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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2023
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
            For the transition period from                                    to            
Commission file number 1-15525
EDWARDS LIFESCIENCES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware
36-4316614
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)

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

(949) 250-2500
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1.00 per shareEWNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒Accelerated filer☐Non-accelerated filer☐Smaller reporting company☐Emerging growth company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐    No ☒
The number of shares outstanding of the registrant's common stock, $1.00 par value, as of April 25, 2023 was 606,218,215.


Table of Contents
EDWARDS LIFESCIENCES CORPORATION
FORM 10-Q
For the quarterly period ended March 31, 2023

TABLE OF CONTENTS
  
Page
Number
 
 
 
 
 
 
 
Item 6.


Table of Contents
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We intend the forward-looking statements contained in this report to be covered by the safe harbor provisions of such Acts. Statements other than statements of historical or current fact in this report or referred to or incorporated by reference into this report are "forward-looking statements" for purposes of these sections. These statements include, among other things, the expected impact of COVID-19 on our business, the expected impact of macroeconomic conditions on our business, any predictions, opinions, expectations, plans, strategies, objectives and any statements of assumptions underlying any of the foregoing relating to our 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: our success in developing new products and avoiding manufacturing and quality issues; clinical trial or commercial results or new product approvals and therapy adoption; the impact of public health crises, including the COVID-19 pandemic; the impact of domestic and global conditions; competitive dynamics in the markets in which we operate; our reliance on vendors, suppliers, and other third parties; damage, failure or interruption of our information technology systems; consolidation in the healthcare industry; our ability to protect our intellectual property; our compliance with applicable regulations; our exposure to product liability claims; use of our products in unapproved circumstances; changes to reimbursement for our products; the impact of currency exchange rates; unanticipated actions by the United States Food and Drug Administration and other regulatory agencies; changes to tax laws; unexpected impacts or expenses of litigation or internal or government investigations; and other risks detailed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2022, as such risks and uncertainties may be amended, supplemented or superseded from time to time by our subsequent reports on Forms 10-Q and 8-K we file with the United States Securities and Exchange Commission. These forward-looking statements speak only as of the date on which they are made and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of the statement. If we do update or correct one or more of these statements, investors and others should not conclude that we will make additional updates or corrections.

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


Table of Contents
Part I. Financial Information
Item 1.    Financial Statements
EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(in millions, except par value; unaudited)
 March 31,
2023		December 31,
2022
ASSETS  
Current assets  
Cash and cash equivalents$872.5 $769.0 
Short-term investments (Note 4)381.7 446.3 
Accounts receivable, net of allowances of $7.6 and $7.9, respectively
717.7 643.0 
Other receivables61.6 56.1 
Inventories (Note 2)914.3 875.5 
Prepaid expenses119.1 110.0 
Other current assets190.3 195.9 
Total current assets3,257.2 3,095.8 
Long-term investments (Note 4)1,066.7 1,239.0 
Property, plant, and equipment, net1,646.0 1,632.8 
Operating lease right-of-use assets 88.5 92.3 
Goodwill 1,308.4 1,164.3 
Other intangible assets, net (Note 6) 446.8 285.2 
Deferred income taxes544.0 484.0 
Other assets (Note 5)293.6 299.1 
Total assets$8,651.2 $8,292.5 
LIABILITIES AND STOCKHOLDERS' EQUITY  
Current liabilities  
Accounts payable$180.8 $201.9 
Accrued and other liabilities (Note 2)876.1 795.0 
Operating lease liabilities25.1 25.5 
Total current liabilities1,082.0 1,022.4 
Long-term debt 596.5 596.3 
Contingent consideration liabilities (Note 7)26.9 26.2 
Taxes payable143.4 143.4 
Operating lease liabilities 66.2 69.5 
Uncertain tax positions284.0 267.5 
Litigation agreement accrual (Note 2)130.1 143.0 
Other liabilities260.1 217.5 
Total liabilities2,589.2 2,485.8 
Commitments and contingencies (Note 11)
Stockholders' equity  
Preferred stock, $0.01 par value, authorized 50.0 shares, no shares outstanding          
— — 
Common stock, $1.00 par value, 1,050.0 shares authorized, 647.1 and 646.3 shares issued, and 606.0 and 608.3 shares outstanding, respectively
647.1 646.3 
Additional paid-in capital2,049.3 1,969.3 
Retained earnings7,930.5 7,590.0 
Accumulated other comprehensive loss (Note 12)(255.4)(254.9)
Treasury stock, at cost, 41.1 and 38.0 shares, respectively
(4,393.5)(4,144.0)
Total Edwards Lifesciences, Inc. stockholders' equity5,978.0 5,806.7 
Noncontrolling interest84.0 — 
Total stockholders' equity6,062.0 5,806.7 
Total liabilities and equity$8,651.2 $8,292.5 
The accompanying notes are an integral part of these
consolidated condensed financial statements.
1
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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in millions, except per share information; unaudited)
 Three Months Ended
March 31,
 20232022
Net sales$1,459.6 $1,341.2 
Cost of sales329.5 299.3 
Gross profit1,130.1 1,041.9 
Selling, general, and administrative expenses436.3 370.3 
Research and development expenses261.2 228.6 
Intellectual property agreement and litigation expenses, net (Note 3)43.5 7.1 
Change in fair value of contingent consideration liabilities, net (Note 7)0.7 (2.9)
Operating income388.4 438.8 
Interest income, net(8.6)(0.6)
Other (income) expense, net(1.6)3.3 
Income before provision for income taxes398.6 436.1 
Provision for income taxes58.1 62.5 
Net income$340.5 $373.6 
Share information (Note 13)
  
