1

 
                                 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 (FEE REQUIRED)

For the fiscal year ended December 31, 1995


                                       OR


     / /  TRANSITION  REPORT  PURSUANT TO SECTION 13 OR 15(D) OF THE  SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

For the transition period from _____________ to ________________

                         Commission file number 0-12938


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


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

            899 Cleveland Street, P. O. Box 4028, Elyria, Ohio 44036
            --------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code:         (216) 329-6000
                                                            ---------------
Securities registered pursuant to Section 12(b) of the Act:      None
                                                            --------------
Securities registered pursuant to Section 12(g) of the Act:

                        Common Shares, without par value
                        --------------------------------
                                (Title of Class)

         Rights to purchase Common Shares of Invacare, without par value
         ---------------------------------------------------------------
                                (Title of Class)

           Indicate  by check  mark  whether  the  Registrant  (1) has filed all
reports  required 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 or information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ X ]




                                       2
As of February 28, 1996,  27,930,528  Common Shares and 1,677,367 Class B Common
Shares  were  outstanding.  At that  date,  the  aggregate  market  value of the
23,003,376  Common  Shares  of  the  Registrant  held  by   non-affiliates   was
$563,582,712 and the aggregate market value of the 344,271 Class B Common Shares
of the Registrant held by non-affiliates was $8,434,640 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 NASDAQ  National
Market  System on  February  28,  1996 which was  $24.50.  For  purposes of this
information,  the 4,927,152  Common  Shares and 1,333,096  Class B Common Shares
which were held by Executive Officers and Directors were deemed to be the Common
Shares and Class B Common Shares held by affiliates.


                       Documents Incorporated By Reference
                       -----------------------------------





Part of Form 10-K                      Document Incorporated By Reference
- - ------------------                     -----------------------------------
                                    
Part III (Items 10, 11,                Portions of the Registrant's
12 and 13)                             definitive Proxy Statement to
                                       be used in connection with
                                       its 1996 Annual Meeting of
                                       Shareholders.


Except as otherwise stated,  the information  contained in this Annual Report on
Form 10-K is as of December 31, 1995.





                                     PART I
Item 1.  Business.

(a) General Development of Business.

Invacare is the leading home medical  equipment  manufacturer in the world based
upon its distribution  channels,  the breadth of its product line and sales. The
company  designs,  manufactures  and  distributes  an extensive  line of medical
equipment  for  the  home  health  care  and  extended  care  markets.  Invacare
continuously  revises  and expands its  product  lines to meet  changing  market
demands.  The company's products are sold principally to over 10,000 home health
care and medical equipment dealer locations in the U.S., 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  world-wide
distribution  network by its sales force,  telemarketing  employees  and various
organizations of independent  manufacturer's  representatives.  The company also
uses its extensive  dealer network to distribute  medical  equipment and related
supplies manufactured by others.

Invacare is committed to design,  manufacture  and  distribute the best value in
mobility  products and medical  equipment for people with disabilities and those
requiring home health care. Invacare will achieve this vision by:

          * designing and developing  innovative and  technologically  superior
            products;
          * ensuring continued focus on our primary market - the home
            care market;
          * providing  the  industry's  best  and most  cost-effective  sales,
            customer service and distribution organization;
          * providing superior and innovative dealer support and aggressive 
            product line extensions;
          * building a strong referral base among health care professionals;  
          * building  brand  preference  with  consumers;
          * handling  the retail channel through a dedicated sales and 
            marketing structure; 
          * managing the extended care  institutional  market  with  separate
            sales and distribution; 
          * continuous recruitment of top management candidates;
          * empowering  all employees; 
          * providing a performance  based reward environment;  and 
          * continually striving for total quality throughout the organization.

When  the  company  was  acquired  in  December  1979 by a group  of  investors,
including  certain  members of management and of the Board of Directors,  it had
$19.5  million in net sales and a limited  product line of standard  wheelchairs
and  patient  aids.  In 1995,  Invacare  reached  $504.0  million  in net sales,
representing a 22.5% compound  average sales growth since 1979, and currently is
one of the  only  companies  in the  industry  which  manufactures  and  markets
products in each of the following major home medical equipment categories: power
and manual wheelchairs, patient aids, home care beds, home respiratory products,
low air loss therapy products,  seating and positioning  products and ambulatory
infusion pumps.

The company's  executive  offices are located at 899 Cleveland  Street,  Elyria,
Ohio and its telephone number is (216) 329-6000. In this report,  "Invacare" and
the "company" refer to Invacare  Corporation  and, unless the context  otherwise
indicates, its consolidated subsidiaries.

(b) Financial Information About Industry Segments.

The  company  operates  predominantly  in the home  medical  equipment  industry
segment. For information relating to net sales,  operating income,  identifiable
assets and other  information for this industry  segment,  see the  Consolidated
Financial Statements of the company.

(c) Narrative Description of Business

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 the sales of domestic
home medical equipment  products will continue to grow during the next decade as
a result of several factors, including:

                                       3


     Growth in population over age 65. The over 65 age group represents the vast
     majority of home health care patients and  continues to grow. In 1993,  the
     U.S. Census Bureau estimated that by the year 2000 approximately 35 million
     people,  13% of the population in the U.S., will be over age 65. The growth
     of this segment is expected to continue  until the year 2010,  when over 40
     million  people  in this  group  will  still  represent  nearly  13% of the
     population.

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

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

     Healthcare cost containment trends. In 1994, it was estimated that spending
     on  health  care in the U.S.  surpassed  $ 940  billion  dollars,  which is
     approximately  14.0% of Gross Domestic  Product (GDP).  Current spending is
     projected to reach $1 trillion in 1995,  and 15.9% and 17.9% of GDP, in the
     year's  2000 and 2005,  respectively.  The rising  cost of health  care has
     caused  many  payors of health  care  expenses  to look for ways to contain
     costs.   Home  health  care  continues  to  gain   acceptance  due  to  the
     technological  and treatment trends described above, as well as many health
     care payors altering their reimbursement  patterns to encourage home health
     care whenever  appropriate,  as studies have shown that home health care is
     generally less costly than hospital or other institutional treatment.

     Society's acceptance of people with disabilities.  People with disabilities
     are part of the  mainstream of society,  and this has  increased,  in large
     part, due to the Americans with  Disabilities Act which became law in 1991.
     This  legislation   provides   mainstream   opportunities  to  people  with
     disabilities.  The Americans with Disabilities Act 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
     dealers and nursing homes but retail drug stores,  surgical  supply houses,
     rental dealers,  hospital and HMO-based stores, home health agencies,  mass
     merchandisers and direct sales.

EUROPE
The company believes that, while many of the market factors  influencing  demand
in the U.S. are also present in Europe - aging of the population,  technological
trends and society's  acceptance of people with disabilities - each of the major
national  markets within Europe has distinctive  characteristics.  Variations in
product  specifications,  regulatory  approvals,  distribution  requirements and
reimbursement  policies  require  the  company  to tailor its  approach  to each
market. Management believes that as the European markets become more homogeneous
and the company continues to refine its distribution  channels,  the company can
effectively penetrate these markets.


OPERATING UNITS

NORTH AMERICA
North  American  operations  are  aligned  into three  operating  groups,  which
manufacture  and  market  products  in all of the major home  medical  equipment
categories.   In  Canada,  the  company   principally  sells  Invacare  products
manufactured in the U.S. The company also sells standard wheelchairs and seating
and  positioning  products  manufactured  in Canada  and  certain  patient  aids
manufactured in Europe.



                                       4




     REHAB PRODUCTS GROUP

     Power  wheelchairs.  Invacare  manufactures  and markets a complete line of
     prescription  power  wheelchairs  for people  with  chronic  and  temporary
     disabilities,  older persons and people who are convalescing.  Prescription
     power  wheelchairs  are designed to  accommodate  the  capabilities  of the
     individual and are custom built for long-term use by one  individual  based
     on specifications  prescribed by a medical  professional.  Invacare's power
     wheelchair  lines are marketed under the Action brand name and includes the
     Storm SeriesTM, a technologically advanced series of power wheelchairs. The
     Storm  SeriesTM  was extended in 1995 with the Action Power 9000 and Ranger
     II chairs that introduced the Storm Series styling, performance and feature
     package to economy power chairs. Additionally,  diagnostic features such as
     the battery  quality  monitor  and fault log  monitor  were added to reduce
     downtime and maintenance.

     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 Action brand name and Action Top
     End(R) product name.  The chairs provide  mobility for people with moderate
     to severe  disabilities in their everyday  activities as well as for sports
     such as basketball, racing, skiing and tennis.

     Scooters.   Invacare  manufactures  and  markets  three-  and  four-wheeled
     motorized scooters, including rear wheel drive models for outdoor use and a
     front-wheel  drive model for indoor use, under the Action brand name.  This
     product line includes the Action Cat(TM) and Action Flyer(TM) products.

     Seating and positioning  products.  Invacare  manufactures and markets seat
     cushions,  back  positioners and a variety of attachments used for comfort,
     support,  pressure  relief and posture  control under the PinDot(R)  brand.
     Seating  products  marketed  under the Action brand name include the Tarsys
     brand of electronic and mechanical tilting and reclining devices for use on
     power wheelchairs.

     STANDARD PRODUCTS GROUP

     Manual wheelchairs.  For use in the home or public places (e.g.  hospitals,
     nursing  homes,  airports)  by people who are  chronically  or  temporarily
     disabled but do not require or qualify under medical reimbursement programs
     for customization in terms of size, basic performance  characteristics,  or
     frame modification. Examples of Invacare's standard wheelchair lines, which
     are  marketed  under  the  Invacare(R)  brand  name,  include  the 9000 and
     TracerTM  lines.  Both standard and  prescription  manual  wheelchairs  are
     designed to accommodate the capabilities of the individual.

     Self Care. Invacare  manufactures and/or distributes a full line of patient
     aids including ambulatory aids such as crutches, canes, walkers and wheeled
     walkers;  bath safety aids such as tub transfer benches,  shower chairs and
     grab bars; and patient care products such as commodes, lift-out chairs, and
     foam products.

     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 bed side rails,
     mattresses,  overbed tables, traction equipment,  trapeze bars and traction
     bars.

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

     Patient  transport.  Invacare  manufactures and markets products for use in
     home care and  institutional  settings,  including  patient lifts and 
     slings and multi-position recliners.

     Distributed products.  Invacare distributes a line of personal medical care
     products  manufactured  by  others,  including  incontinence  products  and
     bedding.




                                       5

     RESPIRATORY  PRODUCTS GROUP

     Home  respiratory  products.  Invacare  manufactures  and distributes  home
     respiratory products including oxygen concentrators, liquid oxygen systems,
     nebulizer compressors,  aspirators,  portable compressed oxygen systems and
     respiratory disposables.  Invacare's home respiratory products are marketed
     predominately under the Invacare(R) brand name.

     OTHER  PRODUCTS

     Microprocessor   electronic  control  systems.  Invacare  manufactures  and
     markets  electronic  control  systems  for  power  wheelchairs,   scooters,
     respiratory and 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.

     Infusion Therapy.  Invacare  manufactures and markets  ambulatory  infusion
     pumps and accessories for delivery of a variety of therapies, including 
     pain and feeding.

EUROPE
The company's  European  operations  operate as a "common  market"  company with
sales throughout Europe.  The European operation  currently sells a limited line
of  products  providing  significant  room for growth as Invacare  continues  to
broaden  the  product  line  offerings  to  mirror  that of the  North  American
operations.  The expansion of respiratory products and the development of a home
care bed is a key focus for 1996.

Most wheelchair products sold in Europe are designed and manufactured locally to
meet specific market requirements.  However, as a result of Invacare's worldwide
development  efforts, the Action 2000, which is a manual lightweight design that
originated  in the  U.S.,  was the first  wheelchair  in Europe to meet the high
standards of quality  required to receive the CE (Community  European)  mark and
the  Action  Storm  Series,  which has been  very  successful  in the  U.S.,  is
scheduled  for roll out in Europe in the first  quarter  of 1996.  In  addition,
certain power  wheelchair  products sold in the United States are adaptations of
products originally designed for the European markets.

The company  manufactures and/or assembles both manual and power wheelchair
products at all five of its  European  facilities  - Bencraft  Ltd.  and Carters
(J&A) Ltd. in the U.K.,  Poirier S.A. in France,  Invacare  Deutschland  GmbH in
Germany,  and Paratec AG in Switzerland.  Motorized scooters are manufactured in
Germany. Self care products and patient lifts and slings are manufactured in the
U.K. and France. Oxygen products are imported from Invacare in the U.S.


WARRANTY
In general,  Invacare's  products are sold with limited warranties of up to five
years.  Customers may also  purchase  extended  warranties on certain  products.
Electrical  components  are  warranted for one year.  Certain  components of the
company's prescription wheelchairs carry a lifetime warranty.


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

                                       6


NORTH AMERICA
The home medical equipment market is highly competitive, and Invacare's 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's products,  the range of products offered,  the technical expertise
of the sales force, the effectiveness of the company's  distribution system, the
strength of the dealer and  distributor  network and the  availability of prompt
and  reliable  service  for its  products.  The company  believes  our "One Stop
Shopping" approach provides the competitive  advantage  necessary for continuing
profitability and market share growth. In the past,  various  manufacturers have
from time to time instituted  price-cutting programs in an effort to gain market
share. There can be no assurance that other home medical equipment manufacturers
will not attempt to implement such aggressive pricing again.

EUROPE
As a  result  of  the  differences  encountered  in  the  European  marketplace,
competition  generally varies from one market to another.  The company typically
encounters  one or  two  strong  competitors  in  each  country,  but no  single
competitor is dominant outside the country in which its sales are  concentrated.
Management believes that as the European markets become more homogeneous and the
company  continues  to  refine  its  distribution   channels,  the  company  can
effectively penetrate these markets.

