Invacare 2006 Annual Report Download - page 92

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The carrying amounts and fair values of the company’s financial instruments at December 31, 2006 and 2005
are as follows (in thousands):
Carrying
Value
Fair
Value
Carrying
Value
Fair
Value
2006 2005
Cash and cash equivalents ................... $ 82,203 $ 82,203 $ 25,624 $ 25,624
Marketable securities....................... 190 190 252 252
Other investments ......................... 8,461 8,461 8,342 8,342
Installment receivables ..................... 22,887 22,887 13,081 13,081
Long-term debt (including short-term borrowings
secured by accounts receivable and current
maturities of long-term debt) ............... 573,126 583,856 537,981 538,053
Interest rate swaps ........................ (435) (435) (202) (202)
Forward contracts ......................... 1,213 1,213 (2,330) (2,330)
Forward Contracts: The company operates internationally and as a result is exposed to foreign currency
fluctuations. Specifically, the exposure includes intercompany loans and third party sales or payments. In an attempt
to reduce this exposure, foreign currency forward contracts are utilized and accounted for as hedging instruments.
The forward contracts in 2006 and 2005 were entered into to as hedges of the following currencies: USD, NZD,
CAD, GBP, EUR, SEK, DKK and AUD. The company does not use derivative financial instruments for speculative
purposes.
The gains and losses that result from the majority of the forward contracts are deferred and recognized when
the offsetting gains and losses for the identified transactions are recognized. The company recognized losses of
$240,000 in 2006 and $280,000 in 2005 and gains of $6,961,000 in 2004, respectively, which were recognized in
cost of products sold and selling, general and administrative expenses.
Business Segments
The company operates in five primary business segments: North America/Home Medical Equipment
(NA/HME), Invacare Supply Group, Institutional Products Group, Europe and Asia/Pacific. The company
expanded its number of reporting segments from three to five in 2006 due to organizational changes within the
former North American geographic operating segment and changes in how the chief operating decision maker
assesses performance and makes resource allocation decisions. Prior to 2006, the Invacare Supply Group and
Institutional Products Group were fully integrated into the former North American operating segment in that they
shared the same sales force, managed customer service jointly, etc. In 2006, management reporting changes were
made along with changes in the sales structure, customer service, supply chain management, etc., all of which
established ISG and IPG as autonomous businesses. Accordingly, the company has modified its operating segments
and reportable segments in 2006 with the corresponding prior year amounts being reclassified to conform to the
2006 presentation.
The NA/HME segment sells each of three primary product lines, which includes: standard, rehab and
respiratory products. Invacare Supply Group sells distributed product and the Institutional Products Group sells
health care furnishings and accessory products. Europe and Asia/Pacific sell the same product lines with the
exception of distributed products. Each business segment sells to the home health care, retail and extended care
markets.
FS-33
INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Fair Values of Financial Instruments — Continued