-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DdDWKjW6HJL6y9sc61N/BHbWWRaBZbvVuIDXdslRe8cY185arWDDoqjVFKTgFhPA bjk26KRF3kLt5uRoRIWz7w== 0000742112-04-000033.txt : 20041021 0000742112-04-000033.hdr.sgml : 20041021 20041021093104 ACCESSION NUMBER: 0000742112-04-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20041021 ITEM INFORMATION: Results of Operations and Financial Condition FILED AS OF DATE: 20041021 DATE AS OF CHANGE: 20041021 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVACARE CORP CENTRAL INDEX KEY: 0000742112 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 952680965 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-15103 FILM NUMBER: 041088727 BUSINESS ADDRESS: STREET 1: ONE INVACARE WAY STREET 2: P O BOX 4028 CITY: ELYRIA STATE: OH ZIP: 44036 BUSINESS PHONE: 4403296000 8-K 1 q304release8k.txt INVACARE Q3 04 8-K EARNINGS RELEASE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): October 21, 2004 INVACARE CORPORATION -------------------- (Exact Name of Registrant as Specified in its Charter) OHIO ---- (State or Other Jurisdiction of Incorporation) 0-12938 95-2680965 ------------------- ------------------- (Commission File No.) (IRS Employer Identification No.) One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036 ---------------------------------------------------- (Address of Principal Executive Offices) (440) 329-6000 -------------- (Registrant's Telephone Number, Including Area Code) - -------------------------------------------------------------------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 204.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 2.02.Results of Operation and Financial Condition. On October 21, 2004, Invacare Corporation issued a press release announcing results for the quarter ended September 30, 2004. The press release is furnished herewith as Exhibit 99.1. The attached press release contains non-GAAP measures. The company has provided a reconciliation of the non-GAAP measures to the most directly comparable GAAP measure in the press release. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Invacare Corporation By: /s/ Gregory C. Thompson --------------------------- Gregory C. Thompson Senior Vice President and Chief Financial Officer Date: October 21, 2004 EX-99 2 exhibit99.txt EXHIBIT 99.1 Exhibit 99.1 Investor Inquiries: Robert K. Gudbranson (440) 329-6001 NEWS RELEASE INVACARE CORPORATION REPORTS RECORD THIRD QUARTER EARNINGS WHICH INCREASED 13% ELYRIA, Ohio - (October 21, 2004) - Invacare Corporation (NYSE: IVC) today reported record financial results for the third quarter and nine months of the year ended September 30, 2004. CONSOLIDATED RESULTS Net earnings for the quarter grew 13% to $22.5 million versus $20.0 million last year, and earnings per share for the quarter increased to $0.70 versus $0.63 last year. Net sales for the quarter increased 7% to $349.5 million versus $327.4 million last year. Foreign currency accounted for three percentage points of the net sales increase, while acquisitions contributed an additional five percentage points for the quarter. Results for the quarter benefited from higher net sales, a higher gross margin and a reduced effective tax rate. Gross margin as a percentage of net sales for the third quarter improved to 30.4%, an increase of 0.3 percentage points compared to last year's third quarter. The Company is encouraged that it has been able to more than offset competitive price pressures and rising raw material costs with further cost reductions coupled with margin improvements from a shift in sales mix to higher margin product. SG&A expense as a percentage of net sales decreased by 0.1 percentage points compared to last year's third quarter. SG&A expense increased 6% over last year's third quarter principally due to acquisitions and foreign currency translation. Earnings per share for nine months of this year increased to $1.70 versus $1.51 last year. Net earnings grew 15% to $54.8 million versus $47.7 million last year. Net sales for nine months of the year increased 12% to $1,010.1 million versus $904.2 million last year. Foreign currency accounted for four percentage points of the net sales increase, while acquisitions contributed an additional seven percentage points for nine months. Results for nine months benefited from higher net sales, a higher gross margin and a reduced effective tax rate, partially offset by higher SG&A expense. A. Malachi Mixon, III, chairman and chief executive officer, stated, "Although the sales growth for the third quarter was below our expectations, Invacare achieved its previous earnings guidance ($0.68 to $0.72) and generated strong free cash flow* of $20.7 million. Net sales excluding acquisitions and foreign currency declined 1% for the quarter primarily due to significantly restrictive Medicare reimbursement policies, which are awaiting further clarification, on consumer power wheelchairs. If we exclude net sales related to consumer power wheelchairs, acquisitions and foreign currency from the third quarter sales performance**, Invacare sales grew 4% from the third quarter last year." Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment. NORTH AMERICA For the quarter, North American net sales increased 8% to $251.5 million versus $232.8 million last year. Acquisitions accounted for seven percentage points of the net sales increase. Excluding sales related to consumer power wheelchairs, acquisitions and foreign currency from the third quarter sales performance**, North American net sales increased 8%. Respiratory products sales increased 56%, largely due to continued strong performance in the HomeFill(TM) oxygen system product line. Standard products sales decreased by 7% in the third quarter, primarily due to pricing adjustments. Sales of rehab products decreased 23%, excluding the impact of acquisitions. The difficulty and uncertainty related to customers obtaining Medicare reimbursement from the Center for Medicare Services (CMS) for consumer power wheelchairs caused this decrease in rehab products sales. The consumer power wheelchairs sales were down 45% or $15 million compared to third quarter last year. Invacare Supply Group sales increased 24%, with acquisitions accounting for 15 percentage points of the sales increase. The Invacare Continuing Care Group (ICCG) sales increased by 66%, led by strong performance of the Carroll Healthcare product line. Excluding acquisitions, ICCG sales grew 19% largely due to cross selling of Carroll products by the ICCG sales force, indicating another benefit of the acquisition. For the quarter, earnings before income taxes increased to $28.0 million versus $21.1 million last year largely due to acquisitions, the strong sales performance in respiratory products and continued cost reductions, partially offset by increased SG&A expense. The improved earnings performance was achieved despite a $0.9 million impact related to increased manufacturing costs in Florida associated with the hurricanes and to increased raw materials costs across all plants. For nine months, North American net sales increased 14% to $737.8 million versus $646.2 million last year. Foreign currency accounted for one percentage point of the net sales increase, while acquisitions contributed an additional nine percentage points. EUROPE For the quarter, European net sales increased 8% to $79.9 million versus $73.8 million last year. Adjusting for foreign currency, European net sales were flat for the quarter. For the quarter, earnings before income taxes decreased to $5.0 million versus $6.4 million last year primarily due to pricing pressures, a shift in sales mix to lower margin product and additional costs related to the new product introductions. For nine months, European net sales increased 10% to $224.6 million versus $205.0 million last year. Adjusting for foreign currency, European net sales decreased 1% for nine months. Adjusting for foreign currency and acquisitions, European net sales decreased 3% for nine months. AUSTRALASIA For the quarter, Australasian net sales decreased 12% to $18.2 million versus $20.7 million last year. Adjusting for foreign currency, Australasian net sales decreased 20% for the quarter. The sales decline was due in part to lower sales of microprocessor controllers, primarily resulting from the global slowdown in the production of power wheelchairs principally due to Medicare reimbursement challenges. For the quarter, earnings before income taxes decreased to $0.9 million versus $2.7 million last year primarily due to declining volumes. For nine months, Australasian net sales decreased 10% to $47.7 million versus $52.9 million last year. Adjusting for foreign currency, Australasian net sales decreased 21% for nine months. FINANCIAL CONDITION Total debt outstanding increased to $443.4 million at the end of the quarter, due to the previously announced acquisition of WP Domus GmbH (Domus), bringing debt-to-total-capitalization up to 39.7% versus 27.6% at the end of last year. Days sales outstanding were 65 days, compared with 64 days at the end of last year and at the end of the third quarter last year. Inventory turns were 5.5, down from 5.9 at the end of last year and 6.2 at the end of the third quarter last year, largely due to lower than anticipated sales. OUTLOOK The Company achieved earnings growth in the third quarter in the range of its previous guidance primarily due to the benefits from ongoing cost reduction programs, accretive acquisitions, increased volumes in certain segments in North America and an improved tax rate. Although the Company is expected to achieve some benefit from the acquisition of Domus in the fourth quarter of this year, there are a number of items that will negatively impact performance. CMS has started to address some of the reimbursement issues, which have led to the uncertainty on coverage of power wheelchairs for seniors and people with disabilities. However, the changes will take time to be implemented and will not likely benefit the fourth quarter. Additionally, further increasing raw material costs will reduce some of the benefits of the cost reduction projects already implemented. As a result of these factors, the Company believes it will achieve earnings per share of between $0.75 and $0.80 for the fourth quarter and earnings per share of between $2.45 and $2.50 for the year. Previously, earnings guidance for the year was between $2.48 and $2.55. Due to the slightly lower earnings performance, the Company anticipates that its free cash flow* for 2004 will be between $70 million and $75 million. For the fourth quarter, net sales are expected to increase between 13% and 15%. Excluding foreign currency and acquisitions, the sales increase is expected to be between 3% and 5%. Commenting on the Company's anticipated results, Mixon said, "Invacare continues to generate strong earnings improvements in North America despite the pressures of competition from imports and of reimbursement uncertainty. In order to address the import competition, the Company opened its second wholly-owned manufacturing facility in China during the