Before it was the target of a federal consent decree, before it posted repeated financial losses and before its stock tanked to less than $1, Invacare Corp. was a powerhouse in its highly regulated and potentially lucrative field.

The times have certainly changed for the global maker of medical equipment, which once was revered as a leading innovator for products such as its powered wheelchairs, among other things.

Now, activist investors, led by an Ohio investment firm Azurite Management, are trying to restore the Elyria-based manufacturer to its former heyday.

But there is a steep hill to climb to reach that point.

According to quarterly filings, through the first half of 2022, Invacare has reported $390 million in sales (a 7.5% decrease compared to midyear 2021) but a net loss of $46 million (an 86% increase over midyear 2021).

"No matter how much they restructure or consolidate or how much they drop off products that are not profitable, they just can't seem to make any money," said Matt Mishan, an equity research analyst with KeyBanc Capital Markets who has covered Invacare for many years.

"It is a story where you have a unique company that is balance sheet insufficient that continues to run into various macro headwinds," Mishan added. "They are trying to fight them off but just can't."

This is where investors like Azurite manager Steven Rosen — co-founder and co-CEO of Cleveland lower-middle market private equity firm Resilience Capital Partners — think they might make a difference.

"(Late Invacare founder) Mal Mixon built a great global business. Over time, the operations and performance of the business have deteriorated," Rosen said. "We do see an opportunity to unlock value, return the company to profitability and leverage what's there but also change a lot of things as well."

So what does someone like Mishan think about folks like Rosen who are optimistic about affecting a financial turnaround for Invacare?

"They see a company that has $900 million in revenue but isn't making money, and they think they can find out a way to get around this," Mishan said. "But you are in a horrible macro environment right now. There is maybe a European recession coming. You have massive supply chain and energy issues. So, I'm not sure what those guys are seeing."

Before its struggles, Invacare was a Northeast Ohio success story.

Mixon — an Oklahoma native and longtime chair of the Cleveland Clinic board of trustees who died in 2020 — is known for turning the little-known Elyria company into a juggernaut in its industry.

At its peak, Invacare was the world's top manufacturer of home medical products with $1.7 billion in sales. In 2004, its stock was worth more than $50 per share.

But troubles soon began to mount.

One longtime employee, a product engineer who worked at Invacare for nearly 20 years before being laid off in 2005, said workers were fond of the company, its culture and Mixon himself. He recalls Mixon often coming in to have breakfast and shoot the breeze with workers in the morning.

Sales began to slip. But a greater issue was a consent decree filed in December 2012 by the Department of Justice.

The Food and Drug Administration said it had conducted numerous inspections of Invacare's corporate headquarters and Taylor Street manufacturing facility related to "design controls, complaint handling and corrective and preventive action."

As a result, Invacare's Elyria operations became heavily restricted. The company was no longer permitted to make power wheelchairs or conduct design activities related to wheelchairs or power beds until passing future inspections intended to ensure compliance with the law.

That consent decree was in place until July 2017. Its lifting was deemed an important milestone for the company.

But damage was already done.

"They were very limited in what they could sell to their customers (with the consent decree in place)," Mishan said. "They lost a ton of market share coming out of that."

Matthew Monaghan, Invacare's CEO at the time since 2015, seemed to have a plan to improve the company in the aftermath of all that. Making up lost ground proved to be tough sledding, though.

"The plan was starting to work," Mishan said. "But then they ran into the pandemic. And this year and last year, they were hit with supply chain issues."

The company was facing competitors in lower-cost areas than its own footprints in Europe and North America. Costs soared and continue to be elevated among various macroeconomic headwinds, creating a rough situation for Invacare both domestically and overseas.

"It is difficult to understand why you can have $900 million in sales and you can't make money off that," Mishan said.

Azurite started buying up Invacare's devalued shares earlier this year. As of June 30, the investment firm was reported as the company's largest shareholder with an ownership stake of 10.3%. The company's stock is currently hovering around $1 per share.

"If you are going to spend the time and effort and invest and allocate resources, you should do it in a marketplace and end market that has nice growth characteristics and a nice addressable market, and that is where Invacare is," Rosen said. "They're in healthcare. We have an aging population, and everyone is talking about longevity and lifespan. People want to be independent longer and living at home, not in nursing homes. What Invacare is doing today and, in the future, will allow that to happen."

Invacare's ultimate long-term road back to profitability is still being mapped out, Rosen said.

But some actions are already being taken, starting with a revamping of leadership.

In August, Invacare and Azurite inked an agreement that added Rosen and Michael Merriman, Jr. to the manufacturer's board of directors.

Merriman previously served on Invacare's board and served as chair of its audit committee from 2014 to 2018. He also worked with Rosen's Resilience Capital between 2008 and 2017. He's now the non-executive chairman of the Invacare board.

Additionally, Monaghan was removed from his roles as chairman, president and CEO, though he retains a seat on the board.

Replacing Monaghan is Geoffrey Purtill, who previously served as senior vice president and general manager, EMEA (Europe, Middle East and Africa) and APAC (Asia-Pacific) for Invacare.

Regarding the removal of Monaghan, Rosen said it was simply "time for a change."

"When you transform a business, you really need to do it with a fresh, transformational leader," he said, "and I think we are putting that team together."

As far as a search for a permanent CEO goes, that's seemingly Purtill's position to keep or lose.

"We are taking a hard look at every aspect of our business to ensure Invacare is best positioned for the future," said Purtill in an emailed statement. "Between my time leading our international business and now as interim CEO, I am partnering closely with our board and appreciate their confidence as we take necessary and decisive action to address supply chain challenges, simplify our operations and product portfolio and accelerate our business transformation to return to profitable growth."

In terms of what business lines might be divested or consolidated, or what other reparative actions will be taken, Rosen said that a refocusing plan is in the works. So, more to come there.

"Invacare North America may look different a year from now than it does today," he said. "But our goal is to have it be a much better business."

Whatever plays out, Rosen did say that there are no plans to shrink the Elyria workforce — quite the contrary, in fact. The local operations actually have open positions now that need filled. The company has about 3,000 worldwide employees, including roughly 395 in Northeast Ohio.

"I'm not sure the people we have in Elyria have historically been optimized properly," Rosen said. "But I would tell you it is in our plans to potentially even grow in Northeast Ohio."

With Invacare, there is not just "one big thing" that needs addressed, Rosen said, but a number of smaller things.

"This isn't a case where you can just change the right front tire and get back on the highway. The entire car needs an overhaul, including parts of the engine," he said. "This car also needs gas in the tank for when it's fixed. We are working on the current capital structure and actively thinking about those financial needs going forward."

"At some point, we are going to bring that Mal Mixon entrepreneurial spirit back," Rosen added. "But for now, we need to focus on the fundamentals of running a business."

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