Invacare 2012 Annual Report Download - page 25

FDA will provide written notification that the company is permitted to resume full operations at the impacted
facilities. The company cannot currently estimate the timing of the FDA written notifications. At the time of
filing this Annual Report on Form 10-K, the company had initiated the first two of its third-party expert
certification audits. Barring any unexpected developments or the requirement to perform additional remediation
activities as a result of the third-party expert audits, the company expects the first two certification audits to be
completed in the first quarter of 2013. At the time of filing of this Annual Report on Form 10-K, the third expert
certification audit has commenced and the company plans to complete the audit in the second quarter of 2013.
Because the FDA has the authority to reinspect at any time, the company cannot determine whether the FDA will
elect to inspect after either the first or second third-party expert audits. According to the consent decree, the FDA
has thirty (30) days after receipt of the third expert certification audit results to commence its own inspection. It
is not possible for the company to estimate the timing or potential response of the FDA’s inspection and
subsequent written notifications. A delay in the timing of the completion of the third-party expert certification
audits, the FDA’s inspection or clearance, or any need to complete significant additional remediation as a result
of the third-party expert certification audits or the FDA inspection could have a material adverse effect on the
company’s business, financial condition, liquidity or results of operations.
During the pendency of the consent decree negotiations, and now during its effectiveness, the company has
experienced pressures on its net sales and operating results from this segment. While, at the time of this filing,
the consent decree had been effective for only approximately two months and thus, the effect on customer orders
and net sales was not yet clear, the company expects to experience further declines in net sales as a result of the
limitations imposed by the consent decree. See Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations. The company expects to continue to experience decreased net sales and
challenged profitability in the North America/HME segment until it has successfully completed the previously
described third-party expert certification audit and FDA inspection and has received written notification from the
FDA that the company may resume full operations. For example, the company expended an additional
$22,757,000 in 2012 for regulatory and compliance costs to quality systems improvements compared to 2011.
Even after the company receives the FDA notification, it is uncertain as to whether, or how quickly, the company
will be able to rebuild net sales to more typical historical levels, irrespective of market conditions. Accordingly,
the company expects that these challenges could negatively impact the company’s operating results in 2013 to an
even greater degree than was experienced in 2012.
The company’s failure to comply with medical device regulatory requirements or receive regulatory
clearance or approval for the company’s products or operations in the United States or abroad could adversely
affect the company’s business.
The company’s medical devices are subject to extensive regulation in the United States by the FDA, and by
similar governmental authorities in the foreign countries 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, death or serious injury, or if they malfunction and would be likely to cause, or contribute to,
death or serious injury if the malfunction were to recur. In general, unless an exemption applies, the company’s
mobility and respiratory therapy medical devices must receive a pre- marketing clearance from the FDA before
they can be marketed in the United States. The FDA also regulates the export of medical devices to foreign
countries. The company cannot be assured that any of the company’s devices, to the extent required, will be
cleared by the FDA through the pre-market clearance process or that the FDA will provide export certificates that
are necessary to export certain of the company’s products. In connection with the FDA warning letter received by
the company’s Sanford, Florida facility in December 2010, as described below, the FDA has refused to provide
new export certificates for company products until the matters covered in the warning letter are resolved.
Currently, the company cannot obtain new certificates of export for Sanford, Florida facility products until the
warning letter has been closed and for Taylor Street facility products until the company has exited the injunctive
phase of the consent decree.
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