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."