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, 2004


                                       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
 incorporation or organization)                          Identification 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,                 New York Stock Exchange
  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
    -----                             -----

<page>
As of June 30, 2004, the aggregate market value of the 27,329,710  Common Shares
of the Registrant held by non-affiliates  was  $1,222,184,631  and the aggregate
market  value of the  31,803  Class B Common  Shares of the  Registrant  held by
non-affiliates  was  $1,422,230.  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, 2004, which
was $44.72.  For purposes of this  information,  the 2,724,495 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.

As of February 24, 2005,  30,322,573  Common Shares and 1,111,965 Class B Common
Shares were outstanding.

                       Documents Incorporated By Reference
                       -----------------------------------
Portions  of  the  Registrant's  definitive  Proxy  Statement  to  be  filed  in
connection  with its 2005 Annual Meeting of  Shareholders  are  incorporated  by
reference into Part III (Items 10, 11, 12, 13 and 14) of this report.

Except as otherwise stated,  the information  contained in this Annual Report on
Form 10-K is as of December 31, 2004.










































                                       I-1





                              INVACARE CORPORATION
                    2004 ANNUAL REPORT ON FORM 10-K CONTENTS

                                                                            Page
Item
PART I:

1. Business                                                                  I-3

2. Properties                                                               I-14

3. Legal Proceedings                                                        I-17

4. Submission of Matters to a Vote of Security Holders                      I-17

   Executive Officers of the Registrant                                     I-17

PART II:

5. Market for the Registrant's Common Equity, Related Stockholder           I-19
     Matters and Issuer Purchases of Equity Securities

6. Selected Financial Data                                                  I-20

7. Management's Discussion and Analysis of Financial Condition and          I-21
     Results of Operations

7A.Quantitative and Qualitative Disclosures About Market Risk               I-29

8. Financial Statements and Supplementary Data                              I-29

9. Changes in and Disagreements with Accountants on Accounting and          I-29
     Financial Disclosure

9A. Controls and Procedures                                                 I-29

PART III:

10. Directors and Executive Officers of the Registrant                      I-30

11. Executive Compensation                                                  I-30

12. Security Ownership of Certain Beneficial Owners and Management          I-31

13. Certain Relationships and Related Transactions                          I-31

14. Principal Accounting Fees and Services                                  I-31

PART IV:

15. Exhibits and Financial Statement Schedules                              I-31

    Signatures                                                              I-32

                                       I-2
<page>


                                     PART I

Item 1.  Business.

GENERAL
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 pursues 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 our broad range of products;
          *    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;
          *    continuous   advancement   and   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 of our current officers and Directors, it had $19.5 million in
net sales and a limited  product line of standard  wheelchairs and patient aids.
In 2004,  Invacare  reached  $1.403  billion  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  operates in a single  industry,  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.

The company's  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.














                                       I-3
<page>
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 and
beyond as a result of several factors, including:

     Growth in  population  over age 65. The nation's  overall  life  expectancy
     continues to increase.  A recent 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  and life
     expectancy  at birth is now 74 for men and  almost 80 for  women.  The DHHS
     also reports  that people age 65 or older  represent  the vast  majority of
     home health care patients and 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 home health
     care   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 payers and private  payers 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 an 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.

     Health care cost containment  trends.  In 2002, health care expenditures in
     the U.S. totaled $1.5 trillion dollars or approximately  14.9% of the Gross
     Domestic  Product (GDP),  the highest among  industrialized  countries.  In
     2013,  the nation's  health care  spending is projected to increase to $3.4
     trillion, growing at an average annual rate of 7.3%. Over this same period,
     spending on health care is expected to increase to approximately 18.4% as a
     share of GDP.  The rising  cost of health  care has caused  many  payers of
     health care  expenses to look for ways to contain  costs.  Home health care
     has gained  widespread  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/Asia/Pacific
- -------------------
The company believes that, while many of the market factors  influencing  demand
in the  U.S.  are  also  present  in  Europe  and  Asia/Pacific  - aging  of the
population,  technological  trends  and  society's  acceptance  of  people  with
disabilities  -  each  of  the  major  national  markets  within  Europe  and in
Asia/Pacific 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  national  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, New Zealand and Asian markets.





                                       I-4
<page>
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 Storm Series(R) was expanded in 2004 with the introduction of
     the  TDX(TM)  line  of  power  wheelchairs  which  offer  an  unprecedented
     combination of power, stability and maneuverability.  The Pronto(TM) Series
     Power   Wheelchairs  with   SureStep(TM),   introduced  in  2002,   feature
     center-wheel   drive  performance  for  exceptional   maneuverability   and
     intuitive driving.  The power tilt and recline systems are now offered also
     as a result of the company's acquisition of Motion Concepts, Inc.

     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.

     Personal  Mobility.  In  2003,  Invacare  introduced  the  HMV(TM)  (Highly
     Maneuverable  Vehicle)  product,  which  in 2004  replaced  the  three  and
     four-wheeled motorized scooters, including rear-wheel drive models for both
     outdoor  and indoor use,  marketed  under the  Invacare(R)  brand name that
     include 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.  The company has
     also expanded its product line of seating  products and wheelchairs for the
     pediatric market with the acquisition of Freedom Designs, Inc.

     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-5
<page>
     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(TM) 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.
     In 2004, Invacare introduced its own private label brand of certain medical
     supplies.

     CONTINUING CARE

     Health Care Furnishings.  Invacare,  operating as Invacare  Continuing Care
     Group,  is a manufacturer  and  distributor of beds and furnishings for the
     long-term 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.

Asia/Pacific
- ------------
The  company's  Asia/Pacific  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 electronic operating components
used in power wheelchairs and scooters;  Invacare New Zealand, a manufacturer of
wheelchairs  and  beds  and a  distributor  of a  wide  range  of  home  medical
equipment;  and Invacare Asia Sales,  which imports and distributes home medical
equipment to the Asia markets.

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  locally to meet specific
market  requirements.  The company manufactures and/or assembles both manual and
power wheelchair  products at the following European  facilities:  Invacare (UK)
Ltd. in the United  Kingdom,  Invacare  Poirier S.A.S.  in France,  and Invacare
Deutschland GmbH in Germany.  Manual  wheelchair  products are also manufactured
and/or  assembled at Invacare Lda. in Portugal,  Invacare AG in Switzerland (the
Kuschall  Range),  and  Invacare  Rea AB in Sweden.  Beds and patient  lifts are
manufactured  at Invacare Hong A/S in Denmark.  A range of patient lifts is also
assembled  at Invacare  (UK) Ltd. in the United  Kingdom.  Oxygen  products  are
imported from Invacare U.S. operations. In addition to distributing the Invacare
range of products,  Invacare Mecc San SrL in Italy  manufactures  beds,  patient
lifts and commodes specifically for the local market.

With the  acquisition in September  2004 of WP Domus GmbH (Domus),  the European
product  range  has  been  enhanced  and  market  share  increased.  Domus  is a
European-based  holding company that manufactures several  complementary product
lines to Invacare's product lines,  including power add-on products,  bath lifts
and walking aids. Domus has three divisions: Alber, Aquatec and Dolomite.

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.





                                       I-6
<page>
North America and Asia/Pacific
- ------------------------------
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. 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 Asia/Pacific
- ------------------------------
Invacare's products are marketed in the United States and Asia/Pacific 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.

The  Inside  Sales  Department  provides  increased  sales  coverage  of smaller
accounts  and  complements  the efforts of the field sales  force.  Inside Sales
offers  cost-effective  sales coverage through a targeted  telesales effort, and
has delivered excellent sales growth in each of its five years of existence.

The Invacare  Service and Parts Division  (ISP) focuses on improving  operations
and enhancing overall service to its customers.  Recent initiatives included the
pre-packaging  of parts  and  adding a bar code to the  label,  the  kitting  of
upholstery with associated hardware, and introducing 15 new power wheelchair and
scooter accessories.  ISP's Technical Education department recently consolidated
its  Power  Wheelchair  and  Respiratory  schools  into a  four-day  format  and
continued its emphasis on improving providers repair technicians'  productivity.
The Service  Referral  Network  includes over 600 providers who honor Invacare's
product warranties  regardless of where the product was purchased.  This network
of servicing  providers helps 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"  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 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 2004,  ISG completed the
purchase  and  integration  of ACS, a home  infusion  company,  opening up a new
market  for  ISG.  ISG also  added  more  than 150 SKUs to its  Invacare-branded
consumable line. The company opened a new state-of-the-art distribution facility
in Jamesburg,  New Jersey and closed its existing  Edison,  New Jersey facility.
The move more than doubled available space, while also enhancing Invacare Supply
Group's ability to effectively pick, pack and ship customer orders.




                                       I-7
<page>
In 2004,  Invacare,  through its co-op advertising  program,  continued to offer
direct response television  commercials designed to generate demand for Invacare
Power Chairs,  Scooters and the HomeFill Oxygen System sold by the HME provider.
These commercials feature Arnold Palmer, Invacare's worldwide spokesperson,  who
has become an integral part of Invacare's  "Yes,  you can(TM)"  promotional  and
marketing  efforts.  This  program  encourages  consumers  to  achieve  personal
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  signed an extended  agreement  with Arnold
Palmer through the end of 2006. Mr. Palmer, serving as Invacare's  spokesperson,
is helping accomplish three objectives: (i) creating attention and awareness for
the category of home health care products,  (ii)  accelerating the acceptance of
these products as lifestyle  enhancing so that consumers want these products and
don't just need them, and (iii)  establishing 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.

Invacare continues to enhance www.invacare.com,  maintaining its position as the
leader  in  e-commerce  in  the  HME  industry.   In  2004,  Invacare's  website
utilization  continued to increase.  Thirty-two-percent of all standard domestic
orders were placed over the web.  Another 14% of orders were EDI, for a total of
46% of all orders being placed  electronically,  resulting in a significant cost
savings.  New online  offerings in 2004 included  online  financing for Invacare
providers, resulting in additional transactional cost savings for the company. A
full  transactional  web site for  Invacare  Canada  went live in  March.  Major
enhancements  to the  administration  tools for the online Product  Catalog were
developed.  A web version of the tool makes updating the online catalog  quicker
and easier. Users can make faster updates to product PDF documents in the online
product catalog, streamlining the content management process. The integration of
Invacare's  website  with  the new  Oracle  ERP  system  began  in 2004 and will
continue into 2005. Increasing web transactions are reducing the number of calls
to the  customer  service call center,  which also results in  significant  cost
savings.  This  integration is expected to further  improve the online  customer
experience  by adding  additional  website  features  such as contract  pricing,
financing options, coupons and product security.

In 2004,  Invacare  continued  its strategic  advertising  campaign in key trade
publications  that reach the  providers of home medical  equipment.  The company
also  contributed  extensively  to  editorial  coverage  in  trade  publications
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.  This was  evidenced by  enhancements  made to its  consumer-marketing
program in 2004 through  sponsorships of a variety of wheelchair sporting events
and support of various  philanthropic  causes  benefiting  the  consumers of its
products.  For the eleventh  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  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 for the ninth year in a row of the Invacare World
Team Cup of  Wheelchair  Tennis  Tournament,  which  took  place in  January  in
Christchurch,  New Zealand.  The company also  continued its support of disabled
veterans through its sponsorship of the 24th National Veterans Wheelchair Games,
the largest annual wheelchair  sports event in the world,  which was held in St.
Louis,   Missouri.  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 year
2004  also was a  Paralympic  year.  Team  Invacare  had more  than 30  athletes
participating in the competition who brought home more than 30 gold,  silver and
bronze  medals at the games,  which were held in  September  in Athens,  Greece,
following the Olympic Games.

The  company's  top 10 customers  accounted  for  approximately  14% of 2004 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 2004 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 where  appropriate,  distribution  centers,  in the United Kingdom,  France,
Germany, Belgium, Portugal, Spain, Italy, 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.
                                       I-8
<page>
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
policy losses of $10,000,000  per occurrence and $11,000,000 in the aggregate of
the company's North American product  liability  exposure.  The company also has
additional layers of external insurance coverage insuring $100,000,000 in annual
aggregate  losses  arising  from  individual  claims  anywhere in the world that
exceed the captive  insurance  company policy limits.  There can be no assurance
that  Invacare's  current  insurance  levels  will  continue  to be  adequate or
available at affordable rates.

Product  liability  reserves  are  recorded  for  individual  claims  based upon
historical  experience,  industry expertise and indications from the third-party
actuary.  Additional  reserves,  in  excess  of  the  specific  individual  case
reserves,  are  provided  for  incurred  but  not  reported  claims  based  upon
third-party  actuarial  valuations at the time such  valuations  are  conducted.
Historical claims experience and other assumptions are taken into  consideration
by the third-party actuary to estimate the ultimate reserves.  For example,  the
actuarial  analysis  assumes that  historical loss experience is an indicator of
future  experience,  the distribution of exposures by geographic area and nature
of  operations  for  ongoing  operations  is  expected  to be  very  similar  to
historical  operations with no dramatic changes and that the government  indices
used to trend losses and exposures are appropriate.  Estimates made are adjusted
on a regular  basis and can be  impacted  by actual  loss award  settlements  on
claims.  While actuarial  analysis is used to help determine  adequate reserves,
the company  accepts  responsibility  for the  determination  and  recording  of
adequate  reserves in  accordance  with accepted  loss  reserving  standards and
practices.

PRODUCT DEVELOPMENT AND ENGINEERING
- -----------------------------------
Invacare is committed to  continuously  improving,  expanding and broadening its
existing product lines. In 2004, new product development continued to receive an
even stronger  emphasis as part of Invacare's  strategy to gain market share and
maintain  competitive  advantage.  To this end,  the company  introduced  53 new
products. The following are some of the most significant product introductions:

North America
- -------------
     The At'm Take Along Chair,  Invacare's  newest power  wheelchair,  provides
     consumers a light-weight and compact chair to fit in the trunk of a car and
     assemble easily in just 60 seconds.  The consumer's  caregiver can open the
     seat,  snap it on the  lightweight  base,  and add  the  battery.  Assembly
     requires absolutely no tools.

     Formula(TM)  Powered Seating,  combines three systems:  the Formula(TM) PTO
     Plus, the Formula(TM)  Invisible Super Low(TM) Tilt, and Formula(TM) TRE to
     meet the rehab positioning needs of consumers from simple to complex.  This
     all-new  Formula  Powered  Seating  package offers the best  integration of
     powered seating upon the number-one  bases with the number-one  electronics
     in the HME industry, all from a single company, Invacare.

     The Zoom 220 HMV(TM), the newest entrant to the Zoom family of HMVs (Highly
     Maneuverable  Vehicles), is compact,  portable,  lightweight and economical
     for  active  consumers.   The  Zoom  line  combines  the  power  wheelchair
     technology of center-wheel drive with the aesthetics of traditional scooter
     products for indoor maneuverability and outdoor performance.

     The  HomeFill(TM) II Patient  Convenience  Pack ML4, is an all-new portable
     oxygen  supply  system  that is  lightweight  -- 3 1/2 pounds - and easy to
     transport  for oxygen  patients.  The  HomeFill  Oxygen  System  offers HME
     providers 3-to-1 cost savings in servicing their ambulatory oxygen patients
     since the patient can fill  cylinders  themselves in their own home,  which
     gives  them  freedom  and  independence  - they no longer  have to wait for
     cylinder deliveries.

     The Polaris(TM) EX(TM) with SoftX(TM) Technology and the Polaris(TM) EX(TM)
     Heated  Humidifier  have been  integrated  as one  product  rather than two
     separate units. The Polaris EX CPAP features  Invacare's SoftX  technology,
     which tracks the patient's breathing pattern and reduces the patient's work
     of breathing during  exhalation,  providing  effortless  exhalation for the
     patient.

     Web  Ox is a  PC-based,  high-tech  solution  to the  oxygen  qualification
     problem  facing the industry  today.  For a minimal  quarterly  fee, Web Ox
     allows  providers to subscribe  to an unlimited  number of tests,  allowing
     faster Medicare billing for oxygen patients,  thus improving the provider's
     cash flow.

     A new  Bariatrics  Program  offers a complete  solutions  approach  for the
     bariatric  provider  and  their  clients,  and  features  the full  line of
     Invacare bariatric products.  Making it easy to find the right product, the
     bariatric catalog employs color-coding to sort products by weight capacity.
     The catalog also offers cross-selling or complementary  product suggestions
     to help  educate  providers,  clinicians  and  consumers  about  additional
     product  they may need,  and at the same time  establishes  Invacare as the
     leading manufacturer offering bariatric solutions.

                                       I-9
<page>
     Court-Side  Glides(TM) for Invacare walkers are an innovative  product that
     takes the  homemade  tennis  ball  solution  for  walker  glide tips a step
     further.  For years,  consumers and  therapists  have been slashing  tennis
     balls,  sometimes injuring  themselves in the process,  to create makeshift
     walker  glide tips that are durable for indoor and outdoor use and safe for
     flooring surfaces.  Invacare has enhanced the homemade tennis ball solution
     to create a walker  glide tip that is longer  lasting,  easy to install and
     replace.

     The Invacare Full Electric Low Bed is ideal for  circumstances  where rails
     are not desirable or appropriate,  but injuries from falling out of bed are
     still a concern.  It is the newest  split-spring  low bed  available on the
     market today,  allowing easy, one-person delivery to home or long-term care
     locations.  The split-spring  design,  which Invacare  pioneered,  combines
     easy, one-person delivery with the benefits of a low bed.

Asia/Pacific
- ------------
Dynamic Controls  continued various range extensions and design  improvements to
products  during  2004.  Additionally,  design  work  was  continued  on  a  New
Generation  Scooter  Controller  to be  introduced  in late  2005 and  extending
functionality  in the "Shark"  wheelchair  controller,  which was  introduced in
2004.

Europe
- ------
During 2004, European operations  introduced less new products than in 2003, but
updated  a  number  of  existing  products  as  required  by  the  market.   Key
introductions and updates in 2004 included:

     The Invacare(R) Dragon is a rear wheel drive power wheelchair  designed and
     manufactured in Europe.  It is a solid and cost efficient power  wheelchair
     that  provides  excellent  indoor  and  outdoor  mobility  in the  suburban
     environment.  It is easy to  drive,  and the  seat can be  adjusted  to the
     physical requirements of the user.

     The  Invacare(R)  Robin is a ceiling hoist designed in Europe.  It provides
     the most  innovative way of transfer with care for nursing staff.  Ensuring
     excellent  personal  contact,  the  two-strap  design  offers  comfort  and
     efficiency in a safe patient handling  environment.  Without the need for a
     spreader bar, a secure and dignified transfer can be achieved.

     The Invacare(R)  Clematis is a manual  wheelchair  primarily for use in the
     French  market.  Excellent  comfort,  quality and  elegance  describe  this
     folding chair equipped with pneumatic  actuators.  The seat  positioning of
     the Clematis offers the user a real sensation of relaxation and wellbeing.

     The Invacare(R)  Mistral3 power wheelchair is an updated folding chair with
     seat positioning. It replaces the Mistral and Mistral Plus.

     The  Invacare(R)  Mistral3  Junior  power  wheelchair  is a version  of the
     Mistral3  with a  reclining  rigid  seat  base  which is width  and  length
     adjustable from 30cm to 36cm and provides  ultimate  comfort to children or
     younger teenagers whether they are installed in a shell or not.

     The Invacare(R)  Action3 manual wheelchair,  which was released in 2002 has
     been improved with the  following;  new locking pin on hanger and elevating
     leg-rest,  folding backrest,  reclining backrest with gas spring,  leg-rest
     adaptor, angle adjustable backrest and hemi motion armrest.

     The  Invacare(R)  Action 2000 & MB2 manual  wheelchairs  have been improved
     with the following; new arm-pads - short and long and shorter brake shoe.

