Invacare Corporation
Q3 2015 Earnings Call Transcript

Published: 22 Oct 2015

[Operator:]

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Invacare 2015 Third Quarter Conference Call. I would like to remind you that all phone lines have been placed on mute for the first part of the call. After the management overview, we will open the call for questions. This conference is being recorded on Thursday, October 22, 2015. I will now turn the call over to Lara Mahoney, Invacare’s Director of Corporate Communications and Investor Relations.

[Lara Mahoney:]

Thank you, Hanna. Joining me on today’s call from Invacare are Matthew Monaghan, Chairman, President and Chief Executive Officer; and Rob Gudbranson, Senior Vice President and Chief Financial Officer. We will begin the call with the customary Safe Harbor statement that this call may include statements regarding anticipated or future developments that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are those that describe future outcomes or expectations that are usually identified by words such as should, could, plan, intend, expect, continue, forecast, believe, and anticipate, and include, for example, any statements made regarding our future results. Actual results may differ materially as a result of inherent uncertainties and risks, including the risk factors described in our Form 10-K and other filings with the Securities and Exchange Commission and in our earnings release, and we refer you to those risks factors. We may not be able to predict and may have little or no control over the factors or events that may influence our financial results. Also of note, except for free cash flow, the financial information for all periods excludes the discontinued operations of Altimate Medical, Inc., the company’s former subsidiary which manufactured stationary standing assistive devices for use in patient rehabilitation, and which was divested on August 29, 2014. Altimate was a part of the North America Home Medical Equipment or HME segment. On July 2, 2015, the company divested its United States medical device rental businesses for long-term care facility, which were part of the Institutional Products Group or IPG segment. The rental businesses were not deemed discounted operations for reporting purposes, and therefore, are included in the results unless otherwise noted. On today's call, we will focus on the highlights of the quarter as opposed to covering all the detail, which you can read in the earnings release that was issued earlier today. In particular, I would refer investors to the release for the definitions of free cash flow, constant currency net sales and the adjusted earnings and loss items, which will be discussed during the call. You can find the release and access to our SEC filings at www.invacare.com. I will now turn the call over to Matt Monaghan.

[Matthew Monaghan:]

Thank you, Lara, and good morning. I will begin today’s call by reviewing the consolidated results for the company’s third quarter ended September 30, 2015. For the consolidated company and normalizing for divested rental businesses, constant currency net sales grew 1.1% in the third quarter, including the rental businesses, constant currency net sales decreased by 1.5% compared to last year’s third quarter. As reported and including the rental businesses in the third quarter 2014 comparison, reported net sales from continuing operations decreased 11.5% compared to last year. Constant currency SG&A expense decreased $13.9 million or 14.2% compared to the third quarter last year. This reduction was partially driven by the sale of the rental businesses in July 2015, which decreased SG&A expense by $6.7 million. The remaining reduction in SG&A during the quarter was due to reduced employment, consulting, depreciation and amortization expenses. The team continued to do a nice job of controlling spending across the company in the third quarter. Lower SG&A and reduced warranty expenses resulted in an adjusted net loss per share of $0.13, compared to a per share loss of $0.56 in the third quarter 2014. It’s worth noting that the adjusted net loss per share in 2014 included incremental warranty expense of $0.27 per share. For the third quarter, gross margin as a percentage of net sales was higher by 1 point compared to the third quarter of last year. Gross margin for the third quarter 2014 included incremental warranty expense related to product recalls of $9.3 million or 2.9 percentage points. Excluding the incremental warranty expense in 2014, gross margin as a percentage of net sales for the third quarter 2015 decreased by 1.9 points as compared to the same period last year, the decline was driven by unfavorable sales mix related to the sale of the rentals businesses and by the impact of foreign exchange. The rentals businesses had a higher than average gross margin rate compared to the overall company. In the third quarter, free cash flow was negative $1 million, compared to positive $14.3 million in the third quarter last year. The third quarter free cash flow was unfavorably impacted by retirement payments of $13.7 million to executive officers retired in 2014. Excluding these retirement payments free cash flow would have been positive $12.7 million. I’ll now turn the call over to Rob Gudbranson our CFO to discuss the performance for the segments and additional financial results for the third quarter.

