Invacare 2011 Annual Report Download - page 52

IPG gross profit as a percentage of net sales increased 4.5 percentage points in 2010 from the prior year. The
increased in margin is primarily attributable to favorable mix toward rental business, which had higher margins,
and cost reduction activities which were partially offset by reduced volumes.
Gross profit in Europe as a percentage of net sales declined 0.4 percentage points in 2010 from the prior
year. The decrease was primarily a result of unfavorable product mix toward lower margin product and
unfavorable foreign currency transactions partially offset by cost reduction activities associated with commodity
costs.
Gross profit in Asia/Pacific as a percentage of net sales increased by 4.3 percentage points in 2010 from the
prior year. The improvement was primarily as a result of increased volumes and favorable foreign currency
impact principally due to the strengthening of the U.S. dollar.
Selling, General and Administrative. Consolidated selling, general and administrative expenses as a
percentage of net sales were 23.9% in 2010 and 23.5% in 2009. The overall dollar increase was $12,867,000 or
3.2%, with foreign currency translation increasing expenses by $4,869,000 or 1.2 percentage points and an
acquisition increasing expenses by approximately $4,455,000 or 1.1 percentage points. Excluding acquisitions
and the impact of foreign currency translation, selling, general and administrative (SG&A) expenses increased
$3,543,000 or 0.9%. This increase is primarily attributable to increased associate costs and higher legal expenses
related to enforcement of intellectual property rights.
SG&A expenses for NA/HME increased 2.1% or $4,267,000 in 2010 compared to 2009. Foreign currency
increased SG&A expense by $1,672,000. Excluding the acquisition and foreign currency translation, SG&A
expense increased $2,595,000 or 1.3% primarily due to increased associate costs, and higher legal expenses
related to enforcement of intellectual property rights. In addition, the SG&A expenses for 2010 include an
impairment charge related to a customer list of $248,000 recorded as a result of the company’s 2010 intangible
impairment review.
SG&A expenses for ISG decreased by 4.8% or $1,357,000 in 2010 compared to 2009. The decrease is
primarily attributable to a decrease in distribution and marketing costs partially offset by increased bad debt
expense.
SG&A expenses for IPG increased by 48.8% or $8,282,000 in 2010 compared to 2009. An acquisition
increased these expenses by $4,455,000 while foreign currency translation increased SG&A expenses by
$242,000 or 1.4 percentage points. Excluding the impact of acquisitions and foreign currency translation, SG&A
expenses increased by $3,585,000 due to increased associate costs and unfavorable currency transaction effects
associated with the Canadian Dollar versus the U.S. Dollar. In addition, the SG&A expenses for 2010 include an
impairment charge related to a trademark of $336,000 recorded as a result of the company’s 2010 intangible
impairment review.
European SG&A expenses decreased by 0.5% or $568,000 in 2010 compared to 2009. Foreign currency
translation decreased SG&A expenses by approximately $390,000. Excluding the foreign currency translation
impact, SG&A expenses decreased by $178,000.
Asia/Pacific SG&A expenses increased 8.8% or $2,243,000 in 2010 compared to 2009. Foreign currency
translation increased expenses by $3,345,000. Excluding the foreign currency translation impact, SG&A
expenses decreased $1,102,000 or 4.3% primarily due to favorable currency transactions partially offset by
increased associate costs.
Debt Finance Charges and Fees Associated with Debt Refinancing. In 2010, as part of the company’s
refinancing, proceeds of the refinancing were used by the company to repay amounts outstanding on its
$150,000,000 revolving credit facility which was not due to expire until February 2012 and repurchase all of its
I-46