Invacare tries to even out impact of pandemic

Company balances increased demand for respiratory products with decreased demand for mobility products
Friday, May 15, 2020

ELYRIA, Ohio – Invacare saw decent sales in the first quarter of 2020, particularly in mobility and seating products, but the company expects a decline in the second quarter due to the coronavirus pandemic.

The company saw a constant currency 4% increase in sales for mobility and seating products in the first quarter, which took place largely before the pandemic hit, driven by a 16% increase in power wheelchairs and offset by a decline in sales for manual mobility products.

“We were very pleased with the mobility and seating performance in first quarter 2020,” said Matthew Monaghan, chairman, president and CEO. “We have been growing our commercial organization and improving our new product launch processes. The results in mobility and seating, especially with power wheelchairs, were strong.”

In April and going into May, however, the pandemic has been limiting end user access to the clinicians who perform fittings for mobility and seating products.

While Invacare has seen an increase in demand for beds and respiratory products due to the pandemic, mobility and seating products typically carry higher margins, so losses in that product category carry more weight.

“Which is why we’re anticipating that there will be some pressure on margins,” said Kathleen Leneghan, senior vice president and CFO.

Invacare is already taking operational and cost management actions to mitigate “margin dilution” like instituting: salary reductions for senior executives, including members of its board of directors; part-time work schedules; and furloughs for a limited number of associates.

“These actions, in addition to proactively borrowing on our bank credit facilities, strengthen our balance sheet and preserve liquidity to support our continued transformation efforts,” Leneghan said.

Invacare has also added temporary surcharges to mitigate significant costs from supply issues and expedited materials related to the pandemic and the increased demand for beds and respiratory products.

“We buy components from places like Italy and China and even across the United States, and you could imagine, in all those places local shelter orders have made it more difficult for those suppliers to assemble a workforce and for their suppliers to do the same thing,” Monaghan said. “So we’ve got a small army of people who are working really hard every day to overcome those, and then squeeze into what is effectively more expensive and much more limited logistics capacity around the world. So the costs have been extraordinarily high.”

Invacare expects sales for mobility and seating products to bounce back in the third quarter.

“Mobility and seating demand is expected to rebound with the resumption of elective care, easier access to clinics and the loosening of stay-at-home orders,” Monaghan said. “Predicting the exact profile of the change in demand is difficult, but we generally expect recovery to begin as early as the third quarter.”