Earnings per share:  
Basic$0.56 $0.60 
Diluted$0.56 $0.59 
Weighted-average number of common shares outstanding:  
Basic607.5 622.1 
Diluted610.9 629.4 
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
March 31,
 20232022
Net income$340.5 $373.6 
Other comprehensive loss, net of tax (Note 12):
Foreign currency translation adjustments3.8 (10.0)
Unrealized (loss) gain on hedges(17.2)13.4 
Unrealized pension costs(0.1)— 
Unrealized gain (loss) on available-for-sale investments9.0 (37.1)
Reclassification of realized investment losses to earnings4.0 4.8 
Other comprehensive loss(0.5)(28.9)
Comprehensive income$340.0 $344.7 
The accompanying notes are an integral part of these
consolidated condensed financial statements.
3
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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in millions; unaudited)
 Three Months Ended
March 31,
 20232022
Cash flows from operating activities  
Net income$340.5 $373.6 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization35.2 34.7 
Non-cash operating lease cost6.8 7.1 
Stock-based compensation (Note 9)38.9 32.4 
Change in fair value of contingent consideration liabilities, net (Note 7)0.7 (2.9)
Deferred income taxes(51.8)(42.6)
Other0.4 20.4 
Changes in operating assets and liabilities:  
Accounts and other receivables, net(77.5)(57.8)
Inventories(32.8)(24.0)
Accounts payable and accrued liabilities(45.2)(109.2)
Income taxes87.2 82.9 
Prepaid expenses and other current assets(23.8)1.7 
Intellectual property agreement accrual29.3 (10.0)
Other6.2 (13.0)
Net cash provided by operating activities314.1 293.3 
Cash flows from investing activities  
Capital expenditures(61.5)(72.7)
Purchases of held-to-maturity investments (Note 4)(12.5)(128.0)
Proceeds from held-to-maturity investments (Note 4)80.5 130.0 
Purchases of available-for-sale investments (Note 4)(3.2)(74.1)
Proceeds from available-for-sale investments (Note 4)183.4 372.0 
Business combination, net of cash (Note 6)(141.2)— 
Payment for acquisition options (Note 5)(15.0)— 
Issuances of notes receivable(15.0)(10.5)
Collections of notes receivable— 18.0 
Other(15.0)(5.2)
Net cash provided by investing activities0.5 229.5 
Cash flows from financing activities  
Purchases of treasury stock(249.3)(405.6)
Proceeds from stock plans41.9 37.5 
Other0.8 — 
Net cash used in financing activities(206.6)(368.1)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash(4.2)13.2 
Net increase in cash, cash equivalents, and restricted cash103.8 167.9 
Cash, cash equivalents, and restricted cash at beginning of period772.6 867.4 
Cash, cash equivalents, and restricted cash at end of period$876.4 $1,035.3 
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 Common StockTreasury Stock
 SharesPar ValueSharesAmountAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Edwards Lifesciences, Inc. Stockholders' EquityNoncontrolling InterestTotal Stockholders' Equity
Balance at December 31, 2022646.3 $646.3 38.0 $(4,144.0)$1,969.3 $7,590.0 $(254.9)$5,806.7 $— $5,806.7 
Net income     340.5  340.5 — 340.5 
Other comprehensive loss, net of tax      (0.5)(0.5)(0.5)
Common stock issued under stock plans0.8 0.8   41.1   41.9 41.9 
Stock-based compensation expense    38.9   38.9 38.9 
Purchases of treasury stock  3.1 (249.5)  (249.5)(249.5)
Changes to noncontrolling interest  — 84.0 84.0 
Balance at March 31, 2023
647.1 $647.1 41.1 $(4,393.5)$2,049.3 $7,930.5 $(255.4)$5,978.0 $84.0 $6,062.0 
The accompanying notes are an integral part of these
consolidated condensed financial statements.

