Invacare Corporation CEO Interview: A. Malachi Mixon III

• On 3:45 pm EDT, Tuesday September 22, 2009

67 WALL STREET, New York - September 22, 2009 - The Wall Street Transcript has just published its Medical Devices Report offering a timely review of the sector to serious investors and industry executives. This 41 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Developments in the Industry -- New Devices -- Negative Price Pressure -- Inject Mix -- Hospital Capital Spending Behavior -- Growth -- Rate of Growth Reliability -- Execution of Management -- Clinical Trials -- The Next Big Thing -- Innovation -- Acquisition -- Loss -- Major Turnarounds -- Productive Work Force -- Medication Adherence -- Undervaluation -- Improvement in Earnings -- Price Sensitivity -- Weakening Dollar -- Winning Market Share -- Significant Share Gains -- Profitability -- Regulatory Standard -- Opportunities -- Licensing Opportunities -- Collective Experience -- Drug Approvals -- Growth in Revenue -- Measuring Success -- Profit Margins

Companies include: Medtronic (MDT); Boston Scientific (BSX); Greatbatch (GB); Vascular Solutions (VASC); AngioDynamics (ANGO); St. Jude Medical (STJ); Edwards Lifesciences (EW); Stryker (SYK); Zimmer Holdings (ZMH); Abbott Laboratories (ABT); Johnson and Johnson (JNJ); Baxter International (BAX); Thoratec (THOR); HeartWare (HTWR); Hill-Rom Holdings (HRC); Accuray (ARAY); Smith and Nephew (SN.L); Wright Medical (WMGI); NuVasive (NUVA); TranS1 (TSON); Becton, Dickinson (BDX); C.R. Bard (BCR); Covidien (COV); CareFusion (CFN);Edwards Lifesciences (EW); Zimmer (ZMH); Nanosphere (NSPH)

In the following brief excerpt from the 41 page report, A. Malachi Mixon III, CEO of Invacare Corporation, discusses the company and the outlook for the sector and for investors.

TWST: Would you give us a brief history of your company and what your focus is on now?

Mr. Mixon: Invacare Corporation is the world's largest home medical products company. This is my 30th year as CEO of the company, and we've grown from $19 million to approximately $1.8 billion over that period. We are on the New York Stock Exchange under the symbol IVC. We make a broad line of products used in the home, which include both manual and motorized wheelchairs, oxygen systems, home medical beds and all the associated equipment to transfer you from the bed to a wheelchair, to provide bathing aids and toileting aids and virtually create a hospital room in your home, keeping you out of an institution.

TWST: What is your company's business model?

Mr. Mixon: Our business model is two-step distribution. We manufacture and distribute products through home care providers - some 25,000 of them worldwide. Today we market in 80 countries. We have 12 U.S. factories and 18 factories outside the United States. Some names that might be known in America that are public companies would include Lincare, Apria, American HomePatient, Rotech, and thousands of small mom-and-pops and independently owned providers.

TWST: How has your company's funding been affected by the recession?

Mr. Mixon: Invacare's home care business really has not been affected much by the recession. In fact, we are projecting improved earnings in 2009 over 2008. We hit the numbers that we gave Wall Street last year, and so far we've beaten the numbers that we gave Wall Street this year. We benefited from a number of initiatives that we undertook several years ago to ship much of our manufacturing and purchasing offshore, especially to China, Mexico and Portugal. Much of the purchasing is through our Hong Kong office, and we have essentially changed our manufacturing process from an integrated manufacturer to primarily an assembly operation. In addition, in the recession we are seeing a softening of our parts and components, and raw materials that are used to make our products. So we are benefiting on the cost side. We have a good banking arrangement with variable interest rates that we paid down a substantial amount of debt in the last two years. In fact, since we raised new financing in the first quarter of 2007, we paid down $158 million in debt. Basically people who have a health care need are not really impacted so much by the recession. They need a wheelchair, they need oxygen, they need the basic products that we make. The market is still strong. So we look forward to an outstanding year in 2009.

TWST: You have markets in some 80 different countries. What are your key markets? Are there any in China?

Mr. Mixon: China is a manufacturing base for us. We have two factories there. We have been studying China for two years, and we expect to enter China in the year 2010 and actually sell our products in that market. We started out in the United States. I led the LBO that purchased the company in December 1979. In 1980 we entered Canada and our sales grew from $19 million to $25 million corporate-wide. Later we began to move into Europe. I still think Europe is not one market, but really a collection of many different markets. But we are approximately $500 million now in Europe; we are number one in Europe in our field. We are number one in Canada. We then moved into Australia and New Zealand, and we are number one in that market. So we have yet to really exploit and develop our marketing and sales operations in the Far East. We see a little bit of interest in that region, but not much yet. So that lies ahead of us. It's a great opportunity. We have not been serious about South America, but we are beginning to sell into that market as well. Those parts of the world are still great opportunities for us.

TWST: Especially more as the demographics start to change and people live longer lives.

Mr. Mixon: Really these changes are happening all over the world. People are simply living longer and most medical need occurs in the last 10 years of your life. We think of medicine as fixing something or curing something. But in our case, our products enable people to continue to remain active. It's not just about dealing with illness, though many of our customers' patients have chronic medical problems. People are getting older, and our products enable them to stay active in the mainstream and continue to keep up with the family - and this phenomenon is happening all over the world. I believe the government is beginning to realize that home care is really the trifecta of health care. First, the cost in home care is about one-sixth the cost of institutionalized care. Secondly, when you are at home, you are less exposed to all the pathogens, and bacteria and disease that are around in institutionalized care. When you get 100, 200 people gathered and someone's sick, they're likely to transfer germs or disease to another person. The outcomes are much better at home. And lastly, people want to be home. The happiest words anyone hears when they are leaving an institution are "we are going home." That's where people around the world prefer to be. They want to be with their loved ones, their family and pets in their home, the environment they know and call home. So it doesn't matter whether it's America or Canada, or Australia or Central Europe, these trends are the same. And for those countries that were in World War II, which were many, we have the Baby Boomers coming along, and clearly we are going to see an increase in the need for our products with that.

TWST: And do you develop products or do you manufacture them only?

Mr. Mixon: We design and manufacture almost all the products that we sell. We spend roughly 2% of our sales on product development, which this year is roughly $30 million. We invented the first microprocessor-controlled motorized wheelchair. That's basically the programmable computer. Christopher Reeves was in our chair. And we developed the first split-spring home care bed that allows the bed to be segmented into pieces, so one person can pick it up and install it in about 10 minutes. We've invented many of the new, portable oxygen systems called transfilling systems and portable oxygen concentrators that allow people to be much more mobile with a greater capability to move around and integrate again into their communities. We are very innovative and design our own products, and of course we manufacture and distribute equipment as well.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 41 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

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