ArthroCare (FRA:BQK) Operating Income : €20.1 Mil (TTM As of Mar. 2014)

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What is ArthroCare Operating Income?

ArthroCare's Operating Income for the three months ended in Mar. 2014 was €6.7 Mil. Its Operating Income for the trailing twelve months (TTM) ended in Mar. 2014 was €20.1 Mil.

Operating Margin % is calculated as Operating Income divided by its Revenue. ArthroCare's Operating Income for the three months ended in Mar. 2014 was €6.7 Mil. ArthroCare's Revenue for the three months ended in Mar. 2014 was €69.4 Mil. Therefore, ArthroCare's Operating Margin % for the quarter that ended in Mar. 2014 was 9.58%.

ArthroCare's 5-Year average Growth Rate for Operating Margin % was 0.00% per year.

Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition. ArthroCare's annualized ROC % for the quarter that ended in Mar. 2014 was 9.06%. ArthroCare's annualized ROC (Joel Greenblatt) % for the quarter that ended in Mar. 2014 was 36.19%.

ArthroCare Operating Income Historical Data

The historical data trend for ArthroCare's Operating Income can be seen below:

* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.

* Premium members only.

ArthroCare Operating Income Chart

ArthroCare Annual Data

Trend

Dec04

Dec05

Dec06

Dec07

Dec08

Dec09

Dec10

Dec11

Dec12

Dec13

Operating Income

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-0.47

41.03

-11.76

48.87

23.33

ArthroCare Quarterly Data
	Jun09	Sep09	Dec09	Mar10	Jun10	Sep10	Dec10	Mar11	Jun11	Sep11	Dec11	Mar12	Jun12	Sep12	Dec12	Mar13	Jun13	Sep13	Dec13	Mar14
Operating Income	Get a 7-Day Free Trial															10.40	-8.38	9.54	12.26	6.65

ArthroCare Operating Income Calculation

Operating Income, is the profit a company earned through operations. All expenses, including cash expenses such as cost of goods sold (COGS), research & development, wages, and non-cash expenses, such as depreciation, depletion and amortization, have been deducted from the sales.

Operating Income for the trailing twelve months (TTM) ended in Mar. 2014 adds up the quarterly data reported by the company within the most recent 12 months, which was €20.1 Mil.

ArthroCare (FRA:BQK) Operating Income Explanation

1. Operating Income or EBIT is linked to Return on Capital for both regular definition and Joel Greenblatt's definition.

ArthroCare's annualized ROC % for the quarter that ended in Mar. 2014 is calculated as:

	ROC % (Q: Mar. 2014 )
=	NOPAT	/	Average Invested Capital
=	Operating Income * ( 1 - Tax Rate % )	/	( (Invested Capital (Q: Dec. 2013 )	+	Invested Capital (Q: Mar. 2014 ))	/ count )
=	26.612 * ( 1 - 23% )	/	( (215.089	+	237.298)	/ 2 )
=	20.49124	/	226.1935
=	9.06 %

where

	Invested Capital		(Q: Dec. 2013 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	433.723	-	61.791	-	( 156.843	-	max(0, 62.049	-	242.636	+	156.843	))
=	215.089

	Invested Capital		(Q: Mar. 2014 )
=	Total Assets	-	Accounts Payable & Accrued Expense	-	Excess Cash
=	Total Assets	-	Accounts Payable & Accrued Expense	-	( Cash, Cash Equivalents, Marketable Securities	-	max(0, Total Current Liabilities	-	Total Current Assets	+	Cash, Cash Equivalents, Marketable Securities	))
=	413.14	-	37.746	-	( 138.096	-	max(0, 37.945	-	222.922	+	138.096	))
=	237.298

Note: The Operating Income data used here is four times the quarterly (Mar. 2014) data.

