Invacare — Investor Presentation (February 2006)
31 slides from Invacare's investor presentation, Feb 24, 2006
Slide 1: 1
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Slide 2: Safe Harbor Statement
Safe Harbor Statement This presentation contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Terms such as “will,” “should,” “plan,” “intend,” “expect,” “continue,” “forecast”, “believe,” “anticipate” and “see
Slide 3: Invacare Vision
Invacare Vision Strengthen global leadership in the design, assembly/ manufacture and distribution of innovative home and long term care medical products Regain low cost advantage with China manufacturing, factory consolidations and expense reductions Drive profitable market share growth with: • New
Slide 4: Sales Record – 26 years of growth
Sales Record – 26 years of growth $1,750 $1,500 Sales $ Millions 1979-2005 $1,250 NYSE $1,000 $750 $500 IPO IVC Purchased $250 from J&J $0 1979 1982 1985 1988 1991 1994 1997 2000 2003 2005 4
Slide 5: Stock Performance – 1984 to 2005
Stock Performance – 1984 to 2005 $2,000 $1,500 $1,000 $500 $0 ' 84 ' 85 ' 86 ' 87 ' 88 ' 89 ' 90 ' 91 ' 92 ' 93 ' 94 ' 95 ' 96 ' 97 ' 98 ' 99 ' 00 ' 01 ' 02 ' 03 ' 04 ' 05 IVC 100 41 71 57 86 96 180 485 422 478 595 878 957 757 835 698 1191117311581404 16091248 SP500 100 126 145 148 166 211 197 249 2
Slide 6: Premiere Position in Market
Premiere Position in Market Global leader in $8 billion industry Generating substantial cash flow #1 or #2 in most business lines Product and geographic diversity Strong new product pipeline $ millions Sales & EPS $/share $ millions FCF & Debt-to-Cap 120 80% 1,750 2.50 Percent Sales Free Cash Flow 1
Slide 7: Product Diversity
Product Diversity Sales Segments Rehab Products 33% Standard Products 32% Medical Supplies 15% Respiratory Products 13% Continuing Care/Other 7% Based on 2004 unaudited segment data 7
Slide 8: Geographic Diversity
Geographic Diversity Canada Europe 3% of sales 24% of sales #1 market share #1 market share Asia distribution opened United States in late 2004 68% of sales #1 market share Australasia 5% of sales #1 market share Based on 2004 unaudited segment data 8
Slide 9: Long Term Growth Drivers
Long Term Growth Drivers Social and economic drivers Demographics: 65+ population growing at 2-3% annually Technology: Medical advances extending life expectancy Economic: Lower costs favoring home care Lifestyle: Older population becoming active instead of passive 9
Slide 10: Benefits of Home Care
Benefits of Home Care Home care is a major part of the solution to rising costs of Medicare and Medicaid “In Vermont, 85 percent of the Medicaid population over 65 still live at home. In New Hampshire, only half can live at home. And Vermont spends less than half as much per elderly person on Medica
Slide 11: Reimbursement Status
Reimbursement Status Prescription drug bill cuts on eight items to FEHBP levels Continuous Medicaid down coding, administrative slowdowns and coverage restrictions Wheeler Dealer power wheelchair pressures with lower reimbursement to be determined and face-to-face requirements for physicians to writ
Slide 12: Reimbursement Status (continued)
Reimbursement Status (continued) New Bill Reduces reimbursement and caps monthly rental (HME from 15 months to 13 months, oxygen 36 months). Title passes to consumer after capped rental period. Service responsibilities after capped period unclear Medicare 2007 and 2009 national competitive bidding E
Slide 13: Competitive Landscape
Competitive Landscape North America: Competition by product segment • Rehab: Pride key competitor on consumer power (e.g. Medicare K-11 code) and scooters with movement into custom power brand • Standard: Solely importers (Medline/Drive) focused on copying IVC and offering a lower price • Respirator
Slide 14: Competitive Landscape (continued)
Competitive Landscape (continued) Market Leader * Private Company 2nd Tier Small Share 14
Slide 15: Strategic Initiatives
Strategic Initiatives Reestablish low-cost position Generate revenue growth with new products and new markets Invest in brand recognition Acquisition activities 15
Slide 16: Reestablish Low Cost Position
Reestablish Low Cost Position Reduce costs by sourcing components and materials • Hong Kong purchasing office • Manufacturing in two factories in China began in 2004 • Increase local sourcing for China plants in 2005 • $100 million sourced or manufactured in Far East today with target of $400 millio
Slide 17: Reestablish Low Cost Position (continued)
