Invacare 2015 Annual Report Download - page 29

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operations in China for the production of its products. Disruptions in the company’s foreign operations, particularly those in China
or Mexico, may impact the company’s revenues and profitability.
The company may be adversely affected by legal actions or regulatory proceedings.
In addition to the risks associated with the impact of the FDA consent decree, the company may be subject to claims, litigation,
governmental or regulatory investigations, or other liabilities as a result of injuries caused by allegedly defective products, or
disputes arising out of acquisitions or dispositions the company has completed or relating to the company's intellectual property.
Any such claims or litigation against the company, regardless of the merits, could result in substantial costs and could harm the
company's business or its reputation.
The results of legal or regulatory actions or regulatory proceedings are difficult to predict and the company cannot provide
any assurance that an action or proceeding will not be commenced against the company, or that the company will prevail in any
such action or proceeding. An unfavorable resolution of any legal action or proceeding could materially and adversely affect the
company's business, results of operations, liquidity or financial condition or its reputation.
Product liability claims may harm the company’s business, particularly if the number of claims increases significantly or
the company’s product liability insurance proves inadequate.
The manufacture and sale of medical devices and related products exposes the company to a significant risk of product
liability claims. From time to time, the company has been, and currently is, subject to a number of product liability claims alleging
that the use of the company’s products has resulted in serious injury or even death.
Even if the company is successful in defending against any liability claims, these claims could nevertheless distract the
company’s management, result in substantial costs, harm the company’s reputation, adversely affect the sales of all the company’s
products and otherwise harm the company’s business. If there is a significant increase in the number of product liability claims,
the company’s business could be adversely affected.
The company is self-insured in North America for product liability exposures through its captive insurance company,
Invatection Insurance Company, which currently has a policy year that runs from September 1 to August 31 and insures annual
policy losses up to $10,000,000 per occurrence and $13,000,000 in the aggregate. The company also has additional layers of
external insurance coverage, related to all lines of insurance coverage, insuring up to $75,000,000 in aggregate losses per policy
year arising from individual claims anywhere in the world 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 recorded for individual claims based upon historical experience, industry expertise and
indications from the third-party actuary. Additional reserves, in excess of the specific individual case reserves, are provided for
incurred but not reported claims based upon actuarial valuations at the time such valuations are conducted. Historical claims
experience and other assumptions are taken into consideration to estimate the ultimate reserves. For example, the actuarial analysis
assumes that historical loss experience is an indicator of future experience, that the distribution of exposures by geographic area
and nature of operations for ongoing operations is expected to be very similar to historical operations with no dramatic changes
and that the government indices used to trend losses and exposures are appropriate. Estimates made are adjusted on a regular basis
and can be impacted by actual loss awards and settlements on claims. While actuarial analysis is used to help determine adequate
reserves, the company is responsible for the determination and recording of adequate reserves in accordance with accepted loss
reserving standards and practices. If the company's reserves are not adequate to cover actual claims experience, the company's
financial results could be adversely affected.
In addition, as a result of a product liability claim or if the company’s products are alleged to be defective, the company
may have to recall some of its products, may have to incur significant costs or may suffer harm to its business reputation.
Decreased availability or increased costs of raw materials could increase the company’s costs of producing its products.
The company purchases raw materials, fabricated components, some finished goods and services from a variety of suppliers.
Raw materials such as plastics, steel and aluminum are considered key raw materials. Where appropriate, the company employs
contracts with its suppliers, both domestic and international. In those situations in which contracts are not advantageous, the
company believes that its relationships with its suppliers are satisfactory and that alternative sources of supply are readily available.
From time to time, however, the prices and availability of these raw materials fluctuate due to global market demands or economic
conditions, which could impair the company’s ability to procure necessary materials, or increase the cost of these materials.