Notes to Consolidated Financial Statements A reconciliation of the United States federal statutory income tax rate to the Company’s effective income tax rate is as follows: Edwards Lifesciences filed a lawsuit on June  29 , 2000, for patent infringement against Medtronic, Inc., which, as amended, alleges infringement of three Edwards Lifesciences United States patents. On September  18 , 2001 , Edwards Lifesciences filed a separate complaint against Medtronic alleging infringement of a fourth Edwards Lifesciences United States patent. On June  29 , 2000 , Edwards Lifesciences also filed a lawsuit against St. Jude Medical, Inc. alleging infringement of three patents. The Medtronic lawsuits were filed in the United States District Court for the District of Delaware and the St. Jude lawsuit was filed in the United States District Court for the Central District of California. The lawsuits seek monetary damages and injunctive relief. Each of Medtronic and St. Jude has answered, and asserted various affirmative defenses and counterclaims with respect to the lawsuits. Discovery is proceeding in both lawsuits. On March  6, 2002 , St. Jude filed a lawsuit against Edwards Lifesciences in the United States District Court for the District of Minnesota requesting a declaratory judgment that the fourth Edwards Lifesciences United States patent (involved in the lawsuit against Medtronic) is invalid and not infringed by St. Jude. On March  11 , 2002 , Edwards Lifesciences filed a motion to amend the complaint in the lawsuit against  St. Jude to add the fourth Edwards Lifesciences United States patent and a motion to enjoin the declaratory judgment action filed by St. Jude. 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 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. As of December  31 , 2001 , the Company has approximately $ 47 million of U.S. federal and state tax net operating losses and $ 3 million of tax credits available for carryforward that will begin to expire in  2010 if not utilized. The Company also has approximately $ 22 million of foreign tax net operating losses available for carryforward that will begin to expire in 2005 if not utilized. A valuation allowance has been provided on certain foreign net operating losses. note 13. LEGAL PROCEEDINGS Years Ended December 31, (in millions) 2001 2000 1999 Income tax expense  (benefit) at U.S. federal statutory rate $ ( 3 ) $ ( 90 ) $ 40 Nondeductible  charges (Note  3 ) — 100 — Nondeductible  goodwill 6 10 12 Foreign income tax  at different rates ( 7 ) ( 9 ) ( 24 ) Disposition of assets 11 — — State and local taxes, net of federal  tax benefit ( 3 ) — 3 Tax credits ( 2 ) ( 1 ) — Other ( 1 ) 3 — Income tax expense $ 1 $ 13 $ 31 50 Edwards Lifesciences Corporation 51 Edwards Lifesciences Corporation Notes to Consolidated Financial Statements Geographic area data includes net sales based on product shipment destination and long-lived asset data is presented based on physical location. uncertainties and complexities, including, but not limited to, the facts and circumstances of each particular case or claim, the jurisdiction in which each suit is brought, and differences in applicable law. Upon resolution of any pending legal matters, Edwards Lifesciences may incur charges in excess of presently established reserves. While such a charge could have a material adverse impact on Edwards Lifesciences’ net income or net cash flows in the period in which it is recorded or paid, management believes that no such charge would have a material adverse effect on Edwards Lifesciences’ consolidated financial position. Edwards Lifesciences also is subject to various environ- mental 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. 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 technologies share similar distribution channels and customers and are sold principally to hospitals and physicians. Management evaluates its various global product portfolios on a revenue basis, which is presented below, and profitability is generally evaluated on an enterprise-wide basis due to shared infrastructures. Edwards Lifesciences’ principal markets are the United States, Europe and Japan. note 14. SEGMENT INFORMATION As of or for the  Years Ended December 31, (in millions) 2001 2000 1999 Net Sales by Geographic Area United States $ 421 $ 482 $ 504 Europe 145 160 171 Japan 62 94 166 Other countries 64 68 64 $ 692 $ 804 $ 905 Net Sales by Major Product and Service Area Cardiac Surgery $ 329 $ 311 $ 306 Critical Care 210 217 242 Vascular 49 55 61 Perfusion 102 207 244 Other 2 14 52 $ 692 $ 804 $ 905 Long-Lived Assets by Geographic Area United States $ 656 $ 780 $ 1,035 Other countries 24 26 46 $ 680 $ 806 $ 1,081