INVACARE CORP - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the fiscal year ended December 31, 2002

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from _____________ to ________________

Commission file number 0-12938

INVACARE CORPORATION
(Exact name of Registrant as specified in its charter)

Ohio 95-2680965
- ------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)

One Invacare Way, P.O. Box 4028, Elyria, Ohio 44036
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (440) 329-6000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Name of Exchange on which Registered
- ------------------- -------------------------------------
Common Shares, without par value New York Stock Exchange
Rights to Purchase Commons Shares of New York Stock Exchange
Invacare, without par value

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to the filing
requirements for the past 90 days.

Yes X No
----- -----

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark if the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

Yes X No
----- -----

As of February 27, 2003, 29,661,183 Common Shares and 1,112,023 Class B Common
Shares were outstanding. As of June 30, 2002, the aggregate market value of the
26,951,244 Common Shares of the Registrant held by non-affiliates was
$997,196,028 and the aggregate market value of the 31,849 Class B Common Shares
of the Registrant held by non-affiliates was $1,178,413. While the Class B
Common Shares are not listed for public trading on any exchange or market
system, shares of that class are convertible into Common Shares at any time on a
share-for-share basis. The market values indicated were calculated based upon
the last sale price of the Common Shares as reported by The New York Stock
Exchange on June 30, 2002, which was $37.00. For purposes of this information,
the 2,905,723 Common Shares and 1,080,174 Class B Common Shares which were held
by Executive Officers and Directors of the Registrant were deemed to be the
Common Shares and Class B Common Shares held by affiliates.

Documents Incorporated By Reference

Part of Form 10-K Document Incorporated By Reference
- ---------------------- ----------------------------------
Part III (Items 10, 11, Portions of the Registrant's
12, and 13) definitive Proxy Statement to
be used in connection with
its 2003 Annual Meeting of
Shareholders.

Except as otherwise stated, the information contained in this Annual Report on
Form 10-K is as of December 31, 2002.

I-1

PART I
------

Item 1. Business.
- ------------------
(a) General Development of Business
- -----------------------------------
Invacare Corporation is the world's leading manufacturer and distributor of
non-acute health care products based upon its distribution channels, the breadth
of its product line and its net sales. The company designs, manufactures and
distributes an extensive line of health care products for the non-acute care
environment, including the home health care, retail and extended care markets.
Invacare continuously revises and expands its product lines to meet changing
market demands and currently offers over two dozen product lines. The company's
products are sold principally to over 25,000 home health care and medical
equipment provider locations in the U.S., Australia, Canada, Europe and New
Zealand, with the remainder of its sales being primarily to government agencies
and distributors. Invacare's products are sold through its worldwide
distribution network by its sales force, telesales associates and various
organizations of independent manufacturers' representatives and distributors.
The company also distributes medical equipment and related supplies manufactured
by others.

Invacare is committed to design, manufacture and deliver the best value in
medical products which promote recovery and active lifestyles for people
requiring home and other non-acute health care. Invacare intends to achieve this
vision by:

* designing and developing innovative and technologically
superior products;
* ensuring continued focus on our primary market - the
non-acute health care market;
* marketing ourbroad range of products under the "Total One
Stop Shopping(sm)" strategy;
* providing the industry's most professional and
cost-effective sales, customer service and distribution
organization;
* supplying superior and innovative provider support and
aggressive product line extensions;
* building a strong referral base among health care
professionals;
* building brand preference with consumers;
* handling the retail channel through a dedicated sales and
marketing structure;
* continuous advancement/recruitment of top management
candidates;
* empowering all employees;
* providing a performance-based reward environment; and
* continually striving for total quality throughout the
organization.

When the company was acquired in December 1979 by a group of investors,
including certain members of management and the Board of Directors, it had $19.5
million in net sales and a limited product line of standard wheelchairs and
patient aids. In 2002, Invacare reached $1,089 million in net sales,
representing a 19% compound average sales growth rate since 1979, and currently
is the leading company in the industry that manufactures, distributes and
markets products in each of the following major, non-acute, medical equipment
categories: power and manual wheelchairs, patient aids, home care beds, home
respiratory products, low air loss therapy products, seating and positioning
products, bathing equipment and distributed products.

The company executive offices are located at One Invacare Way, Elyria, Ohio and
its telephone number is (440) 329-6000. In this report, Invacare and the company
refer to Invacare Corporation and, unless the context otherwise indicates, its
consolidated subsidiaries.

(b) Financial Information About Industry Segments
- -------------------------------------------------
The company operates predominately in the home medical equipment (HME) industry
segment. For information relating to net sales, operating income, identifiable
assets and other information for this industry segment, see the Consolidated
Financial Statements of the company.

(c) Narrative Description of Business
- -------------------------------------

I-2

THE HOME MEDICAL EQUIPMENT INDUSTRY
- -----------------------------------
North America
- -------------
The home medical equipment market includes home health care products, physical
rehabilitation products and other non-disposable products used for the recovery
and long-term care of patients. The company believes that sales of domestic home
medical equipment products will continue to grow during the next decade as a
result of several factors, including:

Growth in population over age 65. The nation's overall life expectancy
continues to increase. The latest report from the U.S. Department of Health
and Human Services (DHHS) states that the average life expectancy for men
and women who reach the age of 65 is now 81 and 84, respectively. The DHHS
also reports that people age 65 or older, which represent the vast majority
of home health care patients, will increase from 12% of the population in
2000 to 20% of the population by the year 2050. A significant percentage of
people using home and community-based health care services are 65 years of
age and older.

Treatment trends. Many medical professionals and patients prefer home
health care over institutional care because they believe that it results in
greater patient independence, increased patient responsibility and improved
responsiveness to treatment because familiar surroundings are conducive to
improved patient outcomes. Health care professionals, public payors and
private payors agree that home care is a cost effective, clinically
appropriate alternative to facility-based care. Recent surveys show that
approximately 70% of adults would rather recover from accident or illness
in their home, while approximately 90% of the older population showed
preference for home-based, long-term care.

Technological trends. Technological advances have made medical equipment
increasingly adaptable for use in the home. Current hospital procedures
often allow for earlier patient discharge, thereby lengthening recuperation
periods outside of the traditional institutional setting. In addition,
continuing medical advances prolong the lives of adults and children, thus
increasing the demand for home medical care equipment.

Healthcare cost containment trends. In 2000, spending on health care in the
U.S. totaled $1.3 trillion dollars or approximately 13% of the Gross
Domestic Product (GDP), the highest among industrialized countries. In
2012, the nation's health care spending is projected to increase to $3.1
trillion growing at an average annual rate of 7.3%. Over this same period,
spending on health care is expected to increase to approximately 17.7% as a
share of GDP. The rising cost of health care has caused many payors of
health care expenses to look for ways to contain costs. Home health care
has gained wide-spread acceptance among health care providers and public
policy makers as a cost effective, clinically appropriate and patient
preferred alternative to facility-based care for a variety of acute and
long-term illnesses and disabilities. Thus, the company believes that home
health care and home medical equipment will play a significant role in
reducing health care costs.

Society's mainstreaming of people with disabilities. People with
disabilities are part of the fabric of society and this has increased, in
large part, due to the 1991 Americans with Disabilities Act (ADA). This
legislation provides mainstream opportunities to people with disabilities.
The ADA imposes requirements on certain components of society to make
reasonable accommodations to integrate people with disabilities into the
community and the workplace.

Distribution channels. The changing home health care market continues to
provide new ways of reaching the end user. The distribution network for
products has expanded to include not only specialized home health care
providers and extended care facilities but retail drug stores, surgical
supply houses, rental, hospital and HMO-based stores, home health agencies,
mass merchandisers, direct sales and the Internet.

Europe/Australasia
- ------------------
The company believes that while many of the market factors influencing demand in
the U.S. are also present in Europe and Australasia - aging of the population,
technological trends and society's acceptance of people with disabilities - each
of the major national markets within Europe and in Australasia have distinctive
characteristics. The health care industry is more heavily socialized and,
therefore, is more influenced by government regulation and fiscal policy.
Variations in product specifications, regulatory approvals, distribution
requirements and reimbursement policies require the company to tailor its
approach to each market. Management believes that as the European markets become
more homogeneous and the company continues to refine its distribution channels,
the company can more effectively penetrate these markets. Likewise, the company
expects to increase its sales in the highly fragmented Australian and New
Zealand markets.

I-3

GEOGRAPHICAL SEGMENTS AND PRODUCT CATEGORIES
- --------------------------------------------
North America
- -------------
North American operations are aligned into five primary product groups which
manufacture and market products in all of the major home medical equipment
categories. In Canada, the company primarily sells Invacare products
manufactured in the U.S.

REHAB PRODUCTS

Power wheelchairs. Invacare manufactures a complete line of power
wheelchairs for individuals who require independent powered mobility. The
range includes products that can be significantly customized to meet an
individual's specific needs, as well as products that are inherently
versatile and meet a broad range of individual requirements. Power
wheelchair lines are marketed under the Invacare(R) Storm Series(R) and
Xterra(TM) brand names and include a full range of powered mobility
products. The new Pronto(TM) Series Power Wheelchairs with SureStep(TM),
introduced in 2002, feature center-wheel drive performance for exceptional
maneuverability and intuitive driving.

Custom manual wheelchairs. Invacare manufactures and markets a range of
custom manual wheelchairs for everyday, sports and recreational uses. These
lightweight chairs are marketed under the Invacare(R) and Invacare Top
End(R) brand names. The chairs provide mobility for people with moderate to
severe disabilities in their everyday activities as well as for use in
various sports such as basketball, racing, skiing and tennis.

Scooters. Invacare distributes three and four-wheeled motorized scooters,
including rear-wheel drive models for both outdoor and indoor use, and
markets them under the Invacare(R) brand name which includes scooters under
the Lynx(TM) and Panther(TM) product names.

Seating and positioning products. Invacare markets seat cushions, back
supports and accessories under three series. Invacare(R) Essential(TM)
Series provides simple seating solutions for comfort, fit and function.
Invacare Infinity(TM) Series includes versatile modular seating, providing
optimal rehab solutions. Invacare PinDot(R) Series offers custom seating
solutions personalized for the most challenged clients. In 2002, the
Infinity(TM) FloGel and ViscoFoam Cushions were redesigned with reshaped
contouring that enhances pelvic stability and improves pressure
redistribution.

STANDARD PRODUCTS

Manual wheelchairs. Invacare's manual wheelchairs are sold for use inside
and outside the home, institutional settings, or public places (e.g.,
airports, malls, etc.). Our clients include people who are chronically or
temporarily disabled and require basic mobility performance with little or
no frame modification. Examples of Invacare manual wheelchair lines, which
are marketed under the Invacare(R) brand name, include the 9000 and
Tracer(R) product lines. These lines offer wheelchairs that are designed to
accommodate the diverse capabilities and unique needs of the individual
from petite to bariatric sizes.

Personal care. Invacare manufactures and/or distributes a full line of
personal care products, including ambulatory aids such as crutches, canes,
walkers and wheeled walkers. This line also features one of Invacare's
latest product innovations, the Rollite(TM) Rollator, a truly unique
solution in patient mobility. Also available are safety aids such as tub
transfer benches, shower chairs and grab bars, and patient care products
such as commodes and other toilet assist aids.

Home care beds. Invacare manufactures and distributes a wide variety of
manual, semi-electric and fully-electric beds for home use under the
Invacare(R) brand name. Home care bed accessories include bedside rails,
mattresses, overbed tables, trapeze bars and traction equipment. Also
available are the new bariatric beds and accompanying accessories to serve
the special needs of bariatric patients.

Low air loss therapy products. Invacare manufactures and markets a complete
line of mattress overlays and replacement products, under the Invacare(R)
brand name. These products, which use air flotation to redistribute weight
and move moisture away from patients, assist in the total care of those who
are immobile and spend a great deal of time in bed.

Patient Transport. Invacare manufactures and markets products needed to
assist in transferring individuals from surface to surface (bed to chair)
or transporting from room to room. Designed for use in the home and
institutional settings, these products include patient lifts and slings,
and a new series of mobile, multi-functional recliners.

I-4

RESPIRATORY PRODUCTS

Home respiratory products. Invacare manufactures and/or distributes home
respiratory products, including oxygen concentrators, nebulizer compressors
and respiratory disposables, sleep therapy products and portable compressed
oxygen systems. Invacare home respiratory products are marketed
predominantly under the Invacare(R) brand name. The Invacare Venture
HomeFill II Oxygen Compressor enables people to safely and easily make
compressed oxygen in their home and store it in cylinders for future use.

DISTRIBUTED PRODUCTS

Distributed products. Invacare distributes numerous lines of branded
medical supplies including ostomy, incontinence, diabetic, wound care and
miscellaneous home medical products, as well as HME aids for daily living.

CONTINUING CARE

Health Care Furnishings. Invacare, operating as Invacare Continuing Care
Group, is a manufacturer and distributor of beds and furnishings for the
non-acute care markets. In addition, certain home medical equipment also is
sold through this channel.

OTHER PRODUCTS

Accessory Products. Invacare also manufactures, markets and distributes
many accessory products, including spare parts, wheelchair cushions, arm
rests, wheels and respiratory parts. In some cases, Invacare's accessory
items are built to be interchangeable so that they can be used to replace
parts on products manufactured by others.

Australasia
- -----------
The company's Australasia operations consist of Invacare Australia, which
imports and distributes the Invacare range of products and manufactures and
distributes the Rollerchair range of custom power wheelchairs and Pro Med lifts;
Dynamic Controls, a New Zealand manufacturer of operating components used in
power wheelchairs and scooters; and Invacare New Zealand, a manufacturer of
wheelchairs and beds and a distributor of a wide range of home medical
equipment.

Europe
- ------
The company's European operations operate as a "common market" company with
sales throughout Europe. The European operations currently sell a line of
products providing significant room for growth as Invacare continues to broaden
its product line offerings to more closely resemble that of the North American
operations.

Most wheelchair products sold in Europe are designed and manufactured locally to
meet specific market requirements. With the acquisition of Scandinavian Mobility
in 1999, Invacare not only has improved access of such products to Nordic
markets, but has expanded the company's range of premium designs which are
exported worldwide, including to the Far East and Southern Europe.

The company manufactures and/or assembles both manual and power wheelchair
products at six of its European facilities - Invacare Ltd. in the United
Kingdom, Invacare Poirier S.A.S in France, Invacare Deutschland GmbH in Germany,
Invacare Lda. in Portugal, Invacare AG in Switzerland, and Invacare Rea AB in
Sweden. Motorized scooters are manufactured in Germany. Beds are manufactured at
Invacare Hoeng in Denmark. Self-care products, bathtubs, patient lifts and
slings also are manufactured in the United Kingdom, France and Holland. Oxygen
products are imported from Invacare's U.S. operations.

For information relating to net sales by product group, see Business Segments in
Notes to the Consolidated Financial Statements.

WARRANTY
- --------
Generally, the company's products are covered by warranties against defects in
material and workmanship for periods up to six years from the date of sale to
the customer. Certain components carry a lifetime warranty.

COMPETITION
- -----------
In each of the company's major product lines, both domestically and
internationally, there are a limited number of significant national competitors
and a number of multi-national competitors. In some countries or in certain
product lines, the company may face competition from other manufacturers that
have larger market shares, greater resources or other competitive advantages.
Invacare believes that it is the leading home medical equipment manufacturer
based on its distribution channels, breadth of product line and net sales.

I-5

North America and Australasia
- -----------------------------
The home medical equipment market is highly competitive and Invacare products
face significant competition from other well-established manufacturers. The
company believes that its success in increasing market share is dependent on
providing value to the customer based on the quality, performance and price of
the company products, the range of products offered, the technical expertise of
the sales force, the effectiveness of the company distribution system, the
strength of the dealer and distributor network and the availability of prompt
and reliable service for its products. The company believes that its "Total One
Stop Shopping(sm)" approach provides the competitive advantage necessary for
continuing profitability and market share growth. Various manufacturers, from
time to time, have instituted price-cutting programs in an effort to gain market
share. There can be no assurance that other HME manufacturers will not attempt
to implement such aggressive pricing in the future.

Europe
- ------
As a result of the differences encountered in the European marketplace,
competition generally varies from one country to another. The company typically
encounters one or two strong competitors in each country, some of them becoming
regional leaders in specific product lines.

MARKETING AND DISTRIBUTION
- --------------------------
North America and Australasia
- -----------------------------
Invacare's products are marketed in the United States and Australasia primarily
to providers who in turn sell or rent these products directly to consumers
within the non-acute care setting. Invacare's primary customer is the home
medical equipment (HME) provider. The company also employs a "pull-through"
marketing strategy to medical professionals, including physical and occupational
therapists, who refer their patients to HME providers to obtain specific types
of home medical equipment, as well as to consumers who express a product or
brand preference.

Invacare's domestic sales and marketing organization consists primarily of a
home care sales force, which markets and sells Invacare(R) branded products to
HME providers. Each member of Invacare's home care sales force functions as a
Territory Business Manager (TBM) and handles all product and service needs for
an account, thus saving customers valuable time. The TBM also provides training
and servicing information to providers, as well as product literature,
point-of-sale materials and other advertising and merchandising aids. In Canada,
products are sold by a sales force and distributed through regional distribution
centers in British Columbia, Ontario and Quebec to health care providers
throughout Canada. Manufacturers' representatives market and sell Invacare
products through the company's Invacare Continuing Care Group to the non-acute
care market.

