Invacare 2012 Annual Report Download - page 60

lower margin customers, pricing pressure, primarily in the European segment, and increased warranty costs.
Gross profit as a percentage of net sales for IPG and Asia/Pacific segments were favorable as compared to the
prior year with NA/HME and European segments unfavorable to the prior year.
NA/HME gross profit as a percentage of net sales decreased by 3.0 percentage points in 2011 from the prior
year. The decline in margins was principally due to an unfavorable sales mix favoring lower margin customers
and product lines, and increased warranty costs.
IPG gross profit as a percentage of net sales increased 5.3 percentage points in 2011 from the prior year. The
increase in margin is primarily attributable to volume increases, reduced freight cost and favorable impact from
the rental acquisition completed in 2011.
Gross profit in Europe as a percentage of net sales declined 0.4 percentage points in 2011 from the prior
year. The decrease was primarily a result of unfavorable product mix toward lower margin product and lower
margin customers, pricing pressures primarily in personal care products and unfavorable foreign currency
transactions.
Gross profit in Asia/Pacific as a percentage of net sales increased by 1.4 percentage points in 2011 from the
prior year. The improvement was primarily as a result of favorable foreign currency impact principally due to the
strengthening of the U.S. dollar partially offset by volume declines.
Selling, General and Administrative. Consolidated selling, general and administrative (SG&A) expenses as
a percentage of net sales were 26.4% in 2011 and 27.0% in 2010. The overall dollar increase was $11,301,000, or
2.9%, with foreign currency translation increasing expenses by $12,669,000, or 3.3 percentage points, and
acquisitions increasing expenses by $7,944,000, or 2.1 percentage points. Excluding acquisitions and the impact
of foreign currency translation, SG&A expenses decreased $9,312,000, or 2.4%. This decrease is primarily
attributable to reduced bad debt and product liability expenses, as well as decreased associate costs, including
certain retirement plan costs, partially offset by increased legal, regulatory and compliance costs as well as
unfavorable foreign currency transactions.
SG&A expenses for NA/HME decreased 5.0%, or $10,618,000, in 2011 compared to 2010 with foreign
currency translation increasing SG&A expense by $704,000. Excluding the foreign currency translation, SG&A
expense decreased $11,322,000 or 5.4% primarily due to reduced bad debt and product liability expenses, as well
as decreased associate costs, including certain retirement plan costs, partially offset by increased legal, regulatory
and compliance costs.
SG&A expenses for IPG increased by 37.6%, or $9,484,000, in 2011 compared to 2010. Acquisitions
increased SG&A expenses by 31.5 percentage points, or $7,944,000, while foreign currency translation increased
expense by $48,000, or 0.2 of a percentage point. Excluding the impact of acquisitions and foreign currency
translation, SG&A expenses increased by $1,492,000, or 5.9%, largely due to increased associate costs, including
commission expense, partially offset by favorable currency transaction effects associated with the Canadian
Dollar versus the U.S. Dollar.
European SG&A expenses increased by 7.2%, or $8,725,000, in 2011 compared to 2010. Foreign currency
translation increased SG&A expenses by approximately $8,815,000. Excluding the foreign currency translation
impact, SG&A expenses decreased by $90,000.
Asia/Pacific SG&A expenses increased 13.4%, or $3,710,000, in 2011 compared to 2010. Foreign currency
translation increased expenses by $3,102,000. Excluding the foreign currency translation impact, SG&A
expenses increased $608,000, or 2.2%, primarily due to increased associate costs.
Asset write-downs to goodwill and intangible assets. The company undertakes its annual impairment test
of goodwill and intangible assets in accordance with ASC 350, Intangibles - Goodwill and Other,asof
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