MARKETING AND DISTRIBUTION

     NORTH AMERICA Sales and Marketing.  Invacare's products are marketed in the
United States primarily to home health care and medical  equipment  dealers that
in turn sell or rent these  products  directly to the end user or to health care
institutions. Although the company's primary customer is the dealer, the company
also  markets  its  products  to  medical  professionals,   including  physical,
occupational and respiratory therapists,  who refer their patients to dealers to
purchase specific types of home medical  equipment.  As a result of the superior
service  provided  by the "One Stop  Shopping"  approach,  Invacare  was able to
increase large national  account  business as well as enhance service to smaller
independent  dealers.  In some cases,  Invacare  sells  directly  to  government
agencies  such as the  Department  of  Veterans  Affairs  or the  Department  of
Defense.  The company made improvements to existing programs to generate greater
consumer  awareness of Invacare and its products,  as witnessed by  enhancements
made to its consumer  marketing  program by  sponsoring a variety of  wheelchair
activities for consumers supporting charitable causes which benefit users of its
products.  In addition,  the company  launched a new domestic  brand strategy in
November  designed to effectively  communicate to home health care providers and
consumers  the wide variety of products  which  Invacare  manufactures.  The new
brand strategy  makes  Invacare(R)  the company's  primary brand for home health
care and respiratory equipment, or "stock" products. Action is the primary brand
for  high-tech  mobility  and sports  equipment,  or "custom"  products  and the
PinDot(R)  brand  represents  the  company's  various  seating  and  positioning
products.

       Invacare's domestic sales and marketing  organization  consists primarily
of  in-house   salespersons,   in  some  cases  Invacare  utilizes   independent
manufacturers' representatives. Each of the company's domestic sales territories
is  coordinated  by an area vice  president.  The sales force is trained to sell
Invacare's  entire  range of  products  so that a dealer can order any  Invacare
product from one person.  The  salespersons  also provide training and servicing
information  to  the  dealers,  as  well  as  brochures,  point-of-sale  display
materials and advertising and merchandising  aids. In Canada,  products are sold
by a separate direct sales force of the company's wholly owned  subsidiaries and
are  distributed  through  regional  distribution  centers in British  Columbia,
Ontario and Quebec and health care dealers. In addition,  Invacare advertises in
home health care journals and trade publications, and its representatives attend
trade shows and similar conventions to display its products to dealers,  medical
professionals and others.

In  addition to the North  American  sales  force,  in January  1996,  the North
American sales and marketing  group created a new department in order to provide
additional focus on clinical applications for Invacare's products.  Initially, a
clinical staff of 12 physical and occupational  therapists was hired and trained
to provide  valuable  services to medical  professionals  in the  facility-based
rehab setting.  The specialists will assist peer professionals with:  in-service
education  on relevant  topics of seating  and  positioning;  broad  spectrum of
product  education  and their  clinical  applications;  assistance  in  clinical
evaluations for mobility;  documentation  for reimbursement  entities;  programs
offering  continuing  education credits;  and selected product  availability for
patient evaluation purposes.

The company's top ten  customers and buying groups  accounted for  approximately
30% of 1995 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 8% of the companies  1995 net sales.  Dealers
that are part of a buying group generally make individual  purchasing  decisions
and are invoiced directly by the company.

                                       7


Customer Service. As part of "One Stop Shopping,  the company views its customer
service  activities as strategically  important in its efforts to achieve market
leadership.  The company's  customer service strategy is directed at meeting the
need of medical equipment  dealers and is specifically  designed to focus on the
dealer's inventory management,  equipment financing, training and administrative
needs.

Invacare has made a significant  investment  in assisting  dealers in minimizing
inventory  requirements.  For stock items,  dealers can either pick up orders at
the nearest center or receive freight-free delivery (with minimum order levels),
generally within 48 hours of the company's  receipt of an order for any standard
product.  This  distribution  system permits dealers to minimize their inventory
levels. As an additional service,  Invacare  manufactures  accessories,  such as
upholstery and arm rests for wheelchairs, that are interchangeable with products
of other  manufacturers,  thereby  allowing  dealers  to stock  only one line of
accessories.

The company also  maintains a network of five regional  technical  centers where
Invacare products can be repaired promptly by factory technicians.  Invacare has
a network of 23 independent  dealers that can provide factory authorized service
and train the service  technicians of selected  dealers.  This service  network,
when  combined  with the  company's  distribution  centers,  enables  dealers to
minimize spare parts inventory.

To further assist dealers in reducing their cash requirements for inventory
and rental equipment, the company provides various financing options for certain
types of its products. In a typical financing arrangement, the company sells the
equipment on a financing contract to the dealer for periods ranging from 6 to 51
months.  The company also  introduced  a revolving  credit  agreement,  known as
Invacard, which provides an additional financing option to our dealer base.

The  company   devotes   significant   time  and  resources  to  train  dealers,
rehabilitation  therapists,  and others in the sale, use, maintenance and repair
of its  products.  Expenditures  for  training  are  expected to increase as the
company's  product  lines  continue to expand and as certain  products,  such as
power wheelchairs, become more complex.

Invacare  is  continuing  to develop  programs  to assist  dealers  in  reducing
administrative  costs.  One such  effort is to  provide  customers  with  direct
computer-to-computer  links with the company in order to provide  on-line  order
entry and order  tracking to further  expedite  delivery,  thereby  reducing the
dealer's   paperwork  and  inventory.   During  1995,   additional   programming
enhancements  were made which resulted in an increase in the number of customers
utilizing  Electronic  Data  Interchange  (EDI) and an  increase  in related EDI
sales.

Invacare is also  dedicated to reducing its own internal  costs and running cost
effective operations. To further this endeavor, a new sales and order processing
system was  installed  in 1995.  This  system  brought the  following  benefits:
automatic  price  generation,  on-line order  accuracy  check,  paperless  order
processing environment and automatic sourcing of order to the proper fulfillment
facility.  This new system will allow customer  service to handle more calls and
process more orders without a comparable increase in cost.

The company believes 1996 holds  additional  opportunities as Invacare will
enter two new distribution  channels as a result of acquisitions made during the
first quarter of 1996. The acquisition of Frohock-Stewart  will provide Invacare
entry into the "retail distribution  channel",  utilizing a different brand name
and separate sales force and the  acquisition of Healthtech,  a nursing home bed
manufacturer   and  marketer,   will  provide  access  into  the  extended  care
institutional market.

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 direct sales force and distribution  centers in the U.K.,  France,
Germany, Spain, Sweden and Switzerland, 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 authorities.  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.   Key   organizational
enhancements  were made during 1995 that are required to implement the "One Stop
Shopping"  concept  in Europe,  which will be a key focus over the next  several
years.



PRODUCT LIABILITY COSTS
Invacare supports its dealers in defending product liability claims in an effort
to hold down costs. The company's  captive  insurance  company,  formed in 1986,
insures  the first $2  million  per  claim of the  company's  product  liability
exposure.  The company also has additional layers of coverage insuring up to $50
million in annual aggregate losses arising from individual losses that exceed $2
million. There can be no assurance that Invacare's insurance will continue to be
available at affordable rates or will be adequate.


                                       8



PRODUCT DEVELOPMENT AND ENGINEERING
Invacare is engaged in  continuous  efforts to  improve,  expand and broaden its
existing product lines.  During the past three years, new product  introductions
included:   major  improvements  in  the  power  wheelchair  line  in  terms  of
electronics,  functionality and aesthetics; new models of power wheelchairs; new
electronic  controllers for power wheelchairs;  new models of both composite and
aluminum frame ultralight  wheelchairs;  a comprehensive  new line of innovative
seating and positioning  products; a complete line of home respiratory products,
including nebulizers, compressors, flowmeters, aspirators, liquid oxygen, oxygen
analyzer,   and  respiratory   disposables;   new  version  of  the  Invacare(R)
microAir(R)  Turn-Q(TM)  automatic turning mattress system; and an improved line
of ambulatory and safety products.

NORTH AMERICA
New product  development  remains a key component of Invacare's strategy to grow
market share and maintain competitive advantage. More than 27 major new products
were introduced at the  Medtrade/NHHCE in Atlanta,  the industry's largest trade
show, where Invacare's  exhibit was recognized as "Best of Show".  Important new
technologies  were added,  as well as many line  extensions  and  refinements to
existing categories. The most significant introductions included:

      Action  Power 9000 Storm  Series(R)  -  Redesigned  with the clean,  sleek
      styling characteristic of the Storm Series. The gear system was redesigned
      to improve  performance  and provide  for a quiet ride,  while at the same
      time offering more  efficient  operation and  reliability.  For a smoother
      response,  the INT P9 and MKIV RII  electronic  control  systems also were
      introduced.

      Action Comet(TM)  Pediatric  Wheelchair - Created  specifically to address
      the market need for early  intervention  and  treatment  of children  with
      genetic  deformities.  Early mediation may provide for improved  function,
      promote bone growth, enhance comfort and improve coordination and posture,
      thereby contributing to the overall health and well-being of the child.

      Tarsys Tilt and Recline  System - Developed to maximize the benefits  that
      tilt,  recline  or a  combination  of tilt and  recline  offers.  Provides
      cost-effective  pressure relief and postural  benefits for a wide range of
      disabilities, including spinal cord injuries and neuromuscular diseases.

      Invacare(R)  9000  Series  Wheelchair  -  Available  in  the  SL,  XT  and
      Recliner/Tall  series.  The SL is the perfect  rental  chair for those who
      want  quality  at a  moderate  price.  The  XT  is a  manual  prescription
      wheelchair  for   individuals  who  require  a  standard  or  custom  size
      wheelchair.  The  Recliner/Tall  is designed for individuals who, based on
      anatomy and function level, require a custom size wheelchair.

      Invacare(R)  Venture (TM) Demand  Oxygen  Delivery  Device  (D.O.D.D.) - A
      technologically  advanced,  convenient  oxygen  delivery  device  used  in
      conjunction  with  compressed  oxygen  cylinders and liquid oxygen,  it is
      lightweight, portable and extremely easy to carry. Through a wide range of
      respiratory rates, it is able to deliver precise amounts of oxygen on each
      breath and can be used in  continuous  or pulse modes at  prescribed  flow
      rates.

EUROPE
During  1995,  European  operations  also  introduced  several new  products and
continued  to  update  existing   products  as  required  by  the  market.   Key
introductions and updates in 1995 included updated and reengineered patient aids
and lifting equipment, as well as new lines of manual wheelchairs.


MANUFACTURING  AND  SUPPLIERS  The  company's  objective is to maintain its
commitment to be the lowest-cost  manufacturer  in its industry,  as well as the
highest-quality  producer.  The  company  believes  that  it is  achieving  this
objective not only through improved product design,  but also by taking a number
of steps to lower manufacturing costs. During 1995, the worldwide  consolidation
of  purchasing  began  in  order  to  take  advantage  of  significant  leverage
opportunities  available  to the  company for certain  commodity  raw  materials
thereby helping to achieve ongoing cost reduction  objectives.  The company also
makes   substantial   investments   in  its  facilities  in  order  to  increase
productivity,  lower costs and improve  quality.  Over the past three years, the
company has  invested $35 million in capital  improvements  and  acquisition  of
facilities.

The cost  containment  initiatives and  manufacturing  improvements  resulted in
improved inventory turns, service levels and working capital management.


                                       9



NORTH AMERICA
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 cost by
eliminating  product complexity and using common  components.  Value engineering
has been applied to all product introductions in the last three years, including
the latest generation of oxygen concentrators, electronic controls, wheelchairs,
patient lifts, beds and bath safety products.

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

The  manufacturing  operations  for the company's  wheelchairs  and  replacement
parts, patient aids and home care beds consist of a variety of metal fabricating
procedures,  electronics production,  coating,  plating and assembly operations.
Manufacturing  operations  for the  company's  oxygen  concentrators,  nebulizer
compressors,  and electronic  seating and positioning  products  consist of both
finishing  and  assembly.  The  company  purchases  raw  materials,   fabricated
components and services from a variety of suppliers.  Invacare does not have any
long-term  contracts with its suppliers,  but considers its  relationships  with
suppliers to be satisfactory and believes that adequate  alternative  sources of
supply are available.

EUROPE
As in other areas,  manufacturing  and operational  issues faced in the U.S. are
also present in Europe. The European  operations has challenged and rationalized
the mission of each  manufacturing  location  allowing  for the  realization  of
significant  synergies  and  identified  areas for further cost  reductions  and
improved efficiencies for 1996.


ACQUISITIONS
During 1995,  the company made eight  acquisitions  for $31 million in cash
which  extended  or added new  product  lines as well as  expanded  distribution
capabilities, without increasing its debt-to-equity ratio which remains at .6 to
1. As a result  of our  unending  search  for  opportunities,  coupled  with the
industry trend toward  consolidation,  numerous  acquisition  opportunities were
evaluated  in 1995.  The  company  focuses on  acquisitions  which  fulfill  the
following objectives:

Tactical.   Grow market share or extend current product lines.
            - Special Health  Systems  (Canada) - designer and  manufacturer  
              of planar  seating and  positioning  systems for wheelchairs.
            - Paratec (Switzerland) - manufacturer of active 
              wheelchairs sold under the Kuschall name.
            - PinDot  Products, (Northbrook,  Illinois) - designer,  
              manufacturer  and distributor of contour,  custom seating 
              systems.
Strategic.  Enter new market segments that complement existing businesses or 
            utilize our distribution strength.
            - Patient Solutions (San Diego, California) - manufacturer of 
              ambulatory infusion pumps.
            - Medical  Equipment  Repair  Service  (Sarasota,  Florida)  -
              aftermarket oxygen concentrator parts and repair service, as well
              as supplier of other related respiratory equipment.
Geographic. Enables rapid entry into new foreign markets.
            - Group  Pharmaceutical (New  Zealand) - distributor  of 
              Invacare  prescription  wheelchairs  and other rehab products.
            - Thompson Rehab (New Zealand) - manufacturer  and distributor
              of manual and power  wheelchairs.  
            - Bencraft (England)  - manufacturer  of  wheelchairs 
              and  specialty seating systems and cushions.

