Invacare 2013 Annual Report Download - page 119

INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-45
FDA Matters
The FDA regulates virtually all aspects of the development, testing, manufacturing, labeling, promotion, distribution and
marketing of a medical device. The Company's failure to comply with the regulatory requirements of the FDA and other applicable
U.S. medical device regulatory requirements can subject the Company to administrative or judicially imposed sanctions. These
sanctions include injunctions, consent decrees, warning letters, civil penalties, criminal penalties, product seizure or detention,
product recalls and total or partial suspension of production.
In December 2012, the Company reached agreement with the FDA on the terms of the consent decree of injunction with
respect to the Company's Corporate facility and its Taylor Street wheelchair manufacturing facility in Elyria, Ohio. A complaint
and consent decree were filed in the U.S. District Court for the Northern District of Ohio, and on December 21, 2012, the Court
approved the consent decree and it became effective. The consent decree limits the Company's manufacture and distribution of
power and manual wheelchairs, wheelchair components and wheelchair sub-assemblies at or from its Taylor Street manufacturing
facility. The decree also temporarily limited design activities related to wheelchairs and power beds that take place at the impacted
Elyria, Ohio facilities. The Company is entitled to continue to produce from the Taylor Street manufacturing facility certain
medically necessary wheelchairs provided that documentation and record-keeping requirements are followed, as well as ongoing
replacement, service and repair of products already in use, under terms delineated in the consent decree. Under the terms of the
consent decree, in order to resume full operations at the impacted facilities, the Company must successfully complete a third-party
expert certification audit at the impacted Elyria facilities, which is comprised of three distinct reports that must be submitted to,
and accepted by, the FDA. After the final certification report is submitted to the FDA, along with the Company’s own report as to
its compliance as well as responses to any observations in the certification report, the FDA will perform an inspection of the
Company's Corporate and Taylor Street facilities to determine whether they are in compliance with the Quality System Regulation
(QSR) governing the manufacture of medical devices. The FDA has the authority to inspect at any time. Once satisfied with the
Company's compliance, the FDA will provide written notification that the Company is permitted to resume full operations at the
impacted facilities.
At the time of filing this Annual Report on Form 10-K, the Company has completed the first two of its third-party expert
certification audits, and the FDA has found the results of both to be acceptable. In these reports, the third-party expert certified
that the Company's equipment and process validation procedures and its design control systems are compliant with the FDA's
QSR. As a result of the FDA's acceptance of the first certification audit on May 13, 2013, the Taylor Street facility was able to
resume supplying parts and components for the further manufacturing of medical devices at other Company facilities. The
Company's receipt of the FDA's acceptance on the second certification report on July 15, 2013, resulted in the Company being
able to resume design activities at the impacted facilities related to power wheelchairs and power beds. The third, most
comprehensive third-party certification audit is a comprehensive review of the Company's compliance with the FDA's QSR at the
impacted Elyria facilities.
During the final expert certification audit, the auditor indicated that some additional work was required primarily in the
Company's updated complaint and risk review processes before the final, and most comprehensive, certification report could be
completed and provided to the FDA, as the Company discussed in its December 23, 2013 press release. The Company has been
executing its action plan relating to these comments, and the third-party expert returned at the end of February 2014 to re-commence
this final certification audit.
The Company cannot predict the timing of the completion or the outcome of the third-party expert’s final certification report.
However, after the expert's certification report is completed and submitted to the FDA, along with the Company’s own report
related to its compliance status together with its responses to any observations in the certification report, the FDA is expected to
inspect the Company's Corporate and Taylor Street facilities to determine whether they are in compliance with the FDA's QSR.
The FDA has the authority to inspect these facilities at any time. If the FDA is satisfied with the Company's compliance, the FDA
will provide written notification that the Company is permitted to resume full operations at the impacted facilities.
As described above, because the limitations on production will only be temporary in nature, and partial production will be
allowed, the Company does not anticipate any major repair, replacement or scrapping of its fixed assets at the Taylor Street
manufacturing facility. Based on the Company's expectations at the time of filing of this Annual Report on Form 10-K with respect
to the time frame for completion of the third-party expert certification audits and FDA inspection and with respect to future cash
flows from production at the Taylor Street manufacturing facility, the Company concluded that there is no impairment in the value
of the fixed assets related to the Taylor Street manufacturing facility at December 31, 2013.