8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of report (Date of earliest event reported):

January 30, 2008

INVACARE CORPORATION

(Exact name of registrant as specified in its charter)

Ohio	001-15103	95-2680965
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(IRS Employer Identification No)
One Invacare Way, P.O. Box 4028, Elyria, Ohio  44036
(Address of principal executive offices, including zip code)
(440) 329-6000
(Registrant's telephone number, including area code)
_____________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition.

On January 30, 2008, Invacare Corporation issued a press release providing its financial  results for the fourth quarter and twelve months ended December 31, 2007. The press release is furnished herewith as Exhibit 99.1.

The attached press release contains  non-GAAP  financial  measures.  In the press release, the Company has provided a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure.

Item 9.01 Financial Statements and Exhibits.

Exhibit Index
Exhibit Number	Description of Exhibit
99.1	Press Release dated January 30, 2008

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 hereunto duly authorized.

	Invacare Corporation
Date:  January 31, 2008	By:	/s/ Gregory C. Thompson
		Name:  Gregory C. Thompson
		Title:   Chief Financial Officer

EX-99.1

Exhibit 99.1

Investor Inquiries:

Gregory C. Thompson

(440) 329-6111

INVACARE CORPORATION REPORTS FOURTHQUARTER RESULTS

ELYRIA, Ohio – (January 30, 2008) – Invacare Corporation (NYSE: IVC) today announced its financial results for the fourth quarter and twelve months ended December 31, 2007.

The following Financial Highlights should be read in conjunction with the Condensed Consolidated Statements of Operations and Balance Sheets and related Reconciliation Tables included elsewhere in this press release.

FINANCIAL HIGHLIGHTS

(In thousands, except per share data)	Three Months Ended  December 31,					Twelve Months Ended  December 31,
	2007		2006			2007		2006
Net Sales	$	426,762	$	385,105		$	1,602,237	$	1,498,035
Net earnings (loss) per share – assuming dilution	$	.22	$	(10.61	)	$	.04	$	(10.00	)
Net earnings (loss)	$	7,001	$	(337,627	)	$	1,190	$	(317,774	)
Adjusted earnings per share(a), (d)	$	.62	$	.33		$	1.34	$	1.18
Adjusted net earnings(b), (e)	$	19,861	$	10,403		$	42,905	$	37,753
Adjusted EBITDA(f)	$	43,805	$	27,802		$	132,671	$	121,071
Free cash flow(c)	$	44,414	$	23,399		$	72,539	$	52,898

CONSOLIDATED RESULTS

Earnings per share on a GAAP basis for the fourth quarter were $.22 ($7.0 million net earnings) as compared to a loss per share for the same period last year of $10.61 ($337.6 million net loss).  Adjusted earnings per share(a)were $.62 for the fourth quarter of 2007 as compared to $.33 for the fourth quarter last year.   Adjusted net earnings(b)for the quarter were $19.9 million versus $10.4 million last year.  The fourth quarter 2007 net earnings and adjusted net earnings(b)include an additional $.9 million attributable to the one-time tax benefit associated with new tax laws enacted in Germany which reduced the Company’s tax rate and the corresponding German net deferred tax credits.  Adjusted earnings per share(a)excluding the one-time tax benefit were $.59 for the fourth quarter of 2007.  

Net sales for the quarter increased 10.8% to $426.8 million versus $385.1 million last year.  Foreign currency translation increased net sales by five percentage points.Organic net sales for the quarter grew 6.0% over the same period last year driven primarily by European organic net sales growth of 9.8% and Invacare Supply Group (ISG) net sales growth of 14.2%.  European net sales growth continues, resulting from volume increases in most regions.  ISG growth continues mainly due to home delivery program sales to large providers and volume increases in enterals and diabetic product lines.  North America/HME (NA/HME) organic net sales increased by 2.8% for the quarter, the first quarter over quarter increase this year, reflecting the improved stability and sequential improvement of this business segment as compared to a revenue decline in the first nine months of the year of 3.3%.

The Company achieved its cost reduction and profit improvement initiatives established at the beginning of the year.  The benefits achieved from the cost reduction initiatives, principally related to product sourcing savings, headcount reductions, and manufacturing consolidation, totaled $40 million for 2007, which was slightly better than the Company’s expectations.  However, as expected, a significant portion of this benefit was offset by continued pricing pressures and product mix shift toward lower margin product in the U.S. as a result of Medicare related reimbursement changes.

