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Form 10-Q INVACARE CORP For: Jun 30

August 8, 2022 4:37 PM EDT

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
[] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from            to           
Commission File Number 001-15103
INVACARE CORPORATION
(Exact name of registrant as specified in its charter)
ivc-20220630_g1.jpg 
Ohio95-2680965
(State or other jurisdiction of
incorporation or organization)
(IRS Employer Identification No.)
One Invacare Way,Elyria,Ohio44035
(Address of principal executive offices)(Zip Code)
(440) 329-6000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading SymbolName of exchange on which registered
Common Shares, without par valueIVCNew York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 (the “Exchange Act”) 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   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act. (Check One):    Large accelerated filer     Accelerated filer   Non-accelerated filer   Smaller reporting company Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   No  
As of August 5, 2022, the registrant had 38,310,514 Common Shares and 3,667 Class B Common Shares outstanding.



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Table of Contents
 
 ItemPage
PART I: FINANCIAL INFORMATION
2
1
3
4
PART II: OTHER INFORMATION
1
1A
2
6

About Invacare Corporation

Invacare Corporation (NYSE: IVC) ("Invacare" or the "company") is a leading manufacturer and distributor in its markets for medical equipment used in non-acute care settings. At its core, the company designs, manufactures and distributes medical devices that help people to move, breathe, rest and perform essential hygiene. The company provides clinically complex medical device solutions for congenital (e.g., cerebral palsy, muscular dystrophy, spina bifida), acquired (e.g., stroke, spinal cord injury, traumatic brain injury, post-acute recovery, pressure ulcers) and degenerative (e.g., ALS, multiple sclerosis, chronic obstructive pulmonary disease (COPD), age related, bariatric) conditions. The company's products are important parts of care for people with a wide range of challenges, from those who are active and heading to work or school each day and may need additional mobility or respiratory support, to those who are cared for in residential care settings, at home and in rehabilitation centers. The company sells its products principally to home medical equipment providers with retail and e-commerce channels, residential care operators, dealers and government health services in North America, Europe and Asia Pacific. For more information about the company and its products, visit the company's website at www.invacare.com. The contents of the company's website are not part of this Quarterly Report on Form 10-Q and are not incorporated by reference herein.




MD&AOverview

Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The discussion and analysis presented below is concerned with material changes in financial condition and results of operations between the periods specified in the condensed consolidated balance sheets at June 30, 2022 and December 31, 2021, and in the condensed consolidated statement of comprehensive income (loss) for the three and six months ended June 30, 2022 and June 30, 2021. All comparisons


presented are with respect to the same period last year, unless otherwise stated. This discussion and analysis should be read in conjunction with the condensed consolidated financial statements and accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q and the MD&A included in the company's Annual Report on Form 10-K for the year ended December 31, 2021. For some matters, SEC filings from prior periods may be useful sources of information.
OVERVIEW

OVERVIEW
Invacare is a multi-national company with integrated capabilities to design, manufacture and distribute durable medical devices. The company makes products that help people move, breathe, rest and perform essential hygiene, and with those products the company supports people with congenital, acquired and degenerative conditions. The company's products and solutions are important parts of care for people with a range of challenges, from those who are active and involved in work or school each day and may need additional mobility or respiratory support, to those who are cared for in residential care settings, at home and in rehabilitation centers. The company operates in facilities in North America, Europe and Asia Pacific, which are the result of dozens of acquisitions made over the company's forty-two-year history. Some of these acquisitions have been combined into integrated operating units, while others have remained relatively independent.
COVID-19 / Supply Chain Impacts
The company continues to monitor the impact of the pandemic, which continues to negatively impact the company’s business in 2022 with regard to supply chain disruptions impacting both input costs and availability of components, resulting in compressed gross margins. The company expects these issues will remain throughout 2022. While the company has implemented actions to mitigate the negative impact of higher input costs, it is expected that there could continue to be a difference between the timing of when the mitigation actions are effective and when the cost inflation is incurred.
The year-over-year decline in revenue experienced in the second quarter of 2022 was primarily in all product categories given supply chain challenges but most notably in North America. These challenges also impacted sequential revenue growth in respiratory and lifestyle product categories.
However, the company realized sequential growth in its mobility and seating product category in the second quarter of 2022 as a result of improved access to healthcare and loosening of public health restrictions. However, demand for mobility and seating product still has not returned to pre-pandemic levels.
The company continues to experience elevated backlog across all product categories and regions, with strong demand in mobility and seating and lifestyle products. During the second quarter of 2022, we started to experience slower demand for respiratory products which we believe is influenced by the progression of the pandemic resulting in a reduction in pandemic-related demand. The company has, and continues to, experience availability issues with components which may limit the ability to increase output and meet demand. In addition, the company has continued to experience cost increases from pandemic-related supply chain disruptions. These disruptions and availability issues, from pandemic-related supply chain challenges and supplier delivery holds resulting from past due payables, have resulted in intermittent production stoppages.
The extent to which the company’s operations will continue to be impacted by the pandemic will depend largely on future developments, which remain highly uncertain and difficult to accurately predict, including, among other things, new information which may emerge concerning the severity of the pandemic, actions by government authorities to contain COVID-19 and its variants or treat their impacts, such as restrictions imposed in China to control the pandemic, and potential of reimposed public health restrictions or restrictions on access to healthcare facilities. In addition, supply chain disruptions and inflation continue to negatively impact the global economy and may affect the business including availability and cost of components and freight, which may have a negative impact on the company and results of operations, if mitigation actions are not effective.
1

