INVACARE CORP - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended September 30, 2003
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Commission File Number 0-12938
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Invacare Corporation
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(Exact name of registrant as specified in its charter)

Ohio 95-2680965
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(State or other jurisdiction of (IRS Employer Identification No)
incorporation or organization)

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

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

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(Former name, former address and former fiscal year, if change since last
report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 or 15 (d) of the Securities Exchange Act of 1934 (the
"Exchange Act") 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
such filing requirements for the past 90 days. Yes X No____

Indicate by check mark if the registrant is an accelerated filer (as defined in
Rule 12b-2 of the Act). Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:

As of November 6, 2003, the company had 29,922,043 Common Shares and 1,112,023
Class B Common Shares outstanding.

INVACARE CORPORATION

INDEX

Part I. FINANCIAL INFORMATION: Page No.
- ------------------------------ --------

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheet -

September 30, 2003 and December 31, 2002....................3

Condensed Consolidated Statement of Earnings -

Three and Nine Months Ended September 30, 2003 and 2002.....4

Condensed Consolidated Statement of Cash Flows -

Nine Months Ended September 30, 2003 and 2002...............5

Notes to Condensed Consolidated Financial

Statements - September 30, 2003.............................6

Item 2. Management's Discussion and Analysis of

Financial Condition and Results of Operations...............10

Item 3. Quantitative and Qualitative Disclosure of Market Risk...............16

Item 4. Controls and Procedures..............................................16

Part II. OTHER INFORMATION:
- ---------------------------

Item 6. Exhibits and Reports on Form 8-K.....................................16

SIGNATURES....................................................................17

2

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)

See notes to condensed consolidated financial statements.

3

See notes to condensed consolidated financial statements.

4

See notes to condensed consolidated financial statements.

5

INVACARE CORPORATION AND SUBSIDIARIES
Notes to Condensed Consolidated
Financial Statements
(Unaudited)
September 30, 2003

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

Principles of Consolidation - The consolidated financial statements include the
accounts of the company and its majority owned subsidiaries and include all
adjustments, which were of a normal recurring nature, necessary to present
fairly the financial position of the company as of September 30, 2003 and the
results of its operations for the three and nine months ended September 30, 2003
and 2002, respectively, and changes in its cash flows for the nine months ended
September 30, 2003 and 2002, respectively. Certain foreign subsidiaries are
consolidated using an August 31 quarter end. The results of operations for the
three and nine months ended September 30, 2003, respectively, are not
necessarily indicative of the results to be expected for the full year. All
significant intercompany transactions are eliminated.

Reclassifications - Certain reclassifications have been made to the prior years'
consolidated financial statements to conform to the presentation used for the
periods ended September 30, 2003.

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

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

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

The company evaluates performance and allocates resources based on profit or
loss from operations before income taxes for each reportable segment. The
accounting policies of each segment are the same as those for the company's
consolidated financial statements. Intersegment net sales and transfers are
based on the costs to manufacture plus a reasonable profit element. Therefore,
intercompany profit or loss on intersegment net sales and transfers are not
considered in evaluating segment performance. Intersegment net sales for
reportable segments was $20,722,000 and $55,314,000 for the three and nine

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months ended September 30, 2003, respectively, and $16,052,000 and $45,704,000
for the same periods in the preceding year.

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

* Consists of the domestic export unit, unallocated corporate selling,
general and administrative costs, the Invacare captive insurance unit, and
intercompany profits which do not meet the quantitative criteria for
determining reportable segments.

Net Earnings Per Common Share - The following table sets forth the computation
of basic and diluted net earnings per common share for the periods indicated.

7

Goodwill and Other Intangibles - The change in goodwill reflected on the balance
sheet from December 31, 2002 to September 30, 2003 was the result of strategic
acquisitions of $49,578,000 in North America and $1,391,000 in Europe with the
balance attributable to currency translation. All of the company's other
intangible assets have definite lives and are amortized over their useful lives,
except for $4,084,000 related to trademarks, which have indefinite lives.

As of September 30, 2003 and December 31, 2002, other intangibles consisted of
the following (in thousands):

The September 30, 2003 balances of other intangibles include a write up of
approximately $10.9 million based on the preliminary valuation of the identified
intangible assets acquired through the strategic acquisitions. Amortization
expense related to other intangibles was $361,000 in the third quarter of 2003,
$950,000 for the nine months ended September 30, 2003 and is estimated to be
$1,445,000 in 2004, $991,000 in 2005, $542,000 in 2006, $528,000 in 2007 and
$520,000 in 2008.

