Invacare Reports Results for First Quarter 2023
Improved operating results driven by lower SG&A expense and expanded gross margin
Executive Summary
Reflecting on the company’s progress, Geoff Purtill, president and chief executive officer, said “Year-to-date, we've made tremendous strides in all aspects of the company’s transformation plan. With Chapter 11 behind us, our focus is on driving operational excellence and delivering profitable long-term growth in our core lifestyle and mobility & seating product categories. This is a new beginning for the company and a great opportunity to redefine the business for the future and realize our long-term growth potential.”
Turning to 1Q23 results, demand for lifestyle and mobility & seating products remained resilient on a global basis. In
To further position the business for long-term success, the company continues to execute strategic actions which include product line rationalization, footprint optimization, supply chain simplification, revisiting the IT infrastructure, and organization rightsizing. Mr. Purtill stated, “Building on our May 5th emergence from bankruptcy, we continue to accelerate the execution of our transformation plan which has yielded positive results in
Key Metrics (1Q23* versus 1Q22)
-
Reported net sales were
$165.5 million 17.7% and constant currency net sales(a) decreased13.2% . Excluding the divestiture of respiratory products, constant currency net sales declined7.7% with largest decline inNorth America as result of the bankruptcy filing and product discontinuation. -
Gross margin was
26.5% , an increase of 280 basis points, driven by favorable product mix and lower input costs. -
SG&A expense decreased
11.2% to$53.8 million 8.2% primarily due to lower employment costs. -
Operating loss improved by
37% to$10.4 million $16.6 million -
Adjusted EBITDA(c) loss improved by
30% to$6.2 million $8.6 million -
Free cash flow(d) usage was
$32.6 million $29.8 million $9.5 million $23.1 million $6.7 million
* Date format is quarter and year in each instance
Commenting on the company’s financial results, Kathy Leneghan, senior vice president and chief financial officer stated, “In line with our historic seasonality, the company consumed cash in 1Q23 to fund customer rebates as well as costs leading up to, and as a result of, the bankruptcy filing. Excluding the bankruptcy related items, free cash flow usage improved driven by lower working capital requirements. We are beginning to see the benefit of the transformation actions previously implemented reflected in our financial results. As we progress through the year, we continue to be focused on improving our service levels to enhance the customer experience, and our efforts to return the company to long-term, sustainable growth.”
1Q23 Segment Results versus 1Q22
(in millions USD) |
Net Sales |
|
Operating Profit (Loss) |
||||||||||||||
|
|
1Q23 |
|
1Q22 |
Reported % Change |
Constant Currency % Change |
|
|
1Q23 |
|
|
1Q22 |
|
% Change |
|||
|
$ |
104.9 |
$ |
118.1 |
(11.1 |
)% |
(4.1 |
)% |
|
$ |
6.2 |
|
$ |
3.2 |
|
91.3 |
% |
|
|
52.4 |
|
75.3 |
(30.5 |
) |
(30.1 |
) |
|
|
(10.3 |
) |
|
(8.3 |
) |
(23.7 |
) |
All Other |
|
8.2 |
|
7.6 |
8.0 |
|
14.1 |
|
|
|
(5.8 |
) |
|
(7.7 |
) |
24.7 |
|
At a segment level, reported net sales in
Gross margin improved by 280 basis points driven by product mix benefits from portfolio simplification actions and favorable costs, primarily lower freight expense. Gross profit dollars declined, primarily attributable to lower net sales and unfavorable foreign currency translation of
Constant Currency SG&A expenses decreased as a result of lower employment and IT costs. Lower SG&A expense was impacted by restructuring actions taken in 2022.