Gross margin as a percentage of net sales for the fourth quarter was higher by 2.9 percentage points compared to last year’s fourth quarter, primarily due to cost reduction activities, offset by higher volume discounts related to increased sales to national providers in the Respiratory product line and continued competitive pricing pressures in the U.S.  Margins were also favorably impacted by .8 of a percentage point from insurance and asset recoveries related to an embezzlement, which was disclosed earlier this year, at one of the Company’s foreign facilities.

Selling, general and administrative expense (SG&A) decreased 18.3% to $92.7 million in the quarter compared to $113.5 million in the fourth quarter last year.  Foreign currency translation increased SG&A expense by three percentage points, while acquisitions increased SG&A expense by less than one percentage point.  SG&Adecreased when compared to the fourth quarter of last year as a result of recording an incremental reserve related to accounts receivable of approximately $26.8 million pre-tax in the prior year.  After adjusting for this item, along with foreign currency translation and acquisitions, SG&A increased 2.0%.  SG&A benefited in the quarter from a one-time gain of $4.0 million resulting from debt cancellation related to a development stage company which the Company consolidated in accordance with the provisions of FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46). This benefit was offset by an increase in bonus expense of $3.0 million, increased bad debt expense of $1.4 million, and legal and professional expenses related to the settlement of the embezzlement noted above of $1.0 million.

Earnings per share on a GAAP basis for the year ended December 31, 2007 were $.04 ($1.2 million net earnings) as compared to a loss per share for the same period last year of $10.00 ($317.8 million net loss). Adjusted earnings per share(d)were $1.34 for 2007 as compared to $1.18 last year.   Adjusted net earnings(e)for the year ended December 31, 2007 were $42.9 million versus $37.8 million last year.  The 2007 net earnings and adjusted net earnings(e)include a one-time net tax benefit recorded in the third and fourth quarters of $7.2 million ($.22 per share benefit), primarily attributable to new German tax laws enacted which reduced the Company’s tax rate and German net deferred tax credits.  Adjusted earnings per share(d), excluding the one-time net tax benefit, were $1.12 for 2007.  Net sales for 2007 increased 7.0% to $1.6 billion versus $1.5 billion last year.  Acquisitions increased net sales by one percentage point and foreign currency translation increased net sales by three percentage points.

A. Malachi Mixon, III, Chairman and Chief Executive Officer, stated, “I am extremely proud that our management team met and exceeded challenging commitments for adjusted earnings per share(d), free cash flow(c), and cost reduction.  Invacare’s performance was better than expected as a result of continued execution of our cost reduction programs totaling $40 million for the year.  We are also encouraged by the improving organic net sales growth trends.  As well, during 2007, two national accounts have made significant purchases of our HomeFill®oxygen technology.  European business continues to perform well with improved sales and earnings over last year.  We also generated strong free cash flow(c), totaling $44 million for the quarter and $73 million for the year, driven by stronger than expected cash collections on receivables and by inventory reductions.  This enabled the Company to reduce debt in the quarter by approximately $38 million.  Cost reduction and reducing our debt levels were our top priorities for 2007 and we were successful in achieving both.”

NORTH AMERICA/HME (NA/HME)

For the quarter ended December 31, 2007, NA/HME net sales increased 4.7% to $172.8 million compared to $165.1 million in the same period last year, driven primarily by sales increases in the Rehab and Standard product lines.  Foreign currency increased net sales by one percentage point,while acquisitions increased net sales by less than a percentage point.  Standard product line net sales for the fourth quarter increased 4.9%compared to the fourth quarter of last year driven by increased volumes in manual wheelchairs, patient aids and beds, along with stable pricing.  Rehab product line net sales increased by 5.6% compared to the fourth quarter last year despite competitive pricing reductions resulting from Medicare reimbursement changes.  Excluding consumer power products, Rehab product line net sales increased 12% driven by volume increases in custom power and custom manual wheelchairs, as well as seating systems, and benefited from new product introductions and market share gains.   However, this increase was partially offset by continued volume declines in the consumer power product line, primarily with national providers, along with competitive price reductions implemented in late 2006 due to Medicare reimbursement changes for these products.  Respiratory product line net sales declined 6.2% due to reduced unit volumes of oxygen concentrators resulting from the loss of one large national provider, continued inventory utilization programs by providers, and pricing declines in concentrators. HomeFill® oxygen system net sales increased for the quarter by 20.0%due to increased purchases by a large national provider.

