Invacare 2011 Annual Report Download

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2011 Annual Report
And Form 10-K

Table of contents

  • Page 1
    2011 Annual Report And Form 10-K

  • Page 2

  • Page 3
    ...the Company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio. The Company is working expeditiously to finalize discussions with the FDA, and continues to add resources in order to make systemic improvements to ensure full compliance with the FDA's QSR. Invacare has more...

  • Page 4
    ... solutions selling approach for wound therapies, safe patient handling and other rental applications in institutional settings. These offerings will enhance the Company's ability to serve the needs of its long-term care providers whether they opt to purchase or rent capital equipment as market...

  • Page 5
    ... hospitalizations. Home healthcare is the next great medical frontier." Invacare is well positioned in the home and long-term care markets to be a key part of the solution in healthcare reform. Updates on the Board of Directors In May 2011, Baiju R. Shah, president and chief executive officer of...

  • Page 6
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  • Page 7
    ...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, 2011, which was $33...

  • Page 8
    INVACARE CORPORATION 2011 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 ...Mine Safety Disclosures ...Executive Officers of the Registrant ...PART II: Market for the Registrant's Common ...

  • Page 9
    ... 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 network by its sales force...

  • Page 10
    ...Market The home medical equipment (HME) market includes home health care products, physical rehabilitation products and other non-disposable products used for the recovery and long-term care of patients. As healthcare spending continues to escalate around the world, particularly in the United States...

  • Page 11
    ...the following segments in the United States and Canada: North America/Home Medical Equipment (NA/HME), Invacare Supply Group (ISG) and Institutional Products Group (IPG). NA/HME This segment primarily includes: Mobility and Seating, Lifestyle and Respiratory Therapy product lines as discussed below...

  • Page 12
    ..., walkers, knee walkers and wheeled walkers. Also available are safety aids such as tub transfer benches, shower chairs and grab bars, and patient care products such as commodes and other toilet assist aids. Homecare Beds. Invacare manufactures and distributes a wide variety of manual, semi-electric...

  • Page 13
    ... and Invacare New Zealand, which distributes a wide range of home medical equipment including mobility and seating, lifestyle and respiratory therapy products to homecare and long-term care markets; and Dynamic Controls, a manufacturer of electronic operating components used in power wheelchairs...

  • 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 customers are home medical equipment (HME...

  • Page 15
    ...services organization and a team of clinical professionals who call on clinical decision makers. IPG products include beds and furnishings, patient handling, bathing, durable medical equipment and clinical therapies, such as therapeutic support surfaces and negative pressure wound therapy. IPG sales...

  • Page 16
    ... through dealers of medical equipment and, in certain markets, products are sold directly to government agencies. In 2011, the continued consolidation of big buying groups tending to develop their business on a European scale has continued. As a result, Invacare is generalizing the application of...

  • Page 17
    ...both homecare and continuing care medical device equipment. This will uniquely position the company in a changing healthcare environment. The following are some of Invacare's notable new products and product updates for 2011: Global Products The patented design of the Invacare® GlissandoTM mattress...

  • Page 18
    ... and personalized adjustments for the consumer. The Myon™ wheelchair is based off of a successful European platform and launched in Canada in 2011. Local Products In 2011 the Invacare® VerandaTM low active manual wheelchair product was expanded in the United States from the existing 18 inch seat...

  • Page 19
    ... final assembly of a variety of standard manual wheelchairs and personal care products in North America. The company operates four major factories located in Elyria, Ohio; Sanford, Florida; London, Ontario and Reynosa, Mexico. Asia/Pacific The Asia/Pacific region is focused on improving its customer...

  • Page 20
    ...adopted regulations relating to the design, manufacture and marketing of health care products. In December 2011, the FDA requested that the company negotiate and agree to a consent decree of injunction at the company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the...

  • Page 21
    ...that limits any annual cost of living increases applied to the fee schedules. The 2010 health care reform law also includes a new tax on U.S. sales of medical device manufacturers or importers, such as Invacare. The law will impose a yearly 2.3% sales-based excise tax on medical device manufacturers...

  • Page 22
    ...Company's products resulting from the current global economic conditions 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 products with...