To complement the efforts of the company's field sales force and to increase
business with smaller-to-medium-sized customers, the company utilizes an Inside
Sales Department. The Inside Sales Department provides expanded account coverage
in a cost-effective manner, through targeted telesales initiatives, and
continues to be received positively by customers. The company's internet
initiatives also continue to complement the efforts of the field sales force, as
eCommerce accounted for approximately 14% of the company's North American sales
in 2002.

In 2002, the company launched the Invacare Service and Parts Division to further
enhance the technical service and parts support provided to the company's
providers. The company also further enhanced the Service Referral Network, which
it had launched in 2000, increasing the number of providers in the network to
nearly 600. Through the Service Referral Network, the company provides a
Warranty Labor Reimbursement Program, which enables service providers who make
repairs under warranty claims to receive reimbursement for the labor expense
associated with such claims for certain Invacare products. The reimbursement
program provides service providers the opportunity to honor Invacare's product
warranties while at the same time establishing a relationship with consumers
that may lead to future sales. Invacare launched the Service Referral Network to
help ensure that all consumers using Invacare products receive quality service
and support that is consistent with the Invacare brand promise.

The company sells distributed products, primarily soft goods and disposable
medical supplies, through the Invacare Supply Group (ISG). ISG is an important
component of Invacare's "Total One Stop Shopping(sm)" program, through which
Invacare offers HME providers of all sizes a broader range of products and
services at a lower total cost. ISG products include ostomy, incontinence, wound
care and diabetic supplies, as well as other soft goods and disposables which
complement other Invacare products that are purchased by many of the same
customers who buy Invacare equipment. ISG markets its products through an inside
telesales and customer service department, the Internet and Invacare's more than
100-person HME field sales force. ISG also markets a Home Delivery Program to
HME providers through which ISG drop-ships supplies in the provider's name to
the customer's address. Thus, providers have no products to stock, no minimum
order requirements and delivery is made within 24 to 48 hours nationwide.

In 2002, the company introduced new direct response television commercials
designed to generate demand for Invacare products sold by the HME provider.
These commercials feature Arnold Palmer, Invacare's worldwide spokesperson. Mr.
Palmer is becoming an integral part of Invacare's "Yes, you can(TM)" promotional
and marketing efforts encouraging consumers to achieve personal
I-6

independence and participate in the activities of life, facilitated by the home
health care products which Invacare manufactures, distributes and/or markets
throughout the world. The company believes that Mr. Palmer, serving as its
spokesperson, will help accomplish three objectives: (i) create attention and
awareness for the category of home health care products, (ii) accelerate the
acceptance of these products as lifestyle enhancing so that consumers want these
products and not just need them, and (iii) establish the Invacare brand as the
consumer category-brand for home health care products. Mr. Palmer is featured
throughout Invacare's marketing communications, including Invacare
direct-response television commercials, print advertising, point-of-purchase
displays, and other merchandising and marketing materials.

As part of its ongoing effort to continue building the company's leadership
position in e-commerce in the HME industry, Invacare further enhanced its web
site at www.invacare.com. Customers can easily access their own personalized
account information, including order status, credit availability and other
account specific information. In addition, serial number tracking has emerged as
a customer directed initiative to review configurations for service parts, and
self-service invoice history has been added to the account information available
online. The web site conforms to the World Wide Web Consortium guidelines for
web content accessibility for people with disabilities. Invacare's extensive
online product catalog is supported by BroadVision's suite of personalized
e-business applications and includes product specifications and an interactive
comparison chart. Interactive 3-D product demos were added in 2002 for
significant product introductions. Another addition to the online product
catalog is an area dedicated to providing technical information, including
diagnostic tips, service manuals and a parts catalog which features diagrams and
a point-and-click shopping function. In 2002, Invacare also launched a provider
web site program through which the company leverages its own online product
catalog for providers to build their own transactional web sites. More than 325
provider sites were developed and launched in 2002, promoting the Invacare brand
across the World Wide Web.

In 2002, Invacare continued its strategic advertising campaign in trade
publications that reach the providers of home medical equipment. This campaign
supports the company's focused brand strategy through the use of four-page and
eight-page advertising inserts versus the traditional two-page spread ads, which
the company had run for a number of years. The company also contributed
extensively to editorial coverage in trade publications on articles concerning
the products it manufactures. Company representatives attended numerous trade
shows and conferences on a national and regional basis in which Invacare
products were displayed to providers, health care professionals and consumers.

Invacare continues to generate greater consumer awareness of the company and its
products, as evidenced by enhancements made to its consumer marketing program in
2002 through sponsorships of a variety of wheelchair sporting events and support
of various philanthropic causes which benefit the consumers of its products. For
the ninth consecutive year, Invacare continued as a National Corporate Partner
with Easter Seals, one of the most recognized charities in the United States
that meets the needs of both children and adults with various types of
disabilities. The company further continued its sponsorships of 75 individual
wheelchair athletes and teams, including several of the top-ranked male and
female racers, hand cyclists, and wheelchair tennis players in the world.
Invacare was the title sponsor of the Invacare World Team Cup Tennis Tournament,
which took place in September in Tremosine, Italy for the seventh year in a row.
The company also continued its support of disabled veterans through its
sponsorship of the 22nd National Veterans Wheelchair Games, the largest annual
wheelchair sports event in the world, which was held in Cleveland, Ohio, near
Invacare's world headquarters in Elyria. The games bring a competitive and
recreational sports experience to military service veterans who use wheelchairs
for their mobility needs due to spinal cord injury, neurological conditions or
amputation.

The company's top ten customers accounted for approximately 13% of 2002 net
sales. The loss of business of one or more of these customers or buying groups
may have a significant impact on the company, although no single customer
accounted for more than 5% of the company's 2002 net sales. Providers, who are
part of a buying group, generally make individual purchasing decisions and are
invoiced directly by the company.

Europe
- ------
The company's European operations consist primarily of manufacturing, marketing
and distribution operations in Western Europe and export sales activities
through local distributors elsewhere in the world. The company has a sales force
and distribution centers in the United Kingdom, France, Germany, Belgium,
Portugal, Spain, Denmark, Sweden, Switzerland, Norway and the Netherlands, and
sells through distributors elsewhere in Europe. In markets where the company has
its own sales force, product sales are typically made through dealers of medical
equipment and, in certain markets, directly to government agencies. In most
markets, government health care and reimbursement policies play an important
role in determining the types of equipment sold and price levels for such
products.

PRODUCT LIABILITY COSTS
- -----------------------
The company's captive insurance company, Invatection Insurance Co., currently
has a policy year that runs from September 1 to August 31 and insures annual
aggregate policy losses of $10 million of the company's North American product
liability exposure. The company also has additional layers of coverage insuring
$90 million in annual aggregate losses arising from individual claims that
exceed the captive insurance company policy limits. Invatection records product
liability reserves based upon independent actuarial valuations. There can be no
assurance that Invacare's current insurance levels will continue to be adequate
or available at affordable rates.
I-7

PRODUCT DEVELOPMENT AND ENGINEERING
- -----------------------------------
Invacare is committed to continuously improving, expanding and broadening its
existing product lines. Starting in 2001, new product development was given an
even stronger emphasis as part of Invacare's strategy to gain market share and
maintain competitive advantage. To this end, the company introduced 45 new
products in 2002. The following are some of the most significant product
introductions:

North America
- -------------
The Pronto(TM) Series Power Wheelchairs with SureStep(TM), including the
M91(TM), the M51(TM) and the M50(TM) power wheelchairs feature center-wheel
drive performance for exceptional maneuverability and intuitive driving.
The M91 has high-speed motors and a 300-pound weight capacity.

The Platinum 5 Concentrator, the workhorse of the industry in oxygen
concentrators, has a top handle, filter access door, quieter operation,
diagnostics memory, low flow alarm and is HomeFill(TM) II compatible.

The HomeFill(TM) II Convenience Pack, combines an integrated pneumatic
conserving device with HomeFill II cylinders in a pack that provides
patients with over 4.5 hours of oxygen, yet weighs less than 4.5 pounds.

The A4(TM) Custom Manual Wheelchair features a new super lightweight frame
and a streamlined design.

The IVC(TM) Manual Wheelchairs feature a new design that offers
interchangeability of various components with the company's Tracer 9000
series. The number of frames were consolidated to 10 from 18, while
offering more features, options and functionality.

The Blue-Release Walker offers a wide, deep, stable frame at an attractive
price in both junior and adult sizes. The dual blue-release mechanism
provides both visual and audible "locked" cues.

The Infinity(TM) FloGel and ViscoFoam Cushions were redesigned with
reshaped contouring that enhances pelvic stability and improves pressure
redistribution.

The 3G Arrow(R) TTHD Package was introduced for the 3G Arrow, featuring a
TrueTrack Heavy Duty package that delivers 40% more power and 60% more
speed - up to 7.5 mph.

Australasia
- -----------
Dynamic Controls released the "Shark" wheelchair controller in 2002.
Additionally, various range extensions and design improvements were made to
existing product lines within Australasia.

Europe
- ------
During 2002, European operations also introduced several new products and
continued to update existing products as required by the market. Key
introductions and updates in 2002 included:

The Invacare(R) Action 3000(R) is the next generation of standard
lightweight manual wheelchairs designed and manufactured in Europe. The
Action is a modern design with improved functionality, rapid assessment and
easy adjustment.

The Invacare(R) Electra is a micro scooter designed in Europe and the Far
East, manufactured in the Far East and currently sold in the United Kingdom
and German markets. The Electra is compact and easily disassembles to be
transported in a car trunk.

The Invacare(R) Meteor is a large electric scooter cooperatively designed
in Europe and the Far East, manufactured in the Far East and currently sold
in the United Kingdom and German markets. The Meteor is primarily for
outdoor use and possesses easily adjustable seating and controls for
comfort and safety.

The Invacare(R) Flamingo is a new, affordable, high feature floor lifter
tested to 180kg capacity. With a superior lifting range and depth, and an
enlarged leg space, the Flamingo enables easy positioning during bed, chair
and floor transfers.

The Invacare(R) Alegio is a new, affordable, and robust bed designed for
the French and Southern Europe markets which was designed and manufactured
by the Invacare Hong facility.

The New Kuschall Champion(R) is a 'folding rigid' active chair with an
improved and lighter-weight folding mechanism. The chair was designed for
very active and independent individuals who require high performance with
easy vehicle transfer.

The Invacare(R) Action 2000 Junior is a standard lightweight chair to
complete the range of pediatric manual chairs.
I-8

MANUFACTURING AND SUPPLIERS
- ---------------------------
The company's objective is to maintain its commitment to be the highest quality
and lowest-cost manufacturer in its industry. The company believes that it is
achieving this objective not only through improved product design, but also by
taking a number of steps to lower manufacturing costs. The company initiated
plans to close and consolidate several distribution and manufacturing
operations, the cost of which was included in a charge taken in the fourth
quarter of 2000. These plans were completed during 2001. In addition, during the
fourth quarter of 2002, the company announced the closing of its Florida
respiratory plant to be completed in the first half of 2003. The closing did not
have a material impact on the company's financial results.

The company opened up a new Far East sourcing office during 2001. While the
company believes that the opportunities to reduce overall costs are significant,
the short-term emphasis will be on building the professional disciplines in the
areas of sourcing, quality and logistics with particular focus on sourcing
components and finished goods to each of the business segments.

North America / Australasia
- ---------------------------
The company has vertically integrated its manufacturing processes by
fabricating, coating, plating and assembling many of the components of each
product. The company designs and manufactures electronics for power wheelchairs,
from insertion of components into printed circuit boards to final assembly and
testing.

Invacare has focused on value engineering which reduces manufacturing costs by
eliminating product complexity and using common components. Value engineering
has been applied to all product introductions in the last three years, including
the latest generation of oxygen concentrators, electronic controls, wheelchairs,
patient lifts, beds and bath safety products.

Investments continue to be made in manufacturing automation. The company has
initiated lean manufacturing programs to reduce manufacturing lead times,
shorten production cycles, increase associate training, encourage employee
involvement in decision-making and improve manufacturing quality. Associate
involvement teams participate in engineering, production and processing
strategies and associates have been given responsibility for their own quality
assurance.

The manufacturing of wheelchairs, replacement parts, patient aids and home care
beds consists of a variety of metal fabricating procedures, electronics
production, coating, plating and assembly operations. Manufacturing of oxygen
concentrators, nebulizer compressors, and seating and positioning products
consists primarily of assembly operations. The company purchases raw materials,
fabricated components and services from a variety of suppliers. Where
appropriate, Invacare does employ long-term contracts with its suppliers, both
domestically and from the Far East. In those situations in which long-term
contracts are not advantageous, the company believes that its relationship with
those suppliers are satisfactory and that alternative sources of supply are
readily available.

Europe
- ------
As in other areas, manufacturing and operational issues faced in the U.S. are
also present in Europe. The European operations have challenged and rationalized
the mission of each European manufacturing location allowing for the realization
of significant synergies and has identified areas for further cost reductions
and improved efficiencies for 2003.

ACQUISITIONS
- ------------
During 2002, the company did not make any acquisitions. However, as a result of
the company's ongoing search for opportunities, coupled with the industry trend
toward consolidation, the company evaluated various acquisition opportunities in
2002. The company focuses on acquisitions intended to fulfill the following
objectives:

Tactical. Grow market share or extend current product lines.
Strategic. Enter new market segments that complement existing businesses or
utilize the company's distribution strengths.
Geographic. Enable rapid entry into new foreign markets.

GOVERNMENT REGULATION
- ---------------------
The company is directly affected by government regulation and reimbursement
policies in virtually every country in which it operates. Government regulations
and health care policy differ from country to country and, within the U.S.,
Australia and Canada, from state to state or province to province. Changes in
regulations and health care policy take place frequently and can impact the
size, growth potential and profitability of products sold in each market.

In the U.S., the growth of health care costs has increased at rates in excess of
the rate of inflation and as a percentage of GDP for several decades. A number
of efforts to control the federal deficit have impacted reimbursement levels for
government sponsored health care programs and private insurance companies often
imitate changes made in federal programs. Reimbursement guidelines in the home
health care industry have a substantial impact on the nature and type of
equipment an end user can obtain and, thus, affect the product mix, pricing and
payment patterns of the company's customers who are the HME providers.
I-9

In late 2000, Congress enacted legislation (the Benefits Improvement and
Protection Act or BIPA) that provides several victories for the homecare and HME
services industries. First, Congress provided a full restoration of the annual
cost-of-living adjustment for the Durable Medical Equipment Industry (DME) for
fiscal 2001 and subsequent years. This amounts to a 3.27% increase in the
Medicare fee schedules for most Invacare products. BIPA provides a measure of
security for home health agencies by questioning the need for a 15% reduction in
fees paid for home health services. BIPA also called for a study of the way
supplies and equipment are billed to Medicare when the patient is enrolled in a
plan of care through a home health agency.

A final ruling implementing the consumer choice, or DME Upgrade, provision
originally contained in the Balanced Budget Act of 1997 was issued on October
22, 2001. This provision makes it easier for consumers to choose more functional
products than the minimally medically necessary items that Medicare previously
had reimbursed patients for. Invacare anticipates this rule will have a positive
impact on the sales of high-end products in every product line. The new rule was
effective on January 1, 2002.

The company continues its aggressive, pro-active efforts to shape public policy
that impacts home and community-based, non-acute health care. We are currently
supporting legislation that would extend Medicare coverage to products such as
patient lifts, bath safety products and other items designed to provide physical
safety and well being. Invacare believes that these efforts give the company a
competitive advantage in two ways. First, customers frequently express
appreciation for our efforts on behalf of the entire industry. Second, we have
the ability to anticipate and plan for changes in public policy, unlike most
other HME manufacturers who must react to change after it occurs.

Congress and the new Administration once again have placed Medicare reform high
on the priority list for change. Another item being discussed is prescription
drug coverage. Both of these areas will provide ample opportunities to
re-educate policymakers on the fact that homecare is a clinically appropriate,
cost-effective and a patient preferred alternative to facility-based care. As
the "graying of America" continues, homecare will play an increasingly important
role in meeting the health care needs of our citizens. Invacare was a leading
force in thwarting the efforts of a small number of Congressmen and Senators
from changing the way Medicare reimburses providers for DME from a
fee-for-service model to a nationwide competitive bidding or competitive
acquisition system. This is the top priority for our customers of all sizes who
have looked to Invacare for leadership on this important issue.

The Safe Medical Devices Act of 1990 and Medical Device Amendments of 1976 to
the Federal Food, Drug and Cosmetics Act of 1938 (the Acts) provide for
regulation by the United States Food and Drug Administration (the FDA) of the
manufacture and sale of medical devices. Under the Acts, medical devices are
classified as Class I, Class II or Class III devices. The company principal
products are designated as Class I or Class II devices. In general, Class I
devices must comply with labeling and record keeping requirements and are
subject to other general controls. In addition to general controls, certain
Class II devices must comply with product design and manufacturing controls
established by the FDA. Manufacturers of all medical devices are subject to
periodic inspections by the FDA. Furthermore, state, local and foreign
governments have adopted regulations relating to the manufacture and marketing
of health care products. Nonetheless, from time to time, the company may
undertake voluntary recalls of its products to maintain ongoing customer
relationships as well as its reputation for adhering to high standards of
quality and safety. The company believes that it is presently in material
compliance with applicable regulations promulgated by the FDA for which the
failure to comply would have a material adverse effect.

