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Invacare Reports Results for First Quarter 2021

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Invacare Corporation (NYSE: IVC) ("Invacare" or the "company") today reported results for the quarter ended March 31, 2021.

Key Metrics (1Q21 versus 1Q20*)

  • Reported net sales decreased 10.2% to $196.2 million, and constant currency net sales(a), which excludes the 1Q20 Dynamic Controls divestiture, decreased 14.2%.
    • Prior year first quarter performance was not impacted by the pandemic.
    • Revenue growth in respiratory products was more than offset by lower sales of mobility and seating and lifestyle products, which continue to be impacted by the pandemic, as well as supply chain disruptions which hampered order fulfillment during the quarter.
  • Gross profit as a percent of net sales was 27.8%, a decrease of 100 basis points, attributable to unfavorable manufacturing variances due to supply chain and logistics challenges which temporarily delayed revenues and inefficiencies associated with disrupted production.
  • Reported SG&A expense improved by $2.9 million, or 4.7%, and constant currency SG&A(b) improved by $5.1 million, or 8.4%, driven primarily by reduced employment costs, lower commercial expenses including reduced commissions on lower net sales.
  • Operating loss was $5.7 million, a decline of $15.2 million, due to lower gross profit as a result of reduced net sales partially offset by reduced SG&A expenses.
    • Prior year operating profit included a gain of $9.6 million from the divestiture of Dynamic Controls.
  • Adjusted EBITDA(d) was $1.5 million, a decline of $4.4 million, due to reduced gross profit on lower sales offset by lower SG&A expense.
  • Free cash flow(e) usage was $17.9 million, an increase of $5.9 million. 1Q21 usage included the funding of $8 million one-time payments related to severance costs for German plant consolidation and value added tax payments deferred from 2020, which were previously disclosed, and increases to inventory.

* Date format is quarter and year in each instance

Key Financial Results (1Q21 versus 1Q20)

(in millions USD)

 

1Q21

 

1Q20

 

$ Change
Fav/(Unfav)

 

% Change
Fav/(Unfav)

Net Sales

 

$196.2

 

$218.4

 

$(22.2)

 

(10.2)%

Constant Currency Net Sales (1)

 

$185.1

 

$215.6

 

$(30.5)

 

(14.2)%

Gross Profit

 

$54.6

 

$63.0

 

$(8.4)

 

(13.3)%

Gross Profit % of Net Sales

 

27.8%

 

28.8%

 

 

 

(100 bps)

SG&A

 

$58.8

 

$61.7

 

$2.9

 

4.7%

Constant Currency SG&A (1)

 

$55.8

 

$60.9

 

$5.1

 

8.4%

Operating Income (Loss)

 

$(5.7)

 

$9.4

 

$(15.2)

 

--

Adjusted EBITDA

 

$1.5

 

$5.9

 

$(4.4)

 

(74.8)%

Free Cash Flow Usage

 

$(17.9)

 

$(12.0)

 

$(5.9)

 

(49.3)%

(1) Based on 1Q20 FX rates

Executive Summary

Commenting on 1Q21 results, Matt Monaghan, chairman, president, and chief executive officer, said "We entered 2021 with strong demand for lifestyle and respiratory products and strengthening demand for mobility & seating products. We see these trends continuing into the second quarter. Despite good demand, our first quarter revenues were lower by approximately $15 million of firm orders which didn't ship and become revenue in the quarter as a result of various supply chain disruptions, which impacted all regions. Component delays and parts shortages prevented the timely delivery of confirmed orders and led to a higher than typical backlog, with the additional backlog expected to convert to net sales within the next two quarters. As our team continues to rise to the challenge of supporting our customers globally, we will mitigate further disruptions by investing in additional inventory in the short-term.

Looking forward, I am encouraged as our healthy order book, high backlog, and early second quarter indicators demonstrate that demand remains strong, further establishing that the revenue decline in 1Q21 was temporary in nature. Based on revenues to date through April 2021 and projecting those trends for the full quarter, we anticipate constant currency net sales growth in the mid-single digit range for 2Q21 compared to the prior year. As pandemic related restrictions ease and supply chain disruptions subside, we anticipate significant improvement in our results during the second half of the year, driven by strengthening demand for our products, backlog reduction, fulfillment of pent-up demand, and increased adoption of compelling new products.

