Exhibit 99.1
INVACARE CORPORATION AND SUBSIDIARIES
Unaudited Pro Forma Condensed Combined Financial Information
The unaudited pro forma condensed combined financial statements are derived from the historical consolidated financial statements of the Company and give effect to the disposition of the Rental Subsidiaries. The unaudited pro forma condensed combined balance sheet at March 31, 2015 gives effect to the adjustments for the Rental Subsidiaries disposition as if the Transaction was completed on March 31, 2015. The unaudited pro forma condensed combined statements of comprehensive income (loss) for the quarter ended March 31, 2015 and the year ended December 31, 2014 give effect to the adjustments for the Rental Subsidiaries disposition as if the Transaction had been completed on January 1, 2014. The Rental Subsidiaries historical amounts are presented according to accounting principles generally accepted in the United States (U.S. GAAP) and include certain pro forma adjustments. The notes to the balance sheet and statements of comprehensive income (loss) describe the transaction and adjustments applicable to each.
The purchase price allocation of the Rental Subsidiaries disposition reflected in these unaudited pro forma condensed combined financial statements is preliminary and has been based on preliminary estimates of the book value of assets and liabilities ultimately sold. Accordingly, the loss on sale reflected in these unaudited pro forma condensed combined financial statements is preliminary and is estimated based on the pro forma balance sheet as of March 31, 2015. As a result, the unaudited pro forma condensed combined financial information presented herein is subject to change and may differ from the final results based upon the final purchase price allocation. The determination of the final purchase price allocation and resulting loss on sale will be based on the actual final valuation of the assets and liabilities of the Rental Subsidiaries that exist as of the date of completion of the disposition and will be reflected and disclosed in the Company's financial statements for the quarter ended September 30, 2015.
The Company has made, in management's opinion, all significant necessary adjustments that can be factually supported to reflect the effect of the disposition. The unaudited condensed combined pro forma financial information is presented for informational purposes only. The unaudited condensed combined pro forma financial statements do not purport to represent what the actual results of operations or financial position would have been if the disposition of the Rental Subsidiaries as described above had occurred on the dates indicated or to project the Company's results of operations or financial position for any future period.
The following unaudited condensed combined pro forma financial information should be read in conjunction with:
a.The Company's consolidated financial statements and notes thereto and management's discussion and analysis for the year ended ended December 31, 2014 included in the Company's Form 10-K for the fiscal year ended December 31, 2014;