Accounting for Stock-Based Compensation - The company utilizes the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation (SFAS 123). Accordingly, no
compensation cost has been recognized for non-qualified stock options. However,
expense was recorded for the 90,203 restricted stock awards granted since 2001.
Had compensation cost for the company's stock option plans been determined based
on the fair value at the grant date for awards in 2003 and 2002 consistent with
the provisions of SFAS 123, the company's net earnings and earnings per share
would have been reduced to the pro forma amounts indicated below (in thousands
except per share data):

8

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

The following is a reconciliation of the changes in accrued warranty costs for
the reporting period (in thousands):

Balance as of January 1, 2003 $ 11,448
Warranties issued during the period 7,194
Settlements made during the period (5,614)
Changes in liability for pre-existing warranties during
the period, including expirations 517
-------
Balance as of September 30, 2003 $13,545
=======

Comprehensive Earnings - Total comprehensive earnings were as follows (in
thousands):

Statement of Cash Flows - The company made payments of (in thousands):

Nine Months Ended
September 30,
2003 2002
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Interest $8,137 $12,495
Income taxes 20,564 20,505

Inventories - Inventories consist of the following components (in thousands):

September 30, December 31,
2003 2002
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Raw materials $ 40,301 $ 35,457
Work in process 13,355 12,789
Finished goods 75,937 63,136
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$129,593 $111,382
======= =======

The final inventory determination under the LIFO method is made at the end of
each fiscal year based on the inventory levels and cost at that point;
therefore, interim LIFO determinations are based on management's estimates of
expected year-end inventory levels and costs.

9

Property and Equipment - Property and equipment consist of the following (in
thousands):

September 30, December 31,
2003 2002
------- -------
Land, buildings and improvements $ 60,252 $55,232
Machinery and equipment 206,315 199,448
Furniture and fixtures 18,276 15,641
Leasehold improvements 14,175 13,874
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299,018 284,195
Less allowance for depreciation (160,388) (153,232)
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$138,630 $ 130,963
======= =======

Acquisitions - In the first nine months of 2003, Invacare acquired for cash the
following four entities for a total cost of $70,555,000:

o Pinnacle Medsources Inc., a Georgia corporation, and distributor of
home medical equipment.
o Meccsan SrL, an Italian corporation, and manufacturer of home medical
equipment.
o Carroll Healthcare, Inc. ("Carroll"), a Canadian corporation, and a
leading manufacturer of beds and furniture for the long-term care
industry in North America.
o Motion Concepts, Inc. ("Motion"), a Canadian corporation, and a
leading manufacturer of seating and positioning products in North
America.

Goodwill recognized in these transactions amounted to approximately $51 million,
the majority of which is not expected to be deductible for tax purposes.
Goodwill of $50 million was assigned to the North American segment and $1
million was assigned to the European segment. As part of the Carroll purchase
agreement, the Company agreed to pay additional consideration based upon
earnings before interest, taxes, depreciation and amortization from September 1,
2003 through August 31, 2004 calculated under Canadian generally accepted
accounting principles with no defined maximum amount. Pursuant to the Motion
purchase agreement, the Company agreed to pay contingent consideration based
upon earnings before interest and taxes over the three years subsequent to the
acquisition up to a maximum of approximately $16 million. When the contingencies
related to both of the acquisitions are settled, any additional consideration
paid will increase the respective purchase price and reported goodwill.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The following discussion and analysis should be read in conjunction with our
Condensed Consolidated Financial Statements and related notes thereto included
elsewhere in this Quarterly Report on Form 10-Q and our Current Report on Form
8-K filed on October 16, 2003.

RESULTS OF OPERATIONS

NET SALES

Net sales for the three months ended September 30, 2003 were $327,366,000,
compared to $280,253,000 for the same period a year ago, representing a 17%

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increase. For the nine months ended September 30, 2003, net sales increased 12%
to $904,153,000, compared to $807,180,000 for the same period a year ago.
Foreign currency translation and acquisitions accounted for 5% and 4% of the net
sales increase for the quarter, respectively. Year to date net sales increased
6% due to foreign currency translation and 2% due to acquisitions. Excluding the
impact of currency and acquistions, net sales growth was driven primarily by
volume increases in North America and Australasia.

