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Invacare Corporation

Invacare Corporation

One Invacare Way
Elyria, Ohio 44035-4196
U.S.A.
Telephone: (440) 329-6000
Toll Free: (800) 333-6900
Fax: (440) 366-9008
Web site: http://www.invacare.com

Public Company
Incorporated:
1971
Employees: 5,400
Sales: $1.05 billion (2001)
Stock Exchanges: New York
Ticker Symbol: IVC
NAIC: 339111 Laboratory Apparatus and Furniture Manufacturing; 339113 Surgical Appliance and Supplies Manufacturing

Invacare Corporation is a world leading maker and distributor of non-acute healthcare products for people requiring home healthcare, for those needing rehabilitative care, and for persons with temporary or permanent disabilities. Among the companys products are power wheelchairs, manual wheelchairs, motorized scooters, seating and positioning products, crutches, canes, walkers, manual and electric home care beds, respiratory products for the home, and safety equipment, such as shower chairs and grab bars. Acquisitions and innovative products have fueled Invacares success. It was the first firm to produce a motorized wheelchair with computerized controls.

1885 to the 1970s: From Fay Manufacturing Company to Invacare Corporation

The roots of Invacare can be traced back to 1885, when Fay Manufacturing Company was founded in the Cleveland suburb of Elyria by Winslow Lamartine Fay and began making tricycles. Competition from the newly introduced two-wheeled safety bicycle reduced demand for tricycles, leading Fay to transform his tricycle design into a line of mobility devices for persons with disabilities. The new products featured hand levers and treadles for steering and pedaling. The products proved successful, in part because they filled an existing needthe Civil War had left thousands of veterans with amputated limbs who needed help getting around. Following on this success, Fay developed specialized carts that were precursors to the modern wheelchair.

Looking to pursue other business opportunities, Fay sold his company to Arthur L. Garford in 1891. Soon after, Garford hired George Cushing Worthington to manage the firms plant operations. Worthington became a key employee at the company, designing a line of bicycle-wheeled rolling chairs. His influence was great enough that when Garford elected to rename the company in 1899, he chose the moniker the Worthington Manufacturing Company. Worthington was named president in 1902, and five years later the firm was renamed the Worthington Company.

In 1917, Fred W. Colson, a Worthington vice-president, engineered the merger of Worthington with the Machine Parts Company to form the Colson Company, majority owned by Colson, who also served as company president. The Colson Company continued to make wheelchairs and tricyclesas well as the automotive parts that had been made by Machine Parts Companybut it soon expanded its product line to include stretchers, service carts, and bicycles and scooters for children.

During the Great Depression of the 1930s, Colson fell upon hard times. The firm went into receivership in 1933 and was reorganized as the Colson Corporation, with new management and with Neely Powers serving as president. The company once again specialized in tricycles, wheelchairs, and automotive parts until World War II, when Colson produced Mighty Mouse rockets for the U.S. Navy.

In the postwar era, the firm struggled shifting back to civilian production, and in 1953 a weakened Colson was purchased by the Pritzker family of Chicago. The manufacture of bicycles and tricycles was halted and the company was moved out of Elyria. The wheelchair division of Colson, however, was purchased in 1957 by three veteran employees: W.C. Court Shea, Charles Chuck Hazelton, and WJ. Pivacek. The three men renamed the division Mobilaid Inc. and concentrated primarily on the manufacture of wheelchairs. Much smaller than Colson, Mobilaid had annual revenues of about $150,000 in the late 1950s. A key development in this period was the procurement of a large government contract to supply wheelchairs to the Veterans Administration.

In 1967, Mobilaid formed a subsidiary called the Rolls Equipment Company, which was charged with selling the companys products under the Rolls brand directly to hospitals and surgical equipment companies. By 1970, Mobilaid had grown substantially and was producing nearly 40,000 wheelchairs per year. The following year, Boston Capital Corporation (BCC) purchased both Mobilaid and Invalex Company, a maker of walkers, safety side rails, and other home healthcare products that had operations in Long Beach, California, and Lodi, Ohio. BCC merged these companies later in 1971 to form Invacare Corporation.

Transitioning from investment firm to healthcare company, BCC changed its name first to BCC Industries Inc. and then to Technicare Corporation; it also moved its headquarters to Cleveland. In addition to Invacare, Technicare also owned Ohio-Nuclear Inc., which achieved tremendous success with a new line of CT scanners in the mid-1970s. By 1977, Ohio-Nuclear accounted for $125 million of Technicares overall sales of $164.4 million, while Invacare contributed only $17 million. With Invacares slow sales, muddled management, and lack of new product development becoming a financial drain, Technicare decided to sell the company. But in 1978, Johnson & Johnson purchased Technicare for $87 million in stock. The following year, Johnson & Johnson, which had purchased Technicare mainly to gain the CT scanner business of Ohio-Nuclear, announced that it intended to sell Invacare. Two groups of investors stepped forward with offers to buy Invacare but both deals fell through. Then A. Malachi Mixon appeared on the scene.

