Invacare ekes out 2012 profit, despite ‘most challenging year’

Invacare (NYSE:IVC) weathered what CEO Gerald Blouch called "1 of the most challenging in the company’s history" and managed to eke out a small profit.

But the home healthcare supplies maker still faces stiff headwinds, including the lingering after-effects of an FDA probe that crippled a crucial business segment, a stalled research & development program and downward price pressure from new Medicare competitive bidding rules.

Last year Invacare agreed to a consent decree with the FDA that temporarily shut down 2 facilities and forced the sale of its Invacare Supplies Group division to AssuraMed for $151 million and led to layoffs for more than 140 workers, or about 40% of its total workforce.

Excluding the divested supplies business, Invacare posted a loss of $7.3 million, or 23¢ per share, on sales of $360.4 million for the 3 months ended Dec. 31, representing a 79.2% increase in losses and a 3.7% sales slide.

For the full year, Invacare logged profits of $1.8 million, or 6¢ per share, on sales of $1.46 billion, compared with losses of $4.1 million (13¢) on sales of $1.50 billion, down 3.1%.

"2012 was one of the most challenging years in the company’s history. The year was dominated by our consent decree negotiations with the United States Food & Drug Administration. Negotiations were completed and the consent decree became effective in December, necessitating a temporary cessation of production at our Taylor Street wheelchair manufacturing facility to allow time to implement compliance controls," Blouch said in prepared remarks.

The combined Invacare businesses posted losses of $35.0 million, or $1.25 per share, on sales of $455.6 million last year. The ISG business logged 2012 profits of $4.7 million, or 15¢ per share, on sales of $95.2 million.

Blouch said an intensive, 2-year retrofit of its compliance systems caused research & development to come to a near halt. The FDA consent decree also bars "design activities related to wheelchairs and power beds" at Invacare’s Elyria home base until the FDA gives the OK, according to a press release.

"The lack of new products coupled with uncertainty among our customers over Invacare’s ability to offer continuous product supply from the Taylor Street facility resulted in a loss of market share and gross margin pressure in the North America/home medical equipment segment last year," Blouch said.

Invacare said it expects the pressure to continue this year, with the "key drivers" including the costs of the compliance remediation and limited production at the facility under FDA investigation.