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Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                                    to            
Commission file number 1-15525
 
EDWARDS LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
 
36-4316614
 
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 

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

(949) 250-2500
(Registrant's telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $1.00 per share
EW
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes     No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No 
The number of shares outstanding of the registrant's common stock, $1.00 par value, as of October 20, 2020 was 623,248,273.
 


Table of Contents

EDWARDS LIFESCIENCES CORPORATION
FORM 10-Q
For the quarterly period ended September 30, 2020

TABLE OF CONTENTS
 
 
Page
Number
 
 
 
 
 
 
 
 


Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements contained in this report to be covered by the safe harbor provisions of such Acts. 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, the expected impact of COVID-19 on our business, any predictions, opinions, expectations, plans, strategies, objectives and any statements of assumptions underlying any of the foregoing relating to the company's current and future business and operations, including, but not limited to, financial matters, development activities, clinical trials and regulatory matters, manufacturing and supply operations, and product sales and demand. These statements can sometimes be identified by the use of the forward-looking words such as "may," "believe," "will," "expect," "project," "estimate," "should," "anticipate," "plan," "goal," "continue," "seek," "pro forma," "forecast," "intend," "guidance," "optimistic," "aspire," "confident," other forms of these words or similar words or expressions or the negative thereof. Statements of past performance, efforts, or results about which inferences or assumptions may be made can also be forward-looking statements and are not indicative of future performance or results; these statements can be identified by the use of words such as "preliminary," "initial," diligence," "industry-leading," "compliant," "indications," or "early feedback" or other forms of these words or similar words or expressions or the negative thereof. These forward-looking statements are subject to substantial risks and uncertainties that could cause our results or future business, financial condition, results of operations or performance to differ materially from our historical results or experiences or those expressed or implied in any forward-looking statements contained in this report. These risks and uncertainties include, but are not limited to: uncertainties regarding the severity and duration of the COVID-19 pandemic and its impact on our business and the economy generally, clinical trial or commercial results or new product approvals and therapy adoption; unpredictability of product launches; competitive dynamics; changes to reimbursement for the company's products; the company’s success in developing new products and avoiding manufacturing and quality issues; the impact of currency exchange rates; the timing or results of research and development and clinical trials; unanticipated actions by the U.S. Food and Drug Administration and other regulatory agencies; unexpected litigation impacts or expenses; and other risks detailed under “Risk Factors” in the quarterly report on Form 10-Q for the quarter ended March 31, 2020 and in our annual report on Form 10-K for the year ended December 31, 2019, as such risks and uncertainties may be amended, supplemented or superseded from time to time by subsequent reports on Forms 10-Q and 8-K we file with the Securities and Exchange Commission from time to time. These forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

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



Table of Contents

Part I. Financial Information

Item 1.    Financial Statements
EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions, except par value; unaudited)
 
September 30,
2020
 
December 31,
2019
ASSETS
 

 
 

Current assets
 

 
 

Cash and cash equivalents
$
1,024.0

 
$
1,179.1

Short-term investments (Note 5)
271.3

 
337.8

Accounts receivable, net of allowances of $9.9 and $8.7, respectively
549.7

 
543.6

Other receivables
122.0

 
55.5

Inventories (Note 2)
773.3

 
640.9

Prepaid expenses
68.6

 
59.1

Other current assets
171.5

 
168.0

Total current assets
2,980.4

 
2,984.0

Long-term investments (Note 5)
599.0

 
585.5

Property, plant, and equipment, net
1,276.3

 
1,060.3

Operating lease right-of-use assets
89.5

 
80.1

Goodwill
1,170.0

 
1,167.7

Other intangible assets, net
332.4

 
336.5

Deferred income taxes
215.2

 
172.2

Other assets
138.0

 
101.8

Total assets
$
6,800.8

 
$
6,488.1

LIABILITIES AND STOCKHOLDERS' EQUITY
 

 
 

Current liabilities
 

 
 

Accounts payable and accrued liabilities (Note 2)
$
822.1

 
$
876.9

Operating lease liabilities
24.2

 
25.5

Total current liabilities
846.3

 
902.4

Long-term debt
594.9

 
594.4

Contingent consideration liabilities (Note 6)
180.9

 
172.5

Taxes payable
214.2

 
236.6

Operating lease liabilities
71.0

 
58.9

Uncertain tax positions
199.2

 
171.7

Other liabilities (Note 2)
484.0

 
203.3

Commitments and contingencies (Note 9)


 


Stockholders' equity
 

 
 

Preferred stock, $.01 par value, authorized 50.0 shares, no shares outstanding          

 

