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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2002

For the transition period from                              to                             

Commission file number 1-15525

EDWARDS LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)

(949) 250-2500
(Registrant's telephone number, including area code)

        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     X                  No         

        The number of shares of the registrant's common stock, par value $1.00 per share, outstanding as of July 31, 2002, the latest practicable date, was 59,837,430 shares.

EDWARDS LIFESCIENCES CORPORATION

FORM 10-Q
For the quarterly period ended June 30, 2002

TABLE OF CONTENTS

Part I. Financial Information

Item 1. Financial Statements

EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(unaudited) (in millions, except share data)

The accompanying notes are an integral part of these consolidated
condensed financial statements.

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EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(unaudited) (in millions, except per share information)

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

(unaudited) (in millions)

The accompanying notes are an integral part of these consolidated
condensed financial statements.

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Edwards Lifesciences

Notes to Consolidated Condensed Financial Statements

June 30, 2002

(unaudited)

1. DESCRIPTION OF BUSINESS

        Edwards Lifesciences Corporation ("Edwards Lifesciences" or the "Company") is a global provider of products and technologies that are designed to treat advanced cardiovascular disease. Edwards Lifesciences' sales are categorized in four main product areas: cardiac surgery, critical care, vascular and perfusion. Edwards Lifesciences' cardiac surgery portfolio is comprised of products relating to heart valve therapy and other products used during open-heart surgery. In the critical care area, Edwards Lifesciences is a world leader in hemodynamic monitoring systems that are used to measure a patient's heart function, and also provides central venous access products for fluid and drug delivery. Edwards Lifesciences' vascular portfolio includes a line of balloon catheter-based products, surgical clips and inserts, angioscopy equipment, and artificial implantable grafts, as well as an endovascular system used to treat life-threatening abdominal aortic aneurysms less invasively. In the perfusion category, Edwards Lifesciences designs, develops, manufactures and markets in regions outside of the United States and Western Europe a diverse line of disposable products used during cardiopulmonary bypass procedures, including oxygenators, blood containers, filters and related devices. Effective June 30, 2001, the Company sold its perfusion services business in the United States to an affiliate of Fresenius Medical Care AG. The Company continues to maintain its perfusion services business in Europe.

2. FINANCIAL INFORMATION

        These interim consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission and should be read in conjunction with the consolidated financial statements and notes included in the Company's Form 10-K for the year ended December 31, 2001. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Certain reclassifications of previously reported amounts have been made to conform to classifications used in the current period.

        In the opinion of management, the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair presentation of the interim periods. All such adjustments 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.

3. INVENTORIES

        Inventories consisted of the following (in millions):

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4. COMPREHENSIVE INCOME

        Reconciliation of net income to comprehensive income is as follows (in millions):

5. GOODWILL AND OTHER INTANGIBLE ASSETS

        On January 1, 2002, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets," whereby goodwill is no longer amortized, but instead is subject to a periodic impairment review. As the Company's operations are comprised of one reporting unit, the Company reviews the recoverability of its goodwill by comparing the Company's fair value to the net book value of its assets. If the book value of the Company's assets exceeds the Company's fair value, the goodwill is written down to its implied fair value.

        Pursuant to SFAS No. 142, the results for periods prior to adoption are not to be restated. If SFAS No. 142 had been effective January 1, 2001, net loss and earnings per basic and diluted share would have been as follows (in millions, except per share information):

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        Other intangible assets subject to amortization consisted of the following (in millions):

        Amortization expense related to other intangible assets for the six months ended June 30, 2002 was $4.4 million. Estimated amortization expense for each of the years ending December 31 is as follows (in millions):

6. EARNINGS PER SHARE

        A reconciliation of the shares used in the basic and diluted per share computations is as follows (in millions):

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7. COMMITMENTS AND CONTINGENCIES

        On June 29, 2000, Edwards Lifesciences filed a lawsuit for patent infringement against Medtronic, Inc., which, as amended, alleged infringement of three Edwards Lifesciences United States patents. On September 18, 2001, Edwards Lifesciences filed a separate complaint against Medtronic alleging infringement of a fourth Edwards Lifesciences United States patent. These lawsuits were filed in the United States District Court for the District of Delaware. Effective April 24, 2002, Edwards Lifesciences entered into an agreement with Medtronic resolving these patent infringement claims and dismissing the two lawsuits. Under the terms of the settlement, Edwards Lifesciences received a one-time cash payment of $20.0 million (recorded as a gain of $14.7 million, net of legal expenses, in Other (Income) Expense, net) and granted Medtronic a royalty-bearing license on two of the Edwards Lifesciences' patents. In addition, on July 2, 2002, Edwards Lifesciences and Medtronic submitted to binding arbitration on another of the patents in dispute. Medtronic prevailed in this arbitration and will not require an additional license.

