SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

                      FOR THE YEAR ENDED DECEMBER 31, 1999

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934

          FOR THE TRANSITION PERIOD FROM ____________ TO ____________.

                                 AMERIPATH, INC.
             (Exact Name of Registrant as Specified in Its Charter)

           DELAWARE                                               65-0642485
 (State or Other Jurisdiction                                 (I.R.S. Employer
Incorporation or Organization)                               Identification No.)

            7289 GARDEN ROAD, SUITE 200, RIVIERA BEACH, FLORIDA 33404
                    (Address of Principal Executive Offices)

         Registrant's Telephone Number, Including Area Code: (561) 845-1850

         Securities Registered Pursuant to Section 12(B) of the Act:

         Securities Registered Pursuant to Section 12(G) of the Act:

                     COMMON STOCK (PAR VALUE $.01 PER SHARE)
                                (Title of Class)

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to 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 voting stock held by non-affiliates of
the Registrant as of March 10, 2000 was approximately $196.9 million based on
the $9.938 closing sale price for the Common Stock on the NASDAQ National Market
System on such date. For purposes of this computation, all executive officers
and directors of the Registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the Registrant.

         The number of shares of Common Stock of the Registrant outstanding as
of March 10, 2000 was 21,580,687.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive Proxy Statement relating to the
Registrant's 2000 Annual Meeting of Shareholders to be filed with the Securities
and Exchange Commission no later than 120 days after the end of the year covered
by this Report are incorporated by reference into Part III of this Report.

<PAGE>

                                 INDEX TO ITEMS
<TABLE>
<CAPTION>
                                                                                                    PAGE
                                                                                                    ----
<S>               <C>          <C>                                                                  <C>
PART I
                  Item 1.      General Business                                                       1
                  Item 2.      Properties                                                            16
                  Item 3.      Legal Proceedings                                                     16
                  Item 4.      Submission of Matters to a Vote of Security Holders                   16

PART II.
                  Item 5.      Market for the Registrant's Common Stock and Related
                                 Stockholder Matters                                                 17
                  Item 6.      Selected Financial Data                                               17
                  Item 7.      Management's Discussion and Analysis of Financial
                                 Condition and Results of Operations                                 19
                  Item 7A.     Quantitative and Qualitative Disclosures about Market Risk            29
                  Item 8.      Financial Statements and Supplementary Data; Index to
                                 Consolidated Financial Statements                                   29
                  Item 9.      Changes in and Disagreements with Accountants on
                                 Accounting and Financial Disclosure                                 29

PART III.
                  Item 10.     Directors and Executive Officers of the Registrant                    30
                  Item 11.     Executive Compensation                                                30
                  Item 12.     Security Ownership of Certain Beneficial Owners and Management        30
                  Item 13.     Certain Relationships and Related Transactions                        30

PART IV.
                  Item 14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K       31

Exhibits                                                                                             31
Signatures                                                                                           35
Financial Statements                                                                                F-1
Financial Statement Schedules                                                                       S-1

</TABLE>

<PAGE>

                                     PART I

ITEM 1.  GENERAL BUSINESS

         AmeriPath, Inc. and its subsidiaries ("AmeriPath" or "the Company") is
the nation's leading integrated physician group practice and laboratory
management company focused on providing anatomic pathology diagnostic services,
based on an analysis of geographic breadth, number of physicians, number of
hospital contracts, number of practices and net revenues. Since inception, the
Company has acquired or affiliated with 44 physician practices (the "Practices")
located in 13 states. The 297 pathologists employed by the Company provide
medical diagnostic services in outpatient laboratories owned and operated by the
Company, hospitals, and outpatient ambulatory surgery centers. Of these
pathologists, 293 are board certified in anatomic and clinical pathology, and
133 are also board certified in a subspecialty of anatomic pathology, including
dermatopathology (study of diseases of the skin), hematopathology (study of
diseases of the blood) and cytopathology (study of abnormalities of the cells).

         As of December 31, 1999, 24 Practices had contracts with a total of 164
hospitals to manage their clinical pathology and other laboratories and provide
professional pathology services. The majority of these hospital contracts are
exclusive provider relationships of the Company. The Company has 29 outpatient
laboratories, of which 13 operate in conjunction with hospital laboratories.

STATISTICAL DATA:
                                                      DECEMBER 31,
                                            1997         1998          1999
                                            ----         ----          ----
        /bullet/ Pathologists               133           226           297
        /bullet/ Hospital Contracts          75           125           164
        /bullet/ Employees                  994         1,346         1,595
        /bullet/ Outpatient laboratories     16            21            29

         The Company essentially operates as a pathology group practice and is
legally structured so as to comply with the different laws dealing with the
corporate practice of medicine. Refer to the section entitled "AmeriPath
Corporate Structure; Owned and Affiliated Practices; Hospital Contracts and
Laboratories" for a more detailed discussion of the Company's legal structure in
the various states.

         AmeriPath manages and controls all of the non-medical functions of the
Practices, including:

         /bullet/ recruiting, training, employing and managing the technical and
                  support staff of the Practices;
         /bullet/ developing, equipping and staffing laboratory facilities;
         /bullet/ establishing and maintaining courier services to transport
                  specimens;
         /bullet/ negotiating and maintaining contracts with hospitals, national
                  clinical laboratories and managed care organizations and other
                  payors;
         /bullet/ providing financial reporting and administration, clerical,
                  purchasing, payroll, billing and collection, information
                  systems, sales and marketing, risk management, employee
                  benefits, legal, tax and accounting services;
         /bullet/ maintaining compliance with applicable laws, rules and
                  regulations; and
         /bullet/ providing slide preparation and other technical services for
                  the Practices.

         During 1999, the Company acquired 10 Practices in six states (adding a
total of 71 pathologists): eight of these were in states in which the Company
previously operated (Pennsylvania, Wisconsin, Florida, and Texas) and two were
in additional states (Georgia and Michigan).

                                       1
<PAGE>

ANATOMIC PATHOLOGY; INDUSTRY OVERVIEW

         Pathologists are medical doctors who specialize in the science of
pathology, the study of disease. Following college and medical school,
pathologists typically spend five or more years to become eligible to sit for
certification by the American Board of Pathology in anatomic and clinical
pathology. Many pathologists spend additional years of training to receive
certification in subspecialty areas of pathology such as dermatopathology (study
of diseases of the skin), hematopathology (study of diseases of the blood and
bone marrow), immunopathology (study of diseases of the immune system), and
cytopathology (study of abnormalities of cells).

         Anatomic pathology involves evaluating tissues (surgical pathology) and
cells (cytopathology) through variable magnifications using a microscope. In
surgical pathology, the goal of such microscopic evaluations is to make a
definitive diagnosis of a patient's disease. Virtually all tissues removed from
patients during surgery (hence the term "surgical" pathology) are examined under
the microscope by pathologists in order to determine whether or not a disease is
present; examples of surgical pathology specimens seen by pathologists include
breasts, prostate, skin, and bone marrow biopsies. Thus, pathologists play an
indispensable role in determining whether a patient's illness is benign,
inflammatory or cancerous. The surgical patient's subsequent treatment almost
always depends on the diagnosis rendered by the surgical pathologist. For this
reason, doctors often refer to pathologists as the "physician's physician" a
compliment that acknowledges the fact that the pathologist's diagnosis
represents a critical factor in determining a patient's future care.

         Pathologists receive tissue samples from surgical procedures performed
on both inpatients (patients seen in hospitals) and outpatients (patients seen
in physician offices and in ambulatory surgery centers). Subspecialties within
the area of surgical pathology include dermatopathology and hematopathology. The
Company currently employs almost 300 pathologists who are board certified in
anatomic pathology; over 130 of them have additional subspecialty board
certification.

         Cytopathology involves the evaluation of cells under the magnification
of a microscope. Pathologists examine cells obtained from body fluids, from
solid tissues aspirated through needles and from scrapings of body tissues. The
most widely known cytopathologic examination is the "Pap" smear, developed by
George Papanicolaou in 1940. A conventional "Pap" smear consists of a scraping
of cells taken from the cervix, spread on a slide, stained with a dye to color
the cells, and examined by a pathologist using a microscope. To help reduce the
number of false negatives, another form of cell accumulation was developed. This
mono-layer technology collects a sample from the cervix using a cyto-brush,
which is then rinsed into a vile filled with preserved solution. The cell
solution is processed at a laboratory by a technician. The device filters the
blood and mucous and spreads cells in a thin layer, making the slide easier to
read. Despite the higher cost of mono-layer methods, the technology is rapidly
gaining acceptance in the medical community. "Pap" smears are considered
screening tests, which provide another physician with information that suggests
whether or not a potentially dangerous condition is present. If an abnormality
is detected, the pathologist recommends what additional diagnostic procedures
(such as biopsy of the affected tissue) may be necessary. Other cytopathology
examinations may, in and of themselves, be diagnostic of a specific disease
condition. As with surgical pathology specimens, cytopathology specimens may
come from hospitalized patients, from patients in ambulatory surgery centers,
from patients being seen in private physician offices, from clinics, or from
pathologists taking aspiration biopsies directly from patients. Experts in this
subspecialty of pathology are called cytopathologists. All of the Company's
anatomic pathologists possess board certification that qualifies them to read
cytology cases. Of these pathologists, 60 also are board certified
cytopathologists.

