Invacare earnings slide

Thursday, August 31, 2006

ELYRIA, Ohio - Uncertainty in the Medicare market battered Invacare's second quarter performance, pushing the company's net sales down 6% to $371.8 million. Net sales for the first six months decreased 4% to $733.7 million.
"While our lack of sales growth continues to be disappointing, it is a reflection of the difficult industry conditions that exist," stated CEO Mal Mixon in the company's second quarter financial report, released in late July. "Providers tell me they have never seen reimbursement conditions as unsettled and onerous as they are today."
The overhanging uncertainty has led providers to become excessively cautious when making capital investments, Mixon said.
That caution helped depress Invacare's sales of respiratory products by 22% in the second quarter. The company attributed that drop "largely due to slower demand in the HomeFill oxygen system product line."
According to Invacare's second-quarter financial statement:
- Sales of standard products decreased by 5% for the quarter, with particular weakness in manual wheelchairs and patient aids (canes, walkers, bath aids) due to low-cost Asian imports. However, standard product revenues improved sequentially by 3% over first quarter, as a result of pricing and product line adjustments, facilitated by Asian sourcing.
- Sales of rehab products decreased 3%, primarily due to continued Medicare power wheelchair eligibility pressures and Medicaid-related reimbursement pressures. Sales of consumer power wheelchairs were down 7% and continued to be acutely impacted by these reimbursement issues.
- Since Invacare began reducing costs in July 2005, it has eliminated roughly 450 jobs.
"While the protracted uncertainty is disruptive and unnecessary, these issues will at some point be resolved and we can again expect organic growth consistent with underlying demographics," Mixon stated. "As an industry leader, we will continue to work hard for the industry to help educate our government as to the benefits of homecare and bring the numerous reimbursement challenges to a satisfactory conclusion."