        On June 29, 2000, Edwards Lifesciences also filed a lawsuit against St. Jude Medical, Inc. alleging infringement of three Edwards Lifesciences United States patents. This lawsuit was filed in the United States District Court for the Central District of California, seeking monetary damages and injunctive relief. St. Jude has answered and asserted various affirmative defenses and counterclaims with respect to the lawsuits. On April 9, 2002, the court granted Edwards Lifesciences' motion to amend the complaint to add a fourth Edwards Lifesciences United States patent and ordered St. Jude to dismiss a lawsuit it had filed against the Company in Minnesota related to the same patent.

        Edwards Lifesciences is, or may be, a party to, or may be otherwise responsible for, pending or threatened lawsuits related primarily to products and services currently or formerly manufactured or performed, as applicable, by Edwards Lifesciences. Such cases and claims raise difficult and complex factual and legal issues and are subject to many uncertainties and complexities, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any pending legal matters, Edwards Lifesciences may incur charges in excess of presently established reserves. While such a charge could have a material adverse impact on Edwards Lifesciences' net income or net cash flows in the period in which it is recorded or paid, management believes that no such charge would have a material adverse effect on Edwards Lifesciences' consolidated financial position.

        Edwards Lifesciences also is subject to various environmental laws and regulations both within and outside of the United States. The operations of Edwards Lifesciences, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. While it is difficult to quantify the potential impact of compliance with environmental protection laws, management believes that such compliance will not have a material impact on Edwards Lifesciences' financial position, results of operations or liquidity.

8. SEGMENT INFORMATION

        Edwards Lifesciences manages its business on the basis of one reportable segment. The Company's products and technologies share similar distribution channels and customers and are sold principally to hospitals and physicians. Management evaluates its various global product portfolios on a revenue basis,

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which is presented below, and profitability is generally evaluated on an enterprise-wide basis due to shared infrastructures. Edwards Lifesciences' principal markets are the United States, Europe and Japan.

        Geographic area data includes net sales, based on product shipment destination, and long-lived assets, based on physical location.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        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. These statements include, among other things, statements concerning the Company's future operations, financial condition and prospects, and business strategies. The words "may," "believe," "will," "expect," "project," "estimate," "anticipate," "plan," "continue," and other similar expressions generally identify forward-looking statements. Investors are cautioned not to unduly rely on such forward-looking statements. These forward-looking statements are subject to substantial risks and uncertainties that could cause the Company's future business, financial condition, results of operations, or performance to differ materially from the Company's historical results or those expressed in any forward-looking statements contained in this report. Investors should carefully review the information contained in the Company's Form 10-K for the year ended December 31, 2001, including under the caption "Certain Business Risks" beginning on page 10 of the Form 10-K, and elsewhere in, or incorporated by reference into, the Form 10-K or this report.

        The following discussion and analysis presents the factors that had a material effect on the results of operations of Edwards Lifesciences for the three and six months ended June 30, 2002 and 2001. Also discussed is Edwards Lifesciences' financial position as of June 30, 2002. You should read this discussion in conjunction with the Company's Form 10-K for the year ended December 31, 2001 and the historical consolidated condensed financial statements and related notes thereto included elsewhere in this Form 10-Q.

Overview

        Edwards Lifesciences is a global provider of products and technologies that are designed to treat advanced cardiovascular disease. Edwards Lifesciences focuses on providing products and technologies to address four main cardiovascular disease states:

•

heart valve disease;

•

coronary artery disease;

•

peripheral vascular disease; and

•

congestive heart failure.

