Invacare 2009 Annual Report Download

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2009 Annual Report
And Form 10-K

Table of contents

  • Page 1
    2009 Annual Report And Form 10-K

  • Page 2

  • Page 3
    ...as a return to organic sales growth, both driven by glocalization and exciting new product introductions like one of Invacare's first globally designed products, the Invacare® FDX™ front-wheel drive power wheelchair. Shared resources in Europe and the United States worked together to develop this...

  • Page 4
    ... allowed to continue billing Medicare for products sold. When competitive bidding originally took effect in 2008, Invacare's analysis of government data suggests that as many as 80% of qualified home medical equipment and service providers (including approximately 4,200 small businesses) would have...

  • Page 5
    ... it serves and beyond. For example, Invacare donated medical supplies, wheelchairs, beds, mattresses and other requested products to the earthquake relief efforts in Haiti. Invacare is also actively engaged with many organizations and events that support people with disabilities, most notably Easter...

  • Page 6
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 7
    ...public trading on any exchange or market system, shares of that class are convertible into Common Shares at any time on a share-for-share basis. The market 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, 2009...

  • Page 8
    INVACARE CORPORATION 2009 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 9
    ... product lines. The company sells its products principally to over 25,000 home health care and medical equipment providers, distributors and government locations in the United States, Australia, Canada, Europe, New Zealand and Asia. Invacare's products are sold through its worldwide distribution...

  • Page 10
    THE HOME MEDICAL EQUIPMENT INDUSTRY North America Market The home medical equipment market includes home health care products, physical rehabilitation products and other non-disposable products used for the recovery and long-term care of patients. The company believes that patients overwhelmingly ...

  • Page 11
    ...: North America/Home Medical Equipment (NA/HME), Invacare Supply Group (ISG) and Institutional Products Group (IPG). NA/HME This segment includes: Rehab, Standard and Respiratory product lines as discussed below. REHAB PRODUCTS Power Wheelchairs. Invacare manufactures a complete line of power...

  • Page 12
    ... surface to surface (bed to chair) or transporting from room to room. Designed for use in the home and institutional settings, these products include patient lifts and slings, and a series of mobile, multifunctional recliners. RESPIRATORY PRODUCTS HomeFill Oxygen Filling System. Invacare has sold...

  • Page 13
    ...and power wheelchairs, lifts, ramps, beds, furniture and pressure care products; Dynamic Controls, a manufacturer of electronic operating components used in power wheelchairs, scooters, respiratory and other products; Invacare New Zealand, a distributor of a wide range of home medical equipment; and...

  • Page 14
    ... AND DISTRIBUTION North America and Asia/Pacific Invacare products are marketed in the United States and Asia/Pacific primarily to providers who in turn sell or rent these products directly to consumers within the non-acute care setting. Invacare's primary customer is the home medical equipment (HME...

  • Page 15
    ... with the Invacare brand promise. The company markets products and services to the institutional care market through IPG. IPG products include beds and furnishings, patient handling, bathing, therapeutic support surfaces and durable medical equipment products. IPG sales and marketing organizations...

  • Page 16
    ..., product sales are typically made through dealers of medical equipment and, in certain markets, directly to government agencies. In 2009, the consolidation of big buying groups tending to develop their business on a European scale has continued. As a result, Invacare is generalizing the application...

  • Page 17
    ...3G Pediatric Tilt-in-Space Wheelchair as a new pediatric offering. Improvements include a compact sleek design, accessories like Bodypoint® positioning products and easy growth, tilt and adjustment for parent or caregiver. The new Invacare® SOLO2™ Transportable Oxygen Concentrator is designed to...

  • Page 18
    ... have a high risk of developing pressure ulcers. Individual interconnected air cells allow free movement of air within the cushion, which allows the level of air to be individually adjusted to body shape thus maximizing immersion. The unique design of the Invacare® Softform Premier Active features...

  • Page 19
    ... and key suppliers. The operational strategy further supports the marketing strategy with flexible providers of new and modified products that respond to the demands of the market. The supply chain is focused on providing custom-configured, made-to-order manufactured products as well as high-quality...

  • Page 20
    ... assembly of a variety of standard manual wheelchairs and personal care products. The company operates four major factories located in Elyria, Ohio; Sanford, Florida; London, Ontario and Reynosa, Mexico. Asia/Pacific The company has as it key strategic imperatives to improve its customer delivery...