         Clinical pathology represents the second major category of pathology.
Broadly defined, clinical pathology involves the study of diseases identified by
analyzing blood or other body fluids such as urine or spinal fluid (the liquid
that surrounds the brain and spinal cord). Frequently, high volume, high
technology automated equipment performs these analyses. Pathologists'
responsibilities related to automated testing revolve around their roles as
medical directors and clinical consultants. Pathologists are legally responsible
for the validity and accuracy of clinical laboratory test results and for the
function of the clinical laboratory under the federal Clinical Laboratory
Improvement Act of 1988 ("CLIA"), for identifying additional diagnostic and/or
therapeutic approaches suggested by the laboratory result; and for discussing
the possible clinical significance of laboratory results with attending
physicians in light of the patient's history and symptoms.

         In other words, pathologists play a critical role in ensuring that
laboratory tests are performed accurately and in a timely fashion. Once again,
the pathologist's role as a "physician's physician" makes a critical
contribution to the proper diagnosis and efficient management of patients with
virtually every disease. Modern healthcare would not be possible without such
invaluable supervision of the clinical laboratory.

                                       2
<PAGE>

         Pathologists perform their duties in laboratories within hospitals,
within free standing local, regional, and national laboratories independent of
hospitals, within ambulatory surgery centers, and within a variety of other
settings. Because tissue and fluid samples are readily transportable,
pathologists working within one of these settings may actually receive specimens
for evaluation and diagnosis from multiple sources including physician offices,
clinics, other laboratories, and even other hospitals. This ability to deliver
work to sites having capacity to handle additional volume enhances the
pathologists' productivity and allows a pathology practice to serve a larger
geographic area. The Company uses this strategy to ensure the growth of "same
practice net revenues," while making its pathologists more productive and
efficient, and enabling the Company to better serve the customer by utilizing
the specialized expertise available within the Company's pathologists.

         The Company focuses on providing its inpatient anatomic and clinical
pathology services at hospitals and outpatient anatomic pathology services to
nonhospital clients. Based on a study prepared for the Company, the Company
believes that, as of 1995, the domestic market for nonhospital outpatient
pathology services was approximately $2.1 billion; for inpatient pathology
services in hospitals with 400 or fewer beds, the market was approximately $1.1
billion.

         The Company expects the market for anatomic pathology services to grow
primarily due to the aging of the United States population, the increasing
incidence of cancer, and accelerating medical advancements that allow for the
earlier diagnosis and treatment of diseases. The American Cancer Society
estimates that approximately 13 million Americans alive today have had, or still
have, some form of cancer and in 2000, about 1.2 million new cancer cases are
expected to be diagnosed, 47,700 of which will be new melanoma cases. Studies
published by the American Cancer Society revealed that there were approximately
1.3 million new cases of non-melanoma cases (basal cell carcinoma and squamous
cell carcinoma) diagnosed in 1999. According to the information published by the
American Medical Association, there are approximately 14,000 practicing
pathologists in the United States.

         Current trends within healthcare may accelerate the demand for the
Company's services. Healthcare cost containment pressures, the increasing
influence of managed care, and medical and technological advancements drive
hospitals to reduce the length of patient stays, decrease the number of
procedures being performed as inpatients, and increase the number of procedures
shifted to the outpatient setting. The Company expects to capitalize on this
trend by working with hospitals to eliminate the redundancies within the typical
anatomic pathology laboratories that exist within hospitals, thereby reducing
hospitals' costs. By consolidating and centralizing these functions into more
efficient and cost effective outpatient anatomic pathology laboratories, the
Company will also be able to broaden the range of subspecialty services it
offers and to develop new esoteric testing capabilities. Because the trend
toward providing medical services in outpatient settings almost certainly will
continue, the Company will be well positioned to capitalize on these
opportunities.

         Although the selection of a pathologist is primarily made by individual
referring physicians, a trend is evolving toward decisions being made by managed
care organizations and other third-party payors. While the majority of referrals
by managed care organizations for outpatient anatomic pathology services are
made directly to pathology practices on a local basis, in certain instances
managed care organizations contract with national clinical laboratories.
Generally, these national clinical laboratories subcontract anatomic pathology
and cytology services to large practices that can provide a comprehensive range
of anatomic pathology and cytology services. The Company believes that hospitals
and national clinical laboratories will continue to outsource for the provision
of anatomic pathology services.

         Historically, the anatomic pathology industry has been highly
fragmented, with the majority of the services being provided by relatively small
practices. The Company estimates that there are over 3,300 pathology practices
operating in outpatient laboratories in the United States. There is an evolving
trend among pathologists to form larger practices to provide a broader range of
outpatient and inpatient services and enhance the utilization of the practice's
pathologists. The Company believes this trend can be attributed to several
factors, including cost containment pressures by government and other
third-party payors, increased competition, managed care and the increased costs
and complexities associated with operating a medical practice. Moreover, given
the current trends of increasing outpatient services, outsourcing and the
consolidation of hospitals, pathologists are seeking to align themselves with
larger practices and physician practice management companies that can assist
providers in the evolving healthcare environment. Larger practices and physician
practice management companies can offer physicians certain advantages, such as:

                                       3
<PAGE>

         /bullet/ obtaining and negotiating contracts with hospitals, managed
                  care providers and national clinical laboratories;
         /bullet/ marketing and selling of professional services;
         /bullet/ providing continuing education and career advancement
                  opportunities;
         /bullet/ making available a broad range of specialists with whom to
                  consult;
         /bullet/ providing access to capital and business and management
                  experience;
         /bullet/ establishing and implementing more efficient and cost
                  effective billing and collection procedures; and
         /bullet/ expanding the practice's geographic coverage area.

         Each of the foregoing factors support the pathologists in the efficient
management of the complex and time-consuming non-medical aspects of their
practice.

BUSINESS STRATEGY

         The Company's objective is to enhance its position as the largest
provider of anatomic pathology services through the following strategies:

         FOCUS ON ANATOMIC PATHOLOGY. The Company believes that its focus of
providing management services to anatomic pathology practices provides it with a
competitive advantage in the management of such practices. As a result of the
Company's single focus, pathologists are able to form an internal network for
consultations and to offer specialized services and testing to their clients.
The Company also believes that its single specialty focus enhances its expertise
in managing both inpatient and outpatient pathology practices.

         In the fourth quarter of 1998, the Company began the operation of its
Center for Advanced Diagnostics ("CAD") in Fort Myers, Florida. CAD focuses on
molecular testing including DNA analysis, flow cytometry and cytogenetics. With
CAD's advanced technologies, it is able to provide AmeriPath's pathologists with
a greater level of diagnostic information to further refine diagnoses made after
routine surgical pathology evaluation. This increased diagnostic value is
demonstrated in CAD's ability to assist pathologists in better grading and
staging of cancers, accurately classifying leukemia and lymphomas as well as
providing a variety of prognostic information through enhanced pathology
reporting. As this detailed diagnostic reporting is provided to assist
AmeriPath's pathologists, it allows for improved input in analyzing the best
treatment options and selecting the most effective therapies. The Company is in
the process of moving this operation to an expanded facility in Orlando,
Florida.

         During the second quarter of 1999, the Company entered into a services
agreement with A. Bernard Ackerman, M.D., widely regarded as the preeminent
dermatopathologist in the world. In order to maximize the effectiveness of Dr.
Ackerman's affiliation with the Company, AmeriPath established the "ACKERMAN
ACADEMY OF DERMATOPATHOLOGY" and a diagnostic facility in New York City. The
Academy has an accredited dermatopathology fellowship training program with
state-of-the-art instrumentation, including a 27-head microscope, and one of the
most technologically advanced audiovisual systems available. The diagnostic
facility, AmeriPath New York, operates as a licensed independent outpatient
laboratory specializing in dermatopathology and offers adjunctive methods for
diagnosis, including immunoperoxidase, marker studies, gene rearrangement, and
immunofluorescence.

         ACQUIRE LEADING PRACTICES. The Company expects to increase its presence
in existing markets and enter into new markets through acquisitions of,
affiliations with and strategic minority investments in leading practices. The
Company's acquisition criteria include market demographics, size, profitability,
local prominence, payor relationships, synergy with other acquisitions in a
given geographic region and opportunities for growth of the acquired practice.
The Company intends to continue to source acquisitions and affiliations by
capitalizing on the professional reputations of its acquired practices and its
pathologists, and the Company's management experience and the benefits of being
part of a public company, including increased resources and access to capital.
In existing markets, the Company targets acquisitions and affiliations that can
expand its presence, provide specialization, such as dermatopathology, and
provide operational efficiencies for the practices in that market. In new
markets, the Company seeks to acquire and affiliate with prominent practices to
serve as a platform for building upon their long-standing relationships and
reputations. The Company's acquisition, or physician employment model, enables
the Company to more rapidly affect administrative and economic changes, improve
pathologist utilization, and consolidate technical and administrative support,
to effect cost savings. It also enables the Company to actually consolidate
practices into a more efficient, integrated group practice in a region, which is
not always possible under the management service agreement or equity model.

