Invacare 2014 Annual Report Download - page 47

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$202,000, $323,000 and $378,000 for 2014, 2013 and 2012, respectively, as proceeds from the sale were required to be utilized
to pay down debt. The interest allocation was based on the net proceeds assumed to pay down debt applying the Company's average
interest rates for the periods presented.
The Company recorded total expenses related to the discontinued operations noted above of $8,801,000, of which $7,790,000
were paid as of December 31, 2014.
The Company recorded an incremental intra-period tax allocation expense to discontinued operations for 2014 and 2013
representing the cumulative intra-period allocation expense to discontinued operations based on the Company's domestic taxable
loss related to continuing operations for 2014 and 2013.
The Company has classified ISG, Champion and Altimate as a discontinued operations for all periods presented. Unless
otherwise noted, the following discussion of the Company and its segments exclude the discontinued operations of ISG, Champion
and Altimate.
RESULTS OF CONTINUING OPERATIONS
2014 Versus 2013
Net Sales. Consolidated net sales for 2014 decreased 4.8% for the year, to $1,270,163,000 from $1,334,505,000 in 2013.
Foreign currency translation increased net sales by 0.2 of a percentage point. Organic net sales decreased 5.0% as a result of
declines in the North America/HME, IPG and Asia/Pacific segments being offset by increases in the European segment.
Europe
European net sales increased 4.7% in 2014 compared to the prior year to $610,555,000 from $583,143,000 as foreign currency
translation increased net sales by 1.1 percentage points. Organic net sales increased 3.6% principally due to increases in lifestyle
and mobility and seating products, which were partially offset by declines in respiratory products.
North America/Home Medical Equipment (North America/HME)
North America/HME net sales decreased 13.8% in 2014 versus the prior year to $507,867,000 from $589,240,000 with
foreign currency translation decreasing net sales by 0.5 of a percentage point. The organic net sales decrease of 13.3% was driven
by declines in all product categories. The net sales decline in respiratory products is primarily attributable to a significant shipment
of Invacare® HomeFill® oxygen systems to a large national account in 2013 that did not repeat in 2014. The net sales decline in
lifestyle products was primarily impacted by a shift toward lower cost products for certain lifestyle products that are subject to
the Centers for Medicare and Medicaid Services' National Competitive Bidding program and pre- and post-payment audits. The
net sales decline in mobility and seating products was primarily driven by reduced net sales of scooter products, which the Company
decided to exit domestically. In addition, the mobility and seating product category continued to be impacted by the FDA consent
decree, which limits production of custom power wheelchairs and seating systems at the Taylor Street manufacturing facility to
products having properly completed verification of medical necessity (VMN) documentation. The VMN is a signed document
from a clinician, and in some instances a physician, that certifies that the product is deemed medically necessary for a particular
patient's condition, which cannot be adequately addressed by another manufacturer's product or which is a replacement of the
patient's existing product.
Institutional Products Group (IPG)
IPG net sales decreased 8.5% in 2014 over the prior year to $102,796,000 from $112,290,000 with foreign currency translation
decreasing sales by 0.3 of a percentage point. The organic net sales decrease of 8.2% was driven primarily by declines in all
product categories except therapeutic support surfaces and patient transport products.
Asia/Pacific
Asia/Pacific net sales decreased 1.8% in 2014 from the prior year to $48,945,000 from $49,832,000. Foreign currency
translation decreased net sales by 1.4 percentage points. Organic net sales decreased 0.4% largely due to declines at the Company's
subsidiary that produces microprocessor controllers primarily related to its decision to exit the contract manufacturing business
for customers outside of the healthcare industry. This was partially offset by growth in the Company's Australian distribution
business. Changes in exchange rates, particularly with the Euro and U.S. Dollar, have had, and may continue to have, a significant
impact on sales in this segment.