Invacare 2007 Annual Report Download

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2007 Annual Report
And Form 10-K

Table of contents

  • Page 1
    2007 Annual Report And Form 10-K

  • Page 2
    ... of 4.7%; this occurred as sales and pricing stabilized for home care products, and sales of rehab product lines, excluding consumer power, began to recover. For the year, Invacare Supply Group also showed strong sales growth, increasing 12.6% to $257 million. In Europe, net sales increased 15.7% to...

  • Page 3
    ... concentrator and the new line of HomeFill® Post Valve cylinders, establishing new performance thresholds in the delivery of oxygen. Soon, the Company will begin shipping a new line of Therapeutic Support Services, including Invacare® SolaceTM Foam and Invacare® MicroAirTM Powered TSS Products...

  • Page 4
    ... customers a successful service plan that expands their service geography, helps drive costs from their business, and assures consumers of technical service anywhere in the USA, regardless of where the product was purchased. Effective April 1, 2008, Invacare appointed its new Chief Financial Officer...

  • Page 5
    ... net deferred tax credits. (2) Free Cash Flow is a non-GAAP financial measure that is comprised of net cash provided by operating activities, excluding net cash impact related to restructuring activities less purchases of property and equipment, net of proceeds from sales of property and equipment...

  • Page 6
    ... values indicated were calculated based upon the last sale price of the Common Shares as reported by The New York Stock Exchange on June 30, 2007, which was $19.54. For purposes of this information, the 2,814,361 Common Shares and 1,080,174 Class B Common Shares which were held by Executive Officers...

  • Page 7
    INVACARE CORPORATION 2007 ANNUAL REPORT ON FORM 10-K CONTENTS Item Page 1. 1A. 1B. 2. 3. 4. PART I: Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Submission of Matters to a Vote of Security Holders ...Executive Officers of the Registrant ...PART II: ...

  • Page 8
    ... major, non-acute, medical equipment categories: power and manual wheelchairs, home care bed systems and home oxygen systems. The company's executive offices are located at One Invacare Way, Elyria, Ohio, 44036 and its telephone number is (440) 329-6000. In this report, "Invacare" and the "company...

  • Page 9
    ...The changing home health care market continues to provide new ways of reaching the end user. The distribution network for products has expanded to include not only specialized home health care providers and extended care facilities but retail drug stores, surgical supply houses, rental, hospital and...

  • Page 10
    ... center-wheel drive performance for exceptional maneuverability and intuitive driving. Power tilt and recline systems are offered as well. Custom Manual Wheelchairs. Invacare manufactures and markets a range of custom manual wheelchairs for everyday, sports and recreational uses. These lightweight...

  • Page 11
    ...as tub transfer benches, shower chairs and grab bars, and patient care products such as commodes and other toilet assist aids. Home Care Beds. Invacare manufactures and distributes a wide variety of manual, semi-electric and fully electric beds for home use under the Invacare® brand name. Home care...

  • Page 12
    ... manual and power wheelchairs, lifts, ramps, beds, furniture and pressure care products; Dynamic Controls, a New Zealand manufacturer of electronic operating components used in power wheelchairs and scooters; Invacare New Zealand, a distributor of a wide range of home medical equipment; and Invacare...

  • Page 13
    ... using Invacare products receive quality service and support that is consistent with the Invacare brand promise. The company sells distributed products, primarily soft goods and disposable medical supplies, through ISG. ISG products include ostomy, incontinence, wound care and diabetic supplies...

  • Page 14
    ... 2007, the continued consolidation of big buying groups tending to develop their business on a European scale has confirmed itself. As a result, Invacare is generalizing the application of pan-European pricing policies. The company's top 10 customers accounted for approximately 10% of 2007 net sales...

  • Page 15
    ...than the Platinum XL concentrator. The new line of HomeFill® Post Valve cylinders gives portable oxygen patients more choices and flexibility than ever before. The new cylinders expand Invacare's line of HomeFill cylinders, which already includes integrated continuous flow regulators and integrated...