  • Page 23
    ... consequences to the company's business. The company received inspectional observations (known as FDA Form-483s) in connection with inspections in 2010 and 2011 of its corporate facility and its wheelchair manufacturing facility in Elyria, Ohio. In December 2011, the FDA requested that the company...

  • Page 24
    ... 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 25
    ... 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 26
    ...by country. Many foreign 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...

  • Page 27
    ... negatively impacted. In response to reimbursement reductions and competitive pricing pressures, the company continues to initiate numerous cost reduction and organizational efficiency efforts, including globalization of its product lines. The company may not be successful in achieving the operating...

  • Page 28
    ... of operations. 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...

  • Page 29
    ... inherent in managing and operating businesses in many different foreign jurisdictions. The company has significant international operations, including operations in Australia, Canada, New Zealand, Mexico, Asia (primarily China) and Europe. There are risks inherent in operating and selling products...

  • Page 30
    ... 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 devices...

  • Page 31
    ... 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 the company's current insurance levels will continue to be adequate or available at affordable rates. Product liability reserves are...

  • Page 32
    ... the company's overall profitability. 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...

  • Page 33
    ... could make it difficult or impossible for the company to deliver products or for the company's suppliers to deliver materials, and could create delays and inefficiencies in the company's manufacturing operations. The company's Chairman of the Board of Directors and certain members of management own...

  • Page 34
    ...that are necessary in the design and manufacture of some of the company's products. The loss of these licenses could prevent the company from, or could cause additional disruption or expense in, manufacturing, marketing and selling these products, which could harm the company's business. The company...

  • Page 35
    ... to realize operating efficiencies, synergies, or other benefits expected from an acquisition, and possible delays in realizing the benefits of the acquired company or products; diversion of management's time and attention from other business concerns; difficulties in retaining key employees of the...

  • Page 36
    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 technical ...

  • Page 37
    ..., Ohio ...Pharr, Texas ...Pinellas Park, Florida ...Pinellas Park, Florida ...Reynosa, Mexico ...Sanford, Florida ...Scarborough, Ontario ...Shenzhen, China ...Simi Valley, California ...Spicewood, Texas ...Suzhou, China ...Suzhou, China ...Tonawanda, New York ...Vaughan, Ontario ...Invacare Supply...

  • Page 38
    ..., Australia ...Carrum Downs, VIC, Australia ...Christchurch, New Zealand ...Christchurch, New Zealand ...Kidderminster, United Kingdom ...Malaga, WA, Australia ...Netley, SA, Australia ...North Olmsted, Ohio ...North Rocks, NSW, Australia ...Shanghai, China ...European Operations Albstadt, Germany...

  • Page 39
    ...any of these actions will have a material adverse effect upon the company's business or financial condition. In December 2010, the FDA requested that the company agree to a consent decree of injunction at the company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the...

  • Page 40
    ... specific corporate governance reforms. In accordance with the company's organizational documents and indemnification agreements entered into between the company and its executive officers and directors, the costs of the shareholder derivative lawsuits brought by both the Lansing Retirement System...

  • Page 41
    ... President-General Counsel and Secretary President-Invacare Technologies, Senior Vice President-Electronics and Design Engineering and Director Senior Vice President-Corporate Marketing and Chief Product Officer Senior Vice President-Human Resources Senior Vice President-Global Commercial Operations...

  • Page 42
    ...the Human Resources Group from August 2006 until August 2009. She also has prior experience in healthcare, small business and the services industry. She holds a B.A. in Psychology and M.B.A. from The University of Toledo. Carl E. Will has been Senior Vice President-Global Commercial Operations since...

  • Page 43
    ... Matters and 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...

  • Page 44
    ...Inc. All rights reserved. * The S&P Healthcare Equipment & Supplies Index is a capitalization-weighted average index comprised of health care companies in the S&P 500 Index. The graph assumes $100 invested on December 31, 2006 in the common shares of Invacare Corporation, S&P 500 Index, Russell 2000...

  • Page 45
    ... months ended December 31, 2011. 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 (2) Period Total Number of Shares Purchased (1) Average Price Paid Per Share 10/1/2011-10/31/11 ...11...

