Invacare 2012 Annual Report Download - page 59

company. The company’s effective tax rate in 2011 was higher than the expected U.S. federal statutory rate due
to goodwill and intangible write-offs without tax benefit and the negative impact of the company not being able
to record tax benefits related to losses in countries which had tax valuation allowances for the year, which more
than offset the benefit of foreign income taxed at rates below the U.S. statutory rate. In addition, during 2011, the
company recognized a $4,947,000 tax benefit as a result of a tax settlement in Germany as the German
government agreed to follow a European Court of Justice case and a German Tax Court case that impacted an
open tax return year. In both years, the company’s losses without benefit and valuation allowances existed in the
United States, Denmark, Australia and New Zealand. See “Income Taxes” in the Notes to the Consolidated
Financial Statements included elsewhere in this report for more detail.
Research and Development. The company continues to invest in research and development activities to
maintain its competitive advantage. The company dedicates funds to applied research activities to ensure that
new and enhanced design concepts are available to its businesses. Research and development expenditures,
which are included in costs of products sold, increased to $31,663,000 in 2012 from $27,556,000 in 2011. The
expenditures, as a percentage of net sales, were 2.2% and 1.8% in 2012 and 2011, respectively.
2011 Versus 2010
Net Sales. Consolidated net sales for 2011 increased 5.4% for the year, to $1,501,639,000 from
$1,424,564,000 in 2010. Foreign currency translation increased net sales 2.7 percentage points while acquisitions
increased net sales by 0.8 of a percentage point. The organic net sales increase was 1.9% which was driven
primarily 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 in the
prior year, with foreign currency translation increasing net sales by 0.3 of a percentage point. The organic net
sales increase of 0.8% was driven largely by respiratory therapy, which was 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.
Institutional Products Group (IPG)
IPG net sales increased 27.4% in 2011 to $124,121,000 from $97,419,000 in the prior year. 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.
Europe
European net sales increased 7.6% in 2011 to $544,537,000 from $506,069,000 in the prior year with
foreign currency translation increasing net sales by 5.4 percentage points. Organic net sales increased 2.2%
primarily as a result of increases in mobility and seating, respiratory therapy and lifestyle products.
Asia/Pacific
Asia/Pacific net sales increased 4.3% in 2011 to $86,199,000 from $82,635,000 in the prior year. Foreign
currency translation increased net sales by 10.3 percentage points. The organic net sales decline of 6.0% was
driven largely by the company’s Australian and New Zealand distribution businesses.
Gross Profit. Consolidated gross profit as a percentage of net sales was 32.0% in 2011 as compared to
33.2% in 2010. The margin decline was principally related to sales mix favoring lower margin product lines and
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