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EDWARDS LIFESCIENCES CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
(in millions; unaudited)
 Common StockTreasury Stock
 SharesPar ValueSharesAmountAdditional Paid-in CapitalRetained EarningsAccumulated Other Comprehensive LossTotal Equity
Balance at December 31, 2021642.0 $642.0 17.9 $(2,416.9)$1,700.4 $6,068.1 $(157.7)$5,835.9 
Net income     373.6  373.6 
Other comprehensive loss, net of tax      (28.9)(28.9)
Common stock issued under stock plans0.9 0.9   36.6   37.5 
Stock-based compensation expense    32.4   32.4 
Purchases of treasury stock  3.6 (405.6)  (405.6)
Balance at March 31, 2022
642.9 $642.9 21.5 $(2,822.5)$1,769.4 $6,441.7 $(186.6)$5,844.9 
The accompanying notes are an integral part of these
consolidated condensed financial statements.
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1.     BASIS OF PRESENTATION

The accompanying interim consolidated condensed financial statements and related disclosures have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and should be read in conjunction with the consolidated financial statements and notes included in Edwards Lifesciences' Annual Report on Form 10-K for the year ended December 31, 2022. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") have been condensed or omitted.

The consolidated condensed financial statements include the accounts of all wholly-owned subsidiaries and variable interest entities for which the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

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

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

There have been no material changes to the Company's significant accounting policies from those described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022.

New Accounting Standards Not Yet Adopted

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

2.     OTHER CONSOLIDATED FINANCIAL STATEMENT DETAILS

Composition of Certain Financial Statement Captions
(in millions)

Components of selected captions in the consolidated condensed balance sheets consisted of the following:
March 31, 2023December 31, 2022
Inventories
Raw materials$164.6 $156.4 
Work in process206.4 177.4 
Finished products543.3 541.7 
$914.3 $875.5 

At March 31, 2023 and December 31, 2022, $146.1 million and $128.6 million, respectively, of the Company's finished products inventories were held on consignment.

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March 31, 2023December 31, 2022
Accrued and other liabilities 
Employee compensation and withholdings$225.8 $268.7 
Taxes payable120.8 50.6 
Property, payroll, and other taxes53.6 45.6 
Research and development accruals67.7 66.9 
Accrued rebates112.3 116.1 
Fair value of derivatives23.4 20.7 
Accrued marketing expenses13.2 17.0 
Legal and insurance29.1 28.1 
Intellectual property agreements (a)
95.4 53.3 
Accrued relocation costs26.2 25.2 
Accrued professional services10.6 6.6 
Accrued realignment reserves14.8 15.6 
Other accrued liabilities83.2 80.6 
$876.1 $795.0 
_______________________________________
(a)     As of March 31, 2023, $95.4 million was accrued in "Accrued and other liabilities" and $130.1 million was accrued in "Litigation agreement accrual" on the consolidated condensed balance sheet related to intellectual property agreements with Abbott Laboratories and its direct and indirect subsidiaries, and Medtronic, Inc.

