Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | Apr. 30, 2014 | |
Document and Entity Information | ' | ' |
Entity Registrant Name | 'Edwards Lifesciences Corp | ' |
Entity Central Index Key | '0001099800 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Filer Category | 'Large Accelerated Filer | ' |
Entity Common Stock, Shares Outstanding | ' | 105,493,815 |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q1 | ' |
CONSOLIDATED_CONDENSED_BALANCE
CONSOLIDATED CONDENSED BALANCE SHEETS (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Current assets | ' | ' |
Cash and cash equivalents | $295.70 | $420.40 |
Short-term investments (Note 6) | 535.9 | 516.5 |
Accounts and other receivables, net of allowances of $5.5 and $5.4, respectively | 305.1 | 328 |
Inventories (Note 5) | 308 | 308.9 |
Deferred income taxes | 35.4 | 33.4 |
Prepaid expenses | 46 | 46.8 |
Other current assets | 77.2 | 71.8 |
Total current assets | 1,603.30 | 1,725.80 |
Long-term accounts receivable, net of allowances of $6.8 and $6.8, respectively | 5.9 | 7.3 |
Long-term investments (Note 6) | 95.2 | 21.9 |
Property, plant and equipment, net | 418.7 | 421.6 |
Goodwill | 385.4 | 385.4 |
Other intangible assets, net (Note 7) | 31.6 | 33.5 |
Deferred income taxes | 76.4 | 79 |
Other assets | 35.2 | 35.4 |
Total assets | 2,651.70 | 2,709.90 |
Current liabilities | ' | ' |
Accounts payable and accrued liabilities | 356.2 | 345.6 |
Long-term debt (Note 8) | 725.4 | 593.1 |
Other long-term liabilities | 229.3 | 226.8 |
Commitments and contingencies (Note 13) | ' | ' |
Stockholders' equity | ' | ' |
Preferred stock, $.01 par value, authorized 50.0 shares, no shares outstanding | ' | ' |
Common stock, $1.00 par value, 350.0 shares authorized, 126.4 and 126.0 shares issued, and 105.3 and 109.3 shares outstanding, respectively | 126.4 | 126 |
Additional paid-in capital | 711.7 | 671.2 |
Retained earnings | 2,091.10 | 2,030.80 |
Accumulated other comprehensive loss | -32.4 | -27.6 |
Treasury stock, at cost, 21.1 and 16.7 shares, respectively | -1,556 | -1,256 |
Total stockholders' equity | 1,340.80 | 1,544.40 |
Total liabilities and stockholders' equity | $2,651.70 | $2,709.90 |
CONSOLIDATED_CONDENSED_BALANCE1
CONSOLIDATED CONDENSED BALANCE SHEETS (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, except Per Share data, unless otherwise specified | ||
CONSOLIDATED CONDENSED BALANCE SHEETS | ' | ' |
Accounts and other receivables, allowances | $5.50 | $5.40 |
Long-term accounts receivable, allowances | $6.80 | $6.80 |
Preferred stock, par value (in dollars per share) | $0.01 | $0.01 |
Preferred stock, authorized shares | 50 | 50 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $1 | $1 |
Common stock, shares authorized | 350 | 350 |
Common stock, shares issued | 126.4 | 126 |
Common stock, shares outstanding | 105.3 | 109.3 |
Treasury stock, shares | 21.1 | 16.7 |
CONSOLIDATED_CONDENSED_STATEME
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS | ' | ' |
Net sales | $522.40 | $496.70 |
Cost of sales | 145.9 | 121 |
Gross profit | 376.5 | 375.7 |
Selling, general and administrative expenses | 197.2 | 182.4 |
Research and development expenses | 85.8 | 79.8 |
Intellectual property litigation expense (income), net (Note 3) | 5.5 | -78.1 |
Special charges (Note 4) | 7.5 | ' |
Interest expense (income), net | 3.5 | -0.2 |
Other (income) expense, net | -0.3 | 1.2 |
Income before provision for income taxes | 77.3 | 190.6 |
Provision for income taxes | 17 | 46.7 |
Net income | $60.30 | $143.90 |
Earnings per share: | ' | ' |
Basic (in dollars per share) | $0.57 | $1.26 |
Diluted (in dollars per share) | $0.56 | $1.24 |
Weighted-average number of common shares outstanding: | ' | ' |
Basic (in shares) | 106.7 | 113.9 |
Diluted (in shares) | 108.5 | 116.5 |
CONSOLIDATED_CONDENSED_STATEME1
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME | ' | ' |
Net income | $60.30 | $143.90 |
Other comprehensive loss, net of tax (Note 14) | ' | ' |
Foreign currency translation adjustments | -0.8 | -24.2 |
Unrealized (loss) gain on cash flow hedges | -4 | 10.1 |
Other comprehensive loss | -4.8 | -14.1 |
Comprehensive income | $55.50 | $129.80 |
CONSOLIDATED_CONDENSED_STATEME2
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Cash flows from operating activities | ' | ' |
Net income | $60.30 | $143.90 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 16.2 | 14.1 |
Stock-based compensation (Note 12) | 12 | 11.2 |
Excess tax benefit from stock plans | -14 | -61.6 |
Special charge (Note 4) | 7.5 | ' |
Loss (gain) on investments | 3.6 | -0.5 |
Deferred income taxes | 0.7 | 0.2 |
Other | -0.7 | 0.6 |
Changes in operating assets and liabilities: | ' | ' |
Accounts and other receivables, net | 22.7 | 5.4 |
Inventories | -0.5 | -18.7 |
Accounts payable and accrued liabilities | 20.8 | -22.1 |
Prepaid expenses and other current assets | 8.4 | 27.7 |
Other | 1.9 | 0.9 |
Net cash provided by operating activities | 138.9 | 101.1 |
Cash flows from investing activities | ' | ' |
Capital expenditures | -14.3 | -36.8 |
Purchases of held-to-maturity investments | -391.8 | -92.7 |
Proceeds from held-to-maturity investments | 296.8 | 145.2 |
Investments in trading securities, net | -10.4 | -0.1 |
Investments in unconsolidated affiliates, net | -0.7 | -1.5 |
Other | 0.6 | -0.4 |
Net cash (used in) provided by investing activities | -119.8 | 13.7 |
Cash flows from financing activities | ' | ' |
Proceeds from issuance of debt | 208.3 | 163.8 |
Payments on debt | -78.3 | -158.3 |
Purchases of treasury stock | -300 | -107.7 |
Excess tax benefit from stock plans | 14 | 61.6 |
Proceeds from stock plans | 14.2 | 13.8 |
Other | -2 | 1.9 |
Net cash used in financing activities | -143.8 | -24.9 |
Effect of currency exchange rate changes on cash and cash equivalents | ' | 0.7 |
Net (decrease) increase in cash and cash equivalents | -124.7 | 90.6 |
Cash and cash equivalents at beginning of period | 420.4 | 310.9 |
Cash and cash equivalents at end of period | 295.7 | 401.5 |
Non-cash investing and financing transactions: | ' | ' |
Capital expenditures accruals | $6.20 | $5.70 |
BASIS_OF_PRESENTATION
BASIS OF PRESENTATION | 3 Months Ended |
Mar. 31, 2014 | |
BASIS OF PRESENTATION | ' |
BASIS OF PRESENTATION | ' |
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, 2013. 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. | |
Cash Flow Statement Revision | |
In preparing the consolidated financial statements for the year ended December 31, 2013, the Company determined that it had misclassified certain accrued capital expenditures in the consolidated condensed statements of cash flows for the quarter ended March 31, 2013. The Company has evaluated and concluded that this did not result in a material misstatement of the Company's previously issued consolidated financial statements. However, the Company has elected to revise its consolidated condensed statement of cash flows for the quarter ended March 31, 2013 to correct the presentation of accrued capital expenditures, resulting in a decrease to net cash provided by investing activities (with a corresponding increase to net cash provided by operating activities) of $13.8 million. | |
Recently Adopted Accounting Standards | |
In July 2013, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on income taxes impacting the presentation of unrecognized tax benefits. The guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss or similar tax loss carryforwards, or tax credit carryforwards. The guidance was effective for annual reporting periods beginning after December 15, 2013 and interim periods therein. The adoption of this guidance did not have a material impact on the Company's consolidated condensed financial statements. | |
CHANGE_IN_ACCOUNTING_PRINCIPLE
CHANGE IN ACCOUNTING PRINCIPLE | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
CHANGE IN ACCOUNTING PRINCIPLE | ' | |||||||
CHANGE IN ACCOUNTING PRINCIPLE | ' | |||||||
2. CHANGE IN ACCOUNTING PRINCIPLE | ||||||||
Effective January 1, 2014, the Company changed its method of accounting for certain intellectual property litigation expenses related to the defense and enforcement of issued patents. Previously, the Company capitalized these legal costs if a favorable outcome in the patent defense was determined to be probable, and amortized the capitalized legal costs over the life of the related patent. As of December 31, 2013, the Company had remaining unamortized capitalized legal costs of $23.7 million, which, under the previous accounting method, would have been amortized through 2021. Under the new method of accounting, these legal costs are expensed in the period they are incurred. The Company has retrospectively adjusted the comparative financial statements of prior periods to apply this new method of accounting. | ||||||||
The Company believes this change in accounting principle is preferable because (1) due to more competitors entering the Company's key product markets and the increasing threat of complex intellectual property litigation across multiple jurisdictions, it will become more difficult for the Company to accurately assess the probability of a favorable outcome in such litigation, and (2) it will enhance the comparability of the Company's financial results with those of its peer group because it is the predominant accounting practice in the Company's industry. | ||||||||
The accompanying consolidated condensed financial statements and related notes have been adjusted to reflect the impact of this change retrospectively to all prior periods presented. The cumulative effect of the change in accounting principle was a decrease in retained earnings of $12.2 million as of January 1, 2013. The following tables present the effects of the retrospective application of the change in accounting principle (in millions): | ||||||||
As of December 31, 2013 | ||||||||
Consolidated Condensed Balance Sheet | As Reported | As Adjusted | ||||||
Other intangible assets, net | $ | 57.2 | $ | 33.5 | ||||
Deferred income taxes | 70.1 | 79 | ||||||
Total assets | 2,724.70 | 2,709.90 | ||||||
Retained earnings | 2,045.60 | 2,030.80 | ||||||
Total stockholders' equity | 1,559.20 | 1,544.40 | ||||||
Total liabilities and stockholders' equity | 2,724.70 | 2,709.90 | ||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Operations | As Reported | As Adjusted | ||||||
Cost of sales | $ | 122.2 | $ | 121 | ||||
Selling, general and administrative expenses(a) | 185.2 | 182.4 | ||||||
Special gain(a) | (83.6 | ) | — | |||||
Intellectual property litigation income, net(a) | — | (78.1 | ) | |||||
Income before provision for income taxes | 192.1 | 190.6 | ||||||
Provision for income taxes | 47.2 | 46.7 | ||||||
Net income | 144.9 | 143.9 | ||||||
Earnings per share: | ||||||||
Basic | $ | 1.27 | $ | 1.26 | ||||
Diluted | $ | 1.24 | $ | 1.24 | ||||
(a) | ||||||||
The above amounts also reflect certain reclassifications of previously reported amounts related to intellectual property litigation to conform to classifications used in the current year. | ||||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Comprehensive Income | As Reported | As Adjusted | ||||||
Net income | $ | 144.9 | $ | 143.9 | ||||
Comprehensive income | 130.8 | 129.8 | ||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Cash Flows | As Reported | As Adjusted | ||||||
Net income | $ | 144.9 | $ | 143.9 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 15.3 | 14.1 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 28.2 | 27.7 | ||||||
Other | (1.8 | ) | 0.9 |
INTELLECTUAL_PROPERTY_LITIGATI
INTELLECTUAL PROPERTY LITIGATION EXPENSE (INCOME), NET | 3 Months Ended |
Mar. 31, 2014 | |
INTELLECTUAL PROPERTY LITIGATION EXPENSE (INCOME), NET | ' |
INTELLECTUAL PROPERTY LITIGATION EXPENSE (INCOME), NET | ' |
3. INTELLECTUAL PROPERTY LITIGATION EXPENSE (INCOME), NET | |
During the three months ended March 31, 2014 and 2013, the Company incurred external legal costs related to intellectual property litigation of $5.5 million and $5.5 million, respectively. | |
