Invacare 2013 Annual Report Download - page 30

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Decreased availability or increased costs of raw materials could increase the Company’s costs of producing its products.
The Company purchases raw materials, fabricated components, some finished goods and services from a variety of suppliers.
Raw materials such as plastics, steel and aluminum are considered key raw materials. Where appropriate, the Company employs
contracts with its suppliers, both domestic and international. In those situations in which contracts are not advantageous, the
Company believes that its relationships with its suppliers are satisfactory and that alternative sources of supply are readily available.
From time to time, however, the prices and availability of these raw materials fluctuate due to global market demands, which
could impair the Company’s ability to procure necessary materials, or increase the cost of these materials. Inflationary and other
increases in costs of these raw materials have occurred in the past and may recur from time to time. In addition, freight costs
associated with shipping and receiving product and sales are impacted by fluctuations in the cost of oil and gas. A reduction in
the supply or increase in the cost of those raw materials could impact the Company’s ability to manufacture its products and could
increase the cost of production. Additionally, the Company may not be able to increase the prices of our products due to competitive
pricing pressure or other factors. As an example, inflation in China has in the past and will probably in the future increase costs
and an appreciation of the Yuan or an increase in labor rates could have an unfavorable impact on the cost of key components and
some finished goods. Demand in China and other developing countries for raw materials may result in increases in the cost of key
commodities and could have a negative impact on the profits of the Company if these increases cannot be passed onto the Company’s
customers.
Lower cost imports could negatively impact the Company’s profitability.
Competition from lower cost imports sourced from low cost countries, such as Asia, may negatively impact the Company’s
sales volumes. In the past, competition from certain of these products has caused the Company to lower its prices, cutting into the
Company’s profit margins and reducing the Company’s overall profitability.
The Company’s success depends on the Company’s ability to design, manufacture, distribute and achieve market acceptance
of new products with higher functionality and lower costs.
The Company sells products to customers primarily in markets that are characterized by technological change, product
innovation and evolving industry standards, yet in which product price is increasingly a primary consideration in customers’
purchasing decisions. The Company historically has been engaged in product development and improvement programs. However,
during 2012 and 2013 as a result of the FDA consent decree, which is described elsewhere in this Annual Report on Form 10-K,
the Company's engineering resources were focused primarily on quality remediation and not on the design of new products. The
Company has received the FDA's approval to resume design activities at the impacted Elyria facilities and has started to refocus
its engineering resources on new product development.
The Company must continue to design and improve innovative products, effectively distribute and achieve market acceptance
of those products, and reduce the costs of producing the Company’s products, in order to compete successfully with the Company’s
competitors. If competitors’ product development capabilities become more effective than the Company’s product development
capabilities, if competitors’ new or improved products are accepted by the market before the Company’s products or if competitors
are able to produce products at a lower cost and thus offer products for sale at a lower price, the Company’s business, financial
condition and results of operation could be adversely affected.
The Company’s business strategy relies on certain assumptions concerning demographic trends that impact the market for
its products. If these assumptions prove to be incorrect, demand for the Company’s products may be lower than expected.
The Company’s ability to achieve its business objectives is subject to a variety of factors, including the relative increase in
the aging of the general population. The Company believes that these trends will increase the need for its products. The projected
demand for the Company’s products could materially differ from actual demand if the Company’s assumptions regarding these
trends and acceptance of its products by health care professionals and patients prove to be incorrect or do not materialize. If the
Company’s assumptions regarding these factors prove to be incorrect, the Company may not be able to successfully implement
the Company’s business strategy, which could adversely affect the Company’s results of operations. In addition, the perceived
benefits of these trends may be offset by competitive or business factors, such as the introduction of new products by the Company’s
competitors or the emergence of other countervailing trends, including lower reimbursement and pricing.
The Company’s debt may limit the Company’s flexibility in operating its business.
The Company's senior secured revolving credit agreement, as most recently amended on January 31, 2014, (the “Amended
and Restated Credit Agreement”) has been a principal source of financing for much of its liquidity needs. As a result of the
January 31, 2014 amendment, the capacity was reduced from $250,000,000 to $100,000,000. The credit facility contains, among