Invacare 2011 Annual Report Download - page 47

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OUTLOOK
In December 2011, the FDA requested that the company agree to a consent decree of injunction at the
company’s corporate facility and its wheelchair manufacturing facility in Elyria, Ohio, the proposed terms of
which would require the suspension of certain operations at those facilities until they are certified by the
company and then determined by the FDA to be in compliance with FDA quality system regulations (QSR).
Since the company is in the process of negotiating with the FDA on the terms of the consent decree, the company
is currently unable to provide guidance for 2012. Once the company is able to analyze the final terms of the
FDA’s proposed consent decree of injunction, it plans on providing guidance. While the final terms of the
consent decree have not been determined, it will impact orders and sales in 2012. See Item 1A. Risk Factors.
In the meantime, the company is working expeditiously to make systemic improvements to ensure full
compliance with the FDA’s QSR. The company continues to add resources in order to support these efforts,
which in the fourth quarter of 2011, cost the company an incremental $2,100,000. The company expects at least a
similar incremental spend in each of the quarters of 2012. The company has also diverted some internal resources
in order to accelerate progress on regulatory and compliance improvements. Any such diversion of resources
could impact other areas of the company’s business in 2012, such as, for example, delays in new product
development and the globalization initiative. However, these efforts will make Invacare, which is already the
market leader in the home and long-term care industries, an even better company.
RESULTS OF OPERATIONS
2011 Versus 2010
Net Sales. Consolidated net sales for 2011 increased 4.6% for the year, to $1,801,130,000 from
$1,722,081,000 in 2010. Foreign currency translation increased net sales 2.2 percentage points while acquisitions
increased sales by 0.7 of a percentage point. The organic net sales increase was 1.7% which was driven by
growth in all segments except Asia/Pacific.
North America/Home Medical Equipment (NA/HME)
NA/HME net sales increased 1.1% in 2011 versus the prior year to $746,782,000 from $738,441,000 with
foreign currency translation increasing net sales by 0.3 of a percentage point. The organic net sales increase of
0.8% was driven by respiratory therapy partially offset by net sales declines in mobility and seating products.
Specifically, net sales increases in stationary and portable oxygen concentrators and Invacare®Homefill®
Oxygen systems were partially offset by decreases in net sales of powered mobility products including custom
and consumer power wheelchairs.
Invacare Supply Group (ISG)
ISG net sales increased 0.7% in 2011 over the prior year to $299,491,000 from $297,517,000. The net sales
increase was primarily the result of volume increases in urological and ostomy products, partially offset by
declines in infusion and enteral products.
Institutional Products Group (IPG)
IPG net sales increased 27.4% in 2011 over the prior year to $124,121,000 from $97,419,000. Foreign
currency translation increased net sales by 0.5 of a percentage point and acquisitions increased net sales by 12.0
percentage points. The organic net sales increase of 14.9% was largely driven by net sales increases in beds and
dialysis chairs. As a result of an acquisition that expanded the company’s North American rental operations,
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