8 million of the purchase price paid was recorded as a forward contract indexed to the Company's own common stock and was recorded in "Additional Paid-in Capital" on the consolidated condensed balance sheet. The initial delivery of shares resulted in an immediate reduction of the outstanding shares used to calculate the weighted-average common shares outstanding for basic and diluted earnings per share. The Company determined that the forward contract indexed to the Company's common stock met all the applicable criteria for equity classification and, therefore, was not accounted for as a derivative instrument.

10.   COMMITMENTS AND CONTINGENCIES

        In February 2008, Edwards Lifesciences filed a lawsuit against CoreValve, Inc. ("CoreValve") in the United StatesU.S. District Court for the District of Delaware alleging that its ReValving System infringes three of the Company'sEdwards' U.S. Andersen patents, later narrowed to one patent ("the '552 patent"). CoreValve was acquired by Medtronic, Inc. ("Medtronic") acquired CoreValve, Inc. ("Medtronic CoreValve") in April 2009. In April 2010, a federal jury found thatthe '552 patent to be valid and found that Medtronic CoreValve willfully infringes it. The jury also awarded Edwards $73.9 million in damages. In February 2011, the District Court reaffirmed the jury decision and ruled that Edwards is entitled to recover additional damages due to Medtronic CoreValve's continued infringing sales from the trial through the life of the patent, plus interest. In the same ruling, the court denied Edwards' motions for a permanent injunction, as well as its motion for increased damages relating to Medtronic CoreValve's willful infringement. Both Edwards and Medtronic CoreValve have appealed. The U.S. Court of Appeals for the Federal Circuit heard the appeals in January 2012 and the parties are awaiting its decision. A second lawsuit is pending in the same trial court against Medtronic CoreValve and Medtronic alleging infringement of three of Edwards' U.S. Andersen patents. In September 2010, the United States Patent and Trademark Office ("USPTO") granted Medtronic's third request to reexamine the validity of the claim of the '552 patent and in July 2011 confirmed the validity of that patent. Medtronic has since filed another request for reexamination of the '552 patent.

        In June 2011, Medtronic filed a lawsuit in the United StatesU.S. District Court for the District of Minnesota alleging that certain surgical valve holders and a surgical embolic filter device infringe its patents. Edwards counterclaimed against Medtronic, alleging that the Medtronic Contour 3D annuloplasty ring infringes an Edwards ring patent. By the Order of a Magistrate Judge in January 2012, the lawsuit was


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stayed pending the outcome of future reexamination findings by the USPTO, but this stay was later lifted. In February and March 2012, the USPTO granted Edwards' request to reexamine the validity of three of the four Medtronic patents involved in this lawsuit.

        In June 2011, Medtronic CoreValve also filed another lawsuit in the United StatesU.S. District Court for the Central District of California alleging that theEdwards SAPIEN transcatheter heart valve infringes a Medtronic CoreValve patent.


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In the California action, Edwards has counterclaimed against Medtronic CoreValve and Medtronic, alleging that the Medtronic CoreValve heart valve infringes Edwards' U.S. Letac-Cribier transcatheter heart valve patent. Edwards' counterclaim was subsequently transferred to the U.S. District Court for the District of Delaware. In April 2012, the USPTO granted Edwards' request to reexamine the validity of the Medtronic CoreValve patent.

        In March 2012, Medtronic filed another lawsuit in the U.S. District Court for the Central District of California alleging that the methods of implanting theEdwards SAPIEN transcatheter heart valve in the United States infringes two Medtronic patents relating to methods of pacing the heart. The Company plans to vigorously defend against this claim.

        In March and September 2010, the Company received grand jury subpoenas for documents from the United States Attorney's Office in the Central District of California in connection with an investigation by the Food and Drug Administration. The subpoenas to the Company seek records relating to the Vigilance I Monitor model with software release 5.3 that was the subject of a voluntary field recall by the Company in June 2006. The Company is cooperating fully with the investigation.

        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. The Company is not able to estimate the amount or range of any loss for legal contingencies for which there is no reserve or additional loss for matters already reserved. 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.


13.Table of Contents

11.   OTHER COMPREHENSIVE INCOME

        ReconciliationThe tax effect on the components of net income toother comprehensive income is as follows (in millions):

 
 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
 
 
 2011 2010 2011 2010 

Net income

 $51.6 $48.0 $173.6 $153.2 

Other comprehensive income:

             
 

Currency translation adjustments

  (29.8) 42.7  13.3  (13.6)
 

Unrealized net loss on investments in unconsolidated affiliates, net of tax

  (0.4) (0.1) (0.7) (2.7)
 

Reclassification of net realized investment (gain) loss to earnings

  (1.0) 3.7  (1.0) 3.7 
 

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

  17.5  (17.5) 7.3  (3.7)
          

Comprehensive income

 $37.9 $76.8 $192.5 $136.9 
          

        The tax effect on the unrealized net loss on investments in unconsolidated affiliates was $0.8 million and $1.0 million for the three and nine months ended September 30, 2011, respectively, and $0.1 million for both the three and nine months ended September 30, 2010. The tax effect on the unrealized net gain (loss) on cash flow hedges was $(11.4) million and $(4.7) million for the three and nine months ended September 30, 2011, respectively, and $11.4 million and $2.4 million for the three and nine months ended September 30, 2010, respectively.