1980s: A Company Turnaround Under Mixons Leadership

Mixon, a 39-year-old head of marketing at Ohio-Nuclears CT scanner division, former Marine Corps artillery officer who served in Vietnam, and Harvard Business School graduate, immediately decided to buy Invacare when he heard it was for sale. But with only $10,000 of his own money to invest, financing the acquisition of a company that cost $7.8 million seemed almost impossible. Undeterred, Mixon arranged for two real estate brokers to purchase Invacares facility on Taylor Street, and then lease it back to the company. Then, Mixon arranged for a $4.3 million loan from First Chicago Bank. The remainder of the needed money came from his own resources, loans from friends, and issuing shares of stock to various local investors. While structuring the financing of Invacare, Mixon included a 15 percent interest in the company for himself.

When Mixon and his group officially assumed control of Invacare on December 28, 1979, the company had a low standing within the healthcare products industry. Sales were stagnant at approximately $20 million, far lower than the $124 million sales figure of its chief competitor, Everest & Jennings. Further-more, Mixons leveraged buyout resulted in a $6.5 million debt, and the high interest rate of nearly 25 percent was devouring Invacares modest $1.2 million in profits.

During the first year as chief executive officer at Invacare, Mixon devoted a significant amount of time to studying the companys product line. After eliminating the manufacture of those items that were either obsolete or unprofitable, he pushed Invacares engineering department to develop highly innovative products. Mixon believed that Everest & Jennings, which had over an 80 percent share of the worlds wheelchair market, not only was growing complacent with its position within the industry but also was losing touch with its customers.

In 1982, Mixons emphasis on new product development paid off when Invacare was the first in the industry to introduce a motorized wheelchair with computerized controls. Invacares computer controls could be easily adapted to suit the individual needs and requirements of the severely disabled. The wheelchair quickly became an industry standard, and Invacare suddenly found itself in an intense competition with Everest & Jennings for the larger share of the wheelchair market.

Everest & Jennings responded to Invacare by reducing its prices, but cost-effective production methods enabled Invacare to match its competitors prices. At the same time, Mixon had worked hard to improve Invacares distribution network: inexpensive financing, volume discounts, 48-hour delivery, funds for cooperative advertising, and prepaid freight convinced more than 6,000 home healthcare dealers in the United States that Invacare was the better of the two companies. In a short time, Invacare had equaled and then surpassed Everest & Jennings share of the wheelchair market. Invacares ever expanding product line, which now included items such as cardiovascular exercise equipment and oxygen concentrators, and its policy of stocking parts for the products of its competitors, soon placed the company in a league of its own.

Company Perspectives:

Invacare Corporation s mission is to provide, worldwide, the highest value in mobility products and home medical equipment for people with disabilities and those requiring home health care. To accomplish this, the company focuses on two basic fundamentals innovation and distribution. The companys name, in fact, stems from the slogan Innovation In Healthcare. The company is managed on a decentralized basis by an operating committee. Invacare continuously strives to achieve excellence through improved products, processes and service. The breadth and depth of the companys distribution system, together with the continuous search for new channels and expansion opportunities has allowed Invacare to literally explode new products into the marketplace. Internally, Invacare employs its technological and personnel resources to their maximum potential. Externally, the company seeks to add value through acquisitions and partnerships with companies that provide synergistic relationships.

In the beginning of 1984, it appeared that Invacares rapid growth and enviable financial success would continue unabated. During that year, Mixon decided to enter the European market for home healthcare products, and acquired a British firm that manufactured wheelchair and patient aids and a West German producer of wheelchairs. Mixon also determined that it was an appropriate time to take the company public in order to under-write the expenditures for Invacares quick growth, offer employee stock options that would attract highly qualified managers, and provide Invacares original group of investors with some liquidity for their initial stake in the company.

Later in 1984, however, Invacare was hurt by a series of unexpected events. When the company discovered it had less inventory than was reported in its books, it was forced to take a charge against earnings that resulted in a financial loss for fiscal 1984. In addition, because of manufacturing defects in the companys oxygen concentrator, Invacare was forced to recall the product and suffered a loss of approximately $1.5 million in sales. To compound company problems, in 1985 the U.S. government changed its formulas for Medicare reimbursement. The new requirement led wheelchair dealers to sell more chairs than they leased, which resulted in a disincentive for dealers to purchase better built, but more expensive, reusable wheelchairs. Invacares sales dropped precipitously, and its profitability was threatened. Not surprisingly, the companys initial stock, offered at $11 per share just one year earlier, plummeted to less than $4 by mid-1985.

Mixon was convinced that a significant part of Invacares problems could be attributed to a lack of manufacturing efficiency and quality control problems. He was determined never to allow another Invacare product to suffer the embarrassment of a recall by the federal government. Mixon called on Joseph B. Richey to rectify the manufacturing problems at Invacare. Richey was a former associate of Mixons at Ohio-Nuclear and was head of that companys research and development department and was also one of the initial investors in the 1979 buyout of Invacare and a member of the Invacare board since 1980. He joined Invacare in an executive capacity in 1994 as senior vice-president of product development. Richey first concentrated on finding Invacares quality control problems. The companys sales force was required to submit monthly reports detailing customer complaints about its products. With these reports, Richey then began to correct the problems that occurred during production.

Simultaneously, Richey implemented a program in statistical process control methods for company employees. Another quality control measure involved sending Invacares own certified representatives to check the plants of its suppliers; this policy led to a reduction in the number of suppliers but a higher and more consistent quality of product parts. Richeys strategy paid off handsomely as Invacare reduced the rejection rate of its suppliers parts to less than 2 percent. But Richey had said numerous times that Invacares goal should be to measure rejection rates as Japanese companies doin parts per million. One of the most important aspects of Invacares determination to improve the quality control of its products involved a switch from purchasing to manufacturing the electronic control systems on its motorized wheelchairs. Richey went directly to the National Aeronautic and Space Administrations (NASA) Lewis Space Center and purchased much of the equipment NASA used to test its controls on the space shuttles. The result of employing such sophisticated quality control equipment led to the perception that Invacares power wheelchairs were the most reliable in the industry.