Common stock, $1.00 par value, 1,050.0 shares authorized, 635.0 and 218.1 shares issued, and 622.9 and 209.1 shares outstanding, respectively (Note 1)
635.0

 
218.1

Additional paid-in capital
1,381.6

 
1,623.3

Retained earnings
4,255.5

 
3,741.6

Accumulated other comprehensive loss (Note 10)
(157.9
)
 
(156.0
)
Treasury stock, at cost, 12.1 and 9.0 shares, respectively
(1,903.9
)
 
(1,278.7
)
Total stockholders' equity
4,210.3

 
4,148.3

Total liabilities and stockholders' equity
$
6,800.8

 
$
6,488.1

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

1

Table of Contents

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except per share information; unaudited)
 
Three Months Ended   
September 30,
 
Nine Months Ended   
September 30,
 
2020
 
2019
 
2020
 
2019
Net sales
$
1,140.9

 
$
1,094.0

 
$
3,194.6

 
$
3,173.9

Cost of sales
281.0

 
292.4

 
784.3

 
828.2

Gross profit
859.9

 
801.6

 
2,410.3

 
2,345.7

Selling, general, and administrative expenses
307.2

 
306.2

 
889.9

 
895.0

Research and development expenses
195.5

 
195.5

 
565.0

 
558.8

Intellectual property litigation expenses (Note 3)
8.4

 
7.9

 
400.8

 
19.5

Change in fair value of contingent consideration liabilities, net (Note 6)
(9.0
)
 
(2.3
)
 
8.4

 
12.4

Special charge (Note 4)

 

 

 
24.0

Operating income
357.8

 
294.3

 
546.2

 
836.0

Interest income, net
(0.8
)
 
(2.8
)
 
(7.1
)
 
(7.2
)
Other income, net
(5.7
)
 
(4.6
)
 
(7.3
)
 
(7.8
)
Income before provision for income taxes
364.3

 
301.7

 
560.6

 
851.0

Provision for income taxes
39.1

 
27.0

 
46.7

 
84.3

Net income
$
325.2

 
$
274.7

 
$
513.9

 
$
766.7

Share information (Notes 1 and 11)
 

 
 

 
 

 
 

Earnings per share:
 

 
 

 
 

 
 

Basic
$
0.52

 
$
0.44

 
$
0.83

 
$
1.23

Diluted
$
0.52

 
$
0.43

 
$
0.82

 
$
1.20

Weighted-average number of common shares outstanding:
 

 
 

 
 

 
 

Basic
622.1

 
624.6

 
622.3

 
624.3

Diluted
631.0

 
636.3

 
628.8

 
636.3

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

2

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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
(in millions; unaudited)
 
Three Months Ended   
September 30,
 
Nine Months Ended   
September 30,
 
2020
 
2019
 
2020
 
2019
Net income
$
325.2

 
$
274.7

 
$
513.9

 
$
766.7

Other comprehensive loss, net of tax (Note 10):
 
 
 
 
 
 
 
Foreign currency translation adjustments
10.6

 
(23.5
)
 
14.6

 
(27.1
)
Unrealized (loss) gain on hedges
(22.2
)
 
5.6

 
(22.9
)
 
3.8

Defined benefit pension plans
0.1

 
(0.2
)
 
(0.1
)
 
(0.3
)
Unrealized (loss) gain on available-for-sale investments
(0.4
)
 
0.5

 
6.3

 
6.0

Reclassification of net realized investment loss to earnings
0.1

 

 
0.2

 
0.3

Other comprehensive loss
(11.8
)
 
(17.6
)
 
(1.9
)
 
(17.3
)
Comprehensive income
$
313.4

 
$
257.1

 
$
512.0

 
$
749.4

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

3

Table of Contents

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
 
Nine Months Ended   
September 30,
 
2020
 
2019
Cash flows from operating activities
 

 
 

Net income
$
513.9

 
$
766.7

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
74.6

 
65.4

Non-cash operating lease cost
20.7

 
18.7

Stock-based compensation (Note 8)
71.7

 
62.9

Inventory write off

 
73.1

Change in fair value of contingent consideration liabilities, net (Note 6)
8.4

 
12.4

Deferred income taxes
(37.8
)
 
9.5

Purchase of intellectual property (Note 4)

 
24.0

Other
0.6

 
(4.8
)
Changes in operating assets and liabilities:
 

 
 

Accounts and other receivables, net
(9.2
)
 
(70.3
)
Inventories
(118.2
)
 
(83.9
)
Accounts payable and accrued liabilities
(53.9
)
 
70.8

Income taxes
(65.6
)
 
