Invacare’s earnings slide

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Friday, July 27, 2012

ELYRIA, Ohio – Invacare officials say a number of pressures drove a net loss of $1.98 million for the second quarter this year compared to net earnings of $10.66 million for the same period last year.

Chief among them: a U.S. Food & Drug Administration (FDA) investigation, which cost Invacare $7 million in remediation efforts in the second quarter alone and which continues to divert internal resources away from new product introductions; and CMS’s pending announcement of Round 2 contracts, which has made HME providers reluctant to buy equipment.

“The theme is, ‘Unless I need it, I’m not going to buy it; I don’t want money tied up in assets that I may not be able to deploy,’” said Gerald Blouch, president and CEO, during an earnings call July 26. “Once people know whether they’re in or out, they can start making business-as-usual decisions.”

Invacare reported net sales of $455 million for the second quarter this year compared to $466 million for the same period last year. It reported net earnings of $6.26 million for the first half of this year compared to $18.12 for the same period last year. It reported net sales of $888.5 million vs. $894.9 million.

HME sales down 7.4%

In addition to competitive bidding, prepayment reviews and other audits for HME have affected capital spending. As a result, Invacare reported net earnings of $5.7 million for North America/HME for the second quarter this year, excluding restructuring charges of $1.7 million, compared to $13.6 million for the same period last year. It reported net sales of $180.4 million vs. $194.7 million, a 7.4% drop.

Invacare reported net earnings of $13.4 million for North America/HME for the first half of this year, excluding restructuring charges of $1.9 million, compared to $26.9 million for the same period last year. Net sales were $356.5 million vs. $376.6 million, a 5.3% drop.

ISG sales up 8.5%

Invacare reported net earnings of $1.8 million for Invacare Supply Group (ISG) for the second quarter this year compared to $1.5 million for the same period last year. Net sales were $82.2 million vs. $75.7 million, an 8.5% increase.

It reported net earnings of $3 million for ISG for the first half of this year compared to $2.7 million for the same period last year. Net sales were $160.7 million vs. $149.8 million, a 7.3% increase.

FDA questions linger

The bulk of investor questions during the call focused on Invacare’s on-going negotiations with the FDA concerning violations at its corporate headquarters and manufacturing facility in Elyria. But Invacare officials had little new to report.

Are they confident the planned third-party audit in the fourth quarter of this year will resolve the FDA’s issues? “I do feel very confident,” Blouch said.

When do they expect to come to an agreement with the FDA? “We are quickly responding to any and all requests made by the FDA, they’re engaged in the issue and we’re having a constructive dialogue,” Blouch said.

If there is a shutdown, how long will it last? “The whole thing hinges on our successful implementation of remediation,” Blouch said. “We spent $7 million on that in the second quarter and I would have spent $10 million. That’s the linchpin to normal resumption of operations.”