Invacare 2005 Annual Report Download - page 8
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Please find page 8 of the 2005 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.2006.Managementbelievestheseactionswill
enableInvacaretocompeteprofitablyinthismore
challengingmarketenvironmentandgenerate
significantearningsgrowthin2006andbeyond.
2005FinancialResults
The2005financialresultsreflectthedisruptions
causedbythefourthquarterimplementationof
anewenterpriseresourceplanning(ERP)system
andthecostsassociatedwithrestructuring,and
theyarenotindicativeoftheoutlookgoingforward.
Fortheyear,Invacarereporteda9%increasein
netsales.Foreigncurrencyaccountedforless
thanonepercentagepointoftheincrease,while
acquisitionscontributedninepercentagepoints
fortheyear.Wecontinuetoderivestrongbenefit
fromour2004acquisitionofWPDomusGmbH.
TheERPproblemsresultedinlostrevenues
estimatedat$30millioninthefourthquarterof
2005.Althoughtherewillbeanegativeimpact
onfirstquarter2006shipments,theCompanyis
winningnewordersfromaffectedcustomersand
doesnotexpectanymarketsharelosses.With
thenewERPsystem,wehavereplacedthelegacy
systemsthatwereinadequatetosupportfuture
growth.Wearenowpositionedgoingforwardto
enhanceservicelevelsthroughacceleratingorder
processingandproductshipments.
Saleswerealsoaffectedbypricingpressurein
thestandardproductslineandreduceddemand
intheU.S.forconsumerpowerwheelchairsand
otherhomemedicalproductsduetochanging
Medicarereimbursementpolicies.Althoughthe
pricingpressureinstandardproductscontinues,
increaseduseofInvacare’sChinafactoriesand
othercost-reductioneffortswillerodecompeti-
tors’costadvantage,andwearenowpositioned
torecapturemarketshare.
HomeFillIIsalestolocalandregionalproviders
increasedstronglyin2005.However,respiratory
productsalesoveralldeclinedduetoreduced
purchasesofHomeFillIIsystemsandoxygencon-
centratorsbynationalaccountsinthesecondhalf
of2005.Goingforward,Invacarewillincrease
itsfocusontherespiratorybusiness,especially
oxygenandsleeptherapy.Respiratoryisthe
fastest-growingmarketsegmentandpresents
thebestopportunitytogrowlongterm.
Netearningspersharefortheyeardeclined35%
comparedwiththeprioryearlargelydueto
lower-than-anticipatedsalesandpricereductions
instandardproductsresultingfromcompetitive
pressures.Thesefactors,alongwithhigherraw
materialcostsandhigherfreightcosts,ledtoa
0.5%declineingrossmarginpercentage.
1213
Despitethecurrentmarketadversity,itisimpor-
tanttorememberthelong-termdemographic,
socialandeconomictrendsdrivingglobalgrowth
inHME.Inaddition,tremendouspotentialdemand
existsforhomemedicalsolutionsthataddress
arangeofhealthproblemsthatareincreasing
rapidly(obesity),areunder-diagnosed(sleepapnea),
orareunderserved(ambulatoryoxygen).
Invacareispartofthesolutiontothesehealthcare
issues.Nooneisbetterpositionedtoservethis
market,providenewsolutions,andachieveprofit-
ablegrowthinexcessoftheoverallindustry.
Inthefirstphaseofamulti-yearglobalcostreduc-
tioninitiative,Invacareeliminatedapproximately
300positionsin2005,exitedfourfacilities,
reducedfreightandgeneralexpenses,increased
productionatitsChinamanufacturingfacilities,
anddiscontinuedseveralproductlines.These
actionsresultedin2005pre-taxsavingstotaling
$7.1million,withthefull-yearbenefitin2006
estimatedtobe$25millioninsavings.
Oncecompletein2008,theplanisexpectedto
generateapproximately$30millionofannual
pre-taxsavingsandresultinpre-taxrestructur-
ingchargestotalingapproximately$42million,
ofwhich$7.3millionwasrecordedin2005,with
afurther$7millionexpectedtoberecordedin
FellowShareholders:
Lastyear,InvacarelaunchedaglobalinitiativetopositiontheCompanyforachanging
marketplaceinhomemedicalequipment(HME).Inthefaceofgovernmentreimbursement
pressuresandlow-costAsiancompetition,costreductionhasbeenandwillcontinueto
beacriticalpriorityforus.Atthesametime,Invacarewillcontinuetoinvestinsuccessful,
value-addedproductsliketheHomeFill™IIOxygenSystemandinemergingmarketslike
sleepandbariatrics.
Photolefttoright:A.MalachiMixon,III,Chairman
andChiefExecutiveOfficer,andGeraldB.Blouch,
PresidentandChiefOperatingOfficer