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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-Q



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(MARK ONE)



|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------



For the Quarterly Period Ended March 31, 2003



OR



| ̈ |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES ACT OF 1934
|- |  | -------------------------------------------------------------------------------



Commission File Number 0-19946



LINCARE HOLDINGS INC.

(Exact name of registrant as specified in its charter)





|Delaware                                                       |  | 51-0331330                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|19387 US 19 North Clearwater, FL         |  | 33764     
|---------------------------------------- |  | ----------
|(Address of principal executive offices) |  | (Zip Code)



Registrants telephone number, including area code:

(727) 530-7700



Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.    Yes x    No ̈



Indicate by check mark whether
the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes x    No ̈



Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



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|                             
|-----------------------------
|Class                        
|                             
|Common Stock, $0.01 par value

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LINCARE HOLDINGS INC. AND SUBSIDIARIES



FORM 10-Q

For The Quarterly Period Ended March 31, 2003



INDEX



|                                 |  |                                                                                       |  | Page
|-------------------------------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I.    FINANCIAL INFORMATION |  |                                                                                      
|Item 1                           |  | Financial Statements (unaudited)                                                      |  |     
|                                 |  | Condensed consolidated balance sheets                                                 |  | 3   
|                                 |  | Condensed consolidated statements of operations                                       |  | 4   
|                                 |  | Condensed consolidated statements of cash flows                                       |  | 5   
|                                 |  | Notes to condensed consolidated financial statements                                  |  | 6   
|Item 2                           |  | Managements Discussion and Analysis of Results of Operations and Financial Condition |  | 9   
|Item 3                           |  | Quantitative and Qualitative Disclosure Regarding Market Risk                         |  | 12  
|Item 4                           |  | Controls and Procedures                                                               |  | 12  
|                                
|PART II.    OTHER INFORMATION    |  |                                                                                      
|Item 1                           |  | Legal Proceedings                                                                     |  | 13  
|Item 2                           |  | Changes in Securities                                                                 |  | 13  
|Item 3                           |  | Defaults Upon Senior Securities                                                       |  | 13  
|Item 4                           |  | Submission of Matters to a Vote of the Security Holders                               |  | 13  
|Item 5                           |  | Other Information                                                                     |  | 13  
|Item 6                           |  | Exhibits and Reports on Form 8-K                                                      |  | 13  
|SIGNATURE                        |  | 14                                                                                   
|CERTIFICATIONS                   |  | 15                                                                                   



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PART I.    FINANCIAL INFORMATION



Item 1.Financial Statements
(Unaudited)



LINCARE HOLDINGS
INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

(Unaudited)



|                                                      |  | March 31, 2003 |           |   | December 31, 2002 |  
|----------------------------------------------------- |  | -------------- | --------- | - | ----------------- | -
|Current assets:                                       |  |                |           |   |                   |  
|Cash and cash equivalents                             |  | $              | 4,412     |   |                   | $
|Accounts and notes receivable                         |  |                | 152,327   |   |                   |  
|Income tax receivable                                 |  |                |          |   |                   |  
|Inventories                                           |  |                | 2,657     |   |                   |  
|Other                                                 |  |                | 3,284     |   |                   |  
|                                                      |  |                |           |   |                   |  
|Total current assets                                  |  |                | 162,680   |   |                   |  
|                                                      |  |                |           |   |                   |  
|Property and equipment                                |  |                | 529,430   |   |                   |  
|Less: accumulated depreciation                        |  |                | (286,959  | ) |                   |  
|                                                      |  |                |           |   |                   |  
|Net property and equipment                            |  |                | 242,471   |   |                   |  
|                                                      |  |                |           |   |                   |  
|Other assets:                                         |  |                |           |   |                   |  
|Goodwill                                              |  |                | 827,557   |   |                   |  
|Covenants not to compete                              |  |                | 5,321     |   |                   |  
|Other                                                 |  |                | 2,820     |   |                   |  
|                                                      |  |                |           |   |                   |  
|Total other assets                                    |  |                | 835,698   |   |                   |  
|                                                      |  |                |           |   |                   |  
|Total assets                                          |  | $              | 1,240,849 |   |                   | $
|                                                      |  |                |           |   |                   |  
|Current liabilities:                                  |  |                |           |   |                   |  
|Current installments of long-term obligations         |  | $              | 53,391    |   |                   | $
|Accounts payable                                      |  |                | 28,267    |   |                   |  
|Accrued expenses:                                     |  |                |           |   |                   |  
|Compensation and benefits                             |  |                | 13,043    |   |                   |  
|Other                                                 |  |                | 11,399    |   |                   |  
|Income taxes payable                                  |  |                | 24,858    |   |                   |  
|                                                      |  |                |           |   |                   |  
|Total current liabilities                             |  |                | 130,958   |   |                   |  
|                                                      |  |                |           |   |                   |  
|Long-term obligations, excluding current installments |  |                | 158,763   |   |                   |  
|Deferred income taxes                                 |  |                | 77,505    |   |                   |  
|Minority interest                                     |  |                | 765       |   |                   |  
|Stockholders equity:                                 |  |                |           |   |                   |  
|Common stock                                          |  |                | 1,218     |   |                   |  
|Additional paid-in capital                            |  |                | 209,100   |   |                   |  
|Retained earnings                                     |  |                | 962,987   |   |                   |  
|Less: treasury stock                                  |  |                | (300,447  | ) |                   |  
|                                                      |  |                |           |   |                   |  
|Total stockholders equity                            |  |                | 872,858   |   |                   |  
|                                                      |  |                |           |   |                   |  
|Total liabilities and stockholders equity            |  | $              | 1,240,849 |   |                   | $
|                                                      |  |                |           |   |                   |  



