Invacare (NYSE:IVC) plans by mid-2014 to shutter operations at a London, Canada, manufacturing plant that employs 70 workers. The facility’s long-term care bed manufacturing will shift to a third party and case goods will move to an Invacare plant in Florida, the company said.
"While we regret the impact that this decision will have on our London associates, we believe this is an important step for the long-term health of the company," president & CEO Gary Blouch said in prepared remarks. "We expect that this closure will result in long-term cost savings that will enhance our ability to compete in the healthcare market."
Some employees may receive offers to move to other Invacare facilities and the details of severance packages are still under discussion, Invacare spokeswoman Lara Mahoney told MassDevice.com today.
The closure will cost Invacare an estimated $3.5 million on a pre-tax basis. That includes $2.5 million in restructuring charges and another $1 million in operating expenses during the closure, according to a company statement. Cost-savings of about $2.7 million per year should begin in 2015.
IVC shares were flat today, trading at $19.06 as of about 3:20 p.m.
Invacare faced some major hurdles in 2013, which Blouch called “one of the most challenging [years] in the company’s history.”
An FDA order temporarily closed 2 facilities and forced Invacare to divest its medical supplies business.
The FDA said it had flagged problems with Invacare’s quality control systems, “along with failures to properly report adverse events to the agency.”
Invacare’s corporate headquarters and a wheelchair manufacturing facility were largely shut down and ordered to undergo 3rd-party inspections to demonstrate compliance with FDA manufacturing guidelines. The company nonetheless managed to eke out a modest profit in Q2 and beat Wall Street’s expectations for Q3.
The closed facilities are awaiting certification from a 3rd-party auditor, as required under the FDA’s consent decree. The auditor told the company late last year that there were a few more problems to address before operations could resume.