GOVERNMENT REGULATION
The company is directly  affected by  government  regulation  and  reimbursement
policies in virtually every country in which it operates. Government regulations
and health care policy  differ from country to country,  and within the U.S. 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.

                                       10


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 more than four decades.  A
number of efforts to control the federal  deficit  have  impacted  reimbursement
guidelines  for government  sponsored  health care programs and often changes in
federal  programs are  imitated by private  insurance  companies.  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 our dealers.

Congress,  in their efforts to balance the federal  budget,  continue to propose
Medicare  and  Medicaid  cuts to  accomplish  this task.  Cuts in  Medicare  are
projected at $200 to $250 billion  over a seven year period.  The cuts  proposed
would  affect  oxygen  reimbursement  and the  elimination  of  cost  of  living
increases in reimbursement levels. Invacare believes the cuts currently proposed
are manageable as they are not disproportionate to the overall budget.  Congress
is serious about reducing  health care costs and is interested in cost effective
alternatives  such as home care. The company believes that home health care is a
viable solution to reducing health care costs.

Invacare  will  continue  its  pro-active  efforts on  improving  public  policy
affecting home health care and believes that it gives us a competitive advantage
over  other HME  manufacturers  who are  forced to react to  change  instead  of
helping to direct change.

The Safe Medical  Devices Act of 1990 and Medical  Device  Amendments of 1976 to
the  Federal  Food,  Drug and  Cosmetics  Act of 1938 (the  "Act")  provide  for
regulation by the United States Food and Drug  Administration (the "FDA") of the
manufacture and sale of medical devices.  Under the Act, all medical devices are
classified as Class I, Class II or Class III devices.  The  company's  principal
products  are  designated  as Class I or Class II devices.  In general,  Class I
devices must comply with labeling and recordkeeping requirements and are subject
to other general  controls.  In addition to general  controls,  certain Class II
devices may have to comply with  performance  standards when  established by the
FDA. Manufacturers of all medical devices are subject to periodic inspections by
the  FDA.  Furthermore,  state,  local  and  foreign  governments  have  adopted
regulations  relating to the  manufacture and marketing of health care products.
The  company  believes  that it is  presently  in material  compliance  with all
applicable regulations promulgated by FDA, for which the failure to comply would
have a material adverse effect.


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

EMPLOYEES
As of December 31, 1995, the company had approximately 3,740 employees.


(d)Financial Information About Foreign and Domestic Operations and Export Sales.

The company also markets its products for export to other foreign countries. The
company had product sales in approximately 80 countries worldwide.

For information relating to net sales,  operating income and identifiable assets
of the company's foreign and domestic  operations,  see Business Segments in the
Notes to the Consolidated Financial Statements of the company.



                                       11

Item 2.  Properties.

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


                                                      Ownership Or
                                                      Expiration           Renewal
Location                         Square Feet          Date of Lease        Options            Use
- - -----------------------------------------------------------------------------------------------------------
                                                                                   

North America
Atlanta, Georgia                      45,866             May 1997            none              Warehouse

Auckland, New Zealand                 11,244             March 1996          one (2 yr.)       Manufacturing

Auckland, New Zealand                 11,959             March 2003          one (5 yr.)       Distribution

Auckland, New Zealand                 24,750             December 1997       two (2 yr.)       Distribution

Aurora, Ontario                       25,125             September 1997      one (5 yr.)       Manufacturing and offices

Carmel, New York                      13,900             July 1998           none              Manufacturing and offices

Cerritos, California                  47,366             May 1996            none              Warehouse

Christchurch, New Zealand             48,178             April 1998          one (2 yr.)       Manufacturing and offices

Concord, Ontario                      22,000             February 19         none              Manufacturing and offices

Edison, New Jersey                    32,207             November 1996       one (3 yr.)       Warehouse and sales office

Elyria, Ohio
   - Taylor Street                    145,344            Own                 -                 Manufacturing and offices

   - Cleveland Street                 226,998            September 1999      one (5 yr.)       Manufacturing and offices

Grand Prairie, Texas                  43,754             December 1998       one (3 yr.)       Warehouse

Kirkland, Quebec                      26,500             December 1996       one (2 yr.)       Warehouse

McAllen, Texas                        12,000             March 1997          none              Warehouse

Mississauga, Ontario                  81,004             January 2005        none              Manufacturing, warehouse and offices

North Ridgeville, Ohio                139,200            Own                 -                 Manufacturing warehouses and offices

Northbrook, Illinois                  27,458             June 1999           two (3 yr. 
                                                                                & 2 yr.)       Manufacturing and offices

Pinellas Park, Florida                12,000             June 1996           three (1 yr.)     Wheelchair manufacturing and offices

Reynosa, Mexico                       70,400             Own                 -                 Wheelchair and patient aid
                                                                                               manufacturing and offices

Sacramento, California                26,900             February 1998       none              Wheelchair parts and accessories
                                                                                               manufacturing, warehouse and offices







                                       12




                                                       Ownership Or
                                                       Expiration            Renewal
Location                          Square Feet          Date of Lease         Options         Use
- - ------------------------------------------------------------------------------------------------------------------------
                                                                                 
San Diego, California                  5,940                 May 1997          none          Manufacturing and offices

Sanford, Florida                       7,485                 June 1996         one (1 yr.)   Warehouse

Sanford, Florida                       113,034               Own               -             Manufacturing and offices

Sarasota, Florida                      15,450                March 1998        five (5 yr.)  Manufacturing, warehouse and offices

Tonawanda, New York                    4,700                 April 1998        none          Warehouse and offices

Delta, British Columbia                6,900                 January 2000      none          Warehouse & offices

Europe
Allschwill, Switzerland                36,000                Own               -             Manufacturing and offices

Anthony, France                        7,126                 April 2000        one (3 yr.)   Warehouse and offices

Askersund, Sweden                      10,000                November 1998     one (1 yr.)   Warehouse

Bad Oeynhousen, Germany                76,600                June 1998         one (3 yr.)   Manufacturing, warehouse and offices

Birmingham, England                    13,000                Own               -             Warehouses and offices

Birmingham, England                    19,378                Own               -             Manufacturing and offices

Bridgend, Wales                        131,522               Own               -             Manufacturing and offices

Fondettes, France                      86,000                November 2007     none          Manufacturing

Fondettes, France                      104,500               Own               -             Manufacturing, warehouse and offices

Girona, Spain                          13,600                November 2004     (1 yr.)       Warehouse and offices

Spanga, Sweden                         2,000                 April 1999        none          Offices



Item 3.  Legal Proceedings.

Invacare  is a  defendant  in a number of  product  liability  actions  in which
various  plaintiffs  seek  damages for  injuries  allegedly  caused by defective
products.  All these  actions  have been  referred  to the  company's  insurance
carriers and are being vigorously  contested.  The primary carrier for the first
$2 million of insurance  coverage per claim is a subsidiary of the company which
was  established  in  September  1986 to  provide  the  first  layer of  product
liability  insurance  for the  company.  The  company has  additional  layers of
coverage  insuring up to $50 million in annual  aggregate  losses  arising  from
individual  losses that exceed $2 million.  Management does not believe that the
outcome of any of these  actions  will have a material  adverse  effect upon its
business or financial condition.

Item 4.  Submission of Matters to a Vote of Security Holders.

Not applicable.




                                       13




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.



Name                                          Age               Position
- - ------                                        ------            -----------
                                                          
A. Malachi Mixon, III                         55                Chairman of the Board of Directors, President and
                                                                Chief Executive Officer

Gerald B. Blouch                              49                Chief Operating Officer

Joseph B. Richey, II                          59                President - Invacare Technologies & Invacare Senior Vice
                                                                President - Total Quality Management

Thomas R. Miklich                             48                Chief Financial Officer, General Counsel, Treasurer
                                                                and Corporate Secretary

Benoit Juranville                             47                President - Invacare Europe

Richard A. Sayers, II                         44                Vice President - Human Resources

Louis F.J. Slangen                            48                Senior Vice President - Sales & Marketing

M. Louis Tabickman                            51                Group Vice President Rehab Products

Thomas J. Buckley                             47                Group Vice President Standard Products


A. Malachi  Mixon,  III has been  President  and Chief  Executive  Officer and a
Director  of the company  since  December  1979 and  Chairman of the Board since
September 1983.

Gerald B. Blouch was named Chief Operating Officer in December 1994 and has been
Chairman - Invacare  International since December 1993.  Previously,  Mr. Blouch
was  President - Home Care  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 from May 1990 to May 1993 and Treasurer from
March 1991 to May 1993.

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

Thomas  R.  Miklich  has been  Chief  Financial  Officer,  General  Counsel  and
Treasurer since May 1993 and in September 1993 was named Secretary.  Previously,
Mr. Miklich was Executive Vice President and Chief Financial Officer of Van Dorn
Company from 1991 to 1993, and Chief Financial  Officer of The  Sherwin-Williams
Company from 1986 to 1991.

Benoit  Juranville has been President - Invacare  Europe since December 1993 and
previously  was  President  of Poirier S.A.  which was  purchased by Invacare in
1992.  He was added to the  company's  Executive  Committee in December of 1994.
From 1983 through 1992,  Mr.  Juranville  was Chairman of the Board and Managing
Director of Poirier, S.A.

Richard A. Sayers,  II has been Vice President - Human Resources since July
1991.  Mr. Sayers was Vice President and General  Manager -  Aftermarkets  Parts
Division from September 1992 to August 1995.  From 1989 to July 1991, Mr. Sayers
was Vice President of Human Resources for the Steering Systems group of TRW Inc.

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


                                       14


     M. Louis  Tabickman  was named  Group Vice  President  - Rehab  Products in
August 1995.  Mr.  Tabickman  has been an officer  since July 1985 and was named
President - Invacare Canada in March, 1994.  Previously,  Mr. Tabickman was Vice
President & General  Manager - Power  Business Unit from December 1994 to August
1995,  Vice President and General  Manager - Invacare Canada from September 1992
to March 1994 and Vice President and General Manager of Service and Distribution
from July 1985 until September 1992.

     Thomas J.  Buckley  was named Group Vice  President - Standard  Products in
August 1995. Mr. Buckley was previously  General  Manager of Manual  Wheelchairs
from  December  1994 to August 1995.  From  November  1993 to December  1994 Mr.
Buckley was the Business  Unit Leader of the Bed  Products  and Pressure  Relief
Business  Units.   Before  this  period,  Mr.  Buckley  served  as  Director  of
Distribution.

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

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

Invacare's Common Shares, without par value, are traded  over-the-counter in the
NASDAQ National Market System under the symbol IVCR.  Ownership of the company's
Class B Common  Shares  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's Common Shares and Class B Common Shares at February 28, 1996 was 2,048
and 40 , respectively.  The closing sale price for the Common Shares on February
28, 1996 as  reported by NASDAQ,  was $24.50 . The prices set forth below do not
include retail markups, markdowns or commissions.

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




                                                                                       1995*                    1994*
                                                                                       -----                    -----
                                                                               High             Low         High        Low
                                                                               -----           -----      -----        -----
                                                                                                           
                                      December 31                            $29.75          $21.25       $18.13       $13.63
                                      September 30                            24.00           19.25        15.88        13.38
                                      June 30                                 21.88           17.63        14.50        12.63
                                      March 31                                18.13           16.13        14.75        12.88


* All share  prices  are  adjusted  to  reflect  the 2 for 1 stock  split  which
occurred on October 16, 1995.

During 1995, the Board of Directors for Invacare  Corporation declared dividends
of $.0375 per Common Share. For information regarding limitations on the payment
of  dividends  in  the  company's  loan  and  note  agreements,  see  Long  Term
Obligations  in  the  Notes  to the  Consolidated  Financial  Statements  of the
company.  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.



                                       15





Item 6.  Selected Financial Data.



                                          1995               1994          1993            1992             1991          1990
                                          ------------------------------------------------------------------------------------
                                                           (In thousands except per share data and ratio data)

                                                                                                               
Earnings
Net Sales                                 $504,032       $411,123      $365,457        $305,171         $263,181      $229,797
Income from Operations                      54,144         43,736        36,870          27,567           23,628        16,750
Net Earnings                                32,165         26,377        22,110          17,739           14,128         7,610
Earnings per Share *                          1.07            .89           .75             .63              .53           .33
Dividends per Common Share*                 .03750         .01875             -               -                -             -

Balance Sheet
Current Assets                            $204,685       $180,435      $156,191        $151,934         $119,814      $103,810
Total Assets                               408,750        338,109       286,367         262,412          162,349       138,338
Current Liabilities                         84,936         67,667        60,913          68,226           42,056        42,801
Working Capital                            119,749        112,768        95,278          83,708           77,758        61,009
Long-Term Obligations                      122,456        105,528        90,351          78,648           31,795        51,506
Shareholders' Equity                       201,319        164,007       134,962         114,000           86,710        41,862

Other Data
Research and Development
   Expenditures                           $  9,002       $  7,651      $  6,840        $  5,251         $  4,518      $  3,343
Capital Expenditures, net of
   disposals                                11,027         12,217        11,961          17,301           11,396         8,600
Depreciation and Amortization               14,159         12,686        12,280          10,008            8,073         6,603

Key Ratios
Return on Sales                               6.4%           6.4%          6.0%            5.8%             5.4%          3.3%
Return on Average Assets                      8.6%           8.4%          8.1%            8.4%             9.4%          5.8%
Return on
Beginning                                    19.6%          19.5%         19.4%           20.5%            33.7%         23.7%
       Shareholders' Equity
Current Ratio                                2.4:1          2.7:1         2.6:1           2.2:1            2.8:1         2.4:1
Debt-to-Equity Ratio                          .6:1           .6:1          .7:1            .7:1             .4:1         1.2:1



 * As adjusted for the 2-for-1  splits  effected in the form of a 100% share
dividend in September 1991 and October 1995.




