SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2002
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Commission File Number 0-12938
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Invacare Corporation
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(Exact name of registrant as specified in its charter)
Ohio 95-2680965
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(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036
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(Address of principal executive offices)
(440) 329-6000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if change since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
As of May 13, 2002, the company had 29,840,597 Common Shares and 1,112,023 Class
B Common Shares outstanding.
<page>
INVACARE CORPORATION
INDEX
Part I. FINANCIAL INFORMATION: Page No.
- ------------------------------ --------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
March 31, 2002 and December 31, 2001.........................3
Condensed Consolidated Statement of Earnings -
Three Months Ended March 31, 2002 and 2001...................4
Condensed Consolidated Statement of Cash Flows -
Three Months Ended March 31, 2002 and 2001...................5
Notes to Condensed Consolidated Financial
Statements - March 31, 2002..................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............10
Item 3. Quantitative and Qualitative Disclosure of Market Risk...............13
Part II. OTHER INFORMATION:
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Item 6. Exhibits and Reports on Form 8-K.....................................15
SIGNATURES....................................................................15
Part I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet - (unaudited)
March 31, December 31,
2002 2001
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ASSETS (In thousands)
- ------
<s> <c> <c>
CURRENT ASSETS
...........Cash and cash equivalents $ 11,330 $16,683
...........Marketable securities 1,560 1,188
...........Trade receivables, net 212,527 219,844
...........Installment receivables, net 31,340 35,423
...........Inventories, net 104,568 111,868
...........Deferred income taxes 22,554 24,125
...........Other current assets 14,578 19,270
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........... TOTAL CURRENT ASSETS 398,457 428,401
OTHER ASSETS 47,235 44,492
OTHER INTANGIBLES 5,637 5,906
PROPERTY AND EQUIPMENT, NET 130,285 132,202
GOODWILL, NET 299,794 303,536
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........... TOTAL ASSETS $881,408 $914,537
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
...........Accounts payable $64,137 $74,133
...........Accrued expenses 69,863 76,000
...........Accrued income taxes 17,513 16,207
...........Current maturities of long-term obligations 5,465 9,083
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........... TOTAL CURRENT LIABILITIES 156,978 175,423
LONG-TERM DEBT 314,408 342,724
OTHER LONG-TERM OBLIGATIONS 16,956 14,840
SHAREHOLDERS' EQUITY
...........Preferred shares 0 0
...........Common shares 7,510 7,466
...........Class B common shares 278 278
...........Additional paid-in-capital 92,941 87,980
...........Retained earnings 355,494 344,032
...........Accumulated other comprehensive earnings (50,423) (48,129)
...........Treasury shares (10,943) (9,306)
...........Unearned compensation on stock awards (1,791) (771)
-------- --------
........... TOTAL SHAREHOLDERS' EQUITY 393,066 381,550
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $881,408 $914,537
======== ========
</table>
See notes to condensed consolidated financial statements.
<page>
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings - (unaudited)
<table>
Three Months Ended
March 31,
2002 2001
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(In thousands except per share data)
<s> <c> <c>
Net sales $255,081 $254,149
Cost of products sold 180,447 177,259
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Gross profit 74,634 76,890
Selling, general and administrative expense 53,065 50,860
Amortization of goodwill and intangibles 352 2,956
Interest income (929) (2,505)
Interest expense 4,468 6,788
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Earnings before income taxes 17,678 18,791
Income taxes 5,810 7,235
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NET EARNINGS $ 11,868 $ 11,556
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DIVIDENDS DECLARED PER COMMON SHARE .0125 .0125
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Net earnings per share - basic $ 0.39 $ 0.38
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Weighted average shares outstanding - basic 30,738 30,472
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Net earnings per share - assuming dilution $ 0.38 $ 0.37
======== ========
Weighted average shares outstanding - assuming dilution 31,572 31,575
======== ========
</table>
See notes to condensed consolidated financial statements.
