Invacare 2011 Annual Report Download - page 35

products or new manufacturing and service capabilities, to add new customers, to increase penetration with
existing customers, and to expand into new geographic markets. The company’s ability to successfully grow
through acquisitions depends upon its ability to identify, negotiate, complete and integrate suitable acquisitions
and to obtain any necessary financing. The costs of acquiring other businesses could increase if competition for
acquisition candidates increases. Further, the provisions of the company’s existing credit facility impose
limitations regarding acquisitions, which could prevent significant acquisitions, without entering into
amendments with regard to those provisions. If the company is unable to obtain the necessary financing, it may
miss opportunities to grow its business through strategic acquisitions.
Additionally, the success of the company’s acquisition strategy is subject to other risks and costs, including
the following:
• the company’s ability 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 acquired businesses who are necessary to manage these
businesses;
• difficulties in maintaining uniform standards, controls, procedures and policies throughout acquired
companies;
• adverse effects on existing business relationships with suppliers or customers;
• the risks associated with the assumption of contingent or undisclosed liabilities of acquisition
targets; and
• ability to generate future cash flows or the availability of financing.
In addition, an acquisition could materially impair the company’s operating results by causing the company
to incur debt or requiring the amortization of acquisition expenses and acquired assets.
The company’s reported results may be adversely affected by increases in reserves for uncollectible
accounts receivable.
The company has a large balance of accounts receivable and has established a reserve for the portion of such
accounts receivable that the company estimates will not be collected because of the company’s customers’
non-payment. The specific reserve is based on historical trends and current relationships with the company’s
customers and providers. Changes in the company’s collection rates can result from a number of factors,
including turnover in personnel, changes in the payment policies or practices of payors, changes in industry rates
or pace of reimbursement or changes in the financial health of the company’s customers. As a result of past
changes in Medicare reimbursement regulations, specifically changes to the qualification processes and
reimbursement levels of consumer power wheelchairs and custom power wheelchairs, the business viability of
several of the company’s customers had become questionable and several have failed. Further, as National
Competitive Bidding is implemented in additional areas, the number of start-up or new providers who have
three-year contracted pricing will increase. The company’s reserve for uncollectible receivables has fluctuated in
the past and will continue to fluctuate in the future. Changes in rates of collection, even if they are small in
absolute terms, could require the company to increase its reserve for uncollectible receivables beyond its current
level. The company has reviewed the accounts receivables, including those receivables financed through DLL,
associated with many of its customers that are most exposed to these issues. If the business viability of certain of
the company’s customers deteriorates or if the company’s credit policies are ineffective in reducing the
company’s exposures to credit risk, additional increases in reserves for uncollectible accounts may be necessary,
which could adversely affect the company’s financial results.
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