In February 2013, the Company received $83.6 million from Medtronic, Inc. in satisfaction of the initial April 2010 jury award of damages for infringement of the U.S. Andersen transcatheter heart valve patent, including accrued interest. For further information, see Note 13. | |
SPECIAL_CHARGE
SPECIAL CHARGE | 3 Months Ended |
Mar. 31, 2014 | |
SPECIAL CHARGE | ' |
SPECIAL CHARGE | ' |
4. SPECIAL CHARGE | |
Settlement | |
In March 2014, the Company recorded a $7.5 million charge to settle past and future obligations related to one of its intellectual property agreements. | |
INVENTORIES
INVENTORIES | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
INVENTORIES | ' | |||||||
INVENTORIES | ' | |||||||
5. INVENTORIES | ||||||||
Inventories consisted of the following (in millions): | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Raw materials | $ | 56.1 | $ | 57.8 | ||||
Work in process | 79.2 | 82.2 | ||||||
Finished products | 172.7 | 168.9 | ||||||
| | | | | | | | |
$ | 308 | $ | 308.9 | |||||
| | | | | | | | |
| | | | | | | | |
INVESTMENTS
INVESTMENTS | 3 Months Ended | |||||||||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||||||||
6. INVESTMENTS | ||||||||||||||||||||||||||
Held-to-maturity Investments | ||||||||||||||||||||||||||
Held-to-maturity investments at the end of each period were as follows (in millions): | ||||||||||||||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||||||||||||||
Cost | Gross | Gross | Fair | Cost | Gross | Gross | Fair | |||||||||||||||||||
Unrealized | Unrealized | Value | Unrealized | Unrealized | Value | |||||||||||||||||||||
Gains | Losses | Gains | Losses | |||||||||||||||||||||||
Bank time deposits | $ | 515.8 | $ | — | $ | — | $ | 515.8 | $ | 516.5 | $ | — | $ | — | $ | 516.5 | ||||||||||
Commercial paper | 17.2 | — | — | 17.2 | — | — | — | — | ||||||||||||||||||
U.S. government and agency securities | 41.5 | — | — | 41.5 | — | — | — | — | ||||||||||||||||||
Asset-backed securities | 9.4 | — | — | 9.4 | — | — | — | — | ||||||||||||||||||
Corporate debt securities | 24.2 | — | — | 24.2 | — | — | — | — | ||||||||||||||||||
Municipal securities | 3.9 | — | — | 3.9 | — | — | — | — | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 612 | $ | — | $ | — | $ | 612 | $ | 516.5 | $ | — | $ | — | $ | 516.5 | ||||||||||
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The cost and fair value of held-to-maturity investments, by contractual maturity, as of March 31, 2014 were as follows: | ||||||||||||||||||||||||||
Cost | Fair Value | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Due in 1 year or less | $ | 535.9 | $ | 535.9 | ||||||||||||||||||||||
Due after 1 year through 5 years | 62.4 | 62.4 | ||||||||||||||||||||||||
Instruments not due at a single maturity date | 13.7 | 13.7 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
$ | 612 | $ | 612 | |||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
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Actual maturities may differ from the contractual maturities due to call or prepayment rights. | ||||||||||||||||||||||||||
Investments in Unconsolidated Affiliates | ||||||||||||||||||||||||||
The Company has a number of equity investments in privately and publicly held companies. Investments in these unconsolidated affiliates are recorded in "Long-term Investments" on the consolidated condensed balance sheets, and are as follows: | ||||||||||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Available-for-sale investments | ||||||||||||||||||||||||||
Cost | $ | 0.4 | $ | 0.4 | ||||||||||||||||||||||
Unrealized gains | 0.3 | 0.4 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Fair value of available-for-sale investments | 0.7 | 0.8 | ||||||||||||||||||||||||
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Equity method investments | ||||||||||||||||||||||||||
Cost | 14.4 | 14.1 | ||||||||||||||||||||||||
Equity in losses | (2.7 | ) | (2.7 | ) | ||||||||||||||||||||||
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Carrying value of equity method investments | 11.7 | 11.4 | ||||||||||||||||||||||||
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Cost method investments | ||||||||||||||||||||||||||
Carrying value of cost method investments | 6.7 | 9.7 | ||||||||||||||||||||||||
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Total investments in unconsolidated affiliates | $ | 19.1 | $ | 21.9 | ||||||||||||||||||||||
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During the three months ended March 31, 2014, the Company recorded an other-than-temporary impairment charge of $3.5 million related to one of its cost method investments. There were no sales of available-for-sale investments during the three months ended March 31, 2014 and 2013. | ||||||||||||||||||||||||||
OTHER_INTANGIBLE_ASSETS
OTHER INTANGIBLE ASSETS | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
7. OTHER INTANGIBLE ASSETS | ||||||||||||||||||||
Other intangible assets consisted of the following (in millions): | ||||||||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||||||||
Cost | Accumulated | Net | Cost | Accumulated | Net | |||||||||||||||
Amortization | Carrying | Amortization | Carrying | |||||||||||||||||
Value | Value | |||||||||||||||||||
Amortizable intangible assets | ||||||||||||||||||||
Patents | $ | 181.6 | $ | (165.0 | ) | $ | 16.6 | $ | 181.6 | $ | (163.5 | ) | $ | 18.1 | ||||||
Developed technology | 43.5 | (35.6 | ) | 7.9 | 43.3 | (35.1 | ) | 8.2 | ||||||||||||
Other | 10.7 | (8.2 | ) | 2.5 | 10.7 | (8.1 | ) | 2.6 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
235.8 | (208.8 | ) | 27 | 235.6 | (206.7 | ) | 28.9 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Unamortizable intangible assets | ||||||||||||||||||||
In-process research and development | 4.6 | — | 4.6 | 4.6 | — | 4.6 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
$ | 240.4 | $ | (208.8 | ) | $ | 31.6 | $ | 240.2 | $ | (206.7 | ) | $ | 33.5 | |||||||
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| | | | | | | | | | | | | | | | | | | | |
The net carrying value of patents as of December 31, 2013 has been adjusted to reflect the Company's change in its method of accounting for certain legal costs related to the defense and enforcement of issued patents. For further information, see Note 2. | ||||||||||||||||||||
Amortization expense related to other intangible assets was $2.1 million and $2.5 million for the three months ended March 31, 2014 and 2013, respectively. Estimated amortization expense for each of the years ending December 31 is as follows (in millions): | ||||||||||||||||||||
2014 | $ | 7.7 | ||||||||||||||||||
2015 | 6.6 | |||||||||||||||||||
2016 | 6.5 | |||||||||||||||||||
2017 | 6.2 | |||||||||||||||||||
2018 | 1.2 | |||||||||||||||||||
The Company expenses costs incurred to renew or extend the term of acquired intangible assets. | ||||||||||||||||||||
DEBT
DEBT | 3 Months Ended |
Mar. 31, 2014 | |
DEBT | ' |
DEBT | ' |
8. DEBT | |
In October 2013, the Company issued $600.0 million of 2.875% fixed-rate unsecured senior notes due October 15, 2018 (the "Notes"). Interest is payable semi-annually in arrears, with the first payment due in April 2014. The effective interest rate is 2.983%. Issuance costs of $5.4 million, as well as a $3.0 million discount on the Notes, are being amortized to interest expense over the term of the Notes. As of March 31, 2014, the carrying value of the Notes was $595.4 million. | |
The Company has a Four-Year Credit Agreement ("Credit Facility") that matures on July 29, 2015. The Credit Facility provides for aggregate borrowings up to $750.0 million. As of March 31, 2014, borrowings of $130.0 million were outstanding under the Credit Facility, and have been classified as long-term obligations as these borrowings are expected to be refinanced pursuant to the Credit Facility. | |
FAIR_VALUE_MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
9. FAIR VALUE MEASUREMENTS | ||||||||||||||
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, 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. Financial instruments also include notes payable. As of March 31, 2014, the fair value of the notes payable, based on Level 2 inputs, was $605.4 million. | ||||||||||||||
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company prioritizes the inputs used to determine fair values in one of the following three categories: | ||||||||||||||
Level 1—Quoted market prices in active markets for identical assets or liabilities. | ||||||||||||||
Level 2—Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly. | ||||||||||||||
Level 3—Unobservable inputs that are not corroborated by market data. | ||||||||||||||
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. | ||||||||||||||
Assets and Liabilities Measured at Fair Value on a Recurring Basis | ||||||||||||||
The following table summarizes the Company's financial instruments which are measured at fair value on a recurring basis (in millions): | ||||||||||||||
March 31, 2014 | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Assets | ||||||||||||||
Investments held for deferred compensation plans | $ | 25.4 | $ | — | $ | — | $ | 25.4 | ||||||
Available-for-sale investments | 0.7 | — | — | 0.7 | ||||||||||
Derivatives | — | 6.5 | — | 6.5 | ||||||||||
| | | | | | | | | | | | | | |
$ | 26.1 | $ | 6.5 | $ | — | $ | 32.6 | |||||||
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| | | | | | | | | | | | | | |
Liabilities | ||||||||||||||
Derivatives | $ | — | $ | 12.2 | $ | — | $ | 12.2 | ||||||
Deferred compensation plans | 25.3 | — | — | 25.3 | ||||||||||
| | | | | | | | | | | | | | |
$ | 25.3 | $ | 12.2 | $ | — | $ | 37.5 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
December 31, 2013 | ||||||||||||||
Assets | ||||||||||||||
Investments held for deferred compensation plans | $ | 15.1 | $ | — | $ | — | $ | 15.1 | ||||||
Available-for-sale investments | 0.8 | — | — | 0.8 | ||||||||||
Derivatives | — | 13.8 | — | 13.8 | ||||||||||
| | | | | | | | | | | | | | |
$ | 15.9 | $ | 13.8 | $ | — | $ | 29.7 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Liabilities | ||||||||||||||
Derivatives | $ | — | $ | 17.2 | $ | — | $ | 17.2 | ||||||
Deferred compensation plans | 15.5 | — | — | 15.5 | ||||||||||
| | | | | | | | | | | | | | |
$ | 15.5 | $ | 17.2 | $ | — | $ | 32.7 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Deferred Compensation Plans | ||||||||||||||
The Company holds investments in trading securities related to its deferred compensation plans. The investments are 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. | ||||||||||||||
Available-for-sale Investments | ||||||||||||||
The Company has a number of long-term equity investments in companies that are in various stages of development. Certain of these investments have been designated as available-for-sale. These investments are carried at fair market value based on quoted market prices and are categorized as Level 1. | ||||||||||||||
Derivative Instruments | ||||||||||||||
The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts to manage foreign currency exposures and interest rate swap agreements to manage its interest rate exposures. All derivatives contracts are recognized on the balance sheet at their fair value. The fair value of foreign currency derivative financial instruments was estimated by discounting expected cash flows using quoted market interest rates and foreign exchange rates. The fair value of the interest rate swap agreements was determined based on a discounted cash flow analysis reflecting the contractual terms of the agreements and the 6-month London interbank offered rate forward interest rate curve. Judgment was employed in interpreting market data to develop estimates of fair value; accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts. The derivative instruments are categorized as Level 2. | ||||||||||||||
DERIVATIVE_INSTRUMENTS_AND_HED