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows - (unaudited)
<table>
Three Months Ended
March 31,
2002 2001
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<s> <c> <c>
OPERATING ACTIVITIES (In thousands)
Net earnings $ 11,868 $ 11,556
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 6,136 8,410
Provision for losses on trade and installment receivables 1,744 1,527
Provision for deferred income taxes 233 187
Provision for other deferred liabilities 1,381 (1,009)
Changes in operating assets and liabilities:
Trade receivables 6,270 6,902
Inventories 7,164 (11,581)
Other current assets 4,654 3,472
Accounts payable (10,502) 9,713
Accrued expenses (2,075) (8,744)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 26,873 20,433
INVESTING ACTIVITIES
Purchases of property and equipment (4,721) (4,185)
Proceeds from sale of property and equipment 4 545
Installment sales contracts, net 4,231 4,310
Marketable securities (72) 36
Increase in other investments (82) (477)
Increase in other long term assets (4,395) (3,229)
Other 566 103
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NET CASH REQUIRED BY INVESTING ACTIVITIES (4,469) (2,897)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and long-term borrowings 41,708 16,597
Principal payments on revolving lines of credit, long-term debt
and capital lease obligations (71,174) (38,580)
Proceeds from exercise of stock options 1,951 2,189
Payment of dividends (394) (378)
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NET CASH REQUIRED BY FINANCING ACTIVITIES (27,909) (20,172)
Effect of exchange rate changes on cash 152 (980)
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Decrease in cash and cash equivalents (5,353) (3,616)
Cash and cash equivalents at beginning of period 16,683 12,357
-------- --------
Cash and cash equivalents at end of period $ 11,330 $ 8,741
======== ========
</table>
See notes to condensed consolidated financial statements.
INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
March 31, 2002
Nature of Operations - Invacare Corporation and its subsidiaries (the "company")
is the leading home medical equipment manufacturer in the world based on the
breadth of its product line and sales. The company designs, manufactures and
distributes an extensive line of medical equipment for the home health care,
retail and extended care markets. The company's products include standard manual
wheelchairs, motorized and lightweight prescription wheelchairs, seating and
positioning systems, motorized scooters, patient aids, home care beds, home
respiratory products and distributed products.
Principles of Consolidation - The consolidated financial statements include the
accounts of the company and its majority owned subsidiaries and include all
adjustments, which were of a normal recurring nature, necessary to present
fairly the financial position of the company as of March 31, 2002 and the
results of its operations for the three months ended March 31, 2002 and 2001 and
changes in its cash flows for the three months ended March 31, 2002 and 2001.
Certain foreign subsidiaries are consolidated using a one-month lagging. The
results of operations for the three months ended March 31, 2002, are not
necessarily indicative of the results to be expected for the full year.
Reclassifications - Certain reclassifications have been made to the prior years'
consolidated financial statements to conform to the presentation used for the
period ended March 31, 2002.
Use of Estimates - The consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States
which require management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results may differ from these estimates.
Business Segments - The company operates in three primary business segments
based on geographical area: North America, Europe and Australasia. The three
reportable segments represent operating groups which offer products to different
geographic regions.
The North America segment consists of five operating groups which sell the
following products: wheelchairs, scooters, seating products, self care products,
home care beds, low air loss therapy products, patient transport products,
supplies product, extended care beds and furniture products, respiratory and
other products. The Europe segment consists of one operating group that sells
primarily wheelchairs, scooters, self care products, beds, patient transport and
oxygen therapy products. The Australasia segment consists of two operating
groups which sell primarily custom power wheelchairs, electronic wheelchair and
scooter controllers, manual wheelchairs, beds, oxygen therapy products and
patient aids. Each business segment sells to the home health care, retail and
extended care markets.
The company evaluates performance and allocates resources based on profit or
loss from operations before income taxes for each reportable segment. The
accounting policies of each segment are the same as those for the company's
consolidated financial statements. Intersegment sales and transfers are based on
the costs to manufacture plus a reasonable profit element. Therefore,
intercompany profit or loss on intersegment sales and transfers are not
considered in evaluating segment performance. Intersegment revenue for
<page>
reportable segments was $14,158,000 for the period ended March 31, 2002 and
$17,347,000 for the same period a year ago.
The information by segment is as follows (in thousands):
Three Months Ended
March 31,
2002 2001
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Revenues from external customers
North America $191,769 $187,963
Europe 54,335 56,511
Australasia 8,977 9,675
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Consolidated $255,081 $254,149
Earnings (loss) before income taxes
North America $31,824 $31,144
Europe 906 351
Australasia 438 584
All Other * (15,490) (13,288)
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Consolidated $ 17,678 $ 18,791
* Consists of the domestic export unit, corporate selling, general and
administrative costs, the Invacare captive insurance unit, and inter-company
profits which do not meet the quantitative criteria for determining reportable
segments.