MANUFACTURING AND SUPPLIERS
- ---------------------------
The  company's   objective  is  to  be  the  highest   quality  and  lowest-cost
manufacturer  in its  industry.  The company  believes  that it can achieve this
objective not only through improved product design,  but also by taking a number
of  steps  to  lower  manufacturing  costs.  During  2004,  the  company  opened
manufacturing  locations in China at Suzhou  Industrial  Park and Kunshan  City,
both of which are near Shanghai, to manufacture components,  including bases for
consumer power  wheelchairs.  The company has plans to further  utilize its Hong
Kong office to increase  local sourcing of components in China in order to lower
costs. With these actions, Invacare expects to regain its position as one of the
lowest cost producers of standard products in the industry.

Of the many opportunities to reduce overall costs, 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
for each of the business segments.




                                      I-10
<page>
North America / Asia/Pacific
- ----------------------------
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.

The company  continues to make  investments  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 relationships 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 manufacturing  operations have streamlined,
allowing for the  realization  of  significant  synergies  and  additional  cost
reductions and improved  efficiencies  are planned going  forward.  This process
will continue and will now include the integration of the Domus businesses.

ACQUISITIONS
- ------------
In 2004, Invacare acquired for cash the following six businesses at a total cost
of $343,554,000:

          o    The assets of ACS,  a New York  distributor  of medical  supplies
               with a focus on infusion therapy.
          o    The assets of Decpac,  an  Australian  company  that  designs and
               manufactures   portable   folding   access  ramps  for  use  with
               wheelchairs and scooters.
          o    Freedom Designs,  Inc., a  California-based  company that designs
               and   manufactures   seating  products  and  wheelchairs  with  a
               particular focus on the pediatric marketplace.
          o    WP  Domus  GmbH,   a   European-based   holding   company   which
               manufactures  several  complementary  product lines to Invacare's
               product lines.
          o    Champion Manufacturing, LLC , an Indiana company that designs and
               manufactures medical recliners.
          o    The assets of Premier  Designs,  a California  company from which
               Invacare  acquired  assets and designs for a lightweight,  easily
               transportable power wheelchair.

On September 9, 2004 the company finalized the acquisition of 100% of the shares
of WP Domus GmbH, a  European-based  holding company that  manufactures  several
complementary product lines to Invacare's product lines,  including power add-on
products,  bath  lifts and  walking  aids,  from WP Domus  LLC.  Domus has three
divisions:  Alber,  Aquatec and Dolomite.  The acquisition allows the company to
expand its product line and reach new markets.  The  preliminary  purchase price
was $227,382,000  including  acquisition costs of $3,670,000,  which was paid in
cash, and is subject to final  determination  of the estimated costs of possible
office closures, sales agency transfers and other consolidation efforts expected
to be finalized by the end of the third  quarter of 2005.  The  acquisition  was
consummated after satisfaction of certain  conditions,  including receipt of all
requisite regulatory approvals.  Invacare entered into a 100,000,000 Euro bridge
loan  agreement  and  utilized its  existing  revolving  credit line to fund the
acquisition.  Invacare's reported results reflect the operating results of Domus
since the date of the acquisition.

Carroll  Healthcare,  Inc.  was  purchased  in 2003 and as part of the  purchase
agreement,  the  company  agreed  to pay  additional  consideration  based  upon
earnings before interest, taxes, depreciation and amortization from September 1,
2003  through  August 31, 2004  calculated  under  Canadian  generally  accepted
accounting  principles (U.S. GAAP has been used for company reporting  purposes)
in accordance with the purchase  agreement,  with no defined maximum amount. The
payment  amount was finalized  and paid in October 2004 at  74,667,000  Canadian
Dollars, or $60,992,335 U.S. Dollars, which increased goodwill.

                                      I-11
<page>
Motion Concepts,  Inc. ("Motion") also was purchased in 2003 and pursuant to the
Motion purchase  agreement,  the Company agreed to pay contingent  consideration
based upon earnings before interest and taxes over the three years subsequent to
the acquisition up to a maximum of  approximately  $16,000,000.  Based upon 2004
results, no additional consideration was paid. When the contingency calculations
are  completed  in 2005 and 2006  related  to the  acquisition,  any  additional
consideration paid will increase the purchase price and reported goodwill.

As a result of the company's ongoing search for opportunities,  coupled with the
industry trend toward consolidation,  other acquisitions were evaluated in 2004.
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 some countries,
most notably 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.

The company continues its pro-active efforts to shape public policy that impacts
home and  community-based,  non-acute  health care. We are currently very active
with federal  legislation and regulatory  policy makers.  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,  sometimes 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.

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.  Domestic and foreign  manufacturers  of medical devices
distributed  commercially in the U.S. 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.  During the
past year, the company was inspected by the FDA at multiple  locations and found
to be acceptable,  with only minor inspectional findings needing attention. From
time to time,  the company may  undertake  voluntary  recalls of its products to
maintain  ongoing  customer  relationships  and to enhance  its  reputation  for
adhering  to high  standards  of quality and safety.  The company  continues  to
strengthen its programs to better ensure compliance with applicable  regulations
for which the failure to comply would have a material adverse effect.

Although  there  are a number  of  reimbursement  related  issues in most of the
countries  in which  Invacare  competes,  the issues of primary  importance  are
currently  in the United  States.  There are two critical  issues for  Invacare:
eligibility for  reimbursement of power wheelchairs for elderly patients and the
provisions  of the  legislation  related to  prescription  drug  coverage  under
Medicare. With regard to power wheelchairs,  there has been a regulatory push by
the  Centers  for  Medicare  and  Medicaid   Services  (CMS)  towards   limiting
eligibility  to  patients  who  cannot  take a single  step on their  own.  This
limitation  has  confined  many elderly  patients,  who could be mobile in power
wheelchairs, to their beds. Invacare and the home care industry are working hard
to convince  CMS and the Bush  administration  that this change does not benefit
the elderly and is leading to less  active  patients  who could end up in costly
nursing  homes and  hospitals,  and thereby  would  counteract  any cost savings
attributable   to  limiting  the   eligibility   for  power   wheelchairs.   The
Administration  is  scheduled  to soon  issue new power  wheelchair  eligibility
criteria,  which we expect to provide more predictability and improved access to
this benefit.





                                      I-12
<page>
In  November  of  2003,   Congress  passed  legislation   related  to  providing
prescription drug coverage for the elderly under the Medicare  program.  As part
of funding the costs of this new program,  a number of changes to Medicare  home
care  reimbursement  rules will take effect over the next few years.  First, the
home care provider, who is Invacare's customer, did not receive a cost-of-living
adjustment in 2004 and will not receive an update in 2005 and 2006.  Second,  in
2005, Medicare  reimbursement for oxygen,  along with certain types of home care
beds,  wheelchairs,  nebulizers  and  supplies,  will be  lowered  to the median
reimbursement  levels in the  Federal  Employee  Health  Benefit  Plans.  Third,
starting in 2007,  Congress  has  authorized  competitive  bidding in ten of the
largest metropolitan regions of the U.S. for home medical items and services. In
2009,  the  program  would be  extended  to eighty of the  largest  metropolitan
regions.

Although  none of  these  changes  are  beneficial  to the home  care  industry,
Invacare  believes  that it can still grow and thrive in this  environment.  The
home care industry has not received any cost-of-living adjustments over the last
few years and will try to respond with improved productivity to address the lack
of support from Congress. In terms of the 2005 price reductions,  although we do
not yet know what price reduction will be applied to oxygen reimbursement, it is
anticipated that the blended cut for all items will be  approximately  8%. If we
estimate  the impact that the 2005 cuts could have on our revenue  stream,  they
are expected to be around 1% of consolidated net sales.

However,  Invacare's  new products  (for example,  the low cost oxygen  delivery
system of HomeFill(TM)), can help address the cuts the home care provider has to
endure. We will continue to focus on developing  products that help the provider
improve  profitability.  With such products,  Invacare believes that it can grow
and offset the risks.  Additionally,  Invacare will accelerate its activities in
China  to make  sure  that  we are  one of the  lowest  cost  manufacturers  and
distributors to the home care provider.

In terms of competitive  bidding,  Invacare has strong positions with the likely
consolidators who will probably gain share as we approach 2007 and enter the new
reimbursement  environment.  We believe  that we are well  positioned  to combat
pricing pressures with volume gains and productivity improvements. Nevertheless,
there will be ongoing  uncertainty  in the industry over the extent and depth of
these  cuts  to the  home  care  industry.  Invacare  is  concerned  that,  once
implemented, competitive bidding will likely generate poorer service in the home
care arena as providers look to remain profitable. Likewise, it will likely lead
to further consolidation of the provider base as small entrepreneurs may look to
exit a less profitable  business model.  Invacare will keep a close watch on its
extension  of credit in this  environment  and will  work with the  industry  to
pressure  Congress to reconsider  its actions.  We believe that home care is the
least costly and most  preferred  environment in which an individual can recover
from an operation or illness and that government  actions should  encourage home
care rather than lead to more expensive alternatives.

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, 2004, the company had approximately 6,100 employees.

FOREIGN 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  operations,  see  Business  Segments  in the Notes to the  Consolidated
Financial Statements.

AVAILABLE INFORMATION
- ---------------------
The company files Annual Reports on Form 10-K,  Quarterly  Reports on Form 10-Q,
Current  Reports  on Form  8-K,  and any  amendments  thereto,  as well as 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.  The SEC  also
maintains a website,  www.sec.gov,  that contains all reports,  proxy statements
and other information filed by the company with the SEC.

Additionally,  Invacare's  filings with the SEC are  available on or through the
company's  website,  www.invacare.com,  as soon as reasonably  practicable after
they are filed  electronically  with,  or furnished  to, the SEC.  Copies of the
company's  filings  also  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-13
<page>
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, 2004 is set forth in Leases
and  Commitments in the Notes to the  Consolidated  Financial  Statements of the
company and in the table below:
<table>
<caption>
                                                     Ownership
                                                     Or Expiration        Renewal
North American Operations            Square Feet     Date of Lease        Options                  Use
- -------------------------            -----------     -------------        -------                  ---
<s>                                  <c>             <c>                  <c>                      <c>
Alexandria, Virginia                     230         September 2005       None                     Office

Apharetta, Georgia                     9,000         June 2006            None                     Warehouse and Offices

Atlanta, Georgia                     137,284         February 2008        One (3 yr.)              Warehouse and Offices

Atlanta, Georgia                      48,000         August 2006          None                     Sublet

Beltsville, Maryland                  33,329         February 2005        One (3 yr.)              Manufacturing, Offices, and
                                                                                                   Warehouse

Delta, British Columbia               12,000         January 2008         One (3 yr.)              Warehouse and Offices

Deer Park, New York                    5,100         January 2006         None                     Warehouse and Offices

Edison, New Jersey                   105,014         March 2010           None                     Warehouse and Offices

Elyria, Ohio
- - Taylor Street                      251,656         Own                  -                        Manufacturing and Offices

- - Cleveland Street                   107,052         November 2007        One (3 yr.)              Warehouse

- - One Invacare Way                    50,000         Own                  -                        Headquarters

- - 1320 Taylor Street                  30,000         January 2010         One (5 yr.)              Offices

- - 1160 Taylor Street                   4,800         Own                  -                        Warehouse and Offices

Fresno, California                     2,500         August 2005          -                        Warehouse and Offices

Grand Prairie, Texas                  43,754         April 2008           One (3 yr.)              Warehouse and Offices

Holliston, Massachusetts              57,420         August 2006          None                     Warehouse and Offices

Kirkland, Quebec                      26,196         November 2010        One (5 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Jamesburg, New Jersey                 83,200         November 2009        One (5 yr.)              Warehouse and Offices

Kunshan City, China                    4,800         May 2006             One (2 yr.)              Manufacturing and Offices

Longmont, Colorado                     2,400         December 2006        -                        Offices

London, Ontario                      103,200         Own                  -                        Manufacturing and Offices

Marlboro, New Jersey                   2,100         June 2005            None                     Office

Mississauga, Ontario                  81,004         January 2005         One (5 yr.)              Sublet

Mississauga, Ontario                  26,530         November 2011        Two (5 yr.)              Warehouse and Offices

North Ridgeville, Ohio               152,861         Own                  -                        Manufacturing, Warehouses and
                                                                                                   Offices
</table>
                                                             I-14
<page>
<table>
<caption>
                                                     Ownership
                                                     Or Expiration        Renewal
North American Operations            Square Feet     Date of Lease        Options                  Use
- -------------------------            -----------     -------------        -------                  ---
<s>                                  <c>             <c>                  <c>                      <c>

North Ridgeville, Ohio                66,724         September 2007       Two (3 yr.)              Office

Overland, Missouri                    67,500         May 2007             Two (3 yr.)              Manufacturing, Warehouses and
                                                                                                   Offices

Pharr, Texas                           2,672         Month to Month       -                        Warehouse

Pinellas Park, Florida                11,400         July 2005            Three (1 yr.)            Manufacturing and Offices

Rancho Cucamonga, California          55,890         June 2009            One (60 day)             Warehouse

Reynosa, Mexico                      129,690         Own                  -                        Manufacturing and Offices

Sacramento, California                26,900         May 2008             One (3 yr.)              Manufacturing, Warehouse
                                                                                                   and Offices

Sanford, Florida                     117,108         Own                  -                        Manufacturing and Offices

Sanford, Florida                     100,000         Own                  -                        Manufacturing and Offices

Scarborough, Ontario                   5,428         February 2005        None                     Manufacturing and Offices

Simi Valley, California               38,501         February 2009        Two (5 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

South Bend, Indiana                   48,000         September 2008       Two (5 yr.)              Warehouse

Spicewood, Texas                       6,500         Month to Month       None                     Manufacturing and Offices

Suzhou, China                          5,000         May 2006             None                     Manufacturing and Offices

Tonawanda, New York                    7,515         March 2008           None                     Warehouse and Offices

Traverse City, Michigan               15,850         April 2006           None                     Manufacturing and Offices

Vaughan, Ontario                      12,000         June 2008            None                     Manufacturing and Offices

Asia/Pacific Operations
- -----------------------
Adelaide, Australia                   21,668         April 2006           One (5 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Adelaide, Australia                   24,000         August 2007          One (5 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Auckland, New Zealand                 27,000         September 2008       Two (3 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Birmingham, United Kingdom            15,845         July 2013            None                     Warehouse and Offices

Christchurch, New Zealand             57,682         December 2005        Two (3 yr.)              Manufacturing and Offices

Hong Kong, China                         600         February 2007        None                     Offices

Hong Kong, China                         600         April 2007           None                     Offices
</table>

                                                             I-15
<page>
<table>
<caption>
                                                     Ownership
                                                     Or Expiration        Renewal
Asia/Pacific Operations              Square Feet     Date of Lease        Options                  Use
- -------------------------            -----------     -------------        -------                  ---
<s>                                  <c>             <c>                  <c>                      <c>
Melbourne, Australia                  19,629         July 2006            One (2 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Napier, New Zealand                    4,844         March 2009           Two (3 yr.)              Warehouse and Offices

North Olmsted, Ohio                    2,280         October 2008         None                     Warehouse and Offices

Sydney, Australia                     16,000         February 2009        Two (3 yr.)              Warehouse and Offices

European Operations
- -------------------
Albstadt-Tailfi, Germany              78,495         January 2018         Two (5 yr.)              Manufacturing, Warehouse and
                                                                                                   Offices

Allschwil, Switzerland                36,000         Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Anderstorp, Sweden                    47,527         Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Bergen, Norway                         1,000         May 2009             One (5 yr.)              Warehouse and Offices

Bridgend, Wales                      131,522         Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Brondby, Denmark                      16,142         December 2005        One (1 yr.)              Warehouse and Offices

Dio, Sweden                          107,600         Own                  -                        Manufacturing and Offices

Dublin, Ireland                        5,000         December 2009        Three (5 yr.)            Warehouse and Offices

Ede, The Netherlands                  16,000         May 2009             One (5 yr.)              Warehouse and Offices

Fondettes, France                    106,412         November 2007        None                     Manufacturing, Warehouse, and
                                                                                                   Offices

Girona, Spain                         13,600         November 2005        One (1 yr.)              Warehouse and Offices

Gland, Switzerland                     4,306         September 2007       One (5 yr.)              Offices

Gland, Switzerland                     1,173         September 2007       One (4 yr.)              Offices

Goteberg, Sweden                       7,500         June 2006            One (3 yr.)              Warehouse and Offices

Hong, Denmark                        155,541         Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Isny, Germany                        197,581         Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Loppem, Belgium                        6,000         December 2009        One (3 yr.)              Warehouse and Offices

Landskrona, Sweden                     3,099         April 2005           One (3 yr.)              Warehouse

Mondsee, Austria                       1,505         March 2005           Unlimited                Warehouse and Offices

Munchen, Germany                       2,022         July 2005            None                     Offices
</table>
                                                            I-16
<page>
<table>
<caption>
                                                     Ownership
                                                     Or Expiration        Renewal
European Operations                  Square Feet     Date of Lease        Options                  Use
- -------------------------            -----------     -------------        -------                  ---
<s>                                  <c>             <c>                  <c>                      <c>
Ontario, Canada                      14,394          May 2007             None                     Offices

Oporto, Portugal                     27,800          Own                  -                        Manufacturing, Warehouse and
                                                                                                   Offices

Oskarshamn, Sweden                   3,551           December 2005        One (1 yr.)              Warehouse

Oslo, Norway                         30,650          September 2006       None                     Warehouse and Offices

Porta Westfalica, Germany            134,563         October 2021         None                     Manufacturing, Warehouse and
                                                                                                   Offices

Spanga, Sweden                       3,228           June 2007            One (3 yr.)              Warehouse and Offices

Spanga, Sweden                       16,140          Own                  -                        Warehouse and Offices

Thiene, Italy                        21,520          Own                  -                        Warehouse and Offices

Marano, Italy                        21,528          May 2005             One (6 yr.)              Manufacturing

Fondettes, France                    106,412         November 2007        None                     Manufacturing, Warehouse, and
                                                                                                   Offices

Trondheim, Norway                    3,000           December 2007        One (3 yr.)              Services and Offices

Venissieux, France                   1,409           October 2006         None                     Offices

Witterswil, Switzerland              40,301          March 2015           Various (5 year)         Manufacturing, Warehouse, and
                                                                                                   Offices

Wurenlos, Switzerland                3,935           June 2009            One (to be determined)   Offices
</table>
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.
- -------------------------------------------------------------
During the  fourth  quarter of 2004,  no matter was  submitted  to a vote of our
security holders.

Executive Officers of the Registrant.*
- ------------------------------------
The following table sets forth the names of the executive  officers of Invacare,
each of whom  serves  at the  pleasure  of the  Board of  Directors,  as well as
certain other information.
<table>
<caption>
Name                                           Age               Position
- ----                                           ---               --------
<s>                                            <c>               <c>
A. Malachi Mixon, III                          64                Chairman of the Board of Directors and Chief Executive Officer

Gerald B. Blouch                               58                President, Chief Operating Officer and Director

Gregory C. Thompson                            49                President - HME Group and Chief Financial Officer

</table>
                                      I-17
<page>
<table>
Name                                           Age               Position
- ----                                           ---               --------
<s>                                            <c>               <c>
Joseph B. Richey, II                           68                President - Invacare Technologies, Senior Vice
                                                                 President - Electronics and Design Engineering and Director

Louis F.J. Slangen                             57                Senior Vice President - Global Market Development

Joseph Usaj                                    53                Senior Vice President - Human Resources

</table>
A. Malachi  Mixon,  III has been a Director since 1979. Mr. Mixon has been Chief
Executive  Officer  since  1979 and  Chairman  of the Board  since 1983 and also
served as President until 1996, when Gerald B. Blouch,  Chief Operating Officer,
was elected President.