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | ' | |||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | ' | |||||||||||||||||||
10. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | ||||||||||||||||||||
The Company uses derivative financial instruments to manage its currency exchange rate risk and its interest rate risk, as summarized below. Notional amounts are stated in United States dollar equivalents at spot exchange rates at the respective dates. | ||||||||||||||||||||
Notional Amount | ||||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||
Foreign currency forward exchange contracts | $ | 793.2 | $ | 805.5 | ||||||||||||||||
Interest rate swap agreements | $ | 300 | $ | 300 | ||||||||||||||||
The Company uses derivative financial instruments to manage interest rate and foreign currency risks. It is the Company's policy not to enter into derivative financial instruments for speculative purposes. The Company uses interest rate swaps to convert a portion of its fixed-rate debt into variable-rate debt. These interest rate swaps are designated as fair value hedges and meet the shortcut method requirements under the accounting standards for derivatives and hedging. Accordingly, changes in the fair values of the interest rate swaps are considered to exactly offset changes in the fair value of the underlying long-term debt. The Company uses foreign currency forward exchange 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 13 months. These foreign currency forward exchange 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 are denominated in currencies of major industrial countries, principally the Euro and the Japanese yen. | ||||||||||||||||||||
All derivative financial instruments are recognized at fair value in the consolidated condensed balance sheets. For each derivative instrument that is designated and effective as a fair value hedge, the gain or loss on the derivative is recognized immediately to earnings, and offsets the loss or gain on the underlying hedged item. The gain or loss on fair value hedges is classified in net interest expense, as they hedge the interest rate risk associated with the Company's fixed-rate debt. The Company reports in "Accumulated Other Comprehensive Loss" 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, 2014 and 2013, 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. | ||||||||||||||||||||
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. The master-netting agreements provide for the net settlement of all contracts through a single payment in a single currency in the event of default, as defined by the agreements. | ||||||||||||||||||||
The following table presents the location and fair value amounts of derivative instruments reported in the consolidated condensed balance sheets (in millions): | ||||||||||||||||||||
Fair Value | ||||||||||||||||||||
Derivatives designated as hedging | Balance Sheet | March 31, | December 31, | |||||||||||||||||
instruments | Location | 2014 | 2013 | |||||||||||||||||
Assets | ||||||||||||||||||||
Foreign currency contracts | Other current assets | $ | 6.5 | $ | 13.8 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Foreign currency contracts | Accrued and other liabilities | $ | 10.3 | $ | 13.2 | |||||||||||||||
Interest rate swap agreements | Other long-term liabilities | $ | 1.9 | $ | 4 | |||||||||||||||
The following table presents the effect of master-netting agreements and rights of offset on the consolidated condensed balance sheets (in millions): | ||||||||||||||||||||
Gross Amounts Not | ||||||||||||||||||||
Offset in the | ||||||||||||||||||||
Gross | Consolidated Balance | |||||||||||||||||||
Amounts | Sheet | |||||||||||||||||||
Offset in the | ||||||||||||||||||||
Consolidated | Net Amounts | |||||||||||||||||||
Balance Sheet | Presented in the | |||||||||||||||||||
Consolidated | ||||||||||||||||||||
March 31, 2014 | Gross | Balance Sheet | Financial | Cash | Net | |||||||||||||||
Amounts | Instruments | Collateral | Amount | |||||||||||||||||
Received | ||||||||||||||||||||
Derivative Assets | ||||||||||||||||||||
Foreign currency contracts | $ | 6.5 | $ | — | $ | 6.5 | $ | (4.0 | ) | $ | — | $ | 2.5 | |||||||
Derivative Liabilities | ||||||||||||||||||||
Foreign currency contracts | $ | 10.3 | $ | — | $ | 10.3 | $ | (4.0 | ) | $ | — | $ | 6.3 | |||||||
Interest rate swap agreements | $ | 1.9 | $ | — | $ | 1.9 | $ | — | $ | — | $ | 1.9 | ||||||||
December 31, 2013 | ||||||||||||||||||||
Derivative Assets | ||||||||||||||||||||
Foreign currency contracts | $ | 13.8 | $ | — | $ | 13.8 | $ | (9.5 | ) | $ | — | $ | 4.3 | |||||||
Derivative Liabilities | ||||||||||||||||||||
Foreign currency contracts | $ | 13.2 | $ | — | $ | 13.2 | $ | (9.5 | ) | $ | — | $ | 3.7 | |||||||
Interest rate swap agreements | $ | 4 | $ | — | $ | 4 | $ | — | $ | — | $ | 4 | ||||||||
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) | Amount of Gain or (Loss) | |||||||||||||||||||
Recognized in OCI | Reclassified from | |||||||||||||||||||
on Derivative | Accumulated OCI | |||||||||||||||||||
(Effective Portion) | into Income | |||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||
March 31, | Location of Gain or | March 31, | ||||||||||||||||||
(Loss) Reclassified from | ||||||||||||||||||||
Accumulated OCI | ||||||||||||||||||||
Derivatives in cash flow hedging | 2014 | 2013 | into Income | 2014 | 2013 | |||||||||||||||
relationships | ||||||||||||||||||||
Foreign currency contracts | $ | (1.7 | ) | $ | 21.7 | Cost of sales | $ | 5 | $ | 5.2 | ||||||||||
Amount of Gain or (Loss) | ||||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivative | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Location of Gain or (Loss) | March 31, | |||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivatives in fair value hedging | Derivative | 2014 | 2013 | |||||||||||||||||
relationships | ||||||||||||||||||||
Interest rate swap agreements | Interest expense (income), net | $ | 2.1 | $ | — | |||||||||||||||
The gains on the interest rate swap agreements are fully offset by the changes in the fair value of the fixed-rate debt being hedged. | ||||||||||||||||||||
Amount of Gain or (Loss) | ||||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivative | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Location of Gain or (Loss) | March 31, | |||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivatives not designated as hedging | Derivative | 2014 | 2013 | |||||||||||||||||
instruments | ||||||||||||||||||||
Foreign currency contracts | Other (income) expense, net | $ | (0.7 | ) | $ | 9.3 | ||||||||||||||
The Company expects that during the next twelve months it will reclassify to earnings a $2.9 million gain currently recorded in "Accumulated Other Comprehensive Loss." | ||||||||||||||||||||
DEFINED_BENEFIT_PLANS
DEFINED BENEFIT PLANS | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
DEFINED BENEFIT PLANS | ' | |||||||
DEFINED BENEFIT PLANS | ' | |||||||
11. DEFINED BENEFIT PLANS | ||||||||
The components of net periodic benefit cost for the three months ended March 31, 2014 and 2013 were as follows (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Service cost | $ | 1.7 | $ | 2 | ||||
Interest cost | 0.6 | 0.5 | ||||||
Expected return on plan assets | (0.4 | ) | (0.3 | ) | ||||
Amortization of actuarial loss, prior service credit and other | 0.1 | 0.2 | ||||||
| | | | | | | | |
Net periodic benefit cost | $ | 2 | $ | 2.4 | ||||
| | | | | | | | |
| | | | | | | | |
STOCKBASED_COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
STOCK-BASED COMPENSATION | ' | |||||||
12. STOCK-BASED COMPENSATION | ||||||||
Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three months ended March 31, 2014 and 2013 was as follows (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Cost of sales | $ | 1.5 | $ | 1.4 | ||||
Selling, general and administrative expenses | 8.8 | 8.2 | ||||||
Research and development expenses | 1.7 | 1.6 | ||||||
| | | | | | | | |
Total stock-based compensation expense | $ | 12 | $ | 11.2 | ||||
| | | | | | | | |
| | | | | | | | |
At March 31, 2014, the total remaining compensation cost related to nonvested stock options, restricted stock units, market-based restricted stock units and employee stock purchase plan ("ESPP") subscription awards amounted to $73.4 million, which will be amortized on a straight-line basis over the weighted-average remaining requisite service period of 29 months. | ||||||||
Fair Value Disclosures | ||||||||
The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the following periods: | ||||||||
Option Awards | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Average risk-free interest rate | 1.5 | % | 0.8 | % | ||||
Expected dividend yield | None | None | ||||||
Expected volatility | 30.8 | % | 31.2 | % | ||||
Expected term (years) | 4.9 | 4.9 | ||||||
Fair value, per share | $ | 20 | $ | 23.3 | ||||
The Black-Scholes option pricing model was used with the following weighted-average assumptions for ESPP subscriptions granted during the following periods: | ||||||||
ESPP | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Average risk-free interest rate | 0.1 | % | 0.1 | % | ||||
Expected dividend yield | None | None | ||||||
Expected volatility | 31.9 | % | 36 | % | ||||
Expected term (years) | 0.7 | 0.6 | ||||||
Fair value, per share | $ | 16.55 | $ | 23.4 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2014 | |
COMMITMENTS AND CONTINGENCIES | ' |
COMMITMENTS AND CONTINGENCIES | ' |
13. COMMITMENTS AND CONTINGENCIES | |
In February 2008, Edwards Lifesciences filed a lawsuit against CoreValve, Inc. in the U.S. District Court for the District of Delaware ("District Court") alleging that its ReValving System infringes three of Edwards' U.S. Andersen patents, later narrowed to one patent ("the '552 patent"). Medtronic, Inc. ("Medtronic") acquired CoreValve, Inc. ("Medtronic CoreValve") in April 2009. In April 2010, a federal jury found the '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 before trial. In November 2012, the U.S. Court of Appeals for the Federal Circuit ("Court of Appeals") affirmed the April 2010 federal jury decision that Medtronic CoreValve is willfully infringing the '552 patent and ordered the District Court to reconsider Edwards' request for a permanent injunction that would prohibit the manufacture or sale of the CoreValve System in the United States. The Court of Appeals also affirmed the validity of the '552 patent and the federal jury's verdict awarding an initial payment of $73.9 million in damages to Edwards, which covers infringement through early 2010. In February 2013, the Court of Appeals issued a mandate affirming the judgment of the District Court and directing it to reconsider its prior denial of Edwards' request for a permanent injunction and to assess additional damages for the period after the date of the jury award. In February 2013, Edwards received a payment of $83.6 million from Medtronic in satisfaction of the April 2010 jury award of damages for infringement, including accrued interest, through April 2010 (see Note 3). In October 2013, the U.S. Supreme Court denied Medtronic's request for review of the Court of Appeals decision. In April 2014, the District Court granted a preliminary injunction limiting the sale of Medtronic's CoreValve system in the United States. Medtronic has appealed the District Court's ruling and the Court of Appeals has postponed the injunction while it considers the matter. The Company's requests for damages since 2010, enhanced damages, and attorneys fees remain pending at the District Court. | |
A second lawsuit is pending in the same District Court against Medtronic CoreValve and Medtronic alleging infringement of two of Edwards' U.S. Andersen patents. | |