        The products and technologies provided by Edwards Lifesciences to treat cardiovascular disease are categorized into four main areas:

•

Cardiac Surgery;

•

Critical Care;

•

Vascular; and

•

Perfusion.

        Edwards Lifesciences' cardiac surgery portfolio is comprised of products relating to heart-valve therapy and other products used during open-heart surgery. Edwards Lifesciences is the world's leader in, and has been a pioneer in the development and commercialization of, tissue valves and repair products used to replace or repair a patient's diseased or defective heart valve. In the critical care area, Edwards Lifesciences is a world leader in hemodynamic monitoring systems used to measure a patient's heart function, and also provides central venous access products for fluid and drug delivery. Edwards Lifesciences' vascular portfolio includes a line of balloon catheter-based products, surgical clips and inserts, angioscopy equipment, artificial implantable grafts, and an endovascular system used to treat life-threatening abdominal aortic aneurysms less invasively. In the perfusion category, Edwards Lifesciences develops, manufactures and markets, in regions outside the United States and Western Europe, a diverse line of disposable products used during cardiopulmonary bypass procedures, including oxygenators, blood containers, filters and related devices. Effective June 30, 2001, the

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Company sold its perfusion services business in the United States to an affiliate of Fresenius Medical Care AG. The Company continues to maintain its perfusion services business in Europe.

Joint Venture in Japan

        Subsequent to the Company's spin-off from Baxter International Inc. ("Baxter") in April 2000, the cardiovascular business in Japan has been operated pursuant to a joint venture under which a Japanese subsidiary of Baxter retains ownership of the Japanese business assets, but a subsidiary of Edwards Lifesciences holds a 90% profit interest. Edwards Lifesciences recognizes its shipments into the joint venture as sales, at distributor price, at the time the joint venture sells to the end customer, and utilizes the equity method of accounting to record its interest in the operations of the joint venture in Other Operating Income.

        Effective July 25, 2002, the Company entered into an agreement with Baxter to terminate the joint venture and acquire the Japanese business on October 1, 2002. The transaction, which is subject to certain regulatory approvals, is not expected to materially impact the Company's future net income as the terms of the existing joint venture agreement currently enable the Company to receive 90% of the net profit generated by the Japan business. The transaction price is estimated to be approximately $25 million, net, which excludes an estimated $30 million of accounts receivable previously securitized by Baxter. In connection with the transaction, Edwards Lifesciences expects to incur one-time transaction expenses of approximately $3 million and make capital investments of approximately $4 million through December 31, 2002.

Results of Operations

Net Sales Trends

        The following is a summary of United States and international net sales (dollars in millions):

        The net sales decrease in the United States for the three and six months ended June 30, 2002 was due primarily to the sale of the Company's perfusion services business in the United States effective June 30, 2001, partially offset by an increase in sales of cardiac surgery products. Excluding the impact of the sale of the perfusion services business, net sales in the United States would have increased 4.4% and 2.9% for the three and six months ended June 30, 2002, respectively.

        The increase in international net sales was due primarily to increased sales of cardiac surgery and critical care products, partially offset by the impact of changes in foreign currency exchange rates (primarily the movement of the United States dollar against the Euro and the Japanese Yen). Excluding the impact of foreign currency exchange rate fluctuations, international net sales would have increased 7.7% and 6.5% for the three and six months ended June 30, 2002, respectively. The impact of foreign currency exchange rate fluctuations on net sales would not necessarily be indicative of the impact on net income due to the corresponding effect of foreign currency exchange rate fluctuations on international manufacturing and operating costs, the location of the Company's manufacturing plants and Edwards Lifesciences' hedging activities. For more information, see "Quantitative and Qualitative Disclosure About Market Risk."

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Net Sales by Product Line

        The following table is a summary of net sales by product line (dollars in millions):

        Excluding the impact of foreign currency exchange rate fluctuations and assuming the sale of the perfusion services business to Fresenius Medical Care AG had occurred as of January 1, 2001, net sales by product line would have changed as follows ("Adjusted Net Sales") (dollars in millions):

Cardiac Surgery

        The Adjusted Net Sales growth for cardiac surgery products for the three and six months ended June 30, 2002 resulted primarily from sales growth of valve replacement and repair products, partially offset by continued declines in sales of porcine tissue valves. During the quarter ended June 30, 2002, the Company received FDA product approvals for the Carpentier-Edwards S.A.V. porcine heart valve and the Edwards MC³ tricuspid annuloplasty system. Management expects that its cardiac surgery products will continue to serve as a key driver of Edwards Lifesciences' sales growth.