  • Page 46
    ... Results of Operations" and the company's Consolidated Financial Statements and Notes thereto included elsewhere in this Form 10-K. 2011 * 2010 ** 2009 *** 2008 **** 2007 ***** (In thousands, except per share and ratio data) Earnings Net Sales ...Net Earnings (loss) ...Net Earnings (loss) per Share...

  • Page 47
    ... seating products. Specifically, net sales increases in stationary and portable oxygen concentrators and Invacare® Homefill® Oxygen systems were partially offset by decreases in net sales of powered mobility products including custom and consumer power wheelchairs. Invacare Supply Group (ISG) ISG...

  • Page 48
    ...result of unfavorable product mix toward lower margin product and lower margin customers, pricing pressures primarily in personal care products and unfavorable foreign currency transactions. Gross profit in Asia/Pacific as a percentage of net sales increased by 1.4 percentage points in 2011 from the...

  • Page 49
    ... the segment. In December 2011, the FDA requested that the company agree to a consent decree of injunction at the company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the proposed terms of which would require the suspension of certain operations at those facilities...

  • Page 50
    ... to losses without benefit, and due to valuation allowances in the United States, Denmark, Australia and New Zealand. See "Income Taxes" in the Notes to the Consolidated Financial Statements included elsewhere in this report for more detail. Research and Development. The company continues to invest...

  • Page 51
    ...in 2010, driven by increased volumes in standard wheelchairs, beds and therapeutic support surfaces. Mobility and Seating product line net sales increased by 2.0% in 2010 primarily driven by increases in custom power products. Invacare Supply Group ISG net sales increased 6.1% in 2010 over the prior...

  • Page 52
    ... was primarily a result of unfavorable product mix toward lower margin product and unfavorable foreign currency transactions partially offset by cost reduction activities associated with commodity costs. Gross profit in Asia/Pacific as a percentage of net sales increased by 4.3 percentage points in...

  • Page 53
    ... other investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return and the...

  • Page 54
    ... increased sales volumes, capital expenditure programs designed to improve productivity, alternative sourcing of material and other cost control measures. LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain an adequate liquidity position through its unused bank lines of credit (see...

  • Page 55
    ... customers; interest rates on the company's variable rate debt could increase significantly; 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...

  • Page 56
    .... Free cash flow is a non-GAAP financial measure that is comprised of net cash provided by operating activities, excluding net cash impact related to restructuring activities, less net purchases of property and equipment, net of proceeds from sales of property and equipment. Management believes that...

  • Page 57
    ... 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 anticipated returns at the time of sale. The company...

  • Page 58
    ... customers as needed. The company continues to closely monitor the credit-worthiness of its customers and adhere to tight credit policies. During the first quarter of 2011, the Centers for Medicare and Medicaid Services implemented the single payment amounts for Round 1 of the National Competitive...

  • Page 59
    ... for the reporting unit. In December 2011, the FDA requested that the company agree to a consent decree of injunction at the company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the proposed terms of which would require the suspension of certain operations at those...

  • Page 60
    ... in a 230 basis point risk premium to the discount rate used to reflect the increased uncertainty with the company's forecasted cash flows for the reporting unit. The risk premium adjustment was calculated by the company by considering the decline in the company's stock price as well as the company...

  • Page 61
    ...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 to be adequate or available at affordable rates. Product liability reserves are...

  • Page 62
    ... to be adopted for the company's first quarter 2012 Form 10-Q. The company does not believe ASU 2011-05 will have a material impact on the company's financial position, results of operations or cash flows. Item 7A. Quantitative and Qualitative Disclosure about Market Risk. The company is exposed to...

  • Page 63
    ...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 circumvention...

  • Page 64
    company's internal control over financial reporting, which is included in this Annual Report on Form 10-K on page FS-2. (d) Changes in Internal Control Over Financial Reporting There have been no changes in the company's internal control over financial reporting that occurred during the company's ...

  • Page 65
    ...III Item 10. Directors, Executive Officers and Corporate Governance. Information required by Item 10 as to 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...

  • Page 66
    ... page number I-62 of this Report on Form 10-K. Pursuant to the requirements of Section 13 or 15(d) of the Securities 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 27, 2012. INVACARE CORPORATION...