In June 2011, Medtronic filed a lawsuit in the U.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. Edwards subsequently added two more patents to its counterclaim. In February and March 2012, the United States Patent and Trademark Office granted Edwards' requests 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 U.S. District Court for the Central District of California alleging that the Edwards SAPIEN transcatheter heart valve infringes a Medtronic CoreValve patent. Edwards 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, and in January 2014, a federal jury found Edwards' patent to be valid and found that Medtronic CoreValve willfully infringes it. The jury also awarded Edwards $393.6 million in damages based on Medtronic's worldwide sales of its infringing devices. As to Medtronic CoreValve's original lawsuit in California, in November 2012, the California court ruled that the Medtronic CoreValve patent is invalid and dismissed the lawsuit in favor of Edwards. Medtronic filed an appeal, and in January 2014 the Court of Appeals confirmed that Medtronic CoreValve's patent is invalid. | |
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 the Edwards SAPIEN transcatheter heart valve in the United States infringe two Medtronic patents relating to methods of pacing the heart. The Company is vigorously defending this lawsuit and trial is scheduled for August 2014. | |
In August 2012, Edwards filed a lawsuit against Medtronic in the German District Court of Mannheim alleging that Medtronic's CoreValve and Evolut valves infringe two of Edwards' transcatheter valve patents. These patents were issued by the European Patent Office ("EPO") and were validated as national patents in various European countries, including Germany. In April 2013, Edwards added a third transcatheter valve patent to the lawsuit. An infringement hearing was held in April 2013 for one of the original patents, and the Court ruled that the Medtronic valves did not infringe that patent. Edwards has appealed this decision. In the opposition to the first patent, the EPO determined that patent to be invalid in December 2013. Edwards has appealed this decision. The hearing for the second patent was held in May 2013 and the Court subsequently ruled that the Medtronic valves infringe that patent. Enforcement of this decision was stayed pending validity proceedings at the EPO, which later found the patent to be invalid. Edwards intends to appeal this decision. A hearing for the opposition to the third patent is scheduled in June 2014. | |
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 related to matters other than those specifically described above 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. | |
ACCUMULATED_OTHER_COMPREHENSIV
ACCUMULATED OTHER COMPREHENSIVE LOSS | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ' | ||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ' | ||||||||||||||||
14. ACCUMULATED OTHER COMPREHENSIVE LOSS | |||||||||||||||||
Presented below is a summary of activity for each component of "Accumulated Other Comprehensive Loss" for the three months ended March 31, 2014. | |||||||||||||||||
Foreign | Unrealized Gain | Unrealized Gain | Unrealized | Total | |||||||||||||
Currency | (Loss) on Cash | on Available-for- | Pension | Accumulated | |||||||||||||
Translation | Flow Hedges | sale Investments | Costs | Other | |||||||||||||
Adjustments | Comprehensive | ||||||||||||||||
Loss | |||||||||||||||||
(in millions) | |||||||||||||||||
December 31, 2013 | $ | (20.2 | ) | $ | 3.5 | $ | 0.3 | $ | (11.2 | ) | $ | (27.6 | ) | ||||
Other comprehensive loss before reclassifications | (0.8 | ) | (1.7 | ) | (0.1 | ) | — | (2.6 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (5.0 | ) | — | — | (5.0 | ) | ||||||||||
Deferred income tax benefit | — | 2.7 | 0.1 | — | 2.8 | ||||||||||||
| | | | | | | | | | | | | | | | | |
March 31, 2014 | $ | (21.0 | ) | $ | (0.5 | ) | $ | 0.3 | $ | (11.2 | ) | $ | (32.4 | ) | |||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
The following table provides information about amounts reclassified from "Accumulated Other Comprehensive Loss" (in millions): | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | Affected Line on Consolidated Condensed | ||||||||||||||||
Details about Accumulated Other | 2014 | 2013 | Statements of Operations | ||||||||||||||
Comprehensive Loss Components | |||||||||||||||||
Gain on cash flow hedges | $ | 5 | $ | 5.2 | Cost of sales | ||||||||||||
(1.9 | ) | (1.9 | ) | Provision for income taxes | |||||||||||||
| | | | | | | | | |||||||||
$ | 3.1 | $ | 3.3 | Net of tax | |||||||||||||
| | | | | | | | | |||||||||
| | | | | | | | | |||||||||
EARNINGS_PER_SHARE
EARNINGS PER SHARE | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
EARNINGS PER SHARE | ' | |||||||
EARNINGS PER SHARE | ' | |||||||
15. 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, market-based restricted stock units, and in-the-money options. The dilutive impact of the restricted stock units, market-based restricted stock units, and in-the-money options is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the amount that the employee must pay for exercising stock options, the amount of compensation expense for future service that the Company has not yet recognized, and the amount of tax benefits that would be recorded in "Additional Paid-in Capital" when the award becomes deductible are assumed to be used to repurchase shares. Potential common share equivalents have been excluded where their inclusion would be anti-dilutive. | ||||||||
The table below presents the computation of basic and diluted earnings per share (in millions, except for per share information): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Basic: | ||||||||
Net income | $ | 60.3 | $ | 143.9 | ||||
| | | | | | | | |
| | | | | | | | |
Weighted-average shares outstanding | 106.7 | 113.9 | ||||||
| | | | | | | | |
| | | | | | | | |
Basic earnings per share | $ | 0.57 | $ | 1.26 | ||||
| | | | | | | | |
| | | | | | | | |
Diluted: | ||||||||
Net income | $ | 60.3 | $ | 143.9 | ||||
| | | | | | | | |
| | | | | | | | |
Weighted-average shares outstanding | 106.7 | 113.9 | ||||||
Dilutive effect of stock plans | 1.8 | 2.6 | ||||||
| | | | | | | | |
Dilutive weighted-average shares outstanding | 108.5 | 116.5 | ||||||
| | | | | | | | |
| | | | | | | | |
Diluted earnings per share | $ | 0.56 | $ | 1.24 | ||||
| | | | | | | | |
| | | | | | | | |
Stock options, restricted stock units, and market-based restricted stock units to purchase 3.7 million and 2.2 million shares for the three months ended March 31, 2014 and 2013, respectively, were outstanding, but were not included in the computation of diluted earnings per share because the effect would have been anti-dilutive. | ||||||||
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2014 | |
INCOME TAXES | ' |
INCOME TAXES | ' |
16. INCOME TAXES | |
The Company's effective income tax rates were 22.0% and 24.5% for the three months ended March 31, 2014 and 2013, respectively. | |
The federal research credit expired on December 31, 2013 and has not been reinstated as of March 31, 2014. Therefore, the effective income tax rate for the three months ended March 31, 2014 was calculated without an assumed benefit for the federal research credit. The effective income tax rate for the three months ended March 31, 2013 included (1) $31.3 million of tax expense associated with the $83.6 million litigation award received from Medtronic in February 2013 (see Note 3) and (2) an $8.4 million benefit for the full year 2012 federal research credit, which was reinstated on January 2, 2013. | |
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. | |
As of March 31, 2014 and December 31, 2013, the liability for income taxes associated with uncertain tax positions was $133.2 million and $127.7 million, respectively. The Company estimates that these liabilities would be reduced by $31.3 million and $30.9 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 $101.9 million and $96.8 million, respectively, if not required, would favorably affect the Company's effective tax rate. | |
At March 31, 2014, all material state, local and foreign income tax matters have been concluded for years through 2006. During the third quarter of 2013, the Internal Revenue Service ("IRS") completed its fieldwork for the 2009 and 2010 tax years. The case is currently in suspense pending finalization of an Advance Pricing Agreement ("APA") and Joint Committee of Taxation approval. The IRS began its examination of the 2011 and 2012 tax years during the fourth quarter of 2013. The Company has also entered into an APA process between the Switzerland and United States governments for the years 2009 through 2013 covering transfer pricing matters. The transfer pricing matters are significant to the Company's consolidated condensed financial statements, and the final outcome of the negotiations between the two governments is uncertain. | |
SEGMENT_INFORMATION
SEGMENT INFORMATION | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
SEGMENT INFORMATION | ' | |||||||
SEGMENT INFORMATION | ' | |||||||
17. 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. | ||||||||
The Company's geographic segments are reported based on the financial information provided to the Chief Operating Decision Maker (the Chief Executive Officer). The Company evaluates the performance of its geographic segments based on net sales and income before provision for income taxes ("pre-tax income"). The accounting policies of the segments are substantially the same as those described in Note 2 of the Company's consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2013. Segment net sales and segment pre-tax income are based on internally derived standard foreign exchange rates, which may differ from year to year, and do not include inter-segment profits. Because of the interdependence of the reportable segments, the operating profit as presented may not be representative of the geographical distribution that would occur if the segments were not interdependent. Net sales by geographic area are based on the location of the customer. | ||||||||
Certain items are maintained at the corporate level and are not allocated to the segments. The non-allocated items include net interest expense, global marketing expenses, corporate research and development expenses, manufacturing variances, corporate headquarters costs, special gains and charges, stock-based compensation, foreign currency hedging activities, certain litigation costs and most of the Company's amortization expense. Although most of the Company's depreciation expense is included in segment pre-tax income, due to the Company's methodology for cost build-up, it is impractical to determine the amount of depreciation expense included in each segment, and, therefore, a portion is maintained at the corporate level. The Company neither discretely allocates assets to its operating segments, nor evaluates the operating segments using discrete asset information. | ||||||||
The table below presents information about Edwards Lifesciences' reportable segments (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Segment Net Sales | ||||||||
United States | $ | 222.4 | $ | 227.9 | ||||
Europe | 175.6 | 155.5 | ||||||
Japan | 60.2 | 67.3 | ||||||
Rest of World | 63.7 | 54.5 | ||||||
| | | | | | | | |
Total segment net sales | $ | 521.9 | $ | 505.2 | ||||
| | | | | | | | |
| | | | | | | | |
Segment Pre-tax Income | ||||||||
United States | $ | 118.4 | $ | 132.8 | ||||
Europe | 80.2 | 72.5 | ||||||
Japan | 27.6 | 33.5 | ||||||
Rest of World | 16.3 | 12.5 | ||||||
| | | | | | | | |
Total segment pre-tax income | $ | 242.5 | $ | 251.3 | ||||
| | | | | | | | |
| | | | | | | | |
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 | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Net Sales Reconciliation | ||||||||
Segment net sales | $ | 521.9 | $ | 505.2 | ||||
Foreign currency | 0.5 | (8.5 | ) | |||||
| | | | | | | | |
Consolidated net sales | $ | 522.4 | $ | 496.7 | ||||
| | | | | | | | |
| | | | | | | | |
Pre-tax Income Reconciliation | ||||||||