North American Operations

North American net sales, consisting of Rehab (power wheelchairs, custom manual
wheelchairs, scooters and seating and positioning), Standard (manual
wheelchairs, personal care, home care beds, low air loss therapy and patient
transport), Continuing Care (beds and furniture), Respiratory (oxygen
concentrators, aerosol therapy, sleep, homefill and associated respiratory) and
Distributed (ostomy, incontinence, diabetic, wound care and other medical
supplies) products, increased 17% for the quarter, and 9% year to date, compared
to the same periods a year ago. The increase for the quarter was principally due
to net sales volume increases in Respiratory products (51%), Rehab products
(45%), Continuing Care products (21%) and Distributed products (13%), which were
partially offset by declines in Standard products (9%). Excluding acquisitions,
Rehab product net sales increased by 40% and Continuing Care product net sales
declined by 11% for the quarter. The net sales increase year to date likewise
was attributable to net sales increases in Respiratory products (39%), Rehab
products (25%), Distributed products (10%) and Continuing Care products (3%),
which were partially offset by declines in Standard products (9%). Excluding
acquisitions, Rehab product net sales increased by 23% and Continuing Care
product net sales declined by 8% year to date. The net sales improvements were
led by strong sales growth in oxygen concentrators, the HomeFill(TM) product
line and consumer power products while declines largely were attributable to
continued pricing pressures in Standard products and weaker sales to nursing
homes through Invacare Continuing Care Group primarily due to continued
uncertainty surrounding government reimbursement programs.

European Operations

European net sales increased 7% to $73,839,000 for the three months ended
September 30, 2003 from $68,808,000 for the three months ended September 30,
2002 and increased 13% to $205,020,000 for the nine months ended September 30,
2003 from $182,204,000 for the nine months ended September 30, 2002. Adjusting
for the impact of foreign currency translation, European net sales decreased 6%
for the quarter and 5% year to date, when compared to the same periods a year
ago, primarily due to slower than expected sales in the Nordic region and
reimbursement pressures in Germany.

Australasia Operations

The Australasia operations consists of Invacare Australia, which imports and
distributes the Invacare range of products and manufactures and distributes the
Rollerchair range of custom power wheelchairs, Dynamic Controls, a New Zealand
manufacturer of operating components used in power wheelchairs and Invacare New
Zealand, a distribution business. Australasia net sales increased 71% to
$20,698,000 from $12,112,000 in the third quarter and 67% to $52,931,000 from
$31,753,000 year to date. Adjusting for the impact of foreign currency
translation, Australasia net sales increased 37% for the quarter and 35% year to
date, when compared to the same periods a year ago. The growth was primarily the
result of sales at Dynamic Controls due in part to a significant increase in
sales to a non-healthcare customer.

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GROSS PROFIT

Gross profit as a percentage of net sales for the three and nine month periods
ended September 30, 2003 was 30.1% and 29.5% compared to 31.2% and 30.1%,
respectively, in the same periods last year. The overall decrease in margins as
a percentage of net sales is principally the result of a shift in demand toward
lower margin products and pricing pressures, particularly in North American
Standard products. Productivity improvements in the company's manufacturing
facilities continued to partially offset these unfavorable factors. North
American margins declined for the first nine months of the year to 29.2%
compared with 30.2% in the same period in the prior year principally as a result
of a shift in product mix to lower margin products and pricing pressure in the
Standard products lines primarily as a result of increased competition from low
cost imports. Gross profit for Europe improved year to date by 1.7 percentage
points primarily due to favorable sales mix towards higher margin products, cost
reductions and favorable foreign currency translation. Gross margin in
Australasia declined by 3.3 percentage points largely due to increased sales of
lower margin products in the company's Dynamic Controls subsidiary.

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expense as a percentage of net sales for the
three and nine months ended September 30, 2003 was 20.5% and 21.1%,
respectively, compared to 20.1% and 20.2% in the same periods a year ago. The
dollar increase was $10,641,000 and $27,702,000, or 19% and 17%, respectively,
for the quarter and first nine months of the year. The increase largely was due
to acquisitions, foreign currency translation, continued investments in
marketing and branding programs, additional provisions for bad debts and an
increase in insurance costs. Excluding the impact of foreign currency
translation and acquisitions, selling, general and administrative expense
increased 10% for the quarter and 9% for the for the first nine months compared
to the same periods a year ago.

