Invacare considers recall, sells recliner business
ELYRIA, Ohio – Invacare announced on Aug. 6 that it’s considering repairing or replacing “an anomaly” in one of the components in all potentially affected power wheelchairs, at a possible cost of $3.8 million.
Invacare identified the anomaly, reported it to the U.S. Food and Drug Administration (FDA) and, initially, proposed an action plan of issuing an end user notification and repairing or replacing the component for only affected users. Based on this plan, the company reported in its financial results on July 25 a warranty expense estimate of $0.4 million for the second quarter ended June 30, 2013.
“While our action plan is still under review, we believe it is appropriate to adjust our warranty accrual to give investors a more comprehensive view of the potential costs,” stated President and CEO Gerry Blouch in a press release. “When we have more information, we will communicate with our customers.”
Blouch characterized the size of the recall this way: “The occurrence of this anomaly was discovered in a fraction of a percentage of components in the field.”
As a result, Invacare has revised its financial results for the second quarter to reflect an increased warranty expense accrual of $3.4 million to a total of $3.8 million for the three and six months ended June 30, 2013. Additionally, it is decreasing warranty expense by $0.2 million for the conclusion of a prior unrelated issue with the FDA.
The $3.8 million is an estimate based on the company’s actual experience with repairs and replacements in prior field actions, according to the release.
“Any warranty accrual recorded related to this issue would be subject to adjustment in future periods as new developments or experiences change the company’s estimate of the total cost of this matter,” the company states.
Champion no longer
Also on Aug. 6, Invacare announced that it has completed the sale of Champion Manufacturing Inc., its domestic medical recliner business for dialysis clinics, for about $45 million in cash, subject to certain post-closing adjustments.
The buyer: Los Angeles-based private equity firm Levine Leichtman Capital Partners.
The sale is consistent with Invacare’s globalization strategy to harmonize core global product lines and reduce complexity within its business, according to a press release.
“The net proceeds from this divestiture also give us the opportunity to strengthen our balance sheet through the continued reduction of debt,” stated Blouch in the release.
Net sales for Champion were about $22.1 million for 2012 and $12.8 million for the six months ended June 30, 2013. EBITDA: $5.5 million for 2012 and $3.1 million for the six months ended June 30, 2013.
SunTrust Robinson Humphrey acted as exclusive financial adviser and Calfee, Halter & Griswold LLP acted as legal counsel to Invacare in the transaction.