<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
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Commission File Number 0-12938
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Invacare Corporation
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(Exact name of registrant as specified in its charter)
Ohio 95-2680965
- - -------------------------------- ------------------------------
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
899 Cleveland Street, P.O. Box 4028, Elyria, Ohio 44036
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(Address of principal executive offices)
(216) 329-6000
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if change since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
As of October 20, 1995 the Company had 24,153,384 Common Shares and 5,005,018
Class B Common Shares outstanding which reflects the two for one stock split
distributed on October 16, 1995.
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INVACARE CORPORATION
INDEX
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<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION: Page No.
- - ------------------------------ --------
<S> <C>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
September 30, 1995 and December 31, 1994......................... 3
Condensed Consolidated Statement of Earnings -
Three and Nine Months Ended September 30, 1995 and 1994.......... 4
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 1995 and 1994.................... 5
Notes to Condensed Consolidated Financial Statements-
September 30, 1995 ............................................. 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ................... 7
Part II. OTHER INFORMATION:
- - ---------------------------
Item 5. Other Information ............................................... 10
Item 6. Exhibits and Reports on Form 8-K ................................ 10
SIGNATURES .............................................................. 10
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
- - ------------------------------
Item 1. Financial Statements
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet - (unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
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(In thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,143 $ 7,359
Marketable securities 2,279 3,044
Trade receivables, net 90,640 76,280
Installment receivables, net 36,856 33,723
Inventories 52,554 49,982
Deferred income taxes 3,668 3,444
Other current assets 4,112 5,959
-------- --------
TOTAL CURRENT ASSETS $194,252 $179,791
OTHER ASSETS 31,502 28,840
PROPERTY AND EQUIPMENT, NET 59,968 55,919
GOODWILL, NET 91,042 72,915
-------- --------
TOTAL ASSETS $376,764 $337,465
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 34,932 $ 29,882
Accrued expenses 44,717 37,015
Accrued income taxes 1,685 3,225
Current maturities of long-term obligations 228 326
-------- --------
TOTAL CURRENT LIABILITIES 81,562 70,448
LONG-TERM OBLIGATIONS 106,648 103,010
SHAREHOLDERS' EQUITY
Preferred shares 0 0
Common shares 6,116 5,573
Class B common shares 1,253 1,767
Additional paid-in-capital 64,874 63,671
Retained earnings 119,874 99,086
Adjustments to shareholders' equity 492 (2,196)
Treasury shares (4,055) (3,894)
-------- --------
TOTAL SHAREHOLDERS' EQUITY 188,554 164,007
-------- --------
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $376,764 $337,465
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings - (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
--------- -------- --------- ----------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $130,547 $108,977 $360,577 $295,773
Cost of products sold 86,643 73,237 243,187 201,957
--------- -------- --------- ---------
GROSS PROFIT 43,904 35,740 117,390 93,816
Selling, general and 28,236 23,502 80,515 64,989
--------- -------- --------- ---------
administrative expenses
INCOME FROM OPERATIONS 15,668 12,238 36,875 28,827
Interest income 1,741 1,630 5,272 4,616
Interest expense (2,791) (2,001) (7,360) (5,896)
--------- -------- --------- ---------
EARNINGS BEFORE INCOME TAXES 14,618 11,867 34,787 27,547
Income taxes 5,550 4,390 13,210 10,190
--------- -------- --------- ---------
NET EARNINGS $ 9,068 $ 7,477 $ 21,577 $ 17,357
========= ======== ========= =========
*NET EARNINGS PER SHARE (Post-Split) $ .30 $ .25 $ .72 $ .59
========= ======== ========= =========
*Weighted average shares outstanding (Post-Split) 30,104 29,716 30,012 29,666
========= ======== ========= =========
NET EARNINGS PER SHARE (Pre-Split) $ .60 $ .50 $ 1.44 $ 1.17
========= ======== ========= =========
Weighted average shares outstanding (Pre-Split) 15,052 14,858 15,006 14,833
========= ======== ========= =========
*DIVIDEND DECLARED PER COMMON SHARE(Post-Split) $ .0125 $ .00625 $ .0250 $ .0125
========= ======== ========= =========
<FN>
See notes to condensed consolidated financial statements.
