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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2024
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            For the transition period from                                    to            
Commission file number 1-15525
EDWARDS LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
36-4316614
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

One Edwards Way
Irvine, California 92614
(Address of principal executive offices and zip code)

(949) 250-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareEWNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒
The number of shares outstanding of the registrant's common stock, $1.00 par value, as of July 26, 2024 was 602.4 million.



EDWARDS LIFESCIENCES CORPORATION
FORM 10-Q
For the quarterly period ended June 30, 2024

TABLE OF CONTENTS



NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements contained in this report to be covered by the safe harbor provisions of such Acts. Statements other than statements of historical or current fact in this report or referred to or incorporated by reference into this report are "forward-looking statements" for purposes of these safe harbor provisions. These statements can sometimes be identified by the use of the forward-looking words such as "may," "believe," "will," "expect," "project," "estimate," "should," "anticipate," "plan," "goal," "continue," "seek," "pro forma," "forecast," "intend," "guidance," "optimistic," "aspire," "confident," other forms of these words or similar words or expressions or the negatives thereof. Statements regarding past performance, efforts, or results about which inferences or assumptions may be made can also be forward-looking statements and are not indicative of future performance or results; these statements can be identified by the use of words such as "preliminary," "initial," "potential," "possible," "diligence," "industry-leading," "compliant," "indications," or "early feedback" or other forms of these words or similar words or expressions or the negatives thereof. These forward-looking statements are subject to substantial risks and uncertainties that could cause our results or future business, financial condition, results of operations or performance to differ materially from our historical results or experiences or those expressed or implied in any forward-looking statements contained in this report. These risks and uncertainties include, but are not limited to: our ability to complete or realize the anticipated benefits of the sale of our critical care product group; our ability to develop new products and avoid manufacturing and quality issues; risks related to our recent pending acquisitions, including our ability to close the transactions in a timely manner or at all; clinical trial or commercial results or new product approvals and therapy adoption; the impact of domestic and global conditions; competition in the markets in which we operate; our reliance on vendors, suppliers, and other third parties; damage, failure or interruption of our information technology systems; the impact of public health crises; consolidation in the healthcare industry; our ability to protect our intellectual property; our compliance with applicable regulations; our exposure to product liability claims; use of our products in unapproved circumstances; changes to reimbursement for our products; the impact of currency exchange rates; unanticipated actions by the United States Food and Drug Administration and other regulatory agencies; changes to tax laws; unexpected impacts or expenses of litigation or internal or government investigations; and other risks detailed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2023, as amended in this report, and as such risks and uncertainties may be further amended, supplemented or superseded from time to time by our subsequent reports on Forms 10-Q and 8-K we file with the United States Securities and Exchange Commission. These forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

Unless otherwise indicated or otherwise required by the context, the terms "we," "our," "it," "its," "Company," "Edwards," and "Edwards Lifesciences" refer to Edwards Lifesciences Corporation and its subsidiaries.



