Edwards Lifesciences Corp

Previous wording

On June 3, 2024, we entered into a definitive agreement to sell our Critical Care product group ("Critical Care") to Becton, Dickinson and Company. We expect to complete the sale of Critical Care by the end of the third quarter of 2024 in an all cash-transaction for $4.2 billion, subject to certain customary adjustments as set forth in the agreement. We believe that the planned sale will enable us to pursue expanded opportunities for TAVR, TMTT, and Surgical patients, as well as new investments in interventional heart failure technologies. We analyzed the quantitative and qualitative factors relevant to the divestiture of Critical Care, including its significance to our overall net income and total assets, and determined that the conditions for discontinued operations presentation with respect to Critical Care had been met. As such, the historical financial condition and results of Critical Care have been reflected as discontinued operations in our consolidated condensed financial statements. Prior period amounts have been adjusted to reflect the discontinued operations presentation. Our discussion and analysis of our results of operations is reflective of our continuing operations. See Note 4 to the Consolidated Condensed Financial Statements for further information.

Current wording

On June 3, 2024, we entered into a definitive agreement to sell our Critical Care product group ("Critical Care") to Becton, Dickinson and Company in an all cash-transaction for $4.2 billion, subject to certain customary adjustments as set forth in the agreement. We completed the sale of Critical Care on September 3, 2024. We believe that the sale will enable us to pursue expanded opportunities for TAVR, TMTT, and Surgical patients, as well as new investments in interventional heart failure technologies. In addition, as a next step in our disposal plan to exit businesses that are not focused on implantable medical innovations for structural heart disease, we have committed to a plan to sell a non-core product group, with the sale expected to occur within the next 12 months. We analyzed the quantitative and qualitative factors relevant to the divestiture of Critical Care and the aforementioned non-core product group (collectively, the "discontinued product groups"), including its significance to our overall net income and total assets, and determined that, when considered together, the conditions for discontinued operations presentation with respect to the discontinued product groups had been met. As such, the historical financial condition and results of the discontinued product groups have been reflected as discontinued operations in our consolidated condensed financial statements, including a $3.3 billion pre-tax gain on the sale of Critical Care. Prior period amounts have been adjusted to reflect the discontinued operations presentation. Our discussion and analysis of our results of operations is reflective of our continuing operations. See Note 5 to the Consolidated Condensed Financial Statements for further information.

Previous wording

Our net sales for the first six months of 2024 were $2.7 billion, representing an increase of $199.6 million compared to the first six months of 2023, driven primarily by sales of our TAVR products.

Current wording

Our net sales for the first nine months of 2024 were $4.1 billion, representing an increase of $310.1 million compared to the first nine months of 2023, driven primarily by sales of our TAVR and TMTT products.

Previous wording

Our gross profit increased in the six months ended June 30, 2024, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to foreign currency rate fluctuations. The increase in our diluted earnings per share in the six months ended June 30, 2024 was driven by an after-tax charge of $142.2 million in the six months ended June 30, 2023 related to an intellectual property agreement.

Current wording

Our gross profit increased in the nine months ended September 30, 2024, driven by our sales growth. Gross profit as a percentage of sales decreased primarily due to foreign currency rate fluctuations. The increase in our diluted earnings per share in the nine months ended September 30, 2024 was driven by a one-time after-tax charge of $138.7 million in the nine months ended September 30, 2023 related to an intellectual property agreement.

Previous wording

The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation. In the first six months of 2024, we invested 19.4% of our net sales in research and development.

Current wording

The medical technology industry is highly competitive and continues to evolve. Our success is measured both by the development of innovative products and the value we bring to our stakeholders. We are committed to developing new technologies and innovations, and we are committed to defending our intellectual property in support of those developments. Our vision for growth is to treat patients with both valvular and non-valvular structural heart disease, such as heart failure, which is a natural progression of the disease for many patients suffering from aortic stenosis and mitral and tricuspid regurgitation.

