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                        SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D. C.  20549

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                                   FORM 10-K

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996       COMMISSION FILE NUMBER 0-9387
                          -----------------                              ------

                                  EMPI, INC.
            (Exact name of registrant as specified in its charter)

             MINNESOTA                                        41-1310335
        (State or other jurisdiction of                     (I.R.S. employer
        incorporation or organization)                     identification no.)

            599 CARDIGAN ROAD
           ST. PAUL, MINNESOTA                                  55126
    (Address of principal executive offices)                  (Zip code)


       Registrant's telephone number, including area code  (612)  415-9000
                                                           ---------------

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       Securities registered pursuant to Section 12 (b) of the Act:  NONE
                                                                     ----

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

                        NO PAR VALUE COMMON STOCK
                        -------------------------
                            (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 twelve 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 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 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/

The aggregate market value of the voting stock held by non-affiliates of the
registrant on March 21, 1997, was approximately $156,932,666.

The number of shares outstanding of the registrant's class of common stock as of
March 21, 1997, was 8,259,614 shares of no par value common stock.

                DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Annual Meeting of Shareholders to be
held May 13, 1997, are incorporated by reference into Part III.

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ITEM 1.     BUSINESS

GENERAL

Empi, Inc. ("Empi" or the "Company") is one of the largest medical device
companies in rehabilitative medicine in the United States.  The Company is a
leading supplier of electrotherapy products, iontophoretic drug delivery
products, orthotic products, and incontinence treatment products to the physical
therapy, sports medicine, and incontinence treatment markets, worldwide.  Empi
designs, develops, and produces products which are supported by clinical outcome
studies collected by the Company.

Empi was organized as a Minnesota corporation in October 1977.  The Company's
corporate headquarters is located at 599 Cardigan Road, St. Paul, Minnesota
55126, telephone (612) 415-9000.

COMPANY STRATEGY

Empi has established five major strategic initiatives to guide and manage the
Company's business.

(1)  MARKET LEADERSHIP

    Empi seeks to be the leader in its chosen markets by continuing  to broaden
    the Company's product offerings with the highest quality products and with
    superior customer service.  In 1996, the Company added to its orthotics
    product line by introducing the Protonics-TM- functional active resistance
    knee orthosis as well as new models of the Advance Dynamic ROM-Registered
    Trademark- devices. Empi also expanded catalog offerings by adding such
    items as a therapeutic ultrasound system, a clinic-based electrical
    stimulation system, and the Total Gym-Registered Trademark- Therapy System.
    The Company also organized a number of continuing education programs for
    clinicians and physical therapists during 1996.  In 1997 the Company
    intends to develop new products, pursue additional marketing partnerships,
    and increase public awareness and customer education programs to reinforce
    its leadership position in the physical therapy market.  In addition, Empi
    intends to continue to explore new market opportunities which diversify its
    business.

(2)  REIMBURSEMENT

    The Company is committed to maintaining reimbursement for all its products
    as well as extending the availability of coverage for its incontinence
    therapies.  Empi has invested significant  resources to establish a strong
    medical billing and patient care service organization that verifies
    coverage and reimbursement levels on behalf of the patient.  Empi plans to
    continue to work with leading physicians to publish outcome studies which
    support the effectiveness of the Company's products.  In 1996 the Company
    presented the first outcomes-based study of Empi's Epix XL-Registered
    Trademark- TENS device in the CLINICAL JOURNAL OF PAIN and the ARCHIVES
    OF PHYSICAL MEDICINE AND REHABILITATION.  Using evidence from well
    constructed randomized clinical studies the Company intends to continue to
    aggressively seek reimbursement from the Health Care Financing
    Administration (HCFA) for its incontinence products.  Empi was extremely
    disappointed with HCFA's decision, May 1996, not to grant reimbursement
    status for pelvic floor stimulation to treat urinary incontinence.
    Following such decision, the Company was, however, able to expand regional
    coverage for its incontinence products through new agreements with key
    Health Maintenance Organizations.  Empi also promotes its products as being
    highly effective, low cost alternatives to surgery or medication.

(3)  NATIONAL ACCOUNTS

    Today's U.S. healthcare market has never been more dynamic.  Empi
    recognized the importance of being in a position to respond to those
    dynamics in 1994 when it formed its National Accounts department, whose
    charter is to leverage the Company's market position by negotiating
    preferred supplier agreements with prominent national and regional provider
    networks, payor groups, and managed care organizations.  This group is also
    responsible for raising the awareness and acceptance level for Empi's
    products with key decision makers in Medicare, Medicaid, state workers
    compensation agencies, and private insurance plans.  To further this
    effort, the Company hired a director of national accounts in 1996 to
    oversee the development and implementation of the Company's objectives.


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(4)  ORGANIZATIONAL DEVELOPMENT

    Empi recognizes the necessity to grow, develop, and strengthen the
    Company's organizational talent pool.  In 1996, the Company dedicated
    substantial training resources to establish a consultative selling approach
    with our field sales representatives as well as our internal sales and
    marketing employees.  During the year, Empi integrated the organization's
    domestic sales and marketing functions while strengthening the functional
    leadership team, at the director level.  In 1997, the Company intends to
    focus on refining its sales and marketing approach to the incontinence
    market and improving time-to-market performance in new product development.

(5)  PROFITABILITY

    Empi has made consistent improvements in earnings per share performance in
    1995 and 1996 by rigorously managing expenses and making wise capital
    investments in order to favorably leverage its top line revenue growth.
    The Company remains dedicated to providing strong returns to shareholders
    by efficiently managing its sales and marketing organization, management
    information systems, operating expenses, gross margins, and pricing
    strategies.  The Company plans to continue to seek opportunities to
    leverage its existing distribution base by broadening and diversifying its
    product  offerings.

PRODUCTS

    ELECTROTHERAPY

    TENS DEVICES:  Physicians and physical therapists have treated their
    patients' chronic and acute pain with electrical stimulation, often
    referred to as "transcutaneous electrical nerve stimulation" or "TENS," for
    over 20 years.  Although TENS may not be effective for every patient or
    every condition, medical professionals have generally accepted TENS as an
    effective treatment for chronic or acute pain resulting from a variety of
    medical conditions.  TENS devices are most frequently used to treat
    persistent orthopedic conditions such as low back pain, joint stiffness and
    muscle spasm.  Physicians have also prescribed TENS for pain resulting from
    a variety of other conditions including abdominal surgery, post-operative
    pain, arthritis, tendonitis, phantom limb pain and childbirth.  TENS
    devices generally reduce pain while the device is being used, as well as
    for a period of time following usage, but do not cure the cause of the
    pain.

    TENS devices consist of a small, portable, battery-powered electrical pulse
    generator which is connected via wires to electrodes placed at or near the
    site of the patient's pain.  The devices are small enough to fit into a
    shirt pocket and weigh approximately 5 ounces, allowing patients to
    alleviate pain conveniently at home or elsewhere.  The electrodes are
    attached to the skin with an interface layer of conductive gel.  The
    stimulator produces low voltage pulses of electricity which can be
    delivered continuously or intermittently in different wave forms.  Empi's
    leading TENS product, Epix XL, is a market leader due to its pre-programmed
    features and high intensity capability.

    Two theories have been advanced to explain the manner in which TENS
    alleviates pain.  The "gate control theory" postulates that the electrical
    impulses from TENS devices block or interfere with the neurological
    transmission of pain signals from the site of the injury to the brain.  A
    second theory suggests that the electrical impulses prompt the release of
    endogenous endorphins, the body's natural pain suppressing agents.  Neither
    theory has conclusive support in the scientific literature.  Under either
    theory, TENS relieves pain without the costs and risks associated with
    surgery or the undesirable side effects and physiological problems of
    prolonged drug use which can include addiction, stupor, depression,
    disorientation, nausea and ulcers.

    NMES DEVICES:  Medical professionals also use electrical stimulation to
    activate and exercise muscles for rehabilitative purposes.  "Neuromuscular
    electrical stimulation" or "NMES" has proven effective in producing
    controlled, involuntary muscle contractions which can maintain the strength
    and mobility of a limb or prevent deterioration of muscle tissues in
    patients who are unable to perform voluntary muscle contraction.
    Physicians have prescribed neuromuscular stimulation in a variety of
    circumstances intended to improve muscle tone, increase joint mobility and
    accelerate recovery from traumatic injury.  Common conditions for which
    NMES therapy may be prescribed include common knee injuries, swelling,
    spasticity and improper gait.


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    ACCESSORIES:  The Company meets the needs of the customer by supplying
    accessories such as electrodes, cables, conductive gel, skin care
    products, batteries and other accessories, which are either manufactured by
    Empi or purchased from other vendors for resale.  The Company has exclusive
    rights to distribute several unique models of electrodes.

    Empi believes that the U.S. market for TENS, NMES, and Accessories is in
    excess of $100 million, and  the Company anticipates the market to grow, in
    unit volume, by approximately 5% per annum.

   IONTOPHORETIC DRUG DELIVERY

    IONTOPHORESIS:  Iontophoresis is a process which uses electric current to
    assist drug transfer through the skin.  Iontophoretic applications include
    the delivery of local anesthesia and anti-inflammatory medication for
    tissue treatment.  For many applications, use of iontophoresis can be
    advantageous when compared to a syringe because it allows medications to be
    dispersed without invading the joint space.  It can also avoid many of the
    systemic and other side effects frequently associated with oral medications
    or injections.

    The Company has developed both a proprietary iontophoresis device and
    patented buffered electrode capable of delivering small molecule drugs that
    can be ionized, such as drugs for arthritis, bursitis, tendonitis and
    related conditions.  The system is controlled by a microprocessor and uses
    continuous low voltage electrical current which delivers charged drug
    particles through the skin's surface.  The Company estimates that the
    current market for human iontophoresis systems is approximately $30 million
    and that the market defined in sales dollars is growing at a rate of
    approximately 10% per annum.  The Company is continually investigating
    alternate uses of this technology in new medical markets.

    The Company received FDA 510 (k) clearance in July 1990 for its
    Dupel-Registered Trademark- iontophoresis device and in November 1991 for
    its buffered electrode.  The Company introduced its iontophoresis system,
    for human use,  to the marketplace in the first quarter of 1992.  During
    1996, Empi developed and test marketed the Relion-TM- iontophoresis drug
    delivery system for use in the equine veterinary marketplace.  Relion was
    tested over several months and appears to offer veterinarians a useful
    system for local delivery of a variety of drugs for the treatment of
    horses.  In February of 1997 the Company launched Relion in the U.S. and
    International marketplace through regional veterinary distributors.