                                       4
<PAGE>

         EXPAND SALES AND MARKETING EFFORTS. The Company focuses on generating
internal growth for the Practices by augmenting their existing physician and
contractual relationships through a professional sales and marketing program.
The Company's marketing program is designed to: increase relationships with
physicians over a broader geographic region; expand contracts with national
clinical laboratories that subcontract for anatomic pathology services; and
capitalize on existing managed care relationships. Since specimens are readily
transportable, the Company's sales and marketing efforts focus on expanding the
geographic scope of the Practices. Nine Practices presently have contracts to
provide outpatient anatomic and cytopathology pathology services with the two
major national clinical laboratories. These contracts generally are exclusive to
the individual practice. The Company is seeking to extend its existing contracts
with national clinical laboratories to include multiple practices that cover
broader geographic regions. The Company believes that its regional business
model offers national clinical laboratories and managed care organizations a
convenient single source for anatomic pathology services.

         INCREASE CONTRACTS WITH HOSPITALS. The Company seeks to obtain
additional exclusive hospital contracts for the Practices in a region through
the acquisition of other anatomic pathology practices, as well as through the
expansion of the Company's existing relationships with multi-hospital systems.
The Company believes that multi-hospital systems can benefit from contracting
with a single provider of pathology services in a geographic region through the
consolidation of clinical laboratory, histology and other ancillary hospital
support functions, thereby reducing costs, and simplifying and consolidating
contractual relationships with managed care organizations and other third party
payors. In addition, the Company believes that providing inpatient laboratory
services to multiple hospitals within a geographic area facilitates the
development and effectiveness of a successful outpatient services network by
creating market presence and economies of scale offering a broader range of
pathology expertise while maintaining the important physician relationships.

         ACHIEVE OPERATIONAL EFFICIENCIES. The Company believes that its
Practices will benefit from the management and administrative support provided
by the Company's corporate staff, which provides oversight and technical and
administrative support services. The Company has centralized accounting and
financial reporting, payroll, benefits administration, purchasing, managed care
contracting, risk management and corporate compliance. Furthermore, the Company
has achieved and continues to pursue certain cost and operational efficiencies,
enhancing the Practices' profitability and efficiency by utilizing the Company's
collective buying power to negotiate discounts on laboratory equipment and
medical supplies and reductions in premiums for health, property, casualty and
professional liability insurance. Also, prior to their acquisition, each of the
Practices either managed their billing and collections in-house or outsourced
these functions. The Company continues to evaluate the billing and collection
systems of the Practices and centralizes such functions to the extent determined
practicable and efficient. To date, the Company has centralized the billing and
collections functions for eleven of the Practices at its centralized billing
operation in Fort Lauderdale, and has outsourced the billing for ten of its
Practices to Per Se' Technologies ("Per Se' "), formerly Medaphis Corporation.
Rates paid to Per Se' are tied to collection volume on accounts handled by Per
Se'. For the year ended December 31, 1999, the Company's consolidated billing
operation in Fort Lauderdale handled $63.7 million and Per Se' $59.4 million of
the Company's net revenue. This is compared to $55.5 million in Fort Lauderdale
and $41.4 million handled by Per Se' in 1998.

REGIONAL BUSINESS MODEL

         The Company believes that its regional business model offers short and
long-term benefits to the Company, its pathologists, referring physicians, third
party payors and patients. The Company continues to integrate the Practices'
administrative and technical support functions, including accounting, payroll,
purchasing, risk management, billing and collections, and expects such
integration to result in enhanced operational efficiencies. The Company's
courier system for transporting specimens enables the Practices to penetrate
areas outside their current markets and enhance the utilization of their
laboratory facilities. The Company also integrates and coordinates the sales and
marketing personnel of the Practices to promote the Practices to physicians,
hospitals, surgery centers, managed care organizations and national clinical
laboratories. This marketing effort is based upon promoting the broad geographic
coverage, professional pathologist expertise and the extensive professional
services offered by the Company. The Company's strategy is to leverage its size
to expand its contracts with national clinical laboratories to all of the areas
covered by its Practices. The Company markets its services under the name
"AmeriPath" in order to develop brand identification of products and services to
payors and other clients. The Company plans to integrate the Practices'
management information systems into a single system (or at a minimum consolidate
the information resident on the various lab information systems) that will
expand the financial and diagnostic reporting capabilities of each of the
Practices and the Company. Based on the foregoing, the Company believes that
implementation of this regional model increases the revenues and profitability
of the Practices in the region, and the Company is applying this regional
business model, in whole or in part, to other states in which it operates.

                                       5
<PAGE>

         Through the implementation of its operating strategies, the Company
continues to develop integrated networks of anatomic pathology practices on a
regional basis. These networks consist of a number of practices that together:
(i) have a substantial regional market presence; (ii) offer a broad range of
services; (iii) have extensive physician contacts; and (iv) possess
complementary strengths and opportunities for operational and production
efficiencies. The Company has developed its regional business model in Florida
and is replicating its model in Texas and the Midwest. The Company believes that
Florida represents an attractive market due to its population, demographics,
including the growth of the general population and a large elderly population,
as well as the Company's familiarity and understanding of the anatomic pathology
market in Florida. The Company currently owns, controls and manages anatomic
pathology practices throughout Florida including Miami, Fort Lauderdale,
Jacksonville, Orlando, Daytona, Fort Myers and Tampa. In addition, the Company
contracts with Quest Diagnostics ("Quest") (including the former SmithKline
Beecham Clincal Laboratories, Inc. ("SmithKline")), a national clinical
laboratory, to provide anatomic pathology services on an exclusive basis in all
of Florida's 67 counties.

         The Company believes that its improving performance in Florida, as
reflected in the following table, is due in part to the favorable results of its
regional model in Florida:

                                                           DECEMBER 31,
                                                    1997      1998       1999
                                                  -------    -------    -------
FLORIDA STATISTICS                                    (DOLLARS IN MILLIONS)
Number of Practices                                     8         11         12
Pathologists                                           72         82         80
Hospital contracts                                     30         31         31
Net revenues                                      $  70.8    $  85.1    $  92.5
Operating margin before amortization              $  20.2    $  25.6    $  27.7
Operating margin as a percent of net revenues        28.5%      30.1%      30.0%

AMERIPATH CORPORATE STRUCTURE; OWNED AND AFFILIATED PRACTICES; HOSPITAL
CONTRACTS AND LABORATORIES.

         AmeriPath, Inc. is a holding company that currently operates through
its Practice Subsidiaries and Manager Subsidiaries as defined below. The manner
in which AmeriPath operates a particular Practice is determined primarily by the
corporate practice of medicine restrictions of the State in which the Practice
is located and other applicable regulation. The Company believes that it
exercises care in its efforts to structure its practices and arrangements with
hospitals and physicians and its subsidiaries so as to comply with relevant
federal and state laws and believes that such current arrangements and practices
comply with all applicable statutes and regulations. However, due to
uncertainties in the law there can be no assurance that none of such
arrangements or practices could be deemed to be in noncompliance in the future,
or that such occurrence could not result in a material adverse effect on the
Company.

         Corporate practice of medicine restrictions, which are discussed in
further detail under "Government Regulation" below, prohibit corporate entities
from employing or otherwise exercising control over physicians. In states that
do not prohibit a for-profit corporation from employing physicians such as
Florida, Alabama, Mississippi and Kentucky, AmeriPath operates its Practices
through Practice Subsidiaries, which are subsidiary corporations of AmeriPath
that directly employ the physicians. In states that prohibit a for-profit
corporation from employing physicians, such as Texas, Indiana, Ohio, North
Carolina, Michigan, Wisconsin New York and Pennsylvania, AmeriPath operates each
Practice through a Management Subsidiary, which is a subsidiary of AmeriPath
that has a long-term management agreement with the applicable PA Contractor,
which in turn employs the Physicians. In many cases, several Practices are
included within or organized under a single Practice Subsidiary or PA
Contractor, as the case may be.

         OWNERSHIP AND MANAGEMENT OF THE MANAGEMENT SUBSIDIARIES AND PRACTICE
SUBSIDIARIES. The Management Subsidiaries and the Practice Subsidiaries are
wholly-owned subsidiaries of AmeriPath and the officers and directors of such
companies are generally members of AmeriPath's executive management team.

         OWNERSHIP AND MANAGEMENT OF THE PA CONTRACTORS. The term PA Contractor,
is used throughout this document to refer to an entity which has a contractual
relationship with the Company but is not owned directly by AmeriPath. These
entities can be a professional corporation or professional association, as
permitted and defined in various state statutes. The PA Contractors operating in
North Carolina, Wisconsin, New York, Michigan and Pennsylvania are owned by
physicians affiliated with AmeriPath. To the extent permitted under applicable
law, members of AmeriPath's executive management

                                       6
<PAGE>

team who are also affiliated physicians own or control such PA Contractors. The
affiliated physicians who own PA Contractors have entered into agreements with
AmeriPath that (i) prohibit such affiliated physicians from transferring their
ownership interests in the PA Contractor, except in very limited circumstances
and (ii) require such affiliated physicians to transfer their ownership in the
PA Contractor to designees of AmeriPath upon the occurrence of specified events.