In 1Q23, the company recorded a
Restructuring expense was
Reorganization items, net of tax, of
About Invacare Holdings Corporation
Invacare Holdings Corporation (OTC: IVCRQ) is a leading manufacturer and distributor in its markets for medical equipment, and services used in non-acute care settings. Invacare Holdings Corporation became the successor to Invacare Corporation upon its emergence from bankruptcy on May 5, 2023, as further described in the company’s Quarterly Report on Form 10-Q. At its core, the company designs, manufactures and distributes products, services and solutions Making Life’s Experiences Possible® for people with congenital, acquired and degenerative conditions. The company’s products are important parts of care for people with a wide range of challenges, from those who are active and heading to work or school each day and may need additional mobility to those who are cared for in residential care settings, at home and in rehabilitation centers in
This press release contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that describe future outcomes or expectations that are usually identified by words such as will,” "may," “should,” “could,” “plan,” “intend,” “expect,” “continue,” "forecast," “believe” and “anticipate,” as well as similar comments, denote forward-looking statements that are subject to inherent uncertainties that are difficult to predict. These include, for example, statements related to the company’s business and financial condition following its restructuring under Chapter 11. Actual results and events may differ significantly from those expressed or anticipated as a result of various risks and uncertainties, including the potential adverse effects of the Chapter 11 Cases on the company’s liquidity and results of operations; employee attrition and the company’s ability to retain senior management and other key personnel due to the distractions and uncertainties; the company’s ability to comply with the restrictions imposed by the terms and conditions of its post-bankruptcy emergence financing arrangements; the company’s ability to maintain relationships with suppliers, customers, employees and other third parties and regulatory authorities as a result of the Chapter 11 Cases; the effects of the Chapter 11 Cases on the company and on the interests of various constituents, including holders of the company’s common stock; the Bankruptcy Court’s rulings in the Chapter 11 Cases, including the approvals of the terms and conditions of the plan of reorganization and financing arrangements, and the outcome of the Chapter 11 Cases generally; the length of time that the company operated under Chapter 11 protection and the continued availability of operating capital following the Chapter 11 Cases; increased administrative and legal costs related to the Chapter 11 process; and other inherent risks involved in a bankruptcy process, on-going supply chain challenges and component shortages; sales and free cash flow trends; the impact of contingency plans and cost containment actions; the company’s liquidity and working capital expectations; the company’s future financial results including expectations as to consolidated and segment revenue, net sales and profitability; the company’s future business plans and similar statements. The availability and cost to the company of needed products, components or raw materials from the company’s suppliers, including delivery delays and production interruptions from global supply chain challenges and supplier delivery holds resulting from past due payables; global shortages in, or increasing costs for, transportation and logistics services and capacity; the impact of political or geopolitical crises, such as the Russian war with
INVACARE CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) - (UNAUDITED) |
|||||||
(In thousands, except per share data) |
Three Months Ended |
||||||
|
March 31 |
||||||
|
2023 |
|
2022 |
||||
Net sales |
$ |
165,481 |
|
|
$ |
200,988 |
|
Cost of products sold |
|
121,637 |
|
|
|
153,259 |
|
Gross Profit |
|
43,844 |
|
|
|
47,729 |
|
Selling, general and administrative expenses |
|
53,809 |
|
|
|
60,564 |
|
Net gain on sale of businesses |
|
(4,212 |
) |
|
|
— |
|
Charges related to restructuring activities |
|
4,694 |
|
|
|
3,790 |
|
Operating Loss |
|
(10,447 |
) |
|
|
(16,625 |
) |
Net gain on convertible debt derivatives |
|
(85 |
) |
|
|
— |
|
Interest expense - net |
|
9,084 |
|
|
|
6,252 |
|
Reorganization items, net |
|
20,791 |
|
|
|
— |
|
Loss Before Income Taxes |
|
(40,237 |
) |
|
|
(22,877 |
) |
Income tax provision |
|
940 |
|
|
|
1,320 |
|
Net Loss |
|
(41,177 |
) |
|
|
(24,197 |
) |
|
|
|
|
||||
Net Loss per Share—Basic |
$ |
(1.08 |
) |
|
$ |
(0.69 |
) |
|
|
|
|
||||
Weighted Average Shares Outstanding—Basic |
|
37,994 |
|
|
|
35,046 |
|
|
|
|
|
||||
