Invacare ($IVC) has struggled to right itself for years, but thus far has failed to recover from an ongoing FDA investigation of a wheelchair manufacturing facility that first started in December 2011. Now it has undertaken its latest restructuring in an effort to return to profitability. The home and long-term medical products company started operating at a loss in 2013 due to the manufacturing difficulties.
On Aug. 20, the company said it would cut 190 positions, including 40 temporary employees, from its North American Home Medical Equipment, Institutional Products and Asia/Pacific segments. The move is expected to save the company $14 million to $15 million pre-tax in 2015.
It expects to incur restructuring charges of no more than $6 million. Invacare last restructured in late 2012, when it let go of 143 employees. On June 30, the company had 5,400 employees.
''Invacare is committed to improving free cash flow and restoring profitability in the North America/HME and Asia/Pacific businesses," Invacare interim President and CEO Robert Gudbranson said in a statement. "It is a necessary step toward achieving these objectives in light of our financial results for the first 6 months of 2014 and the slow sales start to the third quarter."
Invacare President and CEO Gerald Blouch retired at the end of July and former SVP and CFO Gudbranson assumed these positions on an interim basis while retaining his role as CFO. Blouch was with the company for almost 25 years, having started in 1990 as CFO. The company is currently conducting a search reviewing internal and external candidates to replace him, which seems vital to being able to move the company past its ongoing issues with the FDA.
In 2013, the company addressed two out of three certification audits under a December 2012 agreement with the FDA regarding its Elyria, OH, manufacturing facilities. The third audit is ongoing and is the most comprehensive. The company hasn't provided a timeline on when it should conclude.
"We are continuing to work on the final expert certification process. We need to better demonstrate that our quality system is sustainably compliant and that each subsystem is properly integrated," Gudbranson said on a July earnings call.
But shareholders remain unconvinced that Invacare has the situation in hand. As of Aug. 20, Invacare shares were down 31% for the year; shareholders responded to the restructuring news by pulling out an additional 2% in early trading on Aug. 21.
- here is the release and the Q2 earnings transcript