Invacare 2015 Annual Report Download

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2015 Annual Report
And Form 10-K

Table of contents

  • Page 1
    2015 Annual Report And Form 10-K

  • Page 2

  • Page 3
    ... care centers, specialized residential facilities and at home - where costs are lower, outcomes are better and where patients prefer to be treated. These are long-term shifts in healthcare and the characteristics of an environment where Invacare can win. Invacare provides medical device solutions...

  • Page 4
    ... sports equipment (Top End); patient-specific custom seating (PinDot); pediatric and adult tilt-in-space wheelchairs (Freedom Designs); complex seating and positioning solutions (Motion Concepts); programmable electronic control systems (Dynamic Controls); and non-delivery oxygen devices (Invacare...

  • Page 5
    ... sales force and support our team to be more focused on clinically complex products. To increase awareness and provide more access to our devices, we will invest in more training, an expanded clinical staff and further commercial and marketing activities. We will explore ways to make our operations...

  • Page 6
    [THIS PAGE INTENTIONALLY LEFT BLANK]

  • Page 7
    ... The market values indicated were calculated based upon the last sale price of the Common Shares as reported by The New York Stock Exchange on June 30, 2015, which was $21.63. For purposes of this information, the 1,231,149 Common Shares and 703,912 Class B Common Shares which were held by Executive...

  • Page 8
    INVACARE CORPORATION 2015 ANNUAL REPORT ON FORM 10-K CONTENTS Item PART I: 1 1A. 1B. 2 3 4 Business ...Risk Factors ...Unresolved Staff Comments ...Properties ...Legal Proceedings ...Mine Safety Disclosures...Executive Officers of the Registrant ...PART II: 5 6 7 7A. 8 9 9A. 9B. Market for the ...

  • Page 9
    ... home medical equipment providers with retail and e-commerce channels, residential living operators, distributors and government health services in the United States, Europe, Canada, New Zealand, Australia and Asia. Invacare's products are sold through its worldwide distribution network by its sales...

  • Page 10
    ...revenues from products sold into Australia, New Zealand, China, Japan, Korea and South East Asia. Invacare's Asia/Pacific businesses sell through six distribution channels. Mobility and seating products are sold via a dealer network with almost all sales directly government-funded. Homecare products...

  • Page 11
    ... as patient care products such as commodes and other toileting aids. Homecare Beds. Invacare manufactures and distributes a wide variety of manual, semi-electric and fully-electric beds for home use under the Invacare® brand name. Homecare bed accessories include bedside rails, mattresses, overbed...

  • Page 12
    ... Germany. Invacare UK Ltd. manufactures therapeutic support surfaces, and seating and positioning products. It also receives imported seating and positioning products from Invacare's Motion Concepts subsidiary in Canada. Oxygen products, such as concentrators and Invacare® HomeFill® oxygen systems...

  • Page 13
    ... from continuing operations in 2015, 2014 and 2013, respectively. • Asia/Pacific The company's Asia/Pacific operations consist of Invacare Australia, Invacare New Zealand and Dynamic Controls. The company distributes a range of home medical equipment including mobility and seating, lifestyle and...

  • Page 14
    ...In Canada, products are sold by a sales force and distributed through regional distribution centers to health care providers throughout Canada. Products from the IPG segment include beds and resident room furnishings, safe patient handling equipment, bathing systems, and therapeutic support surfaces...

  • Page 15
    ... and revenue from trade sales and rentals to customers in Australia, New Zealand, China, Japan, Korea and South East Asia. Invacare Asia/Pacific businesses sell through six distribution channels Mobility and seating products are sold via a dealer network with almost all sales directly government...

  • Page 16
    ... of Invacare's notable new products introduced in 2015: • The ROVI® X3 Power Base with Motion Concepts Ultra Low Maxx Power Positioning was launched in North America and Asia/Pacific available with a full range of Motion Concepts power positioning products. This wheelchair features center-wheel...

  • Page 17
    ... company has eight manufacturing/assembly facilities in Europe with capabilities to manufacture patient aid, wheelchair, powered mobility, bath safety, beds, therapeutic support surfaces, and patient transport products. Products manufactured in Europe are used by customers in Europe, Middle East and...

  • Page 18
    ...with the consent decree or FDA regulations, including requiring the company to cease all operations relating to Taylor Street products. The FDA also can order the company to undertake a partial cessation of operations or a recall, issue a safety alert, public health advisory, or press release, or to...