MD&AOverview
Strategy
The company historically had a strategy to be a leading provider of durable medical equipment to health care providers in global markets by providing the broadest portfolio available. This strategy has not kept pace with certain reimbursement changes, competitive dynamics and company-specific challenges. Since 2015, the company has made a major shift in its strategy. The company has since been aligning its resources to produce products and solutions that assist customers and end-users with their most clinically complex needs. By focusing the company's efforts to provide the best possible assistance and outcomes to the people and caregivers who use its products, the company aims to improve its financial condition for sustainable profit and growth. As a result, the company is undertaking a substantial multi-year business optimization plan.
Business Optimization Efforts
The company continues to execute a multi-year strategy to return the company to profitability by focusing its resources on products and solutions that provide greater healthcare value in clinically complex rehabilitation and post-acute care.
Cost pressures on the business impacted by supply chain disruptions and inflationary economic conditions are anticipated to continue through 2022. While the company has implemented actions to mitigate these cost increases, additional actions may be needed to drive profitability and free cash flow generation. These actions could include further restructuring actions including organization optimization, supply chain rationalization, and product line rationalization for those product categories which do not deliver adequate profitability given the higher cost inputs being incurred. These actions are anticipated to result further restructuring costs in 2022.
The company's business optimization actions balance product portfolio changes across all regions and cost improvements in supply chain and administrative functions. Key elements of the global business optimization plans are:
Continue to drive all business segments and product lines based on their potential to achieve a leading market position and to support profitability goals;
Simplify the organization to leverage a reduced cost structure while allocating resources to the business units or product categories which deliver improved financial returns;
Product rationalization and discontinuance with consideration of cost increases incurred by the company and those anticipated to continue. Adjust the product portfolio to consistently grow profitability amid cost
increases by adding new products, reducing costs and continuing to improve customer experiences; and
Take actions globally to reduce working capital and improve free cash flow.
As it navigates the uncertain business environment resulting from the pandemic, the company continues to allocate more resources to the business units experiencing increased demand and expects to continue taking actions to mitigate the potential negative financial and operational impacts on other parts of the business that have declined. In the medium-term, the company still expects to execute on its business optimization strategy, such as the global IT modernization initiative which is intended to optimize the operating structure.
The company intends to continue to make significant investments in its business improvement initiatives with a focus on improving profitability and free cash flow generation. As a result, the company may take actions which may reduce sales in certain areas, refocus resources away from less profitable activities, and look at its global infrastructure for opportunities to further optimize the business. As part of the company’s efforts to streamline its operations and focus its resources on core product lines that provide the greatest value and financial returns, the company continuously evaluates opportunities and activities, including potential divestitures, which it considers from time to time, particularly if they involve businesses or assets outside of the company’s primary areas of focus.
Outlook
The company participates in durable healthcare markets and serves a persistent need for its products. By continuing to drive for improved operating efficiency, the company expects to grow revenue and profit, and improve its cash flow performance into the future.
Cost pressures on the business due to supply chain disruptions and inflationary economic conditions are anticipated to continue into 2022. The company continues to see higher input costs related to freight and materials, increasing the challenges to schedule deliveries of key components, including electronic components for respiratory and mobility and seating products. While the company has implemented actions to mitigate these cost increases, additional restructuring actions may be implemented to drive profit and improve cash flows. These restructuring actions may include organization simplification and supply chain rationalization. These actions are expected to include organization and supply chain changes and a narrowing of the product portfolio for those items which no longer meet customer or business needs. These actions are anticipated to take effect in 2022 and as a result the company anticipates incurring additional costs related to its restructuring actions.
2

MD&AOverview
Challenges related to the availability of components continued to have a significant impact on the fulfillment of demand as experienced in 2Q22 and impacted the efficiency of operations. As these conditions continue into 3Q22, the company has suspended its financial guidance for the remainder of the year.

The benefit of additional liquidity available to the business is expected to improve access to components and support sequential improvement in net sales, but is not anticipated to have a meaningful impact until the later half of 3Q22 and into 4Q22. For 3Q22, the company anticipates sequential improvement in Adjusted EBITDA driven by revenue growth, pricing effectiveness, and restructuring benefits partially offset by continued higher input costs. In addition, the financing transactions announced in July 2022 are anticipated to result in free cash flow usage for 3Q22, including a use of working capital to help accelerate the business evolution.
Improvement in the company's earnings performance for the future is expected to benefit from: (1) margin expansion expected as a result of effectiveness of pricing actions, favorable product mix as a result of product rationalization efforts and improved efficiencies in our operations including maximizing our distribution structure offset by higher material and freight costs; and (2) benefit of restructuring actions. SG&A expense for the second half of 2022 is anticipated to continue to be impacted by classification of IT costs as operating expenses as a result of a temporary pause in the ERP roll-out. Stock compensation expense for the year is expected to be similar to 2021.
The company continues to focus on its transformation plan, revenue growth for clinically relevant product categories, and effectiveness of pricing actions to drive significant improvement in financial performance to deliver enhanced long-term shareholder value.
Favorable Long-Term Demand
Ultimately, demand for the company's products and services is based on the need to provide care for people with certain conditions. The company's medical devices provide solutions for end-users and caregivers. Therefore, the demand for the company's medical equipment is largely driven by population growth and the incidence of certain conditions where treatment may be supplemented by the company's devices. The company also provides solutions to help equipment providers and residential care operators deliver cost-effective and high-quality care. The company believes that its commercial team, customer relationships, products and solutions, supply chain infrastructure, and strong research and development pipeline will create favorable business potential.

July 2022 Financings
On July 26, 2022, the company entered into a senior secured term loan agreement with certain funds managed by Highbridge Capital Management LLC, providing for delayed draws of up to $104.5 million. The company completed an initial drawdown of $66.5 million under the term loan agreement effective July 26, 2022. The secured term loan matures on July 26, 2026 and accrues interest at an initial annual rate of SOFR + 7.00% or a base rate plus 6.00% and after the second anniversary of the closing date at an annual rate of SOFR + 8.75% or a base rate plus 7.75%. The company may draw the remaining $38 million from the Term Loan Agreement in three incremental tranches subject to certain conditions.
Concurrently, the company entered into private exchange agreements providing for the settlement of $5.0 million aggregate principal amount of the company’s outstanding 5.00% Series II Convertible Senior Exchange Notes due 2024 and up to $55.3 million aggregate principal amount of its outstanding 4.25% Convertible Senior Notes due 2026. The company completed the exchange of all $5.0 million aggregate principal amount of the 5.00% notes and $41.5 million aggregate principal amount of the 4.25% notes on July 26, 2022. This exchange was funded by $31.1 million aggregate principal amount of newly issued 5.68% Convertible Senior Secured Notes due 2026, 2.7 million Common Shares of the company, cash payment of $4.5 million, and cash equal to accrued and unpaid interest on the outstanding convertible notes exchanged in the transaction. The company may exchange the remaining $13.8 million aggregate principal amount of 4.25% notes for $10.4 million aggregate principal amount of new notes in two incremental tranches subject to certain conditions. The new notes will pay interest at a 5.68% annual rate and mature on July 1, 2026.
In addition, the company amended its existing asset based lending credit facility to extend its maturity to January 16, 2026 and reduce the maximum notional amount of the facility from $90 million to $35 million. Proceeds from the secured term loan were used to repay in full outstanding borrowings under the asset based lending credit facility.
Proceeds from the secured term loan are also anticipated to be used to fund working capital, restructuring actions and general purposes. The company recognizes that the near-term external factors of inflation and supply chain challenges, as well as costs associated with restructuring actions, may require balance sheet action, including additional financing to support working capital requirements (refer to "Liquidity and Capital Resources"). The company will continue to take actions to optimize its business as required to operate in the present landscape.
Refer to Part I, Item 1-Long-Term Liabilities-Long-Term Debt-July 2022 Financing in the notes to the condensed
3