17.0

Prepaid expenses and other current assets
(22.1
)
 
(2.5
)
Litigation settlement accrual (Note 3)
269.2

 
(180.0
)
Other
2.0

 
1.0

Net cash provided by operating activities
654.3

 
780.0

Cash flows from investing activities
 

 
 

Capital expenditures
(293.8
)
 
(182.9
)
Purchases of held-to-maturity investments (Note 5)
(112.0
)
 
(30.0
)
Proceeds from held-to-maturity investments (Note 5)
212.2

 
50.0

Purchases of available-for-sale investments (Note 5)
(394.3
)
 
(95.0
)
Proceeds from available-for-sale investments (Note 5)
358.3

 
278.3

Investments in intangible assets (Note 4)

 
(24.0
)
Acquisition

 
(100.2
)
Payment for acquisition option
(10.0
)
 
(35.0
)
Issuances of notes receivable
(26.5
)
 
(8.4
)
Other
(5.1
)
 
(3.3
)
Net cash used in investing activities
(271.2
)
 
(150.5
)
Cash flows from financing activities
 

 
 

Proceeds from issuance of debt, net
12.3

 
12.0

Payments on debt and finance lease obligations
(14.0
)
 
(23.7
)
Purchases of treasury stock
(625.2
)
 
(263.3
)
Proceeds from stock plans
103.5

 
125.5

Other
(4.9
)
 
(3.1
)
Net cash used in financing activities
(528.3
)
 
(152.6
)
Effect of currency exchange rate changes on cash and cash equivalents
(9.9
)
 
(4.4
)
Net (decrease) increase in cash and cash equivalents
(155.1
)
 
472.5

Cash and cash equivalents at beginning of period
1,179.1

 
714.1

Cash and cash equivalents at end of period
$
1,024.0

 
$
1,186.6

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

4

Table of Contents

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 
Common Stock
 
Treasury Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total Stockholders' Equity
Balance at December 31, 2019
218.1

 
$
218.1

 
9.0

 
$
(1,278.7
)
 
$
1,623.3

 
$
3,741.6

 
$
(156.0
)
 
$
4,148.3

Net income
 

 
 

 
 

 
 

 
 

 
310.6

 
 

 
310.6

Other comprehensive income, net of tax
 

 
 

 
 

 
 

 
 

 
 

 
4.0

 
4.0

Common stock issued under equity plans
0.4

 
0.4

 
 

 
 

 
28.7

 
 

 
 

 
29.1

Stock-based compensation expense
 

 
 

 
 

 
 

 
23.9

 
 

 
 

 
23.9

Purchases of treasury stock
 

 
 

 
3.0

 
(614.8
)
 


 
 

 
 

 
(614.8
)
Balance at March 31, 2020
218.5

 
$
218.5

 
12.0

 
$
(1,893.5
)
 
$
1,675.9

 
$
4,052.2

 
$
(152.0
)
 
$
3,901.1

Net loss


 


 


 


 


 
(121.9
)
 


 
(121.9
)
Other comprehensive income, net of tax


 


 


 


 


 


 
5.9

 
5.9

Common stock issued under equity plans
1.2

 
1.2

 


 


 
37.0

 


 


 
38.2

Stock-based compensation expense


 


 


 


 
24.8

 


 


 
24.8

Purchases of treasury stock


 


 
0.1

 
(9.0
)
 


 


 


 
(9.0
)
Stock issued to effect stock split (Note 1)
413.8

 
413.8

 


 


 
(413.8
)
 


 


 

Balance at June 30, 2020
633.5

 
$
633.5

 
12.1

 
$
(1,902.5
)
 
$
1,323.9

 
$
3,930.3

 
$
(146.1
)
 
$
3,839.1

Net income


 


 


 


 


 
325.2

 


 
325.2

Other comprehensive loss, net of tax


 


 


 


 


 


 
(11.8
)
 
(11.8
)
Common stock issued under equity plans
1.5

 
1.5

 


 


 
34.7

 


 


 
36.2

Stock-based compensation expense


 


 


 


 
23.0

 


 


 
23.0

Purchases of treasury stock


 


 

 
(1.4
)
 


 


 


 
(1.4
)
Balance at September 30, 2020
635.0

 
$
635.0

 
12.1

 
$
(1,903.9
)
 
$
1,381.6

 
$
4,255.5

 
$
(157.9
)
 
$
4,210.3

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


5

Table of Contents

EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 
Common Stock
 
Treasury Stock
 
 
 
 
 
 
 
 
 