    ORTHOTICS/OEM

    ORTHOTICS:  The Advance Dynamic ROM orthoses product line is used to
    correct joint range of motion limitations at the wrist, elbow, knee or
    ankle.  The Company's Advance Dynamic ROM orthosis is based on the
    principle that particular connective tissue will remodel over time in
    response to the type and amount of physical stress  it receives.  The
    Advance Dynamic ROM orthosis addresses the permanent or plastic component
    of connective tissue deformation to achieve long-term range of motion
    improvement.  It does this by gently delivering low-load stress at the
    joint's end-range over a prolonged period of time.  The Company's Advance
    Dynamic ROM orthosis product line consists of models for the elbow, wrist,
    knee and ankle joints and was introduced in the first quarter of 1995.
    Range of motion limitations, generally referred to as contractures, often
    result following long periods of restricted motion or when scar adhesions
    form following trauma.  The dynamic orthoses line fits very well with the
    Company's focus on cost effective treatments used outside the clinic
    setting.  The Company estimates that the current ROM orthotics market is
    approximately $30 million and that the growth potential over the next few
    years is estimated at 15% per year.

    During the second quarter of 1996, Empi entered into an agreement with
    Inverse Technology Corporation to market Protonics, a functional active
    resistance orthosis, to physicians and physical therapists.  The innovative
    design of Protonics addresses neuromuscular disorders in patients with knee
    dysfunction problems by helping to strengthen muscles, ligaments and
    tendons surrounding the knee joint through resistive exercise.  The
    addition of Protonics is part of the Company's strategy to become a leader
    in the growing therapeutic bracing market.  After a brief test marketing
    period, Protonics was launched nationally in the fourth quarter of 1996.

    The Company also has a national distribution agreement to market
    Pronex-TM-, a cervical traction device used to relieve chronic neck pain by
    relaxing muscle tension and spasms and by mechanical separation of the
    cervical vertebrae.  Pronex is sold to physical therapists and patients.


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    OEM:  To further leverage the Company's sales force, Empi teamed up with
    Rehab Med+Equip in 1995 to offer a broad line of catalog items to physical
    therapy clinics and the home health care industry.  The catalog contains
    over 250 products.  New to the catalog this year is a therapeutic
    ultrasound system, a clinic-based electrical stimulation system, and the
    Total Gym Therapy System.

    The Total Gym Therapy System is a complete body exercise system that allows
    therapists to accurately assess early, post-surgery or post-injury, lower
    body function in a closed chain, partial weight bearing position.  It is
    effective for quantitative clinical testing of functional abilities and
    allows therapists to design comprehensive, injury specific rehabilitation
    protocols that achieve proprioceptive response.

INCONTINENCE TREATMENT

    FEMALE URINARY INCONTINENCE PRODUCTS:  In 1987, the Company began a
    research project relating to the application of its electro-therapeutic
    technology to the treatment of female urinary incontinence.  In July 1991,
    the Company received FDA 510 (k) clearance for Innova-Registered Trademark-
    PFS, the Company's female pelvic floor rehabilitation system.  Urinary
    incontinence is the involuntary loss of urine so severe as to have social,
    psychological or hygienic consequences.   According to the 1996 Agency for
    Health Care Policy and Research (AHCPR) guidelines, "the U.S. spends $16
    billion a year to care for people with urinary incontinence, up from $10
    billion in 1990."  At least 50% of the 1.5 million men and women in nursing
    homes suffer from incontinence.  This condition is often a principal reason
    that leads families of the elderly to commit them to full-time care.
    Current treatments for female urinary incontinence range from surgical
    procedures with a three to four day hospital stay and costs of $6,000 to
    $13,000, to behavioral therapy or pharmacologic therapy.  Products designed
    to manage the problem of urinary incontinence include incontinence
    appliances such as catheters, collection devices, and urethral plugs as
    well as incontinence disposables such as adult diapers or briefs, padded
    undergarments and bed pads designed to keep urine away from the patient's
    skin.  Innova PFS is designed to cure or control stress, urge and mixed
    incontinence.  Stress incontinence, the most common form, is the inability
    of the sphincter to hold back urine when there is a sudden increased
    pressure on the bladder.  Leakage of urine commonly occurs with activities
    such as coughing, sneezing, lifting and exercising.  Urge incontinence
    occurs when the bladder is irritated and contracts spontaneously causing a
    sudden need to urinate.  Mixed incontinence is a combination of both stress
    and urge incontinence.  Traditionally, urge incontinence has been treated
    with pharmacological therapy.  Many patients are intolerant of the
    medication's side effects.  Stress incontinence is poorly treated by
    pharmacological treatment and therefore, in most cases, has resulted in
    surgical intervention.

    Innova PFS is composed of an externally worn, microprocessor-based
    neuromuscular stimulator that activates a proprietary multi-channel vaginal
    or rectal electrode.  The device automatically delivers timed dosages of
    stimulation for the treatment of stress, urge and mixed incontinence during
    twenty-minute treatment sessions.  The treatment sessions are generally
    performed twice a day in the convenience and privacy of the home.  The
    regular use of Innova PFS can improve or cure stress, urge or mixed
    incontinence; published studies indicate a success rate of 60-90%.  The
    cost of treatment with Innova PFS is approximately six to nine hundred
    dollars, including physician fees.

    The Company believes electro-therapeutic pelvic muscle stimulation will
    eventually be selected as one of the first choice treatments before more
    invasive treatments due to its noninvasive nature, lower cost, lower risk
    and lack of side effects.  The recent AHCPR guidelines, for the treatment
    of adult urinary incontinence, gives pelvic floor electrical stimulation
    (PFS) a "B" strength of evidence recommendation for stress, urge and mixed
    incontinence.  This is the same rating currently enjoyed  by available
    surgical alternatives.  While there are other pelvic muscle stimulation
    devices available, Innova PFS has been proven to be safe and effective
    based on controlled clinical studies, which have been published in peer-
    reviewed journals. The Company has designed an intravaginal electrode which
    it believes has several significant advantages over other electrodes,
    including the patented ComfortPulse-Registered Trademark- technology which
    makes the electrode more comfortable and effective during treatment.  The
    Company added three new electrode models in the last year, for both male
    and female use.

    It is estimated that more than 13 million women in the United States suffer
    from urinary incontinence.  The Company believes that, for various reasons,
    electro-therapeutic treatment will not be appropriate for a portion of
    these women.  The Company's initial target market includes women aged 35-65
    who, when properly diagnosed, would benefit from electrical stimulation
    therapy.  The Company estimates that there are at least 6 million women in
    this target market.  One of the biggest business risks facing the Company
    is establishment of broad reimbursement coverage for Empi's Innova PFS
    system.  The Company is also investigating the use of Innova for


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the treatment of post-prostatectomy incontinence, fecal incontinence and
interstitial cystitis.  Studies using Innova to treat these conditions are under
review.

MANUFACTURING

Empi manufactures most of its electrotherapy devices and its Advance ROM
orthotic devices, as well as some components and related accessories, at its
Clear Lake, South Dakota facility.  Manufacturing activities at the Clear Lake
facility include electronic and mechanical assembly, electrode fabrication and
assembly, and fabric sewing processes.

The Company's products are comprised of a variety of components including metal
or plastic cases, plastic subassemblies, die cast metal parts, injection-molded
plastic parts, printed circuit boards, electronic components, alkaline and
rechargeable nickel cadmium batteries, battery chargers, leadwires, electrodes
and other components.  These parts are purchased from outside suppliers and some
are manufactured by others on a custom basis for the Company.

Many of the component parts and raw materials used by the Company in its
manufacturing and  assembly operations are available from more than one
supplier.  However, several component parts and accessory products are currently
purchased through a single supply source.  If these components were no longer
available, the Company believes it could develop alternative sources that would
avoid any material adverse effect upon the Company's operations.

CUSTOMERS, MARKETING AND SALES

The Company's primary customers are patients, physical therapists/clinics, U.S.
distributors, and International distributors.  These customers represented 61%,
30%, 4%, and 5%, respectively, of Empi's net sales for fiscal 1996. As of
year-end 1996, Empi had approximately 115 sales representatives, in the field,
selling rehabilitation products domestically on a direct basis to physicians,
physical therapists and their patients.  The Company currently serves over
12,000 physical therapy clinics and hospital physical therapy departments. The
Company also provides its customers a network for direct billing to insurance
claims offices, Medicare carriers, HMO's and other managed healthcare programs.
On February 24, 1997 Empi announced the launch of its new Relion-TM-
iontophoresis product line for veterinary use.  The new Relion  iontophoresis
line was developed for equine use and will be marketed through distributors.

Empi has also invested in both telemarketing and direct mail programs to contact
patients who use its TENS and NMES devices to help them meet their needs in
reordering accessory products.  Telemarketing and direct sales programs are also
used to contact home healthcare dealers who purchase the Company's products for
resale to hospitals, clinicians and patients.

Responding to the consolidation of provider networks and larger payor groups,
which have gained leverage in coverage and reimbursement decisions, the Company
established a national accounts group in 1994 to address those coverage and
reimbursement issues and to gain preferred supplier agreements with the leading
provider and payor groups.

Empi believes that combining the Company's direct sales force, state-of-the-art
patient care services, clinic customer service, third party billing services,
and national account service gives the Company a distinct competitive advantage
in today's market place.

The Company sells its products internationally through distributors and dealers.
At the end of 1996 Empi had 21 International distributors covering 27 countries,
worldwide.  A Japanese distributor agreement with Nihon Medix, of Tokyo , Japan
was finalized and signed in April 1996.  The Company introduced the Advance ROM
orthoses product line in Germany in May 1996 and plans to introduce the Advance
ROM and Protonics in additional countries, in 1997.

No individual customer accounted for 10 percent or more of total revenue for
1996, 1995, or 1994, respectively.


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COMPETITION

ELECTROTHERAPY

The Company believes that its two strongest competitors in the electrotherapy
market are Rehabilicare, Inc. and Staodyn, Inc., and also believes that the
principal competitive factors in the electrotherapy marketplace are price,
product quality and service.  Empi believes its competitive advantage in the
electrotherapy marketplace to be higher quality products and superior customer
service.

IONTOPHORETIC DRUG DELIVERY

The Company feels its primary competitors in the iontophoretic market are IOMED,
Inc., Life-Tech, Inc. and Henley International, Inc.

ORTHOTICS/OEM

The Company's major competitors in the orthosis market are Dynasplint and
DeRoyal/LMB.  In the cervical traction market, the Company faces three main
competitors: Saunders, Staodyn and Lossing.