  • Page 21
    ... to address the lack of support from Congress. In addition, the company's respiratory products (for example, the low-cost HomeFill® oxygen delivery system) can help offset the Medicare reimbursement cuts to the home care provider. The company will continue to focus on developing products that...

  • Page 22
    ... suppliers and on the demand for our products of the current global economic downturn and general volatility in the credit and stock markets; loss of key health care providers; exchange rate and tax rate fluctuations; inability to design, manufacture, distribute and achieve market acceptance of new...

  • Page 23
    ...services provided to their customers and patients by third-party payors, such as government programs, including Medicare and Medicaid, private insurance plans and managed care programs. Most of these programs set maximum reimbursement levels for some of the products sold by the company in the United...

  • Page 24
    ...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, Germany, France...

  • Page 25
    ...thus offer products for sale at a lower price, the company's business, financial condition and results of operation could be adversely affected. The consolidation of health care customers and the company's competitors could result in a loss of customers or in additional competitive pricing pressures...

  • Page 26
    ... and operating businesses in many different foreign jurisdictions. The company has significant international operations, including operations in Australia, New Zealand, Mexico, Asia (primarily China) and Europe. There are risks inherent in operating and selling products internationally, including...

  • Page 27
    ... component failures, manufacturing errors or design defects, including defects in labeling. Any recall/field correction 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...

  • Page 28
    ... of operations, liquidity or financial condition or its reputation. 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...

  • Page 29
    ... products and services. The company's distribution network includes various customers such as specialized home health care providers and extended care facilities, hospital and HMO-based stores, home health agencies, mass merchandisers and the Internet. As the company reaches more customers worldwide...

  • Page 30
    ... 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 third...

  • Page 31
    ... 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 32
    ...'s results of operations. In addition, the perceived benefits of these trends may be offset by competitive or business factors, such as the introduction of new products by the company's competitors or the emergence of other countervailing trends, including lower reimbursement and pricing. Decreased...

  • Page 33
    ...'s customers. The loss of the services of the company's key management and personnel could adversely affect its ability to operate the company's business. The company's future success will depend, in part, upon the continued service of key managerial, research and development staff and sales and...

  • Page 34
    ... rights plan and Ohio law may make it more difficult for a third party to acquire, or attempt to acquire, control of the company even if a change in control would result in the purchase of shares of the company at a premium to market price. In addition, these provisions may limit the ability...

  • Page 35
    ..., adequately insured and suitable for their present and intended uses. Information concerning certain leased facilities of the company as of December 31, 2009 is set forth in Leases and Commitments in the Notes to the Consolidated Financial Statements of the company included in this report and in...

  • Page 36
    Invacare Supply Group Square Feet Ownership Or Expiration Date of Lease Renewal Options Use Grand Prairie, Texas ...Jacksonville, Florida ...Jamesburg, New Jersey ...Milford, Massachusetts ...Rancho Cucamonga, California ...South Bend, Indiana ...Institutional Products Group 87,508 79,652 83,...

  • Page 37
    ..., Sweden ...Oslo, Norway ...Pencoed, United Kingdom ...Porta Westfalica, Germany ...Spanga, Sweden ...Spanga, Sweden ...St. Cyr sur Loire, France ...Thiene, Italy ...Thiene, Italy ...Trondheim, Norway ...Witterswil, Switzerland ...Witterswil, Switzerland ...Witterswil, Switzerland ... 78,523 47,576...

  • Page 38
    ... Holdings Corp. (NASDAQ), Cleveland, Ohio, a diversified manufacturing services and products holding company. Mr. Mixon serves as Chairman of the Board of Trustees of The Cleveland Clinic Foundation, Cleveland, Ohio, one of the world's leading academic medical centers. Mr. Mixon previously served on...

  • Page 39
    ... of Product Development from July 1984 to September 1992 and Senior Vice President and General Manager of North American Operations from September 1989 to September 1992. Mr. Richey is also a member of the Board of Trustees for Case Western Reserve University and The Cleveland Clinic Foundation...

  • Page 40
    ...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 members. Class...

  • Page 41
    ...companies listed on the Standard & Poor's 500 Stock Index, the Russell 2000 Stock Index and the S&P Healthcare Equipment & Supplies Index*. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Invacare Corporation, The S&P 500 Index, The Russell 2000 Index And S&P Healthcare Equipment & Supplies $140...

  • Page 42
    ... the company'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 (1) Period Total Number of Shares Purchased Average Price Paid Per Share 10/1/2009-10/31/09 ...11...