BACKLOG
- -------
The company generally manufactures most of its products to meet near-term
demands by shipping from stock or by building to order based on the specialty
nature of certain products. Therefore, the company does not have substantial
backlog of orders of any particular product nor does it believe that backlog is
a significant factor for its business.

EMPLOYEES
- ---------
As of December 31, 2002, the company had approximately 5,300 employees.

(d) Financial Information about Foreign and Domestic Operations and Export
Sales.
- --------------------------------------------------------------------------
The company also markets its products for export to other foreign countries. The
company had product sales in over 80 countries worldwide. For information
relating to net sales, operating income and identifiable assets of the company's
foreign and domestic operations, see Business Segments in the Notes to the
Consolidated Financial Statements.

(e) Available Information.
- --------------------------
The company files annual, quarterly and current reports, proxy statements and
other documents with the Securities and Exchange Commission (SEC). The public
may read and copy any material that the company files with the SEC at the SEC's
Public Reference Room located at 450 Fifth Street, NW, Washington D.C. 20549.
The public may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website,
www.sec.gov, that contains all reports, proxy statements and other information
filed by the company with the SEC.

Invacare filings with the SEC - Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q, Current Reports on Form 8-K, and any amendments thereto - are
available on the company's website, www.invacare.com. In addition, copies of the
company's filings can be requested, free of charge, by writing to: Shareholder
Relations Department, Invacare Corporation, One Invacare Way, P.O. Box 4028,
Elyria, OH 44036-2125.
I-10

Item 2. Properties.
- --------------------
The company owns or leases its warehouses, offices and manufacturing facilities
and believes that these facilities are well maintained, adequately insured and
suitable for their present and intended uses. Information concerning certain
leased facilities of the company as of December 31, 2002 is set forth in Leases
and Commitments in the Notes to the Consolidated Financial Statements of the
company and in the table below:

I-11

I-12

Item 3. Legal Proceedings.
- --------------------------
In the ordinary course of its business, Invacare is a defendant in a number of
lawsuits, primarily product liability actions in which various plaintiffs seek
damages for injuries allegedly caused by defective products. All of the product
liability lawsuits have been referred to the company's insurance carriers and
are being contested vigorously. Coverage territory is worldwide with the
exception of those countries with respect to which, at the time the product is
sold for use or at the time a claim is made, the U.S. government has suspended
or prohibited diplomatic or trade relations. Management does not believe that
the outcome of any of these actions will have a material adverse effect upon its
business or financial condition.

Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
Not applicable.

Executive Officers of the Registrant.*
- --------------------------------------
The following table sets forth the names of the executive officers and certain
other key employees of Invacare, each of whom serves at the pleasure of the
Board of Directors, as well as certain other information.

I-13

CORPORATE OFFICERS
- ------------------
A. Malachi Mixon, III has been Chief Executive Officer and a Director of the
company since December 1979, and Chairman of the Board since September 1983. Mr.
Mixon had been President of the company from December 1979 until November 1996.

Gerald B. Blouch was named President and a Director of the company in November
1996. Mr. Blouch was Chief Operating Officer since December 1994 and Chairman -
Invacare International since December 1993. Previously, Mr. Blouch was President
- - Home Care Division from March 1994 to December 1994 and Senior Vice President
- - Home Care Division from September 1992 to March 1994. Mr. Blouch served as
Chief Financial Officer from May 1990 to May 1993 and Treasurer from March 1991
to May 1993.

Gregory C. Thompson was named Senior Vice President and Chief Financial Officer
in November 2002. Before coming to Invacare, Mr. Thompson served as Senior Vice
President and Chief Financial Officer of Sensormatic Electronics Corporation, a
global manufacturer of electronic security products, from October 2000 to
January 2002 and was Vice President and Controller from February 1997 to October
2000. Previously, Mr. Thompson was Vice President and Corporate Controller for
Wang Laboratories from August 1994 to February 1997 and Assistant Corporate
Controller from October 1990 to August 1994.

Joseph B. Richey, II has been a Director since 1980 and in September 1992 was
named President - Invacare Technologies and Senior Vice President - Electronics
and Design Engineering. Previously, Mr. Richey was Senior Vice President of
Product Development from July 1984 to September 1992 and Senior Vice President
and General Manager of North American Operations from September 1989 to
September 1992.

Louis F. J. Slangen was named Senior Vice President - Sales & Marketing in
December 1994 and from September 1989 to December 1994 was Vice President -
Sales and Marketing. Mr. Slangen was previously President - Rehab Division from
March 1994 to December 1994 and Vice President and General Manager - Rehab
Division from September 1992 to March 1994.

Thomas Kroeger joined Invacare as Senior Vice President - Human Resources in May
2001. Before coming to Invacare, Mr. Kroeger was the Executive Vice President -
Organization and People for Office Depot, the world's largest seller of office
products, from July 1997 until April 2001 and Corporate Vice President - Human
Resources for The Sherwin-Williams Company from October 1987 to July 1997.

I-14

OPERATING OFFICERS
- ------------------
Kenneth A. Sparrow was named President - Invacare Europe in September 2001.
Previously, Mr. Sparrow was Managing Director of Australasia from January 1998
to September 2001. Before coming to Invacare, Mr. Sparrow was General Manager of
Operations for the Lyttelton Port Company from December 1995 to January 1998 and
Divisional General Manager for Skellerup Industries from July 1992 to November
1995.

Neal J. Curran was named Vice President of Engineering and Product Development
in August 2000. Mr. Curran has been with the company since 1983 and has
previously held positions as Vice President - Rehab Group July 1999 to August
2000, Vice President - Respiratory Group July 1998 to July 1999, Vice President
- - Seating and Custom Mobility Products October 1997 to July 1998 and General
Manager of the Custom Manual Business Unit from December 1994 to October 1997.

Michael A. Perry was named Vice President of Distributed Products in November of
1998. Previously, Mr. Perry was General Manager of Account Services, Vice
President of National Accounts, Vice President of Retail Sales and Vice
President of Clinical Application Consumer Marketing since 1995. In 1994, Mr.
Perry served as Area Vice President of Sales.

Bridget A. Miller was named Vice President and General Counsel in November 2002,
after serving as Acting General Counsel from May 2002 until November 2002. Mrs.
Miller has been with the company since July 1993 and has previously served as
Assistant General Counsel from July 1998 to November 2002, Staff Counsel from
July 1994 to July 1998 and Corporate Risk Manager since joining Invacare in
1993. She is licensed to practice law in the State of Ohio.

Hugh L. Martyn was named Managing Director of Australasia in September 2001.
Previously, Mr. Martyn was Chief Executive Officer of Dynamic Controls
Unlimited, a wholly owned subsidiary of Invacare Corporation, from September
1998 to September 2001. Prior to this, Mr. Martyn was the Managing Director of
Whisper-Tech Limited from December 1997 to September 1998, and the General
Manager, Country Fare Bakeries (Christchurch, NZ) Ltd. from September 1996 to
December 1997.

* The description of executive officers is included pursuant to Instruction 3
to Section (b) of Item 401 of Regulation S-K.

PART II
-------
Item 5. Market for Registrant Common Equity and Related Stockholder Matters.
- --------------------------------------------------------------------------------
Invacare Common Shares, without par value, began trading on the New York Stock
Exchange (NYSE) under the symbol IVC on June 25, 1999. Prior to listing the
Common Shares on the NYSE, the Common Shares were included for trading and
quotation on the NASDAQ National Market System under the symbol IVCR. Ownership
of the company Class B Common Shares (which are not listed on NYSE) cannot be
transferred, except, in general, to family members. Class B Common Shares may be
converted into Common Shares at any time on a share-for-share basis. The
approximate number of record holders of the company Common Shares and Class B
Common Shares at February 27, 2003 was 5,450 and 29, respectively. The closing
sale price for the Common Shares on February 27, 2003 as reported by NYSE, was
$30.95. The prices set forth below do not include retail markups, markdowns or
commissions.

The range of high and low quarterly prices of the Common Shares in each of the
two most recent fiscal years are as follows:

2002 2001
---- ----
Quarter Ended: High Low High Low
------------- ------ ------ ------ ------
December 31 $34.85 $30.59 $38.84 $28.91
September 30 36.40 29.28 40.98 35.16
June 30 39.80 33.86 40.00 34.20
March 31 37.59 31.98 39.52 31.38

During 2002 and 2001, the Board of Directors declared dividends of $.05 per
Common Share and $.045 per Class B Common Share. For information regarding
limitations on the payment of dividends in the company loan and note agreements,
see Long Term Debt in the Notes to the Consolidated Financial Statements. The
Common Shares are entitled to receive cash dividends at a rate of at least 110%
of cash dividends paid on the Class B Common Shares.

Information regarding the securities authorized for issuance under equity
compensation plans is incorporated by reference to the information set forth
under the captions Compensation of Executive Officers and Compensation of
Directors in the company definitive Proxy Statement for the 2003 Annual Meeting
of Shareholders, since such Proxy Statement will be filed with the SEC not later
than 120 days after the end of the company's fiscal year pursuant to Regulation
14A.
I-15

Item 6. Selected Financial Data
- --------------------------------

* Reflects non-recurring and unusual charge of $31,950 ($25,250 after
tax or $.80 per share assuming dilution).
** Reflects non-recurring and unusual charge of $14,800 ($9,028 after tax
or $.29 per share assuming dilution).
*** Amortization of goodwill ceased in 2002, net earnings for prior years
includes amortization expense of $8,972 in 2001, $8,899 in 2000,
$7,258 in 1999 and $6,332 in 1998.

I-16

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
- --------------------------------------------------------------------------------

RESULTS OF OPERATIONS
- ---------------------
2002 Versus 2001

Reclassifications. The following Management's Discussion and Analysis of
Financial Condition and Results of Operations reflect certain reclassifications
made to the prior years' consolidated financial statements to conform to the
presentation used for the year ended December 31, 2002.

Non-recurring and Unusual Items. The review of results that follows excludes the
impact of the non-recurring and unusual items recorded in 2001. In 2001, the
company recorded a fourth quarter non-cash charge of approximately $31,950,000
($25,250,000 after tax) to reserve the value of certain investments and notes
receivable. The decline in value of these investments was determined to be other
than temporary due in part to the economic decline and tightening of the capital
markets which made obtaining the additional funding that these entities require
difficult.

Net Sales. Consolidated net sales for 2002 increased 3% for the year with net
sales increasing in all business segments on a reported basis. Excluding the
impact of foreign currency, North America and Europe achieved sales gains of 3%
and 2%, while Australasian sales declined 8%. The overall growth was primarily
driven by new product introductions.

North American Operations

North American net sales, consisting of Rehab (power wheelchairs, custom manual
wheelchairs, scooters and seating), Standard (manual wheelchairs, personal care,
bed products, low air loss therapy and patient transport), Continuing Care (beds
and furniture), Respiratory (oxygen concentrators, aerosol therapy, sleep,
homefill and associated respiratory) and Distributed (ostomy, incontinence,
diabetic, wound care and other medical supplies) products grew 4% over the prior
year, adjusting for the exit of two product lines with currency translation
having no material impact.

For the year, net sales of Rehab products increased by 9% driven by the
continued strengthening in sales of consumer power products introduced during
2002. Net sales of distributed products increased by 15%. However, standard and
respiratory product net sales were down 4% and 7%, respectively, or 2% and 5%,
respectively, adjusting for the exit of two product lines. The standard products
net sales decline is primarily due to pricing pressure from low cost imports
from the Far East, the company's exit from the lift out chair product line, and
slow transition by customers to the new standard wheelchair product line
introduced in the fourth quarter. The decline in respiratory net sales was
driven by slow purchases by national accounts and the company's exit from the
liquid oxygen product line. With reimbursement and economic uncertainty, many
dealers have limited their purchases of replacement products for their rental
fleets in order to preserve cash.

Other products, consisting primarily of the company's Canadian and aftermarket
parts businesses, had a 3% net sales decrease for the year primarily as a result
of volume increases.

Australasia Operations

The Australasia products group consists of Invacare Australia, which imports and
distributes the Invacare range of products and manufactures and distributes the
Rollerchair range of custom power wheelchairs, Dynamic Controls, a New Zealand
manufacturer of operating components used in power wheelchairs and Invacare New
Zealand, a distribution business. Net sales for the Australasia group increased
1% from the prior year. Excluding the impact of foreign exchange, net sales
decreased 8% for the year. The decrease was the result of volume declines,
primarily in the company's Dynamic Controls subsidiary. Weak global economic
conditions tend to have a more significant impact on this business than the
other businesses of the company.

European Operations

European net sales improved 7% over the prior year, including a 5% positive
impact from foreign currency translation. Sales growth was driven by volume
increases in power wheelchairs, manual wheelchairs, high-action wheelchairs,
patient aids and scooters.

Gross Profit. Consolidated gross profit as a percentage of net sales was 30.1%
in 2002 and 30.2% in 2001. Margins remained flat as the company was able to
offset unfavorable product mix and pricing pressures with improved manufacturing
performance.

I-17

North American gross profit from operations as a percentage of net sales was
29.9% in 2002 versus 30.6% in 2001. The decrease was primarily attributable to a
shift towards lower margin product lines (distributed, respiratory, and consumer
power products) and higher freight and warranty costs.

Gross profit in Australasia was down by 3.9 percentage points from last year.
The decline was due principally to volume declines in core markets and an
increase in mix towards lower margin products, which was partially offset by
manufacturing cost reductions.

Gross profit in Europe as a percentage of net sales improved 2.4 percentage
points from the prior year. The improvement is attributable to a shift in
product mix towards higher margin products, outsourcing projects that improved
the European cost position and favorable currency translation.

Selling, General and Administrative. Consolidated selling, general and
administrative expenses as a percentage of net sales were 20.2% in 2002 and
18.6% in 2001. The overall dollar increase was $24,722,000 or 13% with currency
translation increasing selling, general and administrative costs by
approximately $1,970,000 or 1%. The increase is primarily in North America and
the result of continued investment in marketing and branding programs being
implemented to drive future growth, higher employee benefit costs, increased
investment in additional headcount, additional provision for bad debts and
significant increases in insurance costs largely due to general market
conditions.

North American operations selling, general and administrative expenses as a
percentage of net sales increased 18% or $24,352,000 compared to 2001. As noted
above, this increase is primarily in marketing and branding programs, additional
provision for bad debt, higher employee benefit costs and significant increases
in insurance costs.

Australasia operations selling, general and administrative expenses decreased
approximately 25% from the prior year. The overall dollar decline between years
was $1,883,000 despite foreign currency increasing the expense by $458,000. The
decline was due to tight expense controls.

European operations selling, general and administrative expenses increased
$2,284,000 or 5% from the prior year. European selling, general and
administrative expenses were negatively impacted by foreign currency
translation, which increased selling, general and administrative expenses
reported in dollars by $1,581,000. The remaining increase was due to increased
systems costs and depreciation expense.

Interest. Interest expense decreased to $15,122,000 in 2002 from $22,764,000 in
2001, representing a 34% decrease. This decrease was attributable to the
reduction in borrowings outstanding under the company's revolving credit
facility and also a reduction in borrowing costs due to the low interest rate
environment. The company's debt-to-equity ratio decreased to .5:1 as of December
31, 2002 from .9:1 as of the end of the prior year. Interest income decreased in
2002 to $4,550,000 from $7,303,000 in the prior year, representing a 38%
decrease. The decrease is a direct result of the minimal amount of new
installment contracts that were written internally. Interest income primarily
represents loan origination fees received from De Lage Landen Inc. (DLL). Since
December 2000, Invacare customers primarily utilize the third-party financing
arrangement with DLL, a subsidiary of Rabo Bank of the Netherlands, to provide
financing.

Income Taxes. The company had an effective tax rate of 32.9% in 2002 compared to
38.5% in 2001, excluding the effects of the unusual and non-recurring charge
recorded in 2001. The effective rate for 2001 including the unusual and
non-recurring charge was 47% as a result of the valuation reserve recorded in
the fourth quarter of 2001, which was not entirely deductible for tax purposes
due to limitations on capital losses. The lower effective tax rate for 2002 is
primarily due to the change in accounting for goodwill. See Income Taxes and
Non-Recurring and Unusual Items in the Notes to Consolidated Financial
Statements for further discussion of these items.

Research and Development. The company continues to increase its research and
development activities to maintain its competitive advantage. While the
competitive environment requires that research and development expenditures be
focused on the cost reduction of products while increasing functionality and
reliability, the company continues to dedicate dollars 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 $17,934,000 in 2002 from $17,394,000 in 2001. The
expenditures, as a percentage of net sales, were 1.6% in 2002 and 1.7% in the
prior year.

I-18

2001 Versus 2000

Non-recurring and Unusual Items. The review of results that follows excludes the
impact of the non-recurring and unusual items recorded in 2001 and 2000. In
2001, the company recorded a fourth quarter non-cash charge of approximately
$31,950,000 ($25,250,000 after tax) to reserve the value of certain investments
and notes receivable. The decline in value of these investments was determined
to be other than temporary due in part to the recent economic decline and
tightening of the capital markets which has made obtaining the additional
funding that these entities require difficult.

