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Invacare Corporation Announces Financial Results for the Fourth Quarter and Full Year Ended December 31, 2017

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Invacare Corporation (NYSE:IVC) today announced its financial results
for the fourth quarter and year ended December 31, 2017.

Highlights for the Fourth Quarter 2017

  • Reported net sales increased 1.5% to $250.4 million compared to the
    fourth quarter 2016. Constant currency net sales(a)
    decreased 2.3% compared to the fourth quarter 2016.
  • Consolidated constant currency sequential net sales(b)
    decreased 1.2% compared to the third quarter 2017. Notably, North
    America/Home Medical Equipment (NA/HME) constant currency sequential
    net sales were flat.
  • Gross margin as a percentage of net sales decreased 60 basis points to
    27.3% compared to the fourth quarter 2016, primarily as a result of
    inventory liquidation following previously announced 2017 plant
    transfers and year-end promotional activities.
  • Operating loss was $7.9 million, or $1.0 million greater than the
    fourth quarter 2016, primarily related to increased restructuring
    costs of $2.2 million.
  • GAAP loss per share was $0.54 and adjusted net loss per share(c)
    was $0.42. Both reflect a negative impact of $0.10 per share from
    restructuring costs and $0.06 per share of increased interest expense
    partially offset by a benefit of $0.05 per share related to U.S. tax
    reform legislation.
  • Free cash flow(d) was positive $20.6 million, which was a
    $31.1 million improvement compared to the fourth quarter 2016 and a
    $25.3 million improvement compared to the third quarter 2017. The
    current quarter benefited from strong improvements in working capital.

Highlights for the Full Year 2017

  • Reported net sales decreased 7.7% to $966.5 million compared to 2016.
    Excluding the divested Garden City Medical, Inc. (GCM), constant
    currency net sales decreased 5.2% compared to 2016.
  • Gross margin as a percentage of net sales increased 80 basis points to
    27.9% compared to 2016, principally as a result of the strategic mix
    shift toward mobility and seating products and reduced freight costs
    partially offset by increased manufacturing costs.
  • Operating loss was $40.2 million, or $24.9 million greater than 2016.
    Excluding a $7.4 million gain on sale of the GCM business realized in
    the third quarter 2016, the operating loss increased by $17.6 million
    compared to 2016 primarily due to increased restructuring costs of
    $9.8 million and lower net sales.
  • GAAP loss per share was $2.34 and adjusted net loss per share was
    $1.93. Both reflect a negative impact of $0.36 per share from
    restructuring costs and $0.21 per share of increased interest expense
    partially offset by a benefit of $0.05 per share related to U.S. tax
    reform legislation.
  • Free cash flow usage was $40.0 million compared to usage of $66.7
    million in 2016.

Additional 2017 Highlights

  • Following five years of quality systems remediation, the company
    successfully satisfied the requirements under the consent decree with
    the United States Food and Drug Administration (FDA) to resume full
    operations at Corporate and the Taylor Street manufacturing facility
    in Elyria, Ohio, effective July 24, 2017.
  • The company launched over ten new products, including the new Invacare®
    TDX® SP2 Power Wheelchair with LiNX® Technology
    and the Invacare® Platinum® Mobile Oxygen
    Concentrator with Connectivity. These two notable products signified
    the company's launch of product informatics that feature great
    benefits for both consumers and providers.
  • After several quarters of transformation work, NA/HME started to
    achieve constant currency sequential net sales growth in the third
    quarter 2017 compared to the second quarter 2017, which was largely
    the result of new product offerings and increased commercial
    effectiveness.
  • The company announced in 2017 approximately $23.4 million in expected
    annualized cost savings as a result of restructuring activities to
    streamline operations, drive efficiencies, and reshape the
    organization around its new business model.
       