2. Joel Greenblatt's definition of Return on Capital:

ArthroCare's annualized ROC (Joel Greenblatt) % for the quarter that ended in Mar. 2014 is calculated as:

	ROC (Joel Greenblatt) %		(Q: Mar. 2014 )
=	EBIT	/	Average of (Net fixed Assets	+	Net Working Capital)
=	EBIT	/	Average of (Property, Plant and Equipment	+	Net Working Capital)
			Q: Dec. 2013		Q: Mar. 2014
=	EBIT	/	( ( (Property, Plant and Equipment + Net Working Capital)	+	(Property, Plant and Equipment + Net Working Capital) )	/	count )
=	26.612	/	( ( (37.408 + max(23.744, 0))	+	(39.051 + max(46.881, 0)) )	/	2 )
=	26.612	/	( ( 61.152	+	85.932 )	/	2 )
=	26.612	/	73.542
=	36.19 %

where Working Capital is:

	Working Capital		(Q: Dec. 2013 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(38.551	+	33.79	+	13.452)	-	(61.791	+	0.258	+	0)
=	23.744

	Working Capital		(Q: Mar. 2014 )
=	(Accounts Receivable	+	Total Inventories	+	Other Current Assets)	-	(Accounts Payable & Accrued Expense	+	Defer. Rev.	+	Other Current Liabilities)
=	(36.885	+	35.215	+	12.726)	-	(37.746	+	0	+	0.199)
=	46.881

When net working capital is negative, 0 is used.

Note: The EBIT data used here is four times the quarterly (Mar. 2014) EBIT data.

3. Operating Income is also linked to Operating Margin %:

ArthroCare's Operating Margin % for the quarter that ended in Mar. 2014 is calculated as:

Operating Margin %	=	Operating Income (Q: Mar. 2014 )	/	Revenue (Q: Mar. 2014 )
	=	6.653	/	69.448
	=	9.58 %

4. Please click Growth Rate Calculation Example (GuruFocus) to see how GuruFocus calculates Wal-Mart Stores Inc (WMT)'s revenue growth rate. You can apply the same method to get the Operating Income growth rate using Operating Income per share data.

Be Aware

Compared with a company's EBITDA margin, Operating Margin can be manipulated by adjusting the rate of depreciation, depletion and amortization (DDA).

If a company is facing competition, its Operating Margin may decline. Often the Operating Margin declines well before the company's revenue or even profit decline. Therefore, Operating Margin is a very important indicator of whether the company is facing problems.

For instance, by 2012, Nokia (NOK)'s problems were well known and its stock had lost more than 90% of its market value since 2007. But Nokia's Operating Margin had already been in decline since 2002, although its earnings per share were still rising. Investors who paid attention to Operating Margin would have avoided this huge loss. The same can be said for Research-in-Motion (RIMM).

Therefore, Operating Margin is a very important screening filter for GuruFocus. GuruFocus's Buffett-Munger screener requires that the profit margin is either consistent or expanding. The Model Portfolio of the Buffett-Munger screener has outperformed the market every year since inception in 2009.

ArthroCare Operating Income Related Terms

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ArthroCare (FRA:BQK) Business Description

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Website

http://www.arthrocare.com

ArthroCare was incorporated in California in 1993 and reincorporated in Delaware in 1995. The Company is a multi-business medical device Company that develops, manufactures and markets minimally invasive surgical products, many of which are based on its patented Coblation(r) technology. The Company has grown well beyond its roots in arthroscopy to capitalize on numerous market opportunities across several medical specialties, improving many existing soft-tissue surgical procedures and enabling new minimally invasive procedures. With its innovative technologies, the Company is improving the lives of individuals suffering from conditions as diverse as torn rotator cuffs and anterior cruciate ligaments to herniated discs and enlarged tonsils/tonsillitis. The Company currently markets minimally invasive surgical products across three core business units-ArthroCare Sports Medicine, which include shoulder and knee arthroscopic products; ArthroCare Spine, which include spinal and neurosurgery products; and ArthroCare Ear, Nose and Throat, which include ear, nose, throat and the Visage(r) cosmetic products; - but also has developed, manufactured and marketed Coblation-based and complementary products for application in neurology, cosmetic surgery, urology and gynecology, with research continuing in additional areas. In each of its core business units, the Company is focusing on driving the application of enabling technologies, primarily for plasma-based soft tissue removal, and increasing the number of minimally invasive procedures being performed. The Company is marketing and selling its arthroscopic/sports medicine, spinal surgery, ENT and cosmetic surgery products using a combination of distributors supported by regional sales mangers, a direct sales force and corporate partners to sell its products both domestically and internationally. The Company owns over 170 issued U.S. patents and over 195 issued international patents. The Company's products are considered medical devices and are subject to regulation in the United States, with the approval of FDA for each of its products. Its primary competitors include Medtronic, Inc., Smith & Nephew, Stryker Corporation, Johnson & Johnson, Olympus (through its subsidiary Gyrus) and Arthrex, Inc.

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