Part I. Financial Information

Item 1.    Financial Statements
EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions, except par value; unaudited)
 June 30, 2024December 31, 2023
ASSETS  
Current assets  
Cash and cash equivalents$1,644.5 $1,136.1 
Short-term investments (Note 5)345.3 500.5 
Accounts receivable, net of allowances of $13.9 and $8.3, respectively
778.3 771.5 
Other receivables56.1 56.6 
Inventories (Note 2)1,024.7 918.3 
Prepaid expenses110.2 128.8 
Other current assets252.1 224.9 
Current assets of discontinued operations (Note 4)304.8 299.0 
Total current assets4,516.0 4,035.7 
Long-term investments (Note 5)353.3 583.9 
Property, plant, and equipment, net1,640.1 1,592.8 
Operating lease right-of-use assets 92.8 84.4 
Goodwill 1,151.0 1,152.5 
Other intangible assets, net417.1 399.4 
Deferred income taxes832.6 749.4 
Other assets (Note 2)789.8 463.1 
Non-current assets of discontinued operations (Note 4)306.6 302.0 
Total assets$10,099.3 $9,363.2 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities  
Accounts payable$185.9 $186.6 
Accrued and other liabilities (Note 2)902.4 858.2 
Operating lease liabilities21.5 22.9 
Current liabilities of discontinued operations (Note 4)107.2 127.7 
Total current liabilities1,217.0 1,195.4 
Long-term debt 597.3 597.0 
Taxes payable1.1 80.6 
Operating lease liabilities 74.2 65.2 
Uncertain tax positions343.2 335.0 
Litigation settlement accrual74.8 94.2 
Other liabilities257.1 251.3 
Non-current liabilities of discontinued operations (Note 4)30.0 25.1 
Total liabilities2,594.7 2,643.8 
Commitments and contingencies (Note 11)
Stockholders' equity  
Preferred stock, $0.01 par value, authorized 50.0 shares, no shares outstanding          
— — 
Common stock, $1.00 par value, 1,050.0 shares authorized, 653.5 and 650.5 shares issued, and 602.3 and 601.1 shares outstanding, respectively
653.5 650.5 
Additional paid-in capital2,476.3 2,274.4 
Retained earnings9,710.6 8,992.4 
Accumulated other comprehensive loss (Note 12)(220.2)(242.8)
Treasury stock, at cost, 51.2 and 49.4 shares, respectively
(5,182.8)(5,024.5)
Total Edwards Lifesciences Corporation stockholders' equity7,437.4 6,650.0 
Noncontrolling interest67.2 69.4 
Total stockholders' equity7,504.6 6,719.4 
Total liabilities and equity$10,099.3 $9,363.2 
The accompanying notes are an integral part of these consolidated condensed financial statements.
1

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except per share information; unaudited)
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2024202320242023
Net sales$1,385.9 $1,295.5 $2,732.8 $2,533.2 
Cost of sales285.3 256.9 581.6 495.9 
Gross profit1,100.6 1,038.6 2,151.2 2,037.3 
Selling, general, and administrative expenses450.8 410.4 883.6 792.4 
Research and development expenses272.6 243.7 530.4 478.5 
Intellectual property agreement and certain litigation expenses (Note 3)
8.1 147.9 17.0 191.4 
Change in fair value of contingent consideration liabilities (Note 7)— (26.9)— (26.2)
Operating income, net369.1 263.5 720.2 601.2 
Interest income, net(15.5)(9.1)(32.0)(17.7)
Other income, net(2.0)(2.5)(7.7)(3.7)
Income from continuing operations before provision for income taxes386.6 275.1 759.9 622.6 
Provision for income taxes20.2 20.9 66.8 66.2 
Net income from continuing operations366.4 254.2 693.1 556.4 
(Loss) income from discontinued operations, net of tax(1.4)51.3 22.9 89.6 
Net income365.0 305.5 716.0 646.0 
Net loss attributable to noncontrolling interest(1.3)(1.6)(2.2)(1.6)
Net income attributable to Edwards Lifesciences Corporation$366.3 $307.1 $718.2 $647.6 
Share information (Note 13)
    
Earnings per share:    
Basic
Continuing operations$0.61 $0.42 $1.15 $0.92 
Discontinued operations$— $0.09 $0.04 $0.15 
Basic earnings per share$0.61 $0.51 $1.19 $1.07 
Diluted
Continuing operations$0.61 $0.42 $1.15 $0.91 
Discontinued operations$— $0.08 $0.04 $0.15 
Diluted earnings per share$0.61 $0.50 $1.19 $1.06 
Weighted-average number of common shares outstanding:    
Basic602.1 606.9 601.8 607.2 
Diluted604.3 610.3 604.2 610.6 
The accompanying notes are an integral part of these consolidated condensed financial statements.
2

