By Mary Vanac
Invacare Corp.‘s (NYSE: IVC) sales are growing again, especially in Asia. So the Elyria, Ohio-based maker of home healthcare equipment and supplies has raised its sights for earnings and free cash flow for the year, to the delight of shareholders.
“Invacare delivered strong results in three key areas” during the second quarter, interim CEO Gerald Blouch, the company’s interim chief executive, said in prepared remarks. “First, adjusted earnings-per-share for the quarter increased 30 percent over the second quarter last year to $0.39. This dramatic improvement is attributed principally to net sales growth, gross margin improvement and lower interest expense related to the paydown of debt.
“Second, the company reported a 2.7 percent increase in organic net sales over the second quarter of last year, returning to growth for the quarter,” said Blouch, who stepped in as Invacare interim chief executive while Invacare’s high-profile CEO, A. Malachi Mixon III, recovers from a mild stroke. “Third, Invacare generated free cash flow of $40 million, which was above the company’s internal plan for the quarter.”
On a non-adjusted basis, however, Invacare lost $611,000, or 2 cents per diluted share, during the second quarter, compared with earnings of $7.7 million, or 24 cents per diluted share, in the year-ago quarter. The loss came largely from a $14 million (45 cents per diluted share) loss on extinguishing debt — the company’s decision. Net sales grew 4 percent to $430.8 million from $412.5 million a year ago.
Invacare posted respectable sales growth of 6.2 percent for its Invacare Supply Group and nearly 7 percent for its Institutional Product Group during the recent quarter. Sales grew 26.6 percent in the Asia/Pacific region. Given cost-cutting and other efficiency moves in the last two years, the company’s gross profit margin is improving in spite of rising raw materials prices.
For the six months ended June 30, Invacare had net earnings of $2.5 million, or 8 cents a diluted share, down more than 300 percent from $10.1 million, or 31 cents a diluted share, in the year-ago period. Net sales grew 3 percent to $833.1 million from the same 2009 period.
In the first half the year, Invacare repaid $75 million of high-interest debt. That means the company is paying less interest expense than a year ago. It’s also considering refinancing all of its high-interest debt. In 2007, Invacare refinanced $400 million in debt, selling $135 million worth of convertible debt and $175 million worth of high-yield debt.
In light of the strong quarterly results, Invacare raised its 2010 guidance for adjusted earnings per share (omitting restructuring and refinancing expenses) to between $1.75 and $1.85, up 5 cents a share from previous guidance. The company now expects free cash flow of between $75 million and $85 million, up $10 million.
Invacare shares shot up more than 25 percent to $25 soon after the opening bell today.