b.The Company's consolidated financial statements and notes thereto and management's discussion and analysis for the three months ended March 31, 2015 included in the Company's Form 10-Q for the fiscal quarter ended March 31, 2015.
INVACARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
at March 31, 2015
|
| | | | | | | | | | | | | | | | | | | | |
| (In thousands) | Invacare as Reported (1) | Rental Subsidiaries Historical (2) | Pro Forma Adjust-ments (3) | | Pro Forma Rental Subsidiaries | Pro Forma Eliminations (4) | | Pro Forma Invacare (5) |
| Assets | | | | | | | | |
| Current Assets | | | | | | | | |
| Cash and cash equivalents | $ | 20,618 |
| $ | 2 |
| $ | — |
| | $ | 2 |
| $ | — |
| | $ | 20,616 |
|
| Trade receivables, net | 163,664 |
| 6,143 |
| — |
| | 6,143 |
| — |
| | 157,521 |
|
| Installment receivables, net | 1,088 |
| — |
| — |
| | — |
| — |
| | 1,088 |
|
| Inventories, net | 150,975 |
| 386 |
| — |
| | 386 |
| — |
| | 150,589 |
|
| Deferred income taxes | 1,982 |
| — |
| — |
| | — |
| — |
| | 1,982 |
|
| Other current assets | 39,567 |
| 188 |
| — |
| | 188 |
| — |
| | 39,379 |
|
| Total Current Assets | 377,894 |
| 6,719 |
| — |
| | 6,719 |
| — |
| | 371,175 |
|
| Other Assets | 6,435 |
| — |
| — |
| | — |
| — |
| | 6,435 |
|
| Other Intangibles | 34,119 |
| 48 |
| — |
| | 48 |
| — |
| | 34,071 |
|
| Property and Equipment, net | 80,427 |
| 4,905 |
| — |
| | 4,905 |
| — |
| | 75,522 |
|
| Goodwill | 386,627 |
| — |
| 4,487 |
| (A) | 4,487 |
| — |
| | 382,140 |
|
| Total Assets | $ | 885,502 |
| $ | 11,672 |
| $ | 4,487 |
| | $ | 16,159 |
| $ | — |
| | $ | 869,343 |
|
| Liabilities and Shareholders’ Equity | | | | | | | | |
| Current Liabilities | | | | | | | | |
| Accounts payable | $ | 119,408 |
| $ | 190 |
| $ | 155 |
| (B) | $ | 345 |
| $ | — |
| | $ | 119,063 |
|
| Accrued expenses | 140,656 |
| 878 |
| — |
| | 878 |
| — |
| | 139,778 |
|
| Current taxes, payable and deferred | 12,410 |
| — |
| (70 | ) | (C) | (70 | ) | (70 | ) | (F) | 12,410 |
|
| Short-term debt and current maturities of long-term obligations | 843 |
| 8 |
| — |
| | 8 |
| — |
| | 835 |
|
| Total Current Liabilities | 273,317 |
| 1,076 |
| 85 |
| | 1,161 |
| (70 | ) | | 272,086 |
|
| Long-Term Debt | 22,066 |
| 4 |
| — |
| | 4 |
| (13,700 | ) | (G) | 8,362 |
|
| Other Long-Term Obligations | 83,196 |
| — |
| — |
| | — |
| — |
| | 83,196 |
|
| Shareholders’ Equity | | | | | — |
| | | — |
|
| Preferred Shares (Authorized 300 shares; none outstanding) | — |
| — |
| — |
| | — |
| — |
| | — |
|
| Common Shares (Authorized 100,000 shares; 34,457 issued and outstanding in 2015)—no par | 8,652 |
| — |
| — |
| | — |
| — |
| | 8,652 |
|
| Class B Common Shares (Authorized 12,000 shares; 1,085 issued and outstanding in 2015)—no par | 272 |
| — |
| — |
| | — |
| — |
| | 272 |
|
| Additional paid-in-capital | 241,293 |
| 36,518 |
| 3,950 |
| (D) | 40,468 |
| 40,468 |
| (H) | 241,293 |
|
| Retained earnings | 330,712 |
| (25,926 | ) | 452 |
| (E) | (25,474 | ) | (26,698 | ) | (H) | 329,488 |
|
| Accumulated other comprehensive earnings | 20,259 |
| — |
| — |
| | — |
| — |
| | 20,259 |
|
| Treasury shares (3,187 shares) | (94,265 | ) | — |
| — |
| | — |
| — |
| | (94,265 | ) |
