By Mary Vanac
ELYRIA, Ohio — Home healthcare products maker Invacare Corp. (NYSE:IVC) is closing the books on a strong financial performance in 2009 “despite a challenging reimbursement and economic environment,” chairman and CEO A. Malachi Mixon III said.
In the fourth quarter, net earnings rose 6 percent to $17.6 million, or 55 cents per diluted share, from $16.6 million, or 52 cents per diluted share, in the year-ago quarter. For the year, net earnings were up 18 percent to $41.2 million, or $1.29 per diluted share, from $34.9 million, or $1.09 per diluted share, mostly because of a more favorable tax rate.
Adjusted earnings per share, which exclude one-time items like restructuring costs, rose 5 percent in the fourth quarter to 63 cents, and 17 percent for the year, to $1.58, from the year-ago periods.
Free cash flow, which is a measure of net cash Invacare generated after paying bills and making investments, was $61.8 million in the quarter, up from $56.5 million a year ago. For the year, free cash flow was $141.6 million, up more than two times from $59.9 million 2008.
Net sales rose 4 percent to $448.6 million in the quarter and fell 4 percent to $1.7 billion in the year from the year-ago periods. “Organic sales” — those that come from operations not from acquisitions or foreign currency adjustments — increased 0.3 percent in the quarter and decreased 0.2 percent for the year.
Invacare expects organic sales to increase between 1 percent and 3 percent in 2010. It also expects adjusted earnings per share of between $1.70 and $1.80, and free cash flow of between $65 million and $75 million.
“This improvement will be built upon 2009’s successful cost reductions, as well as a return to organic sales growth, both driven by globalization and exciting new product introductions,” Mixon said in his company’s earnings release. “The company plans to use its projected strong free cash flow … to continue to retire debt or pursue accretive acquisitions, as available.”
And one Invacare specter appears to have been vanquished — a tax on medical device sales proposed under health care reform that would have cost Invacare between $12 million and $14 million a year.
“The primary reimbursement risk for Invacare in 2010 … is related to health care reform in the United States,” Mixon said. “However, the likelihood of a massive health care reform bill has been diminished by the outcome of the Senate election in Massachusetts. The Obama Administration’s number one priority seems to have moved from health care to jobs and the economy. As a result, the Company is optimistic that the medical device excise tax will not materialize, although there is still discussion in Congress on how to achieve health care reform in the future.”
To start saving money this year to pay the expected medical device tax next year, last month Invacare suspended some benefits for employees, including matching contributions to its 401(k) retirement plan and merit pay increases for managers, as well as frozen new hiring.
Invacare shares were up more than 6 percent to $26.23 in late-morning trading on the New York Stock Exchange.