         The PA Contractors in Ohio and Indiana are owned by trusts. The
beneficiary of such trusts is AmeriPath and the Trustees of such trusts are
affiliated physicians. The PA Contractors operating in Texas are organized as
not-for-profit 5.01(a) corporations, which are discussed in greater detail under
the "Government Regulation" below. The sole member of the not-for-profit PA
Contractors in Texas is AmeriPath.

         To the extent permitted by law, the officers and directors of the PA
Contractors are members of AmeriPath's executive management team. However, in
states where law prohibits such non-licensed physician personnel from serving as
an officer or director of a PA Contractor, eligible affiliated physicians serve
in such positions.

         Each PA Contractor is party to a long-term management agreement with
one of the Company's Management Subsidiaries. Under the terms of these
management agreements, AmeriPath provides all non-medical and administrative
support services to the Practices including accounting and financial reporting,
human resources, payroll, billing, and employee benefits administration. In
addition, the management agreements give the Management Subsidiaries certain
rights with respect to the management of the non-medical operations of the PA
Contractors. The management agreements require the PA Contractors to pay a
management fee to the applicable Management Subsidiaries. The fee structure is
different for each Practice based upon various factors, including applicable
law, and includes fees based on a percentage of earnings, performance-based
fees, and flat fees that are adjusted from time to time.

         OPERATION OF PRACTICES GENERALLY. AmeriPath manages and controls all of
the non-medical functions of the Practices. AmeriPath is not licensed to
practice medicine. The practice of medicine is conducted solely by the
affiliated physicians. In managing the Practices, the Board of Directors and
management of AmeriPath formulate strategies and policies which are implemented
locally on a day-to-day basis by each Practice, without regard to whether such
practice is organized as a management or Practice Subsidiary or PA Contractor.
Each Practice has a pathologist Managing Director who is responsible for
overseeing the day-to-day management of the Practice, who report to one of four
Regional Managing Directors, three of whom are pathologists, who in turn report
to AmeriPath's Chief Operating Officer. AmeriPath's Medical Director and Chief
Operating Officer, are physicians and develop and review standards for the
affiliated physicians and their medical practices and review quality and peer
review matters with each Practice's Medical Director (or a medical review
committee). AmeriPath's Chief Operating Officer, a physician, oversees all
employment matters with respect to affiliated physicians and staffing decisions
at the Practices.

         HOSPITAL CONTRACTS AND LABORATORIES. The Practices typically contract
with hospitals to exclusively provide pathology services. The Practices staff
each hospital with at least one pathologist who generally serves as the Medical
Director of the hospital laboratory and who facilitates the hospital's
compliance with licensing requirements. The Practices are responsible for
recruiting, staffing and scheduling the Practice's affiliated physicians in the
local hospital's inpatient laboratories. The Medical Director of the laboratory
is responsible for: (i) the overall management of the laboratory, including
quality of care, professional discipline and utilization review; (ii) serving as
a liaison to the hospital administrators and medical staff; and (iii)
maintaining professional and public relations in the hospital and the community.
Several Practices have both outpatient laboratories and hospital contracts,
which allow outpatient specimens to be examined by the hospital pathologists,
enhancing the utilization of pathologists in inpatient facilities. In the
hospitals, technical personnel are typically employed by the hospital, rather
than by the Practices. Upon initiation, the hospital contracts typically have
terms of one to five years and automatically renew for additional terms of one
year unless otherwise terminated by either party. The contracts provide that the
hospital may terminate the agreement prior to the expiration of the initial or
renewal term. Loss of any particular hospital contract would not only result in
a loss of net revenue to the Company, but also a loss of outpatient net revenue
that may be derived from the relationship with a hospital and its medical staff.
Continuing consolidation in the hospital industry may result in fewer hospitals
or fewer laboratories as hospitals move to combine their operations. As of
December 31, 1999, the Practices had contracts with 164 hospitals, of which the
majority are exclusive, 27 of which are owned by Columbia/HCA Healthcare
Corporation ("Columbia"), the country's largest publicly owned hospital company.
No assurance can be given that such contracts with hospitals will not be
terminated or that they will be renewed in the future.

         All of AmeriPath's outpatient laboratories are licensed and certified
under the guidelines established by CLIA and

                                       7
<PAGE>

applicable state statutes and are managed by a Medical Director of the
Laboratory. AmeriPath's corporate compliance, quality assurance and quality
improvement programs are designed to assure that all laboratories and other
operations are in compliance with applicable laws, rules and regulations.

MANAGEMENT INFORMATION SYSTEMS

         The Company believes that its increasing integration and consolidation
of its laboratory information, billing and collections and financial reporting
systems enable it to monitor the operations of the Practices, enhance
utilization of the pathologists, develop practice protocols and archives and
provide the Company with a competitive advantage in negotiating national
clinical laboratory and managed care contracts. Each of the Company's
laboratories has a laboratory information system that enables laboratory
personnel to track, process, report and archive patient diagnostic information.

         The Company's systems include an outpatient billing software program,
at its Fort Lauderdale centralized billing operation, which is being utilized
for the integration of outpatient billing. In its effort to further increase the
capacity of its centralized billing operations, during 1999 the Company signed
an agreement with a large healthcare software provider for a billing, accounts
receivable and collections system. In addition to performing services for
outpatient billing, hospital billing will be tested on the new system.
Conversion from the current billing system to the new billing system is
anticipated to be completed by the end of 2000. The Company has installed a
complete general ledger and financial reporting system to handle accounting for
the Practices and to consolidate all accounting and financial information. As of
January 2000, all of the Practices have been integrated onto one common
accounting system.

         In 1999, the Company allocated significant resources to ensure that its
systems would not be adversely affected by the Year 2000. Because of its
remediation efforts, all systems within the Company functioned without flaw at
the turn of the millennium.

         Because the Company is one of the largest diagnostic information
providers it realizes the importance and value of the data resident in the
various systems. In an effort to mine this data, the Company is in the process
of developing a Web-enabled data warehouse offering named PathWay
Solutions/trademark/. PathWay Solutions/trademark/ will provide comparative
statistical and diagnostic information that can be used by its client referring
physicians, hospitals, payers and others for disease management and awareness,
utilization management and research capabilities.

         The impetus and advancement in the Internet is changing the way society
is conducting business and obtaining information. In an effort to exceed the
challenge, the Company is developing an Internet strategy that will provide
advanced services to its patients, client referring physicians, hospitals,
payers, and general public.

         The Company invested approximately $1.5 million and $2.5 million in
information technology during the years ended December 31, 1998 and 1999,
respectively. It plans to invest additional amounts necessary to implement
advanced technologies by becoming more cost effective, efficient and responsive,
as well as providing value-added services.

SALES AND MARKETING

         OUTPATIENT MARKET. The Company's marketing efforts are focused on
physicians, hospital and outpatient surgery center administrators, national
clinical laboratories and managed care organizations. Prior to being acquired by
the Company, the Practices' marketing efforts were primarily based upon the
professional reputations and individual efforts of the pathologists. The Company
believes that there is an opportunity to capitalize on these professional
reputations by hiring experienced personnel and utilizing professional sales and
marketing techniques. Historically, some of the outpatient practices marketed
outpatient services primarily to dermatologists, over a broad geographic area
including neighboring states. The Company continues to expand its sales force
with additional sales personnel and management staff to accommodate new
acquisitions as well as increase same store growth. These field representatives
are supervised by regional sales managers who coordinate the implementation of
regional contracting efforts, leverage operational capabilities, support
national sales strategies and provide ongoing training and field sales support.
The Regional Sales Managers report to a National Director of Sales to insure the
implementation of consistent and effective sales activities nationwide. The
sales and marketing staff also includes Directors of Marketing and Managed Care.
In 1999, the Company added four positions to the marketing department: two
product development managers, a sales analyst, and a marketing coordinator, all
of whom report directly to the Director of Marketing. The Director of Managed
Care directs regional managed care specialists in negotiating additional
contracts. In

                                       8
<PAGE>

1999, the Company added two positions to its Managed Care Department. The
Director of Managed Care Sales will oversee the department's efforts with
national contracts, and the Manager of Contract Administration who will ensure
adherence to contract terms and conditions.