Supplemental Cash Flow Information
(in millions)
Three Months Ended
March 31,
20232022
Cash paid during the year for:
Amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$7.1 $7.6 
Non-cash investing and financing transactions:  
Right-of-use assets obtained in exchange for new lease liabilities$2.2 $6.4 
Capital expenditures accruals$26.5 $23.8 

Cash, Cash Equivalents, and Restricted Cash
(in millions)
March 31, 2023December 31, 2022
Cash and cash equivalents$872.5 $769.0 
Restricted cash included in other current assets0.6 0.5 
Restricted cash included in other assets3.3 3.1 
Total cash, cash equivalents, and restricted cash$876.4 $772.6 

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

3.    INTELLECTUAL PROPERTY AGREEMENT AND LITIGATION EXPENSES

On April 12, 2023, Edwards entered into an Intellectual Property Agreement ("Agreement") with Medtronic, Inc. ("Medtronic") pursuant to which the parties agreed to a 15-year global covenant not to sue ("CNS") for infringement of certain patents in the structural heart space owned or controlled by each other. In consideration for the global CNS and related mutual access to certain intellectual property rights, Edwards will pay to Medtronic a one-time, lump sum payment of $300.0 million and annual royalty payments that are tied to net sales of certain Edwards products. Based upon the terms of the Agreement, the Company identified the relevant elements for accounting purposes and allocated the $300.0 million upfront payment based on their fair values. The Company recorded a $37.0 million pre-tax charge in March 2023 related primarily to prior commercial sales incurred through March 31, 2023. The Company recorded a prepaid royalty asset of $124.0 million in April 2023 related
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to future commercial sales, which will be amortized as expense during the term of the Agreement. Separately, the Company recorded a $139.0 million pre-tax charge in April 2023 related to products currently in development.

4.     INVESTMENTS

Debt Securities

Investments in debt securities at the end of each period were as follows (in millions):
 March 31, 2023December 31, 2022
Held-to-maturityAmortized CostGross Unrealized GainsGross Unrealized LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Bank time deposits$28.0 $— $— $28.0 $96.0 $— $— $96.0 
Available-for-sale
U.S government and agency securities108.6 — (4.9)103.7 137.7 — (6.1)131.6 
Asset-backed securities304.2 — (11.2)293.0 380.6 — (14.0)366.6 
Corporate debt securities948.8 — (38.8)910.0 1,028.1 — (47.8)980.3 
Municipal securities2.8 — (0.2)2.6 2.7 — (0.2)2.5 
Total$1,364.4 $— $(55.1)$1,309.3 $1,549.1 $— $(68.1)$1,481.0 
The cost and fair value of investments in debt securities, by contractual maturity, as of March 31, 2023, were as follows:
Held-to-MaturityAvailable-for-Sale
 Amortized CostFair ValueAmortized CostFair Value
 (in millions)
Due in 1 year or less$23.5 $23.5 $366.5 $358.2 
Due after 1 year through 5 years4.5 4.5 647.3 614.8 
Due after 5 years through 10 years— — 5.2 5.1 
Instruments not due at a single maturity date (a)
— — 345.4 331.2 
$28.0 $28.0 $1,364.4 $1,309.3 
_______________________________________
(a)     Consists of mortgage- and asset-backed securities.
Actual maturities may differ from the contractual maturities due to call or prepayment rights.
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2023 and December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position (in millions):

March 31, 2023
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. government and agency securities$10.6 $(0.1)$92.2 $(4.8)$102.8 $(4.9)
Asset-backed securities59.1 (0.8)224.7 (10.4)283.8 (11.2)
Corporate debt securities30.8 (0.1)871.7 (38.7)902.5 (38.8)
Municipal securities— — 2.6 (0.2)2.6 (0.2)
$100.5 $(1.0)$1,191.2 $(54.1)$1,291.7 $(55.1)
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December 31, 2022
Less than 12 Months12 Months or GreaterTotal
Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. government and agency securities$61.6 $(1.5)$69.5 $(4.6)$131.1 $(6.1)
Asset-backed securities103.3 (1.3)254.6 (12.7)357.9 (14.0)
Corporate debt securities189.0 (5.3)784.8 (42.5)973.8 (47.8)
Municipal securities— — 2.5 (0.2)2.5 (0.2)
$353.9 $(8.1)$1,111.4 $(60.0)$1,465.3 $(68.1)