| Total Shareholders’ Equity | 506,923 |
| 10,592 |
| 4,402 |
| | 14,994 |
| 13,770 |
| | 505,699 |
|
| Total Liabilities and Shareholders’ Equity | $ | 885,502 |
| $ | 11,672 |
| $ | 4,487 |
| | $ | 16,159 |
| $ | — |
| | $ | 869,343 |
|
INVACARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Quarter Ended March 31, 2015 |
| | | | | | | | | | | | | | | | | | | | | |
| | Invacare as Reported (1) | Rental Subsidiaries Historical (2) | Pro Forma Adjust-ments (3) | | Pro Forma Rental Subsidiaries | | Pro Forma Eliminations (4) | | Pro Forma Invacare (6) |
| | (In thousands, except per share data) |
| Net sales | $ | 289,024 |
| $ | 7,195 |
| $ | — |
| | $ | 7,195 |
| | $ | — |
| | $ | 281,829 |
|
| Cost of products sold | 211,929 |
| 1,603 |
| — |
| | 1,603 |
| | — |
| | 210,326 |
|
| Gross Profit | 77,095 |
| 5,592 |
| — |
| | 5,592 |
| | — |
| | 71,503 |
|
| Selling, general and administrative expenses | 81,240 |
| 5,685 |
| — |
| | 5,685 |
| | — |
| | 75,555 |
|
| Charges related to restructuring activities | 240 |
| — |
| — |
| | — |
| | — |
| | 240 |
|
| Interest expense | 692 |
| 490 |
| (382 | ) | (I) | 108 |
| | — |
| | 584 |
|
| Interest income | (38 | ) | — |
| — |
| | — |
| | — |
| | (38 | ) |
| Loss from Continuing Operations Before Income Taxes | (5,039 | ) | (583 | ) | 382 |
| | (201 | ) | | — |
| | (4,838 | ) |
| Income taxes (benefit) | 2,475 |
| — |
| (70 | ) | (C) | (70 | ) | | 70 |
| (F) | 2,475 |
|
| Net Earnings (Loss) from Continuing Operations | $ | (7,514 | ) | $ | (583 | ) | $ | 452 |
| (E) | $ | (131 | ) | | $ | (70 | ) | | $ | (7,313 | ) |
| Net Earnings from Discontinued Operations (net of tax of $0) | $ | — |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
| Gain on Sale of Discontinued Operations (net of tax of $140) | $ | 260 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 260 |
|
| Total Net Earnings from Discontinued Operations | $ | 260 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 260 |
|
| Net Loss | $ | (7,254 | ) | $ | (583 | ) | $ | 452 |
| | $ | (131 | ) | | $ | (70 | ) | | $ | (7,053 | ) |
| Net Earnings (Loss) per Share—Basic | | | | | | | | | |
| Net Loss from Continuing Operations | $ | (0.23 | ) | $ | (0.02 | ) | $ | 0.01 |
| | $ | — |
| | $ | — |
| | $ | (0.23 | ) |
| Net Earnings from Discontinued Operations | $ | 0.01 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.01 |
|
| Net Earnings (Loss) per Share—Basic | $ | (0.23 | ) | $ | (0.02 | ) | $ | 0.01 |
| | $ | — |
| | $ | — |
| | $ | (0.23 | ) |
| Weighted Average Shares Outstanding—Basic | 32,125 |
| 32,125 |
| 32,125 |
| | 32,125 |
| | 32,125 |
| | 32,125 |
|
| Net Earnings (Loss) per Share—Assuming Dilution | | | | | | | | | |
| Net Loss from Continuing Operations | $ | (0.23 | ) | $ | (0.02 | ) | $ | 0.01 |
| | $ | — |
| | $ | — |
| | $ | (0.22 | ) |
| Net Earnings from Discontinued Operations | $ | 0.01 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.01 |
|
| Net Earnings (Loss) per Share—Assuming Dilution | $ | (0.23 | ) | $ | (0.02 | ) | $ | 0.01 |
| | $ | — |
| | $ | — |
| | $ | (0.22 | ) |
| Weighted Average Shares Outstanding—Assuming Dilution | 32,389 |
| 32,389 |
| 32,389 |
| | 32,389 |
