Invacare 2014 Annual Report Download - page 61

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years, and interim periods within those years, beginning after December 15, 2013. ASU 2013-11 was adopted by the Company
on January 1, 2014 and did not have a significant impact on the Company's financial statements.
In April 2014, the FASB issued ASU 2014-08 changing the presentation of discontinued operations on the statements of
income and other requirements for reporting discontinued operations. Under the new standard, a disposal of a component or a
group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift
that has (or will have) a major effect on an entity’s operations and financial results when the component meets the criteria to be
classified as held for sale or is disposed. The amendments in this update also require additional disclosures about discontinued
operations and disposal of an individually significant component of an entity that does not qualify for discontinued operations.
This standard must be prospectively applied to all reporting periods presented in financial reports issued after the effective date.
Early adoption is permitted for disposals that have not been reported in financial statements previously issued or available for
issuance. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2014. If applicable,
this standard will change the presentation of the Company's financial statements but will not affect the calculation of net income,
comprehensive income or earnings per share. The Company adopted ASU 2014-08 effective January 1, 2015.
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 requires a company
to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration
to which the company expects to be entitled in exchange for those goods and services. The guidance requires five steps to be
applied: 1) identify the contract(s) with customers, 2) identify the performance obligations in the contract, 3) determine the
transaction price, 4) allocated the transaction price to the performance obligation in the contract and 5) recognize revenue when
(or as) the entity satisfies a performance obligation. The guidance also requires both quantitative and qualitative disclosures, which
are more comprehensive than existing revenue standards. The disclosures are intended to enable financial statement users to
understand the nature, timing and uncertainty of revenue and the related cash flow. An entity can apply the new revenue standard
retrospectively to each prior reporting period presented or retrospective with the cumulative effect of initially applying the standard
recognized at the date of initial application in retained earnings. The new accounting guidance is effective for annual periods
beginning after December 15, 2016 and early adoption is not permitted. The Company is currently reviewing the impact of the
adoption of ASU 2014-09 on the Company's financial statements.
Item 7A. Quantitative and Qualitative Disclosure about Market Risk.
The Company is exposed to market risk through various financial instruments, including fixed rate and floating rate debt
instruments. The Company does at times use interest swap agreements to mitigate its exposure to interest rate fluctuations. Based
on December 31, 2014 debt levels, a 1% change in interest rates would impact annual interest expense by approximately $40,000.
Additionally, the Company operates internationally and, as a result, is exposed to foreign currency fluctuations. Specifically, the
exposure results from intercompany loans, intercompany sales or payments and third party sales or payments. In an attempt to
reduce this exposure, foreign currency forward contracts are utilized to hedge intercompany purchases and sales as well as third
party purchases and sales. The Company does not believe that any potential loss related to these financial instruments would have
a material adverse effect on the Company’s financial condition or results of operations.
As of December 31, 2014, the Company had $4,000,000 outstanding under its Amended and Restated Credit Agreement,
which provided for a $100,000,000 senior secured revolving credit facility at variable rates, and $13,350,000 outstanding in
principal on its 4.125% Convertible Senior Subordinated Debentures due in February 2027, of which $1,999,000 is included in
equity. On January 16, 2015, the Company entered into the New Credit Agreement (the “New Credit Agreement”). The proceeds
of the New Credit Agreement were used to repay and terminate the Company’s Amended and Restated Credit Agreement, which
was scheduled to mature in October 2015. Accordingly, while the Company is exposed to increases in interest rates, its exposure
to the volatility of the current market environment is limited as the Company recently entered into its New Credit Agreement. The
New Credit Agreement contains customary default provisions, with certain grace periods and exceptions, which provide that events
of default that include, among other things, failure to pay amounts due, breach of covenants, representations or warranties,
bankruptcy, the occurrence of a material adverse effect, exclusion from any medical reimbursement program, and an interruption
of any material manufacturing facilities for more than ten consecutive days. Should the Company fail to comply with these
requirements, the Company would potentially have to attempt to obtain alternative financing and thus likely be required to pay
much higher interest rates.