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Invacare Corporation (NYSE: IVC) today announced its financial results for the quarter and nine months ended September 30, 2012.
Commenting on Invacare's third quarter 2012 results, Gerald B. Blouch, President and Chief Executive Officer, stated, ''The Company's first priority continues to be focused on making improvements to its quality systems related to previously disclosed observations made by the United States Food and Drug Administration (FDA). Largely as a result of the related incremental regulatory and compliance costs, as well as the ongoing pressures primarily in the North America/Home Medical Equipment (HME) and Asia/Pacific segments, adjusted earnings per share
(a) decreased 64% to $0.21 in the third quarter of 2012 compared to $0.59 in the third quarter of 2011. If the impact of the incremental regulatory and compliance costs, which aggregated approximately $0.13 per share ($4.0 million after-tax expense), were excluded, adjusted earnings per share
(a) would have been approximately $0.34 in the third quarter. Also in the third quarter, gross margin as a percentage of net sales declined by 1.8 percentage points compared to last year primarily related to sales mix favoring lower margin product lines and lower margin customers. Even with these pressures, the Company achieved its strongest quarter of organic net sales growth this year of 2.2% compared to last year with strong performances from Europe, Invacare Supply Group and the Institutional Products Group segments. The Company also generated free cash flow
(c) in the third quarter of $15.6 million.''
Blouch continued, ''Throughout the year the Company has faced several internal and external challenges that have lowered the Company's sales and margins. Internally, one of the key pressures is the delay of new products, particularly higher margin products. The Company has temporarily ceased most new product development, because the majority of its engineers are currently focused on remediation. When the quality systems improvements are complete, the Company will re-energize its new product development activity. Externally, Invacare's sales in the domestic HME industry are being impacted as its customers' cope with prepayment reviews and post-payment audits by payors, as well as uncertainty related to their participation in the next round of National Competitive Bidding (NCB). While the Company believes these are not generally long-term issues, it is continuously assessing the domestic market, including analyzing data from the Centers for Medicare and Medicaid Services (CMS) about demand trends for home medical equipment. If it is determined that there are structural changes to the HME industry, the Company will take the appropriate course of action. Also, the senior management team is working closely with the General Manager for the Australian and New Zealand distribution businesses to return the segment to profitability.''