Net Income Per Common Share - The following table sets forth the computation of
basic and diluted net earnings per common share for the periods indicated.
Three Months Ended
March 31,
2002 2001
-------- --------
(In thousands except per
share data)
Basic
Average common shares outstanding 30,738 30,472
Net earnings $11,868 $11,556
Net earnings per common share $ .39 $ .38
Diluted
Average common shares outstanding 30,738 30,472
Stock awards 21 0
Stock options 813 1,103
-------- --------
Average common shares assuming dilution 31,572 31,575
Net earnings $11,868 $11,556
Net earnings per common share $ .38 $ .37
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Adoption of FAS 142 -In June 2001, the FASB issued SFAS No. 142, Goodwill and
Other Intangible Assets, which the company adopted in the first quarter of 2002.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives are no longer amortized but are subject to annual impairment tests in
accordance with the Statements. The company is in the process of performing its
initial goodwill impairment analysis, which will be completed by June 30, 2002.
In accordance with SFAS No. 142, the effect of no longer amortizing goodwill is
reflected prospectively. The following comparative disclosure shows the impact
of adoption had the change been applied retroactively.
Three Months Ended
March 31,
(In thousands, except per share data) 2002 2001
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Reported net income $ 11,868 $ 11,556
Goodwill amortization - 2,558
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Adjusted net income $ 11,868 $ 14,114
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Basic earning per share:
Reported net income $0.39 $0.38
Goodwill amortization - 0.08
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Adjusted net income $0.39 $0.46
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Diluted earning per share:
Reported net income $0.38 $0.37
Goodwill amortization - 0.08
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Adjusted net income $0.38 $0.45
======== ========
All of the Company's other intangible assets have definite lives and will
continue to be amortized over their useful lives. As of March 31, 2002 and
December 31, 2001, other intangibles consisted of the following:
March 31, 2002 December 31, 2001
----------------------- -----------------------
(In thousands) Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
-------- ------------ -------- ------------
License agreements $5,932 $3,391 $5,882 $3,185
Patents 2,431 726 2,450 679
Customer list 1,000 312 1,000 250
Non-compete agreements 688 331 689 315
Trademarks and other 880 534 827 513
------- ------- ------- -------
Other intangibles $10,931 $5,294 $10,848 $4,942
Amortization expense related to other intangibles is expected to be $1,257,000
for 2002, $1,067,000 in 2003, $1,050,000 in 2004, $798,000 in 2005 and $314,000
in 2006. The change in goodwill reflected on the balance sheet for the quarter
was the sole result of currency translation.
Accounting Policy for Derivative Instruments - Financial Accounting Standards
Board Statement No. 133, Accounting for Derivative Instruments and Hedging
Activities, requires companies to recognize all of its derivative instruments as
<page>
either assets or liabilities in the consolidated balance sheet at fair value.
The company adopted the statement on January 1, 2001 and, accordingly,
recognized a pretax cumulative effect adjustment to other comprehensive income
of $802,000.
A majority of the company's derivative instruments are designated and qualify as
cash flow hedges. Accordingly, the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive income
and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. The remaining gain or loss on the
derivative instrument in excess of the cumulative change in the present value of
future cash flows of the hedged item, if any, is recognized in current earnings
during the period of change. The derivatives designated as fair value hedges are
perfectly effective; thus, the entire gain or loss associated with the
derivative instrument directly affects the value of the debt by increasing or
decreasing its carrying value.
The company has entered into interest rate swap agreements that qualify as cash
flow hedges and effectively convert $45 million of its floating-rate debt to a
fixed-rate basis, thus reducing the impact of interest-rate changes on future
interest expense. The company has also entered into interest rate swap
agreements that qualify as fair value hedges and effectively convert $80 million
of fixed-rate debt to floating-rate debt, so the company can avoid paying higher
than market interest rates. For the quarter, the company recognized a net
immaterial gain related to its swap agreements, which is reflected in interest
expense on the statement of earnings.