 
 Foreign
Currency
Translation
Adjustments
 Unrealized
Gain (Loss)
on Cash
Flow Hedges
 Unrealized Gain
on Investments in
Unconsolidated
Affiliates
 Total Other
Comprehensive
Income
 

Three Months Ended March 31, 2012

             

Pre-tax period change

 $7.2 $7.3 $1.5 $16.0 

Deferred income tax expense

    (2.6) (0.5) (3.1)
          

Net of tax amount

 $7.2 $4.7 $1.0 $12.9 
          

Three Months Ended March 31, 2011

             

Pre-tax period change

 $32.3 $(11.9)$2.4 $22.8 

Deferred income tax benefit (expense)

    4.8  (1.0) 3.8 
          

Net of tax amount

 $32.3 $(7.1)$1.4 $26.6 
          

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14.12.   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-InPaid-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
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Basic:

Basic:

  

Net income

 $65.1 $63.9 

Net income

 $51.6 $48.0 $173.6 $153.2      

Weighted-average shares outstanding

 114.0 114.9 
              

Weighted-average shares outstanding

 114.6 113.6 114.8 113.4 
         

Basic earnings per share

 $0.45 $0.42 $1.51 $1.35 

Basic earnings per share

 $0.57 $0.56 
              

Diluted:

Diluted:

  

Net income

 $65.1 $63.9 

Net income

 $51.6 $48.0 $173.6 $153.2      

Weighted-average shares outstanding

 114.0 114.9 

Dilutive effect of stock plans

 4.0 5.6 
              

Dilutive weighted-average shares outstanding

 118.0 120.5 

Weighted-average shares outstanding

 114.6 113.6 114.8 113.4      

Diluted earnings per share

 $0.55 $0.53 

Dilutive effect of stock plans

 4.4 5.3 5.0 5.5      
         

Dilutive weighted-average shares outstanding

 119.0 118.9 119.8 118.9 
         

Diluted earnings per share

 $0.43 $0.40 $1.45 $1.29 
         

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        Stock options and restricted stock units to purchase 1.31.2 million and 1.70.2 million shares for the three months ended September 30,March 31, 2012 and 2011, and 2010, respectively, and 0.9 million and 1.2 million for the nine months ended September 30, 2011 and 2010, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. Additionally, 0.2 million shares that would have been received if the ASR agreement discussed in Note 9 were settled as of March 31, 2012 were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive.

15.13.   INCOME TAXES

        The Company's effective income tax rates were 10.4%23.9% and 19.3%24.5% for the three and nine months ended September 30,March 31, 2012 and 2011, respectively, and 27.5% and 22.7% for the three and nine months ended September 30, 2010, respectively. The effective income tax ratesrate for the three and nine months ended September 30, 2011March 31, 2012 included a $6.9$2.3 million and $9.4 millionbenefit from the remeasurement of uncertain tax benefit, respectively, related to rulings made by the tax authorities in Switzerland.positions.

        The effective income tax rates for the three and nine months ended September 30, 2010 were calculated without the benefit of the federal research credit expired on December 31, 2011 and has not been reinstated as it was not reinstated until December 2010. In addition, theof March 31, 2012. The effective income tax rate for the ninethree months ended September 30, 2010 included a $9.8 millionMarch 31, 2012 has been calculated without an assumed benefit for the federal research credit. In 2011, the federal research credit favorably impacted the effective tax benefit resulting from a partial settlement of a prior year tax audit.rate by approximately 2.4%.

        The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for matters it


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believes are more likely than not to require settlement, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the consolidated condensed financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues and issuance of new legislation, regulations or case law.

        As of September 30, 2011March 31, 2012 and December 31, 2010,2011, the liability for income taxes associated with uncertain tax positions was $72.2$84.2 million and $55.1$78.0 million, respectively. TheseThe Company estimates that these liabilities couldwould be reduced by $8.0$8.6 million and $4.7$6.8 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 $64.2$75.6 million and $50.4$71.2 million, respectively, if not required, would favorably affect the Company's effective tax rate.

        All material state, local and foreign income tax matters have been concluded for years through 2005.2006. The Internal Revenue Service ("IRS") has completed its examination of the 2007 and 2008 tax years for all matters except for certain transfer pricing issues. The Company has entered the appeals process for those transfer pricing issues.issues is on-going, but is expected to be finalized within the next twelve months. The Company hadIRS began its opening conference with the IRS related to the examination of itsthe 2009 and 2010 tax years during the second quarter of 2011.

16.14.   SEGMENT INFORMATION

        Edwards Lifesciences conducts operations worldwide and is managed in the following geographical regions: United States, Europe, Japan and Rest of World. All regions sell products that are used to treat advanced cardiovascular disease. Net sales by geographic area are based on the location of the customer.


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



 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Segment Net Sales

Segment Net Sales

  

United States

United States

 $150.5 $140.1 $450.9 $423.1  $186.6 $149.1 

Europe

Europe

 128.9 109.2 409.0 333.2  150.8 137.8 

Japan

Japan

 53.3 53.8 167.9 160.0  69.8 57.4 

Rest of world

Rest of world

 50.1 41.9 147.9 121.9  52.7 44.3 
              

Total segment net sales

 $382.8 $345.0 $1,175.7 $1,038.2 

Total segment net sales

 $459.9 $388.6 
              

Segment Pre-Tax Income

Segment Pre-Tax Income

  

United States

United States

 $76.3 $75.6 $237.2 $232.8  $101.7 $81.3 

Europe

Europe

 52.4 40.7 177.2 125.6  67.7 62.4 

Japan

Japan

 23.6 25.3 78.9 73.9  35.8 27.3 

Rest of world

Rest of world

 15.4 13.1 44.8 35.4  13.2 12.3 
              

Total segment pre-tax income

 $218.4 $183.3 

Total segment pre-tax income

 $167.7 $154.7 $538.1 $467.7      
         

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        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
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Net Sales Reconciliation

Net Sales Reconciliation

  

Segment net sales

Segment net sales

 $382.8 $345.0 $1,175.7 $1,038.2  $459.9 $388.6 

Foreign currency

Foreign currency

 29.9 3.9 72.7 16.4  (0.7) 15.9 
              

Consolidated net sales

Consolidated net sales

 $412.7 $348.9 $1,248.4 $1,054.6  $459.2 $404.5 
              

Pre-Tax Income Reconciliation

Pre-Tax Income Reconciliation

  

Segment pre-tax income

Segment pre-tax income

 $167.7 $154.7 $538.1 $467.7  $218.4 $183.3 

Unallocated amounts:

Unallocated amounts:

