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Invacare Corporation Announces Financial Results For The Quarter And Year Ended December 31, 2012

FINANCIAL CONDITION

Total debt outstanding was $238.1 million as of December 31, 2012, as compared to $269.5 million as of December 31, 2011 (including the convertible debt discount, which reduced convertible debt and increased equity by $3.3 million as of December 31, 2012 and by $4.1 million as of December 31, 2011). The Company's total debt outstanding as of December 31, 2012 consisted of $217.5 million drawn on the revolving credit facility, $13.4 million in convertible debt and $7.2 million of other debt.

The Company reported $31.2 million of free cash flow (c) in the fourth quarter of 2012 as compared to $28.6 million of free cash flow (c) in the fourth quarter of 2011. The fourth quarter 2012 free cash flow (c) was positively impacted by cash flow benefits from accounts receivable and accrued expenses partially offset by an increase in inventory and a decline in accounts payable. Free cash flow (c) for the year ended December 31, 2012 was $49.1 million compared to $80.6 million for the year ended December 31, 2011. The contribution to free cash flow from the discontinued operation ISG is shown in the table included with this release.

The Company's ratio of debt to adjusted EBITDA (d) was 2.7 as of December 31, 2012 compared to 1.8 as of December 31, 2011.

Days sales outstanding associated with continuing operations were 49 days as of December 31, 2012 compared to 50 days as of December 31, 2011. Inventory turns from continuing operations as of December 31, 2012 were 4.6, compared to 5.0 as of December 31, 2011.

OUTLOOK

In 2013, the Company expects continued pressure on its organic net sales, free cash flow (c) and operating profitability. The key drivers of these pressures include the ongoing quality systems remediation costs, the related diversion of resources, and the limited production at its Taylor Street wheelchair manufacturing facility in Elyria, Ohio, due to the consent decree. In addition, the Company has been unable to invest in the development or introduction of new products while it focuses its engineering resources on its quality systems remediation. Further, the consent decree enjoins the Company from design activities related to wheelchairs and power beds at its corporate facility until it receives approval from the FDA on the second expert certification audit. As previously announced, the Company may continue manufacturing at Taylor Street with certain documentation requirements in cases of existing orders, medical necessity and repair and replacement of products currently in use. As the Company educates customers on the new documentation requirements, particularly the more detailed verification of medical necessity documentation for new wheelchairs and/or seating systems, the Company expects to experience slowness in the fulfillment of new wheelchairs from the Taylor Street facility. The Company is focused on completing its expert certification audits as quickly and efficiently as possible.

The Company also is facing external challenges within its North America/HME segment. In addition to customers coping with prepayment reviews and post-payment audits of power mobility devices from Medicare and Medicaid, the Centers for Medicare and Medicaid Services recently announced the bid rates for the second round of National Competitive Bidding. As mentioned in the Company's third quarter 2012 earnings announcement, it expects continued pressure on net sales as providers in the 91 metropolitan statistical areas deal with finalizing the contracting process for the successful bidders. Looking forward, the Company is positioned to assist HME providers in managing these price reductions, and it will remain judicious in its extension of credit to customers in these areas. The Company has worked closely with providers over the last two years in preparation for National Competitive Bidding, offering programs to assist them in improving their operational efficiency, as well as products that serve to expand market opportunities.

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