Invacare Corporation (NYSE: IVC) today reported results for the
quarter ended June 30, 2017. All comparisons are with respect
to the same period last year, unless otherwise stated.
Release Highlights
- Reported net sales decreased 15.1% to
$233.5 million. Excluding the divested Garden City Medical, Inc.
(GCM), constant currency net sales(a) decreased 9.3%. Constant
currency sequential net sales(b) decreased 0.1% compared to first
quarter 2017.
- Gross margin as a percentage of net
sales increased 100 basis points to 27.8%.
- Operating loss increased by $9.9
million to $15.7 million.
- GAAP loss per share was $0.72; adjusted
net loss per share(c) was $0.63, which included $0.15 per share of
restructuring charges.
- Free cash flow(d) usage was $22.4
million, which was $10.9 million lower than the first quarter
2017.
- Consent decree milestone: Successfully
satisfied FDA requirements to resume full operations at Corporate
and Taylor Street manufacturing facilities in Elyria, Ohio.
- Phase Two progress on strategic
transformation: Restructuring activities since May 2017 expected to
yield an incremental $8.3 million in annualized cost savings.
During the second quarter, reported net sales decreased 15.1% to
$233.5 million, or 9.3% on a constant currency basis, which
excludes the impact of the third quarter 2016 divestiture of GCM.
Constant currency sequential net sales decreased 0.1% compared to
the first quarter 2017 driven by declines in the North America/Home
Medical Equipment (NA/HME) and Institutional Products Group (IPG)
segments. Gross margin as a percentage of net sales improved by 100
basis points to 27.8% as a result of lower warranty costs and the
strategic mix shift toward clinically complex products. Operating
loss increased by $9.9 million, primarily driven by lower net sales
and increased restructuring costs largely related to the closure of
the company's Suzhou, China manufacturing facility announced in
June 2017. Operating loss and EBITDA(e) were impacted by $5.0
million in restructuring charges. Adjusted net loss per share
increased by $0.30 to $0.63, which included $0.15 of restructuring
charges. Free cash flow usage of $22.4 million was $10.9 million
lower than the first quarter of 2017.
Key Indicators of the Transformation(1)
Phase Two
(in millions USD)
Indicators(1)
Q2 17 Q2 16
$ Change
% Change Net Sales
↓
$ 233.5 $ 275.0 $ (41.5 ) (15.1 )% Constant Currency Net Sales,
excluding GCM
↓
$ 241.3 $ 266.0 $ (24.7 ) (9.3 )% Gross Margin % of Net Sales
↑
27.8 %
26.8
%
100 bps Gross Profit
↓
$ 65.0 $ 73.6 $ (8.6 ) (11.7 )% Constant Currency SG&A,
excluding GCM
↑
$ 77.3 $ 77.6 $ (0.3 ) (0.4 )% Free Cash Flow
↓
$ (22.4 ) $ (17.4 ) $ (5.0 ) (28.5 )% EBITDA
$ (12.0 ) $ (2.2 ) $ (9.8
) (444.0 )%
(1)
As previously disclosed, the key
indicators of the transformation noted in this table are measures
of progress used by the company as it moves through its three-phase
transformation from a generalist durable medical equipment company
toward one more focused on clinically complex products and
solutions.
CEO Summary
"As indicated previously, we expected net sales to continue to
decline through the first half of 2017 before stabilizing
sequentially later in the year. In the second quarter, net sales
from the North America businesses were lower than expected largely
due to intentional net sales declines from the transformation and
weaker sales in other areas. The consolidated operating loss
increased as a result of the sales decline and due to restructuring
charges during the quarter," said Matthew E. Monaghan, chairman,
president and chief executive officer. "In the second half of 2017,
constant currency net sales should start to stabilize sequentially,
as we grow our clinically complex portfolio, especially in mobility
and seating products. With growth in new products and the lifting
of sales restrictions from the consent decree, we are increasingly
confident this will occur. In North America, where the
transformation is most significant, the rehab and post-acute care
sales teams continue to build relationships in the field. Our rehab
products are getting customer approvals. We have launched new
products and services in both rehab and post-acute categories.
Importantly, we are launching the new Invacare® TDX® SP2 power
wheelchair with LiNX® technology this month, which is the first new
Invacare-branded power wheelchair offering in North America since
2010."
