Invacare 2011 Annual Report Download - page 3

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Fellow Shareholders,
Throughout its history, Invacare Corporation has developed innovative medical devices and services that
have made life’s experiences possible for millions of people. The Company has proven time and time again that
it is able to adapt and grow while overcoming obstacles of all kinds, and 2011 was no exception. Invacare
delivered on its financial guidance during a year of unexpected challenges, including the investment of
significant resources to ensure its compliance with the U.S. Food and Drug Administration’s (FDA) Quality
System Regulation (QSR), natural disasters in Christchurch, New Zealand, and Japan, as well as fluctuations in
commodity costs and foreign currencies. The Company also continued to make progress on two core initiatives
that will be key to its future success: globalization and the ongoing remediation of its quality systems and
regulatory compliance processes.
With the leadership of its experienced management team, which holds approximately 14% of the
Company’s outstanding stock, Invacare is well aligned to continue to evolve, make improvements and become
even stronger as the industry leader.
Compliance is good business
Throughout 2011, the Company actively made systemic improvements in its quality systems and regulatory
reporting processes in response to observations made by the FDA at its Sanford, Florida facility, as well as its
corporate and wheelchair manufacturing sites in Elyria, Ohio. The Company has added internal resources and
engaged outside experts with proven quality systems and regulatory experience in the medical device industry in
order to accelerate these improvements. In December 2011, Doug Uelmen joined the Company as Senior Vice
President, Quality Assurance and Regulatory Affairs. Mr. Uelmen has over 30 years of experience in quality and
regulatory roles, nearly all of which have been in the medical device industry. In his two most recent assignments
at Abbott and GE Healthcare, he provided leadership at corporate and divisional levels toward the successful
remediation of consent decrees. His initial focus at Invacare will be on the remediation efforts at the facilities
mentioned above, but he also is responsible for rolling out consistent quality assurance processes worldwide.
Despite its efforts to make improvements to its quality systems processes, the FDA has requested that the
Company negotiate and agree to a consent decree of injunction relating to 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 than 30 years of innovation, quality and industry leadership in the manufacture and
distribution of home and long-term care medical devices. There are millions of people safely using Invacare’s
products each day. The Company is making significant investments to improve its quality systems processes, and
it will continue to do so to ensure it achieves sustainable corporate-wide compliance. While the consent decree
will have an impact on the Company’s results in the near-term, Invacare embraces the importance of compliance
and knows that the long-term benefits will make Invacare an even stronger company.
Also in regards to regulatory matters, the Company is seeking additional clarity on the United States
medical device excise tax that will be effective in 2013. In January 2012, the Department of the Treasury issued
guidance on the definition of a taxable medical device related to the excise tax. While the Company believes a
significant portion of its products will be exempt from the excise tax under the retail 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 further detail and clarity on the proposed
regulations.
Globalization
Uncertainty related to healthcare reform and slowing healthcare spending related to difficult economic
conditions around the globe caused an unanticipated slowness in Invacare’s markets in 2011. The Company
continued to make progress on its globalization initiative which it expects will drive sales and expand margins in