Invacare 2015 Annual Report Download - page 104

INVACARE CORPORATION AND SUBSIDIAIRIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
FS-32
Charges for the year ended December 31, 2012 totaled $11,395,000 including charges for severance ($6,775,000), lease
termination costs ($1,725,000), building and asset write-downs, primarily related to the closure of the Hong, Denmark assembly
facility, and other miscellaneous charges in Europe and Asia/Pacific ($2,404,000) and inventory write-offs ($491,000) in Asia/
Pacific recorded in cost of products sold. Severance charges were primarily incurred in the North America/HME segment
($4,242,000), Asia/Pacific segment ($1,681,000) and Europe segment ($817,000). In addition, a portion of the North America/
HME 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 expenses and manufacturing expenses for the company. In Europe, positions were
eliminated as a result of finalizing the exit from the manufacturing facility in Denmark and an elimination of a senior management
position in Switzerland. In Asia/Pacific, at the end of October 2012, the company's management approved a plan to restructure
the company's operations in this segment. In Australia, the company consolidated offices / warehouses, decreased staffing and
exited various activities while returning to a focus on distribution. At the company's subsidiary, which produces microprocessor
controllers, the company decided to cease the contract manufacturing business for companies outside of the healthcare industry.
Payments for the year ended December 31, 2012 were $9,381,000 and were funded with operating cash flows. The 2012 charges
have been paid out.
Charges for the year ended December 31, 2013 totaled $9,336,000 including charges for severance ($8,282,000), lease
termination costs ($698,000) and other miscellaneous charges principally in North America/HME ($356,000). Severance charges
were primarily incurred in the North America/HME segment ($5,405,000), Europe segment ($1,640,000) and Asia/Pacific segment
($970,000). The charges were incurred as a result of the elimination of various positions as part of the company's globalization
initiatives. North America/HME segment severance was principally related to positions eliminated due to lost sales volumes
resulting from the impact of the FDA consent decree. The savings from these charges will be reflected primarily in reduced selling,
general and administrative expenses and manufacturing expenses for the company. In Europe, severance incurred for elimination
of certain sales and supply chain positions. In Asia/Pacific, severance principally incurred at the company's subsidiary, which
produces microprocessor controllers, as a result of the company's decision in 2012 to cease the contract manufacturing business
for companies outside of the healthcare industry. The lease termination costs were principally related to Australia as a result of
the restructuring announced in 2012. Payments for the year ended December 31, 2013 were $11,844,000 and were funded with
operating cash flows and cash on hand. The 2013 charges have been paid out.
Charges for the year ended December 31, 2014 totaled $11,112,000 including charges for severance ($9,841,000), other
charges in IPG and Europe ($1,286,000) principally related to building write-downs and lease termination cost reversals ($15,000).
Severance charges were incurred in the North America/HME segment ($4,404,000), Other ($2,978,000), IPG segment
($1,163,000), Asia/Pacific segment ($769,000) and Europe segment ($527,000). The North America/HME segment severance
was principally related to additional positions eliminated due to lost sales volumes resulting from the continued impact of the FDA
consent decree. The Other severance related to the elimination of two senior corporate executive positions. IPG segment severance
related principally to the closure of the London, Canada facility. Europe and Asia/Pacific severance related to the elimination of
certain positions as a result of general restructuring efforts. The savings from these charges will be reflected primarily in reduced
selling, general and administrative expenses and manufacturing expenses for the company. Payments for the year ended
December 31, 2014 were $11,131,000 and were funded with operating cash flows and cash on hand. The majority of the 2014
charges have been paid out other than certain executive charge payments which will be paid out over next few years.
Charges for the year ended December 31, 2015 totaled $1,971,000 including charges for severance ($1,678,000) and charges
primarily in the North America/HME segment ($293,000) principally related to a building lease termination. Severance charges
were incurred in the North America/HME segment ($1,069,000), Europe segment ($510,000), IPG segment ($73,000) and Asia/
Pacific segment ($26,000) related to the elimination of certain positions as a result of general restructuring efforts. The savings
from these charges will be reflected primarily in reduced selling, general and administrative expenses and manufacturing expenses
for the company. Payments for the year ended December 31, 2015 were $3,723,000 and were funded with operating cash flows
and cash on hand. The majority of the 2015 charges are expected to be paid out within the next 12 months. To date, the company's
liquidity has not been materially impacted.
There have been no material changes in accrued balances related to the charges, either as a result of revisions in the plans
or changes in estimates. In addition, the savings anticipated as a result of the company's restructuring plans have been or are
expected to be achieved, primarily resulting in reduced salary and benefit costs principally impacting Selling, General and
Administrative expenses, and to a lesser extent, Costs of Products Sold. However, these savings have been more than offset by
continued margin decline, principally as a result of product mix, and higher regulatory and compliance costs related to quality
system improvements as well as reduced net sales volumes.