Edwards Lifesciences Corporation (NYSE: EW), the global leader in the science of heart valves and hemodynamic monitoring, today reported net income for the quarter ended March 31, 2010 of $47.7 million, or $0.80 per diluted share, compared to net income of $60.5 million, or $1.03 per diluted share, for the same period in 2009.

(1888PressRelease) April 26, 2010 – First quarter diluted earnings per share decreased 22.3 percent over last year, due primarily to the receipt of a milestone payment in the year ago period. Excluding special items detailed in the reconciliation table below, first quarter diluted earnings per share grew 14.3 percent over last year.

First quarter net sales increased 8.6 percent to $340.5 million. Underlying(1) sales growth was 9.4 percent, which excludes a $10.7 million positive impact from foreign exchange and a $12.9 million reduction from divested products.

“Our leadership in transcatheter heart valves continues to grow, highlighted by our ongoing clinical and commercial success, and the launch of our next generation system,” said Michael A. Mussallem, Edwards Lifesciences’ chairman and CEO.

“Our 2010 underlying sales growth rate expectation remains unchanged at 10 to 13 percent. In addition, excluding special items, we are raising our full year net income growth estimate to approximately 19 percent, primarily as a result of our improving product mix.”

Sales Results

For the first quarter, the company reported Heart Valve Therapy sales of $196.7 million, representing 15.4 percent growth over last year. Underlying sales grew 11.6 percent, which excludes a $5.9 million contribution from foreign exchange. Strong transcatheter heart valve sales of $39.1 million continued to drive significant growth during the quarter.

“While our first quarter surgical heart valve growth rate was lower than expected, we anticipate improvement throughout the year. We expect our overall Heart Valve Therapy underlying growth rate to remain unchanged at 14 to 17 percent, due to an improved outlook for transcatheter heart valves” said Mussallem.

“Also, in the first quarter, we received a CE Mark and began a disciplined launch of our Edwards SAPIEN XT transcatheter heart valve in Europe. Conversion to this next generation valve is going smoothly and clinician enthusiasm for this lower profile system is high.”

Critical Care sales were $105.1 million for the quarter, representing 0.6 percent growth over last year. Underlying sales grew 6.9 percent over prior year, excluding a $9.8 million impact from the divested hemofiltration product line, partially offset by a $3.6 million contribution from foreign exchange. Robust sales of premium products, led by the company’s FloTrac system, continued to drive growth. Pressure monitoring products also made a significant contribution.

Cardiac Surgery Systems sales for the quarter were $24.8 million, representing 10.2 percent growth over last year, which included a $0.6 million benefit from foreign exchange.

Vascular sales were $13.9 million, a decline from $16.1 million in the same quarter last year due to the divestiture of the LifeStent product line.

Domestic and international sales for the first quarter were $138.3 million and $202.2 million, respectively.

Additional Operating Results

For the quarter, Edwards’ gross profit margin was 71.0 percent compared to 69.1 percent in the same period last year. This increase was due to an improved product mix and manufacturing efficiencies, partially offset by foreign exchange.

Selling, general and administrative expenses were $134.0 million for the quarter, or 39.4 percent of sales, compared to $121.9 million in the prior year. The increase was driven mainly by foreign exchange and higher expenses, primarily to support transcatheter heart valve sales.

Research and development expenses (R&D) for the quarter were $45.2 million, or 13.3 percent of sales. As a result of additional investments in the company’s transcatheter and surgical heart valve programs, R&D investments increased 13.3 percent compared to the prior year.

Free cash flow for the quarter was $5.0 million, calculated as cash from operating activities of $13.0 million, minus capital expenditures of $8.0 million. For 2010, excluding the impact of special items, the company continues to expect free cash flow to be $190 to $200 million.

Total debt at March 31, 2010 was $129.3 million. Cash and cash equivalents were $321.2 million at the end of the quarter, resulting in net cash of $191.9 million.

During the quarter, the company repurchased approximately 1.1 million shares of common stock for $98.0 million.

Edwards recently announced a two-for-one split of the company’s outstanding shares of common stock. Stockholders of record at the close of business on May 14, 2010 will be issued one additional share of common stock for each share owned as of that date. The additional shares will be distributed on May 27, 2010 and will increase the number of common shares outstanding from approximately 57 million shares to approximately 114 million shares.

2010 Outlook

“With the substantial movement in foreign exchange since December, primarily resulting from the weakening of the Euro, we now expect full year 2010 reported sales to be at the bottom of our original $1.43 to $1.50 billion estimate,” said Mussallem. “However, we continue to expect the same strength in our underlying sales growth and a gross profit margin improvement to approximately 72 percent.”

“We are raising the low end of our expected 2010 diluted EPS by two cents, despite the foreign exchange headwind. Our new range is $3.52 to $3.60 per share, or $1.76 to $1.80 on a post-split basis. Finally, we estimate that second quarter 2010 diluted EPS, on a post split basis, will be between $0.43 and $0.46.”

About Edwards Lifesciences

Edwards Lifesciences is the global leader in the science of heart valves and hemodynamic monitoring. Driven by a passion to help patients, the company partners with clinicians to develop innovative technologies in the areas of structural heart disease and critical care monitoring that enable them to save and enhance lives. Additional company information can be found at www.edwards.com. ###

 

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