The Company reviews its investments in debt securities to determine if there has been an other-than-temporary decline in fair value. Consideration is given to 1) the length of time and the extent to which the security's fair value has been below cost, 2) the financial condition and near term prospects of the issuer, including the credit quality of the security's issuer, 3) the Company's intent to sell the security, and 4) whether it is more likely than not the Company will have to sell the security before recovery of its amortized cost. The decline in fair value of the debt securities was largely due to changes in interest rates, not credit quality, and as of March 31, 2023, the Company did not intend to sell the securities, and it was not more likely than not that it will be required to sell the securities before recovery of the unrealized losses, and, therefore, the unrealized losses are considered temporary.

Investments in Unconsolidated Entities

The Company has a number of equity investments in unconsolidated entities. These investments are recorded in "Long-term Investments" on the consolidated condensed balance sheets, and are as follows:
 March 31,
2023		December 31,
2022
 (in millions)
Equity method investments  
Carrying value of equity method investments$24.2 $21.4 
Equity securities  
Carrying value of non-marketable equity securities86.9 86.9 
Total investments in unconsolidated entities$111.1 $108.3 

During the three months ended March 31, 2023, the Company made $1.7 million of equity investments in limited liability companies that invest in qualified community development entities ("CDEs") through the New Markets Tax Credit ("NMTC") program. The NMTC program provides federal tax incentives to investors to make investments in distressed communities and promotes economic improvements through the development of successful businesses in these communities. The NMTC is equal to 39% of the qualified investment and is taken over seven years. These limited liability companies are variable interest entities ("VIEs"). The Company determined that it is not the primary beneficiary of the VIEs because it does not have the power to direct the activities that most significantly impact the economic performance of the VIEs, and therefore the Company does not consolidate these entities. Instead, the NMTC investments are accounted for as equity method investments.

Non-marketable equity securities consist of investments in privately held companies without readily determinable fair values, and are reported at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investment of the same issuer. As of March 31, 2023, the Company had recorded cumulative upward adjustments of $8.8 million based on observable price changes, and cumulative downward adjustments of $3.1 million due to impairments and observable price changes.

During the three months ended March 31, 2023, the gross realized gains or losses from sales of available-for-sale investments were not material.

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5.     INVESTMENTS IN VARIABLE INTEREST ENTITIES

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

Consolidated VIEs

In February 2023, the Company entered into a preferred stock purchase agreement to acquire a majority equity interest in a medical technology company and an option agreement to acquire the remaining equity interest. Edwards concluded that it is the primary beneficiary and consolidated the VIE. See Note 6 for additional information.

Unconsolidated VIEs

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

In March 2023, the Company agreed to pay a medical device company up to $45 million as consideration for an option to acquire the medical device company, of which $15.0 million has been paid as of March 31, 2023. Also, in March 2023, Edwards advanced $5 million to the medical device company under a convertible promissory note. The option and the note are included in "Other Assets" on the consolidated condensed balance sheet.
In January 2023, the Company loaned a privately-held medical device company (the "Investee") $10 million under a $45 million secured promissory note agreement. Previously, in 2021, the Company invested $39.3 million, included in "Long-term Investments," in the Investee's preferred equity securities and paid $13.1 million, included in "Other Assets," for an option to acquire the Investee. Per the agreement, the Company may be required to invest up to an additional $6.5 million in the Investee's preferred equity securities and up to an additional $14.4 million for the option to acquire the Investee.

In August 2022, the Company entered into an option agreement with a medical device company. Under the option agreement, Edwards paid $47.1 million for an option to acquire the medical device company. The $47.1 million option is included in "Other Assets" on the consolidated condensed balance sheet.

In June 2022, the Company entered into a convertible promissory note and amended its existing warrant agreement with a medical device company. Under the convertible promissory note agreement, the Company agreed to loan the medical device company up to $47.5 million, of which $32.5 million has been advanced as of March 31, 2023. In addition, in 2019 the Company paid $35.0 million for an option to acquire the medical device company. The $35.0 million warrant and the $32.5 million note receivable are included in "Other Assets" on the consolidated condensed balance sheet.

