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Upon adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142 , “Goodwill and Other Intangible Assets” (see “New Accounting and Disclosure Standards Issued”), effective January 1 , 2002 the accounting for goodwill will change from an amortization method to an impairment- only approach, resulting in the elimination of goodwill amortization expense in 2002 . 

## Disposition of Assets and Other Non-Recurring Charges, net 2001 Initiatives 

Loss on Sale of Assets ($68 million) 

Effective June 30 , 2001 , the Company sold the stock of Edwards Lifesciences Cardiovascular Resources, Inc. (“ELCR”) to an affiliate of Fresenius Medical Care AG (“Fresenius”) for cash proceeds of $ 45 million (the “ELCR Sale”), resulting in a pre- tax loss of $ 68 million. ELCR provided and managed perfusionists, monitoring systems, capital equipment and disposable material on a contract service basis to hospitals in the United States and Puerto Rico. 

The following unaudited pro forma consolidated condensed statement of operations gives effect to the ELCR Sale as if it had occurred on January 1 , 2001 and excludes the $ 68 million loss on the sale. The unaudited pro forma consoli- dated condensed statement of operations does not purport to be indicative of either the results of future operations or the results of operations that would have occurred had the ELCR Sale been consummated on January 1 , 2001 . The following are in millions, except per share amounts: 

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## Other Non-Recurring Charges ($15 million) 

Based upon the non-strategic nature and declining profitability of certain products in the Company’s portfolio (including certain distributed products), the Company decided during 2001 to discontinue its sales effort of these products. The long- lived assets and the investments related to these products were evaluated to determine whether any impairment in their recoverability existed at the determination date. As a result, 

Edwards Lifesciences assessed whether the estimated cash flows of the products or investments over the estimated lives of the related assets were sufficient to recover their costs. Where such cash flows were insufficient, the Company utilized a discounted cash flow model to estimate the fair value of assets or investments and recorded an impairment charge to adjust the carrying values to estimated fair values. As a result of this evaluation, Edwards Lifesciences recorded a non-cash charge of $ 15 million, primarily related to the impairment of intangibles ($ 9 million), the impairment of an investment ($ 5 million) and the write-down of non-productive assets ($ 1 million). 

## 2000 Initiatives 

Loss on Sale and Abandonment of Assets ($302 million) 

During 2000 , the Company sold the majority of its United States and Western European assets and rights related to its perfusion products to Jostra AG (the “Jostra Sale”). In accordance with SFAS No. 121 , “Accounting for the Impairment of Long- Lived Assets and for Long-Lived Assets to be Disposed Of,” and Staff Accounting Bulletin No. 100 , “Restructuring and Impairment Charges,” the Company recorded a pre-tax impairment charge of $ 290 million in 2000 to reduce the carrying value of these assets to fair value based upon the estimated net proceeds from the Jostra Sale. Assets subject to this impairment charge consisted primarily of goodwill ($ 245 million) and special-use manufacturing and support assets. The goodwill impairment charge was calculated based upon a pro rata allocation of the goodwill using the relative fair values of the affected long-lived assets and identifiable intangibles acquired at the inception date of the goodwill. On August 31 , 2000 , Edwards Lifesciences completed the Jostra Sale for $ 24 million (consisting of $ 10 million in cash and a $ 14 million note receivable, payable in six equal quarterly installments through March 1 , 2002 , plus interest at an annual effective rate of 8 %). All payments under the note have been made. 

In conjunction with the Jostra Sale, during 2000 the Company recorded charges to establish a $ 10 million reserve for personnel costs and a $ 2 million reserve for exit activities. The personnel costs consisted primarily of severance, medical plan continuation and outplacement services for the approxi- mately 225 employees impacted by the Jostra Sale. The impacted employees were located in Europe, the United States and Puerto Rico, and primarily worked in a manufacturing capacity. The exit activities consisted primarily of information systems costs, contract termination costs and shutdown expenses. 

The following table summarizes the utilization of these reserves through December 31 , 2001 : 

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## Gain on Sale of Assets ($35 million) 

On June 30 , 2000 , Edwards Lifesciences transferred the rights, intellectual property and United States assets related to the Novacor mechanical cardiac assist product line to World Heart Corporation (“WorldHeart”). In return, the Company received (a) preferred stock of a subsidiary of WorldHeart which, at Edwards Lifesciences’ option, can be exchanged for approximately 5 million shares of WorldHeart’s common stock commencing July 2002 , bearing a cumulative dividend and maturing in June 2015 , and (b) exclusive worldwide distribution rights to the Novacor left ventricular assist system and any ventricular assist technologies developed by WorldHeart. Edwards Lifesciences also will provide components and technical support to WorldHeart for ventricular assist products at agreed upon prices. The Company recorded a pre-tax gain of $ 35 million during 2000 in connection with this transaction. 

As part of the transaction with WorldHeart, the Company invested $ 20 million in WorldHeart convertible preferred stock. The preferred stock bears a cumulative dividend, matures in June 2007 , is callable at any time by WorldHeart and is convertible by Edwards Lifesciences into WorldHeart common stock commencing July 2006 . Edwards Lifesciences reports its investments in WorldHeart as available-for-sale securities. 

The following unaudited pro forma consolidated condensed statement of operations gives effect to the sales to Jostra AG and WorldHeart by Edwards Lifesciences as if the sales had occurred on January 1 , 2000 and exclude the $ 302 million loss on sale to Jostra AG and the $ 35 million gain on sale to WorldHeart. The unaudited pro forma consolidated condensed statement of operations does not purport to be indicative of either the results of future operations or the results of operations that would have occurred had 

the sales been consummated on January 1 , 2000 . The following amounts are in millions, except per share amounts: 

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## Other Non-Recurring Charges ($45 million) 

As a result of Edwards Lifesciences’ continuing efforts to focus the Company’s product portfolio and effect the Company’s business strategy following the spin-off from Baxter, during 2000 the Company decided to discontinue certain products in its portfolio that did not meet the objectives of its business strategy. The long-lived assets or the investments in these products were evaluated to determine whether any impairment in their recoverability existed at the determination date. As a result, Edwards Lifesciences assessed whether the estimated cash flows of the products over the estimated lives of the related assets were sufficient to recover their costs. Where such cash flows were insufficient, the Company utilized a discounted cash flow model to estimate the fair value of assets or investments and recorded an impairment charge to adjust the carrying values to estimated fair values. As a result of this evaluation, Edwards Lifesciences recorded a non-cash charge of $ 45 million during 2000 primarily related to the impairment of goodwill unrelated to perfusion products ($ 37 million), the impairment of other intangibles ($ 5 million) and the write-down of non-productive assets ($ 3 million). 