Key Dates:

1885:
Fay Manufacturing Company is founded in Elyria, Ohio, by Winslow Lamartine Fay and begins making tricycles; the company soon finds success through a line of mobility devices for persons with disabilities.
1891:
Fay sells his company to Arthur L. Garford, who soon hires George Cushing Worthington to manage the firms plant operations.
1899:
The firm is renamed the Worthington Manufacturing Company.
1907:
The companys name is changed to Worthington Company.
1917:
Worthington merges with the Machine Parts Company to form the Colson Company.
1933:
During the Great Depression, the firm goes into receivership and is reorganized as the Colson Corporation.
1953:
Colson is purchased by the Pritzker family of Chicago and moved from Elyria.
1957:
Colsons wheelchair division in Elyria is purchased by three veteran employees and renamed Mobilaid Inc.
1971:
Boston Capital Corporation (later known as Technicare Corporation) purchases Mobilaid and Invalex Company, a maker of home healthcare products, and merges the two firms to create Invacare Corporation.
1978:
Johnson & Johnson acquires Technicare and its Invacare subsidiary.
1979:
An investment group led by A. Malachi Mixon purchases Invacare for $7.8 million.
1982:
Company becomes the first to introduce a motorized wheelchair with computerized controls.
1984:
Company goes public and enters the European market for home healthcare products.
1992:
Poirier S.A., the leading wheelchair maker in France, is acquired.
1997:
Invacare is rebuffed in hostile bid for Healthdyne Technologies Inc.
1998:
Suburban Ostomy Supply Company, Inc. is acquired for $132 million.
1999:
Denmark-based Scandinavian Mobility International A/S is acquired for $142 million.

With all its improvements in quality control, Invacare was well-prepared to meet an unexpected challenge in 1986. Wheelchair manufacturers in Taiwan started to sell their products in the United States that year at nearly 20 percent below the normal price structure. Invacares response was to construct a new manufacturing plant in Reynosa, Mexico, in addition to its facilities in Elyria, Ohio. Although Mixon denied that there was a plan to shut down the Elyria plant or relocate jobs to Mexico, the consequence was that Elyria employees became more productive and efficient in light of the prospect of losing their jobs. Invacares new plant in Mexico produced wheelchairs at a much lower cost and almost eliminated the Taiwanese manufacturers from the U.S. domestic market. With its quality control problems solved and no other company to challenge its dominance of the wheelchair market, Invacare grew quickly. In 1986 the company reported profits of $3.4 million on revenues of $111 million.

By 1989, Invacares revenues jumped to over $186 million. An important aspect of its success was the decentralized management structure emphasized by Mixon. Each of the key officers in the company was given complete authority to make the changes necessary for the respective divisions they supervised to meet their sales goals. This organizational setup encouraged a fast-paced, high-pressure work enviroment, but management was given full authority to meet the dual responsibilities of efficiency and productivity. In addition, Invacare not only hired disabled people to help design and test its products, but the company also provided a stock sharing plan for its employees that helped create a sense of ownership, empowerment, and accountability.

1990s: Growing Toward $1 Billion in Sales Through Acquisitions

The next two years, 1990 and 1991, were watershed years for Invacare. In 1990, the company introduced a total of 53 new products, including significant innovations in wheelchair design with the introduction of microprocessors for power wheelchairs and the first wheelchair designed for use on airliners. Invacare also created its Action Technology division in which highly flexible wheelchairs made of light composite materials were designed for active users. By 1991, Invacare stock had climbed to $25 per share. That year, the company launched an advertising campaign to sell its products directly to consumers. Although still relying heavily on dealers to market its products, Mixon successfully anticipated that a large segment of the disabled population was looking for products allowing them to lead a more active life. Invacare reported revenues of more than $263 million for fiscal 1991. Invacares successes made it one of the top 50 firms to invest in during the decade of the 1990s, according to U.S. News and World Report.

In 1992, Invacare was known by industry analysts as the leader in manufacturing wheelchairs and home care medical equipment. The company was manufacturing a comprehensive line of wheelchairs, including pediatric and sports models, quad canes, scooters, and walkers in the most up-to-date ultralight materials. With its oxygen concentrators, medical beds, nebulizers, cushions, and positioning systems, Invacare produced the broadest line of items in the home healthcare industry. The company had expanded to include 19 manufacturing facilities in the United States and over 10,000 dealers distributing its products throughout the world, including Mexico, Canada, New Zealand, and Europe. In 1992 international sales accounted for approximately 23 percent of Invacares total revenues.

