Invacare announces its financial results for the quarter and nine months ended September 30, 2009

Invacare Corporation (NYSE: IVC) today announced its financial results for the quarter and nine months ended September 30, 2009.

HIGHLIGHTS FOR THE THIRD QUARTER

• Earnings per share on a GAAP basis increased 27% to $0.42 versus $0.33 last year
• Adjusted earnings per share^(a) increased 24% to $0.52 versus $0.42 last year
• Free cash flow^(d) of $44.7 million as compared to $15.9 million last year
• Organic sales decreased 2.2%
• Adjusted EBITDA^(e) of $40.1 million
• Reduction in debt outstanding of $71.9 million

CONSOLIDATED RESULTS

Earnings per share on a GAAP basis for the third quarter were $0.42 ($13.5 million net earnings) as compared to earnings per share for the same period last year of $0.33 ($10.7 million net earnings). Adjusted earnings per share^(a) were $0.52 for the third quarter of 2009 as compared to $0.42 for the third quarter of 2008. Adjusted net earnings^(b) for the quarter were $16.7 million versus $13.4 million for the third quarter last year. Adjusted earnings before income taxes^(c) for the third quarter were $21.0 million as compared to $17.5 million for the third quarter last year. Adjusted net earnings^(b) for the quarter were positively impacted by an improved gross profit, reduced net interest expense and a lower effective tax rate, which were partially offset by reduced volumes, and unfavorable foreign currency translation and transactions.

Net sales for the quarter decreased 6.0% to $434.0 million versus $461.8 million last year. Foreign currency translation decreased net sales by four percentage points while acquisitions increased net sales by less than a percentage point. Organic net sales for the quarter declined 2.2% over the same period last year driven by organic net sales declines in North America/Home Medical Equipment, Asia/Pacific and Institutional Products Group, which were partially offset by an organic net sales increase for Invacare Supply Group.

Gross margin as a percentage of net sales for the third quarter was higher by 1.9 percentage points compared to last year’s third quarter and 1.7 percentage points compared to this year’s second quarter. The margin improvement compared to the prior year in virtually all segments was the result of cost reduction activities, including commodity cost and freight reductions, along with a favorable customer mix toward higher margin customers, which were partially offset by volume declines and currency weakness in Asia Pacific related to purchases of sourced product.

Selling, general and administrative (SG&A) expense decreased 1.7% to $104.3 million in the quarter compared to $106.2 million in the third 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 increased by 1.4% compared to the third quarter of last year, primarily due to an increase to the bad debt reserve, higher distribution costs, stock option expense and unfavorable foreign currency transactions.

Earnings per share on a GAAP basis for the nine months ended September 30, 2009 were $0.74 ($23.5 million net earnings) as compared to earnings per share for the same period last year of $0.57 ($18.3 million net earnings). Adjusted earnings per share^(a) were $0.95 for the nine months ended September 30, 2009 as compared to $0.75 for the same period last year. Adjusted net earnings^(b) for the first nine months of 2009 were $30.4 million versus $24.0 million last year. Adjusted earnings before income taxes^(c) for the first nine months of 2009 were $39.9 million as compared to $34.6 million for the first nine months of last year. Adjusted net earnings^(b) for the first nine months of 2009 were positively impacted by cost reduction activities, selective price increases implemented in the second half of 2008, reduced net interest expense and a lower effective tax rate, which were partially offset by volume declines and unfavorable foreign currency translation and transactions.

Net sales for the nine months ended September 30, 2009 decreased 6.1% to $1.24 billion versus $1.33 billion last year. Foreign currency translation decreased net sales by six percentage points while acquisitions increased net sales by less than a percentage point. Organic net sales for the nine months ended September 30, 2009 decreased 0.3% over the same period last year.

A. Malachi Mixon, III, Chairman and Chief Executive Officer, stated, “For the third quarter, the Company delivered a 25% improvement in adjusted net earnings^(b), a 1.9 percentage point improvement in the gross margin and approximately $45 million of free cash flow^(d). Operating margin continues to improve, while the Company efficiently managed its working capital. Using the free cash flow^(d) generated in the quarter along with cash already on its balance sheet, the Company reduced debt by approximately $72 million in the quarter, bringing the Company’s ratio of debt to adjusted EBITDA^(e) to 2.6 as of the end of the quarter.”