         NATIONAL CLINICAL LABORATORY MARKETING. The national clinical
laboratories, principally the two major ones, Quest and Laboratory Corporation
of America Holdings ("LabCorp") contract with managed care organizations to
provide clinical laboratory services, as well as anatomic pathology and cytology
services. Their contracts with managed care organizations are typically
capitated. Nine Practices have exclusive subcontracts with one of the two
national clinical laboratories to provide anatomic pathology and cytology
services. Under these contracts, which typically run from one to three years
with automatic renewals unless terminated earlier, the Practices bill the
national clinical laboratories on a discounted fee-for-service basis. The
reduced fee is offset by the national clinical laboratories provision of courier
services, supplies, and reduced billing costs and lower bad debts, since the
national clinical labs bear the capitation risk. The Company is directing its
marketing efforts to national clinical laboratories to expand these contracts on
a regional basis to additional practices as well as to enter into new contracts.
At the same time the Company is seeking to secure new contracts and expand
existing provider contracts with managed care organizations for the provision of
anatomic pathology services directly to their members and is prepared to
negotiate flexible arrangements with managed care organizations, including
discounted fee-for-service or capitated contracts. There can be no assurance
that the Company's efforts to contract directly with managed care organizations
will not adversely affect the Company's relationship with the national clinical
laboratories.

         In February 1999, SmithKline announced the sale of its clinical
laboratories unit to Quest, which gave Quest the leading position in the $30
billion clinical laboratory testing industry. At the time, the Company had
contracts with both SmithKline and Quest, often in areas where the two were not
in direct competition. It is too soon to assess the impact of the acquisition on
the Company's operations or contracts with Quest. However, all indications are
that the combined entity will maintain its relationship with pathology service
providers, and may consolidate the number of providers it uses. Since AmeriPath
is one of their largest providers of pathology services, it places AmeriPath's
pathologists in a very competitive position. However, there is no assurance that
we will maintain these relationships in the future.

CLIENT AND PAYOR RELATIONSHIPS

         The Practices also provide services to a wide variety of other
healthcare providers and payors including physicians, government programs,
indemnity insurance companies, managed care organizations and national clinical
laboratories. Fees for anatomic pathology services rendered to physicians are
billed either to the physicians, the patient or to the patient's third party
payor.

CONTRACTS AND RELATIONSHIPS WITH AFFILIATED PHYSICIANS

         The Company employs pathologists, or manages the PA Contractors who
employ pathologists, to provide medical services in hospitals and in other
inpatient and outpatient laboratories. Pathologist employment agreements
typically have terms of three to five years and generally can be terminated at
any time upon 60 to 180 days notice. The pathologists generally receive a base
salary, fringe benefits, and may include an incentive performance bonus. In
addition to compensation, the Company provides its pathologists with uniform
benefit plans, such as disability, supplemental retirement, life and group
health insurance and medical malpractice insurance. The pathologists are
required to hold a valid license to practice medicine in the jurisdiction in
which they practice and, with respect to inpatient or hospital services, to
become a member of the medical staff at the contracting hospital with privileges
in pathology. The Company is responsible for billing patients, physicians and
third party payors for services rendered by the pathologists. Most of the
agreements prohibit the physician from competing with the Company within a
defined geographic area and prohibit solicitation of pathologists, other
employees or clients of the Company for a period of one to two years after
termination of employment.

         The Company's business is dependent upon the recruitment and retention
of pathologists, particularly those with subspecialties, such as
dermatopathology. While the Company has been able to recruit (principally
through practice acquisitions) and retain pathologists, no assurance can be
given that the Company will be able to continue to do so successfully or on
terms similar to its current arrangements. The relationship between the
Company's pathologists and their respective local medical communities is
important to the operation and continued profitability of the Practices. In the
event that a significant number of pathologists terminate their relationships
with the Company or become unable or unwilling to continue their employment, the
Company's business could be materially and adversely affected.

                                       9
<PAGE>

         The experience and specialized certifications of the Company's
affiliated physicians provide opportunities for immediate consultation in
complex cases among the internal network of affiliated physicians. Pathology is
a specialized field of medicine and is a core requirement in a dermatologist's
training. Through teaching at medical institutions, the Company's affiliated
physicians have an opportunity to develop a reputation and following among
residents and practicing physicians. Several affiliated physicians have teaching
positions with universities or affiliations with other educational institutions
for the training and continuing medical education of physicians, particularly
dermatologists.

GOVERNMENT REGULATION

         The Company's business is subject to a myriad of governmental and
regulatory requirements relating to healthcare matters as well as laws and
regulations that relate to business corporations in general. The Company
believes that it exercises care to structure its practices and arrangements with
hospitals and physicians to comply with relevant federal and state law and
believes that such current arrangements and practices do comply with applicable
statutes and regulations. However, there can be no assurance that none of the
Company's current or prior practices or arrangements could be found to be in
noncompliance with law, or that such occurrence could not result in a material
adverse effect on the Company.

         The Company derived approximately 22% and 20% of its collections for
the years ended December 31, 1998 and 1999, respectively, from payments made by
government sponsored healthcare programs (principally Medicare and Medicaid).
The decrease in the percentage of collections attributable to government
sponsored healthcare programs resulted primarily from the acquisition of
practices outside Florida, with smaller Medicare populations. These programs are
subject to substantial regulation by the federal and state governments. Any
change in reimbursement regulations, policies, practices, interpretations or
statutes that places limitations on reimbursement amounts, or changes in
reimbursement coding, or practices could materially and adversely affect the
Company's financial condition and results of operations. Increasing budgetary
pressures at both the federal and state level and concerns over escalating costs
of healthcare have led, and may continue to lead, to significant reductions in
health care reimbursements. State concerns over the growth in Medicaid also
could result in payment reductions. Although governmental payment reductions
have not materially affected the Company in the past, it is possible that such
changes in the future could have a material adverse effect on the Company's
financial condition and results of operations. In addition, Medicare, Medicaid
and other government sponsored healthcare programs are increasingly shifting to
some form of managed care. Some states have recently enacted legislation to
require that all Medicaid patients be converted to managed care organizations,
and similar legislation may be enacted in other states, which could result in
reduced payments to the Company for such patients. In addition, a
state-legislated shift in a Medicaid plan to managed care could cause the loss
of some, or all, Medicaid business for the Company in that state if the Company
were not selected as a participating provider. Additionally, funds received
under all health care reimbursement programs are subject to audit with respect
to the proper billing for physician services and, accordingly, retroactive
adjustments of revenue from these programs could occur. The Company expects that
there will continue to be proposals to reduce or limit Medicare and Medicaid
reimbursements.

         In connection with practice acquisitions, the Company performs certain
due diligence investigations with respect to the potential liabilities of
acquired practices and obtains indemnification with respect to certain
liabilities from the sellers of such practices. Nevertheless, there can be
undiscovered claims which subsequently can arise and there can be no assurance
that any liabilities for which the Company becomes responsible (despite such
indemnification) will not be material or will not exceed either the limitations
of any applicable indemnification provisions or the financial resources of the
indemnifying parties. Furthermore, the Company, through its Corporate Compliance
Program, regularly reviews the Practices' compliance with federal and state
healthcare laws and regulations and revises as appropriate the operations,
policies and procedures of its Practices to conform with the Company's policies
and procedures and applicable law. While the Company believes that the
operations of the Practices prior to their acquisition were generally in
compliance with such laws and regulations, there can be no assurance that the
prior operations of the Practices were in full compliance with such laws, as
such laws may ultimately be interpreted. Moreover, although the Company
maintains an active compliance program, it is possible that the government might
challenge some of the current practices of the Company as not being in full
compliance with such laws. A violation of such laws by a practice could result
in civil and criminal penalties, exclusion of the physician, the practice or the
Company from participation in Medicare and Medicaid programs and/or loss of a
physician's license to practice medicine.

         FRAUD AND ABUSE. Federal anti-kickback laws and regulations prohibit
any knowing and willful offer, payment, solicitation or receipt of any form of
remuneration, either directly or indirectly, in return for, or to induce: (i)
the referral of an individual for a service for which payment may be made by
Medicare and Medicaid or certain other federal healthcare programs;

                                       10
<PAGE>

or (ii) the purchasing, leasing, ordering or arranging for, or recommending the
purchase, lease or order of, any service or item for which payment may be made
by Medicare, Medicaid or certain other federal healthcare programs. Violations
of federal anti-kickback rules are punishable by monetary fines, civil and
criminal penalties and exclusion from participation in Medicare and Medicaid
programs. Several states have laws that are similar.

         SAFE HARBORS. The federal government has published regulations that
provide "safe-harbors" for certain business transactions that would otherwise
violate the anti-kickback statute. While arrangements between the Company,
physicians and third parties may not satisfy applicable requirements under these
safe harbors, the Company believes its operations are in material compliance
with applicable Medicare and fraud and abuse laws. There is a risk however, that
the Office of the Inspector General ("OIG") might investigate arrangements which
do not satisfy the safe harbors. If the Company's arrangements were found to be
illegal, the Company, the physician groups and/or the individual physicians
would be subject to civil and criminal penalties, including exclusion from the
participation in government reimbursement programs, which could materially
adversely affect the Company.