  • Page 16
    ... small, lightweight, durable portable concentrator that is also clinically robust. It will offer a pulse dose oxygen delivery system with settings from one to five, and weigh a mere six pounds. The Invacare aerosol therapy product line is expanding to better meet both patient and provider needs. New...

  • Page 17
    ... new handle bar, fits to almost every wheelchair, driving range up to 15 km (9.4 miles), very swift for indoor use, easy to dismantle and ideal for transporting. An "electronic spare part list" has been introduced across the European Invacare after sales service departments, which improves product...

  • Page 18
    ... and institutional care beds, the final assembly of respiratory products and the integrated component fabrication, painting, and final assembly of a variety of standard manual wheelchairs and commodes. The company operates four major factories located in Elyria, Ohio; Sanford, Florida; London...

  • Page 19
    ... years and will try to respond with improved productivity to address the lack of support from Congress. In addition, the company's new products (for example, the HomeFillâ„¢ low-cost oxygen delivery system), can help address the cuts the home care provider has to endure. Moreover, effective January...

  • Page 20
    ...of health care providers and our competitors; loss of key health care providers; ineffective cost reduction and restructuring efforts; inability to design, manufacture, distribute and achieve market acceptance of new products with higher functionality and lower costs; extensive government regulation...

  • Page 21
    ... by the company's Dynamic Controls subsidiary. Sales of respiratory products were particularly affected by the changes. Small and independent provider sales declined as these dealers slowed their purchases of the company's HomeFillâ„¢ oxygen system product line, in part, until they had a clearer...

  • Page 22
    ... markets have government-managed health care systems that govern reimbursement for new home health care products. The ability of hospitals and other providers supported by such systems to purchase the company's products is dependent, in part, upon public budgetary constraints. Canada and Germany and...

  • Page 23
    ... results of operations. The company sells its products principally to medical equipment and home health care providers who resell or rent those products to consumers. Many of those providers (the company's customers) are reimbursed for the Invacare® products sold to their customers and patients by...

  • Page 24
    ...into the company's profit margins and reducing the company's overall profitability. Asian goods had a particularly strong negative impact on the company's sales of Standard Products (this category includes products such as manual wheelchairs, canes, walkers and bath aids) during 2006 and 2007. I-19

  • Page 25
    ... where the company does business. The FDA regulates virtually all aspects of a medical device's development, testing, manufacturing, labeling, promotion, distribution and marketing. In addition, the company is required to file reports with the FDA if the company's products cause, or contribute to...

  • Page 26
    ... 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...

  • Page 27
    ..., results of operations, liquidity or financial condition. Product liability claims may harm the company's business, particularly if the number of claims increases significantly or the company's product liability insurance proves inadequate. The manufacture and sale of home health care devices and...

  • Page 28
    ... design and manufacture of some of the company's products. The loss of these licenses could prevent the company from, or could cause additional disruption or expense in, manufacturing, marketing and selling these products, which could harm the company's business. The company's operating results and...

  • Page 29
    ... business. The company's future success will depend, in part, upon the continued service of key managerial, research and development staff and sales and technical personnel. In addition, the company's future success will depend on its ability to continue to attract and retain other highly qualified...

  • Page 30
    ... to acquire businesses or product lines, including providing new products or new manufacturing and service capabilities, to add new customers, to increase penetration with existing customers, and to expand into new geographic markets. The company's ability to successfully grow through acquisitions...

  • Page 31
    ... 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...

  • Page 32
    ... Or Expiration Date of Lease Renewal Options North American/HME Operations Use Alexandria, Virginia ...Alpharetta, Georgia ...Arlington, Texas ...Atlanta, Georgia ...Augusta, Georgia ...Edison, New Jersey ...Elyria, Ohio -Taylor Street ...-Cleveland Street ...-One Invacare Way ...-1320 Taylor...

  • Page 33
    Invacare Supply Group Square Feet Ownership Or Expiration Date of Lease Renewal Options Use Atlanta, Georgia ...Grand Prairie, Texas ...Jamesburg, New Jersey ...Milford, Massachusetts ...Rancho Cucamonga, California . . South Bend, Indiana ...Elkhart, Indiana ...London, Ontario ...London, ...

