Invacare 2012 Annual Report Download - page 34

Download and view the complete annual report

Please find page 34 of the 2012 Invacare annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 152

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152

inflation in China has in the past and will probably in the future increase costs and an appreciation of the Yuan or
an increase in labor rates could have an unfavorable impact on the cost of key components and some finished
goods. Demand in China and other developing countries for raw materials may result in increases in the cost of
key commodities and could have a negative impact on the profits of the company if these increases cannot be
passed onto the company’s customers.
Lower cost imports could negatively impact the company’s profitability.
Competition from lower cost imports sourced from low cost countries, such as Asia, may negatively impact
the company’s sales volumes. In the past, competition from certain of these products has caused the company to
lower its prices, cutting into the company’s profit margins and reducing the company’s overall profitability.
The company’s success depends on the company’s ability to design, manufacture, distribute and achieve
market acceptance of new products with higher functionality and lower costs.
The company sells products to customers primarily in markets that are characterized by technological
change, product innovation and evolving industry standards, yet in which product price is increasingly a primary
consideration in customers’ purchasing decisions. The company historically has been engaged in product
development and improvement programs. However, during 2012 as a result of the FDA consent decree, which is
described elsewhere in this Annual Report on Form 10-K, the company’s engineering resources have been
focused on quality remediation versus design of new product. Completing the remediation and receiving the
FDA’s approval on the second certification audit related to design controls will allow the company to resume
design activities and start to refocus its engineering resources on new product development.
The company must continue to design and improve innovative products, effectively distribute and achieve
market acceptance of those products, and reduce the costs of producing the company’s products, in order to
compete successfully with the company’s competitors. If competitors’ product development capabilities become
more effective than the company’s product development capabilities, if competitors’ new or improved products
are accepted by the market before the company’s products or if competitors are able to produce products at a
lower cost and thus offer products for sale at a lower price, the company’s business, financial condition and
results of operation could be adversely affected.
The company’s business strategy relies on certain assumptions concerning demographic trends that impact
the market for its products. If these assumptions prove to be incorrect, demand for the company’s products
may be lower than expected.
The company’s ability to achieve its business objectives is subject to a variety of factors, including the
relative increase in the aging of the general population. The company believes that these trends will increase the
need for its products. The projected demand for the company’s products could materially differ from actual
demand if the company’s assumptions regarding these trends and acceptance of its products by health care
professionals and patients prove to be incorrect or do not materialize. If the company’s assumptions regarding
these factors prove to be incorrect, the company may not be able to successfully implement the company’s
business strategy, which could adversely affect the company’s results of operations. In addition, the perceived
benefits of these trends may be offset by competitive or business factors, such as the introduction of new
products by the company’s competitors or the emergence of other countervailing trends, including lower
reimbursement and pricing.
The company’s debt may limit the company’s flexibility in operating its business.
The company’s $400 million senior secured credit facility has been a principal source of financing for much
of its liquidity needs. The credit facility contains, among other things, certain financial covenants that require the
company to maintain a maximum leverage ratio (consolidated funded indebtedness to consolidated EBITDA, as
I-28