In addition, we were pleased to have opportunistically completed a debt transaction during the quarter which strengthened our balance sheet, providing a clear runway to execute our growth strategy for the next few years. As a result, we have continued confidence in our ability to achieve our previously disclosed full year guidance for net sales, Adjusted EBITDA, and free cash flow."

Commenting on the company's financial results, Kathy Leneghan, senior vice president and chief financial officer stated, "Free cash flow usage in the quarter was in line with 1Q20, with the consideration of funding one-time items as previously discussed. The company did a great job managing working capital to offset delayed sales impacted by supply chain disruptions. We also increased our financial flexibility with the issuance of new convertible notes which allowed us to retire nearly all of our 2022 debt and extend the overall debt maturity profile to 2026."

Reaffirms Full Year 2021 Guidance

The company reaffirms its financial guidance for the full year 2021 consisting of:

  • Constant currency net sales growth in the range of 4% to 7%;
  • Adjusted EBITDA improvement of 41%, to $45 million; and,
  • Free cash flow of $5 million.

The company expects restoration of access to healthcare, normalization of the global supply chain, and fulfillment of its excess order backlog, which was elevated at the end of 1Q21, will yield improved financial performance with growth in revenue, profitability and free cash flow for the year.

Based on revenue to date through April 2021 and projecting those trends for the full quarter, constant currency net sales are anticipated to increase in the mid-single digit range for 2Q21 compared to the prior year, as well as improve sequentially throughout the year. This increase is driven by positive trends in each of the segments as order intake continues to strengthen and a portion of the elevated backlog has been shipped and billed to customers. Additionally, the volume and value of mobility and seating quotes in North America are showing clear signs of improvement, a key indicator for future period growth.

1Q21 Segment Results versus 1Q20

(in millions USD)

 

Net Sales

 

Operating Income (Loss)

 

 

1Q21

 

1Q20

 

Reported
% Change

 

Constant
Currency
% Change

 

1Q21

 

 

1Q20

 

 

% Change

Europe

 

$

112.8

 

 

$

121.0

 

 

(6.8

)%

 

(14.8

)%

 

$

3.8

 

 

$

6.9

 

 

(44.1

)%

North America

 

76.0

 

 

87.0

 

 

(12.6

)

 

(13.1

)

 

(2.4

)

 

(2.0

)

 

(16.1

)

All Other

 

7.5

 

 

10.5

 

 

(29.0

)

 

(16.4

)

 

(5.6

)

 

(3.6

)

 

(58.6

)

Globally, net sales continued to be impacted by the pandemic with public health restrictions in certain countries continuing to limit access to healthcare professionals and institutions needed for certain product selections. 1Q20 financial performance was not impacted by the pandemic. In addition, supply chain disruptions related to transportation and logistics, and parts shortages delayed receipt of components which limited conversion of orders to shipments in the quarter.

Europe - Constant currency net sales decreased 14.8% with lower sales of mobility and seating and lifestyle products partially offset by growth in respiratory products. This revenue decline is less than the declines experienced in 2Q20 and 3Q20 as a result of limitations in healthcare access but also impacted by supply chain disruptions noted above. Gross profit declined by $4.0 million, or 160 basis points, due to reduced net sales and unfavorable operational variances. Operational variances were impacted by supply chain disruptions which impacted volume in the company's assembly locations. Operating income was $3.8 million, a decrease of $3.0 million, due to reduced gross profit as result of lower net sales partially offset by reduced SG&A expense.

North America - Constant currency net sales decreased 13.1% with higher sales of respiratory products more than offset by lower sales of mobility and seating and lifestyle products. This revenue decline is higher than experienced for mobility & seating and lifestyle products in 2Q20 and 3Q20 impacted by supply chain disruptions and continued limitation to healthcare access, including long-term care facilities. Gross profit as a percentage of sales was flat, while gross profit declined $3.9 million driven by lower revenues and unfavorable manufacturing variances, partially offset by favorable product mix and lower material costs. Operating loss increased by $0.3 million primarily due to reduced gross profit on lower net sales offset by lower SG&A expense.