To protect against decreases/increases in forecasted foreign currency cash flows
resulting from inventory purchases/sales over the next year, the company
utilizes cash flow hedges to hedge portions of its forecasted purchases/sales
denominated in foreign currencies.
The company recognized no gain or loss related to hedge ineffectiveness or
discontinued cash flow hedges. If it is later determined that a hedged
forecasted transaction is unlikely to occur, any gains or losses on the forward
contracts would be reclassified from other comprehensive income into earnings.
The company does not expect this to occur during the next twelve months.
Comprehensive Earnings - Total comprehensive earnings were as follows (in
thousands):
Three Months Ended
March 31,
2002 2001
------- -------
Net earnings $11,868 $11,556
Foreign currency translation gain (loss) (3,095) 6,994
Unrealized gain (loss) on available for
sale securities (3) 275
Cumulative effect upon adoption of FAS 133 - 521
Current period unrealized gain (loss) on
cash flow hedges 804 (2,038)
------- -------
Total comprehensive earnings $ 9,574 $17,308
======= =======
Statement of Cash Flows - The company made payments (in thousands) of:
Three Months Ended
March 31,
2002 2001
------- -------
Interest $6,288 $8,462
Income taxes 2,657 8,191
<page>
Inventories - Inventories consist of the following components (in thousands):
March 31, December 31,
2002 2001
------- -------
Raw materials $ 32,807 $ 35,333
Work in process 11,667 11,326
Finished goods 60,094 65,209
------- -------
$ 104,568 $ 111,868
======= =======
The final inventory determination under the LIFO method is made at the end of
each fiscal year based on the inventory levels and cost at that point,
therefore, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.
Property and Equipment - Property and equipment consist of the following (in
thousands):
March 31, December 31,
2001 2001
-------- --------
Land, buildings and improvements $ 54,375 $ 54,308
Machinery and equipment 188,739 186,622
Furniture and fixtures 14,520 14,516
Leasehold improvements 11,685 11,648
-------- --------
269,319 267,094
Less allowance for depreciation (139,034) (134,892)
-------- --------
$130,285 $132,202
======== ========
Income Taxes - The Company had an effective tax rate of 32.9% for the three
months ended March 31, 2002 and 38.5% for the same period a year ago. The
reduction in rates is the result of tax restructuring completed in the fourth
quarter of 2001 and the benefit of the change in accounting for goodwill.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESULTS OF OPERATIONS
NET SALES
Net sales for the three months ended March 31, 2002 were $255,081,000 compared
to $254,149,000 for the same period a year ago, representing a .4% increase.
Excluding the negative impact from currency translation, overall sales increased
1%. The increase was driven primarily by increases in North America partially
offset by sales declines in Europe and Australasia.
<page>
North American Operations
North American sales, consisting of Rehab (power wheelchairs, custom manual
wheelchairs, seating and scooters), Standard (manual wheelchairs, personal care,
bed products, patient transport and low air loss therapy), Continuing Care (beds
and furniture), Respiratory (oxygen concentrators, aerosol therapy, sleep and
associated respiratory) and Distributed (ostomy, incontinence, wound care and
other medical supplies) products, increased 2% from the prior year. The gain was
principally due to sales volume increases in supplies product (21%) while North
American equipment sales were down approximately 2% in the quarter. The
equipment decline was in Respiratory (13%) and Standard products (1%).
European Operations
European sales decreased to $54,335,000 from $56,511,000 in the first quarter
last year. Adjusting for the impact of exchange rate differences, European sales
increased .5% in the quarter versus the same period a year ago. Sales were in
line with the company's expectations for the quarter and new product launches
should lead to improved sales in the second half of the year.
Australasia Operations
The Australasia products group consists of Invacare Australia, which imports and
distributes the Invacare range of products and manufactures and distributes the
Rollerchair range of custom power wheelchairs and Pro Med lifts, Dynamic
Controls, a New Zealand manufacturer of operating components used in power
wheelchairs and scooters and Invacare New Zealand, a manufacturer of wheelchairs
and beds and a distributor of a wide range of home medical equipment. Sales for
the Australasia group decreased 6%, excluding the negative impact of 1% from
foreign currency translation. Sales were negatively impacted by weak global
economic conditions, which have a more significant impact on this business than
the other businesses of the Company.