  

Corporate items

 (109.8) (92.7) (330.2) (269.0)

Special charges, net

  (3.9) (4.0) (12.2)

Interest (expense) income, net

  (0.4) 0.3 (1.1)

Foreign currency

 (0.3) 8.5 10.8 12.7 

Corporate items

 (130.4) (103.8)

Foreign currency

 (2.4) 5.1 
              

Consolidated pre-tax income

Consolidated pre-tax income

 $57.6 $66.2 $215.0 $198.1  $85.6 $84.6 
              

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Enterprise-Wide Information

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


 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 

 2011 2010 2011 2010  2012 2011 

 (in millions)
  (in millions)
 

Net Sales by Geographic Area

  

United States

 $150.5 $140.1 $450.9 $423.1  $186.6 $149.1 

International

 262.2 208.8 797.5 631.5 

Europe

 148.8 139.5 

Japan

 70.8 69.3 

Rest of world

 53.0 46.6 
              

 $412.7 $348.9 $1,248.4 $1,054.6  $459.2 $404.5 
              

Net Sales by Major Product and Service Area

  

Heart Valve Therapy

 $246.1 $200.6 $754.1 $612.1 

Surgical Heart Valve Therapy

 $203.6 $198.3 

Transcatheter Heart Valves

 121.5 72.7 

Critical Care

 126.7 111.0 375.0 326.6  134.1 133.5 

Cardiac Surgery Systems

 26.9 23.7 80.3 75.0 

Vascular

 13.0 13.6 39.0 40.9 
              

 $412.7 $348.9 $1,248.4 $1,054.6  $459.2 $404.5 
              

 


 September 30,
2011
 December 31,
2010
  March 31,
2012
 December 31,
2011
 

 (in millions)
  (in millions)
 

Long-Lived Tangible Assets by Geographic Area

  

United States

 $206.8 $180.5  $226.5 $223.0 

International

 104.2 102.3  107.5 105.9 
          

 $311.0 $282.8  $334.0 $328.9 
          

15.   RESTATEMENT OF UNAUDITED INTERIM CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

        During the fourth quarter of 2011, the Company determined that its previously issued consolidated condensed balance sheet and consolidated condensed statement of cash flows for the quarter ended March 31, 2011 contained a classification error related to its cash equivalents and short-term investments. The Company purchased bank time deposits with original maturities over three months but less than one year. The Company determined that these bank time deposits had been incorrectly classified as cash equivalents for the above mentioned period and, accordingly, the Company has restated the presentation as reflected below. The classification error had no impact on the Company's current assets nor on the consolidated condensed statement of operations.

 
 As of March 31, 2011 
Balance Sheets
 As Reported As Restated 
 
 (in millions)
 

Cash and cash equivalents

 $433.8 $325.2 

Short-term investments

    108.6 
      

Total

 $433.8 $433.8 
      

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 Three Months Ended
March 31, 2011
 
Statements of Cash Flows
 As Reported As Restated 
 
 (in millions)
 

Cash flows from investing activities

       

Purchases of short-term investments

 $ $(105.6)

Net cash used in investing activities

  (52.5) (158.1)

Effect of currency exchange rate changes on cash and cash equivalents

  15.8  12.8 

Net increase (decrease) in cash and cash equivalents

  37.7  (70.9)

Cash and cash equivalents at end of period

  433.8  325.2 

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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 statements 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," "guidance," "optimistic," "aspire," "confident," other forms of these words or 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 results or future business, financial condition, results of operations or performance to differ materially from the Company's historical results or experiences 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, 20102011 and subsequent reports on Forms 10-Q and 8-K 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 theCritical Care area, Edwards LifesciencesThe Company is also a worldglobal leader in hemodynamic monitoring systems used to measure a patient's cardiovascular function in the hospital setting.

        During the quarter, the Company began reporting its products and technologies in disposable pressure transducers. The Company'sthree new product groups: Surgical Heart Valve Therapy, which combines surgical heart valves and Cardiac Surgery SystemsSystems; Transcatheter Heart Valves; and Critical Care which includes Vascular. Sales amounts for the prior year periods have been recast to conform with the new product classification.

        Edwards Lifesciences'Surgical Heart Valve Therapy portfolio comprisesis comprised primarily of tissue heart valves and heart valve repair products for the surgical repair or replacement of a patient's heart valve. The portfolio also includes a diverse line of products for useused during cardiac surgery includingminimally invasive surgical procedures, and cannulae, embolic protection devices and other products used during cardiopulmonary bypass and minimally invasive surgical procedures. Edwards Lifesciences'bypass. The Company'sVascularTranscatheter Heart Valves portfolio includes technologies designed to treat heart valve disease using catheter-based approaches as opposed to open surgical techniques. In theCritical Care portfolio, Edwards Lifesciences' products include pulmonary artery catheters, disposable pressure transducers and advanced monitoring systems. The portfolio also includes a line of balloon catheter-based products, surgical clips and inserts.

        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


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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


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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.

New Accounting Standards Not Yet Adopted

        In May 2011, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on fair value measurements to ensure that United States generally accepted accounting principles and International Financial Reporting Standards have common requirements for fair value measurement and disclosures, including a consistent definition of fair value. The guidance is effective for interim and annual periods beginning on or after December 15, 2011. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

        In June 2011, the FASB issued an amendment to the accounting guidance on the presentation of comprehensive income. The guidance eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholders' equity, and instead requires that all nonowner changes in stockholders' equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted.

        In September 2011, the FASB issued an amendment to the accounting guidance on goodwill to permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The guidance is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company does not expect the adoption of this guidance will have a material impact on its consolidated financial statements.