Net Loss per Share—Assuming Dilution * |
$ |
(1.08 |
) |
|
$ |
(0.69 |
) |
|
|
|
|
||||
Weighted Average Shares Outstanding—Assuming Dilution |
|
38,037 |
|
|
|
35,419 |
|
__________ |
|||||||
| * Net loss per share assuming dilution calculated using weighted average shares outstanding - basic for periods in which there is a loss. | |||||||
INVACARE CORPORATION AND SUBSIDIARIES RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA(c) |
|||||||
|
Three Months Ended |
||||||
(In thousands) |
March 31 |
||||||
|
2023 |
|
2022 |
||||
Net Loss |
$ |
(41,177 |
) |
|
$ |
(24,197 |
) |
Income tax provision |
|
940 |
|
|
|
1,320 |
|
Reorganization items, net |
|
20,791 |
|
|
|
— |
|
Interest expense - net |
|
9,084 |
|
|
|
6,252 |
|
Net gain on convertible debt derivatives |
|
(85 |
) |
|
|
— |
|
Operating Loss |
|
(10,447 |
) |
|
|
(16,625 |
) |
Net gain on sale of businesses |
|
(4,212 |
) |
|
|
— |
|
Depreciation and amortization |
|
3,570 |
|
|
|
3,942 |
|
EBITDA |
|
(11,089 |
) |
|
|
(12,683 |
) |
Charges related to restructuring activities |
|
4,694 |
|
|
|
3,790 |
|
Stock compensation expense |
|
181 |
|
|
|
310 |
|
Adjusted EBITDA(c) |
$ |
(6,214 |
) |
|
$ |
(8,583 |
) |
__________ |
|||||||
| "Adjusted EBITDA(c)" is a non-GAAP financial measure, which is defined at the end of this press release. | |||||||
INVACARE CORPORATION AND SUBSIDIARIES BUSINESS SEGMENTS (UNAUDITED) |
|||||||||||
| The company operates in two primary business segments: |
|||||||||||
The information by segment is as follows: |
|||||||||||
|
Three Months Ended |
|
|
||||||||
(In thousands) |
March 31 |
|
|
||||||||
|
2023 |
|
2022 |
|
Change |
||||||
Revenues from external customers |
|
|
|
|
|
||||||
|
$ |
104,923 |
|
|
$ |
118,079 |
|
|
$ |
(13,156 |
) |
|
|
52,364 |
|
|
|
75,319 |
|
|
|
(22,955 |
) |
All Other (sales in |
|
8,194 |
|
|
|
7,590 |
|
|
|
604 |
|
Consolidated |
$ |
165,481 |
|
|
$ |
200,988 |
|
|
$ |
(35,507 |
) |
|
|
|
|
|
|
||||||
Operating income (loss) |
|
|
|
|
|
||||||
|
$ |
6,170 |
|
|
$ |
3,225 |
|
|
$ |
2,945 |
|
|
|
(10,315 |
) |
|
|
(8,336 |
) |
|
|
(1,979 |
) |
All Other |
|
(5,820 |
) |
|
|
(7,724 |
) |
|
|
1,904 |
|
Charges related to restructuring activities |
|
(4,694 |
) |
|
|
(3,790 |
) |
|
|
(904 |
) |
Net gain on sale of businesses |
|
4,212 |
|
|
|
— |
|
|
|
4,212 |
|
Consolidated operating loss |
|
(10,447 |
) |
|
|
(16,625 |
) |
|
|
6,178 |
|
Net gain on convertible debt derivatives |
|
85 |
|
|
|
— |
|
|
|
85 |
|
Net interest expense |
|
(9,084 |
) |
|
|
(6,252 |
) |
|
|
(2,832 |
) |
Reorganization items, net |
|
(20,791 |
) |
|
|
— |
|
|
|
(20,791 |
) |
Loss before income taxes |
$ |
(40,237 |
) |
|
$ |
(22,877 |
) |
|
$ |
(17,360 |
) |
__________ |
|||||||||||
“All Other” consists of operating income (loss) associated with the company’s businesses in the |
|||||||||||
INVACARE CORPORATION AND SUBSIDIARIES BUSINESS SEGMENT NET SALES (UNAUDITED) |
||||||||
| The following tables provide net sales changes by segment as reported and as adjusted to exclude the impact of foreign exchange translation (constant currency net sales(a)) for the periods referenced below. The current year constant currency net sales are translated using the prior year’s foreign exchange rates. These amounts are then compared to the prior year’s sales to calculate the constant currency net sales change. | ||||||||
Three months ended March 31, 2023 compared to March 31, 2022: |
||||||||
|
Reported |
|
Foreign Exchange Translation Impact |
|
Constant Currency |
|||
|
(11.1 |
)% |
|
(7.0 |
)% |
|
(4.1 |
)% |
|
(30.5 |
) |
|
(0.4 |
) |
|
(30.1 |
) |
All Other (sales in |
8.0 |
|
|
(6.1 |
) |
|
14.1 |
|
Consolidated |
(17.7 |
)% |
|
(4.5 |
)% |
|
(13.2 |
)% |
|
|
|
|
|
|
|||
Consolidated Respiratory Products |
(5.2 |
)% |
|
0.3 |
% |
|
(5.5 |
)% |
Consolidated Excluding Respiratory |
(12.5 |
)% |
|
(4.8 |
)% |
|
(7.7 |
)% |
| __________ | ||||||||
| "Constant currency net sales(a)" is a non-GAAP financial measure, which is defined at the end of this press release. | ||||||||
INVACARE CORPORATION AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONDENSED CONSOLIDATED BALANCE SHEETS |
|||||
|
(unaudited) |
|
|
||
(In thousands) |
March 31,
|
|
December 31,
|
||
Assets |
|
|
|
||
Current Assets |
|
|
|
||
Cash and cash equivalents |
$ |
66,284 |
|
$ |
58,792 |
Trade receivables, net |
|
82,659 |
|
|
87,952 |
Installment receivables, net |
|
263 |
|
|
311 |
Inventories, net |
|
103,635 |
|
|
112,561 |
Other current assets |
|
32,947 |
|
|
39,702 |
Total Current Assets |
|
285,788 |
|
|
299,318 |
Other Assets |
|
4,610 |
|
|
5,159 |
Intangibles, net |
|
21,771 |
|
|
21,669 |
Property and Equipment, net |
|
50,514 |
|
|
51,533 |
Finance Lease Assets, net |
|
55,809 |
|
|
56,272 |
Operating Lease Assets, net |
|
12,111 |
|
|
10,737 |
Goodwill |
|
331,513 |
|
|
326,281 |
Total Assets |
$ |
762,116 |
|
$ |