Invacare experienced another banner year in 1993. Sales increased to $365 million while earnings were reported at over $22 million. From 1979 through 1993, the company had achieved an annual growth rate of over 23 percent and was listed in Forbes as one of the 200 best small companies in America and in Business Weeks 250 Companies on the Move. From October 1991 to the end of 1993, Invacare made seven major acquisitions, including Canadian Posture and Seating Centre, Inc. (Kitchener, Ontario); Ho vis Medical Limited (Mississauga, Ontario); Perry Oxygen Systems, Inc. (Port St. Lucie, Florida); Poirier S.A. (Tours, France); Top End (Pinellas Park, Florida); Dynamics Controls Ltd. (Christchurch, New Zealand); and Geomarine Systems, Inc. (Carmel, New York). Although Dynamic Controls, a manufacturer of power controls for wheelchairs, and Geomarine Systems, a manufacturer of low air loss therapy mattress replacement systems, were important in expanding the companys product line and increasing the cost effectiveness of its manufacturing operations, it was the purchases of Top End Wheelchair Sports and Poirier that were most significant.

Top End products included road racing and tennis wheelchairs, and a water ski for disabled people. Top End Action wheelchairs were used in over 200 sports events during 1993, including the National Veterans Wheelchair Games, NBA-sponsored wheelchair basketball games, Easter Seals wheelchair tennis camps, and numerous other competitive and recreational sports events. The acquisition of Top End gave Invacare valuable exposure to the growing active user wheelchair market.

Purchased for $57.3 million in October 1992, Poirier was the leading maker of wheelchairs in France and the leading maker of lightweight wheelchairs in Europe. The addition of Poirier doubled Invacares European sales, and the companys head-quarters were made the new base for Invacares European operations. These acquisitions helped increase sales to $411.1 million by 1994, a year in which Gerald B. Blouch was named chief operating officer, with Mixon remaining chairman, president, and CEO.

Throughout the 1990s, the company pursued acquisitions that tended to: grow market share in or extend existing product lines (called tactical); expand the firm into new, complementary product segments (strategic); and/or open up new foreign markets for selling the companys products (geographic). During 1995 and 1996 Invacare completed more than a dozen acquisitions. One area of expansion was specialty seating systems and cushions, and the 1995 acquisitions of PinDot Products, Inc. (Northbrook, Illinois), Bencraft Limited (Birmingham, England), and Special Health Systems (Ontario, Canada) all contributed to that expansion. In early 1996, Invacare acquired Frohock-Stewart, Inc. (Northboro, Massachusetts), a manufacturer of Aurora brand bath safety products that were sold to mass retail outlets, such as Home Depot and Eagle Hardware. This marked Invacares entry into the retail market, although home medical equipment dealers remained the core market. The Aurora line of products was soon expanded to include such Invacare mainstays as canes, walkers, and wheelchairs, while the retail channels broadened to include Wal-Mart, Sears, and other major retailers. Also purchased in 1996 was Healthtech Products, Inc. (St. Louis), a maker of beds and patient room furniture for nursing homes and other institutions.

A number of acquisitions outside North America extended Invacares geographic presence during this period. European purchases included Beram AB (Gothenburg, Sweden), a distributor of wheelchairs and other rehabilitative products, and Paratec AG (Basel, Switzerland), maker of the Kuschall brand of active wheelchairs, both bought in 1995; and Fabriorto, Lda. (Oporto, Portugal), a producer of wheelchairs, beds, and walking aids purchased in early 1996. Invacares presence in the Australasian region was significantly bolstered as well, in a follow-up to the purchase of Dynamic Controls in 1993. Invacare bought Thompson Rehab (Auckland, New Zealand) in July 1995, gaining a manufacturer and distributor of power and manual wheelchairs. The following month the company acquired another Auckland firm, Group Pharmaceutical Limited, which distributed Invacare products in New Zealand. In July 1996, Invacare purchased the leading maker of power wheelchairs in Australia, Roller Chair Pty. Ltd. (Adelaide). The person responsible for integrating all of these foreign acquisitions was Blouch, who was placed in charge of international operations in December 1993 and was promoted from COO to president in November 1996.

In January 1997, Invacare made an offer to acquire Health-dyne Technologies Inc., a maker of products for adult sleep disorders and sleep apnea monitors for infants, for $12.50 a share, or $163 million, in what would have been the companys largest acquisition to date. Healthdynes board rejected the offer as too low, turning the bid into a hostile one. Invacare subsequently raised its bid three times, eventually offering $15 a share, or $190 million, in June. Two months later, after this final offer was rejected, Invacare called off its takeover attempt. (Healthdyne was later purchased by Respironice s Inc. for about $370 million.)

In addition to this disappointment, 1997 was also noteworthy for the difficult environment in which Invacare had to operate, resulting in below average sales growth for the company of about 5.5 percent. Increasing competition, a strong dollar that dampened sales in Europe, and uncertainty created by a Medicare budget debate combined to wreak havoc. Invacare responded with a major restructuring involving plant closures, the elimination of unprofitable product lines, asset write-downs, and increased bad debt reserves. In connection with the restructuring, the firm took a pretax charge of $61 million, resulting in net income of just $1.6 million for the year, compared to $38.9 million for 1996. In September 1997, Invacare moved into a new $5 million headquarters building in Elyria.

