Invacare 2013 Annual Report Download - page 121

INVACARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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party thereto and PNC Bank, National Association, as administrative agent, which amended and restated the Credit Agreement,
dated as of October 28, 2010, by and among the Company and the other parties named therein, as amended (the “Prior Credit
Agreement”).
The Amended and Restated Credit Agreement, among other things, provides for the following:
• An increase in the maximum leverage ratio for the first three quarters of 2014, with quarterly ratios, as described in
the following table:
Fiscal Quarter Ending Maximum Leverage Ratio
March 31, 2014 . . . . . . . . . . . . . . . . . . . . 4.75 to 1.00
June 30, 2014. . . . . . . . . . . . . . . . . . . . . . 4.5 to 1.00
September 30, 2014. . . . . . . . . . . . . . . . . 4.0 to 1.00
December 31, 2014 and thereafter. . . . . . 3.5 to 1.00
The minimum interest coverage ratio of 3.5 to 1.0 was not changed in the Amended and Restated Credit Agreement.
• In calculating the Company’s EBITDA for purposes of determining the leverage and interest coverage ratios, the
Amended and Restated Credit Agreement allows the Company to add back to EBITDA up to $20,000,000 for one-
time cash restructuring charges incurred after May 30, 2013, which is an incremental increase of $5,000,000 from
the terms of the Prior Credit Agreement.
• A decrease in the aggregate principal amount of the revolving credit facility to $100,000,000 from $250,000,000
through the maturity date of the facility in October 2015, as well as reductions in the facility’s swing line loan,
optional currency and foreign borrower sublimits.
• Reductions in the allowances under the facility for capital expenditures (down to $25,000,000 annually), dividends,
other indebtedness and liens.
• Further restrictions on acquisitions, share repurchases, certain investments and repurchases of convertible debt until
after the Company confirms compliance with the Amended and Restated Credit Agreement following the quarter
ending December 31, 2014.
• An increase of 25 basis points in the margin applicable to determining the interest rate on borrowings under the
revolving credit facility.
As a result, the Company incurred $375,000 in fees which were capitalized and are being amortized through October 2015.
In addition, as a result of reducing the capacity of the facility from $250,000,000 to $100,000,000, the Company wrote-off
$1,070,000 in fees previously capitalized, which will be reflected in the expense of the North America / HME segment in the first
quarter of 2014.
On February 12, 2014, the Company announced its decision to close its London, Canada manufacturing facility during 2014.
The closure of this plant, which produces long-term care beds and case goods, is part of the Company’s long-term strategy to
remain cost competitive by optimizing its global supply chain.
Production of case goods currently manufactured in London will be transferred to another Company manufacturing plant in
Sanford, Florida. The long-term care beds production in London will be outsourced to a third-party with established FDA-registered
manufacturing capabilities. The third-party manufacturer has a significant focus on medical devices, including acute care bed
production.
The Company expects to incur project-related expenses of at least $3,500,000 on a pre-tax basis across the second and third
quarter of 2014. At this time, those costs are estimated to include approximately $1,400,000 in one-time cash restructuring charges,
approximately $1,100,000 in non-cash restructuring charges and approximately $1,000,000 in operating expenses during the
closure. The Company expects minimal benefits in 2014, but it expects annualized savings of up to $2,700,000 starting in 2015.