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 September 30, 2000
----------------------------------------------------------
Commission File Number 0-12938
Invacare Corporation
(Exact name of registrant as specified in its charter)
Ohio 95-2680965
(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)
One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036
(Address of principal executive offices)
(440) 329-6000
(Registrant's telephone number, including area code)
------------------------------------------------------------------------
(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 November 9, 2000, the company had 28,894,355 Common Shares and 1,371,623
Class B Common Shares outstanding.
1
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INVACARE CORPORATION
INDEX
Part I. FINANCIAL INFORMATION: Page No.
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet -
September 30, 2000 and December 31, 1999.....................3
Condensed Consolidated Statement of Earnings -
Three and Nine Months Ended September 30, 2000 and 1999......4
Condensed Consolidated Statement of Cash Flows -
Nine Months Ended September 30, 2000 and 1999................5
Notes to Condensed Consolidated Financial
Statements - September 30, 2000..............................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................9
Item 3. Quantitative and Qualitative Disclosure of Market Risk...............14
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K.....................................14
SIGNATURES....................................................................14
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
<CAPTION>
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheet - (unaudited)
September 30, December 31,
2000 1999
ASSETS (In thousands)
------ ----------------------------------
<S> <C> <C>
CURRENT ASSETS
.........Cash and cash equivalents $ 8,507 $18,258
.........Marketable securities 862 1,593
.........Trade receivables, net 195,507 181,550
.........Installment receivables, net 65,124 70,378
.........Inventories 107,572 108,535
.........Deferred income taxes 25,062 26,561
.........Other current assets 11,269 11,745
------- -------
......... TOTAL CURRENT ASSETS 413,903 418,620
OTHER ASSETS 77,947 71,316
PROPERTY AND EQUIPMENT, NET 138,755 137,132
GOODWILL, NET 316,402 328,217
------- -------
......... TOTAL ASSETS $947,007 $955,285
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
.........Accounts payable $68,479 $58,367
.........Accrued expenses 82,683 97,156
.........Accrued income taxes 19,290 15,547
.........Current maturities of long-term obligations 6,501 6,401
------- -------
......... TOTAL CURRENT LIABILITIES 176,953 177,471
LONG-TERM DEBT 404,550 440,795
OTHER LONG-TERM OBLIGATIONS 13,514 18,147
SHAREHOLDERS' EQUITY
.........Preferred shares 0 0
.........Common shares 7,286 7,282
.........Class B common shares 358 358
.........Additional paid-in-capital 79,441 79,470
.........Retained earnings 291,910 251,955
.........Accumulated other comprehensive earnings (20,016) (8,976)
.........Treasury shares (6,989) (11,217)
------- -------
......... TOTAL SHAREHOLDERS' EQUITY 351,990 318,872
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $947,007 $955,285
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Earnings - (unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
(In thousands except per share data) September 30, September 30,
2000 1999 2000 1999
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $250,441 $223,335 $740,997 $621,622
Cost of products sold 171,117 152,828 509,124 432,293
------- ------- ------- -------
Gross profit 79,324 70,507 231,873 189,329
Selling, general and administrative expense 45,672 44,032 149,217 123,581
------- ------- ------- -------
Income from operations 33,652 26,475 82,656 65,748
Interest income 1,906 1,905 5,484 5,868
Interest expense (7,007) (5,312) (20,798) (15,088)
------- ------- ------- -------
Earnings before income taxes 28,551 23,068 67,342 56,528
Income taxes 11,135 8,991 26,263 22,045
------- ------- ------- -------
NET EARNINGS $ 17,416 $ 14,077 $ 41,079 $ 34,483
======== ======== ======== ========
DIVIDENDS DECLARED PER
COMMON SHARE .0125 .0125 .0375 .0375
======== ======== ======== ========
Net earnings per share - basic $ 0.58 $ 0.46 $ 1.37 $ 1.14
======== ======== ======== ========
Weighted average shares outstanding - basic 30,141 30,278 30,075 30,138
======== ======== ======== ========
Net earnings per share - assuming dilution $ 0.57 $ 0.46 $ 1.34 $ 1.13
======== ======== ======== ========
Weighted average shares outstanding -
assuming dilution 30,766 30,708 30,652 30,632
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows - (unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
(In thousands)
-----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 41,079 $ 34,483
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 23,337 18,114
Provision for losses on receivables 6,448 5,480
Provision for deferred income taxes 1,248 (1,123)
Provision for other deferred liabilities (4,617) 262
Changes in operating assets and liabilities:
Trade receivables (24,955) (16,578)