In 2000, as a result of repaying EURO and DKK denominated debt, the company
realized a non-recurring pre-tax foreign currency gain of approximately
$20,130,000. The gain was offset by charges in the fourth quarter aggregating
$8,700,000 related primarily to closing two distribution centers and a
manufacturing plant ($3,700,000), severance costs due to staff reductions (nine
individuals) primarily at the corporate office ($1,000,000) and costs associated
with the settlement of litigation ($4,000,000). In addition, during the fourth
quarter of 2000, the company also increased its bad debt reserve impacting
selling, general and administrative expenses by approximately $8,000,000. All
initiatives for which charges were reported have been completed.

Net Sales. Consolidated net sales for 2001 increased 4% for the year despite a
2% negative impact from foreign currency translation. Net sales increased in all
three business segments excluding currency translation. Net sales gains were
lower than last year primarily due to the slowing economy and tightening of the
credit markets. Growth also was impacted by the economic shock and market
uncertainty resulting from the September terrorist attacks. However, the company
believes its net sales grew faster than the overall industry, resulting in
market share gains. This net sales growth was due in part to additional
marketing and branding programs and its cost-effective "Total One Stop
Shopping(sm)" distribution system that is supported by the company's broad range
of products and services.

North American Operations

North American net sales, consisting of Rehab (power wheelchairs, custom manual
wheelchairs, seating and scooters), Standard (manual wheelchairs, personal care,
bed products, patient transport and low air loss therapy), Continuing Care (beds
and furniture), Respiratory (oxygen concentrators, liquid oxygen, aerosol
therapy, sleep and associated respiratory) and Distributed (ostomy,
incontinence, wound care and other medical supplies) products grew 5% over the
prior year excluding the negative impact of currency translation. All major
product lines showed growth for the year. The largest gains were recorded in
Continuing Care, Respiratory, and Rehab product lines primarily due to the
increased unit volumes of these products. Distributed net sales increased
approximately 5% over the prior year.

Other products, consisting primarily of the company's Canadian and aftermarket
parts businesses, had a 5% net sales increase for the year primarily as a result
of volume increases.

Australasia Operations

The Australasia products group consists of Invacare Australia, which imports and
distributes the Invacare range of products and manufactures and distributes the
Rollerchair range of custom power wheelchairs, Dynamic Controls, a New Zealand
manufacturer of operating components used in power wheelchairs and Invacare New
Zealand, a distribution business. Net sales for the Australasia group increased
$10,134,000 or 30% from the prior year. Excluding the impact of foreign
exchange, net sales increased 41% for the year. The increase was the result of
continued expansion into the market, with volume increases in Standard
wheelchairs and Respiratory products.

European Operations

European net sales improved 4% over the prior year, excluding a 5% negative
impact from foreign currency translation. European sales were less than expected
due to reimbursement pressure in key markets throughout the year and the weak
Euro. Net sales growth was driven by volume increases in Patient Aids, Homecare
Beds and Patient Transport product lines.

Gross Profit. Consolidated gross profit as a percentage of net sales was 30% in
2001 and 31% in 2000, primarily due to product mix, pricing pressures and the
decline in the Euro. Continued productivity improvements and cost reduction
activities partially offset these negative impacts.

North American gross profit from operations as a percentage of net sales was
flat as a result of depressed margins due to pricing pressures in the Supplies
business which was offset by productivity improvements and cost reduction
activities realized in the North American plants.

I-19

Gross profit in Australasia as a percentage of net sales was down by one percent
from last year. A negative impact from foreign currency was offset by continued
cost reduction activities.

Gross profit in Europe as a percentage of net sales declined by two percentage
points from prior year. The decline is primarily attributable to the unfavorable
impact of both product and country mix, unfavorable pricing particularly in the
beds and power wheelchair product lines, the negative impact of the Euro and
rising freight costs.

Selling, General and Administrative. Consolidated selling, general and
administrative expenses as a percentage of net sales were approximately 19% in
2001 and 2000. The overall dollar increase was $2,031,000 or 1% with currency
translation decreasing selling, general and administrative costs by
approximately $3,668,000 or 2%. The minimal increase is the result of
administrative cost control and the utilization of activity-based budgeting
aimed at allocating expense dollars to the programs that most effectively
support the company's business strategy.

North American operations selling, general and administrative expenses as a
percentage of net sales increased 2% or $3,005,000 compared to 2000.

Australasia operations selling, general and administrative expenses decreased
approximately 8% from the prior year. The overall dollar decline between years
was $702,000 primarily due to the strong dollar, which reduced the expense by
$590,000.

European operations selling, general and administrative expenses increased
$265,000 or 1% from the prior year. European selling, general and administrative
expenses were positively impacted by continued cost containment initiatives and
the strong dollar, which reduced selling, general and administrative expenses
reported in dollars by $2,803,000.

Interest. Interest income decreased in 2001 to $7,303,000 from $7,807,000 in the
prior year, representing a 7% decrease. The decrease was primarily due to a 37%
decrease in installment sales volume booked in 2001, partially offset by loan
origination fees received on new business written as a result of our third-party
financing arrangement with DLL, a subsidiary of Rabo Bank of the Netherlands.
Interest expense decreased to $22,764,000 in 2001 from $27,853,000 in 2000,
representing an 18% decrease. This decrease was attributable to the declining
interest rate environment throughout 2001, in conjunction with a decrease in our
average borrowing outstanding under our revolver facility. The company's
debt-to-equity ratio decreased to .9:1 as of December 31, 2002 from 1.1:1 as of
the end of the prior year.

Income Taxes. The company had an effective tax rate of 38.5% in 2001 compared to
39.0% in 2000, excluding the effects of the unusual and non-recurring charge
recorded in 2001. The effective rate for 2001 including the unusual and
non-recurring charge was 47% as a result of the valuation reserve recorded in
the fourth quarter of 2001 which was not entirely deductible for tax purposes
due to limitations on capital losses. See Income Taxes and Non-Recurring and
Unusual Items in the Notes to Consolidated Financial Statements for further
discussion of these items.

Research and Development. The company continues to increase its research and
development activities to maintain its competitive advantage. While the
competitive environment requires that research and development expenditures be
focused on the cost reduction of products while increasing functionality and
reliability, the company continues to dedicate dollars to applied research
activities to ensure that new and enhanced design concepts are available to its
businesses. Research and development expenditures, which are recorded in costs
of products sold, increased to $17,394,000 in 2001 from $16,231,000 in 2000. The
expenditures, as a percentage of net sales, increased to 1.7% from 1.6% in the
prior year.

INFLATION
- ---------
Although the company cannot determine the precise effects of inflation,
management believes that inflation does continue to have an influence on the
cost of materials, salaries and benefits, utilities and outside services. The
company attempts to minimize or offset the effects through increased sales
volume, capital expenditure programs designed to improve productivity,
alternative sourcing of material and other cost control measures. In 2002 and
2001, the company was able to offset the majority of the impact of price
increases from suppliers by productivity improvements and other cost reduction
activities.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The company continues to maintain an adequate liquidity position through its
unused bank lines of credit (see Long-Term Debt in the Notes to Consolidated
Financial Statements) and working capital management. The company maintains
various bank lines of credit to finance its worldwide operations. In 2001, the
company completed a $325,000,000 multi-currency, long-term revolving credit
agreement which expires on October 17, 2006 and a $100,000,000 364-day facility,
renewed in 2002, which expires on October 15,

I-20

2003, or such later dates as mutually agreed upon by the company and the banks.
Additionally, the company maintains various other demand lines of credit
totaling a U.S. dollar equivalent of approximately $8,378,000 as of December 31,
2002. The lines of credit along with cash generated from operations have been
and will continue to be used to fund the company's domestic and foreign working
capital, capital expenditures and acquisition requirements. As of December 31,
2002, the company had approximately $307,604,000 available under its various
lines of credit, excluding debt covenant restrictions.

The company's borrowing arrangements contain covenants with respect to, among
other items, interest coverage, net worth, dividend payments, working capital,
and funded debt to capitalization, as defined in the company's bank agreements
and agreement with its note holders. The company is in compliance with all
covenant requirements. Under the most restrictive covenant of the company's
borrowing arrangements, the company has the capacity to borrow up to an
additional $209,457,000 as of December 31, 2002.

While there is general concern about the potential for rising interest rates,
exposure to interest fluctuations is manageable given that a portion of the debt
is at fixed rates through 2004. In addition, the ability to utilize interest
rate swaps to fix a higher percentage of the company's debt coupled with free
cash flow should allow Invacare to absorb the expected modest rate increases in
the months ahead without any material impact on our liquidity or capital
resources. As of December 31, 2002, the weighted average floating interest rate
on U.S. borrowings was 3.66%.

CAPITAL EXPENDITURES
- --------------------
There are no individually material capital expenditure commitments outstanding
as of December 31, 2002. The company estimates that capital investments for 2003
will be approximately $28,000,000. The company believes that its balances of
cash and cash equivalents, together with funds generated from operations and
existing borrowing facilities, will be sufficient to meet its operating cash
requirements and fund required capital expenditures for the foreseeable future.

CASH FLOWS
- ----------
Cash flows provided by operating activities were $124,181,000 in 2002, compared
to $54,222,000 last year. The increase is due primarily to changes in working
capital accounts. Improvements in accounts receivable collections and inventory
turns as well as better cash management regarding accounts payable were
principally responsible for the increase in operating cash flows.

Cash flows required for investing activities were comparable to 2001, decreasing
slightly by $829,000. Net property and equipment activity was relatively
unchanged compared to the prior year while cash received from installment sales
contracts decreased significantly due to the fact that the company no longer
enters into new installment contracts as a result of its third party financing
arrangement with DLL.

Cash flows used for financing activities in 2002 were $120,157,000, compared to
$34,127,000 in 2001. The increase in cash used was principally a result of the
company using cash flows generated during the year to decrease its debt in 2002
by approximately $123,070,000 compared to $33,985,000 in 2001. In addition to
acquisition activities, the effect of foreign currency translation results in
amounts being shown in the Consolidated Statement of Cash Flows that are
different from the changes reflected in the respective balance sheet captions.

DIVIDEND POLICY
- ---------------
It is the company's policy to pay a nominal dividend in order for its stock to
be more attractive to a broader range of investors. The current annual dividend
rate remains at $.05 per Common Share and $.045 per Class B Common Share. It is
not anticipated that this will change materially as the company continues to
have available significant growth opportunities through internal development and
acquisitions. For 2002, dividends of $.05 per Common Share and $.045 per Class B
Common Share were declared and paid.

NON-RECURRING AND UNUSUAL ITEMS
- -------------------------------
In 2001, the company recorded a fourth quarter non-cash charge of approximately
$31,950,000 ($25,250,000 after tax) to reserve the value of certain investments
and notes receivable. The decline in value of these investments was determined
to be other than temporary due in part to the recent economic decline and
tightening of the capital markets which has made obtaining the additional
funding that these entities require difficult.

In 2000, as a result of repaying EURO and DKK denominated debt, the company
realized a non-recurring pre-tax foreign currency gain of approximately
$20,130,000. The gain was offset by charges in the fourth quarter aggregating
$8,700,000 related primarily to closing

I-21

two distribution centers and a manufacturing plant ($3,700,000), severance costs
due to staff reductions (nine individuals) primarily at the corporate office
($1,000,000) and costs associated with the settlement of litigation
($4,000,000). The entire amount of these charges have been utilized in
accordance with their initial designation. In addition, during the fourth
quarter of 2000, the company also increased its bad debt reserve impacting
selling, general and administrative expenses by approximately $8,000,000.

CRITICAL ACCOUNTING POLICIES
- ----------------------------
The consolidated financial statements include accounts of the company and all
majority-owned subsidiaries. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. However,
application of these accounting policies involves the exercise of judgment and
use of assumptions as to future uncertainties and, as a result, actual results
could differ from these estimates.

Revenue Recognition
Invacare's revenues are recognized when products are shipped to unaffiliated
customers. The Securities and Exchange Commission's Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition" provides guidance on the application of
generally accepted accounting principles to selected revenue recognition issues.
The company has concluded that its revenue recognition policy is appropriate and
in accordance with generally accepted accounting principles and SAB No. 101.

Allowance for Uncollectible Accounts Receivable
Accounts receivable are reduced by an allowance for amounts that may become
uncollectible in the future. Substantially all of the company's receivables are
due from health care, medical equipment dealers and long term care facilities
located throughout the United States, Australia, Canada, New Zealand and Europe.
A significant portion of products sold to dealers, both foreign and domestic,
are ultimately funded through government reimbursement programs such as Medicare
and Medicaid. In addition, the company has seen a significant shift in
reimbursement to customers from managed care entities. As a consequence, changes
in these programs can have an adverse impact on dealer liquidity and
profitability. The estimated allowance for uncollectible amounts is based
primarily on management's evaluation of the financial condition of the customer.
In addition, as a result of the third party financing arrangement with DLL,
management monitors the collection status of these contracts in accordance with
the company's limited recourse obligations and provides amounts necessary for
estimated losses in the allowance for doubtful accounts.

Inventories and Related Allowance for Obsolete and Excess Inventory
Inventories are valued at the lower of cost or market value and have been
reduced by an allowance for excess and obsolete inventories. The estimated
allowance is based on management's review of inventories on hand compared to
estimated future usage and sales.

Goodwill, Intangible and Other Long-Lived Assets
Property, equipment, intangibles and certain other long-lived assets are
amortized over their useful lives. Useful lives are based on management's
estimates of the period that the assets will generate revenue. As a result of
the adoption of SFAS No. 142, Goodwill and Other Intangible Assets in 2002,
goodwill and intangible assets deemed to have indefinite lives are subject to
annual impairment tests in accordance with the Statement. Furthermore, goodwill
and other long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. The company completed the required initial analysis of goodwill
as of January 1, 2002 as well the annual impairment test in the fourth quarter
of 2002. The results of these analyses indicated no impairment of goodwill.

Product Liability
The company's captive insurance company, Invatection Insurance Co., currently
has a policy year that runs from September 1 to August 31 and insures individual
losses up to $10 million and annual aggregate policy losses of $10 million of
the company's domestic product liability exposure. The company also has
additional layers of coverage insuring $90 million in annual aggregate losses
arising from individual claims that exceed the captive insurance company policy
limits. Invatection records product liability reserves for both known claims and
incurred but not reported claims based upon independent actuarial valuations.
There can be no assurance that Invacare's current insurance levels will continue
to be adequate or available at an affordable rate.

Warranty
Generally, the company's products are covered by warranties against defects in
material and workmanship for periods up to six years from the date of sale to
the customer. Certain components carry a lifetime warranty. A provision for
estimated warranty cost is recorded at the time of sale based upon actual
experience. The company continuously assesses the adequacy of its product
warranty accrual and makes adjustments as needed. See Current Liabilities in the
Notes to the Consolidated Financial Statements for a reconciliation of the
changes in the warranty accrual.
I-22

Accounting for Stock-Based Compensation
The company accounts for options under its stock-based compensation plans using
the intrinsic value method proscribed in APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. The majority of the
options awarded have been granted at exercise prices equal to the market value
of the underlying stock on the date of grant; thus, no compensation cost has
been reflected in the Consolidated Statement of Earnings for these options. In
addition, restricted stock awards have been granted without cost to the
recipients and are being expensed on a straight-line basis over the vesting
periods. If the company had applied the fair value recognition provisions of
SFAS No. 123 Accounting for Stock-Based Compensation for all stock options
granted, net earnings per share assuming dilution would have been reduced by
$.15 in 2002, $.14 in 2001 and $.13 in 2000.

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. This statement provides
guidance for those companies wishing to voluntarily change to the fair value
based method of accounting for stock-based compensation. The statement also
amends the disclosure requirements of SFAS No. 123. While Invacare continues to
utilize the disclosure-only provisions of SFAS No. 123, the company has modified
its disclosures to comply with the new statement. See the company's Accounting
Policies and Shareholders' Equity Transactions in the Notes to the Consolidated
Financial Statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------
In June 2002, the FASB issued SFAS No. 146, Accounting for the Costs Associated
with Exit or Disposal Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities. The provisions
of this Statement, which is effective for exit or disposal activities that are
initiated after December 31, 2002, are not expected to have a material impact on
the Company's financial position, results of operations or cash flows.

Item 7a. Quantitative and Qualitative Disclosure about Market Risk.
- --------------------------------------------------------------------
The company is exposed to market risk through various financial instruments,
including fixed rate and floating rate debt instruments. The company uses
interest swap agreements to mitigate its exposure to interest rate fluctuations.
Based on December 31, 2001 debt levels, a 1% change in interest rates would
impact interest expense by approximately $1,852,000. Additionally, the company
operates internationally and as a result is exposed to foreign currency
fluctuations. Specifically, the exposure includes intercompany loans, and third
party sales or payments. In an attempt to reduce this exposure, foreign currency
forward contracts are utilized. The company does not believe that any potential
loss related to these financial instruments would have a material adverse effect
on the company's financial condition or results of operations.