Key Indicators of the Transformation(1)

                 
(in millions USD)   Q4 17   Q4 16  

$ Change

  % Change
Net Sales $250.4 $246.7 $3.6 1.5%
Constant Currency Net Sales $241.0 $246.7 $(5.7) (2.3)%
Gross Margin % of Net Sales 27.3% 27.9% (60 bps)
Gross Profit $68.3 $68.7 $(0.4) (0.6)%
Constant Currency Selling, General & Administrative Expense (SG&A)(e) $70.8 $74.5 $(3.7) (5.0)%
Free Cash Flow $20.6 $(10.6) $31.1 294.6%
EBITDA(f)   $(3.9)   $(3.2)   $(0.7)   (22.7)%

(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

Commenting on the company's financial results for the fourth quarter and
year ended December 31, 2017, Matthew E. Monaghan, chairman, president
and chief executive officer, stated, "2017 was a tremendous year of
progress in our transformation across the company. In quality
milestones, we had a major step forward with the consent decree. As of
July 24, 2017, we were able to sell without restrictions from our
Elyria, Ohio power wheelchair manufacturing facility. We launched over
ten new products, including two products that move Invacare into the
world of informatics - the new Invacare® TDX® SP2
Power Wheelchair with LiNX® Technology and the Invacare® Platinum®
Mobile Oxygen Concentrator with Connectivity. We also made significant
investments to begin to resize our infrastructure around our new
business model, as reflected in the reduction of SG&A expense. During
the fourth quarter, we generated $20.6 million of free cash flow, which
was driven by meaningful improvements in working capital, including the
liquidation of inventory we had built up to facilitate our 2017 plant
transfers. In 2017, Europe overcame foreign currency headwinds from the
beginning of the year and delivered solid performance. Asia/Pacific
demonstrated continued improvement. NA/HME continued to stabilize
constant currency sequential net sales in the fourth quarter compared to
the third quarter 2017 with growth in mobility and seating and
respiratory products. The increase in respiratory sales was largely
driven by promotional activities for our new portable oxygen
concentrator that launched in October 2017. We have good momentum to
build upon in 2018."

   

Q4 17 Segment Results

         
(in millions USD)   Net Sales Operating Income (Loss)
Q4 17   Q4 16  

Reported
% Change

 

Constant Currency
% Change

Q4 17   Q4 16   % Change
Europe $ 144.1   $ 135.3   6.5 %   (0.1 )% $ 9.0   $ 9.6   (6.0 )%
NA/HME 79.4 85.2 (6.9 ) (7.3 ) (8.6 ) (13.8 ) 38.0
IPG 13.8 14.7 (6.2 ) (6.3 ) 1.3 1.2 2.2
Asia/Pacific   13.1     11.5     14.2     13.9     0.1     0.2     (17.8 )
 

Europe - Compared to the fourth quarter 2016, the slight
decline in constant currency net sales was driven primarily by
respiratory products, partially offset by increases in mobility and
seating products. Sequential net sales decreased 1.7% compared to the
third quarter 2017, which is historically the strongest quarter for the
Europe segment. Operating income decreased compared to the fourth
quarter 2016 principally due to unfavorable manufacturing variances,
including one-time costs related to the company's decision to move
certain production from Sweden to France, and increased freight and
warranty expenses. These factors were partially offset by favorable net
sales mix.

North America/Home Medical Equipment (NA/HME) - Constant
currency net sales decreased in all categories compared to the fourth
quarter 2016, though mostly in lifestyle and respiratory products.
Excluding consumer power products that were discontinued in the fourth
quarter 2016, mobility and seating sales increased by 5.4% compared to
the fourth quarter 2016. Sequential net sales were flat compared to the
third quarter 2017 with growth in mobility and seating and respiratory
products offset by declines in lifestyle products. Operating loss
improved compared to the fourth quarter 2016 primarily related to lower
SG&A and research and development expenses, as well as favorable
manufacturing variances, partially offset by year-end promotional
efforts. The SG&A decline was driven by reduced product liability
expense and employment costs.

Institutional Products Group (IPG) - Constant currency net
sales decreased compared to the fourth quarter 2016, primarily in bed
products. Compared to the third quarter 2017, sequential net sales
decreased 1.1%. The segment continued to work through its customer mix
shift within the long-term care channel. Operating income increased due
to reduced SG&A expense and favorable sales mix.

