MANAGEMENT’S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  of use, safety and reliability of its current products and to expand the applications of its products as appropriate. 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: The elimination of goodwill amortization for the year 2002 resulted from the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (see “New Accounting and Disclosure Standards Issued”). Effective January 1, 2002, the accounting for goodwill changed from an amortization method to an impairment-only approach. The reduction in goodwill amortization for the year 2001 resulted primarily from (a) the sale of the perfusion services business in the United States and the disposition of the related goodwill effective June 30, 2001, and (b) the write- down of goodwill related to the sale of the Company’s line of perfusion products in the United States and Western Europe effective June 30, 2000 (see “Disposition of Assets and Other Non-Recurring Charges, net”). 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 impairment charge to adjust the carrying values to estimated fair values. As a result of this evaluation, Edwards Lifesciences recorded a non-cash charge of $14.8 million 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). In September 2002, the Company recorded a $67.4 million pretax 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 decision to record the charge was based primarily on delays in WorldHeart’s product development timelines, arising from its revised strategy. Effective June 30, 2001, the Company sold the stock of Edwards Lifesciences Cardiovascular Resources, Inc. (“ELCR”) to Fresenius Medical Care AG (“Fresenius”) for cash proceeds of $45.0 million (the “ELCR Sale”), resulting in a pre-tax loss of $68.2 million. 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 S38 Edwards Lifesciences Corporation During 2000, the Company sold the majority of its United States and Western European assets and rights related to its perfusion products to Jostra AG (the “Jostra Sale”). In accordance with SFAS No.121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,” and Staff Accounting Bulletin No. 100, “Restructuring and Impairment Charges,” the Company recorded a pre-tax impairment charge of $290.5 million in 2000 to reduce the carrying value of these assets to fair value based upon the estimated net proceeds from the Jostra Sale. Assets subject to this impairment charge consisted primarily of goodwill ($245.0 million) and special-use manufacturing and support assets. The goodwill impairment Goodwill Amortization Other Non-recurring Charges ($14.8 million) Disposition of Assets and Other Non-recurring Charges, net 2002 2001  Loss on Sale of Assets ($68.2 million) 2000 Loss on Sale and Abandonment of Assets ($302.0 million)