MANAGEMENT’S DISCUSSION AND ANALYSIS  OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  Commencing October 1, 2002 the Company began reporting the results of its Japan business on a fully consolidated basis. Assuming the Japan business was consolidated for all periods presented, net sales by product line would have been as follows: Assuming the Japan business was consolidated for all periods presented, excluding the impact of foreign currency exchange rate fluctuations and assuming the sales of (a) the mechanical cardiac assist product line, (b) the perfusion product line, and (c) the perfusion services business had occurred as of January 1, 2000 (see “Disposition of Assets and Other Non- recurring Charges, net”), net sales by product line (“Adjusted Net Sales”) would have changed as follows: Years Ended December 31, Percent Change (dollars in millions) 2002 2001 2000 2002 2001 Cardiac Surgery $ 375.0 $ 338.6 $ 317.9 10.8% 6.5% Critical Care 251.1 245.2 247.7 2.4% (1.0%) Vascular 53.3 52.3 57.3 1.9% (8.7%) Perfusion 58.6 122.6 221.3 (52.2%) (44.6%) Other Distributed Products 43.2 42.5 47.2 1.6% (10.0%) Total net sales $ 781.2 $ 801.2 $ 891.4 (2.5%) (10.1%) Years Ended December 31, Percent Change (dollars in millions) 2002 2001 2000 2002 2001 Cardiac Surgery $ 376.4 $ 338.6 $ 308.7 11.2% 9.7% Critical Care 258.6 250.6 240.5 3.2% 4.2% Vascular 53.6 52.5 55.6 2.1% (5.6%) Perfusion 63.4 66.2 70.1 (4.2%) (5.6%) Other Distributed Products 49.0 46.4 46.2 5.6% 0.4% Total net sales $ 801.0 $ 754.3 $ 721.1 6.2% 4.6% Cardiac Surgery The Adjusted Net Sales growth in 2002 and 2001 in cardiac surgery products resulted primarily from strong sales growth of pericardial tissue valves and heart valve repair products in the United States and Japan. Management expects that its heart-valve therapy products will continue to serve as a key driver of Edwards Lifesciences’ sales growth. Critical Care The Adjusted Net Sales growth in 2002 and 2001 in critical care products was due primarily to strong sales of advanced technology catheter products and access and hemofiltration products, partially offset by the decline in base hemodynamic catheters. Critical care products have been, and are expected to continue to be, significant contributors to Edwards Lifesciences’ total sales. Vascular The Adjusted Net Sales growth for vascular products for 2002 was primarily the result of initial sales of the  Lifepath AAA endovascular graft system, which offset declining sales S36 Edwards Lifesciences Corporation Perfusion The Adjusted Net Sales decrease for perfusion for 2002 and 2001 was due primarily to an ongoing reduction of sales to Jostra AG, the purchaser during 2000 of the Company’s line of perfusion products in Western Europe Management continues to see opportunities in less invasive peripheral vascular disease treatments and intends to build on the Company’s strong base franchise by developing and marketing products such as (a) its  Lifepath AAA endovascular graft system, which is currently being marketed in Europe and undergoing clinical studies in the United States, and (b) a broad peripheral stent offering, which is scheduled for launch in mid-2003. of the Company’s base vascular products due to the ongoing shift to less invasive therapies and non-surgical options. The decline in Adjusted Net Sales for vascular products for 2001 resulted primarily from declines in base vascular products, and the wind-down of a distribution contract in France during 2001.