Exhibit 99.1
Investor Inquiries:
Robert K. Gudbranson
(440) 329-6001
NEWS RELEASE
INVACARE CORPORATION REPORTS RECORD THIRD QUARTER SALES AND EARNINGS, EXCEEDING
PREVIOUS GUIDANCE
ELYRIA, Ohio - (October 16, 2003) - On the strength of new product introductions
and recent acquisitions, Invacare Corporation (NYSE: IVC) today reported record
financial results for the third quarter and nine months ended September 30,
2003.
CONSOLIDATED RESULTS
Earnings per share for the quarter increased to $0.63 versus $0.61 last year,
while net earnings for the quarter were $20.0 million versus $19.2 million last
year. Net sales for the quarter increased 17% to $327.4 million versus $280.3
million last year. Foreign currency accounted for five percentage points of the
sales increase, while acquisitions contributed an additional four percentage
points for the quarter. Results for the quarter benefited from higher net sales,
offset by a lower gross margin percentage and higher selling, general and
administrative expense (SG&A expense).
The gross margin as a percentage of net sales for the third quarter improved by
0.8 percentage points compared to this year's second quarter, although the gross
margin percentage decreased 1.1 percentage points compared to last year's
quarter. Cost reduction projects along with the increased volume resulted in an
increasing gross margin percentage for each of the quarters of this year. SG&A
expense as a percentage of net sales increased by 0.4 percentage points compared
to last year. However, compared to second quarter this year, SG&A expense as a
percentage of net sales declined by 0.7 percentage points as the Company
benefits from the growth of net sales. SG&A expense increased 19% over last
year's quarter due to acquisitions, foreign currency translation, continued
investments in marketing and branding programs, additional provisions for bad
debts, and an increase in insurance costs. Foreign currency accounted for five
percentage points of the increase of SG&A expense, while acquisitions
contributed an additional four percentage points.
Earnings per share for the nine months were $1.51, up from $1.49 last year. Net
earnings were $47.7 million up from $47.1 million last year. Net sales for the
nine months increased 12% to $904.2 million versus $807.2 million last year.
Foreign currency accounted for six percentage points of the sales increase,
while acquisitions contributed an additional two percentage points for the nine
months. Results for the nine months benefited from higher net sales and lower
interest expense, offset by a lower gross margin percentage and higher SG&A
expense.
A. Malachi Mixon, III, chairman and chief executive officer, stated, "Invacare's
improving sales performance, recent acquisitions and expanding gross margin
allowed us to exceed the previous guidance on earnings per share for the
quarter. The strong increase in North American sales of respiratory products,
rehab products and medical supplies and in Australasian sales led the improved
revenue growth. Additionally, the Company continued to generate strong free cash
flow*, totaling $20 million for the quarter. During the quarter, the Company
paid down debt by approximately $36 million and borrowed $65 million to fund
acquisitions." Free cash flow is defined as net cash provided by operating
activities less the purchases of property and equipment.
NORTH AMERICA
For the quarter, North American net sales increased 17% to $232.8 million versus
$199.3 million last year. Foreign currency accounted for one percentage point of
the sales increase, while acquisitions contributed an additional four percentage
points for the quarter. Respiratory products sales increased 51% due to
continued strong performance in oxygen concentrators and the HomeFillTM oxygen
system product line. Sales of the rehab products line increased 45%, due largely
to the strength of sales in both the consumer power and custom power product
lines. Excluding acquisitions, rehab sales increased by 40%. Invacare Supply
Group sales increased 13%, continuing its recent strong growth.
Standard products sales declined 9%, primarily due to continued pricing
pressures. Invacare Continuing Care Group sales increased by 21% on a reported
basis. However, excluding acquisitions, Invacare Continuing Care Group sales
decreased 11%, primarily due to continued slow purchases in the nursing home
sector.
For the quarter, earnings before income taxes decreased versus last year largely
due to pricing pressures along with continued shift in the product mix toward
lower margin products and supplies, coupled with increased spending on branding
and marketing programs, bad debt expense and insurance costs.
For the nine months, North American net sales increased 9% to $646.2 million
versus $593.2 million last year. Adjusting for acquisitions, net sales increased
7% for the nine months.