"Further, we are making progress on Phase Two of our strategic
transformation. Since May, we have taken actions expected to yield
$8.3 million in annualized cost savings, which is in addition to
the previously announced $9.2 million of annualized cost savings
attributable to restructuring actions taken since October 2016.
These actions will help us optimize our infrastructure and reduce
costs. In June, we raised $120.0 million in gross proceeds from our
convertible notes offering to further fund, among other things,
transformation activities, including ongoing restructuring costs
and the increase in working capital related to the expected sales
increases from the Taylor Street power wheelchair manufacturing
facility. The scope of our commercial change is significant. We are
pleased with the progress of our quality culture, new product
pipeline and infrastructure realignment, and we look forward to the
results of our commercial investments."
Q217 Segment Results
(in millions
USD) Net Sales Operating
Income (Loss)
Constant
Reported Currency Q2 17 Q2 16 %
Change % Change Q2 17 Q2 16 %
Change Europe $ 128.5 $ 135.7 (5.3 )% 0.2 % $ 7.1 $ 6.9 1.8 %
NA/HME 77.7 110.7 (29.8 ) (29.5 ) (12.4 ) (6.6 ) (86.4 ) NA/HME,
excluding GCM 77.7 101.6 (23.6 ) (23.2 ) (12.4 ) (7.4 ) (67.5 ) IPG
15.3 16.1 (4.9 ) (4.8 ) 1.5 1.5 (3.9 ) Asia/Pacific
12.0 12.5 (3.7 )
(4.3 ) (0.1 ) (0.3 )
65.0
Europe - Constant currency net sales growth was driven by
increases in mobility and seating products, partially offset by
declines in lifestyle and respiratory products. Operating income
increased principally due to reduced warranty expense partially
offset by unfavorable foreign exchange and increased employment
costs.
North America/Home Medical Equipment (NA/HME) - Constant
currency net sales decreased in all categories, though mostly in
lifestyle and respiratory products. Mobility and seating sales were
a lesser part of the net sales decline. Net sales of newer mobility
and seating products grew during the quarter, including the Alber®
Twion® power assist device, Invacare® MyON® HC manual wheelchair,
and the Rovi® power wheelchair from Motion Concepts. Operating loss
increased primarily related to net sales declines and unfavorable
manufacturing costs partially offset by favorable sales mix and
reduced employment, warranty and freight expense.
Institutional Products Group (IPG) - Net sales increased
in interior design projects and beds, but were more than offset by
net sales declines in other product categories. With the support of
IPG's Outcomes by Design™ program, the new post-acute commercial
team continued to build its new customer base. The company expects
this new sales approach within capital selling cycles to take time
to yield growth. Operating income was largely unchanged as reduced
SG&A expense was principally offset by reduced net sales.
Asia/Pacific - Constant currency net sales decline was
driven by decreases in the Australia business partially offset by
net sales increases in the New Zealand distribution business, as
well as the company's subsidiary that produces microprocessor
controls. Operating loss decreased primarily related to reduced
employment costs, favorable foreign currency impact, and favorable
sales mix partially offset by net sales declines.
Additional Highlights
- Convertible debt transaction in June
2017 generated $120.0 million of gross proceeds to, among other
things, further fund the transformation.
- Invacare® TDX® SP2 power wheelchair
with LiNX® technology launched in Europe in July 2017; received
510(k) clearance from FDA in the United States in July 2017 ahead
of its expected August 2017 North America launch.
Outlook
The company is focused on transforming its business, especially
in North America. In the second half of 2017, the company should
start to stabilize sales sequentially in its North America
businesses through new product and service offerings, and increased
productivity from its new commercial salesforce. The launch of the
new Invacare TDX SP2 power wheelchair and the ability to sell power
and manual wheelchairs from the Taylor Street manufacturing
facility without the previous restrictions from the consent decree
are unlikely to have a material impact on the business in 2017 due
to the time it takes to earn that business combined with the
industry's extended quote-to-order process. The quote-to-order
process can delay the successful conversion of sales quotes to
shipments for 60 to 90 days. The company's priorities remain:
emphasizing a culture of quality excellence and achieving its
long-term earnings potential.