                                       16





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

RESULTS OF OPERATIONS

1995 Versus 1994

     Net  Sales.   Net  sales  for  1995  increased  22.6%  for  the  year  with
acquisitions  accounting  for 5.2% of the  increase  and a positive  impact from
currency   translation  of  2.7%.   The  sales  increase  of  14.7%,   excluding
acquisitions and the impact of foreign currency  translation,  was due primarily
to increased unit volumes as competitive  pressures caused prices to decline for
most product  lines during 1995.  All product lines had sales gains for the year
with power wheelchairs, respiratory, beds and personal care products posting the
largest  percentage  increases.   Sales  growth  was  aided  by  the  successful
completion of supply  contracts  with several major  national  providers late in
1995. It is believed these  arrangements will provide  additional sales momentum
as we enter 1996.  The company  achieved  its  long-term  goal of reaching  $500
million in sales and set a new long-term goal of reaching $1 billion in sales by
the year 2000.


North America

Rehab Group.  Sales of the Rehab Group, which consists of the power wheelchairs,
custom manual wheelchairs and seating and positioning business units,  increased
38.4% for the year,  with 9.3% of the increase due to the  acquisition  of Genus
Medical, Inc., PinDot Products, Inc. and Special Health Systems. All of the gain
was due to unit  volume  growth  as prices  for the  Group's  products  declined
slightly  during the year.  The  successful  introduction  in 1994 of the Action
Storm Series(R) of power wheelchairs  continued to lead the way as sales for the
power business unit increased 42.6% with all of the improvement due to increased
unit sales.

Sales of custom manual  wheelchairs  also showed strong sales growth of  13.5%,
primarily due to the introduction of an adult  tilt-in-space chair and continued
strong  market  acceptance  of the  Action  Patriot(R),  a  prescription  manual
wheelchair.  Seating and positioning  sales more than doubled,  principally as a
result of key strategic  acquisitions  made to complete this product line during
1995.  The Group is now  well-positioned  for growth in this product area as the
company will be able to market a full range of seating and positioning products.
The acquisitions also provide  opportunities for product line  consolidations as
well as manufacturing synergies in 1996.

Standard Products Group. Sales of the Standard Products Group, which consists of
the manual wheelchairs/patient  transport,  personal care, beds and low air loss
therapy business units, increased 15.4%. The Group had a significant unit volume
increase as prices for the Group's  product  lines  declined due to  significant
competitive  pricing  pressures.  The beds and personal  care product lines each
posted sales  increases  of over 19%,  while low air loss therapy grew more than
40% for the year despite  governmental  cuts in reimbursement  policies near the
end of 1995.

Respiratory  Group. Sales of the Respiratory Group, which consists of the oxygen
concentrator, liquid oxygen, aerosol therapy and associated respiratory products
business   units,   increased  21.8%  for  the  year.   Volume   increases  were
significantly  greater than the overall sales increases as the Group experienced
significant  pricing pressure in 1995,  particularly in the oxygen  concentrator
product line. The wide acceptance of the company's  SensO2  concentrator and the
continued  growth  of  business  with  large  national  accounts,   as  well  as
independent providers, led to the increase.

     Other.  The Other Group,  consisting  primarily of the  company's  Canadian
operation,  aftermarket parts business,  electronic  controls for power products
and  ambulatory  infusion  pumps had a 19.8 % sales  increase for the year.  The
acquisition of Patient  Solutions,  Thompson  Rehab,  GP Healthcare and M.E.R.S.
contributed 10.6% to the increase. The company's Canadian operation had a strong
year with sales up 17.2% despite  tightened  government  reimbursement  policies
introduced  in 1994.  This gain was  offset  by a flat year in sales at  Dynamic
Controls, the company's electronic wheelchair controller business, due primarily
to the loss of a large  customer who is also a major  competitor to the company.
In early 1996, the company completed the acquisition of Frohock-Stewart  Inc., a
manufacturer of personal care products with distribution  primarily through mass
retailers and Healthtech,  a manufacturer of nursing home beds with distribution
in the extended care institutional market. These acquisitions will open up a new
channel for growth for the company's products.

                                       17



Europe.  European sales increased 30.1%, with acquisitions  accounting for 12.5%
of the increase.  Foreign currency translation also had a positive effect on the
reported sales increase  contributing 11.2% to the improvement.  Sales increased
in almost all  product  lines,  with power  wheelchairs  and  patient  aid sales
particularly  strong.  Competitive  pricing  pressure  was also  experienced  in
Europe,  limiting the company's  ability to increase prices.  The sales gain was
achieved with European operations  currently selling a limited line of products.
A key focus for future  growth will be the  introduction  of product  lines that
mirror North American operations.

Gross Profit.  Gross profit as a percentage of net sales  improved to 33.0% from
32.4% last year,  despite  significant  pricing pressures in the marketplace and
raw material cost  increases.  The principal  factors leading to the improvement
were productivity gains,  improved  manufacturability of products resulting from
design changes and cost reductions  arising out of material  substitutions.  The
company's   efforts  in  realigning   production   among  its   facilities   and
consolidating  certain  processes  continues  to help improve  productivity  and
efficiency and reduce costs.

North  American   margins  were  basically  flat  with  last  year  as  improved
manufacturing  productivity  and reduced  distribution  costs were offset by the
competitive  pricing  environment,  raw material  cost  increases and a shift in
product mix.  Excluding  businesses  acquired,  North American  margins showed a
slight improvement for the year.

Gross profit in Europe improved to 33.2% from 30.3% in 1994.  Increased  volume,
continued  manufacturing  productivity  improvements  and a shift in product mix
contributed to the increase.

Inventory  turns and  service  levels  continued  to  improve  in both the North
American and European operations,  contributing to the gross margin improvement.
The company's focus on  implementation  of a global  manufacturing  strategy and
further  consolidation  of purchasing  leverage will provide the cost reductions
and productivity improvements necessary for future profitability.

Selling, General and Administrative. Selling, general and administrative expense
as a percentage  of net sales was 22.3% in 1995  compared to 21.7% in 1994.  The
dollar  increase  was  $22,823,000  or 25.5%.  Acquisitions  increased  selling,
general  and  administrative  costs by  approximately  $8,000,000  for the year,
representing 9.0% of the percentage  increase.  The businesses acquired operated
with a significantly  higher selling,  general and  administrative  expense as a
percent of sales ratio,  resulting  in the overall  higher  percentage  of sales
ratio for the company in 1995.  It is expected  that the ratio for the  acquired
businesses will decline as they are integrated into the company.

     North  American  operations'  selling,  general  and  administrative  costs
increased  as a  percent  of sales to 21.6%  from  21.3%  last  year.  Excluding
acquisitions,  these  costs  were  lower than last year as a percent of sales as
increased spending on sales and marketing programs were offset by administrative
cost  reductions.  The  company  believes  the  investments  made in  sales  and
marketing programs, primarily related to brand strategy and clinical application
specialists, will have a positive impact on future growth opportunities.

European  operations'  selling,   general  and  administrative  expenses,  as  a
percentage  of  sales,  increased  to 24.3%  from  23.4%  in 1994.  Acquisitions
accounted for all of the percentage  increase.  The dollar increase was a result
of spending required to build the infrastructure needed to implement a full-line
product strategy in Europe which caused the spending, excluding acquisitions, to
increase 16.7% for the year. The company believes the infrastructure investments
in Europe  provides  the  organizational  structure  required to support  future
growth as well as a full-line product strategy.

     Interest.  Interest  income in 1995 increased to $7,276,000 from $6,373,000
last  year,  a 14.2%  increase.  The  increase  was due to  increased  financing
incurred  by the  company's  finance  subsidiary  as a result of higher  average
outstanding installment loans. Interest expense increased to $9,575,000,  16.3%,
primarily  as a result of the  additional  borrowings  incurred to fund the 1995
acquisition  activity.  The company's debt- to-equity ratio remained at .6 to 1.
It is  anticipated  that the  company's  interest  expense,  in the  absence  of
additional  acquisitions  or  significant  increases  in borrowing  rates,  will
decline due to the company's strong cashflows from operations.

Income  Taxes.  The  company  had an  effective  tax  rate of 38.0% in 1995
compared  to 37.0% in  1994.  See  Income  Taxes  in the  Notes to  Consolidated
Financial Statements for further discussion.

Research  and  Development.  The company  continues to increase its research and
development  activities  to maintain  its  competitive  advantage . Research and
development  expenditures  increased to $9,002,000  from $7,651,000 in 1994. The
expenditures declined slightly as a percent of sales, principally as a result of
acquisitions.  The businesses acquired spent less on research and development as
a  percent  to  sales  than the  company,  however  future  spending  for  these
businesses  are  anticipated  to be more in line  with  the  company's  spending
levels.  Research  and  development  activities  are focused on new and enhanced
products,  as well as new  designs  and  processes  that reduce cost and improve
manufacturability.

                                       18



1994 Versus 1993

Net Sales.  Net sales for 1994 increased  12.5% over 1993 with 1994  acquisition
activity  accounting  for  less  than  1%  of  the  increase.  Foreign  currency
translation   had  a  negative   impact  on  the  reported   sales  increase  of
approximately 1% due to the relative strength of the dollar as compared to those
currencies.  The sales  increase  was  primarily  the result of  increased  unit
volumes  as the  pricing  environment  for  most  product  lines  was  extremely
competitive during the year.

North America

Rehab Group.  Sales of this Group  increased  10.9% over 1993 due principally to
the successful  introduction of the Action Storm Series(R) of power wheelchairs,
the introduction of the Action Power Tiger(R), a pediatric power wheelchair with
tilt-in-space features and the 1993 introduction of the Action Patriot(R). Sales
of the power and custom  manual  wheelchair  product lines  increased  10.4% and
seating and positioning products over 25.0%.

Standard  Products Group.  Sales of this Group increased 5.3% over 1993 as sales
of beds,  personal  care and  therapeutic  support  surfaces  product lines were
strong. The company's bed products were favorably impacted by a shift in product
mix to semi-electric beds from manual beds.  Therapeutic support surfaces showed
significant gains as a result of a full-year of sales for this product line that
was  acquired in July,  1993.  The sales gain for this Group was offset by lower
sales in manual  wheelchairs  as a result of an aggressive  competitive  pricing
environment,   and  to  a  lesser  extent,   tightening  Medicare  reimbursement
guidelines.

Respiratory Group. Sales of the Group increased 53.9% for the year due primarily
to the  ongoing  success of new  products,  principally  the SensO2  (TM) oxygen
concentrator and the introduction of liquid oxygen systems.

Other Group. Sales of this Group increased 23.5% primarily due to the first full
year of sales for Dynamic Controls, a manufacturer of electronic controllers for
power wheelchairs, that was acquired in June, 1993. The increase was offset by a
4.8%  decline  in  sales  for  the  company's  Canadian  operations,  as  strict
government  reimbursement  policies were implemented due to a sluggish  economy.
The weak Canadian  dollar also  negatively  impacted sales, as reported in U. S.
dollars, by 5.8%.

Europe. European sales increased 8.6% over 1993, as a result of increased market
focus, new and expanded product offerings and the improving economy. The success
of the Action  2000LT  manual  wheelchair,  the  European  version of the Action
Patriot(R),  and increased  volume in patient aids marketed under the OPALE name
contributed  significantly  to  the  sales  increase.  Significant  competition,
especially  in power  wheelchairs,  played an important  role in limiting  price
increases. European currencies, when compared to the dollar, negatively impacted
European sales by less than 1%.

Gross  Profit.  Gross profit as a percentage  of net sales was 32.4% in 1994 and
1993.  The  gross  profit  percentage  was  maintained  as  competitive  pricing
pressures and inflationary cost increases were offset by increased manufacturing
efficiencies  resulting from productivity  improvements and capital expenditures
to modernize equipment and processes. Increasing volumes and the effect of style
and design  changes  made to major  product  groups  contributed  to margin to a
lesser extent.

North American gross profit declined in 1994. Improved inventory  management and
increased  manufacturing  efficiency and productivity  were offset by a shift in
product mix and the continued  competitive  pricing  environment for most of our
product categories. Sluggish sales for the company's Canadian operations and the
weak Canadian  dollar also had a negative  impact on North American  margins for
1994.

The gross profit in Europe improved from 29.3% in 1993 to 30.3% in 1994. A focus
on manufacturing  process improvements coupled with the production of the Action
2000LT in our European operations contributed to the increase.

Selling, General and Administrative. Selling, general and administrative expense
as a percentage of net sales was 21.7% for 1994 compared to 22.3% for 1993, as a
result of a focus on productivity and cost containment. The 9.4% dollar increase
was a result of spending required to support increased sales volume and expanded
operations   and  relates   principally   to  increased   wages,   benefits  and
administrative costs associated with a larger workforce.

                                       19


North American selling,  general and administrative costs decreased as a percent
of sales in 1994 due to cost containment efforts.  Actual spending increased, in
part due to a full year effect of prior year  acquisitions  which  occurred  mid
year during 1993 and additional  costs  incurred to complete the  realignment of
several operating units during 1994.

European selling,  general and  administrative  expenses increased slightly as a
percentage of sales mainly as a result of increased sales activity.

     Interest.  Interest income in 1994 increased  21.3% over 1993,  principally
due to increased financing income from the company's  financing  subsidiary as a
result of greater installment loan volumes. Interest expense decreased from 1993
as a result of lower  borrowing  costs offset  somewhat by  increased  borrowing
levels. The increased  borrowings were a result of the above mentioned financing
activity and the funding of acquisitions during 1994.

Income Taxes. The company had an effective tax rate of 37.0% in 1994 compared to
an effective rate of 34.0% in 1993, primarily because of the aggregate impact of
adoption of the liability method in 1993.

Research and Development.  Research and development  expenditures increased
11.9% to $7,651,000 in 1994 compared to $6,840,000 in 1993.

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 1995 and
1994, the company was able to offset most 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  Obligations  in the  Notes  to
Consolidated  Financial Statements) and working capital management.  The company
maintains various bank lines to finance its worldwide  operations.  In 1994, the
company completed a $200,000,000  multi-currency  long-term  financial agreement
which expires in December,  2000.  Additionally,  the company  maintains various
other demand lines of credit  representing  a U.S.  dollar  equivalent for these
demand lines  approximating  $27,000,000 as of December 31, 1995. The facilities
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, 1995, the company had approximately $145,000,000 available under
its various lines of credit.

