content_image/95399.jpg content_image/95398.jpg
Effective January 1 , 2001 , Edwards Lifesciences adopted the provisions of SFAS No. 140 , “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” This statement replaces SFAS No. 125 and revises the standards for accounting for securitizations and other transfers of financial assets and collateral. SFAS No. 140 is effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after March 31 , 2001 . This statement is effective for recognition and reclassification of collateral and for disclosures relating to securitization transactions and collateral for fiscal years ending after December 15 , 2000 . Adoption of this standard did not have a material impact on the Company’s consolidated financial statements. 

## New Accounting and Disclosure Standards Issued 

In June 2001 , the FASB issued SFAS No. 142 , “Goodwill and Other Intangible Assets.” SFAS No. 142 , which changes the accounting for goodwill from an amortization method to an impairment-only approach, is effective for fiscal years beginning after December 15 , 2001 . No transition adjustment was recorded upon adoption of this standard on January 1 , 2002 .However, adoption of this standard resulted in the elimination of goodwill amortization commencing January 1 , 2002 . 

In June 2001 , the FASB issued SFAS No. 143 , “Accounting for Asset Retirement Obligations.” SFAS No. 143 , which changes the accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs, will be effective for fiscal years beginning after June 15 , 2002 . The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements. 

In August 2001 , the FASB issued SFAS No. 144 , “Accounting for the Impairment or Disposal of Long Lived Assets.” SFAS No. 144 , which changes the accounting and reporting for the impairment of long-lived assets, is effective for fiscal years beginning after December 15 , 2001 . The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements. 

## Notes to Consolidated Financial Statements 

During 2001 and 2000 , Edwards Lifesciences recorded non- recurring charges comprised of the following: 

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 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 ELCR Sale been consummated on January 1 , 2001 . The following are in millions, except per share amounts: 

<img src='content_image/95399.jpg'>

## note 3. 

## DISPOSITION OF ASSETS AND OTHER NON-RECURRING CHARGES, NET 

## 2001 Initiatives 

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). 

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,” 

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

<img src='content_image/95398.jpg'>

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 

## 2000 Initiatives 

## Notes to Consolidated Financial Statements 

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 approximately 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. 

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. 