All Other - Constant currency net sales in the Asia Pacific region decreased 16.4% due to lower sales of lifestyle products partially offset by growth in mobility and seating products. Operating loss for All Other increased $2.1 million primarily as a result of lower profitability in the Asia Pacific business impacted by lower net sales, unfavorable foreign currency transactions and the divestiture of Dynamic Controls in 1Q20. Corporate All Other expenses increased primarily related to stock compensation expense.

Financial Condition

The company's cash and cash equivalents balances were $86.1 million and $105.3 million at March 31, 2021, and December 31, 2020, respectively. The change was primarily the result of cash used for operating activities and capital expenditures. Financing activities during 1Q21 resulted in a net use of cash of $2.5 million which included net proceeds from the completion of a convertible debt offering offset by debt payments related to the repayment and retirement of 2021 and 2022 convertible debt as well as repayments of borrowings under the company's ABL credit facilities.

Free cash flow usage in 1Q21 was $17.9 million, unfavorable by $5.9 million as compared to 1Q20 due to the funding of one-time payments related to the German plant consolidation ($5.0 million) and value added tax payments deferred from 2020 ($2.8 million), which were previously disclosed. Free cash flow usage for 1Q21 funded operating activities supporting working capital needs, primarily in inventories and accrued expenses partially offset by lower accounts receivable. 1Q21 inventory levels were elevated as a result of supply chain disruptions which increased goods-in-transit and created a higher backlog of certain components which could not be converted into complete products.

Conference Call and Webcast

As previously announced, the company will provide a conference call and webcast for investors and other interested parties to review its first quarter 2021 financial results on Thursday, May 6, 2021 at 8:30 AM ET. Those wishing to participate in the live call should dial 888-394-8218, or for international callers 786-789-4776, and enter Conference ID 2946784. A simultaneous webcast of the call will be accessible at https://ctevents.webex.com/ctevents/onstage/g.php?MTID=e548c01978e3d9562b119968f68aae878. A copy of the webcast slide deck will be posted to www.invacare.com/investorrelations prior to the webcast.

A recording of the conference call can be accessed by dialing 888-203-1112 (U.S. and Canada) or 719-457-0820 (international callers) and entering the Conference ID Code 2946784 and PIN 8398, through May 13, 2021. An archive of the webcast presentation will be posted at www.invacare.com/investorrelations 24 hours after the call.

Upcoming Investor Events

  • May 25, 2021 - UBS Global Healthcare Conference (virtual)
  • June 16, 2021 - IDEAS Investor Conference (virtual)

About Invacare Corporation

Invacare Corporation (NYSE: IVC) ("Invacare" or the "company") is a leading manufacturer and distributor in its markets for medical equipment used in non-acute care settings. At its core, the company designs, manufactures and distributes medical devices that help people to move, breathe, rest, and perform essential hygiene. The company provides clinically complex medical device solutions for congenital (e.g., cerebral palsy, muscular dystrophy, spina bifida), acquired (e.g., stroke, spinal cord injury, traumatic brain injury, post-acute recovery, pressure ulcers) and degenerative (e.g., ALS, multiple sclerosis, chronic obstructive pulmonary disease (COPD), elderly, bariatric) ailments. The company's products are important parts of care for people with a wide range of challenges, from those who are active and involved in work or school each day and may need additional mobility or respiratory support, to those who are cared for in residential care settings, at home and in rehabilitation centers. The company sells its products principally to home medical equipment providers with retail and e-commerce channels, residential care operators, distributors, and government health services in North America, Europe, and Asia Pacific. For more information about the company and its products, visit Invacare's website at www.invacare.com.