For the quarter, NA/HME earnings before income taxes were $8.6 million, excluding restructuring charges of $.2 million pre-tax, as compared to loss before income taxes of $328.9 million last year, excluding restructuring charges of $3.6 million pre-tax. Loss before income taxes for the quarter ended December 31, 2006 also included charges of $26.8 million pre-tax accounts receivable reserve and a $300.4 million pre-tax impairment charge related to goodwill and other intangible assets.  Excluding these items, loss before income taxes was$1.8 million in the fourth quarter.  The increase in earnings before income taxes of $10.4 million after these adjustments was the result of cost reduction programs, increased volumes, and insurance and asset recoveries related to embezzlement at one of the Company’s foreign facilities.

For the year, NA/HME net sales decreased 1.2% to $668.3 million versus $676.3 million last year.  Foreign currency increased net sales by one percentage point while acquisitions increased net sales by less than one percentage point.  Earnings before income taxes increased to $14.7 million, excluding restructuring charges of $3.9 million pre-tax, versus a loss of $306.2 million last year, excluding restructuring charges of $9.6 million pre-tax.  Loss before income tax for the year ended December 31, 2006 also included charges of $26.8 million pre-tax accounts receivable reserve and $300.4 million pre-tax impairment charge related to goodwill and other intangible assets.  Excluding these items, earnings before income taxes were $21.0 million last year.

INVACARE SUPPLY GROUP (ISG)

ISG net sales for the quarter increased 14.2% to $68.6 million compared to $60.0 million last year driven by an increase in home delivery program sales primarily with larger providers and volume increases in enterals and diabetic product lines.  Earnings before income taxes for the quarter increased slightly to $.8 million ascompared to $.7 million last year, excluding restructuring charges of $.3 million pre-tax, as a result of increased volumes.

For the year, ISG net sales increased 12.6% to $257.0 million versus $228.2 million last year.  Earnings before income taxes decreased to $3.3 million as compared to $4.3 million last year, excluding restructuring charges of $.1 and $1.0 million pre-tax, respectively.

INSTITUTIONAL PRODUCTS GROUP (IPG)

IPG net sales for the quarter decreased by 5.6% to $23.1 million compared to $24.5 million last year primarily due to reduced purchasing by a large national account.  The introduction of new bed productsduring the fourth quarter offset a portion of the decline.  Foreign currency translation increased net sales by four percentage points. Earnings before income taxes decreased to $.1 million, as compared to $.8 million last year as a result of volume reductions, unfavorable foreign currency exchange rate movement of the Canadian dollar and incremental costs related to new product introductions.

For the year, IPG net sales decreased 4.7% to $89.0 million versus $93.5 million last year.  Earnings before income taxes decreased to $1.0 million, excluding restructuring charges of $.2 million pre-tax, as compared to $4.8 million last year.

EUROPE

For the quarter, European net sales increased 19.7% to $139.2 million versus $116.3 million last year.  Foreign currency translation increased net sales by ten percentage points.  For the quarter, earnings before income taxes were $14.2 million, excluding restructuring charges of $1.4 million pre-tax, as compared to $11.4 million last year, excluding restructuring charges of $6.4 million pre-tax.  Net sales performance continues to be strong in most regions and increased profits were driven by volume increases, cost reduction initiatives and a weakening U.S. dollar.

For the year, European net sales increased 15.7% to $498.1 million versus $430.4 million last year.  Foreign currency translation increased net sales by eight percentage points. Earnings before income taxes were $40.7 million, excluding restructuring charges of $4.5 million pre-tax, as compared to $34.7 million last year, excluding restructuring charges of $8.7 million pre-tax.

ASIA/PACIFIC

For the quarter, Asia/Pacific net sales increased 20.1% to $23.0 million versus $19.2 million last year.  Foreign currency increased net sales by fifteen percentage points.  For the quarter, loss before income taxes was $1.7 million, excluding restructuring charges of $1.3 million pre-tax, as compared to pre-tax loss of $.9million last year, excluding restructuring charges of $1.0 million pre-tax.  Performance in this region continues to be negatively impacted by U.S. reimbursement uncertainty in the consumer power wheelchair market, resulting in decreased sales of microprocessor controllers by Invacare’s New Zealand subsidiary along with negative foreign currency impacts.  The Company is taking aggressive action to further reduce costs by moving its New Zealand manufacturing to China with completion expected by July 2008.