PRIVATE SECURITIES LITIGATION REFORM ACT
- ----------------------------------------
The statements contained in this Form 10-K constitute forward-looking statements
within the meaning of the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Terms such as "will," "should," "achieve,"
"increase," "plan," "can," "expect," "pursue," "benefit," "continue," "exceed,"
"improve," "believe," "estimate," "anticipate," "build," "strengthen," "new,"
"lower," "drive," "seek," "hope," and "create," as well as similar comments, are
forward-looking in nature. Actual results and events may differ significantly
from those expressed or anticipated as a result of risks and uncertainties which
include, but are not limited to, the following: pricing pressures, increasing
raw material costs, the consolidations of health care customers and competitors,
government reimbursement issues including those that affect the viability of
customer, the ability to design, manufacture and distribute new products with
higher functionality and lower costs and the ability to accelerate market
acceptance of and transition to new products, the effect of offering customers
competitive financing terms, Invacare's ability to effectively identify, acquire
and integrate acquisition candidates, the difficulties in managing and operating
businesses in many different foreign jurisdictions, the timely and efficient
completion of facility consolidations, the vagaries of any litigation or
regulatory investigations that the company may be or become involved in at any
time, the difficulties in acquiring and maintaining a proprietary intellectual
property ownership position, the overall economic, market and industry growth
conditions, foreign currency and interest rate risk, Invacare's ability to
improve financing terms and reduce working capital, as well as the risks
described from time to time in Invacare's reports as filed with the Securities
and Exchange Commission. The company undertakes no obligation to update any of
the forward-looking or other information contained herein.

Item 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
Reference is made to the Report of Independent Auditors, Consolidated Balance
Sheet, Consolidated Statement of Earnings, Consolidated Statement of Cash Flows,
Consolidated Statement of Shareholders' Equity, Notes to Consolidated Financial
Statements and Financial Statement Schedule which appear on pages FS-1 to FS-22
of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------
None.
I-23

PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- -------------------------------------------------------------
The information required by Item 10 as to the directors of the company is
incorporated herein by reference to the information set forth under the caption
Election of Directors in the company's definitive Proxy Statement for the 2003
Annual Meeting of Shareholders, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the company fiscal year pursuant to Regulation 14A. Information required by Item
10 as to the executive officers of the company is included in Part I of this
Annual Report on Form 10-K.

Item 11. Executive Compensation.
- ---------------------------------
The information required by Item 11 is incorporated by reference to the
information set forth under the captions Compensation of Executive Officers and
Compensation of Directors in the company's definitive Proxy Statement for the
2003 Annual Meeting of Shareholders, since such Proxy Statement will be filed
with the Securities and Exchange Commission not later than 120 days after the
end of the company fiscal year pursuant to Regulation 14A.

Item. 12. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The information required by Item 12 is incorporated by reference to the
information set forth under the caption Share Ownership of Principal Holders and
Management in the company's definitive Proxy Statement for the 2003 Annual
Meeting of Shareholders, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
company's fiscal year pursuant to Regulation 14A.

Item 13. Certain Relationships and Related Transactions.
- ---------------------------------------------------------
The information required by Item 13 is incorporated by reference to the
information set forth under the caption Compensation Committee Interlocks and
Insider Participation in the company's definitive Proxy Statement for the 2003
Annual Meeting of Shareholders, since such Proxy Statement will be filed with
the Securities and Exchange Commission not later than 120 days after the end of
the company fiscal year pursuant to Regulation 14A.

Item 14. Controls and Procedures.
- ----------------------------------
As of December 31, 2002, an evaluation was performed under the supervision and
with the participation of the company's management, including the CEO and CFO,
of the effectiveness of the design and operation of the company's disclosure
controls and procedures. Based on that evaluation, the company's management,
including the CEO and CFO, concluded that the company's disclosure controls and
procedures were effective as of December 31, 2002 in ensuring that information
required to be disclosed by the company in the reports it files and submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the Commission's rules and forms. There have been
no significant changes subsequent to December 31, 2002 and prior to the date of
this filing in the company's internal controls or in other factors that could
significantly affect internal controls.

PART IV
-------
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1)
Financial Statements
- --------------------------------------------------------------------------------
The following financial statements of the company are included in Part II, Item
8:

Consolidated Statement of Earnings - years ended December 31, 2002, 2001
and 2000

Consolidated Balance Sheet - December 31, 2002 and 2001

Consolidated Statement of Cash Flows - years ended December 31, 2002, 2001,
and 2000

Consolidated Statement of Shareholders' Equity - years ended December 31,
2002, 2001, and 2000

Notes to Consolidated Financial Statements

(a)(2) Financial Statement Schedules
- --------------------------------------
The following financial statement schedule of the company is included in
Part II, Item 8:

Schedule II - Valuation and Qualifying Accounts

I-24

All other schedules have been omitted because they are not applicable or
not required, or because the required information is included in the
Consolidated Financial Statements or notes thereto.

(a)(3) Exhibits.
- ------------------
See Exhibit Index at page number I-29 of this Report on Form 10-K.

(b) Reports on Form 8-K.
- ------------------------
An 8-K was filed on October 16, 2002 under Item 5, Other Events. The filing
included a 364-day credit renewal agreement dated October 16, 2002 which
was filed as exhibit 10(u).

An 8-K was filed on October 28, 2002 under Item 5, Other Events. The filing
contained Invacare Corporation's news release dated October 24, 2002.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized as of March 10, 2003.

INVACARE CORPORATION

By: /S/ A. Malachi Mixon, III
----------------------
A. Malachi Mixon, III
Chairman of the Board of
Directors and Chief Executive Officer

I-25

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated as of March 7, 2003.

Signature Title
- --------- --------------------------------------

/s/A. Malachi Mixon, III Chairman of the Board of Directors and
- ------------------------------------ Chief Executive Officer
A. Malachi Mixon, III (Principal Executive Officer)

/s/Gerald B. Blouch President, Chief Operating Officer and
- ------------------------------------ Director
Gerald B. Blouch

/s/Gregory C. Thompson Senior Vice President and Chief
- ------------------------------------ Financial Officer
Gregory C. Thompson (Principal Financial and Accounting
Officer)

/s/James C. Boland Director
- ------------------------------------
James C. Boland

/s/Michael F. Delaney Director
- ------------------------------------
Michael F. Delaney

/s/Whitney Evans Director
- ------------------------------------
Whitney Evans

/s/Bernadine P. Healy, M.D. Director
- ------------------------------------
Bernadine P. Healy, M.D.

/s/John R. Kasich Director
- ------------------------------------
John R. Kasich

/s/Dan T. Moore, III Director
- ------------------------------------
Dan T. Moore, III

/s/E. P. Nalley Director
- ------------------------------------
E. P. Nalley

/s/Joseph B. Richey, II Director
- ------------------------------------
Joseph B. Richey, II

/s/William M. Weber Director
- ------------------------------------
William M. Weber

I-26

CERTIFICATIONS

I, Gregory C. Thompson, certify that:

1. I have reviewed this annual report on Form 10-K of Invacare
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:

a). designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b). evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

c). presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a). all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and

b). any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

INVACARE CORPORATION

By:/s/Gregory C. Thompson
-----------------------
Gregory C. Thompson
Chief Financial Officer

Date: March 10, 2003

I-27

CERTIFICATIONS

I, A. Malachi Mixon, III, certify that:

1. I have reviewed this annual report on Form 10-K of Invacare
Corporation;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:

a). designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;

b). evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the "Evaluation Date"); and

c). presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a). all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weakness in internal controls; and

b). any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and

6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

INVACARE CORPORATION

By:/S/A. Malachi Mixon, III
------------------------
A. Malachi Mixon, III
Chief Executive Officer

Date: March 10, 2003

I-28

I-29

* Management contract, compensatory plan or arrangement
** Management contract, compensatory plan or arrangement filed herein.

(A) Reference is made to the appropriate Exhibit of the company Definitive
Proxy Statement used in connection with the Annual Meeting of Shareholders
held on May 22, 1996, which Exhibit is incorporated herein by reference.

(B) Reference is made to the appropriate Exhibit of the company report on Form
10-Q for the quarter ended September 30, 1996, which Exhibit is
incorporated herein by reference.

(C) Reference is made to the appropriate Exhibit of the company Registration
Statement on Form S-3 (Reg. No. 33-40168), effective as of April 26, 1991,
which Exhibit is incorporated herein by reference.

(D) Reference is made to Exhibit 1 of the company report on Form 8-A, dated
July 18, 1995, which Exhibit is incorporated herein by reference.

(E) Reference is made to the appropriate Exhibit of the company Report on Form
10-K for the fiscal year ended December 31, 1984, which Exhibit is
incorporated herein by reference.

(F) Reference is made to the appropriate Exhibit of the company's report on
Form 10-K for the fiscal year ended December 31, 1987, which Exhibit is
incorporated herein by reference.

(G) Reference is made to Exhibit A of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 25,
1988, which Exhibit is incorporated herein by reference.

I-30

(H) Reference is made to Exhibit A of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 24,
1991, which Exhibit is incorporated herein by reference.

(I) Reference is made to the appropriate Exhibit of the company Form 8
Amendment No. 1 (filed on September 23, 1987) to its Registration Statement
on Form 8-A (Reg. No. 0-12938, effective as of October 21, 1986), which
Exhibit is incorporated herein by reference.

(J) Reference is made to the appropriate Exhibit of the company report on Form
10-K for the fiscal year ended December 31, 1991, as amended, which is
incorporated herein by reference.

(K) Reference is made to the appropriate Exhibit of the company report on Form
10-K for the fiscal year ended December 31, 1992, which Exhibit is
incorporated herein by reference.

(L) Reference is made to Exhibit C of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 27,
1992, which Exhibit is incorporated herein by reference.

(M) Reference is made to Exhibit A of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 27,
1992, which Exhibit is incorporated herein by reference.

(N) Reference is made to Exhibit B of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 27,
1992, which Exhibit is incorporated herein by reference.

(O) Reference is made to Exhibit A of the company Definitive Proxy Statement
used in connection with the Annual Meeting of Shareholders held on May 23,
1994, which Exhibit is incorporated herein by reference.

(P) Reference is made to the appropriate Exhibit of the company report on Form
10-Q for the quarter ended March 31, 1997, which Exhibit is incorporated
herein by reference.

(Q) Reference is made to the appropriate Exhibit of the company report on Form
10-K for the fiscal year ended December 31, 1997, as amended, which is
incorporated herein by reference.

(R) Reference is made to the appropriate Exhibit to the company report on Form
8-K, dated January 23, 1998, which Exhibit is incorporated herein by
reference.

(S) Reference is made to the appropriate Exhibit of the company report on Form
10-Q for the quarter ended March 31, 1998, which Exhibit is incorporated
herein by reference.

(T) Reference is made to the appropriate Exhibit of the company report on Form
10-K for the fiscal year ended December 31, 1999, which Exhibit is
incorporated herein by reference.

(U) Reference is made to the appropriate Exhibit of the company report on Form
S-8, dated March 30, 2001, which Exhibit is incorporated herein by
reference.

(V) Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated
October 17, 2001, which Exhibit is incorporated herein by reference.

(W) Reference is made to Exhibit 10.2 of the company report on Form 8-K, dated
October 17, 2001, which Exhibit is incorporated herein by reference.

(X) Reference is made to Exhibit 10.1 of the company report on Form 10-Q, dated
September 30, 2002, which Exhibit is incorporated herein by reference.

(Y) Reference is made to Exhibit 10.1 of the company report on Form 8-K, dated
October 16, 2002, which Exhibit is incorporated herein by reference.

(Z) Reference is made to the appropriate Exhibit of the company report on Form
10-K for the fiscal year ended December 31, 1996, which Exhibit is
incorporated herein by reference.

I-31

REPORT OF INDEPENDENT AUDITORS

Shareholders and Board of Directors
Invacare Corporation

We have audited the accompanying consolidated balance sheet of Invacare
Corporation and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of earnings, cash flows and shareholders' equity for
each of the three years in the period ended December 31, 2002. Our audits also
included the financial statement schedule listed in the Index at Item 15 (a)(2).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Invacare Corporation and subsidiaries at December 31, 2002 and 2001, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in "Goodwill" in the Notes to the Consolidated Financial
Statements, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets, effective
January 1, 2002.

ERNST & YOUNG LLP

Cleveland, Ohio
January 22, 2003

FS-1

CONSOLIDATED STATEMENT OF EARNINGS

INVACARE CORPORATION AND SUBSIDIARIES

See notes to consolidated financial statements.

FS-2

CONSOLIDATED BALANCE SHEET

INVACARE CORPORATION AND SUBSIDIARIES

See notes to consolidated financial statements.

FS-3

CONSOLIDATED STATEMENT OF CASH FLOWS

INVACARE CORPORATION AND SUBSIDIARIES

See notes to consolidated financial statements.

FS-4

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

INVACARE CORPORATION AND SUBSIDIARIES

(In thousands)
Accumulated
Additional Other Unearned
Common Class B Paid-in- Retained Comprehensive Compen- Treasury
Stock Stock Capital Earnings Earnings(Loss) sation Stock Total
---------- --------- ----------- ---------- --------------- ---------- ---------- ---------

January 1, 2000 Balance $7,282 $358 $79,470 $251,955 $(8,976) $ - $(11,217) $318,872
Conversion of shares from Class B to
Common 15 (15) -
Exercise of stock options, including
tax benefit 4 (365) 7,304 6,943

Net earnings 59,911 59,911
Foreign currency translation adjustments (34,793) (34,793)
Marketable securities holding gain 339 339
-------
Total comprehensive income 25,457

Dividends (1,499) (1,499)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 2000 Balance 7,301 343 79,105 310,367 (43,430) - (3,913) 349,773
Conversion of shares from Class B to
Common 65 (65) -
Exercise of stock options, including
tax benefit 94 7,932 2,078 10,104
Restricted stock awards 6 943 (949) -
Restricted stock award expense 178 178

Net earnings 35,190 35,190
Foreign currency translation adjustments (3,342) (3,342)
Cumulative effect upon adopting FAS 133 521 521
Unrealized losses on cash flow hedges (1,561) (1,561)
Marketable securities holding loss (317) (317)
-------
Total comprehensive income 30,491

Dividends 1,525) (1,525)
Purchase of treasury shares (7,471) (7,471)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 2001 Balance 7,466 278 87,980 344,032 (48,129) (771) (9,306) 381,550
Exercise of stock options, including
tax benefit 105 9,834 (2,863) 7,076
Restricted stock awards 9 1,181 (1,190) -
Restricted stock award expense 757 757

Net earnings 64,770 64,770
Foreign currency translation adjustments 28,214 28,214
Unrealized gains on cash flow hedges 1,349 1,349
Marketable securities holding loss (163) (163)
-------
Total comprehensive income 94,170

Dividends (1,567) (1,567)
Purchase of treasury shares (1,674) (1,674)
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 2002 Balance $7,580 $278 $98,995 $407,235 $(18,729) $(1,204) $(13,843) $480,312
====== ==== ======= ======== ========= ======== ========= ========

See notes to consolidated financial statements.

FS-5

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING POLICIES

Nature of Operations: Invacare Corporation and its subsidiaries (the "company")
is the leading home medical equipment manufacturer in the world based on its
distribution channels, the breadth of its product line and net sales. The
company designs, manufactures and distributes an extensive line of medical
equipment for the home health care, retail and extended care markets. The
company's products include standard manual wheelchairs, motorized and
lightweight prescription wheelchairs, seating and positioning systems, motorized
scooters, patient aids, home care beds, low air loss therapy products,
respiratory products and distributed products.

Principles of Consolidation: The consolidated financial statements include the
accounts of the company and its majority owned subsidiaries. Certain foreign
subsidiaries are consolidated using a November 30 fiscal year end. All
significant intercompany transactions are eliminated.

Reclassifications: Certain reclassifications have been made to the prior years'
consolidated financial statements to conform to the presentation used for the
year ended December 31, 2002.

Use of Estimates: The consolidated financial statements are prepared in
conformity with accounting principles generally accepted in the United States
which require management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results may differ from these estimates.

Marketable Securities: Marketable securities consist of short-term investments
in repurchase agreements, government and corporate securities, certificates of
deposit and equity securities. Marketable securities with original maturities of
less than three months are treated as cash equivalents. The company has
classified its marketable securities as available for sale. The securities are
carried at their fair value and net unrealized holding gains and losses, net of
tax, are carried as a component of accumulated other comprehensive earnings
(loss).

Inventories: Inventories are stated at the lower of cost or market with cost
principally determined for domestic manufacturing inventories by the last-in,
first-out (LIFO) method and for non-domestic inventories and domestic finished
products purchased for resale ($74,037,000 and $72,025,000 at December 2002 and
2001, respectively) by the first-in, first-out (FIFO) method. Market costs are
based on the lower of replacement cost or estimated net realizable value. The
value of inventory on the LIFO method is approximately equal to its current cost
as of December 31, 2002 and 2001.

Property and Equipment: Property and equipment are stated on the basis of cost.
The company principally uses the straight-line method of depreciation for
financial reporting purposes based on annual rates sufficient to amortize the
cost of the assets over their estimated useful lives. Accelerated methods of
depreciation are used for federal income tax purposes. Expenditures for
maintenance and repairs are charged to expense as incurred.

Effective January 1, 2002, the company adopted, SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. The Statement addresses the
conditions under which an impairment charge should be recorded related to
long-lived assets (excluding goodwill) to be held and used or to be disposed of
by sale or otherwise. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate the carrying amount may not be
recoverable. The asset would be considered impaired when the future net
undiscounted cash flows generating by the asset are less than its carrying
value. An impairment loss would be recognized based on the amount by which the
carrying value of the asset exceeds its fair value. The adoption of SFAS No. 144
did not have an impact on the company's consolidated financial position or
results of operations.