  • Page 43
    ... in this Form 10-K. 2009 * 2008 ** 2007 *** 2006 **** 2005 ***** (In thousands, except per share and ratio data) Earnings Net Sales ...Net Earnings (loss) ...Net Earnings (loss) per Share-Basic ...Net Earnings (loss) per Share-Assuming Dilution ...Dividends per Common Share ...Dividends per Class...

  • Page 44
    ... increase was driven by performance in NA/HME, ISG and Europe. North America/Home Medical Equipment NA/HME net sales increased 0.9% in 2009 versus the prior year to $748,401,000 from $741,502,000 with acquisitions increasing net sales by one percentage point while foreign currency translation...

  • Page 45
    ... seating and positioning), Standard (manual wheelchairs, personal care, home care beds, low air loss therapy and patient transport), and Respiratory (oxygen concentrators, HomeFill® oxygen delivery systems, sleep apnea, aerosol therapy and other respiratory) products. The standard product line net...

  • Page 46
    ... in margin is primarily attributable to selective price increases introduced in the second half of 2008 and cost reduction activities associated with commodity and freight costs. Gross profit in Europe as a percentage of net sales declined 0.7 percentage points in 2009 from the prior year. The...

  • Page 47
    ... maintain its competitive advantage. The company dedicates funds to applied research activities to 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 $25,725,000 in 2009 from...

  • Page 48
    ...seating and positioning), Standard (manual wheelchairs, personal care, home care beds, low air loss therapy and patient transport), and Respiratory (oxygen concentrators, HomeFill® oxygen delivery systems, sleep apnea, aerosol therapy and other respiratory) products. Standard product line net sales...

  • Page 49
    ... and pricing pressures in Germany. Gross profit in Asia/Pacific as a percentage of net sales improved by 8.3 percentage points in 2008 from the prior year. The increase was largely due to cost reduction activities including the move of controller manufacturing from New Zealand to China, which...

  • Page 50
    ...and development activities to maintain its competitive advantage. The company dedicates funds to applied research activities to 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...

  • Page 51
    LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain an adequate liquidity position through its unused bank lines of credit (see Long-Term Debt in the Notes to Consolidated Financial Statements included in this report) and working capital management. The company's debt decreased by $153...

  • Page 52
    ... its financing obligations or extend credit to the company's customers; one or more customers of the company may be unable to pay for purchases of the company's products on a timely basis; one or more key suppliers may be unable or unwilling to provide critical goods or services to the company; and...

  • Page 53
    ... as follows (in thousands): Twelve Months Ended December 31, 2009 2008 Net cash provided by operating activities ...Plus: Net cash impact related to restructuring activities ...Less: Purchases of property and equipment-net ...Free Cash Flow ...CONTRACTUAL OBLIGATIONS $155,663 $ 76,414 2,771 3,211...

  • Page 54
    ..., which may include obtaining a credit application, a signed security agreement, personal guarantee and/or a cross corporate guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of their credit report and/or other relevant...

  • Page 55
    ... reserve for the individual item. The company continues to increase its overseas sourcing efforts, increase its emphasis on the development and introduction of new products, and decrease the cycle time to bring new product offerings to market. These initiatives are sources of inventory obsolescence...

  • Page 56
    ...in annual aggregate losses arising from individual claims anywhere in the world that exceed the captive insurance company policy limits or the limits of the company's per country foreign liability limits, as applicable. There can be no assurance that Invacare's current insurance levels will continue...

  • Page 57
    ... to FASB Staff Position 157-2, Effective Date of FASB Statement No. 157. The adoption of FAS 157 on January 1, 2009 for assets and liabilities measured at fair value on a nonrecurring basis had no material impact on the company's financial position, results of operations or cash flows. In December...

  • Page 58
    ..., and disclosures about credit-risk-related contingent features in derivative agreements. The company adopted ASC 815 effective January 1, 2009 and the adoption had no material impact on the company's financial position, results of operations or cash flows. On May 9, 2008, FASB Staff Position APB 14...

  • Page 59
    ...; a Code of Conduct; written policies and procedures; and a careful selection and training of employees. Actions are taken to correct deficiencies as they are identified. An effective internal control system, no matter how well designed, has inherent limitations-including the possibility of the...

  • Page 60
    ... 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 61
    ... the executive officers of the company is included in Part I of this Annual Report on Form 10-K. The other information required by Item 10 as to the directors of the company, the Audit Committee, the audit committee financial expert, the procedures for recommending nominees to the Board of Directors...

