Invacare 2013 Annual Report Download - page 28

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I-22
The Company’s revenues and profits are subject to exchange rate and interest rate fluctuations that could adversely
affect its results of operations or financial position.
Currency exchange rates are subject to fluctuation due to, among other things, changes in local, regional or global economic
conditions, the imposition of currency exchange restrictions and unexpected changes in regulatory or taxation environments. The
functional currency of the Company’s subsidiaries outside the United States is the predominant currency used by the subsidiaries
to transact business. Through the Company’s international operations, the Company is exposed to foreign currency fluctuations,
and changes in exchange rates can have a significant impact on net sales and elements of cost. The Company conducts a significant
number of transactions in currencies other than the U.S. dollar. In addition, because certain of the Company’s costs and revenues
are denominated in other currencies, the Company’s results of operations are exposed to foreign exchange rate fluctuations as the
financial results of those operations are translated from local currency into U.S. dollars upon consolidation.
The Company uses foreign exchange forward contracts primarily to help reduce its exposure to transactional exchange rate
risk. Despite the Company’s efforts to mitigate these risks, however, the Company’s revenues and profitability may be materially
adversely affected by exchange rate fluctuations. The Company does not have a meaningful way to hedge translation.
The Company also is exposed to market risk through various financial instruments, including fixed rate and floating rate
debt instruments. The Company does at times use interest rate swap contracts to mitigate its exposure to interest rate fluctuations,
but those efforts may not adequately protect the Company from significant interest rate risks. Interest on much of the Company’s
debt is based on the London Interbank Offered Rate (LIBOR), which is currently historically low. Increases in LIBOR could have
a significant impact on the Company’s reported interest expense.
The Company maintains cash balances globally in various financial institutions.
While the Company monitors its accounts with financial institutions both domestically and internationally, recovery of funds
cannot be assured in the event the financial institution would fail. In addition, the Company may be limited by foreign governments
in the amount and timing of funds to be repatriated from foreign financial institutions. As a result, this could adversely impact
the Company's ability to fund normal operations, capital expenditures, or service debt, which could adversely affect our results.
The Company is subject to certain risks inherent in managing and operating businesses in many different foreign
jurisdictions.
The Company has significant international operations, including operations in Australia, Canada, New Zealand, Mexico,
Asia (primarily China) and Europe. There are risks inherent in operating and selling products internationally, including:
• different regulatory environments and reimbursement systems;
• difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
• foreign customers who may have longer payment cycles than customers in the United States;
• fluctuations in foreign currency exchange rates;
• tax rates in certain foreign countries that may exceed those in the United States and foreign earnings that may be
subject to withholding requirements;
• the imposition of tariffs, exchange controls or other trade restrictions including transfer pricing restrictions when
products produced in one country are sold to an affiliated entity in another country;
• general economic and political conditions in countries where the Company operates or where end users of the
Company’s products reside;
• government control of capital transactions, including the borrowing of funds for operations or the expatriation of
cash;
• potential adverse tax consequences;
• security concerns and potential business interruption risks associated with political and/or social unrest in foreign
countries where the Company’s facilities or assets are located;
• difficulties associated with managing a large organization spread throughout various countries;
• difficulties in enforcing intellectual property rights and weaker intellectual property rights protection in some
countries;
• required compliance with a variety of foreign laws and regulations; and
• differing consumer product preferences.