Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements note 10. RELATED PARTY TRANSACTIONS Prior to the Distribution, Baxter provided to the Edwards Lifesciences Business certain legal, treasury, employee benefit, insurance and administrative services. Charges for these services were based on actual costs incurred by Baxter. The amounts charged to Edwards Lifesciences varied depending on the nature of the service, but generally were determined using headcount, sales, payroll, square footage or other appropriate data, or were determined on actual utilization of services. Management believes that the allocation of service charges is reasonable. However, the terms of these transactions may differ from those that would result from transactions with unrelated third parties or had Edwards Lifesciences performed these functions on its own. Prior to the Distribution, Edwards Lifesciences partici- pated in a centralized cash management program administered by Baxter. Short-term advances from Baxter or excess cash sent to Baxter were treated as an adjustment to the Investment by Baxter International Inc., net account as of and through March  31 , 2000 . No interest was allocated to Edwards Lifesciences on this balance. Effective on the Distribution, Baxter and Edwards Lifesciences entered into a series of administrative services agreements pursuant to which Baxter and Edwards Lifesciences continue to provide certain administrative services (primarily information systems support, payroll, accounting and ware- housing and logistics support) that each entity historically has provided to the other. These agreements require the parties to pay each other a fee that approximates the actual costs of these services and these agreements generally expire by December  31 , 2002 . Additionally, subsequent to March  31 , 2000 , Edwards Lifesciences has continuing relationships with Baxter as a customer and supplier for certain products, and uses Baxter as a distributor of the Company’s products in certain regions of the world. 48 Edwards Lifesciences Corporation The following table summarizes the charges from Baxter for the above-mentioned services prior to the Distribution, as recorded in Edwards Lifesciences’ Consolidated Statements of Operations: Sales to Baxter, acting in the capacity of the Company’s distributor subsequent to the Distribution, represented  11 % and 12 % of the Company’s total net sales for  2001 and  2000 , respectively. In December  2001 , the Company’s chief executive officer 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 and is secured with a first deed of trust on that residence. The loan is non-interest bearing and is due in December  2006 . The loan may become payable sooner upon the occurrence of certain events such as his resignation or termination of employment, except that a termination after a change in control would not accelerate the repayment obligation. note 11. Years Ended December 31, (in millions) 2000 1999 Cost of goods sold $ 5 $ — Selling, general and  administrative expenses 19 44 Research and development  expenses 1 2 Years Ended December 31, (in millions) 2001 2000 1999 Foreign exchange $ 5 $ 2 $ 2 Asset dispositions and  write-downs, net 6 1 1 Insurance and legal  settlements — — ( 1 ) Other ( 1 ) 1 2 $ 10 $ 4 $ 4 note 12. INCOME TAXES Edwards Lifesciences’ operations prior to the Distribution were included in the consolidated income tax returns of Baxter. The income tax information for periods prior to the Distribution was calculated as if Edwards Lifesciences were a stand-alone affiliated group for those periods. The Company’s income (loss) before provision for income taxes was generated from United States and international operations as follows: The provision for income taxes consists of the following: 49 Edwards Lifesciences Corporation Deferred income taxes have not been provided on the  undistributed earnings of the Company’s foreign subsidiaries of approximately $ 45 million as of December  31 , 2001 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. The components of deferred tax assets and liabilities are as follows: Years Ended December 31, (in millions) 2001 2000 1999 United States $ ( 67 ) $ ( 321 ) $ 92 International 58 62 21 $ ( 9 ) $ ( 259 ) $ 113 Years Ended December 31, (in millions) 2001 2000 1999 Current United States Federal $ — $ — $ 13 State and local, including  Puerto Rico 1 2 8 International 30 12 8 Current income tax expense 31 14 29 Deferred United States Federal ( 15 ) — 2 State and local, including  Puerto Rico ( 5 ) ( 1 ) — International ( 10 ) — — Deferred income tax  expense (benefit) ( 30 ) ( 1 ) 2 Total income  tax expense $ 1 $ 13 $ 31 December 31,  (in millions) 2001 2000 Deferred tax assets Compensation and benefits $ 7 $ 7 Net operating loss carryforwards 13 4 Tax credit carryforwards 3 1 Accrued liabilities 5 5 Allowance for doubtful accounts 5 4 Inventories 3 3 Other 5 4 Total deferred tax assets  41 28 Deferred tax liabilities Intangible assets ( 10 ) ( 27 ) Property, plant and equipment ( 13 ) ( 14 ) Gain on sale of assets ( 14 ) ( 13 ) Other ( 1 ) ( 5 ) Total deferred tax liabilities ( 38 ) ( 59 ) Valuation allowance ( 4 ) ( 3 ) Net deferred tax liabilities $ ( 1 ) $ ( 34 ) OTHER EXPENSE, NET