[Rob Gudbranson:]

Thanks Matt. All the references to earnings or losses before income taxes exclude restructuring cost. In the third quarter, the European segment had constant currency net sales growth of 5.7%, driven by increases in mobility and seating and respiratory products. For the third quarter 2015, earnings before income taxes in the European segment increased $1.2 million compared to last year. Last year’s earnings before income taxes included incremental warranty expense of $3.4 million. Excluding the incremental warranty expense in 2014, earnings before income taxes decreased by $2.2 million compared to last year primarily due to unfavorable foreign exchange. The decrease in earnings were partially offset by reduced SG&A expense due to lower depreciation and amortization. In the third quarter, constant currency net sales for the North America HME segment decreased by 6.4% compared to the third quarter last year. Loss before income taxes improved by $10.4 million compared to the third quarter of last year. The third quarter of 2014 included incremental warranty expense of $5.6 million. Excluding the incremental warranty expense in 2014, loss before income taxes improved by $4.9 million compared to last year. This reduction in loss was driven by favorable SG&A expense from reductions in consulting and employee cost and by improved gross margin due to favorable manufacturing cost. For the third quarter, IPG constant currency net sales decreased 29.2%. Excluding the net sales impact of the divested rentals businesses, constant currency net sales increased 4.9%. This increase was driven by interior design projects and case goods, partially offset by sales declines in beds. Coupled with the uneven nature of orders in the IPG business, the weakness in bed sales was not unexpected following the challenging supply chain transition mentioned in the first quarter. The company resolved its transition in the second quarter and we are now focused on regaining customer confidence. Earnings before income taxes for the IPG segment improved by $8.1 million in the third quarter 2015 compared with the same period last year. The third quarter of 2014 included $8.3 million intangible impairment charge. Excluding this intangible impairment charge, earnings before income taxes declined by $0.2 million compared with the third quarter last year. This decrease in earnings before income taxes was largely due to a negative gross margin which was partially offset by favorable SG&A expense, primarily related to lower employment costs. In third quarter 20165, constant currency net sales for the Asia/Pacific segment increased 10.5% compared to the same period last year due to net sales increases in the New Zealand and Australian distribution businesses, as well as increases in the company subsidiary that produces microprocessor controllers. Asia/Pacific loss before income taxes decreased by $1.0 million in the third quarter. Third quarter of 2014 included an incremental warranty expense of $0.3 million. Excluding the incremental warranty expense in 2014, the reduction in loss before income taxes of $0.6 million compared to last year was largely due to favorable gross margin as a result of lower manufacturing and freight costs and to lower SG&A expense driven by employment costs. Total debt outstanding which includes the debt -- the convertible debt discount is described in the release was $49.0 million as of September 30, 2015. The company's total debt outstanding consisted of zero drawn on the revolving credit facility, $13.4 million in convertible debt and $35.6 million of other debt principally lease liabilities. During the third quarter, borrowings on the revolving credit facility ranged from a high of $18.3 million to a low of zero with the ending balance of zero. The company's available borrowing capacity on the U.S. Canada portion of its credit agreement was $44.5 million as of September 30, 2015. At the end of the third quarter, the company added a tranche of European asset-based borrowing, as allowed by the existing facility. This enhanced facility provided additional available borrowing capacity of $20.5 million as of September 30, 2015. The company’s cash balances were $33.5 million as of September 30, 2015, compared to $22.7 million as of June 30, 2015, and $38.9 million as of December 31, 2014. In July 2015, the company received approximately $13.7 million in net proceeds from the sale of its rentals businesses. These net proceeds are excluded from the company’s free cash flow calculation. Despite the increases in available borrowing capacity and cash balances, the company remains vigilant about managing cash. This is particularly important in light of recent history demonstrating the seasonality of the company’s cash flow needs. As of the end of the third quarter, days sales outstanding were 47 days, up from 45 days as of December 31, 2014 and down from 48 days as of September 30, 2014. At the end of the third quarter, inventory turns were 4.7, down from 4.9 as of December 31, 2014 and equal to 4.7 as of September 30, 2014. I will now turn the call back over to Matt for few closing comments. We then can address questions.