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in millions; unaudited)
 Three Months Ended
June 30,		Six Months Ended
June 30,
 2024202320242023
Net income$365.0 $305.5 $716.0 $646.0 
Other comprehensive income (loss), net of tax (Note 12):
Foreign currency translation adjustments1.0 (11.5)(25.1)(7.7)
Unrealized gain (loss) on hedges
6.9 5.3 33.8 (11.9)
Unrealized pension (costs) credits
(0.1)0.2 0.2 0.1 
Unrealized gain on available-for-sale investments
5.3 5.9 13.7 18.9 
Other comprehensive income (loss), net of tax
13.1 (0.1)22.6 (0.6)
Comprehensive income378.1 305.4 738.6 645.4 
Comprehensive loss attributable to noncontrolling interest
(1.3)(1.6)(2.2)(1.6)
Comprehensive income attributable to Edwards Lifesciences Corporation$379.4 $307.0 $740.8 $647.0 
The accompanying notes are an integral part of these consolidated condensed financial statements.
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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
 Six Months Ended
June 30,
 20242023
Cash flows from operating activities  
Net income$716.0 $646.0 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization78.1 71.3 
Non-cash operating lease cost15.1 13.7 
Stock-based compensation (Note 9)88.5 76.3 
Change in fair value of contingent consideration liabilities (Note 7)— (26.2)
Deferred income taxes(101.9)(134.7)
Other2.0 (0.7)
Changes in operating assets and liabilities:  
Accounts and other receivables, net(32.0)(124.3)
Inventories(163.7)(113.7)
Accounts payable and accrued liabilities62.7 76.2 
Income taxes(370.0)31.0 
Prepaid expenses and other current assets40.1 (43.4)
Intellectual property agreement accrual(11.8)(14.5)
Long-term prepaid royalties (Note 3)4.2 (114.0)
Other(9.3)4.7 
Net cash provided by operating activities318.0 347.7 
Cash flows from investing activities  
Capital expenditures(150.7)(109.4)
Purchases of held-to-maturity investments (Note 5)(14.1)(15.5)
Proceeds from held-to-maturity investments (Note 5)25.2 83.5 
Purchases of available-for-sale investments (Note 5)(1.8)(6.8)
Proceeds from available-for-sale investments (Note 5)388.4 314.5 
Investments in intangible assets(20.0)(13.3)
Business combination, net of cash— (141.2)
Payment for acquisition options (Note 6)(10.8)(15.0)
Issuances of notes receivable(17.5)(22.5)
Other(10.8)(3.6)
Net cash provided by investing activities187.9 70.7 
Cash flows from financing activities  
Purchases of treasury stock(158.3)(256.8)
Proceeds from stock plans116.4 102.7 
Other7.0 (0.4)
Net cash used in financing activities(34.9)(154.5)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash39.1 11.0 
Net increase in cash, cash equivalents, and restricted cash510.1 274.9 
Cash, cash equivalents, and restricted cash at beginning of period1,148.0 772.6 
Cash, cash equivalents, and restricted cash at end of period (Note 2)$1,658.1 $1,047.5 
The accompanying notes are an integral part of these consolidated condensed financial statements.
4

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 Common StockTreasury Stock
 SharesPar ValueSharesAmountAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Edwards Lifesciences Corporation Stockholders' EquityNoncontrolling InterestTotal Stockholders' Equity
Balance at December 31, 2023650.5 $650.5 49.4 $(5,024.5)$2,274.4 $8,992.4 $(242.8)$6,650.0 $69.4 $6,719.4 
Net income     351.9  351.9 (0.9)351.0 
Other comprehensive gain, net of tax      9.5 9.5 9.5 
Common stock issued under stock plans1.3 1.3   60.8   62.1 62.1 
Stock-based compensation expense    44.6   44.6 44.6 
Purchases of treasury stock  — (0.2)  (0.2)(0.2)
Balance at March 31, 2024
651.8 $651.8 49.4 $(5,024.7)$2,379.8 $9,344.3 $(233.3)$7,117.9 $68.5 $7,186.4 
Net income366.3 366.3 (1.3)365.0 
Other comprehensive gain, net of tax13.1 13.1 13.1 
Common stock issued under equity plans
1.7 1.7 52.6 54.3 54.3 
Stock-based compensation expense43.9 43.9 43.9 
Purchases of treasury stock1.8 (158.1)(158.1)(158.1)
Balance at June 30, 2024
653.5 $653.5 51.2 $(5,182.8)$2,476.3 $9,710.6 $(220.2)$7,437.4 $67.2 $7,504.6 
The accompanying notes are an integral part of these consolidated condensed financial statements.