INCONTINENCE TREATMENT

Several companies are developing new treatment products designed to cure or
control incontinence problems, including injectable biomaterials, improved drug
therapy, other electro-therapeutic devices and muscle contraction biofeedback
devices.  Each of these treatment approaches is aimed at eliminating or reducing
a patient's reliance on incontinence appliances or disposable diapers.  Utah
Medical, BMR and Stimtech all have pelvic floor stimulation devices on the
market.  Currently, none of these devices have published placebo-controlled
clinical studies to support the effectiveness of their product claims.

PRODUCTS AND TECHNOLOGIES UNDER DEVELOPMENT

Empi's current research and development efforts are principally directed towards
the development of next generation products and technologies related to the
Company's electrotherapy, iontophoresis, orthotics and incontinence businesses,
enhancement of existing products, and manufacturing process developments to
improve product performance and costs.  In 1996 research and development focused
on developing a low cost incontinence pelvic floor stimulation system, a new
TENS device with data collection capabilities, expanding the iontophoresis
technology into new markets, new models for the Advance ROM, and other new
therapeutic braces.

In fiscal 1996, 1995, and 1994, the Company's research and development expenses
(including clinical studies) were $3,476,000, $3,424,000, and $3,432,000
respectively.  These expenses are expected to increase in future years.

BACKLOG

As of February 28, 1997, Empi did not have a material backlog situation and does
not expect to experience a material backlog situation in the foreseeable future.


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PATENTS AND TRADEMARKS

The Company currently owns numerous U.S. patents issued between 1982 and 1996.
These patents cover various aspects and features of Empi's electrotherapy
devices and associated electrodes, incontinence devices and associated
electrodes, and range of motion orthotic devices.  A number of patents and
trademarks were obtained as a result of the Nortech and PHD acquisitions which
cover various aspects of electrodes, stimulators and surface sEMG equipment.  In
addition, numerous patent applications have been filed on various aspects of
range of motion orthotic devices, incontinence electrodes, and iontophoresis
electrodes.  The initial life of each patent issued to the Company is either 14
or 17 years from the date of issue.

Although the Company generally seeks patent protection when possible, it does
not consider patent protection to be a significant, competitive advantage in the
marketplace for electro-therapeutic devices; however, patent protection may be
of significance with various aspects of the Company's incontinence electrode
technology and its orthosis technology.  There is no assurance that any of the
Company's existing patents or any patents obtained in the future will provide
substantial protection, or be of commercial benefit to the Company, or that
their validity will not be successfully challenged; and there is also no
assurance that the Company's products will not infringe upon any patents held by
others.

The Company has also registered and filed applications to register various
trademarks with the U.S. Patent and Trademark Office and appropriate offices in
foreign countries.  There is no assurance that the Company's assertion of
trademark protection will prevent competitors from infringing on the Company's
trademarks.

GOVERNMENT REGULATIONS AND REIMBURSEMENT

GOVERNMENT REGULATIONS

Medical device development, testing, manufacturing, labeling and marketing are
regulated under the Federal Food, Drug and Cosmetic Act (the "ACT"), as amended,
and additional regulations promulgated thereunder.  These statutes and
regulations require that manufacturers adhere to certain standards designed to
assure product safety and effectiveness.

The FDA's "Good Manufacturing Practices of Medical Devices" regulation
establishes standards for the Company's manufacturing processes, requires
maintenance of certain records and provides for unscheduled inspections of the
Company facilities.  Certain requirements of state, local and foreign
governments must also be complied with in the manufacture and marketing of the
Company's products.  The Company believes its operations meet the  requirements
of these regulations.

New medical devices require regulatory approval prior to market introduction. In
the United States, new medical devices are subject to either the 510(k)
Pre-Market Notification regulation or the Pre-Market Approval (PMA) regulation;
the pathway is dependent on the device's nature and intended use.  International
registration and approval requirements vary and are country dependent.  Most
regulatory approvals require submission of extensive documentation, engineering,
pre-clinical testing and manufacturing information to demonstrate compliance
with the pertinent regulations.  In some cases, product electronics, appearance
or labeling must be modified in order to comply with the foreign regulations.
In addition, some products may require extensive clinical testing to obtain
regulatory approval.  The Company anticipates the FDA may require submission of
additional clinical testing concerning iontophoretic drug delivery.  In this
regard, the Company is preparing the necessary clinical trial data to support
the ongoing sale of its iontophoresis product, Dupel.

The Company contracts with an outside certification authority to review the
conformance of its quality assurance system to two recognized international
quality system standards, ISO-9001 and EN 46001.  Continued certification is
essential for compliance with the Medical Device Directive in the European
Union.  The Company received this certification in 1996.

REIMBURSEMENT

A significant portion of the Company's revenues are paid by third-party payors,
such as Medicare, workers compensation, private insurance companies and health
maintenance organizations, on behalf of the patients who rent or purchase the
Company's products.  The Company maintains a large support staff that verifies
third-party payor coverage prior to each purchase and bills the third-party
payor directly.  When appropriate, the Company's


                                       8
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staff obtains appropriate letters of medical necessity from the prescribing
physician and sends such letters to the third-party payor.  Delays in obtaining
appropriate documentation and the time required for claims processing by the
third-party payors have a significant impact on the Company's outstanding
receivables.

Empi's dependence on third-party payors exposes the Company to the risk of
government regulations limiting the amount that such third-party payors may pay
for the Company's products.  The Company anticipates a continuing dependence on
third-party payors with respect to new products, such as its pelvic floor
stimulation device.   The process to establish reimbursement for new technology
in the current medical marketplace is costly and time consuming.

EMPLOYEES

As of February 28, 1997, the Company had 549 employees.  Of these, 171 were
engaged in production and production support, 37 in research and development,
127 in sales and marketing, 157 in sales operations, and 57 in various
administrative capacities.

None of the Company's employees is represented by a labor union, and the Company
believes that it has an amicable and positive working relationship with its
employees.

CAUTIONARY STATEMENTS

As provided for under the Private Securities Litigation Reform Act of 1995, the
Company wishes to caution investors that the following important factors, among
others, in some cases have affected and in the future could affect the Company's
actual results of operations and cause such results to differ materially from
those anticipated in forward-looking statements made in this document and in the
Company's Annual Report by or on behalf of the Company.

The Company's goals are: (i) to expand medical device offerings by bringing
additional products to its existing markets; (ii) to take its existing
technology to markets currently not served by the Company; and (iii) to evaluate
entering other markets not currently served by the Company with new or existing
technologies.  These objectives will be pursued through internal development
efforts or through acquisition of technology, products, or entities, depending
upon Company resources and the availability of acquisition opportunities.  The
Company's efforts will also be focused on maintaining its position as a leader
in the rehabilitation medical device market.  As the Company's future sales
growth depends upon its ability to continually offer new products acceptable to
the marketplace, any inability of the Company to develop new products
internally, or to acquire technology or distribution rights from other product
manufacturers, could have a material and adverse impact on future sales.

The Company will continue to seek to diversify its product offerings and to
enter into new markets.  However, markets for the Company's current and future
products are highly competitive and subject to continuing technological change
and development.  Some of the Company's products also compete against drugs,
therapies, surgical procedures or new medical devices that may result from
future technological or medical advances.  Future sales growth will depend to
some degree upon the ability of the Company to continue to successfully market
its current and future products in this competitive environment.  In addition,
the Company's products are regulated under the federal Food, Drug and Cosmetic
Act, and the Company is required to secure clearance from the U.S. Food and Drug
Administration (FDA) prior to marketing new products.  Lack of clearance or
delays in securing clearance could negatively impact sales of new products.

The Company continues to develop a broader market acceptance of its incontinence
treatment products, the Innova PFS and Innova sEMG systems.  To date, the
Company has been unable to secure reimbursement approval from Medicare for its
Innova PFS system, and there is no assurance that such approval will be
obtained.  The Company believes that significant sales growth for these products
is dependent upon obtaining Medicare reimbursement approval.  If the Company is
unable to generate significant sales of Innova PFS, its future sales growth
would be materially and adversely affected.


                                       9
<PAGE>

More than 68 percent of the Company's sales are derived from its electrotherapy
product lines, which are used by patients and reimbursed by Medicare carriers,
workers' compensation programs, managed care and private insurance payors.
While the Company's electrotherapy product sales increased 5 percent in 1996, it
anticipates continued pressure from regulatory agencies and insurance companies
to reduce reimbursement for electrotherapy products.  This pressure will make it
difficult for the Company to continue to increase sales of its electrotherapy
products in 1997.  Any change in reimbursement policies or payment levels could
adversely affect the Company's revenues.

The Company's primary financial goal in 1997 is to increase its revenue growth
rate while continuing to enhance profitability.  To accomplish this goal, the
Company will focus on its mission:  the development, licensing or distribution
of non-invasive, biomedical products that provide the best medical value,
combining cost effectiveness and therapeutic outcomes.  If the Company is not
successful in the development, licensing or distribution of such devices, its
financial goals likely will not be met.

The Company currently purchases, and will in the future purchase, products,
parts and components from vendors.  The Company attempts wherever practical, to
have more than a single source of supply for each product, part and component.
The Company does, in some situations, have only one supplier for a product, part
or component.  If a supplier was unable or unwilling to supply any such product,
part or component in a timely manner, the Company's business could be adversely
affected.


ITEM 2.  PROPERTIES

On June 14, 1996, the Company and Cardigan Investments Limited Partnership
entered into an office/light manufacturing lease for a 93,666 square foot
building that now serves as the Company's corporate headquarters.  The term of
the lease is ten (10) years, with two (2) options to renew for five (5) years
each and commenced on October 11, 1996.  The building is located at 599 Cardigan
Road, Shoreview, Minnesota 55126.  Simultaneously, the Company vacated the other
two office building locations which were located in Fridley and Arden Hills,
Minnesota.

The Company owns two properties in Clear Lake, South Dakota.  One location is a
24,000 square foot manufacturing facility on 4 acres of property, and the other
is a 10,000 square foot warehouse on 1.3 acres.


ITEM 3.  LEGAL PROCEEDINGS

There are no material legal proceedings to which the Company is a party or of
which any of its property is the subject other than ordinary, routine litigation
incidental to the Company's business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

There were no matters submitted to a vote of shareholders during the fourth
quarter ended December 31, 1996.


                                      10
<PAGE>

EXECUTIVE OFFICERS OF THE COMPANY

Each executive officer is elected to office by the Board of Directors and holds
the office until his or her successor is elected and qualified.  There are no
family relationships among any of the Company's Directors or Officers.