*Noted amounts reflect 2 for 1 stock split distributed on October 16, 1995
</TABLE>
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<PAGE> 5
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows - (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
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(In thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $21,577 $17,357
Adjustments to reconcile net earnings to
net cash required by operating activities:
Depreciation and amortization 10,680 9,653
Provision for losses on receivables 368 1,059
Provision for deferred income taxes (53) (166)
Provision for deferred compensation 356 209
Changes in operating assets and liabilities:
(Increase) in accounts receivable (10,392) (8,969)
(Increase)/decrease in inventories 2,579 (5,867)
Decrease in other assets 1,025 647
Increase in accounts payable 2,000 7,496
(Increase)/decrease in accrued expenses 1,590 (2,185)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 29,730 19,234
INVESTING ACTIVITIES
Purchases of property and equipment (8,602) (9,088)
Proceeds from sale of property and equipment 139 59
Installment sales contracts written (32,588) (34,337)
Payments received on installment sales contracts 31,534 23,935
Marketable securities purchased (3,682) (350)
Marketable securities sold 4,427 880
Increase in other investments (2,133) (896)
Business acquisitions net of cash acquired (17,898) (838)
Increase in other long term assets (3,889) (1,083)
Other 67 962
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NET CASH (REQUIRED) BY INVESTING ACTIVITIES (32,625) (20,756)
FINANCING ACTIVITIES
Proceeds from long-term borrowings 37,808 11,596
Principal payments on long-term borrowings (39,285) (12,516)
Proceeds from exercise of stock options 1,232 1,507
Dividends paid (608) (174)
Purchase of treasury shares (161) 0
------- -------
NET CASH PROVIDED BY (USED FOR) FINANCING
ACTIVITIES (1,014) 413
Effect of exchange rate changes on cash 693 675
------- -------
(Decrease) in cash and cash equivalents (3,216) (434)
Cash and cash equivalents at beginning of period 7,359 9,392
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Cash and cash equivalents at end of period $ 4,143 $ 8,958
======= =======
<FN>
See notes to condensed consolidated financial statements.
</TABLE>
5
<PAGE> 6
INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements - September 30, 1995
(Unaudited)
PRINCIPLES OF CONSOLIDATION -- In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements include all adjustments,
which were of a normal recurring nature, necessary to present fairly the
financial position of the Company as of September 30, 1995 and December 31,
1994, and the results of its operations for the three and nine months ended
September 30, 1995 and 1994 and changes in its cash flows for the nine months
ended September 30, 1995 and 1994. The results of operations for the three and
nine months ended September 30, 1995, are not necessarily indicative of the
results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements contained in the Company's annual financial statements and notes.
Certain reclassifications have been made to the prior years' consolidated
financial statements to conform to the presentation used for the period ended
September 30, 1995.
STATEMENT OF CASH FLOWS -- The Company made payments (in thousands) of :
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Interest $5,822 $5,414
Income Taxes $14,337 $10,113
</TABLE>
INSTALLMENT RECEIVABLES -- In May 1993, the Financial Accounting Standards
Board issued Statement No. 114 "Accounting by Creditors for Impairment of a
Loan" (SFAS 114). SFAS 114 is effective for fiscal years beginning after
December 15, 1994. The Company adopted SFAS 114 effective January 1, 1995.
The new standard requires that impaired loans within the scope of SFAS 114 be
measured based on the present value of expected future cash flows discounted at
the loan's effective interest rate. The effect of adopting SFAS 114 was not
material to the Company's financial condition and had no impact on results of
operations.
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<PAGE> 7
INVENTORIES -- Inventories consist of the following components (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Raw materials $17,578 $17,272
Work in process 10,101 9,093
Finished goods 24,875 23,617
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$52,554 $49,982
======= =======
</TABLE>
The inventory determination under the LIFO method can only be made at the end
of each fiscal year based on the inventory levels and cost at that point,
therefore, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.