Conference Call and Webcast
As previously announced, the company will provide a conference
call and webcast for investors and other interested parties to
review its second quarter 2017 financial results on Tuesday, August
8, 2017 at 8:30 AM ET. Those wishing to participate in the live
call should dial 888-516-2447, or for international callers
719-457-2087, and enter Conference ID 8679128. A simultaneous
webcast of the call will be accessible at https://calltower.adobeconnect.com/invacare2q2017/event/registration.html.
A copy of the webcast slide deck will be posted to www.invacare.com/investorrelations prior to the
webcast.
A recording of the conference call can be accessed by dialing
888-203-1112 (U.S. and Canada) or 719-457-0820 (international) and
entering the Conference ID Code 8679128 through August 15, 2017. An
archive of the webcast presentation will be posted at www.invacare.com/investorrelations 24 hours after
the call.
Upcoming Investor Events
- Morgan Stanley Healthcare Conference -
September 13, 2017 (New York City)
- CL King Conference - September 14, 2017
(New York City)
About Invacare Corporation
Invacare Corporation (NYSE: IVC) is a leading manufacturer and
distributor in its markets for medical equipment used in non-acute
care settings. At its core, the company designs, manufactures and
distributes medical devices that help people to move, breathe, rest
and perform essential hygiene. The company provides clinically
complex medical device solutions for congenital (e.g., cerebral
palsy, muscular dystrophy, spina bifida), acquired (e.g., stroke,
spinal cord injury, traumatic brain injury, post-acute recovery,
pressure ulcers) and degenerative (e.g., ALS, multiple sclerosis,
chronic obstructive pulmonary disease (COPD), elderly, bariatric)
ailments. The company's products are important parts of care for
people with a wide range of challenges, from those who are active
and involved in work or school each day and may need additional
mobility or respiratory support, to those who are cared for in
residential care settings, at home and in rehabilitation centers.
The company sells its products principally to home medical
equipment providers with retail and e-commerce channels,
residential care operators, distributors and government health
services in North America, Europe and Asia/Pacific. For more
information about the company and its products, visit Invacare's
website at www.invacare.com.
This press release contains forward-looking statements within
the meaning of the “Safe Harbor” provisions of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are those that describe future outcomes or expectations
that are usually identified by words such as “will,” “should,”
“could,” “plan,” “intend,” “expect,” “continue,” “forecast,”
“believe,” and “anticipate” and include, for example, any statement
made regarding the company's future results. Actual results may
differ materially as a result of various risks and uncertainties,
including regulatory proceedings or the company's failure to comply
with regulatory requirements or receive regulatory clearance or
approval for the company's products or operations; circumstances or
developments that may make the company unable to implement or
realize the anticipated benefits, or that may increase the costs,
of its current business initiatives; possible adverse effects on
the company’s liquidity that may result from delays in the
implementation or realization of benefits from its current business
initiatives; exchange rate fluctuations; and those other risks and
uncertainties expressed in the cautionary statements and risk
factors in the company’s annual report on Form 10-K, quarterly
reports on Form 10-Q and other filings with the Securities and
Exchange Commission. The company may not be able to predict and may
have little or no control over many factors or events that may
influence its future results and, except as required by law, shall
have no obligation to update any forward-looking statements.
INVACARE CORPORATION AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF LOSS
(UNAUDITED) (In thousands, except per share data) Three
Months Ended Six Months Ended June 30, June 30, 2017
2016 2017 2016 Net sales $ 233,517 $ 275,037 $
465,240 $ 532,589 Cost of products sold 168,495 201,442
335,073 391,134
Gross Profit 65,022
73,595 130,167 141,455 Selling, general and administrative expenses
75,721 78,722 148,234 151,556 Charges related to restructuring
activities 4,987 689 8,270 791
Operating Loss (15,686 ) (5,816 ) (26,337 ) (10,892 ) Net
loss (gain) on convertible debt derivatives 1,051 (486 ) 150 (1,090
) Interest expense - net 4,596 4,300 9,026
6,619
Loss before Income Taxes (21,333 ) (9,630 )
(35,513 ) (16,421 ) Income tax provision 2,175 1,950
4,775 3,775
Net Loss (23,508 ) (11,580 )
(40,288 ) (20,196 )
Net Loss per Share—Basic $ (0.72
) $ (0.36 ) $ (1.23 ) $ (0.63 ) Weighted Average Shares
Outstanding—Basic 32,833 32,176 32,654 32,274
Net Loss
per Share—Assuming Dilution * $ (0.72 ) $ (0.36 ) $ (1.23 ) $
(0.63 ) Weighted Average Shares Outstanding—Assuming
Dilution 33,193 32,530 32,947 32,572
__________
* Net loss per share assuming dilution calculated using weighted
average shares outstanding - basic for periods in which there is a
loss.
