Invacare Corporation Announces Financial Results f Invacare Corporation Announces Financial Results for the Quarter and Year Ended December 31, 2012
Friday, February 8, 2013 6:30 am EST
ELYRIA, Ohio--(BUSINESS WIRE)--Invacare Corporation (NYSE: IVC) today announced its financial results for the quarter and year ended December 31, 2012.
During the fourth quarter of 2012, the Company announced the sale of its Invacare Supply Group (ISG) medical supplies business, which was completed on January 18, 2013. Accordingly, the results for the quarter and year ended December 31, 2012, include the results of ISG as a discontinued operation. Since ISG was not sold until 2013, the CEO Summary addresses the results of the continuing operations and Invacare Supply Group as a combined operation for the year ended December 31, 2012. However, the primary text of the release, including the consolidated results, focuses on continuing operations. For more information on the Company's continuing, discontinued and combined operations, see the detailed condensed consolidated financial statements at the end of the release.
CEO SUMMARY
Commenting on the Company's focus in 2012, Gerald B. Blouch, President and Chief Executive Officer, stated, ``2012 was one of the most challenging years in the Company's history. The year was dominated by our consent decree negotiations with the United States Food & Drug Administration (FDA). Negotiations were completed and the consent decree became effective in December, necessitating a temporary cessation of production at our Taylor Street wheelchair manufacturing facility to allow time to implement compliance controls. In addition, over the past two years, most significantly in 2012, we made a concerted effort to update and implement a comprehensive portfolio of processes compliant with the FDA's Quality System Regulation. These processes will be standardized across all of our FDA registered facilities. To accelerate our progress on the remediation, we engaged third-party medical device experts and extensively engaged the entire management team. As a result, we suspended most new product development over the past year, because the majority of our design engineering team was redeployed to focus on remediation. The lack of new products coupled with uncertainty among our customers over Invacare's ability to offer continuous product supply from the Taylor Street facility resulted in a loss of market share and gross margin pressure in the North America/Home Medical Equipment (HME) segment last year.”
Blouch continued, ``While our quality systems remediation is subject to approval by the FDA, we have made significant progress. In order to resume full operations at the Taylor Street and corporate facilities, the terms of the consent decree require three expert certification audits followed by a comprehensive FDA inspection and receipt of the FDA's confirmation of compliance. The first two of three expert certification audits started in December and are still in progress. We expect to complete these two certification audits within the first quarter and complete the third expert certification audit in the second quarter of 2013. Completing the remediation and receiving the FDA's approval on the second certification audit related to design controls will allow us to resume design activities and refocus our engineering resources on new product development. Introducing new product solutions to the market will get us back on track to regaining market share and resuming our globalization program to harmonize core product offerings and deliver on our long-term goal of $100 million in cost improvements and re-establish high single-digit operating margins.”
Commenting on Invacare's combined 2012 results, Blouch said, ``Largely as a result of the aforementioned challenges, as well as the ongoing pressures primarily in the North America/HME and Asia/Pacific segments, the Company had:
• Adjusted earnings per share(a) for the year, including discontinued operations, of $0.87 in 2012 compared to $2.05 in 2011;
• An increase of 0.9% in organic net sales on a combined basis compared to last year with strong performances from Europe and the Institutional Products Group segments, as well as the discontinued operations of ISG; and
• Free cash flow(c) of $49.1 million in 2012. Applying the net proceeds of $146.6 million from the January 2013 sale of ISG to the December 31, 2012 debt levels on a pro forma basis, the Company's debt reduction over the past five years would have been approximately $500 million, since the peak of our total debt outstanding in the first quarter of 2007 of approximately $602 million.
Blouch continued, ``In December 2012, we made two positive announcements about our future. First, our analysis of the final regulations of the Affordable Care Act's 2.3% excise tax on medical devices indicated that the impact of the tax on Invacare is expected to be less than $1.5 million annually, as most of our products are exempt based on the retail exemption. We intend to pass this increase on to the market. Second, we announced the divestiture of Invacare Supply Group, our domestic medical supplies business. The sale, which closed on January 18, 2013, generated net proceeds of $146.6 million that were used to reduce debt outstanding under the Company's revolving credit facility. This additional capital capacity will better position us to explore selective niche acquisitions to accelerate new product development after we have completed our quality systems remediation.”
Looking forward, Blouch said, ``As difficult a year as this has been, our quality systems investments will make us an even stronger company and will facilitate complexity reduction, which will drive the $100 million in structural benefits that we intend to achieve over the long-term from our globalization program. While the United States HME industry faces several challenges, including the second round of National Competitive Bidding where the bid rates were recently announced, the underlying fundamentals continue to be compelling. The aging of the population, growing prevalence of chronic illness and healthcare reform all bode well for the future of our business. We expect that, after we emerge from the remediation process, we will continue to strengthen our product portfolio to serve the needs of the market with innovative and cost-effective solutions, and will restore our profitability to historic levels.”
https://newsroom.invacare.com/press-release/2013/invacare-corporation-announces-financial-results-quarter-and-year-ended-december-
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