Gerald B. Blouch has been  President and a Director of Invacare  since  November
1996.  Mr.  Blouch has been Chief  Operating  Officer  since  December  1994 and
Chairman-Invacare  International since December 1993. Previously, Mr. Blouch was
President-Homecare  Division  from March 1994 to  December  1994 and Senior Vice
President-Homecare Division from September 1992 to March 1994. Mr. Blouch served
as Chief  Financial  Officer of Invacare from May 1990 to May 1993 and Treasurer
of  Invacare  from March  1991 to May 1993.  Mr.  Blouch is also a  director  of
NeuroControl  Corporation,  Cleveland,  Ohio, a privately  held  company,  which
develops and markets electromedical stimulation systems for stroke patients.

Gregory C. Thompson was named Senior Vice President and Chief Financial  Officer
in November  2002. In January 2005, he was assigned the  additional  position of
President  - Home  Medical  Equipment  Group.  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.  Mr.  Richey is also a director  of  NeuroControl  Corporation,
Cleveland,   Ohio,  a  privately  held  company,   which  develops  and  markets
electromedical stimulation systems for stroke patients.

Louis F. J. Slangen was named Senior Vice President - Global Market  Development
in June 2004.  Previously,  Mr.  Slangen  was Senior  Vice  President  - Sales &
Marketing  from December 1994 to June 2004 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.

Joseph Usaj has been the Senior Vice President - Human Resources since May 2004.
Before coming to Invacare,  Mr. Usaj served as Vice President - Human  Resources
for Ferro  Corporation,  a global  manufacturer of performance  materials in the
electronics,  automotive,  consumer products and pharmaceutical industries, from
August 2002 to December  2003.  Previously,  Mr. Usaj was Vice President - Human
Resources for Phillips Medical Systems from 1998 to 2002.

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


                                      I-18
<page>
                                     PART II

Item 5. Market for Registrant's  Common Equity,  Related Stockholder Matters and
        Issuer Repurchases of Equity Securities.
- --------------------------------------------------------------------------------
Invacare Common Shares,  without par value, trade on the New York Stock Exchange
(NYSE)  under the symbol IVC.  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 24, 2005 was 4,813
and 27,  respectively.  The closing sale price for the Common Shares on February
24,  2005 as reported  by NYSE,  was  $46.57.  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 were as follows:

                                                 2004                 2003
                                                 ----                 ----
       Quarter Ended:                       High       Low      High       Low
       -------------                        ----       ---      ----       ---
       December 31                         $52.00    $43.72    $43.74    $38.78
       September 30                         47.16     39.74     40.00     32.99
       June 30                              46.50     39.34     34.00     30.29
       March 31                             46.50     39.63     34.15     30.02

During 2004 and 2003,  the Board of  Directors  declared  dividends of $0.05 per
Common  Share and $0.045 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's  definitive  Proxy  Statement  for the 2005  Annual
Meeting of Shareholders.






























                                      I-19

<table>
Item 6.  Selected Financial Data
<caption>
                                               2004          2003          2002          2001*         2000
                                               ----          ----          ----          ----          ----
<s>                                             <c>           <c>           <c>           <c>            <c>
                                             (In thousands, except per share and ratio data)
Earnings
Net Sales                                $1,403,327    $1,247,176    $1,089,161    $1,053,639    $1,013,162
Net Earnings **                              75,197        71,409        64,770        35,190        59,911
Net Earnings per Share - Basic                 2.41          2.31          2.10          1.15          1.99
Net Earnings per Share -
    Assuming Dilution                          2.33          2.25          2.05          1.11          1.95
Dividends per Common Share                  0.05000       0.05000       0.05000       0.05000       0.05000
Dividends per Class B Common Share          0.04545       0.04545       0.04545       0.04545       0.04545


                                               2004          2003          2002          2001*         2000
                                               ----          ----          ----          ----          ----
Balance Sheet
Current Assets                             $565,151      $474,722      $398,812     $ 428,401      $432,408
Total Assets                              1,628,124     1,108,213       906,703       914,537       951,855
Current Liabilities                         258,141       223,488       168,226       167,453       197,387
Working Capital                             307,010       251,234       230,586       260,948       235,021
Long-Term Debt                              547,974       232,038       234,134       342,724       384,316
Shareholders' Equity                        753,438       618,304       480,312       381,550       349,773

Other Data
Research and Development
   Expenditures                             $21,638       $19,130       $17,934       $17,394       $16,231
Capital Expenditures, net of
   Disposals                                 41,400        30,129        19,718        19,486        26,268
Depreciation and Amortization                32,316        27,235        26,638        33,448        31,469

Key Ratios
Return on Sales                                5.4%          5.7%          5.9%          3.3%          5.9%
Return on Average Assets                       5.5%          7.1%          7.1%          3.8%          6.3%
Return on Beginning
   Shareholders' Equity                       12.2%         14.9%         17.0%         10.1%          18.8%
Current Ratio                                 2.2:1         2.1:1         2.4:1         2.6:1          2.2:1
Debt-to-Equity Ratio                          0.7:1         0.4:1         0.5:1         0.9:1          1.1:1
</table>
     *    Reflects  non-recurring  and unusual charge of $31,950  ($25,250 after
          tax or $0.80 per share assuming dilution).

     **   Amortization of goodwill ceased in 2002, net earnings in 2001 and 2002
          include amortization expense of $8,972 and $8,899, respectively.

The comparability of the Selected  Financial Data provided in the above table is
limited as  acquisitions  made, in  particular,  the Domus  acquisition in 2004,
materially  impacted the company's  reported  results.  See  Acquisitions in the
Notes  to  the  Consolidated  Financial  Statements,  which  provides  pro-forma
results.














                                      I-20
<page>
Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of Operations.
- --------------------------------------------------------------------------------

OUTLOOK
- -------
Uncertainty related to Medicare's  reimbursement  policies for power wheelchairs
is now expected to continue  throughout 2005. The new proposed criteria from CMS
require public comment before  implementation.  The resulting  ambiguity that is
impacting  the consumer  power  wheelchair  market  likely will not be clarified
until late 2005,  although CMS has  recently  indicated it will try and finalize
the new criteria in the first half of 2005.  Adding to the problems arising from
the reimbursement  difficulties,  there will be additional  confusion  resulting
from  Medicare's  plan to expand  coding of the power  wheelchair  reimbursement
system  from 4 codes to 49 codes in  January  2006.  Despite  the  reimbursement
pressures,  the  Company  believes  that it will  have a net sales  increase  of
between  18% and 20%,  with  acquisitions  contributing  between 11% and 13% and
currency  translation  contributing  a  minimal  amount.  Earnings  per share is
expected to be between  $2.75 and $2.90 in 2005,  excluding  the impact from the
stock option accounting standard recently announced by the Financial  Accounting
Standards Board.

Invacare  believes  it can still grow and thrive  despite the fact that the home
care industry has not received any cost-of-living  adjustments over the last few
years and government regulatory landscape is uncertain. The company expects that
the blended cut for the items affected by recent government  regulations will be
around 8%, which should negatively  affect  consolidated net sales by around 1%.
However,  Invacare's new products,  (for example,  the low cost oxygen  delivery
system of HomeFill(TM)), can help address the cuts the home care provider has to
endure. We will continue to focus on developing  products that help the provider
improve  profitability.  With such products,  Invacare  believes it can grow and
offset the risks. Additionally, Invacare will accelerate its activities in China
to make sure that we are one of the lowest cost  manufacturers  and distributors
to the home care provider.

RESULTS OF OPERATIONS
- ---------------------
2004 Versus 2003

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, 2004.

Net  Sales.  Consolidated  net sales  for 2004  increased  13% for the year,  to
$1,403,327,000  from  $1,247,176,000.  Acquisitions  accounted  for 8 percentage
points of the net sales increase while foreign currency translation  contributed
an additional 3 percentage  points.  The overall growth was primarily  driven by
volume increases in North America.

North American Operations

North American net sales,  increased 12% over the prior year, with  acquisitions
accounting  for 8% of the increase and currency  translation  having less than a
one percentage  point impact.  These sales consist of Rehab (power  wheelchairs,
custom  manual  wheelchairs,  personal  mobility  and seating and  positioning),
Standard  (manual  wheelchairs,  personal  care,  home care  beds,  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.

For the year, the net sales increase was  attributable  to volume  increases in:
Respiratory  products (37%),  largely due to continued strong performance in the
Homefill(TM)  oxygen  system  product line;  Distributed  products  (26%),  with
acquisitions   contributing  15  percentage  points  of  the  improvement;   and
Continuing  Care products  (59%) with  acquisitions  contributing  52 percentage
points of the  improvement.  These were partially offset by declines in Standard
products (6%) as a result of reduced pricing and flat Rehab product sales. Sales
of Rehab  products  were  negatively  impacted by Medicare and Medicaid  related
reimbursement  pressures.  In  particular,  CMS  was  expected  to  release  new
guidelines for power chairs in the fourth quarter of 2004, it instead circulated
proposed criteria that required public comment before implementation.  While the
proposed  criteria are  favorable and are based on CMS' own medical  study,  the
ambiguity  that is  impacting  the  power  wheelchair  market  has  resulted  in
significant declines in this market segment.

Other products,  consisting  primarily of the company's Canadian and aftermarket
parts businesses, had a 10% net sales increase principally as a result of volume
increases.

European Operations

European  net sales  increased  20% over the  prior  year to  $336,792,000  from
$279,782,000.  Acquisitions contributed 12 percentage points of the increase and
foreign currency accounted for 10 percentage points of the increase. The decline
in organic growth was primarily due to reduced  volumes in the Nordic  countries
and continued reimbursement pressures in Germany.

                                      I-21
<page>
Asia/Pacific Operations

Asia/Pacific  net sales  declined  8% from the prior  year to  $64,262,000  from
$70,186,000.  Excluding the impact of foreign  exchange,  net sales declined 18%
for the year.  The  decline  was  primarily  the  result of  reduced  volumes of
microprocessor controllers, resulting from the global slowdown in the production
of  power  wheelchairs  caused  in  large  part  by the  Medicare  reimbursement
challenges  in the United  States  described  above.  The  Asia/Pacific  segment
transacts a substantial  amount of its business with customers  outside of their
region in  various  currencies  other than their  functional  currency,  the New
Zealand Dollar.  As a result,  changes in exchange rates  particularly  with the
Euro and U.S. Dollar can have a significant impact on sales and cost of sales.

Gross Profit.  Consolidated  gross profit as a percentage of net sales was 29.8%
in 2004 and 30.0% in 2003.  The margin  decline was  attributable  to  continued
competitive  pricing  pressures and increased  freight costs partially offset by
continued cost reduction initiatives.

North  American  gross  profit  as a  percentage  of net sales was 30.2% in 2004
versus 30.3% in 2003. The decline was primarily  attributable to reduced pricing
in Standard products partially offset by continued cost reduction efforts.

Gross profit in Europe as a percentage of net sales  declined .7 of a percentage
point from the prior year. The decline is attributable to unfavorable  sales mix
toward  lower  margin  products  and  additional  costs  related to new  product
introductions.

Gross  profit in  Asia/Pacific  as a  percentage  of net sales  decreased by 3.5
percentage  points from the prior year. The decline was due in part to increased
sales of lower margin  products in the company's  Dynamic  Controls  subsidiary,
reduced  volumes  and  unfavorable   foreign  currency  associated  with  normal
operating transactions.

Selling,   General  and  Administrative.   Consolidated  selling,   general  and
administrative  expenses  as a  percentage  of net sales  were 21.2% in 2004 and
21.0%  in 2003.  The  overall  dollar  increase  was  $35,109,000  or 13%,  with
acquisitions   increasing   selling,   general  and   administrative   costs  by
approximately  $20,263,000  or 8% and currency  translation by $9,409,000 or 4%.
Selling,  general and  administrative  expenses  also  increased  as a result of
increased  distribution  and  commission  costs  related to  increased  volumes,
continued  investments in marketing and branding  programs,  and increased legal
costs.  These were  partially  offset by reduced bad debt expense and management
bonuses as a result of reduced profitability from plan.

Selling,  general and  administrative  expenses  for North  American  operations
increased 9% or $16,562,000 compared to 2003 with acquisitions  accounting for 7
percentage  points  of  the  increase.   The  remaining  increase  is  primarily
attributable  to  continued  investments  in marketing  and  branding  programs,
increased  distribution  and  commission  costs related to increased  volume and
higher legal costs.  These  increases were partially  offset by reduced bad debt
expense and management bonuses.

European operations' selling,  general and administrative expenses increased 26%
or $17,290,000 from the prior year. European selling, general and administrative
expenses  increased  due  to  acquisitions  and  foreign  currency  translation.
Increases,  primarily for acquisitions,  were $7,791,000 or 12% and for currency
translation  totaled  $7,305,000  or 11%. The  remaining  increase was primarily
attributable to additional programs to re-establish sales growth.

Asia/Pacific  operations' selling, general and administrative expenses increased
16% or $1,257,000  with foreign  currency  increasing the expense by $961,000 or
12%. The remaining  increase was primarily  attributable  to additional  systems
costs related to an Enterprise Resource Planning (ERP)  implementation and sales
and marketing costs associated with the development of the Asia market.

Interest.  Interest expense increased to $16,282,000 in 2004 from $11,710,000 in
2003,  representing a 39% increase.  This increase was attributable to increased
borrowings under the Company's revolving credit facility,  and to new borrowings
under an interim bridge loan financing  facility.  The company's  debt-to-equity
ratio increased to 0.7:1 as of December 31, 2004 from 0.4:1 as of the end of the
prior year.  Interest  income in 2004 was  $5,186,000,  which was  comparable to
$5,473,000 in the prior year. 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 31.9% in 2004 and 32.9%
in 2003.  The effective tax rate declined due to a change in the mix of earnings
and permanent  deductions.  The  Company's  effective tax rate is lower than the
federal  statutory rate  primarily due to tax credits and earnings  abroad being
taxed at rates lower than the federal statutory rate.





                                      I-22
<page>
Research  and  Development.  The company  continues to increase its research and
development  activities  to  maintain  its  competitive  advantage.  The company
dedicates 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
$21,638,000 in 2004 from $19,130,000 in 2003. The expenditures,  as a percentage
of net sales, were 1.5% in 2004 and 1.5% in the prior year.

2003 Versus 2002

Net  Sales.  Consolidated  net sales  for 2003  increased  15% for the year,  to
$1,247,176,000  from  $1,089,161,000,  with net sales increasing in all business
segments on a reported basis. Foreign currency  translation  accounted for 6% of
the net sales  increase,  while  acquisitions  contributed an additional 3%. The
overall  growth was  primarily  driven by volume  increases in North America and
Asia/Pacific.

North American Operations

North American net sales, consisting of Rehab (power wheelchairs,  custom manual
wheelchairs,  personal mobility and seating and  positioning),  Standard (manual
wheelchairs,  personal  care,  home care beds,  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 increased 13% over the prior year, with currency  translation
having less than a one percentage point impact and  acquisitions  accounting for
3%.

For  the  year,  the  net  sales  increase  was  attributable  to  increases  in
Respiratory products (43%), Rehab products (30%), Distributed products (11%) and
Continuing  Care  products  (20%),  which were  partially  offset by declines in
Standard  products  (6%).  Excluding  acquisitions,   Rehab  product  net  sales
increased by 26% and  Continuing  Care product net sales declined by 4%. The net
sales improvements were led by strong sales growth in oxygen concentrators,  the
HomeFill(TM)  product line and consumer power products.  Declines were primarily
attributable  to continued  pricing  pressures  in Standard  products and weaker
sales to nursing homes through Invacare Continuing Care Group as a result of the
continued uncertainty surrounding government reimbursement programs.

Other products,  consisting  primarily of the company's Canadian and aftermarket
parts businesses,  had an 8% net sales increase  primarily as a result of volume
increases.

European Operations

European  net sales  increased  11% over the  prior  year to  $279,782,000  from
$251,443,000. Foreign currency and acquisitions contributed 16 percentage points
and 3 percentage points,  respectively,  of the net sales increase.  The organic
decline of 8% was  primarily  due to slower  than  expected  sales in the Nordic
region and reimbursement pressures in Germany.

Asia/Pacific Operations

Asia/Pacific  net sales  increased 59% from the prior year to  $70,186,000  from
$44,254,000.  Excluding the impact of foreign exchange,  net sales increased 27%
for the year. The increase was primarily the result of sales at Dynamic Controls
due in part to a significant increase in sales to a non-healthcare customer.

Gross Profit.  Consolidated gross profit as a percentage of net sales were 30.0%
in 2003 and 30.1% in 2002. Margins remained  relatively flat, as the company was
able to offset pricing pressures with improved manufacturing performance.

North  American  gross  profit  as a  percentage  of net sales was 30.3% in 2003
versus 30.0% in 2002. The increase was primarily  attributable to continued cost
reduction efforts and improved product and customer mix.

Gross profit in Europe as a  percentage  of net sales  improved  1.0  percentage
point from the prior year. The  improvement is  attributable  to favorable sales
mix towards higher margin products and cost reduction efforts.

Gross  profit in  Asia/Pacific  as a  percentage  of net sales  decreased by 6.1
percentage points from last year. The decline was due in part to increased sales
of lower  margin  products in the  company's  Dynamic  Controls  subsidiary  and
increased costs to support the growth in the business.





                                      I-23
<page>
Selling,   General  and  Administrative.   Consolidated  selling,   general  and
administrative  expenses  as a  percentage  of net sales  were 21.0% in 2003 and
20.2% in 2002. The overall dollar  increase was $41,719,000 or 19% with currency
translation   increasing   selling,   general   and   administrative   costs  by
approximately  $13,103,000 or 6% and  acquisitions by $6,800,000 or 3%. Selling,
general and  administrative  expenses also increased as a result of accruals for
management bonuses as a result of improved profitability, increased distribution
and  commission  costs related to increased  volumes,  continued  investments in
marketing and branding programs, and increased insurance costs.

North American operations selling, general and administrative expenses increased
15% or $21,789,000  compared to 2002. The increase is primarily  attributable to
acquisitions,   continued   investments  in  marketing  and  branding  programs,
additional provisions for bad debt and increases in insurance costs.

European operations selling,  general and administrative  expenses increased 30%
or $15,721,000 from the prior year. European selling, general and administrative
expenses  were  negatively   impacted  by  foreign   currency   translation  and
acquisitions, which increased expenses, reported in dollars by $9,993,000 or 19%
and  $1,547,000  or 3%,  respectively.  The  remaining  increase  was  primarily
attributable to additional programs to re-establish sales growth.

Asia/Pacific  operations' selling, general and administrative expenses increased
40% or $2,264,000 with foreign currency  increasing the expense by $1,522,000 or
27%.  Asia/Pacific  selling,  general and administrative  costs grew at a slower
rate than sales principally as a result of aggressive expense control.

Interest.  Interest expense decreased to $11,710,000 in 2003 from $15,122,000 in
2002,  representing  a 23%  decrease.  This  decrease  was  attributable  to the
continued  favorable  interest rate environment in 2003 and to a decrease in the
company's average  borrowings  outstanding under the company's  revolving credit
facility.  The company's  debt-to-equity ratio decreased to 0.4:1 as of December
31, 2003 from 0.5:1 as of the end of the prior year.  Interest income  increased
in 2003 to $5,473,000 from $4,550,000 in the prior year, primarily  attributable
to an increase in 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 both 2003 and
2002,  which is  lower  than  the  United  States  federal  statutory  rate as a
significant portion of the company earnings are outside of the United States and
taxed at lower rates.

Research  and  Development.  The company  continues to increase its research and
development  activities  to  maintain  its  competitive  advantage.  The company
dedicates 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
$19,130,000 in 2003 from $17,934,000 in 2002. The expenditures,  as a percentage
of net sales, were 1.5% in 2003 and 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 2004 and
2003,  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 2003, the
company  issued  $100,000,000  in senior  notes,  which are due between 2007 and
2010. In 2001, the company  completed a $325,000,000  multi-currency,  long-term
revolving credit agreement, which was replaced on January 14, 2005, along with a
100,000,000  Euro bridge  agreement  entered into in 2004, by a new $450,000,000
multi-currency,  long-term revolving credit agreement. In February 2005, the new
$450,000,000 multi-currency,  long-term revolving credit agreement was also used
to pay off the  $20,000,000  senior  notes at 6.60%.  Additionally,  the company
maintains various other demand lines of credit totaling a U.S. dollar equivalent
of  approximately  $4,229,000 as of December 31, 2004. 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,  2004,  the  company  had
approximately   $126,734,000  available  under  its  various  lines  of  credit,
excluding debt covenant restrictions.