Critical Care

        The Adjusted Net Sales growth for critical care products for the three and six months ended June 30, 2002 was due primarily to sales growth in emerging international markets of pressure monitoring and access products, partially offset by the decline in base hemodynamic catheters. Critical care products have been, and are expected to continue to be, significant contributors to Edwards Lifesciences' total sales.

Vascular

        The Adjusted Net Sales growth for vascular products for the three months ended June 30, 2002 was primarily the result of initial sales of the Lifepath AAA endovascular graft, which has begun to offset declining sales of the Company's base vascular products. The decline in Adjusted Net Sales for vascular products for the six months ended June 30, 2002 resulted primarily from the continued shift from traditional surgical procedures to less-invasive therapies.

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        Management continues to see opportunities in less invasive peripheral vascular disease treatments and intends to build on the Company's strong base franchise by developing and marketing products such as its Lifepath AAA endovascular graft system, which is currently being marketed in Europe and undergoing clinical studies in the United States, and a broad peripheral stent offering, which is scheduled for launch in 2003.

Perfusion

        The Adjusted Net Sales decrease for perfusion for the six months ended June 30, 2002 was due primarily to a reduction in product sales to Jostra AG, the purchaser during 2000 of the Company's line of perfusion products in Western Europe and the United States. The Company anticipated that its sales to Jostra would decline as Jostra expanded their capabilities to self-manufacture all required products.

Gross Profit

        Assuming the sale of the perfusion services business had occurred on January 1, 2001, the gross profit percentage ("Adjusted Percentage") would have been 56.3% and 56.1% for the three and six months ended June 30, 2001, respectively. The increases for the three and six months ended June 30, 2002 from the Adjusted Percentages are due primarily to increased sales of higher-margin cardiac surgery products.

Selling General and Administrative (SG&A) Expenses

        Assuming the sale of the perfusion services business had occurred on January 1, 2001, SG&A expenses as a percentage of net sales ("Adjusted Percentage") would have been 30.0% and 30.8% for the three and six months ended June 30, 2001, respectively. The increases for the three and six months ended June 30, 2002 from the Adjusted Percentages are due primarily to additional expenses related to the Company's growth initiatives, partially offset by one-time costs associated with the strategic realignment of the Company incurred during the three months ended March 31, 2001.

Research and Development Expenses

        Assuming the sale of the perfusion services business had occurred on January 1, 2001, research and development expenses as a percentage of net sales ("Adjusted Percentage") would have been 8.3% and 8.2% for the three and six months ended June 30, 2001, respectively. The increases for the three and six months ended June 30, 2002 from the Adjusted Percentages are related primarily to

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expenditures related to the Company's efforts to develop a broad, differentiated peripheral stent product offering.

Goodwill Amortization

        No goodwill amortization was recorded for the three or six months ended June 30, 2002. The elimination of goodwill amortization resulted from the adoption of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. See "New Accounting and Disclosure Standards Adopted" and Note 5 to the consolidated condensed financial statements for more information.

Other Operating Income

        Other operating income was $3.6 million and $4.4 million for the three months ended June 30, 2002 and 2001, respectively, and $7.4 million and $8.3 million for the six months ended June 30, 2002 and 2001, respectively. Other operating income represents the Company's 90% profit interest in the cardiovascular business in Japan. These decreases are due to a one-time expense during the three months ended June 30, 2002 related to the exiting of an employee benefit plan and the impact of foreign currency exchange rates, offset by strong sales of cardiac surgery products. For more information, see "Joint Venture in Japan."

Interest Expense, net

        Interest expense, net was $3.0 million and $10.9 million during the three months ended June 30, 2002 and 2001, respectively, and $5.8 million and $16.4 million during the six months ended June 30, 2002 and 2001, respectively. The decrease in interest expense, net resulted from (a) the Company's reduction of debt, (b) lower interest rates on its floating rate debt and (c) a $6.2 million charge during the three months ended June 30, 2001 related to a payment to unwind an interest rate swap agreement.

