Invacare 2009 Annual Report Download - page 25

The company’s revenues and profits are subject to exchange rate fluctuations that could adversely affect its
results of operations or financial position.
Currency exchange rates are subject to fluctuation due to, among other things, changes in local, regional or
global economic conditions, the imposition of currency exchange restrictions and unexpected changes in
regulatory or taxation environments. The functional currency of the company’s subsidiaries outside the United
States is the predominant currency used by the subsidiaries to transact business. Through the company’s
international operations, the company is exposed to foreign currency fluctuations, and changes in exchange rates
can have a significant impact on net sales and elements of cost. The company conducts a significant number of
transactions in currencies other than the U.S. dollar. In addition, because certain of the company’s costs and
revenues are denominated in other currencies, the company’s results of operations are exposed to foreign
exchange rate fluctuations as the financial results of those operations are translated from local currency into U.S.
dollars upon consolidation.
The company uses forward contracts to help reduce its exposure to exchange rate variation risk. Despite the
company’s efforts to mitigate these risks, however, the company’s revenues and profitability may be materially
adversely affected by exchange rate fluctuations. The company also is exposed to market risk through various
financial instruments, including fixed rate and floating rate debt instruments. The company does at times use
interest swap agreements to mitigate its exposure to interest rate fluctuations, but those efforts may not
adequately protect the company from significant interest rate risks.
The company’s success depends on the company’s ability to design, manufacture, distribute and achieve
market acceptance of new products with higher functionality and lower costs.
The company sells products to customers primarily in markets that are characterized by technological
change, product innovation and evolving industry standards, yet in which product price is increasingly a primary
consideration in customers’ purchasing decisions. The company is continually engaged in product development
and improvement programs. The company must continue to design and improve innovative products, effectively
distribute and achieve market acceptance of those products, and reduce the costs of producing the company’s
products, in order to compete successfully with the company’s competitors. If competitors’ product development
capabilities become more effective than the company’s product development capabilities, if competitors’ new or
improved products are accepted by the market before the company’s products or if competitors are able to
produce products at a lower cost and 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.
Numerous initiatives and reforms instituted by legislators, regulators and third-party payors to reduce home
medical equipment costs have resulted in a consolidation trend in the home medical equipment industry as well
as among the company’s customers, including home health care providers. In the past, some of the company’s
competitors have been lowering the purchase prices of their products in an effort to attract customers. This in
turn has resulted in greater pricing pressures, including pressure to offer customers more competitive pricing
terms, and the exclusion of certain suppliers from important market segments as group purchasing organizations,
independent delivery networks and large single accounts continue to consolidate purchasing decisions for some
of the company’s customers. Further consolidation could result in a loss of customers, in increased collectability
risks, or in increased competitive pricing pressures.
Lower cost imports could negatively impact the company’s profitability.
Lower cost imports sourced from Asia may negatively impact the company’s sales volumes. In the past,
competition from certain of these products has caused the company to lower its prices, cutting into the
company’s profit margins and reducing the company’s overall profitability.
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