                                      I-24
<page>
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 $60,800,000 as of December 31, 2004 and up to $108,000,000, effective
February  2005,  pursuant to the  covenants of the  company's  new  $450,000,000
multi-currency, long-term revolving credit agreement.

While there is general  concern about the potential for rising  interest  rates,
exposure to interest rate fluctuations is manageable given that a portion of the
debt is at fixed rates  through  2010.  In  addition,  the ability to  terminate
existing swaps that exchange fixed rate debt to variable and 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, 2004, the weighted average floating interest rate
on U.S. borrowings was 3.36%.

CAPITAL EXPENDITURES
- --------------------
There are no individually material capital expenditure  commitments  outstanding
as of December 31, 2004. The company estimates that capital investments for 2005
could  approximate up  $37,000,000,  compared to actual capital  expenditures of
$41,403,000  in 2004.  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 $98,324,000 in 2004,  compared
to  $116,204,000  last year.  The  decrease is due  primarily  to  increases  in
installment  receivables  and  inventory  and  a  decline  in  accrued  expenses
primarily related to reduced customer rebates. These were partially offset by an
increase in accounts payable.

Cash flows used for investing  activities were $389,022,000 in 2004, compared to
$101,558,000  in  2003.  The  increase  was  primarily   attributable  to  costs
associated with acquired  businesses with the Domus  acquisition  being the most
significant.  In addition,  purchases of property and equipment activity in 2004
was  higher  compared  to the prior  year as the  company  is in the  process of
implementing  Enterprise Resource Planning Systems in North America,  Europe and
Asia/Pacific.

Cash flows provided by financing activities in 2004 were $307,051,000,  compared
to cash flows  required of $13,955,000  in 2003.  Financing  activities for 2004
were  impacted  by an  increase  in the  company's  borrowings  of  $303,188,000
primarily related to acquisitions.  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.

During 2004, the company  generated  free cash flow of  $56,921,000  compared to
free cash flow of $85,544,000  in 2003. The decrease was primarily  attributable
to  additional  capital  expenditures  made in 2004,  primarily  for  enterprise
resource  planning  systems as well as increases in installment  receivables and
inventory  coupled  with a decline in  accrued  expenses,  primarily  related to
reduced customer rebates. Free cash flow is a non-GAAP financial measure that is
comprised  of net cash  provided  by  operating  activities  less  purchases  of
property and equipment. Management believes that this financial measure provides
meaningful  information for evaluating the overall financial  performance of the
Company  and its  ability to repay debt or make  future  investments  (including
acquisitions,  etc.). The non-GAAP  financial  measure is reconciled to the GAAP
measure as follows (in thousands):

                                                          Twelve Months Ended
                                                              December 31,
                                                          2004           2003
    ----------------------------------------------------------------------------
    Net cash provided by operating activities          $98,324       $116,204
    Adjusted for:
    Purchases of property and equipment                (41,403)       (30,660)
                                                       -------        -------
    Free Cash Flow                                     $56,921        $85,544
                                                       =======        =======








                                      I-25
<page>
<table>
<caption>
CONTRACTUAL OBLIGATIONS
- -----------------------
 (In thousands)                                                            Payments due by period
                                           Total      Less than 1 year           1-3 years          3-5 years     More than 5 years
                                        --------      ----------------           ---------          ---------     -----------------
<s>                                          <c>                   <c>                 <c>                <c>                    <c>
Long-term debt obligations
   Senior Notes                         $234,595                $8,054             $68,065           $116,629               $41,847
   Revolving credit agreements           382,755                10,647              20,648             20,648               330,812
   Other notes                             1,415                   162                 324                324                   605
Operating lease obligations               37,354                15,680              14,909              5,050                 1,715
Capital lease obligations                 21,539                 1,751               3,285              3,064                13,439
Purchase obligations
   (primarily computer systems             6,975                 6,468                 507                  -                     -
    contracts)
Other long-term obligations
   Product liability                      17,045                 2,595               7,263              3,227                 3,960
   SERP                                   13,371                   424               1,658              1,559                 9,730
   Other, principally deferred
     compensation                         16,680                   339               3,068                612                12,661
                                        --------               -------            --------           --------              ---------
Total                                   $731,729               $46,120            $119,727           $151,113              $414,769
                                        ========               =======            ========           ========              ========
</table>
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 $0.05 per Common Share and $0.045 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 2004, dividends of $0.05 per Common Share and $0.045 per Class
B Common Share were declared and paid.

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,"  as  updated by SAB No.  104,  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.

Sales are only made to customers  with whom the company  believes  collection is
reasonably  assured based upon a credit analysis,  which may include obtaining a
credit  application,  a signed security  agreement,  personal guarantee and/or a
cross  corporate  guarantee  depending  on the credit  history of the  customer.
Credit lines are  established  for new  customers  after an  evaluation of their
credit report and/or other relevant financial information. Existing credit lines
are regularly reviewed and adjusted with consideration  given to any outstanding
past due amounts.

The company offers discounts and rebates,  which are accounted for as reductions
to  revenue  in the period in which the sale is  recognized.  Discounts  offered
include:  cash discounts for prompt  payment,  base and trade discounts based on
contract level for specific  classes of customers.  Volume discounts and rebates
are given based on large purchases and the achievement of certain sales volumes.
Product  returns  are  accounted  for as a  reduction  to  reported  sales  with
estimates recorded for anticipated returns at the time of sale. The company does
not sell any goods on consignment.

Distributed  products sold by the company are  accounted for in accordance  with
EITF 99-19 Reporting  Revenue Gross as a Principal  versus Net as an Agent.  The
company records Distributed product sales gross as a principal since the company
takes title to the products and has the risks of loss for collections,  delivery
and returns.

                                      I-26
<page>
Product sales that give rise to installment receivables are recorded at the time
of sale when the risks and rewards of  ownership  are  transferred.  In December
2000, the company  entered into an agreement  with DLL, a third party  financing
company,  to  provide  the  majority  of  future  lease  financing  to  Invacare
customers.  As such,  interest  income is  recognized  based on the terms of the
installment  agreements.  Installment  accounts are  monitored and if a customer
defaults on payments,  interest income is no longer recognized.  All installment
accounts are accounted for using the same methodology, regardless of duration of
the installment agreements.

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, is
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  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 by the first-in, first-out (FIFO) method.

Inventories   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.  A provision
for  excess  and  obsolete  inventory  is  recorded  as  needed  based  upon the
discontinuation  of  products,  redesigning  of existing  products,  new product
introductions, market changes and safety issues. Both raw materials and finished
goods are reserved for on the balance sheet.

In general,  we review  inventory  turns as an indicator of obsolescence or slow
moving product as well as the impact of new product introductions.  Depending on
the situation,  the  individual  item may be partially or fully reserved for. No
inventory  that was  reserved  for has been sold at prices  above their new cost
basis. In 2004, individual items were both partially and fully written down. The
company  continued  to increase  its  overseas  sourcing  efforts,  increase its
emphasis on the development and  introduction of new products,  and decrease the
cycle time to bring new  product  offerings  to market.  These  initiatives  are
sources of inventory obsolescence for both raw material and finished goods.

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  Statement of  Financial  Accounting  Standard  (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  tests in the fourth quarter of 2002, 2003 and 2004.
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  annual
policy losses of $10,000,000  per occurrence and $11,000,000 in the aggregate of
the company's North American product  liability  exposure.  The company also has
additional layers of external insurance coverage insuring $100,000,000 in annual
aggregate  losses  arising  from  individual  claims  anywhere in the world that
exceed the captive  insurance  company policy limits.  There can be no assurance
that  Invacare's  current  insurance  levels  will  continue  to be  adequate or
available at affordable rates.

Product  liability  reserves  are  recorded  for  individual  claims  based upon
historical  experience,  industry expertise and indications from the third-party
actuary.  Additional  reserves,  in  excess  of  the  specific  individual  case
reserves,  are  provided  for  incurred  but  not  reported  claims  based  upon
third-party  actuarial  valuations at the time such  valuations  are  conducted.
Historical claims experience and other assumptions are taken into  consideration
by the third-party actuary to estimate the ultimate reserves.  For example,  the
actuarial  analysis  assumes that  historical loss experience is an indicator of
future  experience,  the distribution of exposures by geographic area and nature
of  operations  for  ongoing  operations  is  expected  to be  very  similar  to
historical  operations with no dramatic changes and that the government  indices
used to trend losses and exposures are appropriate.  Estimates made are adjusted
on a regular  basis and can be  impacted  by actual  loss award  settlements  on
claims.  While actuarial  analysis is used to help determine  adequate reserves,
the company  accepts  responsibility  for the  determination  and  recording  of
adequate  reserves in  accordance  with accepted  loss  reserving  standards and
practices.
                                      I-27
<page>
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.  Historical  analysis  is
primarily used to determine the company's warranty  reserves.  Claims history is
reviewed  and  provisions  are  adjusted as needed.  However,  the company  does
consider other events, such as a product recall,  which could warrant additional
warranty reserve  provision.  No material  adjustments to warranty reserves were
necessary  in the  current  year.  See Current  Liabilities  in the Notes to the
Consolidated  Financial  Statements for a  reconciliation  of the changes in the
warranty accrual.

Accounting for Stock-Based Compensation
The company accounts for options under its stock-based  compensation plans using
the intrinsic  value method  proscribed in Accounting  Principles  Board Opinion
(APBO)  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 $0.14 in 2004,  $0.14 in 2003 and $0.15 in
2002.

In December 2002, the Financial  Accounting  Standards  Board (FASB) issued 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.

Income Taxes
As part of the process of preparing our financial statements, we are required to
estimate income taxes in various jurisdictions.  The process requires estimating
our current tax  exposure,  including  assessing the risks  associated  with tax
audits,  as  well  as  estimating  temporary  differences  due to the  different
treatment of items for tax and accounting  policies.  The temporary  differences
are  reported as deferred tax assets and or  liabilities.  The company also must
estimate the  likelihood  that its  deferred  tax assets will be recovered  from
future  taxable  income  and  whether  or not  valuation  allowances  should  be
established.  In the event that actual results  differ from our  estimates,  the
company's provision for income taxes could be materially impacted.

The  company  does not  believe  that  there is a  substantial  likelihood  that
materially   different  amounts  would  be  reported  related  to  its  critical
accounting policies.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -----------------------------------------
In December  2004,  FASB issued  Statement  of  Financial  Accounting  Standards
("SFAS")  No. 123 (Revised  2004),  Share-Based  Payment  ("SFAS  123R"),  which
requires companies to expense stock options and other share-based payments. SFAS
123R supersedes SFAS No. 123, which permitted  either expensing stock options or
providing  pro forma  disclosure.  The  provisions of this  Statement,  which is
effective  July 1, 2005,  apply to all awards  granted,  modified,  cancelled or
repurchased  after July 1, 2005 as well as the unvested portion of prior awards.
The company will adopt the standard as of the effective  date and estimates that
the impact to the  company's  reported  results will be similar to the pro forma
results  shown  in the  company's  Accounting  Policy  Note to the  Consolidated
Financial Statements.

The American  Jobs Creation Act of 2004 (the Act) was signed into law in October
2004.  The Act provides for a tax deduction on qualified  production  activities
and  introduced  a  special  one-time   dividends   received  deduction  on  the
repatriation of certain foreign  earnings to a U.S.  taxpayer,  provided certain
criteria are met. The FASB issued FASB Staff Position 109-1 to provide  guidance
on the application of SFAS No. 109,  Accounting for Income Taxes, and FASB Staff
Position  109-2  to  provide   accounting   and  disclosure   guidance  for  the
repatriation provision. The company is reviewing the implication of the new Act,
recently released treasury  guidance,  and the FASB staff positions but does not
intend to repatriate any foreign  earnings under the Act and does not expect the
Act will have a material impact on the company's financial position,  results of
operations or cash flows.





                                      I-28
<page>
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,  2004 debt  levels,  a 1% change in interest  rates would
impact interest expense by approximately $5,107,000.  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 as  "will,"  "should,"  "plan,"
"intend," "expect," "continue," "forecast",  "believe," "anticipate" and "seek,"
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, the success of the Company's ongoing efforts to reduce costs,
increasing raw material costs, the  consolidations  of health care customers and
competitors,  government  reimbursement  issues (including those that affect the
sales of and margins on products,  along with the viability of customers)both at
the federal and state level, the ability to design, manufacture,  distribute and
achieve market  acceptance of new products with higher  functionality  and lower
costs, the effect of offering customers competitive financing terms,  Invacare's
ability to successfully  identify,  acquire and integrate strategic  acquisition
candidates,  the  difficulties  in managing  and  operating  businesses  in many
different foreign  jurisdictions  (including the recent Domus acquisition),  the
timely completion of facility consolidations,  the vagaries of any litigation or
regulatory  investigations  that the Company may be or become involved in at any
time  (including the  previously-disclosed  litigation  with  Respironics),  the
difficulties  in acquiring and maintaining a proprietary  intellectual  property
ownership position, the overall economic,  market and industry growth conditions
(including   the  impact  that  acts  of  terrorism  may  have  on  such  growth
conditions),  foreign  currency and interest rate risks,  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.  We undertake no  obligation to review or update these
forward-looking statements or other information contained herein.

Item 8.  Financial Statements and Supplementary Data
- ----------------------------------------------------
Reference  is made to the Report of  Independent  Registered  Public  Accounting
Firm,   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-27 of this  Annual  Report on Form
10-K.

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

Item 9A.  Controls and Procedures.
- ---------------------------------
(a) Evaluation of Disclosure Controls and Procedures
- ----------------------------------------------------
Under the supervision and with the  participation  of the company's  management,
including the Chief Executive Officer and Chief Financial Officer,  we evaluated
the effectiveness of the company's  disclosure controls and procedures as of the
end of the  period  covered  by  this  report.  Based  on that  evaluation,  the
company's management,  including the Chief Executive Officer and Chief Financial
Officer,  concluded that the company's  disclosure  controls and procedures were
effective to provide reasonable assurance that we record, process, summarize and
report the  information we must disclose in reports that we file or submit under
the  Securities  Exchange  Act of 1934,  as  amended,  within  the time  periods
specified by the SEC.












                                      I-29
<page>
(b) Management's Report on Internal Control Over Financial Reporting
- --------------------------------------------------------------------
Management is responsible for  establishing and maintaining a system of adequate
internal  control over financial  reporting that provides  reasonable  assurance
that assets are safeguarded and that  transactions are authorized,  recorded and
reported  properly.  The system  includes  self-monitoring  mechanisms;  regular
testing by the Company's internal auditors; a Code of Conduct;  written policies
and procedures;  and a careful selection and training of employees.  Actions are
taken to correct  deficiencies  as they are  identified.  An effective  internal
control  system,  no  matter  how well  designed,  has  inherent  limitations  -
including the possibility of the  circumvention  or overriding of controls - and
therefore can provide only  reasonable  assurance that errors and fraud that can
be material to the financial  statements are prevented or would be detected on a
timely basis. Further, because of changes in conditions, internal control system
effectiveness may vary over time.

Management's  assessment of the effectiveness of the company's  internal control
over financial reporting is based on the Internal Control -Integrated  Framework
published  by  the  Committee  of  Sponsoring   Organizations  of  the  Treadway
Commission  and was limited as  explained in the Scope of  Management's  Report,
which follows this report.

In management's opinion,  internal control over financial reporting is effective
as of December 31, 2004.

The Company's independent  registered public accounting firm, Ernst & Young LLP,
audited  management's  assessment of internal  control over financial  reporting
and, based on that audit, issued their report included in this Annual Report.

Scope of Management's Report
- ----------------------------
Management's  assessment of the effectiveness of internal control over financial
reporting  excludes  the WP Domus  GmbH  acquisition,  which  was  finalized  on
September  9, 2004.  WP Domus  GmbH  represents  approximately  19% of the total
assets and approximately 2% of the net sales, respectively,  of the consolidated
financial  statements  as of December  31, 2004 and the year ended  December 31,
2004.

(c) Changes in Internal Control Over Financial Reporting
- --------------------------------------------------------
There have been no significant  changes in the company's  internal  control over
financial  reporting  that  occurred  during our last fiscal  quarter  that have
materially  affected,  or  are  reasonably  likely  to  materially  affect,  the
company's internal control over financial reporting.

                                    PART III
                                    --------
Item 10.  Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------
We have  adopted a Code of  Business  Conduct  and  Ethics  that  applies to all
Directors,  officers and  employees.  We also have adopted a separate  Financial
Code of Ethics  that  applies  to our Chief  Executive  Officer  (our  principal
executive  officer) and our Chief  Financial  Officer (our  principal  financial
officer  and  principal  accounting  officer).  You can find  both  codes on our
website at www.invacare.com  by clicking on the link for Investor Relations.  We
will post any amendments to the codes,  as well as any waivers that are required
to be disclosed pursuant to the rules of the Securities and Exchange  Commission
and the New York Stock Exchange, on our website.

Our Board of Directors has adopted Corporate Governance  Guidelines and charters
for the Audit  Committee,  Compensation,  Management  Development  and Corporate
Governance Committee, Nominating Committee and Investment Committee of the Board
of Directors. These documents can be found on our website at www.invacare.com by
clicking on the link for Investor Relations.

You also can obtain  printed  copies of any of the materials  referred to above,
free of charge,  by  writing  to:  Shareholder  Relations  Department,  Invacare
Corporation, One Invacare Way, P.O. Box 4028, Elyria, OH 44036-2125.

We  submitted  the New York Stock  Exchange  ('NYSE')  Section  12(a) Annual CEO
Certification  as to our compliance with the NYSE corporate  governance  listing
standards  to  the  NYSE  in  June  2004.   In  addition,   we  have  filed  the
certifications  of our  Chief  Executive  Officer  and Chief  Financial  Officer
pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 regarding the quality
of our public disclosures as exhibits to this Annual Report on Form 10-K.

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,  the other  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 2005 Annual  Meeting of
Shareholders.

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 2005 Annual Meeting of Shareholders.
                                      I-30
<page>
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 2005 Annual
Meeting of Shareholders.

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 2005
Annual Meeting of Shareholders.

Item 14.  Principal Accounting Fees and Services.
- ------------------------------------------------
The  information  required  by  Item  14 is  incorporated  by  reference  to the
information set forth under the caption "Independent  Auditors" in the company's
definitive Proxy Statement for the 2005 Annual Meeting of Shareholders.


                                     PART IV
                                     -------
Item 15.  Exhibits and Financial Statement Schedules
- ----------------------------------------------------
(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, 2004,
          2003 and 2002

          Consolidated Balance Sheet - December 31, 2004 and 2003

          Consolidated  Statement of Cash Flows - years ended December 31, 2004,
          2003, and 2002

          Consolidated  Statement of Shareholders' Equity - years ended December
          31, 2004, 2003, and 2002

          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

          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-33 of this Report on Form 10-K.


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 11, 2005.

                                  INVACARE CORPORATION

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








                                      I-31
<page>
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 11, 2005.

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              Chief Financial Officer
- ------------------------------      (Principal Financial and Accounting Officer)
    Gregory C. Thompson

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

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

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

/s/ C. Martin Harris, M.D.           Director
- ------------------------------
    C. Martin Harris, M.D.