As healthier growth returned in the last two years of the 1990s, Invacare rounded out its acquisitive decade with its two biggest deals ever. In January 1998, the company acquired Suburban Ostomy Supply Company, Inc. (Holliston, Massachusetts) for about $132 million in cash. Suburban Ostomy was a leading wholesaler of disposable medical products for the home healthcare market, primarily in the areas of ostomy, incontinence, and diabetes and wound care. This move into soft goods was part of the companys effort to provide its customers with one-stop shopping for home healthcare products. During 2000, Suburban was renamed Invacare Supply Group. In July 1999, Invacare spent approximately $142 million in cash to buy Scandinavian Mobility International A/S (SMI), which was based in Copenhagen, Denmark. SMI was one of the largest European makers of bed systems and mobility aids for the home care and institutional markets. Also during 1999, Invacare began retooling its product line toward the eventual goal of selling all products under the Invacare name. The aim was to make the Invacare name synonymous with home healthcare products. In conjunction with this effort, the company logo was redesigned and the tag line Yes, you can was adopted to emphasize the firms can-do spirit.

New Goal and New Spokesperson for the New Millennium

By 2000, Invacare was the clear leader of the home healthcare product market. Under the continued leadership of Mixon, Invacare had acquired 35 companies since the Mixon-led group bought the company in 1979. These acquisitions, along with innovative new product development, helped the company surpass the $1 billion revenue mark for the first time in 2000, a remarkable achievement for a company that had had revenue of only $19 million two decades earlier. Earnings for 2000 were a record $59.9 million. In June 2000, Invacare moved its stock listing from the NASDAQ to the prestigious New York Stock Exchange. Mixon, meantime, set a goal of achieving $2 billion in sales by 2005.

A key to reaching this target would be to achieve success in the effort to make Invacare a household name. Toward that end, in late 2001 the company signed up legendary golfer Arnold Palmer to be the company spokesperson in a $5 million marketing campaign. Although 72-year-old Palmer did not need to use the companys products, he was chosen for his image as an older American maintaining an active lifestyle. Sales for 2001, however, were discouraging, increasing by only 4 percent as the weakening economic climate, particularly after the events of September 11, led customers to cut back on purchases. Despite this setback, the longer term forecast for Invacare remained bright. Demographic trends were in the companys favor, in terms of the continuing aging of the U.S. and European populations, as were the increasing efforts to have the elderly live at home rather than in nursing homes.

Principal Subsidiaries

Invacare Ltd. (U.K.); Invacare Canada Inc.; Invacare Deutschland GmbH (Germany); Invacare International Corporation; Invacare Trading Company, Inc. (U.S. Virgin Islands); Invamex, S.A. de R.L.C.V. (Mexico); Invacare Credit Corporation; Invatection Insurance company; Lam Craft Industries; Invacare Poirier S.A. (France); Dynamic Controls Ltd. (New Zealand); Quantrix Consultants Ltd. (New Zealand); Dynamic Europe Ltd. (U.K.); Sci Des Hautes Roches (France); Sci Des Roches (France); Mobilite Building Corporation; Genus Medical Products USA, Inc.; Invacare Florida; Infusion Systems, Inc.; Invacare New Zealand Ltd.; Invacare AG (Switzerland); Healthtech, Inc.; Invacare Portugual Lda. (Portugal); Production Research Corporation; Suburban Ostomy Supply Company, Inc.; Roller Chair Pty. Ltd. (Australia); Silcraft Corporation; Invacare Supply Group; The Aftermarket Group, Inc.; Invacare Holdings Denmark ApS; Scandinavian Mobility International ApS (Denmark); Invacare EC-Hong A/S (Denmark); Invacare A/S (Denmark); Invacare AB (Sweden); Invacare NV (Belgium); Scandinavian Mobility Niltek A/S (Denmark); Scandinavian Mobility Radius A/S (Denmark); EC-Invest A/S (Denmark); Invacare Holdings AS (Norway); Groas A/S (Norway); Invacare Rea AB (Sweden); France Reval SA; Matia SA (France); R2P S.a.r.L. (France); Scandinavian Mobility GmbH (Germany); France Reval GmbH (Germany); Invacare B.V. (Netherlands); Samarite B.V. (Netherlands); Revato B.V. (Netherlands); Scandinavian Mobility Medical Services B.V. (Netherlands); Invacare Australia Pty, Ltd.; Adaptive Switch Laboratories, Inc.; Adaptive Research Laboratories, Inc.; Garden City Medical; Hatfield Mobility Limited (New Zealand); Pro Med Equipment Pty, Ltd. (Australia); Pro Med Australia Pty, Ltd.; Invacare, S.A. (Spain); Invacare Holdings Two AB (Sweden); Invacare Holdings AB (Sweden); Invacare Holdings CV (Netherlands); Invacare Holdings BV (Netherlands); Invacare Verwaltungs GmbH (Germany); Invacare GmbH and Co. KG (Germany); Invacare Holdings Two BV (Netherlands); Invacare Holdings (New Zealand).

Principal Competitors

Sunrise Medical Inc.; Hillenbrand Industries, Inc.; Kinetic Concepts, Inc.; Graham-Field Health Products, Inc.

Further Reading

Bendix, Jeffrey, Invacare Rolls to Number One, Cleveland Enterprise, Spring 1991.

Butler, Charles, Mai Bonding, Sales and Marketing Management, July 1995, pp. 6672.

Byrne, Harlan S., The Right Rx, Barrons, July 18, 1994, p. 19.

Freeman, Anne M., The Energizer, Medical Industry Executive, February/March 1992, pp. 2831.

Gleisser, Marcus, Invacare Corp. Purchase of Medical Supplier Feeds 22.1 Percent Increase in Sales, Cleveland Plain Dealer, June 22, 1999, p. 30S.