         ADVISORY OPINIONS. The Department of Health and Human Services Office
of Inspector General issue advisory opinions that provide advice on whether
proposed business arrangements violate the anti-kickback law. In Advisory
Opinion 99-13, the OIG opined when prices for laboratory services for
non-governmental patients are discounted below Medicare reimbursable rate, the
anti-kickback statute may be implicated. The OIG found prices discounted below
the laboratory supplier's costs to be particularly problematic. In the same
opinion, OIG suggests that a laboratory may be excluded from federal health care
programs if it charges Medicare or Medicaid amounts substantially in excess of
discounted charges to the physician. In the OIG's opinion, charges are likely
excessive if the profit margin for Medicare business exceeds profit margin for
non-federally reimbursed business. The OIG also has addressed physician practice
management arrangements in an advisory opinion. In Advisory Opinion 98-4, the
OIG found that management fees based on a percentage of practice revenues may
violate the anti-kickback statute. Although these advisory opinions are limited
to the parties who request them, in the event the Company has arrangements that
are inconsistent with the OIG's opinions, the OIG might take the position that
the arrangements violate the anti-kickback law. Any such finding could have a
material adverse impact on the Company.

         SELF-REFERRAL AND FINANCIAL INDUCEMENT LAWS. The Company is also
subject to federal and state statutes and regulations banning payments for
referral of patients and referrals by physicians to healthcare providers with
whom the physicians have a financial relationship. The federal Stark Bill
applies to Medicare and Medicaid. State statutes and regulations generally apply
to services reimbursed by both governmental and private payors. Violations of
these laws may result in prohibition of payment for services rendered, loss of
licenses as well as fines and criminal penalties. State statutes and regulations
affecting the referral of patients to healthcare providers range from statutes
and regulations that are substantially the same as the federal laws and the safe
harbor regulations to a simple requirement that physicians or other healthcare
professionals disclose to patients any financial relationship the physicians or
healthcare professionals have with a healthcare provider that is being
recommended to the patients. These laws and regulations vary significantly from
state to state, are often vague and, in many cases, have not been interpreted by
courts or regulatory agencies. Adverse judicial or administrative
interpretations of any of these laws could have a material adverse effect on the
operating results and financial condition of the Company. In addition, expansion
of the Company's operations to new jurisdictions, or new interpretations of laws
in existing jurisdictions, could require structural and organizational
modifications of the Company's relationships with physicians to comply with that
jurisdiction's laws. Such structural and organizational modifications could have
a material adverse effect on the operating results and financial condition of
the Company.

         Physicians affiliated with the Company may have financial relationships
with the Company, as defined by Stark, in the form of compensation arrangements,
ownership of Company shares, contingent promissory notes with the Company, or a
combination of the above. With respect to compensation arrangements, the Company
believes that existing arrangements are structured to comply with an applicable
exception. With respect to the ownership of shares, the Company believes that
the ownership of Company shares by physicians should fall within the publicly
traded stock exception to the Stark law's definition of financial relationship.
However, certain physician-owned shares do have a transfer restriction and, as a
result, the government could take the position that the exception is not met.
The contingent notes held by some physicians do not meet an exception to the
Stark law's definition of financial relationship. In either case, however, the
Company believes that its current operations comply with the Stark law because
physicians affiliated with the Company ordinarily do not make referrals and in
any event have been instructed, and are believed to be following such
instructions, not to make referrals to the Company. To the extent physicians
affiliated with the Company may make a referral to the Company and a financial
relationship exists between the Company and the referring physician through
either the ownership of Company shares or contingent notes, the government might

                                       11
<PAGE>

take the position that the arrangement does not comply with the Stark Bill. Any
such finding could have a material adverse impact on the Company.

         GOVERNMENT INVESTIGATIONS OF HOSPITALS AND HOSPITAL LABORATORIES.
Significant media and public attention has been focused on the health care
industry due to ongoing federal and state investigations reportedly related to
certain referral and billing practices, laboratory and home healthcare services
and physician ownership and joint ventures involving hospitals. Most notably,
Columbia is under investigation with respect to such practices. The Company
operates laboratories on behalf of and has numerous contractual agreements with
hospitals, including 27 pathology service contracts with Columbia hospitals as
of December 31, 1999. The government's ongoing investigation of Columbia could
result in a governmental investigation of one or more of the Company's
operations that have arrangements with Columbia. In addition, the Office of the
Inspector General and the Department of Justice have initiated hospital
laboratory billing review projects in certain states and are expected to extend
such projects to additional states, including states in which the Company
operates hospital laboratories. These projects increase the likelihood of
governmental investigations of laboratories owned and operated by the Company.
Although the Company monitors its billing practices and hospital arrangements
for compliance with prevailing industry practices under applicable laws, such
laws are complex and constantly evolving and there can be no assurance that
governmental investigators will not take positions that are inconsistent with
the Company's or industry practices. The government's investigations of entities
with which the Company contracts may have other effects which could materially
and adversely affect the Company, including termination or amendment of one or
more of the Company's contracts or the sale of hospitals potentially disrupting
the performance of services under such contracts.

         CORPORATE PRACTICE OF MEDICINE. The Company is not licensed to practice
medicine. The practice of medicine is conducted solely by its licensed
pathologists. The manner in which licensed physicians can be organized to
perform and bill for medical services is governed by the laws of the state in
which medical services are provided and by the medical boards or other entities
authorized by such states to oversee the practice of medicine. Business
corporations are generally not permitted under certain state laws to exercise
control over the medical judgments or decisions of physicians, or engage in
certain practices such as fee-splitting with physicians. In states where the
Company is not permitted to directly own a medical practice, the Company
performs only non-medical and administrative and support services, does not
represent to the public or its clients that it offers medical services and does
not exercise influence or control over the practice of medicine. See discussion
"AmeriPath Corporate Structure; Owned and Affiliated Practices; Hospital
Contracts and Laboratories", above.

         Based on the advice of the Company's general counsel and health care
regulatory counsel, the Company believes that it currently is in material
compliance with the corporate practice laws in the states in which it operates.
There can be no assurance that regulatory authorities or other parties will not
assert that the Company is engaged in the corporate practice of medicine. If
such a claim were successfully asserted in any jurisdiction, the Company, and
its pathologists could be subject to civil and criminal penalties under such
jurisdiction's laws and could be required to restructure their contractual and
other arrangements. Alternatively, some of the Company's existing contracts
could be found to be illegal and unenforceable. In addition, expansion of the
operations of the Company to other "corporate practice" states may require
structural and organizational modification of the Company's form of relationship
with physicians, PA Contractors or hospitals. Such results or the inability to
successfully restructure contractual arrangements could have a material adverse
effect on the Company's financial condition and results of operations.

         MEDICARE FEE SCHEDULE PAYMENT FOR CLINICAL DIAGNOSTIC LABORATORY
TESTING. Medicare reimburses hospitals based on locality-specific fee schedules
on the basis of a reimbursement methodology with Consumer Price Index ("CPI")
related adjustments. Medicare includes payment for services performed for
clinical diagnostic laboratory inpatients within the prospectively determined
Diagnosis Related Group rate paid to the hospital. Additionally, state Medicaid
programs may pay no more than the Medicare fee schedule amount. Congress also
has implemented a national cap on Medicare clinical diagnostic laboratory fee
schedules. This national cap has been lowered nearly every year and now is 74%
of the national median. In addition, Congress frequently has either limited or
eliminated the annual CPI adjustments of the Medicare clinical diagnostic
laboratory fee schedules. The Omnibus Budget Reconciliation Act of 1993
eliminated the adjustment for the years 1994 and 1995. In 1996 and 1997,
however, the fee schedule adjustments were 3.2% and 2.7%, respectively. Even
these modest increases were reduced in some areas due to a recalculation of
national medians and by conversion in some carrier areas to a single statewide
fee schedule. In the Balanced Budget Act of 1997 ("BBA"), Congress again
eliminated the annual adjustments, this time for the years 1998 through 2002.
The adjustment limitations and changes in the national cap made to date have not
had, and are not expected by the Company to have, a material adverse effect on
the Company's results of operations. Any further significant decrease in such
fee schedules could have a material adverse effect on the Company.

                                       12
<PAGE>

         Due to uncertainty regarding the implementation of the above-described
Medicare developments, the Company currently is unable to predict their ultimate
impact on the laboratory industry generally or on the Company in particular.
Reforms may also occur at the state level (and other reforms may occur at the
federal level) and, as a result of market pressures, changes are occurring in
the marketplace as the number of patients covered by some form of managed care
continues to increase. In the past, the Company has offset a substantial portion
of the impact of price decreases and coverage changes through the achievement of
economies of scale, more favorable purchase contracts and greater operational
efficiencies. However, if further substantial price decreases or coverage
changes were to occur, or if the government were to seek any substantial
repayments or penalties from the Company, such developments would likely have an
adverse impact on gross profits from the Company's testing services unless
management had an opportunity to mitigate such impact.

         REEVALUATIONS AND EXAMINATION OF BILLING. Payors periodically
reevaluate the services they reimburse. In some cases, government payors such as
Medicare also may seek to recoup payments previously made for services
determined not to be reimbursable. Any such action by payors would have an
adverse affect on the Company's revenues and earnings.

         Moreover, in recent months the federal government has become more
aggressive in examining laboratory billing and seeking repayments and penalties
as the result of improper billing for services (e.g., the billing codes used),
regardless of whether carriers had furnished clear guidance on this subject. The
primary focus of this initiative has been on hospital laboratories and on
routine clinical chemistry tests which comprise only a small part of the
Company's revenues. Although the scope of this initiative could expand, it is
not possible to predict whether or in what direction the expansion might occur.
The Company believes its practices are proper and do not include any allegedly
improper practices now being examined. However, no assurance can be given that
the government will not broaden its initiative to focus on the type of services
furnished by the Company or, if this were to happen, on how much money, if any,
the Company might be required to repay.