INVACARE CORPORATION AND
SUBSIDIARIES RECONCILIATION OF NET LOSS PER SHARE
TO ADJUSTED NET LOSS PER
SHARE(c)
(In thousands, except per share data) Three Months Ended Six
Months Ended June 30, June 30, 2017 2016 2017
2016 Net loss per share - assuming dilution* $ (0.72
) $ (0.36 ) $ (1.23 ) $ (0.63 ) Weighted average shares
outstanding- assuming dilution 32,833 32,176 32,654 32,274 Net loss
(23,508 ) (11,580 ) (40,288 ) (20,196 ) Income tax provision 2,175
1,950 4,775 3,775
Loss before Income
Taxes (21,333 ) (9,630 ) (35,513 ) (16,421 ) Amortization of
discount on convertible debt 1,702 1,557 3,451 2,221 Net loss
(gain) on convertible debt derivatives 1,051 (486 ) 150
(1,090 )
Adjusted Loss before Income Taxes (18,580 )
(8,559 ) (31,912 ) (15,290 ) Adjusted Income Taxes 2,175
1,900 4,255 3,500
Adjusted Net
Loss(f) $ (20,755 ) $ (10,459 ) $ (36,167 ) $ (18,790 )
Weighted Average Shares Outstanding - Assuming Dilution
32,833 32,176 32,654 32,274
Adjusted
Net Loss per Share - Assuming Dilution(c) * $
(0.63 ) $ (0.33 ) $ (1.11 ) $ (0.58 )
Adjusted net loss per share (Adjusted EPS)
and adjusted net loss are non-GAAP financial measures, which are
defined at the end of the release.
* Net loss per share assuming dilution and adjusted net loss
per share(c) assuming dilution calculated using weighted average
shares outstanding - basic for periods in which there is a loss.
INVACARE CORPORATION AND
SUBSIDIARIES
RECONCILIATION OF NET LOSS TO
EBITDA(e)
(In thousands) Three Months Ended Six Months Ended June 30,
June 30, 2017 2016 2017 2016 Net
Loss $ (23,508 ) $ (11,580 ) $ (40,288 ) $ (20,196 ) Income tax
provision 2,175 1,950 4,775 3,775 Interest expense - net 4,596
4,300 9,026 6,619 Net loss (gain) on convertible debt derivatives
1,051 (486 ) 150 (1,090 ) Operating Loss (15,686 )
(5,816 ) (26,337 ) (10,892 ) Depreciation and amortization 3,719
3,616 7,312 7,269 EBITDA(e) $ (11,967 )
$ (2,200 ) $ (19,025 ) $ (3,623 )
"EBITDA" is a non-GAAP financial measure,
which is defined at the end of the release.
INVACARE CORPORATION AND
SUBSIDIARIESBUSINESS SEGMENTS (UNAUDITED)
The company operates in four primary business segments: North
America/Home Medical Equipment (NA/HME), Institutional Products
Group (IPG), Europe and Asia/Pacific. The four reportable
segments represent operating groups, which offer products to
different geographic regions. Intersegment revenue for
reportable segments was $29,659,000 and $60,057,000 for the three
and six months ended June 30, 2017, respectively compared to
$35,459,000 and $71,303,000 for the three and six months ended
June 30, 2016, respectively.
As of the third quarter of 2016, the company redefined the
measure by which it evaluates segment income or loss. Segment
performance is measured and resources are allocated based on a
number of factors, with the primary profit or loss measure being
operating income (loss). Segment operating income (loss) represents
net sales less cost of products sold less selling, general and
administrative expenses. Segment operating income (loss) excludes
unallocated corporate general and administrative expenses not
allocated to the segments and intersegment sales and profit
eliminations, which are included in All Other. In addition, segment
operating income (loss) further excludes charges related to
restructuring activities, asset write-downs and gains or losses on
the sales of businesses (as applicable). The previous performance
measure was earnings before income taxes. With the issuance of
convertible debt during 2016, this performance measure has not been
utilized by the Chief Operating Decision Maker (CODM) as the
interest expense incurred by the company is related to the
company’s financing decision to issue convertible debt as compared
to the operating decisions resulting from allocation of resources
and segment operating income performance.
