10-K

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

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2003
OR
o	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
(State or other jurisdiction of
incorporation or organization) 36-4316614
(I.R.S. Employer Identification No.)

One Edwards Way, Irvine, California 92614
(Address of principal executive offices) (ZIP Code)

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

Securities registered pursuant to Section 12(b) of the Act:
Common Stock, par value $1.00 per share
Series A Junior Participating Preferred Purchase Rights
(currently traded with common stock) Name of each exchange on which registered:
New York Stock Exchange
New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

        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 ý    No o

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý

        Indicate by check whether the registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2) Yes ý    No o

        The aggregate market value of the registrant's common stock held by non-affiliates as of June 30, 2003 (the last trading day of the registrant's most recently completed second quarter): $1,897,246,312 based on a closing price of $32.14 of the registrant's common stock on the New York Stock Exchange. This calculation does not reflect a determination that persons are affiliates for any other purpose.

        The number of shares outstanding of the registrant's common stock, $1.00 par value, as of February 27, 2004 was 59,662,194.

Documents Incorporated by Reference

        Portions of the registrant's proxy statement for the 2004 Annual Meeting of Stockholders (to be filed on or before April 30, 2004) are incorporated by reference into Part III, as indicated herein.

EDWARDS LIFESCIENCES CORPORATION
Form 10-K Annual Report—2003
Table of Contents

PART I
	Item 1.	Business	1
	Item 2.	Properties	19
	Item 3.	Legal Proceedings	19
	Item 4.	Submission of Matters to a Vote of Security Holders	20
PART II
	Item 5.	Market for the Registrant's Common Equity and Related Stockholder Matters	21
	Item 6.	Selected Financial Data	21
	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	40
	Item 8.	Financial Statements and Supplementary Data	43
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	85
	Item 9A.	Controls and Procedures	85
PART III
	Item 10.	Directors and Executive Officers of the Registrant	86
	Item 11.	Executive Compensation	86
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	86
	Item 13.	Certain Relationships and Related Transactions	86
	Item 14.	Principal Accountant Fees and Services	86
PART IV
	Item 15.	Exhibits, Financial Statement Schedules and Reports on Form 8-K	87
		Signatures	91

PART I

Item 1    Business

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. The Company intends the forward-looking statements to be covered by the safe harbor provisions for such statements contained in this report. All statements other than statements of historical fact in this report or referred to or incorporated by reference into this report are "forward-looking statements" for purposes of these sections. These statements include, among other things, any predictions of earnings, revenues, expenses or other financial items, any statements of plans, strategies and objectives of management for future operations, any statements concerning the Company's future operations, financial conditions and prospects, and any statement of assumptions underlying any of the foregoing. These statements can sometimes be identified by the use of the forward-looking words such as "may," "believe," "will," "expect," "project," "estimate," "anticipate," "plan," "continue," "seek," "pro forma," "forecast," or "intend" or other similar words or expressions of the negative thereof. 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.

Overview

        Edwards Lifesciences Corporation is a global leader in products and technologies designed to treat advanced cardiovascular disease. Edwards Lifesciences focuses on providing products and technologies to address four main cardiovascular disease states:

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heart valve disease;



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coronary artery disease;



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peripheral vascular disease; and



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congestive heart failure.

        Cardiovascular disease is the number-one cause of death in the world, and is among the top three diseases in terms of health care spending in nearly every country. Cardiovascular disease is both progressive and pervasive; progressive, in that it tends to worsen over time, and pervasive because it often affects an individual's entire circulatory system. In its later stages, cardiovascular disease is frequently treated with surgery, including heart valve replacement or repair procedures and coronary artery bypass graft ("CABG") procedures.

        The products and technologies provided by Edwards Lifesciences to treat cardiovascular disease are categorized into five main areas: Cardiac Surgery; Critical Care; Vascular; Perfusion; and Other Distributed Products.

        Patients undergoing surgical treatment for cardiovascular disease are likely to be treated using a variety of Edwards Lifesciences' products and technologies. For example, an individual with a heart valve disorder may have a faulty valve re-shaped and repaired with an Edwards Lifesciences annuloplasty ring, or the surgeon may elect to remove the valve altogether and replace it with one of Edwards Lifesciences' bioprosthetic tissue heart valves, which are made of bovine or porcine tissue. Virtually all high-risk patients in the operating room or cardiac care unit are candidates for having their cardiac function monitored by Edwards Lifesciences' critical care products. If the circulatory problems are in the limbs rather than in the heart, the patient's procedure may involve some of Edwards Lifesciences' vascular products, which include various types of balloon-tipped catheters that are used to remove blood clots, and stents that are used to prop open the diseased blood vessels of patients suffering from atherosclerotic vascular disease. If a patient undergoes other types of open-heart surgery, such as a CABG procedure, the functions of their heart and lungs may be managed through the use of disposable products and equipment offered in certain international markets by Edwards

Lifesciences' perfusion product line. Lastly, Edwards Lifesciences' other distributed products include sales of intra-aortic balloon pumps, pacemakers, angioplasty systems and other products sold primarily through the Company's distribution network in Japan.

Corporate Background

        Edwards Lifesciences Corporation was incorporated in Delaware on September 10, 1999 as a wholly owned subsidiary of Baxter International Inc. ("Baxter") to assume the business and operations of Baxter's CardioVascular Group. On March 31, 2000, Edwards Lifesciences was spun-off from Baxter and became an independent company. Unless the context indicates otherwise, references to the "Company" and "Edwards Lifesciences" refer to Baxter's CardioVascular Group for periods prior to April 1, 2000 and to Edwards Lifesciences Corporation and its subsidiaries for the periods on or after such date. Unless otherwise indicated or the context otherwise requires, the terms "it," "its," "Company" and "Edwards Lifesciences" refer to Edwards Lifesciences Corporation and its subsidiaries.

        Edwards Lifesciences' principal executive offices are located at One Edwards Way, Irvine, California 92614. The telephone number at that address is (949) 250-2500. The Company makes available, free of charge on its web site located at www.edwards.com, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after filing such reports with the SEC. The Company's corporate governance guidelines, audit and public policy committee charter, compensation and nominating committee charter, and code of business conduct ethics are posted on the Company's web site, the address of which is www.edwards.com, and are each available in print to any shareholder upon request by writing to: Edwards Lifesciences Corporation, Investor Relations, One Edwards Way, Irvine, California 92614.

Edwards Lifesciences' Product and Technology Offerings

        The following discussion summarizes the five main categories of products and technologies offered by Edwards Lifesciences to treat advanced cardiovascular disease. For more information on net sales from these five main categories, see "Net Sales by Product Line" under Management's Discussion and Analysis of Financial Condition and Results of Operations. In order to provide greater visibility to a key part of its business, beginning in January 2004, the Company will recategorize its products into the following five areas: Heart Valve Therapy; Cardiac Surgery Systems; Critical Care; Vascular; and Other Distributed Products.

Cardiac Surgery

        Heart Valve Therapy.    Edwards Lifesciences is the world's leading manufacturer of tissue heart valves and repair products, which are used to replace or repair a patient's diseased or defective heart valve. The Company operates manufacturing facilities in Irvine, California, and Horw, Switzerland, producing pericardial and porcine valves from biologically inert animal tissue sewn onto proprietary wireform stents.

        The core of Edwards Lifesciences' tissue product line is the Carpentier-Edwards PERIMOUNT pericardial valve, including PERIMOUNT Magna, the newest generation pericardial valve approved for sale in the United States, Europe and Canada. The PERIMOUNT valve is the most widely prescribed tissue heart valve in the world due to its proven durability and performance, and is the only pericardial valve available in the United States. Edwards Lifesciences' Carpentier-Edwards porcine valves, Edwards Prima Plus stentless tissue valve, Edwards MIRA bi-leaflet mechanical valve, and Starr- Edwards silastic ball valve complement its line of heart valves.

        In addition to its replacement valves, Edwards Lifesciences is the worldwide leader in heart valve repair therapies with products including its Carpentier-Edwards annuloplasty rings, Cosgrove-Edwards

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annuloplasty system, Edwards MC³ Tricuspid annuloplasty system, and recently introduced Carpentier-McCarthy-Adams IMR ETlogix annuloplasty system.

        The Company is currently developing technologies for the percutaneous (catheter-based) repair and replacement of heart valves.

        Beginning in 2004, the following products currently in Cardiac Surgery will be included in Cardiac Surgery Systems:

        Cannula.    The Company is a leading manufacturer of select disposable products used during cardiac surgery including cannula to facilitate vacuum-assisted venous drainage during perfusion, and aortic dispersion cannula. Edwards Lifesciences also has a number of products to facilitate coronary artery bypass surgery when performed on a beating heart, including the AnastaFlo coronary shunt used to redirect blood away from the suturing site, and the VisuFlo humidifying blower to keep the surgical site dry and optimize the surgeon's visual field during a cardiothoracic surgical procedure.

        Angina Therapy.    Edwards Lifesciences distributes carbon-dioxide lasers and related disposables for use in transmyocardial revascularization ("TMR"), a procedure for treating severe angina. These products are manufactured by PLC Systems Inc., and Edwards Lifesciences is responsible for all sales, marketing and distribution of these products in the United States.

        Cardiac Tissue Ablation.    The Company has partnered with PLC Systems Inc. to commercialize the Optimaze surgical ablation system, a photonic laser system for treating cardiac arrhythmias. Approximately 2.2 million Americans suffer from atrial fibrillation, the most common and serious type of cardiac arrhythmia. PLC Systems Inc. is responsible for ongoing product development and manufacturing of the Optimaze system and disposable components, while Edwards Lifesciences is responsible for worldwide, sales, marketing and distribution of these products. The Company plans to begin market introduction of Optimaze in the second half of 2004.

        Embolic Management.    Edwards Lifesciences produces the EMBOL-X Intra-Aortic Embolic Management System, the only system of its kind designed to capture embolic material, such as blood clots or tissue fragments that might be generated during open-heart surgery procedures.

Critical Care

        Edwards Lifesciences is a world leader in hemodynamic monitoring systems that are used to measure a patient's heart function in surgical and intensive care settings. Hemodynamic monitoring enables a clinician to balance the oxygen supply and demand of a critically ill patient and plays an important role in assuring that the heart function of millions of patients who have pre-existing cardiovascular conditions or other critical illnesses is optimized before they undergo a surgical procedure.

        Edwards Lifesciences' hemodynamic monitoring technologies are often deployed before, during and after open-heart, major vascular, major abdominal, neurological and orthopedic surgical procedures. Edwards Lifesciences manufactures and markets the Swan-Ganz brand line of hemodynamic monitoring products, originally launched in the 1970s. The latest evolution in the Swan-Ganz product line is the CCOmbo V catheter. The CCOmbo V catheter adds a proprietary continuous volume measurement to the series of continuous parameters already integrated into the device, most notably cardiac output and venous oxygen saturation. Edwards Lifesciences' most recent addition to its hemodynamic monitoring product line is the PreSep central venous oximetry catheter, designed to help clinicians identify and manage sepsis, a widespread blood infection that is believed to affect as many as 18 million people worldwide each year.

        Edwards Lifesciences is also a global leader in the broader field of disposable pressure monitoring devices and has a line of innovative products enabling closed-loop arterial blood sampling to protect

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both patients and clinicians from the risk of infection. Central venous catheters are the primary route for fluid and medication delivery to patients undergoing major surgical procedures and/or intensive care. The Company's Advanced Venous Access products, marketed under the AVA HF and AVA 3Xi brand names, provide increased convenience, effectiveness and efficiency by integrating the capabilities of an introducer and multi-lumen central venous access into a single device. Edwards Lifesciences' Vantex central venous catheter, which is manufactured from a patented, antimicrobial material, addresses the potentially life-threatening and costly problems of bloodstream infections.

        The Company also markets a range of products required to perform continuous renal replacement therapies including access catheters, hemofilters, substitution fluids and pumps.

Vascular

        The pervasive nature of cardiovascular disease means that the circulatory conditions that occur inside the heart are often mirrored elsewhere in a patient's body. Atherosclerotic disease is one common condition that involves the thickening of blood-carrying vessels and the formation of circulation-restricting plaque, clots and other substances, and often occurs concurrently in the vascular system as well as in the heart. When the abdomen, arms or legs are impacted, the diagnosis is usually peripheral vascular disease ("PVD"), which occurs in millions of patients worldwide.

        Edwards Lifesciences manufactures and sells a variety of products used to treat occlusive PVD, including a line of balloon-tipped, catheter-based products, as well as surgical clips and inserts, angioscopy equipment and artificial implantable grafts. Edwards Lifesciences' Fogarty line of embolectomy catheters has been an industry standard for removing blood clots from peripheral blood vessels for more than 40 years.

        Edwards Lifesciences has developed the Lifepath AAA endovascular graft system to less invasively treat abdominal aortic aneurysms. The Lifepath AAA system is currently being sold in Europe. The Company announced in December 2003 its intent to explore strategic alternatives for this program.

        In 2003, Edwards Lifesciences introduced its balloon-expandable LifeStent systems, the first in a series of new non-coronary stent offerings that are used to prop open the diseased blood vessels of patients suffering from atherosclerotic vascular disease. The Company expects to continue introducing balloon-expandable and self-expanding LifeStent products throughout 2004.

Perfusion

        Edwards Lifesciences develops, manufactures and distributes a line of disposable perfusion products for customers in regions outside of the United States and Western Europe. These products include the Edwards Vital oxygenator and various blood containers, filters and related devices used during the practice of bypassing the heart and lungs during open-heart surgical procedures. Edwards Lifesciences operates an oxygenator manufacturing facility in Brazil.

Other Distributed Products

        Other distributed products include sales of intra-aortic balloon pumps, pacemakers, angioplasty systems and other products sold though the Company's operations in Japan, and miscellaneous pharmaceutical products sold in the United States.

Competition

        The medical devices industry is highly competitive. Edwards Lifesciences competes with many companies, ranging from small start-up enterprises to companies that are larger and more established than Edwards Lifesciences with access to significant financial resources. Furthermore, rapid product development and technological change characterize the market in which Edwards Lifesciences

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competes. The present or future products of Edwards Lifesciences could be rendered obsolete or uneconomical as a result of technological advances by one or more of Edwards Lifesciences' present or future competitors or by other therapies, including drug therapies. Edwards Lifesciences must continue to develop and acquire new products and technologies to remain competitive in the cardiovascular medical devices industry. Edwards Lifesciences believes that it competes primarily on the basis of product reliability and performance, product features that enhance patient benefit, customer and sales support, and cost-effectiveness.

        The cardiovascular segment of the medical device industry is dynamic and currently undergoing significant change due to cost-of-care considerations, regulatory reform, industry and customer consolidation and evolving patient needs. The ability to provide cost-effective products and technologies that improve clinical outcomes is becoming increasingly important for medical device manufacturers.

        Edwards Lifesciences' products and technologies face substantial competition from a number of companies. In cardiac surgery, the primary competitors include St. Jude Medical, Inc., Medtronic, Inc. and the Sorin Group. In critical care, Edwards Lifesciences' principal competitors include Abbott Laboratories and Arrow International, Inc. In vascular, Edwards Lifesciences' primary competitors for the traditional surgical segments of its business include W.L. Gore & Associates, Inc. and Applied Medical Resources Corporation. For emerging peripheral vascular disease products, Edwards Lifesciences' competitors are, or are expected to be, Boston Scientific Corporation, Johnson & Johnson, Guidant Corporation and Medtronic, Inc. In perfusion, Edwards Lifesciences competes with the Sorin Group, Medtronic, Inc. and Jostra AG.

Sales and Marketing

        Edwards Lifesciences has a number of broad product lines that require a sales and marketing strategy tailored to its customers in order to deliver high-quality, cost-effective products and technologies to all of its customers worldwide. Edwards Lifesciences' portfolio includes some of the most recognizable product brands in cardiovascular devices today, including Carpentier-Edwards, Cosgrove-Edwards, Fogarty, Research Medical, Starr-Edwards and Swan-Ganz.

        Because of the diverse global needs of the population that Edwards Lifesciences serves, Edwards Lifesciences' distribution system includes a direct sales force and independent distributors. Edwards Lifesciences is not dependent on any single customer and no single customer accounted for more than 10% of Edwards Lifesciences' net sales in 2003.

        Sales personnel work closely with the primary decision makers who purchase Edwards Lifesciences' products, which include physicians, material managers, nurses, biomedical staff, hospital administrators and purchasing managers. Also, where appropriate, Edwards Lifesciences' sales force actively pursues approval of Edwards Lifesciences as a qualified supplier for hospital group purchasing organizations that negotiate contracts with suppliers of medical products. Edwards Lifesciences has contracts with a number of domestic national buying groups and is working with a growing number of regional buying groups that are emerging in response to cost containment pressures and health care reform in the United States.

        United States.    In the United States, Edwards Lifesciences sells substantially all of its products through its direct sales force. Substantially all of its direct sales force consists of employees of Edwards Lifesciences. In 2003, 44.7% of Edwards Lifesciences' reported sales were derived from sales to customers in the United States.

        International.    In 2003, 55.3% of Edwards Lifesciences' reported sales were derived internationally through its direct sales force and independent distributors. Edwards Lifesciences sells its products in approximately 100 countries. Major international markets for Edwards Lifesciences' products are: Japan, Germany, France, United Kingdom, Italy, Brazil, Canada, Belgium, Spain, The Netherlands and

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Australia/New Zealand. The sales and marketing approach in international geographies varies depending on each country's size and state of development. See Note 18 to the "Consolidated Financial Statements" contained herein for additional information.

Raw Materials and Manufacturing

        Edwards Lifesciences uses a diverse and broad range of raw and organic materials in the design, development and manufacture of its products. Edwards Lifesciences' non-implantable products are manufactured from man-made raw materials including resins, chemicals, electronics and metal. Most of Edwards Lifesciences' heart valve therapy products are manufactured from natural tissues harvested from animal tissue, as well as man-made materials. Edwards Lifesciences purchases certain materials and components used in manufacturing its products from external suppliers. In addition, Edwards Lifesciences purchases certain supplies from single sources for reasons of quality assurance, sole source availability, cost effectiveness or constraints resulting from regulatory requirements.

        Edwards Lifesciences works closely with its suppliers to assure continuity of supply while maintaining high quality and reliability. Alternative supplier options are generally considered and identified, although Edwards Lifesciences does not typically pursue regulatory qualification of alternative sources due to the strength of its existing supplier relationships and the time and expense associated with the regulatory validation process. Although a change in suppliers could require significant effort or investment by Edwards Lifesciences in circumstances where the items supplied are integral to the performance of Edwards Lifesciences' products or incorporate unique technology, management does not believe that the loss of any existing supply contract would have a material adverse effect on the Company.

        Edwards Lifesciences follows rigorous sourcing and manufacturing procedures intended to safeguard humans from potential risks associated with diseases such as bovine spongiform encephalopathy ("BSE"), commonly known as "mad cow disease." International health and regulatory authorities have given guidance identifying three factors contributing to the control of BSE: source of animals, nature of tissue used and manufacturing process. The Company complies with all current global guidelines regarding risks for products intended to be implanted in humans. The Company obtains bovine tissue used in its pericardial tissue valve products only from sources within the United States, where strong control measures and surveillance programs exist. In addition, bovine tissue used in the Company's pericardial tissue valve products are from tissue types considered by global health and regulatory organizations to have shown no risk of infectibility. The Company's manufacturing and sterilization processes render tissue biologically safe from all known infectious agents and viruses, and exceed the worldwide standard for sterile medical products. See "Risk Factors" contained herein.

Quality Assurance

        Edwards Lifesciences is committed to providing quality products to its customers. To meet this commitment, Edwards Lifesciences has implemented modern quality systems and concepts throughout the organization. The quality system starts with the initial product specification and continues through the design of the product, component specification processes and the manufacturing, sales and servicing of the product. The quality system is designed to build in quality and to utilize continuous improvement concepts throughout the product lifecycle.

        Edwards Lifesciences' operations are certified under applicable international quality systems standards, such as ISO 9001, ISO 9002 and ISO 13485. These standards require, among other items, quality system controls that are applied to product design, component material, suppliers and manufacturing operations. These ISO certifications can be obtained only after a complete audit of a company's quality system has been conducted by an independent outside auditor. Periodic reexamination by an independent outside auditor is required to maintain these certifications.

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Research and Development

        Edwards Lifesciences is engaged in ongoing research and development to deliver clinically advanced new products, to enhance the effectiveness, ease of use, safety and reliability of its current leading products and to expand the applications of its products as appropriate. Edwards Lifesciences is dedicated to developing novel technologies that will furnish health care providers with a more complete line of products to treat heart valve disease, coronary artery disease, peripheral vascular disease and congestive heart failure.

        The Company spent $72.8 million on research and development in 2003, $65.2 million in 2002 and $55.0 million in 2001 (8.5%, 9.3% and 7.9% of net sales, respectively). A significant portion of Edwards Lifesciences' research and development investment has been applied to extend and defend its core cardiac surgery, critical care and vascular franchises, including research and development relating to next-generation pericardial tissue valves and enhanced tissue processing technologies.

        Edwards Lifesciences is investing in the development of percutaneous heart valve repair and replacement technologies, designed to treat heart valve disease using a catheter-based approach as opposed to direct surgical techniques. In 2003, the Company acquired the intellectual property and assets of Jomed's percutaneous heart valve repair program, and in January 2004 acquired Percutaneous Valve Technologies, Inc., a privately held firm with notable clinical experience and intellectual property relating to a percutaneous heart valve replacement system. Both acquisitions enhanced the Company's existing percutaneous repair and replacement development efforts.

        The Company is also pursuing the development of minimally invasive cardiac output ("MICO") monitoring systems, which offer the promise of collecting critical data using less invasive methods than current technologies. Additionally, the Company is investing in activities designed to create new growth platforms including peripheral stents, laser-based photonic ablation to treat cardiac arrhythmia, tissue-engineered heart valves, and angiogenesis gene therapy treatment for coronary artery and peripheral vascular diseases.

        Edwards Lifesciences' research and development activities are carried out primarily in facilities located in the United States. The Company's experienced research and development staff is focused on product design and development, quality, clinical research and regulatory compliance. To pursue primary research efforts, Edwards Lifesciences has developed alliances with several leading research institutions and universities, and also works with leading clinicians around the world in conducting scientific studies on Edwards Lifesciences' existing and developing products. These studies include clinical trials, which provide data for use in regulatory submissions, and post-market approval studies involving applications of Edwards Lifesciences' products.

Proprietary Technology

        Patents and other proprietary rights are important to the success of Edwards Lifesciences' business. Edwards Lifesciences also relies upon trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain its competitive position.

        Edwards Lifesciences owns approximately 450 issued United States patents, 190 pending United States patent applications, 740 issued foreign patents and 500 pending foreign patent applications, and has licensed numerous United States patents and patent applications that relate to aspects of the technology incorporated in many of Edwards Lifesciences' products.

        Most of Edwards Lifesciences' products are protected in some way by issued patents and/or pending patent applications. Although the original Carpentier-Edwards pericardial valve patent expired in 2002 in most countries, Edwards Lifesciences has a number of other key patents and pending patent applications in the United States, Europe, Australia, Japan and Canada on improvements to the pericardial valve that enhance and extend the original patent coverage. Because of these design

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improvements, management does not expect the expiration of the original pericardial patent to have a significant effect on its business. Edwards Lifesciences also has many important United States and foreign patents and pending patent applications related to mitral valve repair and, in particular, patent coverage on the Cosgrove-Edwards annuloplasty system and the Carpentier-Edwards Physio annuloplasty ring, as well as the Edwards MC³ tricuspid annuloplasty system and the IMR ETlogix annuloplasty ring. Edwards Lifesciences also has a number of significant United States and foreign patents and patent applications in the field of percutaneous heart valve repair and replacement. In addition, Edwards Lifesciences has a number of key United States and foreign patents and patent applications that cover catheters, systems and methods for hemodynamic monitoring, including measuring and monitoring continuous cardiac output ("CCO") and vascular access products, including combinations of introducers and central venous catheters. Many of the CCO and vascular access patents were issued within the past few years and are expected to protect Edwards Lifesciences' intellectual property rights in such technologies for the next 8 to 16 years. Edwards Lifesciences also owns a significant number of United States and foreign patents and patent applications relating to intra-aortic embolic management systems, including the EMBOL-X system. The Lifepath AAA system for endovascular repair of abdominal aortic aneurysms is protected by approximately 20 issued United States patents and numerous issued patents and foreign patent applications pending in Europe, Canada, Japan and Australia. Edwards Lifesciences has also exclusively licensed and owns several important United States and foreign patents and patent applications relating to peripheral stents, including the LifeStent products. In addition, Edwards Lifesciences has exclusively licensed an extensive portfolio of United States and foreign patents and patent applications in the angiogenesis field.

        Although some of Edwards Lifesciences' patents are due to expire within the next five years, Edwards Lifesciences' patent strategy is to file improvement patent applications and, in some cases, additional patent applications covering new aspects or modifications of the affected products, or line extensions of these products. As a result, the duration of some of the patents covering Edwards Lifesciences' products can extend up to 20 years from the date of filing of the patent application. Edwards Lifesciences management does not believe that the expiration of any one or more of its patents that are due to expire in the next five years will cause a material adverse effect on the sales of Edwards Lifesciences' products. In addition, Edwards Lifesciences is a party to several license agreements with unrelated third parties pursuant to which it has obtained, for varying terms, the exclusive or non-exclusive rights to certain patents held by such third parties in consideration for cross licensing rights or royalty payments. Edwards Lifesciences has also granted various rights in its own patents to others under license agreements. There can be no assurance that pending patent applications will result in issued patents. Competitors may challenge the validity and enforceability of, or circumvent, these patents issued to or licensed by Edwards Lifesciences. Such patents may also be found to be insufficiently broad to provide Edwards Lifesciences with a competitive advantage.

        Edwards Lifesciences actively monitors the products of its competitors for possible infringement of Edwards Lifesciences' owned and/or licensed patents. Although litigation has been necessary to enforce certain patent rights held by Edwards Lifesciences, the Company plans to continue to defend and prosecute its rights with respect to such patents. However, the Company's efforts in this regard may not be successful. In addition, patent litigation could result in substantial cost and diversion of effort. Edwards Lifesciences also relies upon trade secrets for protection of its confidential and proprietary information. Others may independently develop substantially equivalent proprietary information and techniques, and third parties may otherwise gain access to Edwards Lifesciences' trade secrets.

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        The following table identifies some of the primary trademarks of Edwards Lifesciences that are registered in the United States Patent and Trademark Office:

Advanced Venous Access
AnastaFlo
AVA 3Xi
Carpentier-Edwards
Carpentier-Edwards Physio
CCOmbo
Cosgrove-Edwards
Edwards MIRA Edwards Prima Plus
Edwards MC³
Everclip
Evergrip
Fogarty
LifeStent
PERIMOUNT
PERIMOUNT Magna PERIMOUNT Plus
Starr-Edwards
Swan-Ganz
Thrombex PMT
Vantex
Vigilance

        Other key trademarks owned by Edwards Lifesciences include:

AVA HF V
CCOmbo
BioPhysio
Edwards
Edwards Lifesciences IMR ETLogix
Lifepath AAA
Optimaze
PreSep Research Medical
Tricentrix
VisuFlo
XenoLogiX

        Many of these trademarks have also been registered for use in certain foreign countries where registration is available and Edwards Lifesciences has determined it is commercially advantageous to do so.

Government Regulation and Other Matters

        Regulatory Approvals.    In the United States, the Food and Drug Administration ("FDA") has responsibility for regulating the introduction of new medical devices. The FDA regulates laboratory and manufacturing practices, labeling and record-keeping for medical devices, and review of required manufacturers' reports of adverse experience to identify potential problems with marketed medical devices. Many of the devices that Edwards Lifesciences develops and markets are in a category for which the FDA has implemented stringent clinical investigation and pre-market approval requirements. The process of obtaining FDA approval to market a product can be resource-intensive, lengthy and costly. FDA review may involve substantial delays that adversely affect the marketing and sale of Edwards Lifesciences' products. Any delay or acceleration experienced by Edwards Lifesciences in obtaining regulatory approvals to conduct clinical trials or in obtaining required market clearances (especially with respect to significant products in the regulatory process that have been discussed in public announcements) may affect Edwards Lifesciences' operations or the market's expectations for the timing of such events and, consequently, the market price for Edwards Lifesciences' common stock. The FDA has the authority to halt the distribution of certain medical devices, detain or seize adulterated or misbranded medical devices, or order the repair, replacement or refund of the costs of such devices. The FDA also may require notification of health professionals and others with regard to medical devices that present unreasonable risks of substantial harm to the public health. The FDA may enjoin and restrain certain violations of the Food, Drug and Cosmetic Act and the Safe Medical Devices Act pertaining to medical devices, or initiate action for criminal prosecution of such violations. Moreover, the FDA administers certain controls over the export of medical devices from the United States and the importation of devices into the United States.

        Medical device laws are also in effect in countries outside of the United States where Edwards Lifesciences does business. These range from comprehensive device approval requirements for some or all of Edwards Lifesciences' medical device products to requests for product data or certifications. The number and scope of these requirements are increasing.

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        Edwards Lifesciences is also governed by federal, state, local and foreign laws of general applicability, such as those regulating employee health and safety. In addition, Edwards Lifesciences is subject to various federal, state, local and foreign environmental protection laws and regulations, including those governing the adverse impact of material on the environment.

        Health Care Initiatives.    Government and private sector initiatives to limit the growth of health care costs, including price regulation and competitive pricing, are continuing in many countries where Edwards Lifesciences does business, including the United States and Japan. As a result of these changes, the marketplace has placed increased emphasis on the delivery of more cost-effective medical therapies. Although Edwards Lifesciences believes it is well positioned to respond to changes resulting from this worldwide trend toward cost containment, proposed legislation and/or changes in the marketplace could have an adverse impact on future operating results.

        Diagnostic-related groups' reimbursement schedules regulate the amount the United States government, through the Health and Human Services Centers for Medicare and Medicaid Services, will reimburse hospitals and doctors for the inpatient care of persons covered by Medicare. In response to rising Medicare and Medicaid costs, several legislative proposals in the United States have been advanced that would restrict future funding increases for these programs. While Edwards Lifesciences has been unaware of significant domestic price resistance directly as a result of the reimbursement policies of diagnostic-related groups, changes in these reimbursement levels and processes could have an adverse effect on Edwards Lifesciences' domestic pricing flexibility.