third quarter. We should see cost improvements resulting from these two plants in 2005." Mixon continued, "With the ongoing focus on the 50 new product introductions planned for 2004 and the continuing cost reduction programs, including manufacturing in China, we believe that the annual earnings growth of between 9% and 11% for the 2004 year is achievable. During 2005, we expect earnings per share of between $3.00 to $3.15, driven by a recovery in consumer power wheelchair sales, continued cost reductions, and increased benefits from the Domus acquisition." - -------------------------------------------------------------------------------- * Free cash flow is a non-GAAP financial measure, which is reconciled to the related GAAP financial measure in the "Reconciliation" table included after the Condensed Consolidated Balance Sheets in this press release. **Net sales excluding consumer power wheelchairs, acquisitions and foreign currency is a non-GAAP financial measure, which is reconciled to the related GAAP financial measure in the "Reconciliation" table included after the Condensed Consolidated Balance Sheets in this press release. Invacare Corporation (NYSE:IVC), headquartered in Elyria, Ohio, is the global leader in the manufacture and distribution of innovative home and long-term care medical products that promote recovery and active lifestyles. The company has 5,700 associates and markets its products in 80 countries around the world. For more information about the company and our products, visit Invacare's website at www.invacare.com. This press release contains forward-looking statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Terms such as "will," "should," "plan," "intend," "expect," "continue," "forecast", "believe," "anticipate" and "seek," as well as similar comments, are forward-looking in nature. Actual results and events may differ significantly from those expressed or anticipated as a result of risks and uncertainties which include, but are not limited to, the following: pricing pressures, the success of the Company's ongoing efforts to reduce costs, increasing raw material costs, the consolidations of health care customers and competitors, government reimbursement issues (including those that affect the sales of and margins on product, along with the viability of customers), the ability to design, manufacture, distribute and achieve market acceptance of new products with higher functionality and lower costs, the effect of offering customers competitive financing terms, Invacare's ability to successfully identify, acquire and integrate strategic acquisition candidates, the difficulties in managing and operating businesses in many different foreign jurisdictions (including the recent Domus acquisition), the timely completion of facility consolidations, the vagaries of any litigation or regulatory investigations that the Company may be or become involved in at any time (including the previously-disclosed litigation with Respironics), the difficulties in acquiring and maintaining a proprietary intellectual property ownership position, the overall economic, market and industry growth conditions (including the impact that acts of terrorism may have on such growth conditions), foreign currency and interest rate risks, Invacare's ability to improve financing terms and reduce working capital, as well as the risks described from time to time in Invacare's reports as filed with the Securities and Exchange Commission. We undertake no obligation to review or update these forward-looking statements or other information contained herein. INVACARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands, except per share data) 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------------- Net sales $349,507 $327,366 $1,010,138 $904,153 Cost of products sold 243,431 228,914 708,559 637,416 ------- ------- ------- ------- Gross profit 106,076 98,452 301,579 266,737 Selling, general and administrative expense 71,230 66,983 216,214 191,092 Interest expense - net 2,232 1,657 5,012 4,544 ------- ------- ------- ------- Earnings before income taxes 32,614 29,812 80,353 71,101 Income taxes 10,085 9,805 25,600 23,390 ------- ------- ------- ------- Net earnings $22,529 $20,007 $54,753 $47,711 ======= ======= ======= ======= Net earnings per share - basic $0.72 $0.65 $1.76 $1.55 ===== ===== ===== Weighted average shares outstanding - basic 31,122 30,845 31,120 30,825 ====== ====== ====== ====== Net earnings per share - assuming dilution $0.70 $0.63 $1.70 $1.51 ===== ===== ===== ===== Weighted average shares outstanding - assuming dilution 32,283 31,752 32,272 31,602 ====== ====== ====== ======
Business Segments - The Company operates in three primary business segments based on geographical area: North America, Europe and Australasia. The three reportable segments represent operating groups which offer products to different geographic regions. Intersegment revenue for reportable segments was $20,312,000 and $60,691,000 for the three and nine months ended September 30, 2004 and $20,722,000 and $55,314,000 for the same periods a year ago. The information by segment is as follows: Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2004 2003 2004 2003 - ---------------------------------------------------------------------------------------------------------------------- Revenues from external customers North America $251,457 $232,829 $737,780 $646,202 Europe 79,889 73,839 224,633 205,020 Australasia 18,161 20,698 47,725 52,931 -------- -------- -------- -------- Consolidated $349,507 $327,366 $1,010,138 $904,153 ======== ======== ======== ======== Earnings (loss) before income taxes North America $ 27,990 $ 21,056 $ 73,753 $ 54,520 Europe 4,984 6,399 9,427 13,014 Australasia 874 2,695 1,551 5,973 All Other (1,234) (338) (4,378) (2,406) -------- -------- -------- -------- Consolidated $32,614 $29,812 $ 80,353 $ 71,101 ======== ======== ======== ========