| | 32,389 |
| | 32,389 |
|
| | | | | | | | | | |
| Net Earnings (Loss) | $ | (7,254 | ) | $ | (583 | ) | $ | 452 |
| | $ | (131 | ) | | $ | (70 | ) | | $ | (7,053 | ) |
| Other comprehensive income (loss): | | | | | | | | | |
| Foreign currency translation adjustments | (53,378 | ) | — |
| — |
| | — |
| | — |
| | (53,378 | ) |
| Defined Benefit Plans: | | | | | | | | | |
| Amortization of prior service costs and unrecognized gains | 94 |
| — |
| — |
| | — |
| | — |
| | 94 |
|
| Deferred tax adjustment resulting from defined benefit plan activity | (33 | ) | — |
| — |
| | — |
| | — |
| | (33 | ) |
| Valuation reserve associated with defined benefit plan activity | 33 |
| — |
| — |
| | — |
| | — |
| | 33 |
|
| Current period unrealized gain on cash flow hedges | 2,020 |
| — |
| — |
| | — |
| | — |
| | 2,020 |
|
| Deferred tax benefit related to unrealized gain on cash flow hedges | (96 | ) | — |
| — |
| | — |
| | — |
| | (96 | ) |
| Other Comprehensive Income | (51,360 | ) | — |
| — |
| | — |
| | — |
| | (51,360 | ) |
| | | | | | | | | | |
| Comprehensive Income (Loss) | $ | (58,614 | ) | $ | (583 | ) | $ | 452 |
| | $ | (131 | ) | | $ | (70 | ) | | $ | (58,413 | ) |
INVACARE CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
Twelve Months Ended December 31, 2014
|
| | | | | | | | | | | | | | | | | | | | | |
| | Invacare as Reported (1) | Rental Subsidiaries Historical (2) | Pro Forma Adjust-ments (3) | | Pro Forma Rental Subsidiaries | | Pro Forma Eliminations (4) | | Pro Forma Invacare (6) |
| | (In thousands, except per share data) |
| Net sales | $ | 1,270,163 |
| $ | 31,794 |
| $ | — |
| | $ | 31,794 |
| | $ | — |
| | $ | 1,238,369 |
|
| Cost of products sold | 922,775 |
| 7,128 |
| — |
| | 7,128 |
| | — |
| | 915,647 |
|
| Gross Profit | 347,388 |
| 24,666 |
| — |
| | 24,666 |
| | — |
| | 322,722 |
|
| Selling, general and administrative expenses | 383,913 |
| 26,785 |
| — |
| | 26,785 |
| | — |
| | 357,128 |
|
| Charges related to restructuring activities | 11,112 |
| (2 | ) | — |
| | (2 | ) | | — |
| | 11,114 |
|
| Asset write-downs related to intangible assets | 13,041 |
| 13,041 |
| — |
| | 13,041 |
| | — |
| | — |
|
| Interest expense | 3,039 |
| 2,249 |
| (1,940 | ) | (I) | 309 |
| | — |
| | 2,730 |
|
| Interest income | (507 | ) | (1 | ) | — |
| | (1 | ) | | — |
| | (506 | ) |
| Earnings (Loss) from Continuing Operations Before Income Taxes | (63,210 | ) | (17,406 | ) | 1,940 |
| | (15,466 | ) | | — |
| | (47,744 | ) |
| Income taxes (benefit) | 5,550 |
| — |
| (5,413 | ) | (C) | (5,413 | ) | | 5,413 |
| (F) | 5,550 |
|
| Net Earnings (Loss) from Continuing Operations | $ | (68,760 | ) | $ | (17,406 | ) | $ | 7,353 |
| (E) | $ | (10,053 | ) | | $ | (5,413 | ) | | $ | (53,294 | ) |
| Net Earnings from Discontinued Operations (net of tax of $1,200) | 1,596 |
| — |
| — |
| | — |
| | — |
| | 1,596 |
|
| Gain on Sale of Discontinued Operations (net of tax of $5,975) | 11,094 |
| — |
| — |
| | — |
| | — |
| | 11,094 |
|
| Total Net Earnings from Discontinued Operations | 12,690 |
| — |
| — |
| | — |
| | — |
| | 12,690 |
|
| Net Earnings (Loss) | $ | (56,070 | ) | $ | (17,406 | ) | $ | 7,353 |
