Invacare 2007 Annual Report Download - page 42

North America/Home Medical Equipment
NA/HME net sales declined 1.2% in 2007 versus the prior year to $668,305,000 from $676,326,000 with
foreign currency translation and acquisitions increasing net sales by one percentage point and less then one
percentage point, respectively. These sales consist of Rehab (power wheelchairs, custom manual wheelchairs,
personal mobility and seating and positioning), Standard (manual wheelchairs, personal care, home care beds,
low air loss therapy and patient transport), and Respiratory (oxygen concentrators, HomeFill™ transfilling
systems, sleep apnea, aerosol therapy and other respiratory) products. Standard product line net sales improved
by 1.9% in 2007, driven by increased volumes in manual wheelchairs and beds, partially offset by pricing
reductions. Rehab product line net sales declined by 2.3% in 2007, primarily driven by volume declines in
consumer power product line, primarily with national providers, along with competitive pricing reductions
implemented in late 2006 due to Medicare reimbursement changes for custom and consumer power
wheelchairs. Respiratory product line sales declined by 9.0% in 2007 primarily attributable to reduced unit
volumes of oxygen concentrators resulting from the loss of one large national provider, continued inventory
utilization programs by providers and pricing declines in concentrators. However, HomeFill®oxygen system net
sales increased for the year by 30.4% due to increased purchases by two national providers.
Invacare Supply Group
ISG net sales increased 12.6% in 2007 over the prior year to $256,993,000 from $228,236,000. Acquisitions
and foreign currency translation had no impact on the sales increase. These sales consist of ostomy, incontinence,
diabetic, wound care and other medical supply product. The increase is primarily attributable due to home
delivery program sales to large providers and volume increases in diabetic, incontinence and enterals product
lines.
Institutional Products Group
IPG net sales decreased 4.7% in 2007 over the prior year to $89,026,000 from $93,455,000. Foreign
currency translation increased net sales by one percentage point while acquisitions had no impact net sales. These
sales consist of bed, furniture, home medical equipment, and bathing equipment products sold into the long-term
care market. The decrease is primarily attributable reduced purchasing by a national account.
Europe
European net sales increased 15.7% in 2007 compared to the prior year to $498,109,000 from $430,427,000
with foreign currency translation increasing net sales by eight percentage points. Net sales were strong in most of
the regions as sales volumes increased with growth in Standard, Rehab and Respiratory product lines.
Asia/Pacific
Asia/Pacific net sales increased 29.0% in 2007 from the prior year to $89,804,000 from $69,591,000.
Acquisitions increased net sales by nineteen percentage points and foreign currency translation increased net
sales by thirteen percentage points. Performance in this region continues to be negatively impacted by
U.S. reimbursement uncertainty in the consumer power wheelchair market. This has resulted in decreased sales
of microprocessor controllers by Invacare’s New Zealand subsidiary, along with negative foreign currency
impacts as Asia/Pacific transacts a substantial amount of its business with customers outside of their region in
various currencies other than their functional currencies. As a result, changes in exchange rates, particularly with
the Euro and U.S. Dollar, can have a significant impact on sales and cost of sales.
Gross Profit. Consolidated gross profit as a percentage of net sales was 27.9% in 2007 as compared to
27.8% in 2006. The improvement in margin was primarily attributable to the company benefiting from cost
reduction initiatives which was offset by continued competitive pricing pressures and increased freight
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