Shares
 
Par Value
 
Shares
 
Amount
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Loss
 
Total Stockholders' Equity
Balance at December 31, 2018
215.2

 
$
215.2

 
7.5

 
$
(1,015.4
)
 
$
1,384.4

 
$
2,694.7

 
$
(138.5
)
 
$
3,140.4

Net income
 

 
 

 
 

 
 

 
 

 
249.7

 
 

 
249.7

Other comprehensive loss, net of tax
 

 
 

 
 

 
 

 
 

 
 

 
(2.7
)
 
(2.7
)
Common stock issued under equity plans
0.8

 
0.8

 
 

 
 

 
44.2

 
 

 
 

 
45.0

Stock-based compensation expense
 

 
 

 
 

 
 

 
20.8

 
 

 
 

 
20.8

Purchases of treasury stock
 

 
 

 
0.1

 
(5.7
)
 
 
 
 

 
 

 
(5.7
)
Balance at March 31, 2019
216.0

 
$
216.0

 
7.6

 
$
(1,021.1
)
 
$
1,449.4

 
$
2,944.4

 
$
(141.2
)
 
$
3,447.5

Net income


 


 


 


 


 
242.3

 


 
242.3

Other comprehensive loss, net of tax


 


 


 


 


 


 
3.0

 
3.0

Common stock issued under equity plans
0.9

 
0.9

 


 


 
40.6

 


 


 
41.5

Stock-based compensation expense


 


 


 


 
22.3

 


 


 
22.3

Purchases of treasury stock


 


 
1.4

 
(256.3
)
 

 


 


 
(256.3
)
Balance at June 30, 2019
216.9

 
$
216.9

 
9.0

 
$
(1,277.4
)
 
$
1,512.3

 
$
3,186.7

 
$
(138.2
)
 
$
3,500.3

Net income


 


 


 


 


 
274.7

 


 
274.7

Other comprehensive loss, net of tax


 


 


 


 


 


 
(17.6
)
 
(17.6
)
Common stock issued under equity plans
0.6

 
0.6

 


 


 
38.3

 


 


 
38.9

Stock-based compensation expense


 


 


 


 
19.8

 


 


 
19.8

Purchases of treasury stock


 


 

 
(1.3
)
 

 


 


 
(1.3
)
Balance at September 30, 2019
217.5

 
$
217.5

 
9.0

 
$
(1,278.7
)
 
$
1,570.4

 
$
3,461.4

 
$
(155.8
)
 
$
3,814.8

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


6

Table of Contents


1.     BASIS OF PRESENTATION

The accompanying interim consolidated condensed financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in Edwards Lifesciences Corporation's Annual Report on Form 10-K for the year ended December 31, 2019. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

The 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 may differ from these estimates. In particular, the novel Coronavirus ("COVID-19") pandemic has adversely impacted and is likely to further adversely impact nearly all aspects of our business and markets, including our workforce and the operations of our customers, suppliers, and business partners.  The full extent to which the pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, manufacturing, clinical trials, research and development costs, reserves and allowances, fair value measurements, asset impairment charges, contingent consideration obligations, and the effectiveness of the Company's hedging instruments, will depend on future developments that are highly uncertain and difficult to predict. These developments include, but are not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or address its impact, U.S. and foreign government actions to respond to the reduction in global economic activity, and how quickly and to what extent normal economic and operating conditions can resume.

In the opinion of management, the interim consolidated condensed financial statements reflect all adjustments considered necessary for a fair statement of the interim periods. All such adjustments are of a normal, recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of operations to be expected for the full year.

Certain reclassifications have been made to the prior year's consolidated condensed financial statements to conform to the current year presentation.

Stock Split

On May 7, 2020, the Company’s Board of Directors declared a three-for-one stock split of its outstanding shares of common stock effected in the form of a stock dividend, distributed on May 29, 2020 to stockholders of record on May 18, 2020. The Company distributed two newly issued shares of common stock to holders of record of each share of common stock to effect the stock split. All applicable share and per-share amounts in the consolidated condensed financial statements and the notes to consolidated condensed financial statements have been retroactively adjusted to reflect this stock split. The consolidated condensed balance sheet as of December 31, 2019 and the consolidated condensed statements of stockholders’ equity for the nine months ended September 30, 2019 have not been retroactively adjusted to reflect the stock split.

Recently Adopted Accounting Standards

In August 2018, the Financial Accounting Standards Board ("FASB") issued an amendment to the accounting guidance on cloud computing service arrangements. The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance also requires an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement. The guidance was effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of this guidance on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued an amendment to the accounting guidance on fair value measurements. The guidance modifies the disclosure requirements on fair value measurements, including the removal of disclosures of the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. The guidance also adds certain disclosure requirements related to Level 3 fair value measurements. The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The adoption of this guidance on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.

