IVC, a lovely chart and an interesting company, here's the new america profile from Wednesday's Investors Business Daily.
By Janet Purdy Levaux Investor's Business Daily
While Congress mulls what to do with prescription drug benefits, one sector of the health care business - medical equipment - might get a leg up from the government.
Patients tend to rent the equipment, including wheelchairs and respiratory devices, from dealers.. Dealers are then reimbursed by government programs and other payers. The government is set to raise reimbursement rates about 7% this summer for home medical equipment
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That might turn out to he good news for Invacare Corp., the world's top manufacturer of wheelchairs.
‘Congress is focused on prescription drug benefits," said Chief Executive Malachi Mixon, whose company also makes everything from motorized scooters and crutches to respiratory devices. 'They're not talking about cutting (other benefits).’
That's quite a change from a couple of years ago, when Medicare, Medicaid and other insurers cut back on how much they would cover - or reimburse - for respiratory machines and the like.
'There was a move to rationalize pricing in lots of health care sectors,' explained Theodore Huber of Banc of America Securities.
The move to increase reimbursement rates is a significant improvement, Mixon says.
While no one knows what the situation might be five years down the road, Huber sounds confident that big funding slashes are a thing of the past.
'We don't expect big cuts (like those of the late 1990's) again," he said.
Thanks to the positive fiscal environment and the company's strong market position, lnvacare has set its sights on doubling revenue to around $2 billion over the next five years. Mixon, a 21-year Invacare veteran, says the goal is well within reach.
'We've grown the company from $19 million to $1 billion (over the past couple of decades),' he said. 'We believe this is a reasonable goal.'
Yearly demand for home health care equipment - including wheelchairs, scooters and special beds - is worth more than $6 billion worldwide, Huber says. Invacare competes in segments valued at roughly $4 billion.
Including operations in Europe, Australia, New Zealand, Canada and other countries, the company has about a 25% share of the business, Mixon says. Analysts estimate it controls 30% to 35% of the U.S. home health care equipment market.
'Invacare by far outdistances its nearest competitors,' said analyst Hans von der Luft of McDonald Investments Inc. in Boston.
Much of the company's market growth has come through acquisitions - 35 to date. It'll have to make some big deals to hit the $2 billion target, analysts say.
'It's harder to generate meaningful growth with small acquisitions,' von der Luft said.
For now, Invacare is still integrating its last two major deals. The list includes its July 1999 purchase of Scandinavian Mobility, which added about $100 million in annual sales. It also includes the 1998 acquisition of Suburban Ostomy, a wholesaler and distributor of medical supplies that also brought in around $100 million in annual revenue.
By the end of this year the company might give another deal serious thought, Mixon says. He hints it might target a company in the respiratory device field.
“This is still the fastest and most profitable growing (field in the business),” he said.
Another area of focus for the company is e-commerce. It’s investing heavily in its Web site, Mixon says, and should have an enhanced site up and running by the end of May.
Consumers should be able to make online orders for wheelchairs with custom features – something few of the company’s rivals already offer, analysts say.
At the time, Invacare officials say the company wants to make sure its Internet, marketing, shipping and distribution operations are all nicely tied together.
“We want to be the best manufacturer and shipper, and be seen (by dealers) as driving customers to the stores,” Mixon said.
Invacare has 5,500 employees and 29 plants worldwide. In the U.S. it can deliver standard products within 24 hours to its dealers.
Standard wheelchairs, crutches, canes, walkers, specialty beds and similar products account for about 35% of revenue. Customized wheelchairs, motorized scooters and related gear bring in about 25%.
The company gets about 23% of sales from disposable products related to incontinence, diabetes and other illness. It brings in 11% from respiratory products, such as oxygen concentrators and portable oxygen systems. Remaining sales include spare parts for its equipment and wheelchair cushions.
North American sales generate roughly 75% of revenue. European sales bring in 22%, while sales in Australia, New Zealand and Asia combine to produce the remaining 3%.
The company’s sales were fairly flat during the fourth quarter ended in December. It posted $268.3 million in revenue, up just 4% from a year earlier. Sales for the entire year gained 15% to just more than $1 billion. Earnings for the year rose 18% to $1.95 a share.
Analysts polled by First Call see earnings this year climbing 13% to $2.21, then reaching $2.50 a year later. The stock trades as IVC near 38.
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