Results of Operations



 Three Months
Ended
September 30,
  
  
 Nine Months
Ended
September 30,
  
  
  Three Months
Ended
March 31,
  
  
 


  
 Percent
Change
  
 Percent
Change
   
 Percent
Change
 


 2011 2010 Change 2011 2010 Change  2012 2011 Change 

United States

United States

 $150.5 $140.1 $10.4 7.5%$450.9 $423.1 $27.8 6.6% $186.6 $149.1 $37.5 25.2%

International

International

 262.2 208.8 53.4 25.6% 797.5 631.5 166.0 26.3% 272.6 255.4 17.2 6.7%
                          

Total net sales

 $459.2 $404.5 $54.7 13.5%

Total net sales

 $412.7 $348.9 $63.8 18.3%$1,248.4 $1,054.6 $193.8 18.4%         
                 

        In the United States, the $10.4$37.5 million and $27.8 million increasesincrease in net sales for the three and nine months ended September 30, 2011 wereMarch 31, 2012 was due primarily to:


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        International net sales increased $53.4 million and $166.0$17.2 million for the three and nine months ended September 30, 2011March 31, 2012, due primarily to:

        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."

 
 Three Months
Ended
September 30,
  
  
 Nine Months
Ended
September 30,
  
  
 
 
  
 Percent
Change
  
 Percent
Change
 
 
 2011 2010 Change 2011 2010 Change 

Heart Valve Therapy

 $246.1 $200.6 $45.5  22.7%$754.1 $612.1 $142.0  23.2%

Critical Care

  126.7  111.0  15.7  14.2% 375.0  326.6  48.4  14.8%

Cardiac Surgery Systems

  26.9  23.7  3.2  13.2% 80.3  75.0  5.3  7.1%

Vascular

  13.0  13.6  (0.6) (4.4)% 39.0  40.9  (1.9) (4.8)%
                    
 

Total net sales

 $412.7 $348.9 $63.8  18.3%$1,248.4 $1,054.6 $193.8  18.4%
                    
 
 Three Months
Ended
March 31,
  
  
 
 
  
 Percent
Change
 
 
 2012 2011 Change 

Surgical Heart Valve Therapy

 $203.6 $198.3 $5.3  2.7%

Transcatheter Heart Valves

  121.5  72.7  48.8  67.2%

Critical Care

  134.1  133.5  0.6  0.5%
           

Total net sales

 $459.2 $404.5 $54.7  13.5%
           

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        Net sales of Surgical Heart Valve Therapy products for the three and nine months ended September 30, 2011March 31, 2012 increased by $45.5$5.3 million, and $142.0 million, respectively, due primarily to:

        In Europe, the Company received CE Mark in February 2012 forMagna Mitral EaseEDWARDS INTUITY, its minimally invasive aortic valve surgery system. Also during the first quarter, the Company initiated a limited launch of itsIntraClude valves; andaortic occlusion device for use in patients undergoing cardiopulmonary bypass, including during mitral heart valve repair or replacement surgery using a minimally invasive approach.

        Net sales of Transcatheter Heart Valves for the three months ended March 31, 2012 increased net sales by $15.3$48.8 million, and $30.9 million, respectively, due primarily to a $51.4 million increase in net sales of valves with transfemoral delivery systems. The increase was primarily due to the strengtheninglaunch of the Euro and the Japanese yen againstEdwards SAPIEN transcatheter heart valve in the United States dollar.in the fourth quarter of 2011, and an increase in international net sales of theEdwards SAPIEN XT transcatheter heart valve.

        The Company expects that its transcatheter heart valves will continue to be a strong contributor to 20112012 sales. In November 2011, the Company received approval from the United States Food and Drug Administration ("FDA") for the transfemoral delivery of theEdwards SAPIEN transcatheter heart valve for treatment of certain inoperable patients with severe symptomatic aortic stenosis. During the second quarterstenosis (Cohort B of The PARTNER Trial). In 2011, the Company received regulatorysubmitted its pre-market approval and initiated its launchapplication for Cohort A of theCarpentier-Edwards


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Physio Tricuspid annuloplasty ring inThe PARTNER Trial to the United States and Europe. In Japan,FDA. Cohort A studied patients with severe, symptomatic aortic stenosis deemed at high risk for traditional open-heart surgery. An FDA advisory panel has been scheduled for June 13, 2012 with respect to the Company obtained approval of itsCarpentier-Edwards PERIMOUNT Magna Aortic Ease valve in July 2011, and introduced this product in the third quarter of 2011. In Europe, the Company expects to receive CE Mark in the fourth quarter of 2011 ofEDWARDS INTUITY, its minimally invasive aortic valve surgery system. In the United States, the Company remains hopeful for Investigational Device Exemption ("IDE") approval for the clinical trial ofEDWARDS INTUITY in the fourth quarter of 2011.Cohort A application.

        Net sales of Critical Care products for the three and nine months ended September 30, 2011March 31, 2012 increased by $15.7$0.6 million, and $48.4 million, respectively, due primarily to:

        Duringdollar, partially offset by the fourth quarterweakening of 2010, the Company launched, outside ofEuro against the United States theVolumeView System, which broadensdollar;

partially offset by:

a $4.3 million decrease in net sales due to the Company's product offering in the medical intensive care unit. At the same time, the Company launched theEV1000 Clinical Platform, a new hardware platform with a simpler, more intuitive informational display. The Company obtained regulatory clearance for the salediscontinuation of these products in the United States in the second quarter of 2011.

        The Company has a collaboration agreement with DexCom, Inc. to develop products for continuously monitoring blood glucose levels in patients hospitalized for a variety of conditions. The Company's recent design enhancements to its second generation product now require a more extensive regulatory review in Europe. The Company anticipates obtaining CE Mark on the second generation product in the second half of 2012.

    Cardiac Surgery Systems

        Netdistributed sales of Cardiac Surgery Systems products for the three and nine months ended September 30, 2011 increased by $3.2 million and $5.3 million, respectively, due primarily to foreign currency exchange rate fluctuations, which increased net sales by $1.2 million and $2.7 million, and specialty cannula products, which increased net sales by $0.9 million and $2.7 million, respectively. Also, in the three month period, minimally invasive surgery products increased net sales by $1.2 million.

    Vascular

    certain oximetry products.