  • Page 19
    ... expert certification reports previously accepted in 2013. The company has filed its response to this Form 483 with the FDA and continues to work on addressing the FDA's observations. From time to time, the company may undertake voluntary recalls or field corrective actions of the company's products...

  • Page 20
    ..., or furnished to, the SEC. Copies of the company's filings also can be requested, free of charge, by writing to: Shareholder Relations Department, Invacare Corporation, P.O. Box 4028, Elyria, OH 44036-2125. The contents of the company's website is not part of this Annual Report on Form 10-K. I-14

  • Page 21
    ...claims; product recalls, including more extensive recall experience than expected; the failure or refusal of customers or healthcare professionals to sign verification of medical necessity (VMN) documentation or other certification forms required by the exceptions to the FDA consent decree; possible...

  • Page 22
    ... and wheelchair sub-assemblies at or from its Taylor Street manufacturing facility in Elyria, Ohio. The decree also temporarily limited design activities related to wheelchairs and power beds that take place at the impacted Elyria, Ohio facilities. However, the company is entitled to continue to...

  • Page 23
    ... been closed and for Taylor Street facility products until the company has exited the injunctive phase of the consent decree. The inability to obtain export certificates for products produced at its Taylor Street or Sanford facilities has limited the company's ability to support new foreign markets...

  • Page 24
    ... is subject to a FDA consent decree affecting its Corporate facility and Taylor Street manufacturing facility in Elyria, Ohio and received a FDA warning letter related to its Sanford, Florida facility. Health care is an area of rapid regulatory change. Changes in the law and new interpretations of...

  • Page 25
    ...services provided to their customers and patients by third-party payors, such as government programs, including Medicare and Medicaid, private insurance plans and managed care programs. Most of these programs set maximum reimbursement levels for some of the products sold by the company in the United...

  • Page 26
    ...in the Affordable Care Act as defined by the regulations. However, certain products that it sells for institutional use are subject to the excise tax. Based on the company's interpretation of the regulations, the impact from the tax was immaterial for the company in 2015, 2014 and 2013. However, the...

  • Page 27
    ... strategic execution. The home medical equipment market is highly competitive and the company's products face significant competition from other well-established manufacturers. Reduced government reimbursement levels and changes in reimbursement policies, such as the National Competitive Bidding...

  • Page 28
    ... inherent in managing and operating businesses in many different foreign jurisdictions. The company has significant international operations, including operations in Australia, Canada, New Zealand, Mexico, Asia (primarily China) and Europe. There are risks inherent in operating and selling products...

  • Page 29
    ...that exceed the captive insurance company policy limits or the limits of the company's per country foreign liability limits, as applicable. There can be no assurance that Invacare's current insurance levels will continue to be adequate or available at affordable rates. Product liability reserves are...

  • Page 30
    ... price is increasingly a primary consideration in customers' purchasing decisions. The company historically has been engaged in product development and improvement programs. However, beginning in 2012 as a result of the FDA consent decree, which is described elsewhere in this Annual Report on Form...

  • Page 31
    ... own report, to successfully complete the FDA inspection contemplated under the consent decree and to obtain 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 agreement...

  • Page 32
    ... the company to acquire businesses or product lines, including providing new products or new manufacturing and service capabilities, to add new customers, to increase penetration with existing customers, and to expand into new geographic markets. The provisions of the credit agreement restrict the...

  • Page 33
    ... of the services of, the company's key management and personnel could adversely affect its ability to operate the company's business. The company's future success will depend, in part, upon the continued service of key managerial, research and development staff and sales and technical personnel. In...

  • Page 34
    ... that the company will not experience disruptions or inefficiencies in the company's business operations as a result of the upgrade which could have a material adverse effect on the company's business, financial condition, liquidity or results of operations. Item 1B. Unresolved Staff Comments...

  • Page 35
    ...report and in the table below: Square Feet North American/HME Operations Arlington, Texas...Atlanta, Georgia ...Attleboro, Massachusetts ...Beijing, China...Cranbury, New Jersey...Cranbury, New Jersey...Elyria, Ohio ...-1200 Taylor Street ...-899 Cleveland Street ...-One Invacare Way ...-1320 Taylor...

  • Page 36
    ...Products Group Maryland Heights, Missouri...Asia/Pacific Operations Auckland, New Zealand ...Christchurch, New Zealand ...Kidderminster, United Kingdom ...North Olmsted, Ohio ...North Rocks, NSW, Australia...Suzhou, China ...European Operations Albstadt, Germany ...Albstadt, Germany...Use ...