  • Page 67
    ...the following persons on behalf of the Registrant and in the capacities indicated as of February 27, 2012. Signature Title /S/ A. MALACHI MIXON, III A. Malachi Mixon, III Chairman of the Board of Directors /S/ GERALD B. BLOUCH Gerald B. Blouch President and Chief Executive Officer and Director...

  • Page 68
    ... Officer Invacare Corporation 401(K) Plus Benefit Equalization Plan, effective January 1, 2003, as amended and restated Invacare Corporation Amended and Restated 2003 Performance Plan Form of Change of Control Agreement entered into by and between the company and certain of its executive officers...

  • Page 69
    ... Agreement by and among Invacare Corporation, the Subsidiary Guarantors named therein, and the Initial Purchasers named therein dated as of February 5, 2007 Form of Rule 10b5-1 Sales Plan entered into between the company and certain of its executive officers and other employees and a schedule of all...

  • Page 70
    ... effective January 1, 2012 Amendment No. 3 to Invacare Corporation Deferred Compensation Plus Plan, effective January 1, 2005 Subsidiaries of the company Consent of Independent Registered Public Accounting Firm Certification of the Chief Executive Officer pursuant to Section 302 of the SarbanesOxley...

  • Page 71
    ...company report on Form 8-K,...company report on Form 10...report on Form...report on Form ...report on Form 8-K, dated May 21, 2009, which Exhibit is incorporated herein by reference. Reference is made to Exhibit 3.1 of the company report on Form... report on Form ...company report on Form ...company report on Form ...

  • Page 72
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  • Page 73
    ... the consolidated financial position of Invacare Corporation and subsidiaries at December 31, 2011 and 2010, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with U. S. generally accepted accounting...

  • Page 74
    ... the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Invacare Corporation and subsidiaries as of December 31, 2011 and 2010 and the related consolidated statements of operations, cash flows and shareholders' equity for each of the three...

  • Page 75
    ... STATEMENT OF OPERATIONS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2011 2010 2009 (In thousands, except per share data) Net sales ...Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ...Charges related to restructuring activities ...Loss on...

  • Page 76
    CONSOLIDATED BALANCE SHEETS INVACARE CORPORATION AND SUBSIDIARIES December 31, December 31, 2011 2010 (In thousands) Assets Current Assets Cash... issued in 2011 and 2010, respectively)-no par ...Class B Common Shares (Authorized 12,000 shares; 1,086 and 1,086, issued and outstanding in 2011 and 2010,...

  • Page 77
    ... STATEMENT OF CASH FLOWS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2011 2010 2009 (In thousands) Operating Activities Net earnings (loss) ...$ (4,113) $ 25,341 $ 41,179 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and...

  • Page 78
    ...adjustments ...Unrealized gain on cash flow hedges ...Defined benefit plans: Amortization of prior service costs and unrecognized losses and credits ...Amounts arising during the year, primarily due to the addition of new participants ...Marketable securities holding loss ...Total comprehensive loss...

  • Page 79
    ...: Invacare Corporation is the world's leading manufacturer and distributor in the estimated $11.0 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, manufactures and...

  • Page 80
    ...Recognition: Invacare's revenues are recognized when products are shipped or service provided to unaffiliated customers, risk of loss is passed and title is transferred. Revenue Recognition, ASC 605, provides guidance on the application of generally accepted accounting principles to selected revenue...

  • Page 81
    ... 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 anticipated returns at the time of sale. The company...

  • Page 82
    ... notes should the conditions be met to make the notes convertible or if average market price of company stock for the period exceeds the conversion price of $24.79. For the year ended December 31, 2011, net loss per share assuming dilution utilized weighted average shares-basic as a result of the...

  • Page 83
    ... 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 providers, both foreign and domestic, is ultimately funded through government reimbursement programs...

  • Page 84
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Receivables-Continued collateral and time in business. Additional analysis is performed for customers desiring credit greater than $250,000 which includes a detailed review of the customer's financials as ...

  • Page 85
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Receivables-Continued Installment receivables by class as of December 31, 2011...Installment receivables with a related allowance recorded ...Canada Non-Impaired Installment receivables with no related ...

  • Page 86
    ... As of December 31, 2011, the company had no U.S. installment receivables past due of 90 days or more for which the company is still accruing interest. Individually, all U.S. installment receivables are assigned a specific allowance for doubtful accounts based on management's review when the company...