        Net sales of Vascular products for the three and nine months ended September 30, 2011 decreased by $0.6 million and $1.9 million, respectively, due primarily to the Company's discontinued distribution of artificial implantable grafts during the first quarter of 2011.


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 Three Months
Ended September 30,
 Nine Months
Ended September 30,
 
 
 2011 2010 Change 2011 2010 Change 

Gross profit as a percentage of net sales

  69.6% 72.5% (2.9) pts.  70.3% 72.0% (1.7) pts. 
 
 Three Months
Ended March 31,
 
 
 2012 2011 Change 

Gross profit as a percentage of net sales

  72.3% 71.1% 1.2 pts. 

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        The 2.9 and 1.71.2 percentage point decreasesincrease in gross profit as a percentage of net sales for the three and nine months ended September 30, 2011, respectively, wereMarch 31, 2012 was driven primarily by:


 Three Months
Ended September 30,
 Nine Months
Ended September 30,
  Three Months
Ended March 31,
 

 2011 2010 Change 2011 2010 Change  2012 2011 Change 

SG&A expenses

 $165.5 $133.0 $32.5 $479.0 $407.6 $71.4  $177.2 $150.3 $26.9 

SG&A expenses as a percentage of net sales

 40.1% 38.1% 2.0 pts. 38.4% 38.6% (0.2) pts.  38.6% 37.2% 1.4 pts. 

        The increase in SG&A expenses for the three and nine months ended September 30, 2011March 31, 2012 was due primarily to higher sales and marketing expenses in the United States, and Europe, mainly to support the transcatheter heart valve program, including preparation for the launch in the United States. Foreign currency rate fluctuations increased SG&A expenses by $9.9 million and $19.8 million, respectively, due to the strengthening of various currencies against the United States dollar, primarily the Euro and the Japanese yen.


 Three Months
Ended September 30,
 Nine Months
Ended September 30,
  Three Months
Ended March 31,
 

 2011 2010 Change 2011 2010 Change  2012 2011 Change 

Research and development expenses

 $61.7 $52.7 $9.0 $185.6 $148.5 $37.1  $68.6 $59.0 $9.6 

Research and development expenses as a percentage of net sales

 15.0% 15.1% (0.1) pts. 14.9% 14.1% 0.8 pts.  14.9% 14.6% 0.3 pts. 

        The increase in research and development expenses for the three and nine months ended September 30, 2011March 31, 2012 was due primarily to additional investments in clinical studies and new product development efforts in the transcatheter heart valve program.


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        The following are the developments related to the Company's transcatheter heart valve program:

 
 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
 
 
 2011 2010 2011 2010 
 
 (in millions)
 

Greece receivables reserve

 $ $ $4.0 $ 

Investment impairment

    3.9    3.9 

MONARC program discontinuation

        8.3 
          
 

Special charges, net

 $ $3.9 $4.0 $12.2 
          

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        In June 2011, the Company recorded a $4.0 million charge to reflect the increased collection risk associated with its receivables in Greece.

        In December 2010, the Company recorded a $7.2 million charge related primarily to severance expenses associated with a global workforce realignment impacting 84 employees. As of September 30, 2011, the Company's remaining severance obligations of $1.5 million are expected to be substantially paid by March 2012.

        In September 2010, the Company recorded a $3.9 million charge related to the other-than-temporary impairment of two non-strategic investments in unconsolidated affiliates. The Company concluded that the impairment of these investments was other-than-temporary based upon the continuing duration and severity of the impairment.

        During the second quarter of 2010, the Company decided to discontinue itsMONARC transcatheter mitral valve program due to slow enrollment in the EVOLUTION II trial. As a result, the Company recorded an $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.



 Three Months
Ended September 30,
 Nine Months
Ended September 30,
  Three Months
Ended March 31,
 


 2011 2010 Change 2011 2010 Change  2012 2011 Change 

Interest expense

Interest expense

 $1.0 $0.7 $0.3 $2.2 $1.9 $0.3  $1.1 $0.5 $0.6 

Interest income

Interest income

 (1.0) (0.3) (0.7) (2.5) (0.8) (1.7) (1.1) (0.5) (0.6)
                    

Interest expense (income), net

 $ $ $ 

Interest expense (income), net

 $ $0.4 $(0.4)$(0.3)$1.1 $(1.4)       
             

        The increase in interest expense for the three and nine months ended September 30, 2011March 31, 2012 resulted primarily from a higher average debt balanceinterest rates as compared to the prior year period. The increase in interest income for the three and nine months ended September 30, 2011 resulted primarily from higher averagethe recognition of interest ratesincome on discounted accounts receivables in Italy, Spain, Portugal and higher cash and short-term investment balances.Greece.


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 Three Months
Ended
September 30,
 Nine Months
Ended
September 30,
  Three Months
Ended
March 31,
 


 2011 2010 2011 2010  2012 2011 

Foreign exchange losses (gains), net

Foreign exchange losses (gains), net

 $3.1 $(1.7)$1.7 $(1.7) $0.6 $(0.9)

(Gain) loss on investments in unconsolidated affiliates

 (0.9) 0.2 (5.5) (1.1)

Gain on investments in unconsolidated affiliates

 (0.4) (4.3)

Earn-out payments

Earn-out payments

  (1.5) (1.0) (4.5)  (1.0)

Other

Other

 0.1 (0.1) (0.3) (0.4) 0.3  
              

Other expense (income), net

 $0.5 $(6.2)

Other expense (income), net

 $2.3 $(3.1)$(5.1)$(7.7)     
         

        The foreign exchange losses (gains) relate to the foreign currency fluctuations in the Company's global trade and intercompany receivable and payable balances. Foreign exchange fluctuations (primarily the Euro) resulted in a net loss in 2011.2012.

        The gain (loss) on investments in unconsolidated affiliates primarily represents the Company's net 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 and cost method investments.

        In September 2009, the Company sold its hemofiltration product line. In connection with the transaction, the Company was 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. As of March 31, 2011, all $9.0 million of earn-out payments had been earned.