EUROPE
For the quarter, European net sales increased 7% to $73.8 million versus $68.8
million last year. Adjusting for foreign currency, European net sales decreased
6% for the quarter primarily due to slower than expected sales in the Nordic
region and Germany. In our effort to regain sales growth with market share
gains, the Company will introduce 10 key products at the industry's European
trade show this week. The Company is hopeful that new product introductions
should help drive a recovery in sales growth, as they have in North America.
For the quarter, earnings before income taxes decreased primarily due to
increased spending on SG&A expense to re-establish sales growth. However, cost
reduction projects and product rationalization have led to gross margin
expansion.
For the nine months, European net sales increased 13% to $205.0 million versus
$182.2 million last year. Adjusting for foreign currency, European net sales
decreased 5% for the nine months. For the nine months, European earnings before
taxes increased by 15% related to improved gross margins and currency
translation.
AUSTRALASIA
For the quarter, Australasian net sales increased 71% to $20.7 million versus
$12.1 million last year. Adjusting for foreign currency, Australasian net sales
increased 37% in the quarter versus last year, strongly driven by sales at
Dynamic Controls including a large increase to a non-healthcare related
customer. For the quarter, earnings before income taxes increased compared to
last year due in part to increased sales, a favorable impact from foreign
currency translation and continued control on SG&A expense.
For the nine months, Australasian net sales increased 67% to $52.9 million
versus $31.8 million last year. Adjusting for foreign currency, Australasian net
sales increased 35% for the nine months.
FINANCIAL CONDITION
Total debt outstanding was $252.7 million at the end of the third quarter,
bringing debt-to-total-capitalization to 31.4% versus 33.2% at the end of last
year and 36.1% at the end of the third quarter last year. Despite borrowing $65
million related to purchasing accretive acquisitions, the Company has lowered
its debt-to-total-capitalization since year end with continued strong free cash
flow. With the current debt-to-total-capitalization level, the Company has the
flexibility to continue to make accretive acquisitions or to purchase common
shares. Days sales outstanding were 64 days, improving by two days compared with
the end of last year and improving by four days compared with the end of the
third quarter last year. Inventory turns were 6.2, flat with the level at the
end of last year and at the end of the third quarter last year.
OUTLOOK
Strength in rehab, respiratory and supplies revenues and profits during the
third quarter gives the Company additional confidence in its ability to achieve
double-digit sales and earnings growth in the fourth quarter. For the fourth
quarter, the Company expects a net sales increase of between 16% and 18% and
earnings per share of between $0.65 and $0.70. For the year, the Company
believes it will report earnings per share of between $2.16 and $2.21. The
Company's previous guidance of earnings per share was between $2.10 and $2.20.
Net sales for the year are expected to be between 12% and 14% above last year.
The Company also reconfirms its free cash flow guidance of $65 million to $75
million for the year.
Commenting on the Company's anticipated results, Mixon said, "We believe we have
a number of activities that should further improve profitability in the near and
medium term. The Company continues to lower costs in order to blunt the attack
from Asian copycat products on our standard product lines. We also believe we
are on schedule to control our own manufacturing capability in China in early
2004. Additionally, with the recent launch of a private label-branding program
at the supplies division, the Company should also improve gross margin at that
division."
Mixon continued, "We are extremely pleased with the very strong performance of
the rehab and respiratory product lines in North America. Invacare's new product
introduction program over the last three years has already produced and will
continue to generate returns for the shareholders. The Company should exit the
year reaching its 2003 target of replacing 90% of North American equipment sales
in the homecare channel from new products introduced since October 2001. We had
good response on the 40 new product introductions at the Medtrade show in
Atlanta last week, including the particularly strong reception of a new highly
maneuverable vehicle, the Invacare(R) Buzz HMVTM."
* 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.
Invacare Corporation (NYSE:IVC - news), headquartered in Elyria, Ohio, is the
global leader in the manufacture and distribution of innovative home care and
long term care medical products that promote recovery and active lifestyles. The
Company has 5,300 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,"
"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 cost, increasing raw material costs, the
consolidations of health care customers and competitors, government
reimbursement issues (including those that affect the viability of customers),
the ability to design, manufacture and distribute new products with higher
functionality and lower costs, the ability to accelerate market acceptance of
and transition to new products, 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, 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, the difficulties in acquiring and maintaining a proprietary intellectual
property ownership position, the overall economic, market and industry 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.
