For 2012, gross profit was $22.6 million, an increase of 7.6% over $21.0 million in 2011. Gross margins for the period were 69%, a 1% decrease from gross margins reported in 2011.
Gross profit for the fourth quarter was $4.6 million, or 56% of sales, and includes the impacts associated with an increase in inventory reserves and a write-down of expired inventory of approximately $671,000. In addition, fourth quarter gross margins were negatively impacted by increased sales price discounts for hospital accounts and higher sales of lower gross margin products compared to the prior quarter. Excluding the increase in reserves and write off of expired products, gross margins would have been 65% for the quarter.
Sales and Marketing ExpensesSales and marketing expenses decreased to $15.6 million as compared to $18.5 million for 2011. As a percentage of revenues, selling and marketing expenses decreased to 47% in 2012 from 61% in the prior year. Fourth quarter 2012 sales and marketing expenses decreased $813,000 to $4.3 million from $5.1 million reported in the fourth quarter of 2011. The decrease was primarily the result of more variable compensation paid to the direct sales force in 2012 compared to fixed salaries earned in the comparable period of 2011, and a lower corporate sales commission structure for direct sales representatives and independent distributors. General and Administrative Expenses In 2012, general and administrative expenses increased to $11.1 million for the period as compared to $6.9 million reported for the same period last year. As a percentage of revenues, general and administrative expenses increased to 34% for 2012 compared to 23% in 2011. Fourth quarter 2012, general and administrative expenses increased to $3.8 million compared to $908,000 in 2011. Sequentially, compared to the third quarter of 2012, higher expenses are due, in large part, to a decrease in overhead applied to cost of goods sold, the recording of royalty expense, an increase in allowance for doubtful accounts, an increase in non-cash stock option expense, and increases in salaries, wages and benefits.
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