Invacare 2011 Annual Report Download - page 27

exemption, it is still in the process of fully analyzing the implications of the excise tax by the Department of the
Treasury. The company intends to respond to the IRS and the Treasury Department to seek additional clarity on
the proposed regulations. Various healthcare reform proposals have also emerged at the state level. The new law
and these proposals could impact the demand for the company’s products or the prices at which the company
sells its products. In addition, the excise tax may increase the company’s cost of doing business. The impact of
this law and these proposals could have a material adverse effect on the company’s business, results of operations
and/or financial condition.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) enacted in 2010 institutes a
wide range of reforms, some of which may impact the company. Among other things, the Act contains
significant corporate governance and executive compensation-related provisions that authorize or require the
SEC to adopt additional rules and regulations in these areas, such as shareholder “say on pay” voting and proxy
access. The impact of these provisions on the company’s business is uncertain. The Act also provides for new
statutory and regulatory requirements for derivative transactions, including foreign exchange and interest rate
hedging transactions. Certain transactions will be required to be cleared on exchanges, and cash collateral will be
required for those transactions. While the Act provides for a potential exception from these clearing and cash
collateral requirements for commercial end-users such as the company, the exception is subject to future rule
making and interpretation by regulatory authorities. The company enters into foreign exchange contracts, interest
rate swaps and foreign currency forward contracts from time to time to manage its exposure to commodity price
risk, foreign currency exchange risk and interest rate risk. If, in the future, the company is required to provide
cash collateral for its hedging transactions, it could reduce the company’s ability to execute strategic hedges. In
addition, the contractual counterparties in hedging arrangements will be required to comply with the Act’s new
requirements, which could ultimately result in increased costs of these arrangements to customers such as the
company.
If the company’s cost reduction efforts are ineffective, the company’s revenues and profitability could be
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 efficiencies and operating cost reductions
expected from these efforts, and the company may experience business disruptions associated with the
restructuring and cost reduction activities. These efforts may not produce the full efficiency and cost reduction
benefits that the company expects. Further, these benefits may be realized later than expected, and the costs of
implementing these measures may be greater than anticipated. If these measures are not successful, the company
may undertake additional cost reduction efforts, which could result in future charges. Moreover, the company’s
ability to achieve other strategic goals and business plans and the company’s financial performance may be
adversely affected and the company could experience business disruptions with customers and elsewhere if the
company’s cost reduction and restructuring efforts prove ineffective.
The company is subject to risks arising out of the continuing global economic uncertainty.
As is the case for many companies operating in the current economic environment, the company is exposed
to a number of risks. These risks include the possibility that: one or more of the lenders participating in the
company’s revolving credit facility may be unable or unwilling to extend credit to the company; the third party
company that provides lease financing to the company’s customers may refuse or be unable to fulfill 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 one or more of the counterparties to the
company’s hedging arrangements may be unable to fulfill its obligations to the company. Although the company
has taken actions in an effort to mitigate these risks, during periods of economic downturn, the company’s
exposure to these risks increases. Events of this nature may adversely affect the company’s liquidity or sales and
revenues, and therefore have an adverse effect on the company’s business and results of operations.
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