Asia/Pacific - Constant currency net sales increased in
all product categories compared to the fourth quarter 2016, principally
related to mobility and seating products. Compared to the third quarter
2017, sequential net sales decreased 3.6%. Operating income was down
slightly as a result of unfavorable net sales mix offset by reduced
research and development expenses.

Financial Condition

Key balances on the company's balance sheet and related metrics:

(in millions USD)   December 31, 2017   December 31, 2016  

$ Change

  % Change
Cash and cash equivalents   $ 176.5   $ 124.2   $ 52.3   42.1 %
Working capital (1) 238.9 188.2 50.7 26.9
Total debt (2) 301.4 196.5 104.9 53.4
Long-term debt (2) 299.4 181.2 118.2 65.2
Total shareholders' equity 423.3 422.4 0.9 0.2
Credit agreement borrowing availability (3)   39.9   44.3   (4.4 )   (9.9 )

(1)

 

Current assets less current liabilities.

(2)

Long-term debt and total debt includes debt issuance costs
recognized as a deduction from the carrying amount of debt
liability and debt discounts classified as debt or equity.

(3)

Reflects the combined availability of the company's North
American and European asset-based revolving credit facilities. The
change in borrowing availability is due to changes in the
calculated borrowing base.

 

In the fourth quarter 2017, the company generated $20.6 million of free
cash flow compared to usage of $10.6 million in the fourth quarter 2016.
Free cash flow in the fourth quarter 2017 was driven by reduced
inventory and accounts receivable, and increased accounts payable.

The company's cash and debt balances increased compared to December 31,
2016 as a result of the net proceeds received from the issuance of
convertible debt in the second quarter 2017. Total debt outstanding as
of December 31, 2017 consisted of $270.0 million in convertible debt and
$31.4 million of other debt, principally capital lease liabilities.
Long-term debt as of December 31, 2017 included unamortized debt
discount of $50.3 million and additional offset for debt fees of $7.7
million related to convertible debt issued in 2016 and 2017. The company
had zero drawn on its revolving credit facilities as of December 31,
2017.

The company's cash conversion days(g) at December 31, 2017
were 67.1 days as compared to 81.9 days at September 30, 2017 and 63.6
days at December 31, 2016. The reduction in cash conversion days
compared to third quarter 2017 benefited from reduced inventory levels
and increased accounts payable as the result of the company's focus on
improving working capital. The increase in cash conversion days compared
to 2016 is primarily attributable to increased accounts receivable
primarily from customer mix and sales growth.

As a result of the new U.S. tax reform legislation, the company recorded
a non-cash tax benefit of $1.6 million related to the revaluation of net
deferred tax liabilities in the fourth quarter 2017. The company
provisionally does not expect to have a deemed repatriation transition
tax liability. The company will provide a complete analysis of its tax
liabilities in its Form 10-K filing in March 2018. At December 31, 2017,
the company has a U.S. federal tax loss carryforward in excess of $280
million.

Outlook

The company has been executing a multi-year strategic transformation of
its overall approach to quality, product mix, commercial execution,
supply chain, and product development. Following the stabilization of
net sales after several quarters of transformation work, the company
anticipates continued improvement in the NA/HME segment. The company
expects increased working capital to support growth, especially of
NA/HME mobility and seating products, which would include investments in
demonstration units and the working capital needed to support the
extended quote-to-cash process for power wheelchairs. Also, the company
will make additional restructuring and capital investments as it
continues to reshape the business over the course of 2018.