MD&AOverview
consolidated financial statements for more information about the July 2022 financing transactions.
4

MD&ANet Sales
RESULTS OF OPERATIONS - NET SALES

The company operates in two primary business segments: North America and Europe with each selling the company's primary product categories, which include: lifestyle, mobility and seating and respiratory therapy products. Sales in Asia Pacific are reported in All Other and include products similar to those sold in North America and Europe.
($ in thousands USD)2Q22*2Q21% Change
Fav/(Unfav)
Foreign Exchange % ImpactConstant Currency % Change
Fav/(Unfav)
Europe112,768 121,296 (7.0)(9.8)2.8 
North America68,718 96,247 (28.6)(0.2)(28.4)
All Other (Asia Pacific)7,531 8,321 (9.5)(7.7)(1.8)
Consolidated189,017 225,864 (16.3)(5.6)(10.7)

($ in thousands USD)YTD 2Q22**YTD 2Q21% Change
Fav/(Unfav)
Foreign Exchange % ImpactConstant Currency % Change
Fav/(Unfav)
Europe230,847 234,071 (1.4)(8.2)6.8 
North America144,037 172,221 (16.4)(0.2)(16.2)
All Other (Asia Pacific)15,121 15,774 (4.1)(7.0)2.9 
Consolidated390,005 422,066 (7.6)(4.9)(2.7)
* Date format is quarter and year in each instance.
** YTD means the first six months of the year in each instance.

The table above provides net sales change as reported and as adjusted to exclude the impact of foreign exchange translation (constant currency net sales). “Constant currency net sales" is a non-Generally Accepted Accounting Principles ("GAAP") financial measure, which is defined as net sales excluding the impact of foreign currency translation. The current year's functional currency net sales are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's sales to calculate the constant currency net sales change.
Global supply chain challenges continued to delay receipt of components and limit conversion of orders to sales, which continued to impact each of the regions in 2Q22 in different ways.
Europe - Constant currency net sales increased $3,366,000, or 2.8% in 2Q22 compared to 2Q21 as sales started to recover from pandemic-related challenges led by increased sales in mobility and seating and respiratory products reflecting the improving restoration of access to healthcare and timely receipt of respiratory product to fulfill
backlog. Constant currency net sales increased 6.8% YTD 2Q22 compared to YTD 2Q21 with growth in all major product categories and led by mobility and seating products.
North America - Constant currency net sales for 2Q22 decreased $27,333,000 or 28.4% compared to 2Q21 with decreases in all categories but primarily attributable to lower respiratory sales. Supply chain disruptions continued to burden order fulfillment in all product categories. Constant currency net sales decreased 16.2% YTD 2Q22 compared to YTD 2Q21 primarily due to lower respiratory sales which had higher sales in prior periods benefiting from pandemic-related demand. Respiratory products demand is down due to lower pandemic demand.
All Other - Constant currency net sales, which relates entirely to the Asia Pacific region, decreased $152,000 or 1.8% for 2Q22 compared to 2Q21 driven by respiratory products. Constant currency net sales increased 2.9% YTD 2Q22 compared to YTD 2Q21 driven by lifestyle products.

5

MD&ANet Sales
ivc-20220630_g2.jpg
Constant currency net sales of mobility and seating products, which comprise most of the company's clinically complex product portfolio, were 40.7% of constant currency net sales in 2Q22 and 38.0% in 2Q21. Constant currency net sales of mobility and seating products were 39.2% YTD 2Q22 compared to 37.0% YTD in 2Q21.

The improvement in mix percentage for mobility and seating products is the result of continued improvement to access to healthcare compared to 2Q21 as well as the decrease in respiratory products attributable to component shortages. All product categories continued to be impacted by supply chain challenges, including timely delivery of components through 2Q22.
6

MD&AGross Profit

GROSS PROFIT
ivc-20220630_g3.jpg
Gross profit decreased $12,836,000 and gross profit as a percentage of net sales for 2Q22 decreased 150 basis points to 25.4%, primarily attributable to lower sales impacting gross profit dollars. Increased pricing across product portfolios continue to lag higher costs as lower pricing orders are fulfilled. In addition, margin was negatively impacted by intermittent production stoppages and unfavorable foreign currency.

Sequentially, gross margin improved 160 basis points driven by the benefit of pricing actions and favorable product mix.

ivc-20220630_g4.jpg
Gross profit decreased $19,745,000 and gross profit as a percentage of net sales for YTD 2Q22 decreased 290 basis points to 24.5%, primarily attributable to lower sales impacting gross profit dollars and unfavorable foreign currency. Increased pricing across product portfolios continue to lag higher costs as lower pricing orders are fulfilled.

Gross profit drivers by segment:
Europe - Gross profit dollars for 2Q22 decreased $5,356,000 on higher net sales compared to 2Q21. Gross profit as a percentage of net sales decreased 2.2% compared to 2Q21. Gross profit dollars were burdened by additional freight and material costs which were partially offset by pricing actions.
Gross profit dollars decreased $7,511,000 and gross profit as a percentage of net sales decreased 2.4% for YTD 2Q22 compared to YTD 2Q21. These decreases were driven by higher freight and material costs including expediting costs partially offset by pricing actions and volume increases.
North America - Gross profit dollars decreased $8,271,000 and gross profit as a percentage of net sales decreased 0.3% for 2Q22 compared to 2Q21 driven primarily by lower net sales. The decrease in gross profit as a percentage of net sales was driven by higher material and freight costs, partially offset by pricing actions.
Gross profit dollars decreased $12,539,000 and gross profit as a percentage of net sales decreased 2.3% for YTD 2Q22 compared to YTD 2Q21. The decrease in gross profit dollars and gross profit as a percentage of net sales driven primarily by lower net sales, higher material and freight costs, partially offset by pricing actions.
All Other - Asia Pacific gross profit dollars increased $320,000 and gross profit as a percentage of net sales increased 7.5% for 2Q22 compared to 2Q21 driven primarily by pricing actions to offset higher material costs.
Asia Pacific gross profit dollars increased $95,000 and gross profit as a percentage of net sales increased 2.1% for YTD 2Q22 compared to YTD 2Q21 driven primarily by pricing actions to offset higher material costs.
All Other also includes the impact of intercompany profit eliminations for the consolidated company.
7

