Exhibit 99.1
Investor Inquiries:
Robert K. Gudbranson
(440) 329-6001
NEWS RELEASE
INVACARE CORPORATION EXCEEDS PREVIOUS GUIDANCE AND REPORTS RECORD SALES AND
EARNINGS FOR THE FOURTH QUARTER AND THE YEAR
ELYRIA, Ohio - (January 22, 2004) - Invacare Corporation (NYSE: IVC) today
reported record financial results for the fourth quarter and year ended December
31, 2003.
CONSOLIDATED RESULTS
Earnings per share for the quarter increased 32% to $0.74 versus $0.56 last
year, while net earnings for the quarter were $23.7 million versus $17.6 million
last year. Net sales for the quarter increased 22% to $343.0 million versus
$282.0 million last year. Foreign currency accounted for six percentage points
of the net sales increase, while acquisitions contributed an additional six
percentage points for the quarter. Results for the quarter benefited from higher
net sales and an improved gross margin percentage, partially offset by higher
selling, general and administrative expense (SG&A expense).
Gross margin as a percentage of net sales for the fourth quarter improved by 1.4
percentage points compared to both this year's third quarter and last year's
fourth quarter. Increased volume, cost reduction projects, sales mix toward
smaller customers, and sales mix toward higher margin product led to the
increase in the gross margin percentage. SG&A expense as a percentage of net
sales increased by 0.5 percentage points compared to last year and by 0.2
percentage points compared to this year's third quarter. SG&A expense increased
25% over last year's fourth quarter due to acquisitions, foreign currency
translation, management bonuses, increased distribution and commission costs
related to higher volumes, continued investments in marketing and branding
programs, and an increase in insurance costs. Foreign currency accounted for
five percentage points of the increase in SG&A expense, while acquisitions
contributed an additional six percentage points.
Earnings per share for the year increased 10% to $2.25 versus $2.05 last year.
Net earnings were $71.4 million up from $64.8 million last year. Net sales for
the year increased 15% to $1.25 billion versus $1.09 billion last year. Foreign
currency accounted for six percentage points of the net sales increase, while
acquisitions contributed an additional three percentage points for the year.
Results for the year benefited from higher net sales and lower interest expense,
partially offset by a slightly lower gross margin percentage and higher SG&A
expense.
A. Malachi Mixon, III, chairman and chief executive officer, stated, "Invacare's
strong sales performance, recent acquisitions and expanding gross margin allowed
us to return to double digit growth in both sales and earnings per share for the
quarter. Strong revenue growth was driven by North American sales of respiratory
products, rehab products and medical supplies. We also continued to generate
strong free cash flow*, totaling $22 million for the quarter and $78 million for
the year. During the quarter, the Company also paid down debt by approximately
$13 million." 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 25% to $251.0 million versus
$200.2 million last year. Foreign currency accounted for two percentage points
of the net sales increase, while acquisitions contributed an additional seven
percentage points for the quarter. Respiratory products sales increased 53%,
largely due to continued strong performance in oxygen concentrators and the
HomeFillTM oxygen system product line. Sales of the rehab products line
increased 44%, due primarily to the strength of sales in both the consumer power
and custom power product lines. Excluding acquisitions, rehab sales increased by
33%. Invacare Supply Group sales increased 14%, continuing its recent strong
growth.
Standard products sales increased by 2%, as cost reduction activities that
Invacare has taken allowed the Company to lower pricing and address the pressure
from imports. Invacare Continuing Care Group (ICCG) sales increased by 74% on a
reported basis and increased 10% excluding acquisitions.
For the quarter, earnings before income taxes increased 107% to $33.8 million
versus $16.3 million last year largely due to the strong sales performance along
with cost reductions and improved product and customer mix.
For the year, North American net sales increased 13% to $897.2 million versus
$793.5 million last year. Adjusting for acquisitions, net sales increased 10%
for the year. Earnings before income taxes increased 15% to $88.3 million from
$76.5 million last year.
EUROPE
For the quarter, European net sales increased 8% to $74.8 million versus $69.2
million last year. Adjusting for foreign currency and acquisitions, European net
sales decreased 10% for the quarter due in part to continued reimbursement
pressures. During the fourth quarter, Europe introduced 10 new products to
reinvigorate growth in 2004. For the quarter, earnings before income taxes
decreased primarily due to lower volume.
For the year, European net sales increased 11% to $279.8 million versus $251.4
million last year. Adjusting for foreign currency and acquisitions, European net
sales decreased 8% for the year. For the year, European earnings before taxes
increased by 1%.
AUSTRALASIA
For the quarter, Australasian net sales increased 38% to $17.3 million versus
$12.5 million last year. Adjusting for foreign currency, Australasian net sales
increased 6% in the quarter versus last year. For the quarter, earnings before
income taxes decreased compared to last year due in part to foreign currency
exposures from sales in US dollars and increased costs to support the growth in
the business.
For the year, Australasian net sales increased 59% to $70.2 million versus $44.3
million last year. Adjusting for foreign currency, Australasian net sales
increased 27% for the year. For the year, Australasian earnings before taxes
increased by 4%.
FINANCIAL CONDITION
Total debt outstanding was $236.6 million at the end of the year, bringing
debt-to-total-capitalization to 27.8% versus 33.2% at the end of last year. 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. Inventory turns were 5.9, down from 6.2 at the end of last year, due
in part to new product introductions.