Reestablish Low Cost Position (continued) Additional cost and expense reduction initiatives • Reduce headcount, exit four facilities, freight auctions and general expense reductions $7 million savings in second half 2005 $25 million annualized exiting 2005 • Consolidate additional manufacturing and
Slide 18: Generate Revenue Growth - New Products
Generate Revenue Growth - New Products Develop innovative and disruptive products Increased emphasis on intellectual property protection – patent attorneys sit in PPC meetings Reduce product development cycle time - 18 months to 12 months Replace products over two to three year life cycle – do not w
Slide 19: Generate Revenue Growth - New Markets
Generate Revenue Growth - New Markets Expansion into new homecare markets for IVC • HomeFill II TM • Sleep apnea product offerings with a target to develop $100 million business over the next three to five years Geographic expansion • Utilize China manufacturing to develop $100 million business in A
Slide 20: Product Focus: HomeFill II
Product Focus: HomeFill II HomeFillTM II with Patient Convenience Pack (Oct 2002) • Provides consumer the ability to fill oxygen cylinder at home independent of deliveries by dealer • Combination of oxygen concentrator and a five stage compressor • Replaces delivered oxygen over time • Patient conve
Slide 21: Product Focus: Sleep Apnea
Product Focus: Sleep Apnea Invacare® TwilightTM Mask and Invacare® Polaris EXTM CPAP with SoftXTM (June 2004) • Recent study at a leading Sleep Center indicated that 78% of patients rated the comfort of the Twilight Mask better than that of their usual mask. • SoftX Technology, which reduces expirat
Slide 22: Product Focus: At'm Take Along Chair
Product Focus: At’m Take Along Chair Invacare® At’m Take Along Chair (October 2004) • Mobility and Portability • Lightweight and compact enough to fit in the trunk of a car • Powerful enough for a full day of adventure • No mobility lifts, no tools, just three easy pieces to assemble 22
Slide 23: Product Focus: Storm Series TDX
Product Focus: Storm Series TDX Storm Series® TDXTM – Total Driving eXperience (May 2003) • Center Wheel Drive offers the tightest turning radius possible along with ease of driving over all other configurations TM • SureStep ensures obstacles are navigated smoothly • Stability Lock allows CWD to be
Slide 24: Build a Powerful Brand - Invacare
Build a Powerful Brand - Invacare Change attitude from “I need” to “I want” Consolidated 50 names into one brand name • Tag Line “Yes, you can.TM” • Hired Arnold Palmer as company spokesperson • Arnold Palmer appears in HomeFillTM and HMVTM co-op advertising on television • Bayhill Tournament sponso
Slide 25: Brand Recognition with ISG
Brand Recognition with ISG Private label program • Drive Invacare brand identity with home delivery of supplies • Support ISG continued double digit growth plan • Expanded One Stop Shopping • Many products covered including wound care, diabetic care, incontinence, among others 25
Slide 26: Acquisition Activities
Acquisition Activities Opportunity in the non-acute marketplace • Estimated 17%-20% of world equipment market share • Both product niche and geographic expansion • Some categories not even entered • Over $260 million of acquired revenues from acquisitions in 2003, 2004 and 2005 year to date Temporar
Slide 27: Domus Acquisition
Domus Acquisition Alber Dolomite Aquatec September 2004 purchase of Domus operating companies • Complementary or new products that expand global product offerings • Sales around $116 million at purchase 27
Slide 28: Financial Guidance
Financial Guidance 2006 Year Guidance (as of February 16th 2006 release) • Sales increase 4% to 6% • EPS of $2.00 to $2.10 • Free cash flow of $70 million to $80 million 28
Slide 29: Management Interests Aligned with Shareholders
Management Interests Aligned with Shareholders Significant insider ownership Compensation linked with shareholder value • Median salaries with bonus driven by performance improvement 401(k) retirement program for employees Straight forward business/accounting model Clean opinions from E&Y 29
Slide 30: Summary Putting it all together
Summary Putting it all together Invacare is a company with real products, strong profitability and robust cash flow 21 year public stock performance outstanding Solid management team Building on worldwide market leadership position • Strengthen low cost position • Revenue growth with new products an
Slide 31: Contact Information: Gregory C. Thompson, Chief Financial Officer
Contact Information: Gregory C. Thompson Chief Financial Officer Phone: 440-329-6111 gthompson@invacare.com 31 2-21-06