  • Page 62
    ... 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 26, 2010. INVACARE CORPORATION By: /s/ A. MALACHI MIXON, III A. Malachi Mixon, III Chairman of the Board of Directors and Chief Executive Officer...

  • Page 63
    ... Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated as of February 26, 2010. Signature Title /s/ A. MALACHI MIXON, III A. Malachi Mixon, III Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer...

  • Page 64
    INVACARE CORPORATION Report on Form 10-K for the fiscal year ended December 31, 2009. Exhibit Index Official Exhibit No. Description Sequential Page No. 2.1 Sale and Purchase Agreement Regarding the Sale and Purchase of All Shares in WP Domus GmbH by and among WP Domus LLC, Mr. Peter Schultz and ...

  • Page 65
    ...Switzerland Stock Option Award under Invacare Corporation 2003 Performance Plan Form of Switzerland Executive Stock Option Award under Invacare Corporation 2003 Performance Plan Director Compensation Schedule Invacare Corporation Executive Incentive Bonus Plan, effective as of January 1, 2005 Credit...

  • Page 66
    ...1 to the Invacare Corporation Deferred Compensation Plus Plan, effective August 19, 2009 Amendment No. 1 to the Cash Balance Supplemental Executive Retirement Plan, effective August 19, 2009 Third Amendment to Credit Agreement, dated as of December 9, 2009, by and among Invacare Corporation, certain...

  • Page 67
    ... the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Management contract, compensatory plan or arrangement Filed herewith Reference is made to the appropriate Exhibit to the company report on Form 8-K, dated September...

  • Page 68
    ... is made to the appropriate Exhibit of the company report on Form 10-Q, dated June 30, 2009, which is incorporated herein by reference. Reference is made to the appropriate Exhibit of the company report on Form 8-A, dated October 30, 2009, which is incorporated herein by reference. Reference is made...

  • Page 69
    ... with the standards of the Public Company Accounting Oversight Board (United States), Invacare Corporation's internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations...

  • Page 70
    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders Invacare Corporation We have audited Invacare Corporation's internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued...

  • Page 71
    ... OF OPERATIONS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2009 2008 (1) 2007 (1) (In thousands, except per share data) Net sales ...Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ...Charges related to restructuring activities ...Debt...

  • Page 72
    ...INVACARE CORPORATION AND SUBSIDIARIES December 31, December 31, 2009 2008 (1) (In thousands) Assets Current Assets Cash and cash equivalents ...Trade receivables, net ...Installment receivables, net ...Inventories, net... $1,314,473 (1) Adjusted to reflect the retrospective application of FSP APB 14...

  • Page 73
    ... OF CASH FLOWS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2009 2008 (1) 2007 (1) (In thousands) Operating Activities Net earnings (loss) ...$ 41,179 $ 34,857 $ (1,714) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and...

  • Page 74
    ... stock option expense ...Restricted 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 and credits ...Plan amendment giving rise to prior service credit...

  • Page 75
    ...Nature of Operations: Invacare Corporation is the world's leading manufacturer and distributor in the estimated $8.0 billion worldwide market for medical equipment and supplies used in the home based upon the company's distribution channels, breadth of product line and net sales. The company designs...

  • Page 76
    ..., which may include obtaining a credit application, a signed security agreement, personal guarantee and/or a cross corporate guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of their credit report and/or other relevant...

  • Page 77
    ... payment, base and trade discounts based on contract level for specific classes of customers. Volume discounts and rebates are given based on large purchases and the achievement of certain sales volumes. Product returns are accounted for as a reduction to reported sales with estimates recorded for...

  • Page 78
    ... outside the United States is the applicable local currency. The assets and liabilities of the company's foreign subsidiaries are translated into U.S. dollars at year-end exchange rates. Revenues and expenses are translated at monthly weighted average exchange rates. Gains and losses resulting from...

  • Page 79
    ...business combination. The company adopted SFAS 141R as of January 1, 2009 and the adoption had no material impact on the company's financial position, results of operations or cash flows... 2009, resulted in retrospective application and accordingly reported interest expense was increased and net ...

  • Page 80
    ... 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 81
    ... purchase price and reported goodwill. On November 27, 2007, Invacare Corporation acquired RoadRunner Mobility, Inc., a Texas corporation and a leading repairer of power wheelchairs supporting the equipment service needs of the Medicare beneficiary through a national network of service centers...

