Exhibit 99.1
Investor Inquiries:
Robert K. Gudbranson
(440) 329-6001
NEWS RELEASE
INVACARE CORPORATION REPORTS FIRST QUARTER EARNINGS INCREASED 16%
ELYRIA, Ohio - (April 15, 2004) - Invacare Corporation (NYSE: IVC) today
reported record financial results for the first quarter ended March 31, 2004.
CONSOLIDATED RESULTS
Earnings per share for the quarter increased to $0.44 versus $0.39 last year,
and net earnings for the quarter grew 16% to $14.2 million versus $12.3 million
last year. Net sales for the quarter increased 16% to $321.3 million versus
$276.7 million last year. Foreign currency accounted for six percentage points
of the net sales increase, while acquisitions contributed an additional eight
percentage points for the quarter. Results for the quarter benefited from higher
net sales, partially offset by higher selling, general and administrative
expense (SG&A expense).
Gross margin as a percentage of net sales for the first quarter was unchanged
compared to last year's first quarter. The positive impact of continuing cost
reduction projects on the gross margin percentage was offset by sales mix toward
lower margin product and ongoing competitive pricing pressures. SG&A expense as
a percentage of net sales increased by 0.3 percentage points compared to last
year's first quarter. SG&A expense increased 18% over last year's first quarter
principally due to acquisitions and foreign currency translation, which
accounted for seven and six percentage points of the increase, respectively.
Additionally, distribution and commission costs increased with the higher sales
volumes.
A. Malachi Mixon, III, chairman and chief executive officer, stated, "Invacare's
strong sales performance in North American respiratory and rehab products
allowed us to meet the high end of the earnings guidance for the quarter. We
also continued to generate strong free cash flow*, totaling $22 million for the
quarter and used the cash and availability under bank lines to fund
approximately $31 million of acquisitions." 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 18% to $237.3 million versus
$200.4 million last year. Foreign currency accounted for one percentage point of
the net sales increase, while acquisitions contributed an additional 10
percentage points for the quarter.
Respiratory products sales increased 38%, largely due to continued strong
performance in the HomeFillTM oxygen system product line and oxygen
concentrators. Standard products sales decreased by 11%, primarily due to
continued pricing pressures and the timing of orders. Sales of rehab products
increased 22% on a reported basis, with acquisitions accounting for 12
percentage points of the sales increase. Slower sales of consumer power
products, resulting from the tightening by the Centers for Medicare and Medicaid
Services (CMS) of power wheelchair eligibility rules for seniors and people with
disabilities, were more than offset by increased sales of custom power products
led by the Storm Series(R) TDXTM power wheelchair, which drove the strong
performance in the rehab division.
Invacare Supply Group sales increased 33% on a reported basis, with acquisitions
accounting for 14 percentage points of the sales increase. Invacare Continuing
Care Group sales increased by 93% on a reported basis, with acquisitions
accounting for 88 percentage points of the sales increase.
For the quarter, earnings before income taxes increased to $21.9 million versus
$16.1 million last year largely due to acquisitions, the strong sales
performance in most divisions and continued cost reductions.
EUROPE
For the quarter, European net sales increased 11% to $69.3 million versus $62.4
million last year. Adjusting for foreign currency, net sales declined by 5% in
the quarter versus last year. Adjusting for foreign currency and acquisitions,
net sales declined 9% for the quarter, due in part to continued pricing pressure
in Germany and reduced funding in other key markets. The 10 new product
introductions completed during 2003 reached the market late in the first quarter
of 2004, and Europe expects to see benefit from shipments of these products
beginning in the second quarter. For the quarter, earnings before income taxes
decreased to $1.1 million versus $2.3 million last year, primarily due to lower
volumes and higher spending on SG&A.
AUSTRALASIA
For the quarter, Australasian net sales increased 6% to $14.7 million versus
$13.9 million last year. Adjusting for foreign currency, Australasian net sales
decreased 14% in the quarter versus last year. The sales decline was primarily
due to lower sales of microprocessor controllers, resulting from a global
slowdown in the production of power wheelchairs. For the quarter, earnings
before income taxes decreased to $0.4 million versus $1.3 million last year due
in part to declining volumes and foreign currency exposures from sales in US
dollars and Euros.
FINANCIAL CONDITION
Total debt outstanding was $234.6 million at the end of the quarter, bringing
debt-to-total-capitalization to 26.8% versus 27.6% at the end of last year and
30.8% at the end of the first quarter last year. The lower
debt-to-total-capitalization was achieved despite spending $31.1 million on
acquisitions in the quarter. With the current debt-to-total-
capitalization level, the Company has the flexibility to continue to make
additional accretive acquisitions or to purchase common shares. Days sales
outstanding were 70 days, compared with 64 days at the end of last year and at
the end of the first quarter last year. The increase in days sales outstanding
resulted primarily from slower reimbursement by CMS for power wheelchair claims
to home care providers. Inventory turns were 5.6, down from 5.9 at the end of
last year and flat with turns at the end of the first quarter last year.
