Invacare Q2 Earnings Tumble On HME Audits
Invacare, a manufacturer and distributer of long-term care and home medical equipment (HME), reported a second quarter loss in the North American HME sector.
Net sales for the second quarter ending June 30 decreased 3.9% to $331.3 million versus $344.8 million for the same period last year. The company’s first quarter earnings also decreased from the same quarter last year. The company reported net sales of $309.1 million for the first quarter ending March 31, down 6.7% from the first quarter of 2013.
Organic net sales for the second quarter decreased by 6.1% compared to the same period last year. Free cash flow was negative $8.6 million in the second quarter compared to positive free cash flow of $2.9 million in the second quarter of last year.
”Clearly, Invacare’s businesses outside of Europe are under pressure, and we are not pleased with the second quarter’s consolidated financial results,” said Invacare President and CEO Gerald B. Blouch, in a news release. “We are determined to turn around the business by focusing on improving free cash flow and restoring profitability in the North America/HME and Asia/Pacific businesses. We also are working to establish a new credit facility with our banks, as our existing credit facility matures in October 2015.”
Offsetting the company’s weak North American financial results is its strong performance in the European market, Blouch said, attributing some of its poor results in the North American market to its consent decree with the United States Food and Drug Administration (FDA).
The company’s consent decree limits the company’s ability to manufacture products at its Taylor Street facility in Elyria, Ohio.
“The decline in mobility and seating products continues to be principally due to the reduced order volume at the company’s Taylor Street manufacturing facility resulting from the FDA consent decree,” Invacare said.
The company estimates that sales of products manufactured from the Taylor Street facility, which included some products sold outside of the North America/HME segment, were about $10.5 million in the second quarter of the current year compared to about $14.7 million in the second quarter of last year.
The consent decree allowed Invacare to fulfill orders and quotes that were in the company’s order fulfillment system prior to the effective date of the consent decree, which benefited net sales results for the second quarter of 2013.
Currently, Invacare is continuing through the final certification audit process with the FDA.
“We need to better demonstrate that our quality system is sustainably compliant and that each subsystem is properly integrated,” Blouch said in the release, adding that Invacare has engaged additional consultants to help improve the functionality and capabilities of certain subsystems. “This is a detailed and complex process, and we are working hard to be in a position to ultimately demonstrate compliance to the third-party auditor and subsequently the FDA.”
Written by Cassandra Dowell