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
($ in thousands USD)2Q222Q21Reported ChangeForeign Exchange ImpactConstant Currency Change
SG&A expenses - $58,623 63,765 (5,142)(2,719)(2,423)
SG&A expenses - % change(8.1)(4.3)(3.8)
% to net sales31.0 28.2 

($ in thousands USD)YTD 2Q22**YTD 2Q21Reported ChangeForeign Exchange ImpactConstant Currency Change
SG&A expenses - $119,187 122,586 (3,399)(4,467)1,068 
SG&A expenses - % change(2.8)(3.7)0.9 
% to net sales30.6 29.0 


The table above provides selling, general and administrative (SG&A) expenses change as reported and as adjusted to exclude the impact of foreign exchange translation (constant currency SG&A). “Constant currency SG&A" is a non-GAAP financial measure, which is defined as SG&A expenses excluding the impact of foreign currency translation. The current year's functional currency SG&A expenses are translated using the prior year's foreign exchange rates. These amounts are then compared to the prior year's SG&A expenses to calculate the constant currency SG&A expenses change. Management believes this financial measure provides meaningful information for evaluating the core operating performance of the company.

Constant currency SG&A decreased $2,423,000 or 3.8% for 2Q22 compared to the same period last year and reflects benefit of lower employment costs from previously announced restructuring actions and reduced stock compensation expense attributable a lower trading price on the company's Common Shares in 2Q22 on outstanding equity awards to which variable accounting applies. However, the current quarter includes IT expenses being classified as operating costs as a result of the temporary pause in the ERP roll-out, similar to 1Q22. In addition, the company incurred higher expense related to foreign currency transactions.

Constant currency SG&A increased $1,068,000 or 0.9% for YTD 2Q22 compared to the same period last year increased IT costs partially offset by lower employment costs. 2Q22 YTD benefited from reduced stock compensation expense attributable a lower trading price on the company's Common Shares in first half of 2022 on outstanding equity awards to which variable accounting applies. In addition, the company incurred higher expense related to foreign currency transactions.
SG&A expense drivers by segment:

Europe - SG&A expenses for 2Q22 decreased $3,853,000 or 13.3% compared to 2Q21 with foreign currency translation decreasing SG&A expenses by $2,380,000, or 8.2%. Constant currency SG&A expenses decreased $1,473,000, or 5.1%. Lower employment costs were offset by foreign currency transactions losses and increased sales and marketing costs.
North America - SG&A expenses for 2Q22 decreased $417,000, or 1.8%, compared to 2Q21. Constant currency SG&A expenses decreased $318,000, or 1.4% primarily attributable to outside services and foreign currency transactions.
All Other - SG&A expenses for 2Q22 decreased $872,000 compared to 2Q21 with foreign currency translation decreasing SG&A expenses by $240,000. Constant currency SG&A expenses decreased by $632,000. All Other includes SG&A related to the Asia Pacific businesses and non-allocated corporate costs. Constant currency SG&A expenses related to Asia Pacific businesses for 2Q22 decreased 7.6% or $228,000, compared to 2Q21 driven primarily by reduced facility and sales and marketing costs partially offset by unfavorable foreign currency transactions. Unallocated corporate costs decreased primarily due to increased IT costs partially offset by lower stock compensation expense, noted above.
8

MD&AOperating Income (Loss)
OPERATING INCOME (LOSS)
($ in thousands USD)2Q222Q21$ ChangeYTD 2Q22YTD 2Q21$
Change
Europe3,489 4,992 (1,503)6,714 8,824 (2,110)
North America(6,264)1,590 (7,854)(14,600)(785)(13,815)
All Other(7,866)(9,529)1,663 (15,590)(15,169)(421)
Charges related to restructuring(4,153)(547)(3,606)(7,943)(2,099)(5,844)
Consolidated Operating Income (Loss)(14,794)(3,494)(11,300)(31,419)(9,229)(22,190)
For the quarter and year-to-date, consolidated operating loss increased compared to last year due to lower net sales impacted lower gross profit, higher input costs not fully mitigated by pricing actions and unfavorable foreign currency.
Operating income (loss) by segment:
Europe - Operating income for 2Q22 decreased by $1,503,000 primarily due to lower gross profit dollars impacted by higher input costs and foreign currency partially offset by net sales increases including pricing actions.
Operating income for YTD 2Q22 decreased $2,110,000 compared to YTD 2Q21 attributable to lower gross profit dollars impacted by higher input costs and foreign currency.
North America - Operating loss for 2Q22 increased by $7,854,000 primarily due to lower gross profit on lower sales. Benefit of pricing actions continue to lag higher input costs.
Operating loss for YTD 2Q22 was $14,600,000 compared to YTD 2Q21 operating loss of $785,000 due to lower gross profit impacted by lower net sales and unfavorable costs associated with supply chain disruptions partially offset by lower SG&A expenses and pricing actions.
All Other - Operating loss for All Other includes the operating results of the Asia Pacific businesses, as well as unallocated SG&A expenses and intercompany eliminations. Operating loss increased $1,663,000, or 17.5%, primarily driven increased IT expenses classified as operating expenses partially offset by lower employment costs.
Operating loss for YTD 2Q22 increased $421,000 compared to YTD 2Q21 increased IT expenses.
Charges Related to Restructuring Activities
Restructuring charges were $4,153,000 for 2Q22 compared to $547,000 for 2Q21 which includes severance and other restructuring costs. Restructuring charges were incurred in the Europe segment of $2,613,000 and North America segment of $1,540,000.
Restructuring charges were $7,943,000 for YTD 2Q22 compared to $2,099,000 for YTD 2Q21 which includes severance and other restructuring costs. Restructuring charges
were incurred in the Europe segment of $4,732,000 and North America segment were $3,202,000.



