HME giant battles tough times

Wednesday, February 28, 2007

ELYRIA, Ohio - In his 27 years leading the industry's largest manufacturer, Invacare CEO Mal Mixon has never backed down from a fight, and he's not about to start now. In early February, the company, which has grown from $19 million to $1.5 billion in annual revenues under Mixon's watch, issued a press release filled with mostly negative financial information: a $300-million dollar write-off; declining margins and sales; rising interest rates on its debt. That's not the kind of news any company likes to issue, and Mixon acknowledged that the current HME marketplace, with its declining reimbursement and onerous regulatory requirements, is a tough place to make a living. But at Invacare, he added, "It's not an issue of having a tight noose around our neck. We have a lot of room to continue to be aggressive and grow the company." HME News recently talked to Mixon about the fortunes of his company and the HME industry. Here's what he had to say.
HME News: Recently we've talk to executives at Drive and Graham-Field who attribute some of their growth to taking market share from Invacare. Do you think that is the case?
Mal Mixon: I'm sure we've lost some market share. But keep this in mind: We are huge in the market. My biggest accounts last year were way down, not because we lost business, but because they were conservative in their buying and trying to preserve cash. And a lot of the little guys are scared to invest, and when you are scared and insecure, you try to make the used equipment last another year. It's very sluggish. With all of that going on, we're still only down $30 million on $1.5 billion.
HME: As a publicly traded company, Invacare can't hide anything. If you're not doing well, you've got to disclose it. That's not the case with your privately held competitors, some of whom claim to be doing quite well.
Mixon: We don't know anything about any of our competitors, but I seriously doubt that anyone is not facing the same challenges that we are. We're lowering our costs as aggressively as we can without compromising quality. We're poised to be very competitive with those companies, which wasn't the case three years ago when we didn't have our China operation. We're going to slug it out. We've never been, in my view, stronger and better prepared to deal with our competition and to take care of our customers. We are long-term players. We're committed to this industry--I wouldn't be spending several million dollars on lobbying if I weren't committed to the industry.
HME: In the company's January release, Invacare stated that it is tightening its credit policy with some customers and setting aside $25 million as a hedge against bad debt. Why is that?
Mixon: We've assessed that half of our business in consumer power goes to two large players, and this whole area is at high risk. These companies have not gone bankrupt, but many of them have major challenges, and as a public company, we're taking the conservative position that they may go bankrupt.
HME: Once Invacare refinances its debt, you'll have about $100 million to work with. What will you use that money for?
Mixon: Let's say business spikes and receivables go up by $50 million, I'd have the money to finance them. Or if I want to open a new plant and it costs $20 million, I'd have the capital to do it. If I wanted to make a small acquisition, I've got the money to do it.
HME: Do you ever consider retiring?
Mixon: Obviously, I will retire, but I haven't picked a date. I've still got my health and energy. I've got my net worth wrapped up in the company, and no one is pushing me to retire. I'm 66 and I hope I can work until I'm 70. Then I'd like to be chairman on the board. I still think it is an exciting industry.
HME: How do you mean exciting?
Mixon: The baby boomers are coming; the patient base continues to grow. We couldn't be in a fundamentally stronger business. Home care is one sixth the cost of institutional care, and when Hillary Clinton or whoever gets elected the next president, they are going to realize that home care is the answer, not the problem.