Previous wording

Net sales of TAVR products increased for the three and six months ended June 30, 2024 driven by:

Current wording

Net sales of TAVR products increased for the three and nine months ended September 30, 2024 driven by:

Previous wording

•foreign currency exchange rate fluctuations, which decreased net sales outside of the United States by $10.4 million and $12.5 million for the three and six months ended June 30, 2024, respectively, primarily due to the weakening of the Japanese yen against the United States dollar.

Current wording

•foreign currency exchange rate fluctuations, which decreased net sales outside of the United States by $5.9 million and $18.4 million for the three and nine months ended September 30, 2024, respectively, primarily due to the weakening of the Japanese yen against the United States dollar.

Previous wording

While our global competitive position did not meaningfully change during the first six months of 2024, we experienced lower-than-expected sales growth of TAVR products. This was due to a combination of regional pressure on our competitive position and reduction in procedures with certain hospital centers in the United States related to a variety of factors including, but not limited to, resources and priorities.

Current wording

While our global competitive position and pricing remained stable during the first nine months of 2024, we experienced some regional sales pressure and a reduction in procedures with certain hospital centers in the United States related to a variety of factors including, but not limited to, resources and priorities.

Previous wording

In January 2024, we completed patient treatment in our PROGRESS pivotal trial, studying the treatment of moderate aortic stenosis patients, and we received CE Mark approval for the Edwards SAPIEN 3 Ultra RESILIA valve in Europe.

Current wording

In January 2024, we completed patient treatment in our PROGRESS pivotal trial, studying the treatment of moderate aortic stenosis patients, and we received CE Mark approval for the Edwards SAPIEN 3 Ultra RESILIA valve in Europe. In September 2024, we received CE mark for the Edwards SAPIEN 3 transcatheter pulmonary valve system with Alterra adaptive prestent for use in the management of patients with severe pulmonary regurgitation.

Previous wording

Net sales of TMTT products increased for the three and six months ended June 30, 2024 primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair ("TEER") system and our initial launch of the EVOQUE tricuspid valve replacement system in the United States and Europe.

Current wording

Net sales of TMTT products increased for the three and nine months ended September 30, 2024 primarily due to higher sales of our PASCAL transcatheter edge-to-edge repair ("TEER") system and our continued launch of the EVOQUE tricuspid valve replacement system in the United States and Europe.

Previous wording

Net sales of Surgical products increased for the three and six months ended June 30, 2024 primarily due to higher sales of the INSPIRIS RESILIA aortic valve in the United States and Europe, the MITRIS RESILIA valve in the United States and Europe, and the KONECT RESILIA tissue valved conduit in the United States.

Current wording

Net sales of Surgical products increased for the three and nine months ended September 30, 2024 primarily due to higher sales of the INSPIRIS RESILIA aortic valve in the United States and Europe, the KONECT RESILIA tissue valved conduit in the United States, and the MITRIS RESILIA valve in the United States and Europe.

Previous wording

SG&A expenses increased for the three and six months ended June 30, 2024 primarily due to higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States and Europe. Foreign currency exchange rate fluctuations decreased expenses by $4.2 million and $5.7 million for the three and six months ended June 30, 2024, respectively, primarily due to the strengthening of United States dollar against the Japanese yen.

Current wording

SG&A expenses increased for the three and nine months ended September 30, 2024 primarily due to higher field-based personnel-related costs in support of our growth strategy initiatives, primarily in the United States and Europe, and costs associated with our recent business combinations. Foreign currency exchange rate fluctuations decreased expenses by $2.9 million and $8.6 million for the three and nine months ended September 30, 2024, respectively, primarily due to the strengthening of United States dollar against the Japanese yen.

Previous wording

R&D expenses increased for the three and six months ended June 30, 2024 primarily due to continued investments in our aortic transcatheter valve innovations, including increased clinical trial activity.

Current wording

R&D expenses increased for the three and nine months ended September 30, 2024 primarily due to continued investments in our aortic transcatheter valve innovations, including increased clinical trial activity.