9

MD&AOther Items
OTHER ITEMS
Loss on debt extinguishment including debt finance changes and fees
($ in thousands USD)YTD 2Q22YTD 2Q21$ Change% Change
Loss on debt extinguishment including debt finance fees— 709 (709)(100.0)
During the first quarter of 2021, the company repurchased and retired, at par plus accrued interest, $78,850,000 of its 2022 Notes. The result of the transaction was a loss on debt extinguishment including debt and finance fees of $709,000.
Interest
($ in thousands USD)2Q222Q21$ Change% Change
Interest expense6,230 6,084 146 2.4 
Interest income(1)— (1)(100.0)
($ in thousands USD)YTD 2Q22YTD 2Q21$ Change% Change
Interest expense12,482 11,815 667 5.6 
Interest income(1)(1)— — 
The increase in interest expense for 2Q22 and YTD 2Q22 compared to the same periods of prior year was primarily related to higher interest bearing debt for the full periods of 2022 compared to 2021. Specifically, the 2026 Notes were issued at the end of 1Q21.
Income Taxes
The company had an effective tax rate of 4.4% and 5.1% on losses before tax for the three and six months ended June 30, 2022, respectively, compared to an expected benefit of 21.0% on the pre-tax loss for each period. The company had an effective tax rate of 11.7% and 13.7% on losses before tax for the three and six months ended June 30, 2021, respectively, compared to an expected benefit of 21.0% on the pre-tax loss for each period. The company's effective tax rate for the three and six months ended June 30, 2022 and June 30, 2021 were unfavorable as compared to the U.S. federal statutory rate, principally due to the negative impact of the company not being able to record tax benefits related to the significant losses in countries which had tax valuation allowances. The effective tax rate was increased for the three and six months ended June 30, 2022 and June 30, 2021 by certain taxes outside the United States, excluding countries with tax valuation allowances, that were at an effective rate higher than the U.S. statutory rate.

10

MD&ALiquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES

The company continues to maintain an adequate liquidity position through its cash balances, bank lines of credit and secured term loan credit facility (refer to Long-Term Debt in the notes to condensed consolidated financial statements included in this report) as described below.

As described below under July 2022 Financings, the company recently completed a series of strategic capital markets transactions that altered its long-term debt and credit facility borrowing structure. Key balances on the company's balance sheet and related metrics prior to the July 2022 Financings are presented below:
($ in thousands USD)June 30, 2022December 31, 2021$ Change% Change
Cash and cash equivalents$43,909 $83,745 $(39,836)(47.6)
Working capital (1)
89,433 138,134 (48,701)(35.3)
Total debt (2)
384,138 382,586 1,552 0.4 
Long-term debt (2)
378,892 376,462 2,430 0.6 
Total shareholders' equity147,604 218,489 (70,885)(32.4)
Prior Credit Agreement borrowing availability (3)
40,014 41,845 (1,831)(4.4)
(1)    Current assets less current liabilities.
(2)    Total debt and Long-term debt include finance leases but exclude debt issuance costs recognized as a deduction from the carrying amount of debt liability and operating leases.
(3)    Reflects the combined availability of the company's North American and European asset-based revolving credit facilities before borrowings. At June 30, 2022, the company had $13,215,000 of borrowings outstanding on the European Credit Facility and $25,950,000 of borrowings outstanding on its North America Credit Facility. Outstanding borrowings are based on credit availability calculated on a month lag related to the European credit facility.
The company's cash and cash equivalents balances were $43,909,000 and $83,745,000 at June 30, 2022 and December 31, 2021, respectively. The decrease in cash in the first six months of 2022 is primarily attributable to use from operating activities and cash used for continued investment in business improvement initiatives. Cash used by operating activities was partially offset by credit facilities borrowings. The North America and Europe Credit Facilities under the company's Prior Credit Agreement provides for asset-based-lending senior secured revolving credit facilities.

Refer to "Long-Term Debt" in the notes to the condensed consolidated financial statements included in this report for a summary of the material terms of the company's long-term indebtedness.

Debt repayments, acquisitions, divestitures, the timing of vendor payments, the timing of customer rebate payments, the granting of extended payment terms to significant national accounts and other activity can have a significant impact on the company's cash flow and borrowings outstanding such that the cash reported at the end of a given period may be materially different than cash levels during a given period. While the company has cash balances in various jurisdictions around the world, there are no material restrictions regarding the use of such cash for dividends within the company, loans or other purposes.

The company's total debt outstanding, inclusive of the company's convertible senior notes due 2022 (as of December 31, 2021), 2024 and 2026 and finance leases, increased by $1,552,000 to $384,138,000 at June 30, 2022 from $382,586,000 as of December 31, 2021. The increase is primarily driven by accretion on convertible senior notes due 2024, amortization of debt issuance costs and credit facility borrowings, $2,000,000 debt borrowed against cash surrender value of insurance policies, offset by $2,650,000 payment of 2022 Notes at maturity on June 1, 2022 and finance lease payments.
July 2022 Financings
In July 2022, the company consummated a series of financing transactions. Refer to "Long-Term Debt" / "July 2022 Financings" in the notes to the condensed consolidated financial statements included in this report for more information about the July 2022 financing transactions.
Outlook
The company may incur additional financing in the future, which could include substantial additional debt (including secured debt). Although the terms of the agreements governing existing debt restrict the company's ability to incur additional debt (including secured debt), such restrictions are subject to several exceptions and qualifications and such restrictions and qualifications may be waived or amended, and
11

MD&ALiquidity and Capital Resources
debt (including secured debt) incurred in compliance with such restrictions and qualifications (as they may be waived or amended) may be substantial.

The company may from time to time seek to repay or purchase, exchange or otherwise retire its convertible notes or other debt obligations, in open market transactions, privately negotiated transactions, tender offers, exchange offers, pursuant to the term of debt or otherwise. The company may also incur additional debt (including secured debt) to fund such transactions, refinance or restructure existing debt and/or exchange existing debt for newly issued debt obligations or equity or equity-like securities. Such transactions, if any, will depend on prevailing market conditions, trading prices of debt from time to time, the company's liquidity requirements and cash position, contractual restrictions and other factors. The amount involved in any such transactions, individually or in the aggregate, may be material. The company cannot provide any assurance as to if or when it will consummate any such transactions or the terms of any such transactions.