All Other consists of the domestic export unit, unallocated corporate selling, general and administrative expense, the Invacare captive insurance unit and inter-company profits, which do not meet the quantitative criteria for determining reportable segments. INVACARE CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS September 30, 2004 December 31, 2003 September 30, 2003 (In thousands) (unaudited) (unaudited) - ------------------------------------------------------------------------------------------------------------------ Current Assets Cash, cash equivalents and marketable securities $3,030 $16,288 $ 3,980 Trade receivables - net 262,193 255,534 244,385 Installment receivables - net 13,390 7,755 10,038 Inventories - net 145,804 130,979 129,593 Deferred income taxes and other current assets 53,690 64,166 56,982 ------ ------ ------ Total current assets 478,107 474,722 444,978 Other Assets 76,970 67,941 68,794 Investment in Domus* 229,349 - - Plant and equipment - net 161,502 150,051 138,630 Goodwill - net** 501,197 415,499 392,902 ------- ------- ------- Total assets $1,447,125 $1,108,213 $1,045,304 ========== ========== ========== Liabilities and Shareholders' Equity Current Liabilities Accounts payable $123,817 $110,178 $105,498 Accrued expenses** 143,058 97,148 87,755 Accrued income taxes 21,692 19,107 19,365 Current maturities 1,252 2,171 3,705 ----- ----- ----- Total current liabilities 289,819 228,604 216,323 Long-term debt 442,143 232,038 249,012 Other long-term obligations 41,767 34,383 28,528 Shareholders' equity 673,396 613,188 551,441 ------- ------- ------- Total liabilities and shareholders' equity $1,447,125 $1,108,213 $1,045,304 ========== ========== ==========
* The acquisition of WP Domus GmbH was completed on September 9, 2004 by the European segment of the Company, which reports its financial results on a one-month lag for financial reporting. In order to fairly present the impact of this acquisition as of September 30, 2004, the Company has presented the investment in Domus equal to the purchase price as well as the corresponding long-term debt. The investment will be re-allocated in the fourth quarter of 2004 when the company allocates the purchase price and consolidates the net assets of WP Domus GmbH. ** Includes estimated contingent consideration amount of $59,000,000 pursuant to the Carroll Healthcare, Inc. purchase agreement. Actual consideration payment is expected to be finalized and paid out in the fourth quarter of 2004. INVACARE CORPORATION AND SUBSIDIARIES RECONCILIATION FROM NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2004 2003 2004 2003 -------------------------------------------------------------------------------------------------- Net cash provided by operating activities $31,248 $27,712 $77,037 $72,988 Less: Purchases of property and equipment (10,591) (7,288) (28,924) (17,172) ------- ------- ------- ------- Free Cash Flow $20,657 $20,424 $48,113 $55,816 ======= ======= ======= =======
Free cash flow is a non-GAAP financial measure that is comprised of net cash provided by operating activities, less purchases of property and equipment. Management believes that this financial measure provides meaningful information for evaluating the overall financial performance of the Company and its ability to repay debt or make future investments (including acquisitions, etc.) after purchases of property and equipment. INVACARE CORPORATION AND SUBSIDIARIES RECONCILIATION FROM NET SALES TO SALES EXCLUDING CONSUMER POWER WHEELCHAIRS, ACQUISITIONS AND FOREIGN CURRENCY (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2004 2003 2004 2003 ------------------------------------------------------------------------------------------------------- Net Sales $349,507 $327,366 $1,010,138 $904,153 Less: Consumer power wheelchair sales (18,878) (34,230) (62,022) (79,621) Acquisition sales (17,050) - (63,655) - Foreign currency impact (8,528) - (32,382) - -------- -------- -------- -------- Adjusted Sales $305,051 $293,136 $852,079 $824,532 ======== ======== ======== ======== Net sales increase adjusted for Consumer power wheelchairs, acquisitions and foreign currency 4% 3%
Adjusted Net sales excluding consumer power wheelchairs, acquisitions and foreign currency is a non-GAAP financial measure. NORTH AMERICA SEGMENT RECONCILIATION FROM NET SALES TO SALES EXCLUDING CONSUMER POWER WHEELCHAIRS, ACQUISITIONS AND FOREIGN CURRENCY (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, (In thousands) 2004 2003 2004 2003 ------------------------------------------------------------------------------------------------------ Net Sales $251,457 $232,829 $737,780 $646,202 Less: Consumer power wheelchair sales (18,878) (34,230) (62,022) (79,621) Acquisition sales (17,050) - (60,078) - Foreign currency impact (1,136) - (4,185) - -------- ------- ------- ------- Adjusted Sales $214,393 $198,599 $611,495 $566,581 ======== ======== ======== ======== Net sales increase adjusted for Consumer power wheelchairs, acquisitions and foreign currency 8% 8%
Adjusted Net sales excluding consumer power wheelchairs, acquisitions and foreign currency is a non-GAAP financial measure. -----END PRIVACY-ENHANCED MESSAGE-----