The  company's  borrowing  arrangements  contain  covenants  with respect to net
worth,  dividend  payments,  working  capital,  funded  debt to  capitalization,
interest coverage and leverage,  as defined in the company's bank agreements and
agreements 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 may borrow up to an additional $258,000,000.

CAPITAL EXPENDITURES

Although there are no material capital expenditure commitments outstanding as of
December 31, 1995, the company  expects to invest in capital  projects at a rate
equal to at least depreciation and amortization of capital. The company believes
that its balances of cash and cash  equivalents,  together with funds  generated
from operations and existing borrowing capabilities, will be sufficient to meets
its operating cash  requirements and fund required  capital  expenditures in the
foreseeable future.

CASH FLOWS

     Cash flows provided by operating  activities were $43,721,000,  compared to
$31,514,000 last year. The 38.7%  improvement was provided  principally from the
increased profitability for the year.

                                       20


Improved  inventory  management and the increase in accrued expenses were offset
by higher  receivables  and lower  accounts  payable  balances.  The  changes in
operating  assets and  liabilities are not apparent from the face of the balance
sheet as funds expended for assets acquired  through  business  acquisitions are
accounted for in the investing activities section of the Consolidated  Statement
of Cash Flows.

     Cash flows  required for investing  activities  increased by $17,924,000 or
47.0%. Acquisition activity resulted in increased cash used by $22,414,000.  The
increase was offset  primarily by lower net  installment  contracts  written and
lower other investment activity.

Cash flows provided by financing  activities were $8,594,000 in 1995 compared to
$4,161,000 in 1994. The increase resulted from higher net borrowings required to
support the heightened acquisition activity.

In  addition  to  acquisition   activities,   the  effect  of  foreign  currency
translation  results in amounts  being shown for cash flows in the  Consolidated
Statements  of Cash Flows that are different  from the changes  reflected in the
respective balance sheet captions.

STOCK SPLIT

On August 21, 1995, the board of directors declared a two for one stock split to
be distributed in the form of a 100% stock  dividend.  Shareholders of record on
October 2, 1995 received one additional  Common Share for each Common Share held
on that date. The additional shares were distributed on October 16, 1995.

DIVIDEND POLICY

It is the company's  policy to pay a nominal  dividend in order for its stock to
be more attractive to a broader range of investors.  The current annual dividend
rate remains at $.05 per Common Share and 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 the year,
$.0375  dividends per Common Share were  declared,  adjusted for the two for one
stock split.

Item 8.  Financial Statements and Supplementary Data.

     Reference  is made to the  Report  of  Independent  Auditors,  Consolidated
Balance Sheet,  Consolidated  Statement of Earnings,  Consolidated  Statement of
Cash  Flows,   Consolidated   Statement  of  Shareholders'   Equity,   Notes  to
Consolidated Financial Statements and Financial Statement Schedules which appear
on pages FS-1 to FS-17 of this Annual Report on Form 10-K.


Item 9. Changes in and  Disagreements  with  Accountants  on Accounting and
Financial Disclosure.

None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

The  information  required  by Item 10 as to the  Directors  of the  company  is
incorporated  herein by reference to the information set forth under the caption
"Election of Directors" in the company's definitive Proxy Statement for the 1996
Annual Meeting of  Shareholders,  since such Proxy  Statement will be filed with
the Securities and Exchange  Commission not later than 120 days after the end of
the company's  fiscal year pursuant to Regulation 14A.  Information  required by
Item 10 as to the  Executive  Officers  of the  company is included in Part I of
this Report on Form 10-K.

                                       21


Item 11.  Executive Compensation.

The  information  required  by  Item  11 is  incorporated  by  reference  to the
information set forth under the caption  "Compensation of Executive Officers and
Directors"  in the  company's  definitive  Proxy  Statement  for the 1996 Annual
Meeting  of  Shareholders,  since such  Proxy  Statement  will be filed with the
Securities and Exchange  Commission not later than 120 days after the end of the
company's fiscal year pursuant to Regulation 14A.





Item. 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 1996 Annual
Meeting  of  Shareholders,  since such  Proxy  Statement  will be filed with the
Securities and Exchange  Commission not later than 120 days after the end of the
company's fiscal year pursuant to Regulation 14A.

Item 13.  Certain Relationships and Related Transactions.

The  information  required  by  Item  13 is  incorporated  by  reference  to the
information set forth under the caption "Certain  Transactions" in the company's
definitive  Proxy Statement for the 1996 Annual Meeting of  Shareholders,  since
such Proxy  Statement will be filed with the Securities and Exchange  Commission
not later than 120 days after the end of the  company's  fiscal year pursuant to
Regulation 14A.
                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

Financial Statements

The following financial  statements of the company are included in Part II, Item
8:

(a)(1) Financial Statements.
       Consolidated Statement of Earnings - years ended December 31, 1995, 1994
       and 1993

       Consolidated Balance Sheet - December 31, 1995 and 1994

       Consolidated  Statement of Cash Flows - years ended December 31,
       1995, 1994 and 1993

       Consolidated  Statement  of  Shareholders'  Equity - years ended
       December 31, 1995, 1994 and 1993

       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:

      Schedules

      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-19 of this Report on Form 10-K.

(b)    Reports on Form 8-K.
       None



                                       22







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 on March 26, 1996.

                                     INVACARE CORPORATION


                               By    /S/ A. Malachi Mixon, III
                               -------------------------------

                               A. Malachi Mixon, III Chairman of the Board of
                               Directors, President and Chief Executive Officer

           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 on March 26, 1996.




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


/S/ Thomas R. Miklich                      Chief Financial Officer, General Counsel, Treasurer
- - --------------------------                 and Corporate Secretary
Thomas R. Miklich                


/S/ Francis J. Callahan, Jr.               Director
- - --------------------------
Francis J. Callahan, Jr.


/S/ Frank B. Carr                          Director
- - --------------------------
Frank B. Carr


                                           Director
- - --------------------------
Michael F. Delaney


                                           Director
- - --------------------------
Whitney Evans


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


/S/ E. P. Nalley                           Director
- - --------------------------
E. P. Nalley


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


/S/ William M. Weber                        Director
- - --------------------------
William M. Weber





                                       23



                              INVACARE CORPORATION
                  Report on Form 10-K for the fiscal year ended
                               December 31, 1995.



                                  Exhibit Index
                                  -------------
Official
Exhibit No      Description                                                                               Sequential Page No.
- - -----------------------------------------------------------------------------------------------------------------------------
                                                                                                  
3(a)       -    Amended and Restated Articles of Incorporation, as amended                                 (A)
                through May 29, 1987

3(b)       -    Code of Regulations, as amended on April 7, 1984                                           (B)

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

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

4(d)       -    Rights agreement between Invacare Corporation and Rights Agent                             (T)
                dated as of July 7, 1995

10(a)      -    Stock Option Plan, adopted in February 1984                                                (B)*

10(b)      -    Amendment to Stock Option Plan, adopted in May 1987                                        (C)*

10(c)      -    Amendment to Stock Option Plan, adopted in May 1988                                        (D)*

10(d)      -    Amendment to Stock Option Plan, adopted in May 1991                                        (I)*

10(h)      -    Assignment of Patent Application and License of Know-how dated                             (E)
                January 14, 1981, and an 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(l)      -    Interest Rate Swap Agreement dated as of July 6, 1989                                      (F)

10(p)      -    Form of Indemnity Agreement entered into by and between the company                        (H)
                and certain of its Directors and officers and Schedule of all such
                Agreements with current Directors and officers

10(r)      -    Master Note, between Invacare Corporation and Sanwa Bank, Limited                          (J)

10(s)      -    Employees' Stock Bonus Trust and Plan as amended and restated effective                    (G) *
                January 1, 1988 and as amended on April 13, 1988, April 3, 1990, and May 24, 1991.

10(t)      -    Profit Sharing and Savings Trust and Plan effective as of January 1, 1988                  (G) *
                and as amended on November 28, 1988, September 12, 1990, October 9, 1990,
                and May 24, 1991.

10(u)      -    Agreement between Invacare Corporation and Weber, Wood, Medinger, Inc.                     (J)

10(v)      -    Real Property Purchase Agreement by and between Invacare Corporation and                   (N)
                Taylor Street limited partnership.




                                       24




                                                                                                                    
10(z)      -    Note Agreement dated February 1, 1993 among Invacare Corporation and five                   (P)
                purchasers of an aggregate of $25,000,000, 7.45% Senior Notes due February 1, 2003.

10(aa)     -    Amendments to Stock Option Plan adopted in May 1992.                                        (M) *

10(ab)     -    1992 Non-Employee Directors Stock Option Plan adopted in May 1992.                          (K)

10(ac)     -    Deferred Compensation Plan for Non-Employee Directors, adopted in May 1992.                 (L)

10(ad)     -    Shares Purchase and Contribution Agreement dated July 27, 1992.                             (O)
 
10(af)     -    Invacare Corporation 1994 Performance Plan approved January 28, 1994.                       (Q) *

10(ag)     -    Real  Property   Purchase   Agreement  between  Mobilite  Building
                Corporation (a newly (S) formed subsidiary of Invacare Corporation as                       (R)
                of February 15, 1994) and I-M Associates,
                LTD. dated February 28, 1994.

10(an)     -    Loan Agreement dated as of December 20, 1994 among Invacare Corporation and                 (S)
                certain subsidiaries and NBD Bank, N.A., as agent.

21         -    Subsidiaries of the company.

23         -    Consent of Independent Accountants.

27         -    Financial data schedule.

99(a)      -    Executive Liability and Defense Coverage Insurance Policy.                                  (H)




      *    Management contract, compensatory plan or arrangement

(A)      Reference  is made  to  Exhibit  A of the  company's  Definitive  Proxy
         Statement used in connection  with the Annual  Meeting of  Shareholders
         held  on  May  28,  1987,  which  exhibit  is  incorporated  herein  by
         reference.

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

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

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

(E)      Reference is made to the  appropriate  exhibit of the company's 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 exhibitis incorporated herein by reference.

(F)      Reference is made to the appropriate exhibit of the company's report on
         Form 10-K for the fiscal year ended December 31, 1989, which exhibit is
         incorporated herein by reference.

(G)      Reference is made to the appropriate exhibit of the company's report on
         Form 10-K for the fiscal  year ended  December  31,  1990,  as amended,
         which is incorporated herein by reference.




                                       25





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

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

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

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

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

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

(N)      Reference is made to the appropriate exhibit of the company's report on
         Form 10-Q for the quarter  ended June 30, 1992,  which is  incorporated
         herein by reference.

(O)      Reference is made to Exhibit 2 of the company's  report on Form 8-K, 
         dated October 29, 1992,  which is incorporated  herein by reference.

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

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

(R)      Reference is made to the appropriate Exhibit of the company's report on
         Form 10-K for the fiscal year ended December 31, 1993, which Exhibit is
         incorporated herein by reference.

(S)      Reference is made to the appropriate Exhibit of the company's report on
         Form 10-K for the fiscal year ended December 31, 1994, which Exhibit is
         incorporated herein by reference.

(T)      Reference is made to Exhibit 1 of the company's report on Form 8-A, 
         dated July 18, 1995, which is incorporated herein by reference.






                                       26





                         Report of Independent Auditors



Shareholders and Board of Directors
Invacare Corporation


We  have  audited  the  accompanying  consolidated  balance  sheet  of  Invacare
Corporation  and  subsidiaries as of December 31, 1995 and 1994, and the related
consolidated  statements of earnings,  cash flows, and shareholders'  equity for
each of the three years in the period ended  December 31, 1995.  Our audits also
included the financial statement schedule listed in the Index at Item 14 (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  generally   accepted  auditing
standards.  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, 1995 and 1994 and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity  with 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.



                                ERNST & YOUNG LLP




Cleveland, Ohio
February 1, 1996




                                       27


                                                                 
CONSOLIDATED STATEMENT OF EARNINGS

INVACARE CORPORATION AND SUBSIDIARIES


                                                                                       Years Ended December 31,
                                                                               1995            1994              1993
                                                                               --------------------------------------
                                                                                (In thousands, except per share data)
                                                                                                              
               Net sales                                                     $504,032        $411,123        $365,457
               Cost of products sold                                          337,719         278,041         246,953
                                                                              -------         -------         -------

                    Gross Profit                                              166,313         133,082         118,504

               Selling, general and administrative expense                    112,169          89,346          81,634
                                                                              -------          ------          ------

                    Income from Operations                                     54,144          43,736          36,870

               Interest income                                                  7,276           6,373           5,255
               Interest expense                                                (9,575)         (8,232)        (8,615)
                                                                             ---------         -------        -------

                    Earnings before Income Taxes                               51,845          41,877          33,510

               Income taxes                                                    19,680          15,500          11,400
                                                                               ------          ------          ------

                    Net Earnings                                             $ 32,165        $ 26,377        $ 22,110
                                                                             ========        ========        ========

                    Net Earnings per Share                                   $   1.07       $     .89        $    .75
                                                                             =========       =========       =========

                    Weighted Average Shares Outstanding                        30,077          29,696          29,475
                                                                             ========        =========       =========


See notes to consolidated financial statements.