This press release contains forward-looking statements within the meaning of the “Safe Harbor” provisions 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 “will,” “should,” “could,” “plan,” “intend,” “expect,” “continue,” “forecast,” “believe,” and “anticipate” and include, for example, statements related to the expected effects on the company’s business of the COVID-19 pandemic; sales and free cash flow trends; the impact of contingency plans and cost containment actions; the company’s liquidity and working capital expectations; the company’s future financial results; and similar statements. Actual results may differ materially as a result of various risks and uncertainties, including the duration and scope of the COVID-19 pandemic, the resumption of access to healthcare, including clinics and elective care, and loosening of public health restrictions, or any reimposed restrictions on access to healthcare or tightening of public health restrictions and impact on the demand for the company’s products; the ability of the company to obtain needed raw materials and components from its suppliers; actions that governments, businesses and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic and actions taken in response to the pandemic on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth; the effects of steps the company takes to reduce operating costs; the inability of the company to sustain profitable sales growth, achieve anticipated improvements in segment operating performance, convert high inventory or accounts receivable levels to cash or reduce its costs to maintain competitive prices for its products; lack of market acceptance of the company's new product innovations; circumstances or developments that may make the company unable to implement or realize the anticipated benefits, or that may increase the costs, of its current and planned business initiatives, such as its new product introductions, commercialization plans, additional investments in sales force and demonstration equipment, product distribution strategy in Europe, supply chain actions and global information technology outsourcing and ERP implementation activities; possible adverse effects on the company's liquidity, including the company's ability to address future debt maturities; adverse changes in government and third-party payor reimbursement levels and practices in the U.S.; adverse impacts of new tariffs or increases in commodity prices or freight and logistics costs; regulatory proceedings or the company's failure to comply with regulatory requirements or receive regulatory clearance or approval for the company's products or operations; adverse effects of regulatory or governmental inspections of the company's facilities at any time and governmental investigations or enforcement actions; exchange rate fluctuations; and those other risks and uncertainties expressed in the cautionary statements and risk factors in the company's annual report on Form 10-K, quarterly reports on Form 10-Q and other filings with the Securities and Exchange Commission. The company may not be able to predict and may have little or no control over many factors or events that may influence its future results and, except as required by law, shall have no obligation to update any forward-looking statements.

INVACARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF INCOME (LOSS) - (UNAUDITED)

   

(In thousands, except per share data)

 

Three Months Ended

 

 

March 31

 

 

2021

 

2020

Net sales

 

$

196,202

 

 

$

218,440

 

Cost of products sold

 

141,564

 

 

155,452

 

Gross Profit

 

54,638

 

 

62,988

 

Selling, general and administrative expenses

 

58,821

 

 

61,738

 

Gain on sale of business

 

—

 

 

(9,590

)

Charges related to restructuring activities

 

1,552

 

 

1,392

 

Operating Income (Loss)

 

(5,735

)

 

9,448

 

Loss on debt extinguishment including debt finance charges and fees

 

709

 

 

—

 

Interest expense - net

 

5,730

 

 

6,616

 

Earnings (Loss) Before Income Taxes

 

(12,174

)

 

2,832

 

Income tax provision

 

1,870

 

 

2,100

 

Net Income (Loss)

 

(14,044

)

 

732

 

 

 

 

 

 

Net Income (Loss) per Share—Basic

 

$

(0.41

)

 

$

0.02

 

 

 

 

 

 

Weighted Average Shares Outstanding—Basic

 

34,495

 

 

33,784

 

 

 

 

 

 

Net Income (Loss) per Share—Assuming Dilution *

 

$

(0.41

)

 

$

0.02

 

 

 

 

 

 

Weighted Average Shares Outstanding—Assuming Dilution

 

35,210

 

 

33,853

 

__________
* Net loss per share assuming dilution calculated using weighted average shares outstanding - basic for periods in which there is a loss.

INVACARE CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) PER SHARE

TO ADJUSTED NET LOSS PER SHARE(c)

   

(In thousands, except per share data)

 

Three Months Ended

 

 

March 31

 

 

2021

 

2020

Net Income (Loss) per share - assuming dilution*

 

$

(0.41

)

 

$

0.02

 

Weighted average shares outstanding- assuming dilution

 

34,495

 

 

33,853

 

Net Income (Loss)

 

(14,044

)

 

732

 

Income tax provision

 

1,870

 

 

2,100

 

Income (Loss) Before Income Taxes

 

(12,174

)

 

2,832

 

Convertible debt discount amortization and accretion

 

870

 

 

2,732

 

