Invacare 2008 Annual Report Download - page 100

INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Net Earnings Per Common Share
The following table sets forth the computation of basic and diluted net earnings per common share.
2008 2007 2006
(In thousands except per share data)
Basic
Average common shares outstanding .................................. 31,902 31,840 31,789
Net earnings (loss) ................................................ $38,551 $ 1,190 $(317,774)
Net earnings (loss) per common share ................................. $ 1.21 $ .04 $ (10.00)
Diluted
Average common shares outstanding .................................. 31,902 31,840 31,789
Stock options ..................................................... 51 87 —
Average common shares assuming dilution ............................. 31,953 31,927 31,789
Net earnings (loss) ................................................ $38,551 $ 1,190 $(317,774)
Net earnings (loss) per common share ................................. $ 1.21 $ .04 $ (10.00)
At December 31, 2008, 2007, and 2006, 4,337,838, 4,232,589 and 4,724,651 shares associated with stock
options, respectively were excluded from the average common shares assuming dilution, as they were anti-
dilutive. In 2008, the majority of the anti-dilutive shares were granted at an exercise price of $25.79, which was
higher than the average fair market value price of $20.99 for 2008. In 2007, the majority of the anti-dilutive
shares were granted at an exercise price of $23.71, which was higher than the average fair market value price of
$21.35 for 2007. In 2006, all of the shares associated with stock options were anti-dilutive because of the
company’s loss.
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.
Prior to December 2000, the company financed equipment to certain customers. In December 2000, Invacare
entered into an agreement with De Lage Landen, Inc. (“DLL”), a third party financing company, to provide the
majority of future lease financing to Invacare’s North America customers. The DLL agreement provides for direct
leasing between DLL and the Invacare customer. The company retains a recourse obligation of $33,318,000 at
December 31, 2008 to DLL for events of default under the contracts, which total $91,588,000 at December 31,
2008. FASB Interpretation No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others, requires the company to record a guarantee liability as it
relates to the limited recourse obligation. As such, the company has recorded a liability of $850,000 for this
guarantee obligation within accrued expenses. The company monitors the collections status of these contracts and
has provided amounts for estimated losses in its allowances for doubtful accounts in accordance with SFAS No. 5,
Accounting for Contingencies. Credit losses are provided for in the financial statements.
Substantially all of the company’s receivables are due from health care, medical equipment providers 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 through
government reimbursement programs such as Medicare and Medicaid. In addition, the company has also seen a
significant shift in reimbursement to customers from managed care entities. As a consequence, changes in these
programs can have an adverse impact on dealer liquidity and profitability. In addition, reimbursement guidelines
in the home health care industry have a substantial impact on the nature and type of equipment an end user can
obtain as well as the timing of reimbursement and, thus, affect the product mix, pricing and payment patterns of
the company’s customers.
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