  • Page 37
    ...wheelchairs, wheelchair components and wheelchair sub-assemblies at or from its Taylor Street manufacturing facility. The decree also initially limited design activities related to wheelchairs and power beds that take place at the impacted Elyria, Ohio facilities. The company is entitled to continue...

  • Page 38
    ...with the consent decree or FDA regulations, including requiring the company to cease all operations relating to Taylor Street products. The FDA also can order the company to undertake a partial cessation of operations or a recall, issue a safety alert, public health advisory, or press release, or to...

  • Page 39
    ... of Hips and Reconstructive Research (January 2014 until joining Invacare). Prior to joining Zimmer in 2009, Mr. Monaghan spent eight years as an operating executive for two leading private equity firms, Texas Pacific Group (TPG) and Cerberus Capital Management, where he led acquisitions and...

  • Page 40
    ... her current position in 2009. Previously, Mrs. Stumpp served as Director of Compensation & Benefits from January 2001 to August 2006 and as Director of the Human Resources Group from August 2006 until August 2009. She also has prior experience in healthcare, small business and the services industry...

  • Page 41
    ...0125 0.0125 0.0125 0.0125 During 2015 and 2014, the Board of Directors also declared annualized dividends of $0.0455 per Class B Common Share. For information regarding limitations on the payment of dividends in the company's credit facilities and debt agreements, see Long Term Debt in the Notes to...

  • Page 42
    ...Investment Group. All rights reserved. _____ * The S&P Healthcare Equipment & Supplies Index is a capitalization-weighted average index comprised of health care companies in the S&P 500 Index. The graph assumes $100 invested on December 31, 2010 in the Common Shares of Invacare Corporation, S&P 500...

  • Page 43
    ... which was the company's closing stock price on the pricing date of the offering. The equity compensation plan information required under Item 201(d) of Regulation S-K is incorporated by reference to the information under the caption "Equity Compensation Plan Information" in the company's definitive...

  • Page 44
    ...Current Liabilities ...Working Capital...Long-Term Debt ...Other Long-Term Obligations...Shareholders' Equity ...Other Data Research and Development Expenditures ...$ Capital Expenditures ...Depreciation and Amortization ...Key Ratios Return on Sales % from continuing operations ...Return on Average...

  • Page 45
    ... to restructuring from continuing operations of $1,971,000 ($1,843,000 after-tax expense or $0.06 per share assuming dilution), net warranty reversals of $2,325,000 ($2,325,000 after-tax expense or $0.07 per share assuming dilution related to three product recalls) and the positive impact of an...

  • Page 46
    ... access to low cost supply alternatives. As a specific example of reimbursement reductions, the company's U.S. customers have been exposed to the National Competitive Bidding (NCB) program from the Centers for Medicare and Medicaid Services (CMS), which began in 2011 and will continue with major...

  • Page 47
    ... continue to be pressured in 2016 as a result of its consent decree with the United States Food and Drug Administration (FDA) affecting operations at the Corporate and Taylor Street facilities in Elyria, Ohio. The consent decree limits production at the Taylor Street manufacturing facility to orders...

  • Page 48
    ... on the company's domestic taxable loss related to continuing operations for 2014 and 2013. The company has classified ISG, Champion and Altimate as a discontinued operations for all periods presented. On July 2, 2015, the company sold its rentals businesses to Joerns Healthcare Parent, LLC, for...

  • Page 49
    .... Net sales in the mobility and seating product category continue to be impacted by the FDA consent decree, which limits production of custom power wheelchairs and seating systems at the Taylor Street manufacturing facility to products having properly completed verification of medical necessity (VMN...

  • Page 50
    ... by the U.S. government, as well as similar healthcare reimbursement pressures abroad, which negatively affect the company's customers (e.g. home health care providers) and continued pricing pressures faced by the company as a result of outsourcing by competitors to lower cost locations. In addition...

  • Page 51
    ...its businesses. Research and development expenditures, which are included in costs of products sold, decreased to $18,677,000 in 2015 from $23,149,000 in 2014. The expenditures, as a percentage of net sales, were 1.6% and 1.8% in 2015 and 2014, respectively. 2014 Versus 2013 Net Sales. Consolidated...