[Matthew Monaghan:]

Thank you, Rob. Our top two priorities remain establishing the strong company-wide quality culture and growing profit. Regarding our first priority, quality, there is understandably a lot of interest on specific dates and milestones, for example when the injunction of our Taylor Street facility may be lifted. We are talking about specific milestone dates of interim achievements because we want the focus to be holistically on taking the right actions. I have made this the top priority in every area. We are moving forward as a first-class organization with the right quality systems and culture across the company. We know by doing so we will have a better, more efficient business in all areas, and as a consequence there should be improvements in Taylor Street. To achieve this I have every member of my direct team involved in quality improvements and in turn our associates at all levels of the organization are making this priority. My experience has taught me that embracing this is a fundamental part of doing business, makes sense and leads to an overall better and more sustainable business with casual business practices that improve every internally with process and functional partners and externally with our customers and the people who use our products. The company continues to dedicate resources to improve our quality systems, deploy effective and efficient procedures, and accumulate evidence that demonstrates our sustainable compliances. We also continue to refocus the organization on a profitable growth. I am pleased with our progress as reflected in the third quarter financial results compared to prior year and the periods earlier this year, still there is much work to be done. The North American business made a lot of progress during the quarter in shifting the focus of its sales force from a generalist team to one more focused on clinically complex products. This shift in strategy will take continued training and investment of the sales force. This is critical to the objective for long-term success of the business. Despite improved results in the third quarter, September’s results were weak. We are not going to get into inter-quarter discussion, but I want investors to know that the sequential financial improvement from the second to third quarter should not be extrapolated to subsequent periods as its key jump in performance. We expect turbulence in the US business due to customer reaction to the impending 2016 rural deployment of the National Competitive Bidding reimbursement rate. In addition, the European segment has historically performed strongest in the third quarter. We will continue to manage the business in light of these and other factors. For example, as Rob previously mentioned, we expanded our existing credit facility as previously planned by adding a tranche of European asset-based borrowings. This gives us additional liquidity to meet our working capital needs as we improve the business. I continue to be excited about the opportunities with Invacare. We are committed to serving the patients, who use our products and our team, who is working hard to position the company for success. Thank you for your time and attention on today’s call. We will now open the phone for questions.

[Operator:]

[Operator Instructions] And we will take our first question from Bob Labick with CJS Securities.

[Bob Labick:]

Good morning.

[Matthew Monaghan:]

Good morning.

[Lara Mahoney:]

Good morning, Bob.

[Bob Labick:]

Good morning. Congratulations on a nice quarter.

[Matthew Monaghan:]

Thank you. Lot of hard work.

[Bob Labick:]

Yeah. Well, I will just start. In Europe, the margins were terrific. Could you talk a little bit about the delta versus the first half? How much of that was mixed and how much of that was sustainably lower SG&A? I know you talked about lower D&A, maybe what rolled off there too and just give us a sense of the change first half versus Q3 and where you think targeted margins, the margin profile should be given the large difference between Q2 and Q3?

