Invacare shifts into phase two of transformation
ELYRIA, Ohio – 2016 was the year Invacare tore itself down and 2017 will be the year it starts building itself back up, Matt Monaghan said during a conference call Feb. 9 to discuss the company’s fourth quarter and year-end financial results.
In 2016 and especially in the fourth quarter, Invacare saw the impact of significant costs from investing in the North America sales forces, quality remediation, and research and development—ahead of expected benefits, said Monaghan, chairman, president and CEO.
“We chose to do this to hasten change and get to building momentum sooner,” he said. “People will ask if the fourth quarter was worse than expected. In the fourth quarter, we made a lot of change.”
Monaghan noted that Invacare is poised to release more than 10 new products for the complex rehab and post-acute care markets in 2017. It kicked off these efforts in the fourth quarter of 2016, releasing the Platinum Mobile Oxygen Concentrator.
Invacare is also poised to make progress in lifting its consent decree with the U.S. Food and Drug Administration in 2017. The company submitted specified design history files to a third-party expert for review in January. Once the files are approved by the expert, they will be sent to the FDA, along with Invacare’s own report, for approval, paving the way for a re-inspection.
“I think there are a few things we’ll be talking about in the next couple of quarters that reflect continued milestones on quality progress,” Monaghan said.
The improvements can’t come soon enough. Monaghan acknowledged that Invacare ended the fourth quarter with “disappointing” results, especially for its North America/HME division. Net sales decreased 27.4% to $83.7 million for the fourth quarter of 2016 compared to $115.4 million in the same period in 2015. Net sales decreased 16.1% to $397.7 million for 2016 compared to $474.2 million in 2015.
“I think in the future, as we mentioned, there’s a little more sales reduction to do, but it’s not of the wholesale variety, especially in the seating and mobility lines like we’ve had recently,” he said.
Overall, Invacare reported net sales of $264.7 million for the fourth quarter of 2016 compared to $283.3 million for the same period in 2015. It reported net losses of $17.6 million vs. $2.93 million. The company reported net sales of $1.05 billion for 2016 compared to $1.14 billion for 2015. It reported net losses of $42.86 million vs. $26.45 million.
But there should be signs of positive change in 2017, with Invacare moving into the second phase of its three-phase transformation: “rebuilding the company in alignment with our new direction,” Monaghan said. It kicked off these efforts in January by laying off 100 associates and closing a facility in Kirkland, Quebec, two moves that will save $6.6 million on an annualized basis.
“We plan to continue implementing broader, sustainable quality improvements throughout the business,” he said.