, Invacare Seeking to Buy Danish Wheelchair Maker, Cleveland Plain Dealer, July 2, 1999, p. 1C.

Johnson, Terrence L., Invacare Corp. Broadens Its Base, Cleveland Plain Dealer, April 21, 1996, p. 3J.

Kissling, Catherine L., Invacare Pushing to Reduce Costs, Get Edge on Rivals, Crains Cleveland Business, May 19, 1986, p. 3.

Krouse, Peter, Invacare Hits $1 Billion Annual Sales, Cleveland Plain Dealer, January 23, 2001, p. 1C.

Lipin, Steven, and Matt Murray, Invacare Makes a $163 Million Offer to Acquire Healthdyne Technologies, Wall Street Journal, January 13, 1997, p. B6.

Love, Steve, Invacare Signs Up Palmer as Lifestyle Spokesman, Cleveland Plain Dealer, October 23, 2001, p. C1.

Morrow, David J., Vehicles for Market Share: Wheelchair Makers Are Trying to Expand Their Turf, New York Times, January 21, 1998, p. D1.

Murray, Matt, Invacare Expects Showdown with Healthdyne over Bid, Wall Street Journal, July 30, 1997, p. B4.

Palmeri, Christopher, Wheel-to-Wheel Combat, Forbes, February 15, 1993, pp. 6264.

Peric, T.S., Mixonian Alchemy, Cleveland Magazine, 1993 reprint.

Pfaff, Kimberley, Health for the Masses: Medical-Goods Company Courts an Emerging Market, HFN The Weekly Newspaper for the Home Furnishing Network, January 29, 1996.

Phillips, Stephen, Acquisition Gives Invacare Access to Retail Market, Cleveland Plain Dealer, January 16, 1996, p. 1C.

Prinzinsky, David, Invacare Wheels into Lead with Healthcare Products, Crains Cleveland Business, October 15, 1990.

Rodengen, Jeffrey L., and Anthony L. Wall, The Yes, You Can of Invacare Corporation, Fort Lauderdale, Fla.: Write Stuff Enterprises, 2001, 192 p.

Santiago, Raquel, Invacare Introducing New Brand Plan: Marketing Strategy to Bring Products Under One Name, Crains Cleveland Business, July 19, 1999, p. 2.

, Invacare Sees Growth Avenue in Retail Sales, Crains Cleveland Business, March 3, 1997, p. 3.

Scott, Jennifer A., Money Games: To Invacare Corp.s Mal Mixon and His Close Circle of Friends, Venture Capitalism Is a Hobby That More Than Pays for Itself, Small Business News-Cleveland, June 1, 1995, p. 12.

Shingler, Dan, Invacare Pursuing Growth with Gusto, Crains Cleveland Business, January 1, 1996, p. 1.

, Its the Midas Touch, Crains Cleveland Business, October 21, 1991.

Vickers, Jim, Master Innovator: A. Malachi Mixon III, Balancing Innovation and Growth, Small Business News-Akron, September 1, 2000, p. S6.

Yerak, Becky, Going to the People: Invacare Is Pushing into Retailing to Sell Its Home Health Products, Cleveland Plain Dealer, June 1, 1997, p. 1H.

, Invacare CEO Reflects on Bid: Elyria Firm Still Plans to Enter New Field Without Healthdyne, Cleveland Plain Dealer, August 10, 1997, p. 1H.

, Invacare to Increase Cost-Cutting, Cleveland Plain Dealer, September 10, 1997, p. 1C.

, Serial Entrepreneur: From a $10,000 Investment, Invacare CEO Mai Mixon Has Built a Powerhouse in Medical Equipment. Now, Even As He Drives His Company Toward the $1 Billion Mark, He Works to Help Other Ventures Get off the Ground, Cleveland Plain Dealer, September 14, 1997, p. 1H.

Thomas Derdak
update: David E. Salamie

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Invacare Corporation

Invacare Corporation

899 Cleveland Street
P. O. Box 4028
Elyria, Ohio 44036
U.S.A.
216) 329-6000
Fax: (216) 366-9008

Public Company
Incorporated:
1971
Employees: 3,040
Sales: $365 million
Stock Exchanges: NASDAQ

SICs: 3842 Surgical Appliances and Supplies; 2599 Furniture
Fixtures, Nee

Invacare Corporation, one the leading manufacturers of home medical equipment in the world, focuses on supplying medical equipment and mobility products to people with disabilities and those who require home health care. Its product line ranges from commodes and electric beds to crutches and home respiratory systems. Invacares innovative products have fueled its success. It was the first firm to produce a motorized wheelchair with computerized controls.

Incorporated in 1971 as a subsidiary of Technicare, a Cleveland-based medical equipment firm, Invacare mainly manufactured wheel chairs. But Invacares slow sales, muddled management, and lack of new product development resulted in the company becoming a financial drain on Technicare. When Johnson & Johnson purchased Technicare in 1978, it decided to sell Invacare. The initial group of investors that arranged to purchase Invacare was frustrated in their attempt due to a squabble over the amount of control requested by the new chief executive officer. Then Malachi Mixon appeared on the scene.