  • Page 34
    European Operations Square Feet Ownership Or Expiration Date of Lease Renewal Options Use Albstadt, Germany ...Anderstorp, Sweden ...Bergen, Norway ...Bridgend, Wales ...Brondby, Denmark ...Cardiff, Wales ...Dio, Sweden ...Dublin, Ireland ...Ede, The Netherlands ...Ede, The Netherlands ...Ede, ...

  • Page 35
    ... the Board of Directors and Chief Executive Officer President, Chief Operating Officer and Director** Senior Vice President and Chief Financial Officer** Senior Vice President-Business Development, General Counsel and Secretary President-Invacare Technologies, Senior Vice President- Electronics and...

  • Page 36
    ... of North American Operations from September 1989 to September 1992. Mr. Richey also serves as a director of Steris Corporation (NYSE), Cleveland, Ohio, a manufacturer and distributor of medical sterilizing equipment and is a member of the Board of Trustees for Case Western Reserve University and...

  • Page 37
    ... Matters and Issuer Purchases of Equity Securities. Invacare's Common Shares, without par value, trade on the New York Stock Exchange (NYSE) under the symbol "IVC." Ownership of the company's Class B Common Shares (which are not listed on NYSE) cannot be transferred, except, in general, to family...

  • Page 38
    ...02 12/03 12/04 12/05 12/06 12/07 Invacare Corporation Russell 2000 S&P 500 S & P Healthcare Equipment & Supplies * The S&P Healthcare Equipment & Supplies Index is a capitalization-weighted average index comprised of health care companies in the S&P 500 Index. The graph assumes $100 invested...

  • Page 39
    ...'s 2003 Performance Plan. Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs Period Total Number of Shares Purchased Average Price Paid Per Share 10/1/2007-10/31/07 ...11/1/2007- 11/30...

  • Page 40
    ... and Results of Operations" and the company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K. 2007 * 2006 ** 2005 *** 2004 2003 (In thousands, except per share and ratio data) Earnings Net Sales ...Net Earnings (loss) ...Net Earnings (loss) per Share-Basic...

  • Page 41
    ... in the European and Invacare Supply Group (ISG) segments. European net sales growth resulted from volume increases in most regions, while ISG growth was mainly due to home delivery program sales to large providers and volume increases in diabetic, incontinence and enterals product lines. I-36

  • Page 42
    ... seating and positioning), Standard (manual wheelchairs, personal care, home care beds, low air loss therapy and patient transport), and Respiratory (oxygen concentrators, HomeFillâ„¢ transfilling systems, sleep apnea, aerosol therapy and other respiratory) products. Standard product line net sales...

  • Page 43
    ... attributable to continued unfavorable product mix toward lower margin product-diabetic and incontinence products, and an unfavorable customer mix toward larger providers who historically have lower margins. IPG gross profit as a percentage of net sales decreased 2.2 percentage points in 2007 from...

  • Page 44
    ...ensure that new and enhanced design concepts are available to its businesses. Research and development expenditures, which are included in costs of products sold, increased to $22,491,000 in 2007 from $22,146,000 in 2006. The expenditures, as a percentage of net sales, were 1.4% and 1.5% in 2007 and...

  • Page 45
    ... to lower pricing on oxygen concentrators, changes during the year regarding reimbursement for Respiratory product which hampered volumes, and reduced purchases from national and independent providers for HomeFillâ„¢ II oxygen systems. Invacare Supply Group ISG net sales increased 3.3% in...

  • Page 46
    ... in this region was negatively impacted by U.S. reimbursement uncertainty in the consumer power wheelchair market, resulting in decreased sales of microprocessor controllers by Invacare's New Zealand subsidiary and reduced volumes in the company's Australian distribution business. In addition, the...

  • Page 47
    ... of the company's power wheelchairs. NA/HME sales of respiratory products were also negatively affected by the changes in 2006. Small and independent provider sales declined as these dealers slowed their purchases of the company's HomeFillâ„¢ oxygen system product line, in part, until they had...