See
accompanying notes to unaudited condensed consolidated financial statements.



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LINCARE HOLDINGS INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except share and per share data)

(Unaudited)



|                                                                                  |  | For The Three Months Ended |            
|--------------------------------------------------------------------------------- |  | -------------------------- | -----------
|                                                                                  |  | March 31, 2003             |            
|Net revenues                                                                      |  | $                          | 265,173    
|                                                                                  |  |                            |            
|Costs and expenses:                                                               |  |                            |            
|Costs of goods and services                                                       |  |                            | 39,936     
|Operating expenses                                                                |  |                            | 59,479     
|Selling, general and administrative expenses                                      |  |                            | 56,085     
|Bad debt expense                                                                  |  |                            | 3,978      
|Depreciation expense                                                              |  |                            | 17,275     
|Amortization expense                                                              |  |                            | 415        
|                                                                                  |  |                            |            
|                                                                                  |  |                            | 177,168    
|                                                                                  |  |                            |            
|Operating income                                                                  |  |                            | 88,005     
|                                                                                  |  |                            |            
|Other income (expense):                                                           |  |                            |            
|Interest income                                                                   |  |                            | 31         
|Interest expense                                                                  |  |                            | (3,495     
|Net loss on disposal of property and equipment                                    |  |                            | (2         
|                                                                                  |  |                            |            
|                                                                                  |  |                            | (3,466     
|                                                                                  |  |                            |            
|Income before income taxes                                                        |  |                            | 84,539     
|Income taxes                                                                      |  |                            | 31,617     
|                                                                                  |  |                            |            
|Net income                                                                        |  | $                          | 52,922     
|                                                                                  |  |                            |            
|Basic earnings per common share                                                   |  | $                          | 0.50       
|                                                                                  |  |                            |            
|Diluted earnings per common share                                                 |  | $                          | 0.49       
|                                                                                  |  |                            |            
|Weighted average number of common shares outstanding                              |  |                            | 104,808,097
|                                                                                  |  |                            |            
|Weighted average number of common shares and common share equivalents
outstanding |  |                            | 107,463,380
|                                                                                  |  |                            |            





See accompanying notes to unaudited condensed consolidated financial statements.



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LINCARE HOLDINGS INC. AND SUBSIDIARIES



