Invacare expects lower fourth quarter earnings
ELYRIA, Ohio - Invacare announced last week an anticipated fourth quarter shortfall of $30 million. The drop is due to the implementation of a new $20 million enterprise resource planning system that has disrupted order processing and created inefficiencies.
Net sales for the quarter will range from $370 million to $380 million, a decrease of 3% to 6% compared to the same quarter last year. Previous expectations for the quarter predicted an increase of 2% to 4%. For the full year, the company anticipates a net sales increase of 9% and 10%, compared to prior expectations of 11% to 12%.
Free cash flow for the year is expected to range from $35 million to $45 million, compared to a prior free cash flow guidance of $55 million to $65 million.
Mal Mixon, chairman and CEO said Invacare was disappointed by the results but said the company's outlook for 2006 has not changed.
"The company continues to execute on its previously announced plans to reduce costs and reconfirms that theses cost reduction initiatives should result in annualized pre-tax savings of at least $25 million," said Mixon. "The fourth quarter impacts of the ERP are disappointing, but this is a one-time event."
ERP implementation issues include an inability to ship products on time; increased overtime costs in manufacturing, distribution centers and customer service; and added costs to expedite customer orders. The company expects ERP implementation issues resolved by December 31.
"Our order intake capability has substantially recovered and we are confident we will be in a position to offer our customers significantly enhanced service and support early next year," said Mixon.