Gain on sale of business

 

—

 

 

(9,590

)

Loss on debt extinguishment including debt finance charges and fees

 

709

 

 

—

 

Adjusted Loss Before Income Taxes

 

(10,595

)

 

(4,026

)

Adjusted Income Taxes

 

1,870

 

 

3,088

 

Adjusted Net Loss(f)

 

$

(12,465

)

 

$

(7,114

)

 

 

 

 

 

Weighted Average Shares Outstanding - Assuming Dilution

 

34,495

 

 

33,784

 

Adjusted Net Loss per Share(c) - Assuming Dilution*

 

$

(0.36

)

 

$

(0.21

)

__________
"Adjusted net loss per share" and "adjusted net loss" are non-GAAP financial measures, which are defined at the end of this press release.

*Net loss per share assuming dilution and adjusted net loss per share(c) assuming dilution are calculated using weighted average shares outstanding - basic for periods in which there is a loss.

INVACARE CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA(d)

 

 

Three Months Ended

(In thousands)

 

March 31

 

 

2021

 

2020

Net Income (Loss)

 

$

(14,044

)

 

$

732

 

Income tax provision

 

1,870

 

 

2,100

 

Interest expense - net

 

5,730

 

 

6,616

 

Loss on debt extinguishment including debt finance charges and fees

 

709

 

 

—

 

Operating Income (Loss)

 

(5,735

)

 

9,448

 

Gain on sale of business

 

—

 

 

(9,590

)

Depreciation and amortization

 

4,079

 

 

3,407

 

EBITDA

 

(1,656

)

 

3,265

 

Charges related to restructuring activities

 

1,552

 

 

1,392

 

Stock compensation expense

 

1,580

 

 

1,200

 

Adjusted EBITDA(d)

 

$

1,476

 

 

$

5,857

 

__________
"Adjusted EBITDA(d)" is a non-GAAP financial measure, which is defined at the end of this press release.

INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENTS (UNAUDITED)

The company operates in two primary business segments: North America and Europe with each selling the company's primary product categories, which includes: lifestyle, mobility and seating and respiratory therapy products. Sales in Asia Pacific, which do not meet the quantitative criteria for determining reportable segments, are reported in All Other and include products similar to those sold in North America and Europe. Intersegment revenue for reportable segments was $19,503,000 for the three months ended March 31, 2021 compared to $27,237,000 for the three months ended March 31, 2020. The accounting principles applied at the operating segment level are generally the same as those applied at the consolidated financial statement level. Intersegment sales are eliminated in consolidation.

The information by segment is as follows:

 

 

Three Months Ended

 

 

(In thousands)

 

March 31

 

 

 

 

2021

 

2020

 

Change

Revenues from external customers

 

 

 

 

 

 

Europe

 

$

112,775

 

 

$

120,968

 

 

$

(8,193

)

North America

 

75,974

 

 

86,971

 

 

(10,997

)

All Other (sales in Asia Pacific)

 

7,453

 

 

10,501

 

 

(3,048

)

Consolidated

 

$

196,202

 

 

$

218,440

 

 

$

(22,238

)

 

 

 

 

 

 

 

Operating income (loss)

 

 

 

 

 

 

Europe

 

$

3,832

 

 

$

6,850

 

 

$

(3,018

)

North America

 

(2,375

)

 

(2,045

)

 

(330

)

All Other

 

(5,640

)

 

(3,555

)

 

(2,085

)

Charge related to restructuring activities

 

(1,552

)

 

(1,392

)

 

(160

)

Gain on sale of business

 

—

 

 

9,590

 

 

(9,590

)

Consolidated operating income (loss)

 

(5,735

)

 

9,448

 

 

(15,183

)

Loss on debt extinguishment including debt finance charges and fees

 

(709

)

 

—

 

 

(709

)

Net interest expense

 

(5,730

)

 

(6,616

)

 

886

 

Earnings (loss) before income taxes

 

$

(12,174

)

 

$

2,832

 

 

$

(15,006

)

 

 

 

 

 

 

 

__________
“All Other” consists of operating income (loss) associated with the company's businesses in the Asia Pacific region and unallocated corporate selling, general and administrative ("SG&A") expenses and intersegment eliminations, which do not meet the quantitative criteria for determining reportable segments.