As noted previously, the company is gradually applying the
transformation to the Europe segment, which may slightly reduce the
segment's net sales as it begins to shift its product mix toward more
clinically valued, higher-margin products. Regarding the IPG segment,
the company expects its new strategic selling approach in the capital
selling environment to continue to take time to yield growth. In its
pursuit of increased shareholder value, the company continues to
prioritize its emphasis on 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 on Thursday, February 8, 2018 at 8:30 AM ET for investors and
other interested parties to review its fourth quarter 2017 financial
results. Those wishing to participate in the live call should dial
888-490-2771, or for international callers 719-325-2359, and enter
Conference ID 4425438. A simultaneous webcast of the call will be
accessible at https://calltower.adobeconnect.com/invacare4q2017/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 callers)
and entering the Conference ID Code 4425438 through February 15, 2018.
An archive of the webcast presentation will be posted at www.invacare.com/investorrelations
24 hours after the call.

About Invacare Corporation

Invacare Corporation (NYSE:IVC) ("Invacare" or the "company") 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, 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; adverse effects of
regulatory or governmental inspections of company facilities at any time
and governmental warning letters or enforcement actions; 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 STATEMENTS OF LOSS (UNAUDITED)
 
Three Months Ended Twelve Months Ended
(In thousands, except per share data) December 31, December 31,
2017   2016 2017   2016
Net sales $ 250,351 $ 246,740 $ 966,497 $ 1,047,474
Cost of products sold 182,007   178,010   697,246   763,847  
Gross Profit 68,344 68,730 269,251 283,627
Selling, general and administrative expenses 72,661 74,520 296,816 303,781
Gain on sale of business (7,386 )
Charges related to restructuring activities 3,301 1,148 12,274 2,447
Asset write-down to an intangible asset 320     320    
Operating Loss (7,938 ) (6,938 ) (40,159 ) (15,215 )
Net loss (gain) on convertible debt derivatives 957 1,014 3,657 (1,268 )
Interest expense - net 6,701   4,589   22,434   15,610  
Loss before Income Taxes (15,596 ) (12,541 ) (66,250 ) (29,557 )
Income tax provision 2,066   5,099   10,291   13,299  
Net Loss $ (17,662 ) $ (17,640 ) $ (76,541 ) $ (42,856 )
 
Net Loss per Share—Basic $ (0.54 ) $ (0.54 ) $ (2.34 ) $ (1.32 )
 
Weighted Average Shares Outstanding—Basic 32,834 32,432 32,752 32,471
 
Net Loss per Share—Assuming Dilution * $ (0.54 ) $ (0.54 ) $ (2.34 ) $ (1.32 )
 
Weighted Average Shares Outstanding—Assuming Dilution 33,587 32,612 33,216 32,590

____________

* 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)

 
Three Months Ended Twelve Months Ended
(In thousands, except per share data) December 31, December 31,
2017   2016 2017   2016
Net loss per share - assuming dilution* $ (0.54 ) $ (0.54 ) $ (2.34 ) $ (1.32 )
Weighted average shares outstanding - assuming dilution 32,834 32,432 32,752 32,471
Net loss (17,662 ) (17,640 ) (76,541 ) (42,856 )
Income tax provision 2,066   5,099   10,291   13,299  
Loss before Income Taxes (15,596 ) (12,541 ) (66,250 ) (29,557 )
Amortization of discount on convertible debt 2,717 1,645 8,811 5,454
Gain on sale of business (7,386 )
Asset write-down related to an intangible asset 320 320
Net loss (gain) on convertible debt derivatives 957   1,014   3,657   (1,268 )
Adjusted Loss before Income Taxes (11,602 ) (9,882 ) (53,462 ) (32,757 )
Adjusted income taxes 2,066   5,099   9,771   13,024  
Adjusted Net Loss (h) $ (13,668 ) $ (14,981 ) $ (63,233 ) $ (45,781 )
 
Weighted average shares outstanding - assuming dilution 32,834 32,432 32,752 32,471
       
Adjusted Net Loss per Share - Assuming Dilution(c)
*
$ (0.42 ) $ (0.46 ) $ (1.93 ) $ (1.41 )

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)

