Invacare 2011 Annual Report Download - page 54

INFLATION
Although the company cannot determine the precise effects of inflation, management believes that inflation
does continue to have an influence on the cost of materials, salaries and benefits, utilities and outside services.
The company attempts to minimize or offset the effects through 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 Long-Term Debt in the Notes to Consolidated Financial Statements included in this report) and working
capital management.
The company’s total debt outstanding, inclusive of the debt discount included in equity in accordance with
FSB APB 14-1, decreased by $1,664,000 to $269,537,000 at December 31, 2011 from $271,201,000 as of
December 31, 2010. The company’s balance sheet reflects the impact of ASC 470-20, which reduced debt and
increased equity by $4,053,000 and $25,137,000 as of December 31, 2011 and December 31, 2010,
respectively. The debt discount decreased $21,084,000 during 2011, primarily as a result of the extinguishment
of convertible debt. The company’s cash and cash equivalents were $34,924,000 at December 31, 2011, down
from $48,462,000 at the end of 2010. At December 31, 2011, the company had outstanding $247,063,000 on its
revolving line of credit compared to $184,932,000 as of December 31, 2010.
The company’s borrowing capacity and cash on hand were utilized for acquisitions of $42,430,000,
purchase $21,548,000 in company common shares and to pay a premium of $24,113,000 associated with the
repurchase of $63,351,000 principal amount of Convertible Senior Subordinated Debentures due 2027. Debt
repurchases, acquisitions, the timing of vendor payments and other activity can have a significant impact on the
company’s borrowings outstanding such that the debt reported at the end of a given period may be materially
different than debt levels during a given period. During 2011, the outstanding borrowings on the company’s
revolving credit facility varied from a low of $182,000,000 to a high of $325,000,000. While the company has
cash balances in various jurisdictions around the world, there are no material restrictions regarding the use of
such cash for dividends, loans or other purposes.
The company’s senior secured revolving credit agreement (the “Credit Agreement”) provides for a
$400 million senior secured revolving credit facility maturing in October 2015. Pursuant to the terms of the
Credit Agreement, the company may from time to time borrow, repay and re-borrow up to an aggregate
outstanding amount at any one time of $400 million, subject to customary conditions. The Credit Agreement also
provides for the issuance of swing line loans. Borrowings under the Credit Agreement bear interest, at the
company’s election, at (i) the London Inter-Bank Offer Rate (“LIBOR”) plus a margin; or (ii) a Base Rate Option
plus a margin. The applicable margin is currently 1.75% per annum for LIBOR loans and 0.75% for the Base
Rate Option loans based on the company’s leverage ratio. In addition to interest, the company is required to pay
commitment fees on the unused portion of the Credit Agreement. The commitment fee rate is currently
0.30% per annum. Like the interest rate spreads, the commitment fee is subject to adjustment based on the
company’s leverage ratio. The obligations of the borrowers under the Credit Agreement are secured by
substantially all of the company’s U.S. assets and are guaranteed by substantially all of the company’s material
domestic and foreign subsidiaries.
The Credit Agreement contains certain covenants that are customary for similar credit arrangements,
including covenants relating to, among other things, financial reporting and notification, compliance with laws,
preservation of existence, maintenance of books and records, use of proceeds, maintenance of properties and
insurance, and limitations on liens, dispositions, issuance of debt, investments, payment of dividends,
repurchases of capital stock, acquisitions, transactions with affiliates, and capital expenditures. There also are
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