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

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

















                                      I-32
<page>
                              INVACARE CORPORATION
        Report on Form 10-K for the fiscal year ended December 31, 2004.
<table>
                                  Exhibit Index
<caption>
Official                                                                                                              Sequential
Exhibit No         Description                                                                                        Page No.
- ----------         -----------                                                                                        ----------
<s>                <c>                                                                                                <c>
2.1                Sale and Purchase Agreement Regarding the Sale and Purchase of All Shares in WP Domus GmbH by      (A)
                   and among WP Domus LLC, Mr. Peter  Schultz and Mr.  Wilhelm  Kaiser,  Invacare  GmbH & Co. KG and
                   Invacare Corporation dated as of July 31, 2004

2.2                Guarantee Letter Agreement of Warburg,  Pincus Ventures,  L.P. and Warburg, Pincus International,  (A)
                   L.P. dated as of September 9, 2004

3(a) **            Amended and Restated Articles of Incorporation, as amended through February 2, 1996

3(b) **            Code of Regulations, as amended on May 22, 1996

4(a)               Specimen Share Certificate for Common Shares, as revised                                           (B)

4(b)               Specimen Share Certificate for Class B Common Shares                                               (B)

4(c)               Rights agreement between Invacare Corporation and Rights Agent dated as of July 7, 1995            (C)

10(a)              Assignment  of Patent  Application  and  License of  Know-how  dated  January  14,  1981,  and an  (D)
                   amendment  thereto dated October 12, 1981, with respect to certain royalty payments to be made to
                   the former owners of the company's home care bed subsidiary

10(b) **           1992 Non-Employee Directors Stock Option Plan adopted in May 1992

10(c) **           Deferred Compensation Plan for Non-Employee Directors, adopted in May 1992

10(d) **           Invacare Corporation 1994 Performance Plan approved January 28, 1994

10(e)              Amendment No. 3 to the Invacare Corporation 1994 Performance Plan                                  (H)*

10(f) **           Note Purchase Agreement dated as of February 27, 1998 for $80,000,000 6.71% Series A Senior
                   Notes Due February 27, 2008 and $20,000,000 6.60% Series B Senior Notes Due February 27, 2005

10(g) **           Amendment No. 1 to the Invacare Corporation 1994 Performance Plan approved May 28, 1998            *

10(h)              Amendment No. 2 to the Invacare Corporation 1994 Performance Plan approved May 24, 2000            (E)*

10(i)              Invacare Retirement Savings Plan, effective January 1, 2001                                        (F)

10(j)              Employment Agreement entered into by and between the company and Chief Operating Officer           (G)*

10(k)              Amendment No. 1 to Invacare Corporation 401(K) Plus Benefit Equalization Plan                      (L)

10(l)              Invacare  Corporation  401(K) Plus Benefit  Equalization Plan (As amended and restated  effective  (L)
                   January 1, 2003)

10(m)              Invacare  Corporation Note Purchase  Agreement dated as of October 1, 2003 for $50,000,000  3.97%  (J)
                   Series A Senior  Notes Due October 1, 2007;  $30,000,000  4.74% Series B Senior Notes Due October
                   1, 2009 and $20,000,000 5.05% Series C Senior Notes Due October 1, 2010
</table>



                                      I-33
<page>
<table>
<caption>
Official                                                                                                              Sequential
Exhibit No         Description                                                                                        Page No.
- ----------         -----------                                                                                        ----------
<s>                <c>                                                                                                <c>
10(n)              First  Amendment,  dated as of October 1, 2003, to Note Purchase  Agreement  dated as of February  (K)
                   27, 1998 for $80,000,000  6.71% Series A Senior Notes Due February 27, 2008 and $20,000,000 6.60%
                   Series B Senior Notes Due February 27, 2005

10(o)              Invacare Corporation 2003 Performance Plan                                                         (I)*

10(p)              Form of Change of Control Agreement entered into by and between the company and certain of         (G)*
                   its executive officers and Schedule of all such agreements with current executive officers

10(q)              Form of Indemnity  Agreement entered into by and between the company and certain of its Directors  (G)*
                   and executive  officers and Schedule of all such Agreements with current  Directors and executive
                   officers

10(r)              Employment Agreement entered into by and between the company and Chief Financial Officer           (G)*

10(s)              Credit  Agreement dated as of January 14, 2005 among Invacare  Corporation and Certain  Borrowing  (M)
                   Subsidiaries,  the Banks named therein,  and JPMorgan Chase Bank, N.A. as Agent, Keybank National
                   Association as Syndication Agent, J.P. Morgan Securities,  Inc. and Keybank National Association,
                   as Co-Lead Arrangers.

10(t)**            Invacare Corporation Deferred Compensation Plus Plan, effective January 1, 2005                    *

10(u)**            Invacare Corporation Death Benefit Only Plan, effective January 1, 2005                            *

10(v)**            A. Malachi Mixon, III 10b5-1 Plan, effective February 14, 2005                                     *

10(w)**            Gerald B. Blouch 10b5-1 Plan, effective February 22, 2005                                          *

10(x)**            Gregory C. Thompson 10b5-1 Plan, effective February 21, 2005                                       *

10(y) **           Supplemental Executive Retirement Plan (As amended and restated effective February 1, 2000)        *

10(z)**            Form of Director Stock Option Award under Invacare Corporation 1994 Performance Plan               *

10(aa)**           Form of Director Stock Option Award under Invacare Corporation 2003 Performance Plan               *

10(ab)**           Form of Director Deferred Option Award under Invacare Corporation 2003 Performance Plan            *

10(ac)**           Form of Restricted Stock Option Award under Invacare Corporation 2003 Performance Plan             *

10(ad)**           Form of Stock Option Award under Invacare Corporation 2003 Performance Plan                        *

10(ae)**           Director Compensation Schedule                                                                     *

21                 Subsidiaries of the company

23                 Consent of Independent Registered Public Accounting Firm

31.1 **            Certification of the Chief Executive  Officer pursuant to Section 302 of the  Sarbanes-Oxley  Act
                   of 2002

31.2 **            Certification of the Chief Financial  Officer pursuant to Section 302 of the  Sarbanes-Oxley  Act
                   of 2002
</table>


                                      I-34
<page>
<table>
<caption>
Official                                                                                                              Sequential
Exhibit No         Description                                                                                        Page No.
- ----------         -----------                                                                                        ----------
<s>                <c>                                                                                                <c>
32.1 **            Certification  of the Chief  Executive  Officer  pursuant to 18 U.S.C.  Section  1350, as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2 **            Certification  of the Chief  Financial  Officer  pursuant to 18 U.S.C.  Section  1350, as adopted
                   pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
</table>

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



(A)  Reference is made to the appropriate  Exhibit to the company report on Form
     8-K,  dated  September 9, 2004,  which  Exhibit is  incorporated  herein by
     reference.

(B)  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.

(C)  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.

(D)  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.

(E)  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.

(F)  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.

(G)  Reference is made to the appropriate  Exhibit of the company report on Form
     10-K for the  fiscal  year  ended  December  31,  2002,  which  Exhibit  is
     incorporated herein by reference.

(H)  Reference is made to the appropriate  Exhibit of the company report on Form
     10-Q for the quarter ended March 31, 2003,  which  Exhibit is  incorporated
     herein by reference.

(I)  Reference is made to Exhibit 4.5 of Invacare  Corporation Form S-8 filed on
     October 17, 2003.

(J)  Reference is made to the appropriate  Exhibit of the company report on Form
     10-Q  for  the  quarter  ended   September  30,  2003,   which  Exhibit  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,  2003,  which  Exhibit  is
     incorporated herein by reference.

(L)  Reference is made to the appropriate  Exhibit of the company report on Form
     10-Q for the quarter  ended June 30, 2004,  which  Exhibit is  incorporated
     herein by reference.

(M)  Reference is made to the appropriate  Exhibit of the company report on Form
     8-K, dated January 14, 2005, which is incorporated herein by reference.





                                      I-35
<page>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Shareholders and Board of Directors
Invacare Corporation


We have  audited  the  accompanying  consolidated  balance  sheets  of  Invacare
Corporation  and  subsidiaries as of December 31, 2004 and 2003, and the related
consolidated  statements of earnings,  cash flows and  shareholders'  equity for
each of the three years in the period ended  December 31, 2004.  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 the standards of the Public  Company
Accounting Oversight Board (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, 2004 and 2003, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period  ended  December  31, 2004,  in  conformity  with U.S.
generally  accepted  accounting  principles.  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.

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight  Board  (United  States),  the  effectiveness  of Invacare
Corporation's internal control over financial reporting as of December 31, 2004,
based on criteria  established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring  Organizations of the Treadway Commission and our
report dated March 4, 2005 expressed an unqualified opinion thereon.

                                                           /s/ ERNST & YOUNG LLP



Cleveland, Ohio
March 4, 2005


















                                      FS-1
<page>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Shareholders and Board of Directors
Invacare Corporation


We have audited management's assessment, included in the accompanying Management
Report on Internal Control Over Financial  Reporting,  that Invacare Corporation
maintained  effective  internal control over financial  reporting as of December
31,  2004,  based on  criteria  established  in  Internal  Control -  Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission (the COSO criteria). Invacare Corporation's management is responsible
for maintaining  effective internal control over financial reporting and for its
assessment of the  effectiveness of internal  control over financial  reporting.
Our  responsibility  is to express an opinion on management's  assessment and an
opinion on the  effectiveness  of the company's  internal control over financial
reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

As  indicated in the  accompanying  Management  Report on Internal  Control Over
Financial   Reporting,   management's   assessment  of  and  conclusion  on  the
effectiveness of internal  control over financial  reporting did not include the
internal  controls of WP Domus GmbH, which is included in the 2004  consolidated
financial statements of Invacare Corporation and constituted 19% of total assets
as of December  31, 2004 and 2% of net sales for the year then ended.  Our audit
of internal  control over financial  reporting of Invacare  Corporation also did
not include an evaluation of the internal control over financial reporting of WP
Domus GmbH.

In our opinion,  management's  assessment that Invacare  Corporation  maintained
effective internal control over financial  reporting as of December 31, 2004, is
fairly stated, in all material  respects,  based on the COSO criteria.  Also, in
our  opinion,   Invacare  Corporation  maintained,  in  all  material  respects,
effective  internal  control over  financial  reporting as of December 31, 2004,
based on the COSO criteria.

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets of
Invacare  Corporation  as  of  December  31,  2004  and  2003  and  the  related
consolidated  statements of earnings,  cash flows and  shareholders'  equity for
each of the three  years in the  period  ended  December  31,  2004 of  Invacare
Corporation and our report dated March 4, 2005 expressed an unqualified  opinion
thereon.


                                                           /s/ ERNST & YOUNG LLP

Cleveland, Ohio
March 4, 2005
                                      FS-2



CONSOLIDATED STATEMENT OF EARNINGS

INVACARE CORPORATION AND SUBSIDIARIES
<table>
<caption>
                                                                                       Years Ended December 31,
                                                                                 2004            2003            2002
                                                                                 ----            ----            ----
<s>                                                                               <c>             <c>             <c>
                                                                                (In thousands, except per share data)

             Net sales                                                     $1,403,327      $1,247,176      $1,089,161
             Cost of products sold                                            984,735         872,515         761,763
                                                                              -------         -------         -------

                  Gross Profit                                                418,592         374,661         327,398

             Selling, general and administrative expenses                     297,124         262,015         220,296
             Interest expense                                                  16,282          11,710          15,122
             Interest income                                                   (5,186)         (5,473)         (4,550)
                                                                              -------         -------         -------

                  Earnings before Income Taxes                                110,372         106,409          96,530

             Income taxes                                                      35,175          35,000          31,760
                                                                              -------         -------         -------

                  Net Earnings                                                $75,197         $71,409         $64,770
                                                                              =======         =======         =======

                  Net Earnings per Share - Basic                                $2.41           $2.31           $2.10
                                                                              =======         =======         =======

             Weighted Average Shares Outstanding - Basic                       31,153          30,862          30,867
                                                                              =======         =======         =======

                  Net Earnings per Share - Assuming Dilution                    $2.33           $2.25           $2.05
                                                                              =======         =======         =======

             Weighted Average Shares Outstanding -
               Assuming Dilution                                               32,347          31,729          31,664
                                                                              =======         =======         =======
</table>
                 See notes to consolidated financial statements.


























                                      FS-3
<page>
CONSOLIDATED BALANCE SHEETS

INVACARE CORPORATION AND SUBSIDIARIES
<table>
<caption>
                                                                                  December 31,            December 31,
                                                                                         2004                    2003
                                                                                      -------                 -------
<s>                                                                                       <c>                     <c>
                                                                                              (In thousands)
Assets
- ------
Current Assets
   Cash and cash equivalents                                                          $32,567                 $16,074
   Marketable securities                                                                  199                     214
   Trade receivables, net                                                             287,950                 255,534
   Installment receivables, net                                                        13,422                   7,755
   Inventories, net                                                                   175,883                 130,979
   Deferred income taxes                                                               21,730                  24,573
   Other current assets                                                                33,400                  39,593
                                                                                      -------                 -------
     Total Current Assets                                                             565,151                 474,722

Other Assets                                                                           55,634                  53,263
Other Intangibles                                                                      98,212                  14,678
Property and Equipment, net                                                           191,163                 150,051
Goodwill                                                                              717,964                 415,499
                                                                                      -------                 -------
     Total Assets                                                                  $1,628,124              $1,108,213
                                                                                   ==========              ==========


Liabilities and Shareholders' Equity
- ------------------------------------
Current Liabilities
   Accounts payable                                                                  $149,413                $110,178
   Accrued expenses                                                                    98,850                  92,032
   Accrued income taxes                                                                 7,816                  19,107
   Current maturities of long-term debt                                                 2,062                   2,171
                                                                                      -------                 -------
     Total Current Liabilities                                                        258,141                 223,488

Long-Term Debt                                                                        547,974                 232,038

Other Long-Term Obligations                                                            68,571                  34,383

Shareholders' Equity
   Preferred Shares (Authorized 300 shares; none outstanding)                               -                       -
   Common Shares (Authorized 100,000 shares; 31,209 and
         30,739 issued in 2004 and 2003, respectively) - par $0.25                      7,803                   7,686
   Class B Common Shares (Authorized 12,000 shares; 1,112, issued and
         outstanding) - par $0.25                                                         278                     278
   Additional paid-in-capital                                                         123,793                 109,015
   Retained earnings                                                                  550,753                 477,113
   Accumulated other comprehensive earnings                                           104,629                  51,057
   Unearned compensation on stock awards                                               (1,557)                 (1,458)
   Treasury shares (934 and 770 shares in
         2004 and 2003, respectively)                                                 (32,261)                (25,387)
                                                                                      -------                 -------
     Total Shareholders' Equity                                                       753,438                 618,304
                                                                                      -------                 -------

Total Liabilities and Shareholders' Equity                                         $1,628,124              $1,108,213
                                                                                   ==========              ==========
</table>
                 See notes to consolidated financial statements.


                                      FS-4
<page>
CONSOLIDATED STATEMENT OF CASH FLOWS

INVACARE CORPORATION AND SUBSIDIARIES
<table>
<caption>
                                                                                              Years Ended December 31,
                                                                                         2004           2003            2002
                                                                                         ----           ----            ----
<s>                                                                                       <c>            <c>             <c>
                                                                                                   (In thousands)
    Operating Activities
    Net earnings                                                                      $75,197        $71,409         $64,770
    Adjustments to reconcile net earnings to net cash provided
      by operating activities:
        Depreciation and amortization                                                  32,316         27,235          26,638
        Provision for losses on trade and installment receivables                      11,222         13,760          10,792
        Provision for deferred income taxes                                             4,250          3,205          (3,050)
        Provision for other deferred liabilities                                        4,091          2,587           3,342
    Changes in operating assets and liabilities:
        Trade receivables                                                             (19,978)       (37,122)         19,740
        Installment sales contracts, net                                               (2,911)         6,678          11,435
        Inventories                                                                   (15,781)        (4,607)          6,208
        Other current assets                                                             (516)        (3,447)         (4,193)
        Accounts payable                                                               19,718         13,351           2,576
        Accrued expenses                                                              (11,281)        17,943          (2,534)
        Other long-term liabilities                                                     1,997          5,212            (108)
                                                                                      -------        -------         -------
                  Net Cash Provided by Operating Activities                            98,324        116,204         135,616

    Investing Activities
        Purchases of property and equipment                                           (41,403)       (30,660)        (22,109)
        Proceeds from sale of property and equipment                                        3            531           2,391
        Marketable securities                                                               -          1,130             (43)
        Business acquisitions, net of cash acquired                                  (343,554)       (70,555)              -
        Increase in other investments                                                    (603)           (64)           (317)
        Increase in other long-term assets                                             (3,133)        (1,898)         (1,834)
        Other                                                                            (332)           (42)          1,079
                                                                                      -------         ------         -------
                  Net Cash Required for Investing Activities                         (389,022)      (101,558)        (20,833)

    Financing Activities
        Proceeds from revolving lines of credit and
          long-term borrowings                                                        844,432        474,583         254,512
        Payments on revolving lines of credit and
          long-term borrowings                                                       (541,244)      (483,725)       (377,582)
        Proceeds from exercise of stock options                                         9,850          5,063           6,154
        Payment of dividends                                                           (1,557)        (1,531)         (1,567)
        Purchase of treasury stock                                                     (4,430)        (8,345)         (1,674)
                                                                                      -------        -------         -------
                  Net Cash Provided (Required) by Financing Activities                307,051        (13,955)       (120,157)

        Effect of exchange rate changes on cash                                           140          2,297           1,777
                                                                                      -------        -------         -------

        Increase (decrease) in cash and cash equivalents                               16,493          2,988          (3,597)

        Cash and cash equivalents at beginning of year                                 16,074         13,086          16,683
                                                                                      -------        -------         -------

        Cash and cash equivalents at end of year                                      $32,567        $16,074         $13,086
                                                                                      =======        =======         =======
</table>
                 See notes to consolidated financial statements.






                                      FS-5
<page>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

INVACARE CORPORATION AND SUBSIDIARIES
(In thousands)
<table>
<caption>
                                                                                  Accumulated
                                                           Additional             Other
                                        Common   Class B   Paid-in-    Retained   Comprehensive   Unearned      Treasury
                                        Stock    Stock     Capital     Earnings   Earnings(Loss)  Compensation  Stock      Total
                                        ------   -------   ----------  --------   --------------  ------------  ---------  ---------
<s>                                     <c>      <c>       <c>         <c>        <c>             <c>           <c>        <c>
January 1, 2002 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

Exercise of stock options, including
  tax benefit                                99              9,130                                               (3,199)      6,030
Restricted stock awards                       7                890                                    (897)                       -
Restricted stock award expense                                                                         643                      643

Net earnings                                                             71,409                                              71,409
Foreign currency translation
  adjustments                                                                         66,185                                 66,185
Unrealized gains on cash flow hedges                                                   3,506                                  3,506
Marketable securities holding gain                                                        95                                     95
                                                                                                                              -----
Total comprehensive income                                                                                                  141,195

Dividends                                                                (1,531)                                             (1,531)
Purchase of treasury shares                                                                                      (8,345)     (8,345)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2003 Balance                 7,686    278     109,015      477,113       51,057        (1,458)     (25,387)    618,304

Exercise of stock options, including
  tax benefit                               112             13,872                                               (2,444)     11,540
Restricted stock awards                       5                906                                    (911)                       -
Restricted stock award expense                                                                         812                      812

Net earnings                                                             75,197                                              75,197
Foreign currency translation
  adjustments                                                                         57,903                                 57,903
Unrealized losses on cash flow hedges                                                 (4,322)                                (4,322)
Marketable securities holding loss                                                        (9)                                    (9)
                                                                                                                              -----
Total comprehensive income                                                                                                  128,769

Dividends                                                                (1,557)                                             (1,557)
Purchase of treasury shares                                                                                      (4,430)     (4,430)
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 2004 Balance                $7,803   $278    $123,793     $550,753     $104,629       $(1,557)    $(32,261)   $753,438
                                         ======   ====    ========     ========     ========       =======      =======    ========
</table>
                 See notes to consolidated financial statements.