Inventories (9,743) (7,920)
Other current assets (91) 3,202
Accounts payable 12,677 112
Accrued expenses (12,748) 7,167
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 32,635 43,199
INVESTING ACTIVITIES
Purchases of property and equipment (21,829) (24,343)
Proceeds from sale of property and equipment 163 649
Installment sales contracts written (45,553) (62,718)
Payments received on installment sales contracts 54,220 55,023
Marketable securities purchased (181) (523)
Marketable securities sold 991 1,382
Increase in other investments (3,831) (279)
Increase in other long term assets (8,567) (10,737)
Business acquisitions, net of cash acquired (696) (141,715)
Other 146 2,077
------- -------
NET CASH REQUIRED BY INVESTING ACTIVITIES (25,137) (181,184)
FINANCING ACTIVITIES
Proceeds from revolving lines of credit and long-term borrowings 111,107 252,269
Principal payments on revolving lines of credit, long-term debt
and capital lease obligations (126,204) (106,783)
Proceeds from exercise of stock options 3,026 2,985
Purchase of treasury stock 0 (2,662)
Payment of Dividends (1,122) (1,121)
------- -------
NET CASH (REQUIRED)/PROVIDED BY FINANCING ACTIVITIES (13,193) 144,688
Effect of exchange rate changes on cash (4,056) (238)
------- -------
Increase (Decrease) in cash and cash equivalents (9,751) 6,465
Cash and cash equivalents at beginning of period 18,258 9,460
------- -------
Cash and cash equivalents at end of period $ 8,507 $ 15,925
======= ========
</TABLE>
See notes to condensed consolidated financial statements.
5
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INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
September 30, 2000
Nature of Operations - Invacare Corporation and its subsidiaries (the "company")
is the world's leading manufacturer and distributor of non-acute health care
products based upon its distribution channels, the breadth of its product line
and sales. The company designs, manufactures and distributes an extensive line
of health care products for the non-acute care environment including the home
health care, retail and extended care markets. The company's products include
standard manual wheelchairs, motorized and lightweight prescription wheelchairs,
motorized scooters, patient aids, home care and institutional beds, low air loss
therapy products, home respiratory products, seating and positioning products,
bathing equipment and distributed products.
Principles of Consolidation - In the opinion of the company, the accompanying
unaudited condensed consolidated financial statements are prepared in accordance
with generally accepted accounting principles which require management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results may differ from these estimates. The accompanying
interim financial statements include all adjustments, which were of a normal
recurring nature, necessary to present fairly the financial position of the
company as of September 30, 2000, and the results of its operations for the
three and nine months ended September 30, 2000 and 1999 and changes in its cash
flows for the nine months ended September 30, 2000 and 1999. The results of
operations for the three and nine months ended September 30, 2000, are not
necessarily indicative of the results to be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements contained in the company's annual financial statements and notes.
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 patient
aids, home care beds, low air loss therapy products, patient transport products,
distributed products, extended care and furniture products, respiratory and
other products. The Europe segment consists of one operating group that sells
primarily wheelchairs, scooters, beds, seating, self care patient aids, patient
lifts and slings and respiratory products. The Australasia segment consists of
three operating groups which sell custom power wheelchairs, electronic
wheelchair components and patient aids. Each business segment sells to the home
health care, retail and extended care markets.
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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
reportable segments was $15,105,000 and $46,953,000 for the three and nine
months ended September 30, 2000 respectively.
The information by segment is as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues from external customers
North America $183,472 $167,816 $537,572 $486,947
Europe 58,797 48,457 179,406 115,671
Australia/Asia 8,172 7,062 24,019 19,004
-------- -------- -------- --------
Consolidated $250,441 $223,335 $740,997 $621,622
======== ======== ======== ========
Earnings (loss) before income taxes
North America $ 31,229 $ 27,803 $ 87,719 $ 77,177
Europe 5,374 3,047 7,761 2,053
Australia/Asia 2,701 2,711 7,664 6,409
All Other * (10,753) (10,493) (35,802) (29,111)
-------- -------- -------- --------
Consolidated $28,551 $23,068 $67,342 $56,528
======= ======= ======= =======
</TABLE>
* Consists of the domestic export unit, corporate selling, general and
administrative costs, and the Invacare captive insurance unit, which do not
meet the quantitative criteria for determining reportable segments.
