Invacare 2012 Annual Report Download - page 29

interpretations of the regulations. Various healthcare reform proposals also have 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. 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.
In addition, there is recent U.S. legislation to improve transparency and accountability concerning the
sourcing of “conflict minerals” from mines located in the conflict zones of the Democratic Republic of Congo
(DRC) and its adjoining countries. The term “conflict minerals” currently encompasses tantalum, tin, tungsten
(or their ores) and gold. Conflict minerals can be found in a vast array of products. This legislation requires
manufacturers, such as the company, to investigate and disclose their use of any conflict minerals originating in
the DRC or adjoining countries. It also implements guidelines to assist the manufacturer in preventing, by way of
performing due diligence in its supply chain, any such sourcing from potentially financing or benefiting armed
groups in this area. The company is currently evaluating the potential impact of, and developing an
implementation strategy for, the above-referenced legislation. The company may be required to undertake a
significant due diligence process requiring considerable investments of human resources and finances in order to
comply with the conflict minerals due diligence and disclosure requirements. If the company’s suppliers are
unable or unwilling to provide it with requested information and to take other steps to ensure that no conflict
minerals, financing or benefiting armed groups in the DRC, are included in minerals or components supplied to
the company, it may be forced to disclose in its SEC filings about the use of conflict minerals in its supply chain,
which may expose the company to reputational risks, which in turn could materially adversely affect its business,
financial condition and results of operations.
If the company’s cost reduction efforts are ineffective, the company’s 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.
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