PROPERTY AND EQUIPMENT -- Property and equipment consist of the following (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
---- ----
<S> <C> <C>
Land, buildings and improvements $ 28,735 $ 26,442
Machinery and equipment 81,065 72,815
Furniture and fixtures 8,007 7,478
Leasehold improvements 6,547 5,696
-------- --------
124,354 112,431
Less allowance for depreciation 64,386 56,512
-------- --------
$ 59,968 $ 55,919
======== ========
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
- - ---------------------
NET SALES
- - ---------
Net sales for the three and nine months ended September 30, 1995
increased by 19.8% and 21.9% respectively over the same periods a year ago.
Domestic net sales increased 15.2% for the three months ended September 30, 1995
mainly as a result of higher unit volumes, recent acquisitions and
favorable mix impact in prescription power wheelchairs. Also contributing to
the quarter as a result of increased volumes was therapeutic support surfaces
and beds. Year to date domestic sales increased 19.6% and were also favorably
impacted by prescription power wheelchairs as a result of new product
introductions, higher unit volume and acquisition impact. Beds and respiratory
also experienced growth due to higher unit volumes. Higher unit volumes were
offset slightly by the effects of competitive pricing environment for most of
our product lines.
International net sales, as reported in U.S. dollars, for the three
and nine months ended September 30, 1995 increased by 32.4% and 28.5%,
respectively, over the same period a year ago. European sales increased 33.7%
and 29.8% for the three and nine months ended September 30, 1995, respectively.
European sales, as reported in US dollars, for the three and nine months period
ended September 30, 1995 was favorably impacted as a result of the weakening
dollar against most major European currencies. The reported increase also
includes the impact from two small acquisitions completed late in 1994 and
another acquisition completed in May 1995, which was offset to some extent by
the continuing price competition in most European markets. Canadian sales
increased 24.5%
7
<PAGE> 8
and 20.8% for the three and nine months ended September 30, 1995, respectively,
the impact of foreign currency fluctuation being minimal.
GROSS PROFIT
- - ------------
Gross profit as a percentage of net sales for the three and nine month
period ending September 30, 1995 increased to 33.6% and 32.6%, respectively,
compared to 32.8% and 31.7% for the same periods a year ago. The principal
factor leading to the increase was the significantly improved volume
experienced in the majority of our product lines. Productivity and cost
containment initiatives also contributed to the improvement. The gross profit
improvement was offset to some extent by the effects of a continuing
competitive pricing environment and increased raw material costs.
OPERATING EXPENSES
- - ------------------
Selling, general and administrative expenses as a percentage of net
sales for the three and nine months ending September 30, 1995 was 21.6% and
22.3%, respectively, compared to 21.6% and 22.0% in the same periods a year
ago. The U.S. dollar increase in selling, general and administrative expenses
was impacted as a result of recent acquisitions and increased investment in
additional sales personnel, product specialists and marketing programs.
INTEREST
- - --------
Interest income in the three and nine months ended September 30, 1995
increased over the same periods a year ago mainly as a result of the growing
installment loan portfolio. Overall, debt has remained relatively stable for
the periods ended September 30, 1995 and December 31, 1994. However, increased
acquisition activity has altered the proportion of domestic versus foreign debt
which has impacted interest expense.
INCOME TAXES
- - ------------
The Company had an effective tax rate of 38% for the three and nine
months ended September 30, 1995, compared to 37% for the same periods a year
ago. The higher tax rate is due in part to an increase in state taxes and
reduced low income housing credits.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
The Company's overall level of long-term obligations, excluding the
impact of foreign currency on reported debt, has remained relatively constant
for the nine months ended September 30, 1995, when compared to December 31,
1994. The Company continues to maintain an adequate liquidity position to fund
its working capital and capital requirements through its cash flow from
operations and its bank lines. As of September 30, 1995 the Company has
approximately $157.3 million available under its lines of credit.
In May, 1995, the Company fixed the interest rate on $10 million of
its U.S. dollar borrowings through two interest rate swap agreements. Each
agreement is for $5 million U. S. dollars. The effect of the swaps is to
exchange a short-term floating interest rate for a fixed rate of 6.1725% for a
three year term in one agreement and 6.38% for a five year term in the other
agreement.
