Invacare Improves Q2 Earnings

ELYRIA, Ohio — While sales were $412.5 million, down 7.7 percent from 2008’s $447.2 million, Invacare Corp.
posted second quarter net income of $7.7 million compared with $5.3
million in the same quarter last year. The profit bump was due to
cost reduction initiatives, selective price increases, increased
volumes “and a favorable customer mix toward higher margin
customers,” the manufacturer reported in its July 23 earnings
statement.

Mal Mixon, Invacare’s chairman and CEO, said 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.”

Mixon said some of the company’s larger customers were also its
lowest-margin customers.

“Some of these customers are highly leveraged,” Mixon said,
adding that the company had begun scrutinizing its various accounts
over the last 12 months, and “if they are low-profit and there is
risk associated … we’re walking away from some of that
business. It’s actually improving our margins and improving our
cash flow, and our receivables are probably in the best shape
they’ve been in for a long, long time. It’s really quality of
business we’re pursuing in this environment.”

Despite Medicare reimbursement cuts and Medicaid uncertainties
in light of budget shortfalls in states like California and Ohio,
Mixon said he is looking for a good second half from Invacare’s
North American HME division.

“The major issue facing all organizations in U.S. health care is
how will they fare in President Obama’s reform legislation,” Mixon
said. The company statement noted there “should be more clarity in
the next 90 to 120 days as to how the home care industry and
Invacare will be affected.”

As far as competitive bidding, Mixon said, “I’m spending most of
my energies in Washington on that subject, and I do believe the new
administration is listening and we are making some progress. I
think our best chance is to modify the program to make it a
relatively viable program …

“My customers continue to meet with anyone in the administration
or anyone in Congress who will listen regarding this program,” he
added, pointing out “we have to wait and see what the rules are”
regarding the rebid of Round 1. The fact that the program reprise
won’t begin again until January of 2011 gives the industry another
18 months to continue working on the issue, he said.