        In keeping with the increased emphasis on cost-effectiveness in health care delivery, the current trend among domestic hospitals and other customers of medical device manufacturers is to consolidate into larger purchasing groups to enhance purchasing power. The medical device industry has also experienced some consolidation, partly in order to offer a broader range of products to large purchasers. As a result, transactions with customers are larger, more complex and tend to involve more long-term contracts than in the past. The enhanced purchasing power of these larger customers may also increase the pressure on product pricing, although management is unable to estimate the potential impact at this time.

Employees

        As of December 31, 2003, Edwards Lifesciences had approximately 5,000 employees worldwide, the majority of whom were located at the Company's headquarters in Irvine, California, and at its manufacturing facility in Puerto Rico. Other major concentrations of employees are located in the Dominican Republic, Europe, Japan and Brazil. Edwards Lifesciences emphasizes competitive compensation, benefits, equity participation and work environment practices in its efforts to attract and retain qualified personnel. None of Edwards Lifesciences' North American employees are represented by a labor union. In various countries outside of North America, the Company interacts with trade unions and work councils that represent a limited number of employees. Edwards Lifesciences has a very engaged workforce as measured by the Gallup Employee Engagement Survey.

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Risk Factors

You should carefully consider the risks described below, as well as other information contained in Edwards Lifesciences' filings with the Securities and Exchange Commission. If any of the events described below occurs, Edwards Lifesciences' business, financial condition or results of operations could be materially harmed. In that case, the value of Edwards Lifesciences' securities could decline and you may lose part or all of your investment.

If Edwards Lifesciences does not introduce new products in a timely manner, its products may become obsolete, and its operating results may suffer.

        The cardiovascular products industry is characterized by rapid technological changes, frequent new product introductions and evolving industry standards. Without the timely introduction of new products and enhancements, Edwards Lifesciences' products will likely become technologically obsolete over time, in which case its revenue and operating results would suffer. Even if Edwards Lifesciences is able to develop new technologies, these technologies may not be accepted quickly because of industry specific factors, such as the need for regulatory clearance, unanticipated restrictions imposed on approved indications, entrenched patterns of clinical practice and uncertainty over third party reimbursement

        Moreover, significant technical innovations generally will require a substantial investment before Edwards Lifesciences can determine the commercial viability of these innovations. Edwards Lifesciences may not have the financial resources necessary to fund these technical innovations. In addition, even if Edwards Lifesciences is able to successfully develop enhancements or new generations of its products, these enhancements or new generations of products may not produce revenue in excess of the costs of development, and they may be quickly rendered obsolete by changing customer preferences or the introduction by Edwards Lifesciences' competitors of products embodying new technologies or features.

Edwards Lifesciences may incur product liability losses that could adversely affect its operating results.

        Edwards Lifesciences' business exposes it to potential product liability risks that are inherent in the design, manufacture and marketing of medical devices. Edwards Lifesciences' products are often used in surgical and intensive care settings with seriously ill patients. In addition, some of the medical devices manufactured and sold by Edwards Lifesciences are designed to be implanted in the human body for long periods of time. Edwards Lifesciences could be the subject of product liability suits alleging that component failures, manufacturing flaws, design defects or inadequate disclosure of product-related risks or product-related information could result in an unsafe condition or injury to patients. Product liability lawsuits and claims, safety alerts or product recalls in the future, regardless of their ultimate outcome, could have a material adverse effect on Edwards Lifesciences' business and reputation and on its ability to attract and retain customers.

Edwards Lifesciences may experience supply interruptions that could harm its ability to manufacture products.

        Edwards Lifesciences use a diverse and broad range of raw and organic materials and other items in the design and manufacture of its products. Edwards Lifesciences' non-implantable products are manufactured from man-made raw materials including resins, chemicals, electronics and metals. Edwards Lifesciences' heart valve therapy products are manufactured from treated natural animal tissue and man-made materials. Edwards Lifesciences purchase certain of the materials and components used in the manufacture of its products from external suppliers. In addition, Edwards Lifesciences purchases certain supplies from single sources for reasons of quality assurance, cost-effectiveness or constraints resulting from regulatory requirements. Edwards Lifesciences work closely with its suppliers to assure continuity of supply while maintaining high quality and reliability. Alternative supplier options are

11

generally considered and identified, although Edwards Lifesciences does not typically pursue regulatory qualification of alternative sources due to the strength of its existing supplier relationships and the time and expense associated with this regulatory process. Although a change in suppliers could require significant effort or investment by Edwards Lifesciences in circumstances where the items supplied are integral to the performance of its products or incorporate unique technology, management does not believe that the loss of any existing supply contract would have a material adverse effect on the Company.

        In an effort to reduce potential product liability exposure, in the past certain suppliers have announced that they might limit or terminate sales of certain materials and parts to companies that manufacture implantable medical devices. In some cases, Edwards Lifesciences has been required to indemnify suppliers for product liability expenses in order to continue to receive materials or parts. There can be no assurance that an indemnity from Edwards Lifesciences will be satisfactory to these suppliers in the future. If Edwards Lifesciences is unable to obtain these raw materials or there is a significant increase in the price of materials or components, its business could be harmed.

Edwards Lifesciences may be required to recognize additional charges in connection with the write-down of some of its investments, the disposition of some of its businesses or for other reasons.

        Edwards Lifesciences has made investments in the equity instruments of other companies, and may make further such investments in the future. To the extent that the value of any such investment declines, Edwards Lifesciences may be required to recognize charges to write down the value of that investment. For example, in September 2002, Edwards Lifesciences recorded a $67.4 million pretax charge related to the impairment of its investment in the preferred stock of World Heart Corporation. See "Asset Impairments" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" included herein.

        In the case of some of the companies in which Edwards Lifesciences has invested, the value of its equity securities has declined since the time of its original investment. As a result, Edwards Lifesciences may be required to recognize additional charges, which could be substantial, to write down its investments. At December 31, 2003, in addition to its investment in World Heart, which was $11.6 million, Edwards Lifesciences had approximately $23.8 million of investments in equity instruments of other companies and had recorded unrealized gains of $4.3 million and unrealized losses of $4.8 million on these investments on its balance sheet in "Accumulated Other Comprehensive Income," net of tax.

        As part of the ongoing evaluation of its various businesses and products, Edwards Lifesciences from time to time identifies businesses or products that are not performing at a level commensurate with the rest of its business. Edwards Lifesciences may from time to time seek to dispose of these under performing businesses or product lines, and may also seek to dispose of businesses or product lines from time to time for strategic or other business reasons. If Edwards Lifesciences is unable to dispose of a business or product line on terms it considers acceptable, Edwards Lifesciences may voluntarily terminate that business or cease providing that product. Any of these events may result in charges, which could be substantial and which could adversely affect its results of operations.

        Edwards Lifesciences has entered into interest rate swap agreements in connection with some of its indebtedness, and expects that it will continue to do so from time to time in the future. In the event that Edwards Lifesciences elects to terminate a swap agreement prior to its maturity, it may be required to make cash payments to the counterparty and to recognize a charge in connection with that termination, which could adversely affect its results of operations.

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Edwards Lifesciences may not successfully identify and complete acquisitions or strategic alliances on favorable terms or achieve anticipated synergies relating to any acquisitions or alliances.

        As part of Edwards Lifesciences' growth strategy, Edwards Lifesciences regularly reviews potential acquisitions of complementary businesses, technologies, services or products and potential strategic alliances. Edwards Lifesciences may be unable to find suitable acquisition candidates or appropriate partners with which to form partnerships or strategic alliances. Even if Edwards Lifesciences identifies appropriate acquisition or alliance candidates, it may be unable to complete such acquisitions or alliances on favorable terms, if at all. In addition, the process of integrating an acquired business, technology, service or product into Edwards Lifesciences' existing business and operations may result in unforeseen operating difficulties and expenditures. Integration of an acquired company also may require significant management resources that otherwise would be available for ongoing development of Edwards Lifesciences' business. Moreover, Edwards Lifesciences may not realize the anticipated benefits of any acquisition or strategic alliance, and such transactions may not generate anticipated financial results. In addition, Edwards Lifesciences may be required to take charges or write-downs in connection with acquisitions it have made or may make in the future. Future acquisitions could also require issuances of equity securities, the incurrence of debt, contingent liabilities or amortization expenses related to other intangible assets, any of which could harm Edwards Lifesciences' business.

Edwards Lifesciences business is subject to economic, political and other risks associated with international sales and operations.

        Because Edwards Lifesciences sells its products in a number of foreign countries, its business is subject to risks associated with doing business internationally. Edwards Lifesciences' net sales originating outside of the United States, as a percentage of total net sales, were 55.3% in 2003. Edwards Lifesciences anticipates that sales from international operations will continue to represent a substantial portion of its total sales. In addition, many of Edwards Lifesciences' manufacturing facilities and suppliers are located outside of the United States. Management expects to increase Edwards Lifesciences' international sales, which could expose it to greater risks associated with international sales and operations. Accordingly, Edwards Lifesciences future results could be harmed by a variety of factors, including:

•

changes in foreign medical reimbursement policies and programs;



•

unexpected changes in foreign regulatory requirements;



•

changes in foreign currency exchange rates;



•

changes in a specific country's or region's political or economic conditions, particularly in emerging regions;



•

trade protection measures and import or export licensing requirements;



•

potentially negative consequences from changes in tax laws;



•

difficulty in staffing and managing foreign operations;



•

changes in the international political situation;



•

differing labor regulations; and



•

differing protection of intellectual property.

Edwards Lifesciences is subject to risks arising from currency exchange rate fluctuations.

        Edwards Lifesciences generated 55.3% of net sales in 2003 outside of the United States. Substantially all of Edwards Lifesciences' sales outside of the United States are denominated in local

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currencies. Measured in local currency, a substantial portion of Edwards Lifesciences' foreign generated sales was generated in Europe (and primarily denominated in the Euro) and in Japan. The United States dollar value of Edwards Lifesciences' foreign generated sales varies with currency exchange rate fluctuations. Significant decreases in the value of the United States dollar to the Euro or the Japanese yen have had the effect of increasing Edwards Lifesciences' earnings even when the volume of foreign sales has remained constant. Significant increases in the value of the United States dollar relative to the Euro or the Japanese yen, as well as other currencies, could have a material adverse effect on Edwards Lifesciences' results of operations. Edwards Lifesciences has a hedging program that attempts to manage currency exchange rate risks to an acceptable level based on management's judgment of the appropriate trade-off between risk, opportunity and cost; however, this hedging program does not completely eliminate the effects of currency exchange rate fluctuations.

Fluctuations in Edwards Lifesciences' quarterly operating results may cause its stock price to decline.

        Edwards Lifesciences sales and operating results may vary significantly from quarter to quarter. A high proportion of Edwards Lifesciences' costs are fixed, due in part to significant sales, research and development and manufacturing costs. Thus, small declines in revenue could disproportionately affect operating results in a quarter, and the price of Edwards Lifesciences' common stock may fall. Other factors that could affect quarterly operating results include:

•

demand for and clinical acceptance of products;



•

the timing and execution of customer contracts, particularly large contracts that would materially affect Edwards Lifesciences' operating results in a given quarter;



•

the timing of sales of products;



•

changes in foreign currency exchange rates;



•

unanticipated delays or problems in introducing new products;



•

competitors' announcements of new products, services or technological innovations;



•

changes in Edwards Lifesciences' pricing policies or the pricing policies of its competitors;



•

increased expenses, whether related to sales and marketing, raw materials or supplies, product development or administration;



•

adverse changes in the level of economic activity in the United States and other major regions in which Edwards Lifesciences does business;



•

costs related to possible acquisitions of technologies or businesses;



•

Edwards Lifesciences ability to expand its operations; and



•

the amount and timing of expenditures related to expansion of Edwards Lifesciences' operations.

Edwards Lifesciences inability to protect its intellectual property could have a material adverse effect on its business.

        Edwards Lifesciences' success and competitive position are dependent, in part, upon its proprietary intellectual property. Edwards Lifesciences relies on a combination of patents, trade secrets and nondisclosure agreements to protect its proprietary intellectual property, and will continue to do so. Although Edwards Lifesciences seeks to protect its proprietary rights through a variety of means, Edwards Lifesciences cannot guarantee that the protective steps it has taken are adequate to protect these rights. Patents issued to or licensed by Edwards Lifesciences in the past or in the future may be challenged and held invalid or not infringed by third parties. Competitors may also challenge Edwards Lifesciences' patents. In addition, certain of Edwards Lifesciences' patents are due to expire within the

14

next five years and it may be unsuccessful in its efforts to extend these patents through improvement patents, modifications or line extensions. The failure to maintain Edwards Lifesciences' patents could have a material adverse effect on the Company.

        Edwards Lifesciences also relies on confidentiality agreements with certain employees, consultants and other parties to protect, in part, trade secrets and other proprietary information. These agreements could be breached and Edwards Lifesciences may not have adequate remedies for any breach. In addition, others may independently develop substantially equivalent proprietary information or gain access to Edwards Lifesciences' trade secrets or proprietary information. Edwards Lifesciences spends significant resources to monitor and enforce its intellectual property rights. However, Edwards Lifesciences may not be able to detect infringement and may lose its competitive position in the industry. In addition, competitors may design around Edwards Lifesciences' technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture increased market position.

Third parties may claim Edwards Lifesciences is infringing their intellectual property, and Edwards Lifesciences could suffer significant litigation or licensing expenses or be prevented from selling products.

        During recent years, Edwards Lifesciences' competitors have been involved in substantial litigation regarding patent and other intellectual property rights in the medical device industry generally. From time to time, Edwards Lifesciences may be forced to defend itself against other claims and legal actions alleging infringement of the intellectual property rights of others. Because intellectual property litigation can be costly and time consuming, Edwards Lifesciences' intellectual property litigation expenses could be significant. Adverse determinations in any such litigation could subject Edwards Lifesciences to significant liabilities to third parties, could require Edwards Lifesciences to seek licenses from third parties and could, if such licenses are not available, prevent it from manufacturing, selling or using certain of its products, any one of which could have a material adverse effect on the Company.

        Third parties could also obtain patents that may require Edwards Lifesciences to either redesign its products or, if possible, negotiate licenses to conduct its business. If Edwards Lifesciences is unable to redesign its products or obtain a license, Edwards Lifesciences may have to exit a particular product offering.

Edwards Lifesciences faces intense competition and consolidation within its industry, and if Edwards Lifesciences does not compete effectively, its business will be harmed.

        The cardiovascular medical device industry is highly competitive. Edwards Lifesciences competes with many companies, some of which have longer operating histories, better brand or name recognition and greater access to financial and other resources than Edwards Lifesciences. Furthermore, the industry is characterized by intensive development efforts and rapidly advancing technology. Edwards Lifesciences' present and future products could be rendered obsolete or uneconomical by technological advances by one or more of its current or future competitors or by alternative therapies, including drug therapies. See "Business—Competition" included herein. Edwards Lifesciences' future success will depend, in large part, on its ability to develop and acquire new products and technologies, anticipate technology advances and keep pace with other developers of cardiovascular therapies and technologies.

        The medical device industry has been consolidating and, as a result, transactions with customers are larger, more complex and tend to involve more long-term contracts. The enhanced purchasing power of these larger customers may also increase downward pressure on product pricing. In addition, many existing and potential domestic customers for Edwards Lifesciences' products have combined to form group purchasing organizations, or "GPOs." GPOs negotiate pricing arrangements with medical supply manufacturers and distributors and these negotiated prices are made available to members of GPOs. If Edwards Lifesciences is not one of the providers selected by a GPO, it may be precluded

15

from making sales to members of a GPO for several years. Even if Edwards Lifesciences is one of the selected providers, it may be at a disadvantage relative to other selected providers that are able to offer volume discounts based on purchases of a broader range of medical equipment and supplies. Further, Edwards Lifesciences may be required to commit to pricing that has a material adverse effect on its sales and profit margins, business, financial condition and results of operations.

Edwards Lifesciences and its customers are subject to various governmental regulations, and Edwards Lifesciences may incur significant expenses to comply with these regulations and develop its products to be compatible with these regulations.

        The medical devices manufactured and marketed by Edwards Lifesciences are subject to rigorous regulation by the U.S. Food and Drug Administration, or "FDA," and numerous other federal, state and foreign governmental authorities. The process of obtaining regulatory approvals to market a medical device, particularly from the FDA and certain foreign governmental authorities, can be costly and time consuming, and approvals might not be granted for future products on a timely basis, if at all. Delays in receipt of, or failure to obtain, approvals for future products could result in delayed realization of product revenues or in substantial additional costs, which could have material adverse effects on Edwards Lifesciences' business or results of operations. In addition, there can be no assurance that Edwards Lifesciences will be or will continue to be in compliance with applicable FDA and other material regulatory requirements. If the FDA or some other foreign governmental authority were to conclude that Edwards Lifesciences was not in compliance with applicable laws or regulations, the FDA or such other foreign governmental authority, as applicable, could institute proceedings to detain or seize Edwards Lifesciences' products, issue a recall, impose operating restrictions, enjoin future violations and assess civil penalties against Edwards Lifesciences, its officers or its employees and could recommend criminal prosecution to the Department of Justice. Moreover, the FDA or some other foreign governmental authority could proceed to ban, or request recall, repair, replacement or refund of the cost of, any device or product manufactured or distributed by Edwards Lifesciences. Furthermore, both the FDA and foreign government regulators have become increasingly stringent, and Edwards Lifesciences may be subject to more rigorous regulation by governmental authorities in the future.

Edwards Lifesciences is subject to risks arising from concerns and/or regulatory actions relating to "mad cow disease."

        Certain of Edwards Lifesciences' products, including pericardial tissue valve products, are manufactured using bovine tissue. Concerns relating to the potential transmission of bovine spongiform encephalopathy, or "BSE," commonly known as "mad cow disease," from cows to humans may result in reduced acceptance of bovine products. Edwards Lifesciences obtains its bovine tissue only from closely controlled sources within the United States. In December 2003, one case of a cow infected with BSE was reported in the United States. In response to this situation, in late December 2003, the U.S. Department of Agriculture announced new strengthened control and surveillance measures with respect to BSE. To date, there have been no additional reported cases in the United States. The bovine tissue used in Edwards Lifesciences' pericardial tissue valve products is from tissue types considered by global health and regulatory organizations to have shown no risk of infectibility. Edwards Lifesciences has not experienced any significant adverse impact on its sales as a result of concerns regarding BSE, but no assurance can be given that such an impact may not occur in the future.

If third-party payors decline to reimburse Edwards Lifesciences' customers for its products or reduce reimbursement levels, Edwards Lifesciences' ability to profitably sell its products will be harmed.

        Edwards Lifesciences sells its products and technologies to hospitals, doctors and other health care providers, all of which receive reimbursement for the health care services provided to its patients from

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third-party payors, such as government programs (both domestic and international), private insurance plans and managed care programs. These third-party payors may deny reimbursement if they determine that a device used in a procedure was not used in accordance with cost-effective treatment methods as determined by such third-party payors, or was used for an unapproved indication. Third-party payors may also decline to reimburse for experimental procedures and devices. Edwards Lifesciences believes that many of its existing and future products are cost-effective because they are intended to reduce overall health care costs over a long period of time. Edwards Lifesciences cannot be certain whether these third-party payors will recognize these cost savings or will merely focus on the lower initial costs associated with competing therapies. If Edwards Lifesciences' products are not considered cost-effective by third-party payors, Edwards Lifesciences' customers may not be reimbursed for its products.

        In addition, third-party payors are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement for medical products and services. There can be no assurance that levels of reimbursement, if any, will not be decreased in the future, or that future legislation, regulation or reimbursement policies of third-party payors will not otherwise adversely affect the demand for and price levels of Edwards Lifesciences' products. In Japan, customers are reimbursed for Edwards Lifesciences' products under a government-operated insurance system. Under this system, the Japanese government annually reviews the reimbursement levels for products. The Japanese government is also considering other reimbursement regulation. If the Japanese government decides to reduce reimbursement levels for Edwards Lifesciences products, its product pricing may be adversely affected.

Edwards Lifesciences is, or may be, subject to lawsuits related to products or services manufactured or performed by the Company.

        Edwards Lifesciences is, or may be, a party to, or may be otherwise responsible for, pending or threatened lawsuits or other claims related to products and services currently or formerly manufactured or performed, as applicable, by the Company or other matters. Such cases and claims may raise difficult and complex factual and legal issues and may be 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 or other claims, 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 relating to any currently pending lawsuit would have a material adverse effect on Edwards Lifesciences' consolidated financial position.

The market price for Edwards Lifesciences' common stock may be volatile.

        The market price of Edwards Lifesciences' common stock could fluctuate substantially in the future in response to any of the other risk factors set out above and below as well as a number of factors, including the following:

•

quarterly variations in operating results, as discussed above under "—Fluctuations in Edwards Lifesciences' quarterly operating results may cause its stock price to decline,"



•

announcements of innovations, new products, strategic developments or business combinations by Edwards Lifesciences or its competitors,



•

changes in Edwards Lifesciences expected operating expense levels or income and losses,



•

changes in financial estimates and recommendations of securities analysts,



•

the operating and securities price performance of other companies that investors may deem comparable to Edwards Lifesciences, and

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•

changes in general conditions in the economy, the financial markets, the domestic or international political situation or the medical device industry.

        In addition, in recent years the stock market has experienced extreme price and volume fluctuations. This volatility has had a significant effect on the market prices of securities issued by many companies for reasons unrelated to their operating performance. These broad market fluctuations may materially adversely affect Edwards Lifesciences' stock price, regardless of its operating results.

Edwards Lifesciences' stockholder rights plan, charter and bylaws, as well as provisions of Delaware law, could make it difficult for a third party to acquire the Company.

        Edwards Lifesciences has a stockholder rights plan that may have the effect of discouraging unsolicited takeover proposals. The rights issued under the stockholder rights plan would cause substantial dilution to a person or group that attempts to acquire Edwards Lifesciences on terms not approved in advance by its board of directors. In addition, Delaware corporate law and Edwards Lifesciences' charter and bylaws contain provisions that could delay, deter or prevent a change in control of the Company or its management. These provisions could also discourage proxy contests and make it more difficult for Edwards Lifesciences' stockholders to elect directors and take other corporate actions without the concurrence of its management or board of directors. These provisions:

•

authorize Edwards Lifesciences' board of directors to issue "blank check" preferred stock, which is preferred stock that can be created and issued by its board of directors, without stockholder approval, with rights senior to those of common stock;



•

provide for a staggered board of directors and three-year terms for directors, so that no more than one-third of Edwards Lifesciences' directors could be replaced at any annual meeting;



•

provide that directors may be removed only for cause;



•

provide that stockholder action may be taken only at a special or regular meeting and not by written consent;



•

provide for super-majority voting requirements for some provisions of Edwards Lifesciences' charter; and



•

establish advance notice requirements for submitting nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at a meeting.

        Edwards Lifesciences is also subject to anti-takeover provisions under Delaware law, which could also delay or prevent a change of control. Together, these provisions of Edwards Lifesciences' charter and bylaws, Delaware law and its stockholder rights plan may discourage transactions that otherwise could provide for the payment of a premium over prevailing market prices of Edwards Lifesciences' common stock, and also could limit the price that investors are willing to pay in the future for shares of its common stock.

Edwards Lifesciences' issuance of preferred stock could adversely affect holders of its common stock and discourage a takeover.

        Edwards Lifesciences' board of directors is authorized to issue up to 50,000,000 shares of preferred stock without any action on the part of its stockholders. Edwards Lifesciences' board of directors also has the power, without stockholder approval, to set the terms of any series of preferred stock that may be issued, including voting rights, dividend rights, preferences over its common stock with respect to dividends or in the event of a dissolution, liquidation or winding up and other terms. In the event that Edwards Lifesciences issues preferred stock in the future that has preference over its common stock with respect to payment of dividends or upon its liquidation, dissolution or winding up, or if Edwards Lifesciences issues preferred stock with voting rights that dilute the voting power of its common stock, the rights of the holders of its common stock or the market price of its common stock could be adversely affected. In addition, the ability of Edwards Lifesciences' board of directors to issue shares of preferred stock without any action on the part of its stockholders may impede a takeover of Edwards Lifesciences and prevent a transaction favorable to the holders of its common stock.

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Item 2    Properties

        The locations and uses of the major properties of Edwards Lifesciences are as follows:

North America
Irvine, California	(1)	Corporate Headquarters, Research and Development, Regulatory and Clinical Affairs and Manufacturing
Memphis, Tennessee	(1)	Distribution and Logistics
Midvale, Utah	(1)	Administration, Research and Development and Manufacturing
Haina, The Dominican Republic	(2)	Manufacturing
Anasco, Puerto Rico	(2)	Manufacturing
Europe
Horw, Switzerland	(2)	Administration, Distribution and Manufacturing
Saint Prex, Switzerland	(2)	European Headquarters
South America
São Paulo, Brazil	(1),(2)	Administration, Distribution and Manufacturing
Japan
Tokyo, Japan	(2)	Japan Headquarters, Distribution
Miyazaki, Japan	(2)	Manufacturing, Distribution

(1)

Owned property.

(2)

Leased property.

        The Dominican Republic lease expires in 2006; the Puerto Rico lease expires in 2008; the Horw, Switzerland lease expires in 2007; the Saint Prex, Switzerland lease expires in 2005; and the São Paulo, Brazil lease expires in 2005. The Company's properties have been well maintained, are in good operating condition and are adequate for current needs.

Item 3    Legal Proceedings

        On June 29, 2000, Edwards Lifesciences 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 lawsuit. On April 9, 2002, a fourth Edwards Lifesciences United States patent was added to the lawsuit. Discovery is proceeding.

        On August 18, 2003, Edwards Lifesciences filed a lawsuit against Medtronic, Inc., Medtronic AVE, Cook, Inc. and W.L. Gore & Associates alleging infringement of a patent exclusively licensed to the Company. The lawsuit was filed in the United States District Court for the Northern District of California, seeking monetary damages and injunctive relief. Each of the defendants has answered and asserted various affirmative defenses and counterclaims. Discovery is proceeding.

        In addition, 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

19

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 is also 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.

Item 4    Submission of Matters to a Vote of Security Holders

        No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year ended December 31, 2003.

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PART II

Item 5    Market for the Registrant's Common Equity and Related Stockholder Matters

Market Price

        The principal market for Edwards Lifesciences' common stock is the New York Stock Exchange (the "NYSE"). The table below sets forth, for the calendar quarters indicated, the high and low sales prices of Edwards Lifesciences' common stock as reported by the NYSE.

		2003				2002
		High		Low		High		Low
Calendar Quarter Ended:
	March 31	$	27.64	$	24.40	$	29.60	$	25.00
	June 30		33.60		26.95		28.05		22.18
	September 30		32.65		25.77		25.75		18.40
	December 31		31.56		26.90		27.50		23.81

Number of Stockholders

        On February 27, 2004, there were 34,175 stockholders of record of Edwards Lifesciences' common stock.

Dividends

        Edwards Lifesciences has never paid any cash dividends on its capital stock and has no current plans to pay any cash dividends. The current policy of Edwards Lifesciences is to retain any future earnings for use in the business of the Company.

Item 6    Selected Financial Data

        The following table sets forth selected financial information with respect to Edwards Lifesciences. The information set forth below should be read in conjunction with Edwards Lifesciences' "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Consolidated Financial Statements" found elsewhere in this Form 10-K. No per share data for the years 2000 and prior have been presented because Edwards Lifesciences' earnings were part of Baxter's earnings through the close of business on March 31, 2000. See Notes 4 and 6 to the "Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results

21

of Operations" for discussions of the effect of certain asset divestitures on Edwards Lifesciences' operations.

		As of or for the years ended December 31,
		2003		2002		2001			2000			1999
		(in millions except per share data)
OPERATING RESULTS(a)	Net sales	$	860.5	$	704.0	$	692.1		$	803.8		$	905.0
	Gross profit		501.1		404.9		368.4			380.5			439.0
	Income (loss) from     continuing operations(b)		79.0		55.7		(11.4	)		(271.7	)		82.0
BALANCE SHEET DATA	Total assets(c)	$	1,101.4	$	1,004.4	$	982.9		$	1,106.7		$	1,437.0
	Long-term debt and lease     obligations		255.8		245.5		309.8			367.2			—
COMMON STOCK INFORMATION	Income (loss) from continuing operations per common share:
	Basic	$	1.34	$	0.94	$	(0.19	)		—			—
	Diluted		1.29		0.91		(0.19	)		—			—
	Cash dividends declared     per common share		—		—		—			—			—

(a)

The results prior to April 1, 2000 present Edwards Lifesciences on a divisional basis as it had historically been operated as part of Baxter. From April 1, 2000 (the date following the distribution of the Company's common stock to stockholders of Baxter) to September 30, 2002, Edwards Lifesciences' Japan business is presented on an equity basis as opposed to the consolidation method reflected in the historical results. Commencing October 1, 2002, the Company began reporting the results of its Japan business on a fully consolidated basis. See "Joint Venture in Japan" in Management's Discussion and Analysis of Financial Condition and Results of Operations for more information.

(b)

See Notes 4 and 5 to the "Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding charges of $67.4 million and $83.0 million during 2002 and 2001, respectively. Additionally, during 2000, the Company recorded charges of $312.2 million, net, related primarily to the sale of its perfusion products in the United States and Western Europe to Jostra AG.

(c)

See Note 4 to the "Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" for additional information regarding the write-down of goodwill of $80.7 million ($83.0 million pre-tax) during 2001. Additionally, during 2000, the Company wrote down goodwill by $282.0 million in connection with the sale of its perfusion products in the United States and Western Europe to Jostra AG.

Item 7    Management's Discussion and Analysis of Financial Condition and Results of Operations

        The following discussion and analysis presents the factors that had a material effect on the results of operations of Edwards Lifesciences during the three years ended December 31, 2003. Also discussed is Edwards Lifesciences' financial position as of December 31, 2003. You should read this discussion in conjunction with the historical consolidated condensed financial statements and related notes included elsewhere in this Form 10-K.

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

22

to address four main cardiovascular disease states: heart valve disease, coronary artery disease, peripheral vascular disease, and congestive heart failure. The products and services provided by Edwards Lifesciences to treat cardiovascular disease are categorized into five main areas: Cardiac Surgery, Critical Care, Vascular, Perfusion and Other Distributed Products.