5

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 Common StockTreasury Stock
 SharesPar ValueSharesAmountAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Edwards Lifesciences, Inc. Stockholders' EquityNoncontrolling InterestTotal Stockholders' Equity
Balance at December 31, 2022646.3 $646.3 38.0 $(4,144.0)$1,969.3 $7,590.0 $(254.9)$5,806.7 $— $5,806.7 
Net income     340.5  340.5 — 340.5 
Other comprehensive loss, net of tax      (0.5)(0.5)(0.5)
Common stock issued under stock plans0.8 0.8   41.1   41.9 41.9 
Stock-based compensation expense    38.9   38.9 38.9 
Purchases of treasury stock  3.1 (249.5)  (249.5)(249.5)
Changes to noncontrolling interest84.0 84.0 
Balance at March 31, 2023
647.1 $647.1 41.1 $(4,393.5)$2,049.3 $7,930.5 $(255.4)$5,978.0 $84.0 $6,062.0 
Net income307.1 307.1 (1.6)305.5 
Other comprehensive loss, net of tax(0.1)(0.1)(0.1)
Common stock issued under equity plans
2.0 2.0 58.8 60.8 60.8 
Stock-based compensation expense37.4 37.4 37.4 
Purchases of treasury stock0.1 (7.5)(7.5)(7.5)
Changes to noncontrolling interest(11.6)(11.6)
Balance at June 30, 2023
649.1 $649.1 41.2 $(4,401.0)$2,145.5 $8,237.6 $(255.5)$6,375.7 $70.8 $6,446.5 
The accompanying notes are an integral part of these consolidated condensed financial statements.
6


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' Annual Report on Form 10-K for the year ended December 31, 2023. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

The consolidated condensed financial statements include the accounts of all wholly-owned subsidiaries and variable interest entities for which the Company is the primary beneficiary. The Company attributes the net income or losses of its consolidated variable interest entities to controlling and noncontrolling interests using the hypothetical liquidation at book value method. All intercompany accounts and transactions have been eliminated in consolidation.

On June 3, 2024, the Company entered into a definitive agreement to sell its Critical Care product group ("Critical Care"). The historical results of Critical Care are reflected as discontinued operations in the Company's consolidated condensed financial statements for all periods presented. Unless otherwise indicated, the information in the notes to the consolidated condensed financial statements refer only to Edwards Lifesciences' continuing operations. For more information, see Note 4.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates.

In the opinion of management, the unaudited interim consolidated condensed financial statements reflect all adjustments necessary for a fair statement of the results for the interim periods presented. All such adjustments, unless otherwise noted herein, 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.

There have been no material changes to the Company's significant accounting policies from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

Recently Adopted Accounting Standards

In March 2023, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on investments in tax credit structures to allow entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. The guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company adopted this guidance on January 1, 2024. The adoption of this guidance did not have a material impact on the Company's consolidated financial statements.

New Accounting Standards Not Yet Adopted

In March 2024, the SEC issued final climate-related disclosure rules that will require disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and/or material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain materiality thresholds. The new rules will be effective for annual reporting periods beginning in fiscal year 2025, except for the greenhouse gas emissions disclosures which will be effective for annual reporting periods beginning in fiscal year 2026. Subsequent to issuance, the rules became the subject of litigation, and the SEC has issued a stay to allow the legal process to proceed. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

In December 2023, the FASB issued an amendment to the accounting guidance on income taxes which requires entities to provide additional information in the rate reconciliation and additional disaggregated disclosures about income taxes paid. This guidance requires public entities to disclose in their rate reconciliation table additional categories of information about federal, state, and foreign income taxes and to provide more details about the reconciling items in some categories if the items meet a quantitative threshold. The guidance is effective for annual periods beginning after December 15, 2024. The Company does not expect the adoption of this guidance to impact its financial statements, but the guidance will impact its income tax disclosures.

7

In November 2023, the FASB issued an amendment to the accounting guidance on segment reporting. The amendments require disclosure of significant segment expenses and other segment items and requires entities to provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. The amendment also requires disclosure of the title and position of the chief operating decision maker ("CODM") and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective application is required, and early adoption is permitted. The Company is currently evaluating the impact the guidance will have on its consolidated financial statements.