  • Page 87
    ... related to a negative pressure wound therapy product in the United States for $965,000. In June 2010, Invacare Corporation acquired Centralized Medical Equipment LLC and the majority of the assets of Specialty Medical Equipment LLC, both Massachusetts limited liability companies, collectively...

  • Page 88
    ...-(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 at January 1, 2010 ...Foreign currency translation adjustments ...Purchase...

  • Page 89
    ... the segment. In December 2011, the FDA requested that the company agree to a consent decree of injunction at the company's corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the proposed terms of which would require the suspension of certain operations at those facilities...

  • Page 90
    ... customer list intangible of $18,800,000, which was assigned a ten-year life, other intangibles of $1,000,000, which were assigned four-year lives, and a trademark intangible of $400,000, which was assigned a five-year life, were recorded by the IPG segment. The IPG segment also acquired a developed...

  • Page 91
    ... of accruals for the following (in thousands): 2011 2010 Salaries and wages ...Taxes other than income taxes, primarily Value Added Taxes ...Warranty cost ...Freight ...Professional ...Product liability, current portion ...Rebates ...Insurance ...Interest ...Derivative liability (foreign forward...

  • Page 92
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Long-Term Debt Debt as of December 31, 2011 and 2010 consisted of the following (in thousands): 2011 2010 $400,000,000 senior secured revolving credit facility, due in October 2015 ...Convertible senior ...

  • Page 93
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Long-Term Debt-Continued While there is general concern about the potential for rising interest rates, the company believes that its exposure to interest rate fluctuations is manageable given that portions ...

  • Page 94
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Long-Term Debt-Continued convertible debt equates to 559,000 ... 31, 2011 and 2010 consist of the following (in thousands): 2011 2010 Supplemental Executive Retirement Plan liability ...Product liability ......

  • Page 95
    ..., 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, 2011...

  • Page 96
    ... service costs and other gains/losses. Benefit payments in 2011, 2010 and 2009 were $410,000, $1,592,000 and $517,000, respectively. In 2010, benefit payments included a lump sum distribution to a plan participant. In 2005, the company began sponsoring a Death Benefit Only Plan (DBO) for certain key...

  • Page 97
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Retirement and Benefit Plans-Continued In conjunction with these non-qualified U.S. defined benefit plans, the company has invested in life insurance policies related to certain employees to help satisfy ...

  • Page 98
    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 2011, 2010 and 2009: Weighted Average Exercise Price Weighted ...

  • Page 99
    ...-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: 2011 2010 2009 Expected dividend yield ...Expected stock price volatility ...Risk-free interest rate ...Expected life...

  • Page 100
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Capital Stock Capital stock activity for 2011, 2010 and 2009 consisted of the following (in thousands of shares): Common Stock Shares Class B Shares Treasury Shares January 1, 2009 Balance ...Exercise of ...

  • Page 101
    ...primarily due to the addition of new participants ...Deferred tax adjustment resulting from Defined benefit plan amortization of prior service costs and unrecognized losses ...Valuation reserve increase associated with item directly above ...Current period unrealized loss on cash flow hedges, net of...

  • Page 102
    ...reimbursement by the U.S. government as well as similar reimbursement pressures abroad and continued pricing pressures faced by the company as a result of outsourcing by competitors to lower cost locations. As a result, the company recorded restructuring charges of $10,870,000 in 2011, of which $277...

  • Page 103
    ... the loss carryforward, was fully offset by a tax valuation allowance. A reconciliation to the effective income tax rate from the federal statutory rate is as follows: 2011 2010 2009 Statutory federal income tax rate ...State and local income taxes, net of federal income tax benefit ...Tax credits...

  • Page 104
    ... are as follows (in thousands): 2011 2010 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 105
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Income Taxes-Continued At December 31, 2011, the company had foreign tax loss carryforwards of approximately $39,102,000 of which $31,662,000 are non-expiring and $7,440,000 expire in 2027, of which $30,305,...

  • Page 106
    ...the case in 2011 and 2009. 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...

  • Page 107
    ...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 2011 net sales. Providers who are part of a buying group generally make individual purchasing decisions and are invoiced directly...