| | $ | (10,053 | ) | | $ | (5,413 | ) | | $ | (40,604 | ) |
| Net Earnings (Loss) per Share—Basic: | | | | | | | | | |
| Net Earnings (Loss) from Continuing Operations | $ | (2.15 | ) | $ | (0.54 | ) | $ | 0.23 |
| | $ | (0.31 | ) | | $ | (0.17 | ) | | $ | (1.66 | ) |
| Net Earnings from Discontinued Operations | $ | 0.40 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.40 |
|
| Net Earnings (Loss) per Share—Basic | $ | (1.75 | ) | $ | (0.54 | ) | $ | 0.23 |
| | $ | (0.31 | ) | | $ | (0.17 | ) | | $ | (1.27 | ) |
| Weighted Average Shares Outstanding—Basic | 32,009 |
| 32,009 |
| 32,009 |
| | 32,009 |
| | 32,009 |
| | 32,009 |
|
| Net Earnings (Loss) per Share—Assuming Dilution: | | | | | | | | | |
| Net Earnings (Loss) from Continuing Operations | $ | (2.15 | ) | $ | (0.54 | ) | $ | 0.23 |
| | $ | (0.31 | ) | | $ | (0.17 | ) | | $ | (1.66 | ) |
| Net Earnings from Discontinued Operations | $ | 0.39 |
| $ | — |
| $ | — |
| | $ | — |
| | $ | — |
| | $ | 0.39 |
|
| Net Earnings (Loss) per Share—Assuming Dilution | $ | (1.75 | ) | $ | (0.54 | ) | $ | 0.23 |
| | $ | (0.31 | ) | | $ | (0.17 | ) | | $ | (1.27 | ) |
| Weighted Average Shares Outstanding—Assuming Dilution | 32,197 |
| 32,197 |
| 32,197 |
| | 32,197 |
| | 32,197 |
| | 32,197 |
|
| | | | | | | | | | |
| Net Earnings (Loss) | $ | (56,070 | ) | $ | (17,406 | ) | $ | 7,353 |
| | $ | (10,053 | ) | | $ | (5,413 | ) | | $ | (40,604 | ) |
| Other comprehensive income (loss): | | | | | | | | | |
| Foreign currency translation adjustments | (51,508 | ) | — |
| — |
| | — |
| | — |
| | (51,508 | ) |
| Defined Benefit Plans: | | | | | | | | | |
| Amortization of prior service costs and unrecognized loss | (2,178 | ) | — |
| — |
| | — |
| | — |
| | (2,178 | ) |
| Deferred tax adjustment resulting from defined benefit plan activity | 213 |
| — |
| — |
| | — |
| | — |
| | 213 |
|
| Valuation reserve (reversal) associated with defined benefit plan activity | (222 | ) | — |
| — |
| | — |
| | — |
| | (222 | ) |
| Current period unrealized gain on cash flow hedges | 244 |
| — |
| — |
| | — |
| | — |
| | 244 |
|
| Deferred tax loss related to unrealized gain (loss) on cash flow hedges | (86 | ) | — |
| — |
| | — |
| | — |
| | (86 | ) |
| Other Comprehensive Income (Loss) | (53,537 | ) | — |
| — |
| | — |
| | — |
| | (53,537 | ) |
| | | | | | | | | | |
| Comprehensive Income (Loss) | $ | (109,607 | ) | $ | (17,406 | ) | $ | 7,353 |
| | $ | (10,053 | ) | | $ | (5,413 | ) | | $ | (94,141 | ) |
Note 1. Estimated Net Proceeds (in thousands)
|
| | | |
| Net cash purchase price per the Purchase Agreement | $ | 15,500 |
|
| Estimated transaction costs | (1,800 | ) |
| Estimated net proceeds on sale | $ | 13,700 |
|
Transaction costs noted above include the professional fees associated with the sale of the Rental Subsidiaries and include an estimate of expenses, primarily professional fees and restructuring costs, to be recognized as a result of the divestiture. The Company will utilize the net proceeds to pay down debt.
Note 2. Preliminary Loss on Disposition (in thousands)
Based on the March 31, 2015 pro forma balance sheet for Rental Subsidiaries, the estimated book loss on disposal is approximately $1.3 million.
