MANAGEMENT’S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  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 $45.2 million during 2000 primarily related to the impairment of goodwill unrelated to perfusion products ($37.0 million), impairment of other intangibles ($5.1 million) and the write-down of non- productive assets ($3.1 million). The following is a summary of other (income) expense, net: During the quarter ended September 30, 2002, the Company recorded a $3.3 million charge for legal, administrative and regulatory expenses related to the acquisition of the cardiovascular business in Japan (see “Joint Venture in Japan”). In connection with the spin-off of Edwards Lifesciences from Baxter, Edwards Lifesciences incurred certain one- time costs totaling $18.4 million during 2000. These costs primarily related to the coordination and implementation of the transaction and the recruitment of personnel to perform new corporate administrative functions.  Effective April 24, 2002, Edwards Lifesciences and  Medtronic, Inc. entered into an agreement related to certain patent infringement claims pursuant to which the Company received a one-time cash payment of $20.0 million (recorded as a gain of $14.7 million, net of legal expenses). Foreign exchange gains and losses relate to global trade and intercompany receivable balances. Other operating income was $11.0 million and $16.4 million in 2002 and 2001, respectively. Other operating income represents the Company’s 90% profit interest in the cardiovascular business in Japan effective from April 1, 2000 through September 30, 2002. For more information, see “Joint Venture in Japan.”  The effective income tax rates for 2002, 2001 and 2000 were impacted by several non-recurring items as follows: Interest expense, net was $11.5 million and $22.9 million in 2002 and 2001, respectively. The decrease in interest expense, net for 2002 resulted primarily from (a) the Company’s reduction of debt, (b) lower interest rates on its floating rate debt, and (c) a $6.2 million charge during the three months ended June 30, 2001 related to a payment to unwind an interest rate swap agreement that had locked in a fixed interest rate on $75.0 million of floating rate debt. The decision to unwind the interest rate swap agreement resulted from the Company’s pay-down of underlying floating rate debt not anticipated to be necessary in funding future requirements of working capital, capital expenditures and other financial commitments.  The increase in interest expense, net for 2001 resulted primarily from the $6.2 million charge to unwind the interest rate swap agreement, described above, partially offset by the impact of the Company’s reduction of debt and lower interest rates on its floating rate debt. S40 Edwards Lifesciences Corporation Interest Expense, net Provision for Income Taxes Other Operating Income Non-recurring Spin-off Expenses Other (Income) Expense, net Years Ended December 31, (in millions) 2002 2001 2000 Legal settlement, net $ (14.7) $ — $ — Foreign exchange  (gain) loss (4.1) 5.0 2.3 Asset dispositions and  write-downs, net 2.3 6.5 0.5 Investment write-offs 1.4 — — Other (0.3) (0.9) 1.0 $ (15.4) $ 10.6 $ 3.8 Years Ended December 31, (in millions) 2002 2001 2000 Provision for income  taxes on recurring  operations $ 29.1 $ 24.5 $ 18.4 Tax benefit from sale  of perfusion services  subsidiary in 2001 (20.1) (11.9) — Tax benefit from  impairment charge  on WorldHeart  investment (13.3) — — Impact of legal  settlement 5.6 — — Other (1.0) (11.1) (5.1) Provision (benefit)  for income taxes,  as reported $ 0.3 $ 1.5 $ 13.3