  • Page 108
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Derivatives-Continued The company has historically not recognized any material amount of ineffectiveness related to forward contract cash flow hedges because the company generally limits it hedges to between...

  • Page 109
    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Derivatives-Continued with ASC 815, these derivatives do provide the company with a means to manage the risk associated with currency translation. These instruments are recorded at fair value in the ...

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    ...$ 83 $3,800 The gains or losses recognized as the result of the settlement of cash flow hedge foreign currency forward contracts are recognized in net sales for hedges of inventory sales or cost of product sold for hedges of inventory purchases. In 2011, net sales were increased by $3,080,000 and...

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    ... at Reporting Date Quoted Prices in Active Markets Significant...designated derivatives. 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...

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    ... other investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return and the...

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    ... corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the proposed terms of which would require the suspension of certain operations at those facilities until they are certified by the company and determined by the FDA to be in compliance with FDA quality system regulations...

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    ...: lifestyle, mobility and seating and respiratory therapy products. Invacare Supply Group sells distributed product and the Institutional Products Group sells or rents long-term care medical equipment, health care furnishings and accessory products. Europe and Asia/Pacific sell the same product...

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    ... profit or loss on intersegment sales and transfers is not considered in evaluating segment performance except for Asia/Pacific due to its significant intercompany sales volume. In 2011, and as a result of an acquisition that expanded the company's North American rental operations, management...

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    ...Business Segments-Continued 2011 2010 2009 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(2) ...Invacare Supply Group ...Institutional Products Group...

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    ... sales by product, are as follows (in thousands): 2011 North America/HME Lifestyle Products ...Mobility and Seating ...Respiratory Therapy ...Other(1) ...Invacare Supply Group Distributed ...Institutional Products Group Continuing Care ...Other(1) ...Europe Lifestyle Products ...Mobility and Seating...

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    .... As a medical device manufacturer, the company is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing, invoicing, documenting and other practices of health care...

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    ... 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, 2011 Net sales ...Cost of products sold ...Gross Profit ...Selling, general and...

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    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Supplemental Guarantor Information-Continued CONSOLIDATING...advances, net ...Other Assets ...Other Intangibles ...Property and Equipment, net ...Goodwill ...Liabilities and Shareholders' Equity Current ...

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    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Supplemental Guarantor Information-Continued CONSOLIDATING...advances, net ...Other Assets ...Other Intangibles ...Property and Equipment, net ...Goodwill ...Liabilities and Shareholders' Equity Current ...

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    ... Year ended December 31, 2011 Net Cash Provided (Used) by Operating Activities ...$ 38,724 $ 49,396 Investing Activities Purchases of property and equipment ...(6,887) (5,316) Proceeds from sale of property and equipment ...- 16 Business acquisitions, net of cash acquired ...- (42,430) Other long...

  • Page 123
    ... December 31, 2010 Net Cash Provided (Used) by Operating Activities ...$ 101,658 $ 15,427 Investing Activities Purchases of property and equipment ...(7,281) (1,567) Proceeds from sale of property and equipment ...- - Business acquisitions, net of cash acquired ...- (13,725) Other long-term assets...

  • Page 124
    ... Operating Activities ...$ 154,367 Investing Activities Purchases of property and equipment ...(6,733) Proceeds from sale of property and equipment ...5 Other long-term assets ...737 Other ...(579) Net Cash Used for Investing Activities ...Financing Activities Proceeds from revolving lines of credit...

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    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, 2011 Net sales ...Gross profit ...Earnings before income taxes ......

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    INVACARE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Interim Financial Information (unaudited)-Continued Earnings and earnings per share for the quarter ended September 30, 2010 reflects loss on debt extinguishment including debt finance charges and associated...

  • Page 127
    ... ...Inventory obsolescence reserve ...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. $30,168 14,242 81,981 18,252...

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    ... or 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/ GERALD B. BLOUCH Gerald B. Blouch Chief Executive Officer (Principal Executive Officer) b) Date: February 27, 2012

  • Page 130
    ... I, Robert K. Gudbranson, certify 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 material fact or omit to state a material fact necessary to make the statements made, in light of the...

  • Page 131
    ... In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2011 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Gerald B. Blouch, Chief Executive Officer of the company, certify, pursuant...

  • Page 132
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2011 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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