As noted, this performance measure, operating income (loss), is
used by the CODM for purposes of making decisions about allocating
resources to a segment and assessing its performance. In addition,
this metric is reviewed by the company’s Board of Directors
regarding segment performance and is a key metric in the
performance management assessment of the company's employees. The
accounting principles applied at the operating segment level are
generally the same as those applied at the consolidated financial
statement level. Intersegment sales are eliminated in
consolidation.
INVACARE CORPORATION AND
SUBSIDIARIESBUSINESS SEGMENTS (UNAUDITED)
The information by segment is as follows:
Three Months Ended Six Months Ended (In
thousands) June 30, June 30, 2017 2016
Change 2017 2016 Change Revenues from
external customers Europe (1) $ 128,485 $ 135,735 $ (7,250 ) $
247,993 $ 257,766 $ (9,773 ) NA/HME (1) 77,689 110,700 (33,011 )
161,951 218,372 (56,421 ) IPG 15,320 16,115 (795 ) 31,693 34,359
(2,666 ) Asia/Pacific 12,023 12,487 (464 ) 23,603
22,092 1,511 Consolidated $ 233,517 $
275,037 $ (41,520 ) $ 465,240 $ 532,589 $
(67,349 ) Operating income (loss) Europe (1) $ 7,077 $ 6,949
$ 128 $ 12,177 $ 12,912 $ (735 ) NA/HME (1) (12,395 ) (6,649 )
(5,746 ) (21,821 ) (13,058 ) (8,763 ) IPG 1,472 1,532 (60 ) 3,370
2,956 414 Asia/Pacific (118 ) (337 ) 219 (548 ) (1,040 ) 492 All
Other (6,735 ) (6,622 ) (113 ) (11,245 ) (11,871 ) 626 Charge
related to restructuring activities (4,987 ) (689 ) (4,298 ) (8,270
) (791 ) (7,479 ) Consolidated operating loss (15,686 ) (5,816 )
(9,870 ) (26,337 ) (10,892 ) (15,445 ) Net loss (gain) on
convertible derivatives (1,051 ) 486 (1,537 ) (150 ) 1,090 (1,240 )
Net Interest expense (4,596 ) (4,300 ) (296 ) (9,026 ) (6,619 )
(2,407 ) Loss before income taxes $ (21,333 ) $ (9,630 ) $ (11,703
) $ (35,513 ) $ (16,421 ) $ (19,092 ) __________ “All Other”
consists of unallocated corporate selling, general and
administrative expenses and intercompany profits, which do not meet
the quantitative criteria for determining reportable segments.
(1) During the first quarter of 2017, a subsidiary, formerly
included in the Europe segment, was transferred to the NA/HME
segment as the subsidiary is managed by the NA/HME segment manager
effective January 1, 2017. This restatement increased revenues from
external customers by $1,137,000 and $2,438,000 and operating loss
by $43,000 and $150,000 for the three and six months ended June 30,
2017, respectively, for NA/HME with an offsetting impact on Europe.
INVACARE CORPORATION AND
SUBSIDIARIESBUSINESS SEGMENT NET SALES (UNAUDITED)
The following tables provide net sales change as reported and as
adjusted to exclude the impact of foreign exchange translation
(constant currency net sales(a)) as well as net sales further
adjusted to exclude the impact of the sale of the GCM on September
30, 2016 which was not deemed a discontinued operation for
financial reporting purposes. The current year functional constant
currency net sales are translated using the prior year's foreign
exchange rates. These amounts are then compared to the prior year's
sales to calculate the constant currency net sales change.