Mixon, a 39-year-old head of marketing CT scanners for Technicare, former Marine Corps artillery officer who served in Vietnam, and Harvard Business School graduate, immediately decided to buy Invacare when he heard it was for sale. But with only $10,000 of his own money to invest, financing the acquisition of a company that cost $7.8 million seemed almost impossible. Undeterred, Mixon arranged for two real estate brokers to purchase Invacares facility on Taylor Street, and then lease it back to the company. Then, Mixon arranged for a $4.3 million loan from First Chicago Bank. The remainder of the needed money came from his own resources, loans from friends, and issuing shares of stock to various local investors. While structuring the financing of Invacare, Mixon included a 15 percent interest in the company for himself.

When Mixon and his group officially assumed control of Invacare on January 2, 1980, the company had a low standing within the health care products industry. Sales were stagnant at approximately $20 million, far lower than the $124 million sales figure of its chief competitor, Everest & Jennings. Furthermore, Mixons leveraged buyout resulted in a $6.5 million debt, and the high interest rate of nearly 25 percent was devouring Invacares modest $1.2 million profits.

During the first year as chief executive officer at Invacare, Mixon devoted a significant amount of time to studying the companys product line. After eliminating the manufacture of those items that were either obsolete or unprofitable, he pushed Invacares engineering department to develop highly innovative products. Mixon believed that Everest & Jennings, which had over an 80 percent share of the worlds wheelchair market, was not only growing complacent with its position within the industry but was losing touch with its customers.

In 1982, Mixons emphasis on new product development paid off when Invacare was the first in the industry to introduce a motorized wheelchair with computerized controls. Invacares computer controls could be easily adapted to suit the individual needs and requirements of the severely disabled. The wheelchair quickly became an industry standard, and Invacare suddenly found itself in an intense competition with Everest & Jennings for the larger share of the wheelchair market.

Everest & Jennings responded to Invacare by reducing its prices, but cost-effective production methods enabled Invacare to match its competitors prices. At the same time, Mixon had worked hard to improve Invacares distribution network: inexpensive financing, volume discounts, 48-hour delivery, funds for cooperative advertising, and prepaid freight convinced more than 6,000 home health care dealers in the United States that Invacare was the better of the two companies. In a short time, Invacare had equaled and then surpassed Everest & Jennings share of the wheelchair market. Invacares ever-expanding product line, which now included items such as cardiovascular exercise equipment and oxygen concentrators, and its policy of stocking parts for the products of its competitors, soon placed the company in a league of its own.

In the beginning of 1984, it appeared that Invacares rapid growth and enviable financial success would continue unabated. During that year, Mixon decided to enter the European market for home health care products, and acquired a British firm that manufactured wheelchair and patient aids and a West German producer of wheelchairs. Mixon also determined that it was an appropriate time to take the company public in order to underwrite the expenditures for Invacares quick growth, offer employee stock options that would attract highly qualified managers, and provide Invacares original group of investors with some liquidity for their initial stake in the company.

Later in 1984, however, Invacare was hurt by a series of unexpected events. When the company discovered it had less inventory than was reported in its books, it was forced to take a charge against earnings which resulted in a financial loss for the fiscal year of 1984. In addition, because of manufacturing defects in the companys oxygen concentrator, Invacare was forced to recall the product and suffered a loss of approximately $1.5 million in sales. To compound company problems, in 1985 the U.S. government changed its formulas for Medicare reimbursement. The new requirement led wheelchair dealers to sell more chairs than they leased, which resulted in a disincentive for dealers to purchase better built, but more expensive, reusable wheelchairs. Invacares sales dropped precipitously, and its profitability was threatened. Not surprisingly, the companys initial stock, offered at $11 per share just one year earlier, plummeted to less than $4 by mid 1985.

Mixon was convinced that a significant part of Invacares problems could be attributed to a lack of manufacturing efficiency and quality control problems. He was determined never to allow another Invacare product to suffer the embarrassment of a recall by the federal government. Mixon hired J. B. Richey, a former associate at Technicare and general manager of that companys magnetic resonance division, to rectify the manufacturing problems at Invacare. First, Richey concentrated on finding Invacares quality control problems. The companys sales force was required to submit monthly reports detailing customer complaints about its products. With these reports, Richey then began to correct the problems which occurred during production.

Simultaneously, Richey implemented a program in statistical process control methods for company employees. Another quality control measure involved sending Invacares own certified representatives to check the plants of its suppliers; this policy led to a reduction in the number of suppliers but a higher and more consistent quality of product parts. Richeys strategy paid off handsomely as Invacare reduced the rejection rate of its suppliers parts to less than two percent. But Richey had said numerous times that Invacares goal should be to measure rejection rates as Japanese companies doin parts per million. One of the most important aspects of Invacares determination to improve the quality control of its products involved a switch from purchasing to manufacturing the electronic control systems on its motorized wheelchairs. Richey went directly to the National Aeronautic and Space Administrations (NASA) Lewis Space Center and purchased much of the equipment NASA used to tests its controls on the space shuttles. The result of employing such sophisticated quality control equipment led to the perception that Invacares power wheelchairs were the most reliable in the industry.

With all its improvements in quality control, Invacare was well-prepared to meet an unexpected challenge in 1986. Wheelchair manufacturers in Taiwan started to sell their products in the United States that year at nearly 20 percent below the normal price structure. Invacares response was to construct a new manufacturing plant in Reynosa, Mexico, in addition to its facilities in Elyria, Ohio. Although Mixon denied that there was a plan to shut down the Elyria plant or relocate jobs to Mexico, the consequence was that Elyria employees became more productive and efficient in light of the prospect of losing their jobs. Invacares new plant in Mexico produced wheelchairs at a much lower cost and almost eliminated the Taiwanese manufacturers from the U.S. domestic market. With its quality control problems solved and no other company to challenge its dominance of the wheelchair market, Invacare grew quickly. In 1986, the company reported profits of $3.4 million on revenues of $111 million.