  • Page 48
    ... months. The uncertainty created by these announcements continues to negatively impact the home oxygen equipment market, particularly for those providers considering changing to the HomeFillâ„¢ oxygen system. Medicare will also institute a new competitive bidding program for various items in ten of...

  • Page 49
    ... swaps to exchange variable rate debt to fixed rate debt, if needed, and the company's free cash flow should allow it to absorb any modest rate increases in the months ahead without any material impact on its liquidity or capital resources. As of December 31, 2007, the weighted average floating...

  • Page 50
    ... measure as follows (in thousands): Twelve Months Ended December 31, 2007 2006 Net cash provided by operating activities ...Plus: Net Cash impact related to restructuring activities ...Less: Purchases of property and equipment-net ...Free Cash Flow ... $ 79,100 $ 62,454 13,006 9,935 (19,567) (19...

  • Page 51
    ... Long-term debt obligations Credit Facility ...9.75% Senior Notes due 2015 ...4.125% Convertible Senior Subordinated Debentures due 2027 ...Operating lease obligations ...Capital lease obligations ...Purchase obligations (primarily computer systems contracts) ...Product liability ...SERP ...Other...

  • Page 52
    .... Substantially all of our receivables are due from health care, medical equipment dealers and long term care facilities located throughout the United States, Australia, Canada, New Zealand and Europe. A significant portion of products sold to dealers, both foreign and domestic, is ultimately funded...

  • Page 53
    ... the fair value estimates used in our testing. The company utilizes a discounted cash flow method model to analyze reporting units for impairment in which the company forecasts income statement and balance sheet amounts based on assumptions regarding future sales growth, profitability, inventory...

  • Page 54
    ... or assumptions used to determine the fair value of options granted and the company continues to use a Black-Scholes valuation model. As of December 31, 2007, there was $9,570,000 of total unrecognized compensation cost from stock-based compensation arrangements granted under the plans, which is...

  • Page 55
    ... of items for tax and accounting policies. The temporary differences are reported as deferred tax assets and or...value of the company's financial instruments using methodology which is principally consistent with Statement No. 157. On September 5, 2007, the FASB exposed for comment FASB Staff Position...

  • Page 56
    ... Annual Report on Form 10-K. Item 9. None. Item 9A. Controls and Procedures. (a) Evaluation of Disclosure Controls and Procedures As of December 31, 2007, an evaluation was performed, under the supervision and with the participation of the company's management, including the Chief Executive Officer...

  • Page 57
    ... independent registered public accounting firm, Ernst & Young LLP, audited the company's internal control over financial reporting and, based on that audit, issued an attestation report regarding the company's internal control over financial reporting, which is included in this Annual Report on Form...

  • Page 58
    ... Annual Meeting of Shareholders. We submitted the New York Stock Exchange ("NYSE") Section 12(a) Annual CEO Certification as to our compliance with the NYSE corporate governance listing standards to the NYSE in June 2007. In addition, we have filed the certifications of our Chief Executive Officer...

  • Page 59
    ... Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized as of February 28, 2008. INVACARE CORPORATION By: /s/ A. MALACHI MIXON, III A. Malachi Mixon, III Chairman of the Board of Directors and Chief Executive Officer...

  • Page 60
    ... Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of February 28, 2008. Signature Title /s/ A. MALACHI MIXON, III A. Malachi Mixon, III Chairman of the Board of Directors and Chief Executive Officer...

  • Page 61
    ... by and between the company and Chief Operating Officer Invacare Corporation 401(K) Plus Benefit Equalization Plan, effective January 1, 2003, as amended and restated Invacare Corporation Amended and Restated 2003 Performance Plan Form of Change of Control Agreement entered into by and between the...

  • Page 62
    ... Performance Plan Form of Restricted Stock Option Award under Invacare Corporation 2003 Performance Plan Form of Stock Option Award under Invacare Corporation 2003 Performance Plan Form of Executive Stock Option Award under Invacare Corporation 2003 Performance Plan Form of Switzerland Stock Option...

  • Page 63
    ... purchasers named therein, relating to $150,000,000 6.15% Senior Notes Due April 27, 2016. Credit Agreement, dated February 12, 2007, by and among Invacare Corporation, the Facility Guarantors named therein, the lenders named therein, Banc of America Securities LLC and KeyBank National Association...