 
Three Months Ended Twelve Months Ended
(In thousands) December 31, December 31,
2017   2016 2017   2016
Net loss $ (17,662 ) $ (17,640 ) $ (76,541 ) $ (42,856 )
Income tax provision 2,066 5,099 10,291 13,299
Interest expense - net 6,701 4,589 22,434 15,610
Net loss (gain) on convertible debt derivatives 957   1,014   3,657   (1,268 )
Operating loss (7,938 ) (6,938 ) (40,159 ) (15,215 )
Gain on sale of business (7,386 )
Asset write-down to an intangible asset 320 320
Depreciation and amortization 3,673   3,724   14,631   14,635  
EBITDA(f) $ (3,945 ) $ (3,214 ) $ (25,208 ) $ (7,966 )

"EBITDA" is a non-GAAP financial measure, which is defined at
the end of the release.

 

INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS 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 $26,803,000
and $113,926,000 for the three and twelve months ended December 31,
2017, respectively, and $28,640,000 and $133,183,000 for the three and
twelve months ended December 31, 2016, respectively. 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.

The information by segment is as follows:

   
Three Months Ended Twelve Months Ended
(In thousands) December 31, December 31,
2017   2016   Change 2017   2016   Change
Revenues from external customers
Europe (1) $ 144,052 $ 135,297 $ 8,755 $ 535,326 $ 534,801 $ 525
NA/HME (1) 79,351 85,219 (5,868 ) 320,818 402,914 (82,096 )
IPG 13,804 14,711 (907 ) 59,472 64,413 (4,941 )
Asia/Pacific 13,144   11,513   1,631   50,881   45,346   5,535  
Consolidated $ 250,351   $ 246,740   $ 3,611   $ 966,497   $ 1,047,474   $ (80,977 )
 
Operating income (loss)
Europe (1) $ 8,996 $ 9,572 $ (576 ) $ 33,160 $ 34,122 $ (962 )
NA/HME (1) (8,564 ) (13,811 ) 5,247 (42,831 ) (37,876 ) (4,955 )
IPG 1,267 1,240 27 5,839 5,693 146
Asia/Pacific 134 163 (29 ) (27 ) (1,436 ) 1,409
All Other (6,150 ) (2,954 ) (3,196 ) (23,706 ) (20,657 ) (3,049 )
Charge related to restructuring activities (3,301 ) (1,148 ) (2,153 ) (12,274 ) (2,447 ) (9,827 )
Asset write-down to an intangible asset (320 ) (320 ) (320 ) (320 )
Gain on sale of business         7,386   (7,386 )
Consolidated operating loss (7,938 ) (6,938 ) (1,000 ) (40,159 ) (15,215 ) (24,944 )
Net (loss) gain on convertible derivatives (957 ) (1,014 ) 57 (3,657 ) 1,268 (4,925 )
Net Interest expense (6,701 ) (4,589 ) (2,112 ) (22,434 ) (15,610 ) (6,824 )
Loss before income taxes $ (15,596 ) $ (12,541 ) $ (3,055 ) $ (66,250 ) $ (29,557 ) $ (36,693 )

________

"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 $1,474,000 and $5,212,000 and
decreased operating loss by $38,000 and increased operating loss by
$128,000 for the three and twelve months ended December 31, 2016,
respectively, for NA/HME with an offsetting impact on Europe.
 

INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS 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 December 31, 2017 compared to three months
ended December 31, 2016:

 
Reported

Foreign Exchange
Translation Impact

Constant Currency
Europe 6.5 % 6.6 % (0.1 )%
NA/HME (6.9 )% 0.4 % (7.3 )%
IPG (6.2 )% 0.1 % (6.3 )%
Asia/Pacific 14.2 % 0.3 % 13.9 %
Consolidated 1.5 % 3.8 % (2.3 )%
 

Twelve months ended December 31, 2017 compared to twelve months
ended December 31, 2016:

 
Reported

Foreign Currency
Translation Impact

Constant Currency
Europe 0.1 % (0.5 )% 0.6 %
NA/HME (20.4 )% 0.1 % (20.5 )%
IPG (7.7 )% % (7.7 )%
Asia/Pacific 12.2 % 1.8 % 10.4 %
Consolidated (7.7 )% (0.1 )% (7.6 )%
 