         Furthermore, the Health Insurance Portability and Accountability Act of
1996 ("HIPAA") and Operation Restore Trust have strengthened the powers of the
OIG and increased the funding for Medicare and Medicaid audits and
investigations. As a result, the OIG is currently expanding the scope of its
healthcare audits and investigations. Federal and state audits and inspections,
whether on a scheduled or unannounced basis, are conducted from time to time at
the Company's facilities.

         An inspection was conducted in April 1997 at the Company's laboratory
facility in Fort Lauderdale, Florida by representatives of federal and state
agencies (Medicare (Florida) Program Safeguards ("MPS")) under

Operation Restore Trust, regarding the Company's 1996 Medicare billing
practices. As a result of the 1997 inspection, in 1998 MPS attempted a
recoupment of $2.95 million in alleged Medicare overpayments for use of an
inappropriate procedure code. The government alleged that many of the skin
biopsies performed by the Company should have been coded as an 88304, rather
than the 88305 code used by the Company. The Company mounted a vigorous protest
and defense and argued that its coding practice and procedure codes were
accurate and consistent with accepted CPT code assignment guidelines in effect
since 1992. As support for its position, the Company provided MPS with the
reports of reputable coding experts that independently concluded that the
Company's coding practices were in conformity with accepted CPT assignment
guidelines. After review of the Company's position and the studies presented by
the Company, MPS determined that $204.05 was due as a result of improper
documentation. MPS concluded that no fraud or intentional abuse was
demonstrated. AmeriPath promptly paid the $204.05 and resolved the matter.

         Due to the uncertain nature of coding for pathology services, the
Company cannot assure that issues such as those addressed in the 1997 Operation
Restore Trust investigation will not arise again. If a negative finding is made
as a result of such an investigation, the Company could be required to change
coding practices or repay amounts paid for incorrect practices either of which
could have a materially adverse effect on the operating results and financial
condition of the Company.

         BBA ADDITIONS TO COVERAGE. The BBA added coverage for an annual
screening pap smear for Medicare beneficiaries who are at high risk of
developing cervical or vaginal cancer and for beneficiaries of childbearing age
effective January 1, 1998, as well as coverage for annual prostate cancer
screening, including a prostate-specific antigen blood test, for beneficiaries
over age 50, effective January 1, 2000. Although most women of childbearing age
and men under age 65 are not Medicare beneficiaries, the addition of Medicare
coverage for these tests could provide additional revenues for the Company. With
the BBA, Congress merged the three existing conversion factors into one for all
types of services provided resulting in a single conversion factor for 1998 of
$36.69. These changes effectively provided for an 8.3% increase in reimbursement
in 1998. The conversion factor was reduced by 5% in 1999 to $34.73.

                                       13
<PAGE>

         LABORATORY COMPLIANCE PLAN. In February 1997, OIG released a model
compliance plan for laboratories that is based largely on the corporate
integrity agreements negotiated with the laboratories which settled a number of
government enforcement actions against laboratories under Operation Restore
Trust, initiated in 1995. The Company adopted and maintains a compliance plan,
which includes components of OIG's model compliance plan, as the Company deemed
appropriate to the conduct of its business. The Company's Vice President of
Human Resources serves as the Company's Compliance Officer and reports directly
to the Board of Directors. One key aspect of the corporate integrity agreements
and the model compliance plan is an emphasis on the responsibilities of
laboratories to notify physicians that Medicare covers only medically necessary
services. Although these requirements focus on chemistry tests, especially
routine tests, rather than on anatomic pathology services or the non-automated
tests which make up the majority of the Company's business, they could affect
physician test ordering habits more broadly. The Company is unable to predict
whether or to what extent these developments may have an impact on the
utilization of the Company's services.

          ANTITRUST LAWS. In connection with the corporate practice of medicine
laws discussed above, the physician practices with which the Company is
affiliated in some states are organized as separate legal entities. As such, the
physician practice entities may be deemed to be persons separate both from the
Company and from each other under the antitrust laws and, accordingly, subject
to a wide range of laws that prohibit anti-competitive conduct among separate
legal entities. In addition, the Company also is seeking to acquire or affiliate
with established and reputable practices in its target geographic markets. The
Company believes it is in compliance with these laws and intends to comply with
any state and federal laws that may affect its development of integrated
healthcare delivery networks. There can be no assurance, however, that a review
of the Company's business by courts or regulatory authorities would not
adversely affect the operations of the Company and its affiliated physician
groups.

         HIPPA CRIMINAL PENALTIES. HIPAA created criminal provisions, which
impose criminal penalties for fraud against any health care benefit program for
theft or embezzlement involving health care and for false statements in
connection with the payment of any health benefits. HIPAA also provided broad
prosecutorial subpoena authority and authorized property forfeiture upon
conviction of a federal health care offense. Significantly, the HIPAA provisions
apply not only to federal programs, but also to private health benefit programs
as well. HIPAA also broadened the authority of the OIG to exclude participants
from federal health care programs. Because of the uncertainties as to how the
HIPAA provisions will be enforced, the Company currently is unable to predict
their ultimate impact on the Company. If the government were to seek any
substantial penalties against the Company, this could have a material adverse
effect on the Company.

         LICENSING. CLIA extends federal oversight to virtually all clinical
laboratories by requiring that laboratories be certified by the government. Many
laboratories must also meet governmental quality and personnel standards,
undergo proficiency testing and be subject to biennial inspection. Rather than
focusing on location, size or type of laboratory, this extended oversight is
based on the complexity of the test performed by the laboratory. The CLIA
quality standards regulations divide all tests into three categories (wavered,
moderate complexity and high complexity) and establish varying requirements
depending upon the complexity of the test performed. The Company's outpatient
laboratories are licensed by CLIA to perform high complexity testing. Generally,
the HHS regulations require laboratories that perform high complexity or
moderate complexity tests to implement systems that ensure the accurate
performance and reporting of tests results, establish quality control systems,
have proficiency testing conducted by approved agencies and have biennial
inspections. The Company is also subject to state regulation. CLIA provides that
a state may adopt more stringent regulations than federal law. For example, some
state laws require that laboratory personnel meet certain qualifications,
specify certain quality controls, maintain certain records and undergo
proficiency testing.

         OTHER REGULATIONS. In addition, the Company is subject to licensing and
regulation under federal, state and local laws relating to the handling and
disposal of medical specimens, infectious and hazardous waste and radioactive
materials as well as the safety and health of laboratory employees. All Company
laboratories are operated in a manner designed to comply with applicable federal
and state laws and regulations relating to the generation, storage, treatment
and disposal of all laboratory specimens and other biohazardous waste. The
Company utilizes licensed vendors for the disposal of such specimen and waste.

         In addition to its comprehensive regulation of safety in the workplace,
the federal Occupational Safety and Health Administration ("OSHA") has
established extensive requirements relating to workplace safety for healthcare
employees, including clinical laboratories, whose workers may be exposed to
blood-borne pathogens, such as HIV and the hepatitis B virus. These regulations
require work practice controls, protective clothing and equipment, training,
medical follow-up, vaccinations and other measures designed to minimize exposure
to, and transmission of, blood-borne pathogens. Regulations of the

                                       14
<PAGE>

Department of Transportation, the Public Health Services and the U.S. Postal
Service also apply to the transportation of laboratory specimens.

         HIPAA MEDICAL RECORD CONFIDENTIALITY REQUIREMENTS. Among other things,
HIPAA established several requirements regarding the confidentiality of medical
records. HCFA is in the process of establishing regulations that explain the
application of such requirements. It is unclear whether these requirements will
result in additional financial obligations for the Company or pose increased
regulatory risk.

INSURANCE

         The Company's business entails an inherent risk of claims of physician
professional liability for acts or omissions of its physicians and laboratory
personnel. The Company and its physicians periodically become involved as
defendants in medical malpractice lawsuits, some of which are currently ongoing,
and are subject to the attendant risk of substantial damage awards. The Company
has consolidated its physician professional liability insurance coverages with
the St. Paul Fire and Marine Insurance Company, whereby each of the pathologists
is insured under claims-made policies with primary limits of $1.0 million per
occurrence and $5.0 million in the annual aggregate, and share with the Company
in surplus coverage of up to $20.0 million in the aggregate. The Company's
coverage until July 1999 was with Steadfast Insurance Company (Zurich-American).
The policy also provides "prior acts" coverage for each of the physicians with
respect to the practices prior to their acquisition by the Company. Further, the
Company has provided reserves for incurred but not reported claims in connection
with its claims-made policies. The terms of the purchase agreements relating to
each practice acquisition contain certain limited rights of indemnification from
the sellers of the practices. The Company also maintains property and umbrella
liability insurance policies. While the Company believes it has adequate
professional liability insurance coverage for itself, and physicians, there can
be no assurance that a future claim or claims will not be successful and, if
successful, will not exceed the limits of available insurance coverage or that
such coverage will continue to be available at acceptable costs or on favorable
terms. In addition, the Company's insurance does not cover all potential
liabilities arising from governmental fines and penalties, indemnification
agreements and certain other uninsurable losses. A malpractice claim asserted
against the Company, a Management or Practice Subsidiary, a PA Contractor or an
affiliated physician could, in the event of an adverse outcome exceeding limits
of available insurance coverage, have a material adverse effect on the Company's
financial condition and results of operations.