Other (Income) Expense, net

        The following is a summary of other (income) expense, net (in millions):

        See Note 7 to the consolidated condensed financial statements for further information regarding the legal settlement. Foreign exchange gains and losses relate to global trade and intercompany receivable balances.

Provision for Income Taxes

        The effective income tax rates for the three and six month periods ended June 30, 2002 were impacted by a legal settlement (see Note 7 to the consolidated condensed financial statements). The effective income tax rates for the three and six month periods ended June 30, 2001 were impacted by

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the non-deductibility of the majority of the charges recorded for the disposition of assets and other non-recurring items recorded in the quarter ended June 30, 2001. Excluding these items, the effective income tax rate was 26% for the three and six months ended June 30, 2002, and 29% for the three and six months ended June 30, 2001. The decrease in the effective income tax rate was due primarily to the elimination of all non-deductible goodwill amortization upon the adoption of SFAS No. 142 effective January 1, 2002. For more information see "New Accounting and Disclosure Standards Adopted."

Liquidity and Capital Resources

         The Company's sources of cash liquidity include cash on hand and cash equivalents, cash from operations, amounts available under credit facilities and other external sources of funds. The Company believes that these sources are sufficient to fund the current requirements of working capital, capital expenditures and other financial commitments. The Company further believes that it has the financial flexibility to attract long-term capital to fund short-term and long-term growth objectives. However, no assurances can be given that such long-term capital will be available to Edwards Lifesciences on favorable terms, or at all.

        The Company has two unsecured revolving credit agreements providing for up to an aggregate of $530.0 million in borrowings in multiple currencies. One credit agreement provides for borrowings up to an aggregate of $430.0 million and expires on March 30, 2005. The other credit agreement provides for borrowings up to an aggregate of $100.0 million through March 27, 2003. As of June 30, 2002, borrowings of $296.9 million were outstanding under the $430.0 million credit agreement and no borrowings were outstanding under the $100.0 million credit agreement. All amounts outstanding under the $430.0 million credit agreement have been classified as long-term obligations, as these borrowings will continue to be refinanced pursuant to this credit agreement.

        There have been no material changes in the Company's significant contractual obligations and commercial commitments as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2001.

        Cash flows provided by operating activities for the six months ended June 30, 2002 increased $15.0 million from the same period a year ago due primarily to a legal settlement (see Note 7 to the consolidated condensed financial statements) and lower net cash outflows related to accounts payable and accrued liabilities, partially offset by increased receivables from higher sales.

        Cash used in investing activities for the six months ended June 30, 2002 consisted primarily of $16.4 million of capital expenditures and $2.9 million in patent related investments, partially offset by a $2.4 million receipt of an installment payment on a note receivable from Jostra AG.

        Cash used for financing activities for the six months ended June 30, 2002 consisted primarily of payments on long-term debt. In addition, the Company repurchased approximately 852,000 shares of its common stock, for an aggregate of $20.3 million, during the six months ended June 30, 2002 through the stock repurchase program initiated in 2001, bringing the total shares repurchased program-to-date to approximately 880,000.

Critical Accounting Policies

        The Company's results of operations and financial position are determined based upon the application of the Company's accounting policies, as discussed in the notes to the consolidated financial statements. Certain of the Company's accounting policies represent a selection among acceptable alternatives under Generally Accepted Accounting Principles in the United States ("GAAP"). In evaluating the Company's transactions, management assesses all relevant GAAP and chooses the accounting policy that most accurately reflects the nature of the transactions. Management has not determined how reported amounts would differ based on the application of different accounting

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policies. Management has also not determined the likelihood that materially different amounts could be reported under different conditions or using different assumptions.

        The application of accounting policies requires the use of judgment and estimates. As it relates to the Company, estimates and forecasts are required to determine sales returns and reserves, rebate reserves, allowances for doubtful accounts, reserves for excess and obsolete inventory, investments in unconsolidated affiliates, workers' compensation liabilities, employee benefit related liabilities, deferred tax asset valuation allowances, any impairments of assets, anticipated transactions to be hedged, reserves and contingencies.

