Invacare 2013 Annual Report Download - page 58

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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.
The Company's senior credit facilities, as well as cash flows from operations, have been the principal sources of financing
for much of its liquidity needs. If the Company were unsuccessful in meeting its leverage or interest coverage ratio, or other,
financial or operating covenants in its credit facility, it would result in a default, which could trigger acceleration of, or the right
to accelerate, the related debt. Because of cross-default provisions in the agreements and instruments governing certain of the
Company's indebtedness, a default under the credit facility could result in a default under, and the acceleration of, certain other
Company indebtedness. In addition, the Company's lenders would be entitled to proceed against the collateral securing the
indebtedness.
Based on the Company's current expectations, the Company believes that its cash balances, cash generated by operations
and available borrowing capacity under its senior credit facility should be sufficient to meet working capital needs, capital
requirements, and commitments for at least the next twelve months. However, the Company's ability to satisfy its liquidity needs
will depend on many factors, including the operating performance of the business, the Company's ability to successfully complete
in a timely manner the third-party expert certification audit and FDA inspection contemplated under the consent decree and receipt
of the written notification from the FDA permitting the Company to resume full operations, as well as the Company's continued
compliance with the covenants under its credit facility. Notwithstanding the Company's expectations, if the Company's operating
results decline substantially more than it currently anticipates, or if the Company is unable to successfully complete the consent
decree-related third-party expert certification audit and FDA inspection within the currently estimated time frame (including as a
result of any need to complete significant additional remediation arising from the third-party expert certification audits of the FDA
inspection), the Company may be unable to comply with the financial covenants, and its lenders could demand repayment of the
amounts outstanding under the Company's credit facility.
As a result, continued compliance with, in particular, the leverage covenant under the Company's credit facility is a high
priority, which means the Company has remained focused on generating sufficient cash and managing its expenditures. The
Company also may examine alternatives such as raising additional capital through permitted asset sales. In addition, if necessary
or advisable, the Company may seek to renegotiate its credit facility in order to remain in compliance. The Company can make
no assurances that under such circumstances our financing arrangements could be renegotiated, or that alternative financing would
be available on terms acceptable to the Company, if at all.
The Company may from time to time seek to retire or purchase its 4.125% Convertible Senior Subordinated Debentures
due 2027, in open market purchases, privately negotiated transactions or otherwise. Such purchases or exchanges, if any, will
depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors. The
amounts involved in any such transactions, individually or in the aggregate, may be material. In 2013, the Company did not
repurchase and extinguish any principal amount of its Convertible Senior Subordinated Debentures compared to $500,000 in 2012
and $63,351,000 in 2011. As of December 31, 2013, the Company had $13,350,000 remaining of outstanding Convertible Senior
Subordinated Debentures.
While there is general concern about the potential for rising interest rates, the Company believes that its exposure to interest
rate fluctuations is manageable given that portions of the Company's debt are at fixed rates into 2014, the Company has the ability
to utilize swaps to exchange variable rate debt to fixed rate debt, if needed, and the Company expects that it will be able to absorb
any modest rate increases in the months ahead without any material impact on its liquidity or capital resources. The Company is
a party to an interest rate swap agreement to effectively convert a portion of floating rate revolving credit facility debt to fixed
rate debt to avoid the risk of changes in market interest rates. Specifically, an interest rate swap agreement, as of December 31,
2013, for a notional amount of $12,000,000 through April 2014 was entered into that fixes the LIBOR component of the interest
rate on that portion of the revolving credit facility debt at a rate of 0.54% for an effective aggregate rate of 2.79%. As of December 31,
2013, the weighted average floating interest rate on borrowing was 2.39% compared to 2.21% as of December 31, 2012.
CAPITAL EXPENDITURES
There are no individually material capital expenditure commitments outstanding as of December 31, 2013. The Company
estimates that capital investments for 2014 could approximate between $15,000,000 and $20,000,000, compared to actual capital
expenditures of $14,158,000 in 2013. The Company believes that its balances of cash and cash equivalents, together with funds
generated from operations and existing borrowing facilities, will be sufficient to meet its operating cash requirements and fund
required capital expenditures for the foreseeable future. The Amended and Restated Credit Agreement, entered into on January 31,
2014, limits the Company's annual capital expenditures to $25,000,000.