  • Page 52
    ... In addition, the mobility and seating product category continued to be impacted by the FDA consent decree, which limits production of custom power wheelchairs and seating systems at the Taylor Street manufacturing facility to products having properly completed verification of medical necessity (VMN...

  • Page 53
    ... by the U.S. government, as well as similar healthcare reimbursement pressures abroad, which negatively affect the company's customers (e.g. home health care providers) and continued pricing pressures faced by the company as a result of outsourcing by competitors to lower cost locations. In addition...

  • Page 54
    ... of foreign income taxed at rates below the U.S. statutory rate. In 2013, the company's losses without benefit and valuation allowances existed in the United States, Australia and New Zealand, and for 2014 also existed for one company in Switzerland. During 2013 a Danish valuation allowance of $390...

  • Page 55
    ... expenditure programs designed to improve productivity, alternative sourcing of material and other cost control measures. LIQUIDITY AND CAPITAL RESOURCES The company continues to maintain an adequate liquidity position through its unused bank lines of credit (see Long-Term Debt in the Notes to...

  • Page 56
    ... ongoing turnaround and addressing potential risks and contingencies described in the "Risk Factors" contained in this Annual Report on Form 10-K. The net proceeds will allow the company to invest in new products, people, marketing initiatives and working capital to transform the business and pursue...

  • Page 57
    ... as the surrender of corporate-owned life insurance of $11,902,000 to fund payments in 2015 related to the retirement of certain executive officers of the company in 2014. In addition, the company received net proceeds of $13,700,000 from the sale of its rental businesses in July 2015. By comparison...

  • Page 58
    ... of the sale of the rentals businesses, which were sold in July 2015 and not deemed discontinued operations for financial reporting purposes. Twelve months ended December 31, 2015 compared to December 31, 2014: Reported North America / HME...Institutional Products Group ...Europe ...Asia/Pacific...

  • Page 59
    ... a credit application, a signed security agreement, personal guarantee and/or a cross corporate guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of their credit report and/or other relevant financial information. Existing...

  • Page 60
    .... In 2015, 2014 and 2013, the company performed a review for potential impairments of any other assets, including the company's Taylor Street facility which is subject to the FDA consent decree that limits the company's manufacture and distribution of custom power and manual wheelchairs, wheelchair...

  • Page 61
    ...that exceed the captive insurance company policy limits or the limits of the company's per country foreign liability limits, as applicable. There can be no assurance that Invacare's current insurance levels will continue to be adequate or available at affordable rates. Product liability reserves are...

  • Page 62
    ...recorded at the time of sale based upon actual experience. The company continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. Historical analysis is primarily used to determine the company's warranty reserves. Claims history is reviewed and provisions are...

  • Page 63
    ...of Conduct; written policies and procedures; and a careful selection and training of employees. Actions are taken to correct deficiencies as they are identified. An effective internal control system, no matter how well designed, has inherent limitations-including the possibility of the circumvention...

  • Page 64
    ... and, based on that audit, issued an attestation report regarding the company's internal control over financial reporting, which is included in this Annual Report on Form 10-K on page FS-2. (d) Changes in Internal Control Over Financial Reporting There have been no changes in the company's internal...

  • Page 65
    ... Holders and Management" in the company's definitive Proxy Statement on Schedule 14A for the 2016 Annual Meeting of Shareholders. Information regarding the securities authorized for issuance under the company's equity compensation plans is incorporated by reference to the information set forth under...

  • Page 66
    ... are included in Part II, Item 8: Consolidated Statement of Comprehensive Income (Loss)-years ended December 31, 2015, 2014 and 2013 Consolidated Balance Sheet-December 31, 2015 and 2014 Consolidated Statement of Cash Flows-years ended December 31, 2015, 2014 and 2013 Consolidated Statement of...

  • Page 67
    ... persons on behalf of the Registrant and in the capacities indicated as of March 3, 2016. Signature /s/ MATTHEW E. MONAGHAN Matthew E. Monaghan ROBERT K. GUDBRANSON Robert K. Gudbranson MICHAEL F. DELANEY Michael F. Delaney Title Chairman of the Board of Directors, President and Chief Executive...

  • Page 68
    ..., by and between Invacare Corporation and Wells Fargo Bank, National Association (including the form of the 5.00% Convertible Senior Notes due 2021). Invacare Retirement Savings Plan, effective January 1, 2001, as amended Invacare Corporation 401(K) Plus Benefit Equalization Plan, effective January...