2.     OTHER CONSOLIDATED FINANCIAL STATEMENT DETAILS

Composition of Certain Financial Statement Captions
(in millions)

Components of selected captions in the consolidated condensed balance sheets consisted of the following:
June 30,
2024		December 31, 2023
Inventories
Raw materials$233.5 $196.9 
Work in process237.7 195.7 
Finished products553.5 525.7 
$1,024.7 $918.3 

At June 30, 2024 and December 31, 2023, $167.1 million and $164.6 million, respectively, of the Company's finished products inventories were held on consignment.

June 30,
2024		December 31, 2023
Other assets
Tax receivable (Note 14)$290.0 $— 
Notes and other receivables172.3 155.1 
Acquisition options176.9 161.3 
Long-term prepaid royalties105.7 109.9 
Fair value of derivatives30.5 23.4 
Other long-term assets14.4 13.4 
$789.8 $463.1 
Accrued and other liabilities 
Employee compensation and withholdings$288.7 $318.2 
Taxes payable47.0 52.7 
Property, payroll, and other taxes73.8 53.8 
Research and development accruals78.0 71.6 
Accrued rebates120.6 123.5 
Fair value of derivatives4.7 15.2 
Accrued marketing expenses13.0 13.7 
Legal and insurance32.5 28.9 
Litigation settlement76.7 69.1 
Accrued relocation costs17.0 16.9 
Accrued professional services59.1 8.5 
Accrued realignment reserves8.9 6.4 
Other accrued liabilities82.4 79.7 
$902.4 $858.2 
8


Supplemental Cash Flow Information
(in millions)
Six Months Ended
June 30,
20242023
Cash paid during the year for:
Income taxes (a) (Note 14)
$528.9 $193.5 
Amounts included in the measurement of operating lease liabilities$14.5 $12.7 
Non-cash investing and financing transactions:  
Right-of-use assets obtained in exchange for new lease liabilities$24.6 $5.2 
Capital expenditures accruals$24.1 $26.2 
______________________________________
(a)     Includes cash paid for income taxes from discontinued operations of $7.1 million and $22.3 million for the six months ended June 30, 2024 and 2023, respectively.

Cash, Cash Equivalents, and Restricted Cash
(in millions)
June 30,
2024		December 31, 2023
Continuing operations
Cash and cash equivalents$1,644.5 $1,136.1 
Restricted cash included in other current assets3.5 3.3 
Restricted cash included in other assets0.9 0.7 
Total$1,648.9 $1,140.1 
Discontinued operations
Cash and cash equivalents$9.2 $7.9 
Total$9.2 $7.9 
Total cash, cash equivalents, and restricted cash$1,658.1 $1,148.0 

Amounts included in restricted cash primarily represent funds placed in escrow related to litigation.

3.    INTELLECTUAL PROPERTY AGREEMENT AND CERTAIN LITIGATION EXPENSES

On April 12, 2023, Edwards entered into an Intellectual Property Agreement (the "Intellectual Property Agreement") with Medtronic, Inc. ("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 and related mutual access to certain intellectual property rights, Edwards paid to Medtronic a one-time, lump sum payment of $300.0 million and is paying annual royalties tied to net sales of certain Edwards products. Based upon the terms of the Intellectual Property Agreement, the Company identified the relevant elements for accounting purposes and allocated the $300.0 million upfront payment based on their respective fair values. The Company recorded a $37.0 million pre-tax charge in Intellectual Property Agreement and Certain Litigation Expenses in March 2023 related primarily to prior commercial sales incurred through March 31, 2023. The Company recorded a prepaid royalty asset of $124.0 million in April 2023 related to future commercial sales, which will be amortized to expense during the term of the Intellectual Property Agreement. Separately, the Company recorded a $139.0 million pre-tax charge in Intellectual Property Agreement and Certain Litigation Expenses in April 2023 related to products currently in development.

4.    DISCONTINUED OPERATIONS

On June 3, 2024, the Company entered into a definitive agreement to sell its 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. The closing of the transaction is subject to regulatory approvals and other customary closing conditions.

