Invacare restructures for improved second half of 2022

ELYRIA, Ohio – Invacare plans to make a number of changes this year to pivot the company to “a more profitable and competitive business model,” says Matt Monaghan.  

In the face of persistent supply chain challenges, Invacare expects to optimize its product line for efficiency; shift where and how it manufactures, assembles and distributes products, especially considering freight and logistics trends; align staff levels and how employees are organized to be streamlined and responsive; and improve working capital to enhance free cash flow and strengthen the balance sheet. 

“While first quarter 2022 is expected to be our low point this year, following a typical seasonal pattern of lower sequential performance, we anticipate these actions will drive sequential quarterly improvements for the final three quarters of the year where the majority of benefit is expected to occur in the second half of the year,” said Matt Monaghan, chairman, president and CEO, during a conference call to discuss fourth quarter and full year 2021 financial results. “As a result, we anticipate improved full-year adjusted EBITDA, with North America expected to return to profitability.” 

Invacare has already combined its Europe and Asia-Pacific businesses under one leader to create scale-based cost savings and synergies. 

More specifically, the company plans to optimize its product line by “tightening up” the “vast variety” of products it offers globally, Monaghan said. 

“The easy hypothetical example is, if you have 23 colors of everything, maybe 22 or 12 or something else is easier when you multiply that by sizes and all sorts of features in all our custom and semi-custom products,” he said. “That's one of the things that's caused our working capital to balloon so much, especially on inventory, and not be able to deal with the challenges of the current supply chain environment as effectively as we'd like to. So, that's a big thing.” 

Invacare also expects to benefit from new enterprise resource planning software in 2022, after a bumpy fourth quarter during which the software required additional labor and overtime costs in manufacturing, distribution and customer service, contributing to a 6.9% decrease in net sales for North America.  

“As a result of the inefficiencies and the controlled deployment of our latest ERP expansion in North America in the quarter, revenues were temporarily impacted,” said Kathy Leneghan, senior vice president and CFO. “The system was fully operational by quarter-end, with further efficiencies expected. As the system matures and supports more customers, we expect to recognize benefits that will continue improving customer engagement and financial performance.”