                                       28




                                                                 
CONSOLIDATED BALANCE SHEET

INVACARE CORPORATION AND SUBSIDIARIES



                                                                                             December 31, 
                                                                                        1995                1994
                                                                                       -------------------------
                                                                                            (In thousands)
                                                                                                 
Assets

Current Assets
   Cash and cash equivalents                                                       $   4,132           $   7,359
   Marketable securities                                                               2,437               3,044
   Trade receivables, net                                                             93,592              76,280
   Installment receivables, net                                                       37,074              33,723
   Inventories                                                                        54,468              49,982
   Deferred income taxes                                                               6,831               4,088
   Other current assets                                                                6,151               5,959
                                                                                     ---------------------------
      Total Current Assets                                                           204,685             180,435

Other Assets                                                                          36,581              28,840
Property and Equipment, net                                                           65,078              55,919
Goodwill, net                                                                        102,406              72,915
                                                                                      ---------------------------
      Total Assets                                                                  $408,750            $338,109
                                                                                     ===========================
Liabilities and Shareholders' Equity

Current Liabilities
   Accounts payable                                                                 $ 33,805            $ 29,882
   Accrued expenses                                                                   45,097              34,234
   Accrued income taxes                                                                5,821               3,225
   Current maturities of long-term obligations                                           213                 326
                                                                                     ---------------------------
      Total Current Liabilities                                                       84,936              67,667

Long-Term Obligations                                                                122,456             105,528

Deferred Income Taxes                                                                     39                 907

Shareholders' Equity
   Preferred Shares (Authorized 300 shares; none outstanding)                              0                   0
   Common Shares (Authorized 50,000 shares; 24,589 and
      22,289 issued in 1995 and 1994, respectively)                                    6,148               5,573       
   Class B Common Shares (Authorized 12,000 shares;
      4,973 and 7,068, issued and outstanding in
      1995 and 1994, respectively)                                                     1,243               1,767
   Additional paid-in-capital                                                         66,890              63,671
   Retained earnings                                                                 130,100              99,086
   Adjustments to shareholders' equity                                                   993              (2,196)
   Treasury shares (311 and 303 shares in
   1995 and 1994, respectively)                                                      (4,055)              (3,894)
                                                                                     ---------------------------
      Total Shareholders' Equity                                                     201,319             164,007
                                                                                     ---------------------------

     Total Liabilities and Shareholders' Equity                                     $408,750            $338,109
                                                                                    =============================


See notes to consolidated financial statements.



                                       29



CONSOLIDATED STATEMENT OF CASH FLOWS

INVACARE CORPORATION AND SUBSIDIARIES



                                                                                              Years Ended December 31,
                                                                                     1995              1994              1993
                                                                                ----------------------------------------------
                                                                                               (In thousands) 
                                                                                                             
      Operating Activities
      Net earnings                                                                $ 32,165          $ 26,377          $ 22,110
      Adjustments to reconcile net earnings to net cash provided
        by operating activities:
                Depreciation and amortization                                       14,159            12,686            12,280
                Provision for losses on trade and installment receivables            1,379             1,461               386
                Provision for deferred income taxes                                 (3,321)               19             (775)
                Contribution of stock to employee benefit plan                           0                 0               451
      Changes in operating assets and liabilities:
                (Increase)/decrease in trade receivables                           (10,028)          (10,248)            3,879
                (Increase)/decrease in inventories                                   3,102            (3,219)            4,204
                Increase in other current assets                                    (2,681)               (7)          (1,673)
                Increase/(decrease) in accounts payable                             (1,427)            4,126           (9,046)
                Increase/(decrease) in accrued expenses                             10,373               319           (1,257)
                                                                                ----------------------------------------------- 
                    Net Cash Provided by Operating Activities                       43,721            31,514            30,559

      Investing Activities
          Purchases of property and equipment, net                                 (11,173)          (10,881)          (11,978)
          Proceeds from sale of property and equipment                                 146                60                17
          Installment contracts written                                            (50,908)          (49,492)         (42,344)
          Payments received on installment contracts                                40,705            33,012            29,908
          Marketable securities purchased                                           (4,307)             (350)          (2,102)
          Marketable securities sold                                                 4,927             1,440               480
          Business acquisitions, net of cash acquired                              (31,019)           (8,605)         (11,693)
          Increase in other investments                                             (2,246)           (4,143)          (4,849)
          Increase in other long term assets                                        (3,865)           (1,155)                0
          Other                                                                      1,689             1,987           (2,280)
                                                                                -----------------------------------------------
                    Net Cash Required by Investing Activities                      (56,051)          (38,127)         (44,841)

      Financing Activities
          Proceeds from revolving lines of credit and
            long-term  borrowings                                                   67,057            26,128            92,345
          Principal payments on revolving lines of credit,
            long-term debt and capital lease obligations                           (58,942)          (23,442)         (76,469)
          Proceeds from exercise of stock options                                    1,447             1,830               300
          Payment of dividends                                                        (968)             (355)                0
                                                                                ----------------------------------------------
                    Net Cash Provided by Financing Activities                        8,594             4,161            16,176

          Effect of exchange rate changes on cash                                      509               419             (683)
                                                                                ----------------------------------------------

          Increase/(decrease) in cash and cash equivalents                          (3,227)           (2,033)            1,211

          Cash and cash equivalents at beginning of year                             7,359             9,392             8,181
                                                                                ----------------------------------------------

          Cash and cash equivalents at end of year                                $  4,132          $  7,359          $  9,392
                                                                                ===============================================



See notes to consolidated financial statements




                                       30




CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

INVACARE CORPORATION AND SUBSIDIARIES



                                                                  1995                      1994                       1993
(In thousands)                                                    ----                      ----                       ----
                                                          Shares       Amount       Shares        Amount       Shares       Amount
                                                          -------------------------------------------------------------------------
                                                                                                             
Common Shares:                                            
    Balance at beginning of year                          22,289    $   5,573       20,766     $   5,192       20,015    $   5,004
    Conversion of Class B Common Shares
      to Common Shares                                     2,095          524        1,268           317          563          141
    Issuance of Common Shares for acquisition                 77           19            0             0            0            0
    Exercise of stock options                                128           32          255            64          188           47
                                                        ---------------------------------------------------------------------------
    Balance at end of year                                24,589    $   6,148       22,289      $  5,573       20,766    $   5,192
                                                        ===========================================================================

Class B Common Shares:
    Balance at beginning of year                           7,068    $   1,767        8,337     $   2,084        8,900    $   2,225
    Conversion of Class B Common Shares
      to Common Shares                                    (2,095)        (524)      (1,269)         (317)        (563)        (141)
                                                        --------------------------------------------------------------------------
                                                                                                                             
    Balance at end of year                                 4,973    $   1,243        7,068     $   1,767        8,337    $   2,084
                                                        ===========================================================================

Additional Paid-In Capital:
    Balance at beginning of year                                    $  63,671                   $ 61,709                 $  59,666
    Exercise of stock options                                           1,415                      1,962                     1,946
    Contribution of Common Shares
       to employee benefit plans                                            0                          0                        97
    Issuance of Common Shares for acquisition                           1,804                          0                         0
                                                        --------------------------------------------------------------------------- 
    Balance at end of year                                          $  66,890                   $ 63,671                 $  61,709
                                                        ===========================================================================

Retained Earnings:
    Balance at beginning of year                                    $  99,086                   $ 73,242                  $ 51,132
    Net earnings                                                       32,165                     26,377                    22,110
    Dividend of $.0375 and $.01875 per Common
      Share in 1995 and 1994, respectively                             (1,078)                      (533)                        0
    Redemption of 1991 rights plan                                        (73)                         0                         0
                                                         --------------------------------------------------------------------------
    Balance at end of year                                          $ 130,100                   $ 99,086                  $ 73,242
                                                         ==========================================================================

Adjustments to Shareholders' Equity:
    Balance at beginning of year                                    $  (2,196)                  $ (3,570)                $  (1,671)
    Foreign currency translation adjustment                             2,965                      2,044                    (1,899)
    Marketable securities holding gain(loss), net of tax                  224                       (670)                        0
                                                        ---------------------------------------------------------------------------
    Balance at end of year                                          $     993                   $ (2,196)                $  (3,570)
                                                        ===========================================================================


Treasury Shares:
    Balance at beginning of year                           (303)    $  (3,894)         (289)    $ (3,695)         (202)  $  (2,356)
    Repurchase of treasury shares                            (8)         (161)          (14)        (199)         (123)     (1,693)
    Contribution of Common Shares
       to employee benefit plans                              0             0             0            0            36         354
                                                       ----------------------------------------------------------------------------
                                                       
    Balance at end of year                                 (311)    $  (4,055)         (303)    $ (3,894)         (289)  $  (3,695)
                                                       ============================================================================


See notes to consolidated financial statements.





                                       31






NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INVACARE CORPORATION AND SUBSIDIARIES

ACCOUNTING POLICIES

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

Principles of Consolidation:  The consolidated  financial statements include the
accounts of the company and are prepared in conformity  with generally  accepted
accounting   principles   which  requires   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.  Certain
foreign  subsidiaries are consolidated  using a November 30 fiscal year end. All
significant intercompany transactions are eliminated.

Certain  reclassifications  have  been  made to the  prior  years'  consolidated
financial  statements  to  conform to the  presentation  used for the year ended
December 31, 1995.

Marketable Securities: Current marketable securities are stated at market value,
which  approximates  cost,  and consist of short-term  investments in repurchase
agreements,  government  securities  and  certificates  of  deposit.  Marketable
securities  with  original  maturities  of less than three months are treated as
cash equivalents.

Effective January 1, 1994, the company adopted Statement of Financial Accounting
Standards  No.  115  "Accounting  for  Certain  Investments  in Debt and  Equity
Securities"  (SFAS 115). The company has classified their marketable  securities
as available for sale in accordance with SFAS 115. The securities are carried at
their fair value and net  unrealized  holding gains and losses,  net of tax, are
carried as a component of shareholders' equity.

Inventories:  Inventories  are  at  the  lower  of  cost  or  market  with  cost
principally  determined for domestic  manufacturing  inventories by the last-in,
first-out (LIFO) method. Market costs are based on the lower of replacement cost
or estimated  net  realizable  value.  Non - domestic  inventories  and domestic
finished products purchased for resale  ($39,704,000 and $26,617,000 at December
31, 1995 and 1994  respectively)  are stated at the lower of cost or market with
cost determined by the first-in, first-out (FIFO) method.

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.

Estimated  Liability for Future Warranty Cost: Certain of the company's products
are covered by  warranties  against  defects in  material  and  workmanship  for
periods up to five years from the date of sale to the customer.  A non-renewable
warranty is also offered on certain products for a maximum period of five years.
Components  of certain  products  carry a lifetime  warranty.  A  provision  for
estimated  warranty  cost is  recorded  at the time of sale and is  periodically
adjusted to reflect actual experience.

Research  and  Development:  Research  and  development  costs are  expensed  as
incurred.   The  company's  annual  expenditures  for  product  development  and
engineering were approximately  $9,002,000,  $7,651,000 and $6,840,000 for 1995,
1994 and 1993 respectively.

Revenue  Recognition:  The company  recognizes  revenue when the product is
shipped  and  provides  an  appropriate  allowance  for  estimated  returns  and
adjustments.

Income Taxes:  The company uses the liability  method in measuring the provision
for income  taxes and  recognizing  deferred tax assets and  liabilities  in 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.

Net  Earnings  Per Share and Stock  Split:  On  August  21,  1995,  the board of
directors of the company declared a two-for-one stock split to be distributed in
the form of a 100% stock dividend on October 16, 1995 to  shareholders of record
on October 2, 1995. As a

                                       32


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

ACCOUNTING POLICIES--Continued

result, all references to per share amounts,  number of shares and market prices
of the Common Shares have been adjusted to reflect the stock split.

Common  Shares,  Slass B Common  Shares and the effects of  dilutive  stock
options are included in calculating the weighted average shares outstanding.

     Foreign  Currency   Translation:   Substantially  all  of  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 the balance sheet caption "Adjustments to shareholders' equity".

Goodwill:  The excess of the aggregate purchase price over the fair value of net
assets acquired is amortized by use of the straight line method for periods from
20 to 40 years.  The accumulated  amortization  was $7,094,000 and $4,418,000 at
December  31, 1995 and 1994,  respectively.  The  carrying  value of goodwill is
reviewed at each  balance  sheet date to  determine  whether  goodwill  has been
impaired.  If this review  indicates that goodwill will not be  recoverable,  as
determined based on the undiscounted  cash flows of the entity acquired over the
remaining  amortization  period,  the company's  carrying  value of the goodwill
would be  reduced  by the  estimated  shortfall  of cash  flows at such  time an
impairment in value of goodwill has occurred.  Based on the company's  review as
of December 31, 1995, no impairment of goodwill was evident.

Advertising:  Advertising  costs are  expensed as incurred  and included in
"Selling, general and administrative expenses". Advertising expenses amounted to
$8,972,000, $5,487,000 and $6,304,000 for 1995, 1994  and 1993, respectively.

RECEIVABLES

     Trade receivables are net of allowances for doubtful accounts of $3,551,000
and $3,251,000 in 1995 and 1994, respectively.

Installment  receivables  as of  December  31,  1995  and  1994  consist  of the
following:



                                                                   1995                                       1994
                                                                   Long-                                      Long-
                                                    Current        Term         Total        Current          Term         Total
                                                    ------------------------------------------------------------------------------
                                                                               (In thousands)
                                                                                                             
            Installment receivables                  $42,001     $21,698        $63,699        $38,224       $15,537       $53,761
            Less:                                                                      
               Unearned interest                     (4,153)      (1,637)        (5,790)        (3,590)       (1,021)       (4,611)
               Allowance for doubtful accounts         (774)        (446)        (1,220)          (911)         (378)       (1,289)
                                                    ------------------------------------------------------------------------------
                                                    $37,074      $19,615        $56,689         $33,723      $14,138        $47,861
                                                    ==============================================================================



The company  adopted  Financial  Accounting  Standards  No. 114  "Accounting  by
Creditors for  Impairment of a Loan" (SFAS 114)  effective  January 1, 1995. The
new  standard  requires  that  impaired  loans  within  the scope of SFAS 114 be
measured based on the present value of expected future cash flows  discounted at
the loan's effective interest rate. Adoption of SFAS 114 did not have a material
impact on the company's financial condition or results of operations.





                                       33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

INVENTORIES

Inventories as of December 31, 1995 and 1994 consist of the following:



                                                                                        1995                1994
                                                                                       ------              ------
                                                                                           (In thousands)
                                                                                                  
                    Raw materials                                                   $ 20,045            $ 17,272
                    Work in process                                                   10,898               9,093
                    Finished goods                                                    23,525              23,617
                                                                                      ------              ------
                                                                                    $ 54,468            $ 49,982
                                                                                     ========            ========


Current  cost  exceeds  the LIFO  value  of  inventories  by  approximately
$572,000 and $777,000 at December 31, 1995 and 1994, respectively.