OUTLOOK
The Company reached the top end of its guidance on sales and earnings growth in
the first quarter primarily due to increased volume in the North American
respiratory and rehab divisions, along with the benefits from cost reductions
and acquisitions. Although it continued to grow at double-digit rates in the
first quarter of this year, the rehab division was impacted by the tighter
Medicare rules on the eligibility for reimbursement of power wheelchairs for
seniors and people with disabilities. Late in March, CMS retracted the December
2003 bulletins restricting Medicare coverage of power wheelchairs for seniors
and people with disabilities. Although this change in the rules should return
access for these items to levels seen during recent years, CMS will continue to
scrutinize this area. We are hopeful that the change will lead to more stability
and predictability in the power wheelchair market.
Consistent with prior guidance, the Company believes that, in 2004, it will have
a net sales increase of between 12% and 14% and earnings per share of between
$2.45 and $2.55. Excluding foreign currency and acquisitions, the sales increase
is expected to be between 8% and 10%. For the second quarter, the Company
expects a net sales increase of between 15% and 17% and earnings per share of
between $0.53 and $0.57. The Company still 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, "Invacare continues
to make progress in its new product introductions and the development of its own
manufacturing capability in China. In January, Invacare launched the Invacare(R)
TwilightTM Mask, the first of a number of products for sleep apnea patients.
Invacare recently received 510(k) clearance on the Invacare(R) Polaris EXTM CPAP
with SoftXTM, which has heated humidification to provide moisture to the air
breathed by the patient. In May, Invacare will begin to offer this product to
the home care provider and plans to launch additional competitive sleep apnea
products over the next year. The United States marketplace for sleep apnea
products, which is estimated to be $600 million, is the largest and fastest
growing in the home care arena, and Invacare is committed to being a player in
this category. Additionally, we believe the 10 new products introduced in Europe
will begin to take market share and help return the European division to local
currency sales growth."
Focusing on manufacturing projects in China, Mixon announced, "In April,
Invacare has started to assemble product in Suzhou Industrial Park near
Shanghai, with local sourcing
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of many major components. Yhe Company will have additional manufacturing
capacity in China during 2004. With these actions, Invacare expects to regain
its position as a low cost producer of standard products and lessen the decline
in standard products sales."
Mixon continued, "With ongoing focus on the 40 new product introductions planned
for 2004 and execution of the cost reduction programs mentioned above, we
believe that 2004 will be a year of strong growth for Invacare."
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* 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), 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 its 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 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, 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.
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
Three Months Ended
March 31,
(In thousands, except per share data) 2004 2003
------------------------------------------------------------------------
Net sales $321,343 $276,673
Cost of products sold 227,964 196,222
------- -------
Gross profit 93,379 80,451
Selling, general and administrative expense 71,238 60,520
Interest expense - net 1,100 1,664
------- -------
Earnings before income taxes 21,041 18,267
Income taxes 6,840 6,010
------- -------
Net earnings $14,201 $12,257
======= =======
Net earnings per share - basic $0.46 $0.40
===== =====
Weighted average shares outstanding - basic 31,094 30,830
====== ======
Net earnings per share - assuming dilution $0.44 $0.39
===== =====
Weighted average shares outstanding -
assuming dilution 32,272 31,431
====== ======
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 $19,343,000
for the quarterly period ended March 31, 2004 and $15,729,000 for the same
period a year ago.
The information by segment is as follows:
Three Months Ended
March 31,
(In thousands) 2004 2003
---------------------------------------------------------------------
Revenues from external customers
North America $237,283 $200,383
Europe 69,338 62,439
Australasia 14,722 13,851
-------- --------
Consolidated $321,343 $276,673
======== ========
Earnings (loss) before income taxes
North America $ 21,871 $ 16,108
Europe 1,140 2,320
Australasia 437 1,266
All Other (2,407) (1,427)
-------- --------
Consolidated $ 21,041 $ 18,267
======== ========
All Other consists of the domestic export unit, un-allocated 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.
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<caption>
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<s> <c> <c> <c>
March 31, 2004 December 31, 2003 March 31, 2003
(In thousands) (unaudited) (unaudited)
- --------------------------------------------------------------------------------------------------------------
Current Assets
Cash, cash equivalents and marketable securities $4,683 $16,288 $ 6,746
Trade receivables - net 263,033 255,534 209,347
Installment receivables - net 7,067 7,755 16,983
Inventories - net 131,522 130,979 115,344
Deferred income taxes and other current assets 58,563 64,166 45,648
------ ------ ------
Total current assets 464,868 474,722 394,068
Other Assets 78,713 67,941 57,043
Plant and equipment - net 154,641 150,051 131,289
Goodwill - net 442,229 415,499 337,548
------- ------- -------
Total assets $1,140,451 $1,108,213 $919,948
========== ========== ========
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $121,863 $110,178 $78,614
Accrued expenses 85,296 97,148 67,393
Accrued income taxes 21,458 19,107 19,278
Current maturities 2,163 2,171 1,389
----- ----- -----
Total current liabilities 230,780 228,604 166,674
Long-term debt 232,398 232,038 223,626
Other long-term obligations 36,530 34,383 24,733
Shareholders' equity 640,743 613,188 504,915
------- ------- -------
Total liabilities and shareholders' equity $1,140,451 $1,108,213 $919,948
========== ========== ========
</table>
INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION FROM NET CASH PROVIDED BY
OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)
Three Months Ended
March 31,
(In thousands) 2004 2003
---------------------------------------------------------------------
Net cash provided by operating activities $30,325 $19,244
Less:
Purchases of property and equipment (8,355) (3,775)
------- -------
Free Cash Flow $21,970 $15,469
======= =======
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.