        Edwards Lifesciences' cardiac surgery portfolio is comprised primarily of products relating to heart valve therapy, cannula products used during open-heart surgery and transmyocardial revascularization ("TMR"). 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, stents and artificial implanteable grafts. 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. Lastly, other distributed products include sales of intra-aortic balloon pumps, pacemakers, angioplasty systems and other products sold through the Company's distribution network in Japan, and miscellaneous pharmaceutical products sold in the United States.

        In order to provide greater visibility to a key part of its business, beginning in January 2004, the Company will recategorize its products into Heart Valve Therapy, Cardiac Surgery Systems, Critical Care, Vascular and Other Distributed Products. Heart Valve Therapy will include all heart valve repair and replacement products, and Cardiac Surgery Systems will include cannula products used during open-heart surgery, TMR products, and all products currently in the perfusion category. The other categories will remain the same.

        The health care marketplace continues to be competitive. There has been consolidation in Edwards Lifesciences' customer base and among its competitors, which has resulted in pricing and market share pressures. Edwards Lifesciences has experienced increases in its labor and material costs, which are primarily influenced by general inflationary trends. Management expects these trends to continue.

Joint Venture in Japan

        Subsequent to the distribution of the Company's common stock to stockholders of Baxter International Inc. ("Baxter") on March 31, 2000 the cardiovascular business in Japan was being operated pursuant to a joint venture under which a Japanese subsidiary of Baxter retained ownership of the Japanese business assets, but a subsidiary of Edwards Lifesciences held a 90% profit interest. From April 1, 2000 to September 30, 2002, Edwards Lifesciences (a) recognized its shipments into the joint venture as sales at distributor price at the time the joint venture sold to the end customer, and (b) utilized the equity method of accounting to record its 90% profit interest in the operations of the joint venture in Other Operating Income.

        On October 1, 2002, the Company acquired from Baxter for $19.0 million, net, the cardiovascular business in Japan. The purchase price excluded approximately $30.0 million of securitized accounts receivable. In the three months ended September 30, 2002, the Company recorded a $3.3 million charge for legal, administrative and regulatory expenses related to the acquisition. Commencing October 1, 2002, the Company began reporting the results of the Japan business on a fully consolidated basis. The acquisition did not materially impact the Company's net income as the terms of the joint venture agreement enabled Edwards Lifesciences to record substantially all of the net profit generated by the Japan business.

23

Results of Operations

Net Sales Trends

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

	Years Ended December 31,						Percent Change
	2003		2002		2001		2003		2002
United States	$	384.3	$	383.3	$	420.8	0.3	%	(8.9	%)
International		476.2		320.7		271.3	48.5	%	18.2	%
Total net sales	$	860.5	$	704.0	$	692.1	22.2	%	1.7	%

        The decrease in the United States' net sales in 2002 was due primarily to the sale of the Company's U.S. perfusion services business in June 2001, which decreased United States net sales by 14.5 percentage points. This decrease was partially offset by an increase in sales of cardiac surgery products.

        The increase in international net sales in 2003 was due primarily to the following:

•

the change in accounting for sales in Japan (see "Joint Venture in Japan") increased international net sales by 29.0 percentage points;



•

the impact of changes in foreign currency exchange rates increased international net sales by 12.4 percentage points (primarily the strengthening of the Euro and Japanese yen against the United States dollar); and



•

increased sales of cardiac surgery and vascular products (see below).

        The increase in international net sales for 2002 was due primarily to the following:

•

the change in accounting for sales in Japan increased international net sales by 10.4 percentage points; and



•

increased sales of cardiac surgery products (see below).

        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, and Edwards Lifesciences' hedging activities. For more information see "Quantitative and Qualitative Disclosure About Market Risk."

Net Sales by Product Line

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

	Years Ended December 31,						Percent Change
	2003		2002		2001		2003		2002
Cardiac Surgery	$	426.6	$	365.9	$	329.0	16.6	%	11.2	%
Critical Care		278.8		230.3		209.9	21.1	%	9.7	%
Vascular		55.9		51.3		49.3	9.0	%	4.1	%
Perfusion		54.8		43.2		102.1	26.9	%	(57.7	%)
Other Distributed Products		44.4		13.3		1.8	233.8	%	638.9	%
Total net sales	$	860.5	$	704.0	$	692.1	22.2	%	1.7	%

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Cardiac Surgery

        The net sales growth of cardiac surgery products in 2003 resulted primarily from the following:

•

currency exchange rate fluctuations increased net sales by 5.5 percentage points (primarily the strengthening of the Euro and Japanese yen against the United States dollar);



•

the change in accounting for sales in Japan increased net sales by 2.8 percentage points;



•

pericardial tissue valves increased net sales by 4.8 percentage points; and



•

heart valve repair products increased net sales by 1.7 percentage points.

        The net sales growth of cardiac surgery products in 2002 resulted primarily from the following:

•

pericardial tissue valves increased net sales by 7.9 percentage points;



•

heart valve repair products increased net sales by 1.9 percentage points; and



•

the change in accounting for sales in Japan increased net sales by 1.1 percentage points.

        Management expects that its heart valve therapy products will continue to serve as a key driver of Edwards Lifesciences' sales growth. Beginning in January 2004, the heart valve therapy products will be in a separate product category called Heart Valve Therapy and the remaining cardiac surgery products will be included in Cardiac Surgery Systems.

Critical Care

        The net sales growth of critical care products in 2003 resulted primarily from the following:

•

the change in accounting for sales in Japan increased net sales by 10.0 percentage points;



•

currency exchange rate fluctuations increased net sales by 6.9 percentage points (primarily the strengthening of the Euro and Japanese yen against the United States dollar); and



•

strong sales in global pressure monitoring products and overall strong performance in emerging global markets.

        The net sales growth of critical care products in 2002 resulted primarily from the following:

•

the change in accounting for sales in Japan increased net sales by 4.2 percentage points;



•

increased sales of access, hemofiltration and advanced catheter products; and



•

the net sales growth was partially offset by the decline in base hemodynamic catheters sales, which decreased net sales by 1.4 percentage points.

        Critical care products have been, and are expected to be, significant contributors to the Company's total sales.

Vascular

        The net sales growth of vascular products for 2003 resulted primarily from the following:

•

currency exchange rate fluctuations increased net sales by 7.0 percentage points (primarily the strengthening of the Euro and the Japanese yen against the United States dollar);



•

the change in accounting for sales in Japan increased net sales by 4.0 percentage points;



•

Lifepath AAA sales increased net sales by 2.4 percentage points, primarily in Europe; and



•

net sales growth was partially offset by continued declines in base vascular products.

25

        The net sales growth of vascular products for 2002 resulted primarily from the following:

•

initial sales of Lifepath AAA increased net sales by 5.1 percentage points;



•

the change in accounting for sales in Japan increased net sales by 1.6 percentage points; and



•

net sales growth was partially offset by continued declines in base vascular products.

        In December 2003, the Company announced its intent to explore strategic alternatives for the Lifepath AAA program. Lifepath AAA sales in 2003 were $4.7 million.

Perfusion

        The net sales growth of perfusion for 2003 resulted primarily from the following:

•

the change in accounting for sales in Japan increased net sales by 33.4 percentage points;



•

currency exchange rate fluctuations increased net sales by 5.3 percentage points (primarily the strengthening of the Euro and Japanese yen against the United States dollar);



•

the net sales growth was partially offset by the sale of the Company's German perfusion services subsidiary in July 2003, which decreased net sales by 4.7 percentage points; and



•

the reduction of low-margin distributed product sales in North America, which decreased net sales by 6.5 percentage points.

        The net sales decrease of perfusion for 2002 resulted primarily from the following:

•

the sale of the Company's U.S. perfusion services business in June 2001 decreased net sales by 59.8 percentage points;



•

currency exchange rate fluctuations decreased net sales by 2.6 percentage points (primarily the weakening of the Brazilian real against the United States dollar, offset by the strengthening of the Euro against the United States dollar);



•

the ongoing reduction of sales in Western Europe and the United States; and



•

the net sales decrease was partially offset by the change in accounting for sales in Japan, which increased global net sales by 5.3 percentage points.

        Beginning in January 2004, the Perfusion category will no longer be separately reported and all perfusion products and services will be included in Cardiac Surgery Systems.

Other Distributed Products

        Other distributed products include sales of intra-aortic balloon pumps, pacemakers, angioplasty systems and other products sold through the Company's distribution network in Japan, and miscellaneous pharmaceutical products sold in the United States. The net sales for 2003 and 2002 increased primarily due to the impact of the change in accounting for sales in Japan.

Gross Profit

	Year Ended December 31,						Percentage Point Increase
	2003		2002		2001		2003	2002
Gross profit as a percentage of net sales	58.2	%	57.5	%	53.2	%	0.7 pts.	4.3 pts.

        The increase in gross profit as a percentage of net sales for 2003 resulted primarily from improved manufacturing performance (1.9 percentage points) and the benefit of the consolidation of the Japan

26

business effective October 1, 2002 (0.7 percentage points), partially offset by increased hedging expenses (2.1 percentage points).

        The increase in gross profit as a percentage of net sales for 2002 resulted primarily from the sale of the U.S. perfusion services business in June 2001 (3.6 percentage points), the consolidation of the Japan business effective October 1, 2002 (0.7 percentage points), and the benefit of product mix, partially offset by the unfavorable impact of foreign currency exchange rates (0.8 percentage points).

Selling, General and Administrative ("SG&A") Expenses

	Years Ended December 31,									Change
	2003			2002			2001			2002		2003
SG&A expenses	$	289.9		$	227.9		$	203.2		$	62.0	$	24.7
SG&A expenses as a percentage of net sales		33.7	%		32.4	%		29.4	%		1.3 pts.		3.0 pts.

        The increase in selling, general and administrative expenses in 2003 resulted primarily from the consolidation of the Japan business effective October 1, 2002 ($34.0 million), the impact of foreign currency rate fluctuations, primarily the strengthening of the Euro and Japanese yen against the United States dollar ($12.8 million), and activities in support of increased sales.

        The increase in selling, general and administrative expenses in 2002 resulted primarily from the consolidation of the Japan business effective October 1, 2002 ($14.0 million), increased spending on heart valve growth opportunities ($8.6 million) and the impact of foreign currency rate fluctuations, primarily the strengthening of the Euro against the United States dollar, partially offset by the weakening of the Japanese yen against the United States dollar ($1.6 million).

        The increase in selling, general and administrative expenses as a percentage of net sales for 2003 resulted primarily from the consolidation of the Japan business effective October 1, 2002 (1.1 percentage point increase) and foreign currency rate fluctuations (0.2 percentage point increase, primarily the strengthening of the Euro and Japanese yen against the United States dollar).

        The increase in selling, general and administrative expenses as a percentage of net sales for 2002 resulted primarily from the sale of the U.S. perfusion services business in June 2001 (1.8 percentage points), the consolidation of the Japan business effective October 1, 2002 (0.7 percentage point increase), foreign currency rate fluctuations (0.3 percentage point increase, primarily the strengthening of the Euro against the United States dollar, partially offset by the weakening of the Japanese yen against the United States dollar), and increased spending on heart valve growth opportunities.

Research and Development Expenses

	Years Ended December 31,									Change
	2003			2002			2001			2003		2002
Research and development expenses	$	72.8		$	65.2		$	55.0		$	7.6	$	10.2
Research and development expenses as a percentage of net sales		8.5	%		9.3	%		7.9	%		(0.8)pts.		1.4 pts.

        The increases in research and development expenses for 2003 and 2002 resulted primarily from investments in a broad range of interventional technologies, including market expanding endovascular heart valve repair and replacement therapies, investments in the Company's peripheral vascular disease platform and other growth initiatives.

        The decrease in research and development expenses as a percentage of net sales for 2003 resulted primarily from the consolidation of the Japan business effective October 1, 2002. The increase in

27

research and development expenses as a percentage of net sales for 2002 resulted primarily from investments in the Company's peripheral vascular disease platform and other growth initiatives, partially offset by the consolidation of the Japan business effective October 1, 2002.

Loss on Sale of Stock

        Effective June 30, 2001, the Company sold the stock of Edwards Lifesciences Cardiovascular Resources, Inc. ("ELCR") to Fresenius Medical Care AG for cash proceeds of $45.0 million (the "ELCR Sale"), resulting in a pre-tax loss of $68.2 million (including the write-off of $83.0 million of goodwill). 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 $68.2 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 amounts are in millions, except per share amounts:

		Year Ended December 31, 2001
Net sales		$	631.1
Net income			45.9
Net loss per share:
	Basic		0.78
	Diluted		0.75

Asset Impairments

2002

        In September 2002, the Company recorded a $67.4 million charge related to the impairment of its investment in preferred stock of World Heart Corporation ("WorldHeart"). The investment was written down to $6.2 million, which represented the value of the Company's preferred stock investment had it been converted into common stock at October 15, 2002 (the closing date of September's books). The decision to record the charge was based primarily on WorldHeart's September 2002 decision to refocus its product development efforts by adopting a new design concept for a next generation product that resulted in a significant delay (approximately two years) in its product development timeline (with a revised commercial launch date of 2007) and impaired WorldHeart's competitive position. Accordingly, the Company concluded that sufficient risk existed that WorldHeart may be unable to fully liquidate the Company's investment in WorldHeart's preferred stock. The Company believed that the best objective indicator of the then fair value of its investment in WorldHeart's preferred stock was the market price of WorldHeart's common stock based upon the Company's expectation that the value of its preferred stock investment would be realized through the common stock, as opposed to redemption of the preferred stock.

2001

        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 the quarter ended June 30, 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

28

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 $14.8 million charge primarily related to the impairment of intangibles ($8.3 million), the impairment of an investment ($5.5 million) and the write-down of non-productive assets ($1.0 million).

Goodwill Amortization

        The elimination of goodwill amortization commencing in the year 2002 resulted from the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" (see "Effects of Recent Accounting Pronouncements"). Effective January 1, 2002, the accounting for goodwill changed from an amortization method to an impairment-only approach.

Special Charges

2003

Purchased in-process Research and Development Expenses ($13.6 million)

        On February 18, 2003, the Company acquired the endovascular mitral valve repair program of Jomed N.V., a European-based provider of products for minimally invasive vascular intervention, for $20.0 million in cash. The acquisition included all technology and intellectual property associated with the program. At the acquisition date, the program, which was less than 50% complete, was involved in testing proprietary prototypes prior to initiating required animal studies and human clinicals. Additional design improvements, bench testing, animal studies and human clinical studies must be successfully completed prior to selling the product in Europe (expected in 2005) and in the United States (expected in 2006). The risks and uncertainties associated with completing development within a reasonable period of time include those related to the design, development and manufacturability of the product, the success of animal and clinical studies and the timing of European and United States regulatory approvals. The fair market value of the assets acquired consisted primarily of patents that are being amortized over their estimated economic life of 17 years. Approximately $11.8 million of the purchase price has been charged to in-process research and development. The value of the in-process research and development was calculated using cash flow projections discounted for the risk inherent in such projects. The discount rate used was 30%. The valuation assumed approximately $20.0 million of additional research and development expenditures would be incurred prior to the date of product introduction. In the valuation, material net cash inflows were forecasted to commence in 2008. As of December 31, 2003, the program remains reasonably on track with the Company's original expectations.

        On December 5, 2003, the Company acquired the stock of Whitland Research Limited ("Whitland") for $3.2 million in cash, although achievement of future milestones through 2006 could increase the total price to $5.6 million. Whitland was focused on the development of critical care monitoring technologies. The $3.2 million purchase price was allocated to acquired in-process research and development ($1.8 million) and patents ($1.4 million) based upon their estimated fair values. The patents will be amortized over their estimated useful life of 10 years.

Severance Charge ($13.0 million)

        In July 2003, the Company recorded a charge of $13.0 million associated with a decision to streamline operations. The charge was primarily related to the severance costs associated with reducing the Company's worldwide workforce by 136 employees, primarily in the United States and Europe. As of December 31, 2003, $4.1 million of the charge remained unpaid.

29

Baxter Arbitration Settlement ($5.3 million)

        In January 2004, the Company concluded a dispute resolution proceeding with Baxter. Each company sought reimbursement from the other for a variety of claims arising from the Company's spin-off from Baxter in April 2000. The resolution resulted in a $5.3 million charge primarily related to the valuation of receivables at the date of spin-off, and a $5.4 million increase to Additional Contributed Capital related to the true-up of the beginning balance of equity.

Loss on Sale of Business ($3.3 million)

        Effective July 4, 2003, the Company sold its German perfusion services subsidiary to WKK GmbH, a German-based provider of hospital services, for a nominal amount. Sales generated by the German perfusion services subsidiary were approximately $3.5 million, during the six months ended June 30, 2003 and $6.6 million for the year 2002. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and Staff Accounting Bulletin No. 100, "Restructuring and Impairment Charges," the Company recorded an impairment charge of $3.3 million in 2003 to reduce the carrying value of the subsidiary's assets to fair value based upon the proceeds from the sale.

Pension Curtailment ($1.9 million)

        On November 4, 2003, the Company suspended its defined benefit pension plan in Puerto Rico ("the Plan"). Effective December 31, 2003, employees do not earn additional defined benefits for future services. To mitigate the Puerto Rico employees' reduced benefits from the Plan's suspension, effective January 1, 2004, the Company increased its contributions to the Puerto Rico 1165(e) defined contribution plan. In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," the Company recorded a curtailment loss of $1.9 million during the fourth quarter 2003. As of December 31, 2003, the Plan's accumulated benefit obligation exceeded the fair value of its assets by $2.4 million.

2002

        The Company recorded a $3.3 million charge for legal, administrative and regulatory expenses related to the October 2002 acquisition of the cardiovascular business in Japan (see "Joint Venture in Japan").

Equity Earnings in Japan Operations

        Equity earnings in Japan operations was $11.0 million and $16.4 million in 2002 and 2001, respectively. Equity earnings in Japan operations represent the Company's 90% profit interest in the cardiovascular business in Japan effective from April 1, 2000 through September 30, 2002. The decrease in 2002 results primarily from the consolidation of the Japan business effective October 1, 2002. For more information, see "Joint Venture in Japan."

Interest Expense, net

        Interest expense, net was $13.2 million, $11.5 million and $22.9 million in 2003, 2002, and 2001, respectively. The increase in interest expense, net for 2003 resulted primarily from the higher interest rate associated with the Company's fixed rate debt. The decrease in interest expense, net for 2002 resulted primarily from (a) the Company's reduction of debt, (b) lower interest rates on its floating rate debt, and (c) a $6.2 million charge in 2001 related to a payment to unwind an interest rate swap agreement that had locked in a fixed interest rate on $75.0 million of floating rate debt. The decision to unwind the interest rate swap agreement resulted from the Company's pay-down of underlying floating rate debt not anticipated to be necessary in funding future requirements of working capital, capital expenditures and other financial commitments.

30

Other (Income) Expense, net

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

	Years Ended December 31,
	2003			2002			2001
Foreign exchange (gain) loss	$	(10.6	)	$	(4.1	)	$	5.0
Legal settlement, net		—			(14.7	)		—
Asset dispositions and write-downs		3.6			2.3			6.5
Investment write-offs		—			1.4			—
Accounts receivable securitization costs		0.8			1.5			1.4
Other		1.5			(1.8	)		(2.3	)
	$	(4.7	)	$	(15.4	)	$	10.6

        Foreign exchange gains and losses relate to global trade and intercompany receivable and payable balances.

        Effective April 24, 2002, Edwards Lifesciences and Medtronic, Inc. entered into an agreement related to certain patent infringement claims pursuant to which the Company received a one-time cash payment of $20.0 million (recorded as a gain of $14.7 million, net of legal expenses).

Provision for Income Taxes

        The effective income tax rates for 2003, 2002 and 2001 were impacted by several items as follows (in millions):

	Years Ended December 31,
	2003			2002			2001
	(in millions)
Income tax expense (benefit) at U.S. federal statutory rate	$	32.5		$	19.6		$	(2.9	)
Foreign income tax at different rates		(11.9	)		(10.6	)		(6.8	)
Deemed dividend from Japan, net of foreign tax credit		6.2			—			—
Tax credits, federal and state		(2.1	)		(1.9	)		(1.6	)
(Benefit) from Brazil reorganization		(13.7	)		—			—
State and local taxes, net of federal tax benefit and transactions listed separately		1.0			(0.1	)		(3.0	)
(Benefit) loss on sale of perfusion services business		—			(20.1	)		11.0
Valuation allowance for loss on investment		—			13.8			—
Nondeductible goodwill		—			—			6.0
Other		1.8			(0.4	)		(1.2	)
Income tax expense	$	13.8		$	0.3		$	1.5

        Excluding the impact of special charges, the effective income tax rate was 26.0% for both 2003 and 2002, and 28.0% for 2001. The decrease in the effective income tax rate in 2002 was due primarily to the elimination of non-deductible goodwill amortization upon the adoption of SFAS No. 142 effective January 1, 2002. For more information see "Effects of Recent Accounting Pronouncements." The Company expects its effective income tax rate for recurring operations will increase to 27% for 2004 due in part to the expiration of the research credit.

        During 2003, the Company commenced a legal reorganization of its Brazil subsidiary to improve its balance sheet and to enhance its ability to conduct business in Brazil. Since being acquired a number of years ago, this subsidiary has incurred net operating losses primarily due to the devaluation of the local

31

currency and interest expense incurred on inter-company debt. In addition, the reorganization allowed the Company to recognize the accumulated losses and inter-company debt write-off under United States tax law, resulting in federal and state tax benefits of $13.7 million.

        During 2003, the Company recapitalized its Japan subsidiary. As a result, a deemed dividend occurred for U.S. tax purposes resulting in an incremental tax provision of $6.2 million, net of foreign tax credits. The recapitalization was a one-time event and all of the future earnings of the Company's Japan subsidiary are intended to be permanently reinvested.

        In exchange for the sale of the Novacor mechanical cardiac assist product line to WorldHeart in June 2000, the Company received WorldHeart preferred stock. In 2002, the investment in the WorldHeart preferred stock was deemed to be impaired and written down to its fair market value. Due to the uncertainty of using any potential tax benefit for the loss, a valuation allowance of $13.8 million has been established.

        As a result of tax law developments in 2002, the Company recorded a $20.1 million tax benefit during 2002 related to the loss on sale of its United States perfusion services business in June 2001.

Liquidity and Capital Resources

        The Company's sources of cash liquidity include cash on hand and cash equivalents, amounts available under credit facilities, proceeds from a convertible debt offering, accounts receivable securitization facilities and cash from operations. 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.

        As of December 31, 2003, the Company had two unsecured revolving credit agreements providing for up to an aggregate of $530.0 million in one- to six- month borrowings in multiple currencies. Borrowings currently bear interest at the London interbank offering rate (LIBOR) plus 0.75%, which includes a facility fee. One of the credit agreements provides for long-term borrowings up to an aggregate of $430.0 million and expires on March 30, 2005 (the "Five Year Credit Facility"). The other credit agreement provides for borrowings up to an aggregate of $100.0 million through March 25, 2004 (the "364 Day Facility"). As the 364 Day Facility has not been used recently, the Company does not plan to renew this credit agreement when it expires.

        As of December 31, 2003, borrowings of $105.8 million were outstanding under the Five Year Credit Facility and no borrowings were outstanding under the 364 Day Facility. Edwards Lifesciences pays a facility fee, regardless of available or outstanding borrowings, currently at an annual rate of 0.15% for the Five Year Credit Facility and 0.125% for the 364 Day Facility. As of December 31, 2003, all amounts outstanding under the Five Year Credit Facility have been classified as long-term obligations, as these borrowings will continue to be refinanced pursuant to that credit agreement. In March 2004, the Company will reclassify any balance outstanding on the Five Year Credit Facility to short-term as the agreement will expire within one year. The credit agreements contain various financial and other covenants, all of which the Company was in compliance with at December 31, 2003.

        In May 2003, the Company issued $150.0 million of convertible senior debentures, issued at par, bearing an interest rate of 3.875% per annum due May 15, 2033 (the "Notes"). Interest is payable semi-annually in May and November. Issuance costs of approximately $3.6 million are being amortized to interest expense over 5 years. The Notes are convertible into 18.29 shares of the Company's common stock for each $1,000 principal amount of Notes (conversion price of $54.66 per share), subject to

32

adjustment. The Notes may be converted, at the option of the holders, on or prior to the final maturity date under any of the following circumstances:

•

during any fiscal quarter, if the closing sale price per share of the Company's common stock exceeds 120% of the conversion price;



•

if the Notes have been called for redemption; or



•

upon the occurrence of specified corporate events.

        Holders of the Notes have the right to require the Company to purchase all or a portion of their Notes at a price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest on May 15, 2008, 2013, and 2018. The Company will pay cash for all Notes so purchased on May 15, 2008. For any Notes purchased by the Company on May 15, 2013 or 2018, the Company may, at its option, choose to pay the purchase price in cash, in shares of the Company's common stock, or any combination thereof. The Company must pay all accrued and unpaid interest in cash.

        The Company may redeem for cash all or part of the Notes at any time on or after May 15, 2008, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest.

        Beginning with the six-month interest period commencing May 15, 2008, holders of the Notes will receive contingent interest at a rate of 0.25% if the trading price of the Notes equals or exceeds 120% of the principal amounts of the Notes. This contingent interest payment feature represents an embedded derivative. Based on the immaterial value associated with this feature, no value has been assigned to the derivative at issuance or at December 31, 2003.

        As further discussed in Note 7 to the consolidated financial statements, the Company has two securitization programs whereby certain subsidiaries in the United States and Japan sell, without recourse, on a continuous basis, an undivided interest in certain eligible pools of accounts receivable. The significant benefits of the securitizations are lower cost of funds and differentiated sources of liquidity. The Company has been able to effectively lower its overall cost of funds as a result of the interest rate spreads it pays on these advances as opposed to borrowings under the current LIBOR based credit facility. Additionally, the Company believes that in diversifying its funding sources, the Company's funding availability in the capital markets is strengthened. As of December 31, 2003, the Company had sold a total of $91.2 million of trade accounts receivable and received funding of $76.9 million. These proceeds are generally used to reduce revolving lines of credit. The securitization program in the United States is renewable for one-year periods at the Company's option and will expire on December 21, 2004. The securitization program in Japan will expire on December 3, 2005.

        In November 2001, the Company's Board of Directors approved a stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated transactions up to 2.0 million shares of the Company's outstanding common stock. This program was completed in 2003. In addition, on May 6, 2003, the Company's Board of Directors approved a second stock repurchase program authorizing the Company to purchase an additional 2.0 million shares of the Company's outstanding common stock through December 31, 2005. Stock repurchased under these programs will primarily be used to offset obligations under the Company's employee stock option programs. During 2003, the Company repurchased 1,766,300 shares at an aggregate cost of $49.4 million under the second stock repurchase program.

        Cash provided by operating activities in 2003 increased $1.7 million from 2002 due primarily to:

•

higher earnings in 2003 before non-cash charges and credits;



•

decreased net cash outflows from accounts and other receivables;



•

decreased net cash outflows from accounts payable and accrued expenses;

33

•

partially offset by reduced cash inflows from increases in inventories.

        Cash provided by operating activities in 2002 increased $19.4 million from 2001 due primarily to:

•

higher earnings in 2002 before non-cash charges and credits;



•

increased net cash inflows from reductions in inventory;



•

partially offset by increased net cash outflows from accounts and other receivables (primarily the 2002 securitization of Japan receivables); and



•

increased net cash outflows from accounts payables and accrued expenses.

        Cash used in investing activities in 2003 decreased $5.0 million from 2002 due primarily to the following:

•

acquisition of joint venture in Japan of $19.0 million in 2002;



•

decreased spending in 2003 on capital expenditures and investments in unconsolidated subsidiaries;



•

receipt of payment on a note receivable in 2003;



•

partially offset by the 2003 purchase of Jomed's intellectual property (see "Purchased in-process Research and Development Expenses") and the 2003 purchase of the technology and intellectual property associated with Embol-X Inc.'s surgically placed, intra-aortic embolic management system.

        The total consideration for Embol-X Inc. was $13.6 million, comprised of $8.0 million cash, a deferred payment of $2.0 million cash payable upon the completion of the technology transfer (which was completed during August 2003), stock in an unconsolidated affiliated company valued at $3.0 million and $0.6 million of capitalized transaction costs. In accordance with the guidance provided in Emerging Issues Task Force 98-3, "Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business," the transaction was accounted for as a purchased business combination. The purchase price was allocated to the acquired assets at their estimated fair value as follows (in millions):

Developed technology	$	6.5
Goodwill		4.4
Patents		1.7
Trademarks and trade names		0.5
Machinery and equipment		0.2
Inventory		0.3
	$	13.6

        If prior to April 16, 2008, the Company's sales of medical devices from the transferred technology are at least $20.0 million in any consecutive 12-month period, the Company will pay an additional $5.0 million to Embol-X Inc. This contingent obligation has not been recorded in the Company's balance sheet as of December 31, 2003. Forecasted sales of medical devices from the transferred technology are expected to be less than $2.0 million for 2004.

        Cash used in investing activities in 2002 increased $64.4 million from 2001 due primarily to the cash provided by the sale of the U.S. perfusion services business in 2001, partially offset by the cash used in the acquisition of the Company's joint venture in Japan in 2002.

        Cash used in financing activities in 2003 consisted primarily of purchases of treasury stock of $49.4 million and net payments on debt of $4.0 million, partially offset by proceeds from stock plans of

34

$36.6 million and proceeds from securitization programs of $6.2 million. Cash used in financing activities in 2002 consisted primarily of net payments on debt of $82.1 million and purchases of treasury stock of $30.8 million, partially offset by proceeds from securitization programs of $29.9 million and proceeds from stock plans of $13.7 million.

        A summary of all of the Company's contractual obligations and commercial commitments as of December 31, 2003 were as follows (in millions):

		Payments Due By Period
Contractual Obligations		Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Long-term debt		$	255.8	$	—	$	105.8	$	—	$	150.0
Operating leases			36.6		11.1		14.6		8.8		2.1
Unconditional purchase obligations (b)			22.4		7.3		15.0		0.1		—
Contractual development obligations (a)			31.5		1.7		5.8		—		24.0
	Total contractual cash obligations	$	346.3	$	20.1	$	141.2	$	8.9	$	176.1

(a)

Contractual development obligations consist primarily of cash that Edwards Lifesciences is obligated to pay to unconsolidated affiliates upon their achievement of product development milestones.

(b)

Unconditional purchase obligations consist primarily of minimum purchase commitments of inventory.