Comprehensive Earnings - Total comprehensive earnings were as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net earnings $17,416 $14,077 $41,079 $34,483
Foreign currency translation (2,837) (804) (11,412) (2,848)
Unrealized gain or (loss) on available
for sale securities 42 (341) 372 (919)
-------- -------- -------- --------
Total comprehensive earnings $14,621 $12,932 $30,039 $30,716
======= ======= ======= =======
</TABLE>
7
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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.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(In thousands except per share data)
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Basic
Weighted average common shares outstanding 30,141 30,278 30,075 30,138
Net income $17,416 $14,077 $41,079 $34,483
Net income per common share $ .58 $ .46 $ 1.37 $ 1.14
Diluted
Weighted average common shares outstanding 30,141 30,278 30,075 30,138
Stock options 625 430 577 494
-------- -------- -------- --------
Weighted average common shares assuming dilution 30,766 30,708 30,652 30,632
Net income $17,416 $14,077 $41,079 $34,483
Net income per common share $ .57 $ .46 $ 1.34 $ 1.13
</TABLE>
Recently Issued Accounting Pronouncements - In June, 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative
Instruments and for Hedging Activities. This statement requires all derivatives
to be recorded on the balance sheet at fair value and establishes "special
accounting" for certain types of hedges. The company must adopt the statement no
later than the first quarter of 2001. Management is currently studying the
potential effects of the adoption of this statement but does not anticipate a
significant impact on the company's financial position or results of operations.
In December, 1999, the SEC Staff issued SAB No. 101 addressing proper revenue
recognition which must be adopted in the fourth quarter of 2000. In addition,
EITF 00-10, Accounting for Shipping and Handling Fees and Costs, was issued. The
transition period for this statement is consistent with SAB No. 101. To comply
with these pronouncements, reclassification of shipping and handling revenue
will be required. The exact amount is not yet determinable; however, it is not
expected to be material.
Statement of Cash Flows - The company made payments (in thousands) of:
Nine Months Ended
September 30,
2000 1999
------- -------
Interest $23,335 $17,244
Income taxes 21,390 10,504
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Inventories - Inventories consist of the following components (in thousands):
September 30, December 31,
2000 1999
------- -------
Raw materials $ 30,243 $ 33,564
Work in process 18,350 16,825
Finished goods 58,979 58,146
------- --------
$ 107,572 $ 108,535
========= =========
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):
September 30, December 31,
2000 1999
------- -------
Land, buildings and improvements $ 56,672 $ 58,974
Machinery and equipment 176,659 163,717
Furniture and fixtures 13,711 14,776
Leasehold improvements 10,496 9,985
------- -------
257,538 247,452
Less allowance for depreciation (118,783) (110,320)
------- --------
$138,755 $137,132
======== ========
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 September 30, 2000 were $250,441,000
compared to $223,335,000 the same period a year ago. Excluding the net impact
from acquisitions and currency translation, overall net sales increased 7%.
North American and Australasia posted solid sales increases in the quarter. Year
to date net sales increased to $740,997,000 compared to $621,622,000 the same
period a year ago, representing a 19% increase, with currency having a negative
impact of 2%. Excluding the net impact from acquisitions and currency
translation, overall year to date net sales increased 9% from the same period a
year ago. The year to date increase was driven by continued strong sales
increases in North America and Australasia.
North American Operations
North American sales, consisting of Rehab (power wheelchairs, custom manual
wheelchairs and seating), Standard (manual wheelchairs, personal care and
retail), Beds and Continuing Care (beds, low air loss therapy and furniture and
patient transport equipment), Respiratory (oxygen concentrators, liquid oxygen,
aerosol therapy and associated respiratory) and Distributed (ostomy,
incontinence, wound care and other medical supplies) products, increased 9% for
the quarter and 10% for the first nine months of the year compared to the same
periods a year ago. The increase was due principally to unit volume increases in
Distributed, Standard and Rehab.
9
<PAGE>
European Operations
European sales increased to $58,797,000 from $48,457,000 for the quarter
primarily due to the acquisition of Scandinavian Mobility International AS
(SMI). On a pro-forma basis taking into consideration SMI, European sales,
excluding a negative impact of 10% from foreign currency, decreased 7% from the
same period a year ago. Year to date, on a pro-forma basis, net sales were flat
excluding a negative impact of 11% from foreign currency translation.