Segment pre-tax income | $ | 242.5 | $ | 251.3 | ||||
Unallocated amounts: | ||||||||
Corporate items | (154.6 | ) | (139.7 | ) | ||||
Special charge (Note 4) | (7.5 | ) | — | |||||
Intellectual property litigation (expense) income, net (Note 3) | (5.5 | ) | 78.1 | |||||
Interest (expense) income, net | (3.5 | ) | 0.2 | |||||
Foreign currency | 5.9 | 0.7 | ||||||
| | | | | | | | |
Consolidated pre-tax income | $ | 77.3 | $ | 190.6 | ||||
| | | | | | | | |
| | | | | | | | |
Enterprise-Wide Information | ||||||||
Enterprise-wide information is based on actual foreign exchange rates used in the Company's consolidated financial statements. | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
(in millions) | ||||||||
Net Sales by Geographic Area | ||||||||
United States | $ | 222.4 | $ | 227.9 | ||||
Europe | 180.3 | 154.5 | ||||||
Japan | 58.7 | 60 | ||||||
Rest of World | 61 | 54.3 | ||||||
| | | | | | | | |
$ | 522.4 | $ | 496.7 | |||||
| | | | | | | | |
| | | | | | | | |
Net Sales by Major Product and Service Area | ||||||||
Surgical Heart Valve Therapy | $ | 202.6 | $ | 198.1 | ||||
Transcatheter Heart Valves | 189.2 | 169.7 | ||||||
Critical Care | 130.6 | 128.9 | ||||||
| | | | | | | | |
$ | 522.4 | $ | 496.7 | |||||
| | | | | | | | |
| | | | | | | | |
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in millions) | ||||||||
Long-lived Tangible Assets by Geographic Area | ||||||||
United States | $ | 306.2 | $ | 308.2 | ||||
Europe | 41.9 | 40.9 | ||||||
Japan | 10.4 | 10.8 | ||||||
Rest of World | 95.4 | 97.1 | ||||||
| | | | | | | | |
$ | 453.9 | $ | 457 | |||||
| | | | | | | | |
| | | | | | | | |
BASIS_OF_PRESENTATION_Policies
BASIS OF PRESENTATION (Policies) | 3 Months Ended |
Mar. 31, 2014 | |
BASIS OF PRESENTATION | ' |
Cash Flow Statement Revision | ' |
Cash Flow Statement Revision | |
In preparing the consolidated financial statements for the year ended December 31, 2013, the Company determined that it had misclassified certain accrued capital expenditures in the consolidated condensed statements of cash flows for the quarter ended March 31, 2013. The Company has evaluated and concluded that this did not result in a material misstatement of the Company's previously issued consolidated financial statements. However, the Company has elected to revise its consolidated condensed statement of cash flows for the quarter ended March 31, 2013 to correct the presentation of accrued capital expenditures, resulting in a decrease to net cash provided by investing activities (with a corresponding increase to net cash provided by operating activities) of $13.8 million. | |
Recently Adopted Accounting Standards | ' |
Recently Adopted Accounting Standards | |
In July 2013, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on income taxes impacting the presentation of unrecognized tax benefits. The guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss or similar tax loss carryforwards, or tax credit carryforwards. The guidance was effective for annual reporting periods beginning after December 15, 2013 and interim periods therein. The adoption of this guidance did not have a material impact on the Company's consolidated condensed financial statements. | |
CHANGE_IN_ACCOUNTING_PRINCIPLE1
CHANGE IN ACCOUNTING PRINCIPLE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
CHANGE IN ACCOUNTING PRINCIPLE | ' | |||||||
Schedule of effects of retrospective application of change in accounting principle | ' | |||||||
The following tables present the effects of the retrospective application of the change in accounting principle (in millions): | ||||||||
As of December 31, 2013 | ||||||||
Consolidated Condensed Balance Sheet | As Reported | As Adjusted | ||||||
Other intangible assets, net | $ | 57.2 | $ | 33.5 | ||||
Deferred income taxes | 70.1 | 79 | ||||||
Total assets | 2,724.70 | 2,709.90 | ||||||
Retained earnings | 2,045.60 | 2,030.80 | ||||||
Total stockholders' equity | 1,559.20 | 1,544.40 | ||||||
Total liabilities and stockholders' equity | 2,724.70 | 2,709.90 | ||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Operations | As Reported | As Adjusted | ||||||
Cost of sales | $ | 122.2 | $ | 121 | ||||
Selling, general and administrative expenses(a) | 185.2 | 182.4 | ||||||
Special gain(a) | (83.6 | ) | — | |||||
Intellectual property litigation income, net(a) | — | (78.1 | ) | |||||
Income before provision for income taxes | 192.1 | 190.6 | ||||||
Provision for income taxes | 47.2 | 46.7 | ||||||
Net income | 144.9 | 143.9 | ||||||
Earnings per share: | ||||||||
Basic | $ | 1.27 | $ | 1.26 | ||||
Diluted | $ | 1.24 | $ | 1.24 | ||||
(a) | ||||||||
The above amounts also reflect certain reclassifications of previously reported amounts related to intellectual property litigation to conform to classifications used in the current year. | ||||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Comprehensive Income | As Reported | As Adjusted | ||||||
Net income | $ | 144.9 | $ | 143.9 | ||||
Comprehensive income | 130.8 | 129.8 | ||||||
Three Months Ended | ||||||||
March 31, 2013 | ||||||||
Consolidated Condensed Statement of Cash Flows | As Reported | As Adjusted | ||||||
Net income | $ | 144.9 | $ | 143.9 | ||||
Adjustments to reconcile net income to cash provided by operating activities: | ||||||||
Depreciation and amortization | 15.3 | 14.1 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 28.2 | 27.7 | ||||||
Other | (1.8 | ) | 0.9 |
INVENTORIES_Tables
INVENTORIES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
INVENTORIES | ' | |||||||
Schedule of inventories | ' | |||||||
Inventories consisted of the following (in millions): | ||||||||
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
Raw materials | $ | 56.1 | $ | 57.8 | ||||
Work in process | 79.2 | 82.2 | ||||||
Finished products | 172.7 | 168.9 | ||||||
| | | | | | | | |
$ | 308 | $ | 308.9 | |||||
| | | | | | | | |
| | | | | | | | |
INVESTMENTS_Tables
INVESTMENTS (Tables) | 3 Months Ended | |||||||||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||||||||
INVESTMENTS | ' | |||||||||||||||||||||||||
Schedule of held-to-maturity investments | ' | |||||||||||||||||||||||||
Held-to-maturity investments at the end of each period were as follows (in millions): | ||||||||||||||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||||||||||||||
Cost | Gross | Gross | Fair | Cost | Gross | Gross | Fair | |||||||||||||||||||
Unrealized | Unrealized | Value | Unrealized | Unrealized | Value | |||||||||||||||||||||
Gains | Losses | Gains | Losses | |||||||||||||||||||||||
Bank time deposits | $ | 515.8 | $ | — | $ | — | $ | 515.8 | $ | 516.5 | $ | — | $ | — | $ | 516.5 | ||||||||||
Commercial paper | 17.2 | — | — | 17.2 | — | — | — | — | ||||||||||||||||||
U.S. government and agency securities | 41.5 | — | — | 41.5 | — | — | — | — | ||||||||||||||||||
Asset-backed securities | 9.4 | — | — | 9.4 | — | — | — | — | ||||||||||||||||||
Corporate debt securities | 24.2 | — | — | 24.2 | — | — | — | — | ||||||||||||||||||
Municipal securities | 3.9 | — | — | 3.9 | — | — | — | — | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Total | $ | 612 | $ | — | $ | — | $ | 612 | $ | 516.5 | $ | — | $ | — | $ | 516.5 | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Schedule of cost and fair value of held-to-maturity investments, by contractual maturity | ' | |||||||||||||||||||||||||
Cost | Fair Value | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Due in 1 year or less | $ | 535.9 | $ | 535.9 | ||||||||||||||||||||||
Due after 1 year through 5 years | 62.4 | 62.4 | ||||||||||||||||||||||||
Instruments not due at a single maturity date | 13.7 | 13.7 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
$ | 612 | $ | 612 | |||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Schedule of investments in unconsolidated affiliates | ' | |||||||||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||||||||
2014 | 2013 | |||||||||||||||||||||||||
(in millions) | ||||||||||||||||||||||||||
Available-for-sale investments | ||||||||||||||||||||||||||
Cost | $ | 0.4 | $ | 0.4 | ||||||||||||||||||||||
Unrealized gains | 0.3 | 0.4 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Fair value of available-for-sale investments | 0.7 | 0.8 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Equity method investments | ||||||||||||||||||||||||||
Cost | 14.4 | 14.1 | ||||||||||||||||||||||||
Equity in losses | (2.7 | ) | (2.7 | ) | ||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Carrying value of equity method investments | 11.7 | 11.4 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Cost method investments | ||||||||||||||||||||||||||
Carrying value of cost method investments | 6.7 | 9.7 | ||||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
Total investments in unconsolidated affiliates | $ | 19.1 | $ | 21.9 | ||||||||||||||||||||||
| | | | | | | | |||||||||||||||||||
| | | | | | | | |||||||||||||||||||
OTHER_INTANGIBLE_ASSETS_Tables
OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
OTHER INTANGIBLE ASSETS | ' | |||||||||||||||||||
Schedule of other intangible assets | ' | |||||||||||||||||||
Other intangible assets consisted of the following (in millions): | ||||||||||||||||||||
March 31, 2014 | December 31, 2013 | |||||||||||||||||||
Cost | Accumulated | Net | Cost | Accumulated | Net | |||||||||||||||
Amortization | Carrying | Amortization | Carrying | |||||||||||||||||
Value | Value | |||||||||||||||||||
Amortizable intangible assets | ||||||||||||||||||||
Patents | $ | 181.6 | $ | (165.0 | ) | $ | 16.6 | $ | 181.6 | $ | (163.5 | ) | $ | 18.1 | ||||||
Developed technology | 43.5 | (35.6 | ) | 7.9 | 43.3 | (35.1 | ) | 8.2 | ||||||||||||
Other | 10.7 | (8.2 | ) | 2.5 | 10.7 | (8.1 | ) | 2.6 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | |
235.8 | (208.8 | ) | 27 | 235.6 | (206.7 | ) | 28.9 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | |
Unamortizable intangible assets | ||||||||||||||||||||
In-process research and development | 4.6 | — | 4.6 | 4.6 | — | 4.6 | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | |
$ | 240.4 | $ | (208.8 | ) | $ | 31.6 | $ | 240.2 | $ | (206.7 | ) | $ | 33.5 | |||||||
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | |
Schedule of estimated amortization expense | ' | |||||||||||||||||||
Estimated amortization expense for each of the years ending December 31 is as follows (in millions): | ||||||||||||||||||||
2014 | $ | 7.7 | ||||||||||||||||||
2015 | 6.6 | |||||||||||||||||||
2016 | 6.5 | |||||||||||||||||||
2017 | 6.2 | |||||||||||||||||||
2018 | 1.2 |
FAIR_VALUE_MEASUREMENTS_Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended | |||||||||||||
Mar. 31, 2014 | ||||||||||||||
FAIR VALUE MEASUREMENTS | ' | |||||||||||||
Summary of financial instruments measured at fair value on a recurring basis | ' | |||||||||||||
The following table summarizes the Company's financial instruments which are measured at fair value on a recurring basis (in millions): | ||||||||||||||
March 31, 2014 | Level 1 | Level 2 | Level 3 | Total | ||||||||||
Assets | ||||||||||||||
Investments held for deferred compensation plans | $ | 25.4 | $ | — | $ | — | $ | 25.4 | ||||||
Available-for-sale investments | 0.7 | — | — | 0.7 | ||||||||||
Derivatives | — | 6.5 | — | 6.5 | ||||||||||
| | | | | | | | | | | | | | |
$ | 26.1 | $ | 6.5 | $ | — | $ | 32.6 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Liabilities | ||||||||||||||
Derivatives | $ | — | $ | 12.2 | $ | — | $ | 12.2 | ||||||
Deferred compensation plans | 25.3 | — | — | 25.3 | ||||||||||
| | | | | | | | | | | | | | |
$ | 25.3 | $ | 12.2 | $ | — | $ | 37.5 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
December 31, 2013 | ||||||||||||||
Assets | ||||||||||||||
Investments held for deferred compensation plans | $ | 15.1 | $ | — | $ | — | $ | 15.1 | ||||||
Available-for-sale investments | 0.8 | — | — | 0.8 | ||||||||||
Derivatives | — | 13.8 | — | 13.8 | ||||||||||
| | | | | | | | | | | | | | |
