Originally Published MX July/August
2002
COVER STORY
Top Line, Bottom Line
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Sometimes, increasing a company's bottom line is all about balance. Getting the right balance of product-line offerings has been a major task for the executives of Edwards Lifesciences (Irvine, CA) over the first two-plus years of the company's existence.
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| On April 3, 2000, Edwards Lifesciences spun off from Baxter International and began trading on the New York Stock Exchange under the ticker symbol EW. Winners of an employee contest to articulate Edwards’s new ideals joined company chairman and CEO Mike Mussallem to ring the opening bell on the NYSE. |
Formed from the cardiovascular business units of Baxter International, Edwards started its independent life as a company in need of streamlining. Company leaders thus spent the first year shedding business units that Edwards did not intend to invest in, including a majority of the United States and Western European assets and rights related to its perfusion products (sold to Jostra AG; Hirrlingen, Germany), and the Novacor mechanical cardiac-assist product line (sold to World Heart Corp.; Ottawa, ON, Canada).
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Edwards
Lifesciences stock price since the company went public in April 2000.
Source: NYSE. (click to enlarge) |
The natural result of such divestitures was a drop in the company's top line, with net sales decreasing from $775 million in 2000 to $692 million in 2001—a fall of 8.2% at constant currency-exchange rates. Excluding the divestitures, Edwards's revenues in its remaining vascular and perfusion business decreased still further, dropping 5.9% and 13.7%, respectively, between 2000 and 2001.
Meanwhile, Edwards's rebalanced emphasis on its cardiac surgery and critical care businesses—which account for more than three-fourths of the company's total revenues—was beginning to pay off. In 2001, the company's revenues in cardiac surgery increased by 8.6% (at constant rates) to $329 million, while its critical care unit increased sales by 5.0% to $209.9 million.
The bottom line? Edwards's reported gross margin increased from 47% in 2000 to 53% in 2001, with gross profit also increasing from $364 million to $368 million. Such improved performance hasn't registered with the investment community yet, and Edwards continues to trade at values around the midpoint of its 52-week high and low ($21.75 at press time). But with continued focusing, it seems only a matter of time before the company's efforts begin to pay off in stronger share prices as well.
Copyright ©2002 MX
