I would like to refer the inventors to the company’s earnings release to review the definitions of the free cash flow and some of the adjusted earnings items which would be mentioned during the call and you can find the release on our website.I will now provide an overview of the company’s performance for the second quarter as well as an update on our guidance for 2010. During the quarter, Invacare delivered a strong result in three key areas despite increased commodity costs and pressures from weakening foreign shares extension rates compared to U.S. Dollar. First, adjusted earning per share for the quarter increased 30% over the same quarter last year to $0.39. This dramatic improvement has attributed principally to net sales growth, gross margin improvement and lowered interest rate expense related to the pay down of debt. Second, the company reported a returned to organic sales growth in the quarter with a 2.7% increase in organic sales over the second quarter of last year. And finally, Invacare generated a free cash flow of $40 million which was well above the company’s internal estimate for the quarter as well as above the same period last year. In light of Invacare’s strong second quarter results, the company is raising its guidance for the year on adjusted earnings per share to $1.75 to $1.85 per share and we are increasing our guidance on free cash flow as well to $75 to $85 million. In addition to strong margin improvement, the company is encouraged that its renewed focus on growth is beginning to show improved organic net sales and moreover, the company paid out approximately $75 million of prior interest rate debt in the quarter, and the first two quarters of 2010 is also making significant contribution. And the companies expect to continue to benefits from lowered interest expense for the balance of the year. In addition, the company is reviewing other actions including a complete re-financing that could create substantial additional interest saving into 2011. Also, I'm pleased to announce that Mal Mixon who maybe on call today I hope and he was in the office yesterday will return to his position of chairman of the board at the end of the month.
The company does appreciate Jim Boland’s contribution as Interim Chairman and Jim will resume his role as lead director upon Mal’s return. I'll now cover in more detail the consolidated results from the second quarter.As I said before, adjusted earnings per share were $0.39 for the second quarter of 2010 compared to $0.30 for the second quarter 2009. Adjusted earnings for the quarter were $12.7 million versus $9.6 million for the second quarter last year. Adjusted earnings before income taxes for the second quarter was $17.2 million compared to $12.7 million for the second quarter last year. The significant improvement in adjusted net earnings for the quarter was primarily driven by net sales growth, improved gross margins and reduced interest expense partially offset by higher selling general and administrative expenses. The company interest expense in the quarter benefits from the pay down of approximately $75 million of higher interest rate debt during the first two quarters. Net sales for the quarter increased 4.4% to $430.8 million. Of the 4.4%, foreign currency increased net sales by 1.5 percentage points in an acquisition increased net sales but only slightly. Organic net sales for the quarter increased 2.7% over the same period of last year driven by all segments of the business except the North American HME segment. Gross margins as a percent of sales for the quarter increased by eight tenths of a percent versus last year, second quarter and this is a sequential increase of 1.1% over the first quarter of the year. Read the rest of this transcript for free on seekingalpha.com