Q3 Results: Invacare Up, Lincare Down

ELYRIA, Ohio, and CLEARWATER, Fla. — The industry’s
largest manufacturer and one of its largest providers posted
third-quarter financials last week. While Invacare reported a 27
percent earnings increase, officials at Lincare said net revenues
had dropped $13.1 million compared to last year’s Q3.

Elyria, Ohio-based Invacare reported net earnings of $16.7
million for the quarter ended Sept. 30 compared to $13.4 million
for the same period last year. Net sales for the quarter decreased
6 percent to $434 million versus $461.8 million last year. Organic
net sales for the quarter dipped 2.2 percent over the same period
in 2008.

“The company has delivered nine months of improved
earnings, despite a difficult and uncertain reimbursement
environment for many of its key markets,” said Mal Mixon,
Invacare chairman and CEO, via official press release. “For
the full year, Invacare projects a solid improvement in adjusted
net earnings compared to 2008 and to be at least at the high end of
the company’s original earnings guidance range for 2009. Equally
important, the company’s performance in generating free cash flow
has been substantially above expectations, with results for nine
months almost double the original guidance for the full year. With
strong debt reduction and expanding margins, the company is focused
on delivering improved performance to its shareholders.”

Invacare highlights for the third quarter:

• Earnings increase of  27 percent.
• Free cash flow rose to $44.7 million compared to $15.9 million
  last year.
• Organic sales decreased 2.2 percent.
• Debt reduction of $71.9 million.

According to the company, earnings were in line with internal
planning and ahead of plan on cash flow and debt repayment. For the
fourth quarter, the company continues to expect improvements from
cost reduction activities compared to last year. Commodity costs
have started to rise recently compared to earlier in 2009. Compared
to the third quarter, the higher costs will pressure margins in the
fourth quarter. Offsetting that impact, foreign currency rates have
recently strengthened against the U.S. dollar.

At Clearwater, Fla.-based Lincare, net revenues fell more than
$13 million compared to the same quarter last year. Specific
tallies for 2009 were $392.6 million as opposed to $405.7 million
in 2008. Net income for the quarter was $36 million compared to
$53.3 million for the third quarter of 2008.

Even so, CEO John Byrnes said in a release, “We are pleased with
Lincare’s operating and financial performance in the first nine
months of 2009. As our competitors struggle to deal with the severe
financial consequences of the Medicare price cuts implemented this
year, we continue to focus on meeting the needs of our customers in
order to improve their quality of life and to help them manage
their disease at home while contributing to improved quality of
life and lower overall health care expenditures.”

The giant provider, which has more than 700,000 customers in 48
states, said results for the three and nine months were impacted by
the 9.5 percent DME cut and the 36-month oxygen cap in addition to
lower reimbursement for certain respiratory medications. The
company estimated the changes reduced net revenues in the three and
nine months by approximately $62.6 million and $213.5 million,
respectively.