Invacare 2007 Annual Report Download - 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 related to this unfunded plan was $33,920,000 and
$33,676,000 at December 31, 2007 and 2006, respectively, and the accumulated benefit obligation was $22,842,000
and $20,236,000 at December 31, 2007 and 2006, respectively. The projected benefit obligations were calculated
using salary increases of 4% and 5% at December 31, 2007 and 2006, respectively. The assumed discount rate for
2007 was 6.0% based upon the discount rate on high-quality fixed-income investments without adjustment and the
comparable rate was 6.75% for 2006. The retirement age was 65 for both 2007 and 2006. The salary increase rate
was decreased to recognize the fact that salary increases have decreased over the last few years, while the discount
rate was adjusted to give effect to current market data. Expense for the plan in 2007, 2006 and 2005 was
$3,031,000, $2,861,000, and $2,439,000, respectively of which $1,520,000, $1,407,000 and $1,278,000 was related
to interest cost with the remaining portion related to service costs, prior service costs and other gains/losses. Benefit
payments in 2007, 2006 and 2005 were $424,000, $952,000 and $424,000, respectively.
In 2005, the company began sponsoring a Death Benefit Only Plan for certain key executives that provides a
benefit equal to three times the participant’s final earnings should the participant’s death occur while an
employee and a benefit equal to one times the participant’s final earnings upon the participant’s death after
normal retirement or post-employment. Expense for the plan in 2007, 2006 and 2005 was $281,000, $252,000,
and $209,000, respectively of which $254,000, $221,000 and $209,000 was related to service cost with the
remaining portion related to interest costs. There were no benefit payments in 2007, 2006 or 2005.
Accumulated other comprehensive income associated with the SERP and Death Benefit Only Plan (Defined
Benefit Plans) was $12,239,000 and $14,940,000 as of December 31, 2007 and 2006, respectively for a net
change of $2,701,000 as $3,312,000 in net periodic benefit costs was recognized during the year offset by a net
increase in the projected benefit obligations related to the Defined Benefit Plans of $611,000. Amortization of
prior service costs and unrecognized losses associated with the Defined Benefit Plans is expected to be
approximately $2,313,000 in 2008.
In conjunction with these non-qualified plans, the company has invested in life insurance policies related to
certain employees to satisfy these future obligations. The current cash surrender value of these policies
approximates the current benefit obligations. In addition, the projected policy benefits exceed the projected
benefit obligations.
Shareholders’ Equity Transactions
The company’s Common Shares have a $.25 stated value. The Common Shares and the Class B Common
Shares generally have identical rights, terms and conditions and vote together as a single class on most issues,
except that the Class B Common Shares have ten votes per share, carry a 10% lower cash dividend rate and, in
general, can only be transferred to family members. Holders of Class B Common Shares are entitled to convert
their shares into Common Shares at any time on a share-for-share basis.
The 2003 Performance Plan (the “2003 Plan”) allows the Compensation Committee of the Board of
Directors (the “Committee”) to grant up to 3,800,000 Common Shares in connection with incentive stock
options, non-qualified stock options, stock appreciation rights and stock awards (including the use of restricted
stock). The 1994 Performance Plan (the “1994 Plan”), as amended, expired in 2004 and allowed the
Compensation Committee of the Board of Directors (the “Committee”) to grant up to 5,500,000 Common Shares.
The Committee has the authority to determine which employees and directors will receive awards, the amount of
the awards and the other terms and conditions of the awards. During 2007 and 2006, the Committee granted
503,096 and 522,152, respectively, in non-qualified stock options for a term of ten years at the fair market value
of the company’s Common Shares on the date of grant under the 2003 Plan. There were no stock appreciation
rights outstanding at December 31, 2007, 2006 or 2005.
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