  • Page 69
    ... General Manager, North America and Global Product Development 2012 Non-employee Directors Deferred Compensation Plan, effective January 1, 2012 Amendment No. 3 to Invacare Corporation Deferred Compensation Plus Plan, effective January 1, 2005 Invacare Corporation 2013 Equity Compensation Plan Form...

  • Page 70
    ... of Industrial Realty Group, LLC named therein. Invacare Corporation Executive Incentive Bonus Plan, as amended and restated Amendment No. 1 to the Invacare Corporation 2013 Equity Compensation Plan Amended and Restated Revolving Credit and Security Agreement, dated as of September 30, 2015, by and...

  • Page 71
    ... the appropriate Exhibit of the company report on Form 10-Q, for the fiscal quarter ended September 30, 2013, which Exhibit is incorporated herein by reference. Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated March 7, 2014, which Exhibit is incorporated herein by reference...

  • Page 72
    .... Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated February 26, 2014, which Exhibit is incorporated herein by reference. Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated January 21, 2015, which Exhibit is incorporated herein by reference. Reference...

  • Page 73
    ... Board (United States), Invacare Corporation's internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report...

  • Page 74
    ... of comprehensive income (loss), cash flows and shareholders' equity for each of the three years in the period ended December 31, 2015 of Invacare Corporation and our report dated March 3, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Cleveland, Ohio March 3, 2016 FS...

  • Page 75
    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS) INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2015 2014 2013 (In thousands, except per share data) Net sales...$ 1,142,338 $ 1,270,163 $ 1,334,505 Cost of products sold ...829,514 922,775 967,079 Gross Profit ...312,824 347,388 ...

  • Page 76
    ...held for sale ...Total Current Liabilities ...Long-Term Debt ...Other Long-Term Obligations...Shareholders' Equity Preferred Shares (Authorized 300 shares; none outstanding) ...Common Shares (Authorized 100,000 shares; 35,024 and 34,219 issued in 2015 and 2014, respectively)-no par ...Class B Common...

  • Page 77
    ...OF CASH FLOWS INVACARE CORPORATION AND SUBSIDIARIES Years Ended December 31, 2015 2014 2013 (In thousands) (26,190) $ (56,070) $ 33,051 Operating Activities Net earnings (loss) ...$ Adjustments to reconcile net earnings to net cash provided by operating activities: Gain on sale of business (pre-tax...

  • Page 78
    ... gain on cash flow hedges ...Defined benefit plans: Amortization of prior service costs and unrecognized losses and credits . . Additions - new participants ...Total comprehensive income...Dividends ...December 31, 2013 Balance ...$ Deferred equity compensation ...Exercise of stock options...Non...

  • Page 79
    ... of Operations: Invacare Corporation is a leading manufacturer and distributor of medical equipment used in the home based upon the company's distribution channels, breadth of product line and net sales. The company designs, manufactures and distributes an extensive line of health care products for...

  • Page 80
    ... a credit application, a signed security agreement, personal guarantee and/or a cross corporate guarantee depending on the credit history of the customer. Credit lines are established for new customers after an evaluation of their credit report and/or other relevant financial information. Existing...

  • Page 81
    ...) or goods and service tax (GST) regulations, particularly in Europe and Asia/Pacific. VAT and GST are taxes on consumption in which the company pays tax on its purchases of goods and services and charges customers on the sale of product. The difference between billings to customers and payments on...

  • Page 82
    ...and Statement of Cash Flows. Specifically, the disposal of the United States Rentals businesses, in the third quarter of 2015, was not deemed to be a discontinued operation. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." ASU 2014-09 requires a company to recognize...

  • Page 83
    ..., in order to focus on its core equipment product lines, the company entered into an agreement to sell ISG and determined on that date that the "held for sale" criteria of ASC 360-10-45-9 were met. On January 18, 2013, the company completed the sale of the ISG medical supplies business to AssuraMed...

  • Page 84
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) On August 6, 2013, the company sold Champion, its domestic medical recliner business for dialysis clinics, to Champion Equity Holdings, LLC for $45,000,000 in cash, which was subject to final post-closing ...

  • Page 85
    ... from health care, medical equipment providers and long term care facilities located throughout the United States, Australia, Canada, New Zealand, China and Europe. A significant portion of products sold to providers, both foreign and domestic, are ultimately funded through government reimbursement...