[Matthew Monaghan:]

Bob. Let’s just put some numbers on it just to start and I’m going to reference the earnings before tax as a margin against sales. For the third quarter 2015, Europe was at 9.6%. And I think if you look back over the history that is one if not, I think second best that they’ve pretty much ever done. The other one was third quarter 2014, if you back out the warranty expense. At that point, it was about 9.9%. So those are exceptionally strong. In the first half of the year, you are right. If we take first quarter and second quarter, the equivalent numbers would have been 5.9% for the first quarter and 4.8% for second quarter, so again, huge jump in third quarter. Third quarter, as Matt mentioned is historically their strongest. So, from our vantage point that’s very good performance. I think in terms of what’s sustainable in SG&A, I think the team has done a good job of managing that. There comes a point where if you want to continue to show 5.7% organic sales growth at some point, I would to need invest more SG&A there. But having said that, it’s a team that’s been in place, we think it’s a strong team. It’s a team that continue deliver, but we would obviously pass on saying whether we are going to see a 9.6% EBT margin continue into four, third, first or second quarter. I think again, very-very, strong third quarter.

[Bob Labick:]

Okay. That was helpful color. And I wasn’t looking for specific numbers going forward but it sounds like things are going very well there and without playing numbers on it, the improvements are sustainable. And then just looking to North America, you touched it on in the prepared remarks little bit but could you elaborate a little bit on the change in the sales focus? There was a lot of training in reorientation in Q2. Is that behind us now and talk about what’s changed in terms of focusing on value-added products and clinical products? How long it takes to get through that cycle and start selling those?

[Matthew Monaghan:]

Quick question. I think the enhancements of the sales team are going to continue, probably as not as the NV. The clinical requirements for selling complex rehab and being able to demonstrate traditional use of medical dollars and outcomes is something that is a career long journey for our sales force and we are prepared to make investments in those folks. Remember that the order to cash cycle is pretty long in the complex rehabilitation space. So the evidence of that focus will take some time to fully materialize. And then on the other side of the business, which are the more transactional pieces, Home Medical Equipment providers are the other focus of our sales and that’s really around how to be efficient to deliver that effectively and keep up with channel migration of those customers. And then probably the third focus is on more of our B2B sale in the institutional space, which is a capital expenditure, mostly the build out of long-term care facilities and that tends to be lumpy, maybe the third type of selling that we do. Again, the focus for our sales channel transformation is to take us from a general as far as to areas that are specific in those areas.

[Bob Labick:]

Okay. Great. And this is related to that of course, but maybe you talked about the second half of the rollout or the world rollout of national competitive bidding. And can you talk about the actions taken and the expectations for that? I know it’s related to the prior question but where are you seeing, how do you think it’s going to impact your customers, what are you hearing from them and how should we think about it going into 2016?

[Matthew Monaghan:]

Yeah. For everybody’s benefit, I just would point out again that the reimbursement rates that we are talking about effect our customers, not us directly. And as those customers, which are in this case, 50% of CMS’s expenditure and the world districts where that money is being spent are going to have a significant step-down next year. So the headwind is probably in purchasing patterns where people are trying to consider how this is going to impact your local business and restructure themselves and how they are going to generate profit under that new regime of reimbursement. It’s a good opportunity for us because in areas like our HomeFill system. We can go to those customers and talk to them about how to make good money in respiratory care by eliminating the need for drivers and vans and all the other services that are required to deliver oxygen by giving their patients one of our HomeFill devices, which can stay in their home and still qualify for reimbursement. So that’s a great place for us to be. And then to tieback to your previous question on the commercial transformation, we’ve got to have our sales team clear on how to sell that and talk to those business owners about the transformation of their business. As we’ve disclosed in prior periods, one of the risks for us is the credit risk of those customers who don’t make it through that transformation but the team is well versed at managing that. We’ve gone through this kind of cycle before.

[Bob Labick:]

Great. Thank you very much.

[Matthew Monaghan:]

Thanks, Bob.

[Operator:]

Next, we’ll go to Matt Mishan with KeyBanc.