        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 10.4%23.9% and 19.3%24.5% for the three and nine months ended September 30,March 31, 2012 and 2011, respectively, and 27.5% and 22.7% for the three and nine months ended September 30, 2010, respectively. The effective income tax ratesrate for the three and nine months ended September 30, 2011March 31, 2012 included a $6.9 million and $9.4$2.3 million tax benefit respectively, related to rulings made byfrom the remeasurement of uncertain tax authorities in Switzerland.positions.

        The effective income tax rates for the three and nine months ended September 30, 2010 were calculated without the benefit of the federal research credit expired on December 31, 2011 and has not been reinstated as it was not reinstated until December 2010. In addition, theof March 31, 2012. The effective income tax rate for the ninethree months ended September 30, 2010 included a $9.8 millionMarch 31, 2012 has been calculated without an assumed benefit for the federal research credit. In 2011, the federal research credit favorably impacted the effective tax benefit resulting from a partial settlement of a prior year tax audit.rate by approximately 2.4%.

        The Company strives to resolve open matters with each tax authority at the examination level and could reach agreement with a tax authority at any time. While the Company has accrued for matters it believes are more likely than not to require settlement, the final outcome with a tax authority may result in a tax liability that is more or less than that reflected in the consolidated condensed financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues and issuance of new legislation, regulations or case law. Management believes that adequate amounts of tax and related penalty and interest have been provided in income tax expense for any adjustments that may result from these uncertain tax positions.


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        As of September 30, 2011March 31, 2012 and December 31, 2010,2011, the liability for income taxes associated with uncertain tax positions was $72.2$84.2 million and $55.1$78.0 million, respectively. TheseThe Company estimates that these liabilities couldwould be reduced by $8.0$8.6 million and $4.7$6.8 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 $64.2$75.6 million and $50.4$71.2 million, respectively, if not required, would favorably affect the Company's effective tax rate.

Liquidity and Capital Resources

        The Company's sources of cash liquidity include cash on hand and cash equivalents, short-term investments (bank time deposits with original maturities over three months but less than one year), 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 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 Lifesciencesthe Company on favorable terms, or at all.

        As of September 30, 2011,March 31, 2012, cash and cash equivalents and short-term investments held outside the United States were approximately $391.9$371.0 million, and have historically been used to fund international operations. The Company believes that cash and cash equivalents held in the United States, in addition to amounts available under credit facilities and cash from operations, are sufficient to fund its United States operating requirements. The majority of cash and cash equivalents and short-term investments held outside the United States relate to undistributed earnings of certain of the Company's foreign subsidiaries which isare considered to be indefinitely reinvested by the Company. Repatriations of cash and cash equivalents and short-term investments held outside the United States are subject to restrictions in certain jurisdictions and may be subject to withholding and other taxes. The potential tax liability related to any repatriation would be dependent on the facts and circumstances that would exist at the time such repatriation is made and the complexities of the tax laws of the United States and the respective foreign jurisdictions.

        In July 2011, Edwards Lifesciences entered intoThe Company has a Four-Year Credit Agreement ("the Credit Facility") which matures on July 29, 2015. The proceeds of the Credit Facility were used to refinance the Company's previous Five-Year Unsecured Revolving Credit Agreement ("the Credit Agreement"). The Credit Facility provides up to an aggregate of $500.0 million in borrowings in multiple currencies. Borrowings generally bear interest at the London interbank offering rate ("LIBOR") plus 0.875%, subject to adjustment for leverage ratio changes as defined in the Credit Facility. The Company also pays a facility fee of 0.125% on the entire $500.0 million facility whether or not drawn. The facility fee is also subject to adjustment for leverage ratio changes. All amounts outstanding under the Credit Facility have been classified as long-term obligations as these borrowings are expected to be refinanced pursuant to the Credit Facility. As of September 30, 2011,March 31, 2012, borrowings of $175.0$179.4 million were outstanding under the Credit Facility. The Credit Facility is unsecured and contains various financial and other covenants, including a maximum leverage ratio and a minimum interest coverage ratio, as defined in the Credit Facility. The Company was in compliance with all covenants at September 30, 2011.

        In March 2011, the Company acquired all the outstanding shares of Embrella Cardiovascular, Inc. ("Embrella"), including shares already owned by the Company, for an aggregate purchase price of $42.6 million. The purchase price was funded with cash on hand and borrowings under the Credit Agreement. Embrella is a start-up medical device company developing a device for cerebral embolic protection during cardiovascular procedures.31, 2012.

        In February 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. During the nine months ended September 30, 2011, the Company repurchased 3.3 million shares at an aggregate cost of $260.1 million and had remaining authority


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under the February 2010 program to purchase $137.9 million of the Company's common stock. In September 2011, 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. Under these stock forrepurchase authorizations, in February 2012, the Company entered into an accelerated share repurchase ("ASR") agreement with an investment bank to repurchase $54.0 million of the Company's common stock. The ASR agreement is subject to collar provisions that established minimum and maximum number of shares to be repurchased based on the volume-weighted average price of the Company's common stock during the term of the agreement, less a discount. In March 2012, the Company paid the $54.0 million purchase price and received an initial delivery of 0.6 million shares,


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representing the minimum number of shares to be repurchased under the agreement, which was approximately 80 percent of the shares expected to be repurchased. At the conclusion of the ASR agreement, the Company may receive additional shares, up to a maximum of 1.0 million shares. The ASR agreement has a termination date of May 31, 2012, although the termination date may be accelerated at the investment bank's option. During the three months ended March 31, 2012, the Company repurchased a total availability of $637.91.2 million shares at an aggregate cost of $100.2 million, including prepaid amounts under the ASR agreement, and as of September 30, 2011. The Company has not yet repurchased any sharesMarch 31, 2012, had remaining authority under the new stock repurchase plan.program to purchase $497.7 million of the Company's common stock. In addition to shares repurchased under the stock repurchase program, the Company also acquired shares to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees.

