Invacare 2015 Annual Report Download - page 33

I-27
The company’s reported results may be adversely affected by increases in reserves for uncollectible accounts receivable.
The company has a large balance of accounts receivable and has established a reserve for the portion of such accounts
receivable that the company estimates will not be collected because of the company’s customers’ non-payment. The specific reserve
is based on historical trends and current relationships with the company’s customers and providers. Changes in the company’s
collection rates can result from a number of factors, including turnover in personnel, changes in the payment policies or practices
of payors, changes in industry rates or pace of reimbursement or changes in the financial health of the company’s customers. As
a result of past changes in Medicare reimbursement regulations, specifically changes to the qualification processes and
reimbursement levels of consumer power wheelchairs and custom power wheelchairs, the business viability of some the company’s
customers may be at risk. Further, as National Competitive Bidding is implemented in additional areas, the number of start-up or
new providers who have three-year contracted pricing will increase. The company’s reserve for uncollectible receivables has
fluctuated in the past and will continue to fluctuate in the future. Changes in rates of collection, even if they are small in absolute
terms, could require the company to increase its reserve for uncollectible receivables beyond its current level. The company has
reviewed the accounts receivables, including those receivables financed through DLL, associated with many of its customers that
are most exposed to these issues. If the business viability of certain of the company’s customers deteriorates or the company’s
credit policies are ineffective in reducing the company’s exposures to credit risk, additional increases in reserves for uncollectible
accounts may be necessary, which could adversely affect the company’s financial results.
The inability to attract and retain, or loss 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 addition, the company’s future success will depend on its ability to continue to attract
and retain other highly qualified personnel, including personnel experienced in quality systems and regulatory affairs. If the
company is not successful in retaining its current personnel or in hiring or retaining qualified personnel in the future, the company’s
business may be adversely affected. The company’s future success depends, to a significant extent, on the abilities and efforts of
its executive officers and other members of its management team, such as the company's Chairman, President and Chief Executive
Officer and its Senior Vice President and Chief Financial Officer, as well as other members of its management team. The company
had significant turnover in its management team during 2014 and 2015 and cannot be certain that its executive officers and other
key employees will continue in their respective capacities for any period of time, and these employees may be difficult to replace.
If the company loses the services of any of its management team, the company’s business may be adversely affected.
Certain provisions of the company’s debt agreements, its charter documents, and Ohio law could delay or prevent a sale or
change in control of the company.
Provisions of the company’s credit agreement, its charter documents, and Ohio law may make it more difficult for a third
party to acquire, or attempt to acquire, control of the company even if a change in control would result in the purchase of shares
of the company at a premium to market price. In addition, these provisions may limit the ability of shareholders of the company
to approve transactions that they may deem to be in their best interest.
The holders of the company’s Class B Common Shares own shares representing a substantial percentage of the company’s
voting power, and their interests may differ from other shareholders.
The company has two classes of common stock. The Common Shares have one vote per share and the Class B Common
Shares have 10 votes per share. As of this filing, the Class B Common Shares represented approximately 17% of the combined
voting power of the company’s Common Shares and Class B Common Shares. Substantially all of such Class B Common Shares
are beneficially owned by a former executive whose beneficial ownership (including the right to acquire) of approximately 19%
of the combined voting power could influence the outcome of a corporate transaction or other matter submitted to the shareholders
for approval, including mergers, consolidations and the sale of all or substantially all of the company’s assets. He also will have
the power to influence or make more difficult a change in control, and it is possible that his interests may differ from the interests
of the other shareholders, and he could take actions with which some shareholders may disagree.
Difficulties in implementing or upgrading the company’s Enterprise Resource Planning systems may disrupt the company’s
business.
The company is in the process of upgrading its Enterprise Resource Planning, or “ERP,” system in Europe. The complexities
and business process changes associated with such an ERP upgrade can potentially result in various difficulties including problems
processing and fulfilling orders, customer disruptions and lost business. While the company believes the potential difficulties
associated with upgrading the company’s primary ERP system in Europe have been addressed or can be mitigated, there can be