Management’s Discussion and Analysis  of Financial Condition and Results of Operations Liquidity and Capital Resources The Company has two unsecured revolving credit agreements (the “Credit Facilities”) providing for up to an aggregate of $ 605 million in borrowings in multiple currencies. Borrowings currently bear interest at the London interbank offering rate (LIBOR) plus  0.78 %, which includes a facility fee. One of the credit agreements provides for long-term borrowings up to an aggregate of $ 430 million and expires on March  30 , 2005 . The other credit agreement provides for  short-term borrowings up to an aggregate of $ 175 million and  expires on March  29 , 2002 . The Company anticipates that it  Provision for Income Taxes The effective income tax rates for 2001 and  2000 were impacted by the non-deductibility of the majority of the charges recorded for the disposition of assets and other non-recurring items (see “Disposition of Assets and Other Non-Recurring Charges, net”). Excluding these non- recurring charges, the effective income tax rate was  28 % and 27 % for  2001 and  2000 , respectively. The effective income tax rate for  1999 was  27 %. Other Expense, net Other expense, net was $ 10 million, $ 4 million and $ 4 million in  2001 , 2000 and  1999 , respectively. The increase in  2001 resulted primarily from a $ 6 million charge related to the impairment of land investments. See Note  11 to the “Consolidated Financial Statements” for a summary of the amounts included in other expense, net. The Company’s sources of cash liquidity include cash and cash equivalents on hand, cash from operations, amounts available under credit facilities and other external sources of funds. The Company believes that these sources are sufficient to fund the current requirements of working capital, capital expenditures and other financial commitments. The Company further believes that it has the financial flexibility to attract long-term capital to fund short-term and long-term growth objectives. However, no assurances can be given that such long-term capital will be available to Edwards Lifesciences on favorable terms, or at all. No interest expense was incurred during  1999 as the Company’s indebtedness commenced on March  29 , 2000 (see “Liquidity and Capital Resources”). Interest Expense, net Interest expense, net was $ 23 million and $ 20 million in  2001 and  2000 , respectively. The increase in interest expense, net for  2001 resulted primarily from a  $ 6 million payment to unwind an interest rate swap agreement that had locked in a fixed interest rate on $ 75 million of floating rate debt. The decision to unwind this 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 was partially offset by the impact of the Company’s reduction of debt combined with lower interest rates on its floating rate debt. Other Operating Income Other operating income was  $ 16 million and $ 14  million in  2001 and  2000 , respectively. Other operating income represents the Company’s profit interest in the cardiovascular business in Japan beginning on April  1 , 2000 . For more information, see “Joint Venture in Japan.” Non-Recurring Spin-Off Expenses In connection with the spin-off of Edwards Lifesciences from Baxter, Edwards Lifesciences incurred certain one-time costs totaling $ 18 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. Net Income (Loss) Net income (loss), reflecting pro forma adjustments and excluding non-recurring charges, both as identified below, would have been as follows: Years Ended December 31, (in millions) 2001 2000 1999 As reported $ ( 11 ) $ ( 272 ) $ 82 Pro forma  adjustments, net of tax (a) — ( 9 ) ( 41 ) Non-recurring charges, net of tax (b) 74 332 — As adjusted $ 63 $ 51 $ 41 (a) Reflects the estimated incremental costs associated with being an independent public company and estimated interest expense associated with the Company’s debt that would have been incurred assuming the Company’s spin-off from Baxter had been completed as of January  1 , 1999 . (b) See “Disposition of Assets and Other Non-Recurring Charges, net,” “Non-Recurring Spin-Off Expenses,”“SG & A Expenses,”“Interest Expense, net” and “New Accounting and Disclosure Standards Adopted.” 20 Edwards Lifesciences Corporation