[Matt Mishan:]

Thank you. First question, I guess is on the comment that September sales are weak. Where were they exactly weak? And kind of why do you think that as you’ve kind of done some of the sales force training and that you wouldn’t have seen necessarily sales improve as the quarter went on rather than kind of change at the end?

[Matthew Monaghan:]

Sure. Good morning, Matt.

[Matt Mishan:]

Good morning.

[Matthew Monaghan:]

I don’t want to get into an intercompany discussion about all the -- inter period discussion about all the bidders that are going on. Real meeting point for pointing that out is, so that somebody doesn’t take a graph and draw a straight line or some increasing curve going from first quarter to second quarter to third quarter and thinking of the sky is the limit and in the immediate periods beyond. We’ve still very bullish on the growth of this, which is somewhat tempered coming out of third quarter. As I mentioned, Europe is -- with recent history peaked in the third quarter. And then I think there are other factors that what we will call turbulence in other parts of the market that are going to affect us going forward. I don’t know exactly what those will be. I just want to temper people in their expectations, drawing that extrapolation from the recent three quarters.

[Matt Mishan:]

Okay. Good. That’s very helpful. And then onto the rural National Competitive Bidding, as I think about the difference between the rural and metropolitan is, in the rural, you’re migrating prices down but you’re not necessarily going to see a dislocation of providers that you saw on the metropolitan rollout. As you look back historically, did you see more of an impact from changes of providers not winning contracts and new guys coming into the market, or was it from the impact of pricing and reimbursement on the business?

[Matthew Monaghan:]

There are all sorts of transformations going. There are thousands of providers that will be affected. And I think what you see from history that it’s likely to repeat is the bids get won by folks who have a local nexus historically or by providers who don’t have a local nexus and that’s got to get sorted out. I think one of the things that’s probably new for the marketplace in this rollout is when those providers in rural areas look at their cost structure to serve their customers, the patients, they’re probably going to have a higher percentage of less productive time if you consider the number of windshield miles that they've got being driven around by people in van. And there is less you can do to get rid of that and fewer efficiencies that maybe are more densely populated urban setting. So, I think that’s likely to be a dynamic as those providers look at how they can restructure their business. And again, it’s a great opportunity for us to talk about our single user products and our HomeFill systems.

[Matt Mishan:]

Okay. And on free cash flow, it was impacted by I guess $13 million of retirement benefits to executives. Are those now completely finished to be completed those payments? And I believe there was an offset to that as far as some insurance policies. Have you had the cash inflow from the insurance payments as well?

[Rob Gudbranson:]

Matt, in terms of the $13.7 million we paid in third quarter, the first half we repaid approximately $11 million on retirement benefits. So the $24.7 million that we've been mentioning in the 10-Q and the 10-K as payments to those four senior executives in 2015, those have been fully paid, so we’re done on that front. In terms of the offset in 2015, the real offset was the sale leaseback progress we went through -- the sale leaseback transaction we went through and completed in April and that generated $23 million in the free cash flow. So, net-net if you look at the nine months, they’re pretty close. We had one-time payments, or I’d say discrete payments of $24.7 million go out to the -- for retirees. And we had $23 million coming on the sale leaseback. I wouldn’t represent either of those as being something obviously that would continue in 2016. Does that help?

[Matt Mishan:]

Yeah, it does. And then the last question is on the language in and how you’re describing the remaining steps make sense for you in the press release. There was a little bit of change there. And I was just trying to gauge whether or not you’re trying to indicate something as if you may be completed the third party audit with it? Or is that just more consistent with how you’re choosing to communicate progress going forward?

[Rob Gudbranson:]

Yeah, it’s just the latter, consistent with how we’re communicating progress and I think after having had a number of discussions, it was interesting that the common language was around people wanting to understand what have been going on. And I wanted to make sure that everyone had the same understanding that we’re rolling out procedures and accumulating data in the various subsystems of quality. So, we wanted to true up the language consistently in that way.