North American selling, general and administrative cost increased $6,882,000 or
17.0% for the quarter and $15,338,000 or 12.9% for the first nine months,
compared to the same periods a year ago, with foreign currency translation
accounting for approximately 1% of the increase in both periods. The overall
dollar increase for the quarter and first nine month of the year primarily
resulted from acquisitions, continued investments in marketing and branding
programs, additional provisions for bad debts and increases in insurance costs.
European selling, general and administrative cost increased $3,315,000 or 22.6%
and $11,299,000 or 28.6% for the quarter and first nine months, compared to the
same periods a year ago. Excluding the impact of foreign currency translation,
European selling, general and administrative cost increased $1,272,000 or 8.7%
for the quarter and $3,374,000 or 8.5% for the first nine months, compared to
the same periods a year ago. The increase was primarily attributable to
additional programs to re-establish sales growth. Australasian selling, general
and administrative cost grew at a slower rate than net sales for the quarter and
year to date principally as a result of aggressive expense control.

INTEREST

For the quarter and first nine months of the year, interest expense decreased by
$454,000 and $3,704,000, respectively, compared to the same periods a year ago,
as a result of reduced debt levels and lower overall interest rates. Interest
income for the quarter and first nine months of the year increased compared to
the same periods a year ago due to higher sales volumes.

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INCOME TAXES

The company had an effective tax rate of 32.9% for the three and nine month
periods ended September 30, 2003, which is the same effective tax rate as for
the same periods a year ago.

LIQUIDITY AND CAPITAL RESOURCES

The company's reported level of long-term debt increased $14.9 million to $249.0
million for the nine months ended September 30, 2003. The company continues to
maintain an adequate liquidity position to fund its working capital and capital
requirements through its bank lines of credit and working capital management. As
of September 30, 2003, the company had approximately $283.7 million available
under its lines of credit. Under the most restrictive covenant of the company's
borrowing arrangements, the company has the capacity to borrow up to an
additional $208.0 million as of September 30, 2003. On October 1, 2003, the
company issued $100.0 million of senior notes, which consist of three series of
maturities. The series A notes represent $50.0 million of the total issuance,
bear interest at 3.97% and mature on October 1, 2007. The series B notes
represent $30.0 million of the total issuance, bear interest at 4.74% and mature
on October 1, 2009. The series C notes represent $20.0 million of the total
issuance, bear interest at 5.05% and mature on October 1, 2010. Effective
October 1, 2003, the company entered into swap agreements to exchange this fixed
rate debt for floating rates which are currently between 1.2% and 1.5%. The
proceeds of the note issuance have been used to pay down borrowings under the
revolving credit agreement, thereby allowing for additional capacity to fund
future acquisitions. The note purchase agreement is filed as exhibit 10.1(ab) to
this Form 10-Q.

The company's borrowing arrangements contain covenants with respect to interest
coverage, net worth, dividend payments, working capital, funded debt to
capitalization and interest coverage, as defined in the company's bank
agreements and agreement with its note holders. As of September 30, 2003, the
company was in compliance with all covenant requirements.

CAPITAL EXPENDITURES

There were no material capital expenditure commitments outstanding as of
September 30, 2003. The company expects to continue to invest in capital
projects at a rate that equals or exceeds depreciation and amortization in order
to maintain and improve the company's competitive position. The company
estimates that capital investments for 2003 will approximate $28 million. The
company believes that its balances of cash and cash equivalents, together with
funds generated from operations and existing borrowing facilities will be
sufficient to meet its operating cash requirements and to fund required capital
expenditures for the foreseeable future.

CASH FLOWS

Cash flows provided by operating activities were $73.0 million for the first
nine months of 2003 compared to $93.0 million in 2002. The decrease in operating
cash flows is largely due to increases in accounts receivable and inventory
resulting from increasing revenues, partially offset by increases in accounts
payable and accrued expenses for the first nine months of the year, compared to
the same period a year ago when accounts receivable, inventory and accounts
payable declined.

