Blouch continued, ``While our quality systems remediation is subject to approval by the FDA, we have made significant progress. In order to resume full operations at the Taylor Street and corporate facilities, the terms of the consent decree require three expert certification audits followed by a comprehensive FDA inspection and receipt of the FDA's confirmation of compliance. The first two of three expert certification audits started in December and are still in progress. We expect to complete these two certification audits within the first quarter and complete the third expert certification audit in the second quarter of 2013. Completing the remediation and receiving the FDA's approval on the second certification audit related to design controls will allow us to resume design activities and refocus our engineering resources on new product development. Introducing new product solutions to the market will get us back on track to regaining market share and resuming our globalization program to harmonize core product offerings and deliver on our long-term goal of $100 million in cost improvements and re-establish high single-digit operating margins.”
Commenting on Invacare's combined 2012 results, Blouch said, ``Largely as a result of the aforementioned challenges, as well as the ongoing pressures primarily in the North America/HME and Asia/Pacific segments, the Company had:
- Adjusted earnings per share (a) for the year, including discontinued operations, of $0.87 in 2012 compared to $2.05 in 2011;
- An increase of 0.9% in organic net sales on a combined basis compared to last year with strong performances from Europe and the Institutional Products Group segments, as well as the discontinued operations of ISG; and
- Free cash flow (c) of $49.1 million in 2012. Applying the net proceeds of $146.6 million from the January 2013 sale of ISG to the December 31, 2012 debt levels on a pro forma basis, the Company's debt reduction over the past five years would have been approximately $500 million, since the peak of our total debt outstanding in the first quarter of 2007 of approximately $602 million.
Blouch continued, ``In December 2012, we made two positive announcements about our future. First, our analysis of the final regulations of the Affordable Care Act's 2.3% excise tax on medical devices indicated that the impact of the tax on Invacare is expected to be less than $1.5 million annually, as most of our products are exempt based on the retail exemption. We intend to pass this increase on to the market. Second, we announced the divestiture of Invacare Supply Group, our domestic medical supplies business. The sale, which closed on January 18, 2013, generated net proceeds of $146.6 million that were used to reduce debt outstanding under the Company's revolving credit facility. This additional capital capacity will better position us to explore selective niche acquisitions to accelerate new product development after we have completed our quality systems remediation.”