<table>
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) 2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Net sales $327,366 $280,253 $904,153 $807,180
Cost of products sold 228,914 192,900 637,416 564,575
------- ------- ------- -------
Gross profit 98,452 87,353 266,737 242,605
Selling, general and administrative expense 66,983 56,342 191,092 163,390
Interest expense - net 1,657 2,449 4,544 8,983
----- ----- ----- -----
Earnings before income taxes 29,812 28,562 71,101 70,232
Income taxes 9,805 9,400 23,390 23,100
----- ----- ------ ------
Net earnings $20,007 $19,162 $47,711 $47,132
======= ======= ======= =======
Net earnings per share - basic $0.65 $0.62 $1.55 $1.53
===== ===== ===== =====
Weighted average shares outstanding - basic 30,845 30,900 30,825 30,843
====== ====== ====== ======
Net earnings per share - assuming dilution $0.63 $0.61 $1.51 $1.49
===== ===== ===== =====
Weighted average shares outstanding - assuming dilution 31,752 31,652 31,602 31,677
====== ====== ====== ======
</table>
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
$20,722,000 and $55,314,000 for the three and nine months ended September 30,
2003, respectively, and $16,052,000 and $45,704,000 for the same periods a year
ago.
The information by segment is as follows:
<table>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands) 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Revenues from external customers
North America $232,829 $199,333 $646,202 $593,223
Europe 73,839 68,808 205,020 182,204
Australasia 20,698 12,112 52,931 31,753
-------- -------- -------- --------
Consolidated $327,366 $280,253 $904,153 $807,180
======== ======== ======== ========
Earnings (loss) before income taxes
North America $ 21,056 $ 22,557 $ 54,520 $ 60,254
Europe 6,399 6,627 13,014 11,334
Australasia 2,695 1,706 5,973 3,280
All Other (338) (2,328) (2,406) (4,636)
------- ------- -------- -------
Consolidated $29,812 $ 28,562 $ 71,101 $ 70,232
======= ======== ======== ========
</table>
"All Other" consists of the domestic export unit, un-allocated corporate
selling, general and administrative costs, the Invacare captive insurance unit
and inter-company profits, which do not meet the quantitative criteria for
determining reportable segments.
<page>
<table>
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31, September 30,
, 2003 2002 2002
(In thousands) (unaudited) (unaudited)
- ------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c>
Current Assets
Cash, cash equivalents and marketable securities $ 3,980 $ 14,436 $ 7,396
Trade receivables - net 244,385 200,388 215,696
Installment receivables - net 10,038 20,953 23,294
Inventories - net 129,593 111,382 105,810
Deferred income taxes and other current assets 56,982 51,653 39,569
------ ------ ------
Total current assets 444,978 398,812 391,765
Other Assets 68,794 55,810 53,782
Plant and equipment - net 138,630 130,963 132,415
Goodwill - net 392,902 321,118 318,205
------- ------- -------
Total assets $1,045,304 $906,703 $896,167
========== ======== ========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $105,498 $80,511 $67,734
Accrued expenses 87,755 66,414 76,058
Accrued income taxes 19,365 16,049 16,704
Current maturities 3,705 4,479 5,236
----- ----- -----
Total current liabilities 216,323 167,453 165,732
Long-term debt 249,012 234,134 251,749
Other long-term obligations 28,528 24,804 23,794
Shareholders' equity 551,441 480,312 454,892
------- ------- -------
Total liabilities and shareholders' equity $1,045,304 $906,703 $896,167
========== ======== ========
</table>
<table>
INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION FROM NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)
Three Months Ended Nine MonthsEnded
September 30, September 30,
(In thousands) 2003 2002 2003 2002
------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Net cash provided by operating activities $27,712 $30,575 $72,988 $92,984
Less:
Purchases of property and equipment (7,288) (6,136) (17,172) (15,331)
------- ------- ------- -------
Free Cash Flow $20,424 $24,439 $55,816 $77,653
======= ======= ======= =======
</table>
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.