The following table sets forth information with regard to the executive officers
of the Company as of March 26, 1997:

<TABLE>
<CAPTION>
                              PRINCIPAL OCCUPATION, BUSINESS
NAME AND AGE OF OFFICER       EXPERIENCE PAST FIVE YEARS
-----------------------       --------------------------------------------------------------
<S>                           <C>
Donald D. Maurer (60)         Founder of the Company in 1977.  Chairman of the Company since
                              December 1977 and Chief Scientific Officer since October
                              1994. Chief Executive Officer of the Company from April
                              1979 to September 1994.  Mr. Maurer held the additional
                              position of President from April 1979 to December 1988
                              and from February 1993 to September 1994.  Mr. Maurer is also
                              a director of Angeion, Inc.

Joseph E. Laptewicz (48)      President, Chief Executive Officer and Acting Chief
                              Financial Officer since March 1997.  President and Chief
                              Executive Officer of the Company from October 1994 to
                              February 1997. President and Chief Executive Officer of
                              Schneider (USA), Inc., manufacturer of products for
                              interventional medicine from April 1992 to September 1994
                              and Executive Vice President from July 1991 to March 1992.

Robert W. Clapp (47)          Vice President of Manufacturing of the Company since
                              March 1993.  Mr. Clapp served in the capacity of Vice
                              President of Manufacturing at Dacomed Corp., a medical
                              products manufacturer and distributor, from February 1987
                              to March 1993.

Shawn F. Featherston (43)     Vice President of Sales Operations since July 1996.  Mr.
                              Featherston served as Vice President of Human Resources
                              of the Company from January 1996 to June 1996. Prior to
                              that, his position with the Company was Director of Human
                              Resources from January 1993 to December 1995.  Prior to
                              joining the Company, he served as Human Resources
                              Consulting Manager for McGladry and Pullen from January
                              1989 to December 1992.

Gary D. Sullivan (47)         Vice President of Marketing of the Company since February
                              1995.  Prior to joining the Company, Mr. Sullivan was
                              Director of Sales and Marketing at Schneider (USA) Inc.,
                              a division of Pfizer, Inc., from October 1993 to February
                              1995.  From November 1991 to October 1993, he served as
                              Director of Marketing for Cordis Corp., a manufacturer of
                              medical devices.   Mr. Sullivan worked as an Associate at
                              Lumsden Company, an executive search firm specializing in
                              bio-technology, pharmaceuticals and diagnostics, from
                              October 1989 to November 1991.

</TABLE>


                                      11
<PAGE>

                                   PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         SHAREHOLDER MATTERS


The Company's common stock trades on the Nasdaq National Market tier of The
Nasdaq Stock Marketsm under the symbol EMPI.  High and low bid prices for each
quarter of fiscal years ended December 31, 1996 and 1995 are presented below.


                                       1996                        1995
                                 HIGH         LOW             HIGH        LOW
First. . . . . . . . . . . . . $25 7/8      $16 1/4         $12 1/8      $ 7

Second . . . . . . . . . . . . $20 1/4      $12 1/2         $16 5/8      $11 5/8

Third. . . . . . . . . . . . . $15 1/2      $11 1/4         $21 1/8      $15

Fourth . . . . . . . . . . . . $21 3/4      $14             $27 1/8      $18 1/2


The Company had 627 common shareholders of record at March 21, 1997.  The
Company has never paid a cash dividend and does not anticipate the payment of
cash dividends in the foreseeable future since earnings are expected to be
retained to finance the Company's growth.


                                       12
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

                       SELECTED SIX-YEAR FINANCIAL DATA
                                 EMPI, INC.

<TABLE>
<CAPTION>
(IN THOUSANDS,                                                            YEAR ENDED DECEMBER 31
EXCEPT PERCENTAGES AND  PER SHARE AMOUNTS)            1996       1995        1994         1993       1992         1991
------------------------------------------------------------------------------------------------------------------------

<S>                                                <C>         <C>        <C>         <C>         <C>         <C>
OPERATIONS STATEMENT DATA
Net sales. . . . . . . . . . . . . . . . . . . . . $  70,630   $ 67,342   $  61,304   $  66,377   $  33,355   $  21,819
Gross profit . . . . . . . . . . . . . . . . . . .    52,171     49,654      45,574      49,523      25,143      15,841
       Percent of sales. . . . . . . . . . . . . .     73.9%      73.7%       74.3%       74.6%       75.4%       72.6%
Operating expenses . . . . . . . . . . . . . . . .    37,751     37,319      39,377      34,198      18,834      12,421
       Percent of sales. . . . . . . . . . . . . .     53.5%      55.4%       64.2%       51.5%       56.5%       56.9%
Operating income . . . . . . . . . . . . . . . . .    14,420     12,335       6,197      15,325       6,309       3,420
       Percent of sales. . . . . . . . . . . . . .     20.4%      18.3%       10.1%       23.1%       18.9%       15.7%
Net income . . . . . . . . . . . . . . . . . . . .     9,357      8,002       3,356       9,334       4,049       2,041
       Percent of sales. . . . . . . . . . . . . .     13.3%      11.9%        5.5%       14.1%       12.1%        9.4%
Net income per share . . . . . . . . . . . . . . . $    1.08   $   0.90   $    0.39   $    1.08   $    0.48   $    0.29
Weighted average
       shares outstanding. . . . . . . . . . . . .     8,660      8,899       8,611       8,660      8,438        6,930

BALANCE SHEET DATA
Cash and security investments. . . . . . . . . . . $  20,064   $ 21,039   $  12,062   $   6,981   $   6,858   $   8,950
Working capital. . . . . . . . . . . . . . . . . .    41,187     42,512      34,344      30,434      22,076      18,013
Total assets . . . . . . . . . . . . . . . . . . .    59,841     60,737      52,708      50,185      34,551      22,300
Long-term debt . . . . . . . . . . . . . . . . . .       333      1,468       1,800       1,603       2,016          30
Shareholder's equity . . . . . . . . . . . . . . .    53,657     53,079      45,000      41,355      27,265      20,105

OTHER INFORMATION
Cash flow from operations. . . . . . . . . . . . . $  13,885   $ 11,456   $   8,655   $   2,311   $   2,910   $     923
Cash flow from operations per share. . . . . . . .      1.60       1.29        1.01        0.27        0.34        0.13
Book value per share . . . . . . . . . . . . . . . $    6.53   $   6.12   $    5.25   $    4.87   $    3.34   $    2.57
Common stock outstanding . . . . . . . . . . . . .     8,220      8,669       8,570       8,500       8,174       7,836
</TABLE>


<TABLE>
<CAPTION>


                       QUARTERLY FINANCIAL DATA (UNAUDITED)
                                   EMPI, INC.

YEAR ENDED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)            FIRST      SECOND       THIRD        FOURTH
------------------------------------------------------------------------------------------------------------
<S>                                                          <C>         <C>        <C>           <C>

DECEMBER 31, 1996
Net sales . . . . . . . . . . . . . . . . . . . .            $  16,892   $  16,937  $  17,758     $  19,043
Operating income. . . . . . . . . . . . . . . . .                3,123       3,292      3,640         4,365
Net income. . . . . . . . . . . . . . . . . . . .                2,237       2,173      2,392         2,555
Net income per share. . . . . . . . . . . . . . .                 0.25        0.25       0.28          0.30

DECEMBER 31, 1995
Net sales . . . . . . . . . . . . . . . . . . . .            $  16,524   $  16,274  $  17,273     $  17,271
Operating income. . . . . . . . . . . . . . . . .                2,695       2,985      3,266         3,389
Net income. . . . . . . . . . . . . . . . . . . .                1,708       1,939      2,124         2,231
Net income per share. . . . . . . . . . . . . . .                 0.20        0.22       0.24          0.24

</TABLE>

ALL SHARE AND PER SHARE DATA HAVE BEEN RESTATED TO REFLECT A 3-FOR-2 STOCK
SPLIT, EFFECTIVE AUGUST 1991, AND A 2-FOR-1 STOCK SPLIT, EFFECTIVE JUNE 1993.


                                      13
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items
reflected in the financial statements as a percent of sales:

PERCENT OF SALES

                                                YEAR ENDED DECEMBER 31
                                         1996             1995             1994
-------------------------------------------------------------------------------
Net sales. . . . . . . . . . . . .      100.0%           100.0%          100.0%
Cost of sales. . . . . . . . . . .        26.1             26.3            25.7
Gross profit . . . . . . . . . . .        73.9             73.7            74.3
Selling, general and
     administrative. . . . . . . .        48.6             50.3            58.6
Research and development . . . . .         4.9              5.1             5.6
Operating income . . . . . . . . .        20.4             18.3            10.1
Other income (expense) net . . . .         1.2              1.2            (.1)
Income before taxes. . . . . . . .        21.6             19.5            10.0
Income tax provision . . . . . . .         8.3              7.6             4.5
Net income . . . . . . . . . . . .        13.3             11.9             5.5
                                    -------------------------------------------
                                    -------------------------------------------

GENERAL

Empi, Inc., the "Company," meets the needs of the rehabilitation, orthopedic
and incontinence treatment medical markets through the development,
manufacturing and marketing of innovative, cost effective, biomedical
products and services to continuously improve the quality of life for
patients with functional disabilities.

Currently, the Company has four main product groups: electrotherapy,
iontophoretic drug delivery, orthotic/OEM and incontinence treatment.

The Company's electrotherapy rehabilitation products include: TENS
(transcutaneous electrical nerve stimulation) devices for the treatment of
chronic and acute pain, NMES (neuromuscular electrical stimulation) devices
for restoring muscle tone and mobility, and related TENS and NMES
accessories. These devices work by delivering carefully programmed,
low-voltage pulses of electrical energy.

During the past four years, the Company has broadened and enhanced its
product lines through a number of collaborations with other companies, as
well as the introduction of new, internally developed products.

In 1992, the Company developed a proprietary iontophoretic drug delivery
system, Dupel-Registered Trademark-, that can deliver local anesthesia and
anti-inflammatory medications non-invasively through the skin.  The
iontophoretic drug delivery product line was expanded by the introduction of
Relion-TM- in the first quarter of 1997, for use in the veterinary market.

In 1995, the Company developed a line of orthotic products, the Advance
Dynamic ROM orthoses, which are used to correct range of motion limitations
resulting from surgery or immobilization following an injury.  The current
year brought an expansion of the Advance product line with orthoses for
amputee patients.

Also in 1995, through the establishment of cooperative marketing agreements,
the Company began distributing PRONEX-Registered Trademark-, an orthotic
device used for cervical traction, and the Total Gym line of exercise
systems, as well as a full line of catalog products for both physical therapy
clinics and home health care. In 1996, the Protonics orthosis for functional
knee rehabilitation was introduced into the Company's orthoses product line
as a distributed product.