Reported Impact of GCM

Reported excluding
GCM

NA/HME (20.4 )% (5.7 )% (14.7 )%
Consolidated (7.7 )% (2.4 )% (5.3 )%
 
Constant Currency Impact of GCM

Constant Currency
excluding GCM

NA/HME (20.5 )% (5.6 )% (14.9 )%
Consolidated (7.6 )% (2.4 )% (5.2 )%
 

INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENT
SEQUENTIAL NET SALES (UNAUDITED)

The following tables provide net sales at reported rates for the
quarters ended December 31, September 30, June 30, and March 31, 2017,
respectively, and net sales for the quarters ended December 31,
September 30 and June 30, 2017, respectively, as translated at the
foreign exchange rates for the quarter ended March 31, 2017 with each
then compared to the most recent prior period's net sales (constant
currency sequential net sales(b)).

         

Q4 17 at
Reported
Foreign
Exchange
Rates

Foreign
Exchange
Translation
Impact

Q4 17 at
Q1 17
Foreign
Exchange
Rates

Q3 17 at Q1
17 Foreign
Exchange
Rates

Sequential
Growth $

Sequential
Growth %

Europe $ 144,052 $ (12,999 ) $ 131,053 $ 133,350 $ (2,297 ) (1.7 )%
NA/HME 79,351 (301 ) 79,050 79,069 (19 )
IPG 13,804 (15 ) 13,789 13,941 (152 ) (1.1 )
Asia Pacific 13,144   44   13,188   13,686   (498 ) (3.6 )
Consolidated $ 250,351   $ (13,271 ) $ 237,080   $ 240,046   $ (2,966 ) (1.2 )%
 

Q3 17 at
Reported
Foreign
Exchange
Rates

Foreign
Exchange
Translation
Impact

Q3 17 at
Q1 17
Foreign
Exchange
Rates

Q2 17 at Q1
17 Foreign
Exchange
Rates

Sequential
Growth $

Sequential
Growth %

Europe $ 143,281 $ (9,931 ) $ 133,350 $ 126,226 $ 7,124 5.6 %
NA/HME 79,516 (447 ) 79,069 77,791 1,278 1.6
IPG 13,975 (34 ) 13,941 15,335 (1,394 ) (9.1 )
Asia Pacific 14,134   (448 ) 13,686   12,114   1,572   13.0  
Consolidated $ 250,906   $ (10,860 ) $ 240,046   $ 231,466   $ 8,580   3.7 %
 

Q2 17 at
Reported
Foreign
Exchange
Rates

Foreign
Exchange
Translation
Impact

Q2 17 at
Q1 17
Foreign
Exchange
Rates

Q1 17 at
Reported
Foreign
Exchange
Rates

Sequential
Growth $

Sequential
Growth %

Europe $ 128,485 $ (2,259 ) $ 126,226 $ 119,508 $ 6,718 5.6 %
NA/HME 77,689 102 77,791 84,262 (6,471 ) (7.7 )
IPG 15,320 15 15,335 16,373 (1,038 ) (6.3 )
Asia Pacific 12,023   91   12,114   11,580   534   4.6  
Consolidated $ 233,517   $ (2,051 ) $ 231,466   $ 231,723   $ (257 ) (0.1 )%
 

Q4 17 at
Q1 17
Foreign
Exchange
Rates

Q3 17 at
Q1 17
Foreign
Exchange
Rates

 

Q2 17 at
Q1 17
Foreign
Exchange
Rates

 

Q1 17 at
Reported
Foreign
Exchange
Rates

 

Q4 17 vs
Q3 17
Sequential
Growth
%

 

Q3 17 vs
Q2 17
Sequential
Growth
%

 

