North America weighs on Invacare earnings
ELYRIA, Ohio – There is little update on Invacare’s final audit to comply with U.S. Food and Drug Administration (FDA) regulations, other than to say it’s in progress, according to a conference call on April 24.
During the call to discuss Invacare’s first quarter earnings for 2014, President and CEO Gerry Blouch said he couldn’t predict when the audit, the company’s third and the most comprehensive, would be completed.
“All audits can be viewed as a three-step process: is the process as designed compliant, are you following those processes, and do they feed the adjacencies?” he said. “They’re not silos; it’s an integrated system. So by nature, it bleeds into other things, and that’s the process we’re working through.”
The audit kicked off in late February, after being delayed from June and then November. Once completed, it will be submitted to the FDA for approval. Ultimately, the agency will conduct its own inspection.
As with previous quarters, Invacare’s consent decree with the FDA had a big impact on the company’s first quarter earnings. Net sales were $309.1 million, a 6.7% decrease compared to the same period last year. Net loss was $17.98 million this year vs. net earnings of $35.18 million last year.
The North America/HME segment was hardest hit. It saw net sales of $129.1 million for the first quarter, a 15% decrease compared to the same period last year. Net loss was $16 million this year vs. net earnings of $9.5 million last year, excluding restructuring charges. Sales from products manufactured at the Taylor Street facility were about $9.5 million this year vs. $17 million last year.
While the decreases in the segment are mostly due to Invacare’s consent decree with the FDA, which limits production at the Taylor Street facility, Blouch also noted the role of competitive bidding and Medicare’s pre- and post-payment audits in depressing sales, especially for lifestyle products.
“Competitive bidding has caused certain providers to abandon certain products and areas,” he said, “and audits have caused providers to be more conservative.”
One positive observation amidst all the upheaval: retail, Blouch said.
“Though utilization is down, there appears to be a meaningful shift toward retail sales,” he said. “We’ll continue to evaluate this market shift and our distribution footprint.”