Also in May, 1995, the Company fixed the interest rate on $7.5 million
of its Canadian dollar borrowings through an interest rate swap agreement. The
effect of the swap is to exchange a short-term floating interest rate for a
fixed rate of 7.245% for a three year term.
8
<PAGE> 9
The Company's financing arrangements require it to maintain certain
conditions with respect to net worth, working capital, funded debt to
capitalization and interest coverage as defined in the bank and note
agreements. As of September 30, 1995, the Company is in compliance with all of
the conditions.
CAPITAL EXPENDITURES
- - --------------------
There were no material capital expenditure commitments outstanding as
of September 30, 1995. The Company expects to invest in capital projects at a
rate that approximates depreciation and amortization. The Company estimates
that depreciation and amortization for 1995 will be approximately $14.0
million. The Company believes that its balances of cash and cash equivalents,
together with funds generated from operations and existing borrowing
capabilities will be sufficient to meet its operating cash requirements and
fund required capital expenditures in the foreseeable future.
CASH FLOWS
- - ----------
Cash flows provided by operating activities were $29.7 million for the
first nine months of 1995 compared to $19.2 million in 1994. Increased net
earnings and improved working capital management were the principle contributors
to the increased operating cash flow.
Cash flows required for investing activities increased $11.9 million
for the first nine months of 1995 when compared to 1994 mainly as a result of
increased acquisition and investment activity. Other investments increased
primarily due to the Company's investment in NeuroControl Corporation which is
developing products utilizing functional, electrical stimulation technology.
Cash flows used for financing activities were $1.0 million for the
first nine months of 1995 compared to cash provided from financing of $.4
million in 1994. The decrease in cash required from financing activities was a
result of reductions in long-term borrowings in our European operations offset
to some extent by borrowings utilized to support the increased acquisition
activity.
Amounts for cash flows shown in the Statement of Cash Flows may be
different than the changes reflected in the respective balance sheet captions
due to the impact of acquisition activity and the effects of currency
translation.
STOCK SPLIT
- - -----------
Shareholders of record on October 2, 1995 received one additional
Common Share for each Common Share held on that date. The additional shares
were distributed on October 16, 1995 in the form of a 100% stock dividend.
DIVIDEND POLICY
- - ---------------
On August 21, 1995, the Board of Directors of Invacare Corporation
declared a cash dividend of $.0125 per Common Share to shareholders of record
as of October 2, 1995 to be paid on October 16, 1995. This represents a
doubling of the dividend as a result of the two for one stock split.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
A. Reports on Form 10-C: A current report on Form 10-C, dated October
10, 1995, was filed by the Company regarding the two for one stock split
distributed in the form of a 100% stock dividend. Record date for the
transaction was October 2, 1995 and distribution of the shares occurred on
October 16, 1995.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits:
Official Exhibit No.:
---------------------
27.0 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the securities exchange act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVACARE CORPORATION
By: Thomas R. Miklich
-------------------------
Thomas R. Miklich
Chief Financial Officer
Date: November 14, 1995
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,143
<SECURITIES> 2,279
<RECEIVABLES> 94,250
<ALLOWANCES> (3,610)
<INVENTORY> 52,554
<CURRENT-ASSETS> 194,252
<PP&E> 124,354
<DEPRECIATION> (64,386)
<TOTAL-ASSETS> 376,764
<CURRENT-LIABILITIES> 81,562
<BONDS> 0
<COMMON> 7,369
0
0
<OTHER-SE> 181,185
<TOTAL-LIABILITY-AND-EQUITY> 376,764
<SALES> 360,577
<TOTAL-REVENUES> 360,577
<CGS> 243,187
<TOTAL-COSTS> 243,187
<OTHER-EXPENSES> 80,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,360
<INCOME-PRETAX> 34,787
<INCOME-TAX> 13,210
<INCOME-CONTINUING> 21,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,577
<EPS-PRIMARY> .72
<EPS-DILUTED> .72
</TABLE>