In June 2016, the FASB issued an amendment to the guidance on the measurement of credit losses on financial instruments. The amendment updates the guidance for measuring and recording credit losses on financial assets measured at

7

Table of Contents

amortized cost by replacing the “incurred loss” model with an “expected loss” model. Accordingly, these financial assets will be presented at the net amount expected to be collected. The amendment also requires that credit losses related to available-for-sale debt securities be recorded as an allowance through net income rather than reducing the carrying amount under the current, other-than-temporary-impairment model. The guidance was effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The adoption of this guidance on January 1, 2020 did not have a material impact on the Company's consolidated financial statements.

2.     OTHER CONSOLIDATED FINANCIAL STATEMENT DETAILS

Composition of Certain Financial Statement Captions

Components of selected captions in the consolidated condensed balance sheets consisted of the following (in millions):
 
September 30, 2020
 
December 31, 2019
Inventories
 
 
 
Raw materials
$
129.3

 
$
118.0

Work in process
148.3

 
121.7

Finished products
495.7

 
401.2

 
$
773.3

 
$
640.9



At September 30, 2020 and December 31, 2019, $119.4 million and $117.8 million, respectively, of the Company's finished products inventories were held on consignment.

 
September 30, 2020
 
December 31, 2019
 
(in millions)
Accounts payable and accrued liabilities
 

 
 

Accounts payable
$
162.5

 
$
180.4

Employee compensation and withholdings
244.8

 
295.8

Taxes payable (Note 12)
42.3

 
52.9

Property, payroll, and other taxes
45.5

 
51.4

Research and development accruals
53.7

 
51.4

Accrued rebates
59.8

 
67.1

Fair value of derivatives
21.4

 
6.4

Accrued marketing expenses
15.1

 
17.5

Litigation settlement (Note 3)
25.0

 

Litigation and insurance reserves
21.3

 
20.0

Accrued relocation costs
19.7

 
17.4

Accrued professional services
6.4

 
10.1

Accrued realignment reserves
14.2

 
16.7

Other accrued liabilities
90.4

 
89.8

 
$
822.1

 
$
876.9

 
 
 
 
Other liabilities
 
 
 
Litigation settlement (Note 3)
$
244.2

 
$

Deferred compensation
97.8

 
88.7

Pension liabilities
47.2

 
41.6

Deferred tax liabilities
36.6

 
36.9

Payroll taxes
17.0

 

Other
41.2

 
36.1

 
$
484.0

 
$
203.3




8

Table of Contents

Supplemental Cash Flow Information
(in millions)
 
Nine Months Ended   
September 30,
 
2020
 
2019
Cash paid during the year for:
 
 
 
Amounts included in the measurement of lease liabilities:
 
 
 
Operating cash flows from operating leases
$
21.7

 
$
19.5

Non-cash investing and financing transactions:
 

 
 

Right-of-use assets obtained in exchange for new lease liabilities
$
30.7

 
$
33.2

Capital expenditures accruals
$
39.7

 
$
26.4



3.     INTELLECTUAL PROPERTY LITIGATION EXPENSES

On July 12, 2020, the Company reached an agreement with Abbott Laboratories and its direct and indirect subsidiaries ("Abbott") to, among other things, settle all outstanding patent disputes between the companies (the “Settlement Agreement”) in cases related to transcatheter mitral and tricuspid repair products. See Note 9 for additional information. The Settlement Agreement resulted in the Company recording an estimated $367.9 million pre-tax charge and related liability in June 2020 related to past damages. In addition, the Company will incur royalty expenses through May 2024 totaling an estimated $100 million. The Company made a one-time $100.0 million payment to Abbott in July 2020, and will make quarterly payments in future years.

4.     SPECIAL CHARGE

In March 2019, the Company recorded a $24.0 million charge related to the acquisition of early-stage transcatheter intellectual property and associated clinical and regulatory experience.

5.     INVESTMENTS

Debt Securities

Investments in debt securities at the end of each period were as follows (in millions):
 
September 30, 2020
 
December 31, 2019
Held-to-maturity
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
Fair Value
Bank time deposits
$

 
$

 
$

 
$

 
$
100.2

 
$

 
$

 
$
100.2

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Available-for-sale
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bank time deposits
$
33.3

 
$

 
$

 
$
33.3

 
$
13.1

 
$

 
$

 
$
13.1

Commercial paper
60.1

 

 

 
60.1

 
34.3

 

 

 
34.3