In May 2022, the Company entered into an option agreement with a medical technology company. Under the option agreement, Edwards paid $60.0 million for an option to acquire the medical technology company, of which $10 million was paid in 2021. The $60.0 million option is included in "Other Assets" on the consolidated condensed balance sheet.

In addition, Edwards has made equity investments through the NMTC program in limited liability companies that are considered VIEs. For more information, see Note 4.

6.     BUSINESS COMBINATION

On February 28, 2023, the Company acquired 61% of the then outstanding shares of a medical technology company in an all cash transaction. The Company determined it was the primary beneficiary of this VIE, and the VIE has been consolidated in the Company's consolidated condensed financial statements. In addition, the Company amended and restated its previous option agreement with the medical technology company. The option agreement gives Edwards the option to acquire the remaining equity interest in the medical technology company.

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The medical technology company is dedicated to developing technologies for detecting and managing patients with cardiovascular disease. The transaction was accounted for as a business combination. Tangible and intangible assets and liabilities acquired were recorded based on their estimated fair values at the acquisition date. The excess of the purchase price over the fair value of net assets acquired was recorded to goodwill. The Company is in the process of finalizing its purchase price allocation. Therefore, the amounts reflected below are subject to change and will be finalized during 2023. The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed (in millions):

Assets$7.5 
Goodwill143.0 
In-process research and development150.5 
Liabilities assumed(16.1)
Deferred tax liabilities(25.1)
Fair value of net assets acquired259.8 
Less: Noncontrolling interest (a)
(84.0)
Total purchase price
175.8 
Less: cash acquired(6.8)
Total purchase price, net of cash acquired (b)
$169.0 
_______________________________________
(a) Includes the fair value of the noncontrolling interest of $99.0 million offset by the purchase consideration allocated to the option of $15.0 million, which was ascribed to the noncontrolling interest.
(b)     Includes $22.5 million paid in a previous year under option agreements and $5.3 million for the settlement of a pre-existing note.

Goodwill includes expected synergies and other benefits the Company believes will result from the acquisition. Goodwill was assigned to the Company’s Rest of World segment and is not deductible for tax purposes.

The results of operations for the medical technology company since the date of acquisition were immaterial. Pro forma results have not been presented as the results of the medical technology company are not material in relation to the consolidated financial statements of Edwards Lifesciences.

7.     FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The Company prioritizes the inputs used to determine fair values in one of the following three categories:

Level 1—Quoted market prices in active markets for identical assets or liabilities.
Level 2—Inputs, other than quoted prices in active markets, that are observable, either directly or indirectly.
Level 3—Unobservable inputs that are not corroborated by market data.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The consolidated condensed financial statements include financial instruments for which the fair market value of such instruments may differ from amounts reflected on a historical cost basis. Financial instruments of the Company consist of cash deposits, accounts and other receivables, investments, accounts payable, certain accrued liabilities, and borrowings under a revolving credit agreement. The carrying value of these financial instruments generally approximates fair value due to their short-term nature. Financial instruments also include notes payable. As of March 31, 2023, the fair value of the notes payable, based on Level 2 inputs, was $598.5 million.

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Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes the Company's financial instruments which are measured at fair value on a recurring basis (in millions):
March 31, 2023Level 1Level 2Level 3Total
Assets    
Cash equivalents$9.0 $— $— $9.0 
Available-for-sale investments:
Corporate debt securities
— 910.0 — 910.0 
Asset-backed securities
— 293.0 — 293.0 
United States government and agency securities53.1 50.6 — 103.7 
Municipal securities
— 2.6 — 2.6 
Investments held for deferred compensation plans117.8 — — 117.8 
Derivatives— 51.7 — 51.7 
$179.9 $1,307.9 $— $1,487.8 
Liabilities    
Derivatives$— $23.4 $— $23.4 
Contingent consideration liabilities— — 26.9 26.9 
Other liability— — 14.0 14.0 
$— $23.4 $40.9 $64.3 
December 31, 2022    
Assets    
Cash equivalents$0.4 $— $— $0.4 
Available-for-sale investments:
Corporate debt securities
— 980.3 — 980.3 
Asset-backed securities
— 366.6 — 366.6 
United States government and agency securities37.1 94.5 — 131.6 
Municipal securities
— 2.5