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, Dynamic Controls, a New Zealand
manufacturer of operating components used in power wheelchairs and Invacare New
Zealand, a distribution business. Net sales for the Australasia group increased
$1,110,000 or 16% for the quarter, including a negative 21% impact from foreign
currency translation. Year to date net sales increased 26% including a 16%
negative impact from foreign currency translation.
GROSS PROFIT
Gross profit as a percentage of net sales for the three and nine-month periods
ended September 30, 2000 was 31.7% and 31.3%, respectively, compared to 31.6%
and 30.5% in the same periods last year. Margins for North America, Europe and
Australasia operations each increased year to date. For the quarter, Europe and
Australasia margins increased while North America experienced a slight decline
principally due to the growth in sales of lower margin products. The company's
continued focus on productivity improvements and cost controls in manufacturing
operations, coupled with the realization of synergies from the SMI acquisition
resulted in an increase in gross profit as a percentage of sales.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expense as a percentage of net sales for the
three and nine months ending September 30, 2000 was 18.2% and 20.1%,
respectively, compared to 19.7% and 19.9% in the same periods a year ago. The
overall dollar increase was $1,640,000 (4%) for the quarter and $25,636,000
(21%) for the nine months with acquisitions contributing $4,632,000 (11%) and
$21,262,000 (17%) respectively. Excluding the impact of acquisitions and foreign
currency, selling, general and administrative expense for the first nine months
as a percent of sales remained relatively flat compared to the same period a
year ago.
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North American selling, general and administrative costs, as a percent of sales,
for the three and nine months ending September 30, 2000 decreased by
approximately one percentage point compared to the same periods a year ago.
Administrative cost reductions and hedging gains more than offset the costs
associated with the company's e-commerce and branding initiatives designed to
increase the general public's awareness of home medical equipment products and
specifically the Invacare brand name. European operations' selling, general and
administrative costs, adjusted for acquisition and foreign currency impact, grew
at a slower rate than sales for the quarter and first nine months compared to
the same periods a year ago. As a percent of sales, cost were 18.1% and 22.1%
compared to 23.1% and 25.1% respectively in the prior periods. Australasia
operations' costs increased $773,000 and $1,829,000 for the quarter and first
nine months respectively, compared to the same periods a year ago. As a percent
of sales, cost were 27.1% and 26.8% compared to 20.4% and 24.2% respectively in
the prior periods.
NON-RECURRING CHARGE AND ACQUISITION RESERVES
During the fourth quarter of 1999, the company announced non-recurring and
unusual charges of $14,800,000 ($9,028,000 or $.29 diluted per share after-tax)
primarily related to the acquisition of Scandinavian Mobility International AS
(SMI). In the third quarter of 2000, the company reviewed the charges and
updated the components to reflect current year activity and estimates. Based on
this review, reserves for exit costs primarily for employee severance and lease
terminations were reduced by $2,288,000. These changes were entirely offset by
additional reserves of $588,000 for asset write-downs and $1,700,000 to increase
the provision for doubtful accounts. There was no net impact on reported
earnings for the quarter or year to date due to these changes. Of these charges,
$7,350,000 has been utilized through September 30, 2000 including $259,000 in
the third quarter of 2000 for exit costs. The company anticipates all of the
remaining charge to be utilized in 2000.
In connection with the integration of SMI into Invacare's existing European
operations, the company recorded additional acquisition reserves of $10.1
million for additional employee severance, lease termination costs and legal
costs.
INTEREST
Interest income in the three months ended September 30, 2000 was flat and
declined by $384,000 for the first nine months, when compared to the same
periods a year ago, as decreased volume in customer loan refinancing was
partially offset by an overall increase in the portfolio's effective rate. The
company's tighter refinancing policy resulted in the reduced number of
refinances written in the quarter. The company believes its overall long-term
profitability will be positively impacted by the change in policy.
For the quarter and first nine months, interest expense increased compared to
the same periods a year ago, due to higher average outstanding borrowings
resulting primarily from the acquisition of Scandinavian Mobility International
AS (SMI) in the third quarter of 1999, coupled with an overall increase in
borrowing rates between years.
INCOME TAXES
The company anticipates the effective tax rate for 2001 may be reduced from 2000
as a result of several items including increasing profits in foreign
jurisdictions taxed at rates lower than the domestic effective rate, reduced
impact of domestic state taxes due to increased foreign earnings and increased
tax credits.