Q2 17 vs
Q1 17
Sequential
Growth
%

Europe $ 131,053 $ 133,350 $ 126,226 $ 119,508 (1.7 )% 5.6 % 5.6 %
NA/HME 79,050 79,069 77,791 84,262 1.6 (7.7 )
IPG 13,789 13,941 15,335 16,373 (1.1 ) (9.1 ) (6.3 )
Asia Pacific 13,188   13,686   12,114   11,580   (3.6 ) 13.0   4.6  
Consolidated $ 237,080   $ 240,046   $ 231,466   $ 231,723   (1.2 )% 3.7 % (0.1 )%
 
 
INVACARE CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
 

December 31,
2017

December 31,
2016

(In thousands)
Assets
Current Assets
Cash and cash equivalents $ 176,528 $ 124,234
Trade receivables, net 125,615 116,307
Installment receivables, net 1,334 1,368
Inventories, net 121,933 135,644
Other current assets 31,504   31,519
Total Current Assets 456,914 409,072
Other Assets 97,576 29,687
Intangibles 30,244 29,023
Property and Equipment, net 80,016 75,359
Goodwill 401,283   360,602
Total Assets $ 1,066,033   $ 903,743
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 90,566 $ 88,236
Accrued expenses 118,697 110,095
Current taxes payable 6,761 7,269
Short-term debt and current maturities of long-term obligations 2,040   15,261
Total Current Liabilities 218,064 220,861
Long-Term Debt 241,405 146,088
Other Long-Term Obligations 183,270 114,407
Shareholders' Equity 423,294   422,387
Total Liabilities and Shareholders' Equity $ 1,066,033   $ 903,743
   
INVACARE CORPORATION AND SUBSIDIARIES
RECONCILIATION FROM NET CASH PROVIDED (USED) BY

OPERATING ACTIVITIES TO FREE CASH FLOW (d)

 
Three Months Ended Twelve Months Ended
(In thousands) December 31, December 31,
2017   2016 2017   2016
Net cash provided (used) by operating activities $ 22,345 $ (7,228 ) $ (31,022 ) $ (56,613 )
Plus:
Sale of property and equipment 158 13 369 42
Less:
Purchases of property and equipment (1,932 ) (3,354 )   (9,321 ) (10,151 )
Free Cash Flow(d) $ 20,571   $ (10,569 )   $ (39,974 ) $ (66,722 )
 

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 twelve months ended
December 31, 2017 and December 31, 2016, respectively. 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 a given
period's net sales are compared to the most recent prior period's net
sales with each period's net sales translated at the foreign exchange
rates for the quarter ended March 31, 2017. A table accompanying this
release compares net sales for the three months ended December 31, 2017,
September 30, 2017 and June 30, 2017 to the most recent prior quarter
for each period, respectively, with all 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(h) 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 provided (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) "Constant Currency SG&A" is a non-GAAP financial measure,
which is defined as SG&A expense excluding the impact of foreign
currency translation. The current period's functional constant currency
SG&A expenses are translated using the prior year's foreign exchange
rates. These amounts are then compared to the prior year's SG&A expenses
to calculate the constant currency SG&A expenses change.

(f) 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,
gain on sale of business, asset write-down to an intangible asset 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.

(g) Cash conversion days are equal to days in receivables
plus days in inventory less days in accounts payable.

(h) As used throughout this document, "adjusted net loss" is
a non-GAAP financial measure, which is defined as 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 ($2.7 million
and $8.8 million pre-tax for the three and twelve months ended
December 31, 2017, respectively, compared to $1.6 million and $5.5
million pre-tax for the three and twelve months ended December 31,
2016), gain on sale of business ($7.4 million for the twelve months
ended December 31, 2016), asset write-down related to intangibles ($0.3
million for both the three and twelve months ended December 31, 2017)
and net loss (gain) on convertible debt derivatives (net losses of $1.0
million and $3.7 million for the three and twelve months ended
December 31, 2017, respectively, compared to a net loss of $1.0 million
and a net gain of $1.3 million for the three and twelve months ended
December 31, 2016, respectively). 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. and certain other
jurisdictions are in a full valuation allowance and accordingly, no tax
expense adjustments are appropriate related to U.S. and certain other
jurisdiction 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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