  • Page 82
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Goodwill The carrying amount of goodwill by operating segment is as follows (in thousands): North America / HME Invacare Supply Group Institutional Products Group Asia/ Pacific Europe Consolidated Balance...

  • Page 83
    ... the company's 2009 intangible impairment review, impairment charges of $896,000 and $800,000 were recorded related to trademarks for Europe and a customer list for NA/HME, respectively, as the actual cash flows associated with these intangibles were less than the cash flows originally used to value...

  • Page 84
    ...): 2009 2008 Salaries and wages ...Warranty cost ...Taxes other than income taxes, primarily Value Added Taxes ...Freight ...Interest ...Professional ...Product liability, current portion ...Rebates ...Insurance ...Derivative liability ...Severance ...Other items, principally trade accruals...

  • Page 85
    ...NA/HME operating segment. In February 2007, the company also completed the sale of $175,000,000 principal amount of its 9.75% Senior Notes due 2015 (the "Senior Notes") to qualified institutional buyers pursuant to Rule 144A and to non-U.S. persons outside the United States in reliance on Regulation...

  • Page 86
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Long-Term Debt-Continued conversion rate is 40.3323 shares per $1,000 principal amount of debentures, which represents an initial conversion price of approximately $24.79 per share. Holders of the debentures...

  • Page 87
    ..., transportation equipment, data processing equipment and certain other equipment. These leases have terms from 1 to 20 years and provide for renewal options. Generally, the company is required to pay taxes and normal expenses of operating the facilities and equipment. As of December 31, 2009...

  • Page 88
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Retirement and Benefit Plans Substantially all full-time salaried and hourly domestic employees are included in the Invacare Retirement Savings Plan sponsored by the company. The company makes matching cash ...

  • Page 89
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Retirement and Benefit Plans-Continued In conjunction with these non-qualified plans, the company has invested in life insurance policies related to certain employees to help satisfy these future obligations...

  • Page 90
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Shareholders' Equity Transactions-Continued The following table summarizes information about stock option activity for the three years ended December 31, 2009, 2008 and 2007: Weighted Average Exercise Price ...

  • Page 91
    ...) Shareholders' Equity Transactions-Continued 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: 2009 2008 2007 Expected dividend yield ...Expected stock price volatility ...Risk-free...

  • Page 92
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Capital Stock Capital stock activity for 2009, 2008 and 2007 consisted of the following (in thousands of shares): Common Stock Shares Class B Shares Treasury Shares January 1, 2007 Balance ...Exercise of ...

  • Page 93
    ...of prior service costs and unrecognized losses related to Defined benefit plans ...188 Current period unrealized gain on cash flow hedges, net of reclassifications ...3,360 Deferred tax loss relating to unrealized gain on derivative financial instruments ...(31) Balance at December 31, 2009 ...$ 174...

  • Page 94
    ...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 product rationalization...

  • Page 95
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Charges Related to Restructuring Activities-Continued Severance Product Line Discontinuance Contract Terminations Other Total December 31, 2006 Balance NA/HME ...ISG ...Europe ...Asia/Pacific ...Total ......

  • Page 96
    ... Activities-Continued Severance Product Line Discontinuance Contract Terminations Other Total Accruals NA/HME ...ISG ...IPG ...Europe ...Asia/Pacific ...Total ...Payments NA/HME ...ISG ...IPG ...Europe ...Asia/Pacific ...Total ...December 31, 2009 Balance NA/HME ...IPG ...Europe ...Asia/Pacific...

  • Page 97
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income Taxes-Continued Included in the 2009 Federal current tax benefit is a benefit of $7,750,000 resulting from the carryback of the 2008 Federal domestic net operating loss as a result of the Worker, ...

  • Page 98
    ... are as follows (in thousands): 2009 2008 Current deferred income tax assets (liabilities), net: Loss carryforwards ...Bad debt ...Warranty ...State and local taxes ...Other accrued expenses and reserves ...Inventory ...Compensation and benefits ...Product liability ...Valuation allowance ...Other...

  • Page 99
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income Taxes-Continued 2012 and $366,700,000 of domestic state and local tax loss carryforwards, of which $207,200,000 expire between 2010 and 2013, $79,100,000 expire between 2014 and 2023 and $80,400,000 ...

  • Page 100
    ... conversion price. 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. In December 2000, Invacare entered...

  • Page 101
    ... of 2009 net sales. The loss of business of one or more of these customers may have a significant impact on the company, although no single customer accounted for more than 3.3% of the company's 2009 net sales. Providers who are part of a buying group generally make individual purchasing decisions...

