Invacare Reports Results For Second Quarter 2019

Invacare Corporation (NYSE: IVC) (“Invacare” or the “company”) today reported results for the quarter ended June 30, 2019.

Key Metrics (2Q19 versus 2Q18*)

  • Reported net sales decreased 4.2% to $235.9 million and constant currency net sales(a) increased 0.6% as growth in mobility and seating and lifestyle products was offset by a nearly 20% decline, as anticipated, in respiratory sales. Excluding respiratory products, constant currency net sales grew 2.9% on a consolidated basis.
  • Gross margin as a percentage of net sales increased 20 basis points to 27.6% driven primarily by lower freight and material costs as part of the company’s continuous improvement initiatives, partially offset by unfavorable foreign exchange.
  • Constant currency SG&A(b) improved by $2.8 million, or 3.8%, driven primarily by restructuring actions implemented in 2018, and lower product liability costs.
  • Operating loss improved by $2.3 million to $4.5 million, primarily related to reduced SG&A expense partially offset by lower gross profit, higher restructuring costs, and unfavorable foreign exchange.
  • GAAP loss per share was $0.38 compared to $0.50. Adjusted net loss per share(c) was $0.31 compared to $0.41.
  • Free cash flow(d) was positive $0.3 million, an improvement of $24.9 million due primarily to reduced working capital and lower operating loss.
  • Adjusted EBITDA(e) was positive $3.6 million, an improvement of $5.2 million driven by reduced operating loss.

Key Financial Results

(in millions USD)



$ Change

% Change

Net Sales





Constant Currency Net Sales





Gross Margin % of Net Sales



20 bps

Gross Profit





Constant Currency SG&A





Operating Loss





Free Cash Flow




Adjusted EBITDA




* Date format is quarter and year in each instance

Executive Summary

Reflecting on the second quarter results, Matt Monaghan, chairman, president and chief executive officer, commented, “In the second quarter, we again made substantial improvements to our operating results in line with our transformation plan. We grew consolidated constant currency net sales, with strong growth in Europe and sequential improvements in North America. Operating loss improved by one-third driven by improvements in gross margin and SG&A expense offset by unfavorable foreign exchange. As a result, Adjusted EBITDA improved by more than $5 million to a positive $3.6 million and free cash flow was nearly $25 million better than prior year and prior quarter, resulting in positive cash flow for second quarter.

Per our plan, we have more work to do, and we remain confident in our ability to achieve our long-term objectives. We are experiencing solid overall performance in Europe with meaningful opportunities to drive greater profitability going forward. In North America, our top priority is to drive profitability through a multi-pronged strategy. Our more efficient business processes are yielding higher returns in respiratory, despite lower sales versus a year ago. In mobility and seating, we realized above-market unit growth and higher margins with revenue adversely affected by price and mix. As we progress further with our planned supply chain actions and process improvements in the coming quarters, we will be increasingly able to drive share gains with revenue growth at improving margin. We also expect our strong pipeline of new products in mobility and seating will help improve mix and drive growth.

We are confident our business transformation remains on-track and positions us to meet our 2019 goal of at least $20 million of Adjusted EBITDA. And, we expect to achieve our 2020 year-end run-rate goal of $85 to $105 million of Adjusted EBITDA with further growth and improvements over the next six quarters.”

Commenting on the financial results, Kathy Leneghan, senior vice president and chief financial officer, stated, “We delivered meaningful improvement in Adjusted EBITDA as we continue to make progress on our transformation strategy. It is clear that simplifying the business and previous cost optimization actions are bearing fruit, resulting in lower SG&A expense.

In 2Q19 we generated positive free cash flow of $0.3 million, a significant improvement of approximately $25 million compared to the prior year and sequentially, due to reduced working capital and lower operating loss. While we are pleased with our free cash flow results thus far, we may incur additional costs related to restructuring and capital expenditures in the second half of the year that are supportive of the transformation. For 2019, we continue to expect free cash flow at or favorable to usage of $25 million.”

Europe – Constant currency net sales increased 4.2% driven by an increase in mobility and seating sales partially offset by decreased sales of lifestyle and respiratory products. Operating income increased $0.3 million or 5.8%, principally due to constant currency net sales growth partially offset by unfavorable sales mix and unfavorable foreign exchange. The negative impact from foreign currency translation was $0.8 million.

North America – Constant currency net sales decreased 3.9%. Respiratory net sales continued to be impacted by previously discussed reimbursement changes and declined $4.4 million or 23.5%. Excluding respiratory, constant currency net sales increased 1.0% driven by higher lifestyle products revenues, partially offset by lower mobility and seating revenue. An increase in mobility and seating unit volume was more than offset by price and mix in the second quarter. Gross margin improved by 150 basis points despite the negative impact of tariffs and related material cost increases of approximately $0.4 million in 2Q19. Operating loss improved by $6.0 million primarily due to improved gross margin and reduced SG&A expense, including improvements in all product categories.

All Other – Constant currency net sales in the Asia Pacific region decreased 3.9% impacted by a slowdown in reimbursement in New Zealand as a result of the government fiscal year-end. Operating loss increased $3.1 million primarily driven by the decrease in net sales and increased corporate stock compensation expense. Operating loss for All Other includes the operating income of the Asia Pacific businesses offset by unallocated SG&A expenses and intercompany eliminations, which do not meet the quantitative criteria for determining reportable segments.

Financial Condition

The company’s cash and cash equivalents balances were $89.5 million and $116.9 million at June 30, 2019, and December 31, 2018, respectively. The decrease in cash was the result of funding the operating loss and related working capital as well as continued investment in our transformation strategy.

Free cash flow was a positive $0.3 million, an improvement of $24.9 million compared to 2Q18, and an improvement of $24.7 million sequentially. The improvement was driven by reduced working capital, primarily inventory and accrued expenses, and lower operating loss.

Full Year 2019 and 2020 Guidance Reaffirmed

For the full year 2019 the company continues to expect:

  • Adjusted EBITDA of at least $20 million; and
  • Free cash flow at or favorable to usage of $25 million.

Given the historical seasonal nature of the business and the benefit of previously announced cost reductions, the company anticipates a meaningful improvement in Adjusted EBITDA during the second half of 2019. The company also expects free cash flow to be breakeven in the second half, as improved net loss and inventory reductions will be offset by timing of cash collections from anticipated sales growth, as well as higher capital expenditures and restructuring costs that support the transformation.

The company reaffirms prior guidance and it expects to achieve an Adjusted EBITDA run-rate in the range of $85-$105 million by year-end 2020 with a combination of low single-digit sales growth, gross margin improvements and substantial cost reductions. The company participates in growing markets and believes its long-term economic potential remains strong.

The company believes that a return to positive Adjusted EBITDA driven by operational performance and its balance sheet will support the company’s transformation plans and enable the company to address future debt maturities. – Business Wire

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