Invacare 2013 Annual Report Download - page 4

in net proceeds of approximately $42.9 million. Using net proceeds from these divestitures, as well as free cash flow from operations,
we successfully reduced total debt outstanding in 2013 by $190.1 million to $48.0 million as of December 31, 2013.
In another step toward driving efficiencies within our business, we announced our decision to close our London, Canada
manufacturing facility by mid-2014. Production of case goods currently manufactured in London will be transferred to the Invacare
plant in Sanford, Florida. The long-term care beds production in London will be outsourced to a third-party with established FDA-
registered manufacturing capabilities around the world. This company has a strong quality system, established competence in
acute care bed production, a very efficient operation and advanced information systems. Taking advantage of their size and proven
systems gives Invacare added flexibility that will enhance our ability to compete in the long-term care market.
When we receive the FDA’s approval to resume full operations at the corporate and Taylor Street facilities, we will once
again focus on our globalization program to harmonize global product lines and reduce complexity within our global footprint.
Some time ago, we recognized that our product portfolio of highly tailored regional products would not be cost-effective in a
world of declining reimbursement. In order to reduce complexity and take advantage of our global footprint, we must introduce
global product platforms that may be customized at the local level as appropriate. Reinvigorating new product development, some
of which is already underway since we received the FDA’s acceptance of the second certification audit, is the key to realizing the
anticipated sales and profitability benefits of globalizing the business.
Ongoing Pressures for Our Domestic Customers
While the volume of patients accessing homecare is increasing, the homecare channel itself is evolving, as healthcare
reimbursement authorities from many regions around the world address rising healthcare costs. This has been particularly true in
the United States where domestic home medical equipment providers are adjusting their business models to handle increased
pressure from pre- and post-payment audits as well National Competitive Bidding (NCB). Since July 1, 2013, we have been closely
monitoring the roll-out of the second round of NCB, which expanded to 91 additional metropolitan statistical areas. It is difficult
for us to measure the direct impact of NCB on our sales, as we do not have zip code level visibility into our customers' sales, rental
data or Medicare fulfillment data. Similarly, it is difficult to determine if pre- and post-payment audits are impacting equipment
utilization.
We are committed to providing our customers with solutions as they manage these reimbursement challenges. We have seen
an increase in sales of Invacare® HomeFill® oxygen systems, which we believe indicates that providers are actively seeking
opportunities to reduce costs and transform their business model while also improving patient care. In fact, a highlight of the year
was the completion of a large order of HomeFill systems to a national customer. Throughout 2013 and going forward, we also are
urging our providers to take a fleet management approach to their business focusing on the total cost of equipment ownership
instead of initial purchase price as a means to save costs. Fleet management is the controlled operation of a provider’s product
fleet, which can include maintenance, repairs, tracking, delivery management, financing, regulatory compliance and health and
safety management. Invacare’s fleet management approach asks providers to consider total lifecycle costs to see that higher quality
products ultimately result in greater cost savings.
Updates to the Board of Directors
We want to take a moment to recognize the leadership and retirement of two members of our Board of Directors.
In May 2013, Joseph B. (JB) Richey II, retired from our Board of Directors upon reaching the retirement age set in our
Corporate Governance Guidelines. J.B. was a co-founder of Invacare and had been a director since 1980. He played an integral
role in our innovation, research and development and product design and planning. His experience and understanding of Invacare’s
product development capabilities and opportunities provided valuable perspective to the Board. J.B. continues with the Company
as President, Invacare Technologies and Senior Vice President, Electronic and Design Engineering.
William M. Weber also will retire from our Board of Directors as of the 2014 Annual Meeting of Shareholders, as he also
has reached the retirement age established in our Corporate Governance Guidelines. Bill has been a director since 1988. He has
significant experience in managing diverse private businesses, and his financial experience, particularly in evaluating and managing
the Company’s financial risks and internal controls, was a great asset to the board. Bill chaired our audit committee.
We thank both J.B. and Bill for their contributions to Invacare during their tenure on the Board of Directors. Their valuable
insights and experience will be missed.