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                               |  | For The Three Months Ended |        
|---------------------------------------------- |  | -------------------------- | -------
|                                               |  | March 31, 2003             |        
|Cash from operations                           |  | $                          | 88,480 
|                                              
|Investing activities:                          |  |                            |        
|Proceeds from sale of property and equipment   |  |                            | 26     
|Capital expenditures                           |  |                            | (23,066
|Decrease in other assets                       |  |                            | 483    
|Business acquisitions, net of cash acquired    |  |                            | (22,985
|                                               |  |                            |        
|                                               |  |                            | (45,542
|                                               |  |                            |        
|Financing activities:                          |  |                            |        
|Proceeds from long-term obligations            |  |                            | 55,134 
|Payment of long-term obligations               |  |                            | (58,069
|Decrease in minority interest                  |  |                            |       
|Proceeds from issuance of common stock         |  |                            | 1,758  
|Proceeds from issuance of treasury stock       |  |                            | 340    
|Payment to acquire treasury stock              |  |                            | (39,270
|                                               |  |                            |        
|                                               |  |                            | (40,107
|                                               |  |                            |        
|Increase (decrease) in cash                    |  |                            | 2,831  
|Cash and cash equivalents, beginning of period |  |                            | 1,581  
|                                               |  |                            |        
|Cash and cash equivalents, end of period       |  | $                          | 4,412  
|                                               |  |                            |        



See
accompanying notes to unaudited condensed consolidated financial statements.



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LINCARE HOLDINGS INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 1.    Basis of Presentation



The accompanying condensed consolidated balance sheet as of
March 31, 2003, the condensed consolidated statements of operations for the three months ended March 31, 2003 and 2002 and the condensed consolidated statements of cash flows for the three months ended March 31, 2003 and 2002 are unaudited and have
been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and should be read in conjunction with the consolidated financial statements and related notes of
Lincare Holdings Inc. and Subsidiaries (the Company) on Form 10-K for the fiscal year ended December 31, 2002. In the opinion of management, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation
of the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire year. The accompanying condensed
consolidated balance sheet as of December 31, 2002 is derived from the Companys audited balance sheet as of that date.



Note 2.    Business Combinations



Lincare routinely acquires the business and related assets of local and regional companies as an ongoing strategy to increase sales within
its respective markets. Lincare arrives at a negotiated purchase price taking into account such factors including, but not limited to, the acquired companys historical and projected revenue growth, operating cash flow, product mix, payor mix,
service reputation, and geographical location.



During the three months ended March 31, 2003, the Company acquired, in unrelated acquisitions, certain assets of four companies. Each acquisition was accounted for as a purchase. The results of the acquired companies are included in
the accompanying consolidated statements of operations since the respective dates of acquisition.



The aggregate cost of these acquisitions was as follows:



|                                                       |  | (In thousands)
|------------------------------------------------------ |  | --------------
|Cash                                                   |  | $             
|Deferred acquisition obligations                       |  |               
|Assumption of liabilities                              |  |               
|                                                       |  |               
|                                                       |  | $             
|                                                       |  |               
|                                                      
|The aggregate purchase price was allocated as follows: |  |               
|                                                      
|Current assets                                         |  | $             
|Property and equipment                                 |  |               
|Intangible assets                                      |  |               
|Goodwill                                               |  |               
|                                                       |  |               
|                                                       |  | $             
|                                                       |  |               



Unaudited pro forma supplemental information on the results of operations for the three months ended March 31, 2003 and March 31, 2002 is provided below and reflects the acquisitions as if they had been combined at the beginning of
each respective period. Effective with the adoption of SFAS 142 (see below) on January 1, 2002, the amortization of goodwill and certain intangible assets was discontinued.



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LINCARE HOLDINGS INC. AND SUBSIDIARIES



NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS(Continued)





|                         |  | For The Three Months Ended March 31,
|------------------------ |  | ------------------------------------
|                         |  | 2003                                
|                         |  | (In thousands except per share data)
|Net revenues             |  | $                                   
|                         |  |                                     
|Net income               |  | $                                   
|                         |  |                                     
|Income per common share: |  |                                     
|Basic                    |  | $                                   
|                         |  |                                     
|Diluted                  |  | $                                   
|                         |  |                                     



The
unaudited pro forma financial information is not necessarily indicative of either the results of operations that would have occurred had the transactions been effected at the beginning of the respective preceding periods or of future results of
operations of the combined companies.



In June
2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets. On January 1, 2002, the Company was required to adopt SFAS No. 142, which
requires that goodwill and intangible assets with indefinite lives not be amortized and instead be measured for impairment at least annually, or when events indicate that an impairment exists. As required by SFAS No. 142, the Company performs
impairment tests annually and when events or circumstances indicate that the value of goodwill or other indefinite-lived intangible assets might be impaired. The adoption of this standard had no material effect on the Companys financial
position or results of operations.