Cash used for investing activities was $82.3 million for the first nine months
of 2003 compared to $3.1 million in 2002. The increase was primarily due to the
acquisition of four companies during 2003.

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Cash used for financing activities was $3.8 million for the first nine months of
2003, compared to cash required of $101.9 million in 2002. Financing activities
for the first nine months of 2003 were impacted by an increase in the company's
net long-term borrowings of $3.0 million as a result of the acquisition of four
companies during 2003 and purchases of treasury stock of $8.3 million.

The effect of foreign currency translation and acquisitions may result in
amounts being shown for cash flows in the Condensed Consolidated Statement of
Cash Flows that are different from the changes reflected in the respective
balance sheet captions.

DIVIDEND POLICY

On August 20, 2003, the company's Board of Directors declared a quarterly cash
dividend of $0.0125 per Common Share to shareholders of record as of October 1,
2003, to be paid on October 17, 2003. At the current rate, the cash dividend
will amount to $0.05 per Common Share on an annual basis.

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements include accounts of the company and all
majority-owned subsidiaries. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions in certain circumstances
that affect amounts reported in the accompanying consolidated financial
statements and related footnotes. In preparing these financial statements,
management has made its best estimates and judgments of certain amounts included
in the financial statements, giving due consideration to materiality. There has
been no change in the company's critical accounting policies as disclosed in its
Form 10-K filed for the year ended December 31, 2002. In addition, no new
critical accounting policies have been adopted in the first nine months of 2003.
The company does not believe that there is a substantial likelihood that
materially different amounts would be reported related to its critical
accounting policies. However, application of these accounting policies involves
the exercise of judgment and use of assumptions as to future uncertainties and,
as a result, actual results could differ from these estimates.

Accounting for Stock-Based Compensation
The company accounts for options under its stock-based compensation plans using
the intrinsic value method proscribed in APB Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations. The majority of the
options awarded have been granted at exercise prices equal to the market value
of the underlying stock on the date of grant; thus, no compensation cost has
been reflected in the Consolidated Statement of Earnings for these options. In
addition, restricted stock awards have been granted without cost to the
recipients and are being expensed on a straight-line basis over the vesting
periods. If the company had applied the fair value recognition provisions of
SFAS No. 123 Accounting for Stock-Based Compensation for all stock options
granted, net earnings per share assuming dilution would have been reduced by
$0.04 in the third quarter and $0.11 in the first nine months of 2003 compared
to reductions of $0.05 and $0.11 for the same periods a year ago.

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 148, Accounting for
Stock-Based Compensation-Transition and Disclosure. This statement provides
guidance for those companies wishing to voluntarily change to the fair value
based method of accounting for stock-based compensation. The statement also

14

amends the disclosure requirements of SFAS No. 123. While Invacare continues to
utilize the disclosure-only provisions of SFAS No. 123, the company has modified
its disclosures to comply with the new statement. See Accounting for Stock-Based
Compensation in the Notes to the Condensed Consolidated Financial Statements.

Accounting for Variable Interest Entities
In January 2003, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities (FIN 46). This interpretation requires consolidation
of an entity if the company is subject to a majority of the risk of loss from
the variable interest entity's (VIE) activities or entitled to receive a
majority of the entity's residual returns, or both. A company that consolidates
a VIE is known as the primary beneficiary of that entity.

In October 2003, FASB decided to defer the effective date of FIN 46. With the
deferral, FIN 46 is required to be applied as of December 31, 2003. The company
is currently evaluating the provisions of FIN 46 to determine the impact, if
any, on its financial statements. As of September 30, 2003, the company had an
investment in a development stage company, which is currently pursuing FDA
approval to market a product focused on the treatment of post-stroke shoulder
pain in the United States. The net advances and investment recorded on the
company's books is approximately $3.9 million at September 30, 2003. Based on
the provisions of FIN 46 and the company's preliminary analysis, it does not
believe it is the primary beneficiary of this development stage company.

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The company is exposed to market risk through various financial instruments,
including fixed rate and floating rate debt instruments. The company uses
interest rate swap agreements to mitigate its exposure to interest rate
fluctuations. Based on September 30, 2003 debt levels, a 1% change in interest
rates would impact interest expense by approximately $1,613,000 over the next
twelve months. Additionally, the company operates internationally and as a
result is exposed to foreign currency fluctuations. Specifically, the exposure
includes intercompany loans and third party sales or payments. In an attempt to
reduce this exposure, foreign currency forward contracts are utilized. The
company does not believe that any potential loss related to these financial
instruments would have a material adverse effect on the company's financial
condition or results of operations.