  • Page 86
    ... as of January 1...$ Current period (benefit) provision ...Direct write-offs charged against the allowance...Balance as of December 31...$ 2015 5,852 $ (332) (2,728) 2,792 $ 2014 6,039 796 (983) 5,852 Installment receivables by class as of December 31, 2015 consist of the following (in thousands...

  • Page 87
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Installment receivables by class as of December 31, 2014 consist of the following (in thousands): Related Allowance for Doubtful Accounts Total Installment Receivables U.S. Impaired installment receivables...

  • Page 88
    ...36,798 The company sold life insurance policies of $11,902,000 and $21,338,000 in 2015 and 2014, respectively, to fund payments as the result of the retirement of certain executive officers of the company. Property and Equipment Property and equipment as of December 31, 2015 and 2014 consist of the...

  • Page 89
    .... In 2015, 2014 and 2013, the company performed a review for potential impairments of any other assets, including the company's Taylor Street facility which is subject to the FDA consent decree that limits the company's manufacture and distribution of custom power and manual wheelchairs, wheelchair...

  • Page 90
    ... cash flow then discounted to value the customer list. The fair values of the trademarks and developed technology were calculated using a relief from royalty payment methodology which requires applying an estimated market royalty rate to forecasted net sales and discounting the resulting cash flows...

  • Page 91
    ...recorded at the time of sale based upon actual experience. The company continuously assesses the adequacy of its product warranty accrual and makes adjustments as needed. Historical analysis is primarily used to determine the company's warranty reserves. Claims history is reviewed and provisions are...

  • Page 92
    ... ($1,612,000) and the Asia/Pacific segment ($1,265,000). These warranty reserves are subject to adjustment in future periods as new developments change the company's estimate of the total cost of these matters. Long-Term Debt Debt as of December 31, 2015 and 2014 consisted of the following (in...

  • Page 93
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Prior Credit Agreement to permit the company (i) to make a single acquisition of assets of a third-party for cash consideration not to exceed $500,000 on or before September 30, 2015 and (ii) to accept ...

  • Page 94
    ... effect, exclusion from any medical reimbursement program, and an interruption in the operations of any material manufacturing facility for more than 10 consecutive days. The proceeds of the European Credit Facility will be used to finance the working capital and other business needs of the company...

  • Page 95
    ...000 and $4,046,000 in 2015, 2014 and 2013, respectively. Other Long-Term Obligations Other long-term obligations as of December 31, 2015 and 2014 consist of the following (in thousands): 2015 Supplemental Executive Retirement Plan liability ...$ Product liability ...Deferred income taxes ...Deferred...

  • Page 96
    ... $20,360,000 in 2015, $23,568,000 in 2014 and $24,726,000 in 2013. On April 23, 2015, the company sold and leased back, under four separate lease agreements, four properties located in Ohio and one property in Florida for net proceeds of $23,000,000, which were used to reduce debt under the...

  • Page 97
    ...based on an annual resolution of the Board of Directors. Contribution expense for the Invacare Retirement Savings Plan in 2015, 2014 and 2013 was $2,573,000, $2,698,000 and $3,126,000, respectively. The company sponsors a Deferred Compensation Plus Plan covering certain employees, which provides for...

  • Page 98
    ... rate and, in general, can only be transferred to family members. Holders of Class B Common Shares are entitled to convert their shares into Common Shares at any time on a share-for-share basis. On May 16, 2013 shareholders approved the Invacare Corporation 2013 Equity Compensation Plan (the "2013...

  • Page 99
    ...of grant. The company expects the compensation expense to be recognized over a weighted-average period of approximately 2 years. The following table summarizes information about stock option activity for the three years ended 2015, 2014 and 2013: Weighted Average Exercise Price $ 22.74 0.00 13.95 34...

  • Page 100
    ... the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for awards granted in 2014 and 2013 as no options were granted in 2015: 2014 Expected dividend yield ...Expected stock price volatility ...Risk-free interest rate ...Expected life in years...

  • Page 101
    ...expense was recognized in 2015 or 2014. Rights Agreement Effective July 8, 2005, the company adopted a Rights Agreement to replace the company's previous shareholder rights plan, which expired on July 7, 2005. In order to implement the new Rights Agreement, the Board of Directors declared a dividend...

  • Page 102
    ... on notes that are long-term in nature and not intended to be settled. Reclassifications out of accumulated OCI for the year ended December 31, 2015 and December 31, 2014 were as follows (in thousands): Amount reclassified from OCI 2015 2014 Defined Benefit Plans Service and interest costs ...$ Tax...