$ | 15.9 | $ | 13.8 | $ | — | $ | 29.7 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Liabilities | ||||||||||||||
Derivatives | $ | — | $ | 17.2 | $ | — | $ | 17.2 | ||||||
Deferred compensation plans | 15.5 | — | — | 15.5 | ||||||||||
| | | | | | | | | | | | | | |
$ | 15.5 | $ | 17.2 | $ | — | $ | 32.7 | |||||||
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
DERIVATIVE_INSTRUMENTS_AND_HED1
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Tables) | 3 Months Ended | |||||||||||||||||||
Mar. 31, 2014 | ||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | ' | |||||||||||||||||||
Summary of derivative financial instruments used to manage currency exchange rate risk and interest rate risk | ' | |||||||||||||||||||
Notional Amount | ||||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||
2014 | 2013 | |||||||||||||||||||
(in millions) | ||||||||||||||||||||
Foreign currency forward exchange contracts | $ | 793.2 | $ | 805.5 | ||||||||||||||||
Interest rate swap agreements | $ | 300 | $ | 300 | ||||||||||||||||
Schedule of location and fair value amounts of derivative instruments reported in the consolidated condensed balance sheets | ' | |||||||||||||||||||
The following table presents the location and fair value amounts of derivative instruments reported in the consolidated condensed balance sheets (in millions): | ||||||||||||||||||||
Fair Value | ||||||||||||||||||||
Derivatives designated as hedging | Balance Sheet | March 31, | December 31, | |||||||||||||||||
instruments | Location | 2014 | 2013 | |||||||||||||||||
Assets | ||||||||||||||||||||
Foreign currency contracts | Other current assets | $ | 6.5 | $ | 13.8 | |||||||||||||||
Liabilities | ||||||||||||||||||||
Foreign currency contracts | Accrued and other liabilities | $ | 10.3 | $ | 13.2 | |||||||||||||||
Interest rate swap agreements | Other long-term liabilities | $ | 1.9 | $ | 4 | |||||||||||||||
Schedule of effect of master-netting agreements and rights of offset on the consolidated condensed balance sheets | ' | |||||||||||||||||||
The following table presents the effect of master-netting agreements and rights of offset on the consolidated condensed balance sheets (in millions): | ||||||||||||||||||||
Gross Amounts Not | ||||||||||||||||||||
Offset in the | ||||||||||||||||||||
Gross | Consolidated Balance | |||||||||||||||||||
Amounts | Sheet | |||||||||||||||||||
Offset in the | ||||||||||||||||||||
Consolidated | Net Amounts | |||||||||||||||||||
Balance Sheet | Presented in the | |||||||||||||||||||
Consolidated | ||||||||||||||||||||
March 31, 2014 | Gross | Balance Sheet | Financial | Cash | Net | |||||||||||||||
Amounts | Instruments | Collateral | Amount | |||||||||||||||||
Received | ||||||||||||||||||||
Derivative Assets | ||||||||||||||||||||
Foreign currency contracts | $ | 6.5 | $ | — | $ | 6.5 | $ | (4.0 | ) | $ | — | $ | 2.5 | |||||||
Derivative Liabilities | ||||||||||||||||||||
Foreign currency contracts | $ | 10.3 | $ | — | $ | 10.3 | $ | (4.0 | ) | $ | — | $ | 6.3 | |||||||
Interest rate swap agreements | $ | 1.9 | $ | — | $ | 1.9 | $ | — | $ | — | $ | 1.9 | ||||||||
December 31, 2013 | ||||||||||||||||||||
Derivative Assets | ||||||||||||||||||||
Foreign currency contracts | $ | 13.8 | $ | — | $ | 13.8 | $ | (9.5 | ) | $ | — | $ | 4.3 | |||||||
Derivative Liabilities | ||||||||||||||||||||
Foreign currency contracts | $ | 13.2 | $ | — | $ | 13.2 | $ | (9.5 | ) | $ | — | $ | 3.7 | |||||||
Interest rate swap agreements | $ | 4 | $ | — | $ | 4 | $ | — | $ | — | $ | 4 | ||||||||
Schedule of effect of derivative instruments on the consolidated condensed statements of operations and consolidated condensed statements of comprehensive income | ' | |||||||||||||||||||
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) | Amount of Gain or (Loss) | |||||||||||||||||||
Recognized in OCI | Reclassified from | |||||||||||||||||||
on Derivative | Accumulated OCI | |||||||||||||||||||
(Effective Portion) | into Income | |||||||||||||||||||
Three Months Ended | Three Months Ended | |||||||||||||||||||
March 31, | Location of Gain or | March 31, | ||||||||||||||||||
(Loss) Reclassified from | ||||||||||||||||||||
Accumulated OCI | ||||||||||||||||||||
Derivatives in cash flow hedging | 2014 | 2013 | into Income | 2014 | 2013 | |||||||||||||||
relationships | ||||||||||||||||||||
Foreign currency contracts | $ | (1.7 | ) | $ | 21.7 | Cost of sales | $ | 5 | $ | 5.2 | ||||||||||
Amount of Gain or (Loss) | ||||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivative | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Location of Gain or (Loss) | March 31, | |||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivatives in fair value hedging | Derivative | 2014 | 2013 | |||||||||||||||||
relationships | ||||||||||||||||||||
Interest rate swap agreements | Interest expense (income), net | $ | 2.1 | $ | — | |||||||||||||||
Amount of Gain or (Loss) | ||||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivative | ||||||||||||||||||||
Three Months Ended | ||||||||||||||||||||
Location of Gain or (Loss) | March 31, | |||||||||||||||||||
Recognized in Income on | ||||||||||||||||||||
Derivatives not designated as hedging | Derivative | 2014 | 2013 | |||||||||||||||||
instruments | ||||||||||||||||||||
Foreign currency contracts | Other (income) expense, net | $ | (0.7 | ) | $ | 9.3 |
DEFINED_BENEFIT_PLANS_Tables
DEFINED BENEFIT PLANS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
DEFINED BENEFIT PLANS | ' | |||||||
Components of net periodic benefit cost | ' | |||||||
The components of net periodic benefit cost for the three months ended March 31, 2014 and 2013 were as follows (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Service cost | $ | 1.7 | $ | 2 | ||||
Interest cost | 0.6 | 0.5 | ||||||
Expected return on plan assets | (0.4 | ) | (0.3 | ) | ||||
Amortization of actuarial loss, prior service credit and other | 0.1 | 0.2 | ||||||
| | | | | | | | |
Net periodic benefit cost | $ | 2 | $ | 2.4 | ||||
| | | | | | | | |
| | | | | | | | |
STOCKBASED_COMPENSATION_Tables
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
STOCK-BASED COMPENSATION | ' | |||||||
Schedule of stock-based compensation expense | ' | |||||||
Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three months ended March 31, 2014 and 2013 was as follows (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Cost of sales | $ | 1.5 | $ | 1.4 | ||||
Selling, general and administrative expenses | 8.8 | 8.2 | ||||||
Research and development expenses | 1.7 | 1.6 | ||||||
| | | | | | | | |
Total stock-based compensation expense | $ | 12 | $ | 11.2 | ||||
| | | | | | | | |
| | | | | | | | |
Schedule of weighted-average assumptions for options granted | ' | |||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Average risk-free interest rate | 1.5 | % | 0.8 | % | ||||
Expected dividend yield | None | None | ||||||
Expected volatility | 30.8 | % | 31.2 | % | ||||
Expected term (years) | 4.9 | 4.9 | ||||||
Fair value, per share | $ | 20 | $ | 23.3 | ||||
Schedule of weighted-average assumptions for ESPP subscriptions granted | ' | |||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Average risk-free interest rate | 0.1 | % | 0.1 | % | ||||
Expected dividend yield | None | None | ||||||
Expected volatility | 31.9 | % | 36 | % | ||||
Expected term (years) | 0.7 | 0.6 | ||||||
Fair value, per share | $ | 16.55 | $ | 23.4 |
ACCUMULATED_OTHER_COMPREHENSIV1
ACCUMULATED OTHER COMPREHENSIVE LOSS (Tables) | 3 Months Ended | ||||||||||||||||
Mar. 31, 2014 | |||||||||||||||||
ACCUMULATED OTHER COMPREHENSIVE LOSS | ' | ||||||||||||||||
Summary of activity for each component of Accumulated Other Comprehensive Loss | ' | ||||||||||||||||
Foreign | Unrealized Gain | Unrealized Gain | Unrealized | Total | |||||||||||||
Currency | (Loss) on Cash | on Available-for- | Pension | Accumulated | |||||||||||||
Translation | Flow Hedges | sale Investments | Costs | Other | |||||||||||||
Adjustments | Comprehensive | ||||||||||||||||
Loss | |||||||||||||||||
(in millions) | |||||||||||||||||
December 31, 2013 | $ | (20.2 | ) | $ | 3.5 | $ | 0.3 | $ | (11.2 | ) | $ | (27.6 | ) | ||||
Other comprehensive loss before reclassifications | (0.8 | ) | (1.7 | ) | (0.1 | ) | — | (2.6 | ) | ||||||||
Amounts reclassified from accumulated other comprehensive loss | — | (5.0 | ) | — | — | (5.0 | ) | ||||||||||
Deferred income tax benefit | — | 2.7 | 0.1 | — | 2.8 | ||||||||||||
| | | | | | | | | | | | | | | | | |
March 31, 2014 | $ | (21.0 | ) | $ | (0.5 | ) | $ | 0.3 | $ | (11.2 | ) | $ | (32.4 | ) | |||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Schedule of amounts reclassified from Accumulated Other Comprehensive Loss | ' | ||||||||||||||||
The following table provides information about amounts reclassified from "Accumulated Other Comprehensive Loss" (in millions): | |||||||||||||||||
Three Months Ended | |||||||||||||||||
March 31, | Affected Line on Consolidated Condensed | ||||||||||||||||
Details about Accumulated Other | 2014 | 2013 | Statements of Operations | ||||||||||||||
Comprehensive Loss Components | |||||||||||||||||
Gain on cash flow hedges | $ | 5 | $ | 5.2 | Cost of sales | ||||||||||||
(1.9 | ) | (1.9 | ) | Provision for income taxes | |||||||||||||
| | | | | | | | | |||||||||
$ | 3.1 | $ | 3.3 | Net of tax | |||||||||||||
| | | | | | | | | |||||||||
| | | | | | | | | |||||||||
EARNINGS_PER_SHARE_Tables
EARNINGS PER SHARE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
EARNINGS PER SHARE | ' | |||||||
Schedule of computation of basic and diluted earnings per share | ' | |||||||
The table below presents the computation of basic and diluted earnings per share (in millions, except for per share information): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Basic: | ||||||||
Net income | $ | 60.3 | $ | 143.9 | ||||
| | | | | | | | |
| | | | | | | | |
Weighted-average shares outstanding | 106.7 | 113.9 | ||||||
| | | | | | | | |
| | | | | | | | |
Basic earnings per share | $ | 0.57 | $ | 1.26 | ||||
| | | | | | | | |
| | | | | | | | |
Diluted: | ||||||||
Net income | $ | 60.3 | $ | 143.9 | ||||
| | | | | | | | |
| | | | | | | | |
Weighted-average shares outstanding | 106.7 | 113.9 | ||||||
Dilutive effect of stock plans | 1.8 | 2.6 | ||||||
| | | | | | | | |
Dilutive weighted-average shares outstanding | 108.5 | 116.5 | ||||||
| | | | | | | | |
| | | | | | | | |
Diluted earnings per share | $ | 0.56 | $ | 1.24 | ||||
| | | | | | | | |
| | | | | | | | |
SEGMENT_INFORMATION_Tables
SEGMENT INFORMATION (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
SEGMENT INFORMATION | ' | |||||||
Information about reportable segments | ' | |||||||
The table below presents information about Edwards Lifesciences' reportable segments (in millions): | ||||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Segment Net Sales | ||||||||
United States | $ | 222.4 | $ | 227.9 | ||||
Europe | 175.6 | 155.5 | ||||||
Japan | 60.2 | 67.3 | ||||||
Rest of World | 63.7 | 54.5 | ||||||
| | | | | | | | |
Total segment net sales | $ | 521.9 | $ | 505.2 | ||||
| | | | | | | | |
| | | | | | | | |
Segment Pre-tax Income | ||||||||
United States | $ | 118.4 | $ | 132.8 | ||||
Europe | 80.2 | 72.5 | ||||||
Japan | 27.6 | 33.5 | ||||||
Rest of World | 16.3 | 12.5 | ||||||
| | | | | | | | |
Total segment pre-tax income | $ | 242.5 | $ | 251.3 | ||||
| | | | | | | | |
| | | | | | | | |
Reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | |||||||
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 | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
Net Sales Reconciliation | ||||||||
Segment net sales | $ | 521.9 | $ | 505.2 | ||||
Foreign currency | 0.5 | (8.5 | ) | |||||
| | | | | | | | |
Consolidated net sales | $ | 522.4 | $ | 496.7 | ||||
| | | | | | | | |
| | | | | | | | |
Pre-tax Income Reconciliation | ||||||||
Segment pre-tax income | $ | 242.5 | $ | 251.3 | ||||
Unallocated amounts: | ||||||||
Corporate items | (154.6 | ) | (139.7 | ) | ||||
Special charge (Note 4) | (7.5 | ) | — | |||||
