Invacare Q1 Earnings Up

ELYRIA, Ohio — Invacare Corp. reported Thursday that first-quarter earnings were up compared with a year
ago despite a decline in sales.

Net income for the giant manufacturer rose 8.5 percent for the
quarter to $2.4 million, or 8 cents a share, from $2.2 million, or
7 cents a share, in the same period for 2008. Earnings were
positively impacted by organic sales growth, cost reductions, lower
interest expenses and a lower tax rate.

Net sales decreased 4.4 percent to $398 million versus $416.3
million in 2008, with a negative impact from foreign currency
translation.

In the company’s North America/HME division, net sales for the
quarter increased 6.2 percent to $186.7 million compared to $175.8
million last year. Rehab product net sales increased by 2.6
percent, and standard product net sales increased 11.1 percent
compared to the first quarter of last year, driven by increased
volumes in manual wheelchairs, patient aids and beds. Respiratory
product net sales spiked 14.3 percent on volume increases in oxygen
concentrators and strong purchases by national accounts, according
to the company.

Looking ahead, organic sales growth for the year is expected to
be 4 to 6 percent, excluding any impact from acquisitions and
foreign currency adjustments.

Commenting on the results, Invacare Chairman and CEO Mal Mixon
said the economy has not hurt performance. “Health care is probably
the most insulated industry from this economic crisis we’re in. Our
products are strong,” he said.

Neither has the company seen an effect from the 9.5 percent DME
reimbursement cut that took effect in January. “There’s still a lot
of profitability in this industry,” Mixon said.

But the outcome of industry struggles with competitive bidding
and the 36-month oxygen cap remain to be seen.

“We are optimistic there could be some major changes made to the
rules on competitive bidding,” Mixon said. “As to whether the
program could be eliminated entirely, that appears less
likely.”

As for the oxygen cap, while large public companies had been
preparing for the scenario, “a lot of smaller companies didn’t read
the fine print and some of them didn’t realize it was going to hit
when it hit,” he said, noting those providers may not feel the full
impact of the cap or the 9.5 percent cut until the second quarter.
“They are still collecting money from rents and sales they made in
October, November and December,” Mixon said.

“I think we’re going to see a lot of talk on oxygen reform,” he
continued. “The 36 months doesn’t make any sense from a medical
point of view … Many patients go five to seven years needing
oxygen, so it doesn’t make sense to me that a provider should have
to continue providing all this capability at an arbitrary number of
payments.”

While there could be more influence from reimbursement changes
as the year progresses, Mixon said he expects a strong performance
from the NA/HME division for the year. “Our products are very
basic. If you have a spinal injury, you need a wheelchair,” he
said.

“Revenue sources for our customers are much more dependable and
substantial than most industries in general,” Mixon continued. “Our
customers don’t have to worry unless we think our government is
going to go bankrupt.”