        On January 27, 2004, the Company acquired Percutaneous Valve Technologies, Inc. ("PVT") for $125.0 million in cash, plus up to an additional $30.0 million upon the achievement of key milestones through 2007. The acquisition was financed through the Company's Five Year Credit Facility and operations. The Company expects to take an initial in-process research and development charge related to this transaction in the first quarter of 2004, estimated between $60.0 million and $90.0 million. The remainder of the purchase price will be allocated to patents involving PVT's proprietary technology. PVT, located in Fort Lee, NJ, with a subsidiary in Israel, is a leader in the development of an innovative, catheter-based (percutaneous) approach for replacing aortic heart valves. PVT's technology is a combination balloon-expandable stent technology integrated with a percutaneously delivered tissue heart valve. Unlike conventional open-heart valve replacement surgery, this less-invasive procedure is designed to be performed in a cardiac catheterization laboratory under local anesthesia.

Critical Accounting Policies and Estimates

        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 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

35

tax asset valuation allowances, any impairments of assets, anticipated transactions to be hedged, litigation 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.

        The Company believes the following are the critical accounting policies which could have the most significant effect on the Company's reported results and require subjective or complex judgments by management.

Revenue Recognition

        The Company recognizes revenue for sales when all of the following have occurred: an agreement of sale exists, product delivery and acceptance has occurred or services have been rendered, and collection is reasonably assured. In the case of certain products where the Company maintains consigned inventory at customer locations, revenue is recognized at the time the Company is notified that the customer has used the inventory. The Company enters into certain arrangements in which it commits to provide multiple elements to its customers. Revenue related to an individual element is deferred unless delivery of the element represents a separate earnings process. Total revenue for these arrangements is allocated among the elements based on the fair value of the individual elements, with the relative fair values determined based on objective evidence (generally based on sales of the individual element to other third parties). Management is required to make judgments about whether or not collectibility is reasonably assured.

        The Company adopted Emerging Issues Task Force 01-9 as of January 1, 2002 and presents the cost of certain vendor considerations as reductions of revenue. Adoption of this standard did not have a material impact on the Company's consolidated financial statements. When the Company recognizes revenue from the sale of its products, an estimate of various sales returns and allowances is recorded which reduces product sales and accounts receivable. These adjustments include estimates for charge backs, rebates, returns, and other sales allowances. These provisions are estimated based upon historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with wholesale and indirect customers. If the historical data and inventory estimates used to calculate these provisions does not properly reflect future activity, the Company's financial position, results of operations and cash flows could be impacted. The Company's estimates are subject to inherent limitations of estimates that rely on third-party data, as certain third-party information was itself in the form of estimates, and reflect other limitations.

Allowance for Doubtful Accounts

        The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessments of past due balances and economic conditions. Additional allowances for doubtful accounts may be required if there is deterioration in past due balances, if economic conditions are less favorable than the Company has anticipated or for customer-specific circumstances, such as financial difficulty. The allowance for doubtful accounts was $5.1 million and $5.5 million at December 31, 2003 and 2002, respectively.

Excess and Obsolete Inventory

        The Company records allowances for excess and obsolete inventory based on historical and estimated future demand and market conditions. Additional inventory allowances may be required if future demand or market conditions are less favorable than the Company has estimated. Inventory reserves result from inventory, which is obsolete, is nearing its expiration date (generally triggered at six months prior to expiration), or is damaged or slow moving (defined as quantities in excess of a two year supply). The allowance for excess and obsolete inventory was $8.5 million and $9.6 million at December 31, 2003 and 2002, respectively.

36

Patent Costs

        The Company expenses legal costs incurred for patent preparation and applications. The Company capitalizes legal costs related to the defense and enforcement of issued patents for which success is deemed probable. The related costs are amortized over the remaining useful lives of the patents using the straight-line method. Such deferred costs are periodically reviewed for impairment and recoverability. To the extent the Company is successful in its defense and enforcement of its patents and receives compensation for past infringement, costs capitalized in connection with the specific defense or enforcement are expensed as an offset against any gain received.

Impairment of Long-Lived Assets

        On January 1, 2002, the Company adopted 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.

        Additionally, management reviews the carrying amounts of goodwill and other intangibles whenever events and circumstances indicate that the carrying amounts of an asset may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit and adverse legal or regulatory developments. If it is determined that such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair market value. Estimated fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. For the purposes of identifying and measuring impairment, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

Investments in Unconsolidated Affiliates

        Investments in unconsolidated affiliates are designated as available-for-sale in accordance with the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." These investments are carried at fair market value, with unrealized gains and losses reported in stockholders' equity as Accumulated Other Comprehensive Income. Gains or losses on investments sold are based on the specific identification method. The fair values of certain investments are based on quoted market prices. For other investments, various methods are used to estimate fair value, including external valuations and discounted cash flows. When the fair value of a certain investment declines below cost, management uses the following criteria to determine if such a decline should be considered other than temporary and result in a realized loss:

•

the duration and extent to which the market value has been less than cost;



•

the financial condition and near term prospects of the investee;



•

the reasons for the decline in market value;



•

the investee's performance against product development milestones; and



•

the Company's ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

37

Income Taxes

        The Company records a liability for potential tax assessments based on its estimate of the potential exposure. New laws and new interpretations of laws and rulings by tax authorities may affect the liability for potential tax assessments. Due to the subjectivity and complex nature of the underlying issues, actual payments or assessments may differ from estimates. To the extent the Company's estimates differ from actual payments or assessments, income tax expense is adjusted. Additional information regarding income taxes is included in Note 16 of the consolidated financial statements.

        The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. At December 31, 2003, the Company had deferred tax assets of $107.9 million, partially offset by deferred tax liabilities of $17.2 million. The valuation allowance of $19.5 million as of December 31, 2003 reduces certain deferred tax assets to amounts that are more likely than not to be realized. This allowance primarily relates to the deferred tax assets established for certain investments and the net operating loss carryforwards of certain non-United States subsidiaries. The Company evaluates annually the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the Company's forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings.

Employee Stock Option and Stock Purchase Plans

        The Company applies the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its fixed stock option and employee stock purchase plans. In accordance with this intrinsic value method, no compensation expense is recognized for these plans. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation," (in millions, except per share amounts):

		Year Ended December 31,
		2003			2002			2001
Net income (loss), as reported		$	79.0		$	55.7		$	(11.4	)
	Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of tax		(16.0	)		(15.3	)		(10.8	)
Pro forma net income (loss)		$	63.0		$	40.4		$	(22.2	)
Earnings per basic share:
	Reported net income (loss)	$	1.34		$	0.94		$	(0.19	)
	Pro forma net income (loss)		1.07			0.68			(0.38	)
Earnings per diluted share:
	Reported net income (loss)		1.29			0.91			(0.19	)
	Pro forma net income (loss)		1.03			0.66			(0.38	)

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        The per share weighted-average fair value for options granted during 2003, 2002 and 2001 was $10.93, $11.64, and $7.00, respectively. The fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	2003		2002		2001
Average risk-free interest rate	2.5	%	4.4	%	5.8	%
Expected dividend yield	None		None		None
Expected volatility	42	%	44	%	45	%
Expected life (years)	4		5		5

        The pro forma expense for employee stock purchase subscriptions was calculated with the following weighted-average assumptions for grants during the following periods:

	2003		2002		2001
Average risk-free interest rate	1.3	%	2.1	%	4.1	%
Expected dividend yield	None		None		None
Expected volatility	42	%	45	%	44	%
Expected life (years)	1		1		1

        The expected volatility assumptions for the stock option and stock purchase plans used in the Black-Scholes option pricing model is estimated on the date of each grant.

Effects of Recent Accounting Pronouncements

        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 was 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.

        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 8 of the consolidated financial statements for more information.

        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, is effective for fiscal years beginning after June 15, 2002. Adoption of this standard did not have a material impact on the Company's 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. Adoption of this standard did not have a material impact on the Company's 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

39

restructuring. The provisions of this statement are effective for exit or disposal activities that are initiated after December 31, 2002. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure." This standard amends SFAS No. 123, "Accounting for Stock-Based Compensation", to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this standard amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This standard is effective for financial statements for fiscal years ending after December 15, 2002. The Company has adopted this standard and has made the necessary changes to its financial statement disclosures.

        In January 2003, the FASB issued and in December 2003, revised, FASB Interpretation No. 46 "Consolidation of Variable Interest Entities—an interpretation of ARB No. 51." This interpretation addresses consolidation by business enterprises of variable interest entities, which have certain characteristics. The effective date of this interpretation varies based on certain criteria. The Company is required to apply all of this interpretation no later than the end of the first reporting period that ends after March 15, 2004. The Company is evaluating one entity to determine if it qualifies as a variable interest entity and if the entity will need to be consolidated. This entity had $10.1 million of assets as of September 30, 2003 and had $0.4 million of net income for the nine months ended September 30, 2003.

        In April 2003, the FASB issued, SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This standard is effective for contracts entered into or modified after June 30, 2003, with exception for specified transactions. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of this standard did not impact the Company's consolidated financial statements.

Item 7A    Quantitative and Qualitative Disclosure About Market Risk

        The Company's business and financial results are affected by fluctuations in world financial markets, including currency exchange rates and interest rates. The Company's hedging policy attempts to manage these risks to an acceptable level based on management's judgment of the appropriate trade-off between risk, opportunity and costs.

        Edwards Lifesciences maintains an overall risk management strategy that utilizes a variety of interest rate and currency derivative financial instruments to mitigate its exposure to fluctuations in interest rates and currency exchange rates. The derivative instruments used include interest rate swaps, option-based products and forward currency contracts. The Company does not use any of these instruments for trading or speculative purposes. The total notional amounts of the Company's derivative financial instruments at December 31, 2003 and 2002 were $569.6 million and $588.2 million, respectively. The notional amounts of interest rate swap agreements, option-based products, and forward currency contracts do not represent amounts exchanged by the parties and, are not a measure of the Company's exposure through its use of derivatives.

40

Interest Rate Risk

        The Company 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 or on a portfolio basis. The Company's interest rate swap agreements involve agreements to pay a fixed rate and receive a floating rate, at specified intervals, calculated on an agreed-upon notional amount.

        As part of its overall risk-management program the Company performs sensitivity analyses to assess potential gains and losses in earnings and changes in fair values to hypothetical movements in interest rates. A 46 basis-point increase in interest rates (approximately 10 percent of the Company's weighted average interest rate) affecting the Company's financial instruments, including debt obligations and related derivatives and investments, would not change the Company's annual interest expense, net because the Company has no floating rate debt, after giving effect to interest rate swaps. In January 2004, the Company borrowed $105.0 million on its floating rate Five Year Credit Facility to fund its general operating activities and the acquisition of PVT.

Currency Risk

        The Company is primarily exposed to currency exchange-rate risk with respect to its transactions and net assets denominated in Japanese yen and the Euro. Business activities in various currencies expose the Company to the risk that the eventual net United States dollar cash inflows resulting from transactions with foreign customers and suppliers denominated in foreign currencies may be adversely affected by changes in currency exchange rates. The Company manages these risks utilizing various types of foreign exchange contracts. The Company also enters into foreign exchange contracts to hedge anticipated, but not yet committed, sales expected to be denominated in foreign currencies. In addition, the Company hedges certain of its net investments in international affiliates. Such contracts hedge the United States dollar value of foreign currency denominated net assets from the effects of volatility in currency exchange rates by creating debt denominated in the respective currencies of the underlying net assets. Any changes in the carrying value of these net investments that are a result of fluctuations in currency exchange rates are offset by changes in the carrying value of the foreign currency denominated debt that are a result of the same fluctuations in currency exchange rates.

        As part of the strategy to manage risk while minimizing hedging costs, the Company utilizes both foreign currency forward exchange contracts and option-based products in managing its exposure to currency rate fluctuations. Option-based products consist primarily of purchased put options in conjunction with written (sold) call options to create collars. Option-based products are agreements that either grant the Company the right to receive, or require the Company to make payments at, specified currency rate levels.

        As part of its risk-management process, the Company uses a value-at-risk ("VAR") methodology in connection with other management tools to assess and manage its foreign currency financial instruments and measure any potential loss in earnings as a result of adverse movements in currency exchange rates. The Company utilizes a Monte Carlo simulation, with a 95 percent confidence level, using spot and three-month implied volatilities as stochastic variables and correlations (as of the measurement date) to estimate this potential loss. The Company's calculated VAR at December 31, 2003 and 2002, with a maturity of up to one year, is $3.0 million and $4.3 million, respectively. This amount excludes the potential effects of any changes in the value of the underlying transactions or balances. The Company's calculated VAR exposure represents an estimate of reasonably possible net losses that would be recognized on its portfolio of financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results which may occur. It does not represent the maximum possible loss or any expected loss that may occur. Actual future gains or losses may differ from (and could be significantly greater than) these estimates based upon actual fluctuations in market rates, operating exposures and the timing thereof, and changes in the Company's

41

portfolio of derivatives during the measured periods. In addition, the assumption within the VAR model is that changes in currency exchange rates are adverse, which may not be the case. Any loss incurred on the financial instruments is expected to be offset by the effects of currency movements on the hedging of all exposures; there may be currency exchange-rate gains or losses in the future.

Credit Risk

        Derivative financial instruments used by the Company involve, to varying degrees, elements of credit risk in the event a counter-party should default and market risk as the instruments are subject to rate and price fluctuations. Credit risk is managed through the use of credit standard guidelines, counter-party diversification, monitoring of counter-party financial condition and master-netting agreements in place with all derivative counter-parties. Credit exposure of derivative financial instruments is represented by the fair value effects of contracts with a positive fair value at December 31, 2003 reduced by the effects of master netting agreements. Additionally, at December 31, 2003, all derivative financial instruments, based on notional amounts, were with commercial banks and investment banking firms assigned investment grade ratings of "AA" or better by national rating agencies. The Company does not anticipate non-performance by its counter-parties and has no reserves related to non-performance as of December 31, 2003; the Company has not experienced any counterparty default during the three years ended December 31, 2003.

Concentrations of Credit Risk

        In the normal course of business, Edwards Lifesciences provides credit to customers in the health care industry, performs credit evaluations of these customers and maintains reserves for potential credit losses which, when realized, have been within the range of management's allowance for doubtful accounts during all periods presented.

        Sales to Baxter, acting in the capacity of the Company's distributor subsequent to the Distribution, represented approximately 8% and 11% of the Company's total net sales for 2002 and 2001, respectively. Substantially all of these agreements had been terminated as of December 31, 2002. In 2003, the Company had no customers that represent greater than 10% of its total net sales or accounts receivable, net.

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 consolidated balance sheets.

        In 2002, the Company recorded a $67.4 million pretax charge related to the impairment of its investment in preferred stock of WorldHeart. The investment was written down to $6.2 million, which represented the value of the Company's preferred stock investment had it been converted into common stock at October 15, 2002. The decision to record the charge was based primarily on delays in WorldHeart's product development timelines, arising from its revised strategy. Should WorldHeart fail to meet certain future development and financing milestones, further impairment charges may be necessary.

        In addition to the investment in WorldHeart ($11.6 million at December 31, 2003), Edwards Lifesciences had approximately $23.8 million of investments in equity instruments of other companies. At December 31, 2003, the Company had recorded unrealized gains of $4.3 million and unrealized losses of $4.8 million on these investments 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 achievement of product development milestones. Should these

42

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.

Item 8    Financial Statements and Supplementary Data

Report of Management

        The management of Edwards Lifesciences is responsible for the integrity of the financial information presented in this Form 10-K. The consolidated financial statements have been prepared in accordance with generally accepted accounting principles. Where necessary, they reflect estimates based on management's judgment.

        Management relies upon established accounting procedures and related systems of internal control for meeting its responsibilities to maintain reliable financial records. These systems are designed to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management's intentions. Internal auditors periodically review the accounting and control systems, and these systems are revised if and when weaknesses or deficiencies are found.

        The Audit and Public Policy Committee of the Board of Directors, composed of directors from outside the Company, meets regularly with management, the Company's internal auditors and its independent auditors to discuss audit scope and results, internal control evaluations, and other accounting, reporting and financial matters. The independent auditors and internal auditors have access to the Audit and Public Policy Committee without management's presence.

/s/  MICHAEL A. MUSSALLEM Michael A. Mussallem
Chairman of the Board and Chief Executive Officer

/s/  CORINNE H. LYLE Corinne H. Lyle
Corporate Vice President,
Chief Financial Officer and Treasurer

43

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
DECEMBER 31, 2003

Report of Independent Auditors			45
Financial Statements:
	Consolidated Balance Sheets at December 31, 2003 and 2002		46
	For the years ended December 31, 2003, 2002 and 2001:
		Consolidated Statements of Operations	47
		Consolidated Statements of Cash Flows	48
		Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)	49
		Notes to Consolidated Financial Statements	51
Financial statement schedule for the years ended December 31, 2003, 2002 and 2001:
	Valuation and Qualifying Accounts		85
	Other schedules are not applicable and have not been submitted

44

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders
of Edwards Lifesciences Corporation:

        In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Edwards Lifesciences Corporation and its subsidiaries at December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the accompanying index presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        As discussed in Note 8 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, on January 1, 2002 and as a result changed its method of accounting for goodwill.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orange County, California
February 3, 2004

45

EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

			December 31,
			2003			2002
ASSETS
Current assets
	Cash and cash equivalents		$	61.1		$	34.2
	Accounts receivable, net of allowances of $5.1 and $5.5			97.5			88.3
	Other receivables			21.0			20.1
	Inventories, net			120.5			111.8
	Deferred income taxes			11.9			27.6
	Prepaid expenses			41.8			34.8
	Other current assets			6.4			3.4
		Total current assets		360.2			320.2
Property, plant and equipment, net				209.9			209.4
Goodwill				338.2			333.8
Other intangible assets, net				81.0			65.0
Investments in unconsolidated affiliates				35.4			23.5
Deferred income taxes				59.3			38.8
Other assets				17.4			13.7
		Total assets	$	1,101.4		$	1,004.4
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
	Accounts payable and accrued liabilities		$	167.2		$	177.3
Long-term debt				255.8			245.5
Other long-term liabilities				43.3			42.2
Commitments and contingent liabilities (Note 10 and 17)
Stockholders' equity
	Preferred stock, $.01 par value, authorized 50,000,000 shares, no shares outstanding			—			—
	Common stock, $1.00 par value, 350,0000,000 shares authorized, 62,572,250 and 60,177,275 shares issued, 59,480,850 and 58,852,175 shares outstanding at December 31, 2003 and 2002, respectively			62.6			60.2
	Additional contributed capital			463.2			412.0
	Retained earnings			222.4			143.4
	Accumulated other comprehensive income			(32.2	)		(44.7	)
	Common stock in treasury, at cost, 3,091,400 and 1,325,100 shares at December 31, 2003 and 2002, respectively			(80.9	)		(31.5	)
		Total stockholders' equity		635.1			539.4
		Total liabilities and stockholders' equity	$	1,101.4		$	1,004.4

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

46

EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share information)

			Years Ended December 31,
			2003			2002			2001
Net sales			$	860.5		$	704.0		$	692.1
	Cost of goods sold			359.4			299.1			323.7
Gross profit				501.1			404.9			368.4
	Selling, general and administrative expenses			289.9			227.9			203.2
	Research and development expenses			72.8			65.2			55.0
	Loss on sale of stock (Note 4)			—			—			68.2
	Asset impairments (Note 5)			—			67.4			14.8
	Goodwill amortization			—			—			18.5
	Special charges (Note 6)			37.1			3.3			—
	Equity earnings in Japan operations (Note 1)			—			(11.0	)		(16.4	)
	Interest expense, net			13.2			11.5			22.9
	Other (income) expense, net (Note 15)			(4.7	)		(15.4	)		10.6
Income (loss) before provision for income taxes				92.8			56.0			(8.4	)
	Provision for income taxes			13.8			0.3			1.5
Income (loss) before cumulative effect of change in accounting principle				79.0			55.7			(9.9	)
	Cumulative effect of change in accounting principle, net of tax (Note 2)			—			—			1.5
Net income (loss)			$	79.0		$	55.7		$	(11.4	)
Share information (Note 2):
	Earnings (loss) per basic share
		Income (loss) before cumulative effect of change in accounting principle	$	1.34		$	0.94		$	(0.17	)
		Cumulative effect of change in accounting principle (Note 2)		—			—			(0.02	)
		Net income (loss)	$	1.34		$	0.94		$	(0.19	)
	Earnings (loss) per diluted share
		Income (loss) before cumulative effect of change in accounting principle	$	1.29		$	0.91		$	(0.17	)
		Cumulative effect of change in accounting principle (Note 2)		—			—			(0.02	)
		Net income (loss)	$	1.29		$	0.91		$	(0.19	)
Weighted average number of common shares outstanding:
	Basic			59.1			59.0			58.9
	Diluted			61.1			61.3			58.9

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

47

EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

				Years Ended December 31,
				2003			2002			2001
Cash flows from operating activities
	Net income (loss)			$	79.0		$	55.7		$	(11.4	)
	Income charges (credits) not affecting cash:
		Depreciation and amortization			45.6			40.4			57.4
		Deferred income taxes			5.3			(13.8	)		(29.7	)
		Special charges, losses and impairments			7.1			68.9			89.4
		Other			5.2			8.7			(1.7	)
	Changes in operating assets and liabilities, net of effect from ownership change of Japan business and business acquisitions (Notes 1 and 3):
		Accounts and other receivables			(11.0	)		(32.0	)		(4.7	)
		Inventories			4.2			13.3			(7.7	)
		Accounts payable and accrued liabilities			(8.4	)		(17.6	)		7.0
		Prepaid expenses			3.1			(2.0	)		—
		Other			(7.8	)		(1.0	)		2.6
			Net cash provided by operating activities		122.3			120.6			101.2
Cash flows from investing activities
	Capital expenditures				(37.9	)		(40.7	)		(37.5	)
	Investments in intangible assets				(26.2	)		(7.0	)		(8.0	)
	Investments in unconsolidated affiliates				(4.4	)		(5.7	)		(10.6	)
	Proceeds from asset dispositions				6.0			4.1			9.7
	Proceeds from note receivable				1.7			—			—
	Acquisition of joint venture in Japan				—			(19.0	)		—
	Proceeds from sale of business				—			—			45.0
	Other				(2.5	)		—			(2.5	)
			Net cash used in investing activities		(63.3	)		(68.3	)		(3.9	)
Cash flows from financing activities
	Proceeds from issuance of short-term debt				—			0.4			26.1
	Payments on short-term debt				—			(1.5	)		(86.3	)
	Proceeds from issuance of long-term debt				333.4			150.9			180.0
	Payments on long-term debt				(337.4	)		(231.9	)		(211.2	)
	Proceeds from accounts receivable securitization, net				6.2			29.9			5.2
	Purchases of treasury stock				(49.4	)		(30.8	)		(0.7	)
	Proceeds from stock plans				36.6			13.7			8.9
	Other				(4.4	)		(0.2	)		(0.6	)
			Net cash used in financing activities		(15.0	)		(69.5	)		(78.6	)
Effect of currency exchange rate changes on cash and cash equivalents					(17.1	)		3.7			0.9
			Net increase (decrease) in cash and cash equivalents		26.9			(13.5	)		19.6
Cash and cash equivalents at beginning of year					34.2			47.7			28.1
Cash and cash equivalents at end of year				$	61.1		$	34.2		$	47.7
Supplemental disclosures:
Cash paid during the year for:
	Interest			$	7.9		$	9.8		$	19.2
	Income taxes				14.1			10.4			10.6
Non-cash transactions:
	Purchase of intangible assets in exchange for stock			$	3.0			—			—

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

48

EDWARDS LIFESCIENCES CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND
COMPREHENSIVE INCOME (LOSS)

(in millions)

		Years Ended December 31,
		2003			2002			2001
COMMON STOCK
Beginning of year		$	60.2		$	59.3		$	58.7
Common stock issued under employee benefit plans			2.4			0.9			0.6
End of year		$	62.6		$	60.2		$	59.3
ADDITIONAL CONTRIBUTED CAPITAL
Beginning of year		$	412.0		$	287.2		$	277.4
Common stock issued under employee benefit plans			35.1			12.8			8.2
Tax benefit from exercise of non-qualified stock options			10.6			—			—
Resolution of Baxter arbitration (Note 6)			5.4			—			—
Stock options issued to non-employees			0.1			1.2			1.6
Acquisition of joint venture in Japan (Notes 1 and 3)			—			110.8			—
End of year		$	463.2		$	412.0		$	287.2
RETAINED EARNINGS
Beginning of year		$	143.4		$	87.7		$	102.9
Net income (loss)			79.0			55.7			(11.4	)
Elimination of reporting lag for certain international operations (Note 2)			—			—			(3.8	)
End of year		$	222.4		$	143.4		$	87.7
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Beginning of year		$	(44.7	)	$	25.2		$	0.6
Other comprehensive income (loss)			12.5			(69.9	)		24.6
End of year		$	(32.2	)	$	(44.7	)	$	25.2
TREASURY STOCK
Beginning of year		$	(31.5	)	$	(0.7	)	$	—
Purchases of stock			(49.4	)		(30.8	)		(0.7	)
End of year		$	(80.9	)	$	(31.5	)	$	(0.7	)
	Total stockholders' equity	$	635.1		$	539.4		$	458.7

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

49

			Years Ended December 31,
			2003			2002			2001
COMPREHENSIVE INCOME (LOSS)
Net income (loss)			$	79.0		$	55.7		$	(11.4	)
Other comprehensive income (loss):
	Currency translation adjustments, net of tax			6.5			(8.0	)		29.9
	Currency translation adjustment in connection with the acquisition of joint venture in Japan (Notes 1 and 3)			—			(47.8	)		—
	Pension adjustments, net of tax			1.2			(1.7	)		—
	Unrealized net gain (loss) on investments in unconsolidated affiliates, net of tax			6.3			(1.7	)		(5.8	)
	Net unrealized (loss) gain on cash flow hedges, net of tax			(1.5	)		(10.7	)		0.5
	Other comprehensive income (loss)			12.5			(69.9	)		24.6
		Total comprehensive income (loss)	$	91.5		$	(14.2	)	$	13.2

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

50

EDWARDS LIFESCIENCES CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.    DESCRIPTION OF BUSINESS

        Edwards Lifesciences Corporation is a global provider of products and technologies that are designed to treat advanced cardiovascular disease. Edwards Lifesciences' sales are categorized in five main product areas: cardiac surgery, critical care, vascular, perfusion and other distributed products. Edwards Lifesciences focuses on four main cardiovascular disease states: heart valve disease, coronary artery disease, peripheral vascular disease and congestive heart failure.

        Edwards Lifesciences Corporation was incorporated under the original name of CVG Controlled Inc. in Delaware on September 10, 1999, as a subsidiary of Baxter International Inc. ("Baxter"). On March 31, 2000 (the "Distribution Date"), Baxter transferred its cardiovascular business (the "Edwards Lifesciences Business") to Edwards Lifesciences in connection with a tax-free spin-off by Baxter of the Edwards Lifesciences Business. The spin-off was effected on the Distribution Date through a distribution of 58.1 million shares of Edwards Lifesciences' common stock (the "Distribution") to Baxter stockholders of record on March 29, 2000, resulting in Edwards Lifesciences operating as an independent entity commencing April 1, 2000 with publicly traded common stock. Unless the context indicates otherwise, references to the "Company" and "Edwards Lifesciences" refer to Edwards Lifesciences Corporation and its subsidiaries.

Joint Venture in Japan

        Subsequent to the Distribution, the cardiovascular business in Japan was being operated pursuant to a joint venture under which a Japanese subsidiary of Baxter retained ownership of the Japanese business assets, but a subsidiary of Edwards Lifesciences held a 90% profit interest. From April 1, 2000 to September 30, 2002, Edwards Lifesciences (a) recognized its shipments into the joint venture as sales at distributor price at the time the joint venture sold to the end customer, and (b) utilized the equity method of accounting to record its 90% profit interest in the operations of the joint venture in Other Operating Income. Commencing October 1, 2002, the Company acquired from Baxter the cardiovascular business in Japan and began reporting Japan's results on a fully consolidated basis. See Note 3 for more information.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

        The consolidated financial statements have been prepared using Baxter's historical bases in the assets and liabilities and the historical results of operations of the Edwards Lifesciences Business prior to the Distribution, operated primarily as a division of Baxter, and continuing as a separate legal entity, Edwards Lifesciences Corporation and its subsidiaries, subsequent to the Distribution. All material intercompany balances have been eliminated. Certain reclassifications of previously reported amounts have been made to conform to classifications used in the current year.

Use of estimates

        The consolidated financial statements of Edwards Lifesciences have been prepared in accordance with Generally Accepted Accounting Principles in the United States ("GAAP") and have been applied consistently in all material respects. 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. Estimates are used in accounting for, among other items, sales returns and reserves, rebate reserves, allowances for doubtful accounts,

51

excess and obsolete inventory, investments in unconsolidated affiliates, workers compensation, employee benefits, income taxes, asset impairment, anticipated transactions to be hedged, litigation reserves and contingencies.

Fiscal year of international operations

        Prior to 2001, certain operations outside the United States had been included in the consolidated financial statements on the basis of fiscal years ending November 30 in order to facilitate timely consolidation. This one-month lag was eliminated as of the beginning of 2001 for these international operations as it was no longer required to achieve a timely consolidation. The December 2000 net loss from operations of $3.8 million for these entities was recorded as an adjustment to retained earnings on January 1, 2001.

Foreign currency translation

        The Company follows the principles of Statement of Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation." Accordingly, when the local currency of its foreign entities is the functional currency, all assets and liabilities are translated into United States dollars at the rate of exchange in effect at the balance sheet date. Income and expense items are translated at the weighted average exchange rate prevailing during the period. The effects of foreign currency translation adjustments for these entities are deferred and included as a component of stockholders' equity. The effects of foreign currency transactions denominated in a currency other than its foreign entities' functional currency are included in Other (Income) Expense, net.

Revenue recognition

        The Company recognizes revenue for sales when all of the following have occurred: an agreement of sale exists, product delivery and acceptance has occurred or services have been rendered, and collection is reasonably assured. In the case of certain products where the Company maintains consigned inventory at customer locations, revenue is recognized at the time the Company is notified that the customer has used the inventory. The Company enters into certain arrangements in which it commits to provide multiple elements to its customers. Revenue related to an individual element is deferred unless delivery of the element represents a separate earnings process. Total revenue for these arrangements is allocated among the elements based on the fair value of the individual elements, with the relative fair values determined based on objective evidence (generally based on sales of the individual element to other third parties).