Note
3.    Income Per Common Share



Basic income per common share is computed by dividing earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted income per common share reflects the potential
dilution of securities, including securities that may be issued on exercise of outstanding stock options, that could share in the Companys earnings. When the exercise of stock options is anti-dilutive, they are excluded from the calculation.
There were no anti-dilutive stock options excluded from the calculation at March 31, 2003 and 2002.



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A
reconciliation of the numerators and the denominators of the basic and diluted income per common share computations is as follows:

|                                                                           |  | Income (Numerator)                    |        | Shares (Denominator) |         | Per Share Amount
|-------------------------------------------------------------------------- |  | ------------------------------------- | ------ | -------------------- | ------- | ----------------
|                                                                           |  | (In thousands, except per share data)
|THREE MONTHS ENDED MARCH 31, 2003                                          |  |                                       |        |                      |         |                 
|Basic:                                                                     |  |                                       |        |                      |         |                 
|Income available to common stockholders                                    |  | $                                     | 52,922 |                      | 104,808 |                 
|                                                                           |  |                                       |        |                      |         |                 
|Effect of dilutive securities:                                             |  |                                       |        |                      |         |                 
|Stock options                                                              |  |                                       |       |                      | 2,655   |                 
|                                                                           |  |                                       |        |                      |         |                 
|Diluted:                                                                   |  |                                       |        |                      |         |                 
|Income available to common stockholders and holders of dilutive
securities |  | $                                     | 52,922 |                      | 107,463 |                 
|                                                                           |  |                                       |        |                      |         |                 
|THREE MONTHS ENDED MARCH 31, 2002                                          |  |                                       |        |                      |         |                 
|Basic:                                                                     |  |                                       |        |                      |         |                 
|Income available to common stockholders                                    |  | $                                     | 45,191 |                      | 107,803 |                 
|                                                                           |  |                                       |        |                      |         |                 
|Effect of dilutive securities:                                             |  |                                       |        |                      |         |                 
|Stock options                                                              |  |                                       |       |                      | 2,408   |                 
|                                                                           |  |                                       |        |                      |         |                 
|Diluted:                                                                   |  |                                       |        |                      |         |                 
|Income available to common stockholders and holders of dilutive
securities |  | $                                     | 45,191 |                      | 110,211 |                 
|                                                                           |  |                                       |        |                      |         |                 



Note
4.     Stock Options



The Company applies Accounting Principles Board Opinion No. 25 in accounting for stock options outstanding, and accordingly, no compensation cost has been recognized for outstanding stock options in the financial statements. Had the
Company determined compensation cost based on the fair value at the grant date for stock options under Statement of Financial Accounting Standards No. 123, the Companys net income would have been reduced to the pro forma amounts indicated
below:



|                        |  | For The Three Months                 
|----------------------- |  | -------------------------------------
|                        |  | Ended March 31,                      
|                        |  | 2003                                 
|                        |  | (In thousands, except per share data)
|Net income:             |  |                                      
|As reported             |  | $                                    
|                        |  |                                      
|Pro forma               |  | $                                    
|                        |  |                                      
|Income per common share |  |                                      
|Basicas reported       |  | $                                    
|                        |  |                                      
|Dilutedas reported     |  | $                                    
|                        |  |                                      
|Basicpro forma         |  | $                                    
|                        |  |                                      
|Dilutedpro forma       |  | $                                    
|                        |  |                                      



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LINCARE
HOLDINGS INC. AND SUBSIDIARIES



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



Operating Results



The following table sets forth for the periods indicated a summary of the Companys net revenues by source:



|                                     |  | For The Three Months Ended March 31,
|------------------------------------ |  | ------------------------------------
|                                     |  | 2003                                
|                                     |  | (In thousands)                      
|Oxygen and other respiratory therapy |  | $                                   
|Home medical equipment and other     |  |                                     
|                                     |  |                                     
|Total                                |  | $                                   
|                                     |  |                                     



Net
revenues for the three months ended March 31, 2003 increased by $36,652,000 (or 16.0%) compared with the three months ended March 31, 2002. The increase in net revenues is attributed to underlying growth in the market for the Companys
products, increased market share primarily resulting from the Companys sales and marketing efforts that emphasize quality and customer service, and the effects of business acquisitions completed by the Company. The contribution of oxygen and
other respiratory therapy products to the Companys net revenues during the three months ended March 31, 2003 remained consistent with the prior year period, representing 89.8% of net revenues. The Companys strategy is to focus on the
provision of oxygen and other respiratory therapy services to patients in the home and to provide home medical equipment and other services where it believes such services will enhance the Companys primary respiratory business.