                                      14
<PAGE>

The Company's premier product for the treatment of incontinence is the
Innova-Registered Trademark- PFS (pelvic floor stimulation) system,
introduced in 1992.  Innova PFS treats urinary incontinence using a
proprietary vaginal electrode that is programmed to cause contractions,
thereby strengthening pelvic floor muscles.  The Company diversified its
incontinence product line in 1993 by manufacturing and marketing the Innova
sEMG (surface electromyography) system for teaching proper pelvic floor
muscle movement and control.  In 1996, the Company introduced a proprietary
rectal electrode for use with the Innova PFS system to treat both female and
male incontinence.

The Company currently serves more than 12,000 physical therapy facilities and
has a network for direct billing to insurance claims offices, Medicare
carriers, HMOs and other managed health care programs.  The Company benefits
from this direct link to both patients and third-party payors, and considers
its direct sales force, patient follow-up and insurance billing system to be
distinct competitive advantages.  An additional link to third-party payors
was added in 1994 with the creation of a specialized sales force that calls
on managed care organizations and third-party payors.  These national account
managers address coverage and reimbursement issues and seek to establish
purchase contracts for the Company's products.  At the end of 1996, the
Company had seven national account managers.

RESULTS OF OPERATIONS

SALES

The Company achieved record net sales for 1996.  Net sales grew by 5 percent
over the prior year to $70.6 million.  Electrotherapy sales accounted for 69
percent of total sales and increased by 5 percent over 1995 levels.
Electrotherapy pricing generally remained consistent from 1995 to 1996 in the
Company's retail and wholesale rehabilitation markets.  Drug delivery product
sales increased by 3 percent over the prior year, with increased volumes
partially offset by lower prices resulting from increased competition.
Orthotics/OEM product sales grew by 7 percent over 1995 levels and were enhanced
by the September 1996 introduction of Protonics.  Incontinence sales for 1996
increased 26 percent from a relatively small sales base in 1995.

As of year end 1996, the Company had approximately 115 sales representatives
selling products domestically on a retail basis.  International sales, as a
percentage of total sales, were 5 percent in 1996 and 6 percent in 1995.  The
majority of international sales are generated through distribution agreements
with retailers located in  Germany, Canada, and Spain.  During 1995, the Company
closed its Canadian sales office.  All Canadian sales are now being handled by
one master distributor located in Quebec.

The Company's 1995 sales increased by 10 percent to $67.3 million from $61.3
million in 1994.  Sales of the Company's electrotherapy products and related
accessories increased 2 percent, from $45.4 million to $46.1 million.  The
iontophoresis product line sales increased 21 percent in 1995 compared with
1994.  The product line with the strongest relative sales growth was the
orthotic/OEM product line, with a 106 percent increase in 1995 over 1994.
Sales in 1995 of the incontinence product line increased 5 percent as
compared with 1994.  The Company's sales increase in 1995 was primarily
attributable to the growth of the Company's newer rehabilitation products.
The Dupel, Advance Dynamic ROM and PRONEX products accounted for most of the
dollar gains in sales. While incontinence sales increased slightly from prior
year levels, lack of consistent reimbursement continued to adversely impact
growth of the Company's incontinence product line.

GROSS PROFIT

Gross profit as a percentage of sales was 73.9 percent in 1996, compared with
73.7 percent in 1995.  Continued manufacturing efficiency improvements were
partially offset by reduced margins on iontophoretic drug delivery products
caused by pricing pressures.  Lower-margin wholesale sales were 9 percent of
total sales for 1996, compared with 11 percent for 1995.

Gross profit for 1995 was 73.7 percent of sales, compared with 74.3 percent for
1994.  The primary contributors to the lower gross profit percentage for 1995
were higher manufacturing and distribution costs related to the increase in the
volume of products shipped.


                                      15
<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE

Selling, general and administrative expenses were $34.3 million, or 48.6 percent
of sales, for 1996, versus $33.9 million, or 50.3 percent of sales, in 1995.
This improvement resulted from the Company's continued expense control programs,
including the consolidation of two corporate locations and reductions in
incentive compensation and administrative expenses.

Selling, general and administrative expenses, stated as a percentage of sales
for 1995 and 1994, were 50.3 percent and 58.6 percent, respectively.  Selling,
general and administrative expenses for 1995 totaled $33.9 million, compared
with $35.9 million in 1994.  In 1994, the Company incurred one-time charges for
a write-down of goodwill, an incremental increase in its bad debt provision and
costs associated with a reduction in its work force.  After adjusting for 1994's
one-time charges, total selling, general and administrative spending in 1995 was
flat compared with 1994.

RESEARCH AND DEVELOPMENT

Research and development expenses increased slightly to $3.5 million in 1996
from $3.4 million in 1995, or 4.9 percent of 1996 sales as compared with 5.1
percent of 1995 sales.   The Company's 1996 research and development efforts
were focused on developing next-generation electrotherapy devices, expanding the
orthotics product line, designing new incontinence treatment products and
developing iontophoretic drug delivery system applications for new markets.

Research and development expenses were $3.4 million for both 1995 and 1994.
Stated as a percentage of sales, research and development expenses for 1995 were
5.1 percent, compared with 5.6 percent for 1994.  The Company's research and
development expenses in 1995 were spread relatively evenly among the
electrotherapy, orthotic and iontophoretic drug delivery product groups, with
slightly higher expenditures for incontinence treatment products and other new
product research and development.

OTHER INCOME AND EXPENSES

Interest income was $1.0 million in 1996, up from $798,000 in 1995.  The higher
interest income is the result of the Company's strengthened cash position.
Interest expense for 1996 was $69,000, versus $114,000 in 1995.  The primary
contributor to interest expense was an interest-bearing note issued to partially
finance the Company's 1992 acquisition of Nortech, a division of Medtronic, Inc.
In the third quarter of 1996, the Company repaid the remaining debt and retired
the note.  In the first quarter of 1996, the Company recorded a one-time gain in
excess of $200,000 from the settlement of a trade dress infringement lawsuit,
and in the fourth quarter of 1996 recorded $378,000 in non-recurring expenses
relating to the Company's relocation to a new corporate facility.

In 1995, other income included a one-time gain of $42,000 from the sale of its
UROFITNESS-TM- CENTER, and a one-time gain of $70,000 on the sale of MedAmicus,
Inc. common stock.  Interest income was $798,000 in 1995, compared with $311,000
in 1994.  Interest expense was $114,000 in 1995 and $168,000 in 1994.

NET INCOME

Net income in 1996 improved to $9.4 million, an increase of $1.4 million, or
17 percent.  The improvement resulted from higher sales levels, combined with
strong expense controls.  As a result of the higher net income and the
Company's stock buyback program, 1996 earnings per share increased from $.90
to $1.08, reflecting a 20 percent increase over 1995.  Earnings per share in
1996 increased by approximately $.02 per share as a result of the stock
buyback program.  Net income in 1995 was $8.0 million, compared with $3.4
million in 1994.  Higher sales, combined with relatively flat spending and no
major one-time charges, in addition to the improvement in other income, were
the main reasons for the increase in net income for 1995.


                                      16
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's financial position remains very strong.  Cash and security
investments were $20.1 million as of December 31, 1996, a decrease of
approximately $1.0 million from the year ended December 31, 1995.  Due to its
strong cash position, the Company decided to cancel its $7.0 million line of
credit in 1995.  The Board of Directors approved a $4.0 million stock buyback
program commencing in 1995.  During 1996, the Board of Directors authorized an
additional $10.0 million to buy back and retire shares.  Some of the shares
repurchased under the program will be used to cover stock issuances in
connection with the Company's stock option and stock purchase plans. The Company
bought back and retired 778,000 warrants and shares of common stock at a total
cost of $9.9 million during 1996.  During 1995, the Company bought back and
retired 62,000 shares of common stock at a total cost of $1.2 million.  The
Company intends to continue its stock repurchase program in 1997.  As of
December 31, 1996, the Company's working capital was $41.1 million and its
current ratio was 8.0 to 1.0.  Cash flows generated from operations were $13.9
million in 1996, $11.5 million in 1995, and $8.7 million in 1994.

Accounts receivable remained relatively flat on a 5 percent sales increase,
reflecting sound collection efforts in 1996.  Inventories decreased
approximately $1.0 million, or 11 percent, in 1996.  Lower raw material balances
accounted for the majority of the inventory reduction.  Expenditures for
property, plant, and equipment were $4.1 million in 1996, up 121 percent over
1995 expenditures.  Leasehold improvements and other equipment purchases related
to the move to the new corporate facility accounted for approximately $2.5
million of 1996's capital outlays.  The Company believes its cash and cash
equivalents and short-term investments, together with cash flow from operations,
will be sufficient to meet the Company's currently projected needs for working
capital and capital requirements for the foreseeable future.

OUTLOOK

The statements contained in this Outlook are based on current expectations.
These statements are forward looking, and actual results may differ materially.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties, which are described below.

The Company's goals are: (i) to expand medical device offerings by bringing
additional products to its existing markets; (ii) to take its existing
technology to markets currently not served by the Company; and (iii) to evaluate
entering other markets not currently served by the Company with new or existing
technologies.  These objectives will be pursued through internal development
efforts or through acquisition of technology, products, or entities, depending
upon Company resources and the availability of acquisition opportunities.  The
Company's efforts will also be focused on maintaining its position as a leader
in the rehabilitation medical device market.  As the Company's future sales
growth depends upon its ability to continually offer new products acceptable to
the marketplace, any inability of the Company to develop new products
internally, or to acquire technology or distribution rights from other product
manufacturers, could have a material and adverse impact on future sales.

The Company will continue to seek to diversify its product offerings and to
enter into new markets.  However, markets for the Company's current and future
products are highly competitive and subject to continuing technological change
and development.  Some of the Company's products also compete against drugs,
therapies, surgical procedures or new medical devices that may result from
future technological or medical advances.  Future sales growth will depend to
some degree upon the ability of the Company to continue to successfully market
its current and future products in this competitive environment.  In addition,
the Company's products are regulated under the federal Food, Drug and Cosmetic
Act, and the Company is required to secure clearance from the U.S. Food and Drug
Administration (FDA) prior to marketing new products.  Lack of clearance or
delays in securing clearance could negatively impact sales of new products.

The Company continues to develop a broader market acceptance of its incontinence
treatment products, the Innova PFS and Innova sEMG systems.  To date, the
Company has been unable to secure reimbursement approval from Medicare for its
Innova PFS system, and there is no assurance that such approval will be
obtained.  The Company believes that significant sales growth for these products
is dependent upon obtaining Medicare reimbursement approval.  If the Company is
unable to generate significant sales of Innova PFS, its future sales growth
would be materially and adversely affected.