                                      FS-6
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ACCOUNTING POLICIES

Nature of Operations:  Invacare Corporation and its subsidiaries  ("Invacare" or
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,  represented by the European  segment,  are  consolidated  using a
November 30 fiscal year end. No material subsequent events have occurred related
to the European  segment,  which would  require  disclosure or adjustment to the
company's financial statements.  All significant  intercompany  transactions are
eliminated.

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 method and for non-domestic inventories and domestic finished products
purchased for resale  ($138,845,000  and  $99,607,000 at December 2004 and 2003,
respectively) by the first-in,  first-out 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, 2004 and 2003.  Inventories  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.

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.

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
generated  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.

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 changed 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  tests in the  fourth  quarter  of 2002,  2003 and 2004.  The
results of these tests indicated no impairment of goodwill.






                                      FS-7
<page>
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.
Historical  analysis is  primarily  used to  determine  the  company's  warranty
reserves.  Claims  history is reviewed  and  provisions  are adjusted as needed.
However, the company does consider other events, such as a product recall, which
could warrant additional warranty reserve provision.  No material adjustments to
warranty reserves were necessary in the current year. See Current Liabilities in
the Notes to the Consolidated  Financial  Statements 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  annual  policy  losses  of  $10,000,000   per  occurrence  and
$11,000,000 in the aggregate of the company's North American  product  liability
exposure.  The company also has additional layers of external insurance coverage
insuring  $100,000,000 in annual aggregate losses arising from individual claims
anywhere in the world that exceed the captive  insurance  company policy limits.
There can be no assurance that Invacare's current insurance levels will continue
to be adequate or available at affordable rates.

Product  liability  reserves  are  recorded  for  individual  claims  based upon
historical  experience,  industry expertise and indications from the third-party
actuary.  Additional  reserves,  in  excess  of  the  specific  individual  case
reserves,  are  provided  for  incurred  but  not  reported  claims  based  upon
third-party  actuarial  valuations at the time such  valuations  are  conducted.
Historical claims experience and other assumptions are taken into  consideration
by the third-party actuary to estimate the ultimate reserves.  For example,  the
actuarial  analysis  assumes that  historical loss experience is an indicator of
future  experience,  the distribution of exposures by geographic area and nature
of  operations  for  ongoing  operations  is  expected  to be  very  similar  to
historical  operations with no dramatic changes and that the government  indices
used to trend losses and exposures are appropriate.  Estimates made are adjusted
on a regular  basis and can be  impacted  by actual  loss award  settlements  on
claims.  While actuarial  analysis is used to help determine  adequate reserves,
the company  accepts  responsibility  for the  determination  and  recording  of
adequate  reserves in  accordance  with accepted  loss  reserving  standards and
practices.

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," as updated by
SAB  No.  104,  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.

Sales are only made to customers  with whom the company  believes  collection is
reasonably  assured based upon a credit analysis,  which may include obtaining a
credit  application,  a signed security  agreement,  personal guarantee and/or a
cross  corporate  guarantee  depending  on the credit  history of the  customer.
Credit lines are  established  for new  customers  after an  evaluation of their
credit report and/or other relevant financial information. Existing credit lines
are regularly reviewed and adjusted with consideration  given to any outstanding
past due amounts.

The company offers discounts and rebates,  which are accounted for as reductions
to  revenue  in the period in which the sale is  recognized.  Discounts  offered
include:  cash discounts for prompt  payment,  base and trade discounts based on
contract level for specific  classes of customers.  Volume discounts and rebates
are given based on large purchases and the achievement of certain sales volumes.
Product  returns  are  accounted  for as a  reduction  to  reported  sales  with
estimates recorded for anticipated returns at the time of sale. The company does
not sell any goods on consignment.

Distributed  products sold by the company are  accounted for in accordance  with
EITF 99-19 Reporting  Revenue Gross as a Principal  versus Net as an Agent.  The
company records Distributed product sales gross as a principal since the company
takes title to the products and has the risks of loss for collections,  delivery
and returns.






                                      FS-8
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACCOUNTING POLICIES--Continued

Product sales that give rise to installment receivables are recorded at the time
of sale when the risks and rewards of  ownership  are  transferred.  In December
2000, the company  entered into an agreement  with DLL, a third party  financing
company,  to  provide  the  majority  of  future  lease  financing  to  Invacare
customers.  As such,  interest  income is  recognized  based on the terms of the
installment  agreements.  Installment  accounts are  monitored and if a customer
defaults on payments,  interest income is no longer recognized.  All installment
accounts are accounted for using the same methodology, regardless of duration of
the installment agreements.

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
$21,638,000,   $19,130,000,   and   $17,934,000   for  2004,   2003,  and  2002,
respectively.

Advertising: Advertising costs are expensed as incurred and included in selling,
general and administrative expenses. The company has a co-op advertising program
in which the company reimburses customers up to 50% of their costs of qualifying
advertising   expenditures.   Invacare   product,   brand  logos  and  corporate
spokesperson,  Arnold Palmer, must appear in all advertising.  Invacare requires
customers to submit proof of  advertising  with their claims for  reimbursement.
Invacare receives  advertising and in return reimburses  customers for a portion
of their  advertising  costs.  The company's  cost of the program is included in
SG&A expense on the consolidated statement of earnings at the time the liability
is  estimated.  Reimbursement  is made on an annual basis and within 3 months of
submission  and  approval of the  documentation.  The company  receives  monthly
reporting from those in the program of their qualified advertising dollars spent
and accrues based upon information  received.  Advertising  expenses amounted to
$24,999,000, $22,806,000 and $20,905,000 for 2004, 2003 and 2002, respectively.

Stock-Based  Compensation  Plans:  The company  accounts  for options  under its
stock-based  compensation  plans using the intrinsic value method  proscribed in
APBO  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.  Invacare continues to utilize the
disclosure-only   provisions  of  SFAS  No.  123,  Accounting  for  Stock  Based
Compensation.  If the company had applied the fair value recognition  provisions
of SFAS No. 123, the company's net earnings and earnings per share in 2004, 2003
and 2002 would have been reduced to the pro forma  amounts  indicated  below (in
thousands except per share data):
<table>
<caption>
                                                                                   2004               2003                2002
                                                                                   ----               ----                ----
                <s>                                                                 <c>                <c>                  <c>
                Net earnings - as reported *                                    $75,197            $71,409             $64,770
                Less:  compensation expense determined based on the
                       fair-value method for all awards granted at
                       market value, net of related tax effects                   4,226              4,529               4,504
                                                                                -------            -------             -------
                Net earnings - pro forma                                        $70,971            $66,880             $60,266
                                                                                =======            =======             =======

                Earnings per share as reported - basic                            $2.41              $2.31               $2.10
                Earnings per share as reported - assuming dilution                $2.33              $2.25               $2.05

                Pro forma earnings per share - basic                              $2.28              $2.17               $1.95
                Pro forma earnings per share - assuming dilution                  $2.19              $2.11               $1.90

                * Includes stock compensation expense, net of tax, on
                  restricted awards granted without cost of:                       $528               $418                $492
</table>
Income Taxes:  The company uses the liability  method in measuring 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-9
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACCOUNTING POLICIES--Continued

Derivative  Instruments:  The company  recognizes its derivative  instruments as
assets or liabilities in the consolidated  balance sheet measured at fair value.
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 fair
value  hedges  and  effectively  convert  $180,000,000  of  fixed-rate  debt  to
floating-rate  debt, so the company can avoid paying higher than market interest
rates.  The company also had interest  rate swap  agreements,  which  expired in
2004, that qualified as cash flow hedges and effectively  converted  $20,000,000
of its  floating-rate  debt to a fixed-rate  basis,  thus reducing the impact of
interest-rate  changes on future interest  expense.  The company  recognized net
gains of $4,577,000, $2,872,000 and $773,000, respectively,  related to its swap
agreements in 2004, 2003 and 2002, 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 net gains in 2004,
2003 and 2002 of $6,961,000, $1,410,000 and $1,252,000,  respectively on foreign
currency  cash flow hedges.  The gains are included in cost of products sold and
selling,  general and administrative  expenses on the consolidated  statement of
earnings.

The company has used forward  contracts that do not qualify for special  hedging
treatment,  but do effectively limit the company's  exposure to foreign currency
fluctuations between the Mexican Peso and U.S. Dollar. During 2003 and 2002, the
company  recognized  losses of  $118,000  and $68,000  related to these  forward
contracts,  which are  included  in costs of products  sold on the  consolidated
statement of earnings.  No Mexican Peso forward  contracts  were entered into in
2004.

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:   The  functional  currency  of  the  company's
subsidiaries  outside the United States is the applicable  local  currency.  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.

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, 2004.

Recently  Issued  Accounting  Pronouncements:  In  December  2004,  FASB  issued
Statement of Financial  Accounting  Standards  ("SFAS") No. 123 (Revised  2004),
Share-Based  Payment  ("SFAS 123R"),  which requires  companies to expense stock
options and other share-based payments. SFAS 123R supersedes SFAS No. 123, which
permitted either expensing stock options or providing pro forma disclosure.  The
provisions  of this  Statement,  which is effective  July 1, 2005,  apply to all
awards granted, modified, cancelled or repurchased after July 1, 2005 as well as
the unvested portion of prior awards.  The company will adopt the standard as of
the  effective  date and  estimates  that the impact to the  company's  reported
results  will be  similar  to the  pro  forma  results  shown  in the  company's
Accounting Policy Note to the Consolidated Financial Statements.




                                      FS-10
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACCOUNTING POLICIES--Continued

The American  Jobs Creation Act of 2004 (the Act) was signed into law in October
2004.  The Act provides,  among other  things,  for a tax deduction on qualified
domestic  production  activities  and  introduced a special  one-time  dividends
received  deduction on the  repatriation of certain  foreign  earnings to a U.S.
taxpayer,  provided  certain  criteria  are met.  The  FASB  issued  FASB  Staff
Positions  109-1  to  provide  guidance  on the  application  of SFAS  No.  109,
Accounting  for  Income  Taxes,  and  FASB  Staff  Positions  109-2  to  provide
accounting and disclosure guidance for the repatriation  provision.  The company
is  reviewing  the  implication  of the  new  Act,  recently  released  treasury
guidance,  and the FASB staff  positions but does not intend to  repatriate  any
foreign  earnings under the Act and does not expect the Act will have a material
impact on the company's financial position, results of operations or cash flows.

RECEIVABLES

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, is
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   ($9,857,000  in  2004  and
$16,775,000  in 2003) is  based  primarily  on  management's  evaluation  of the
financial  condition  of  the  customer.  The  decrease  in  the  allowance  for
uncollectible  accounts in 2004  compared to 2003 is primarily  attributable  to
significant  write-offs of accounts  previously  reserved for as all  collection
efforts were exhausted in 2004.

Installment  receivables  as of  December  31,  2004  and  2003  consist  of the
following (in thousands):
<table>
<caption>
                                                                      2004                                   2003
                                                                      ----                                   -----
                                                        Current    Long-Term      Total         Current    Long-Term      Total
                                                        -------    ----------    -------        -------    ---------    -------
<s>                                                         <c>           <c>        <c>            <c>          <c>         <c>
    Installment receivables                             $19,576       $1,324     $20,900        $18,930        $578     $19,508
    Less:
         Unearned interest                                 (435)           -        (435)          (246)        (54)       (300)
         Allowance for doubtful accounts                 (5,719)           -      (5,719)       (10,929)          -     (10,929)
                                                        -------       ------     -------         ------      ------      ------
                                                        $13,422       $1,324     $14,746         $7,755        $524      $8,279
                                                        =======       ======     =======         ======       =====      ======
</table>
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.  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,  2004 and 2003  consist of the  following  (in
thousands):
                                                       2004                2003
                                                     ------             -------
                  Raw materials                     $60,548             $41,573
                  Work in process                    16,156              18,711
                  Finished goods                     99,179              70,695
                                                     ------             -------
                                                   $175,883            $130,979
                                                    =======            ========
PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2004 and 2003 consist of the following
(in thousands):
                                                       2004                2003
                                                     ------             -------
                  Machinery and equipment          $243,335            $216,459
                  Land, buildings and improvements   95,041              67,364
                  Furniture and fixtures             27,494              20,737
                  Leasehold improvements             14,275              14,946
                                                    -------             -------
                                                    380,145             319,506
                  Less allowance for depreciation  (188,982)           (169,455)
                                                     ------             -------
                                                   $191,163            $150,051
                                                    =======             =======
                                      FS-11
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACQUISITIONS

In 2004, Invacare acquired for cash the following six businesses at a total cost
of $343,554,000:

          o    The assets of ACS,  a New York  distributor  of medical  supplies
               with a focus on infusion therapy.
          o    The assets of Decpac,  an  Australian  company  that  designs and
               manufactures   portable   folding   access  ramps  for  use  with
               wheelchairs and scooters.
          o    Freedom Designs,  Inc., a  California-based  company that designs
               and   manufactures   seating  products  and  wheelchairs  with  a
               particular focus on the pediatric marketplace.
          o    WP  Domus  GmbH,   a   European-based   holding   company   which
               manufactures  several  complementary  product lines to Invacare's
               product lines.
          o    Champion Manufacturing, LLC , an Indiana company that designs and
               manufactures medical recliners.
          o    The assets of Premier  Designs,  a California  company from which
               Invacare  acquired  assets and designs for a lightweight,  easily
               transportable power wheelchair.

Carroll  Healthcare,  Inc.  was  purchased  in 2003 and as part of the  purchase
agreement,  the  company  agreed  to pay  additional  consideration  based  upon
earnings before interest, taxes, depreciation and amortization from September 1,
2003  through  August 31, 2004  calculated  under  Canadian  generally  accepted
accounting  principles  (U.S.  GAAP  used for  company  reporting  purposes)  in
accordance  with the purchase  agreement  with no defined  maximum  amount.  The
payment  amount was finalized  and paid in October 2004 at  74,667,000  Canadian
Dollars, $60,992,000 U.S. Dollars, which increased goodwill.

Motion Concepts,  Inc. ("Motion") was also purchased in 2003 and pursuant to the
Motion purchase  agreement,  the Company agreed to pay contingent  consideration
based upon earnings before interest and taxes over the three years subsequent to
the acquisition up to a maximum of  approximately  $16,000,000.  Based upon 2004
results,  no additional  consideration was paid. When the contingency related to
the acquisitions is settled, any additional consideration paid will increase the
purchase price and reported goodwill.

On September 9, 2004 the company finalized the acquisition of 100% of the shares
of WP Domus GmbH, a  European-based  holding company that  manufactures  several
complementary product lines to Invacare's product lines,  including power add-on
products,  bath  lifts and  walking  aids,  from WP Domus  LLC.  Domus has three
divisions:  Alber,  Aquatec and Dolomite.  The acquisition allows the company to
expand its product line and reach new markets.  The  preliminary  purchase price
was $227,382,000  including  acquisition costs of $3,670,000,  which was paid in
cash, and is subject to final  determination  of the estimated costs of possible
office closures, sales agency transfers and other consolidation efforts expected
to be finalized by the end of the third  quarter of 2005.  The  acquisition  was
consummated after satisfaction of certain  conditions,  including receipt of all
requisite regulatory approvals.  Invacare entered into a 100,000,000 Euro bridge
loan  agreement  and  utilized its  existing  revolving  credit line to fund the
acquisition.  Invacare's reported results reflect the operating results of Domus
since the date of the acquisition.

Supplemental  pro forma  information  is presented  below as though the business
combination  had been completed as of the beginning of the period being reported
on.  The pro forma  information  does not  necessarily  reflect  the  results of
operations  that would have  occurred if Domus had been a wholly owned entity of
Invacare as of the beginning of the periods presented (in thousands).

                                                      Years Ended December 31
                                                     2004                  2003
                                               ----------             ----------
                Net sales                      $1,490,140            $1,363,763
                Net earnings                       80,410                75,859
                Earnings per share - assuming
                  dilution                          $2.49                 $2.39

The pro forma results for 2004 included  non-recurring stock option plan expense
of  $1,410,000.  The pro forma  results for 2003  included  non-recurring  stock
option  plan  expense  of  $2,208,000  and a  one-time  shipment  to a  Japanese
distributor of approximately $9,512,000.





                                      FS-12
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

ACQUISITIONS--Continued

The following  summarizes the estimated  fair values of the assets  acquired and
liabilities assumed at the date of acquisition (in thousands):

                     Trade receivables                               $10,845
                     Inventories                                       8,470
                     Other current assets                              5,380
                     Other intangibles                                68,965
                     Property and equipment                           17,673
                     Goodwill                                        161,486
                                                                     -------
                        Total assets acquired                        272,819

                     Accounts payable                                 (3,985)
                     Accrued expenses                                (17,655)
                     Long-term debt                                   (7,771)
                     Other long-term obligations                     (16,026)
                                                                    --------
                        Total liabilities assumed                    (45,437)
                                                                    --------
                     Net assets acquired                            $227,382
                                                                    ========

GOODWILL

The  carrying  amount  of  goodwill  by  operating  segment  is as  follows  (in
thousands):
<table>
<caption>

                                            2004                                                      2003
                     ----------------------------------------------------       ----------------------------------------------------
                       North                                                      North
                      America      Europe    Asia/Pacific    Consolidated        America      Europe     Asia/Pacific   Consolidated
                     --------      ------    ------------    ------------        -------      ------     ------------   ------------
<s>                        <c>         <c>            <c>            <c>             <c>          <c>          <c>             <c>
  Balance as of
   January 1          $210,047    $192,508        $12,944        $415,499       $153,683    $157,325       $10,110        $321,118
  Acquisitions          95,344     161,486             71         256,901         49,723       3,397             -          53,120
  Foreign
   currency
   translation           7,936      36,617          1,011          45,564          6,641      31,786         2,834          41,261
                      --------    --------       --------        --------       --------    --------      --------        --------
  Balance as of
   December 31        $313,327    $390,611        $14,026        $717,964       $210,047    $192,508       $12,944        $415,499
                      ========    ========        =======        ========       ========    ========       =======        ========
</table>
Of the  $256,901,000  in goodwill  recorded from  acquisitions,  $67,557,000  is
expected to be deductible for tax purposes,  of which  $53,716,000 is deductible
related to the acquisition of Domus.

All of the company's other intangible assets have definite lives and continue to
be  amortized  over  their  useful  lives,  except  for  $27,732,000  related to
trademarks,  which have indefinite lives. The company's  intangibles  consist of
the following (in thousands):
<table>
<caption>
                                               December 31, 2004                December 31, 2003
                                               -----------------                -----------------
                                                          Accumulated                         Accumulated
                                       Historical Cost    Amortization     Historical Cost    Amortization
                                       ---------------    ------------     ---------------    ------------
<s>                                               <c>               <c>                <c>             <c>
  Customer Lists                               $57,788          $2,737              $6,105           $ 936
  Trademarks                                    27,732               -               4,268               -
  License agreements                             6,518           5,051               6,455           4,464
  Developed Technology                           5,842              80                   -               -
  Patents                                        4,137           1,443               2,180           1,109
  Other                                          7,348           1,842               3,406           1,227
                                               -------         -------             -------          ------
                                              $109,365         $11,153             $22,414          $7,736
                                               =======         =======             =======          ======
</table>
                                      FS-13
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

OTHER INTANGIBLES

The intangibles recorded on the date of acquisition due to the Domus acquisition
were as follows (in thousands):
                                                             Weighted Average
                                         Fair Value          Amortization Period
                                         ----------          -------------------
      Customer relationships              $  42,731               13 years
      Trademarks - Indefinite lives          20,521              Indefinite
      Developed Technology                    5,311               17 years
      Other                                     402                5 years
                                          ---------
      Total                               $  68,965               13 years
                                          =========

Amortization  expense related to other intangibles was $3,417,000 and $1,506,000
for 2004 and 2003, respectively.  Estimated amortization expense for each of the
next five years is  expected  to be  $7,333,000  for 2005,  $6,591,000  in 2006,
$6,427,000 in 2007, $6,128,000 in 2008 and $5,868,000 in 2009.

