Invacare 2009 Annual Report Download - page 29

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The company’s senior secured credit facilities and the indenture governing its 9
3
⁄
4
% senior notes due 2015
contain various covenants that limit the company’s ability to engage in specified types of transactions. In
addition, under the company’s senior secured credit facilities, it is required to satisfy and maintain specified
financial ratios and other financial condition tests. These covenants could materially and adversely affect the
company’s ability to finance its future operations or capital needs. Furthermore, they may restrict the company’s
ability to conduct and expand its business and pursue its business strategies. The company’s ability to meet these
financial ratios and financial condition tests can be affected by events beyond its control, including changes in
general economic and business conditions.
Failure to properly manage the distribution of the company’s products may result in reduced revenue and
profitability.
The company uses a variety of distribution methods to sell its 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 through an increasing number of new distribution channels,
inventory management becomes more challenging. If the company is unable to properly manage and balance
inventory levels and potential conflicts among these various distribution methods, its operating results could be
harmed.
If the company’s patents and other intellectual property rights do not adequately protect the company’s
products, the company may lose market share to its competitors and may not be able to operate profitably.
The company relies on a combination of patents, trade secrets and trademarks to establish and protect the
company’s intellectual property rights in its products and the processes for the development, manufacture and
marketing of the company’s products.
The company uses non-patented proprietary know-how, trade secrets, undisclosed internal processes and
other proprietary information and currently employs various methods to protect this proprietary information,
including confidentiality agreements, invention assignment agreements and proprietary information agreements
with various vendors, employees, independent sales agents, distributors, consultants and others. However, these
agreements may be breached. The FDA or another governmental agency may require the disclosure of this
information in order for the company to have the right to market a product. Trade secrets, know-how and other
unpatented proprietary technology also may otherwise become known to, or independently developed by, the
company’s competitors.
In addition, the company holds U.S. and foreign patents relating to a number of its components and products
and has patent applications pending with respect to other components and products. The company also applies for
additional patents in the ordinary course of its business, as the company deems appropriate. However, these
precautions offer only limited protection, and the company’s proprietary information may become known to, or
be independently developed by, competitors, or the company’s proprietary rights in intellectual property may be
challenged, any of which could have a material adverse effect on the company’s business, financial condition and
results of operations. Additionally, the company cannot assure that its existing or future patents, if any, will
afford the company adequate protection or any competitive advantage, that any future patent applications will
result in issued patents or that the company’s patents will not be circumvented, invalidated or declared
unenforceable.
Any proceedings before the U.S. Patent and Trademark Office could result in adverse decisions as to the
priority of the company’s inventions and the narrowing or invalidation of claims in issued patents. The company
also could incur substantial costs in any proceeding. In addition, the laws of some of the countries in which the
company’s products are or may be sold may not protect the company’s products and intellectual property to the
same extent as U.S. laws, if at all. The company also may be unable to protect the company’s rights in trade
secrets and unpatented proprietary technology in these countries.
I-23