Invacare Reports Strong First Quarter

ELYRIA, Ohio — “Invacare is off to a solid start in 2011,”
President and CEO Gerald Blouch said of the company’s first-quarter
results, announced during an April 28 conference call with
analysts.

For the three months ended March 31, net earnings were $7.5
million versus $3.1 million for the first quarter of 2010. Net
sales grew 6.5 percent to $428.5 million from $402.2 million last
year. Organic net sales increased 6.1 percent with increases in all
business segments.

North America/HME net sales for the quarter increased 6.1
percent to $185.6 million from $175 million last year. The increase
was primarily driven by oxygen concentrators, custom power and
custom manual wheelchairs and beds, according to the company.

Net sales for Invacare Supply Group increased 6.2 percent to $74
million against $69.7 million for the same period in 2010, with the
increase across all major product lines.

Focusing on the outlook for 2011, Blouch said the company is
managing rising commodity and freight costs, along with the
potential for fluctuations in foreign exchange rates, through
ongoing cost reduction and selective price
increases.

While rising costs didn’t have much effect on results in the
first quarter, Blouch said, things could change.

“Fortunately the company did not experience much pressure
related to commodities in the first quarter due to our supplier
contracts,” Blouch said. “However, we’ll begin to feel more of this
pressure in the second quarter.”

The North America/HME division recently announced a price
increase for certain products effective May 1, and Invacare’s other
segments are reviewing whether freight and price increases might be
warranted, Blouch said.

The company is keeping a particularly close watch on the tragedy
in Japan, he added, as Invacare sources a few key electronic
components from suppliers in that country. If there is a disruption
in the supply chain, the company is “developing component and
supplier alternatives to be implemented if and when necessary.”

Neither did Invacare see a significant impact to its business in
the first quarter related to Round 1 of competitive bidding, Blouch
said. Even though CMS’ has announced a six-month delay of the
program, that does not mean there will be any changes. The company
will continue to work with the industry to implement “meaningful
changes” to the program, Blouch said.

Invacare is also providing updates to the Food & Drug
Administration about improvements in response to regulatory
compliance concerns raised in 2010. Blouch said the company “is in
the process of adding resources to the regulatory affairs and
corporate compliance departments and has engaged outside experts to
accelerate implementation of its corrective actions.”

The company reconfirmed its 2011 guidance to include:

• Organic net sales growth between 3 and 4 percent (narrowed from
  original guidance between 2 and 4 percent);
• Adjusted earnings per share between $2.05 and $2.15;
• Free cash flow between $85 million and $95 million;
• Effective tax rate of approximately 30 percent on adjusted
  pre-tax annual earnings; and
• Adjusted EBITDA between $145 million and $155 million.

All in all, Blouch said, “It was a great first quarter
…  We’re basically saying that Invacare is back to a
growth environment, and we’re going to keep delivering that for
investors.”