PROPERTY AND EQUIPMENT

Property  and  equipment  as of  December  31,  1995  and 1994  consists  of the
following:




                                                                                        1995                1994
                                                                                        ----                 ----
                                                                                            (In  thousands)
                                                                                                  
                    Land, buildings and improvements                                $ 33,501            $ 26,442
                    Machinery and equipment                                           84,662              72,815
                    Furniture and fixtures                                             8,636               7,478
                    Leasehold improvements                                             6,674               5,696
                                                                                       -----               -----
                                                                                     133,473             112,431
                    Less allowance for depreciation                                   68,395              56,512
                                                                                       ------             ------
                                                                                    $ 65,078            $ 55,919
                                                                                      =======            ========
                                                                        

CURRENT LIABILITIES

Accrued expenses as of December 31, 1995 and 1994 consist of the following:



                                                                                        1995                1994
                                                                                        ----                ----
                                                                                              (In thousands)
                                                                                                                      
                    Accrued salaries and wages                                      $ 16,330            $ 12,882
                    Accrued warranty cost                                              5,745               4,554
                    Accrued product liability, current portion                           896                 823
                    Other accrued items                                               22,126              15,975
                                                                                      ------              ------
                                                                                    $ 45,097            $ 34,234
                                                                                     =======              ======

                                                                          
ACQUISITIONS

     In December, 1994 the company purchased the remaining outstanding shares of
Beram AB, a Swedish  marketer and  distributor of  prescription  wheelchairs and
rehab products.  The company  previously  held a minority  interest in Beram. In
May,  1995 the  company  purchased  the  assets  of  PinDot  Products,  Inc.,  a
manufacturer  and  distributor of custom  seating  systems and purchased all the
outstanding shares of Patient Solutions, Inc., a manufacturer and distributor of
an  ambulatory   infusion   pump  that   accommodates   intravascular   feeding,
intermittent antibiotic therapy,  patient-controlled analgesia and chemotherapy.
In June, 1995 the company purchased the outstanding  shares of Bencraft Limited,
a United Kingdom  manufacturer  of manual and power  wheelchairs and supplier of
specialty  seating  systems and  purchased  the assets and  business of Thompson
Rehab from Salmond Smith Biolab Limited. Thompson Rehab is New Zealand's leading
manufacturer  of manual and power  wheelchairs.  In September,  1995 the company
purchased the outstanding shares of Group Pharmaceutical  Limited, a New Zealand
marketer and  distributor  of  prescription  wheelchairs  and other products for
people  with  disabilities  and  purchased  the  outstanding  shares of  Medical
Equipment  Repair  Service,  Inc.,  a supplier of  aftermarket  parts and repair
services for the respiratory equipment market. In September, 1995 for cash

                                       34


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

and company stock,  the company also acquired the outstanding  shares of Paratec
AG, a Swiss company that  manufactures  manual  wheelchairs which are sold under
the Kuschall trademark.  In November, 1995 the company purchased the outstanding
shares of Special Health Systems Ltd., a Canadian  designer and  manufacturer of
seating and positioning systems for wheelchairs.

In August 1994,  the company  purchased  all the  outstanding  shares of Rehadap
S.A., a Spanish  marketer and  distributor  of precision  wheelchairs  and other
rehab  products  for people with  disabilities.  In November  1994,  the company
purchased all the outstanding  shares of Genus Medical,  Inc., a manufacturer of
power positioning seating systems for motorized wheelchairs,  and electric three
and four wheeled scooters.

In March 1993, the company  purchased the assets of Top End, a  manufacturer  of
specialty products for sports and recreational use for people with disabilities.
The company  acquired  for cash all the shares of Dynamic  Controls  Limited,  a
manufacturer of control systems for power drive wheelchairs in June 1993, and in
July 1993  acquired  Geomarine  Systems,  Inc., a  manufacturer  of low air loss
therapy systems.

The  operating  results  of all  acquisitions  are  included  in  the  company's
consolidated results of operations from the respective dates of acquisition. The
above  transactions have been accounted for by the purchase method of accounting
and the pro forma effects are not material.

LEASES AND COMMITMENTS

The  company  leases a  substantial  portion of its  facilities,  transportation
equipment,  data processing equipment and certain other equipment.  These leases
have terms of up to 10 years and  provide for renewal  options.  Generally,  the
company is required to pay taxes and normal expenses of operating the facilities
and  equipment.  As of  December  31,  1995,  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  2005.  Lease  expenses  were
approximately  $4,725,000 in 1995,  $4,458,000 in 1994,  and $4,867,000 in 1993.
Future minimum  operating lease  commitments as of December 31, 1995,  including
minimum  payments  described  in the Related  Party  Transactions  Note,  are as
follows:



                                                              Year                     Amount
                                                              ----                     ------
                                                                              (In thousands)
                                                                                       
                                                              1996                   $  4,282
                                                              1997                      3,226
                                                              1998                      2,039
                                                              1999                      1,035
                                                              2000                        535
                                                        Thereafter                      1,837
                                                                                     --------
                  Total Future Minimum Lease Payments                                $ 12,954
                                                                                     ========


The amount of buildings and  equipment  capitalized  in connection  with capital
leases  was   $3,191,000   and   $3,551,000  at  December  31,  1995  and  1994,
respectively.  At  December  31,  1995 and 1994,  accumulated  amortization  was
$1,009,000 and $1,107,000, respectively.

RETIREMENT AND BENEFIT PLANS

Substantially all full-time  salaried and hourly domestic employees are included
in  two  profit   sharing  plans   sponsored  by  the  company.   The  company's
contributions  to the domestic  plans are based on an annual  resolution  of the
Board of Directors and the company has no  requirement  to make a  contribution.
The  contributions  can either be in the form of cash or  property to the Profit
Sharing Plan or in the form of cash,  Common  Shares or property to the Employee
Stock Bonus Trust and Plan. Cash contributions to the Employee Stock Bonus Trust
are used to purchase the company's Common Shares on the open market.




                                       35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

The company  introduced a 401(k) Benefit  Equalization  Plan effective  March 1,
1994 covering certain employees,  which provide for retirement  payments so that
the total  retirement  payments  equal amounts that would have been payable from
the  Corporation's  principal  retirement  plans if it were not for  limitations
imposed by income tax regulations.

     Contribution  expense  for the  above  plans  in  1995,  1994  and 1993 was
$2,406,000, $1,455,000 and $930,000, respectively.

In  1995,  the  company  introduced  a  non-qualified   Supplemental   Executive
Retirement  Plan (SERP)  effective May 1, 1995 for certain key  executives.  The
projected  benefit  obligation  related to this unfunded plan was $14,643,000 at
December 31, 1995. Pension expense for the plan was $400,532 in 1995.

The company utilizes a Voluntary Employee Benefit  Association (VEBA) to provide
for the payment of self-funded  employee health benefits for current  employees.
The   contribution  for  1995  and  1994  was  $1,400,000  each  year.  No  VEBA
contribution was made in 1993.

SHAREHOLDERS' EQUITY TRANSACTIONS

At December 31,  1995,  the company had  50,000,000  authorized  Common  Shares,
without par value, and 12,000,000 authorized Class B Common Shares,  without par
value.  In  general,  the  Class B Common  Shares  and the  Common  Shares  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.

As of December  31,  1995,  the company had 300,000  shares of Serial  Preferred
Shares  authorized,  none of which were issued or outstanding.  Serial Preferred
Shares are entitled to one vote per share.

During 1994, the Board of Directors  adopted and the  Shareholders  approved the
1994 Performance Plan (the "1994 Plan"). The 1994 Plan provides for the issuance
of up to 2,000,000  Common  Shares in  connection  with stock  options and other
awards granted under the plan. The 1994 Plan allows the  Compensation  Committee
to  grant  incentive   stock  options,   non-qualified   stock  options,   stock
appreciation  rights,  and stock awards (including the use of restricted stock).
The Committee  has the  authority to determine  the employees  that will receive
awards,  the  amount of the  awards and the other  terms and  conditions  of the
awards.  Payments of the stock  appreciation  rights may be made in cash, Common
Shares  or a  combination  thereof.  There  were no  stock  appreciation  rights
outstanding  at December 31, 1995,  1994 or 1993.  During 1995,  the  Committee,
under the 1994 Plan, granted 407,600  non-qualified stock options at 100% of the
fair market value of the  underlying  shares on the date of grant and for a term
of ten years.

The company also has a Stock Option Plan for  non-employee  Directors.  The plan
was  approved  May 27, 1992 and  provides for the granting of up to a maximum of
100,000  options to eligible  Directors.  Directors will receive grants based on
the market value of the company's  stock at the date of grant and have a term of
ten years. To date, no grants have been made under this plan.

The Plans have  provisions  for the  cashless  exercise of options.  Under these
provisions  the company  acquired  8,350  treasury  shares for $161,000 in 1995,
14,270  treasury  shares for $199,000 in 1994, and 123,222  treasury  shares for
$1,693,000 in 1993.




                                       36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

As of December 31, 1995,  an aggregate of  10,798,084  shares were  reserved for
conversion  of Class B Common  Shares,  future  rights  (as  defined  below) and
exercise and future grant of options.

The following summarizes the stock option transactions under the company's stock
option plans:



                                                                                      1995              1994              1993
                                                                                      ----              ----              ----
                                                                                                                  
                      Options outstanding at January 1,                          2,357,304         2,349,848         2,175,402
                      Granted                                                      487,600           342,000           375,400
                      Exercised                                                   (127,973)         (255,114)         (188,004)
                      Canceled                                                     (25,029)          (79,430)          (12,950)
                      Options outstanding at December 31,                        2,691,902         2,357,304         2,349,848

                      Options price range at December 31,                       $     1.56          $   1.56         $    1.56
                                                                                        to                to                to
                                                                                $    25.25          $  15.13         $   14.00

                      Options exercisable at December 31,                        1,651,406         1,352,542         1,096,954
                      Options available for grant at December 31,                1,462,897         1,844,500           416,108



In  October  1995,   Statement  of  Financial   Accounting  Standards  No.  123,
"Accounting  for Stock-Based  Compensation"  ("SFAS 123") was issued and becomes
effective  for fiscal years  beginning  after  December 15, 1995.  Under the new
rules,  companies will be required to provide  additional  footnote  disclosures
relating to stock-based awards. Additionally,  companies are encouraged, but not
required,  to recognize expense for stock-based awards based on their fair value
on the date of grant.  In  accordance  with SFAS 123, the company has elected to
continue to apply  Accounting  Principles  Board Opinion No. 25 "Accounting  for
Stock Issued to Employees ("APB 25") and related  interpretations  in accounting
for its  employee  stock  options.  Under APB 25, if the option is fixed and the
exercise  price of the  underlying  stock equals the market price on the date of
the grant,  no  compensation  expense is  recognized.  The  adoption  of the new
standard will not have an effect on the company's financial condition or results
of operations.

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







                                       37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

LONG-TERM OBLIGATIONS

Long-term obligations as of December 31, 1995 and 1994 consist of the following:



                                                                                           1995             1994
                                                                                           ----             ----
                                                                                               (In thousands)
                                                                                                                           
$25,000,000 senior notes at 7.45%, matures in February 2003                           $  25,000       $   25,000

Revolving credit agreement ($200,000,000 multi-currency) at 1/4 to
1% above local interbank offered rates, expires December 2000                            78,534           62,345

Notes payable to banks under credit facilities                                            3,853            3,900

Notes and mortgages payable, secured by buildings and equipment                           6,614            4,903

Capitalized lease obligations                                                             2,254            2,445

Product liability                                                                         3,269            2,781

Other                                                                                     3,145            4,480
                                                                                         ------           ------
                                                                                        122,669          105,854
          Less current maturities of long-term obligations                                  213              326
                                                                                         ------           ------
                                                                                       $122,456         $105,528
                                                                                       ========          =======
                      

In 1993,  the company  completed a private  placement of  $25,000,000  in senior
notes at 7.45% which contain covenants similar to the revolving credit agreement
described  below.  At December 31,  1995,  $63,382,000  of retained  earnings is
available  for  dividends.  The  notes  are due in 2003  and  require  principal
payments of $3.6 million per year beginning in 1997.

During 1994,  the company  entered into a $200,000,000  multicurrency  long-term
credit  agreement.  The  borrowing  rates are  determined  based on the leverage
ratios of the  company,  as  defined in the  agreement  and range from 1/4 to 1%
above the various interbank offered rates. The agreement requires the company to
maintain  certain  conditions  with  respect  to  net  worth,   funded  debt  to
capitalization and interest coverage as defined per the agreement.

Notes  payable to banks under  credit  facilities  consist of  borrowings  under
various arrangements by the company and its foreign subsidiaries and consists of
a $10,000,000 demand line, a 10,000,000  Canadian dollar demand line,  2,000,000
New Zealand  dollar demand line,  650,000  British pound demand line,  1,200,000
deutsche  mark demand line,  27,700,000  French  franc  demand line,  40,000,000
Spanish  peseta  demand  line,  350,000  Swiss franc demand line and a 1,500,000
Swedish krona demand line. Borrowings under these lines are considered long-term
to the extent that unused borrowing capacity is available under the $200,000,000
revolving  credit  agreement.  Interest  on amounts  borrowed  under the various
credit  facilities is at the respective bank's base rate or an interbank offered
rate. Certain borrowings from foreign banks are secured by the assets of foreign
subsidiaries or by guarantees of the company.

In May 1995,  the company  fixed the interest  rate on  $10,000,000  of its U.S.
dollar borrowing  through two interest rate swap  agreements.  Each agreement is
for $5,000,000 U.S. dollars. The effect of the swaps is to exchange a short-term
floating  interest rate for a fixed rate of 6.1725% for a three year term in one
agreement and 6.38% for a five year term in the other agreement.