Intellectual property litigation (expense) income, net (Note 3) | (5.5 | ) | 78.1 | |||||
Interest (expense) income, net | (3.5 | ) | 0.2 | |||||
Foreign currency | 5.9 | 0.7 | ||||||
| | | | | | | | |
Consolidated pre-tax income | $ | 77.3 | $ | 190.6 | ||||
| | | | | | | | |
| | | | | | | | |
Enterprise-wide information | ' | |||||||
Three Months | ||||||||
Ended | ||||||||
March 31, | ||||||||
2014 | 2013 | |||||||
(in millions) | ||||||||
Net Sales by Geographic Area | ||||||||
United States | $ | 222.4 | $ | 227.9 | ||||
Europe | 180.3 | 154.5 | ||||||
Japan | 58.7 | 60 | ||||||
Rest of World | 61 | 54.3 | ||||||
| | | | | | | | |
$ | 522.4 | $ | 496.7 | |||||
| | | | | | | | |
| | | | | | | | |
Net Sales by Major Product and Service Area | ||||||||
Surgical Heart Valve Therapy | $ | 202.6 | $ | 198.1 | ||||
Transcatheter Heart Valves | 189.2 | 169.7 | ||||||
Critical Care | 130.6 | 128.9 | ||||||
| | | | | | | | |
$ | 522.4 | $ | 496.7 | |||||
| | | | | | | | |
| | | | | | | | |
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
(in millions) | ||||||||
Long-lived Tangible Assets by Geographic Area | ||||||||
United States | $ | 306.2 | $ | 308.2 | ||||
Europe | 41.9 | 40.9 | ||||||
Japan | 10.4 | 10.8 | ||||||
Rest of World | 95.4 | 97.1 | ||||||
| | | | | | | | |
$ | 453.9 | $ | 457 | |||||
| | | | | | | | |
| | | | | | | | |
BASIS_OF_PRESENTATION_Details
BASIS OF PRESENTATION (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Net cash provided by investing activities | $119.80 | ($13.70) |
Restatement adjustment | ' | ' |
Net cash provided by investing activities | ' | $13.80 |
CHANGE_IN_ACCOUNTING_PRINCIPLE2
CHANGE IN ACCOUNTING PRINCIPLE (Details) (USD $) | 3 Months Ended | 3 Months Ended | |||||
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Dec. 31, 2013 | Jan. 02, 2013 | Mar. 31, 2013 | Dec. 31, 2013 |
Patents | Change in method of accounting for certain intellectual property litigation expenses related to defense and enforcement of issued patents | Change in method of accounting for certain intellectual property litigation expenses related to defense and enforcement of issued patents | Change in method of accounting for certain intellectual property litigation expenses related to defense and enforcement of issued patents | ||||
As Reported | As Reported | As Reported | |||||
Change in accounting principle | ' | ' | ' | ' | ' | ' | ' |
Unamortized capitalized legal costs | ' | ' | ' | $23.70 | ' | ' | ' |
Cumulative effect of change in accounting principle on retained earnings | ' | ' | ' | ' | 12.2 | ' | ' |
Consolidated Condensed Balance Sheet | ' | ' | ' | ' | ' | ' | ' |
Other intangible assets, net | 31.6 | ' | 33.5 | ' | ' | ' | 57.2 |
Deferred income taxes | 76.4 | ' | 79 | ' | ' | ' | 70.1 |
Total assets | 2,651.70 | ' | 2,709.90 | ' | ' | ' | 2,724.70 |
Retained earnings | 2,091.10 | ' | 2,030.80 | ' | ' | ' | 2,045.60 |
Total stockholders' equity | 1,340.80 | ' | 1,544.40 | ' | ' | ' | 1,559.20 |
Total liabilities and stockholders' equity | 2,651.70 | ' | 2,709.90 | ' | ' | ' | 2,724.70 |
Consolidated Condensed Statement of Operations | ' | ' | ' | ' | ' | ' | ' |
Cost of sales | 145.9 | 121 | ' | ' | ' | 122.2 | ' |
Selling, general and administrative expenses | 197.2 | 182.4 | ' | ' | ' | 185.2 | ' |
Special charge (gain) | 7.5 | ' | ' | ' | ' | -83.6 | ' |
Intellectual property litigation income, net | 5.5 | -78.1 | ' | ' | ' | ' | ' |
Income before provision for income taxes | 77.3 | 190.6 | ' | ' | ' | 192.1 | ' |
Provision for income taxes | 17 | 46.7 | ' | ' | ' | 47.2 | ' |
Net income | 60.3 | 143.9 | ' | ' | ' | 144.9 | ' |
Earnings per share: | ' | ' | ' | ' | ' | ' | ' |
Basic (in dollars per share) | $0.57 | $1.26 | ' | ' | ' | $1.27 | ' |
Diluted (in dollars per share) | $0.56 | $1.24 | ' | ' | ' | $1.24 | ' |
Consolidated Condensed Statement of Comprehensive Income | ' | ' | ' | ' | ' | ' | ' |
Net income | 60.3 | 143.9 | ' | ' | ' | 144.9 | ' |
Comprehensive income | 55.5 | 129.8 | ' | ' | ' | 130.8 | ' |
Consolidated Condensed Statement of Cash Flows | ' | ' | ' | ' | ' | ' | ' |
Net income | 60.3 | 143.9 | ' | ' | ' | 144.9 | ' |
Adjustments to reconcile net income to cash provided by operating activities: | ' | ' | ' | ' | ' | ' | ' |
Depreciation and amortization | 16.2 | 14.1 | ' | ' | ' | 15.3 | ' |
Changes in operating assets and liabilities: | ' | ' | ' | ' | ' | ' | ' |
Prepaid expenses and other current assets | 8.4 | 27.7 | ' | ' | ' | 28.2 | ' |
Other | $1.90 | $0.90 | ' | ' | ' | ($1.80) | ' |
INTELLECTUAL_PROPERTY_LITIGATI1
INTELLECTUAL PROPERTY LITIGATION EXPENSE (INCOME), NET (Details) (USD $) | 1 Months Ended | 3 Months Ended | |
In Millions, unless otherwise specified | Feb. 28, 2013 | Mar. 31, 2014 | Mar. 31, 2013 |
CoreValve, Inc. | Intellectual property | Intellectual property | |
Litigation (income) expense | ' | ' | ' |
External legal costs related to intellectual property litigation | ' | $5.50 | $5.50 |
Amount of payment received from Medtronic in satisfaction of initial April 2010 jury award of damages for infringement, including accrued interest | $83.60 | ' | ' |
SPECIAL_CHARGE_Details
SPECIAL CHARGE (Details) (USD $) | 3 Months Ended | 1 Months Ended |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2014 |
Intellectual property agreement | ||
Licensing of intellectual property | ' | ' |
Special charges to settle past and future obligations | $7.50 | $7.50 |
INVENTORIES_Details
INVENTORIES (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Inventories | ' | ' |
Raw materials | $56.10 | $57.80 |
Work in process | 79.2 | 82.2 |
Finished products | 172.7 | 168.9 |
Total inventories | $308 | $308.90 |
INVESTMENTS_Details
INVESTMENTS (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Held-to-maturity investments | ' | ' |
Total | $612 | $516.50 |
Fair Value | 612 | 516.5 |
Bank time deposits | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 515.8 | 516.5 |
Fair Value | 515.8 | 516.5 |
Commercial paper | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 17.2 | ' |
Fair Value | 17.2 | ' |
U.S. government and agency securities | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 41.5 | ' |
Fair Value | 41.5 | ' |
Asset-backed securities | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 9.4 | ' |
Fair Value | 9.4 | ' |
Corporate debt securities | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 24.2 | ' |
Fair Value | 24.2 | ' |
Municipal securities | ' | ' |
Held-to-maturity investments | ' | ' |
Total | 3.9 | ' |
Fair Value | $3.90 | ' |
INVESTMENTS_Details_2
INVESTMENTS (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Cost | ' | ' |
Due in 1 year or less | $535.90 | ' |
Due after 1 year through 5 years | 62.4 | ' |
Instruments not due at a single maturity date | 13.7 | ' |
Total | 612 | 516.5 |
Fair Value | ' | ' |
Due in 1 year or less | 535.9 | ' |
Due after 1 year through 5 years | 62.4 | ' |
Instruments not due at a single maturity date | 13.7 | ' |
Total | $612 | $516.50 |
INVESTMENTS_Details_3
INVESTMENTS (Details 3) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
Available-for-sale investments | ' | ' | ' |
Cost | $0.40 | ' | $0.40 |
Unrealized gains | 0.3 | ' | 0.4 |
Fair value of available-for-sale investments | 0.7 | ' | 0.8 |
Equity method investments | ' | ' | ' |
Cost | 14.4 | ' | 14.1 |
Equity in losses | -2.7 | ' | -2.7 |
Carrying value of equity method investments | 11.7 | ' | 11.4 |
Cost method investments | ' | ' | ' |
Carrying value of cost method investments | 6.7 | ' | 9.7 |
Total investments in unconsolidated affiliates | 19.1 | ' | 21.9 |
Other-than-temporary impairment cost method investments | 3.5 | ' | ' |
Available-for-sale investments | ' | ' | ' |
Proceeds from sales of available-for-sale investments | $0 | $0 | ' |
OTHER_INTANGIBLE_ASSETS_Detail
OTHER INTANGIBLE ASSETS (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Amortizable intangible assets | ' | ' |
Cost | $235.80 | $235.60 |
Accumulated Amortization | -208.8 | -206.7 |
Net Carrying Value | 27 | 28.9 |
Unamortizable intangible assets | ' | ' |
Gross intangible Assets | 240.4 | 240.2 |
Total Net Carrying Amount of Intangible Assets | 31.6 | 33.5 |
In-process research and development | ' | ' |
Unamortizable intangible assets | ' | ' |
Net Carrying Value | 4.6 | 4.6 |
Patents | ' | ' |
Amortizable intangible assets | ' | ' |
Cost | 181.6 | 181.6 |
Accumulated Amortization | -165 | -163.5 |
Net Carrying Value | 16.6 | 18.1 |
Developed technology | ' | ' |
Amortizable intangible assets | ' | ' |
Cost | 43.5 | 43.3 |
Accumulated Amortization | -35.6 | -35.1 |
Net Carrying Value | 7.9 | 8.2 |
Other | ' | ' |
Amortizable intangible assets | ' | ' |
Cost | 10.7 | 10.7 |
Accumulated Amortization | -8.2 | -8.1 |
Net Carrying Value | $2.50 | $2.60 |
OTHER_INTANGIBLE_ASSETS_Detail1
OTHER INTANGIBLE ASSETS (Details 2) (USD $) | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 |
OTHER INTANGIBLE ASSETS | ' | ' | ' |
Amortization expense related to other intangible assets | $2.10 | $2.50 | ' |
Estimated amortization expense | ' | ' | ' |
2014 | ' | ' | 7.7 |
2015 | ' | ' | 6.6 |
2016 | ' | ' | 6.5 |
2017 | ' | ' | 6.2 |
2018 | ' | ' | $1.20 |
DEBT_Details
DEBT (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2014 | Oct. 31, 2013 | Mar. 31, 2014 | |
Credit Facility | Senior Notes due 2018 | Senior Notes due 2018 | |
Carrying value | |||
Debt and credit facility | ' | ' | ' |
Term | '4 years | ' | ' |
Principal amount | ' | $600,000,000 | ' |
Interest rate (as a percent) | ' | 2.88% | ' |
Effective interest rate (as a percent) | ' | 2.98% | ' |
Issuance costs | ' | 5,400,000 | ' |
Issuance discount | ' | 3,000,000 | ' |
Value of the Notes | ' | ' | 595,400,000 |
Maximum aggregate borrowings under the facility | 750,000,000 | ' | ' |
Borrowings outstanding under the facility | $130,000,000 | ' | ' |
FAIR_VALUE_MEASUREMENTS_Detail
FAIR VALUE MEASUREMENTS (Details) (Fair value, Level 2, USD $) | Mar. 31, 2014 |
In Millions, unless otherwise specified | |
Fair value | Level 2 | ' |
Financial instruments | ' |
Fair value of notes payable | $605.40 |
FAIR_VALUE_MEASUREMENTS_Detail1
FAIR VALUE MEASUREMENTS (Details 2) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Assets | ' | ' |
Available-for-sale investments | $0.70 | $0.80 |
Fair Value on a Recurring Basis | Level 1 | ' | ' |
Assets | ' | ' |
Investments held for deferred compensation plans | 25.4 | 15.1 |
Available-for-sale investments | 0.7 | 0.8 |
Total assets | 26.1 | 15.9 |
Liabilities | ' | ' |
Deferred compensation plans | 25.3 | 15.5 |
Total liabilities | 25.3 | 15.5 |
Fair Value on a Recurring Basis | Level 2 | ' | ' |
Assets | ' | ' |
Derivatives | 6.5 | 13.8 |
Total assets | 6.5 | 13.8 |
Liabilities | ' | ' |
Derivatives | 12.2 | 17.2 |
Total liabilities | 12.2 | 17.2 |
Fair Value on a Recurring Basis | Total | ' | ' |
Assets | ' | ' |
Investments held for deferred compensation plans | 25.4 | 15.1 |
Available-for-sale investments | 0.7 | 0.8 |
Derivatives | 6.5 | 13.8 |
Total assets | 32.6 | 29.7 |
Liabilities | ' | ' |
Derivatives | 12.2 | 17.2 |
Deferred compensation plans | 25.3 | 15.5 |
Total liabilities | $37.50 | $32.70 |
DERIVATIVE_INSTRUMENTS_AND_HED2
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details) (USD $) | 3 Months Ended | ||||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2013 |
Foreign currency forward exchange contracts | Foreign currency forward exchange contracts | Interest rate swap agreements | Interest rate swap agreements | ||
Derivative Financial Instruments | ' | ' | ' | ' | ' |
Notional Amount | ' | $793.20 | $805.50 | $300 | $300 |
Maximum period of time currency rate movements in future cash flows associated with intercompany transactions and certain third-party expenses are hedged | '13 months | ' | ' | ' | ' |
DERIVATIVE_INSTRUMENTS_AND_HED3
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details 2) (Designated as hedging instruments, USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Foreign currency contracts | Other current assets | ' | ' |