                                      17
<PAGE>

More than 68 percent of the Company's sales are derived from its electrotherapy
product lines, which are used by patients and reimbursed by Medicare carriers,
workers' compensation programs, managed care and private insurance payors.
While the Company's electrotherapy product sales increased 5 percent in 1996, it
anticipates continued pressure from regulatory agencies and insurance companies
to reduce reimbursement for electrotherapy products.  This pressure will make it
difficult for the Company to continue to increase sales of its electrotherapy
products in 1997.  Any change in reimbursement policies or payment levels could
adversely affect the Company's revenues.

The Company's primary financial goal in 1997 is to increase its revenue growth
rate while continuing to enhance profitability.  To accomplish this goal, the
Company will focus on its mission:  the development, licensing or distribution
of non-invasive, biomedical products that provide the best medical value,
combining cost effectiveness and therapeutic outcomes.  If the Company is not
successful in the development, licensing or distribution of such devices, its
financial goals likely will not be met.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to List of Financial Statements and Financial Statement Schedule,
along with such financial statements, immediately following the signature pages
of this Report.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTING AND FINANCIAL
         DISCLOSURE

None.

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 regarding the Company's directors included
in the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held May 13, 1997 under the caption "Election of Directors" is incorporated
herein by reference.

The information required by Item 10 regarding the Company's executive officers
is set forth in Part I of this report.

The information required by Item 10 regarding compliance with Section 16(a) of
the Exchange Act included in the Company's Proxy Statement for the Annual
Meeting of Shareholders to be held May 13, 1997 under the caption "Compliance
with Section 16 (a) of the Exchange Act" is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 regarding executive compensation included in
the Company's Proxy Statement for the Annual Meeting of Shareholders to be held
May 13, 1997 under the caption "Executive Compensation" is incorporated herein
by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS & MANAGEMENT

The information required by Item 12 regarding voting securities and principal
holders thereof included in the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held May 13, 1997 under the caption "Principal
Shareholders and Management Ownership" is incorporated herein by reference 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 included in the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on May 13, 1997 under the
caption "Certain Transactions" is incorporated herein by reference.


                                      18
<PAGE>

                                   PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A)  (1) AND (2)  --  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

    See Index to Consolidated Financial Statements and Schedules, which begins
    on Page F-1 immediately following the signature pages to this report.

    (3)  --  Exhibits.

    (3.1)      Restated Articles of Incorporation, as amended.

    (3.2)      Bylaws together with amendment adopted June 12, 1986, have
               been filed as Exhibit 3.2 to the Company's Report on Form 10-K
               for the fiscal year ended December 31, 1987, and are included
               herein by reference pursuant to Rule 12b-32.

    (4.1)      Certificate for shares of Common Stock has been filed as
               Exhibit 4.1 to the Company's Registration Statement on Form S-2,
               Registration No. 33-42568, and is incorporated herein by
               reference pursuant to Rule 12b-32.

    (10.1)     Employment agreement with Donald D. Maurer, dated May 1, 1993
               has been filed as Exhibit 10.3 to the Company's Report on Form
               10-K for the fiscal year ended December 31, 1993, and is
               incorporated herein by reference pursuant to Rule 12b-32.*

    (10.2)     Empi, Inc. 1987 Stock Option Plan together with Forms of
               incentive and non-qualified option agreements has  been filed as
               Exhibit 10.7 to the Company's Report on Form 10-K for the fiscal
               year ended December 31, 1987, and is incorporated herein by
               reference pursuant to Rule 12b-32.*

    (10.3)     Amendment to Empi, Inc. 1987 Stock Option Plan has been filed as
               Exhibit 10.8 to the Company's Report on Form 10-K for the fiscal
               year ended December 31, 1992, and is incorporated herein by
               reference pursuant to Rule 12b-32.*

    (10.4)     Amendment to Empi, Inc. 1987 Stock Option Plan dated
               December 22, 1992 has been filed as Exhibit 10.13 to the
               Company's Report on Form 10-K for the fiscal year ended
               December 31, 1993, and is incorporated herein by reference
               pursuant to Rule 12b-32.*

    (10.5)     Amendment to Empi, Inc. 1987 Stock Option Plan dated February 9,
               1995, has been filed as Exhibit 10.16 to the Company's Report on
               Form 10-K for the fiscal year ended December 31, 1994, and is
               incorporated herein by reference pursuant Rule 12b-32.*

    (10.6)     Empi, Inc. 1992 Employee Stock Purchase Plan has been filed as
               Exhibit 10.9 to the Company's Report on Form 10-K for the fiscal
               year ended December 31, 1992, and is incorporated herein by
               reference pursuant to Rule 12b-32.*

    (10.7)     Employment agreement with Joseph E. Laptewicz, dated October 1,
               1994 has been filed as Exhibit 10  to the Company's Report on
               Form 10-Q for the quarter ended September 30, 1994, and is
               incorporated herein by reference pursuant to Rule 12b-32.*

    (10.8)     Lease dated July 14, 1996, between the Company and Cardigan
               Investments, a limited Partnership covering office/light
               manufacturing space in Shoreview, Minnesota has been filed as
               Exhibit 10 to the Company's Report on Form 10-Q for the quarter
               ended September 30, 1996, and is included herein by reference
               pursuant to Rule 12b-32.

    (10.9)     Empi, Inc. 1997 Employee Stock Purchase Plan.

    (11)       Statement re:  computation of per share earnings.


                                      19
<PAGE>

ITEM 14.  --   EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
               8-K - CONTINUED


    (21)       A list of Subsidiaries of the Company has been filed as
               Exhibit 21 to the Company's Report on Form 10-K for the fiscal
               year ended December 31, 1993, and is incorporated herein by
               reference pursuant to Rule 12b-32.

    (23)       Consent of Independent Auditors.

    (24)       Power of Attorney for Joseph E. Laptewicz Jr., Donald D.
               Maurer, Warren S. West, Scott R. Anderson, Harold G. Olson and
               Everett F. Carter.  (Included on signature page of this report.)

    (27)       Financial Data Schedule (Filed only in electronic format.)


* Management contract or compensatory plan.


(B) REPORTS ON FORM 8-K

    No Reports on Form 8-K were filed during the quarter ended
    December 31, 1996.

(C) EXHIBITS

    The response to this portion of Item 14 (a) (3) is submitted as a
    separate section of this Report.

(D) FINANCIAL STATEMENT SCHEDULE

    See Index to Consolidated Financial Statements and  Financial Statement
    Schedule which begins on Page F-1 immediately following the signature pages
    of this Report.


                                      20
<PAGE>

                                  SIGNATURES

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.

                                           EMPI, INC.

March 26, 1997            By
                                           /s/ Joseph E. Laptewicz Jr.
                                           ----------------------------------
                                           Joseph E. Laptewicz Jr., 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 and on the dates indicated.

                              (Power of Attorney)

Each person whose signature appears below constitutes and appoints Donald D.
Maurer and Joseph E. Laptewicz Jr. as his true and lawful attorneys-in-fact
and agents, each acting alone, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments to this Annual Report on Form 10-K
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, each acting alone, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all said attorneys-in-fact and agents, each acting alone, or his substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.

March 26, 1997
                                           /s/ Joseph E. Laptewicz Jr.
                                           ----------------------------------
                                           Joseph E. Laptewicz Jr., President,
                                           Chief Executive Officer and
                                           Director (Principal Executive
                                           Officer) and Acting Chief Financial
                                           Officer

March 26, 1997
                                           /s/ Donald D. Maurer
                                           ----------------------------------
                                           Donald D. Maurer, Chairman and Chief
                                           Scientific Officer

March 26, 1997
                                           /s/ Scott R. Anderson
                                           ___________________________________
                                           Scott R. Anderson, Director

March 26, 1997
                                           /s/ Warren S. West
                                           ___________________________________
                                           Warren S. West, Director

March 26, 1997

                                           ___________________________________
                                           Kenneth F. Tempero, Director

March 26, 1997
                                           /s/ Harold G. Olson
                                           ___________________________________
                                           Harold G. Olson, Director

March 26, 1997
                                           /s/ Everett F. Carter
                                           ___________________________________
                                           Everett F. Carter, Director


                                      21
<PAGE>

                            ANNUAL REPORT ON FORM 10-K



             ITEM 8, ITEM  14 (a)  (1)  AND  (2),  AND  ITEM  14 (d)

                           LIST OF FINANCIAL STATEMENTS
                         AND FINANCIAL STATEMENT SCHEDULE

                              FINANCIAL STATEMENTS
                          FINANCIAL STATEMENT SCHEDULE

                          YEAR ENDED DECEMBER 31, 1996



                                  EMPI, INC.

                             ST. PAUL, MINNESOTA




                                     F-1
<PAGE>







                    CONSOLIDATED FINANCIAL STATEMENTS

                                  EMPI, INC.

                  YEARS ENDED DECEMBER 31, 1996 AND 1995



                                      F-2
<PAGE>

FORM 10-K -- ITEM  14 (a)  (1)  and  (2)

                                  EMPI, INC.

              INDEX TO LIST OF CONSOLIDATED FINANCIAL STATEMENTS
                     AND FINANCIAL STATEMENT SCHEDULE


1.  FINANCIAL STATEMENTS                                              PAGE
                                                                      ----

       Report of Independent Auditors................................. F-4

       Consolidated Balance Sheets -- December 31, 1996 and 1995...... F-5

       Consolidated Statements of Operations -- Years ended
         December 31, 1996, 1995 and 1994............................. F-6

       Consolidated Statements of Shareholders' Equity -- Years ended
         December 31, 1996, 1995 and 1994............................. F-7

       Consolidated Statements of Cash Flows -- Years ended
         December 31, 1996, 1995 and 1994............................. F-8

       Notes to Consolidated Financial Statements --
         December 31, 1996............................................ F-9


2.  FINANCIAL STATEMENT SCHEDULE

       Schedule II -- Valuation and Qualifying Accounts...............F-14


All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


                                      F-3
<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Empi, Inc.

We have audited the accompanying consolidated balance sheets of Empi, Inc. as
of December 31, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the three years
in the period ended December 31, 1996.  Our audits also included the
financial statement schedule listed in the Index at Item 14(a).  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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Empi, Inc. at
December 31, 1996 and 1995, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended December
31, 1996, 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.