OUTLOOK
The Company achieved strong double-digit sales and earnings growth in the fourth
quarter due to increased volume in all North American divisions and substantial
progress on all its strategic plans related to new products, lower cost standard
products and the consummation of accretive acquisitions. For 2004, the Company
will continue to execute on these strategic plans. However, changing Medicare
rules on the eligibility of power wheelchairs for the elderly and the recent
passage of the Medicare prescription drug bill will temper an aggressive
positioning for 2004 guidance. As the industry approaches 2005 when the cuts in
reimbursement for nine durable medical equipment items will be implemented as
provided in the Medicare prescription drug bill, purchases by providers for
their rental fleets may be adversely affected. In light of this likely pressure,
the Company believes that, in 2004, it will have a net sales increase of between
10% and 12% and earnings per share of between $2.45 and $2.55 for 2004. For the
first quarter, the Company expects a net sales increase of between 13% and 15%
and earnings per share of between $0.41 and $0.45. The Company anticipates that
its free cash flow* for 2004 will be between $75 million and $85 million.
Commenting on the Company's anticipated results, Mixon said, "We continue to
make progress in our new product introductions and the launching of our own
manufacturing capability in China. Exiting the year, 73% of North American
equipment sales in the homecare channel were from new products introduced since
October 2001. We continue to introduce new products to build on this success. In
January, we launched the Invacare(R) TwilightTM Mask, the first of a number of
products for sleep apnea patients. While we continue to await FDA clearance for
Invacare(R) Polaris EXTM CPAP with SoftXTM, we anticipate introducing the CPAP
along with heated humidification and passover humidification in the near
future."
Focusing specifically on developments in China, Mixon announced, "Invacare just
received a business license to start manufacturing in Suzhou Industrial Park
near Shanghai and is pursuing other opportunities to add further Chinese
manufacturing capability in 2004. With these actions, Invacare expects to regain
its position as the lowest cost producer of standard products in the industry."
Mixon continued, "The strong performance of the rehab and respiratory product
lines in North America along with the return of growth in the standard products
line confirms the preliminary success of our plans. We believe that 2004 will be
a year of continued double-digit growth for Invacare."
* 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 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, 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 (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.
<table>
<caption>
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands, except per share data) 2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Net sales $343,023 $281,981 $1,247,176 $1,089,161
Cost of products sold 235,099 197,188 872,515 761,763
------- ------- ------- -------
Gross profit 107,924 84,793 374,661 327,398
Selling, general and administrative expense 70,923 56,906 262,015 220,296
Interest expense - net 1,693 1,589 6,237 10,572
------- ------- ------- -------
Earnings before income taxes 35,308 26,298 106,409 96,530
Income taxes 11,610 8,660 35,000 31,760
------- ------- ------- -------
Net earnings $23,698 $17,638 $71,409 $64,770
======= ======= ======= =======
Net earnings per share - basic $0.76 $0.57 $2.31 $2.10
===== ===== ===== =====
Weighted average shares outstanding - basic 30,975 30,938 30,862 30,867
====== ====== ====== ======
Net earnings per share - assuming dilution $0.74 $0.56 $2.25 $2.05
===== ===== ===== =====
Weighted average shares outstanding - assuming dilution 32,079 31,616 31,729 31,664
====== ====== ====== ======
</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
$19,521,000 and $74,835,000 for the three and twelve months ended December 31,
2003, respectively, and $15,474,000 and $61,178,000 for the same periods a year
ago.
The information by segment is as follows:
<table>
<caption>
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands) 2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------------
<s> <c> <c> <c> <c>
Revenues from external customers
North America $251,006 $200,241 $897,208 $ 793,464
Europe 74,762 69,239 279,782 251,443
Australasia 17,255 12,501 70,186 44,254
-------- -------- ---------- ---------
Consolidated $343,023 $281,981 $1,247,176 $1,089,161
======== ======== ========= ==========
Earnings (loss) before income taxes
North America $ 33,779 $ 16,294 $ 88,299 $ 76,548
Europe 6,118 7,686 19,132 19,020
Australasia 24 2,460 5,997 5,740
All Other (4,613) (142) (7,019) (4,778)
------- ----- ---- -------
Consolidated $35,308 $26,298 $106,409 $96,530
======= ======= ======== =======
</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.
<table>
<caption>
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
December 31, December 31,
(In thousands) 2003 2002
----------------------------------------------------------------------------------------
<s> <c> <c>
Current assets:
Cash, cash equivalents and marketable securities $14,662 $14,436
Trade receivables - net 255,534 200,388
Installment receivables - net 7,755 20,953
Inventories- net 130,979 111,382
Deferred income taxes and other current assets 64,166 51,653
------ ------
Total current assets 473,096 398,812
Other assets 67,941 55,810
Plant and equipment - net 150,051 130,963
Goodwill - net 415,499 321,118
------- -------
Total assets $1,106,587 $906,703
========== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $105,616 $80,511
Accrued expenses 100,105 66,414
Accrued income taxes 19,107 16,049
Current maturities 3,489 4,479
----- -----
Total current liabilities 228,317 167,453
Long-term debt 233,156 234,134
Other long-term obligations 31,926 24,804
Shareholders' equity 613,188 480,312
------- -------
Total liabilities and shareholders' equity $1,106,587 $906,703
========== ========
</table>
# # #
INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION FROM NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)
<table>
<caption>
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands) 2003 2002 2003 2002
--------------------------------------------------------------------------- ------------ ----------
<s> <c> <c> <c> <c>
Net cash provided by operating activities $35,412 $31,197 $108,400 $124,181
Less:
Purchases of property and equipment (13,488) (6,778) (30,660) (22,109)
------- ------- ------- -------
Free Cash Flow $21,924 $24,419 $77,740 $102,072
======= ======= ======= =======
</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) after
purchases of property and equipment.