GROSS PROFIT
Gross profit as a percentage of net sales for the three-month period ended March
31, 2002 was 29.3% compared to 30.3% for the same period last year. The overall
decrease in margins as a percentage of sales is the result of unfavorable
product mix and pricing pressure. Productivity improvements in the Company's
manufacturing facilities helped to mitigate the gross margin decline. North
American margins declined to 28.3% compared with 28.7% in the prior year as a
result of a shift in product mix to lower margin products, specifically supplies
product, and pricing pressure in the Standard wheelchair product line coming
from increased low cost imports. Gross profit for Europe held constant and
declined as a percent of sales by approximately 7% in Australasia, due to
reduced sales in the company's Dynamic Controls subsidiary. Margins were also
adversely impacted by an increase in research and development spending required
supporting the company's new product strategy.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense as a percentage of net sales for the
three months ended March 31, 2002 was 20.8% compared to 20.0% in the same period
a year ago. The dollar increase was $2,205,000 or 4.3%, which was primarily the
result of continued investment in sales and marketing programs, specifically
branding, being developed to drive future growth. Excluding the impact of
<page>
acquisitions and foreign currency, selling, general and administrative expense
as a percent of sales increased .9% compared with the prior year.
North American selling, general and administrative costs as a percentage of net
sales increased 1% compared to the prior year. The overall dollar increase was
$2,600,000 or 1% with foreign currency having an immaterial impact. European
selling, general and administrative costs grew at a faster rate than sales for
the quarter as organizational restructuring negatively impacted European
profitability. Australasian selling, general and administrative costs grew at a
slower rate than sales for the quarter as a result of aggressive expense
control.
INTEREST
Interest income in the three months ended March 31, 2002 decreased by
approximately $1,576,000 compared to the same period a year ago as a result of
our third-party financing arrangement with DLL, a subsidiary of Rabo Bank of the
Netherlands, in which the Company realizes loan origination fees which are much
lower than the interest income recognized when the Company did the financing
itself.
For the quarter, interest expense decreased from the same period a year ago as a
result of debt paydown efforts and lower rates.
INCOME TAXES
The company had an effective tax rate of 32.9% for the three months ended March
31, 2002 and 38.5% for the same period a year ago. The reduction in rates is the
result of tax restructuring completed in the fourth quarter of 2001 and the
benefit of the change in accounting for goodwill.
LIQUIDITY AND CAPITAL RESOURCES
The company's reported overall level of long-term debt decreased $28.3 million
to $314.4 million for the three months ended March 31, 2002. The company
continues to maintain an adequate liquidity position to fund its working capital
and capital requirements through its bank lines of credit and working capital
management. As of March 31, 2002, the company had approximately $222.0 million
available under its lines of credit. Under the most restrictive covenant of the
company's borrowing arrangements, the company has the capacity to borrow up to
an additional $162 million as of March 31, 2002.
The company's borrowing arrangements contain covenants with respect to interest
coverage, net worth, dividend payments, working capital, funded debt to
capitalization and interest coverage, as defined in the company's bank
agreements and agreement with its note holders. The company is in compliance
with all covenant requirements.
CAPITAL EXPENDITURES
There were no material capital expenditure commitments outstanding as of March
31, 2002. The company expects to invest in capital projects at a rate that
equals or exceeds depreciation and amortization in order to maintain and improve
the company's competitive position. The company estimates that capital
investments for 2002 will approximate $22 million. The company believes that its
<page>
balances of cash and cash equivalents, together with funds generated from
operations and existing borrowing facilities will be sufficient to meet its
operating cash requirements and fund required capital expenditures for the
foreseeable future.
CASH FLOWS
Cash flows provided by operating activities were $26.9 million for the first
quarter of 2002 compared to $20.4 million in 2001. Operating cash flows
increased in 2002 primarily due to a decrease in inventory which was partially
offset by decreases in accounts payable and accrued expenses.
Cash flows required by investing activities were $4.5 million for the first
quarter of 2002 compared to $2.9 million in 2001. The increase is a result of an
increase in employee benefit assets.