Goodwill and Other Intangibles: Effective January 1, 2002, Invacare adopted SFAS
No. 142, Goodwill and Other Intangible Assets and accordingly, discontinued
amortization of goodwill. SFAS No. 142 changes the accounting for goodwill from
an amortization approach to a non-amortization approach requiring periodic
testing for impairment. For purposes of the impairment test, the fair value of
each reporting unit is estimated by forecasting cash flows and discounting those
cash flows using appropriate discount rates. The fair values are then compared
to the carrying value of the net assets of each reporting unit. The company
completed the required initial analysis as of January 1, 2002 as well as the
annual impairment test in the fourth quarter of 2002. The results of both tests
indicated no impairment of goodwill.

FS-6

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACCOUNTING POLICIES--Continued

Accrued Warranty Cost: Generally, the company's products are covered by
warranties against defects in material and workmanship for periods up to six
years from the date of sale to the customer. Certain components carry a lifetime
warranty. A provision for estimated warranty cost is recorded at the time of
sale based upon actual experience. The company continuously assesses the
adequacy of its product warranty accrual and makes adjustments as needed. See
the Current Liabilities footnote for a reconciliation of the changes in the
warranty accrual.

Product Liability Cost: The company's captive insurance company, Invatection
Insurance Co., currently has a policy year that runs from September 1 to August
31 and insures individual losses up to $10 million and annual aggregate policy
losses of $10 million of the company's domestic product liability exposure. The
company also has additional layers of coverage insuring $90 million in annual
aggregate losses arising from individual claims that exceed the captive
insurance company policy limits. Invatection records product liability reserves
for both known claims and incurred but not reported claims based upon
independent actuarial valuations. There can be no assurance that Invacare's
current insurance levels will continue to be adequate or available at an
affordable rate.

Revenue Recognition: The company recognizes revenue when the product is shipped
and provides an appropriate allowance for estimated returns and adjustments. The
cost of shipping products is treated as a component of costs of products sold
and the related revenue from shipping products is treated as a component of net
sales.

Research and Development: Research and development costs are expensed as
incurred and included in cost of products sold. The company's annual
expenditures for product development and engineering were approximately
$17,934,000, $17,394,000, and $16,231,000 for 2002, 2001, and 2000,
respectively.

Advertising: Advertising costs are expensed as incurred and included in selling,
general and administrative expenses. Advertising expenses amounted to
$20,189,000, $18,792,000, and $18,261,000 for 2002, 2001, and 2000,
respectively.

Stock-Based Compensation Plans: The company accounts for options under its
stock-based compensation plans using the intrinsic value method proscribed in
APB Opinion No. 25, Accounting for Stock Issued to Employees, and related
Interpretations. The majority of the options awarded have been granted at
exercise prices equal to the market value of the underlying stock on the date of
grant, thus no compensation cost has been reflected in the consolidated
statement of earnings for these options. In addition, restricted stock awards
have been granted without cost to the recipients and are being expensed on a
straight-line basis over the vesting periods. If the company had applied the
fair value recognition provisions of SFAS No. 123 Accounting for Stock-Based
Compensation for all stock options granted, net earnings per share assuming
dilution would have been reduced by $.15 in 2002, $.14 in 2001 and $.13 in 2000.

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. This statement provides
guidance for those companies wishing to voluntarily change to the fair value
based method of accounting for stock-based compensation. The statement also
amends the disclosure requirements of Statement 123, requiring prominent
disclosure in annual and interim financial statements regarding a company's
method for accounting for stock-based employee compensation and the effect of
the method on reported results. While Invacare continues to utilize the
disclosure-only provisions of Statement 123, the company has modified its
disclosures to comply with the new statement. See the Shareholders' Equity
Transactions footnote.

Income Taxes: The company uses the liability method to measure the provision for
income taxes and recognizing deferred tax assets and liabilities on the balance
sheet. The liability method requires that deferred income taxes reflect the tax
consequences of currently enacted rates for differences between the tax and
financial reporting bases of assets and liabilities. Undistributed earnings of
the company's foreign subsidiaries are considered to be indefinitely reinvested
and, accordingly, no provision for United States federal income taxes has been
provided.

FS-7

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

ACCOUNTING POLICIES--Continued

Derivative Instruments: Financial Accounting Standards Board Statement (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities, requires
companies to recognize derivative instruments as either assets or liabilities in
the consolidated balance sheet measured at fair value. The company adopted the
statement on January 1, 2001 and, accordingly, recognized a net-of-tax
cumulative effect adjustment to other comprehensive income of $521,000.

A majority of the company's derivative instruments are designated and qualify as
cash flow hedges. Accordingly, the effective portion of the gain or loss on the
derivative instrument is reported as a component of other comprehensive income
and reclassified into earnings in the same period or periods during which the
hedged transaction affects earnings. The remaining gain or loss on the
derivative instrument in excess of the cumulative change in the fair value of
the hedged item, if any, is recognized in current earnings during the period of
change. The derivatives designated as fair value hedges are perfectly effective;
thus, the entire gain or loss associated with the derivative instrument directly
affects the value of the debt by increasing or decreasing its carrying value.

The company has entered into interest rate swap agreements that qualify as cash
flow hedges and effectively convert $20 million of its floating-rate debt to a
fixed-rate basis, thus reducing the impact of interest-rate changes on future
interest expense. The company has also entered into interest rate swap
agreements that qualify as fair value hedges and effectively convert $80 million
of fixed-rate debt to floating-rate debt, so the company can avoid paying higher
than market interest rates. For the year, the company recognized a net gain of
$773,000 related to its swap agreements, which is reflected in interest expense
on the consolidated statement of earnings.

To protect against decreases/increases in forecasted foreign currency cash flows
resulting from inventory purchases/sales over the next year, the company
utilizes cash flow hedges to hedge portions of its forecasted purchases/sales
denominated in foreign currencies. The company recognized a net gain in 2002 of
$1,252,000 versus a net loss of $828,000 in 2001 on foreign currency cash flow
hedges. The gains or losses are included in cost of products sold and selling,
general and administrative expenses on the consolidated statement of earnings.

The company uses forward contracts that do not qualify for special hedging, but
do effectively limit the company's exposure to foreign currency fluctuations
between the Mexican Peso and U.S. Dollar. During 2002, the company recognized a
loss of $68,000 versus a gain of $953,000 in 2001 related to these forward
contracts, which are included in costs of products sold on the consolidated
statement of earnings.

The company recognized no gain or loss related to hedge ineffectiveness or
discontinued cash flow hedges. If it is later determined that a hedged
forecasted transaction is unlikely to occur, any gains or losses on the forward
contracts would be reclassified from other comprehensive income into earnings.
The company does not expect this to occur during the next twelve months.

Foreign Currency Translation: Substantially all the assets and liabilities of
the company's foreign subsidiaries are translated into U.S. dollars at year end
exchange rates. Revenues and expenses are translated at weighted average
exchange rates. Gains and losses resulting from translation are included in
accumulated other comprehensive earnings (loss).

Net Earnings Per Share: Basic earnings per share are computed based on the
weighted-average number of Common Shares and Class B Common Shares outstanding
during the year. Diluted earnings per share are computed based on the
weighted-average number of Common Shares and Class B Common Shares outstanding
plus the effects of dilutive stock options outstanding during the year.

Recently Issued Accounting Pronouncements: In June 2002, the FASB issued SFAS
No. 146, Accounting for the Costs Associated with Exit or Disposal Activities,
which addresses financial accounting and reporting for costs associated with
exit or disposal activities. The provisions of this Statement, which is
effective for exit or disposal activities that are initiated after December 31,
2002, are not expected to have a material impact on the Company's financial
position, results of operations or cash flows.

FS-8

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

RECEIVABLES

Trade accounts receivable are reduced by an allowance for amounts that may
become uncollectible in the future. The estimated allowance for uncollectible
amounts ($19,067,000 in 2002 and $14,043,000 in 2001) is based primarily on
management's evaluation of the financial condition of the customer.

Installment receivables as of December 31, 2002 and 2001 consist of the
following:

2002 2001
---- ----
Long- Long-
(In thousands) Current Term Total Current Term Total
------- ------- ------- ------- ------- -------

Installment receivables $33,942 $2,648 $36,590 $50,218 $4,370 $54,588
Less:
Unearned interest (451) (11) (462) (1,111) (94) (1,205)
Allowance for doubtful accounts (12,538) (1,127) (13,665) (13,684) (1,070) (14,754)
------- ------- ------- ------- ------- -------
$20,953 $1,510 $22,463 $35,423 $3,206 $38,629
======= ======= ======= ======= ======= =======

The company no longer enters into new installment receivable contracts. As a
result of the third party financing arrangement with DLL, management monitors
the collection status of these contracts in accordance with the company's
limited recourse obligations and provides amounts necessary for estimated losses
in the allowance for doubtful accounts. See the "Concentration of Credit Risk"
footnote for a description of the financing arrangement. Long-term installment
receivables are included in "Other Assets" on the consolidated balance sheet.

INVENTORIES

Inventories as of December 31, 2002 and 2001 consist of the following:

2002 2001
------- -------
(In thousands)
Raw materials $35,457 $35,333
Work in process 12,789 11,326
Finished goods 63,136 65,209
------- -------
$111,382 $111,868
======= =======

PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2002 and 2001 consist of the
following:
2002 2001
------- -------
(In thousands)
Machinery and equipment $199,448 $186,622
Land, buildings and improvements 55,232 54,308
Furniture and fixtures 15,641 14,516
Leasehold improvements 13,874 11,648
------- -------
284,195 267,094
Less allowance for depreciation (153,232) (134,892)
------- -------
$130,963 $132,202
======= =======

FS-9

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

GOODWILL

In accordance with the provisions of SFAS No. 142, effective January 1, 2002,
the company ceased amortization of goodwill. The following comparative
disclosure shows the impact on 2001 and 2000 as if SFAS No. 142 had been adopted
as of the beginning of each year.

(In thousands, except per share data) 2002 2001 2000
------- ------- ------
Reported net income $64,770 $35,190 $59,911
Goodwill amortization - 8,972 8,899
------- ------- ------
Adjusted net income $64,770 $44,162 $68,810
======= ======= ======

Basic earnings per share:
Reported net income $2.10 $1.15 $1.99
Goodwill amortization - 0.29 0.30
------- ------- ------
Adjusted net income $2.10 $1.44 $2.29
======= ======= ======

Diluted earnings per share:
Reported net income $2.05 $1.11 $1.95
Goodwill amortization - 0.28 0.29
------- ------- ------
Adjusted net income $2.05 $1.39 $2.24
======= ======= ======

The carrying amount of goodwill by operating segment is as follows:

2002 2001
--------------------------------------------------- ---------------------------------------------------
(In thousands) North North
America Europe Australasia Consolidated America Europe Australasia Consolidated
------- ------ ----------- ------------ ------- ------ ----------- ------------

Balance as of
January 1 $153,548 $141,566 $8,422 $303,536 $158,741 $141,907 $9,581 $310,229
Amortization - - - - (4,402) (3,978) (592) (8,972)
Foreign
currency
translation 135 15,759 1,688 17,582 (791) 3,637 (567) 2,279
------- ------- ------- ------- ------- ------- ------- -------
Balance as of
December 31 $153,683 $157,325 $10,110 $321,118 $153,548 $141,566 $8,422 $303,536
======= ======= ======= ======= ======= ======= ======= =======

OTHER INTANGIBLES

All of the company's other intangible assets have definite lives and continue to
be amortized over their useful lives. The company's intangibles consist of the
following:

December 31, 2002 December 31, 2001
------------------------------- --------------------------------
(In thousands) Accumulated Accumulated
Historical Cost Amortization Historical Cost Amortization
--------------- ------------ --------------- ------------

License agreements $6,037 $3,875 $5,882 $3,185
Patents 2,396 880 2,450 679
Other 2,576 1,475 2,516 1,078
------ ------ ------ ------
$11,009 $6,230 $10,848 $4,942
====== ====== ======= ======

Amortization expense related to other intangibles was $1,288,000 and $1,462,000
for 2002 and 2001, respectively. Estimated amortization expense for each of the
next five years is expected to be $1,136,000 for 2003, $1,130,000 in 2004,
$669,000 in 2005, $270,000 in 2006 and $242,000 in 2007.

FS-10

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

CURRENT LIABILITIES

Accrued expenses as of December 31, 2002 and 2001 consist of the following:

2002 2001
---- ----
(In thousands)
Accrued salaries and wages $20,266 $21,538
Acquisition reserves 3,960 5,750
Accrued insurance 2,304 1,784
Accrued warranty cost 11,448 7,607
Accrued rebates 3,669 3,083
Accrued interest 3,504 2,609
Accrued product liability, current portion 2,996 2,469
Accrued freight 3,548 3,766
Other accrued items 14,719 19,424
------ ------
$66,414 $68,030
======= =======

Changes in accrued warranty costs were as follows:
2002 2001
---- ----
(In thousands)
Balance as of January 1 $7,607 $7,917
Warranties issued during the period 7,571 5,213
Settlements made during the period (7,854) (5,897)
Changes in liability for pre-existing
warranties during the period,
including expirations 4,124 374
------ -----
Balance as of December 31 $11,448 $7,607
======= ======

LONG-TERM DEBT

Long-term debt as of December 31, 2002 and 2001 consist of the following:
2002 2001
---- ----
(In thousands)
$25,000,000 senior notes at 7.45%,
mature in February 2003 $ 3,571 $ 7,143
$80,000,000 senior notes at 6.71%,
due in February 2008 87,456 78,822
$20,000,000 senior notes at 6.60%,
due in February 2005 20,000 20,000
Revolving credit agreement
($325,000,000 multi-currency), at
.675% to 1.40% above local interbank
offered rates, expires October 17, 2006 126,128 237,177
Other notes 1,363 7,275
------ ------
238,518 350,417
Less current maturities (4,384) (7,693)
------ ------
$234,134 $342,724

In 2001, the company entered into a $325,000,000 5-year, multi-currency
revolving credit agreement and a $100,000,000 364-day facility with a group of
commercial banks. The 364-day facility was renewed in 2002. The multi-currency
revolving credit agreement and the 364-day facility expire on October 17, 2006
and October 15, 2003 respectively, or such later dates as mutually agreed upon
by the company and the banks. Borrowings denominated in foreign currencies
aggregated $12,842,000 at December 31, 2002 and $22,915,000 at December 31,
2001. The borrowing rates under the agreements are determined based on the ratio
of debt to earnings before interest, taxes, depreciation and amortization
(EBITDA) of the company as defined in the agreements and range from .675% to
1.40% above the various interbank offered rates. As of December 31, 2002 and
2001, the weighted average floating interest rate on U.S. borrowings were 3.66%
and 4.22%, respectively. The agreements require the company to maintain certain
conditions with respect to net worth, funded debt to capitalization, and
interest coverage as defined in the agreements. At December 31, 2002,
$195,415,000 of retained earnings is available for dividends pursuant to the
most restrictive covenants. Under the most restrictive covenants of the
company's borrowing arrangements, the company has the capacity to borrow up to
an additional $209,457,000 as of December 31, 2002.

FS-11

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

LONG-TERM DEBT--Continued

In December 2001, the company exchanged the fixed rate of 6.71% on $50,000,000
of the $80,000,000 in Senior Notes due in February 2008. The three agreements
for $25,000,000, $15,000,000 and $10,000,000 exchange the fixed rate for
variable rates equal to LIBOR plus 1.9%, 1.71% and 1.62% respectively. In
January 2002, the company exchanged the fixed rate of 6.71% on the remaining
$30,000,000 of the $80,000,000 in Senior Notes due in February 2008. The two
agreements for $10,000,000 and $20,000,000 exchange the fixed rate for variable
rates equal to LIBOR plus 1.05% and 1.08%, respectively. The effect of these
swaps is to exchange a fixed rate of 6.71% for floating rates to avoid paying
higher than market interest rates.

In May 1999, the company fixed the interest rate on $20,000,000 of its U.S.
dollar borrowings through two interest rate swap agreements. Each agreement is
for $10,000,000 U.S. dollars. The effect of these swaps is to exchange a
short-term floating interest rate for a fixed rate of 5.63% for a four-year term
on both agreements.

The aggregate minimum maturities of long-term debt for each of the next five
years is as follows: $4,384,000 in 2003, $176,000 in 2004, $138,000 in 2005,
$145,329,000 in 2006, and $109,000 in 2007. Interest paid on borrowings was
$13,465,000, $26,361,000 and $29,987,000 in 2002, 2001 and 2000, respectively.

OTHER LONG-TERM OBLIGATIONS

Other long-term obligations as of December 31, 2002 and 2001 consist of the
following:
2002 2001
---- ----
(In thousands)
Supplemental Executive Retirement
Plan liability $9,460 $7,970
Product liability 5,276 3,347
Other, principally deferred
compensation 10,163 12,883
------ ------
24,899 24,200
Less current maturities of long-term
obligations (95) (1,390)
------ ------
Total long-term obligations $24,804 $22,810
======= =======

LEASES AND COMMITMENTS

The company leases a substantial portion of its facilities, transportation
equipment, data processing equipment and certain other equipment. These leases
have terms of up to 10 years and provide for renewal options. Generally, the
company is required to pay taxes and normal expenses of operating the facilities
and equipment. As of December 31, 2002, the company is committed under
non-cancelable operating leases which have initial or remaining terms in excess
of one year and expire on various dates through 2009. Lease expenses were
approximately $12,575,000 in 2002, $12,045,000 in 2001, and $11,269,000 in 2000.
Future minimum operating lease commitments as of December 31, 2002, are as
follows:

(In thousands)
Year Amount
---- ------
2003 $11,807
2004 7,625
2005 3,783
2006 1,940
2007 1,158
Thereafter 129
------
Total Future Minimum
Lease Payments $26,442
=======

The amount of buildings and equipment capitalized in connection with capital
leases was $4,567,000 and $4,429,000 at December 31, 2002 and 2001,
respectively. At December 31, 2002 and 2001, accumulated amortization was
$2,508,000 and $2,326,000, respectively.