Previous wording

We incurred certain litigation expenses related to intellectual property litigation and tax litigation of $8.1 million and $8.9 million during the three months ended June 30, 2024 and 2023, respectively, and $17.0 million and $15.4 million during the six months ended June 30, 2024 and 2023, respectively. Also, on April 12, 2023, we entered into an Intellectual Property Agreement (the "Intellectual Property Agreement") with Medtronic, Inc. ("Medtronic") and recorded a $37.0 million charge in March 2023 and a $139.0 million charge in April 2023. For more information, see Note 3 to the Consolidated Condensed Financial Statements.

Current wording

We incurred certain litigation expenses related to intellectual property litigation and tax litigation of $10.8 million and $2.2 million during the three months ended September 30, 2024 and 2023, respectively, and $27.8 million and $17.6 million during the nine months ended September 30, 2024 and 2023, respectively. Also, on April 12, 2023, we entered into an Intellectual Property Agreement (the "Intellectual Property Agreement") with Medtronic, Inc. ("Medtronic") and recorded a $37.0 million charge in March 2023 and a $139.0 million charge in April 2023. For more information, see Note 3 to the Consolidated Condensed Financial Statements.

Previous wording

The change in fair value of contingent consideration liabilities resulted in a gain of $26.9 million and $26.2 million for the three and six months ended June 30, 2023, respectively. The gain in 2023 was due to changes in projected probabilities and timing of milestone achievement and the projected timing of cash inflows. As of June 30, 2023, the probability of milestone achievement was determined to be 0% and, accordingly, the contingent consideration liability was zero. For further information, see Note 7 to the Consolidated Condensed Financial Statements.

Current wording

The change in fair value of contingent consideration liabilities resulted in a gain of $26.2 million during the nine months ended September 30, 2023. The gain in 2023 was primarily due to changes in projected probabilities of milestone achievement. For further information, see Note 9 to the Consolidated Condensed Financial Statements.

Previous wording

Our effective income tax rate attributable to continuing operations was 5.2% and 7.6% for the three months ended June 30, 2024 and 2023, respectively, and 8.8% and 10.6% for the six months ended June 30, 2024 and 2023, respectively. The decrease in the effective rate between the six months ended June 30, 2024 and 2023 was primarily due toan increase in tax benefits from foreign earnings taxed at lower rates and favorable global income tax audit settlements. In addition, the effective rates for the six months ended June 30, 2024 and 2023 were lower than the federal statutory rate of 21% primarily due to (1) foreign earnings taxed at lower rates, (2) Federal and California research and development credits, and (3) the tax benefit from employee share-based compensation.

Current wording

Our effective income tax rate attributable to continuing operations was 10.1% and 13.6% for the three months ended September 30, 2024 and 2023, respectively, and 9.2% and 11.8% for the nine months ended September 30, 2024 and 2023, respectively. The decrease in the effective rate between the nine months ended September 30, 2024 and 2023 was primarily due toan increase in tax benefits from foreign earnings taxed at lower rates and favorable global income tax audit settlements. In addition, the effective rates for the nine months ended September 30, 2024 and 2023 were lower than the federal statutory rate of 21% primarily due to (1) foreign earnings taxed at lower rates, (2) Federal and California research and development credits, and (3) the tax benefit from employee share-based compensation.

Previous wording

During 2021, we received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between our United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to our United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $240 million and represented a departure from a transfer pricing method we had previously agreed upon with the IRS. We have disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals ("Appeals"). The Appeals process culminated in the third quarter of 2023 when we and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.

Current wording

During 2021, we received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between our United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to our United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $250 million and represented a departure from a transfer pricing method we had previously agreed upon with the IRS. We have disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals ("Appeals"). The Appeals process culminated in the third quarter of 2023 when we and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.

Previous wording

During the first quarter of 2024, we received a notice of assessment from the Israel Tax Authority (“ITA”) wherein the ITA claimed that we owe approximately $110 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. We maintain that we did not transfer intellectual property outside of Israel and intend to vigorously defend that position through administrative proceedings including a formal appeal of the assessment expected to be filed in the third quarter of 2024. If necessary, we will defend that position through judicial proceedings. There can be no assurance that this matter will be resolved in our favor and an adverse outcome could have a material effect on our consolidated financial statements.