  • Page 64
    ... by reference. Reference is made to the appropriate Exhibit of the company report on Form 10-Q, dated September 30, 2007, which is incorporated herein by reference. Reference is made to Exhibit 4.5 of Invacare Corporation Form S-8 filed on October 17, 2003, which is incorporated herein by reference...

  • Page 65
    ... evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and...United States), Invacare Corporation's internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control...

  • Page 66
    ...in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, Invacare Corporation maintained, in all material aspects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria. We have also audited, in...

  • Page 67
    CONSOLIDATED STATEMENT OF OPERATIONS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2007 2006 2005 (In thousands, except per share data) Net sales ...Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ...Charges related to restructuring activities ...

  • Page 68
    CONSOLIDATED BALANCE SHEETS INVACARE CORPORATION AND SUBSIDIARIES December 31, December 31, 2006 2007 (In thousands) Assets Current Assets Cash and cash equivalents ...Marketable securities ...Trade receivables, net ...Installment receivables, net ...Inventories, net ...Deferred income taxes ......

  • Page 69
    ...Proceeds from sale of property and equipment ...Business acquisitions, net of cash acquired ...(Increase) decrease in other investments ...(Increase) decrease in other long-term assets ...Other ...Net Cash Used for Investing Activities ...Financing Activities Proceeds from revolving lines of credit...

  • Page 70
    ... stock awards ...Net earnings ...Foreign currency translation adjustments ...Unrealized loss on cash flow hedges ...Defined benefit plans amortization of prior service costs and unrecognized losses ...Marketable securities holding gain ...Total comprehensive income ...Dividends ...December 31, 2007...

  • Page 71
    ...Nature of Operations: Invacare Corporation is the world's leading manufacturer and distributor in the $8.0 billion worldwide market for medical equipment used in the home based upon our distribution channels, breadth of product line and net sales. The company designs, manufactures and distributes an...

  • Page 72
    ...each reporting unit is estimated by forecasting cash flows and discounting those cash flows using appropriate discount rates. The fair values are then compared to the carrying value of the net assets of each reporting unit. No impairments were recognized in 2007. As a result of reduced profitability...

  • Page 73
    ... estimates recorded for anticipated returns at the time of sale. The company does not sell any goods on consignment. Distributed products sold by the company are accounted for in accordance with Emerging Issues Task Force (EITF) No. 99-19 Reporting Revenue Gross as a Principal versus Net as an Agent...

  • Page 74
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Accounting Policies-Continued Effective January 1, 2006, the company adopted SFAS No. 123R using the modified prospective application method. Under the modified prospective method, compensation cost has been...

  • Page 75
    ... purchases/sales denominated in foreign currencies. The company recognized a net gain of $451,000 in 2007 and net losses of $240,000 and $280,000 in 2006 and 2005, respectively, on foreign currency cash flow hedges. The gains and losses are included in cost of products sold and selling, general...

  • Page 76
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Accounting Policies-Continued Net Earnings Per Share: Basic earnings per share are computed based on the weighted-average number of Common Shares and Class B Common Shares outstanding during the year. ...

  • Page 77
    ... all of the company's receivables are due from health care, medical equipment dealers and long term care facilities located throughout the United States, Australia, Canada, New Zealand and Europe. A significant portion of products sold to dealers, both foreign and domestic, is ultimately funded...

  • Page 78
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Receivables-Continued subsidiary of Invacare. IRC would then transfer ...provides amounts necessary for estimated losses in the allowance for doubtful accounts. See Concentration of Credit Risk in the Notes to ...

  • Page 79
    ... acquired Home Health Equipment Pty Ltd, an Australian based company, and leading supplier of medical equipment in South Australia, providing high quality equipment and service to institutions and individual clients selling the full range of rehabilitation, mobility and continuing care products. In...

  • Page 80
    ... of goodwill by operating segment is as follows (in thousands): North America / HME Invacare Supply Group Institutional Products Group Europe Asia/Pacific Consolidated Balance at January 1, 2006 ...Acquisitions ...Foreign currency translation adjustments ...Purchase accounting adjustments ...Re...