FS-12

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

RETIREMENT AND BENEFIT PLANS

Substantially all full-time salaried and hourly domestic employees are included
in the Invacare Retirement Savings Plan sponsored by the company. The company
makes matching cash contributions up to 66.7% of employees' contributions up to
3% of compensation and may make discretionary contributions to the domestic
plans based on an annual resolution by the Board of Directors.

The company sponsors a 401(k) Benefit Equalization Plan covering certain
employees, which provides for retirement payments so that the total retirement
payments equal amounts that would have been payable from the company's principal
retirement plans if it were not for limitations imposed by income tax
regulations.

Contribution expense for the above plans in 2002, 2001 and 2000 was $5,444,000,
$5,788,000, and $5,071,000, respectively.

The company also sponsors a non-qualified defined benefit Supplemental Executive
Retirement Plan for certain key executives. The projected benefit obligation
related to this unfunded plan was $21,603,000 at December 31, 2002, of which
approximately $9,823,000 has been accrued. Expense for the plan in 2002, 2001,
and 2000 was $2,147,000, $2,059,000, and $1,714,000, respectively.

SHAREHOLDERS' EQUITY TRANSACTIONS

The Common Shares and the Class B Common Shares generally have identical rights,
terms and conditions and vote together as a single class on most issues, except
that the Class B Common Shares have ten votes per share, carry a 10% lower cash
dividend rate and, in general, can only be transferred to family members.
Holders of Class B Common Shares are entitled to convert their shares into
Common Shares at any time on a share-for-share basis.

The 1994 Performance Plan (the "1994 Plan"), as amended, allows the Compensation
Committee of the Board of Directors (the "Committee") to grant up to 5,500,000
Common Shares in connection with incentive stock options, non-qualified stock
options, stock appreciation rights and stock awards (including the use of
restricted stock). The Committee has the authority to determine which employees
and directors will receive awards, the amount of the awards and the other terms
and conditions of the awards. There were no stock appreciation rights
outstanding at December 31, 2002, 2001 or 2000. During 2002, the Committee
granted 619,868 non-qualified stock options for a term of ten years at the fair
market value of the company's stock on the date of grant.

Restricted stock awards for 37,289 shares were granted in 2002 (24,020 in 2001)
without cost to the recipients. Under the terms of the restricted stock awards,
54,809 of the shares granted vest four years after the award date and 6,500 of
the shares granted vest 2 years after the award date. Unearned restricted stock
compensation of $1,190,000 in 2002 and $949,000 in 2001, determined as the
market value of the shares at the date of grant, is being amortized on a
straight-line basis over the vesting period. Compensation expense of $757,000
was recognized in 2002 and $178,000 was recognized in 2001 related to restricted
stock awards granted in 2002 and 2001.

The company also had a Stock Option Plan for non-employee Directors which
provided for the granting of up to 100,000 options to eligible Directors.
Directors were granted stock options with exercise prices at the fair market
value of the company's stock on the date of grant. At December 31, 2002, there
were 12,550 options outstanding under this plan. During 2002, no options were
granted under this plan, which expired in 2002.

The Plans have provisions for the net share settlement of options. Under these
provisions, the company acquired 85,043 treasury shares for $2,868,514 in 2002,
124,823 treasury shares for $4,781,114 in 2001 and 79,922 treasury shares for
$2,663,062 in 2000.

FS-13

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

SHAREHOLDERS' EQUITY TRANSACTIONS--Continued

As of December 31, 2002, an aggregate of 9,234,168 Common Shares were reserved
for conversion of Class B Common Shares, future rights (as defined below) and
the exercise and future grant of options.

Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
2002 Price 2001 Price 2000 Price
---- ----- ---- ----- ---- -----

Options outstanding at January 1 4,201,943 $23.27 4,289,763 $21.08 4,059,133 $18.70
Granted 619,868 33.59 585,905 33.59 1,082,056 24.33
Exercised (418,432) 18.28 (636,933) 16.84 (659,187) 11.35
Canceled (145,957) 27.32 (36,792) 22.31 (192,239) 22.37
--------- ------ --------- ------ --------- -------
Options outstanding at December 31 4,257,422 $25.23 4,201,943 $23.27 4,289,763 $21.08
========= ====== ========= ====== ========= ======

Options price range at December 31 $11.88 to $9.30 to $7.50 to
$36.84 $37.56 $31.25

Options exercisable at December 31 2,347,721 2,101,706 1,965,220
Options available for grant at December 31 * 296,860 917,530 1,466,643

* Options available for grant as of December 31, 2002 reduced by net
restricted stock award activity of 59,309 and the expiration of 87,450
shares related to the 1992 Non-Employee Directors Stock Option Plan.

The company utilizes the disclosure-only provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123). Accordingly, no compensation cost has been recognized for the stock option
plans, except the expense recorded related to the 61,309 restricted stock awards
granted in 2002 and 2001. Had compensation cost for the company's stock option
plans been determined based on the fair value at the grant date for awards in
2002, 2001 and 2000 consistent with the provisions of SFAS 123, the company's
net earnings and earnings per share would have been reduced to the pro forma
amounts indicated below:

2002 2001 2000
---- ---- ----

(In thousands except per share data)
Net earnings - as reported * $64,770 $35,190 $59,911
Less: compensation expense determined based on the
fair-value method for all awards granted at
market value, net of related tax effects 4,504 4,446 4,072
------ ------ ------
Net earnings - pro forma $60,266 $30,744 $55,839
======= ======= =======

Earnings per share as reported - basic $2.10 $1.15 $1.99
Earnings per share as reported - assuming dilution $2.05 $1.11 $1.95

Pro forma earnings per share - basic $1.95 $1.00 $1.85
Pro forma earnings per share - assuming dilution $1.90 $.97 $1.82

* Includes stock compensation expense, net of tax, on
restricted awards granted without cost of: $492 $116 -

FS-14

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

SHAREHOLDERS' EQUITY TRANSACTIONS--Continued

The assumption regarding the stock options issued in 2002, 2001 and 2000 was
that 25% of such options vested in the year following issuance. The stock
options awarded during such years provided a four-year vesting period whereby
options vest equally in each year. Current and prior years' pro forma
disclosures may be adjusted for forfeitures of awards that will not vest because
service or employment requirements have not been met.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions:

2002 2001 2000
---- ---- ----
Expected dividend yield .80% .90% 1.35%
Expected stock price volatility 31.4% 33.8% 29.7%
Risk-free interest rate 3.26% 4.53% 4.96%
Expected life (years) 5.4 6.0 6.8

The weighted-average fair value of options granted during 2002, 2001 and 2000,
based upon an expected exercise year of 2007, was $10.71, $12.24 and $8.99,
respectively.

The plans provide that shares granted come from the company's authorized but
unissued common stock or treasury shares. Pursuant to the plan, the Committee
has established that the 2002 grants may not be exercised within one year from
the date granted and options must be exercised within ten years from the date
granted. The weighted-average remaining contractual life of options outstanding
at December 31, 2002 is 7.2 years.

On July 7, 1995, the company adopted a Rights Plan whereby each holder of a
Common Share and a Class B Common Share received one purchase right (the
"Rights") for each share owned. Under certain conditions, each Right may be
exercised to purchase one-tenth of one Common Share at a price of $8 per
one-tenth of a share. The Rights may only be exercised 10 days after a third
party has acquired 30% or more of the company's outstanding voting power or 10
days after a third party commences a tender offer for 30% or more of the voting
power (an "Acquiring Party"). In addition, if an Acquiring Party merges with the
company and the company's Common Shares are not changed or exchanged, or if an
Acquiring Party engages in one of a number of self-dealing transactions, each
holder of a Right (other than the Acquiring Party) will have the right to
receive that number of Common Shares or similar securities of the resulting
entity having a market value equal to two times the exercise price of the Right.
The company may redeem the Rights at a price of $.005 per Right at any time
prior to 10 days following a public announcement that an Acquiring Party has
acquired beneficial ownership of 30% or more of the company's outstanding voting
power, and in certain other circumstances as approved by the Board of Directors.
The Rights will expire on July 7, 2005.

CAPITAL STOCK

Capital stock activity for 2002, 2001 and 2000 consisted of the following
(In thousands of shares):

Common Stock Class B Treasury
Shares Shares Shares
----------------- ---------- ---------

January 1, 2000 Balance 29,125 1,433 (579)
Conversion of shares from Class B to Common 61 (61) -
Exercise of stock options - - 402
------------------------------------------------------------------- ----------------- ---------- --------
December 31, 2000 Balance 29,186 1,372 (177)
Conversion of shares from Class B to Common 260 (260) -
Exercise of stock options 368 - 128
Stock Awards 24 - -
Repurchase of treasury shares - - (200)
------------------------------------------------------------------- ----------------- ---------- --------
December 31, 2001 Balance 29,838 1,112 (249)
Exercise of stock options 419 - (85)
Stock Awards 37 - -
Repurchase of treasury shares - - (53)
------------------------------------------------------------------- ----------------- ---------- --------
December 31, 2002 Balance 30,294 1,112 (387)
====== ===== ====

FS-15

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

OTHER COMPREHENSIVE EARNINGS (LOSS)

The components of other comprehensive earnings (loss) are as follows:
(In thousands)

Unrealized
Unrealized Gain Gain (Loss) on
Currency (Loss) on Derivative
Translation Available-for-Sale Financial
Adjustments Securities Instruments Total
----------- ------------------ ------------- ---------

Balance at January 1, 2000 $(9,697) $721 $ - $(8,976)
Foreign currency translation adjustments (34,793) (34,793)
Unrealized gain on available for sale securities 556 556
Deferred tax expense relating to unrealized gain on available
for sale securities (217) (217)
------- ------- ------- -------
Balance at December 31, 2000 (44,490) 1,060 - (43,430)

Foreign currency translation adjustments (3,342) (3,342)
Unrealized loss on available for sale securities (515) (515)
Deferred tax benefit relating to unrealized loss on available
for sale securities 198 198
Cumulative effect upon adoption of FAS 133 802 802
Current period unrealized loss on cash flow hedges (2,402) (2,402)
Deferred tax benefit relating to unrealized loss on
derivative financial instruments 560 560
------- ------- ------- -------
Balance at December 31, 2001 (47,832) 743 (1,040) (48,129)

Foreign currency translation adjustments 28,214 28,214
Unrealized loss on available for sale securities (251) (251)
Deferred tax benefit relating to unrealized loss on available
for sale securities 88 88
Current period unrealized gain on cash flow hedges 2,074 2,074
Deferred tax expense relating to unrealized gain on derivative
financial instruments (725) (725)
------- ------- ------- -------
Balance at December 31, 2002 $(19,618) $580 $309 $(18,729)
======= ======= ======= =======

Net losses of $402,000 and $1,975,000 were reclassified into earnings related to
derivative instruments designated and qualifying as cash flow hedges in 2002 and
2001, respectively.

INCOME TAXES

Earnings before income taxes consist of the following:
2002 2001 2000
---- ---- ----
(In thousands)
Domestic $51,512 $38,848 $67,730
Foreign 45,018 27,542 30,486
------- ------- -------
$96,530 $66,390 $98,216
======= ======= =======

FS-16

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INCOME TAXES --Continued

The company has provided for income taxes as follows:
2002 2001 2000
------ ------ ------
(In thousands)
Current:
Federal $21,415 $11,985 $24,704
State 2,200 3,800 4,100
Foreign 11,195 9,195 11,134
------ ------ ------
34,810 24,980 39,938

Deferred:
Federal (4,620) 5,170 (2,192)
Foreign 1,570 1,050 559
------ ------ ------
(3,050) 6,220 (1,633)
------ ------ ------
Income Taxes $31,760 $31,200 $38,305
====== ======= ======

A reconciliation to the effective income tax rate from the federal statutory
rate follows:

2002 2001 2000
---- ---- ----
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local income taxes, net of
federal income tax benefit 1.5 3.7 2.7
Tax credits (2.3) (1.8) (1.9)
Goodwill - 4.8 3.2
Valuation reserve for investments - 7.5 -
Foreign taxes at less than the federal
statutory rate, excluding goodwill (2.6) (1.7) (.5)
Other, net 1.3 (.5) .5
--- --- ---
32.9% 47.0% 39.0%
==== ==== ====

Significant components of deferred income tax assets and liabilities at December
31, 2002 and 2001 are as follows:

2002 2001
----- ----
(In thousands)
Current deferred income tax assets, net:
Bad debt $11,669 $9,132
Warranty 2,378 1,912
Inventory 2,278 2,611
Other accrued expenses and reserves 2,600 2,548
State and local taxes 3,242 3,242
Litigation reserves 2,171 2,209
Compensation and benefits 674 1,282
Product liability 292 335
Loss carryforwards 860 300
Other, net (111) 554
---- ---
$26,053 $24,125
======= =======

FS-17

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INCOME TAXES --Continued

Long-term deferred income tax assets (liabilities), net:
Fixed assets (11,012) (10,469)
Product liability 1,282 600
Loss carryforwards 768 1,550
Compensation and benefits 6,172 5,438
State and local taxes 2,400 2,400
Valuation reserve (768) (1,414)
Other, net 2,047 1,678
---- ------
$ 889 $ (217)
---- ------
Net Deferred Income Taxes $26,942 $23,908
======= =======

At December 31, 2002, the company had foreign tax loss carryforwards of
approximately $5,280,000 of which all are non-expiring. The company made income
tax payments of $28,769,000, $27,104,000 and $28,626,000 during the years ended
December 31, 2002, 2001 and 2000, respectively.

NET EARNINGS PER COMMON SHARE

The following table sets forth the computation of basic and diluted net earnings
per common share.

2002 2001 2000
---- ---- ----

(In thousands except per share data)
Basic
Average common shares outstanding 30,867 30,620 30,128

Net earnings $64,770 $35,190 $59,911

Net earnings per common share $2.10 $1.15 $1.99

Diluted
Average common shares outstanding 30,867 30,620 30,128
Stock options 797 1,063 633
------ ------ ------
Average common shares assuming dilution 31,664 31,683 30,761

Net earnings $64,770 $35,190 $59,911

Net earnings per common share $2.05 $1.11 $1.95

CONCENTRATION OF CREDIT RISK

The company manufactures and distributes durable medical equipment and supplies
to the home health care, retail and extended care markets. The company performs
credit evaluations of its customers' financial condition. Prior to December
2000, the company leased equipment to certain customers for periods ranging from
6 to 39 months. In December 2000, Invacare entered into an agreement with DLL, a
third party financing company, to provide all future lease financing to
Invacare's customers. The DLL agreement provides for direct leasing between DLL
and the Invacare customer. The company retains a limited recourse obligation
($12.3 million at December 31, 2002) to DLL for events of default under the
contracts (total balance outstanding of $43.5 million at December 31, 2002).
Accordingly, the company monitors the collections status of these contracts and
has provided amounts for estimated losses in its allowances for doubtful
accounts.

Substantially all of the company's receivables are due from health care, medical
equipment dealers and long term care facilities located throughout the United
States, Australia, Canada, New Zealand and Europe. A significant portion of
products sold to dealers, both foreign and domestic, are ultimately funded
through government reimbursement programs such as Medicare and Medicaid. In
addition, the company has seen significant shift in reimbursement to customers
from managed care entities. As a consequence, changes in these programs can have
an adverse impact on dealer liquidity and profitability. Credit losses are
provided for in the financial statements.

FS-18

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FAIR VALUES OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the company in estimating its
fair value disclosures for financial instruments:

Cash, cash equivalents and marketable securities: The carrying amount reported
in the balance sheet for cash, cash equivalents and marketable securities
approximates its fair value.

Installment receivables: The carrying amount reported in the balance sheet for
installment receivables approximates its fair value. The majority of the
portfolio contains receivables which are due in less than one year. The interest
rates associated with these receivables have not varied significantly since
inception. Management believes that after consideration of the credit risk, the
net book value of the installment receivables approximates market value.

Long-term debt: The carrying amounts of the company's borrowings under its
long-term revolving credit agreements approximate their fair value. Fair values
for the company's senior notes are estimated using discounted cash flow
analyses, based on the company's current incremental borrowing rate for similar
borrowing arrangements.

Interest Rate Swaps: The company is a party to interest rate swap agreements
which are entered into in the normal course of business to reduce exposure to
fluctuations in interest rates. The agreements are with major financial
institutions which are expected to fully perform under the terms of the
agreements thereby mitigating the credit risk from the transactions. The
agreements are contracts to exchange floating rate payments with fixed rate
payments or fixed rate payments for floating rate payments over the life of the
agreements without the exchange of the underlying notional amounts. The notional
amounts of such agreements are used to measure interest to be paid or received
and do not represent the amount of exposure to credit loss. The amounts to be
paid or received under the interest rate swap agreements are accrued consistent
with the terms of the agreements and market interest rates. Fair value for the
company's interest rate swaps are based on independent pricing models.