        At September 30, 2011,March 31, 2012, 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, 2010.2011.

        Net cash flows provided byused inoperating activities of $171.4were $30.7 million for the ninethree months ended September 30, 2011 increased $14.0March 31, 2012 compared to net cash flows provided by operating activities of $14.9 million for the three months ended March 31, 2011. The change of $45.6 million over the same period a year ago was due primarily to improved(1) a $23.0 million impact from excess tax benefits from stock plans, primarily the realization of excess tax benefits that had been previously suspended due to credit carryforwards and net operating performance, partially offset by higher working capital needs.losses in the United States in 2011 and (2) timing of supplier payments.

        Net cash used inprovided byinvesting activities of $81.4$68.4 million for the ninethree months ended September 30,March 31, 2012 consisted primarily of net proceeds from short-term investments of $84.2 million, partially offset by capital expenditures of $18.0 million.

        Net cash used in investing activities of $158.1 million for the three months ended March 31, 2011 consisted primarily of net purchases of short-term investments of $105.6 million, a $42.6 million payment associated with the acquisition of Embrella Cardiovascular, Inc., and capital expenditures of $50.6 million.

        Net cash used in investing activities of $38.4 million for the nine months ended September 30, 2010 consisted primarily of capital expenditures of $40.1$13.9 million.

        Net cash used infinancing activities of $38.2$3.1 million for the ninethree months ended September 30, 2011March 31, 2012 consisted primarily of purchases of treasury stock of $263.3$100.3 million, partially offset by net proceeds from debt of $128.8$31.1 million, proceeds from stock plans of $48.6$24.9 million, and the excess tax benefit from stock plans of $47.0 million.$38.2 million (including the realization of previously suspended excess tax benefits).

        Net cash used inprovided by financing activities of $77.3$59.5 million for the ninethree months ended September 30, 2010March 31, 2011 consisted primarily of purchases of treasury stock of $200.0 million, partially offset by net proceeds from debt of $9.2$105.3 million, proceeds from stock plans of $73.8$13.2 million, and the excess tax benefit from stock plans of $42.0$15.2 million, partially offset by purchases of treasury stock of $75.8 million.

Critical Accounting Policies and Estimates

        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 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 and estimates 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 37-41 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, 2010.2011. Management believes that at September 30, 2011,March 31, 2012, there had been no material changes to this information.


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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 42-4341-43 of the Company's Annual Report on Form 10-K for the year ended December 31, 2010.2011. There have been no significant changes from the information discussed therein.


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        The Company invests excess cash in bank time deposits and diversifies the concentration of cash amongst different financial institutions.

        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. The Company continues to do business with foreign governments in certain European countries that have experienced a deterioration in credit and economic conditions. These conditions have resulted in, and may continue to result in, an increase in the average length of time that it takes to collect accounts receivable outstanding in these countries. In addition, the Company may also be impacted by declines in sovereign credit ratings or sovereign defaults in these countries.

        In June 2011, the Company recorded a $4.0 million charge to reflect the increased collection risk associated with its receivables in Greece. A significant further decline in sovereign credit ratings or a default in Greece, or in other European countries, may decrease the likelihood that the Company will collect these accounts receivable, which could result in a negative impact to the Company's operating results.

        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 September 30, 2011,March 31, 2012, Edwards Lifesciences had $21.4$21.9 million of investments in equity instruments of other companies and had recorded unrealized gains of $0.5$2.1 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

        Evaluation of Disclosure Controls and Procedures.    The Company's management, including the Chief Executive Officer and the Chief Financial Officer, conductedperformed an evaluation of the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2011.March 31, 2012. Based on theirupon that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, suchas a result of a material weakness in internal control over financial reporting, as previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, the Company's disclosure controls and procedures are designed at a reasonable assurance level and arewere not effective as of March 31, 2012.

        As described in providing reasonable assurance that the information required to be disclosed byCompany's Annual Report on Form 10-K, filed on February 27, 2012, for the year ended December 31, 2011, the Company did not maintain effective controls over the completeness and timeliness of information impacting classification and disclosures related to financial reporting. Specifically, effective controls were not in place with respect to communication to appropriate financial reporting personnel from other departments of changes to information impacting classification and disclosures in the reports it files or submits under the Securities Exchange Act, is recorded, processed, summarized and reported within the time periods specifiedfinancial statements. This control deficiency resulted in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicateda restatement to the Company's management, includingunaudited consolidated condensed balance sheets as of March 31, June 30, and September 30, 2011 to correct the Chief Executive Officermisclassification of short-term investments incorrectly classified as


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cash equivalents, and the Chiefrestatement of the Company's unaudited consolidated condensed statements of cash flows for the periods ended March 31, June 30, and September 30, 2011 to appropriately present the activity related to short-term investments resulting from the aforementioned classification error and for the periods ended June 30 and September 30, 2011 to correct the amount presented as excess tax benefit from stock plans as a component of cash flows from operating and financing activities (see Note 15 to the "Consolidated Condensed Financial Officer,Statements" of this Quarterly Report on Form 10-Q). Additionally, this control deficiency could result in other classification and disclosure misstatements related to financial reporting that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. Accordingly, the Company's management determined that this control deficiency constituted a material weakness and has determined that it continues to exist as appropriate, to allow timely decisions regarding required disclosure. There have been noof March 31, 2012.

        Changes in Internal Control Over Financial Reporting.    The remediation efforts noted below represent changes in the Company's internal controlscontrol over financial reporting during the quarter ended September 30, 2011March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

        Plan for Remediation of Material Weakness.    Beginning in February 2012, with the oversight of the Audit and Public Policy Committee, the Company's management began to design and implement certain remediation measures to address the material weakness discussed above and to improve its internal control over financial reporting.

