Invacare 2014 Annual Report Download - page 55

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and other reserves. See Subsequent Events in the Notes to the Consolidated Financial Statements for more details regarding the
New Credit Agreement.
The New Credit Agreement contains customary representations, warranties and covenants including dominion triggers
requiring the Company to maintain borrowing capacity of not less than $11,250,000 on an given business day or $12,500,000 for
5 consecutive days. If the Company is unable to comply with the provisions in the New Credit Agreement, it could result in a
default which could trigger acceleration of, or the right to accelerate, the related debt. Because of cross-default provisions in its
agreements and instruments governing certain of the Company's indebtedness, a default under the New Credit Agreement 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 New Credit Agreement 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 compliance
with the provisions under its New Credit Agreement. In addition, the Company must make SERP and deferred compensation
payments of approximately $24,700,000 in 2015 as the result of the retirement of four senior executives during 2014 which will
negatively impact operating cash flows for the Company. As of December 31, 2014, the Company has approximately $12,000,000
in life insurance policies that can be sold to partially fund these executive payments. Notwithstanding the Company's expectations,
if the Company's operating results decline as the result of pressures on the business due to, for example, currency fluctuations or
regulatory issues or the Company's failure to execute its business plans, the Company may be unable to comply with its obligations
under the New Credit Agreement, and its lenders could demand repayment of the amounts outstanding under the Company's credit
facility.
As a result, continued compliance with the Company's credit agreements is a high priority, which means the Company
remains focused on generating sufficient cash and managing its expenditures. The Company also may examine alternatives such
as raising additional capital through permitted asset sales or sales and leaseback of properties. Such items, if available on terms
satisfactory to the Company, could be dilutive to the Company's results. In addition, if necessary and advisable, the Company may
seek to renegotiate its New Credit Agreement in order to remain in compliance with its obligations. The Company can make no
assurances that under such circumstances its financing arrangements could be renegotiated, or that alternative financing would be
available on terms acceptable to the Company, if at all.
The Company's New Credit Agreement prohibits the Company from retiring or purchasing its 4.125% Convertible Senior
Subordinated Debentures due 2027. The Company did not repurchase and extinguish any of its Convertible Senior Subordinated
Debentures in 2014 or 2013 compared to repurchase and extinguishment of a principal amount of $500,000 in 2012. As of
December 31, 2014, the Company had $13,350,000 remaining of 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. The Company has the ability to utilize swaps to exchange variable rate debt to fixed rate debt, if
needed, and the Company's free cash flow should allow it to absorb any modest rate increases in the months ahead without any
material impact on its liquidity or capital resources. As of December 31, 2014, the weighted average floating interest rate on
revolving credit borrowing was 2.25% compared to 2.39% as of December 31, 2013.
CAPITAL EXPENDITURES
There are no individually material capital expenditure commitments outstanding as of December 31, 2014. The Company
estimates that capital investments for 2015 will be approximately $15,000,000 compared to actual capital expenditures of
$12,327,000 in 2014. The Company believes that its balances of cash and cash equivalents and existing borrowing facilities, will
be sufficient to meet its operating cash requirements and fund required capital expenditures for the foreseeable future. On January 16,
2015, the Company entered into the New Credit Agreement which limits the Company's annual capital expenditures to $20,000,000.