ELYRIA, Ohio — Invacare Corp. profits rose 43 percent in the second quarter from a year ago as operating expenses as a proportion of sales, interest expenses and income taxes fell.
Invacare, which makes home health care equipment, products and supplies, earned $7.7 million, or 24 cents a diluted share, in the quarter ended June 30. By omitting restructuring costs, and accounting costs related to debt restructuring and income tax valuations, the company earned $9.6 million or 30 cents a diluted share, up 37 percent from $7 million, or 22 cents a diluted share, a year ago.
Net sales fell 8 percent to $412.5 million in the recent quarter from a year ago. Most of the fall in sales came from unfavorable foreign currency exchange rates in markets like Europe. Free cash flow, a measure of operating cash flow without the effects of restructuring activities, or the buying or selling of property and equipment, was $39.6 million in the just-ended quarter, up from $11.4 million a year ago.
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For the six months ended June 30, Invacare’s earnings rose 33 percent to $10.1 million, or 31 cents a diluted share, from the year-ago period, while adjusted earnings rose 29 percent to $13.7 million, or 43 cents a diluted share. Net sales fell 6 percent to $810.5 million in that time. Total debt was $444.7 million at June 30, down 15 percent from a year ago.
“For the second quarter, the company delivered a 36 percent improvement in adjusted net earnings (per share)Â and generated significantly stronger free cash flow of nearly $40 million,” said A. Malachi Mixon III, Invacare’s chairman and chief executive, in a written statement. “The company benefited from improved gross and operating margins, which were largely due to cost reductions, and from a decision to limit business with various customers that did not provide an adequate return.”
Looking ahead, Invacare expects pricing and reimbursement pressures in certain European markets through year-end, constraining both sales and operating performance. The company is forecasting adjusted earnings-per-share of between $1.38 and $1.48 for 2009.
Sales growth is expected to be between 2 percent and 4 percent in 2009, despite Medicare reimbursement cuts and Medicaid uncertainties that are part of state budget shortfalls in several states, including California and Ohio. That’s down from the company’s previous sales growth forecast of between 4 percent and 6 percent.
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“With six months of improved earnings and very strong cash flow, Invacare has performed well in an uncertain and difficult reimbursement environment for many of its key markets,” Mixon said in his company’s statement. The major uncertainty facing U.S. health care organizations is President Obama’s health care reform. Invacare is actively lobbying on Capitol Hill for the home health care industry, which can improve access, reduce cost and improve quality for most Americans, the company said.
During his town hall meeting in Shaker Heights last week, President Obama indicated support for home health care. Asked whether cutting health care costs was an exercise merely in cutting reimbursement rates for doctors and hospitals, Obama said, no. Some reimbursement rates, such as those for home health care services, should rise. “I actually think home care ends up being cost-efficient, in many cases,” he said. “Rather than institutional care, it helps keep people at home.”
Invacare shares were down 4 cents a share to $18.96 Monday in early-afternoon trading on the New York Stock Exchange. The company made its second-quarter earnings announcement on Thursday.