        These matters that are subject to judgments and estimation are inherently uncertain, and different amounts could be reported using different assumptions and estimates. Management uses its best estimates and judgments in determining the appropriate amount to reflect in the financial statements, using historical experience and all available information. The Company also uses outside experts where appropriate. The Company applies estimation methodologies consistently from year to year.

New Accounting and Disclosure Standards Adopted

        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. See Note 5 to the consolidated condensed financial statements for more information.

        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. 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. 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 July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 changes the accounting and reporting for costs associated with exit or disposal activities, termination benefits and other costs to exit an activity, including certain costs incurred in a restructuring. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company does not expect that the adoption of this standard will have a material impact on its consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Risk

        Edwards Lifesciences operates on a global basis and therefore is subject to the exposure resulting from foreign currency exchange rate fluctuations. These exposures arise from transactions denominated in foreign currencies, primarily from translation of results of operations from outside the United States. Additionally, such exposures may change over time as changes occur in Edwards Lifesciences' international operations.

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        Edwards Lifesciences manages its exposure to foreign currency fluctuations to minimize earnings and cash flow volatility associated with foreign exchange rate changes. In order to reduce the risk of foreign currency exchange rate fluctuations, Edwards Lifesciences has established a policy of hedging a substantial portion of its expected foreign currency denominated cash flow from operations. The instruments that Edwards Lifesciences uses for hedging are readily marketable traded forward contracts and options with financial institutions. Edwards Lifesciences expects that the changes in fair value of such contracts will have a high correlation to the price changes in the related hedged cash flow. Edwards Lifesciences does not expect that the risk of transaction gains or losses from changes in the fair value of its foreign exchange position will be material because most transactions will occur in either the functional currency or in a currency that has a high correlation to the functional currency. The principal currencies that Edwards Lifesciences hedges are the Japanese Yen and the Euro, which present the primary risk of loss. Any gains and losses on these hedge contracts are expected to offset changes in the value of the related exposures. Edwards Lifesciences will enter into foreign currency transactions only to the extent that foreign currency exposure exists; it will not enter into foreign currency transactions for speculative purposes.

Interest Rate Risk

        Edwards Lifesciences utilizes interest rate swap agreements in managing its exposure to interest rate fluctuations. Interest rate swap agreements are executed as an integral part of specific debt transactions. The differential paid or received on interest rate swap agreements is recorded as an adjustment to interest expense over the term of the agreements. Edwards Lifesciences' interest rate swap agreements involve agreements to receive a floating rate and pay a fixed rate, at specified intervals, calculated on an agreed-upon notional amount. As of June 30, 2002, Edwards Lifesciences had in place interest rate swap agreements with a total notional amount of $198.4 million to swap floating rate United States dollar and Yen denominated debt obtained under the Company's revolving credit facilities for fixed rates.

Investment Risk

        Edwards Lifesciences is exposed to investment risks related to changes in the fair values of its investments. The Company invests in equity instruments of public and private companies. These investments are classified in "Investments in unconsolidated affiliates" on the accompanying consolidated condensed balance sheets.

        As of June 30, 2002, the Company had $73.6 million invested in convertible preferred stock of World Heart Corporation and a subsidiary ("WorldHeart"). The convertible preferred stock bears cumulative dividends and may be redeemed upon maturity in 2006 and 2015. The value of Edwards Lifesciences' preferred stock investments, if converted into common stock at June 30, 2002, would be $14.6 million. Management does not believe its investments in WorldHeart preferred stock are impaired based upon WorldHeart's projected cash flows and its attainment of past development milestones. Should WorldHeart fail to meet certain future development and financing milestones, an impairment charge may be necessary.