Costs of goods and services as a percentage of net revenues
were 15.1% for the three months ended March 31, 2003 and the three months ended March 31, 2002.



Operating expenses expressed as a percentage of net revenues declined to 22.4% for the three months ended March 31, 2003 from 22.5% for
the three months ended March 31, 2002. The Company was able to favorably offset wage and fuel price inflation with gains in productivity and control over fixed costs during the quarter.



Selling, general and administrative expenses as a percentage of net revenues were 21.2% for the three months
ended March 31, 2003 compared with 20.9% for the three months ended March 31, 2002. The increase in selling, general and administrative expenses as a percentage of net revenues is primarily attributed to the Companys expansion of its sales and
marketing efforts within the geographic markets it currently serves and increases in premiums and retention amounts under its liability insurance policies.



Operating income for the three months ended March 31, 2003 increased to $88,005,000, or 33.2% of net revenues compared with $76,271,000,
or 33.4% of net revenues, for the three months ended March 31, 2002. The increases in operating income is primarily attributable to the continued growth in net revenues, focusing product mix on higher margin products and control over operating
costs.



Liquidity And Capital Resources



Net cash provided by operating activities was $88,480,000 for
the three months ended March 31, 2003 compared with $74,596,000 for the three months ended March 31, 2002.



Net cash used in investing and financing activities was $85,649,000 for the three months ended March 31, 2003. Activity during the
three-month period ended March 31, 2003 included the Companys investment of $22,985,000 in business acquisitions, investment in capital equipment of $23,066,000, payments to acquire



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treasury stock of $39,270,000, proceeds of $55,134,000 from long-term obligations and payments of $58,069,000 related to long-term
obligations.



As of March 31, 2003, the
Companys principal sources of liquidity consisted of $31,722,000 of working capital and $128,640,000 available under its revolving bank credit facility. The Company believes that internally generated funds, together with funds that may be
borrowed under its bank credit facility, will be sufficient to meet the Companys anticipated capital requirements for the foreseeable future.



On May 21, 2002, the Companys Board of Directors authorized repurchases of up to $100,000,000 of the Companys outstanding
common stock. During the three month period ended March 31, 2003, the Company completed the remaining repurchase of common stock authorized under the 2002 program by repurchasing 3,211,029 shares of common stock. The total common stock held in
treasury as of March 31, 2003 was $300,447,000. An additional repurchase of up to $100,000,000 was authorized by the Companys Board of Directors on February 25, 2003. During the three month period ended March 31, 2003, the Company did not
repurchase any shares of common stock under the 2003 program. Purchases are made through open market or privately negotiated transactions, subject to market conditions and trading restrictions.



New Accounting Standards



In January 2003, the Financial Accounting Standards Board
issued Interpretation No. 46, Consolidation of Variable Interest Entities. Variable interest entities are identified by reviewing the Companys equity investment at risk, the ability to make decisions about the entitys
activities and the obligation to absorb the entitys losses or right to receive expected residual returns. The Company does not expect this interpretation to have a material impact on its consolidated financial position or results of
operations.



In December 2002, the Financial
Accounting Standards Board issued SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure. This SFAS amends SFAS No. 123, Accounting for Stock-Based Compensation, in order to provide alternative
computation methods for entities transitioning to the fair value based method of accounting for stock-based employee compensation. This SFAS also requires additional disclosure related to accounting methods used for stock-based employee compensation
and pro forma amounts related to any period accounted for under the recognition and measurement principles of APB Opinion 25. See Note 4 for disclosure under SFAS No. 148.



In November 2002, the Financial Accounting Standards Board issued Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, including indirect guarantees of indebtedness of others, an interpretation of FASB Statements No. 5, 57 and 107 and rescission of FASB Interpretation No. 34. This
interpretation clarifies the requirements of FASB Statement No. 5, Accounting for Contingencies, relating to the guarantors accounting for, and disclosure of, certain types of guarantees. The disclosure provisions of the
interpretation are effective for financial statements for interim or annual periods that end after December 15, 2002. The provisions for initial recognition and measurement are effective on a prospective basis for guarantees that are issued or
modified after December 31, 2002. The Company does not expect this interpretation to have a material impact on its consolidated financial position or results of operations.