  • Page 102
    ... forward contracts to hedge portions of its forecasted purchases/sales denominated in foreign currencies. The gains and losses are included in cost of products sold and selling, general and administrative expenses on the consolidated statement of operations. If it is later determined that a hedged...

  • Page 103
    ..., no material net gain or loss was realized by the company for the year ended December 31, 2009 related to these forward contracts and the associated short-term intercompany trading receivables and payables. As of December 31, 2009, foreign exchange forward contracts not qualifying or designated for...

  • Page 104
    ...contracts are recognized in net sales for hedges of inventory sales or cost of product sold for hedges of inventory purchases. In 2009, net sales were increased by $3,093,000 and cost of product sold was increased by $3,432,000 for a net realized loss of $338,000 compared to a net loss of $26,000 in...

  • Page 105
    ...December 31, 2009 Marketable Securities ...Forward Exchange Contracts-net ...Total ... $ 3 (266) $ - $ 3 3 $- (266) $(266) $- - $- $(263) Marketable Securities: The company's marketable securities are recorded based on quoted prices in active markets multiplied by the number of shares owned...

  • Page 106
    ...,000 in 2009, a net loss of $26,000 in 2008 and a net gain of $451,000 in 2007. Gains or losses recognized as the result of the settlement of forward contracts are recognized in cost of products sold for hedges of inventory transactions, sales for hedges of forecasted sales or selling, general and...

  • Page 107
    ... reporting units for impairment in which the company forecasts income statement and balance sheet amounts based on assumptions regarding future sales growth, profitability, inventory turns, days' sales outstanding, etc. to forecast future cash flows. The cash flows are discounted using a weighted...

  • Page 108
    ...of $800,000. Business Segments The company operates in five primary business segments: North America/Home Medical Equipment (NA/HME), Invacare Supply Group (ISG), Institutional Products Group (IPG), Europe and Asia/Pacific. The NA/HME segment sells each of three primary product lines, which includes...

  • Page 109
    ...): 2009 2008 2007 Revenues from external customers North America/HME ...Invacare Supply Group ...Institutional Products Group ...Europe ...Asia/Pacific ...Consolidated ...Intersegment revenues North America/HME ...Invacare Supply Group ...Institutional Products Group ...Europe ...Asia/Pacific...

  • Page 110
    ...) Business Segments-Continued 2009 2008 2007 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 111
    ...Business Segments-Continued Net sales by product, are as follows (in thousands): 2009 2008 2007 North America/HME Standard ...Rehab ...Respiratory ...Other ...Invacare Supply Group Distributed ...Institutional Products Group Continuing Care ...Europe Standard ...Rehab ...Respiratory ...Asia/Pacific...

  • Page 112
    ... Information-Continued CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total Year ended December 31, 2009 Net sales ...Cost of products sold ...Gross Profit ...Selling, general...

  • Page 113
    ... Guarantor Information-Continued CONSOLIDATING CONDENSED BALANCE SHEETS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total December 31, 2009 Assets Current Assets Cash and cash equivalents ...Trade receivables, net...

  • Page 114
    ... ...Trade receivables, net ...Installment receivables, net ...Inventories, net ...Deferred income taxes ...Other current assets ...Total Current Assets ...Investment in subsidiaries ...Intercompany advances, net ...Other Assets ...Other Intangibles ...Property and Equipment, net ...Goodwill...

  • Page 115
    ... CASH FLOWS The Company (Parent) Combined Guarantor Subsidiaries Combined Non-Guarantor Subsidiaries (in thousands) Eliminations Total Year ended December 31, 2009 Net Cash Provided (Used) by Operating Activities ...Investing Activities Purchases of property and equipment ...Proceeds from sale of...

  • Page 116
    ...(in thousands) Eliminations Total Year ended December 31, 2008 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 long-term...

  • Page 117
    ...(in 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 long-term...

  • Page 118
    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, 2009 Net sales ...Gross profit ...Earnings before income taxes ......

  • Page 119
    ... 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. $23,090 12,419 75,507 16,798...

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    ...not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. INVACARE CORPORATION /s/ A. MALACHI MIXON, III A. Malachi Mixon, III Chief Executive Officer (Principal Executive Officer) b) Date: February 26, 2010

  • Page 122
    ...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... control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons...

  • Page 123
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2009 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 124
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2009 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert K. Gudbranson, Chief Financial Officer of the company, certify...

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