A collection of one-time charges and write-downs contributed to sharply lower earnings at Philips Healthcare in the third quarter (end-September 30), even as sales grew slightly after currency adjustments.
For the period, the Healthcare division reported revenues of $2.887 billion (2.258 billion euros), up 1% from revenues of $2.856 billion (2.234 billion euros) after currency adjustments. Revenues fell 1% on an unadjusted basis.
The company said that the division's earnings before interest, taxes, and amortization (EBITA) fell into the red, with the division reporting a loss of $192 million (151 million euros), compared with positive EBITA of $420.6 million (329 million euros) in the third quarter of 2013.
A number of one-time charges and write-downs contributed to the loss, according to Philips. Primary among them was a charge of $467 million (366 million euros) related to a jury award against the company in litigation over patient monitoring systems filed by Masimo. Philips is planning to appeal the verdict.
The company also wrote off $62.6 million (49 million euros) for inventory write-downs related to its shutdown of manufacturing at its CT plant in Cleveland. The company voluntarily shut down production after an inspection by the U.S. Food and Drug Administration (FDA) earlier this year found issues related to good manufacturing process controls.
Outside of the one-time charges, EBITA for Healthcare still fell to 12% of sales, compared with 14.6% of sales in the corresponding quarter of 2013, a decline that Philips attributed to operational losses related to the Cleveland facility, as well as negative currency impacts.
The company said it has resumed production of iCT and Ingenuity CT scanners at the Cleveland plant, and it will ramp up manufacturing through the first quarter of 2015. This will contribute to improved financial performance in the Healthcare division in the fourth quarter and into 2015, Philips said.