1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
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Commission File Number 0-12938
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Invacare Corporation
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(Exact name of registrant as specified in its charter)
Ohio 95-2680965
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(State or other jurisdiction of (I.R.S. Employer Identification No.
incorporation or organization)
899 Cleveland Street, P.O. Box 4028, Elyria, Ohio 44036
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(Address of principal executive offices)
(216) 329-6000
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
As of April 20, 1995 the Company had 11,967,036 Common Shares and 2,584,525
Class B Common Shares outstanding.
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INVACARE CORPORATION
INDEX
Part I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994.................. 3
Condensed Consolidated Statement of Earnings -
Three Months Ended March 31, 1995 and 1994............ 4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 1995 and 1994............ 5
Notes to Condensed Consolidated Financial
Statements - March 31, 1995........................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......... 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............................. 10
SIGNATURES............................................................ 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet - (unaudited)
March 31, December 31,
1995 1994
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ASSETS (In thousands)
CURRENT ASSETS
Cash and cash equivalents $ 4,528 $ 7,359
Marketable securities 5,527 3,044
Trade receivables, net 78,058 76,280
Installment receivables, net 36,189 33,723
Inventories 49,232 49,982
Deferred income taxes 3,645 3,444
Other current assets 5,286 5,959
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TOTAL CURRENT ASSETS 182,465 179,791
OTHER ASSETS 24,738 28,840
PROPERTY AND EQUIPMENT, NET 57,257 55,919
GOODWILL, NET 76,787 72,915
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TOTAL ASSETS $341,247 $337,465
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 30,231 $ 29,882
Accrued expenses 35,725 37,015
Accrued income taxes 731 3,225
Current maturities of long-term obligations 292 326
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TOTAL CURRENT LIABILITIES 66,979 70,448
LONG-TERM OBLIGATIONS 103,344 103,010
SHAREHOLDERS' EQUITY
Preferred shares -0- -0-
Common shares 6,057 5,573
Class B common shares 1,292 1,767
Additional paid-in-capital 63,945 63,671
Retained earnings 103,883 99,086
Adjustment to shareholders' equity (359) (2,196)
Treasury shares (3,894) (3,894)
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TOTAL SHAREHOLDERS' EQUITY 170,924 164,007
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TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $341,247 $337,465
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See notes to condensed consolidated financial statements.
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INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings - (unaudited)
Three Months Ended
March 31,
1995 1994
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(In thousands, except per share data)
Net sales $107,729 $87,902
Cost of products sold 74,327 61,325
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GROSS PROFIT
33,402 26,577
Selling, general and administrative expenses 25,146 20,397
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INCOME FROM OPERATIONS 8,256 6,180
Interest income 1,714 1,549
Interest expense (2,233) (1,939)
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EARNINGS BEFORE INCOME TAXES 7,737 5,790
Income taxes 2,940 2,140
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NET EARNINGS
$ 4,797 $ 3,650
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NET EARNINGS PER SHARE $ .32 $ .25
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Weighted average shares outstanding 14,945 14,822
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See notes to condensed consolidated financial statements.
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INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows - (unaudited)
Three Months Ended
March 31,
1995 1994
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OPERATING ACTIVITIES (In Thousands)
Net earnings $4,797 $3,650
Adjustments to reconcile net earnings to
net cash required by operating activities:
Depreciation and amortization 2,915 3,156
Provision for losses on receivables 220 381
Provision for deferred income taxes 76 (21)
Provision for deferred compensation 328 137
Changes in operating assets and liabilities:
(Increase)/decrease in accounts receivable (63) 567
(Increase)/decrease in inventories 2,336 (2,152)
Decrease in other assets 742 1,032
Increase/(decrease) in accounts payable (705) 2,769
Decrease in accrued expenses (2,714) (5,789)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 7,932 3,730
INVESTING ACTIVITIES
Purchases of property and equipment (2,483) (3,955)
Proceeds from sale of property and equipment 497 3
Installment sales contracts written (11,166) (9,928)
Payments received on installment sales contracts 10,005 6,101
Marketable securities purchased (2,856) 0
Marketable securities sold 375 250
Increase in other investments (118) (114)
Other (765) (269)
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NET CASH (REQUIRED) BY INVESTING ACTIVITIES (6,511) (7,912)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 10,677 7,341
Principal payments on long-term borrowings (15,542) (1,965)
Proceeds from exercise of stock options 283 581
Dividends Paid (176) 0
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NET CASH PROVIDED BY FINANCING ACTIVITIES (4,758) 5,957
Effect of exchange rate changes on cash 506 152
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Increase(Decrease) in cash and cash equivalents (2,831) 1,927
Cash and cash equivalents at beginning of period 7,359 9,392
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Cash and cash equivalents at end of period $4,528 $11,319
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See notes to condensed consolidated financial statements.
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INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
PRINCIPLES OF CONSOLIDATION -- In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements include all adjustments,
which were of a normal recurring nature, necessary to present fairly the
financial position of the Company as of March 31, 1995 and December 31, 1994,
and the results of its operations for the three months ended March 31, 1995 and
1994 and changes in its cash flows for the three months ended March 31, 1995 and
1994. The results of operations for the three months ended March 31, 1995, are
not necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements contained in the Company's annual financial statements and notes.