|
| | | |
| Estimated Net Proceeds on Sale | $ | 13,700 |
|
| | |
| Total Assets | 16,159 |
|
| Less Current Liabilities | 1,161 |
|
| Less Long-Term Liabilities | 4 |
|
| Less: Estimated Net Assets | $ | 14,994 |
|
| | |
| Estimated Loss on Disposition | $ | (1,294 | ) |
Note 3. Pro Forma Statements
The following are descriptions of the various columns of data, labeled (1) through (6), which have been reflected in the accompanying Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statement of Comprehensive Income (Loss):
| |
| 1) | Represents the Company's historical financial statements as reported in the Company's 2015 Form 10-Q filing for the three months ended March 31, 2015 and 2014 Form 10-K filing for the twelve months ended December 31, 2014, respectively. |
| |
| 2) | Represents Rental Subsidiaries' historical financial results as consolidated in the Company's 2015 Form 10-Q filing for the three months ended March 31, 2015 and the Company's 2014 Form 10-K filing for the twelve months ended December 31, 2014, respectively. |
| |
| 3) | Represents pro forma adjustments to Rental Subsidiaries' results determined in accordance with Regulation S-X and preliminary disposition adjustments. |
| |
| 4) | Represents pro forma eliminations, considering historical elimination of investments and paid in capital. |
| |
| 5) | Represents "Invacare as Reported" less "Pro Forma Rental Subsidiaries" plus "Pro Forma Eliminations". |
| |
| 6) | Represents "Invacare as Reported" less "Pro Forma Rental Subsidiaries" less "Pro Forma Eliminations". |
Note 4. Pro Forma Adjustments
The following are descriptions for the pro forma disposition related adjustments, labeled (A) through (I), which have been reflected in the accompanying Unaudited Pro Forma Condensed Combined Balance Sheet and Unaudited Pro Forma Condensed Combined Statements of Comprehensive Income (Loss):
| |
| (A) | Represents the allocation of goodwill for the component of the Institutional Products Group (IPG) reporting unit based on the relative fair value of the Rental Subsidiaries as compared to the reporting unit. |
| |
| (B) | Represents third party supplier payables recorded on the Company's balance sheet which relate to the Rental Subsidiaries. |
| |
| (C) | Adjustment to record the federal tax effect of historical and pro forma adjustments at the U.S. Statutory tax rate of 35%. Federal tax benefit of $70,000 is calculated on Rental Subsidiaries' pro forma loss before income tax of $201,000 for the quarter ended March 31, 2015. The pro forma loss before income taxes for the quarter ended March 31, 2015 include the Rental Subsidiaries' historical loss before income taxes of $583,000 and the earnings before income taxes (benefit) of Adjustment (I) as defined below. The 2014 federal tax benefit of $5,413,000 is calculated on Rental Subsidiaries' pro forma loss before income tax of $15,466,000 for the twelve months ended December 31, 2014. The pro forma earnings before income taxes for the twelve months ended December 31, 2014 include the Rental Subsidiaries' historical loss before income taxes of $17,406,000 and the earnings before income taxes (benefit) of Adjustment (I) as defined below. |
| |
| (D) | Represents the offset to Adjustment (A) and (B) and elimination of intercompany receivables and payables, which has effectively been reclassified to equity as a return of capital on the pro forma condensed balance sheet. |
| |
| (E) | Represents the net earnings impact of Adjustments (C) and (I) as reflected in Column 3 on the Pro Forma Condensed Combined Statement of Comprehensive Income (Loss) for the quarter ended March 31, 2015 and the twelve months ended ended December 31, 2014. |
| |
| (F) | Represents an elimination entry to record the impact of income tax valuation reserves for the Company related to Adjustment (C) for federal income taxes for the Rental Subsidiaries since the Company is in a cumulative loss position and, as such, current tax expense is offset by income tax valuation reserves. |
| |
| (G) | Adjustment to reflect anticipated debt pay down with the net proceeds from disposition ($13,700,000 as described in Note 1). |
| |
| (H) | Adjustment to eliminate equity and intercompany accounts at disposition. In addition, the Company's pro forma retained earnings reflects the loss on disposition (as noted in Note 2) of $1,294,000. |
| |
| (I) | Adjustment to reflect allocation of interest expense to Rental Subsidiaries as proceeds from sale are required to be utilized to pay down debt. Interest allocated based on the net proceeds assumed to pay down debt applying the company's average interest rates for the periods presented (an adjustment of $382,000 for the three months ended March 31, 2015 and $1,940,000 for the twelve months ended December 31, 2014). |