                                       /s/ Ernst & Young LLP

Minneapolis, Minnesota
January 30, 1997


                                     F-4
<PAGE>

EMPI, INC. CONSOLIDATED BALANCE SHEETS


                                                           DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)                   1996          1995
------------------------------------------------------------------------------


ASSETS
Current assets:
  Cash and cash equivalents                            $  2,849      $  5,949
  Short-term investments                                 15,216        13,090
  Accounts receivable, less allowances
    $5,062--1996;  $5,966--1995                          15,944        15,846
  Inventories                                             7,320         8,269
  Deferred income taxes                                   5,002         4,842
  Other                                                     707           706
                                                   -----------------------------
       Total current assets                              47,038        48,702

Equipment and improvements:
  Equipment                                              10,995        10,144
  Furniture and fixtures                                  1,630         1,147
  Leasehold improvements                                  3,287         1,187
                                                   -----------------------------
                                                         15,912        12,478
  Less accumulated depreciation and amortization          8,822         7,349
                                                   -----------------------------
                                                          7,090         5,129
Other assets                                              3,714         4,906
Long-term investments                                     1,999         2,000
                                                   -----------------------------
Total assets                                            $59,841       $60,737
                                                   -----------------------------
                                                   -----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                     $  2,455      $  1,924
  Employee compensation                                   1,792         1,955
  Commissions payable                                       596           747
  Current portion of long-term debt                         287           676
  Income taxes                                              386           634
  Other                                                     335           254
                                                   -----------------------------
          Total current liabilities                       5,851         6,190

Long-term debt, less current portion                        333         1,468

Shareholders' equity:
  Common stock, no par value:
     Authorized shares - 25,000,000
     Issued and outstanding shares - 8,219,940 in 1996
       and 8,668,659 in 1995                             15,331        24,110
  Retained earnings                                      38,326        28,969
                                                   -----------------------------
          Total shareholders' equity                     53,657        53,079
                                                   -----------------------------
Total liabilities and shareholders' equity              $59,841       $60,737
                                                   -----------------------------
                                                   -----------------------------


SEE ACCOMPANYING NOTES.


                                      F-5
<PAGE>

EMPI, INC. CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    YEAR ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)          1996         1995         1994
-------------------------------------------------------------------------------


Net sales                                     $70,630      $67,342      $61,304
Cost of goods sold                             18,459       17,688       15,730
                                          -------------------------------------
  Gross profit                                 52,171       49,654       45,574

Operating expenses:
  Selling, general and administrative          34,275       33,895       35,945
  Research and development                      3,476        3,424        3,432
                                          -------------------------------------
                                               37,751       37,319       39,377
                                          -------------------------------------
  Income from operations                       14,420       12,335        6,197
Other income (expense), net                       795          783          (38)
                                          -------------------------------------
  Income before income taxes                   15,215       13,118        6,159
Income tax expense                              5,858        5,116        2,803
                                          -------------------------------------
  Net income                                 $  9,357     $  8,002     $  3,356
                                          -------------------------------------
                                          -------------------------------------
Net income per common and common
  equivalent share                            $  1.08       $  .90       $  .39
                                          -------------------------------------
                                          -------------------------------------
Weighted average common and common
  equivalent shares outstanding during
  the year                                      8,660        8,899        8,611
                                          -------------------------------------
                                          -------------------------------------

SEE ACCOMPANYING NOTES.


                                      F-6
<PAGE>

EMPI, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


                                                  COMMON STOCK      RETAINED
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)            SHARES    AMOUNT    EARNINGS
--------------------------------------------------------------------------------
Balance January 1, 1994                      8,500,443  $  23,744  $  17,611
  Exercise of stock options and warrants        48,525         90          -
  Tax benefits of stock options                      -        (21)         -
  Employee stock purchase plan                  21,403        220          -
  Net income                                         -          -      3,356
                                           -------------------------------------

Balance December 31, 1994                    8,570,371     24,033     20,967
  Exercise of stock options and warrants        57,025        470          -
  Tax benefits of stock options                      -        105          -
  Employee stock purchase plan                 103,263        722          -
  Purchase and retirement of stock             (62,000)    (1,220)         -
  Net income                                         -          -      8,002
                                           -------------------------------------

Balance December 31, 1995                    8,668,659     24,110     28,969
   Exercise of stock options and warrants       60,384        411          -
  Tax benefits of stock options                      -        311          -
  Employee stock purchase plan                  18,897        359          -
  Purchase and retirement of stock            (528,000)    (8,160)         -
  Purchase and retirement of warrant rights          -     (1,700)         -
  Net income                                         -          -      9,357
                                           -------------------------------------

Balance December 31, 1996                    8,219,940  $  15,331  $  38,326
                                           -------------------------------------
                                           -------------------------------------


SEE ACCOMPANYING NOTES.


                                      F-7
<PAGE>

EMPI, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                  YEAR ENDED DECEMBER 31
(IN THOUSANDS)                                1996        1995        1994
-------------------------------------------------------------------------------


OPERATING ACTIVITIES
Net income                                     $  9,357    $  8,002    $  3,356
Adjustments to reconcile net income to
  net cash provided by operating activities:
  Permanent impairment of investments                 -           -         170
  Depreciation and amortization                   3,506       3,512       4,020
  Provision for deferred income taxes              (160)       (566)     (1,729)
  Gain on sale of long-term investments               -         (70)          -
  Loss on sale of equipment                         101          56           4
  Provision for loss on accounts receivable       2,216       2,565       4,395
  Changes in operating assets and liabilities:
    Accounts receivable                          (2,314)     (1,586)        578
    Inventories                                     949        (782)    (1,344)
    Other                                           (50)         25        (348)
    Accounts payable and accrued expenses           217         145        (514)
    Income taxes payable                             63         155          67
                                               ---------------------------------
      Net cash provided by operating activities  13,885      11,456       8,655

INVESTING ACTIVITIES
Maturities of short-term investments             14,624       2,100       2,497
Purchase of short-term investments              (16,750)     (9,881)     (7,306)
Maturities of long-term investments               3,000       1,080           -
Purchase of long-term investments                (2,999)     (1,909)     (1,021)
Additions to other assets                          (233)       (115)       (450)
Acquisition of Nortech                                -           -      (1,115)
Purchase of equipment and improvements           (4,123)     (1,864)     (1,744)
Proceeds from sale of equipment                     110          79           8
                                               ---------------------------------
      Net cash used in investing activities      (6,371)    (10,510)     (9,131)

FINANCING ACTIVITIES
Payments on long-term debt                       (1,524)       (619)       (413)
Purchase and retirement of common stock
  and warrant rights                             (9,860)     (1,220)          -
Proceeds from exercise of common stock options      770       1,190         310
                                               ---------------------------------
      Net cash used in financing activities     (10,614)       (649)       (103)
                                               ---------------------------------
      Net increase (decrease) in cash and
        cash equivalents                         (3,100)        297        (579)
Cash and cash equivalents at beginning of year    5,949       5,652       6,231
                                               ---------------------------------
      Cash and cash equivalents at end of year $  2,849    $  5,949     $ 5,652
                                               ---------------------------------
                                               ---------------------------------


SEE ACCOMPANYING NOTES


                                     F-8
<PAGE>

EMPI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 .
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

The Company develops, manufactures and distributes non-invasive biomedical
devices and accessories for applications in the rehabilitation, orthopedic
and incontinence markets. The primary market for the company's products is in
the United States.  The Company also does a small percentage of business in
Canada, Europe and the Far East.

BASIS OF PRESENTATION

The consolidated financial statements include the Company and its
wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

INVESTMENTS

Investments in marketable equity securities and debt securities are
classified as available-for-sale. Available-for-sale securities are carried
at fair value with the unrealized gains and losses, net of tax, reported as a
separate component of shareholders' equity. Realized gains and losses and
declines in value judged to be other than temporary on available-for-sale
securities, interest and dividends are included in investment income.

INVENTORIES

Inventories are valued at the lower of cost (first-in, first-out method) or
market.

EQUIPMENT AND IMPROVEMENTS

Equipment and improvements are stated on the basis of cost. Depreciation and
amortization of equipment and improvements are computed on the straight-line
method for book purposes (accelerated methods for income tax purposes) over
estimated useful lives of 25 years for building improvements, seven to eight
years for furniture and fixtures, five years for equipment, and three years
for computers.

OTHER ASSETS

Other assets consist primarily of intangible assets including goodwill of
$2,820,000, a $3,000,000 non-compete agreement with Medtronic, Inc., costs
paid to wholesale distributors for territorial distribution rights and patent
costs. These assets are being amortized on a straight-line basis over their
estimated useful lives ranging from four to seven years. Accumulated
amortization was $5,887,000 and $4,333,000 at December 31, 1996 and 1995,
respectively. The Company reduced the carrying amount of its goodwill by
$700,000 at December 31, 1994, due to indicators of an impairment of the
asset.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted
cash flows estimated to be generated by those assets are less than the
assets' carrying amount


                                      F-9
<PAGE>

EMPI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

EARNINGS PER SHARE

Earnings per share is based on the weighted average number of common shares
outstanding plus common share equivalents resulting from dilutive stock
options and warrants. Primary and fully diluted earnings per share are
approximately the same.

NOTE 2. INVESTMENTS

Investments consist of the following:                      (IN THOUSANDS)

                              Cash              Short-       Long-
           Type            Equivalents          Term         Term         Total
--------------------------------------------------------------------------------
   DECEMBER 31, 1996
   Preferred stock       $      -             $  5,000   $      -       $  5,000
   Bonds                        -               10,216      1,999         12,215
   Other                    1,319                    -          -          1,319
                      ----------------------------------------------------------
                         $  1,319            $  15,216   $  1,999      $  18,534
                      ----------------------------------------------------------
                      ----------------------------------------------------------
   DECEMBER 31, 1995
   Preferred stock       $    500             $  6,000   $      -       $  6,500
   Bonds                        -                5,619      2,000          7,619
   Commercial paper           887                1,000          -          1,887
   Other                      882                  471          -          1,353
                      ----------------------------------------------------------
                         $  2,269            $  13,090   $  2,000      $  17,359
                      ----------------------------------------------------------
                      ----------------------------------------------------------

At December 31, 1996 and 1995, the cost of investments approximated market
value. During 1994, the Company recognized a loss of $170,000 due to a
decline in the value of an equity security deemed to be other than temporary.
The security was sold in 1995 and a gain of $70,000 was recognized.

Interest income included in other income was $1,039,000, $798,000, and
$311,000 for the years ended December 31, 1996, 1995 and 1994, respectively.