For the year, Asia/Pacific net sales increased 29.0% to $89.8 million versus $69.6 million last year.  Foreign currency increased net sales by thirteen percentage points and acquisitions increased net sales by nineteen percentage points.  Loss before income taxes was $3.9 million, excluding restructuring charges of $2.8 million pre-tax, as compared to a pre-tax loss of $5.4 million last year, excluding restructuring charges of $1.9 million pre-tax.

FINANCIAL CONDITION

Total debt outstanding was $537.9 million at the end of the year, resulting in a debt-to-total-capitalization ratio of 49.3% versus 54.1% at the end of 2006, and 53.1% at the end of the third quarter of this year.  The Company reduced debt outstanding by $38.2 million during the quarter as a result of significant positive cash flow generation.

The Company generated $44.4 million of free cash flow(c)in the fourth quarter and $72.5 million for the year. The improvement in the fourth quarter free cash flow(c), as compared to the third quarter free cash flow(c)of $29.0 million, was principally due to increased earnings and improved working capital management primarily in accounts receivable and inventory.

Days sales outstanding improved by four days to 62 days versus 66 days last year.  Inventory turns were 4.9 versus 4.4 at the end of last year.   The Company’s cash and cash equivalents at the end of the year were approximately $62.5 million, down from $82.4 million at the end of last year.

OUTLOOK

Cost reduction initiatives were the Company’s primary focus during 2007 and will continue to be a priority in 2008.  The successful implementation of the 2007 cost reductions improved the Company’s operating margin by approximately $40 million.  These initiatives included:

· Product line rationalization;

· Expanded outsourcing;

· Rationalization of facilities;

· Supply chain simplification / rationalization; and

· Organization and infrastructure rationalization.

The incremental annualized savings from these initiatives should improve the Company’s operating margins in 2008 by approximately $15 million.  In addition, the Company has identified new cost reduction initiatives which should result in additional savings in 2008 of at least $20 million.  However, it is anticipated that the benefit to operating margins realized from these initiatives will be tempered by continuing reimbursement uncertainties, primarily the implementation of competitive bidding in the U.S., and continued global pricing pressures in the industry.

With these factors in mind, the Company is providing the following guidance:

· Organic growth in net sales of 4% to 5%, excluding the impact from acquisitions and foreign currency translation adjustments;

· Effective tax rate on adjusted earnings of 20% to 25%;

· Adjusted earnings per share of $1.35 to $1.50; and

· Free cash flow(c) between $45 million and $55 million.

Commenting on the Company’s anticipated results, Mixon said, “In 2008, cost reduction and reducing our debt levels will continue to be our top priorities. We are hopeful that successful execution will ultimately enable us to return to unsecured borrowing status. We expect the Company’s adjusted earnings per share, excluding the one time German tax benefit in 2007, to increase significantly due to a continuation of our cost reduction efforts and modest organic sales growth.  Our European businesses performed well in 2007 with strong top-line growth and improving profitability, and we expect more of the same in 2008 from Europe.  We remain cautious regarding the impact of the potential reimbursement changes in the U.S. market and the continued pricing pressures.
The Centers for Medicare and Medicaid Services (CMS) continues to move forward with the implementation of competitive bidding in 10 Metropolitan Statistical Areas (MSAs) with the bid awards effective as of July 1, 2008, and an additional 70 MSAs in 2009.  There is discussion in Washington regarding the possibility of proposed Medicare changes later this year, particularly with regard to oxygen and power wheelchairs.  We continue to work for the industry and lobby against oxygen reimbursement reductions and against elimination of the power wheelchair first month purchase option.  We are also lobbying for modification to the competitive bidding program to ensure small business participation and consumer access.   At this point, it is still possible oxygen reimbursement cuts will be included in a Medicare bill, as could the power wheelchair issue.  We continue to believe that should reimbursement reductions occur, new oxygen technologies such as our HomeFill®product will remain at current reimbursement levels.

As we enter 2008, we are confident that continued cost reduction initiatives and modest organic growth should position us for solid earnings improvement throughout the year.”