        The Company adopted Emerging Issues Task Force 01-9 as of January 1, 2002 and presents the cost of certain vendor considerations as reductions of revenue. Adoption of this standard did not have a material impact on the Company's consolidated financial statements. When the Company recognizes revenue from the sale of its products, an estimate of various sales returns and allowances is recorded which reduces product sales and accounts receivable. These adjustments include estimates for charge backs, rebates, returns, and other sales allowances. These provisions are estimated based upon historical payment experience, historical relationship to revenues, estimated customer inventory levels and current contract sales terms with wholesale and indirect customers. If the historical data and inventory estimates used to calculate these provisions does not properly reflect future activity, the Company's financial position, results of operations and cash flows could be impacted. The Company's

52

estimates are subject to inherent limitations of estimates that rely on third-party data, as certain third-party information was itself in the form of estimates, and reflect other limitations.

Cash equivalents

        The Company considers highly liquid investments with maturities of three months or less from the date of purchase to be cash equivalents. These investments are valued at cost, which approximates fair value.

Accounts receivable securitization

        The Company accounts for the securitization of accounts receivable in accordance with SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." When the Company sells accounts receivable in securitizations, a subordinated residual interest in the securitized portfolio is retained by the Company and recorded in Other Current Assets. Gain or loss on sale of the accounts receivable depends in part on the previous carrying amount of the financial assets involved in the transfer, allocated between the assets sold and the residual interests based on their relative fair value at the date of transfer. Because quoted market prices are generally not available to determine the Company's fair value of the residual interest, the Company estimates the fair value of the residual interest by estimating future expected credit losses to determine the future expected cash flows, which generally approximate fair value given the securitized portfolio's short-term weighted average life. At the time the receivables are sold, the balances are removed from the Consolidated Balance Sheets. Costs associated with the sale of receivables, primarily related to the discount and loss on sale, are included in Other (Income) Expense, net.

Inventories

        Inventories are stated at the lower of cost (first-in, first-out method) or market value. Market value for raw materials is based on replacement costs, and for other inventory classifications is based on net realizable value.

	December 31,
	2003		2002
	(in millions)
Raw materials	$	20.4	$	17.4
Work in process		16.7		14.7
Finished products		83.4		79.7
	$	120.5	$	111.8

        Inventory reserves result from inventory, which is obsolete, is nearing its expiration date (generally triggered at six months prior to expiration), or is damaged or slow moving (defined as quantities in excess of a two year supply). Reserves for excess and obsolete inventory were approximately $8.5 million and $9.6 million at December 31, 2003 and 2002, respectively. During the years ended December 31, 2003, 2002 and 2001, the Company allocated $9.8 million, $9.8 million and $8.4 million, respectively, of general and administrative costs to inventory. General and administrative costs included in both the December 31, 2003 and 2002 inventory balances were $3.5 and $2.8 million, respectively.

53

Property, plant and equipment

        Property, plant and equipment are recorded at cost. Depreciation and amortization are principally calculated for financial reporting purposes on the straight-line method over the estimated useful lives of the related assets, which range from 20 to 40 years for buildings and improvements and from 3 to 11 years for machinery and equipment. Leasehold improvements are amortized over the life of the related facility leases or the asset, whichever is shorter. Straight-line and accelerated methods of depreciation are used for income tax purposes.

	December 31,
	2003			2002
	(in millions)
Land	$	30.1		$	32.6
Buildings and leasehold improvements		67.4			70.0
Machinery and equipment		204.6			192.8
Equipment with customers		104.8			101.5
Construction in progress		17.2			8.5
		424.1			405.4
Accumulated depreciation and amortization		(214.2	)		(196.0	)
	$	209.9		$	209.4

        Depreciation expense was $34.6 million, $29.6 million and $27.0 million for the years ended December 31, 2003, 2002 and 2001, respectively. Repairs and maintenance expense was $12.1million, $9.1 million and $11.1 million for the years ended December 31, 2003, 2002 and 2001, respectively.

Impairment of Long-Lived Assets

        On January 1, 2002, the Company adopted 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.

        Additionally, management reviews the carrying amounts of goodwill and other intangibles whenever events and circumstances indicate that the carrying amounts of an asset may not be recoverable. Impairment indicators include, among other conditions, cash flow deficits, historic or anticipated declines in revenue or operating profit and adverse legal or regulatory developments. If it is determined that such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair market value. Estimated fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. For the purposes of identifying and measuring impairment, long-lived assets are grouped with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.

54

Patent Costs

        The Company expenses legal costs incurred for patent preparation and applications. The Company capitalizes legal costs related to the defense and enforcement of issued patents for which success is deemed probable. The related costs are amortized over the remaining useful lives of the patents using the straight-line method. Such deferred costs are periodically reviewed for impairment and recoverability. To the extent the Company is successful in its defense and enforcement of its patents and receives compensation for past infringement, costs capitalized in connection with the specific defense or enforcement are expensed as an offset against any gain received.

Investments in unconsolidated affiliates

        The Company has made investments in the equity instruments of other companies. These investments in unconsolidated affiliates are designated as available-for-sale in accordance with the provisions of SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." These investments are carried at fair market value, with unrealized gains and losses reported in stockholders' equity as Accumulated Other Comprehensive Income. Gains or losses on investments sold are based on the specific identification method. The fair values of certain investments are based on quoted market prices. For other investments, various methods are used to estimate fair value, including external valuations and discounted cash flows. When the fair value of a certain investment declines below cost, management uses the following criteria to determine if such a decline should be considered other than temporary and result in a realized loss:

•

the duration and extent to which the market value has been less than cost;



•

the financial condition and near term prospects of the investee;



•

the reasons for the decline in market value;



•

the investee's performance against product development milestones; and



•

the Company's ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

        As of December 31, 2003, the Company had a $7.3 million unrealized loss related to a $12.6 million investment in a publicly traded company. Although the trading value of the Company's investment has been less than the Company's original cost for greater than one year, the Company believes that this unrealized loss is temporary in nature due to the investee's successful performance against its product development milestones and the historical high volatility of its stock price. Additionally, the Company has the ability and intent to hold the investment for a period of time sufficient to allow for any anticipated recovery in market value.

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Income taxes

        The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The Company evaluates annually the realizability of its deferred tax assets by assessing its valuation allowance and by adjusting the amount of such allowance, if necessary. The factors used to assess the likelihood of realization are the Company's forecast of future taxable income and available tax planning strategies that could be implemented to realize the net deferred tax assets. Failure to achieve forecasted taxable income in the applicable taxing jurisdictions could affect the ultimate realization of deferred tax assets and could result in an increase in the Company's effective tax rate on future earnings.

Research and development costs

        Research and development costs are charged to expense when incurred.

Earnings per share

        Earnings per share are calculated in accordance with SFAS No. 128, "Earnings per Share," which requires the Company to report both basic earnings per share, based on the weighted-average number of common shares outstanding, and diluted earnings per share, based on the weighted-average number of common shares outstanding adjusted to include the potentially dilutive effect of outstanding stock options.

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

	Years Ended December 31,
	2003	2002	2001
	(in millions)
Basic shares outstanding	59.1	59.0	58.9
Dilutive effect of employee stock options	2.0	2.3	—
Diluted shares outstanding	61.1	61.3	58.9

        Diluted earnings per share excludes 3.2 million, 2.1 million and 0.3 million shares related to options for the years ended December 31, 2003, 2002 and 2001, respectively. These options were excluded because the exercise price per share was greater than the average market price, resulting in an anti-dilutive effect on diluted earnings per share. The effect of approximately 2.7 million common shares relating to the Company's $150.0 million convertible debentures due 2033 has been excluded from the computation of diluted earnings per share for the year ended December 31, 2003 because none of the conditions that would permit the debentures to be converted to the common shares had been satisfied.

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Employee Stock Option and Stock Purchase Plans

        The Company applies the provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting for its fixed stock option and employee stock purchase plans. In accordance with this intrinsic value method, no compensation expense is recognized for these plans. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation," (in millions, except per share amounts):

		Year Ended December 31,
		2003			2002			2001
Net income (loss), as reported		$	79.0		$	55.7		$	(11.4	)
	Deduct: total stock-based employee compensation expense determined under fair value based method for all awards, net of tax		(16.0	)		(15.3	)		(10.8	)
Pro forma net income (loss)		$	63.0		$	40.4		$	(22.2	)
Earnings per basic share:
	Reported net income (loss)	$	1.34		$	0.94		$	(0.19	)
	Pro forma net income (loss)		1.07			0.68			(0.38	)
Earnings per diluted share:
	Reported net income (loss)		1.29			0.91			(0.19	)
	Pro forma net income (loss)		1.03			0.66			(0.38	)

        The per share weighted-average fair value for options granted during 2003, 2002 and 2001 was $10.93, $11.64, and $7.00, respectively. The fair value of each option was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions:

	2003		2002		2001
Average risk-free interest rate	2.5	%	4.4	%	5.8	%
Expected dividend yield	None		None		None
Expected volatility	42	%	44	%	45	%
Expected life (years)	4		5		5

        The pro forma expense for employee stock purchase subscriptions was calculated with the following weighted-average assumptions for grants during the following periods:

	2003		2002		2001
Average risk-free interest rate	1.3	%	2.1	%	4.1	%
Expected dividend yield	None		None		None
Expected volatility	42	%	45	%	44	%
Expected life (years)	1		1		1

        The expected volatility assumptions for the stock option and stock purchase plans used in the Black-Scholes option pricing model is estimated on the date of each grant.

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Derivatives

        Edwards Lifesciences maintains an overall risk management strategy that incorporates the use of a variety of interest rate and currency derivative financial instruments to mitigate its exposure to significant unplanned fluctuations in earnings caused by volatility in interest rate and currency exchange rates. Derivative instruments that are used as part of the Company's interest and foreign exchange rate management strategy include interest rate swaps, option-based products and forward exchange contracts. These instruments are designated as cash flow hedges. Edwards Lifesciences does not use any of these instruments for trading or speculative purposes.

        The Company uses interest rate swaps to convert floating-rate debt to fixed-rate debt. The Company's interest rate swap agreements involve agreements to pay a fixed rate and receive a floating rate, at specified intervals, calculated on an agreed-upon notional amount. The debt and amounts that the Company hedges are determined based on prevailing market conditions and the current shape of the yield curve. Interest rate swap agreements are executed as an integral part of specific debt transactions.

        The Company utilizes forward exchange contracts and option contracts to hedge a portion of its exposure to forecasted intercompany foreign currency transactions. These contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates. These contracts are entered into to reduce the risk that the Company's earnings and cash flows resulting from certain forecasted intercompany transactions will be adversely affected by changes in foreign currency exchange rates.

        Derivative instruments used by Edwards Lifesciences involve, to varying degrees, elements of credit risk, in the event a counterparty should default, and market risk, as the instruments are subject to rate and price fluctuations. Credit risk is managed through the use of credit standard guidelines, counterparty diversification, monitoring of counterparty financial condition and International Swap Dealers Association master netting agreements in place with all derivative counterparties. All derivative financial instruments are with commercial banks and investment banking firms assigned investment grade ratings of "AA" or better with national rating agencies.

        All derivatives are recognized on the balance sheet at their fair value. On the date that the Company enters into a derivative contract, it designates the derivative as either (a) a hedge of a forecasted transaction or the variability of cash flows that are to be received or paid in connection with a recognized asset or liability (a "cash flow" hedge), or (b) a hedge of an exposure to changes in the fair value of an asset, liability, or an unrecognized firm commitment (a "fair value" hedge). Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow hedge to the extent that the hedge is effective, are recorded in Accumulated Other Comprehensive Income until earnings are affected by the variability of cash flows of the hedged transaction (e.g., until periodic settlements of a variable asset or liability are recorded in earnings). Any hedge ineffectiveness (which represents the amount by which the changes in the fair value of the derivative exceed the variability in the cash flows of the forecasted transaction) is recorded in current-period earnings. Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a foreign-currency hedge, are recorded in either current-period earnings or Accumulated Other Comprehensive Income, depending on whether the hedging relationship satisfies the criteria for a fair-value or cash flow hedge.

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        The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash flow hedges or specific firm commitments or forecasted transactions. The Company also formally assesses (both at the hedge's inception and on an ongoing basis) whether the derivatives that are used in hedging transactions have been highly effective in offsetting changes in the cash flows of hedged items and whether those derivatives may be expected to remain highly effective in future periods. All components of each derivative's gain or loss are included in the assessment of hedge effectiveness.

        When it is determined that a derivative is not, or has ceased to be, highly effective as a hedge, the Company discontinues hedge accounting prospectively. A derivative ceases to be highly effective when (a) the Company determines that the derivative is no longer effective in offsetting changes in the cash flows of a hedged item such as firm commitments or forecasted transactions, (b) it is no longer probable that the forecasted transaction will occur, (c) the derivative expires or is sold, terminated, or exercised, or (d) management determines that designating the derivative as a hedging instrument is no longer appropriate.

        When the Company discontinues hedge accounting because it is no longer probable that the forecasted transaction will occur in the originally expected period, the gain or loss on the derivative remains in Accumulated Other Comprehensive Income and is reclassified into earnings when the forecasted transaction affects earnings. However, if it is probable that a forecasted transaction will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter, the gains and losses that were accumulated in Accumulated Other Comprehensive Income will be recognized immediately in earnings. In a situation in which hedge accounting is discontinued and the derivative remains outstanding, the Company will carry the derivative at its fair value on the balance sheet, recognizing changes in the fair value in current-period earnings.

Comprehensive income

        Comprehensive income encompasses all changes in equity other than those arising from transactions with stockholders, and consists of net income, currency translation adjustments, pension adjustments, unrealized net gains and losses on cash flow hedges and investments in unconsolidated affiliates.

Effects of Recent Accounting Pronouncements

        Effective January 1, 2001, Edwards Lifesciences adopted the provisions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended. SFAS No. 133 requires companies to record derivatives on the balance sheet as assets and liabilities, measured at fair value. Accounting for the gain or loss due to changes in fair value of the derivative instrument depends on whether the derivative qualifies as a hedge. If the derivative instrument does not qualify as a hedge, the gains or losses are reported in earnings when they occur. If the derivative instrument qualifies as a hedge, the accounting varies based upon the type of risk being hedged. Adopting the provisions of SFAS No. 133 on January 1, 2001 resulted in a one-time cumulative after-tax increase in net loss of

59

$1.5 million. In addition, the Company recorded the following one-time cumulative after-tax adjustments in Accumulated Other Comprehensive Income:

		Unrealized Gain (Loss)
		(in millions)
Related to previously designated cash flow hedging relationships:
	Fair value of hedging instruments	$	(6.9	)
	Previously deferred hedging gains and losses		1.5
Total cumulative effect of adoption on Other Comprehensive Income, net of tax		$	(5.4	)

        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 was 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.

        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 8 for more information.

        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, is effective for fiscal years beginning after June 15, 2002. Adoption of this standard did not have a material impact on the Company's 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. Adoption of this standard did not have a material impact on the Company's 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. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." This standard amends SFAS No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value

60

based method of accounting for stock-based employee compensation. In addition, this Standard amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This standard is effective for financial statements for fiscal years ending after December 15, 2002. The Company has adopted this standard and has made the necessary changes to its financial statement disclosures.

        In January 2003, the FASB issued and in December 2003, revised, FASB Interpretation No. 46 "Consolidation of Variable Interest Entities—an interpretation of ARB No. 51." This interpretation addresses consolidation by business enterprises of variable interest entities which have certain characteristics. The effective date of this interpretation varies based on certain criteria. The Company is required to apply all of this interpretation no later than the end of the first reporting period that ends after March 15, 2004. The Company is evaluating one entity to determine if it qualifies as a variable interest entity and if the entity will need to be consolidated. This entity had $10.1 million of assets as of September 30, 2003 and had $0.4 million of net income for the nine months ended September 30, 2003.

        In April 2003, the FASB issued, SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". This standard is effective for contracts entered into or modified after June 30, 2003, with exception for specified transactions. Adoption of this standard did not have a material impact on the Company's consolidated financial statements.

        In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 establishes how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. Adoption of this standard did not impact the Company's consolidated financial statements. On October 1, 2002, the Company acquired from Baxter for $19.0 million, net, the cardiovascular business in Japan. The purchase price excluded approximately $30 million of securitized accounts receivable. In the three months ended September 30, 2002, the Company recorded a $3.3 million charge for legal, administrative and regulatory expenses related to the acquisition reflected in special charges on the Statement of Operations for the year ended December 31, 2002. Commencing October 1, 2002, the Company began reporting the results of the Japan business on a fully consolidated basis. The acquisition did not materially impact the Company's net income as the terms of the joint venture agreement enabled Edwards Lifesciences to record substantially all of the net profit generated by the Japan business (see Note 1).

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3.    ACQUISITION OF JOINT VENTURE IN JAPAN

        The acquisition of the cardiovascular business in Japan was accounted for using the predecessor basis of accounting, whereby acquired assets and liabilities are recorded at their historical balances. The impact to the Company's balance sheet on October 1, 2002 from the acquisition was as follows (in millions):

			Net Assets Acquired			Other			Net Impact
Current assets
	Accounts and other receivables, net		$	18.8		$	(14.8	)(b)	$	4.0
	Inventories, net			36.0			—			36.0
	Prepaid expenses and other current assets			1.6			—			1.6
		Total current assets		56.4			(14.8	)		41.6
Property, plant and equipment, net				15.3			—			15.3
Deferred income taxes				42.7	(a)		—			42.7
Other assets				3.1			—			3.1
			$	117.5		$	(14.8	)	$	102.7
Accounts payable and accrued liabilities			$	29.6		$	(14.8	)(b)	$	14.8
Long-term debt				—			19.0	(c)		19.0
Other liabilities				5.9			—			5.9
Stockholders' equity
	Additional contributed capital			129.8			(19.0	)		110.8
	Accumulated other comprehensive income			(47.8	)		—			(47.8	)
		Total stockholders' equity		82.0			(19.0	)		63.0
			$	117.5		$	(14.8	)	$	102.7

Notes

(a)

Deferred tax asset relates to a tax basis step-up in connection with the acquisition.

(b)

To reflect the elimination of receivables and payables between Edwards Lifesciences and the joint venture in Japan which are considered intercompany balances after the acquisition.

(c)

To reflect the incurrence of $19.0 million of long-term debt to effect the transaction.

        The following unaudited pro forma consolidated statement of operations for the year ended December 31, 2002 presents the results of Edwards Lifesciences assuming that the acquisition of the

62

cardiovascular business in Japan had been completed as of January 1, 2002 (in millions, except per share information):

		Pro Forma Adjustments
		Historical			Japan Operating Results (a)			Other (b)			Pro Forma
Net sales		$	704.0		$	77.2		$	—		$	781.2
	Cost of goods sold		299.1			31.0			—			330.1
Gross profit			404.9			46.2			—			451.1
	Selling, general and administrative expenses		227.9			34.0			—			261.9
	Research and development expenses		65.2			2.5			—			67.7
	Disposition of assets and other charges, net		67.4			—			—			67.4
	Non-recurring spin-off expenses		3.3			—			—			3.3
	Equity earnings in Japan operations		(11.0	)		11.0			—			—
	Interest expense, net		11.5			—			0.8			12.3
	Other income, net		(15.4	)		(1.5	)		—			(16.9	)
Income (loss) before provision for income taxes			56.0			0.2			(0.8	)		55.4
	Provision (benefit) for income taxes		0.3			0.1			(0.2	)		0.2
Net income (loss)		$	55.7		$	0.1		$	(0.6	)	$	55.2
Share information:
	Earnings per basic share	$	0.94								$	0.94
	Earnings per diluted share		0.91									0.90

Notes

(a)

To reflect Edwards Lifesciences' Japanese business on a consolidated basis for the full year ended December 31, 2002.

(b)

To reflect estimated interest expense that would have been incurred by the Company based on incurrence of $19.0 million of debt at an effective interest rate of 5%.

        On a pro forma basis, assuming that the acquisition of the cardiovascular business in Japan had been completed as of January 1, 2001, the following unaudited amounts would have been recorded for the year ended December 31, 2001 (in millions, except per share information):

Net sales		$	801.2
Loss before cumulative effect of change in accounting principle			10.0
Net loss			11.5
Basic and diluted loss per share:
	Loss before cumulative effect of change in accounting principle		0.17
	Cumulative effect of change in accounting		0.02
	Net loss		0.20

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4.    LOSS ON SALE OF STOCK

        Effective June 30, 2001, the Company sold the stock of Edwards Lifesciences Cardiovascular Resources, Inc. ("ELCR") to Fresenius Medical Care AG for cash proceeds of $45.0 million (the "ELCR Sale"), resulting in a loss of $68.2 million (including the write-off of $83.0 million of goodwill). 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 $68.2 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 amounts are in millions, except per share amounts:

		Year Ended December 31, 2001
Net sales		$	631.1
Net income			45.9
Net income per share:
	Basic		0.78
	Diluted		0.75

5.    ASSET IMPAIRMENTS

        In September 2002, the Company recorded a $67.4 million charge related to the impairment of its investment in preferred stock of World Heart Corporation ("WorldHeart"). The investment was written down to $6.2 million, which represented the value of the Company's preferred stock investment had it been converted into common stock at October 15, 2002 (the closing date of September's books). The decision to record the charge was based primarily on WorldHeart's September 2002 decision to refocus its product development efforts by adopting a new design concept for a next generation product that resulted in a significant delay (approximately two years) in its product development timeline (with a revised commercial launch date of 2007) and impaired WorldHeart's competitive position. Accordingly, the Company concluded that sufficient risk existed that WorldHeart may be unable to fully liquidate the Company's investment in WorldHeart's preferred stock. The Company believed that the best objective indicator of the then fair value of its investment in WorldHeart's preferred stock was the market price of WorldHeart's common stock based upon the Company's expectation that the value of its preferred stock investment would be realized through the common stock, as opposed to redemption of the preferred stock.

        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 the quarter ended June 30, 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

64

impairment charge to adjust the carrying values to estimated fair values. As a result of this evaluation, Edwards Lifesciences recorded a $14.8 million charge related to the impairment of intangible assets ($8.3 million), the impairment of an investment ($5.5 million) and the write-down of non-productive assets ($1.0 million).

6.    SPECIAL CHARGES

        During the years ended December 31, 2003 and 2002, Edwards Lifesciences recorded special charges comprised of the following:

		2003		2002
Purchased in-process research and development expenses		$	13.6	$	—
Severance charge			13.0		—
Resolution of Baxter arbitration			5.3		—
Loss on sale of business			3.3		—
Pension curtailment			1.9		—
Spin-off expenses			—		3.3
	Total special charges	$	37.1	$	3.3

Purchased in-process Research and Development Expenses

        On February 18, 2003, the Company acquired the endovascular mitral valve repair program of Jomed N.V., a European-based provider of products for minimally invasive vascular intervention, for $20.0 million in cash. The acquisition included all technology and intellectual property associated with the program. At the acquisition date, the program, which was less than 50% complete, was involved in testing proprietary prototypes prior to initiating required animal studies and human clinicals. Additional design improvements, bench testing, animal studies and human clinical studies must be successfully completed prior to selling the product in Europe (expected in 2005) and in the United States (expected in 2006). The risks and uncertainties associated with completing development within a reasonable period of time include those related to the design, development and manufacturability of the product, the success of animal and clinical studies and the timing of European and United States regulatory approvals. The fair market value of the assets acquired consisted primarily of patents that are being amortized over their estimated economic life of 17 years. Approximately $11.8 million of the purchase price has been charged to in-process research and development. The value of the in-process research and development was calculated using cash flow projections discounted for the risk inherent in such projects. The discount rate used was 30%. The valuation assumed approximately $20 million of additional research and development expenditures would be incurred prior to the date of product introduction. In the valuation, material net cash inflows were forecasted to commence in 2008.

        On December 5, 2003, the Company acquired the stock of Whitland Research Limited ("Whitland") for $3.2 million in cash, although achievement of future milestones through 2006 could increase the total price to $5.6 million. Whitland was focused on the development of critical care monitoring technologies. The $3.2 million purchase price was allocated to acquired in-process research and development ($1.8 million) and patents ($1.4 million) based upon their estimated fair values. The patents will be amortized over their estimated useful life of 10 years.

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Severance Charge

        In July 2003, the Company recorded a charge of $13.0 million associated with a decision to streamline operations. The charge was primarily related to the severance costs associated with reducing the Company's worldwide workforce by 136 employees, primarily in the United States and Europe. As of December 31, 2003, $4.1 million of the charge remained unpaid.

Baxter Arbitration Settlement

        In January 2004, the Company concluded a dispute resolution proceeding with Baxter. Each company sought reimbursement from the other for a variety of claims arising from the Company's spin-off from Baxter in April 2000. The resolution resulted in a $5.3 million charge primarily related to the valuation of receivables at the date of spin-off, and a $5.4 million increase to Additional Contributed Capital related to the true-up of the beginning balance of equity.

Loss on Sale of Business

        Effective July 4, 2003, the Company sold its German perfusion services subsidiary to WKK GmbH, a German-based provider of hospital services, for a nominal amount. Sales generated by the German perfusion services subsidiary were approximately $3.5 million during the six months ended June 30, 2003 and $6.6 million for the year 2002. In accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," and Staff Accounting Bulletin No. 100, "Restructuring and Impairment Charges," the Company recorded a pre-tax impairment charge of $3.3 million in the second quarter of 2003 to reduce the carrying value of the subsidiary's assets to fair value based upon the proceeds from the sale.

Pension Curtailment

        On November 4, 2003, the Company suspended its defined benefit pension plan in Puerto Rico ("the Plan"). Effective December 31, 2003, employees do not earn additional defined benefits for future services. To mitigate the Puerto Rico employees' reduced benefits from the Plan's suspension, effective January 1, 2004, the Company increased its contributions to the Puerto Rico 1165(e) defined contribution plan. In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits," the Company recorded a curtailment loss of $1.9 million during the fourth quarter 2003. As of December 31, 2003, the Plan's accumulated benefit obligation exceeded the fair value of its assets by $2.4 million.

Spin-Off Expenses

        The Company recorded a $3.3 million charge for legal, administrative and regulatory expenses related to the October 2002 acquisition of the cardiovascular business in Japan (see "Joint Venture in Japan").

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7.    ACCOUNTS RECEIVABLE SECURITIZATION

        Edwards Lifesciences has two agreements (the "Japan Receivables Facility" and the "U.S. Receivables Facility," or the "Facilities") with financial institutions whereby it securitizes, on a continuous basis, an undivided interest in certain eligible trade account receivables. In December 2002, the Company entered into the Japan Receivables Facility whereby the Company's Japanese subsidiary (Edwards Lifesciences Japan Limited) sells eligible accounts receivable directly to a financial institution. Under the U.S. Receivables Facility, the Company sells eligible accounts receivable to a wholly-owned, special purpose, bankruptcy-remote subsidiary formed for the purpose of buying and selling these receivables, which then sells the participating interests in the receivables to a financial institution.

        The transactions under both Facilities are accounted for as sales of accounts receivable. The Company retained servicing responsibilities and subordinated residual interests in the accounts receivables. The Company receives annual servicing fees approximating one percent of the outstanding balance and rights to future cash flows arising after the investors in the securitization trust have received their contractual return. No servicing asset or liability has been recorded as the Company's compensation for servicing the assets approximates the cost of its servicing responsibilities. The investors and the securitization trust have no recourse to the Company's other assets for failure of debtors to pay when due. The Company's residual interests are subordinate to the investors' interests. The U.S. Receivables Facility is renewable for one-year periods at the Company's option and will expire on December 21, 2004. The Japan Receivables Facility will expire on December 3, 2005.

        Sales of receivables under these programs result in a reduction of accounts receivable on the Company's Consolidated Balance Sheets. Residual interests of $14.2 million and $9.2 million as of December 31, 2003 and 2002, respectively, are included in Other Current Assets. The interests are carried at their fair value, estimated as the net realizable value, which considers the relatively short liquidation period and includes an estimated provision for credit losses. Pursuant to the terms of the Facilities, the Company had sold $91.2 million and $76.5 million of trade accounts receivable as of December 31, 2003 and 2002, respectively, resulting in a reduction of accounts receivable on the Company's Consolidated Balance Sheets, and received funding of $76.9 million and $67.1 million, respectively. Costs associated with the sale of receivables, primarily related to the discount and loss on sale, were $0.8 million, $1.6 million and $1.4 million in 2003, 2002 and 2001, respectively, and are included in Other (Income) Expense, net.

8.    GOODWILL AND OTHER INTANGIBLE ASSETS

        On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets," whereby goodwill is no longer amortized, but instead is subject to a periodic impairment review, performed by the Company in the fourth quarter of each year. 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. The impairment analyses were completed in the fourth quarters of 2003 and 2002 and resulted in no impairments.

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        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 for the year ended December 31, 2001 (in millions, except per share information):

Reported net loss		$	(11.4	)
	Goodwill amortization, net of tax		17.7
Adjusted net income		$	6.3
Earnings per basic share:
	Reported net loss	$	(0.19	)
	Adjusted net income		0.11
Earnings per diluted share:
	Reported net loss		(0.19	)
	Adjusted net income		0.10

        In April 2003, the Company purchased the technology and intellectual property associated with Embol-X Inc.'s surgically placed, intra-aortic embolic management system. The total consideration for Embol-X Inc. was $13.6 million, comprised of $8.0 million cash, a deferred payment of $2.0 million cash payable upon the completion of the technology transfer (which was completed during August 2003), stock in an unconsolidated affiliated company valued at $3.0 million and $0.6 million of capitalized transaction costs. In accordance with the guidance provided in Emerging Issues Task Force 98-3, "Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business," the transaction was accounted for as a purchased business combination. The purchase price was allocated to the acquired assets at their estimated fair value as follows (in millions):

Developed technology	$	6.5
Goodwill		4.4
Patents		1.7
Trademarks and trade names		0.5
Machinery and equipment		0.2
Inventory		0.3
	$	13.6

        If prior to April 16, 2008, the Company's sales of medical devices from the transferred technology are at least $20.0 million in any consecutive 12-month period, the Company will pay an additional $5.0 million to Embol-X Inc. This contingent obligation has not been recorded in the Company's balance sheet as of December 31, 2003. Forecasted sales of medical devices from the transferred technology are expected to be less than $2.0 million for 2004.