Also in May 1995,  the  company  fixed the  interest  rate on  7,500,000  of its
Canadian dollar borrowing through an interest rate swap agreement. The effect of
the swap is to exchange a short-term  floating interest rate for a fixed rate of
7.245% for a three year term.  As of  December  31,  1995 the  weighted  average
variable interest rate on Canadian debt was 6.7%.


                                       38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

In March  1993,  the  company  fixed the  interest  rate on  100,000,000  of the
outstanding  French franc debt through two interest rate swap  agreements.  Each
agreement is for 50,000,000 French francs. The effect of the swap is to exchange
short term  floating  interest  rates for a fixed rate of 7.48% for a  five-year
term in one agreement and 7.81% for a three-year term in the other agreement. As
of December 31, 1995 and 1994 the weighted average variable interest rate on the
French franc debt was 7.1% and 7.2%, respectively.

In July 1989, the company entered into a seven-year interest rate swap agreement
which effectively fixed the interest rate on $5,000,000 of the company's various
domestic variable rate borrowings at 8.89% under revolving credit agreements and
notes payable to banks under credit  facilities.  The weighted  average variable
interest rate on the domestic debt was 6.4% and 6.8% as of December 31, 1995 and
1994, respectively.

The secured  promissory  notes  financed the purchase of certain  buildings  and
equipment which secure the notes.  The notes bear interest at rates from 4.8% to
10.4 % and mature through 2001 .

The capital  leases at December  31, 1995 are  principally  for a  manufacturing
facility and computer systems, with payments due through 2007.

The company is self-insured  for a portion of its product  liability and certain
other  liability  exposures.  Product  liability for  domestically  manufactured
products is insured  through the  company's  captive  insurance  company,  which
insures  the first  $2,000,000  per  claim of the  company's  product  liability
exposure.  The company  also has  additional  layers of coverage  insuring up to
$50,000,000  in annual  aggregate  losses  arising from  individual  losses that
exceed $2,000,000.

The  aggregate  minimum  combined   maturities  of  long-term   obligations  are
approximately  $213,000  in  1996,  $4,897,000  in  1997,  $4,718,000  in  1998,
$4,239,000 in 1999,  $94,428,000 in 2000, and $14,174,000  thereafter.  Interest
paid on borrowings was  $8,982,000,  $6,625,000 and $7,665,000 in 1995, 1994 and
1993, respectively.


INCOME TAXES

Earnings before income taxes consist of the following:



                                                                     1995                 1994             1993
                                                                     ----                ----              ----
                                                                                  (In thousands)
                                                                                                     
                          Domestic                                $46,062             $38,871           $31,505
                          Foreign                                   5,783               3,006             2,005
                                                                    -----               -----             -----

                                                                  $51,845             $41,877           $33,510
                                                                  =======             =======           =======




The company has provided for income taxes as follows:



                                                                     1995                 1994            1993
                                                                     ----                 ----            ----
                                                                                 (In thousands)
                                                                                              
                          Current:
                             Federal                              $16,340             $12,115          $  8,675
                             State                                  3,490               2,580             2,075
                             Foreign                                2,980               1,170             1,425
                                                                    -----               -----             -----
                                                                   22,810              15,865            12,175
                          Deferred:
                             Federal                               (1,300)               (635)              (25)
                             Foreign                               (1,830)                270              (750)
                                                                   =======             =======           =======
                                                                   (3,130)              (365)              (775)
                                                                  $19,680             $15,500           $11,400
                                                                  ========             =======           =======



At December 31, 1995, the company has available  foreign tax loss  carryforwards
of approximately  $4,440,000 of which $3,025,000 are non expiring and $1,415,000
expire between 1998 and 2001.


                                       39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

INCOME TAXES--Continued

     The  company  made  income tax  payments of  $19,528,000,  $16,606,000  and
$12,264,000   during  the  years  ended  December  31,  1995,   1994  and  1993,
respectively.

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



                                                                     1995                 1994                1993
                                                                     ----                 ----                ----
                                                                                           
            Statutory federal income tax rate                        35.0  %              35.0  %             35.0  %
            State and local income taxes, net of
              federal income tax benefit                              4.4                  4.0                 4.0
            Tax credits                                              (1.9)                (2.0)               (2.3)
            Other, net                                                0.5                    -                (2.7)
                                                                     ----                -----                -----
                                                                     38.0  %              37.0  %             34.0  %
                                                                     ====                 =====               =====




Significant components of deferred income tax assets and liabilities at December
31, 1995 and 1994 are as follows:



            Current deferred income tax assets (net):                       1995             1994
                                                                            ----             ----
                                                                               (In thousands)
                                                                                   
            Bad Debt                                                    $  1,101         $  1,017
            Warranty                                                       1,224              972
            Inventory                                                        850              356
            Other accrued expenses and reserves                            1,986              826
            State and local taxes                                            973            1,031
            Loss carryforward                                                720              142
            Other, net                                                       (23)            (256)
                                                                            ----             ----
                                                                        $  6,831         $  4,088

            Long-term deferred income tax liabilities (net):
               Depreciation                                              $(1,646)         $(1,745)
               Loss carryforward                                             878              490
               Other, net                                                    729              348
                                                                           -----             -----
                                                                        $    (39)        $   (907)
                                                                          =======            =====


RELATED PARTY TRANSACTIONS

The  company  leased  a  facility  from a  partnership  (I-M  Associates,  Ltd.,
"Partnership") comprised of certain officers,  directors and shareholders of the
company.  The  General  Partner  of the  Partnership  is also the  director  and
chairman of the  company.  In March 1994,  the  company,  through a newly formed
subsidiary,  exercised  its option to  acquire  the  entire  facility  (land and
building)  for  $3,800,000.  As  part  of  the  purchase,  the  company  assumed
approximately $1,400,000 in indebtedness of industrial development revenue bonds
issued by the Sanford  Airport  Authority.  The purchase price was based upon an
independent  appraisal of the fair market value of the facility.  Lease payments
during 1994 and 1993 were $98,000 and $544,000, respectively.





                                       40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

INTERIM FINANCIAL INFORMATION (UNAUDITED)




                                                                                QUARTER ENDED
                                                                    (In thousands, except per share data)
                                1995                    March 31,       June 30,       September 30,      December 31,
                   ----------------------------         ----------------------------------------------------------------
                                                                                                            
                   Net sales                            $ 107,729        $ 122,301         $ 130,547         $ 143,455
                   Gross profit                            33,402           40,084            43,904            48,923
                   Earnings before income taxes             7,737           12,432            14,618            17,058
                   Net earnings                             4,797            7,712             9,068            10,588
                   Net earnings per share                     .16              .26               .30               .35


                                1994                    March 31,         June 30,     September 30,      December 31,
                   ----------------------------         ----------------------------------------------------------------
                                                                                                          
                   Net sales                            $  87,902        $  98,894         $ 108,977         $ 115,350
                   Gross profit                            26,577           31,499            35,740            39,266
                   Earnings before income taxes             5,790            9,890            11,867            14,330
                   Net earnings                             3,650            6,230             7,477             9,020
                   Net earnings per share                     .12              .21               .25               .30



BUSINESS SEGMENTS

The company operates in one business segment, home medical equipment. Geographic
information for each of the three years ended December 31 is as follows:



                                                             Other         Total
                                                             North         North
                                           Domestic        America       America        Europe          Total
                                           -------------------------------------------------------------------
                                                                     ( In thousands)
                                                                                 
1995
Net sales                                 $353,340    $    34,154  $    387,494  $    116,538   $    504,032
Earnings before income taxes                46,930         (2,842)       44,088         7,757         51,845
Assets                                     227,003         56,974       283,977       124,773        408,750
Liabilities                                 96,129         43,718       139,847        67,584        207,431    
                                                                                                   

1994
Net sales                                 $293,790    $    27,774  $    321,564   $    89,559   $    411,123
Earnings before income taxes                39,742          (885)        38,857         3,020         41,877
Assets                                     204,715         31,582       236,297       101,812        338,109
Liabilities                                 87,691         28,566       116,257        57,845        174,102


1993
Net sales                                $261,337    $    21,638  $    282,975   $    82,482   $    365,457
Earnings before income taxes               31,681          1,057        32,738           772         33,510
Assets                                    173,235         25,186       198,421        87,946        286,367
Liabilities                                73,880         19,604        93,484        57,921        151,405






                                       41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

The  operations  of the company's  Mexican  facility are treated as Domestic for
segment reporting  purposes.  Substantially all of the products  manufactured at
the Mexican facility are sold to customers located in the United States.

The results of the company's Canadian and New Zealand operations are included in
Other North America for segment reporting purposes. A significant portion of the
New Zealand operations are components for products manufactured by the company's
North American facilities.

Eliminated  from  above  net sales  for  1995,  1994 and 1993 were  $11,296,000,
$6,922,000, and $6,128,000 respectively, of sales by North American subsidiaries
to European subsidiaries and $1,005,000,  $576,000 and $761,000,  respectively,
of sales by European subsidiaries to North American subsidiaries.  Sales between
geographic areas are based on the costs to manufacture plus a reasonable  profit
element.

CONCENTRATION OF CREDIT RISK

The company  manufactures and distributes durable medical equipment and supplies
to the home health care and extended care markets.  The company  performs credit
evaluations  of its customers'  financial  condition and on a case by case basis
may  require a security  position  in the form of UCC  filings,  purchase  money
security  interests  and/or  personal  guarantees.   Substantially  all  of  the
company's  receivables  are due from  home  health  care and  medical  equipment
dealers located throughout the United States,  Canada, and Europe. A significant
portion of products sold to dealers,  both foreign and domestic,  are ultimately
funded through government  reimbursement programs such as Medicare and Medicaid.
As a consequence, changes in these programs can have an adverse impact on dealer
liquidity  and  profitability.  Credit  losses are provided for in the financial
statements and consistently have been within management's expectations.

FAIR VALUES OF FINANCIAL INSTRUMENTS

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

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

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

Long-term  debt:  The carrying  amounts of the  company's  borrowings  under its
long-term revolving credit agreements  approximate their fair value. Fair values
for the  company's  senior  notes  are based on  pricing  models  using  current
assumptions.

Interest  Rate Swaps:  The company is a party to interest  rate swap  agreements
with  off-balance  sheet risk  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  variable rate payments
with fixed 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 pricing models or formulas using current assumptions.







                                       42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

FAIR VALUES OF FINANCIAL INSTRUMENTS - (continued)

The carrying amounts and fair values of the company's  financial  instruments at
December 31, 1995 and 1994 are as follows:





                                                                                 1995                          1994
                                                                                 -----                         ----
                                                                     Carrying          Fair            Carrying          Fair
                                                                        Value         Value               Value         Value
                                                                    ---------------------------------------------------------
                                                                                                ( In thousands)
                                                                                                        
                Cash and cash equivalents                          $    4,132    $    4,132        $   7,359      $   7,359
                Marketable securities                                   2,437         2,437            3,044          3,044
                Installment receivables                                56,689        56,689           47,861         47,861
                Long-term debt (including current                     116,255       118,322           98,323         97,884
                maturities)
                Interest rate swaps (fair value liability)                  -         1,136                -             62


                                                                   
Forward  Contracts:  The  company  operates  internationally  and as a result is
exposed to foreign currency  fluctuations.  Specifically,  the exposure includes
firm or anticipated  intercompany trade accounts,  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  effective   hedging
instruments.  The company  does not use  derivative  financial  instruments  for
speculative purposes.

The gains and losses that result from the forward  contracts  are  deferred  and
recognized when the offsetting gains and losses for the identified  transactions
are recognized.  At December 31, 1995, the gain resulting from forward contracts
was not material to the financial statements.

The  following  table  represents  the  fair  value of all  outstanding  forward
currency contracts at December 31, 1995. The valuations are based on quotes from
brokers.  All contracts  noted below mature before March 1996. No contracts were
outstanding at December 31, 1994.



                                                                                   December 31, 1995
                                                                           (Buy)/Sell            Market Value
                                                                               U.S. dollar (In thousands)
                                                                        -------------------------------------

                                                                                                             
                       Deutsche mark                                      $     156               $     6
                       French franc                                              78                     3
                       Spanish peseta                                            95                    (5)
                        New Zealand dollar                                   (1,391)                   (1)







                                       43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued

INVACARE CORPORATION AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS





                                                COL. A         COL. B         COL. C              COL. D         COL.E
                                             -----------    ---------         -----------        ------------    --------

                                                                           ADDITIONS
                                                                           ---------

                                               Balance      Charged           Charged To                        Balance
                                                 At           To                Other                              At
                                              Beginning     Cost And           Accounts          Deductions-     End Of
          Description                         Of Period     Expenses           Describe            Describe      Period
          -------------                      -----------    ---------         -----------        ------------   --------
                                                                             (In thousands)

                                                                                                  
Year Ended December 31, 1995
- - ----------------------------
Deducted from asset accounts
     Allowance for doubtful
         accounts                              $4,540       $3,419                 $   163(C)    $3,351(A)       $4,771
     Inventory obsolescence
         reserve                                3,491        4,158                     510(C)     2,885(B)        5,274
Product warranty liability                      4,554        4,689                      64(C)     3,562(B)        5,745

Year Ended December 31, 1994
- - ----------------------------
Deducted from asset accounts 
     Allowance for doubtful
         accounts                              $4,093       $2,804                $    159(C)    $2,516(A)       $4,540
     Inventory obsolescence
         reserve                                4,114        1,692                      53(C)     2,368(B)        3,491
Product warranty liability                      3,539        3,560                     112(C)     2,657(B)        4,554

Year Ended December 31, 1993
- - ----------------------------
Deducted from asset accounts
     Allowance for doubtful
         accounts                              $3,841      $ 2,490                     $21(C)    $2,259(A)       $4,093
     Inventory obsolescence
         reserve                                3,736        1,244                   1,253(C)     2,119(B)        4,114
Product warranty liability                      2,957        2,530                     521(C)     2,469(B)        3,539




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

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

NOTE (C)--Amounts recorded due to acquisition of subsidiaries.