What were the primary drivers of the decrease in net sales for the quarter?

The primary drivers for the 20.5% decrease in net sales for the three months ended September 30, 2001, were the sale of the US perfusion services business effective June 30, 2001, and a change in accounting for the Japan operations to the equity method. Additionally, the divestiture of the perfusion products line in certain regions also contributed to the decline.

How did the company manage to improve its gross profit margin despite lower sales?

The improvement in gross profit margin to 56.4% in Q3 2001 from 48.2% in Q3 2000 was primarily due to a more favorable product mix. The divestiture of lower-margin businesses, such as the US perfusion services, and increased sales of higher-margin cardiac surgery products contributed to this improvement.

What is the impact of the new SFAS No. 133 accounting standard on the company's financials?

Effective January 1, 2001, Edwards Lifesciences adopted SFAS No. 133, 'Accounting for Derivative Instruments and Hedging Activities.' This adoption resulted in a one-time cumulative after-tax increase in net loss of $1.5 million and adjustments to Accumulated Other Comprehensive Loss. For the current quarter, reclassifications from Accumulated Other Comprehensive Loss affected Cost of Goods Sold and Interest Expense, net.

Can you explain the significant loss on the sale of assets reported in the quarter?

Yes, the company reported a pre-tax loss of $68.2 million on the sale of Edwards Lifesciences Cardiovascular Resources, Inc. (ELCR) to Fresenius Medical Care AG on June 30, 2001. This sale represented the company's perfusion services business in the United States and Puerto Rico.

EW 10-Q Quarterly Report Q3 FY2001 — Revenue, Net Income, EPS

Summary

Edwards Lifesciences Corporation's (EW) Q3 2001 10-Q filing reveals a challenging quarter with a significant year-over-year decline in net sales, primarily impacted by divestitures and changes in accounting for international operations. For the three months ended September 30, 2001, net sales were $147.8 million, down from $185.8 million in the prior year's quarter. The company experienced a substantial decrease in its Perfusion Products and Services segment, largely due to the sale of its US perfusion services business and divestitures in Western Europe. While Cardiac Surgery product sales showed modest growth, Critical Care and Vascular segments saw slight declines or remained flat. The nine-month period ending September 30, 2001, also reflected a downward trend in sales, totaling $532.1 million compared to $616.4 million in the same period of 2000. This decline was exacerbated by a change in accounting for its Japan operations, which moved from consolidation to the equity method. Despite the top-line pressures, the company managed to improve its gross profit margin to 56.4% in the current quarter from 48.2% in Q3 2000, attributed to a favorable product mix including higher-margin cardiac surgery products and the divestiture of lower-margin businesses. However, operating income turned negative for the nine-month period due to significant non-recurring charges and a loss on the sale of assets.

Key Highlights

1Net sales for the three months ended September 30, 2001, decreased by 20.5% to $147.8 million compared to $185.8 million in the prior year, driven by divestitures and accounting changes in Japan.
2The Perfusion Products and Services segment experienced an 80.0% decrease in net sales for the three months ended September 30, 2001, primarily due to the sale of the US perfusion services business and divestitures in Europe.
3Gross profit margin improved significantly to 56.4% in Q3 2001 from 48.2% in Q3 2000, reflecting a favorable shift in product mix towards higher-margin offerings and divestiture of lower-margin businesses.
4Operating income for the nine months ended September 30, 2001, was a loss of $3.0 million, compared to a loss of $263.2 million in the same period of 2000, with the prior year heavily impacted by non-recurring charges.
5The company reported a net income of $14.5 million for the three months ended September 30, 2001, a substantial increase from $4.4 million in the prior year's quarter, and earnings per basic share of $0.25.
6For the nine months ended September 30, 2001, the company reported a net loss of $28.5 million, a significant improvement from a net loss of $287.6 million in the prior year's comparable period.
7Cash provided by operating activities for the nine months ended September 30, 2001, was $54.5 million, a decrease from $87.5 million in the prior year, partly due to increased inventory levels.

Edwards Lifesciences Corp Quarterly Report for Q3 Ended Sep 30, 2001

Summary

Key Highlights

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