INVESTMENT IN AFFILIATED COMPANY

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable  Interest  Entities  (FIN 46),  which was revised in December 2003 and,
which among  other  things,  deferred  the  implementation  date of FIN 46 until
periods after March 15, 2004. This interpretation  requires  consolidation of an
entity if the  company is  subject  to a  majority  of the risk of loss from the
variable interest entity's (VIE) activities or entitled to receive a majority of
the entity's  residual  returns,  or both. A company that  consolidates a VIE is
known as the primary beneficiary of that entity.

As of December 31, 2004,  the company had an investment  in a development  stage
company, which is currently pursuing FDA approval to market a product focused on
the treatment of post-stroke  shoulder pain in the United States.  The amount of
net advances and  investment  recorded on the company's  books is  approximately
$3,000,000 at December 31, 2004. Certain of the Company's officers and directors
have small minority  equity  ownership  positions in this company.  Based on the
provisions of FIN 46 and the company's  preliminary  analysis,  the company does
not believe that its investment is a VIE as of December 31, 2004.  Subsequent to
December 31, 2004,  the  company's  board of  directors  approved an  additional
funding  commitment.  Accordingly,  the company will be required to  consolidate
this  investment on a prospective  basis for the quarter ended March 31, 2005 as
the company will be deemed the primary  beneficiary  of this  variable  interest
entity.

CURRENT LIABILITIES

Accrued  expenses as of December 31, 2004 and 2003 consist of the  following (in
thousands):
                                                            2004           2003
                                                          ------         ------
           Accrued salaries and wages                    $35,280        $31,960
           Accrued warranty cost                          13,998         12,688
           Accrued rebates                                 7,427         13,595
           Accrued taxes other than income taxes           6,419          3,661
           Accrued interest                                5,274          3,998
           Accrued legal and professional                  4,761          2,029
           Accrued freight                                 2,894          4,524
           Accrued insurance                               2,656          2,470
           Accrued product liability, current portion      2,595          2,245
           Other accrued items                            17,546         14,862
                                                          ------         ------
                                                         $98,850        $92,032
                                                          ======         ======

Accrued rebates relate to several volume  incentive  programs the company offers
its customers.  The company accounts for these rebates as a reduction of revenue
when the  products  are sold in  accordance  with the  guidance  in EITF  01-09:
Accounting  for  Consideration  Given by a Vendor  to a  Customer  (Including  a
Reseller of the  Vendor's  Products).  The company has  experienced  significant
pricing  pressure in the U.S.  market for standard  products in recent years and
has  partially  reduced  prices to our  customers in the form of a volume rebate
such that the rebates would  typically  apply only if customers  increased their
standard  product  purchases  from the  company.  The  decrease in rebates  from
December 31, 2003 to December 31, 2004 is  attributable  to the fact that rebate
programs in place at December 31, 2003 targeted at Standard  Products  customers
in the U.S. expired during 2004 and were not renewed.

                                      FS-14
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

CURRENT LIABILITIES --Continued

Changes in accrued warranty costs were as follows (in thousands):

                                                            2004          2003
                                                          ------        ------
            Balance as of January 1                      $12,688       $11,448
            Warranties provided during the period          8,665         8,557
            Settlements made during the period            (7,977)       (8,288)
            Changes in liability for pre-existing
               warranties during the period,
               including expirations                         622           971
                                                          ------        ------
            Balance as of December 31                    $13,998       $12,688
                                                          ======        ======

LONG-TERM DEBT

Long-term  debt as of December  31, 2004 and 2003 consist of the  following  (in
thousands):
<table>
<caption>
                                                                                           2004             2003
                                                                                         ------           ------
<s>                                                                                         <c>               <c>
$80,000,000 senior notes at 6.71%, due in February 2008                                 $83,304          $85,462
$20,000,000 senior notes at 6.60%, due in February 2005                                  20,000           20,000
$50,000,000 senior notes at 3.97%, due in October 2007                                   50,081           50,560
$30,000,000 senior notes at 4.74%, due in October 2009                                   30,485           30,532
$20,000,000 senior notes at 5.05%, due in October 2010                                   20,433           20,386
Revolving credit agreement ($325,000,000 multi-currency), at 0.675% to
     1.40% above local interbank offered rates, expires October 17, 2006                230,382           20,002
Bridge Credit Agreement                                                                 100,000                -
Other notes                                                                              15,351            7,267
                                                                                         ------           ------
                                                                                        550,036          234,209
Less current maturities                                                                  (2,062)          (2,171)
                                                                                         ------           ------
                                                                                       $547,974         $232,038
                                                                                       ========         ========
</table>
The carrying  values of the senior notes have been increased by the gains on the
interest rate swaps accounted for as fair value hedges.

On  January  14,  2005,   Invacare   Corporation  entered  into  a  $450,000,000
multi-currency  revolving credit  agreement,  which expires on January 14, 2010.
The facility provides that Invacare, may, upon consent of its lenders,  increase
the amount of the facility by an additional  $100,000,000.  The borrowing  rates
under the revolving  credit  agreement are determined based on the ratio of debt
to earnings before interest,  taxes,  depreciation and amortization  (EBITDA) of
the  company as defined in the  agreement,  and ranges  from LIBOR plus 0.35% to
0.675%.

On   September   1,  2004,   Invacare   Corporation   entered  into  a  364-day,
multi-currency bridge credit agreement with a group of commercial banks, with an
expiration date of August 31, 2005 or such later date as mutually agreed upon by
the  company  and the banks.  Pursuant to the  agreement,  the company  borrowed
100,000,000  Euros in order to provide funds for the company's general corporate
purposes,  including  financing the Domus  acquisition and expenses  incurred in
connection therewith.

In October  2003,  Invacare  Corporation  issued  $100,000,000  in senior notes,
maturing between 2007 and 2010. In 2001, the company entered into a $325,000,000
5-year,  multi-currency  revolving  credit  agreement with a group of commercial
banks.  The  multi-currency  revolving credit agreement was to expire on October
17,  2006 or such later date as  mutually  agreed  upon by the  company  and the
banks.

In January  2005,  amounts  outstanding  under both the  $325,000,000  revolving
credit  agreement and the 100,000,000 Euro bridge credit agreement were paid off
with the $450,000,000 multi-currency revolving credit agreement described above.
In addition,  the $20,000,000  senior notes at 6.60%,  due in February 2005 were
paid  off  with the new  $450,000,000  facility  and  thus  were  classified  as
long-term  as of December 31, 2004 as the company had the intent and the ability
to pay-off the notes with long-term debt.

Borrowings denominated in foreign currencies aggregated $179,084,000 at December
31, 2004 and  $872,000 at  December  31,  2003.  The  borrowing  rates under the
revolving  credit  agreement are determined based on the ratio of debt to EBITDA
of the company as defined in the  agreement and range from 0.675% to 1.40% above
the various  interbank  offered  rates.  As of December  31, 2004 and 2003,  the
weighted average floating interest rate on U.S.  borrowings was 3.36% and 2.69%,
respectively.

                                      FS-15
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

LONG-TERM DEBT --Continued

The revolving credit agreement,  as amended,  bridge credit agreement and senior
notes all require the company to maintain certain conditions with respect to net
worth,  funded debt to  capitalization,  and interest coverage as defined in the
agreements.  Under the most  restrictive  covenants of the  company's  borrowing
arrangements,  the  company  has the  capacity  to  borrow  up to an  additional
$60,800,000 as of December 31, 2004 and up to $108,000,000,  effective  February
2005,  pursuant  to  the  covenants  of  the  new  $450,000,000  multi-currency,
long-term revolving credit agreement.

In October 2003, the company exchanged the fixed rates of 3.97%, 4.74% and 5.05%
on the  $50,000,000,  $30,000,000  and  $20,000,000  Senior Notes due in October
2007,  October  2009 and  October  2010 for  variable  rates based on LIBOR plus
0.01%, LIBOR plus 0.14% and LIBOR plus 0.26%, respectively.  The effect of these
swaps  is to  exchange  fixed  rates  for the  lower  floating  rates  currently
available.

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  exchanged  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 exchanged 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 the  lower  floating  rates
currently available.

The aggregate  minimum  maturities  of long-term  debt for each of the next five
years are as follows:  $2,062,000 in 2005,  $1,308,000 in 2006,  $217,578,000 in
2007,  $81,089,000 in 2008, and $31,108,000 in 2009. Interest paid on borrowings
was   $15,348,000,   $9,450,000  and   $13,465,000  in  2004,   2003  and  2002,
respectively.

Other  long-term  obligations  as of December  31, 2004 and 2003  consist of the
following (in thousands):
                                                          2004             2003
                                                        ------           ------
Supplemental Executive Retirement Plan liability       $12,947          $11,048
Product liability                                       14,450            9,664
Deferred federal income taxes                           24,833            2,337
Other, principally deferred compensation                16,341           11,334
                                                        ------           ------
Total long-term obligations                            $68,571          $34,383
                                                       =======          =======

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 18 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,  2004,  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  2014.  Lease  expenses  were
approximately $18,663,000 in 2004, $15,803,000 in 2003, and $12,575,000 in 2002.

The amount of buildings and  equipment  capitalized  in connection  with capital
leases  was   $16,545,000   and  $7,767,000  at  December  31,  2004  and  2003,
respectively.  At  December  31,  2004 and 2003,  accumulated  amortization  was
$3,590,000 and $3,003,000, respectively.

Future minimum  operating and capital lease commitments as of December 31, 2004,
are as follow (in thousands):

                                   Year      Capital Leases     Operating Leases
                                   ----      --------------     ----------------
                                   2005              $1,751              $15,680
                                   2006               1,699                9,039
                                   2007               1,586                5,870
                                   2008               1,538                3,178
                                   2009               1,526                1,872
                             Thereafter              13,439                1,715
                                                    -------              -------
    Total future minimum lease payments              21,539              $37,354
                                                    =======
          Amounts representing interest              (8,262)
Present value of minimum lease payments             $13,277
                                                    =======
                                      FS-16
<page>
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, quarterly contributions based upon 4% of qualified wages and
may make  discretionary  contributions  to the domestic plans based on an annual
resolution by the Directors.

The company also sponsors a non-qualified  401(k) Plus Benefit Equalization Plan
covering certain  employees,  which provides for employee elective deferrals and
company  retirement  deferrals  so that the  total  retirement  deferrals  equal
amounts that would have been contributed to the company's  principal  retirement
plans  if it  were  not for  limitations  imposed  by  income  tax  regulations.
Contribution  expense  for the  plans  in 2004,  2003  and 2002 was  $5,860,000,
$5,619,000, and $5,444,000, 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  $30,631,000  and  $27,618,000 at December 31,
2004 and 2003, respectively, of which approximately $13,371,000 and $11,517,000,
at December 31, 2004 and 2003,  respectively,  has been accrued. Expense for the
plan in 2004,  2003,  and  2002  was  $2,278,000,  $2,108,000,  and  $2,147,000,
respectively.

In conjunction with these non-qualified  plans, the company has invested in life
insurance  policies  related to certain  employees  to satisfy  certain of these
future   obligations.   The  current  cash  surrender   value  of  the  policies
approximates the current benefit obligations.  In addition, the projected policy
benefits exceed the projected benefit obligations.

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 2003 Performance Plan (the "2003 Plan") allows the Compensation Committee of
the Board of Directors (the  "Committee") to grant up to 2,000,000 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 1994  Performance  Plan (the "1994 Plan"),  as amended,  expired in 2004 and
allowed the Compensation  Committee of the Board of Directors (the  "Committee")
to grant up to 5,500,000  Common  Shares.  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.  During  2004,  the
Committee granted 615,450 and 11,000  non-qualified  stock options for a term of
ten years at the fair market value of the company's Common Shares on the date of
grant under the 2003 Plan and the 1994 Plan,  respectively.  There were no stock
appreciation rights outstanding at December 31, 2004, 2003 or 2002.

Restricted  stock  awards for 20,510,  28,894 and 37,289  shares were granted in
years 2004, 2003 and 2002 without cost to the recipients. Under the terms of the
restricted stock awards,  which were initially  granted in 2001,  104,213 of the
shares  granted  vest ratably over the four years after the award date and 6,500
of the  shares  granted  vest  ratably  over the 2 years  after the award  date.
Unearned restricted stock compensation of $911,000 in 2004, $897,000 in 2003 and
$1,190,000 in 2002,  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 $812,000,  $643,000 and $757,000 was recognized in 2004,
2003 and 2002,  respectively,  related to restricted  stock awards granted since
2001.

The 1994 Plan and the 2003 Plan have provisions that allow employees to exchange
mature shares to pay the exercise price and surrender  shares for the options to
cover the minimum  tax  withholding  obligation.  Under  these  provisions,  the
company  acquired  approximately  53,000 treasury shares for $2,444,000 in 2004,
110,000  treasury  shares for $3,199,000 in 2003 and 85,000  treasury shares for
$2,863,000 in 2002.







                                      FS-17
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

SHAREHOLDERS' EQUITY TRANSACTIONS--(Continued)

As of December 31, 2004, an aggregate of 10,389,393  Common Shares were reserved
for  conversion of Class B Common  Shares,  future rights (as defined below) and
the exercise and future grant of options.
<table>
<caption>

                                                                     Weighted                   Weighted                   Weighted
                                                                      Average                    Average                    Average
                                                                     Exercise                   Exercise                   Exercise
                                                           2004         Price          2003        Price          2002        Price
                                                           ----         -----          ----        -----          ----        -----
<s>                                                         <c>           <c>           <c>          <c>           <c>           <c>
     Options outstanding at January 1                 4,518,890        $27.34     4,257,422       $25.23     4,201,943       $23.27
     Granted                                            626,450         43.89       704,617        36.73       619,868        33.59
     Exercised                                         (449,374)        24.13      (340,665)       19.08      (418,432)       18.28
     Canceled                                           (57,561)        34.75      (102,484)       33.02      (145,957)       27.32
                                                      ---------        ------     ---------       ------     ---------       ------
     Options outstanding at December 31               4,638,405        $29.81     4,518,890       $27.34     4,257,422       $25.23
                                                      =========        ======     =========       ======     =========       ======

     Options price range at December 31               $16.03 to                   $15.13 to                  $11.88 to
                                                         $47.35                      $43.37                     $36.84

     Options exercisable at December 31               2,963,385                   2,796,100                  2,347,721
     Options available for grant at December 31*      1,033,858                   1,670,600                    296,860
</table>
*    Options  available  for  grant  as of  December  31,  2004  reduced  by net
     restricted stock award activity of 108,713.

The following table summarizes  information  about stock options  outstanding at
December 31, 2004:
<table>
                                              Options Outstanding                                      Options Exercisable
                                              -------------------                                      -------------------
                              Number            Weighted Average                                  Number
                            Outstanding             Remaining          Weighted Average         Exercisable         Weighted Average
    Exercise Prices         At 12/31/04         Contractual Life        Exercise Price          At 12/31/04          Exercise Price
    ---------------         -----------         ----------------        --------------          -----------          --------------
          <s>                    <c>                   <c>                    <c>                    <c>                  <c>
    $16.03 - $19.50            513,873              3.8 years               $18.25                 513,873               $18.25
    $20.06 - $24.75          1,266,484                 3.9                  $23.67               1,066,484               $23.72
    $25.13 - $29.85            723,042                 4.4                  $25.30                 723,042               $25.30
    $30.02 - $34.54            694,753                 7.4                  $32.54                 387,718               $32.82
    $36.10 - $37.70            823,891                 8.3                  $37.29                 272,268               $37.06
    $40.07 - $47.35            616,362                 9.7                  $44.29                       -                    -
                             ---------                 ---                  ------               ---------               ------
         Total               4,638,405                 6.0                  $29.41               2,963,385               $25.57
</table>
The  company   utilizes  the   disclosure-only   provisions  of  SFAS  No.  123.
Accordingly,  no  compensation  cost has been  recognized  for the stock  option
plans,  except the  expense  recorded  related to the 110,713  restricted  stock
awards granted in years 2001 through 2004.

The  assumption  regarding the stock options  issued in 2004,  2003 and 2002 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:

                                                2004          2003         2002
                                                ----          ----         ----
       Expected dividend yield                  .63%          .75%         .80%
       Expected stock price volatility         28.8%         29.6%        31.4%
       Risk-free interest rate                 3.67%         3.31%        3.26%
       Expected life (years)                    5.6           5.5          5.4

The weighted-average fair value of options granted during 2004, 2003 and 2002,
based upon an expected exercise year of 2010, was $13.58, $11.03 and $10.71,
respectively.
                                      FS-18
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

SHAREHOLDERS' EQUITY TRANSACTIONS --Continued

The plans  provide that shares  granted come from the company's  authorized  but
unissued Common Shares or treasury shares.  Pursuant to the plans, the Committee
has established  that the 2004 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, 2004 is 6.0 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 $8.00 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 $0.005 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 2004,  2003 and 2002  consisted of the following (in
thousands of shares):
<table>
<caption>
                                                                                       Common Stock      Class B      Treasury
                                                                                          Shares         Shares        Shares
                                                                                       ----------------------------------------
                 <s>                                                                              <c>        <c>            <c>
                 January 1, 2002 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)
                 Exercise of stock options                                                        416          -          (110)
                 Stock awards                                                                      29          -             -
                 Repurchase of treasury shares                                                      -          -          (273)
                 --------------------------------------------------------------------------------------------------------------
                 December 31, 2003 Balance                                                     30,739      1,112          (770)
                 Exercise of stock options                                                        449          -           (53)
                 Stock awards                                                                      21          -             -
                 Repurchase of treasury shares                                                      -          -          (111)
                 --------------------------------------------------------------------------------------------------------------
                 December 31, 2004 Balance                                                     31,209      1,112          (934)
                                                                                               ======      =====         =====
</table>
Stock option exercises in 2003 include deferred share activity, which increased
common shares by 75,000 shares and treasury shares by 5,000 shares.













                                      FS-19
<page>
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):
<table>
<caption>
                                                                                                       Unrealized Gain
                                                                                    Unrealized Gain       (Loss) on
                                                                      Currency         (Loss) on          Derivative
                                                                     Translation    Available-for-Sale    Financial
                                                                     Adjustments       Securities         Instruments        Total
                                                                     ---------------------------------------------------------------
<s>                                                                        <c>             <c>                <c>              <c>
Balance at January 1, 2002                                            $(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, net of
    reclassifications                                                                                        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)

Foreign currency translation adjustments                                66,185                                               66,185
Unrealized gain on available for sale securities                                           146                                  146
Deferred tax liability relating to unrealized gain on available
     for sale securities                                                                   (51)                                 (51)
Current period unrealized gain on cash flow hedges, net of
     reclassifications                                                                                       5,394            5,394
Deferred tax expense  relating to  unrealized  gain on derivative
     financial instruments                                                                                  (1,888)          (1,888)
                                                                     ---------------------------------------------------------------
Balance at December 31, 2003                                            46,567             675               3,815           51,057

Foreign currency translation adjustments                                57,903                                               57,903
Unrealized loss on available for sale securities                                           (14)                                 (14)
Deferred  tax benefit  relating to  unrealized  loss on available
     for sale securities                                                                     5                                    5
Current period unrealized loss on cash flow hedges, net of
     reclassifications                                                                                      (6,649)          (6,649)
Deferred tax benefit  relating to  unrealized  loss on derivative
     financial instruments                                                                                   2,327            2,327
                                                                     ---------------------------------------------------------------
Balance at December 31, 2004                                          $104,470            $666               $(507)        $104,629
                                                                     ===============================================================
</table>
Net  gains  of  $6,650,000  and  $500,000  and  a  net  loss  of  $402,000  were
reclassified  into earnings  related to derivative  instruments  designated  and
qualifying as cash flow hedges in 2004, 2003 and 2002, respectively.