NOTE 3. INVENTORIES

Inventories consist of the following:

                                                               December 31
(IN THOUSANDS)                                              1996         1995
--------------------------------------------------------------------------------
   Finished goods                                          $5,399      $5,873
   Work in process                                            678         632
   Raw materials                                            1,243       1,764
                                                        ------------------------
                                                           $7,320      $8,269
                                                        ------------------------
                                                        ------------------------

 Note 4. Borrowings

 Long-term borrowings consist of:
                                                               December 31
 (IN THOUSANDS)                                            1996        - 1995
--------------------------------------------------------------------------------
   Notes payable                                            $620       $2,144
   Less current maturities                                   287          676
                                                        ------------------------
                                                            $333       $1,468
                                                        ------------------------
                                                        ------------------------


                                     F-10
<PAGE>

EMPI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

On November 18, 1992, the Company issued a promissory note for $2 million in
conjunction with the acquisition of the Nortech division of Medtronic, Inc.
The note is repayable in five annual installments of $400,000, with the first
payment occurring on November 11, 1994. The note bears interest at 7 percent
with accrued interest payable semi-annually. In the event of default, the
payor has the right to convert the remaining principal balance, along with
accrued interest, into shares of the Company's Common Stock at $14.20 per
share.  On September 27, 1996, the Company paid to Medtronic, Inc. the
remaining principal balance of this promissory note in addition to accrued
interest.

Notes payable now includes $620,000 of debt issued in conjunction with dealer
acquisitions and non-compete agreements.

Annual maturities of long-term debt are:  1997--$287,000, 1998--$266,000, and
1999--$67,000.

Total interest paid for the years ended December 31, 1996, 1995 and 1994 was
$79,000, $121,000 and $168,000, respectively. Interest expense included in
other income (expense) was $69,000, $114,000 and $168,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.

NOTE 5. INCOME TAXES

At December 31, 1996, the Company has a net operating loss carryforward of $1
million for income tax purposes, resulting from the Company's 1993
acquisition of Physical Health Devices, Inc., which will expire in the year
2007. The Company's ability to utilize the net operating loss carryforward
will be subject to Internal Revenue Code Section 382 limitations. For
financial reporting purposes, a valuation allowance of $332,000 and $382,000
at December 31, 1996 and 1995, respectively, has been recognized to offset
the deferred tax asset related to the carryforward. If realized, the tax
benefit for this item will reduce the goodwill related to the acquisition of
Physical Health Devices, Inc.

Deferred income taxes reflect the net effect of temporary differences between
the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax assets and liabilities as of December 31, 1996
and 1995 are as follows:

  (IN THOUSANDS)                                                   1996     1995
--------------------------------------------------------------------------------
  Deferred tax assets:
    Allowance for doubtful accounts                              $3,716  $3,829
    Net operating loss carryforward                                 332     382
    Amortization of non-compete agreement                           592     476
    Self-insurance medical accrual                                   74     105
    Vacation accrual                                                160     168
    Inventory                                                       257     239
    Other                                                           415     332
                                                               -----------------
    Total deferred tax assets                                     5,546   5,531
    Deferred tax liabilities                                       (165)   (255)
                                                               -----------------
    Net deferred tax assets                                       5,381   5,276
    Valuation allowance for deferred tax assets                    (379)   (434)
                                                               -----------------
                                                                 $5,002  $4,842
                                                               -----------------
                                                               -----------------

  (IN THOUSANDS)                                          1996     1995    1994
--------------------------------------------------------------------------------
  Current:
    Federal                                             $5,040   $4,811  $3,804
    State                                                  978      871     728
  Deferred:
    Federal                                               (118)    (504) (1,547)
    State                                                  (42)     (62)   (182)
                                                   -----------------------------
                                                        $5,858   $5,116  $2,803
                                                   -----------------------------
                                                   -----------------------------

                                     F-11
<PAGE>

EMPI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:

                                                          1996     1995    1994
                                                   -----------------------------
Statutory rate                                              34%      34%     34%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit                      4        4       5
Amortization of goodwill                                      .5      1       6
Other                                                        -        -       1
                                                   -----------------------------
Effective rate                                              38.5%    39%     46%
                                                   -----------------------------
                                                   -----------------------------

Total income taxes paid during the years ended December 31, 1996, 1995 and
1994 were $5,876,000, $5,469,000, and $4,485,000, respectively.

In 1996 and 1995, income tax benefits of $311,000 and $105,000, respectively,
were allocated to stockholders' equity.  Such benefits were attributable to
employee stock option transactions.

NOTE 6.  STOCK OPTIONS

The Company has a qualified and nonqualified stock option plan for officers,
key employees and non-employee directors.  The options are granted at fair
market value and are exercisable over periods up to 10 years from grant date
in various increments.  Shares reserved for issuance upon the exercise of
warrants and options were 1,005,440 at December 31, 1996

At December 31, 1996 and 1995 options for 213,275 and 158,000 shares,
respectively were exercisable.

Option activity in the stock option plan is summarized as follows:

                               Qualified    Non-Qualified       Weighted
                                Option         Option       Average Exercise
                                Shares         Shares            Price
-------------------------------------------------------------------------------

  Balance
    January 1, 1995             393,820       304,757
    Granted                      77,015        31,568           $  8.73
    Canceled/expired            (16,700)       (2,500)            21.21
    Exercised                   (42,025)      (15,000)             9.42
                            -------------------------------
  Balance
    December 31, 1995           412,110       318,825
    Granted                      77,104        26,846             21.36
    Canceled/expired            (96,013)      (30,806)            15.13
    Exercised                   (44,479)      (15,905)          $  6.82
                            -------------------------------
  Balance
    December 31, 1996           348,722   298,960

The Company also has an Employee Stock Purchase Plan.  The Plan enables
employees to contribute up to 10 percent of their compensation toward the
purchase of the Company's common stock at 85 percent of market value.  At
December 31, 1996, 300,000 shares are reserved for future employee purchases
of stock under the Plan.

In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has adopted the disclosure-only provisions of SFAS
123 but applies Accounting Principles Board Opinion No. 25 and related
interpretations in accounting for its plans.  Accordingly, compensation cost
for stock options is measured as the excess, if any, of the quoted market
price of the Company's stock at the date of the grant over the amount an
employee must pay to acquire the stock.  The Company recognized no
compensation expense in 1996, 1995 or 1994 under APB 25.


                                     F-12
<PAGE>

EMPI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

If the Company had elected to recognize compensation cost for the stock
option plan and employee stock purchase plan based on the fair value at the
grant dates for awards under those plans, consistent with the method
prescribed by SFAS 123, net income and earnings per share would have been
changed to the pro forma amounts indicated below:

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)             1996             1995
--------------------------------------------------------------------------------
Net income               As reported             $  9,357             $  8,002
                         Pro forma                  9,051                7,613


Earnings per share       As reported              $  1.08               $  .90
                         Pro forma                   1.05                  .86

Note: The pro forma effect on net income for 1996 and 1995 is not
representative of the pro forma effect on net income in future years because
it does not take into consideration pro forma compensation expense related to
grants made prior to 1995.

The fair value of stock options used to compute pro forma net income and
earnings per share disclosures is the estimated present value at grant date
using a Black-Scholes option-pricing model with the following weighted
average assumptions for 1996 and 1995: dividend yield of 0%; expected
volatility of 61.44%; a risk free interest rate of    5.66% and an expected
holding period of 3.83 years. The weighted average values of the options
granted are $10.47 and $4.48 for 1996 and 1995, respectively.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable.  In addition, option valuation models require the input
of highly subjective assumptions including the expected stock price
volatility.  Because the Company's employee stock options have
characteristics significantly different than those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options.

NOTE 7. CAPITAL STOCK

On May 11, 1994, the Board of Directors and shareholders authorized an
additional 10,000,000 shares of common stock.

In 1996, the Company purchased and retired 250,000 warrant rights for $1.7
million which were originally issued in conjunction with the 1992 acquisition
of the Nortech division of Medtronic, Inc.

NOTE 8. LEASES

The Company leases office space under noncancelable operating leases. These
leases expire on various dates through 2006.

Future minimum payments under all lease arrangements subsequent to 1996 are:
1997--$567,000, 1998--$564,000, 1999--$564,000, 2000--$564,000,
2001--$564,000, and thereafter--$2,706,000.

Rent expense for the years ended December 31, 1996, 1995 and 1994 was
$660,000, $526,000, and $552,000, respectively.

NOTE 9. RETIREMENT PLAN

The Company has a Retirement Profit Sharing and Savings Plan under Section
401(k) of the Internal Revenue Code. The Plan allows employees to defer up to
10% of their income on a pre-tax basis through contributions to the Plan. For
every dollar the employee contributes up to 6% of their income, the Company
will contribute $.50. In 1996, 1995 and 1994, the Company's matching
contribution was $404,000, $421,000 and $377,000, respectively.


                                     F-13
<PAGE>

EMPI, INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS


                          YEAR ENDED DECEMBER 31, 1996
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Col. A                     Col. B                  Col. C                        Col. D           Col. E
------------------------------------------------------------------------------------------------------------
                                                 Additions
                                          -----------------------
                                           (1)                (2)                  (3)

                                                         Charged to Other
                         Beginning Of  Charged to Costs     Accounts --       Deductions --   Balance at End
Description                Period        and Expenses        Describe           Describe         of Period
------------------------------------------------------------------------------------------------------------
<S>                      <C>           <C>                <C>                 <C>             <C>
  Year ended
    December 31, 1996:
    Allowance for
    doubtful accounts    $  5,966      $  2,416           $   -0-            $  3,320          $  5,062

    Inventory reserve       2,757           766               -0-                 754             2,769
                         --------      --------           -------             --------          --------

  Total                  $  8,723      $  3,182           $   -0-            $  4,074          $  7,831
                         --------      --------           -------             --------          --------
                         --------      --------           -------             --------          --------

  Year ended
    December 31, 1995:
    Allowance for
    doubtful accounts    $  7,684      $  2,565           $   -0-            $  4,283          $  5,966

    Inventory reserve    $  2,490           875               -0-                 608             2,757
                         --------      --------           -------             --------          --------

  Total                  $ 10,174      $  3,440           $   -0-            $  4,891          $  8,723
                         --------      --------           -------             --------          --------
                         --------      --------           -------             --------          --------

  Year ended
   December 31, 1994:
   Allowance for
   doubtful accounts     $  5,289      $  4,395           $   -0-            $  2,000          $  7,684

    Inventory reserve       2,593           555               -0-                 658             2,490
                         --------      --------           -------             --------          --------

  Total                  $  7,882      $  4,950           $   -0-            $  2,658           $10,174
                         --------      --------           -------             --------          --------
                         --------      --------           -------             --------          --------
</TABLE>

(1) Provisions for write-off of uncollectable receivables and inventory
    adjustments.

(2) Represents reserves related to acquisitions.

(3) Represents write-offs of doubtful accounts, net of recoveries, and
    write-offs and disposals of inventory.

                                     F-14