Current wording

During the first quarter of 2024, we received a notice of assessment from the Israel Tax Authority (“ITA”) wherein the ITA claimed that we owe approximately $110 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. We maintain that we did not transfer intellectual property outside of Israel and intend to vigorously defend that position through administrative proceedings including a formal appeal of the assessment that was filed during the third quarter of 2024. If necessary, we will defend that position through judicial proceedings. There can be no assurance that this matter will be resolved in our favor and an adverse outcome could have a material effect on our consolidated financial statements.

Previous wording

As of June 30, 2024, cash and cash equivalents and short-term investments held in the United States and outside of the United States were $1.5 billion and $527.9 million, respectively.

Current wording

As of September 30, 2024, cash and cash equivalents and short-term investments held in the United States and outside of the United States were $4.1 billion and $333.9 million, respectively.

Previous wording

In June 2018, we issued $600.0 million of 4.3% fixed-rate unsecured senior notes (the "2018 Notes") due June 15, 2028. We may redeem the 2018 Notes, in whole or in part, at any time and from time to time at specified redemption prices. As of June 30, 2024, we have not elected to redeem any of the 2018 Notes. As of June 30, 2024, the carrying value of the 2018 Notes was $597.3 million.

Current wording

In June 2018, we issued $600.0 million of 4.3% fixed-rate unsecured senior notes (the "2018 Notes") due June 15, 2028. We may redeem the 2018 Notes, in whole or in part, at any time and from time to time at specified redemption prices. As of September 30, 2024, we have not elected to redeem any of the 2018 Notes. As of September 30, 2024, the carrying value of the 2018 Notes was $597.5 million.

Previous wording

From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Board of Directors. We consider several factors in determining when to execute share repurchases, including, among other things, expected dilution from stock plans, cash capacity, and the market price of our common stock. During the six months ended June 30, 2024, under the Board authorized repurchase program, we repurchased a total of 1.7 million shares at an aggregate cost of $150.0 million. As of June 30, 2024, we had remaining authority to purchase $898.5 million of our common stock under the share repurchase program.

Current wording

From time to time, we repurchase shares of our common stock under share repurchase programs authorized by the Board of Directors. We consider several factors in determining when to execute share repurchases, including, among other things, expected dilution from stock plans, cash capacity, and the market price of our common stock. During the nine months ended September 30, 2024, under the Board authorized repurchase program, we repurchased a total of 15.0 million shares at an aggregate cost of $1.2 billion, including pursuant to a $500 million accelerated share repurchase agreement (see Note 12 to the Consolidated Condensed Financial Statements). As of September 30, 2024, we had remaining authority to purchase $1.4 billion of our common stock under the share repurchase program.

Previous wording

In July 2024, we entered into agreements and plans of mergers to acquire multiple medical device companies for a total aggregate cash purchase price of $1.5 billion, subject to certain adjustments, of which $115.0 million was paid in July 2024. These agreements include up to an additional $745.0 million of potential payments upon achievement of certain regulatory, performance, and sales milestones. For more information, see Note 16 to the Consolidated Condensed Financial Statements.

Current wording

In July 2024, we entered into agreements and plans of mergers to acquire multiple medical device companies for a total aggregate cash purchase price of $1.5 billion, subject to certain adjustments. Two of these transactions closed in the third quarter of 2024, and upon closing we paid $763.6 million, and a third closed in October 2024. These agreements include up to an additional $670.0 million of potential payments upon achievement of certain regulatory, performance, and sales milestones. For more information, see Notes 8 and 18 to the Consolidated Condensed Financial Statements.

Previous wording

In June 2024, we entered into a definitive agreement to sell our Critical Care product group ("Critical Care") to Becton, Dickinson and Company. We expect to complete the sale of Critical Care by the end of the third quarter of 2024 in an all cash-transaction for $4.2 billion, subject to certain customary adjustments as set forth in the agreement.