Medicare Reimbursement



As a supplier of home oxygen and other respiratory therapy services for the home health care market, the Company participates in Medicare
Part B, the Supplementary Medical Insurance Program, which was established by the Social Security Act of 1965. Suppliers of home oxygen and other respiratory therapy services have historically been heavily dependent on Medicare reimbursement due to
the high proportion of elderly suffering from respiratory disease.



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In December
2000, the Consolidated Appropriations Act, 2001 (H.R. 4577) was signed into law. The appropriations act incorporated by reference the text of H.R. 5661, the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000
(BIPA), which included certain Medicare reimbursement and other policy changes. Among other things, BIPA required the U.S. General Accounting Office (GAO) to study Medicare reimbursement for drugs and biologicals and for
related services. The GAO issued its report to Congress, entitled Medicare Payments for Covered Outpatient Drugs Exceed Providers Cost, in September 2001. The GAO made recommendations designed to improve the accuracy of Medicare
payment for drugs and related services, including establishing Medicare payment levels for certain covered prescription drugs and their delivery and administration that are more closely related to their costs, examining the benefits and risks of
utilizing competitive bidding for drugs covered under Medicare Part B, and instituting a process to monitor access to Medicare covered drugs to ensure that payment changes do not negatively affect access for particular drugs for groups of
beneficiaries or in certain geographic areas. The government, acting through legislation or regulation, may implement some or all of the GAOs recommendations. The Company cannot predict whether the government will take any such action and, if
so, what effect such action will have on the Companys ability to provide respiratory and infusion drugs and related services to Medicare beneficiaries in the future.



The Presidents fiscal year 2003 budget includes a proposal to change reimbursement for prescription
drugs covered under Medicare Part B. The budget also contains a proposal to adopt a national competitive bidding payment system for durable medical equipment, including home oxygen equipment. The Company cannot predict whether any of the proposals
outlined in the Presidents budget will be adopted by Congress and become law.



Federal and state budgetary and other cost-containment pressures will continue to impact the home respiratory care industry. The Company cannot predict whether new federal and state budgetary proposals
will be adopted or the effect, if any, such proposals would have on the Companys business.



Forward Looking Statements



Statements contained herein that are not based on historical facts are forward-looking statements that are based on projections and estimates regarding the economy in general, the health care industry
and other factors which impact the Company. These statements involve known and unknown risks, uncertainties and other factors that may cause the Companys actual results, levels of activity, performance or achievements to be materially
different from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statements. The estimates relate to, among other things, reimbursement by government and third party payors for the
Companys products, the costs associated with government regulation of the health care industry and the effects of competition and industry consolidation. In some cases, forward-looking statements that involve risks and uncertainties contain
terminology such as may, will, should, could, expects, intends, plans, anticipates, believes, estimates, predicts,
potential or continue or variations of these terms or other comparable terminology.



Key factors that have an impact on the Companys ability to attain these estimates include potential reductions in reimbursement
rates by government and third party payors, changes in reimbursement policies, continued demand for the Companys products and services, the availability of appropriate acquisition candidates and the Companys ability to successfully
complete acquisitions, efficient operations of the Companys existing and future operating facilities, regulation and/or regulatory action affecting the Company or its business, economic and competitive conditions and access to borrowed and/or
equity capital on favorable terms.



In developing
its forward-looking statements, the Company has made certain assumptions relating to reimbursement rates and policies, internal growth and acquisitions and the outcome of various legal and regulatory proceedings. If the assumptions used by the
Company differ materially from what actually occurs, then actual results could vary significantly from the performance projected in the forward-looking statements. The Company is under no duty to update any of the forward-looking statements after
the date of this Form 10-Q.



11



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##### Table of Contents



Item
3.Quantitative and Qualitative Disclosure Regarding Market Risk



The Company had no derivative securities as of March 31, 2003. The Company is exposed to changes in interest rates as a result of its
revolving bank credit facility which is based on the London Interbank Offered Rate. A 10% increase in interest rates related to the Companys revolving bank credit facility would not have a material adverse effect on the Companys earnings
over the next fiscal year or the revolving bank credit facilitys fair value.