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

December 31, 2003		Patents			Unpatented Technology			Other			Total
Cost		$	116.9		$	36.3		$	14.3		$	167.5
Accumulated amortization			(64.8	)		(18.0	)		(3.7	)		(86.5	)
	Net carrying value	$	52.1		$	18.3		$	10.6		$	81.0

December 31, 2002		Patents			Unpatented Technology			Other			Total
Cost		$	96.8		$	36.3		$	8.9		$	142.0
Accumulated amortization			(58.2	)		(15.5	)		(3.3	)		(77.0	)
	Net carrying value	$	38.6		$	20.8		$	5.6		$	65.0

        Amortization expense related to other intangible assets for the years ended December 31, 2003 and 2002 was $9.5 million and $9.5 million, respectively. Estimated amortization expense for each of the years ending December 31 is as follows (in millions):

2004	$	9.7
2005		9.9
2006		9.9
2007		9.9
2008		9.9

9.    ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	December 31,
	2003		2002
	(in millions)
Accounts payable	$	67.3	$	69.5
Employee compensation and withholdings		39.2		38.4
Property, payroll and other taxes		13.6		19.3
Derivative liability (Note 11)		12.4		16.3
Other accrued liabilities		34.7		33.8
	$	167.2	$	177.3

10.    LONG-TERM DEBT, CREDIT FACILITIES AND LEASE OBLIGATIONS

        As of December 31, 2003, the Company had two unsecured revolving credit agreements providing for up to an aggregate of $530.0 million in one- to six-month borrowings in multiple currencies. Borrowings currently bear interest at the London interbank offering rate (LIBOR) plus 0.75%, which includes a facility fee. One of the credit agreements provides for long-term borrowings up to an aggregate of $430.0 million and expires on March 30, 2005 (the "Five Year Credit Facility"). The other credit agreement provides for borrowings up to an aggregate of $100.0 million through March 25, 2004

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(the "364 Day Facility"). As the 364 Day Facility has not been used recently, the Company does not plan to renew this credit agreement when it expires. As of December 31, 2003, borrowings of $105.8 million were outstanding under the Five Year Credit Facility and no borrowings were outstanding under the 364 Day Facility. Edwards Lifesciences pays a facility fee, regardless of available or outstanding borrowings, currently at an annual rate of 0.15% for the $430 million credit agreement, and 0.125% for the $100 million credit agreement. All amounts outstanding under the Five Year Credit Facility have been classified as long-term obligations, as these borrowings will continue to be refinanced pursuant to that credit agreement. In March 2004, the Company will reclassify any balance outstanding on the Five Year Credit Facility to short-term as the agreement will expire within one year. The credit facilities contain various financial and other covenants, all of which the Company was in compliance with at December 31, 2003.

        In May 2003, the Company issued $150.0 million of convertible senior debentures, issued at par, bearing an interest rate of 3.875% per annum due May 15, 2033 (the "Notes"). Interest is payable semi-annually in May and November. Issuance costs of approximately $3.6 million are being amortized to interest expense over 5 years. The Notes are convertible into 18.29 shares of the Company's common stock for each $1,000 principal amount of Notes (conversion price of $54.66 per share), subject to adjustment. The Notes may be converted, at the option of the holders, on or prior to the final maturity date under any of the following circumstances:

•

during any fiscal quarter, if the closing sale price per share of the Company's common stock exceeds 120% of the conversion price;



•

if the Notes have been called for redemption; or



•

upon the occurrence of specified corporate events.

        Holders of the Notes have the right to require the Company to purchase all or a portion of their Notes at a price equal to 100% of the principal amount of the Notes plus any accrued and unpaid interest on May 15, 2008, 2013, and 2018. The Company will pay cash for all Notes so purchased on May 15, 2008. For any Notes purchased by the Company on May 15, 2013 or 2018, the Company may, at its option, choose to pay the purchase price in cash, in shares of the Company's common stock, or any combination thereof. The Company must pay all accrued and unpaid interest in cash.

        The Company may redeem for cash all or part of the Notes at any time on or after May 15, 2008, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus any accrued and unpaid interest.

        Beginning with the six-month interest period commencing May 15, 2008, holders of the Notes will receive contingent interest at a rate of 0.25% if the trading price of the Notes equals or exceeds 120% of the principal amounts of the Notes. This contingent interest payment feature represents an embedded derivative. Based on the immaterial value associated with this feature, no value has been assigned to the derivative at issuance or at December 31, 2003.

        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. 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 December 31, 2003, Edwards Lifesciences had in place four interest rate swaps with a total

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notional amount of $155.8 million to swap floating rate United States dollar and Yen denominated debt obtained under the Company's revolving credit facilities for fixed rates. The original maturities of the interest rate swap agreements are between three and five years.

        The weighted average interest rate under the Credit Facilities was 5.6% at December 31, 2003, including the effect of interest rate swap agreements. The rates have been calculated using rates in effect at December 31, 2003.

        Future minimum lease payments (including interest) under noncancelable operating leases and aggregate debt maturities at December 31, 2003 were as follows:

	Operating Leases		Aggregate Debt Maturities
	(in millions)
2004	$	11.1	$	—
2005		8.2		105.8
2006		6.4		—
2007		5.1		—
2008		3.7		—
Thereafter		2.1		150.0
Total obligations and commitments	$	36.6	$	255.8

        Included in debt at December 31, 2003 and 2002 were unsecured notes denominated in various foreign currencies as follows (in millions):

	December 31,
	2003	2002
Japanese Yen	6,000.0	13,700.0
Euro	—	15.0
Swiss Franc	—	5.0

        Certain facilities and equipment are leased under operating leases expiring at various dates. Most of the operating leases contain renewal options. Total expense for all operating leases was $12.3 million, $6.8 million, and $6.1 million for the years 2003, 2002 and 2001, respectively.

11.    FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

Fair values of financial instruments

        The consolidated financial statements include financial instruments whereby the fair market value of such instruments may differ from amounts reflected on a historical basis. Financial instruments of the Company consist of cash deposits, accounts and other receivables, investments in unconsolidated affiliates, accounts payable, certain accrued liabilities and debt. The fair values of certain investments in unconsolidated affiliates are estimated based on quoted market prices. For other investments, various methods are used to estimate fair value, including external valuations and discounted cash flows. The carrying amount of the Company's long-term debt approximates fair market value based on prevailing

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market rates. The Company's other financial instruments generally approximate their fair values based on the short-term nature of these instruments.

Derivative financial instruments

        The Company utilizes a variety of derivative financial instruments to manage its currency exchange rate and interest rate risk as summarized below. The Company does not enter into these arrangements for trading or speculation purposes.

	December 31,
	2003					2002
	Notional Amount		Fair Value			Notional Amount		Fair Value
	(in millions)
Interest rate swap agreements	$	155.8	$	(6.9	)	$	199.4	$	(11.0	)
Option-based products		189.1		(3.0	)		162.7		(2.7	)
Forward currency agreements		222.7		(2.5	)		226.1		(2.6	)

        The fair value of financial instruments was estimated by discounting expected cash flows using quoted market interest rates and foreign exchange rates as of December 31, 2003 and 2002. Notional amounts are stated in United States dollar equivalents at spot exchange rates at the respective dates. Considerable judgment was employed in interpreting market data to develop estimates of fair value; accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions or valuation methodologies could have a material effect on the estimated fair value amounts.

        At December 31, 2003, the fair value of option-based products, forward currency and interest rate swap agreements is recorded in Accrued Liabilities. During the year ended December 31, 2003 and 2002, the Company reclassified from Accumulated Other Comprehensive Income a net loss of $9.3 million and a net gain of $5.9 million, respectively, to Cost of Goods Sold, and a net loss of $5.7 million and $5.0 million, respectively, to Interest Expense, Net. The Company expects that during the next 12 months it will reclassify to earnings a $6.2 million loss currently recorded in Accumulated Other Comprehensive Income. For the year ended December 31, 2003 and 2002, the Company expensed $1.1 million and $1.3 million, respectively, related to the time value of option-based products.

12.    COMMON STOCK

        The Edwards Lifesciences Corporation Long-Term Stock Incentive Compensation Program (the "Program") provides for the grant of incentive and non-qualified stock options, restricted stock and other stock-based incentive awards for eligible employees and contractors of the Company. Under the Program, these grants are generally awarded at a price equal to the fair market value at the date of grant based upon the closing price on the date immediately preceding the grant date. Options to purchase shares of the Company's common stock granted under the Program generally vest over predetermined periods and expire 7 years after the date of grant. An aggregate of 15.5 million shares of the Company's common stock has been reserved for issuance under the Program.

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        On April 3, 2000, the Company granted options to purchase shares of Edwards Lifesciences' common stock under the Program. The grants include two types of stock options: Founders Options and Conversion Options. The Founders Options were awarded to all salaried employees of the Company and permit the purchase of approximately 5.7 million shares at an exercise price of $13.88, the fair market value at the date of grant. The Founders Options vested 30% on April 3, 2002, and the balance vested on April 3, 2003. The Founders Options included approximately 634,000 options granted to non-employees of the Company in Japan (employees of Baxter dedicated to the joint venture as described in Notes 1 and 3). In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the $4.0 million value of these options was amortized over the three-year vesting period on a straight-line basis. The Conversion Options permitted the purchase of approximately 2.2 million shares at an exercise price based upon an equitable conversion of the exercise price under the Baxter stock option plan, with reference to the when-issued price of the Company's stock and the closing price of Baxter's common stock on March 31, 2000. The Conversion Options retained the vesting periods under the Baxter stock option plan, resulting in various vesting periods. All of the Conversion Options were vested as of the end of September 2002.

        The Company also maintains the Nonemployee Directors and Consultants Stock Incentive Program (the "Nonemployee Program"). Under the Nonemployee Program, each non-employee director annually receives 10,000 stock options. Additionally, each non-employee director may elect to receive all or a portion of the cash retainer to which the director is otherwise entitled through the issuance of stock options. As of December 31, 2003, 208,293 options were issued under the Nonemployee Program.

        Stock option activity under the Program and the Nonemployee Program was as follows (options in thousands):

	2003				2002				2001
	Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price		Number of Options		Weighted Average Exercise Price
Outstanding, beginning of year	9,794		$	17.97	7,716		$	14.79	7,686		$	13.59
Options granted	3,884			30.35	2,784			26.03	1,123			22.01
Options exercised	(2,085	)		14.73	(552	)		14.17	(481	)		12.14
Options cancelled	(601	)		24.89	(154	)		18.17	(612	)		14.33
Outstanding, end of year	10,992			22.65	9,794			17.97	7,716			14.79
Exercisable, end of year	5,346			14.52	3,251			14.52	1,857			13.46

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        The following table summarizes stock options outstanding at December 31, 2003 (options in thousands):

	Outstanding
					Exercisable
		Average Remaining Contractual Life (Years)
Range of Exercise Prices	Number of Options		Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$13.88 (Founders Options)	2,750	6.25	$	13.88	2,750	$	13.88
$10.20-$15.71 (Conversion options)	1,089	4.40		12.18	1,089		12.18
$15.44-$32.36 (Other options)	7,153	8.75		27.61	1,507		21.75
	10,992	7.70		22.65	5,346		14.52

Restricted Stock

        A one-time grant of 5,000 shares of restricted stock was made to each of the non-employee directors pursuant to the Non-employee Program. These grants vest 50% after one year and the balance vests after two years from the date of grant. An aggregate of 300,000 shares of the Company's common stock has been authorized for issuance pursuant to the Non-Employee Program. Grants of restricted stock to non-employees are charged to unearned compensation in Stockholders' Equity at their intrinsic value and recognized as expense over the vesting period. Compensation expense recognized for such grants was approximately $0.1 million for each of 2003 and 2002, and $0.2 million for 2001.

Employee Stock Purchase Plan

        The Company has two employee stock purchase plans ("ESPP") for eligible employees to purchase shares of the Company's common stock at 85% of the lower of the fair market value of Edwards Lifesciences common stock on the effective date of subscription or the date of purchase. Under the ESPP, employees can authorize the Company to withhold up to 12% of their compensation for common stock purchases, subject to certain limitations. The ESPP is available to all active employees of the Company paid from the United States payroll and to eligible employees of the Company outside the United States to the extent permitted by local law. The ESPP for United States employees is qualified under Section 423 of the Internal Revenue Code. The Board of Directors authorized an aggregate of 2,150,000 shares of the Company's common stock for issuance under the ESPP. As of December 31, 2003, 731,606 shares have been issued under the plans.

Stockholder Rights Plan

        The Company has adopted a Stockholder Rights Plan to protect stockholders' rights in the event of a proposed or actual acquisition of 15% or more of the outstanding shares of the Company's common stock. As part of this plan, each share of the Company's common stock carries a right to purchase one one-hundredth (1/100) of a share of Series A Junior Participating Preferred Stock (the "Rights"), par value $0.01 per share, subject to adjustment, which becomes exercisable only upon the occurrence of certain events. The Rights are subject to redemption at the option of the Board of Directors at a price of $0.01 per right until the occurrence of certain events. The Rights expire on March 31, 2010, unless earlier redeemed or exchanged by the Company.

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Treasury Stock

        In November 2001, the Company's Board of Directors approved a stock repurchase program authorizing the Company to purchase on the open market and in privately negotiated transactions up to 2.0 million shares of the Company's outstanding common stock. In addition, on May 6, 2003, the Company's Board of Directors approved a second stock repurchase program authorizing the Company to purchase an additional 2.0 million shares of the Company's outstanding common stock through December 31, 2005. Stock repurchased under these programs will primarily be used to offset obligations under the Company's employee stock option programs. During 2003 and 2002, the Company repurchased 1,766,300 and 1,298,300 shares at an aggregate cost of $49.4 and $30.8 million, respectively. The timing and size of any future stock repurchases are subject to a variety of factors, including market conditions, stock prices and other cash requirements.

13.    EMPLOYEE BENEFIT PLANS

Defined Benefit Plans

        Prior to the Distribution, Edwards Lifesciences employees participated in Baxter-sponsored defined benefit pension plans covering substantially all employees in the United States and Puerto Rico and employees in certain European countries. The benefits were based on years of service and the employees' compensation during five of the last 10 years of employment as defined by the plans. Effective as of the Distribution, Edwards Lifesciences' employees ceased to be eligible to accrue any additional benefits under the Baxter plan for United States employees. Edwards Lifesciences did not adopt a pension plan for United States employees to replace the Baxter plan in the United States. The pension liability related to Edwards Lifesciences' United States employees' service prior to the Distribution remains with Baxter. With respect to the Puerto Rico and certain European plans, Baxter transferred the assets and liabilities relating to Edwards Lifesciences' employees to Edwards Lifesciences as of the Distribution. Edwards Lifesciences has adopted a defined benefit pension plan in Puerto Rico and in certain European countries. On November 4, 2003, the Company suspended its defined benefit pension plan in Puerto Rico ("the Plan"). Effective December 31, 2003, employees do not earn additional defined benefits for future services. To mitigate the Puerto Rico employees' reduced benefits from the Plan's suspension, the Company increased its contributions to the Puerto Rico 1165(e) defined contribution plan.

        On October 1, 2002, the Company completed its spin-off from Baxter and acquired the cardiovascular business in Japan (see Notes 1 and 3). As part of the transaction, the Company acquired the defined benefit plan that covered the Japan employees and the related pension assets and liabilities.

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        Information regarding the Company's defined benefit pension plans in Puerto Rico, Japan and certain European countries is as follows (in millions):

	Years Ended December 31,
	2003			2002
Benefit Obligations:
Beginning of period	$	44.7		$	28.1
Service cost		3.3			1.6
Interest cost		2.2			1.7
Participant contributions		0.4			0.2
Actuarial loss		2.3			4.1
Addition of Japan plan		—			8.6
Curtailment gains		(8.7	)		(0.2	)
Benefits paid		(2.0	)		(0.3	)
Currency exchange rate changes and other		3.7			0.9
End of year	$	45.9		$	44.7
Fair value of plan assets:
Beginning of period	$	22.9		$	20.3
Actual return on plan assets		2.7			(0.7	)
Employer contributions		3.6			1.6
Participant contributions		0.6			0.2
Addition of Japan plan		—			1.1
Benefits paid		(2.0	)		(0.3	)
Currency exchange rate changes and other		2.0			0.7
End of year	$	29.8		$	22.9
Funded status of plans:
Funded status of plans	$	(16.1	)	$	(21.8	)
Unrecognized net transition obligation		0.7			0.6
Unrecognized net actuarial losses		6.6			13.5
Unrecognized prior service cost		(0.9	)		1.6
Net liability on balance sheet	$	(9.7	)	$	(6.1	)
Net liability on balance sheet consists of:
Accrued benefit liability	$	(10.4	)	$	(11.8	)
Prepaid benefit cost		—			0.1
Intangible asset		—			3.1
Accumulated other comprehensive loss		0.4			1.6
Deferred tax asset		0.3			0.9
Net liability on balance sheet	$	(9.7	)	$	(6.1	)

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        The components of net periodic benefit cost are as follows (in millions):

	Years Ended December 31,
	2003			2002			2001
Service cost	$	3.3		$	1.6		$	1.5
Expected employee contributions		(0.2	)		—			—
Interest cost		2.2			1.7			1.7
Expected return on plan assets		(1.6	)		(1.5	)		(1.5	)
Curtailment loss		1.9			—			—
Amortization of prior service cost and other		0.8			0.1			0.3
Net periodic pension benefits cost	$	6.4		$	1.9		$	2.0

        Significant assumptions used in determining benefit obligations and net periodic benefit cost are summarized as follows (in weighted averages):

	Years Ended December 31,
	2003		2002
Discount Rate	4.24	%	4.96	%
Expected return on plan assets	6.77	%	6.77	%
Rate of compensation increase	3.05	%	3.66	%

Defined Contribution Plans

        The Company's employees in the United States and Puerto Rico are eligible to participate in a qualified 401(k) and 1165(e) plan, respectively. In the United States, participants may contribute up to 25% of their annual compensation (subject to tax code limitation) to the plan. Edwards Lifesciences matches the first 3 percent of the participant's annual eligible compensation contributed to the plan on a dollar-for-dollar basis. Edwards Lifesciences matches the next 2 percent of the participant's annual eligible compensation to the plan on a 50% basis. In Puerto Rico, participants may contribute up to 10% of their annual compensation (subject to tax code limitation) to the plan. Edwards Lifesciences matches the first 6 percent of the participant's annual eligible compensation contributed to the plan on a 50% basis. Matching contributions relating to Edwards Lifesciences employees were $4.4 million, $4.4 million and $3.9 million in 2003, 2002 and 2001, respectively.

        The Company has a nonqualified deferred compensation plan for a select group of management that provides the opportunity to defer a specified percentage of their cash compensation. Participants may elect to defer up to 100% of bonus and 25% of total annual compensation. The Company's obligations under this plan are unfunded. The amount accrued under this plan was $5.5 million and $3.3 million at December 31, 2003 and 2002, respectively.

        The Edwards Lifesciences Corporation Executive Option Plan (the "Executive Plan") became effective for participation by eligible employees in 2001. Eligible employees who participate in the Executive Plan may not participate in the Company's nonqualified deferred compensation plan. Under the Executive Plan, executive officers and certain other key employees may elect to forgo a portion of their annual salary and bonus for an option to purchase shares of mutual funds or the Company's

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common stock. The options are granted quarterly with an initial exercise price equal to 25% of the fair market value per share (as defined in the Executive Plan) of the respective security on the grant date. The number of shares subject to each option is determined such that the difference between the aggregate fair market value (as defined in the Executive Plan) and the aggregate exercise price under the option is equal to the amount of forgone compensation attributable to the option. A total of 95,000 shares of the Company's common stock have been registered for issuance under the Executive Plan.

14.    RELATED PARTY TRANSACTIONS

        Effective on the Distribution, Baxter and Edwards Lifesciences entered into a series of administrative services agreements pursuant to which Baxter and Edwards Lifesciences continued to provide, for a specified period of time, certain administrative services (primarily information systems support, payroll, accounting and warehousing and logistics support) that each entity historically provided to the other. These agreements required the parties to pay each other a fee that approximated the actual costs of these services. Additionally, subsequent to March 31, 2000, Edwards Lifesciences had continuing relationships with Baxter as a customer and supplier for certain products, and used Baxter as a distributor of the Company's products in certain regions of the world. Substantially all of these service agreements and relationships had been terminated as of December 31, 2002.

        Sales to Baxter, acting in the capacity of the Company's distributor subsequent to the Distribution, represented approximately 8% and 11% of the Company's total net sales for 2002 and 2001, respectively.

        In December 2001, the Chief Executive Officer of the Company received a $2.5 million loan pursuant to his employment agreement with the Company as approved by the Board of Directors. The loan was used for the purchase of his primary residence in connection with his relocation. The loan is non-interest bearing and is due in December 2006 or upon resignation or the termination of employment. The loan is collateralized by the Chief Executive Officer's primary residence.

15.    OTHER (INCOME) EXPENSE, NET

	Years Ended December 31,
	2003			2002			2001
	(in millions)
Foreign exchange (gain) loss	$	(10.6	)	$	(4.1	)	$	5.0
Legal settlement, net		—			(14.7	)		—
Asset dispositions and write downs		3.6			2.3			6.5
Accounts receivable securitization costs		0.8			1.5			1.4
Investment write-offs		—			1.4			—
Other		1.5			(1.8	)		(2.3	)
	$	(4.7	)	$	(15.4	)	$	10.6

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16.    INCOME TAXES

        The Company's income (loss) before provision for income taxes was generated from United States and international operations as follows:

	Years Ended December 31,
	2003		2002		2001
	(in millions)
United States	$	0.7	$	3.5	$	(66.7	)
International		92.1		52.5		58.3
	$	92.8	$	56.0	$	(8.4	)

        The provision (benefit) for income taxes consists of the following:

			Years Ended December 31,
			2003			2002			2001
			(in millions)
Current
	United States:
		Federal	$	—		$	0.6		$	—
		State and local		0.2			0.3			0.7
	International, including Puerto Rico			6.3			10.6			30.9
		Current income tax expense		6.5			11.5			31.6
Deferred
	United States:
		Federal		4.4			(7.4	)		(15.3	)
		State and local		(1.4	)		(0.9	)		(5.1	)
	International, including Puerto Rico			4.3			(2.9	)		(9.7	)
		Deferred income tax expense (benefit)		7.3			(11.2	)		(30.1	)
Total income tax expense			$	13.8		$	0.3		$	1.5

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        The components of deferred tax assets and liabilities are as follows:

		December 31,
		2003			2002
		(in millions)
Deferred tax assets
	Net operating loss carryforwards	$	32.0		$	19.0
	Investments in unconsolidated affiliates		19.3			29.7
	Tax credit carryforwards		17.5			6.4
	Compensation and benefits		8.6			5.6
	Accrued liabilities		6.5			14.3
	Allowance for doubtful accounts		5.5			5.6
	Other intangible assets		5.4			10.5
	Inventories		2.1			2.4
	Other		11.0			9.9
	Total deferred tax assets		107.9			103.4
Deferred tax liabilities
	Property, plant and equipment		(14.6	)		(15.8	)
	Other		(2.6	)		(1.3	)
	Total deferred tax liabilities		(17.2	)		(17.1	)
Valuation allowance			(19.5	)		(19.9	)
Net deferred tax assets		$	71.2		$	66.4

        At December 31, 2003, the Company had deferred tax assets of $107.9 million, partially offset by deferred tax liabilities of $17.2 million. The valuation allowance of $19.5 million as of December 31, 2003 reduces certain deferred tax assets to amounts that are more likely than not to be realized. This allowance primarily relates to the deferred tax assets established for certain investments and the net operating loss carryforwards of certain non-United States subsidiaries.

        During 2003, the Company recapitalized its Japan subsidiary. As a result, a deemed dividend occurred for U.S. tax purposes resulting in an incremental tax provision of $6.2 million, net of foreign tax credits. The recapitalization was a one-time event and all of the future earnings of the Company's Japan subsidiary are intended to be permanently reinvested.

        Deferred income taxes have not been provided on the undistributed earnings of the Company's foreign subsidiaries of approximately $121.7 million as of December 31, 2003 since these amounts are intended to be permanently reinvested in foreign operations. It is not practicable to calculate the deferred taxes associated with these earnings; however, foreign tax credits would likely be available to reduce federal income taxes in the event of distribution.

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        A reconciliation of the United States federal statutory income tax rate to the Company's effective income tax rate is as follows:

		Years Ended December 31,
		2003			2002			2001
		(in millions)
Income tax expense (benefit) at U.S. federal statutory rate		$	32.5		$	19.6		$	(2.9	)
	Foreign income tax at different rates		(11.9	)		(10.6	)		(6.8	)
	Deemed dividend from Japan, net of foreign tax credit		6.2			—			—
	Tax credits		(2.1	)		(1.9	)		(1.6	)
	(Benefit) from Brazil reorganization		(13.7	)		—			—
	State and local taxes, net of federal tax benefit		1.0			(0.1	)		(3.0	)
	(Benefit) loss on sale of perfusion services business		—			(20.1	)		11.0
	Valuation allowance for loss on investment		—			13.8			—
	Nondeductible goodwill		—			—			6.0
	Other		1.8			(0.4	)		(1.2	)
Income tax expense		$	13.8		$	0.3		$	1.5

        The Company has manufacturing operations outside the United States, primarily in Puerto Rico, Switzerland and The Dominican Republic, which benefit from reductions in local tax rates under various tax incentives.

        During 2003, the Company commenced a legal reorganization of its Brazil subsidiary to improve its balance sheet and to enhance its ability to conduct business in Brazil. Since being acquired a number of years ago, this subsidiary has incurred net operating losses primarily due to the devaluation of the local currency and interest expense incurred on inter-company debt. In addition, the reorganizing allowed the Company to recognize the accumulated losses and inter-company debt write-off under United States tax law, resulting in federal and state tax benefits of $13.7 million.

        As a result of tax law developments in 2002, the Company recorded a $20.1 million tax benefit during 2002 related to the loss on sale of its United States perfusion services business in June 2001.

        In exchange for the sale of the Novacor mechanical cardiac assist product line to WorldHeart in June 2000, the Company received WorldHeart preferred stock. In 2002, the investment in the WorldHeart preferred stock was deemed to be impaired and written down to its fair market value. Due to the uncertainty of using any potential tax benefit for the loss, a valuation allowance of $13.8 million was established.

        As of December 31, 2003, the Company has approximately $42.9 million of U.S. federal and state tax net operating losses and $17.9 million of tax credits available for carry-forward that will begin to expire in 2008 if not utilized. The Company also has approximately $54.3 million of foreign tax net operating losses available for carry-forward that will begin to expire in 2005 if not utilized and approximately $0.9 million of non-expiring tax credits that are available for carry-over. A valuation allowance of $5.7 million has been provided on certain foreign net operating losses.

        The U.S. federal income tax return filed by Edwards for the short period ended December 31, 2000 is being examined by the Internal Revenue Service. Management believes that adequate amounts

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of tax and related interest, if any, have been provided for any adjustments that may result for the short period ended December 31, 2000.

17.    LEGAL PROCEEDINGS

        On June 29, 2000, Edwards Lifesciences 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, a fourth Edwards Lifesciences United States patent was added to the lawsuit. Discovery is proceeding.

        On August 18, 2003, Edwards Lifesciences filed a lawsuit against Medtronic, Inc., Medtronic AVE, Cook, Inc. and W.L. Gore & Associates alleging infringement of a patent exclusively licensed to the Company. The lawsuit was filed in the United States District Court for the Northern District of California, seeking monetary damages and injunctive relief. Each of the defendants has answered and asserted various affirmative defenses and counterclaims. Discovery is proceeding.

        In addition, 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 is also 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.

18.    SEGMENT INFORMATION

        Edwards Lifesciences manages its business on the basis of one reportable segment. Refer to Note 1 for a description of the Company's business. The Company's products and services 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, which is presented below, and profitability is evaluated on an enterprise-wide basis due to shared infrastructures. Edwards Lifesciences' principal markets are the United States, Europe and Japan.

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        Geographic area data includes net sales based on product shipment destination and long-lived asset data is presented based on physical location.

		As of or for the years ended December 31,
		2003		2002		2001
		(in millions)
Net Sales by Geographic Area
	United States	$	384.3	$	383.3	$	420.8
	Europe		193.5		157.3		145.4
	Japan		197.9		94.8		62.0
	Other countries		84.8		68.6		63.9
		$	860.5	$	704.0	$	692.1
Net Sales by Major Product and Service Area
	Cardiac Surgery	$	426.6	$	365.9	$	329.0
	Critical Care		278.8		230.3		209.9
	Vascular		55.9		51.3		49.3
	Perfusion		54.8		43.2		102.1
	Other Distributed Products		44.4		13.3		1.8
		$	860.5	$	704.0	$	692.1
Long-Lived Tangible Assets by Geographic Area
	United States	$	201.9	$	187.4
	Other countries		60.8		59.2
		$	262.7	$	246.6

19.    SUBSEQUENT EVENT

        On January 27, 2004, the Company acquired Percutaneous Valve Technologies, Inc. ("PVT") for $125.0 million in cash, plus up to an additional $30.0 million upon the achievement of key milestones through 2007. The Company expects to take an initial in-process research and development charge related to this transaction in the first quarter of 2004, estimated between $60.0 million and $90.0 million. The remainder of the purchase price will be allocated to patents involving PVT's proprietary technology. PVT, located in Fort Lee, NJ, with a subsidiary in Israel, is a leader in the development of an innovative, catheter-based (percutaneous) approach for replacing aortic heart valves. PVT's technology is a combination balloon-expandable stent technology integrated with a percutaneously delivered tissue heart valve. Unlike conventional open-heart valve replacement surgery, this less-invasive procedure is designed to be performed in a cardiac catheterization laboratory under local anesthesia.