Current wording

In June 2024, we entered into a definitive agreement to sell our Critical Care product group ("Critical Care") to Becton, Dickinson and Company in an all cash-transaction for $4.2 billion, subject to certain customary adjustments as set forth in the agreement. We completed the sale of Critical Care in early September 2024.

Previous wording

On April 12, 2023, we entered into the Intellectual Property Agreement with Medtronic pursuant to which the parties agreed to a 15-year global covenant not to sue ("CNS") for infringement of certain patents in the structural heart space owned or controlled by each other. In consideration for the global CNS, we paid Medtronic a one-time, lump sum payment of $300.0 million and are paying annual royalties that are tied to net sales of certain Edwards products. For more information, see Note 3 to the Consolidated Condensed Financial Statements.

Current wording

On April 12, 2023, we entered into the Intellectual Property Agreement with Medtronic pursuant to which the parties agreed to a 15-year global covenant not to sue ("CNS") for infringement of certain patents in the structural heart space owned or controlled by each other. In consideration for the global CNS, we paid Medtronic a one-time, lump sum payment of

Previous wording

Consolidated Cash Flows - For the six months ended June 30, 2024 and 2023:

Current wording

Consolidated Cash Flows - For the nine months ended September 30, 2024 and 2023:

Previous wording

Net cash flows provided byoperating activities of $318.0 million for the six months ended June 30, 2024 decreased $29.7 million over the same period last year primarily due to a $305.1 million tax deposit we made in 2024 to mitigate interest on potential tax liabilities we are contesting through the judicial process (see Note 14 to the Consolidated Condensed Financial Statements), partially offset by a $300.0 million payment in the six months ended June 30, 2023 under an intellectual property agreement.

Current wording

Net cash flows provided byoperating activities of $669.8 million for the nine months ended September 30, 2024 decreased $89.4 million over the same period last year primarily due to tax payments of $633.8 million for the nine months ended September 30, 2024, which included a $305.1 million tax deposit we made to mitigate interest on potential tax liabilities we are contesting through the judicial process (see Note 16 to the Consolidated Condensed Financial Statements). The nine months ended September 30, 2023 included $219.1 million of tax payments and a $300.0 million payment under an intellectual property agreement.

Previous wording

Net cash provided byinvesting activities of $187.9 million for the six months ended June 30, 2024 consisted primarily of net proceeds from investments of $391.6 million, partially offset by capital expenditures of $150.7 million.

Current wording

Net cash provided byinvesting activities of $2.9 billion for the nine months ended September 30, 2024 consisted primarily of the sale of our Critical Care product group for proceeds of 3.9 billion, partially offset by capital expenditures of $202.6 million and net purchases of investments of $2.3 million

Previous wording

Net cash provided by investing activities of $70.7 million for the six months ended June 30, 2023 consisted primarily of net proceeds from investments of $371.8 million, partially offset by a payment of $141.2 million to acquire a majority interest in another company and capital expenditures of $109.4 million.

Current wording

Net cash provided by investing activities of $159.7 million for the nine months ended September 30, 2023 consisted primarily of net proceeds from investments of $541.1 million, partially offset by a payment of $141.2 million to acquire a majority interest in another company and capital expenditures of $164.7 million.

Previous wording

Net cash used infinancing activities of $34.9 million for the six months ended June 30, 2024 consisted primarily of purchases of treasury stock of $158.3 million, partially offset by proceeds from stock plans of $116.4 million.

Current wording

Net cash used infinancing activities of $1.0 billion for the nine months ended September 30, 2024 consisted primarily of purchases of treasury stock of 1.2 billion, partially offset by proceeds from stock plans of $150.9 million.

Previous wording

Net cash used in financing activities of $154.5 million for the six months ended June 30, 2023 consisted primarily of purchases of treasury stock of $256.8 million, partially offset by proceeds from stock plans of $102.7 million.

Current wording

Net cash used in financing activities of $297.8 million for the nine months ended September 30, 2023 consisted primarily of purchases of treasury stock of $431.2 million, partially offset by proceeds from stock plans of $136.7 million.