Second-Quarter Profits Drop at Invacare

ELYRIA, Ohio–Citing uncertainties about Medicare reimbursement
changes, Invacare Corp. said its second-quarter profit dropped 62
percent.

In a statement issued Thursday, the company said it earned $5
million during the second quarter compared with $12.9 million
during the same period last year. Net sales dipped 6 percent to
$371.7 million from $396.3 million. For the full year, the company
said it expects sales to be flat or decline by 2 percent.

“The domestic market remains unsettled due to a number of
announced changes to Medicare reimbursement policies, the details
of which have not been fully clarified,” the company said. “While
the underlying demand has not changed, customers have taken a
cautious position on purchasing and inventories until details are
finalized and published. This has been most disruptive to the power
wheelchair and oxygen markets.”

North American respiratory product sales dropped 22 percent
during the period, the company said, largely due to slower demand
for its HomeFill oxygen system line. “In addition to significantly
reduced purchases versus last year by national providers, sales to
small providers and independents declined 9 percent in the
quarter,” the company said, noting that uncertainty surrounding the
Deficit Reduction Act’s oxygen provisions continue to impact the
market.

Sales of standard products decreased 5 percent for the quarter,
rehab products were down 3 percent and sales of consumer power
wheelchairs slipped by 7 percent, also “acutely impacted” by
reimbursement issues, the company said.

“While our lack of sales growth continues to be disappointing,
it is a reflection of the difficult industry conditions that
exist,” Invacare Chairman and CEO Mal Mixon said. “Providers tell
me they have never seen reimbursement conditions as unsettled and
onerous as they are today. Providers are being attacked from all
sides with significant reimbursement changes that are still not
clearly defined by the government.”

To improve performance, Invacare said it will continue to shift
substantial resources from product development to manufacturing
cost reduction activities, transfer additional manufacturing to
China, cut personnel and cost reduce the design and engineering of
products. In earlier cost-cutting measures, the company eliminated
450 jobs.

Mixon said he is confident second-half earnings will improve,
and “when reimbursement uncertainty is resolved, we will emerge as
a better, stronger company.”