Critical Care was historically reported in each of the Company's segments (United States, Europe, Japan, and Rest of World).
9


The Company concluded that Critical Care met the criteria to be classified as held-for-sale in June 2024 and determined that the conditions for discontinued operations presentation had been met with respect to Critical Care. A component of an entity is reported in discontinued operations after meeting the criteria for held-for-sale classification if the disposition represents a strategic shift that has (or will have) a major effect on the entity's operations and financial results. The Company analyzed the quantitative and qualitative factors relevant to the divestiture of Critical Care, including its significance to the Company’s overall net income and total assets, and determined that those conditions for discontinued operations presentation had been met. As such, the historical financial condition and results of Critical Care have been reflected as discontinued operations in the Company's consolidated condensed financial statements. The assets and liabilities associated with Critical Care are classified as assets and liabilities of discontinued operations in the Company's consolidated condensed balance sheets. Prior period amounts have been adjusted to reflect the discontinued operations presentation.

In connection with the sale, the Company plans to enter into a Transition Services Agreement ("TSA") to provide certain support services for up to 36 months from the closing date of the sale (with certain extension rights as provided therein). These services may include, among others, accounting, information technology, human resources, quality assurance, regulatory affairs, customer support, and global supply chain. Income recognized related to the TSA will be recorded in Other Operating Income, net on the Company's consolidated condensed statements of operations.

Details of Income from Discontinued Operations are as follows (in millions):

 Three Months Ended
June 30,		Six Months Ended
June 30,
 2024202320242023
Net sales$246.4 $234.7 $497.7 $456.6 
Cost of sales91.2 86.1 180.5 176.6 
Gross profit155.2 148.6 317.2 280.0 
Selling, general, and administrative expenses57.7 58.3 114.6 112.6 
Research and development expenses30.6 26.6 58.0 53.0 
Separation costs79.7 — 121.0 — 
Operating (loss) income, net(12.8)63.7 23.6 114.4 
Other expense (income), net1.1 0.3 1.4 (0.1)
(Loss) income from discontinued operations before provision for income taxes(13.9)63.4 22.2 114.5 
(Benefit from) provision for income taxes from discontinued operations(12.5)12.1 (0.7)24.9 
Net (loss) income from discontinued operations(1.4)51.3 22.9 89.6 

Separation costs related primarily to consulting, legal, tax, and other professional advisory services associated with the planned sale of Critical Care.

10

Details of assets and liabilities of discontinued operations are as follows (in millions):

 June 30,
2024		December 31,
2023
Cash and cash equivalents$9.2 $7.9 
Accounts receivable, net of allowances4.9 3.6 
Other receivables4.1 5.2 
Inventories261.9 249.9 
Prepaid expenses17.9 18.0 
Other current assets6.8 14.4 
Total current assets of discontinued operations$304.8 $299.0 
Property, plant, and equipment, net158.6 156.6 
Operating lease right-of-use assets 14.2 9.6 
Goodwill 101.0 101.0 
Other intangible assets, net27.3 29.0 
Deferred income taxes5.2 5.2 
Other assets0.3 0.6 
Total non-current assets of discontinued operations$306.6 $302.0 
Accounts payable$13.3 $14.8 
Accrued and other liabilities90.9 110.9 
Operating lease liabilities3.0 2.0 
Total current liabilities of discontinued operations$107.2 $127.7 
Operating lease liabilities 11.4 7.8 
Uncertain tax positions4.3 4.3 
Other liabilities14.3 13.0 
Total non-current liabilities of discontinued operations$30.0 $25.1 

Cash flows attributable to the Company's discontinued operations are included in the Company's consolidated condensed statements of cash flows. Significant non-cash operating and investing activities attributable to discontinued operations consisted of the following (in millions):

 Six Months Ended
June 30,
 20242023
Depreciation and amortization11.7 11.2 
Stock-based compensation11.9 7.8 
Inventory write off6.7 3.5 
Capital expenditures11.4 13.4 