INCOME TAXES

Earnings before income taxes consist of the following (in thousands):

                                     2004                2003              2002
                                  -------             -------           -------
          Domestic                $57,557             $59,027           $51,512
          Foreign                  52,815              47,382            45,018
                                  -------             -------           -------
                                 $110,372            $106,409           $96,530
                                  =======             =======            ======

                                      FS-20
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

INCOME TAXES --Continued

The company has provided for income taxes as follows (in thousands):

                                     2004                2003              2002
                                  -------             -------           -------
           Current:
             Federal              $14,075             $16,635           $21,415
             State                  2,800               3,200             2,200
             Foreign               14,050              11,960            11,195
                                  -------             -------           -------
                                   30,925              31,795            34,810

           Deferred:
             Federal                2,225               1,625            (4,620)
             Foreign                2,025               1,580             1,570
                                  -------             -------           -------
                                    4,250               3,205            (3,050)
                                  -------             -------           -------
           Income Taxes           $35,175             $35,000           $31,760
                                  =======             =======           =======

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

                                                  2004       2003       2002
                                                  ----       ----       ----
          Statutory federal income tax rate       35.0%      35.0%      35.0%
          State and local income taxes, net of
            federal income tax benefit             1.6        2.0        1.5
          Tax credits                             (1.6)      (1.4)      (2.3)
          Foreign taxes at less than the federal
            statutory rate                        (2.1)      (2.9)      (2.6)
          Other, net                              (1 0)        .2        1.3
                                                  ----       ----       ----
                                                  31.9%      32.9%      32.9%
                                                  ====       ====       ====

Significant components of deferred income tax assets and liabilities at December
31, 2004 and 2003 are as follows (in thousands):

                                                           2004            2003
                                                          -----           -----
          Current deferred income tax assets, net:
               Loss carryforwards                        $7,620          $1,162
               Bad debt                                   4,366           7,773
               Warranty                                   3,157           3,094
               State and local taxes                      3,048           2,422
               Other accrued expenses and reserves        2,219           2,118
               Inventory                                  1,816           1,931
               Litigation reserves                            -           2,177
               Compensation and benefits                  1,240             968
               Product liability                            292             291
               Other, net                                (2,028)          2,637
                                                          -----           -----
                                                        $21,730         $24,573








                                      FS-21
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

INCOME TAXES --Continued
                                                          2004             2003
                                                         -----            -----
                                                             (In thousands)
          Long-term deferred income tax assets
         (liabilities), net:
               Goodwill & intangibles                  (35,431)          (3,310)
               Fixed assets                            (15,169)         (11,003)
               Compensation and benefits                 9,642            8,219
               Loss carryforwards                        6,429            1,001
               Product liability                         3,391            1,282
               State and local taxes                     2,400            2,400
               Valuation reserve                             -           (1,001)
               Other, net                                3,905               75
                                                         -----            -----
                                                     $ (24,833)        $ (2,337)
                                                         -----            -----
          Net Deferred Income Taxes                    $(3,103)         $22,236
                                                        ======           ======

At December 31, 2004, the company had federal foreign tax loss  carryforwards of
approximately  $47,625,000 of which $43,990,000 are  non-expiring,  $890,000 are
expiring in 2009 and  $2,745,000  are expiring in 2010. At December 31, 2004 the
company also has $17,550,000 of local foreign tax loss carryforwards,  which are
non-expiring.  The loss carryforward  amounts include $43,200,000 of federal and
$17,550,000  of local loss  carryforwards  acquired  in 2004  acquisitions.  The
company made income tax payments of  $30,180,000,  $25,173,000  and  $28,769,000
during the years ended December 31, 2004, 2003 and 2002, respectively.

NET EARNINGS PER COMMON SHARE

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

                                                 2004       2003       2002
                                                 ----       ----       ----
                                            (In thousands except per share data)
    Basic
      Average common shares outstanding        31,153     30,862      30,867

      Net earnings                            $75,197    $71,409     $64,770

      Net earnings per common share             $2.41      $2.31       $2.10

    Diluted
      Average common shares outstanding        31,153     30,862      30,867
      Stock options                             1,194        867         797
                                                 ----       ----        ----
      Average common shares assuming dilution  32,347     31,729      31,664

      Net earnings                            $75,197    $71,409     $64,770

      Net earnings per common share             $2.33      $2.25       $2.05

At December  31, 2004 and 2003,  21,167 and 501,067  shares,  respectively  were
excluded  from  the  average  common  shares  assuming  dilution,  as they  were
anti-dilutive. In 2004, the majority of the anti-dilutive shares were granted at
an exercise price of $47.35, which was higher than the average fair market value
price of $44.39 for 2004. In 2003, the majority of the anti-dilutive shares were
granted at an exercise  price of $37.70,  which was higher than the average fair
market value price of $35.29 for 2003.







                                      FS-22
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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  financed  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 the majority of 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 ($50,010,000 at December 31, 2004) to DLL for events of default under
the contracts (total balance  outstanding of $104,447,000 at December 31, 2004).
Financial Accounting  Standards Board (FASB)  Interpretation No. 45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of Indebtedness of Others, requires the company to record a guarantee
liability as it relates to the limited recourse obligation. As such, the company
has recorded a liability for this guarantee obligation. The company monitors the
collections  status of these  contracts  and has provided  amounts for estimated
losses in its  allowances for doubtful  accounts in accordance  with SFAS No. 5,
Accounting  for  Contingencies.  Credit losses are provided for in the financial
statements.

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,  is  ultimately  funded
through  government  reimbursement  programs such as Medicare and  Medicaid.  In
addition,  the company has also 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.  In
addition,  reimbursement  guidelines  in the home  health care  industry  have a
substantial impact on the nature and type of equipment an end user can obtain as
well as the timing of reimbursement  and, thus,  affect the product mix, pricing
and payment patterns of the company's customers.

FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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:  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  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, adjusted for any estimated declines in value. These investments
were  acquired in private  placements  and there are no quoted  market prices or
stated rates of return.






                                      FS-23
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

FAIR VALUES OF FINANCIAL INSTRUMENTS --Continued

The carrying amounts and fair values of the company's financial instruments at
December 31, 2004 and 2003 are as follows (in thousands):

                                        2004                      2003
                                        ----                      ----
                               Carrying        Fair      Carrying         Fair
                                  Value       Value         Value        Value
                                -------      ------       -------       ------
    Cash and cash equivalents   $32,567     $32,567       $16,074      $16,074
    Marketable securities           199         199           214          214
    Other investments             8,213       8,213         7,642        7,642
    Installment receivables      14,746      14,746         8,279        8,279
    Long-term debt (including
      current maturities)       550,036     551,431       234,209      237,584
    Interest rate swaps           4,302       4,302         6,615        6,615
    Forward contracts              (780)       (780)        6,196        6,196

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 forward  contracts  are entered  into to hedge the
following currencies: USD, NZD, CAD, EUR, SEK, DKK and AUD. 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 $6,961,000 in 2004,
$1,292,000 in 2003,  and  $1,184,000 in 2002,  which were  recognized in cost of
products sold and selling, general and administrative expenses.

BUSINESS SEGMENTS

The company  operates in three primary  business  segments based on geographical
area: North America,  Europe and  Asia/Pacific.  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 Asia/Pacific 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  $83,135,000,
$74,835,000  and  $61,178,000  for the years ended  December 31, 2004,  2003 and
2002, respectively.














                                      FS-24
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

BUSINESS SEGMENTS--Continued

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

                                              2004          2003          2002
   ----------------------------------------------------------------------------
   Revenues from external customers
        North America                   $1,002,273      $897,208      $793,464
        Europe                             336,792       279,782       251,443
        Asia/Pacific                        64,262        70,186        44,254
                                         ---------     ---------     ---------
        Consolidated                    $1,403,327    $1,247,176    $1,089,161
                                         =========     =========     =========

   Depreciation and amortization
        North America                      $20,644       $18,551       $19,232
        Europe                               8,687         6,315         5,699
        Asia/Pacific                         2,911         2,261         1,623
        All Other (1)                           74           108            84
                                         ---------     ---------     ---------
        Consolidated                       $32,316       $27,235       $26,638
                                         =========     =========     =========

   Net interest expense (income)
        North America                       $8,940        $7,780       $11,910
        Europe                               4,924         4,220         5,256
        Asia/Pacific                          (664)         (602)         (282)
        All Other (1)                       (2,104)       (5,161)       (6,312)
                                         ---------     ---------     ---------
        Consolidated                       $11,096        $6,237       $10,572
                                         =========     =========     =========

   Earnings (loss) before income taxes
        North America                      $95,883       $88,299       $76,548
        Europe                              18,705        19,132        19,020
        Asia/Pacific                         1,430         5,997         5,740
        All Other (1)                       (5,646)       (7,019)       (4,778)
                                         ---------     ---------     ---------
        Consolidated                      $110,372      $106,409       $96,530
                                         =========     =========     =========

   Assets
        North America                     $778,820      $616,352      $510,135
        Europe                             710,510       348,063       295,085
        Asia/Pacific                        69,685        56,403        41,185
        All Other (1)                       69,109        87,395        60,298
                                         ---------     ---------     ---------
        Consolidated                    $1,628,124    $1,108,213      $906,703
                                         =========     =========     =========

   Long-lived assets
        North America                     $428,308      $307,736      $252,624
        Europe                             548,843       236,591       194,212
        Asia/Pacific                        31,797        24,492        15,831
        All Other (1)                       53,905        64,672        45,224
                                         ---------     ---------     ---------
        Consolidated                    $1,062,853      $633,491      $507,891
                                         =========     =========     =========

   Expenditures for assets
        North America                      $14,897       $12,513       $11,172
        Europe                              20,064        11,933         7,956
        Asia/Pacific                         6,441         6,203         2,381
        All Other (1)                            1            11           600
                                         ---------     ---------     ---------
        Consolidated                       $41,403       $30,660       $22,109
                                         =========     =========     =========

(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-25
<page>
INVACARE CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

BUSINESS SEGMENTS--Continued

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

      North America                           2004          2003          2002
      -------------                      ---------      --------      --------
      Standard                            $257,668      $274,959      $282,627
      Rehab                                280,339       273,063       211,096
      Distributed                          205,130       162,645       146,573
      Respiratory                          161,247       118,115        82,528
      Continuing Care                       76,578        48,321        40,452
      Other                                 21,311        20,105        30,188
                                         ---------      --------      --------
                                        $1,002,273      $897,208      $793,464
                                         =========      ========      ========

      Europe                                  2004          2003          2002
      ------                             ---------      --------      --------
      Standard                            $200,064      $142,777      $130,617
      Rehab                                128,316       129,167       113,162
      Respiratory                            8,412         7,838         7,664
                                         ---------      --------      --------
                                          $336,792      $279,782      $251,443
                                         =========      ========      ========

      Asia/Pacific                            2004          2003          2002
      ------------                       ---------      --------      --------
      Rehab                                $34,273       $46,832       $32,752
      Respiratory                            8,162         6,584         4,207
      Standard                               7,721         6,427         4,680
      Other                                 14,106        10,343         2,615
                                         ---------      --------      --------
                                           $64,262       $70,186       $44,254
                                         =========      ========      ========

      Total Consolidated                $1,403,327    $1,247,176    $1,089,161
                                         =========     =========     =========

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

INTERIM FINANCIAL INFORMATION (UNAUDITED)
<table>
<caption>
                                                                                QUARTER ENDED
                                                                                -------------
                                                                      (In thousands, except per share data)
                        2004                             March 31,         June 30,     September 30,      December 31,
                        ----                            ---------        ---------         ---------         ---------
<s>                                                          <c>                <c>              <c>               <c>
    Net sales                                            $321,343         $339,288          $349,507          $393,189
    Gross profit                                           93,379          102,124           106,076           117,013
    Earnings before income taxes                           21,041           26,698            32,614            30,019
    Net earnings                                           14,201           18,023            22,529            20,444
    Net earnings per share - basic                            .46              .58               .72               .65
    Net earnings per share - assuming
       dilution                                               .44              .56               .70               .63

                        2003                             March 31,         June 30,     September 30,      December 31,
                        ----                            ---------         ---------        ---------         ---------
    Net sales                                            $276,673         $300,114          $327,366          $343,023
    Gross profit                                           80,451           87,834            98,452           107,924
    Earnings before income taxes                           18,267           23,022            29,812            35,308
    Net earnings                                           12,257           15,447            20,007            23,698
    Net earnings per share - basic                            .40              .50               .65               .76
    Net earnings per share - assuming
       dilution                                               .39              .49               .63               .74
</table>


                                      FS-26
<page>
INVACARE CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<table>
<caption>
                  (In thousands)                  COL A.          COL B.         COL C.          COL D.
                                                  ------          ------         ------          ------
<s>                                                  <c>             <c>            <c>              <c>

                                                  Balance       Charged To                     Balance
                                               At Beginning      Cost And    Deductions         At End
                                                 Of Period       Expenses     Describe        Of Period
      Year Ended December 31, 2004             ------------      --------    ----------       ---------
      ----------------------------
      Deducted from asset accounts -

           Allowance for doubtful accounts        $27,704         $11,222    $(23,350)(A)       $15,576

           Inventory obsolescence reserve           8,715           2,609      (1,792)(B)         9,532

           Investments and related notes           29,540               -           -            29,540
             receivable

      Accrued warranty cost                        12,688           9,287      (7,977)(B)        13,998

      Accrued product liability                    11,909           8,202      (3,066)(C)        17,045

      Year Ended December 31, 2003
      ----------------------------
      Deducted from asset accounts -

           Allowance for doubtful accounts        $32,732         $13,760    $(18,788)(A)       $27,704

           Inventory obsolescence reserve           5,337           6,623      (3,245)(B)         8,715

           Investments and related notes           29,000             540           -            29,540
             receivable

      Accrued warranty cost                        11,448           9,528      (8,288)(B)        12,688

      Accrued product liability                     8,272           8,058      (4,421)(C)        11,909

      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
</table>
       Note (A) - Uncollectible accounts written off, net of recoveries.

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

       Note (C) - Loss and loss adjustment.



                                      FS-27
<page>
                                                                      Exhibit 21
Invacare Corporation Subsidiaries
- ---------------------------------
1.   2030604 Ontario, Inc., an Ontario corporation and wholly owned subsidiary.

2.   3080359 Nova Scotia  Company,  a Nova Scotia  corporation  and wholly owned
     subsidiary.

3.   6123449 Canada, Inc., a Canadian corporation and wholly owned subsidiary.

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

5.   Alber GmbH, Wurenlos, a Swiss corporation and wholly owned subsidiary.

6.   Aquatec GmbH, Isny, a German limited liability company.

7.   Carroll  Healthcare  (USA)  Inc.,  a Nevada  corporation  and wholly  owned
     subsidiary.

8.   Carroll Healthcare Inc. (Chile) Limitada,  a Chilean corporation and wholly
     owned subsidiary.

9.   Carroll   Healthcare,   Inc.,  an  Ontario  corporation  and  wholly  owned
     subsidiary.

10.  Champion Manufacturing Inc., a Delaware corporation.

11.  Dolomite AB, Gislaved, a Swedish corporation and wholly owned subsidiary.

12.  Dolomite  Holding AB,  Gislaved,  a Swedish  corporation  and wholly  owned
     subsidiary.

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

14.  Dynamic Europe Limited, a U.K. corporation and wholly owned subsidiary.

15.  EC-Hong AS, a Danish corporation and wholly owned subsidiary.

16.  Freedom Designs, Inc., a California corporation and wholly owned subsidiary

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

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

19.  Healthtech, Inc., a Missouri corporation and wholly owned subsidiary.

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

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

22.  Invacare AS, a Danish corporation and wholly owned subsidiary.

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

24.  Invacare Australia Pty Limited, an Australian  corporation and wholly owned
     subsidiary.

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

26.  Invacare BV, a Netherlands corporation and wholly owned subsidiary.

27.  Invacare  Canada  Holdings,  Inc., a Canadian  corporation and wholly owned
     subsidiary.



                                      I-36
<page>
Invacare Corporation Subsidiaries
- ---------------------------------
28.  Invacare Canada Inc., an Ontario corporation and wholly owned subsidiary.

29.  Invacare Canadian Holdings,  Inc., a Delaware  corporation and wholly owned
     subsidiary.

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

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

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

33.  Invacare  Germany  Holding  GmbH,  a German  corporation  and wholly  owned
     subsidiary

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

35.  Invacare Holding AB, a Swedish corporation and wholly owned subsidiary.

36.  Invacare Holding BV, a Netherlands corporation and wholly owned subsidiary.

37.  Invacare Holding Two AB, a Swedish corporation and wholly owned subsidiary.

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

39.  Invacare Holdings CV, a Netherlands wholly owned partnership subsidiary.

40.  Invacare  Holdings LLC, an Ohio limited  liability  corporation  and wholly
     owned subsidiary.

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

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

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

44.  Invacare   International   SARL,  a  Swiss  corporation  and  wholly  owned
     subsidiary.

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

46.  Invacare  Mauritius  Holdings,  a Republic of Mauritius  Company and wholly
     owned subsidiary.

47.  Invacare MeccSan SrL, an Italian corporation and wholly owned subsidiary.

48.  Invacare Medical Equipment  (Kunshan) Company,  Ltd., a Chinese company and
     wholly owned subsidiary.

49.  Invacare Medical Equipment  (Suzhou)  Company,  Ltd., a Chinese company and
     wholly owned subsidiary.

50.  Invacare  New  Zealand,   a  New  Zealand   corporation  and  wholly  owned
     subsidiary.

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

52.  Invacare Poirier SAS, a French corporation and wholly owned subsidiary.

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

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

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

                                      I-37
<page>
Invacare Corporation Subsidiaries
- ---------------------------------
56.  Invacare   Verwaltungs   GmbH,  a  German   corporation  and  wholly  owned
     subsidiary.

57.  Invacare(Portugual) - Sociedade Industrial e Comercial de Ortopedia., Lda.,
     a Portugal company and wholly owned subsidiary.

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

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

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

61.  Medbloc, Inc., a Delaware corporation and wholly owned subsidiary.

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

63.  Mobitec Mobilitatshilfen  Ges.m.b.H.,  Tiefgraben,  an Austrian corporation
     and wholly owned subsidiary.

64.  Mobitec  Rehab  AG,  Wurenlos,   a  Swiss   corporation  and  wholly  owned
     subsidiary.

65.  Mobitec  S.a.r.l.,  Venissieux,  A  French  corporation  and  wholly  owned
     subsidiary.

66.  Motion Concepts, L.P., an Ontario wholly owned partnership.

67.  Perpetual Motion Enterprises Inc., an Ontario  corporation and wholly owned
     subsidiary.

68.  Pro-Med Australia Pty. Limited., an Australian corporation and wholly owned
     subsidiary.

69.  Pro-Med Equipment Pty. Limited, an Australian  corporation and wholly owned
     subsidiary.

70.  Roller  Chair Pty.  Limited,  an  Australian  corporation  and wholly owned
     subsidiary.

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

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

73.  Scandinavian  Mobility  International  AS, a Danish  corporation and wholly
     owned subsidiary.

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

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

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

77.  Ulrich Alber GmbH, Albstadt, a German limited liability company.

78.  WP Domus GmbH, a German corporation and wholly owned subsidiary.

79.  WP Gesundheits Verwaltungs GmbH, a German limited liability company .


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







                                      I-38
<page>
                                                                      Exhibit 23

            CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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,  No.  33-57978 dated March 30, 2001 and No.  333-109794  dated October 17,
2003) pertaining to the Invacare  Corporation  stock option plans of our reports
dated March 4, 2005, with respect to the consolidated  financial  statements and
schedule  of  Invacare   Corporation  and  subsidiaries,   Invacare  Corporation
management's  assessment of the effectiveness of internal control over financial
reporting, and the effectiveness of internal control over financial reporting of
Invacare  Corporation,  included in this Annual  Report (Form 10-K) for the year
ended December 31, 2004.



                                                           /S/ ERNST & YOUNG LLP



Cleveland, Ohio
March 4, 2005







































                                      I-39