Three months ended June 30, 2017
compared to June 30, 2016:
Foreign Exchange Reported
Translation Impact
Constant Currency Europe (5.3 )% (5.5 )% 0.2 % NA/HME (29.8 ) (0.3
) (29.5 ) IPG (4.9 ) (0.1 ) (4.8 ) Asia/Pacific (3.7 ) 0.6 (4.3 )
Consolidated (15.1 ) (2.8 ) (12.3 ) Reported Reported Impact
of GCM excluding GCM NA/HME (29.8 )% (6.2 )% (23.6 )% Consolidated
(15.1 ) (2.9 ) (12.2 ) Constant Currency Constant Currency
Impact of GCM excluding GCM NA/HME (29.5 )% (6.3 )% (23.2 )%
Consolidated (12.3 ) (3.0 ) (9.3 )
Six months ended June 30, 2017
compared to June 30, 2016:
Foreign Exchange Reported
Translation Impact
Constant Currency Europe (3.8 )% (5.4 )% 1.6 % NA/HME (25.8 ) —
(25.8 ) IPG (7.8 ) (0.1 ) (7.7 ) Asia/Pacific 6.8 2.3 4.5
Consolidated (12.6 ) (2.5 ) (10.1 ) Reported Reported Impact
of GCM excluding GCM NA/HME (25.8 )% (6.7 )% (19.1 )% Consolidated
(12.6 ) (3.0 ) (9.6 ) Constant Currency Constant Currency
Impact of GCM excluding GCM NA/HME (25.8 )% (6.8 )% (19.0 )%
Consolidated (10.1 ) (3.2 ) (6.9 )
INVACARE CORPORATION AND
SUBSIDIARIESBUSINESS SEGMENT SEQUENTIAL NET SALES
(UNAUDITED)
The following table provides net sales for the three months
ended June 30, 2017 compared to net sales for the three months
ended March 31, 2017 with both periods translated at the foreign
exchange rates for the three months ended March 31, 2017 (constant
currency sequential net sales(b)) as well as reported net sales for
both periods, respectively.
Q2 17 at Q2 17 at Q1 17 at
Reported Foreign Q1 17 Reported
Foreign Exchange Foreign Foreign
Exchange Translation Exchange Exchange
Sequential Rates Impact Rates
Rates Growth Europe $ 128,485 $ (2,259 ) $ 126,226 $
119,508 5.6 % NA/HME 77,689 102 77,791 84,263 (7.7 ) IPG 15,320 15
15,335 16,373 (6.3 ) Asia Pacific 12,023 91 12,114
11,579 4.6 Consolidated $ 233,517 $
(2,051 ) $ 231,466 $ 231,723 (0.1 )%
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31, 2017 2016 (In thousands)
Assets
Current Assets Cash and cash equivalents $ 160,082 $ 124,234
Trade receivables, net 124,632 116,307 Installment receivables, net
1,573 1,368 Inventories, net 153,418 135,644 Other current assets
31,310 31,519
Total Current Assets 471,015 409,072
Other Assets 60,279 29,687
Intangibles 29,771 29,023
Property and Equipment, net 76,607 75,359
Goodwill
380,560 360,602
Total Assets
$ 1,018,232 $ 903,743
Liabilities and Shareholders’
Equity Current Liabilities Accounts payable $ 88,227 $
88,236 Accrued expenses 110,509 110,095 Current taxes payable 6,686
7,269 Short-term debt and current maturities of long-term
obligations 2,159 15,261
Total Current Liabilities
207,581 220,861
Long-Term Debt 235,742 146,088
Other
Long-Term Obligations 149,288 114,407
Shareholders’
Equity 425,621 422,387
Total Liabilities and
Shareholders’ Equity $ 1,018,232 $ 903,743
INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION FROM NET CASH USED BY
OPERATING ACTIVITIES TO FREE CASH
FLOW(d)
Three Months Ended Six Months Ended (In thousands) June 30,
June 30, 2017 2016 2017 2016 Net cash
used by operating activities $ (20,138 ) $ (15,126 ) $ (50,468 ) $
(53,831 ) Plus: Sales of property and equipment 180 16 190 20 Less:
Purchases of property and equipment (2,470 ) (2,339 ) (5,504 )
(3,803 ) Free Cash Flow(d) $ (22,428 ) $ (17,449 ) $ (55,782 ) $
(57,614 )
Definitions of Non-GAAP Financial Measures
(a) As used throughout this document, "constant currency net
sales" is a non-GAAP financial measure, which is defined as net
sales excluding the impact of foreign currency translation. The
current year's functional constant currency net sales are
translated using the prior year's foreign exchange rates. These
amounts are then compared to the prior year's sales to calculate
the constant currency net sales change. A table accompanying this
release compares net sales as reported and net sales excluding the
effects of foreign exchange translation by segment and for the
consolidated company for the three and six months ended
June 30, 2017 and June 30, 2016. The company believes
that this financial measure provides meaningful information for
evaluating the core operating performance of the company. This
financial measure is reconciled to the related GAAP financial
measures in the "Business Segment Net Sales" table included in this
press release.
