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Is Invacare's Turnaround Plan Substantial Enough?

Invacare announced more layoffs along with leadership changes in its ongoing turnaround efforts, but one analyst questioned if the restructuring is substantial enough.

Invacare expects its latest round of layoffs (75 employees) to result in annualized pre-tax cost savings of $6.4 million.

Medical equipment manufacturer Invacare recently reported more layoffs, leadership changes, and product launches as part of the company's ongoing turnaround efforts.

The Elyria, Ohio-based company already reduced its headcount by 2,000 employees between the end of 2012 to the end of 2018, but this week the company said it would lay off another 75 employees in North America and Europe. The company expects this latest round of layoffs to result in annualized pre-tax cost savings of $6.4 million.

Invacare has struggled in recent years and tariffs and reimbursement changes in the United States added to its challenges last year. Invacare also reported leadership appointments and product launches, all in the name of trying to boost its sales in North America.

"While we believe these announcements are positives for [Invacare] and are concrete steps that management is taking in its turnaround efforts, we would have preferred to see more substantial restructuring, specifically in the [North American] lifestyle and respiratory businesses," said Mike Matson, a medtech analyst for Needham & Co. "However, we continue to view [Invacare] as a binary high-risk, high-reward situation, we believe that management can execute the turnaround in time to refinance its convertible debt (which starts to become due in 2021), and we reiterate our buy rating."

Invacare also appointed Joost Beltan to the position of vice president of sales and marketing in the company's North Americanb business. Beltman has worked for Invacare since 2008. Keith Brantly has been appointed the director of CRT sales. Brantly re-joins Invacare from Amoena USA, where he served as vice president of sales. From 2016 to 2018, he served as a national accounts director and regional sales director at Invacare.

Another part of Invacare's growth strategy is product innovation. The company launched several new wheelchair products. Under the Küschall brand, the company has designed a new line of active manual wheelchairs with sleek and minimal design elements intended to enhance the user’s daily life and activities. In addition, the company recently launched SMOOV one, a power add-on which provides flexible electric drive for active manual wheelchair users. Both products are currently available in Europe and the company intends to seek clearance for distribution in other regions.

"We continue to make progress against our enhanced transformation and growth plan, and I am confident that today's announcements, in conjunction with our ongoing strategic changes, will position Invacare for long-term success," said Matthew Monaghan, chairman, president, and CEO of Invacare.

Monaghan said the company has "an incredibly full pipeline of new products on the horizon," which he expects will help Invacare achieve its long-term financial goals. He also commented on the latest round of layoffs.

"While decisions that affect our workforce are never easy, it is important that we make long-term focused decisions and take actions that streamline our business to delight our customers and optimize our cost structure," Monaghan said. "Actions like these will enable us to successfully execute our transformation strategy and increase shareholder value.”

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