Invacare 2015 Annual Report Download - page 30

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Inflationary and other increases in costs of these raw materials have occurred in the past and may recur from time to time. In
addition, freight costs associated with shipping and receiving product and sales are impacted by fluctuations in the cost of oil and
gas. A slowdown in the processing of shipments at U.S. ports may also delay deliveries of components and finished goods. A
reduction in the supply or increase in the cost of those raw materials could impact the company’s ability to manufacture its products
and could increase the cost of production. Additionally, the company may not be able to increase the prices of its products due to
competitive pricing pressure or other factors. As an example, inflation in China has in the past and may in the future increase costs
and an appreciation of the Yuan or an increase in labor rates could have an unfavorable impact on the cost of key components and
some finished goods. Demand in China and other developing countries for raw materials may result in increases in the cost of key
commodities and could have a negative impact on the profits of the company if these increases cannot be passed onto the company’s
customers.
Lower cost imports could negatively impact the company’s profitability.
Competition from lower cost imports sourced from low cost countries, such as countries in Asia, may negatively impact the
company’s sales volumes. In the past, competition from certain of these products has caused the company to lower its prices,
cutting into the company’s profit margins and reducing the company’s overall profitability.
The company’s success depends on the company’s ability to design, manufacture, distribute and achieve market acceptance
of new products with higher functionality and lower costs.
The company sells products to customers primarily in markets that are characterized by technological change, product
innovation and evolving industry standards, yet in which product 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 10-K, the
company's engineering resources had been focused primarily on quality remediation and not on the design of new products. The
company has received the FDA's approval to resume design activities at the impacted Elyria facilities in 2013 and has refocused
certain of its engineering resources on new product development.
The company must continue to design and improve innovative products, effectively distribute and achieve market acceptance
of those products, and reduce the costs of producing the company’s products, in order to compete successfully with the company’s
competitors. If competitors’ product development capabilities become more effective than the company’s product development
capabilities, if competitors’ new or improved products are accepted by the market before the company’s products or if competitors
are able to produce products at a lower cost and thus offer products for sale at a lower price, the company’s business, financial
condition and results of operation could be adversely affected.
The company’s business strategy relies on certain assumptions concerning demographic trends that impact the market for
its products. If these assumptions prove to be incorrect, demand for the company’s products may be lower than expected.
The company’s ability to achieve its business objectives is subject to a variety of factors, including the relative increase in
the aging of the general population. The company believes that these trends will increase the need for its products. The projected
demand for the company’s products could materially differ from actual demand if the company’s assumptions regarding these
trends and acceptance of its products by health care professionals and patients prove to be incorrect or do not materialize. If the
company’s assumptions regarding these factors prove to be incorrect, the company may not be able to successfully implement the
company’s business strategy, which could adversely affect the company’s results of operations. In addition, the perceived benefits
of these trends may be offset by competitive or business factors, such as the introduction of new products by the company’s
competitors or the emergence of other countervailing trends, including lower reimbursement and pricing.
The terms of the company’s debt facilities and financing arrangements may limit the company’s flexibility in operating its
business.
The company is a party to an Amended and Restated Credit Agreement that provides for asset-based lending senior secured
revolving credit facilities which mature in January 2018. The credit agreement provides the company and certain of the company's
U.S., Canadian, U.K. and French subsidiaries with the ability to borrow under senior secured revolving credit, letter of credit and
swing line loan facilities. The aggregate borrowing availability under the credit facilities is determined based on borrowing base
formulas set forth in the credit agreement. The credit facilities are secured by substantially all of the company's domestic and
Canadian assets, other than real estate, and by substantially all of the personal property assets of the company's U.K. subsidiaries
and all of the receivables of the company's French subsidiaries. The credit agreement contains customary default provisions, with
certain grace periods and exceptions, that include, among other things, failure to pay amounts due, breach of covenants,