(b) As used throughout this document, "constant currency
sequential net sales" is a non-GAAP financial measure in which the
current period's net sales are compared to the most recent prior
period's net sales with both periods translated at the most recent
prior period's exchange rates. A table accompanying this release
compares net sales for the three months ended June 30, 2017
and March 31, 2017 with both periods translated at the foreign
exchange rates for the three months ended March 31, 2017. The
company believes that this financial measure provides meaningful
information for evaluating the core operating performance of the
company. This financial measure is reconciled to the related GAAP
financial measures in the "Business Segment Sequential Net Sales"
table included in this press release.
(c) As used throughout this document, "adjusted net loss per
share" (Adjusted EPS) is a non-GAAP financial measure, which is
defined as adjusted net loss(e) divided by weighted average shares
outstanding, assuming dilution. It should be noted that the
company's definition of Adjusted EPS may not be comparable to
similar measures disclosed by other companies because not all
companies and analysts calculate Adjusted EPS in the same manner.
The company believes that its exclusion adjustments are generally
recognized by the industry in which it operates as relevant in
computing Adjusted EPS as a supplementary non-GAAP financial
measure used by financial analysts and others in the company's
industry to meaningfully evaluate operating performance. This
financial measure is reconciled to the related GAAP financial
measure in the “Reconciliation” table located after the Condensed
Consolidated Statement of Operations included in this press
release.
(d) As used throughout this document, "free cash flow" is a
non-GAAP financial measure, which is defined as net cash used by
operating activities less purchases of property and equipment plus
proceeds from sales of property and equipment. Management
believes that this financial measure provides meaningful
information for evaluating the overall financial performance of the
company and its ability to repay debt or make future investments.
This financial measure is reconciled to the related GAAP financial
measure in the “Reconciliation” table located after the Condensed
Consolidated Balance Sheets included in this press release.
(e) As used throughout this document, "EBITDA" is a non-GAAP
financial measure, which is defined as net loss plus: income taxes,
interest expense-net, net gain or loss on convertible debt
derivatives, gains or losses on sales of businesses, and
depreciation and amortization. The company believes that this
financial measure provides meaningful information which is used by
financial analysts and others in the company's industry to evaluate
the performance of the company. This financial measure is
reconciled to the related GAAP financial measure in the
“Reconciliation” table included in this press release.
(f) As used throughout this document, "adjusted net loss" is a
non-GAAP financial measure, which is defined as adjusted net loss
before income taxes net of adjusted income taxes. Adjusted net loss
before income taxes is computed as the net loss excluding the
amortization of convertible debt discounts recorded in interest
expense ($1.7 million and $3.5 million pre-tax for the three and
six months ended June 30, 2017, respectively, compared to $1.6
million and $2.2 million pre-tax for the three and six months ended
June 30, 2016) and net losses on convertible debt derivatives
($1.1 million and $0.2 million for the three and six months ended
June 30, 2017 compared to net gains of $0.5 million and $1.1
million for the three and six months ended June 30, 2016).
Adjusted income taxes are computed as taxes as calculated for GAAP
then adjusted for an expense or benefit at the statutory rate
related to pretax adjustments related to locations without a
valuation allowance, the exclusion of uncertain tax liabilities
deemed not related to current operations or the exclusion of taxes
related to nonrecurring sales of non-inventory product or entities
on an intercompany basis. (Note: The U.S. is in a full
valuation allowance and accordingly, no tax expense adjustments are
appropriate related to U.S. pre-tax adjustments.) This financial
measure is reconciled to the related GAAP financial measure in the
“Reconciliation” table included after the Condensed Consolidated
Statement of Operations included in this press release.
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version on businesswire.com: http://www.businesswire.com/news/home/20170807005827/en/
Invacare CorporationLara Mahoney, 440-329-6393
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