(a) Adjusted earnings per share (EPS) for the quarter is a non-GAAP financial measure which is defined as net earnings excluding the impact of restructuring charges ($3.0 million pre-tax for the quarter ended December 31, 2007 as compared to $11.3 million pre-tax for the quarter ended December 31, 2006), debt finance charges, interest and fees associated with the Company’s debt refinancing ($3.7 million pre-tax for the quarter ended December 31, 2006), incremental accounts receivable reserve ($26.8 million pre-tax for the quarter ended December 31. 2006), asset write-downs related to goodwill and other intangible assets ($300.4 million pre-tax for the quarter ended December 31, 2006) and tax valuation allowances divided by weighted average shares outstanding – assuming dilution.  This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the Condensed Consolidated Statement of Operations included in this press release.

(b) Adjusted net earnings for the quarter is a non-GAAP financial measure which is defined as net earnings excluding the impact of restructuring charges ($3.0 million pre-tax for the quarter ended December 31, 2007 as compared to $11.3 million pre-tax for the quarter ended December 31, 2006), debt finance charges, interest and fees associated with the Company’s debt refinancing ($3.7 million pre-tax for the quarter ended December 31, 2006), incremental accounts receivable reserve ($26.8 million pre-tax for the quarter ended December 31, 2006), asset write-downs related to goodwill and other intangible assets ($300.4 million pre-tax for the quarter ended December 31, 2006) and tax valuation allowances.  This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the Condensed Consolidated Statement of Operations included in this press release.

(c) Free cash flow is a non-GAAP financial measure, which is defined as net cash provided by operating activities, excluding cash related restructuring activities less purchases of property and equipment, net of proceeds from sales of property and equipment.  This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the Condensed Consolidated Balance Sheets included in this press release.

(d) Adjusted earnings per share (EPS) for the year is a non-GAAP financial measure which is defined as net earnings excluding the impact of restructuring charges ($11.4 million pre-tax for the year ended December 31, 2007 as compared to $21.3 million pre-tax for the year ended December 31, 2006), debt finance charges, interest and fees associated with the Company’s debt refinancing ($13.4 million pre-tax for the year ended December 31, 2007 and $3.7 million pre-tax for the year ended December 31, 2006), incremental accounts receivable reserve ($26.8 million pre-tax for the year ended December 31, 2006), asset write-downs related to goodwill and other intangible assets ($300.4 million pre-tax for the year ended December 31, 2006) and tax valuation allowances divided by weighted average shares outstanding – assuming dilution.  This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the Condensed Consolidated Statement of Operations included in this press release.

(e) Adjusted net earnings for the year is a non-GAAP financial measure which is defined as net earnings excluding the impact of restructuring charges ($11.4 million pre-tax for the year ended December 31, 2007 as compared to $21.3 million pre-tax for the year ended December 31, 2006), debt finance charges, interest and fees associated with the Company’s debt refinancing ($13.4 million pre-tax for the year ended December 31, 2007 and $3.7 million pre-tax for the year ended December 31, 2006), incremental accounts receivable reserve ($26.8 million pre-tax for the year ended December 31, 2006), asset write-downs related to goodwill and other intangible assets ($300.4 million pre-tax for the year ended December 31, 2006) and tax valuation allowances.  This financial measure is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the Condensed Consolidated Statement of Operations included in this press release.

(f) Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP financial measure which is defined as net earnings excluding the following:  interest expense, income taxes, depreciation and amortization, as further adjusted to exclude restructuring charges, debt finance charges, interest and fees associated with the Company’s debt refinancing, bank fees, stock option expense, incremental accounts receivable reserve and asset write-downs related to goodwill and other intangible assets.  

Invacare Corporation (NYSE:IVC), headquartered in Elyria, Ohio, is the global leader in the manufacture and distribution of innovative home and long-term care medical products that promote recovery and active lifestyles.  The Company has 5,700 associates and markets its products in 80 countries around the world.  For more information about the Company and its products, visit Invacare's website at www.invacare.com.