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5.     INVESTMENTS

Debt Securities

Investments in debt securities at the end of each period were as follows (in millions):
 June 30, 2024December 31, 2023
Held-to-maturityAmortized CostGross Unrealized GainsGross Unrealized LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Bank time deposits$53.4 $— $— $53.4 $64.5 $— $— $64.5 
Available-for-sale
U.S. government and agency securities48.5 — (2.0)46.5 72.7 0.1 (2.8)70.0 
Asset-backed securities110.8 — (2.7)108.1 192.1 — (7.8)184.3 
Corporate debt securities372.2 0.1 (8.0)364.3 658.5 — (16.7)641.8 
Municipal securities2.8 — (0.1)2.7 2.8 — (0.2)2.6 
Total$534.3 $0.1 $(12.8)$521.6 $926.1 $0.1 $(27.5)$898.7 
The cost and fair value of investments in debt securities, by contractual maturity, as of June 30, 2024, were as follows:
Held-to-MaturityAvailable-for-Sale
 Amortized CostFair ValueAmortized CostFair Value
 (in millions)
Due in 1 year or less$53.4 $53.4 $295.9 $291.9 
Due after 1 year through 5 years— — 114.8 110.4 
Instruments not due at a single maturity date (a)
— — 123.6 119.3 
$53.4 $53.4 $534.3 $521.6 
_______________________________________
(a)     Consists of mortgage-backed and asset-backed securities.
Actual maturities may differ from the contractual maturities due to call or prepayment rights.
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of June 30, 2024 and December 31, 2023, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):

June 30, 2024
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. government and agency securities$— $— $44.8 $(2.0)$44.8 $(2.0)
Asset-backed securities5.1 (0.1)101.8 (2.6)106.9 (2.7)
Corporate debt securities— — 283.4 (8.0)283.4 (8.0)
Municipal securities— — 2.7 (0.1)2.7 (0.1)
$5.1 $(0.1)$432.7 $(12.7)$437.8 $(12.8)
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December 31, 2023
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. government and agency securities$— $— $67.1 $(2.8)$67.1 $(2.8)
Asset-backed securities10.2 (1.8)172.7 (6.0)182.9 (7.8)
Corporate debt securities25.0 (0.1)601.3 (16.6)626.3 (16.7)
Municipal securities— — 2.6 (0.2)2.6 (0.2)
$35.2 $(1.9)$843.7 $(25.6)$878.9 $(27.5)

The Company reviews its investments in debt securities to determine if there has been an other-than-temporary decline in fair value. Consideration is given to 1) the financial condition and near-term prospects of the issuer, including the credit quality of the security's issuer, 2) the Company's intent to sell the security, and 3) whether it is more likely than not the Company will have to sell the security before recovery of its amortized cost. The unrealized losses on the debt securities were largely due to changes in interest rates, not credit quality, and as of June 30, 2024, the Company did not intend to sell the securities, and it was not more likely than not that it will be required to sell the securities before recovery of the unrealized losses, and, therefore, the unrealized losses are considered temporary.

Investments in Unconsolidated Entities

The Company has a number of equity investments in unconsolidated entities. These investments are recorded in Long-term Investments on the consolidated condensed balance sheets, and are as follows:
 June 30,
2024		December 31,
2023
 (in millions)
Equity method investments  
Carrying value of equity method investments$34.0 $33.6 
Equity securities  
Carrying value of non-marketable equity securities89.6 87.6 
Total investments in unconsolidated entities$123.6 $121.2 

The Company makes equity investments in limited liability companies that invest in qualified community development entities ("CDEs") through the New Markets Tax Credit ("NMTC") program. The NMTC program provides federal tax incentives to investors to make investments in distressed communities and promotes economic improvements through the development of successful businesses in these communities. The NMTC is equal to 39% of the qualified investment and is taken over seven years. These limited liability companies are variable interest entities ("VIEs"). The Company determined that it is not the primary beneficiary of the VIEs because it does not have the power to direct the activities that most significantly impact the economic performance of the VIEs and, therefore, the Company does not consolidate these entities. Instead, the NMTC investments are accounted for as equity method investments.

Non-marketable equity securities consist of investments in privately held companies without readily determinable fair values, and are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. The Company recorded a downward adjustment of $2.4 million during the six months ended June 30, 2024 based on observable price changes. As of June 30, 2024, the Company had recorded cumulative upward adjustments of $8.8 million based on observable price changes, and cumulative downward adjustments of $5.5 million due to impairments and observable price changes.

During the three and six months ended June 30, 2024, the gross realized gains or losses from sales of available-for-sale investments were not material.