  • Page 103
    ... by the U.S. government, as well as similar healthcare reimbursement pressures abroad, which negatively affect the company's customers (e.g. home health care providers) and continued pricing pressures faced by the company as a result of outsourcing by competitors to lower cost locations. In addition...

  • Page 104
    ...segment severance was related to positions eliminated, principally in sales and marketing as well as manufacturing, at the company's Taylor Street facility as a result of the FDA consent decree. The savings from these charges will be reflected primarily in reduced selling, general and administrative...

  • Page 105
    ...-(Continued) A progression by reporting segment of the accruals recorded as a result of the restructuring is as follows (in thousands): Severance December 31, 2010 Balance ...$ Charges North America/HME...IPG ...Europe ...Asia/Pacific ...Total ...Payments North America/HME...IPG ...Europe ...Asia...

  • Page 106
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Severance December 31, 2013 Balance North America/HME...$ IPG ...Europe ...Asia/Pacific ...Total ...Charges North America/HME...IPG ...Europe ...Asia/Pacific ...Other ...Total ...Payments North America/HME...

  • Page 107
    ... in the 2015, 2014 and 2013 Federal current tax benefit is a benefit of $140,000, $7,175,000 and $3,455,000, respectively, related to an intra-period allocation to continuing operations. A charge in an equal amount is in discontinued operations. A reconciliation to the effective income tax rate from...

  • Page 108
    ..., net ...$ Long-term deferred income tax assets (liabilities), net: Bad Debt...$ Warranty...Other accrued expenses and reserves ...Inventory ...Goodwill and intangibles ...Convertible debt ...Fixed assets ...Compensation and benefits ...Loss and credit carryforwards ...Product liability ...State...

  • Page 109
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in thousands): 2015 Balance at beginning of year ...$ Additions to: Positions taken during the current year ...

  • Page 110
    ... from health care, medical equipment providers and long term care facilities located throughout the United States, Australia, Canada, New Zealand and Europe. A significant portion of products sold to dealers, both foreign and domestic, is ultimately funded through government reimbursement programs...

  • Page 111
    ...company utilizes foreign currency forward contracts to hedge portions of its forecasted purchases/sales denominated in foreign currencies. The gains and losses are included in cost of products sold and selling, general and administrative expenses on the consolidated statement of comprehensive income...

  • Page 112
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Foreign exchange forward contracts qualifying and designated for hedge accounting treatment were as follows (in thousands USD): December 31, 2015 Unrealized Notional Net Gain Amount (Loss) (83) $ 2,910 $ 3,...

  • Page 113
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Derivatives Not Qualifying or Designated for... gain or loss was realized by the company in 2015 or 2014 related to these contracts and the associated short-term intercompany trading receivables and payables...

  • Page 114
    ...In 2014, net sales were decreased by $657,000 and cost of product sold was decreased by $995,000 for a net realized gain of $338,000 compared to a net loss of $271,000 in 2013. The company recognized incremental expense of $12,000 and $337,000 in 2014 and 2013, respectively, related to interest rate...

  • Page 115
    ...in 2014 and a net loss of $271,000 in 2013 related to ASC 815 designated derivatives. Gains or losses recognized as the result of the settlement of forward contracts are recognized in cost of products sold for hedges of inventory transactions, sales for hedges of forecasted sales or selling, general...

  • Page 116
    ... investments in limited partnerships and non-marketable equity securities, which are accounted for using the cost method, adjusted for any estimated declines in value. These investments were acquired in private placements and there are no quoted market prices or stated rates of return. The company...

  • Page 117
    ... lines, which includes: lifestyle, mobility and seating and respiratory therapy products. IPG sells, and rented prior to the disposition of the rentals businesses, long-term care medical equipment, health care furnishings and accessory products. Europe and Asia/Pacific sell product lines similar to...

  • Page 118
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) 2015 Net interest expense (income) North America/HME ...$ Institutional Products Group ...Europe ...Asia/Pacific ...Consolidated ...$ Earnings (loss) before income taxes from continuing operations North ...

  • Page 119
    ... Products Group Continuing Care ...$ Europe Lifestyle Products ...$ Mobility and Seating ...Respiratory Therapy...Other(1) ...$ Asia/Pacific Mobility and Seating ...$ Lifestyle Products ...Continuing Care ...Respiratory Therapy...Other(1) ...$ 222,944 117,232 130,349 3,671 474,196 87,137 $ 2014...