This press release contains 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,” “plan,” “intend,” “expect,” “continue,” “forecast”,” believe,” “anticipate” and “seek,” as well as similar comments, are forward-looking in nature. Actual results and events may differ significantly from those expressed or anticipated as a result of risks and uncertainties which include, but are not limited to, the following: possible adverse effects of being substantially leveraged, which could impact our ability to raise capital, limit our ability to react to changes in the economy or our industry or expose us to interest rate or event of default risks; changes in government and other third-party payer reimbursement levels and practices; consolidation of health care providers and our competitors; loss of key health care providers; ineffective cost reduction and restructuring efforts; inability to design, manufacture, distribute and achieve market acceptance of new products with higher functionality and lower costs; extensive government regulation of our products; lower cost imports; increased freight costs; failure to comply with regulatory requirements or receive regulatory clearance or approval for our products or operations in the United States or abroad; potential product recalls; uncollectible accounts receivable; difficulties in implementing a new Enterprise Resource Planning system; legal actions or regulatory proceedings and governmental investigations; product liability claims; inadequate patents or other intellectual property protection; incorrect assumptions concerning demographic trends that impact the market for our products; provisions in our bank credit agreement or other debt instruments that may prevent or delay a change in control; the loss of the services of our key management and personnel; decreased availability or increased costs of raw materials which could increase our costs of producing our products; inability to acquire strategic acquisition candidates because of limited financing alternatives; risks inherent in managing and operating businesses in many different foreign jurisdictions; exchange rate fluctuations, as well as the risks described from time to time in Invacare’s reports as filed with the Securities and Exchange Commission. Except to the extent required by law, we do not undertake and specifically decline any obligation to review or update any forward-looking statements or to publicly announce the results of any revisions to any of such statements to reflect future events or developments or otherwise.

INVACARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(In thousands, except per share data)	Three Months Ended  December 31,						Twelve Months Ended December 31,
	2007			2006			2007			2006
Net sales	$	426,762		$	385,105		$	1,602,237		$	1,498,035
Cost of products sold		304,911	*		285,961	*		1,155,933	*		1,080,965	*
Gross profit		121,851			99,144			446,304			417,070
Selling, general and administrative expense		92,693			113,498			366,846			373,846
Charge related to restructuring activities		1,784			8,924			9,591			17,277
Debt finance charges, interest and fees associated with debt refinancing		5			3,745			13,408			3,745
Asset write-downs related to goodwill and other intangibles		-			300,417			-			300,417
Interest expense – net		9,993			8,562			41,969			31,309
Earnings (loss) before income taxes		17,376			(336,002	)		14,490			(309,524	)
Income taxes		10,375			1,625			13,300			8,250
Net earnings (loss)	$	7,001		$	(337,627	)	$	1,190		$	(317,774	)
Net earnings (loss) per share – basic	$	0.22		$	(10.61	)	$	0.04		$	(10.00	)
Weighted average shares outstanding – basic		31,851			31,824			31,840			31,789
Net earnings (loss) per share – assuming dilution **	$	0.22		$	(10.61	)	$	0.04		$	(10.00	)
Weighted average shares outstanding – assuming dilution **		32,067			31,824			31,927			31,789

* Cost of products sold includes inventory markdowns resulting from restructuring of $1,197 and $1,817 for the three and twelve-month periods ending December 31, 2007, respectively; as compared to $2,329 and $3,973 for the three and twelve-month periods ending December 31, 2006, respectively.

** Net earnings (loss) per share assuming dilution calculated for twelve-month period ending December 31, 2006 utilizing weighted average shares outstanding – basic as a result of the Company’s net loss.

INVACARE CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET EARNINGS (LOSS) TO ADJUSTED EBITDA (1)

(In thousands)	Three Months Ended  December 31,					Twelve Months Ended  December 31,
	2007		2006			2007		2006
Net earnings (loss)	$	7,001	$	(337,627	)	$	1,190	$	(317,774	)
Interest expense		10,784		9,336			44,309		34,084
Income taxes		10,375		1,625			13,300		8,250
Depreciation and amortization		11,308		10,896			43,717		39,892
EBITDA		39,468		(315,770	)		102,516		(235,548	)
Restructuring charges		2,981		11,253			11,408		21,250
Debt finance charges, interest and fees associated with debt refinancing		5		3,745			13,408		3,745
Bank fees		585		735			2,785		2,845
Stock option expense		766		647			2,554		1,587
Incremental accounts receivable reserve		-		26,775			-		26,775
Asset write-down related to goodwill and other intangible assets		-		300,417			-		300,417
Adjusted EBITDA(1)	$	43,805	$	27,802		$	132,671	$	121,071