        The Company has enhanced its existing controls and added new controls to improve the communication to appropriate financial reporting personnel from other departments of changes to information impacting classification and disclosures in the financial statements. Specifically, these changes included implementation of quarterly meetings and modifications to existing monthly meetings involving other departments and regions as well as financial reporting personnel to appropriately address matters impacting the classification and disclosures in the Company's financial statements; and enhancing certain tools to be used to facilitate effective communication between other departments, regions and financial reporting personnel.

        The Company believes the remediation measures will strengthen the Company's internal control over financial reporting and remediate the material weakness identified. However, these measures had not been in operation long enough to effectively measure their operating effectiveness and, therefore, the identified material weakness had not been fully remediated as of March 31, 2012. The Company will continue to monitor the effectiveness of these remediation measures and will make any changes and take such other actions that are deemed appropriate given the circumstances.


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Part II. Other Information

Item 1.    Legal Proceedings

        In February 2008, Edwards Lifesciences filed        For a lawsuit against CoreValve, Inc. ("CoreValve") in the United States District Court for the Districtdescription of Delaware alleging that its ReValving System infringes three of the Company's U.S. Andersen patents, later narrowed to one patent ("the '552 patent"). CoreValve was acquired by Medtronic, Inc. ("Medtronic") in April 2009. 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. In February 2011, the District Court reaffirmed the jury decision and ruled that Edwards is entitled to recover additional damages due to CoreValve's continued infringing sales from the trial through the life of the patent, plus interest. In the same ruling, the court denied Edwards' motions for a permanent injunction, as well as its motion for increased damages relating to CoreValve's willful infringement. Both Edwards and CoreValve have appealed. A second lawsuit isour material pending in the same court against CoreValve and Medtronic alleging infringement of three U.S. Andersen patents. In September 2010, the United States Patent and Trademark Office granted Medtronic's third request to reexamine the validity of the claim of the '552 patent and in July 2011 confirmed the validity of that patent.

        In June 2011, Medtronic filed a lawsuit in the United States District Court for the District of Minnesota alleging that certain surgical valve holders and a surgical embolic filter device infringe its patents. Medtronic also filed another lawsuit in the United States District Court for the Central District of California alleging that theEdwards SAPIEN transcatheter heart valve infringes a Medtronic patent. In the California action, Edwards has counterclaimed against Medtronic, alleging that the Medtronic CoreValve heart valve infringes Edwards' U.S. Letac-Cribier transcatheter heart valve patent.

        In March and September 2010, the Company received grand jury subpoenas for documents from the United States Attorney's Office in the Central District of California in connection with an investigation by the Food and Drug Administration. The subpoenaslegal proceedings, please see Note 10 to the Company seek records relating to the Vigilance I Monitor model with software release 5.3 that was the subject"Consolidated Condensed Financial Statements" of a voluntary field recallthis Quarterly Report on Form 10-Q, which is incorporated by the Company in June 2006. The Company is cooperating fully with the investigation.

        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. The Company is not able to estimate the amount or range of any loss for legal contingencies for which there is no reserve or additional loss for matters already reserved. 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

Issuer Purchases of Equity Securities

Period
 Total Number
of Shares
(or Units)
Purchased(a)(c)
 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)(b)(c)
 

January 1, 2012 through January 31, 2012

  467,500 $74.84  467,500 $562.9 

February 1, 2012 through February 29, 2012

  143,127  78.80  142,500  551.7 

March 1, 2012 through March 31, 2012

  596,710  72.40  596,710  497.7 
           

Total

  1,207,337  74.10  1,206,710    
           

Period
 Total Number
of Shares
(or Units)
Purchased(a)
 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)(b)
 

July 1, 2011 through July 31, 2011

  219,619 $86.67  215,000 $223.1 

August 1, 2011 through August 31, 2011

  1,014,900  68.85  1,014,400  153.2 

September 1, 2011 through September 30, 2011

  206,237  74.48  206,200  637.9 
            

Total

  1,440,756  72.38  1,435,600    
            

(a)
The difference between the total number of shares (or units) purchased and the total number of shares (or units) purchased as part of publicly announced plans or programs is due to shares withheld by the Company to satisfy tax withholding obligations in connection with the vesting of restricted stock units issued to employees.

(b)
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. On September 13, 2011, 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 an additional $500.0 million of the Company's common stock.

(c)
In March 2012, the Company paid $54.0 million under its ASR agreement and received an initial delivery of 0.6 million shares of the Company's common stock at $72.40 per share, representing approximately 80 percent of the shares expected to be repurchased. At the conclusion of the ASR agreement, the Company may receive additional shares, up to a maximum of 1.0 million shares. Shares purchased pursuant to the ASR agreement are presented in the above table in the periods in which they were received. The amount that may yet be purchased under the stock repurchase program was reduced by the $54.0 million payment.

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Item 6.    Exhibits

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

 *10.1 Amendment to Edwards Lifesciences Corporation Amended and Restated Chief Executive Deferred Compensation Plan (as amended and restated effective July 6, 2011)Officer Change-in-Control Severance Agreement, dated March 28, 2012
*10.2Amendment to Edwards Lifesciences Corporation Form of original Change-in-Control Severance Agreement, dated March 28, 2012
 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 September 30, 2011,March 31, 2012, 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 Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, and (iv)(v) Notes to Consolidated Condensed Financial Statements


*
Represents management contract or compensatory plan.

**
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: November 8, 2011May 9, 2012

 

By:

 

/s/ THOMAS M. ABATE

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

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EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION

Exhibit No. Description
 *10.1 Amendment to Edwards Lifesciences Corporation Amended and Restated Chief Executive Deferred Compensation Plan (as amended and restated effective July 6, 2011)Officer Change-in-Control Severance Agreement, dated March 28, 2012
*10.2Amendment to Edwards Lifesciences Corporation Form of original Change-in-Control Severance Agreement, dated March 28, 2012
 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 September 30, 2011,March 31, 2012, 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 Comprehensive Income, (iv) the Consolidated Condensed Statements of Cash Flows, and (iv)(v) Notes to Consolidated Condensed Financial Statements


*
Represents management contract or compensatory plan.

**
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.