The fair value of the Companys revolving bank credit facility and senior secured notes are subject to change as a result of changes in interest rates. The Company estimates potential changes in
the fair value of interest rate sensitive financial instruments based on a hypothetical decrease (or increase) in interest rates. The Companys use of this methodology to quantify the market risk of such instruments should not be construed as
an endorsement of its accuracy or the accuracy of the related assumptions. The quantitative information about market risk is necessarily limited because it does not take into account anticipated operating and financial transactions.



The following table sets forth the estimated impact on the
fair value of the Companys long-term obligations and the impact on earnings resulting from a hypothetical 10% decrease in interest rates.



Estimated fair value of financial instruments (in thousands):



|                               |  |             |         |                 |   |            |  | (Assuming 10% Decrease in Interest Rates) |        
|------------------------------ |  | ----------- | ------- | --------------- | - | ---------- |  | ----------------------------------------- | -------
|                               |  | Face Amount |         | Carrying Amount |   | Fair Value |  | Hypothetical Change in Fair Value         |        
|March 31, 2003:                |  |             |         |                 |   |            |  |                                           |        
|Revolving bank credit facility |  | $           | 63,000  |                 | $ | 63,000     |  | $                                         | 63,000 
|Senior secured notes           |  |             | 125,000 |                 |   | 125,000    |  |                                           | 129,349
|                              
|December 31, 2002:             |  |             |         |                 |   |            |  |                                           |        
|Revolving bank credit facility |  | $           | 60,000  |                 | $ | 60,000     |  | $                                         | 60,000 
|Senior secured notes           |  |             | 125,000 |                 |   | 125,000    |  |                                           | 129,390



Item
4.Controls and Procedures



Within the 90 days prior to the date of this Form 10-Q, the Companys Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the Companys disclosure controls and procedures pursuant to Exchange
Act Rule 13a-14. Based upon that evaluation, the officers concluded that the Companys disclosure controls and procedures are effective in timely alerting management to material information relating to the Company required to be included in
periodic filings with the Securities and Exchange Commission. There have been no significant changes in the Companys internal controls or in other factors that could significantly affect internal controls subsequent to the date the Company
completed its evaluation.



12



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##### Table of Contents



PART
II.    OTHER INFORMATION



Item
1.Legal Proceedings



As a health care provider, Lincare is subject to extensive government regulation, including numerous laws directed at preventing fraud and abuse and laws regulating reimbursement under various government programs. The marketing,
billing, documenting and other practices of health care companies are all subject to government scrutiny. To ensure compliance with Medicare and other regulations, regional carriers often conduct audits and request patient records and other
documents to support claims submitted by the Company for payment of services rendered to customers. Similarly, government agencies periodically open investigations and obtain information from health care providers pursuant to legal process.



Violations of federal and state regulations can
result in severe criminal, civil and administrative penalties and sanctions, including disqualification from Medicare and other reimbursement programs.



From time to time, the Company receives inquiries from various government agencies requesting customer records and other documents. It has
been Lincares policy to cooperate with all such requests for information. The government has not instituted any proceedings or served Lincare with any complaints as a result of these inquiries.



Private litigants may also make claims against the Company for
violations of health care laws in actions known as qui tam suits. In these cases, the government has the opportunity to intervene in, and take control of, the litigation. The Company is a defendant in certain qui tam proceedings. The
government has declined to intervene in all unsealed qui tam actions of which the Company is aware. Lincare is vigorously defending these suits.



Items 2-5.    
Not Applicable.



Item
6.    
Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits included or incorporated herein: See Exhibit Index.
| | --- |  | ------------------------------------------------------------



| | (b) |  | The Company did not file a Current Report on Form 8-K during the three months ended March 31, 2003.
| | --- |  | ---------------------------------------------------------------------------------------------------



13



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##### Table of Contents



SIGNATURE



Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



LINCARE HOLDINGS
INC.Registrant/s/    PAUL
G. GABOSPaul G. Gabos Secretary, Chief Financial Officer and Principal Accounting Officer




May 15, 2003



14



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##### Table of Contents



CERTIFICATIONS



I, John P. Byrnes,
certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Lincare Holdings Inc.;
| | -- |  | ----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     
|-----
|Date:
|     