770,969 |
Liabilities and Shareholders’ Equity |
|
|
|
||
Current Liabilities |
|
|
|
||
Accounts payable |
$ |
72,588 |
|
$ |
104,590 |
Accrued expenses |
|
77,712 |
|
|
106,091 |
Current taxes payable |
|
2,636 |
|
|
2,774 |
Current portion of long-term debt |
|
35,656 |
|
|
154 |
Current portion of finance lease obligations |
|
3,162 |
|
|
3,106 |
Current portion of operating lease obligations |
|
4,142 |
|
|
3,420 |
Total Current Liabilities |
|
195,896 |
|
|
220,135 |
Long-Term Debt |
|
137,241 |
|
|
354,087 |
Long-Term Obligations - Finance Leases |
|
57,808 |
|
|
57,994 |
Long-Term Obligations - Operating Leases |
|
7,956 |
|
|
7,259 |
Other Long-Term Obligations |
|
29,650 |
|
|
50,402 |
Liabilities Subject to Compromise |
|
287,626 |
|
|
— |
Shareholders’ Equity |
|
45,939 |
|
|
81,092 |
Total Liabilities and Shareholders’ Equity |
$ |
762,116 |
|
$ |
770,969 |
INVACARE CORPORATION AND SUBSIDIARIES RECONCILIATION FROM NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES TO FREE CASH FLOW(d) |
|||||||
|
Three Months Ended |
||||||
(In thousands) |
March 31 |
||||||
|
2023 |
|
2022 |
||||
Net cash used by operating activities |
$ |
(30,614 |
) |
|
$ |
(27,698 |
) |
Plus: |
|
|
|
||||
Sales of property and equipment |
|
— |
|
|
|
5 |
|
Less: |
|
|
|
||||
Purchases of property and equipment |
|
(1,978 |
) |
|
|
(2,131 |
) |
Free Cash Flow(d) (usage) |
$ |
(32,592 |
) |
|
$ |
(29,824 |
) |
__________ |
|||||||
| "Free Cash Flow(d) is a non-GAAP financial measure, which is defined at the end of this press release. | |||||||
Definitions of Non-GAAP Financial Measures
(a) “Constant currency net sales” is a non-GAAP financial measure, which is defined as net sales excluding the impact of foreign currency translation. The current year's functional constant currency net sales are translated using the prior year’s foreign exchange rates. These amounts are then compared to the prior year’s sales to calculate the constant currency net sales change. The “Business Segments Net Sales” table accompanying this press release compares net sales as reported and net sales excluding the effects of foreign exchange translation by segment and for the consolidated company for the three months ended March 31, 2023 and March 31, 2022, respectively. The company believes that this financial measure provides meaningful information for evaluating the core operating performance of the company. This financial measure is reconciled to the related GAAP financial measures in the “Business Segment Net Sales” table included in this press release.
(b) “Constant Currency SG&A” is a non-GAAP financial measure, which is defined as selling, general and administrative (“SG&A”) expense excluding the impact of foreign currency translation. The current period's functional constant currency SG&A expenses are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's SG&A expenses to calculate the constant currency SG&A expenses change.
(c) “Adjusted EBITDA” is a non-GAAP financial measure, which is defined as earnings before interest, taxes, depreciation and amortization and calculated as net loss plus: income taxes; interest expense, net; reorganization items, net; net gain or loss on convertible debt derivatives; net gain or loss on debt extinguishment including debt finance charges and fees; asset write-downs related to intangible assets; impairment of goodwill; net gain or loss on sale of businesses; and depreciation and amortization; as further adjusted to exclude charges related to exit of product lines; charges related to restructuring activities and stock compensation expense. It should be noted that the company's definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies and financial analysts calculate Adjusted EBITDA in the same manner. The company believes that this financial measure provides meaningful information which is used by financial analysts and others in the company's industry to evaluate the performance of the company. This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation of Net Income (Loss) to Adjusted EBITDA” table included in this press release.
(d) “Free cash flow” is a non-GAAP financial measure, which is defined as net cash provided (used) by operating activities less purchases of property and equipment plus proceeds from sales of property and equipment. The company believes that this financial measure provides meaningful information for evaluating the overall financial performance of the company and its ability to repay debt or make future investments. This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation from Net Cash Provided (Used) by Operating Activities to Free Cash Flow” table included in this press release.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230515005550/en/
Lois Lee
loislee@invacare.com
440-329-6435
Source: Invacare Holdings Corporation