INVACARE CORPORATION AND SUBSIDIARIES
BUSINESS SEGMENT NET SALES (UNAUDITED)

The following tables provide net sales changes by segment as reported and as adjusted to exclude the impact of foreign exchange translation and divestitures (constant currency net sales(a)) for the three-month periods referenced below. The current year constant currency net sales are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's sales to calculate the constant currency net sales change.

Three months ended March 31, 2021 compared to March 31, 2020:

 

 

Reported

 

Foreign Exchange
Translation Impact

 

Divestiture Impact

 

Constant Currency

Europe

 

(6.8

)%

 

8.0

%

 

—

%

 

(14.8

)%

North America

 

(12.6

)

 

0.5

 

 

—

 

 

(13.1

)

All Other (sales in Asia Pacific)

 

(29.0

)

 

14.1

 

 

(26.7

)

 

(16.4

)

Consolidated

 

(10.2

)%

 

5.3

%

 

(1.3

)%

 

(14.2

)%

__________
"Constant currency net sales(a)" is a non-GAAP financial measure, which is defined at the end of this press release.

INVACARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

   

(In thousands)

 

March 31,
2021

 

December 31,
2020

Assets

 

 

 

 

Current Assets

 

 

 

 

Cash and cash equivalents

 

$

86,052

 

 

$

105,298

 

Trade receivables, net

 

99,773

 

 

108,588

 

Installment receivables, net

 

239

 

 

379

 

Inventories, net

 

132,394

 

 

115,484

 

Other current assets

 

35,483

 

 

44,717

 

Total Current Assets

 

353,941

 

 

374,466

 

Other Assets

 

5,643

 

 

5,925

 

Intangibles, net

 

28,066

 

 

27,763

 

Property and Equipment, net

 

57,793

 

 

56,243

 

Finance Lease Assets, net

 

69,096

 

 

64,031

 

Operating Lease Assets, net

 

14,053

 

 

15,092

 

Goodwill

 

407,726

 

 

402,461

 

Total Assets

 

$

936,318

 

 

$

945,981

 

Liabilities and Shareholders’ Equity

 

 

 

 

Current Liabilities

 

 

 

 

Accounts payable

 

$

93,111

 

 

$

85,424

 

Accrued expenses

 

112,278

 

 

126,273

 

Current taxes payable

 

2,470

 

 

3,359

 

Current portion of long-term debt

 

4,840

 

 

5,612

 

Current portion of finance lease obligations

 

3,584

 

 

3,405

 

Current portion of operating lease obligations

 

5,610

 

 

6,313

 

Total Current Liabilities

 

221,893

 

 

230,386

 

Long-Term Debt

 

283,750

 

 

239,441

 

Long-Term Obligations - Finance Leases

 

68,346

 

 

63,137

 

Long-Term Obligations - Operating Leases

 

8,356

 

 

8,697

 

Other Long-Term Obligations

 

71,272

 

 

70,474

 

Shareholders’ Equity

 

282,701

 

 

333,846

 

Total Liabilities and Shareholders’ Equity

 

$

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About IVC

Invacare Corporation is a leading manufacturer and distributor in its markets for medical equipment used in non-acute care settings. At its core, the Company designs, manufactures, and distributes medical devices that help people to move, breathe, rest and perform essential hygiene. The Company provides clinically complex medical device solutions for congenital (e.g., cerebral palsy, muscular dystrophy, spina bifida), acquired (e.g., stroke, spinal cord injury, traumatic brain injury, post-acute recovery, pressure ulcers) and degenerative (e.g., ALS, multiple sclerosis, chronic obstructive pulmonary disease (COPD), elderly, bariatric) ailments. The Company's products are important parts of care for people with a wide range of challenges, from those who are active and involved in work or school each day and may need additional mobility or respiratory support, to those who are cared for in residential care settings, at home and in rehabilitation centers. The Company sells its products principally to home medical equipment providers with retail and e-commerce channels, residential care operators, distributors and government health services in North America, Europe and Asia Pacific.