  • Page 81
    ... of the company's power wheelchairs. NA/HME sales of respiratory products were also negatively affected by the changes in 2006. Small and independent provider sales declined as these dealers slowed their purchases of the company's HomeFillâ„¢ oxygen system product line, in part, until they had...

  • Page 82
    ... rental period from three years (the reimbursement period under current law) to thirteen months. The uncertainty created by these announcements continues to negatively impact the home oxygen equipment market, particularly for those providers considering changing to the HomeFillâ„¢ oxygen system...

  • Page 83
    ...): 2007 2006 Accrued salaries and wages ...Accrued taxes other than income taxes, primarily Value Added Taxes ...Accrued warranty cost ...Accrued interest ...Accrued freight ...Accrued rebates ...Accrued legal and professional ...Accrued product liability, current portion ...Accrued insurance...

  • Page 84
    ...years and has partially reduced prices to our customers in the form of a volume rebate such that the rebates would typically apply only if customers increased their standard product purchases from the company. Changes in accrued warranty costs were as follows (in thousands): 2007 2006 Balance as of...

  • Page 85
    ... on the facility. The company also completed the sale of $175,000,000 principal amount of its 9.75% Senior Notes due 2015 to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation S under the Securities Act of 1933, as amended...

  • Page 86
    ...as part of the company's refinancing, which was completed in February 2007. In August 2006, $50,000,000 in fair value hedge swaps were also terminated. All losses associated with the terminations of fair value hedge swaps were amortized over the remaining life of the previously hedged debt using the...

  • Page 87
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Other Long-Term Obligations Other long-term obligations as of December 31, 2007 and 2006 consist of the following (in thousands): 2007 2006 Supplemental Executive Retirement Plan liability ...Product ...

  • Page 88
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Retirement and Benefit Plans-Continued The company also sponsors a non-qualified defined benefit Supplemental Executive Retirement Plan (SERP) for certain key executives. The projected benefit obligation ...

  • Page 89
    ... as part of the company's Refinancing completed in February 2007. The following table summarizes information about stock option activity form the three years ended December 31, 2007, 2006 and 2005: Weighted Average Exercise Price Weighted Average Exercise Price Weighted Average Exercise Price 2007...

  • Page 90
    ...because service or employment requirements have not been met. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: 2007 2006 2005 Expected dividend yield ...Expected stock price volatility...

  • Page 91
    ...Common Shares and Class B Common Shares to shareholders of record at the close of business on July 19, 2005. Each Right entitles the registered holder to purchase from the company one one-thousandth of a Series A Participating Serial Preferred Share, without par value, at a Purchase Price of $180.00...

  • Page 92
    ... of prior service costs and unrecognized losses related to Defined benefit plans ...Current period unrealized loss on cash flow hedges, net of reclassifications ...Deferred tax benefits relating to unrealized loss on derivative financial instruments ...Balance at December 31, 2007 ... $104,470...

  • Page 93
    ...-year cost reductions and profit improvement actions, which included: reducing global headcount, outsourcing improvements utilizing the company's China manufacturing capability and third parties, shifting substantial resources from product development to manufacturing cost reduction activities and...

  • Page 94
    ... Balance at 12/31/07 North America/HME Severance ...Product line discontinuance ...Contract terminations ...Total ...Invacare Supply Group Severance ...Product line discontinuance ...Contract terminations ...Total ...Institutional Products Group Severance ...Contract terminations ...Other ...Total...

  • Page 95
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income Taxes Earnings (loss) before income taxes consist of the following (in thousands): 2007 2006 2005 Domestic ...Foreign ... $(40,369) $(349,144) $18,605 54,859 39,620 52,697 $ 14,490 $(309,524) $71,302...

  • Page 96
    ...-(Continued) Income Taxes-Continued Significant components of deferred income tax assets and liabilities at December 31, 2007 and 2006 are as follows (in thousands): 2007 2006 Current deferred income tax assets (liabilities), net: Loss carryforwards ...Bad debt ...Warranty ...State and local...