(1)Adjusted earnings before interest, taxes, depreciation and amortization(EBITDA) is a non-GAAP financial measure which is defined as net earnings excluding the following:  interest expense, income taxes, depreciation and amortization, as further adjusted to exclude restructuring charges, debt finance charges, interest and fees associated with the Company’s debt refinancing, bank fees, stock option expense, incremental accounts receivable reserve and asset write-downs related to goodwill and other intangible assets.  It should be noted that the Company’s definition of Adjusted EBITDA may not be comparable to similar measures disclosed by other companies because not all companies and analysts calculate Adjusted EBITDA in the same manner.  We believe that these types of exclusions are also recognized by the industry in which we operate as relevant in computing Adjusted EBITDA as a supplementary non-GAAP financial measure widely used by financial analysts and others in our industry to meaningfully evaluate a company’s future operating performance and cash flow.  Moreover, our definition of Adjusted EBITDA as presented herein also may be useful in reflecting certain debt covenant measurements under our senior secured credit facility.  In addition to these recognized purposes, we also use EBITDA and Adjusted EBITDA to evaluate our performance.

INVACARE CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NET EARNINGS (LOSS) PER SHARE

TO ADJUSTED EARNINGS PER SHARE (2)

(In thousands, except per share data)	Three Months Ended  December 31,					Twelve Months Ended  December 31,
	2007		2006			2007			2006
Net earnings (loss) per share – assuming dilution *	$	0.22	$	(10.61	)	$	0.04		$	(10.00	)
Weighted average shares outstanding- assuming dilution *		32,067		31,824			31,927			31,789
Net earnings (loss)	$	7,001	$	(337,627	)	$	1,190		$	(317,774	)
Income taxes		10,375		1,625			13,300			8,250
Earnings (loss) before income taxes		17,376		(336,002	)		14,490			(309,524	)
Restructuring charges		2,981		11,253			11,408			21,250
Debt finance charges, interest and fees associated with debt refinancing		5		3,745			13,408			3,745
Incremental accounts receivable reserve		-		26,775			-			26,775
Asset write-down related to goodwill and other intangible assets		-		300,417			-			300,417
Adjusted earnings before income taxes		20,362		6,188			39,306			42,663
Income taxes (benefit)		501		(4,215	)		(3,599	)		4,910
Adjusted net earnings	$	19,861	$	10,403		$	42,905		$	37,753
Weighted average shares outstanding- assuming dilution		32,067		31,924			31,927			32,061
Adjusted earnings per share – assuming dilution(2)	$	0.62	$	.33		$	1.34		$	1.18

(2)Adjusted Earnings per share (EPS) is a non-GAAP financial measure which is defined as net earnings excluding the impact of restructuring charges, debt finance charges, interest and fees associated with the Company’s debt refinancing, incremental accounts receivable reserve, asset write-downs related to goodwill and other intangible assets and tax valuation reserves divided by weighted average shares outstanding – assuming dilution.  It should be noted that the Company’s definition of Adjusted EPS may not be comparable to similar measures disclosed by other companies because not all companies and analysts calculate Adjusted EPS in the same manner.  We believe that these types of exclusions are also recognized by the industry in which we operate as relevant in computing Adjusted EPS as a supplementary non-GAAP financial measure widely used by financial analysts and others in our industry to meaningfully evaluate a company’s operating performance.

* Net earnings (loss) per share – assuming dilution calculated for twelve-months ended December 31, 2006 utilizing weighted average shares outstanding – basic as a result of the Company’s net loss.

Business Segments -The Company operates in five primary business segments:  North America / Home Medical Equipment (“HME”), Invacare Supply Group, Institutional Products Group, Europe and Asia/Pacific.  The five reportable segments represent operating groups, which offer products to different geographic regions.  Intersegment revenue for reportable segments was $24,897,000 and $89,301,000 for the three and twelve months ended December 31, 2007 and $26,884,000 and $103,539,000 for the same periods a year ago.  The information by segment is as follows:

(In thousands)	Three Months Ended  December 31,						Twelve Months Ended  December 31,
	2007			2006			2007			2006
Revenues from external customers
North America / HME	$	172,844		$	165,112		$	668,305		$	676,326
Invacare Supply Group		68,553			60,034			256,993			228,236
Institutional Products Group		23,129			24,496			89,026			93,455
Europe		139,201			116,286			498,109			430,427
Asia/Pacific		23,035			19,177			89,804			69,591
Consolidated	$	426,762		$	385,105		$	1,602,237		$	1,498,035
Earnings (loss) before income taxes
North America / HME*	$	8,348		$	(332,512	)	$	10,793		$	(315,763	)
Invacare Supply Group		781			457			3,198			3,291
Institutional Products Group		109			816			801			4,789
Europe		12,803			5,011			36,170			26,077
Asia/Pacific		(2,960	)		(1,892	)		(6,750	)		(7,318	)
All Other		(1,705	)		(7,882	)		(29,722	)		(20,600	)
Consolidated	$	17,376		$	(336,002	)	$	14,490		$	(309,524	)
Restructuring charges before income taxes
North America / HME	$	244		$	3,565		$	3,865		$	9,614
Invacare Supply Group		22			317			67			1,009
Institutional Products Group		-			-			172			38
Europe		1,431			6,372			4,495			8,658
Asia/Pacific		1,284			999			2,809			1,931
Consolidated	$	2,981		$	11,253		$	11,408		$	21,250
Debt finance charges, interest and fees associated with debt refinancing
All Other	$	5		$	3,745		$	13,408		$	3,745
Earnings (loss) before income taxes excluding restructuring charges and debt finance charges, interest and fees associated with debt refinancing
North America / HME*	$	8,592		$	(328,947	)	$	14,658		$	(306,149	)
Invacare Supply Group		803			774			3,265			4,300
Institutional Products Group		109			816			973			4,827
Europe		14,234			11,383			40,665			34,735
Asia/Pacific		(1,676	)		(893	)		(3,941	)		(5,387	)
All Other		(1,700	)		(4,137	)		(16,314	)		(16,855	)
Consolidated	$	20,362		$	(321,004	)	$	39,306		$	(284,529	)

“All other” consists of unallocated corporate selling, general and administrative expense and inter-company profits, which do not meet the quantitative criteria for determining reportable segments.  In addition, the “All other” earnings (loss) before income taxes for 2007 includes debt finance charges, interest and fees associated with debt refinancing and earnings (loss) associated with a consolidated variable interest entity.

*Quarter and year ended December 31, 2006 includes $26.8 million pre-tax expense related to an incremental accounts receivable reserve and $300.4 million pre-tax expense for asset write-downs related to goodwill and other intangible assets.

INVACARE CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)	December 31, 2007 (unaudited)		December 31, 2006
Current Assets
Cash, cash equivalents and marketable securities	$	62,455	$	82,393
Trade receivables – net		264,143		261,606
Inventories – net		195,604		201,756
Deferred income taxes and other current assets		75,371		110,003
Total Current Assets		597,573		655,758
Other Assets		196,398		170,319
Plant and equipment – net		169,376		173,945
Goodwill		543,183		490,429
Total Assets	$	1,506,530	$	1,490,451
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable	$	150,170	$	163,041
Accrued expenses		145,958		147,776
Accrued income taxes		8,495		12,916
Short-term debt and current maturities of long-term debt		24,510		124,243
Total Current Liabilities		329,133		447,976
Long-Term Debt		513,342		448,883
Other Long-Term obligations		110,012		107,223
Shareholders’ Equity		554,043		486,369
Total Liabilities and Shareholders’ Equity	$	1,506,530	$	1,490,451

INVACARE CORPORATION AND SUBSIDIARIES

RECONCILIATION FROM NET CASH PROVIDED BY

OPERATING ACTIVITIES TO FREE CASH FLOW (UNAUDITED)

(In thousands)	Three Months Ended  December 31,						Twelve Months Ended  December 31,
	2007			2006			2007			2006
Net cash provided by operating activities	$	48,688		$	25,173		$	79,100		$	62,454
Plus:
Net cash impact related to restructuring activities		2,055			2,228			13,006			9,935
Less:
Purchases of property and equipment, net		(6,329	)		(4,002	)		(19,567	)		(19,491	)
Free Cash Flow	$	44,414		$	23,399		$	72,539		$	52,898

Free cash flow is a non-GAAP financial measure that is comprised of net cash provided by operating activities, excluding net cash impact related to restructuring activities less purchases of property and equipment, net of proceeds from sales of property and equipment.  Management believes that this financial measure provides meaningful information for evaluating the overall financial performance of the Company and its ability to repay debt or make future investments (including, for example, acquisitions).