Based on the company's current expectations, the company believes that its cash balances and available borrowing capacity under its ABL Credit Agreement should be sufficient to meet working capital needs, capital requirements, and commitments for at least the next twelve months. Notwithstanding the company's expectations, if the company's operating results decrease as the result of pressures on the business due to, for example, prolonged, or worsening of, negative impacts of the COVID-19 pandemic, the impact of the pandemic on the company's supply chain, or political or geopolitical crises such as Russia's invasion of Ukraine, and actions taken in response on global and regional economies and economic activity, continued supply chain challenges, inflationary economic conditions, currency fluctuations or regulatory issues, or the company's failure to execute its business plans or if the company's business improvement actions take longer than expected to materialize or development of one or more of the other risks discussed in "Item 1A. Risk Factors" of the company’s Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, or if the conditions for subsequent draws under the Highbridge Loan Agreement are not satisfied, the company may require additional financing, or may be unable to comply with its obligations under the credit facilities or its other obligations, and its lenders or creditors could demand repayment of any amounts outstanding. If additional financing is required, there can be no assurance that it will be available on terms satisfactory to the company, if at all. The company also may evaluate and implement further changes to its strategic goals and business plans, which may involve additional restructuring of its operations. If and to the extent undertaken, any such restructuring may be substantial and involve significant effort and expense, and the company can make no assurances that such efforts, if undertaken, would be successful and result in improvements to the company’s business performance and financial condition. Refer to "Item 1A. Risk Factors" in the company’s Annual Report on Form 10-K and this Quarterly Report on Form 10-Q for a further discussion of risks
applicable to the company's liquidity, capital resources and financial condition.

The company also has an agreement with De Lage Landen, Inc. (“DLL”), a third-party financing company, to provide lease financing to the company's U.S. customers. Either party could terminate this agreement with 180 days' notice or 90 days' notice by DLL upon the occurrence of certain events. Should this agreement be terminated, the company's borrowing needs under its credit facilities could increase.

While most of the company's debt has fixed interest, should interest rates increase, the company expects that it would be able to absorb modest rate increases without material impact on its liquidity or capital resources. The weighted average interest rate on revolving credit borrowings, excluding finance leases, was 4.5% for the three and six months ended June 30, 2022 and 4.5% for the year ended December 31, 2021. This weighted average interest rate will increase in the second half of the year as a result of the issuance of the new senior secured term loan entered into in July 2022. Refer to "Long-Term Debt" and "Leases and Commitments" in the notes to the condensed consolidated financial statements for more details regarding the company's credit facilities and lease liabilities, respectively.
12

MD&AAccounting Estimates and Pronouncements
ACCOUNTING ESTIMATES AND PRONOUNCEMENTS

CRITICAL ACCOUNTING ESTIMATES

The condensed consolidated financial statements included in the report 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 condensed consolidated financial statements and related footnotes. In preparing the financial statements, management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. However, application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, thus, actual results could differ from these estimates. Refer to the Critical Accounting Estimates section within MD&A of company's Annual Report on Form 10-K for the period ending December 31, 2021.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
For the company’s disclosure regarding recently issued accounting pronouncements, refer to Accounting Policies - Recent Accounting Pronouncements in the notes to the condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q.


CAPITAL EXPENDITURES
The company estimates that capital investments for 2022 could be approximately $5,000,000 compared to actual capital expenditures of $17,698,000 in 2021. The continued investment at this level relates primarily to the new ERP system. The company believes that its balances of cash and cash equivalents and available borrowing capacity under its existing credit facilities should be sufficient to meet its operating cash requirements and fund capital expenditures (refer to "Liquidity and Capital Resources"). The Prior Credit Agreement limited the company's annual capital expenditures to $35,000,000. In July of 2022, the Prior Credit Agreement was amended and restated. Among the updates was a reduction of the annual capital expenditures limitation to $25,000,000.

DIVIDEND POLICY
On May 21, 2020, the Board of Directors suspended the quarterly dividend on the company's Common Shares. The Board of Directors suspended the company's regular dividend
on the Class B Common Shares starting in the third quarter of 2018. Less than 4,000 Class B Common Shares remain outstanding and suspending the regular Class B dividend allows the company to save on the administrative costs and compliance expenses associated with that dividend. Holders of Class B Common Shares are entitled to convert their shares into Common Shares at any time on a share-for-share basis and would be eligible for any Common Share dividends declared following any such conversion.
13

MD&ACash Flows
CASH FLOWS
ivc-20220630_g5.jpg
The improvement in cash provided by operating activities for the three and six months ended June 30, 2022 was driven primarily by the collection of accounts receivable and reduced inventory levels offset by lower accounts payable.
ivc-20220630_g6.jpg
The year over year changes in cash flows related to investing activities was driven primarily by lower capital expenditures.
ivc-20220630_g7.jpg
Cash flows used by financing activities in the first six months of 2022 included credit facility borrowings and repayments, $2,650,000 principal payment of 2022 Notes, as well as payment of $1,267,000 in financing costs ahead of financing transactions executed in the third quarter of 2022. The first six months of 2021 included the issuance of $125,000,000 principal amount of 2026 Notes, payment of $5,175,000 in financing costs, purchase of capped calls related to the 2026 Notes for $18,787,000, repurchase of $78,850,000 principal amount of 2022 Notes and repayment of $1,250,000 principal amount of the company's previously outstanding convertible notes due 2021 (the "2021 Notes"). Borrowings on credit facilities are under the asset-based-lending senior secured revolving credit facilities provided by the company's Prior Credit Agreement.
14

MD&ACash Flows
Free cash flow is a non-GAAP financial measure and is reconciled to the corresponding GAAP measure as follows:
 ($ in thousands USD)2Q222Q21YTD 2Q22YTD 2Q21
Net cash provided (used) by operating activities$756 $(22,290)$(26,942)$(36,050)
Plus: Sales of property and equipment— — 23 
Less: Purchases of property and equipment(633)(4,929)(2,764)(9,047)
Free Cash Flow (usage)$123 $(27,219)$(29,701)$(45,074)
 
Free cash flow for the first six months 2022 and 2021 was primarily impacted by the same items that affected cash flows provided (used) by operating activities. Free cash flow is a non-GAAP financial measure that is comprised of net cash provided (used) by operating activities plus purchases of property and equipment less proceeds from sales of property and equipment. Management believes that this financial measure provides meaningful information for evaluating the overall financial performance of the company and its ability to repay debt or make future investments (including acquisitions, etc.).
Generally, the first half of the year is cash consumptive and impacted by significant disbursements related to annual customer rebate payments which normally occur in the first quarter of the year and earned employee bonuses historically paid in the first half of the year. In addition, investment in inventory is typically heavy in the first half of the year, particularly recently with efforts to mitigate the company's supply chain disruptions and position the company to fulfill shipments in the second half of the year and can be impacted by footprint rationalization projects.
15

MD&ACash Flows
The company's approximate cash conversion days at June 30, 2022, December 31, 2021 and June 30, 2021 were as follows:
ivc-20220630_g8.jpg
Days in receivables are equal to current quarter net current receivables divided by trailing four quarters of net sales multiplied by 365 days. Days in inventory and accounts payable are equal to current quarter net inventory and accounts payable, respectively, divided by trailing four quarters of cost of sales multiplied by 365 days. Total cash conversion days are equal to days in receivables plus days in inventory less days in accounts payable.

