Invacare 2015 Annual Report Download - page 48

I-42
In addition, in accordance with ASC 350, when a portion of a reporting entity that constitutes a business is disposed of,
goodwill associated with that business should be included in the carrying amount of the net assets of the business sold in determining
the gain or loss on the disposal. As such, the company allocated additional goodwill of $16,205,000 to Champion from the continuing
operations of the IPG segment based on the relative fair value of Champion as compared to the remaining IPG reporting unit.
On August 29, 2014, the company sold Altimate Medical, Inc. (Altimate), its manufacturer of stationary standing assistive
devices for use in patient rehabilitation, to REP Acquisition Corporation for $23,000,000 in cash, which was subject to final post-
closing adjustments. Altimate had been operated on a stand-alone basis and reported as part of the North America/HME segment
of the company. The company recorded a gain of $17,069,000 pre-tax in the third quarter of 2014, which represented the excess
of the net sales price over the book value of the assets and liabilities of Altimate. The sale of this business was dilutive to the
company's results. The company utilized the proceeds from the sale to reduce debt outstanding under its revolving credit facility
in the third quarter of 2014. The gain recorded by the company reflects the company's final purchase adjustments.
The net sales of the Altimate discontinued operations were $11,778,000 and $17,854,000 for 2014 and 2013, respectively,
and earnings before income taxes were $2,796,000 and $5,118,000, respectively for the same periods. Results for Altimate include
an interest expense allocation from continuing operations to discontinued operations of $202,000 and $323,000 for 2014 and 2013,
respectively, as proceeds from the sale were required to be utilized to pay down debt. The interest allocation was based on the net
proceeds assumed to pay down debt applying the company's average interest rates for the periods presented. See "Discontinued
Operations" in the Notes to the Condensed Financial Statements included in this Form 10-K for the assets and liabilities sold.
The company recorded total expenses related to the discontinued operations noted above of $8,801,000, of which $8,405,000
were paid as of December 31, 2015.
The company recorded an incremental intra-period tax allocation expense to discontinued operations for 2014 and 2013
representing the cumulative intra-period allocation expense to discontinued operations based on the company's domestic taxable
loss related to continuing operations for 2014 and 2013.
The company has classified ISG, Champion and Altimate as a discontinued operations for all periods presented.
On July 2, 2015, the company sold its rentals businesses to Joerns Healthcare Parent, LLC, for approximately $15,500,000
in cash, which was subject to final post-closing adjustments. The rentals businesses had been operated on a stand-alone basis and
reported as part of the IPG segment of the company. The company recorded a pre-tax gain of approximately $24,000 in the third
quarter of 2015, which represents the excess of the net sales price over the book value of the assets and liabilities of the rentals
businesses, as of the date of completion of the disposition. The company recorded expenses related to the sale of the rentals
businesses totaling $1,792,000, of which $1,244,000 have been paid as of December 31, 2015. The sale of the rentals businesses
was not dilutive to the company's results. The company utilized the net proceeds from the sale to reduce debt outstanding under
its credit agreement. The company determined that the sale of the rentals businesses did not meet the criteria for classification as
a discontinued operation in accordance with ASU 2014-08. The rentals businesses were treated as held for sale as of June 30, 2015
until sold on July 2, 2015. As a result, the December 31, 2014 Balance Sheet was restated to reflect this treatment. As such, the
results of the rentals businesses are included in the Results from Continuing Operations discussion below.
RESULTS OF CONTINUING OPERATIONS
2015 Versus 2014
Net Sales. Consolidated net sales for 2015 decreased 10.1% for the year, to $1,142,338,000 from $1,270,163,000 in 2014.
Foreign currency translation decreased net sales by 8.7 percentage points. Constant currency net sales decreased 1.4% compared
to 2014. Higher constant currency net sales in the Europe and Asia/Pacific segments were offset by lower constant currency net
sales in the North America/HME and IPG segments. Constant currency net sales for the company, excluding the impact of the
divested rentals businesses in the IPG segment, were flat for the year ended December 31, 2015, compared to the prior year.
Constant currency net sales is a non-GAAP financial measure - see "Business Segment Net Sales" on page I-52.
Europe
European net sales decreased 12.1% in 2015 compared to the prior year to $536,463,000 from $610,555,000 as foreign
currency translation decreased net sales by 15.6 percentage points. Constant currency net sales increased 3.5% compared to 2014
principally due to increases in mobility and seating, respiratory and lifestyle products.