STATEMENT OF CASH FLOWS -- The Company made payments (in thousands) of:
Three Months Ended
March 31,
1995 1994
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Interest $2,315 $1,829
Income Taxes 3,035 3,139
INSTALLMENT RECEIVABLES -- In May 1993, the Financial Accounting Standards
Board issued Statement No. 114 "Accounting by Creditors for Impairment of a
Loan" (SFAS 114). SFAS 114 is effective for fiscal years beginning after
December 15, 1994. The Company adopted SFAS 114 effective January 1, 1995. The
new standard requires that impaired loans within the scope of SFAS 114 be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate. The effect of adopting SFAS 114 was not
material to the Company's financial condition and had no impact on results of
operations.
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INVENTORIES -- Inventories consist of the following components (in thousands):
March 31, December 31,
1995 1994
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Raw materials $17,012 $17,272
Work in process 9,210 9,093
Finished goods 23,010 23,617
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$49,232 $49,982
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The inventory determination under the LIFO method can only be made at the end of
each fiscal year based on the inventory levels and cost at that point,
therefore, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.
PROPERTY AND EQUIPMENT -- Property and equipment consist of the following (in
thousands):
March 31, December 31,
1995 1994
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Land, buildings and improvements $ 27,379 $ 26,442
Machinery and equipment 75,600 72,815
Furniture and fixtures 7,680 7,478
Leasehold improvements 5,818 5,696
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116,477 112,431
Less allowance for depreciation 59,220 56,512
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$ 57,257 $ 55,919
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
NET SALES
Net sales for the quarter ended March 31, 1995 increased by 22.6% over the
same period a year ago. Domestic net sales increased 23.2% principally due to
higher unit volumes in respiratory equipment, beds and prescription power
wheelchairs, offset slightly by the effects of a continuing competitive pricing
environment for most of our products.
International net sales, as reported in dollars, for the quarter ended
March 31, 1995 increased by 20.6% over the same period a year ago. European
sales increased 23.0% for the quarter with approximately one-half of the
reported increase arising as a result of the weakening dollar against most
major European currencies. The reported increase includes a modest positive
impact from the two small acquisitions completed late in 1994 offset to some
extent by continuing price competition in most European markets. Canadian sales
increased 9.2% and were negatively impacted by 4.9% due to the weak Canadian
dollar during the quarter.
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GROSS PROFIT
Gross profit as a percentage of net sales for the quarter increased to 31.0%,
compared to 30.2% for the same period a year ago. The principal factor leading
to the increase for the quarter ended March 31, 1995 was the significantly
improved volume experienced in the majority of our product lines. Continued
focus on productivity improvements and cost containment initiatives also
contributed to the improvement. The gross margin increase was offset to some
extent by the effects of a continuing competitive pricing environment.
OPERATING EXPENSES
Selling, general and administrative expense as a percentage of net sales for
the quarter ended March 31, 1995 remained relatively constant at 23.3% when
compared to the same period a year ago. Selling, general and administrative
expense increased by $4,749 in the quarter due to increased investment in
additional sales personnel, product specialists and marketing programs.
INTEREST
Interest income in the quarter ended March 31, 1995 increased over the same
period a year ago mainly as a result of increased installment loan volumes. For
the quarter, interest expense increased due to an increase in interest rates and
to a lesser extent higher average outstanding borrowings.
INCOME TAXES
The Company had an effective tax rate of 38.0% for the quarter ended March
31, 1995, compared to 37.0% in the same period a year ago. The higher tax rate
for the quarter ended March 31, 1995 is due in part to increased earnings in
international operations, which are taxed at higher rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company's overall level of long-term obligations remained relatively
constant at $103 million for the quarter ended March 31, 1995. The Company
continues to maintain an adequate liquidity position to fund its working capital
and capital requirements through its cash flow from operations and its bank
lines. As of March 31, 1995 the Company has approximately $167 million
available under its lines of credit.
The Company's financing arrangements require it to maintain certain
conditions with respect to net worth, working capital, funded debt to
capitalization and interest coverage as defined in the bank and note agreements.
The Company is in compliance with all of the conditions.
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CAPITAL EXPENDITURES
There were no material capital expenditure commitments outstanding as of
March 31, 1995. The Company expects to invest in capital projects at a rate
that approximates depreciation and amortization. The Company estimates that
depreciation and amortization for 1995 will be approximately $13,678. The
Company believes that its balances of cash and cash equivalents, together with
funds generated from operations and existing borrowing capabilities will be
sufficient to meet its operating cash requirements and fund required capital
expenditures in the foreseeable future.
CASH FLOWS
Cash flows provided by operating activities were $7,932 for the first
quarter of 1995 compared to $3,730 in 1994. The primary sources of improved
1995 cash flows provided by operating activities were from increased net income
and a decrease in inventory as a result of improved inventory management.
Cash flows required for investing activities decreased by 18% for the first
quarter of 1995 when compared to 1994 mainly as a result of increased collection
activity by the Company's financing division and a reduction of fixed asset
additions offset by the increase of marketable securities.
Cash flows required for financing activities decreased to $4,758 for the
first quarter of 1995 when compared to $5,957 in 1994 as a result of reductions
in long term borrowings in our European operations.
DIVIDEND POLICY
On February 2, 1995, the Board of Directors for Invacare Corporation
declared a quarterly cash dividend of $.0125 per Common Share to shareholders
of record as of April 28, 1995 and to be paid on May 15th, 1995. At the current
rate, the cash dividend will amount to $.05 per Common Share on an annual
basis.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
Official Exhibit No.
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27 - Financial Data Schedule
B. Reports on Form 8-K: None
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 thereunto duly authorized.
INVACARE CORPORATION
By:/s/ Thomas R. Miklich
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Thomas R. Miklich
Chief Financial Officer
Date: May 15, 1995