Invacare 2015 Annual Report Download - page 26

I-20
The adoption of healthcare reform and other legislative developments in the United States may adversely affect the company’s
business, results of operations and/or financial condition.
The U.S. Affordable Care Act enacted in 2010 includes provisions intended to expand access to health insurance coverage,
improve the quality and reduce the costs of healthcare over time. Specifically, as one means to pay for the costs of the Affordable
Care Act, the law imposes a 2.3% sales-based excise tax on U.S. sales by manufacturers or importers of most medical devices.
The excise tax is deductible by the manufacturer or importer on its federal income tax return. The company has determined that
most of its products are exempt from the tax based on the retail exemption provided 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
excise tax may increase the company’s cost of doing business, particularly if the exemptions do not ultimately apply as the company
expects based on its interpretations of the regulations.
The Affordable Care Act and the programs implemented by the law may reduce reimbursements for the company's products,
may impact the demand for the company’s products and may impact the prices at which the company sells its products. In addition,
various healthcare programs and regulations may be ultimately implemented at the federal or state level. Such changes could have
a material adverse effect on the company’s business, results of operations and/or financial condition.
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) enacted in 2010, and the rules
and regulations enacted thereunder by the SEC and the Commodity Futures Trading Commission (CFTC), institute a wide range
of reforms, certain of which may impact the company. Among other things, the Dodd-Frank Act contains significant corporate
governance and executive compensation-related provisions that authorize or require the SEC to adopt additional rules and
regulations in these areas, such as shareholder “say on pay” voting and proxy access. The Dodd-Frank Act also provides for new
statutory and regulatory requirements for derivative transactions, including foreign exchange and interest rate hedging transactions,
and new requirements will be implemented over time. The company enters into foreign exchange contracts, interest rate swaps
and foreign currency forward contracts from time to time to manage its exposure to commodity price risk, foreign currency
exchange risk and interest rate risk. The company does not enter into derivative transactions for speculative purposes. Unless
exempt, certain of these transactions, such as interest rate swaps and foreign exchange swaps, are required to be cleared by a
registered derivatives clearing organization and subject to exchange trading requirements. If a derivative is required to be cleared,
the company would be subject to cash and securities initial and variation margin posting, increasing the cost to the company of
mitigating commercial risk and impacting its strategic hedging activity. The contractual counterparties in hedging arrangements
are likewise subject to increased costs as a result of compliance with the Dodd-Frank Act and it is anticipated these costs will be
passed on to their customers. The company will continue to analyze the suitability of particular hedging arrangements and to invest
appropriate resources to comply with both existing and evolving standards.
In addition, the Dodd-Frank Act contains provisions to improve transparency and accountability concerning the sourcing
of “conflict minerals” from mines located in the conflict zones of the Democratic Republic of Congo (DRC) and its adjoining
countries. The term “conflict minerals” currently encompasses tantalum, tin, tungsten (or their ores) and gold. Conflict minerals
can be found in a vast array of products. This legislation requires manufacturers, such as the company, to investigate and disclose
their use of any conflict minerals originating in the DRC or adjoining countries in an annual filing with the SEC. It also implements
guidelines to assist the manufacturer in preventing, by way of performing due diligence in its supply chain, any such sourcing
from, or potentially financing or benefiting, armed groups in this area. As standards for the production of the annual conflict
minerals report evolve, the company may be required to undertake significant due diligence processes requiring considerable
investments of human resources and finances in order to comply with the conflict minerals due diligence and disclosure
requirements. If the company's suppliers are unable or unwilling to provide it with requested information and to take other steps
to ensure that there is no financing or benefiting of armed groups in the DRC and there are no conflict minerals included in materials
or components supplied to the company, it may be forced to disclose in its SEC filings about the use of conflict minerals in its
supply chain, which may expose the company to reputational risks, which in turn could materially adversely affect its business,
financial condition and results of operations.
The company’s revenues and profits are subject to exchange rate and interest rate fluctuations that could adversely affect
its results of operations or financial position.
Currency exchange rates are subject to fluctuation due to, among other things, changes in local, regional or global economic
conditions, the imposition of currency exchange restrictions and unexpected changes in regulatory or taxation environments. The
predominant currency used by the company’s subsidiaries outside the United States to transact business is the functional currency
used for each subsidiary. Through the company’s international operations, the company is exposed to foreign currency fluctuations,
and changes in exchange rates can have a significant impact on net sales and elements of cost. The company conducts a significant
number of transactions in currencies other than the U.S. dollar. In addition, because certain of the company’s costs and revenues