Cash flows required by financing activities were $27.9 million compared to cash
required of $20.2 million in 2001. Financing activities for the first quarter of
2002 were impacted by the company's continued effort to pay down long-term
borrowings.
The effect of foreign currency translation may result in amounts being shown for
cash flows in the Condensed Consolidated Statement of Cash Flows that are
different from the changes reflected in the respective balance sheet captions.
DIVIDEND POLICY
On February 15, 2002, the Board of Directors for Invacare Corporation declared a
quarterly cash dividend of $.0125 per Common Share to shareholders of record as
of April 1, 2002, to be paid on April 15, 2002. At the current rate, the cash
dividend will amount to $.05 per Common Share on an annual basis.
CRITICAL ACCOUNTING POLICIES
The consolidated financial statements include accounts of the company and all
majority-owned subsidiaries. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. There has
been no change in the company's critical accounting policies as disclosed in
Form 10-K filed for the year ended December 31, 2001. In addition, no new
critical accounting policies have been adopted in the first quarter of 2002. The
Company does not believe there is a great likelihood that materially different
amounts would be reported related to its critical accounting policies. However,
application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The company is exposed to market risk through various financial instruments,
including fixed rate and floating rate debt instruments. The company uses
interest rate swap agreements to mitigate its exposure to interest rate
<page>
fluctuations. Based on March 31, 2002 debt levels, a 1% change in interest rates
would impact interest expense by approximately $2,488,000 over the next twelve
months. Additionally, the company operates internationally and as a result is
exposed to foreign currency fluctuations. Specifically, the exposure includes
intercompany loans, and third party sales or payments. In an attempt to reduce
this exposure, foreign currency forward contracts are utilized. The company does
not believe that any potential loss related to these financial instruments would
have a material adverse effect on the company's financial condition or results
of operations.
EURO CONVERSION
On January 1, 1999, 11 of the 15 member countries of the European Union (the
"participating countries") established a fixed rate between their existing
sovereign currencies (the "legacy currencies") and the Euro. On January 1, 2002,
the Euro currency was introduced. The legacy currencies are scheduled to remain
legal tender in the participating countries until July 1, 2002. The company
believes with modifications to existing computer software and conversion to new
software, the Euro conversion issue will not pose significant operational
problems to its normal business activities. The company does not expect costs
associated with the Euro conversion project to have a material effect on the
company's results of operations or financial position.
FORWARD-LOOKING STATEMENTS
The statements contained in this form 10-K constitute forward-looking statements
within the meaning of the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Terms such as "will," "should," "achieve,"
"increase," "plan," "can," "expect," "pursue," "benefit," "continue," "exceed,"
"improve," "believe," "anticipate," "build," "strengthen," "new," "lower,"
"drive," "seek," "hope," and "create," as well as similar comments, are
forward-looking in nature. Actual results and events may differ significantly
from those expressed or anticipated as a result of risks and uncertainties which
include, but are not limited to, the following: pricing pressures, increasing
raw material costs, the consolidations of health care customers and competitors,
government reimbursement issues including those that affect the viability of
customers, the effect of offering customers competitive financing terms,
Invacare's ability to effectively identify, acquire and integrate strategic
acquisition candidates, the difficulties in managing and operating businesses in
many different foreign jurisdictions, the timely and efficient completion of
facility consolidations, the difficulties in acquiring and maintaining a
proprietary intellectual property ownership position, the overall economic,
market and industry growth conditions, foreign currency and interest rate risk,
Invacare's ability to improve financing terms and reduce working capital, as
well as the risks described from time to time in Invacare's reports as filed
with the Securities and Exchange Commission. The company undertakes no
obligation to update any of the forward-looking or other information contained
herein.
Item 3. Quantitative and Qualitative Disclosure of Market Risk.
The information called for by this item is provided under the same caption under
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A Exhibits:
Official Exhibit No.
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99(c) Amended and restated Supplemental Executive Retirement Plan
B Reports on Form 8-K:
An 8-K was filed on April 11, 2002 under Item 5, Other Events.
The filing contained Invacare Corporation's news release dated
April 11, 2002 which disclosed the resignation of Thomas R.
Miklich as the company's Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVACARE CORPORATION
By:/s/ Gerald B. Blouch
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Gerald B. Blouch
President and Chief Operating Officer
Date: May 14, 2002