Derivatives designated as hedging instruments | ' | ' |
Fair value of derivative assets | $6.50 | $13.80 |
Foreign currency contracts | Accrued and other liabilities | ' | ' |
Derivatives designated as hedging instruments | ' | ' |
Fair value of derivative liabilities | 10.3 | 13.2 |
Interest rate swap agreements | Other long-term liabilities | ' | ' |
Derivatives designated as hedging instruments | ' | ' |
Fair value of derivative liabilities | $1.90 | $4 |
DERIVATIVE_INSTRUMENTS_AND_HED4
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details 3) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
In Millions, unless otherwise specified | ||
Foreign currency contracts | ' | ' |
Derivative Asset | ' | ' |
Gross Amounts | $6.50 | $13.80 |
Net Amounts Presented in the Consolidated Balance Sheet | 6.5 | 13.8 |
Derivative Assets, Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Financial Instruments | -4 | -9.5 |
Net amount | 2.5 | 4.3 |
Derivative Liabilities | ' | ' |
Gross Amounts | 10.3 | 13.2 |
Net Amounts Presented in the Consolidated Balance Sheet | 10.3 | 13.2 |
Derivative Liabilities, Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Financial Instruments | -4 | -9.5 |
Net amount | 6.3 | 3.7 |
Interest rate swap agreements | ' | ' |
Derivative Liabilities | ' | ' |
Gross Amounts | 1.9 | 4 |
Net Amounts Presented in the Consolidated Balance Sheet | 1.9 | 4 |
Derivative Liabilities, Gross Amounts Not Offset in the Consolidated Balance Sheet | ' | ' |
Net amount | $1.90 | $4 |
DERIVATIVE_INSTRUMENTS_AND_HED5
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (Details 4) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Derivative Instruments, Gain (Loss) | ' | ' |
Expected reclassification of gain recorded in accumulated other comprehensive loss into earnings during next twelve months | $2.90 | ' |
Derivatives not designated as hedging instruments | Foreign currency contracts | Other (income) expense, net | ' | ' |
Derivative Instruments, Gain (Loss) | ' | ' |
Amount of Gain or (Loss) Recognized in Income on Derivative | -0.7 | 9.3 |
Derivatives in cash flow hedging relationships | Foreign currency contracts | ' | ' |
Derivative Instruments, Gain (Loss) | ' | ' |
Amount of Gain or (Loss) Recognized in OCI on Derivative (Effective Portion) | -1.7 | 21.7 |
Derivatives in cash flow hedging relationships | Foreign currency contracts | Cost of sales | ' | ' |
Derivative Instruments, Gain (Loss) | ' | ' |
Amount of Gain or (Loss) Reclassified from Accumulated OCI into Income | 5 | 5.2 |
Derivatives in fair value hedging relationship | Interest rate swap agreements | Interest expense (income), net | ' | ' |
Derivative Instruments, Gain (Loss) | ' | ' |
Amount of Gain or (Loss) Recognized in Income on Derivative | $2.10 | ' |
DEFINED_BENEFIT_PLANS_Details
DEFINED BENEFIT PLANS (Details) (Defined benefit pension plans, USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Defined benefit pension plans | ' | ' |
Components of net periodic benefit cost | ' | ' |
Service cost | $1.70 | $2 |
Interest cost | 0.6 | 0.5 |
Expected return on plan assets | -0.4 | -0.3 |
Amortization of actuarial loss, prior service credit and other | 0.1 | 0.2 |
Net periodic benefit cost | $2 | $2.40 |
STOCKBASED_COMPENSATION_Detail
STOCK-BASED COMPENSATION (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Allocation of stock-based compensation expense | ' | ' |
Stock-based compensation expense | $12 | $11.20 |
Unrecognized compensation expense related to nonvested stock options, restricted stock units, market-based restricted stock units and employee stock purchase subscriptions | 73.4 | ' |
Period over which unrecognized compensation expense is expected to be recognized | '29 months | ' |
Cost of sales | ' | ' |
Allocation of stock-based compensation expense | ' | ' |
Stock-based compensation expense | 1.5 | 1.4 |
Selling, general and administrative expenses | ' | ' |
Allocation of stock-based compensation expense | ' | ' |
Stock-based compensation expense | 8.8 | 8.2 |
Research and development expenses | ' | ' |
Allocation of stock-based compensation expense | ' | ' |
Stock-based compensation expense | $1.70 | $1.60 |
STOCKBASED_COMPENSATION_Detail1
STOCK-BASED COMPENSATION (Details 2) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Option Awards | ' | ' |
Weighted-average assumptions for MRSUs, options and ESPP subscriptions granted | ' | ' |
Average risk-free interest rate (as a percent) | 1.50% | 0.80% |
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Expected volatility (as a percent) | 30.80% | 31.20% |
Expected term | '4 years 10 months 24 days | '4 years 10 months 24 days |
Fair value, per share | $20 | $23.30 |
ESPP | ' | ' |
Weighted-average assumptions for MRSUs, options and ESPP subscriptions granted | ' | ' |
Average risk-free interest rate (as a percent) | 0.10% | 0.10% |
Expected dividend yield (as a percent) | 0.00% | 0.00% |
Expected volatility (as a percent) | 31.90% | 36.00% |
Expected term | '8 months 12 days | '7 months 6 days |
Fair value, per share | $16.55 | $23.40 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Details) (USD $) | 1 Months Ended | 1 Months Ended | |
In Millions, unless otherwise specified | Feb. 28, 2013 | Apr. 30, 2010 | Jan. 31, 2014 |
CoreValve, Inc. | CoreValve, Inc. | Favorable ruling | |
Heart valve patent infringement counterclaim against Medtronic CoreValve and Medtronic | |||
LEGAL PROCEEDINGS | ' | ' | ' |
Amount awarded in damages | ' | $73.90 | ' |
Amount of payment received from Medtronic in satisfaction of the April 2010 jury award of damages for infringement, including accrued interest | 83.6 | ' | ' |
Damage award | $83.60 | ' | $393.60 |
ACCUMULATED_OTHER_COMPREHENSIV2
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details) (USD $) | 3 Months Ended | |||||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2014 | Dec. 31, 2013 |
Foreign Currency Translation Adjustments | Unrealized Gain (Loss) on Cash Flow Hedges | Unrealized Gain on Available-for-Sale Investments | Unrealized Pension Costs | Unrealized Pension Costs | ||
Changes in accumulated other comprehensive loss components | ' | ' | ' | ' | ' | ' |
Balance at the beginning of the period | ($27.60) | ($20.20) | $3.50 | $0.30 | ($11.20) | ($11.20) |
Other comprehensive loss before reclassifications | -2.6 | -0.8 | -1.7 | -0.1 | ' | ' |
Amounts reclassified from accumulated other comprehensive loss | -5 | ' | -5 | ' | ' | ' |
Deferred income tax benefit | 2.8 | ' | 2.7 | 0.1 | ' | ' |
Balance at the end of the period | ($32.40) | ($21) | ($0.50) | $0.30 | ($11.20) | ($11.20) |
ACCUMULATED_OTHER_COMPREHENSIV3
ACCUMULATED OTHER COMPREHENSIVE LOSS (Details 2) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Amounts reclassified from accumulated other comprehensive loss to affected line on Consolidated Statements of Operations | ' | ' |
Cost of sales | ($145.90) | ($121) |
Provision for income taxes | -17 | -46.7 |
Net income | 60.3 | 143.9 |
Gain on cash flow hedges | Amount Reclassified from Accumulated Other Comprehensive Loss | ' | ' |
Amounts reclassified from accumulated other comprehensive loss to affected line on Consolidated Statements of Operations | ' | ' |
Cost of sales | 5 | 5.2 |
Provision for income taxes | -1.9 | -1.9 |
Net income | $3.10 | $3.30 |
EARNINGS_PER_SHARE_Details
EARNINGS PER SHARE (Details) (USD $) | 3 Months Ended | |
In Millions, except Per Share data, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Basic: | ' | ' |
Net income | $60.30 | $143.90 |
Weighted-average shares outstanding | 106.7 | 113.9 |
Basic earnings per share (in dollars per share) | $0.57 | $1.26 |
Diluted: | ' | ' |
Net income | $60.30 | $143.90 |
Weighted-average shares outstanding | 106.7 | 113.9 |
Dilutive effect of stock plans (in shares) | 1.8 | 2.6 |
Dilutive weighted-average shares outstanding | 108.5 | 116.5 |
Diluted earnings per share (in dollars per share) | $0.56 | $1.24 |
EARNINGS_PER_SHARE_Details_2
EARNINGS PER SHARE (Details 2) (Stock compensation plan) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Stock compensation plan | ' | ' |
Anti-dilutive securities | ' | ' |
Anti-dilutive securities excluded from the computation of earnings per share (in shares) | 3.7 | 2.2 |
INCOME_TAXES_Details
INCOME TAXES (Details) (USD $) | 3 Months Ended | 1 Months Ended | 3 Months Ended | ||
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 | Dec. 31, 2013 | Feb. 28, 2013 | Mar. 31, 2013 |
CoreValve, Inc. | CoreValve, Inc. | ||||
INCOME TAXES | ' | ' | ' | ' | ' |
Effective income tax rates (as a percent) | 22.00% | 24.50% | ' | ' | ' |
Tax benefit related to federal research credit | ' | $8.40 | ' | ' | ' |
Liability for income taxes associated with uncertain tax positions | 133.2 | ' | 127.7 | ' | ' |
Offsetting tax benefits associated with correlative effects of potential transfer pricing adjustments, state income taxes and timing adjustments | 31.3 | ' | 30.9 | ' | ' |
Net liability for income taxes associated with uncertain tax positions | 101.9 | ' | 96.8 | ' | ' |
LEGAL PROCEEDINGS | ' | ' | ' | ' | ' |
Tax expense | 17 | 46.7 | ' | ' | 31.3 |
Amount of litigation award from Medtronic | ' | ' | ' | $83.60 | ' |
SEGMENT_INFORMATION_Details
SEGMENT INFORMATION (Details) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | $522.40 | $496.70 |
Pre-tax income | 77.3 | 190.6 |
Unallocated amounts: | ' | ' |
Special charge (Note 4) | -7.5 | ' |
Intellectual property litigation (expense) income, net (Note 3) | -5.5 | 78.1 |
Interest (expense) income, net | -3.5 | 0.2 |
Total segment | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 521.9 | 505.2 |
Pre-tax income | 242.5 | 251.3 |
Total segment | United States | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 222.4 | 227.9 |
Pre-tax income | 118.4 | 132.8 |
Total segment | Europe | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 175.6 | 155.5 |
Pre-tax income | 80.2 | 72.5 |
Total segment | Japan | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 60.2 | 67.3 |
Pre-tax income | 27.6 | 33.5 |
Total segment | Rest of World | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 63.7 | 54.5 |
Pre-tax income | 16.3 | 12.5 |
Reconciling items (Unallocated amounts), foreign currency | ' | ' |
Information about reportable segments and reconciliations of segment net sales to consolidated net sales and segment pre-tax income to consolidated pre-tax income | ' | ' |
Net sales | 0.5 | -8.5 |
Pre-tax income | 5.9 | 0.7 |
Corporate, non-segment | ' | ' |
Unallocated amounts: | ' | ' |
Corporate items | ($154.60) | ($139.70) |
SEGMENT_INFORMATION_Details_2
SEGMENT INFORMATION (Details 2) (USD $) | 3 Months Ended | |
In Millions, unless otherwise specified | Mar. 31, 2014 | Mar. 31, 2013 |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | $522.40 | $496.70 |
Long-lived Tangible Assets by Geographic Area | ' | ' |
Long-lived tangible assets | 453.9 | 457 |
Surgical Heart Valve Therapy | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 202.6 | 198.1 |
Transcatheter Heart Valves | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 189.2 | 169.7 |
Critical Care | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 130.6 | 128.9 |
United States | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 222.4 | 227.9 |
Long-lived Tangible Assets by Geographic Area | ' | ' |
Long-lived tangible assets | 306.2 | 308.2 |
Europe | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 180.3 | 154.5 |
Long-lived Tangible Assets by Geographic Area | ' | ' |
Long-lived tangible assets | 41.9 | 40.9 |
Japan | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 58.7 | 60 |
Long-lived Tangible Assets by Geographic Area | ' | ' |
Long-lived tangible assets | 10.4 | 10.8 |
Rest of World | ' | ' |
Net Sales by Geographic Area and by Major Product and Service Area | ' | ' |
Net sales | 61 | 54.3 |
Long-lived Tangible Assets by Geographic Area | ' | ' |
Long-lived tangible assets | $95.40 | $97.10 |