Invacare 2013 Annual Report Download - page 27

I-21
If the Company's information technology systems fail, or if the Company experiences an interruption in the operation of
its information technology systems, then the Company's business, financial condition and results of operations could be
materially adversely affected.
The Company relies upon the capacity, reliability and security of its information technology, or IT, systems across all of its
major business functions, including research and development, manufacturing, sales, financial and administrative functions. Since
the Company is geographically diverse, has various business segments and has grown over the years though various acquisitions,
it also has many disparate versions of IT systems across its organization. As a result of these disparate IT systems, the Company
faces the challenge of supporting older systems and implementing upgrades when necessary. The failure of the Company's
information technology systems, whether resulting from the disparate versions of IT systems across its various segments, business
functions or otherwise, its inability to successfully maintain, enhance and/or replace its information technology systems, or any
compromise of the integrity or security of the data that is generated from information technology systems, or any shortcomings
in the Company's disaster recovery platforms, could adversely affect the Company's results of operations, disrupt business and
make the Company unable, or severely limit the Company's ability to respond to customer demands. In addition, the Company's
information technology systems are vulnerable to damage or interruption from: earthquake, fire, flood and other natural disasters;
employee or other theft; attacks by computer viruses or hackers; power outages; and computer systems, internet,
telecommunications or data network failure.
Any interruption of the Company's information technology systems could result in decreased revenue, increased expenses,
increased capital expenditures, customer dissatisfaction and potential lawsuits, any of which could have a material adverse effect
on the Company's results of operations or financial condition.
The industry in which the Company operates is highly competitive and some of the Company’s competitors may have greater
financial resources than the Company does.
The home medical equipment market is highly competitive and the Company’s products face significant competition from
other well-established manufacturers. Reduced government reimbursement levels and changes in reimbursement policies, such
as the National Competitive Bidding program implemented by CMS, may drive competitors, particularly those that have greater
financial resources than the Company's to offer drastically reduced pricing terms in an effort to secure government acceptance of
their products and pricing. Any increase in competition may cause the Company to lose market share or compel the Company to
reduce prices to remain competitive, which could have a material adverse affect on the Company’s results of operations.
The consolidation of health care customers and the Company’s competitors could result in a loss of customers or in additional
competitive pricing pressures.
Numerous initiatives and reforms instituted by legislators, regulators and third-party payors to reduce home medical
equipment costs have resulted in a consolidation trend in the home medical equipment industry as well as among the Company’s
customers, including home health care providers. In the past, some of the Company’s competitors have been lowering the purchase
prices of their products in an effort to attract customers. This in turn has resulted in greater pricing pressures, including pressure
to offer customers more competitive pricing terms, and the exclusion of certain suppliers from important market segments as group
purchasing organizations, independent delivery networks and large single accounts continue to consolidate purchasing decisions
for some of the Company’s customers. Further consolidation could result in a loss of customers, increased collectability risks, or
increased competitive pricing pressures.
The Company’s products are subject to recalls, which could be costly and harm the Company’s reputation and business.
The Company is subject to ongoing medical device reporting regulations that require the Company to report to the FDA or
similar governmental authorities in other countries if the Company’s products cause, or contribute to, death or serious injury, or
if they malfunction and would be likely to cause, or contribute to, death or serious injury if the malfunction were to recur. The
FDA and similar governmental authorities in other countries could force the Company to do a field correction or recall the
Company’s products in the event of material deficiencies or defects in design or manufacturing. In addition, in light of a deficiency,
defect in design or manufacturing or defect in labeling, the Company may voluntarily elect to recall or correct the Company’s
products. A government mandated or voluntary recall/field correction by the Company could occur as a result of component
failures, manufacturing errors or design defects, including defects in labeling. Any recall/field correction would divert managerial
and financial resources and could harm the Company’s reputation with its customers, product users and the health care professionals
that use, prescribe and recommend the Company’s products. The Company could have product recalls or field actions that result
in significant costs to the Company in the future, and these actions could have a material adverse effect on the Company’s business.
As an example, the Company's power wheelchair joystick recall has resulted in the recording an incremental warranty expense of
$7,264,000 in 2013. The Company will continue to review the adequacy of the joystick recall accrual as the recall progresses.