[Matt Mishan:]

Okay. Matt, Rob, Lara, thank you very much.

[Rob Gudbranson:]

Thank you, Matt.

[Operator:]

Next we will go to Jim Sidoti with Sidoti & Company.

[Jim Sidoti:]

Good morning. Can you hear me?

[Matthew Monaghan:]

Yes. Good morning, Jim.

[Lara Mahoney:]

Good morning, Jim.

[Jim Sidoti:]

Great. I just want to focus on Europe first. Your sales were up mid-single digits. Most of the surgical device companies have reported weakness in Europe and down sales there on a constant currency. Any explanation as to why you're doing so well?

[Matthew Monaghan:]

Yeah. Jim, again, I’ve referenced it, I think we have strong team here. I’ve referenced that we’re clearly in homecare as opposed to some of the other areas. We may be looking at on that to clear my mind what companies would be. But if you look at the first part of the year, they grew 4.3% first quarter, 2.9% organically in second quarter and 5.7% in third quarter. I think we have a good team. I think we have a good product lines. I think long-term, it’s a good indicator of what we can do with the whole business. But we’re glad to have that team performing as they are right now.

[Jim Sidoti:]

Right. And then just a more general question, it’s been almost four years now since the announcement that the consent decree was coming and then Taylor Street getting shut down. Four years ago, I don’t think I expected it to take this long. I'm sure you didn’t either. So my question is, is there a light at the end of the tunnel with this? Do you think you'll get this done within the next couple years? And two, can you get the company profitable without Taylor Street back online?

[Matthew Monaghan:]

Those are two good questions. Obviously, you can imagine there are tremendous number of resources focused on improving our overall quality system for the specific purpose of changing our situation with Taylor Street and the FDA. But holistically, medical devices are evolving in terms of expectations for quality system and that renovation is holistic for the company, which is why we’re not talking about this per se. I know that by doing the right things everywhere, there is a good chance of positive consequences, for example, at Taylor Street. So, that’s my emphasis overall. And then I want to make sure that it's not just doing -- taking actions for a certain point in time or certain things. These have to be sustainable actions that are not only effective in demonstrating the right quality system, but they have the right profit and level of agility for business to be completive. Look we were -- we have competitive markets in all our areas and with all our produces. So I think if you look at consent decrees overall, most companies have the part that we’re calling Phase III, that is roughly the single phase that many companies have and they do take a long time because you have to overhaul a number of procedures and policies and then you’ve got to accumulate enough data for 180 or 360 days so that you can demonstrate to audit bodies that you're doing this sustainably.

[Jim Sidoti:]

Okay. How about the second part of that question, do you think Invacare could be a profitable company without Taylor Street online?

[Matthew Monaghan:]

Well, I think over the long term we’ve got be a profitable company and it’s Rob, my, and other strategic purposes to make sure that happens and we will do that the right way with the quality system. And I think the network is setup to succeed in this marketplace. We still have the broadest line of products and competitive products and a good portfolio. So that’s not something I’d see as a fundamental issue on horizon.

[Jim Sidoti:]

Okay. I’m going to take that as a yes then. All right. Thank you.

[Matthew Monaghan:]

Okay. Thanks, Jim.

[Rob Gudbranson:]

Thanks, Jim.

[Operator:]

And next we will go to Rich Glass with Deutsche Bank.

[Rich Glass:]

Hi, guys. Nice quarter.

[Lara Mahoney:]

Hi, Rich.

[Matthew Monaghan:]

Good morning, Rich. Thanks.

[Rich Glass:]

Hi. The jump off there, so I apologies and you could just tell me, if you are repeating any of this? But Bob, actually still my questions about sales force? But if I can just add on to that, have you see much in the way of turnover the sales force, it were related to these changes, since the pretty big change? And then, if you can give any insight or your belief at least into when you think these changes and how they are selling should impact the P&L?