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20.    QUARTERLY FINANCIAL RESULTS AND MARKET FOR THE COMPANY'S STOCK (UNAUDITED)

			Years ended December 31
			First quarter		Second quarter		Third quarter			Fourth quarter		Total year
			(in millions, except per share data)
2003
	Net sales		$	212.5	$	217.8	$	206.1		$	224.1	$	860.5
	Gross profit			123.4		128.2		119.2			130.3		501.1
	Net income			14.5		21.1		24.5			18.9		79.0
	Earnings per common share
		Basic		0.25		0.36		0.41			0.32		1.34
		Diluted		0.24		0.34		0.40			0.31		1.29
	Market price
		High		27.64		33.60		32.65			31.56		33.60
		Low		24.40		26.95		25.77			26.90		24.40
2002
	Net sales		$	162.3	$	172.8	$	165.8		$	203.1	$	704.0
	Gross profit			93.2		98.4		95.9			117.4		404.9
	Net income (loss)(a)			20.8		30.6		(17.4	)		21.7		55.7
	Earnings (loss) per common share
		Basic		0.35		0.52		(0.30	)		0.37		0.94
		Diluted		0.34		0.50		(0.30	)		0.36		0.91
	Market price
		High		29.60		28.05		25.75			27.50		29.60
		Low		25.00		22.18		18.40			23.81		18.40

(a)

The third quarter 2002 includes a $67.4 million pretax charge related to the impairment of the Company's investment in WorldHeart preferred stock and a $20.1 million tax benefit related to the loss on sale of its United States perfusion services business in June 2001 resulting from tax law developments and the filing of the Company's 2001 tax return.

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EDWARDS LIFESCIENCES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS (in millions)

				Additions
		Balance at beginning of period		Charged to costs and expenses			Charged to other accounts			Deductions from reserves (b)			Balance at end of period
Year ended December 31, 2003
	Allowance for doubtful accounts and returns	$	5.5	$	3.9		$			$	(4.3	)	$	5.1
	Inventory reserves		9.6		3.9	(a)		—			(5.0	)		8.5
	Litigation reserves		4.1		1.1			(3.2	)		2.0
Year ended December 31, 2002								—
	Allowance for doubtful accounts and returns		4.3		5.7			—			(4.5	)		5.5
	Inventory reserves		9.4		4.9	(a)		1.8			(6.5	)		9.6
	Litigation reserves		3.4		1.4			—			(0.7	)		4.1
Year ended December 31, 2001
	Allowance for doubtful accounts and returns		4.5		3.6			—			(3.8	)		4.3
	Inventory reserves		8.3		9.1	(a)		—			(8.0	)		9.4
	Litigation reserves		5.4		1.5			—			(3.5	)		3.4

(a)

Inventory reserves result from inventory which is obsolete, is nearing its expiration date (generally triggered at six months prior to expiration), or is damaged or slow moving (defined as quantities in excess of a two year supply).

(b)

The deductions related to allowances for doubtful accounts and returns represent accounts receivable which are written off, and product which is returned from customers. The deductions related to inventory reserves represent inventory that is disposed of or sold as part of a business transaction. The deductions related to litigation reserves represent settlements of litigation and reduced estimates of anticipated settlements.

Item 9    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

        None.

Item 9A    Controls and Procedures

        The Company's management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the Company's disclosure controls and procedures as of December 31, 2003. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have determined that such controls and procedures are effective to ensure that information relating to the Company, including its consolidated subsidiaries, required to be disclosed in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There have been no changes in the Company's internal controls over financial reporting that were identified during the evaluation that occurred during the Company's last fiscal quarter of 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART III

Item 10    Directors and Executive Officers of the Registrant

        This information required by this Item is set forth under the headings "Election of Directors," "Section 16(a) Beneficial Ownership Reporting Compliance" and "Executive Officers of Edwards Lifesciences" in the definitive proxy materials to be filed in connection with its 2004 Annual Meeting of Stockholders (the "Proxy Statement") (which Proxy Statement will be filed with the Securities and Exchange Commission on or before April 30, 2004). The information required by this Item to be contained in the Proxy Statement is incorporated herein by reference.

        The Company has adopted a code of ethics that applies to its principal executive officer, principal financial and accounting officer and controller. The code of ethics is posted on the Company's website, the address of which is www.edwards.com. The Company intends to include on its website any amendments to, or waivers from, a provision of its code of ethics that applies to the Company's principal executive officer, principal financial officer or controller that relates to any element of the code of ethics definition enumerated in Item 406(b) of Regulation S-K.

Item 11    Executive Compensation

        Except for information referred to in Item 402(a)(8) of Regulation S-K, the information contained under the headings "Election of Directors" and "Executive Compensation and Other Information" in the Proxy Statement is incorporated herein by reference.

Item 12    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

        The information contained under the headings "Security Ownership of Certain Beneficial Owners and Management" and "Equity Compensation Plan Information" in the Proxy Statement is incorporated herein by reference.

Item 13    Certain Relationships and Related Transactions

        The information contained under the heading "Related Party Transactions" in the Proxy Statement is incorporated herein by reference.

Item 14    Principal Accountant Fees and Services

        The information contained under the heading "Fees Paid to Principal Accountants" in the Proxy Statement is incorporated herein by reference.

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PART IV

Item 15    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

EXHIBITS FILED WITH SECURITIES AND EXCHANGE COMMISSION

Exhibit No.	Description
3.1	Restated Certificate of Incorporation of Edwards Lifesciences Corporation (incorporated by reference to Exhibit 3.1 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
3.2	Amended and Restated Bylaws of Edwards Lifesciences Corporation
3.3	Form of Certificate of Designation for Edwards Lifesciences Corporation Series A Junior Participating Preferred Stock (included as Exhibit A to Exhibit 4.4)
4.1	Specimen form of certificate representing Edwards Lifesciences Corporation common stock (incorporated by reference to Exhibit 4.1 in Edwards Lifesciences' Registration Statement on Form 10 (File No. 001-15525))
4.2	Indenture, dated as of May 9, 2003, by and between Edwards Lifesciences Corporation and JPMorgan Chase Bank including the form of 3.875% Convertible Senior Debenture due 2033 (incorporated by reference to Exhibit 4.1 in Edwards Lifesciences' Registration Statement on Form S-3 (File No. 333-107405))
4.3	Form of Debenture (Exhibit A to the Indenture listed above as Exhibit 4.2)
4.4	Rights Agreement, dated as of March 31, 2000 (incorporated by reference to Exhibit 4.3 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
10.1	Form of Tax Sharing Agreement between Edwards Lifesciences Corporation and Baxter International Inc. (incorporated by reference to Exhibit 10.2 in Edwards Lifesciences' Registration Statement on Form 10 (File No. 001-15525))
10.2	Supplemental Reorganization Agreement and Amendment to Tax Sharing Agreement, dated as of July 25, 2002, by and between Baxter International Inc. and Edwards Lifesciences Corporation (incorporated by reference to Exhibit 10.34 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended September 30, 2002, under the Securities Exchange Act of 1934)
*10.3	Form of Edwards Lifesciences Corporation Change in Control Severance Agreement (incorporated by reference to Exhibit 10.4 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2000, under the Securities Exchange Act of 1934)
*10.4	Employment Agreement for Michael A. Mussallem (incorporated by reference to Exhibit 10.5 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2000, under the Securities Exchange Act of 1934)
*10.5	Promissory Note Secured by Deed of Trust for Michael A. Mussallem dated December 11, 2001 (incorporated by reference to Exhibit 10.6 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2001, under the Securities Exchange Act of 1934)
*10.6	Form of Employment Agreement (incorporated by reference to Exhibit 10.8 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)

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10.7	Five Year Credit Agreement dated as of March 31, 2000, among Edwards Lifesciences Corporation, a Delaware corporation; the Swiss Borrowers; the Japanese Borrowers; the Lenders from time to time party hereto; The Chase Manhattan Bank, as Administrative Agent; Chase Manhattan International Limited, as London Agent; The Fuji Bank, Limited, as the Tokyo Agent; Bank One, N.A., as Syndication Agent; and Credit Suisse First Boston, as Documentation Agent (incorporated by reference to Exhibit 10.19 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2000, under the Securities Exchange Act of 1934)
*10.8	Edwards Lifesciences Corporation Severance Pay Plan (incorporated by reference to Exhibit 10.21 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2000, under the Securities Exchange Act of 1934)
10.9	Amendment No. 1, dated as of June 30, 2000, to the Five Year Credit Agreement dated as of March 30, 2000, among Edwards Lifesciences Corporation, a Delaware corporation; the Swiss Borrowers; the Japanese Borrowers; the Lenders from time to time party thereto; The Chase Manhattan Bank, as Administrative Agent; Chase Manhattan International Limited, as London Agent; The Fuji Bank, Limited, as the Tokyo Agent; Bank One, N.A., as Syndication Agent; and Credit Suisse First Boston, as Documentation Agent, and to the 364 Day Credit Agreement dated as of March 30, 2000, among Edwards Lifesciences Corporation, the Lenders from time to time party thereto, The Chase Manhattan Bank, as Administrative Agent, Bank One, N.A., as Syndication Agent and Credit Suisse First Boston, as Documentation Agent (incorporated by reference to Exhibit 10.23 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended June 30, 2000, under the Securities Exchange Act of 1934)
*10.10	Edwards Lifesciences Corporation Executive Option Plan (incorporated by reference to Exhibit 10.6 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
*10.11	Edwards Lifesciences Corporation of Puerto Rico Savings and Investment Plan (incorporated by reference to Exhibit 4.3 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-40434))
*10.12	Edwards Lifesciences Corporation 401(k) Savings and Investment Plan (incorporated by reference to Exhibit 4.3 in Edwards Lifesciences' Registration Statement on Form S-8 (File No. 333-33056))
10.13	Amendment No. 2, dated as of March 29, 2001, to the Five Year Credit Agreement dated as of March 30, 2000 among Edwards Lifesciences Corporation, a Delaware corporation; the Swiss Borrowers; the Japanese Borrowers; the Lenders from time to time party thereto; The Chase Manhattan Bank, as Administrative Agent; Chase Manhattan International Limited, as London Agent; The Fuji Bank, Limited, as the Tokyo Agent; Bank One, N.A., as Syndication Agent; and Credit Suisse First Boston, as Documentation Agent (incorporated by reference to Exhibit 10.30 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2001, under the Securities Exchange Act of 1934)

88

10.14	Amendment No. 3, dated as of October 21, 2002, to the Five Year Credit Agreement dated as of March 30, 2000 among Edwards Lifesciences Corporation, a Delaware corporation; the Swiss Borrowers; The Japanese Borrowers; the Lenders from time to time party thereto; JPMorgan Chase Bank, as Administrative Agent; J. P. Morgan Europe Limited, as London Agent; Mizuho Corporate Bank, LTD., as the Tokyo Agent; Bank One, N.A., as Syndication Agent; and Credit Suisse First Boston, as Documentation Agent (incorporated by reference to Exhibit 10.36 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended September 30, 2002, under the Securities Exchange Act of 1934)
10.15	Receivables Purchase Agreement, dated as of December 21, 2000, by and among Edwards Lifesciences Financing LLC, a Delaware limited liability company, Edwards Lifesciences LLC, a Delaware limited liability company, Blue Ridge Asset Funding Corporation, a Delaware corporation, and Wachovia Bank, N.A. (incorporated by reference to Exhibit 10.38 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2002)
10.16	Amendment No. 1 to Receivables Purchase Agreement, dated as of February 1, 2001, by and among Edwards Lifesciences Financing LLC, a Delaware limited liability company, Edwards Lifesciences LLC, a Delaware limited liability company, Blue Ridge Asset Funding Corporation, a Delaware corporation, and Wachovia Bank, N.A. (incorporated by reference to Exhibit 10.39 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2002)
10.17	Second Amendment to Receivables Purchase Agreement, dated as of September 20, 2001, by and among Edwards Lifesciences Financing LLC, a Delaware limited liability company, Edwards Lifesciences LLC, a Delaware limited liability company, Blue Ridge Asset Funding Corporation, a Delaware corporation, the Liquidity Banks and Wachovia Bank, N.A. (incorporated by reference to Exhibit 10.40 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2002)
10.18	Third Amendment to Receivables Purchase Agreement, dated as of March 8, 2002, by and among Edwards Lifesciences Financing LLC, a Delaware limited liability company, Edwards Lifesciences LLC, a Delaware limited liability company, Blue Ridge Asset Funding Corporation, a Delaware corporation, the Liquidity Banks and Wachovia Bank, N.A. (incorporated by reference to Exhibit 10.41 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2002)
10.19	Receivables Purchase Agreement, dated December 4, 2002, by and among Edwards Lifesciences Limited, a Japanese corporation, Apreco, Inc., a Delaware corporation and Citilease Company Limited, a Japanese corporation (incorporated by reference to Exhibit 10.42 in Edwards Lifesciences' report on Form 10-K for the fiscal year ended December 31, 2002)
*10.20	Long-Term Stock Incentive Compensation Program (as amended and restated as of February 20, 2003) (incorporated by reference to Exhibit 10.3 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
*10.21	Nonemployee Directors and Consultants Stock Incentive Program (as amended and restated May 14, 2003) (incorporated by reference to Exhibit 10.9 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended June 30, 2003)
*10.22	Agreement between Edwards Lifesciences Corporation and J. Randall Nelson, dated December 2003

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*10.23	2001 Employee Stock Purchase Plan for United States Employees (amended and restated as of February 20, 2003) (incorporated by reference to Exhibit 10.4 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
*10.24	2001 Employee Stock Purchase Plan for International Employees (amended and restated as of February 20, 2003) (incorporated by reference to Exhibit 10.5 in Edwards Lifesciences' report on Form 10-Q for the quarterly period ended March 31, 2003, under the Securities Exchange Act of 1934)
*10.25	Edwards Lifesciences Corporation 2004 Incentive Plan
21.1	Subsidiaries of Edwards Lifesciences Corporation
23	Consent of Independent Accountants
31.1	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

*

Represents management contract or compensatory plan

REPORTS ON FORM 8-K

        The Company filed or furnished three reports during the quarter ended December 31, 2003, as follows:

Date Filed or Furnished	Item No.	Description
October 20, 2003	Items 7 and 12	On October 20, 2003, the Company announced its third quarter results for the period ended September 30, 2003
October 29, 2003	Item 5	On October 29, 2003, the Company provided a description and reconciliation of certain non-GAAP financial measures
December 17, 2003	Item 5	On December 17, 2003, the Company reported it had entered into a definitive agreement for the acquisition of Percutaneous Valve Technologies, Inc. and it intended to explore strategic alternatives for its Lifepath AAA Endovascular Graft System

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SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) 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.

	EDWARDS LIFESCIENCES CORPORATION
March 9, 2004	By:	/s/  MICHAEL A. MUSSALLEM Michael A. Mussallem Chairman of the Board and Chief Executive Officer

        We, the undersigned officers and directors of Edwards Lifesciences Corporation, hereby severally constitute and appoint Bruce P. Garren and Jay P. Wertheim, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all amendments to this Annual Report on Form 10-K, and generally to do all things in our names and on our behalf in such capacities to enable Edwards Lifesciences Corporation to comply with the provisions of the Securities Act of 1934, as amended, and all requirements of the Securities and Exchange Commission. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/  MICHAEL A. MUSSALLEM Michael A. Mussallem	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)	March 9, 2004
/s/  CORINNE H. LYLE Corinne H. Lyle	Corporate Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer)	March 9, 2004
/s/  MIKE R. BOWLIN Mike R. Bowlin	Director	March 11, 2004
/s/  ROBERT A. INGRAM Robert A. Ingram	Director	March 11, 2004
/s/  VERNON R. LOUCKS JR. Vernon R. Loucks Jr.	Director	March 11, 2004
/s/  PHILIP M. NEAL Philip M. Neal	Director	March 11, 2004
/s/  DAVID E.I. PYOTT David E.I. Pyott	Director	March 9, 2004

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EDWARDS LIFESCIENCES CORPORATION Form 10-K Annual Report—2003 Table of Contents
PART I

Item 1 Business

Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders

PART II

Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 7A Quantitative and Qualitative Disclosure About Market Risk
Item 8 Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE DECEMBER 31, 2003
REPORT OF INDEPENDENT AUDITORS
EDWARDS LIFESCIENCES CORPORATION CONSOLIDATED BALANCE SHEETS (in millions, except share data)
EDWARDS LIFESCIENCES CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share information)
EDWARDS LIFESCIENCES CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions)
EDWARDS LIFESCIENCES CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) (in millions)
EDWARDS LIFESCIENCES CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EDWARDS LIFESCIENCES CORPORATION VALUATION AND QUALIFYING ACCOUNTS (in millions)

Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A Controls and Procedures

PART III

Item 10 Directors and Executive Officers of the Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13 Certain Relationships and Related Transactions
Item 14 Principal Accountant Fees and Services

PART IV

Item 15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K

SIGNATURES

EX-3.2

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Exhibit 3.2

EDWARDS LIFESCIENCES CORPORATION
AMENDED AND RESTATED BYLAWS
(AS OF FEBRUARY 19, 2004)
ARTICLE I
STOCKHOLDERS

        SECTION 1.    PLACE OF HOLDING MEETINGS.    All meetings of the stockholders shall be held at the principal executive offices of the Corporation, or such other place as shall be determined by the Board of Directors.

        SECTION 2.    ELECTION OF DIRECTORS.

        (a)   The annual meeting of stockholders for the election of directors and the transaction of other business shall be held at such time and date as shall be determined by the Board of Directors.

        (b)   Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided in the Certificate of Incorporation of the Corporation with respect to the right of holders of Preferred Stock of the Corporation to nominate and elect a specified number of directors in certain circumstances. Nominations of persons for election to the Board of Directors may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, (i) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (ii) by any stockholder of the Corporation (A) who is a stockholder of record or beneficial owner on the date of the giving of the notice provided for in this Section 2 and on the record date for the determination of stockholders entitled to vote at such meeting and (B) who complies with the notice procedures set forth in this Section 2.

        (c)   In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the secretary of the Corporation.

        (d)   To be timely, a stockholder's notice to the secretary must be delivered to or mailed and received at the principal executive offices of the Corporation (i) in the case of an annual meeting, not less than seventy-five (75) days nor more than one hundred (100) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first, and (ii) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first.

        (e)   To be in proper written form, a stockholder's notice to the secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in

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connection with the solicitations of the proxies for election of directors pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder, or any successor provisions thereto; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder, (B) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (C) a description of all arrangements or understandings between such stockholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder, or any successor provisions thereto. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to service as a director if elected.

        (f)    No person shall be eligible for election as a director of the Corporation, at any annual meeting of stockholders or at any special meeting of stockholders called for the purpose of electing directors, unless nominated in accordance with the procedures set forth in this Section 2. If the chairman of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the chairman shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded.

        (g)   The determination of whether shares of capital stock of the Corporation are owned beneficially under this Section 2 shall be made in the manner applicable to proposals submitted pursuant to Rule 14a-8 of the Exchange Act, or any successor provisions thereto.

        SECTION 3.    VOTING.    Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation, these Bylaws or Delaware law shall, unless the Certificate of Incorporation or Delaware law otherwise provides, be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after three years from its date unless such proxy provides for a longer period. The vote for directors, and upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. Except for the election of directors, which shall be decided by a plurality of the shares present in person or represented by proxy at the meeting and entitled to vote thereat, all matters shall be decided by the affirmative vote of a majority of shares present in person or represented by proxy at any meeting duly called and entitled to vote thereat, except as otherwise provided by the Certificate of Incorporation and/or Delaware law.

        A stockholder may authorize another person or persons to act for such stockholder as proxy (i) by executing a writing authorizing such person or persons to act as such, which execution may be accomplished by such stockholder or such stockholder's authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means, including, but not limited to, facsimile signature, or (ii) by transmitting or authorizing the transmission of a telegram, cablegram or other means of electronic transmission (a "Transmission") to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such Transmission, which Transmission must either set forth or be submitted with information from which it can be determined that such Transmission was authorized by such stockholder. The secretary or such other person or persons as shall be appointed from time to time by the Board of Directors shall examine Transmissions to determine if they are valid. If it is determined that a Transmission is valid, the person or persons making that determination shall specify the information upon which such person or persons relied. Any copy, facsimile telecommunication or other reliable reproduction of such

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writing or such a Transmission that is a complete reproduction of the entire original writing or Transmission may be substituted or used in lieu of the original writing or Transmission for any and all purposes for which the original writing or Transmission could be used.

        The secretary shall prepare and make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, at the principal place of business of the Corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

        SECTION 4.    QUORUM.    Except as provided in the next Section hereof, any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If a quorum is present when a meeting is convened, the subsequent withdrawal of stockholders, even though less than a quorum remains, shall not affect the ability of the remaining stockholders lawfully to transact business.

        SECTION 5.    ADJOURNMENT OF MEETINGS.    If less than a quorum shall be in attendance at any time for which the meeting shall have been called, the meeting may, after the lapse of at least half an hour, be adjourned from time to time by a majority of the stockholders present or represented and entitled to vote thereat. If notice of such adjourned meeting is sent to the stockholders entitled by statute to receive the same, and such notice contains a statement of the purpose of the meeting, that the previous meeting failed for lack of a quorum, and that under the provisions of this Section it is proposed to hold the adjourned meeting with a quorum of those present, then any number of stockholders, in person or by proxy, shall constitute a quorum at such meeting unless otherwise provided by statute.

        In addition, the chairman of the meeting may adjourn the meeting from time to time, whether or not there is such a quorum (or, in the case of specified business to be voted on by a class or series, the chairman or a majority of the shares of such class or series so represented may adjourn the meeting with respect to such specified business). Notice need not be given of any such adjourned meeting if the date, time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting any business may be transacted that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with Section 7 of this Article I.

        SECTION 6.    SPECIAL MEETINGS; HOW CALLED.    Special meetings of the stockholders for any purpose or purposes may be called only (a) by the chairman of the board and chief executive officer or the secretary, and shall be called by the chairman of the board and chief executive officer or the secretary upon a request in writing therefor, stating the purpose or purposes thereof, delivered to the chairman of the board and chief executive officer or the secretary, signed by a majority of the directors or (b) by resolution adopted by a majority of the Board of Directors. The business transacted at a special meeting of stockholders shall be limited solely to the matters relating to the purpose or purposes stated in the Corporation's notice of meeting.

        SECTION 7.    NOTICE OF STOCKHOLDERS' MEETINGS.    Written or printed notice stating the time and place, if any, of regular or special meetings of the stockholders, the means of remote

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communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and the general nature of the business to be considered shall be prepared and delivered, either personally or by mail, by the secretary, or such other officer as the Board of Directors may designate, to each stockholder entitled to vote thereat at his or her address as it appears on the records of the Corporation as of the record date of the meeting, at least ten (10) days but not more than sixty (60) days before the date of such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the stockholder at such stockholder's address as it appears on the stock transfer books of the Corporation. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.

        Without limiting the foregoing, any notice to stockholders given by the Corporation pursuant to this Section 7 shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice to the Corporation and shall also be deemed revoked if (i) the Corporation is unable to deliver by electronic transmission two consecutive notices given by the Corporation in accordance with such consent and (ii) such inability becomes known to the secretary or assistant secretary of the Corporation, the transfer agent or other person responsible for the giving of notice; provided, however, the inadvertent failure to treat such inability as a revocation shall not invalidate any meeting or other action. Notice given by a form of electronic transmission in accordance with these Bylaws shall be deemed given: (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice; (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice; (iii) if by a posting on an electronic network, together with separate notice to the stockholder of such specific posting, upon the later of such posting and the giving of such separate notice; and (iv) if by another form of electronic transmission, when directed to the stockholder.

        Any written waiver of notice, signed by the stockholder entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a stockholder at a meeting shall constitute a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice.

        For purposes of these Bylaws, "electronic transmission" means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

        SECTION 8.    CONDUCT OF THE MEETINGS.

        (a)   The chairman of the board, or his or her designee, shall preside over meetings of stockholders and shall have absolute authority over matters of procedure, and there shall be no appeal from the ruling of the chairman. If the chairman, in his or her absolute discretion, deems it advisable to dispense with the rules of parliamentary procedure as to any one meeting of stockholders or part thereof, the chairman shall so state and shall clearly state the rules under which the meeting or appropriate part thereof shall be conducted.

        (b)   If disorder should arise which prevents continuation of the legitimate business of the meeting, the chairman may quit the chair and announce the adjournment of the meeting; and upon his or her doing so, the meeting is immediately adjourned.

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        (c)   The chairman may ask or require that anyone not a bona fide stockholder or proxy leave the meeting.

        (d)   A resolution or motion shall be considered for vote only if (i) proposed by a stockholder or duly authorized proxy, and seconded by an individual, who is a stockholder or a duly authorized proxy, other than the individual who proposed the resolution and (ii) all other requirements under law, the Corporation's Certificate of Incorporation, these Bylaws or otherwise for consideration of such a resolution or motion have been duly satisfied as determined by the chairman in his or her absolute discretion, from which there shall be no appeal.

        SECTION 9.    ANNUAL MEETINGS.

        (a)   No business may be transacted at an annual meeting of stockholders, other than business that is either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (ii) otherwise properly brought before the annual meeting by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (iii) otherwise properly brought before the annual meeting by any stockholder of the Corporation (A) who is a stockholder of record or beneficial owner on the date of the giving of the notice provided for in this Section 9 and on the record date for the determination of stockholders entitled to vote at such annual meeting and (B) who complies with the notice procedures set forth in this Section 9.

        (b)   In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the secretary of the Corporation, which notice is not withdrawn by such stockholder at or prior to such annual meeting.

        (c)   To be timely, a stockholder's notice to the secretary must be delivered to or mailed and received at the principal executive offices of the Corporation not less than seventy-five (75) days nor more than one hundred (100) days prior to the anniversary date of the immediately preceding annual meeting of stockholders; provided, however, that in the event that the annual meeting is called for a date that is not within thirty (30) days before or after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made, whichever occurs first.

        (d)   To be in proper written form, a stockholder's notice to the secretary must set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such stockholder, (iii) the class or series and number of shares of capital stock of the Corporation which are owned beneficially or of record by such stockholder, (iv) a description of all arrangements or understandings between such stockholder and any other person or persons (including their names) in connection with the proposal of such business by such stockholder and any material interest of such stockholder in such business and (v) a representation that such stockholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting.

        (e)   No business shall be conducted at the annual meeting of stockholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 9. If the chairman of the annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the chairman shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted.

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        (f)    The determination of whether shares of capital stock of the Corporation are owned beneficially under this Section 9 shall be made in the same manner applicable to proposals submitted pursuant to Rule 14a-8 of the Exchange Act, or any successor provisions thereto.

ARTICLE II
DIRECTORS

        SECTION 1.    QUALIFICATION AND QUORUM.    No person shall be eligible for election or appointment as a director who, at the time of his or her election or appointment is 70 years old, or older. One-half of the total number of directors (rounded upwards, if necessary, to the next whole number) shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned. The Board of Directors, or any committee thereof, may also transact business without a meeting if all members of the Board of Directors or such committee, as the case may be, consent thereto in writing (which may be in counterparts) or by electronic transmission, and the written consent or consents or electronic transmission or transmissions are filed with the minutes of the proceedings of the Board of Directors or such committee. Such filing shall be made in paper form if the minutes of the Corporation are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.

        The act of the majority of the directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, unless otherwise provided by the laws of the State of Delaware, the Certificate of Incorporation or these Bylaws.

        SECTION 2.    REGULAR MEETINGS.    A regular annual meeting of the Board of Directors shall be held, without call or notice, in connection with the annual meeting of stockholders, for the purpose of organizing the Board of Directors, electing officers and transacting any other business that may properly come before such meeting. Additional regular meetings of the Board of Directors may be held without call or notice at such times as shall be determined by the Board of Directors.

        SECTION 3.    ELECTION OF OFFICERS.    At the first meeting or at any subsequent meeting called for the purpose, the directors shall elect a chairman of the board and chief executive officer as well as a secretary, and may elect a president, one or more executive vice presidents, one or more senior vice presidents, one or more group vice presidents, one or more corporate vice presidents, one or more vice presidents, a treasurer, and one or more assistant secretaries, who need not be directors. Each such officer shall hold office until the next annual election of officers, and until his or her successor is duly elected and qualified, or until such officer's earlier resignation, removal or death.

        SECTION 4.    SPECIAL MEETINGS; HOW CALLED; NOTICE.    Special meetings of the Board of Directors may be called by the chairman of the board and chief executive officer, and shall be called by the chairman of the board and chief executive officer or the secretary on the written request of any two directors. Notice of each such meeting shall state the date, time and place of the meeting, and shall be delivered to each director either personally, by telephone, telegraph, cable or, if consented to by a director, other electronic transmission, at least 24 hours before the time at which such meeting is to be held or mailed by first-class mail, postage prepaid, addressed to the director at his or her residence or usual place of business, at least four days before the day on which such meeting is to be held. Neither the business to be transacted at, nor the purpose of, any special meeting of the Board of Directors need be specified in the notice of such meeting, except for amendments to these Bylaws as provided under Article VII hereof. A meeting may be held at any time without notice if all of the directors are present or if those not present waive notice of the meeting, either before or after such meeting.

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        SECTION 5.    PLACE OF MEETING.    The directors may hold their meetings and have one or more offices, and keep the books of the Corporation, outside the State of Delaware, at any office or offices of the Corporation, or at any place as they may from time to time determine.

        SECTION 6.    TELEPHONIC MEETINGS.    Directors, or any committee of directors designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting.

        SECTION 7.    GENERAL POWERS OF DIRECTORS.    The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors, and subject to the restrictions imposed by law, by the Certificate of Incorporation or by these Bylaws, the Board of Directors may exercise all the powers of the Corporation, including any powers incidental thereto.

        SECTION 8.    COMPENSATION OF DIRECTORS.    Directors shall not receive any stated salary for their services as directors, but the Board of Directors may by resolution authorize compensation together with expenses of attendance at meetings. Such compensation may take the form of cash, stock options or other compensation. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent or otherwise, and receiving compensation therefor.

ARTICLE III
COMMITTEES

        The Board of Directors may in its discretion, by resolution passed by a majority of the whole Board, appoint one or more committees, each consisting of one or more of the directors of the Corporation, which committee shall have and may exercise such of the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation as shall be conferred by the resolution appointing it, and which, in furtherance thereof, may authorize the seal of the Corporation to be affixed to all papers that may require it; but the power and authority of any such committee shall be subject to the provisions of Section 141(c) (or its successor provision) of the Delaware General Corporation Law and any other applicable statute.

        The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee. The Board of Directors shall have the power at any time to change the membership of or to dissolve any such committee. Any such committee may make such rules for the conduct of its business as it shall from time to time deem necessary or appropriate. Except as may be otherwise provided by resolution of the Board, one half of the total number of directors (rounded upwards, if necessary, to the next whole number), shall constitute a quorum.

        Regular meetings of any committee may be held without call or notice at such time as determined by the committee. Notice of special meetings shall be given to each member of the committee in the manner provided for in Section 4 of Article II and such notice may be waived if all of the committee members are present or if those not present waive notice of the meeting, either before or after such meeting.

