Invacare Corporation announces its financial results for the fourth quarter and year ended December 31, 2021.

Reflecting on 2021 results, Matt Monaghan, chairman, president and chief executive officer, Invacare, comments, “We ended the year sustaining strong new order intake and growing customer interest in our leading portfolio of products. We continue to manage this demand and to take actions to mitigate against higher input costs and longer supply lead times. Our 4Q21 results reflect the benefit of a portion of these actions, demonstrated by sequential improvement in gross margin and Adjusted EBITDA. I’d like to thank our team for their work in this fast-evolving environment while keeping the needs of our customers and end-users’ front and center.

In 2022, we expect sustained customer demand and persistent supply chain challenges. Given those assumptions, we are taking strategic actions which by the end of the year will position Invacare for durable, long-term success. We began our actions in December by combining the Europe and APAC businesses under one leader. During the course of the year, we expect further actions to optimize our product portfolio, shift where and how products are made and distributed, align staff and how staff are organized, and implement working capital improvements to enhance free cash flow while strengthening the balance sheet. We anticipate these actions will drive sequential quarterly improvements for the final three quarters of the year with the majority of the restructuring benefits occurring in the second half of 2022.

We also expect to see additional value creation as the enterprise resource planning (ERP) system drives cost savings and simplifies how we do business and support our customers. We went live with another phase of our ERP roll out in October and as expected, had lower output during the initial ramp-up of the new functionality. We have since normalized overall throughput, but the impact was a one-time shift of revenues and free cash flow because of early inefficiencies. Importantly, the system is operating as expected, with more customers using online ordering and customer service functions than with the previous system giving us great confidence that we and our customers will benefit from this strategic investment.

Taken together, we believe actions to mitigate increased input costs, elective implementation of pricing actions, narrowing our product offering, and additional restructuring actions will drive favorable product mix, improved profitability and free cash flow in 2022 and build long-term shareholder value.”

Invacare Key Metrics and Financial Results (4Q21 versus 4Q20)

  • Reported net sales increased 1.0% to $226.2 million, and constant currency net sales(a) increased 0.9%.
    • Revenue growth was driven by double-digit increases in sales of mobility & seating products largely offset by lower sales in all other product categories.
  • Operating income was $9.8 million, an improvement of $8.6 million over 4Q20.
    • The improvement was primarily driven by lower SG&A expense, which benefited from lower employment costs and reduced restructuring expenses. Gross profit margin was unfavorable due to increased input costs for material and freight, partially offset by the benefit of pricing actions.
  • Adjusted EBITDA(b) was $13.1 million compared to $9.5 million, driven by lower SG&A expense and partially offset by reduced gross profit. The negative impact of higher input costs for material and freight was partially offset by the benefit of pricing actions implemented.
  • Free cash flow(c) was $19.2 million, an improvement of $3.6 million, driven primarily by lower working capital. Working capital benefited from higher accounts payable to mitigate slowness in accounts receivable collections in North America given the ERP implementation in 4Q21.

Key Metrics and Financial Results (Full Year 2021 versus Full Year 2020)

  • Reported net sales increased 2.6% to $872.5 million and constant currency net sales decreased 0.8%.
    • Revenue growth in respiratory and mobility & seating products was offset by lower sales of lifestyle products. Net sales and product mix were hindered by continued global supply chain challenges in 2021.
  • Operating loss was $24.2 million, a decline of $35.6 million, primarily due to two one-time events, as noted below. Excluding these one-time events, operating income was $4.3 million, an increase of 181.7%.
    • In 2020, the gain on sale of Dynamic Controls of $9.8 million.
    • In 2021, a non-cash impairment of goodwill of $28.6 million in North America, which was the result of changes in the operating structure of the business following the recent IT implementation.
  • Adjusted EBITDA was $38.1 million, an improvement of $6.3 million, attributable to the benefit of CARES Act loan forgiveness and lower SG&A expenses partially offset by lower gross profit. Excluding the CARES Act benefit, Adjusted EBITDA was $28.0 million.
  • Free cash flow was a usage of $32.0 million compared to break-even cash flow in 2020 primarily due to higher working capital including investments in inventory to mitigate supply chain challenges and increased costs of materials, partially offset by increased payables. In addition, capital expenditures were lower given the ERP implementation in 4Q21.

Commenting on Invacare’s financial results for the year ended December 31, 2021, Kathy Leneghan, senior vice president and chief financial officer, states, “Actions implemented in prior periods to offset higher material and freight costs had a positive impact on the quarter and the year and are beginning to pay off with gross profit as a percentage of net sales improving 110 basis points compared to 3Q21. In 4Q21, free cash flow improved both sequentially and year-over-year driven by lower working capital despite slower cash collections in North America given temporarily lower revenues impacted by the ERP implementation. For the full year, free cash flow usage was higher than anticipated as a result of carrying higher levels of inventory driven by higher material costs, but we expect this to ultimately convert into sales and improved free cash flow.”

[Source(s): Invacare Corporation, Business Wire]

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