LIQUIDITY AND CAPITAL RESOURCES
The company's reported overall level of long-term obligations decreased $36.2
million to $404.6 million for the nine months ended September 30, 2000. The
company continues to maintain an adequate liquidity position to fund its working
capital and capital requirements through its cash flow from operations and its
bank lines. As of September 30, 2000, the company had approximately $146.0
million available under its lines of credit. Pursuant to the most restrictive
covenant of its debt arrangements, the company could borrow up to an additional
$249 million.
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The company's financing arrangements require it to maintain certain conditions
with respect to net worth, working capital, funded debt to capitalization and
interest coverage as defined. The company is in compliance with all of the
conditions.
CAPITAL EXPENDITURES
There were no material capital expenditure commitments outstanding as of
September 30, 2000. 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 2000 will approximate $28 million. The company believes that its
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.
ACQUISITIONS
Effective July 31, 1999, IVC Holdings Denmark AS ("Holdings"), a wholly owned
subsidiary of Invacare Corporation, acquired substantially all of the
outstanding shares of common stock of Scandinavian Mobility International AS
(SMI), a Danish corporation for approximately $142 million in cash. The
acquisition was accounted for under the purchase method of accounting. The
excess of the purchase price over the estimated fair value of the common stock
acquired is being amortized over 40 years. SMI is a producer and distributor of
rehabilitation products, mobility aids and related products in Europe.
CASH FLOWS
Cash flows provided by operating activities were $32.6 million for the first
nine months of 2000 compared to $43.2 million in 1999. Operating cash flows
decreased in 2000 as a result of an increase in trade receivables and accrued
expenses partially offset by an increase in accounts payable and net earnings.
Cash flows required for investing activities decreased by $156.0 million for the
first nine months of 2000 when compared to 1999. The decrease is principally due
to Scandinavian Mobility International AS being acquired in the third quarter of
1999 and no sizable acquisition occurring in 2000. The remainder of the decrease
is principally due to a decrease in the level of installment contracts written
as the company continues to focus on improving collection levels.
Cash flows required by financing activities were $13.2 million compared to cash
flows provided by financing activities of $144.7 million in 1999 which were used
primarily to fund the acquisition of Scandinavian Mobility International AS.
Financing activities through the first nine months of 2000 continued to focus on
reducing debt levels.
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.
12
<PAGE>
DIVIDEND POLICY
On August 17, 2000, the Board of Directors for Invacare Corporation declared a
quarterly cash dividend of $.0125 per Common Share to shareholders of record as
of October 2, 2000, to be paid on October 13, 2000. At the current rate, the
cash dividend will amount to $.05 per Common Share on an annual basis.
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
fluctuations. Based on September 30, 2000 debt levels, a 1% change in interest
rates would impact interest expense by approximately $1,269,000 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. In
addition, the company's existing multi-currency revolving credit agreement
allows the company to borrow in foreign currency which can reduce the company's
exposure to foreign currency fluctuations. The company does not believe that any
potential loss related to these financial instruments will 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. The legacy
currencies are scheduled to remain legal tender in the participating countries
between January 1, 1999 and July 1, 2002. Beginning January 1, 2002, the Euro
currency will be introduced and the legacy currencies withdrawn from circulation
six months later. 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-Q constitute forward-looking statements
based on current expectations which are covered under the "Safe Harbor"
provision within the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include information concerning our possible or
assumed future results of operations and statements in which we use words such
as "expect," "will," "believe," "anticipate," "intend," "plan," "estimate,"
"project" or similar expressions. Actual results and events, including the
results from the acquisition and integration of Scandinavian Mobility
International AS (SMI) may differ significantly from those anticipated as a
result of risks and uncertainties which include, but are not limited to, pricing
pressures, increasing raw material costs, the consolidations of health care
customers and competitors, the availability of strategic acquisition candidates,
government reimbursement issues including those that affect the viability of
customers, the effect in offering customers competitive financing terms,
Invacare's ability to effectively integrate acquired companies, the difficulties
in managing and operating businesses in many different foreign jurisdictions,
the overall economic, market and industry growth conditions, foreign currency
and interest rate risk, as well as the risks described from time to time in
Invacare's reports as filed with the Securities and Exchange Commission.
13
<PAGE>
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.
Item 6. Exhibits and Reports on Form 8-K
A Exhibits:
Official Exhibit No.
(27) Financial Data Schedule
B Reports on Form 8-K: None
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:
Thomas R. Miklich
Chief Financial Officer
Date: November 13, 2000
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