Other investments: The company has made other investments in limited
partnerships and non-marketable equity securities which are accounted for using
the cost method. These investments were acquired in private placements and there
are no quoted market prices or stated rates of return. During 2001, a decline in
market value of certain of these investments was determined to be other than
temporary, and accordingly, a valuation reserve was established. See the
Non-Recurring and Unusual Items footnote.

The carrying amounts and fair values of the company's financial instruments at
December 31, 2002 and 2001 are as follows:

2002 2001
---- ----
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------

(In thousands)
Cash and cash equivalents $13,086 $13,086 $16,683 $16,683
Marketable securities 1,350 1,350 1,522 1,522
Other investments 8,774 8,774 9,018 9,018
Installment receivables 22,463 22,463 38,629 38,629
Long-term debt (including current maturities) 238,518 241,051 350,417 349,052
Interest rate swaps 6,369 6,369 (2,903) (2,903)

Forward Contracts: The company operates internationally and as a result is
exposed to foreign currency fluctuations. Specifically, the exposure includes
intercompany loans and third party sales or payments. In an attempt to reduce
this exposure, foreign currency forward contracts are utilized and accounted for
as hedging instruments. The company does not use derivative financial
instruments for speculative purposes.

The gains and losses that result from the majority of the forward contracts are
deferred and recognized when the offsetting gains and losses for the identified
transactions are recognized. The company recognized gains of $1,185,000 in 2002
and $124,000 in 2001 on forward contracts which were recognized in cost of
products sold and selling, general and administrative expenses.

FS-19

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

FAIR VALUES OF FINANCIAL INSTRUMENTS--Continued

The following table represents the fair value of all outstanding forward
contracts at December 31, 2002 and 2001. The valuations are based on market
rates. All forward contracts noted below mature before January 2004 and January
2003, respectively.

December 31, 2002
Cost Market Value
U.S. dollar (In thousands) (Buy)/Sell Gain/(Loss) (Buy)/Sell
-------------------------- ---------- ----------- ----------

Canadian Dollar $8,700 $88 $8,788
Euro 8,725 (450) 8,275
New Zealand Dollar (10,670) 1,540 (9,130)
Swedish Kroner (13,271) 384 (12,887)
Mexican Peso (6,530) (84) (6,614)

December 31, 2001
Cost Market Value
U.S. dollar (In thousands) (Buy)/Sell Gain/(Loss) (Buy)/Sell
-------------------------- ---------- ----------- ----------
Canadian Dollar $7,800 $103 $7,903
Euro 7,500 87 7,587
New Zealand Dollar (11,050) (106) (11,156)
Swedish Kroner (6,750) 42 (6,708)

NON-RECURRING AND UNUSUAL ITEMS

In 2001, the company recorded a fourth quarter non-cash charge of approximately
$31,950,000 ($25,250,000 after tax) to reserve the value of certain investments
and notes receivable. The decline in value of these investments was determined
to be other than temporary due in part to the recent economic decline and
tightening of the capital markets which has made obtaining the additional
funding that these entities require difficult.

In 2000, as a result of repaying EURO and DKK denominated debt, the company
realized a non-recurring pre-tax foreign currency gain of approximately
$20,130,000. The gain was offset by charges in the fourth quarter aggregating
$8,700,000 related primarily to closing two distribution centers and a
manufacturing plant ($3,700,000), severance costs due to staff reductions (nine
individuals) primarily at the corporate office ($1,000,000) and costs associated
with the settlement of litigation ($4,000,000). The entire amount of these
charges have been utilized in accordance with their initial designation. In
addition, during the fourth quarter of 2000, the company also increased its bad
debt reserve impacting selling, general and administrative expenses by
approximately $8,000,000.

BUSINESS SEGMENTS

The company operates in three primary business segments based on geographical
area: North America, Europe and Australasia. The three reportable segments
represent operating groups which offer products to different geographic regions.

The North America segment sells each of five primary product lines which
includes: standard, rehab, distributed, respiratory, and continuing care
products. Europe and Australasia sell the same product lines with the exception
of distributed products. Each business segment sells to the home health care,
retail and extended care markets.

The company evaluates performance and allocates resources based on profit or
loss from operations before income taxes for each reportable segment. The
accounting policies of each segment are the same as those described in the
summary of significant accounting policies for the company's consolidated
financial statements. Intersegment sales and transfers are based on the costs to
manufacture plus a reasonable profit element. Therefore, intercompany profit or
loss on intersegment sales and transfers is not considered in evaluating segment
performance. Intersegment revenue for reportable segments are $61,178,000,
$66,565,000 and $61,372,000 for the years ended December 31, 2002, 2001 and
2000, respectively.

FS-20

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

BUSINESS SEGMENTS--Continued

In 2002, management changed how certain income and expense items should be
allocated for management reporting purposes. In particular, various selling,
general, and administrative expenses, previously not considered part of any
particular segment and disclosed in the "Other" category, are now assigned to
the North American segment. Additionally, management now assesses the
Australasia segment excluding inter-company profit. Accordingly, the "Other"
category now includes Australasian inter-company profit. Prior period amounts
have been restated to reflect these changes.

The information by segment is as follows (In thousands):

2002 2001 2000
-------- -------- -------
Revenues from external customers
North America $793,464 $773,713 $741,255
Europe 251,443 236,093 238,208
Australasia 44,254 43,833 33,699
-------- -------- --------
Consolidated $1,089,161 $1,053,639 $1,013,162
========= ========= =========

Depreciation and amortization
North America $19,232 $23,365 $21,010
Europe 5,699 7,974 8,814
Australasia 1,623 2,047 1,585
All Other (1) 84 62 60
-------- -------- --------
Consolidated $26,638 $33,448 $31,469
========= ========= =========

Net interest expense (income)
North America $11,910 $16,154 $19,867
Europe 5,256 6,459 7,342
Australasia (282) 9 195
All Other (1) (6,312) (7,161) (7,358)
-------- -------- --------
Consolidated $10,572 $15,461 $20,046
========= ========= =========

Earnings (loss) before income taxes
North America $76,548 $84,208 $82,957
Europe 19,979 8,444 12,142
Australasia 5,740 4,739 981
All Other (1) (5,737) 949 2,136
Non-recurring and unusual item - (31,950) -
-------- -------- --------
Consolidated $96,530 $66,390 $98,216
========= ========= =========

Assets
North America $510,135 $575,238 $593,271
Europe 295,085 254,970 257,240
Australasia 41,185 32,727 32,542
All Other (1) 60,298 51,602 68,802
-------- -------- --------
Consolidated $906,703 $914,537 $951,855
========= ========= =========
Expenditures for assets
North America $11,172 $11,980 $16,704
Europe 7,956 6,401 7,922
Australasia 2,381 1,734 1,639
All Other (1) 600 67 180
-------- ------- ------
Consolidated $22,109 $20,182 $26,445
======== ======= ======

(1) Consists of the domestic export unit, un-allocated corporate selling,
general and administrative costs, the Invacare captive insurance unit and
inter-company profits, which do not meet the quantitative criteria for
determining reportable segments.
FS-21

INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

BUSINESS SEGMENTS--Continued

Net sales by product, are as follows (In thousands):

North America 2002 2001 2000
------------- ------- ------- -------
Standard $281,126 $292,360 $285,568
Rehab 211,096 195,955 189,515
Distributed 146,573 127,975 121,662
Respiratory 82,528 88,915 84,284
Continuing Care 41,953 41,499 36,400
Other 30,188 27,009 23,826
------- ------- -------
$793,464 $773,713 $741,255
======= ======= =======

Europe 2002 2001 2000
------ ------- ------- -------
Standard $125,996 $121,355 $131,327
Rehab 113,162 102,801 96,786
Respiratory 7,664 7,607 6,352
Continuing Care 4,621 4,330 3,743
------- ------- -------
$251,443 $236,093 $238,208
======= ======= =======

Australasia 2002 2001 2000
----------- ------- ------- -------
Rehab $32,752 $33,154 $25,731
Respiratory 4,207 5,440 4,329
Standard 2,917 2,394 1,597
Continuing Care 1,763 1,882 307
Other 2,615 963 1,735
------- ------- -------
$44,254 $43,833 $33,699
======= ======== ========

Total Consolidated $1,089,161 $1,053,639 $1,013,162
========= ========= =========

No single customer accounted for more than 5% of the company's sales.

INTERIM FINANCIAL INFORMATION (UNAUDITED)

QUARTER ENDED
--------------
(In thousands, except per share data)
2002 March 31, June 30, September 30, December 31,
---- --------- --------- ------------- ------------

Net sales $255,081 $271,846 $280,253 $281,981
Gross profit 74,634 80,618 87,353 84,793
Earnings before income taxes 17,678 23,992 28,562 26,298
Net earnings 11,868 16,102 19,162 17,638
Net earnings per share - basic .39 .52 .62 .57
Net earnings per share - assuming
dilution .38 .51 .61 .56

2001 March 31, June 30, September 30, December 31,
---- --------- --------- ------------- ------------
Net sales $254,149 $265,704 $272,210 $261,576
Gross profit 76,890 80,855 83,838 76,764
Earnings (loss) before income taxes 18,791 26,123 31,452 (9,976)
Net earnings (loss) 11,556 16,066 19,343 (11,775)
Net earnings (loss) per share - basic .38 .52 .63 (.38)
Net earnings (loss) per share - assuming
dilution .37 .51 .61 (.37)

See non-recurring and unusual items footnote for disclosure of charge taken in
the fourth quarter of 2001.
FS-22

INVACARE CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS

(In thousands) COL A. COL B. COL C. COL D.
------ ------ ------ ------

Balance Charged To Balance
At Beginning Cost And Deductions At End
Of Period Expenses Describe Of Period
Year Ended December 31, 2002 ------------ ---------- ---------- ---------
----------------------------
Deducted from asset accounts -

Allowance for doubtful accounts $28,797 $10,792 $(6,857)(A) $32,732

Inventory obsolescence reserve 5,463 2,137 (2,263)(B) 5,337

Investments and related notes 29,000 - - 29,000
receivable

Accrued warranty cost 7,607 11,695 (7,854)(B) 11,448

Accrued product liability 5,816 5,086 (2,630)(C) 8,272

Year Ended December 31, 2001
----------------------------
Deducted from asset accounts -

Allowance for doubtful accounts $30,737 $7,533 $(9,473)(A) $28,797

Inventory obsolescence reserve 6,233 3,363 (4,133)(B) 5,463

Investments and related notes - 29,000 - 29,000
receivable

Accrued warranty cost 7,917 5,587 (5,897)(B) 7,607

Accrued product liability 2,881 4,366 (1,431)(C) 5,816

Year Ended December 31, 2000
----------------------------
Deducted from asset accounts -

Allowance for doubtful accounts $21,434 $13,731 $(4,428)(A) $30,737

Inventory obsolescence 10,682 3,970 (8,419)(B) 6,233

Accrued warranty cost 7,758 7,446 (7,287)(B) 7,917

Accrued product liability 6,825 2,664 (6,608)(C) 2,881

Note (A) - Uncollectible accounts written off, net of recoveries.

Note (B) - Amounts written off or payments incurred.

Note (C) - Loss and loss adjustment.

FS-23

Exhibit 21

1. Invacare Ltd., a U.K. corporation and wholly owned subsidiary.*

2. Invacare Canada Inc., an Ontario corporation and wholly owned subsidiary.

3. Invacare Deutschland GmbH, a German corporation and wholly owned
subsidiary.

4. Invacare International Corporation, an Ohio corporation and wholly owned
subsidiary.

5. Invacare Trading Company, Inc., a United States Territory of the Virgin
Islands corporation and wholly owned subsidiary.

6. Invamex, S.A. de R.L. C.V., a Mexican corporation and wholly owned
subsidiary.

7. Invacare Credit Corporation, an Ohio corporation and wholly owned
subsidiary.

8. Invatection Insurance Company, a Vermont corporation and wholly owned
subsidiary.

9. Lam Craft Industries, Incorporated, a Missouri corporation and wholly owned
subsidiary.

10. Invacare Poirier S.A.S., a French corporation and wholly owned subsidiary.

11. Dynamic Controls Unlimited, a New Zealand corporation and wholly owned
subsidiary.

12. Quantrix Consultants Unlimited, a New Zealand corporation and wholly owned
subsidiary.

13. Dynamic Europe Ltd., a U.K. corporation and wholly owned subsidiary.

14. Sci Des Hautes Roches, a French partnership and wholly owned subsidiary.

15. Sci Des Roches, a French partnership and wholly owned subsidiary.

16. Mobilite Building Corporation, a Florida corporation and wholly owned
subsidiary.

17. Genus Medical Products USA, Inc., a New York corporation and wholly owned
subsidiary.

18. Invacare Florida Corporation, a Delaware corporation and wholly owned
subsidiary.

19. Invacare New Zealand Unlimited, a New Zealand corporation and wholly owned
subsidiary.

20. Invacare AG, a Swiss corporation and wholly owned subsidiary.

21. Invacare International Sarl, a Swiss corporation and wholly owned
subsidiary.

22. Healthtech Products, Inc., a Missouri corporation and wholly owned
subsidiary.

23. Invacare Lda., a Portugal company and wholly owned subsidiary.

24. Invacare Supply Group, formerly Suburban Ostomy Supply Company, Inc., a
Massachusetts corporation and wholly owned subsidiary.

25. Roller Chair Pty. Ltd., an Australian corporation and wholly owned
subsidiary.

26. Silcraft Corporation, a Michigan corporation and wholly owned subsidiary.

27. The Aftermarket Group, Inc., a Delaware corporation and wholly owned
subsidiary.

28. Scandinavian Mobility International ApS, a Danish corporation and wholly
owned subsidiary.

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29. Invacare Hong A/S, a Danish corporation and wholly owned subsidiary.

30. Invacare A/S, a Danish corporation and wholly owned subsidiary.

31. Invacare AB, a Swedish corporation and wholly owned subsidiary.

32. Invacare NV, a Belgium corporation and wholly owned subsidiary.

33. Scandinavian Mobility Niltek A/S, a Danish corporation and wholly owned
subsidiary.

34. Scandinavian Mobility Radius A/S, a Danish corporation and wholly owned
subsidiary.

35. EC-Invest A/S, a Danish corporation and wholly owned subsidiary.

36. Invacare Holdings AS, a Norwegian corporation and wholly owned subsidiary.

37. Groas A/S, a Norwegian corporation and wholly owned subsidiary.

38. Invacare Rea AB, a Swedish corporation and wholly owned subsidiary.

39. France Reval GmbH, a French corporation and wholly owned subsidiary.

40. Scandinavian Mobility GmbH, a German corporation and wholly owned
subsidiary.

41. Invacare B.V., a Netherlands corporation and wholly owned subsidiary.

42. Samarite B.V., a Netherlands corporation and wholly owned subsidiary.

43. Revato B.V., a Netherlands corporation and wholly owned subsidiary.

44. Scandinavian Mobility Medical Services B.V., a Netherlands corporation and
wholly owned subsidiary.

45. Invacare Australia Pty, Ltd., an Australian corporation and wholly owned
subsidiary.

46. Adaptive Switch Laboratories, Inc., a Texas corporation and wholly owned
subsidiary.

47. Garden City Medical Inc., a Delaware corporation and wholly owned
subsidiary.

48. Hatfield Mobility Unlimited, a New Zealand corporation and wholly owned
subsidiary.

49. Pro Med Equipment Pty, Ltd., an Australian corporation and wholly owned
subsidiary.

50. Invacare AS, a Norwegian corporation and wholly owned subsidiary.

51. Pro Med Australia Pty, Ltd., an Australian corporation and wholly owned
subsidiary.

52. Invacare, S.A., a Spanish corporation and wholly owned subsidiary.

53. Invacare Holdings Two AB, a Swedish corporation and wholly owned
subsidiary.

54. Invacare Holdings AB, a Swedish corporation and wholly owned subsidiary.

55. Invacare Holdings CV, a Netherlands corporation and wholly owned
subsidiary.

56. Invacare Holdings BV, a Netherlands corporation and wholly owned
subsidiary.

57. Invacare Verwaltungs GmbH, a German corporation and wholly owned
subsidiary.

I-33

58. Invacare GmbH and Co. KG, a German corporation and wholly owned subsidiary.

59. Invacare Holdings Two BV, a Netherlands corporation and wholly owned
subsidiary.

60. Invacare Holdings New Zealand, a New Zealand corporation and wholly owned
subsidiary.

61. Invacare Bencraft Ltd., a U.K. corporation and wholly owned subsidiary.

- --------------------------------------------------------------------------------
* "Wholly owned subsidiary" refers to indirect, as well as direct, wholly
owned subsidiaries.

I-34

Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements
(Forms S-8, No. 33-45993 dated February 24, 1992, No. 33-87052 dated December 5,
1994 and No. 33-57978 dated March 30, 2001) pertaining to the Invacare
Corporation stock option plans, of our report dated January 22, 2003, with
respect to the consolidated financial statements and schedule of Invacare
Corporation and subsidiaries included in the Annual Report (Form 10-K) for the
year ended December 31, 2002.

ERNST & YOUNG LLP

Cleveland, Ohio
March 5, 2003

I-35