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."