Invacare tries to speed up order conversions 

ELYRIA, Ohio – Invacare expects recent strategic funding will increase the company’s liquidity and flexibility, helping it to reduce an elevated backlog. 

The company announced in late July that it had secured a term loan agreement of up to $104.5 million, with certain funds managed by Highbridge Capital Management LLC.  

“We expect this strategic funding will enable us to more effectively work with our suppliers and find alternative solutions to short-term supply constraints, which helps us more quickly convert backlog customer orders to sales and accelerate transformative plans to drive long-term profitability,” said Matt Monaghan, chairman president and CEO during a recent conference call to discuss the company’s financial results for the second quarter. “We anticipate the additional liquidity will also enhance our transformation plan to optimize product portfolio and physical footprint, lower operating costs and improve operating leverage.” 

Invacare has also entered into private exchange agreements providing for the settlement of $5 million aggregate principal amount of its outstanding 5% Series II convertible senior notes due 2024 and up to $55.3 million aggregate principal amount of its outstanding 4.25% convertible senior notes due 2026. 

While the increased liquidity and flexibility will help Invacare in a number of ways, reducing an elevated backlog that has affected all product categories and regions is a top priority. For respiratory products, the company has the added benefit of reduced COVID-related demand in the next several quarters.  

“We continue to have really great interest from customers,” Monaghan said, “and we needed to take some steps to make sure that that’s converting from backlog orders to sold orders as quickly as possible.” 

Invacare also has the added benefit of now converting orders at pricing that better reflects its current costs. The company had about 410 basis points of gross margin in the first quarter compared to 160 basis points in the second quarter. 

“We did see an improvement in the margin and that primarily is related to the effectiveness of pricing as we continue through the year,” said Kathy Leneghan, senior vice president and CFO. “In Q1, we would have fulfilled orders that would have been at old pricing that would have existed in the backlog. And so, we are seeing a more effective pricing regimen in the second quarter, which is helping to offset the higher cost base that we have, as well.”