The improvement in days in receivables is impacted by customer mix and region. Decline in days in accounts receivable is increased levels of payments in the first six months of 2022.

The company provides a summary of days of cash conversion for the components of working capital so investors may see the rate at which cash is disbursed, collected and how quickly inventory is converted and sold.
16

MD&AForward-Looking Statements
FORWARD-LOOKING STATEMENTS

This Form 10-Q contains 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,” “could,” “plan,” “intend,” “expect,” “continue,” “believe” and “anticipate,” as well as similar comments, denote forward-looking statements that are subject to inherent uncertainties that are difficult to predict. These include, for example, statements related to the company’s ability to address on-going supply chain challenges; sales and free cash flow trends; the impact of contingency plans and cost containment actions; the company’s liquidity and working capital expectations; the company’s future financial results; and similar statements. Actual results and events may differ significantly from those expressed or anticipated as a result of various risks and uncertainties, including the availability and cost to the company of needed products, components or raw materials from the company’s suppliers, including delivery delays and production interruptions from pandemic-related supply chain challenges and supplier delivery holds resulting from past due payables; the duration and scope of the COVID-19 pandemic, the pace of resumption of access to healthcare, including clinics and elective care, and loosening of public health restrictions, or any reimposed restrictions on access to healthcare or tightening of public health restrictions, which could impact the demand for the company’s products; global shortages in, or increasing costs for, transportation and logistics services and capacity; actions that governments, businesses and individuals take in response to the pandemic, including mandatory business closures and restrictions on onsite commercial interactions; the impact of the pandemic, or political or geopolitical crises such as Russia's invasion of Ukraine, and actions taken in response, on global and regional economies and economic activity; the pace of recovery when the COVID-19 pandemic subsides; general economic uncertainty in key global markets and a worsening of global economic conditions or low levels of economic growth, including negative conditions attributable to inflationary economic conditions; the effects of steps the company has taken or will take to reduce operating costs; the ability of the company to sustain profitable sales growth, achieve anticipated improvements in segment operating performance, convert high inventory levels to cash or reduce its costs; lack of market acceptance of the company's new product innovations; potential adverse effects of revised product pricing and/or product surcharges on revenues or the demand for the company's products; circumstances or developments that may make the company unable to implement or realize the anticipated benefits, or that may increase the costs, of its current and planned business initiatives, in particular the key elements of its growth plans, such as its new product introductions, commercialization plans, additional investments in demonstration equipment, product distribution strategy in Europe, supply chain actions and global information technology outsourcing and ERP implementation activities; possible adverse effects on the company's liquidity, including (i) the company's ability to address future debt maturities or other obligations, including
additional debt that may be incurred in the future or (ii) the company's ability to access the remaining portion of the financing under the July 2022 financing transactions (as discussed in the notes to the condensed consolidated financial statements) in the event of a failure to satisfy one or more of the applicable closing conditions; increases in interest rates or the costs of borrowing; potential limitations on the company’s business activities from obligations in the company’s debt agreements; adverse changes in government and third-party payor reimbursement levels and practices; decreased availability or increased costs of materials which could increase the company’s cost of producing or acquiring the company’s products, including the adverse impacts of tariffs and increases in commodity costs or freight costs; consolidation of health care providers; increasing pricing pressures in the markets for the company's products; risks of failures in, or disruptions to, legacy IT systems; risks of cybersecurity attack, data breach or data loss and/or delays in or inability to recover or restore data and IT systems; adverse effects of the company's consent decree of injunction with the U.S. Food and Drug Administration (FDA), including but not limited to, compliance costs, inability to rebuild negatively impacted customer relationships, unabsorbed capacity utilization, including fixed costs and overhead; any circumstances or developments that might adversely impact the third-party expert auditor's required audits of the company's quality systems at the facilities impacted by the consent decree, including any possible failure to comply with the consent decree or FDA regulations or the inability to adequately address the matters identified in the FDA Letters; regulatory proceedings or the company's failure to comply with regulatory requirements or receive regulatory clearance or approval for the company's products or operations in the United States or abroad; adverse effects of regulatory or governmental inspections of the company's facilities at any time and governmental enforcement actions; product liability or warranty claims; product recalls, including more extensive warranty or recall experience than expected; possible adverse effects of being leveraged, including interest rate or event of default risks; exchange rate fluctuations, particularly in light of the relative importance of the company's foreign operations to its overall financial performance; legal actions, including adverse judgments or settlements of litigation or claims in excess of available insurance limits; tax rate fluctuations; additional tax expense or additional tax exposures, which could affect the company's future profitability and cash flow; uncollectible accounts receivable; risks inherent in managing and operating businesses in many different foreign jurisdictions; heightened vulnerability to a hostile takeover attempt or other shareholder activism; provisions of Ohio law or in the company's debt agreements, charter documents or other agreements that may prevent or delay a change in control, as well as the risks described elsewhere in this Quarterly Report on Form 10-Q, the company’s Annual Report on Form 10-K and from time to time in the company's reports as filed with the Securities and Exchange Commission. Except to the extent required by law, the company does not undertake and specifically declines any obligation to review or update any forward-looking statements or to publicly
17

MD&AForward-Looking Statements
announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.


18

Financial Statements
Part I.    FINANCIAL INFORMATION
Item 1.    Financial Statements.

INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)
 (In thousands, except per share data)Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Net sales$189,017 $225,864 $390,005 $422,066 
Cost of products sold141,035 165,046 294,294 306,610 
Gross Profit47,982 60,818 95,711 115,456 
Selling, general and administrative expenses58,623 63,765 119,187 122,586 
Charges related to restructuring activities4,153 547 7,943 2,099 
Operating Loss(14,794)(3,494)(31,419)(9,229)
Loss on debt extinguishment including debt finance charges and fees   709 
Interest expense6,230 6,084 12,482 11,815 
Interest income(1) (1)(1)
Loss Before Income Taxes(21,023)(9,578)(43,900)(21,752)
Income tax provision920 1,120 2,240 2,990 
Net Loss$(21,943)$(10,698)$(46,140)$(24,742)
Dividends Declared per Common Share$ $ $ $ 
Net Loss per Share—Basic$(0.62)$(0.31)$(1.31)$(0.71)
Weighted Average Shares Outstanding—Basic35,634 34,969 35,340 34,732 
Loss per Share—Assuming Dilution$(0.62)$(0.31)$(1.31)$(0.71)
Weighted Average Shares Outstanding—Assuming Dilution35,995 35,620 35,714 35,450 
Net Loss$(21,943)$(10,698)$(46,140)$(24,742)
Other comprehensive income (loss):
Foreign currency translation adjustments(26,545)7,038 (32,887)12,715 
Defined Benefit Plans:
Amortization of prior service costs and unrecognized losses4,339 (744)4,563 (395)
Deferred tax adjustment resulting from defined benefit plan activity(38)(5)(85)(63)
Valuation reserve associated with defined benefit plan activity38 5 85 63 
Current period gain (loss) on cash flow hedges812 101 1,692 (774)
Deferred tax benefit (provision) related to gain on cash flow hedges(184)14 (240)97 
Other Comprehensive Income (Loss)(21,578)6,409 (26,872)11,643 
Comprehensive Loss$(43,521)$(4,289)$(73,012)$(13,099)
(Elements as a % of Net Sales)
Net sales100.0 %100.0 %100.0 %100.0 %
Cost of products sold74.6 73.1 75.5 72.6 
Gross Profit25.4 26.9 24.5 27.4 
Selling, general and administrative expenses31.0 28.2 30.6 29.0 
Charges related to restructuring activities2.2 0.2 2.0 0.5 
Operating Loss(7.8)(1.5)(8.1)(2.2)
Loss on debt extinguishment including debt finance charges and fees— — — 0.2 
Interest expense3.3 2.7 3.2 2.8 
Loss Before Income Taxes(11.1)(4.2)(11.3)(5.2)
Income tax provision0.5 0.5 0.6 0.7 
Net Loss(11.6)%(4.7)%(11.8)%(5.9)%
See notes to condensed consolidated financial statements.
19

Financial Statements
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited)
June 30,
2022
December 31,
2021
Assets(In thousands)
Current Assets
Cash and cash equivalents$43,909 $83,745 
Trade receivables, net90,949 117,115 
Installment receivables, net284 218 
Inventories, net138,806 144,274 
Other current assets43,097 40,036 
Total Current Assets317,045 385,388 
Other Assets6,671 5,362 
Intangibles, net26,079 26,356 
Property and Equipment, net55,884 60,921 
Finance Lease Assets, net59,513 63,029 
Operating Lease Assets, net10,679 12,600 
Goodwill336,750 355,875 
Total Assets$812,621 $909,531 
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable$111,562 $130,036 
Accrued expenses105,151 102,971 
Current taxes payable2,102 3,914 
Current portion of long-term debt2,161 3,107 
Current portion of finance lease obligations3,085 3,009 
Current portion of operating lease obligations3,551 4,217 
Total Current Liabilities227,612 247,254 
Long-Term Debt311,489 305,022 
Finance Lease Long-Term Obligations60,710 63,736 
Operating Leases Long-Term Obligations 7,057 8,234 
Other Long-Term Obligations58,149 66,796 
Shareholders’ Equity
Preferred Shares (Authorized 300 shares; none outstanding)
  
Common Shares (Authorized 150,000 shares; 40,147 and 39,416 issued and outstanding at June 30, 2022 and December 31, 2021, respectively)—no par
10,132 9,977 
Class B Common Shares (Authorized 12,000 shares; 4 and 4 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively)—no par
2 2 
Additional paid-in-capital278,788 276,665 
Retained earnings (accumulated deficit)(23,495)22,645 
Accumulated other comprehensive income (loss)(9,884)16,988 
Treasury Shares (4,535 and 4,397 shares at June 30, 2022 and December 31, 2021, respectively)
(107,939)(107,788)
Total Shareholders’ Equity147,604 218,489 
Total Liabilities and Shareholders’ Equity$812,621 $909,531 
See notes to condensed consolidated financial statements.
20

Financial Statements
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (unaudited)
 
For the Six Months Ended June 30,
20222021
Operating Activities(In thousands)
Net loss$(46,140)$(24,742)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization7,848 8,264 
Amortization of operating lease right of use assets2,572 3,201 
Provision for losses on trade and installment receivables318 335 
Provision for deferred income taxes98 460 
Provision for other deferred liabilities(589)(65)
Provision for equity compensation2,278 5,810 
Gain on disposals of property and equipment(38)(175)
Loss on debt extinguishment including debt finance charges and fees 709 
Convertible debt accretion1,828 1,747 
Amortization of debt fees1,230 1,035 
Changes in operating assets and liabilities:
Trade receivables22,503 (10,388)
Installment sales contracts, net210 289 
Inventories, net512 (27,082)
Other current assets(3,013)5,770 
Accounts payable(14,929)22,872 
Accrued expenses931 (24,406)
Other long-term liabilities(2,561)316 
Net Cash Used by Operating Activities(26,942)(36,050)
Investing Activities
Purchases of property and equipment(2,764)(9,047)
Proceeds from sale of property and equipment5 23 
Change in other long-term assets(32)(69)
Other4  
Net Cash Used by Investing Activities(2,787)(9,093)
Financing Activities
Proceeds from revolving lines of credit and long-term borrowings9,292 147,539 
Repurchases of convertible debt, payments on revolving lines of credit and finance leases(15,633)(105,216)
Payment of financing costs(1,267)(5,175)
Purchases of capped calls (18,787)
Purchases of treasury shares(151)(1,752)
Net Cash Used by Financing Activities(7,759)16,609 
Effect of exchange rate changes on cash(2,348)1,488 
Decrease in cash and cash equivalents(39,836)(27,046)
Cash and cash equivalents at beginning of year83,745 105,298 
Cash and cash equivalents at end of period$43,909 $78,252 
See notes to condensed consolidated financial statements.
21

Financial Statements
INVACARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders' Equity (unaudited)
(In thousands)Common
Shares
Class B
Shares
Additional
Paid-in-
Capital
Retained
Earnings (Accumulated Deficit)
Accumulated Other
Comprehensive
Income (Loss)
Treasury
Shares
Total
March 31, 2022 Balance$9,977 $2 $276,975 $(1,552)$11,694 $(107,788)$189,308 
Performance awards