FORWARD-LOOKING STATEMENTS

The statements contained in this Form 10-Q constitute forward-looking statements
within the meaning of the "Safe Harbor" provisions of the Private Securities
Litigation Reform Act of 1995. Terms such as "will," "should," "achieve,"
"increase," "plan," "can," "expect," "pursue," "benefit," "continue," "exceed,"
"improve," "believe," "estimate," "anticipate," "build," "strengthen," "new,"
"lower," "drive," "seek," "hope," and "create," as well as similar comments, are
forward-looking in nature. Actual results and events may differ significantly
from those expressed or anticipated as a result of risks and uncertainties which
include, but are not limited to, the following: pricing pressures, the success
of the company's ongoing effort to reduce raw material costs, increasing raw
material costs, the consolidations of health care customers and competitors,
government reimbursement issues (including those that affect the viability of
customers), the ability to design, manufacture and distribute new products with
higher functionality and lower costs, the ability to accelerate market
acceptance of and transition to new products, the effect of offering customers
competitive financing terms, Invacare's ability to successfully identify,
acquire and integrate acquisition candidates, the difficulties in managing and

15

operating businesses in many different foreign jurisdictions, the timely and
efficient completion of facility consolidations, the vagaries of any litigation
or regulatory investigations that the company may be or become involved in at
any time, the difficulties in acquiring and maintaining a proprietary
intellectual property ownership position, the overall economic, market and
industry growth conditions, foreign currency and interest rate risk, Invacare's
ability to improve financing terms and reduce working capital, as well as the
risks described from time to time in Invacare's reports as filed with the
Securities and Exchange Commission. We undertake no obligation to revise or
update these forward-looking statements or other information contained herein.

Item 3. Quantitative and Qualitative Disclosure of Market Risk.

The information called for by this item is provided under the same caption under
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.

Item 4. Controls and Procedures.

As of September 30, 2003, an evaluation was performed, under the supervision and
with the participation of the company's management, including the CEO and CFO,
of the effectiveness of the design and operation of the company's disclosure
controls and procedures. Based on that evaluation, the company's management,
including the CEO and CFO, concluded that the company's disclosure controls and
procedures were effective as of September 30, 2003 in ensuring that information
required to be disclosed by the company in the reports it files and submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission's rules and forms. There were no
changes in the company's internal control over financial reporting that occurred
during the company's most recent fiscal quarter that have materially affected,
or are reasonably likely to materially affect, the company's internal control
over financial reporting.

Part II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

A Exhibits:
Official Exhibit No.

10.1 (aa) Invacare Corporation 2003
Performance Plan (reference is made
to Exhibit 4.5 of Invacare
Corporation Form S-8 filed on October
17, 2003).
10.1 (ab) Invacare Corporation Note Purchase
Agreement dated as of October 1, 2003
for $50,000,000 3.97% Series A Senior
Notes Due October 1, 2007; $30,000,000
4.74% Series B Senior Notes Due
October 1, 2009 and $20,000,000 5.05%
Series C Senior Notes Due October 1,
2010.
31.1 Certification of the Chief Financial
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed
herewith).
31.2 Certification of the Chief Executive
Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (filed
herewith).
32.1 Certification of the Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002 (furnished herewith).

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32.2 Certification of the Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act
of 2002 (furnished herewith).

B Reports on Form 8-K:
A Form 8-K was filed on October 1, 2003 under Item 5,
Other Events and Regulation FD Disclosure and Item 7,
Financial Statements and Exhibits. The Form 8-K contained
Invacare Corporation's press release announcing the sale of
$100 million in senior notes through a private placement to
institutional investors.
A Form 8-K was furnished on October 16, 2003 under
Item 12, Results of Operations and Financial Condition. The
Form 8-K contained Invacare Corporation's earnings release,
dated October 16, 2003, which disclosed the company's 2003
third quarter results.

SIGNATURES

Pursuant to the requirements 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.

INVACARE CORPORATION

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

Date: November 12, 2003