ELYRIA, Ohio — Invacare Inc. saw earnings-per-share rise 27 percent in the third quarter because of ongoing cost-cutting, and growing financial and operating efficiencies — in spite of a sales drop of 6 percent.
The maker of home health care equipment like power wheelchairs and oxygen systems reported net earnings of $13.5 million, or 42Â cents a diluted share, in the third quarter. That was up 26 percent, on a net earnings basis, from $10.7 million, or 33 cents a diluted share in the year-ago quarter.
The profit rise came mostly from cost-cutting activities — like taking steps to reduce purchasing and freight costs — and from past job and facilities cuts, as well as better accounts receivable and payable management, lower interest payments on debt, and a lower corporate tax rate.
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The company reported restructuring costs of $2.2 million in the third quarter, mostly from downsizing a European plant and Asian operations, Rob Gudbranson, chief financial officer, told securities analysts during an early morning conference call.
Invacare expects to continue to pump up profit margins by squeezing costs through “glocalization” — the practice of buying materials and components in low-cost regions, as well as through simplifying the manufacture of product lines through re-engineering, and reducing inventories. “I expect margins to continue to improve,” A. Malachi Mixon III, the company’s chairman and chief executive, said during the analyst conference call.
Foreign currency translations are “coming back our way now,” Mixon said. “We’re reducing bank debt. It’s a pretty good outlook.”
Invacare also is culling lists of customers that have poor credit ratings, “stepping back from, as we say in the country, taking any old dog that will hunt,” Mixon told analysts. “We’re not trying to set everybody to grow, right now. Our focus is on profits, on managing assets, on getting the bank debt repaid, and we can stoke up the engines again. I’m not worried about growth down the road,” Mixon told the analysts.
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For the first nine months of the year, Invacare had net earnings of $23.5 million, or 74 cents a diluted share, up 28 percent from $18.3 million, or 57 cents a diluted share, in the same period last year.
As a result of profit margin momentum, Invacare raised its adjusted earnings-per-share expectations — earnings minus restructuring costs, and fees related to debt and taxes — for the year to between $1.48 to $1.55, Mixon said. Those expectations previously had been between $1.38 to $1.48, he said.
Sales for the third quarter fell 6 percent to $434.0 million from $461.8 million a year ago because of lower sales volume and unfavorable foreign currency translations. For the nine-month period, sales were $1.24 billion, down 6.1 percent from $1.33 billion in the year-ago period.
Invacare lowered its sales growth expectations for the year to between a drop of 1 percent to zero. That was changed from expected sales growth of between 2 percent and 4 percent, Mixon said.
Invacare shares were down 11 cents to $22.36, or about a half-percentage point, in late-morning trading on the New York Stock Exchange.