15



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##### Table of Contents



I, Paul G. Gabos, certify
that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Lincare Holdings Inc.;
| | -- |  | ----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date); and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c) |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officer and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee
of the registrants board of directors (or persons performing the equivalent function):
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b) |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officer and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|     
|-----
|Date:
|     



16



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##### Table of Contents



INDEX OF
EXHIBITS





|Exhibit Number |     |  | Exhibit                                                                                                                |  | Sequentially Numbered Page
|-------------- | --- |  | ---------------------------------------------------------------------------------------------------------------------- |  | --------------------------
|              
|3.10           | (A) |  | Amended and Restated Certificate of Incorporation of Lincare Holdings
Inc.                                             |  |                           
|              
|3.11           | (C) |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Lincare Holdings Inc.             |  |                           
|              
|3.20           | (I) |  | Amended and Restated By-Laws of Lincare Holdings Inc.,                                                                 |  |                           
|              
|10.20          | (A) |  | Non-Qualified Stock Option Plan of Registrant                                                                          |  |                           
|              
|10.21          | (A) |  | Lincare Holdings Inc. 1991 Stock Plan                                                                                  |  |                           
|              
|10.22          | (E) |  | Lincare Holdings Inc. 1994 Stock Plan                                                                                  |  |                           
|              
|10.23          | (E) |  | Lincare Holdings Inc. 1996 Stock Plan                                                                                  |  |                           
|              
|10.24          | (H) |  | Lincare Holdings Inc. 1998 Stock Plan                                                                                  |  |                           
|              
|10.25          | (E) |  | Lincare Holdings Inc. 2000 Stock Plan                                                                                  |  |                           
|              
|10.26          | (F) |  | Lincare Holdings Inc. 2001 Stock Plan                                                                                  |  |                           
|              
|10.30          | (H) |  | Lincare Inc. 401(k) Plan                                                                                               |  |                           
|              
|10.31          | (B) |  | Employee Stock Purchase Plan                                                                                           |  |                           
|              
|10.40          | (G) |  | Form of Executive Employment Agreement Dated December 15, 2001                                                         |  |                           
|              
|10.50          | (B) |  | Form of Non-Employee Director Stock Option Agreement                                                                   |  |                           
|              
|10.51          | (B) |  | Form of Non-Qualified Stock Option Agreement                                                                           |  |                           
|              
|10.60          | (H) |  | Amended and Restated Credit Agreement dated as of April 25, 2002                                                       |  |                           
|              
|10.70          | (D) |  | Senior Secured Note Purchase Agreement                                                                                 |  |                           
|              
|10.71          | (D) |  | Form of Series A Note                                                                                                  |  |                           
|              
|10.72          | (D) |  | Form of Series B Note                                                                                                  |  |                           
|              
|10.73          | (D) |  | Form of Series C Note                                                                                                  |  |                           
|              
|99.1           |     |  | Certifications pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002 |  |                           

---

|(A) |  | Incorporated by reference to the Corresponding exhibit to the Registrants Registration Statement on
|--- |  | ----------------------------------------------------------------------------------------------------

| |  | Form S-1 (No. 33-44672)
| |  | -----------------------

|(B) |  | Incorporated by reference to the Registrants Form 10-K dated March 26 1998.
|--- |  | ----------------------------------------------------------------------------

|(C) |  | Incorporated by reference to the Registrants Form 10-Q dated August 12, 1998.
|--- |  | ------------------------------------------------------------------------------

|(D) |  | Incorporated by reference to the Registrants Form 10-Q dated November 13, 2000.
|--- |  | --------------------------------------------------------------------------------

|(E) |  | Incorporated by reference to the Registrants Form 10-K dated March 29, 2001.
|--- |  | -----------------------------------------------------------------------------

|(F) |  | Incorporated by reference to the Registrants Form 10-Q dated August 1, 2001.
|--- |  | -----------------------------------------------------------------------------

|(G) |  | Incorporated by reference to the Registrants Form 10-K dated March 28, 2002.
|--- |  | -----------------------------------------------------------------------------

|(H) |  | Incorporated by reference to the Registrants Form 10-Q dated May 13, 2002.
|--- |  | ---------------------------------------------------------------------------

|(I) |  | Incorporated by reference to the Registrants Form 10-Q dated August 13, 2002.
|--- |  | ------------------------------------------------------------------------------