ARTICLE IV
OFFICERS

SECTION 1.    The officers of the Corporation shall be the chairman of the board and chief executive officer and the secretary, and may include a president, one or more executive vice presidents, one or more senior vice presidents, one or more group vice presidents, one or more corporate vice

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presidents, one or more vice presidents, a treasurer, one or more assistant secretaries and such other officers as may from time to time be elected or appointed by the Board of Directors. Any number of offices may be held by the same person.

        SECTION 2.    CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER.    The chairman of the board and chief executive officer shall be the chief executive officer of the Corporation and shall have the responsibility for the management of the Corporation and such other powers and duties as may be assigned to him or her from time to time by the Board of Directors. The chairman of the board and chief executive officer shall, when present, preside at all meetings of the stockholders and of the Board of Directors (other than meetings of the non-management and/or independent members of the Board). He or she shall act as liaison from and as spokesperson for the Board of Directors. He or she shall participate in long range planning for the Corporation. He or she may sign shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, or which are in the ordinary course of business of the Corporation. He or she may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings. He or she shall in general perform all duties incident to the office and such other duties as shall be prescribed by the Board of Directors from time to time.

        SECTION 3.    PRESIDENT.    The president shall have such duties and authority as the chairman of the board and chief executive officer may determine from time to time. In the absence or disability of the chairman of the board and chief executive officer, the president shall exercise all powers and discharge all of the duties of the chairman of the board and chief executive officer, including the general supervision and control of all the business and affairs of the Corporation. The president may sign any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed or which are in the ordinary course of business of the Corporation. The president may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings.

        SECTION 4.    VICE PRESIDENTS.    In the absence or disability of the chairman of the board and chief executive officer and the president, the functions of the chairman of the board and chief executive officer shall be performed by the executive vice president who was first elected to that office and who is not then absent or disabled, or, if none, the senior vice president who was first elected to that office and who is not then absent or disabled, or, if none, the group vice president who was first elected to that office and who is not then absent or disabled, or, if none, the corporate vice president who was first elected to that office and who is not then absent or disabled, or, if none, the vice president who was first elected to that office and who is not then absent or disabled. Each executive vice president, senior vice president, group vice president, corporate vice president and vice president shall have such powers and shall discharge such duties as may be assigned to him or her from time to time by the chairman of the board and chief executive officer or the president and may sign any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed or which are in the ordinary course of business. Each executive vice president, senior vice president, group vice president, corporate vice president and vice president may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings.

        SECTION 5.    SECRETARY.    The secretary shall give, or cause to be given, notice of all meetings of stockholders and directors, and all other notices required by law or by these Bylaws, and in the case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the chairman of the board and chief executive officer or the directors, upon

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whose requisition the meeting is called as provided in these Bylaws. The secretary shall record all the proceedings of the meetings of the stockholders and of the directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the Board of Directors, the chairman of the board and chief executive officer, or the president. The secretary shall have the custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors, the chairman of the board and chief executive officer, or the president, and attest the same. The secretary shall have charge of the original stock books, transfer books and stock ledgers, and act as transfer agent in respect of the stock and the securities of the Corporation in the absence of designation by the Board of Directors of a corporate transfer agent, and shall perform all of the other duties incident to the office of secretary. The secretary may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings.

        SECTION 6.    ASSISTANT SECRETARY.    Each assistant secretary shall have such powers and perform such duties as shall be assigned to him or her by the Board of Directors or delegated to him or her by the secretary, and in the absence or inability of the secretary to act, shall have the same general powers as the secretary. Each assistant secretary may vote, either in person or by proxy, all the shares of the capital stock of any company which the Corporation owns or is otherwise entitled to vote at any and all meetings of the stockholders of such company and shall have the power to accept or waive notice of such meetings.

        SECTION 7.    TREASURER.    The treasurer shall perform such duties as shall be delegated to him or her by the Board of Directors, the chairman of the board and chief executive officer or the president.

ARTICLE V
RESIGNATIONS AND FILLING OF VACANCIES

        SECTION 1.    RESIGNATIONS.    Any director, member of a committee or other officer may resign at any time. Such resignations shall be made in writing or by electronic transmission and shall take effect at the time specified therein and, if no time be specified, at the time of the receipt of such resignation by the chairman of the board and chief executive officer or secretary. The acceptance of the resignation shall not be necessary to make it effective.

        SECTION 2.    FILLING OF VACANCIES.    If the office of any member of a committee or other officer becomes vacant, the vacancy may be filled only by the remaining directors in office, who, by a majority vote, may appoint any qualified person to fill such vacancy. Any vacancy on the Board of Directors, resulting from an increase in the number of directors or for any other reason, may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. A person appointed to fill a vacancy shall hold office for the unexpired term or until the next election of the class to which the director has been assigned, and until his or her successor shall be elected and qualified.

ARTICLE VI
CAPITAL STOCK

        SECTION 1.    CERTIFICATES OF STOCK.    Certificates of stock, numbered and with the seal of the Corporation affixed, signed by the chairman of the board and chief executive officer, the president or any vice president, and the secretary or an assistant secretary or the treasurer, shall be issued to each stockholder certifying the number of shares owned by such stockholder in the Corporation. Any or all the signatures on these certificates may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have

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ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue.

        SECTION 2.    LOST, STOLEN OR DESTROYED CERTIFICATES.    A new certificate of stock may be issued in place of any certificate theretofore issued by the Corporation, alleged to have been lost, stolen or destroyed, and the directors may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such stockholder's legal representative, to give the Corporation a bond, in such sum as they may direct, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate.

        SECTION 3.    TRANSFER OF SHARES.    The shares of stock of the Corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized attorneys or legal representatives, and upon such transfer the old certificates shall be surrendered to the Corporation by the delivery thereof to the person in charge of the stock and transfer books and ledgers, or to such other person as the directors may designate, by whom they shall be canceled, and new certificates shall thereupon be issued. A record shall be made of each transfer, and whenever a transfer shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer.

        SECTION 4.    DETERMINATION OF RECORD DATE.

        (a)   In order that the Corporation may determine the stockholders entitled (i) to notice of or to vote at any meeting of stockholders or any adjournment thereof, (ii) to receive payment of any dividend or other distribution or allotment of any rights, (iii) to exercise any rights in respect of any change, conversion or exchange of stock or (iv) to take, receive or participate in any other lawful action, the Board of Directors may fix, in advance, a record date, which, in the case of action involving a meeting of stockholders, shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, and which shall not be more than sixty (60) days prior to any other action.

        (b)   If no record date is fixed:

          (i)  The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

         (ii)  The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

        (c)   A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

        SECTION 5.    DIVIDENDS.    Subject to the applicable provisions of the Certificate of Incorporation, if any, and Delaware law, the directors may declare dividends upon the capital stock of the Corporation as and when they deem expedient.

ARTICLE VII
AMENDMENTS

        The stockholders by the affirmative vote of at least eighty percent (80%) of the outstanding shares of capital stock of the Corporation entitled to vote in elections of directors of the Corporation considered as one class, or the directors by the affirmative vote of a majority of the directors present at any meeting at which a quorum is present, may amend or alter any of these Bylaws, provided the

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substance of the proposed amendment shall have been stated in the notice of the meeting. "Voting Stock" means the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors of the Corporation.

ARTICLE VIII
MISCELLANEOUS PROVISIONS

        SECTION 1.    CORPORATE SEAL.    The corporate seal of the Corporation shall be circular in form and shall contain the name of the Corporation, and the words "Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

        SECTION 2.    FISCAL YEAR.    The fiscal year of the Corporation shall be the calendar year.

        SECTION 3.    REGISTERED OFFICE.    A registered office of the Corporation shall be established and maintained at the office of The Corporation Trust Company, in the City of Wilmington and County of New Castle, and such company shall be the registered agent of this Corporation in the State of Delaware.

        SECTION 4.    BANK ACCOUNTS, CHECKS, DRAFTS, NOTES.    The Corporation shall maintain such bank accounts and checks upon such accounts shall be signed and/or countersigned by such officers as may be designated by resolution of the Board of Directors. Notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation, and in such manner as shall from time to time be determined by resolution of the Board of Directors.

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Exhibit 3.2

EX-10.22

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Exhibit 10.22

Agreement

        This Agreement, (the "Agreement") is entered into by and between Edwards Lifesciences Corporation (together with its subsidiaries and affiliates, "Edwards") and J. Randall Nelson ("Nelson"), Corporate Vice President, North America, of Edwards.

        WHEREAS, Nelson has acquired knowledge of, and experience in, Edwards' business during his employment with Edwards; and

        WHEREAS, Nelson and Edwards have mutually agreed to continue their employment relationship until December 31, 2003, at which time Nelson will voluntarily resign from Edwards;

        NOW, THEREFORE, in consideration of the mutual promises contained in this Agreement, and for other good and valuable consideration, the adequacy and receipt of which the parties expressly acknowledge, Nelson and Edwards agree as follows:

        1.    Employment Period.    Nelson's status as an officer of Edwards and his current duties with Edwards will terminate on December 1, 2003. Edwards will continue to employ Nelson at his current annual salary until December 31, 2003, on which date Nelson will voluntarily resign from employment with Edwards. Until December 31, 2003, Nelson will make himself available to Edwards as a consultant at reasonable times and as reasonably requested.

        2.    Transition Payment.    Edwards will pay Nelson a sum equal to $140,000.00. This amount will be paid in 13 installments, less appropriate deductions, at regular bi-weekly payroll intervals beginning with the first regular payroll cycle following December 31, 2003.

        3.    Employee Benefits.    Edwards will maintain all of Nelson's current Edwards employee benefits (other than those benefits available exclusively to officers, but including a car allowance) until December 31, 2003, when such benefits will cease in accordance with the terms of the respective Edwards benefit plans.

        4.    Vacation Accrual.    As of December 31, 2003, Nelson will receive a lump sum payment for all accrued and unused vacation, but not as consideration for or as an inducement to sign this Agreement.

        5.    COBRA Coverage.    After December 31, 2003, Nelson may continue his medical coverage on the same terms and conditions as any other employee entitled to elect COBRA continuation coverage under the Edwards Medical Plan. If Nelson does elect COBRA continuation coverage, Edwards will reimburse Nelson the costs of monthly COBRA coverage for a period of six months.

        6.    Outplacement Services.    Edwards will provide to Nelson a maximum of 6 months of executive outplacement services through Right Management to assist his transition to new employment.

        7.    Stock Trading Blackouts.    Nelson will be subject to Edwards' regularly scheduled stock trading blackouts until February 6, 2004.

        8.    Waiver and Release.    In exchange for the consideration provided under this Agreement, Nelson waives and releases any and all claims (whether known or unknown) against Edwards which arose out of or relate to Nelson's employment with Edwards and/or his resignation from employment with Edwards. This waiver and release also applies to Nelson's heirs, assigns, executors and administrators and includes, but is not limited to:

a.

the right to file or participate as an individual or a member of a class in any claims or lawsuits (whether or not the basis for such claims or lawsuits is now known to Nelson) against

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Edwards and/or its employee benefit plans, including their present and former directors, officers, employees, agents and fiduciaries;

b.

any and all claims of unlawful discrimination with regard to age, race, sex, color, religion, national origin and disability under Title VII of the Civil Rights Act, as amended, the Age Discrimination in Employment Act, as amended, the Americans With Disabilities Act, as amended, the Worker Adjustment and Retraining Notification Act, or any other federal or state laws or statutes; and



c.

all claims for wrongful employment termination or breach of contract and any other claim whatsoever, including, but not limited to, claims relating to any form of discrimination or harassment, public policy or tort claims, retaliatory discharge claims, defamation claims, intentional infliction of emotional distress claims, invasion of privacy claims, personal injury claims (this does not impact Workers' Compensation or unemployment insurance claims), claims for back pay, claims for compensatory and/or punitive damages, claims for costs and/or attorney's fees.

        9.    Waiver of Section 1542.    Nelson, his heirs, assigns, executors and administrators also waive any and all rights under the provisions of Section 1542 of the California Civil Code, or any similar statute of the United States or any state or territory of the United States, relating to the subject matter of this Agreement. California Civil Code section 1542 provides as follows:

A general release does not extend to claims, which the creditor does not know or suspect to exist in his/her favor at the time of executing the release, which, if known by him/her, must have materially affected his/her settlement with the debtor.

        10.    Confidential Information.    Nelson acknowledges that during his employment with Edwards, he has had access to confidential and proprietary information. Edwards maintains a proprietary interest in all such confidential data. Accordingly, Nelson will not use or disclose to any entity or person, either directly or indirectly, this confidential information, and will remain bound by the confidentiality provisions of his employment agreement with Edwards. Nelson acknowledges that his confidentiality obligations extend to the terms of this Agreement, with the exception that he may review this Agreement with legal counsel.

        11.    Acknowledgements.    Nelson acknowledges and agrees that:

a.

he has been given a full twenty-one (21) days to consider this Agreement before executing it;



b.

he has been advised to consider the terms of this Agreement and consult with an attorney of his choice prior to executing this Agreement;



c.

he has a full seven (7) days following execution of this Agreement to revoke this Agreement and understands that this Agreement shall not become effective or enforceable until the revocation period has expired; and



d.

he understands that rights or claims under the Age Discrimination in Employment Act of 1967 (29 U.S.C. § 622, et seq.) that may arise after the date of this Agreement are not waived.

        12.    Notices.    All notices and other communications required or permitted under this Agreement shall be deemed to have been duly given and made if in writing and if served personally on the party for whom intended or by being deposited, postage prepaid, certified or registered mail, return receipt requested, in the United States mail.

        13.    Entire Agreement; Severability; Modifications.    No promises have been made which are not included in this Agreement and this Agreement contains the entire understanding between Edwards and Nelson. If any portion of this Agreement is declared invalid or unenforceable, the remaining

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portions of this Agreement will continue in force. Any amendments to this Agreement must be in writing and signed by all parties to the Agreement.

        14.    Waiver of Breach.    Any future waiver by either party of a breach by the other of any provision of this Agreement, or any failure by either party to enforce any such provision, shall not operate or be construed as a waiver of any subsequent breach of any such provision or of the right to enforce any such provision with respect to the other party. No act or omission by either party shall constitute a waiver of any of its rights hereunder except for a written waiver signed by Nelson or, in the case of Edwards, by an officer of Edwards.

        15.    Governing Law.    This Agreement shall be governed by the laws of the State of California without regard to its conflicts of laws rules.

EDWARDS LIFESCIENCES CORPORATION	J. RANDALL NELSON
/s/ Robert C. Reindl Robert C. Reindl Corporate Vice President, Human Resources	/s/ J. Randall Nelson J. Randall Nelson Corporate Vice President, North America
12/01/03 Date	12/03/03 Date

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Exhibit 10.22

EX-10.25

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Exhibit 10.25

Edwards Lifesciences

2004

Edwards Incentive Plan (EIP)

PLAN OBJECTIVE

        The Edwards Lifesciences Incentive Plan for 2004 (2004 EIP) is an annual cash bonus program designed to motivate eligible participants to achieve Edwards' financial and strategic objectives.

ELIGIBILITY

        Edwards regular employees in all locations worldwide are eligible to participate in the 2004 EIP if they meet all of the following criteria:

•

Date of hire is before October 1, 2004;



•

Not a participant in any other commission or management incentive compensation plan intended to replace the 2004 EIP;



•

Full-time employee, or part-time employee regularly scheduled to work at least 20 hours per week; and



•

Participation has been submitted to and approved by the Plan Administrator or its designee; provided, however, participation by Edwards' executive officers may be approved only by the Plan Administrator.

        Employees who are hired or are promoted into a 2004 EIP bonus-eligible position between January 1 and September 30, 2004, will be eligible for target bonuses based on their actual eligible earnings for the year.

        Part-time employees regularly scheduled to work at least 20 hours per week will be eligible for target bonuses based on their actual eligible earnings for the year.

        The Plan Administrator or its designee will consider exceptions to these general eligibility criteria on a case-by-case basis.

Eligibility for and participation in this plan in no way constitutes a contract of employment between Edwards Lifesciences and the employee. Eligible positions and target bonus levels will be evaluated and determined on an annual basis.

Edwards Lifesciences reserves the right to amend or terminate this plan in whole or in part at any time without any advance notification.

ELIGIBLE EARNINGS

        "Eligible earnings" is defined in Exhibit A.

PLAN YEAR

        The 2004 EIP plan year corresponds with the calendar year beginning January 1 and ending December 31, 2004.

PLAN ADMINISTRATOR

        The 2004 EIP Plan Administrator is the Edwards Lifesciences Compensation and Governance Committee (or its successor). The Plan Administrator may delegate responsibility for plan administration to a designee; provided, however, the Plan Administrator may not delegate its responsibility regarding the approval of target and actual bonus amounts for Edwards' executive officers.

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BONUS FUNDING

        The 2004 EIP will be funded based on a percentage of Edwards' financial performance as modified by the participant organization's achievement of its Key Operating Drivers (KODs).

Financial Performance
The Plan Administrator shall set the applicable financial performance targets and the method of determining attainment of such targets. For purposes of the initial funding of the 2004 EIP, Edwards' financial performance will be measured on the following criteria, weighted as noted:

Net Income	40	%
Free Cash Flow*	25	%
Revenue Growth**	35	%

*

Defined as cash flow from operations less capital expenditures.

**

Assumes constant foreign exchange and excludes divested businesses.

        Actual funding levels for each category will be interpolated at 1% intervals. Performance resulting in below 50% funding will result in zero payout for that category. Results from 50% to 150% will be specified in 1% increments. Under no circumstances will a category achieve higher than 150% funding. The funding for each category will be weighted accordingly and added together to achieve a total financial performance funding amount.

        The Plan Administrator shall have sole discretion to determine if, and to what extent, the financial performance targets have been satisfied.

Key Operating Drivers (KODs)
2004 EIP bonus funding will be further modified by achievement of five Edwards Lifesciences Key Operating Drivers (KODs). The Plan Administrator shall set the five 2004 KODs that apply generally to employees. The following regions or organizations, however, shall establish their own KODs: Asia, Europe, Japan, Latin America, North America, and PVT.

        Each Executive Leadership Team member responsible for a region/organization will:

•

Identify and communicate KODs for their respective business, region or function;



•

Track and communicate progress on the KODs; and



•

Recommend the number of KODs achieved for payout.

        Where applicable, regions/organizations should align KODs to corporate KODs established by the Plan Administrator.

        At the end of the plan year, each KOD will be assessed as either achieved or not achieved.

Exhibit B provides an example of how the bonus amount would be funded assuming attainment of a certain level of financial performance (as determined by the Plan Administrator) and as modified by KOD achievement for an organization with five KODs.

TARGET BONUS LEVELS

        Unless determined otherwise by the Plan Administrator or its designee, the target bonus amounts are expressed as a percentage of an employee's 2004 eligible earnings. If a participant had a job change during the plan year that affected bonus level, the target bonus level for purposes of this EIP will be the target bonus applicable at the year end.

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        If a participant transferred to another Edwards Lifesciences business, region or function during the plan year, the KOD achievement of the organization that the participant belonged to at year-end will be used for calculating bonus funding.

        Participants may receive more or less than their target bonus amounts depending on bonus funding and PMO achievement.

ACTUAL BONUS PAYOUTS

        A participant's actual bonus payout amount will be based on individual achievement of 2004 Performance Management Objectives (PMOs). These PMOs must be established with the participant's manager at the beginning of the year. PMOs should reflect a balance between team and individual goals, financial and non-financial goals, and be clearly aligned with Edwards' business goals and the organization's Key Operating Drivers.

        At the end of the plan year, managers and EIP participants will evaluate and discuss individual PMO achievement levels. Achievement percentages may range from 0% to 200%. Unless determined otherwise by the Plan Administrator or its designee, for every 1% awarded over 100%, a corresponding discount of 1% below 100% should be awarded to another participant so that the total PMO pool adds up to approximately 100% (changes up or down must offset each other). Under no circumstances will a participant receive a payout greater than 200%. Actual bonus payouts will then be calculated as follows:

Payout = Target Bonus × EIP Bonus Funding % × PMO achievement %

PAYMENT OF BONUSES

        The Edwards Lifesciences Compensation and Governance Committee or its designee will review the bonus award recommendations in February 2005.

        A participant must be on the Edwards payroll with an "active" status when the bonus amount is paid except as provided in the Termination of Employment Section. EIP payouts will be issued as soon as possible following the February Board of Directors meeting.

        The appropriate withholdings will be deducted from the bonus award including any withholding for employees subject to tax laws of other countries. EIP bonuses are also considered to be part of benefit pay. Contributions to the Edwards 401(k) Savings and Investment Plan, 1165(e) Savings Plan and the Edwards Executive Option Plan will also be deducted where appropriate. Employee Stock Purchase Plan payments will not be deducted from bonus pay.

TERMINATION OF EMPLOYMENT

        Participants who voluntarily sever their employment with Edwards or who are involuntarily terminated for reasons other than those listed below during the plan year or in the following year before bonus payments are actually made are ineligible for 2004 EIP bonus payouts.

        Participants who:

1.

are involuntarily terminated due to a reduction in force, departmental restructuring or job redefinition;



2.

become permanently disabled;



3.

retire; or



4.

die

after at least six months of service during the plan year are eligible for bonus payouts based on their actual eligible earnings. The bonus amounts in these cases will be based on the full year of business performance for funding purposes and the participant's actual level of PMO completion.

EXCEPTIONS

        The Plan Administrator or its designee must approve any exception to these guidelines.

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EXHIBIT A

Eligible Earnings

        For purposes of the 2004 Edwards Lifesciences Incentive Plan eligible earnings shall include:

1.

Payments in lieu of salary increases;



2.

Call in pay;



3.

Commission pay;



4.

Double time pay;



5.

Draws toward commissions;



6.

Funeral pay;



7.

Holiday pay;



8.

Jury duty pay;



9.

Lead pay;



10.

Mileage pay for long haul truckers;



11.

Military pay;



12.

Overtime pay;



13.

Paid absences;



14.

Retroactive pay;



15.

Salary or other regular pay;



16.

Shift differentials;



17.

Sick pay or other short-term disability pay;



18.

Straight time pay; and



19.

Vacation pay.

        For purposes of the Edwards Lifesciences Incentive Plan (EIP) eligible earnings shall not include:

1.

Bonuses including incentive bonuses under any Edwards Incentive Plan, the Edwards Performance Bonus Plan and any other bonus plans;



2.

Amounts constituting imputed income arising from any Edwards moving expense reimbursement policies, any Edwards life insurance plans or any other Edwards fringe benefit plans;



3.

Amounts paid to replace benefits; and



4.

The following amounts paid, accrued or imputed:



a.

attendance awards;



b.

automobile allowances;



c.

business expense reimbursements;



d.

cash prizes or awards;



e.

Christmas gifts;



f.

Contest pay;



g.

Deferred compensation, including deferred bonuses;



h.

Discretionary awards;



i.

Employee referral awards;



j.

Executive perquisite allowances;



k.

Hiring bonuses;



l.

Income from sale of stock;



m.

Income from the exercise of stock options;



n.

Interest earnings and deferred compensation, including deferred bonuses;



o.

Invention fees and awards;



p.

Long-term disability pay;



q.

Mortgage differential payments;



r.

Non-cash prizes or awards;



s.

Pay for unused sick time;



t.

Performance shares;



u.

Promotional awards;



v.

Relocation expense reimbursements;



w.

Restricted stock rights;



x.

Retention bonuses;



y.

Severance pay;



z.

Stock appreciation rights;



aa.

Tax equalization payments to expatriates;



bb.

Technical achievement awards;



cc.

Travel allowances; and



dd.

Tuition reimbursements; and workers' compensation benefits.

EXHIBIT B

Example

Funding and Payout Determination for 2004 EIP

Assumptions Box

Eligible Earnings:	$	80,000
Target Bonus Opportunity:		10	%
Target Bonus Amount:	$	8,000

Financial Performance	% of Target Earned1		Weight		Funding % Per Category
Net Income	100	%	40	%	40.00	%
Free Cash Flow	125	%	25	%	31.00	%
Revenue Growth	100	%	35	%	35.00	%
Funding Based on Financial Measures					106.00	%
KOD Achievement: 3 (100%)

EIP Funding Matrix

	KOD Modifiers			Financial Performance Measures
	# KODs Achieved	Modifier		@80% of Target		@100% of Target		@106% of Target		@125% of Target
5 KODs	5	150	%	120	%	150	%	159	%	188	%
	4	125	%	100	%	125	%	133	%	156	%
	3	100	%	80	%	100	%	106	%	125	%
	2	75	%	60	%	75	%	80	%	94	%
	1	50	%	40	%	50	%	53	%	63	%
	0	25	%	20	%	25	%	27	%	31	%

Payout (Assuming 106% Funding and 100% PMO Completion)

Target	Funding @ 106%		PMO%		Payout
8,000	$	8,480	100	%	$	8,480

¹

The Plan Administrator shall have sole discretion to determine if, and to what extent, the financial performance targets have been satisfied.

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Exhibit 10.25
EXHIBIT A
EXHIBIT B

EX-21.1

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Exhibit 21.1

        The following corporations are wholly-owned subsidiaries of Edwards Lifesciences Corporation:

Legal Entity	State of Incorporation/ Formation	Country of Incorporation/ Formation
Benchmark, Inc.	Utah	U.S.
Edwards Lifesciences Asset Management Corporation	Delaware	U.S.
Edwards Lifesciences Corporation of Puerto Rico	Delaware	U.S.
Edwards Lifesciences Finance LLC	Delaware	U.S.
Edwards Lifesciences International Assignments Inc.	Delaware	U.S.
Edwards Lifesciences International Holdings LLC	Delaware	U.S.
Edwards Lifesciences Japan Holdings Inc.	Delaware	U.S.
Edwards Lifesciences LLC	Delaware	U.S.
Edwards Lifesciences Research Medical, Inc.	Utah	U.S.
Edwards Lifesciences Sales Corporation	Delaware	U.S.
Edwards Lifesciences Sub Inc.	Delaware	U.S.
Edwards Lifesciences (U.S.) Inc.	Delaware	U.S.
Edwards Lifesciences World Trade Corporation	Delaware	U.S.
Percuteneous Valve Technologies, Inc.	Delaware	U.S.
Edwards Lifesciences Austria GmbH		Austria
Edwards Lifesciences Pty. Limited		Australia
Edwards Lifesciences S.P.R.L.		Belgium
Edwards Lifesciences Macchi Ltda.		Brazil
Edwards Lifesciences Participacoes e Comercial Ltda.		Brazil
Edwards Lifesciences Ltda.		Brazil
Edwards Lifesciences Industria e Comercio de Produtos Medico-Cirurgicos Ltda.		Brazil
Edwards Lifesciences (Canada) Inc.		Canada
Edwards Lifesciences A/S		Denmark
Edwards Lifesciences World Trade (Shanghai) Co., Ltd.		China
Edwards Lifesciences SAS		France
Edwards Lifesciences Holding Germany GmbH		Germany
Edwards Lifesciences Germany GmbH		Germany
Edwards Lifesciences Services GmbH		Germany
PAS Palzer Verwaltungs GmbH		Germany
Edwards Lifesciences Hellas, EPE		Greece
Edwards Lifesciences (India) Private Limited		India
Edwards Lifesciences Italia SpA		Italy
Edwards Lifesciences (Japan) Limited		Japan
Edwards Lifesciences Korea Co., Ltd.		Korea
Edwards Lifesciences Mexico, S.A. de C.V.		Mexico
Edwards Lifesciences B.V.		The Netherlands
Edwards Lifesciences Services B.V.		The Netherlands
Edwards Lifesciences Uden B.V.		The Netherlands
Edwards Lifesciences Export (Puerto Rico) Corporation		Puerto Rico
Edwards Lifesciences South Africa Pty. LTD		South Africa
Edwards Lifesciences S.L.		Spain
Edwards Lifesciences Nordic AB		Sweden
Edwards Lifesciences AG		Switzerland
Edwards Lifesciences (Thailand) Ltd.		Thailand
Edwards Lifesciences Limited		United Kingdom
Whitland Research Limited		United Kingdom
Percutaneous Valve Technologies Ltd.		Israel

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Exhibit 21.1

EX-23

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Exhibit 23

CONSENT OF INDEPENDENT ACCOUNTANTS

        We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-33054, 333-33056, 333-40434, 333-52332, 333-52334, 333-52346, 333-60670, 333-98219 and 333-105961) and the Registration Statement on Form S-3 (No. 333-107405) of Edwards Lifesciences Corporation of our report dated February 3, 2004 relating to the financial statements and financial statement schedule, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Orange County, California
March 12, 2004

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CONSENT OF INDEPENDENT ACCOUNTANTS

EX-31.1

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Exhibit 31.1

EDWARDS LIFESCIENCES CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

        I, Michael A. Mussallem, certify that:

1.

I have reviewed this annual report on Form 10-K of Edwards Lifesciences Corporation;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s)and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2004 By: /s/  MICHAEL A. MUSSALLEM Michael A. Mussallem
Chairman of the Board and
Chief Executive Officer

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EDWARDS LIFESCIENCES CORPORATION CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION

EX-31.2

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Exhibit 31.2

EDWARDS LIFESCIENCES CORPORATION
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

        I, Corinne H. Lyle, certify that:

1.

I have reviewed this annual report on Form 10-K of Edwards Lifesciences Corporation;



2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;



3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;



4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;



(b)

Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;



(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and



(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting;



5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):



(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 9, 2004 By: /s/  CORINNE H. LYLE Corinne H. Lyle
Corporate Vice President,
Chief Financial Officer and Treasurer
(Chief Accounting Officer)

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EDWARDS LIFESCIENCES CORPORATION CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION

EX-32

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Exhibit 32

EDWARDS LIFESCIENCES CORPORATION
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Edwards Lifesciences Corporation (the "Company") on Form 10-K for the year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), we, Michael A. Mussallem, Chairman of the Board and Chief Executive Officer of the Company, and Corinne H. Lyle, Corporate Vice President, Chief Financial Officer and Treasurer, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

March 9, 2004	/s/  MICHAEL A. MUSSALLEM Michael A. Mussallem Chairman of the Board and Chief Executive Officer
March 9, 2004	/s/  CORINNE H. LYLE Corinne H. Lyle Corporate Vice President, Chief Financial Officer and Treasurer (Chief Accounting Officer)

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EDWARDS LIFESCIENCES CORPORATION CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002