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6.     INVESTMENTS IN VARIABLE INTEREST ENTITIES

The Company reviews its investments in other entities to determine whether the Company is the primary beneficiary of a VIE. The Company would be the primary beneficiary of the VIE, and would be required to consolidate the VIE, if it has the power to direct the significant activities of the entity and the obligation to absorb losses or receive benefits from the entity that may be significant to the VIE. The Company's maximum loss exposure to variable interest entities, prior to the exercise of options to acquire the entities, is limited to its investment in the variable interest entities, which include equity investments, options to acquire, and promissory notes.

Consolidated VIEs

In February 2023, the Company acquired a majority equity interest in a medical technology company pursuant to a preferred stock purchase agreement, and amended and restated a previous option agreement to acquire the remaining equity interest. Edwards concluded that it is the primary beneficiary and consolidated the VIE. The total assets and liabilities of the Company's consolidated VIE was $262.5 million and $27.2 million, respectively, as of June 30, 2024, and were $272.1 million and $31.5 million, respectively, as of December 31, 2023. The assets of the VIE can only be used to settle obligations of the VIE and general creditors have no recourse to the Company.
Unconsolidated VIEs

Edwards has relationships with various VIEs that it does not consolidate as Edwards lacks the power to direct the activities that significantly impact the economic success of these entities.

In June 2022, the Company entered into a convertible promissory note and amended its existing warrant agreement with a medical device company. Under the convertible promissory note agreement, the Company agreed to loan the medical device company up to $47.5 million, of which $37.5 million had been advanced as of June 30, 2024. In addition, in 2019, the Company paid $35.0 million for an option to acquire the medical device company. The $35.0 million option and the $37.5 million note receivable are included in Other Assets on the consolidated balance sheets.

In May 2022, the Company entered into an option agreement with a medical technology company. Under the option agreement, Edwards paid $60.0 million for an option to acquire the medical technology company, of which $10.0 million was paid in 2021. In addition, the Company has entered into several promissory notes under which the Company agreed to loan the medical technology company an aggregate total of up to $46.0 million, of which $45.0 million had been advanced as of June 30, 2024. In July 2024, the Company agreed to loan the medical technology company an additional $18.0 million, and advanced $5.0 million under this additional promissory note. Also, in July 2024, the Company exercised its option to acquire the medical technology company. For more information, see Note 16. The $60.0 million option and the $45.0 million note receivable are included in Other Assets on the consolidated balance sheets.

In April 2021, the Company entered into a promissory note agreement, a preferred stock purchase agreement, and an option agreement with a privately-held medical device company (the "Investee"). The secured promissory note provides for borrowings up to $45.0 million. At both June 30, 2024 and December 31, 2023, the Company had advanced $30.0 million under the promissory note (included in Other Assets). As of June 30, 2024 and December 31, 2023, the Company had invested $42.8 million and $39.3 million, respectively, in the Investee's preferred equity securities (included in Long-term Investments) and had paid $20.9 million and $13.1 million, respectively, for an option to acquire the Investee (included in Other Assets). Pursuant to the agreements, the Company may be required to invest up to an additional $3.0 million in the Investee's preferred equity securities and up to an additional $6.6 million for the option to acquire the Investee.

In March 2023, the Company agreed to pay a medical device company up to $45.0 million as consideration for an option
to acquire that medical device company, of which $30.0 million had been paid as of June 30, 2024. Also, in March 2023, Edwards advanced $5.0 million to the medical device company under a convertible promissory note. In addition, as of June 30, 2024 and December 31, 2023, the Company had invested $3.5 million and $3.3 million, respectively, in the medical device company's preferred equity securities. The option and the note are included in Other Assets on the consolidated balance sheets, and the equity investment is included in Long-term Investments. In July 2024, the Company exercised its option to acquire the medical device company. For more information, see Note 16.

In addition, Edwards has made equity investments through the NMTC program in limited liability companies that are considered VIEs. For more information, see Note 5.

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7.     FAIR VALUE MEASUREMENTS

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.

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, 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 June 30, 2024, the fair value of the notes payable, based on Level 2 inputs, was $580.3 million.

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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):
June 30, 2024Level 1Level 2Level 3Total
Assets    
Cash equivalents