  • Page 97
    ... to foreign income tax jurisdictions, the company is generally subject to examinations for the periods 2002 to 2007. Net Earnings Per Common Share The following table sets forth the computation of basic and diluted net earnings per common share. 2007 2006 2005 (In thousands except per share data...

  • Page 98
    ... average fair market value price of $41.46 for 2005. Concentration of Credit Risk The company manufactures and distributes durable medical equipment and supplies to the home health care, retail and extended care markets. The company performs credit evaluations of its customers' financial condition...

  • Page 99
    ...2007 and losses of $240,000 and $280,000 in 2006 and 2005, 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...

  • Page 100
    ...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. The company evaluates performance and allocates resources based on profit or loss from operations...

  • Page 101
    ...) Business Segments-Continued 2007 2006 2005 Earnings (loss) before income taxes North America/HME ...Invacare Supply Group ...Institutional Products Group ...Europe ...Asia/Pacific ...All Other(1) ...Consolidated ...Assets North America/HME ...Invacare Supply Group ...Institutional Products Group...

  • Page 102
    ...-(Continued) Business Segments-Continued Net sales by product, are as follows (in thousands): 2007 2006 2005 North America/HME Rehab ...Standard ...Respiratory ...Other ...Invacare Supply Group Distributed ...Institutional Products Group Continuing Care ...Europe Standard ...Rehab ...Respiratory...

  • Page 103
    ... CONDENSED STATEMENTS OF OPERATIONS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total Year ended December 31, 2007 Net sales ...Cost of products sold ...Gross Profit ...Selling, general and administrative expenses...

  • Page 104
    ...-(Continued) CONSOLIDATING CONDENSED BALANCE SHEETS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total December 31, 2007 Assets Current Assets Cash and cash equivalents ...Marketable securities ...Trade receivables, net...

  • Page 105
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) CONSOLIDATING CONDENSED BALANCE SHEETS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total December 31, 2006 Assets Current Assets ...

  • Page 106
    ... thousands) Eliminations Total Year ended December 31, 2007 Net Cash Provided (Used) by Operating Activities ...Investing Activities Purchases of property and equipment ...Proceeds from sale of property and equipment ...Business acquisitions, net of cash acquired ...Decrease in other investments...

  • Page 107
    ... from sale of property and equipment ...Business acquisitions, net of cash acquired ...(Increase) decrease in other investments ...Increase in other long-term assets ...Other ...Net Cash Used for Investing Activities ...Financing Activities Proceeds from revolving lines of credit, securitization...

  • Page 108
    ... from sale of property and equipment ...Business acquisitions, net of cash acquired ...(Increase) decrease in other investments ...Increase in other long-term assets ...Other ...Net Cash Used for Investing Activities ...Financing Activities Proceeds from revolving lines of credit, securitization...

  • Page 109
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Interim Financial Information (unaudited) QUARTER ENDED (In thousands, except per share data) March 31, June 30, September 30, December 31, 2007 Net sales ...Gross profit ...Earnings (loss) before income ...

  • Page 110
    ... and related notes receivable ...Tax valuation allowances ...Accrued warranty cost ...Accrued product liability ...Note (A)-Uncollectible accounts written off, net of recoveries. Note (B)-Amounts written off or payments incurred. Note (C)-Loss and loss adjustment. $37,633 12,143 8,339 50,273...

  • Page 111
    ... 2. I have reviewed this annual report on Form 10-K of Invacare Corporation; Based on my knowledge, this report does not contain any untrue ...control over financial reporting. INVACARE CORPORATION /s/ A. Malachi Mixon, III A. Malachi Mixon, III Chief Executive Officer (Principal Executive Officer...

  • Page 112
    Exhibit 31.2 CERTIFICATIONS I, Gregory C. Thompson, certify that: 1. 2. I have reviewed this annual report on Form 10-K of Invacare Corporation; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the ...

  • Page 113
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, A. Malachi Mixon, III, Chief Executive Officer of the company, certify...

  • Page 114
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gregory C. Thompson, Chief Financial Officer of the company, certify...