        In addition to the investment in WorldHeart, Edwards Lifesciences has investments in equity instruments of other companies. At June 30, 2002, the Company has recorded unrealized losses on these investments of $6.8 million in Accumulated Other Comprehensive Income, net of tax. Management considers these declines temporary in nature based upon the individual companies' operating results, financial condition and product development milestones. Should these companies experience a decline in financial condition or fail to meet certain development milestones, the decline in the investments values may be considered other than temporary and impairment charges may be necessary.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

        On June 29, 2000, Edwards Lifesciences filed a lawsuit for patent infringement against Medtronic, Inc., which, as amended, alleged infringement of three Edwards Lifesciences United States patents. On September 18, 2001, Edwards Lifesciences filed a separate complaint against Medtronic alleging infringement of a fourth Edwards Lifesciences United States patent. These lawsuits were filed in the United States District Court for the District of Delaware. Effective April 24, 2002, Edwards Lifesciences entered into an agreement with Medtronic resolving these patent infringement claims and dismissing the two lawsuits. Under the terms of the settlement, Edwards Lifesciences received a one-time cash payment of $20.0 million and granted Medtronic a royalty-bearing license on two of the Edwards Lifesciences' patents. In addition, on July 2, 2002, Edwards Lifesciences and Medtronic submitted to binding arbitration on another of the patents in dispute. Medtronic prevailed in this arbitration and will not require an additional license.

        On June 29, 2000, Edwards Lifesciences also filed a lawsuit against St. Jude Medical, Inc. alleging infringement of three Edwards Lifesciences United States patents. This lawsuit was filed in the United States District Court for the Central District of California, seeking monetary damages and injunctive relief. St. Jude has answered and asserted various affirmative defenses and counterclaims with respect to the lawsuits. On April 9, 2002, the court granted Edwards Lifesciences' motion to amend the complaint to add a fourth Edwards Lifesciences United States patent and ordered St. Jude to dismiss a lawsuit it had filed against the Company in Minnesota related to the same patent.

        Edwards Lifesciences is, or may be, a party to, or may be otherwise responsible for, pending or threatened lawsuits related primarily to products and services currently or formerly manufactured or performed, as applicable, by Edwards Lifesciences. Such cases and claims raise difficult and complex factual and legal issues and are subject to many uncertainties and complexities, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any pending legal matters, Edwards Lifesciences may incur charges in excess of presently established reserves. While such a charge could have a material adverse impact on Edwards Lifesciences' net income or net cash flows in the period in which it is recorded or paid, management believes that no such charge would have a material adverse effect on Edwards Lifesciences' consolidated financial position.

        Edwards Lifesciences also is subject to various environmental laws and regulations both within and outside of the United States. The operations of Edwards Lifesciences, like those of other medical device companies, involve the use of substances regulated under environmental laws, primarily in manufacturing and sterilization processes. While it is difficult to quantify the potential impact of compliance with environmental protection laws, management believes that such compliance will not have a material impact on Edwards Lifesciences' financial position, results of operations or liquidity.

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Item 4. Submission of Matters to a Vote of Security Holders

        The Company's annual meeting of stockholders was held on May 8, 2002. Each of the nominees for directors, as listed in the proxy statement, was elected with the number of votes set forth below:

        The following directors' terms of office are continuing:

Mike R. Bowlin
Corinne H. Lyle
Vernon R. Loucks Jr.
Michael A. Mussallem

        The results of the other matter voted upon at the annual meeting are as follows:

Item 6. Exhibits and Reports on Form 8-K.

(a)

Exhibits

Exhibits required by Item 601 of Regulation S-K are listed in the Exhibit Index hereto and include the following:

(b)

Reports on Form 8-K

None

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Signature

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION

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(a)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' Registration Statement on Form 10 (File No. 001-15525).

(b)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2000, under the Securities Exchange Act of 1934.

(c)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended June 30, 2000, under the Securities Exchange Act of 1934.

(d)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended September 30, 2000, under the Securities Exchange Act of 1934.

(e)

Incorporated by reference to Exhibit 4.4 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-52332).

(f)

Incorporated by reference to Exhibit 4.3 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-40434).

(g)

Incorporated by reference to Exhibit 4.3 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-33056).

(h)

Incorporated by reference to Exhibit 4.6 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-60670).

(i)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2000, under the Securities Exchange Act of 1934.

(j)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2001, under the Securities Exchange Act of 1934.

(k)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended June 30, 2001, under the Securities Exchange Act of 1934.

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(l)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2001, under the Securities Exchange Act of 1934.

(m)

Incorporated by reference to the cited exhibit in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2002, under the Securities Exchange Act of 1934.

*

Represents management contract or compensatory plan

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QuickLinks

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 1. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K.