Invacare Corporation (Invacare) has reported net sales of $1.76 billion for the full year of 2008, up 9.6%, compared with the net sales of $1.6 billion in the previous year-end. It reported net earnings of $38.6 million, or $1.21 per share, for the full year of 2008, compared with the net earnings of $1.2 million, or $0.04 per diluted share, in the previous year-end.
Highlights for fourth quarter and full year of 2008
Organic sales increase of 5.7% in the quarter and 7.1% for the year
Adjusted earnings per share (a) for the quarter of $0.60 versus $0.59 last year and for the year of $1.35 versus $1.12 last year
Earnings per share on a GAAP basis for the quarter of $0.55 versus $0.22 last year and for the year of $1.21 versus $0.04 last year
Free cash flow(d) of $56 million generated in the quarter and $60 million for the year
Adjusted EBITDA(e) of $44 million for the quarter and $146 million for the year
Reduction in debt outstanding of $29 million for the quarter and $59 million for the year
Consolidated Results
Earnings per share on a GAAP basis for the fourth quarter were $0.55 ($17.5 million net earnings) as compared to earnings per share for the same period last year of $0.22 ($7.0 million net earnings). Adjusted earnings per share(a) were $0.60 for the fourth quarter of 2008 as compared to adjusted earnings per share(a) for the same period last year of $0.59. Adjusted net earnings(b) for the quarter were $19.1 million versus $19.0 million for the fourth quarter last year.
Net sales for the fourth quarter increased 0.9% to $430.4 million versus $426.8 million last year. Foreign currency translation decreased net sales by five percentage points and acquisitions increased net sales by less than a percentage point. Organic net sales for the quarter grew 5.7% over the same period last year driven by improved performance in virtually all segments, particularly for North America/Home Medical Equipment (NA/HME) and Institutional Products Group (IPG).
Gross margin as a percentage of net sales for the fourth quarter was lower by 0.6 percentage points compared to last year’s fourth quarter. Last year’s fourth quarter gross margin was favorably impacted by 0.8 percentage points from insurance and asset recoveries as disclosed in 2007. Excluding this benefit, gross margin as a percentage of net sales for the fourth quarter 2008 was favorable to the fourth quarter of 2007 by 0.2 percentage points.
Selling, general and administrative (SG&A) expense decreased 3.1% to $89.9 million in the fourth quarter compared to $92.7 million in the fourth quarter last year. Foreign currency translation decreased SG&A expense by four percentage points, while acquisitions increased SG&A expense by one percentage point. Excluding foreign currency translation and acquisitions, SG&A expense decreased 0.2% when compared to the fourth quarter of last year. Last year’s SG&A included a one-time benefit of $4.0 million resulting from debt cancellation related to a development stage investment as disclosed in 2007. Excluding foreign currency translation, acquisitions and this one-time benefit, SG&A expense for the quarter decreased by 4.4% primarily due to reduced expenses in distribution, bonus, and legal and professional expenses.
Earnings per share on a GAAP basis for the year ended December 31, 2008 were $1.21 ($38.6 million net earnings) as compared to earnings per share for the same period last year of $0.04 ($1.2 million net earnings). Adjusted earnings per share(a) were $1.35 for the year ended December 31, 2008 as compared to adjusted earnings per share(a) for the same period last year of $1.12. Adjusted net earnings(b) for the year ended December 31, 2008 were $43.1 million versus $35.7 million last year. Both adjusted earnings per share(a) and adjusted net earnings(b) for the year ended December 31, 2007 exclude a one-time net tax benefit primarily attributable to new tax laws adopted in Germany last year. Adjusted earnings before income taxes(c) for the year ended December 31, 2008 were $56.3 million as compared to $39.3 million last year. The significant improvement in adjusted earnings before income taxes(c) was primarily the result of organic sales growth (from both volume and selective price increases), cost reduction activities and reduced net interest expense, which were partially offset by increased freight and commodity costs.
Foreign currency translation increased net sales by two percentage points and acquisitions increased net sales by less than a percentage point. Organic net sales for the year ended December 31, 2008 grew 7.1% over the same period last year driven primarily by performance in NA/HME and Europe. For the year ended December 31, 2008, NA/HME organic net sales grew 9.5% while European organic net sales grew by 4.9%.
A. Malachi Mixon, III, chairman and chief executive officer, stated, “The Company delivered strong organic sales growth and robust earnings for the quarter and the year. Adjusted earnings per share(a) at $1.35 was within the range of Invacare’s original guidance for 2008, despite increased commodity costs during the year and weakening foreign currencies by year end. Equally important, fourth quarter free cash flow(d) strengthened to $56 million as a result of improved earnings and effective working capital management for the quarter, enabling the Company to exceed its projections on free cash flow(d) for the year.”