  • Page 120
    ...wheelchairs, wheelchair components and wheelchair sub-assemblies at or from its Taylor Street manufacturing facility. The decree also initially limited design activities related to wheelchairs and power beds that take place at the impacted Elyria, Ohio facilities. The company is entitled to continue...

  • Page 121
    ... in the National Competitive Bidding ("NCB") process. The negative effect of the consent decree on customer orders and net sales in these segments has been considerable, and the company expects to continue to experience low levels of net sales in the North America/HME and Asia/Pacific segments at...

  • Page 122
    ... and Taylor Street facilities in Elyria, Ohio which included a review of the company's compliance with terms of the consent decree and the matters covered by the first and second expert certification reports previously accepted in 2013. The company has timely filed its responses to these Form 483...

  • Page 123
    ... shares from purchases of notes in the offering in privately negotiated transactions. A portion of the net proceeds from the offering were used to pay the cost of the convertible note hedge transactions (after such cost is partially offset by the proceeds to the company from the sale of the warrant...

  • Page 124
    ...Year ended December 31, 2015 Net sales ...$ Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ...Charge related to restructuring activities . . Income (loss) from equity investee ...Interest expense (income)-net ...Earnings (Loss) from Continuing Operations Before...

  • Page 125
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS The company (Parent) Year ended December 31, 2014 Net sales ...$ Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ......

  • Page 126
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) CONSOLIDATING CONDENSED STATEMENTS OF OPERATIONS The company (Parent) Year ended December 31, 2013 Net sales ...$ Cost of products sold ...Gross Profit ...Selling, general and administrative expenses ......

  • Page 127
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) CONSOLIDATING CONDENSED BALANCE SHEETS The company (Parent) December 31, 2015 Assets Current Assets Cash and cash equivalents ...$ Trade receivables, net ...Installment receivables, net ...Inventories, net ...

  • Page 128
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) CONSOLIDATING CONDENSED BALANCE SHEETS The company (Parent) December 31, 2014 Assets Current Assets Cash and cash equivalents ...$ Trade receivables, net ...Installment receivables, net ...Inventories, net ...

  • Page 129
    ... The company (Parent) Year ended December 31, 2015 Net Cash Provided (Used) by Operating Activities ...$ Investing Activities Purchases of property and equipment . Proceeds from sale of property and equipment ...Proceeds from sale of businesses ...Decrease in other long-term assets ...Other ...Net...

  • Page 130
    ... The company (Parent) Year ended December 31, 2014 Net Cash (Used) Provided by Operating Activities ...$ Investing Activities Purchases of property and equipment . Proceeds from sale of property and equipment ...Proceeds from sale of businesses ...Decrease in other long-term assets ...Other ...Net...

  • Page 131
    ... The company (Parent) Year ended December 31, 2013 Net Cash Provided (Used) by Operating Activities ...$ Investing Activities Purchases of property and equipment . Proceeds from sale of property and equipment ...Proceeds from sale of businesses ...Decrease in other long-term assets ...Other ...Net...

  • Page 132
    INVACARE CORPORATION AND SUBSIDIAIRIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued) Interim Financial Information (unaudited) QUARTER ENDED (In thousands, except per share data) March 31, 2015 Net sales...$ Gross profit ...Earnings (loss) from continuing operations before income taxes ......

  • Page 133
    ... impact as a result of goodwill deducted for tax purposes from the sale of the rentals business of $3,400,000 ($0.11 per share assuming dilution). Loss and loss per share for the quarter ended December 31, 2015 reflects recall warranty expense reversal of $2,325,000 ($2,325,000 after tax or $0.07...

  • Page 134
    ...Accrued warranty cost ...Accrued product liability ...Year Ended December 31, 2014 Deducted from asset accounts- Allowance for doubtful accounts...$ Inventory obsolescence reserve...Tax valuation allowances...Accrued warranty cost ...Accrued product liability ...Year Ended December 31, 2013 Deducted...

  • Page 135
    ... to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) INVACARE CORPORATION /s/ MATTHEW E. MONAGHAN Matthew...

  • Page 136
    ... to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. b) INVACARE CORPORATION /s/ ROBERT K. GUDBRANSON Chief...

  • Page 137
    ... of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Matthew E. Monaghan, Chief Executive Officer of the company, certify...

  • Page 138
    Exhibit 32.2 Certification Pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Invacare Corporation (the "company") on Form 10-K for the period ending December 31, 2015 as filed with the Securities ...

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