By 1989, Invacares revenues jumped to over $186 million. An important aspect of its success was the decentralized management structure emphasized by Mixon. Each of the key officers in the company was given complete authority to make the changes necessary for the respective divisions they supervised to meet their sales goals. This organizational setup encouraged a fast-paced, high-pressure work environment, but management was given full authority to meet the dual responsibilities of efficiency and productivity. In addition, Invacare not only hired disabled people to help design and test its products, but the company provided a stock sharing plan for its employees that helped create a sense of ownership, empowerment, and accountability.

The next two years, 1990 and 1991, were watershed years for Invacare. In 1990, the company introduced a total of 53 new products, including significant innovations in wheelchair design with the introduction of microprocessors for power wheelchairs and the first wheelchair designed for use on airliners. Invacare also created its Action Technology division in which highly flexible wheelchairs made of light composite materials were designed for active users. By 1991, Invacare stock had climbed to $25 per share. That year, the company launched an advertising campaign to sell its products directly to consumers. Although still relying heavily on dealers to market its products, Mixon successfully anticipated that a large segment of the disabled population was looking for products allowing them to lead a more active life. Invacare reported revenues of more than $263 million for the fiscal year ending 1991. Invacares successes made it one of top 50 firms to invest in during the decade of the 1990s, according to U.S. News and World Report.

In 1992, Invacare was known by industry analysts as the leader in manufacturing wheelchairs and home care medical equipment. The company was manufacturing a comprehensive line of wheelchairs, including pediatric and sports models, quad canes, scooters, and walkers in the most up-to-date ultralight materials. With its oxygen concentrators, medical beds, nebulizers, cushions and positioning systems, Invacare produced the broadest line of items in the home health care industry. The company had expanded to include 19 manufacturing facilities in the United States and over 10,000 dealers distributing its products throughout the world, including Mexico, Canada, New Zealand, and Europe. In 1992, international sales accounted for approximately 23 percent of Invacares total revenues.

Invacare experienced another banner year in 1993. Sales increased to $365 million while earnings were reported at over $22 million. From 1979 through 1993, the company had achieved an annual growth rate of over 23 percent and was listed in Forbes as one of the 200 best small companies in America and in Business Week s 250 Companies on the Move. From October of 1991 to the end of 1993, Invacare made seven major acquisitions, including Canadian Posture and Seating Centre, Hovis Medical, Perry Oxygen, Poirier, Top End, Dynamics Controls, and Geomarine Systems, Inc. Although Dynamic Controls, a manufacturer of power controls for wheel chairs, and Geomarine Systems, a manufacturer of low air loss therapy mattress replacement systems, were important in expanding the companys product line and increasing the cost effectiveness of its manufacturing operations, it was the purchase of Top End Wheelchair Sports that was most significant. Top End products included road racing and tennis wheelchairs, and a water ski for disabled people. Top End Action wheelchairs were used in over 200 sports events during 1993, including the National Veterans Wheelchair Games, NBA-sponsored wheelchair basketball games, Easter Seals wheelchair tennis camps, and numerous other competitive and recreational sports events. The acquisition of Top End gave Invacare valuable exposure to the growing active user wheelchair market.

Invacare has been at the forefront of the debate on health care reform and Medicare reimbursement policy. Mixon has testified extensively before committees in both the Senate and the House of Representatives to lobby in favor of the economic and medical benefits of home care as opposed to institutional care. Of the 70 health care reform bills pending Congressional approval in 1993, 69 of them included legislation on the various services and equipment of home health care. Mixon admitted that passage of health care reform bills would directly benefit Invacare, but he cited statistics that convey a message other than self-interest: the cost to care for an infant born with feeding and breathing problems is $61,000 in a hospital and $20,000 at home; more than 90 percent of all people surveyed reported that they would rather be taken care of at home rather than at a hospital or institution; and demographic surveys taken by the U.S. Census Bureau indicate that there will be an ever-increasing demand for home health care equipment due to the fact that one out of every eight people in America is over the age of 65 during the 1990sin contrast to one out of 25 over the age of 65 during the 1920s.

Invacare had six operating divisions in 1993: Home Care division, Rehab division, Aftermarket Parts division, Canadian division, European division, and Invacare Technologies division. The firm continued to hold the greater share of the home health care products market, but was seeing competition in the sports wheelchair market from Quickie Designs, a manufacturer of ultralightweight sports wheelchairs and a subsidiary of Sunrise Medical Inc. Despite the growing competition in the domestic and international wheelchair markets, industry analysts gave high marks to Mixons management of Invacare and maintained that it was still the pre-eminent company in home health care products.

Further Reading

Bendix, Jeffrey, Invacare Rolls to Number 1, Cleveland Enterprise, Spring 1991.

Freeman, Anne M, The Energizer, Medical Industry Executive, February/March 1992, pp. 28-31.

Palmeri, Christopher, Wheel-To-Wheel Combat, Forbes, February 15, 1993, pp. 62-64.

Peric, T.S., Mixonian Alchemy, Cleveland Magazine, 1993 Reprint.

Thomas Derdak

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