Invacare Corporation (NYSE:IVC) Q3 2019 Earnings Conference Call - Final Transcript
Nov 07, 2019 • 08:30 am ET
value-added products at the right margin. In North America, mobility and seating revenue grew 4.3% sequentially and modestly compared to the prior year as growth in power mobility was offset by lower sales of custom manual products as we discussed last quarter.
Our strategy to pursue higher quality sales and to focus on operational improvements led to stronger profitability and essentially flat revenue. While pleased with the improved margin this quarter, we acknowledge we need to also grow sales. Over the next year, we expect our planned process improvements and new products will make our portfolio even more competitive and our go-to-market actions will increase commercial effectiveness and grow revenue. Lower SG&A expenses benefited from process improvements and cost reductions that simplify how we do business, improve customers' experience and strengthen our competitiveness.
Turning to slide 5. The company generated positive free cash flow of $12.3 million, an improvement of nearly $15 million compared to last year and a $12 million sequential improvement. This significant increase was due to higher operating profit and reduced working capital. As a result of our strong free cash flow, we repurchased $16 million of convertible notes during the third quarter at a discount to par, reducing the outstanding balance of the 2021 tranche by nearly 11%. This will result in annual cash interest expense savings of $300,000 and the elimination of approximately 1 million shares of potential dilution on conversion.
We believe delevering balance sheet this way was a good use of cash and increase shareholder value. As we look forward, the expected continued improvement in operating results and free cash flow will give us additional opportunities to strengthen our capital structure.
The key initiatives to accelerate our transformation plan are outlined on slide 6. We continue to lead in many product categories with award-winning clinical solutions and a very full product pipeline, which is expected to drive incremental sales and stronger profitability. This quarter, we again launched industry firsts in manual mobility with technology that allows us to produce manual wheelchairs with significantly higher performance without increased weight. In addition, we introduced a remarkably well-performing standing positioning system on our center-wheel drive power wheelchair, which gives patients the clinical and social benefits of vertical position. We also launched the world's first wirelessly remote-controlled portable oxygen concentrator, making it the only true hands-free device that users can wear or leave in a stationary position and change settings, check status and battery charge with their smartphone. And, our development teams are working on a full lineup of new products across all categories for 2020.
Another pillar of transformation is improving operations to expand margins and accelerate profitability. In particular, we are starting to realize the benefit of continued improvements from two plant consolidations into an existing facility in France and we expect additional efficiencies to be achieved. Meanwhile, although tariffs remains a slight headwind, we saw a net improvement compared to prior year, and we continue to take actions to mitigate the remaining impact.