Invacare 2012 Annual Report Download - page 61

Download and view the complete annual report

Please find page 61 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

October 1 each year. As a result of the reduced forecasted profitability of its Asia/Pacific segment, the company
recorded an impairment charge of $39,729,000 ($39,729,000 after tax), which represented the entire goodwill
amount for the segment. In December 2011, the FDA requested that the company agree to a consent decree of
injunction at the company’s corporate facility and its wheelchair manufacturing facility in Elyria, Ohio. The
significant decline in the company’s stock price and market capitalization, as occurred following the
announcement of the proposed consent decree in December 2011, were considered by the company as indicators
of possible impairment that required an interim assessment of goodwill for impairment. As a result, in connection
with the preparation of its 2011 financial statements, the company reassessed its goodwill for the NA/HME
segment and recorded an estimated impairment charge in 2011 related for all the goodwill in this segment of
$7,990,000 ($7,336,000 after tax).
In addition, the company completed its annual impairment test for intangible assets and recorded
impairment charges totaling $1,761,000 ($1,654,000 after tax) in 2011 related to certain intangible assets in the
NA/HME, Institutional Products Group, Europe and Asia/Pacific segments.
Debt Finance Charges and Fees . In 2011, the company extinguished $63,351,000 in principal amount of
its outstanding 4.125% convertible senior subordinated debentures due in February 2027. This early debt
extinguishment resulted in debt fees and premium expenses of $24,200,000 comprised of $22,646,000 of
premiums paid and losses recorded as a result of early debt extinguishment and $1,554,000 of expense related to
deferred financing fee write-offs, which were previously capitalized.
In 2010, as part of the company’s refinancing, proceeds of the refinancing were used by the company to
repay amounts outstanding on its then existing $250,000,000 revolving credit facility which was not due to
expire until February 2013 and repurchase all of its outstanding 9.75% Senior Notes which were not due until
February 2015. During 2010, the company also extinguished $57,799,000 in principal amount of its outstanding
4.125% convertible senior subordinated debentures due in February 2027. This early debt extinguishment
resulted in debt fees and premium expenses of $40,164,000 for all of these debt instruments. Related to the
revolving credit facility, the company expensed $1,228,000 of deferred financing fees, which were previously
capitalized. Related to the Senior Notes, the company incurred the following debt fees and premium expenses:
debt deferred financing fees of $3,764,000, which were previously capitalized and premiums and fees associated
with the early extinguishment of the debt of $14,907,000. Related to the convertible senior subordinated
debentures, the company incurred $18,763,000 of premiums paid and losses recorded as a result of early debt
extinguishment and expensed deferred financing fees of $1,502,000, which were previously capitalized.
All of the debt finance charges and fees in 2011 and 2010 are included in the All Other segment.
Charge Related to Restructuring Activities. As disclosed previously and as a result of the company’s
ongoing globalization initiative to reduce complexity within its global footprint, the company finalized the
closure of two facilities in 2011: one in the European segment and the other in the NA/HME segment. The
assembly activities were transferred to other company facilities or outsourced to third parties. In addition, the
company, as a continuation of its cost reduction and profit improvement initiatives, reduced headcount, primarily
in the U.S. during the fourth quarter of 2011. As a result, the company incurred restructuring charges in 2011 of
$10,534,000 of which $277,000 was recorded in cost of goods sold, since it related to inventory markdowns, and
the remaining charge amount was included in the Charge Related to Restructuring Activities in the Consolidated
Statement of Operations. The costs incurred during 2011 were principally related to severance and other
associated closure costs.
Interest. Interest expense decreased to $11,025,000 in 2011 from $23,637,000 in 2010, representing a
53.4% decrease. This decrease was attributable to lower borrowing rates in 2011 as compared to 2010, and to a
lesser extent, debt reduction. Interest income in 2011 was $1,212,000 as compared to $606,000 in 2010,
primarily due to increased interest rates charged on financing provided to customers.
I-55