[Rob Gudbranson:]

Okay. So in terms of turnover, it’s a -- the first step has been to do an assessment of the sales team. It’s been a great sales force in this marketplace with kind of a unique burden historically having the broadest product line in Home Medical Equipment. Many of our competitors have a sales force that just expert in the one area where they participate and our team had to be experts in durable medical equipment and respiratory care and complex rehab. So it make sense going forward and hopefully it sounds obvious that we’re going to allowing people’s talent with the market opportunity where they are situated and then globally or at least in North America look at how we are aligned in terms of people in geography and opportunity. So that assessment is going on or has been going on and the training continues to happen that. As I mentioned earlier in the call, we will continue it largely, it’s like any profession where you have got the implement of continuing education credits that have to be part of someone’s normal career curriculum. In terms of turnover, it’s a sales force, you have natural turnover, there has been nothing extraordinary, so it’s really about alignment and then like any good sales force, you’ve got the performance plan that everybody got to meet. So I think that’s normal. And then, your second question was, when will this articulate to the P&L? I think if you think of the biggest emphasis are shipping on the clinically complex, that’s the part of our business that maybe has or the longest quote to cash cycle time, because remember for everybody’s benefit you typically get a quote for complex wheelchair than there is a period of the time where our customers go to the reimbursement source to verify that the product will be reimburse, that might take 90 to 120 days and we have a little bit time to manufacture and deliver the product and then you are into normal accounts receivable duration of a couple of months. So that whole cycle is relatively long and it will take more or less that amount of time for the solid results to show up in our financial statements. Although, I think, in -- on the smallest scale we are having some early wins as a result to confirm this is the right step.

[Rich Glass:]

Okay. Well, that’s good to hear. That’s not a long time even from Wall Street standards, so that’s good.

[Rob Gudbranson:]

Yeah.

[Rich Glass:]

And I would think it will be get -- it will be easier going from broader to more narrow than the other way around as well. Can I ask one question on Europe? I mean, the performance there is great. On an organic basis, you guys have -- it hasn’t always been at the same level but it’s been growing nicely organically, obviously masked by currency but can you remind us of when the currency headwinds dissipate because as I recall this all started in last year's fourth quarter. So I don’t know if it’s easier in the fourth quarter or it’s not until the first quarter that you get more of an apples-to-apples comparison and the world will be able to see the organic growth, which has been running pretty nicely?

[Matthew Monaghan:]

Rich, I’ll try to give you some insight on that but I’ll preface it by saying I'm going to focus on the euro. It’s the most important currency but there are lot of currencies we manage over there and a lot of cross currencies. So there's some noise that we manage and it’s important to manage but I give you the euro as an indicator. If I go back to third quarter 2014, the euro average during that quarter and again we have a lag period. So it’s different than the calendar year. Our third quarter was up $1.35. Our fourth quarter was $1.27. So you are right, it will start to come down in fourth quarter. First quarter is $1.18. Second quarter is $1.09 and third quarter is $1.11. So we came back a little between second and third quarter 2015. But we saw -- today, I think it’s straight $1.13. So we still got a little pain clearly against fourth quarter last year and even against first quarter 2015 when it was $1.18. So we are starting to chip away at that. And obviously something that we try to manage well on the transaction front but on the translation we were exposed.

[Rich Glass:]

Okay. All right. Sounds good. Thanks a lot guys.

[Matthew Monaghan:]

Thanks Rich.

[Operator:]

[Operator Instructions] There are no further questions in queue. I’d like to turn it back over to Matt Monaghan. Please go ahead.

[Matthew Monaghan:]

Thanks Hanna and thanks everybody for your time and attention during today’s call and support for Invacare. Rob, Lara and I are available for any follow-up questions. Hope you have a good day.

[Lara Mahoney:]

Thank you.

[Rob Gudbranson:]

Thank you.

[Operator:]

And this concludes today’s conference. Thank you for your participation.