COMPETITION

         The markets for the services provided by the Company, its Practices and
pathologists are in the provision of physician practice management services to
pathology practices and the provision of pathology and cytology diagnostic
services. Competition may result from other anatomic pathology practices,
companies in other healthcare industry segments, such as other hospital-based
specialties, national clinical laboratories, large physician group practices or
pathology physician practice management companies that may enter the Company's
markets, some of which may have greater financial and other resources than the
Company.

         With respect to physician practice management services, the Company
believes that the principal competitive factors are the Company's pathologist
leadership, and single specialty focus, sales and marketing expertise, its
administrative support capabilities (billing, collections, accounting and
financial reporting, information systems, and human resources). The Company
believes that the infrastructure it is building provides a competitive advantage
in such markets. To date, the Company has not experienced significant
competition in its primary market areas. However, it does compete with several
other companies, and such competition can reasonably be expected to increase. In
addition, companies in other healthcare segments, such as hospitals, national
clinical laboratories, third party payors, and HMO's, many of which have greater
financial resources may become competition in the employment and managers of
pathology practices. The Company competes for acquisitions and affiliations on
the basis of its reputation, management experience, status and resources as a
public company and its single focus on anatomic pathology. There can be no
assurance that the Company will be able to compete effectively or that
additional competitors will not enter the Company's markets or make it more
difficult for the Company to acquire or affiliate with practices on favorable
terms.

SERVICE MARKS

         The Company has registered the service mark "AmeriPath" and the
AmeriPath logo with the United States Patent and Trademark Office.

                                       15
<PAGE>

EMPLOYEES

         At December 31, 1999, the Company's employees totaled 1,595, including
297 physicians. In addition to physicians, the Company's employees include 497
laboratory technicians, 99 couriers and 702 billing, marketing, transcription
and administrative staff, of which 87 personnel are located at the Company's
executive offices. None of the Company's employees or prospective employees is
subject to collective bargaining agreements.

ITEM 2.  PROPERTIES

         The Company leases its executive offices located in Riviera Beach,
Florida (approximately 12,000 square feet) and its centralized billing office in
Fort Lauderdale, Florida (approximately 13,000 square feet) and leases 48 other
facilities: 25 in Florida, two in Alabama, two in Kentucky, three in Ohio, eight
in Texas, three in Pennsylvania, and one in North Carolina, Indiana, New York,
Mississippi and Wisconsin. These facilities are used for laboratory operations,
administrative and billing and collections operations and storage space. The 50
facilities encompass an aggregate of approximately 206,000 square feet, have an
aggregate annual rent of approximately $2.3 million and have lease terms
expiring from 2000 to 2009. As laboratory leases are scheduled to expire, the
Company will consider whether to extend or renegotiate the existing lease or
move the facility to another location within the defined geographic area of the
Practice.

ITEM 3.  LEGAL PROCEEDINGS

         During the ordinary course of business, the Company has become and may
in the future become subject to pending and threatened legal actions and
proceedings. The Company may have liability with respect to its employees and
its pathologists as well as with respect to hospital employees who are under the
supervision of the hospital based pathologists. The majority of the pending
legal proceedings involve claims of medical malpractice. Most of these relate to
cytology services. These claims are generally covered by insurance. Based upon
investigations conducted to date, the Company believes the outcome of such
pending legal actions and proceedings, individually or in the aggregate, will
not have a material adverse effect on the Company's financial condition, results
of operations or liquidity. If the Company is ultimately found liable under
these medical malpractice claims, there can be no assurance that the Company's
medical malpractice insurance coverage will be adequate to cover any such
liability. The Company may also, from time to time, be involved with legal
actions related to the acquisition of and affiliation with physician practices,
the prior conduct of such practices, or the employment (and restriction on
competition of) physicians. There can be no assurance any costs or liabilities
for which the Company becomes responsible in connection with such claims or
actions will not be material or will not exceed the limitations of any
applicable indemnification provisions or the financial resources of the
indemnifying parties.

          As further described above under "Government Regulation -Reevaluations
and Examination of Billing", in November 1998 AmeriPath received (and publicly
announced that it received) a request for a refund of $2.95 million from the
MPS, and the Company also announced that it was vigorously contesting the
Medicare repayment. Following that announcement, seven class action lawsuits
were filed against the Company and certain officers and directors on behalf of
AmeriPath stockholders alleging, among other things, that the Company had
violated securities laws because the Company allegedly had previously failed to
properly disclose the use of improper billing procedures. Then in December 1998,
the Company announced that Medicare, after further consideration of the
Company's position, agreed with the Company and was withdrawing its request for
the $2.95 million refund. As a result, AmeriPath insisted that all the
plaintiff's dismiss their lawsuits against the Company without any payment from
AmeriPath and that all class action plaintiffs publish notice to the class that
they sought to represent that Medicare had withdrawn its refund claim and the
plaintiffs would no longer be pursuing their actions against AmeriPath either on
their own behalf or on behalf of any other shareholder. As of January 8, 1999,
all seven of the class action lawsuits had been dismissed and the requested
notices had been published.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1999.

                                       16
<PAGE>

                                     PART II

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

        AmeriPath's Common Stock, is listed for quotation on the NASDAQ National
Market System under the symbol "PATH". The following table sets forth, the high
and low closing sales prices for the Common Stock, as reported on the NASDAQ
National Market System during the Company's fiscal quarters indicated below. The
Common Stock first began trading on October 21, 1997. As of March 10, 2000,
there were approximately 222 shareholders of record and over 1,800 beneficial
owners.

                                  HIGH                   LOW
                                  ----                   ---
First Quarter 1998             $ 18 3/4               $ 14
Second Quarter 1998            $ 18 13/16             $ 11 13/16
Third Quarter 1998             $ 14 7/8               $ 10
Fourth Quarter 1998            $ 14 5/8               $  4 1/16
First Quarter 1999             $ 12 9/16              $  7 1/2
Second Quarter 1999            $  9 5/8               $  7 1/2
Third Quarter 1999             $ 10 1/8               $  8 3/32
Fourth Quarter 1999            $ 10                   $  7 7/16

         The Company presently has no plans to pay any dividends on its common
stock. All earnings will be retained for the foreseeable future to support
operations and to finance the growth and development of the Company's business.
The payment of future cash dividends, if any, will be at the discretion of the
Board of Directors of the Company and will depend upon, among other things,
future earnings, capital requirements, the Company's financial condition, any
applicable restrictions under credit agreements existing from time to time and
on such other factors as the Board of Directors may consider relevant. The terms
of the Company's existing credit facility prohibit the payment of dividends
without the lenders' consent.

         RECENT SALES OF UNREGISTERED SECURITIES

         There were no shares of Common Stock issued in the fourth quarter of
1999 or through the date of this report.

ITEM 6.  SELECTED FINANCIAL DATA

         The selected Consolidated Financial Data set forth below have been
derived from the Company's consolidated financial statements and should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Consolidated Financial Statements and the
related Notes thereto and the other financial information included elsewhere in
this Annual Report on Form 10-K.

                                       17
<PAGE>

CONSOLIDATED STATEMENT OF OPERATIONS DATA:
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                        1995           1996           1997           1998           1999
                                                     ---------      ---------      ---------      ---------      ---------
<S>                                                  <C>            <C>            <C>            <C>            <C>
Net revenue                                          $  16,024      $  42,558      $ 108,406      $ 177,304      $ 232,753
                                                     ---------      ---------      ---------      ---------      ---------
Operating costs:
     Cost of services                                    8,517         20,106         48,833         78,460        108,177
     Selling, general and administrative
         expense                                         2,644          8,483         19,929         29,731         37,590
     Provision for doubtful accounts                     1,161          3,576         10,892         18,698         25,262
     Amortization expense                                  678          1,958          5,762          9,461         12,453
     Loss on cessation of clinical lab
         operations (1)                                     --            910             --             --             --
                                                     ---------      ---------      ---------      ---------      ---------
Total                                                   13,000         35,033         85,416        136,350        183,482
                                                     ---------      ---------      ---------      ---------      ---------
Income from operations                                   3,024          7,525         22,990         40,954         49,271
Interest expense                                        (1,504)        (3,540)        (8,763)        (8,201)        (9,299)
Nonrecurring charge (2)                                     --             --         (1,289)            --             --
Other (expense) income, net                                (46)          (431)           (96)            10            114
                                                     ---------      ---------      ---------      ---------      ---------
Income before income taxes                               1,474          3,554         12,842         32,763         40,086
Provision for income taxes                                 572          1,528          5,522         14,124         17,117
                                                     ---------      ---------      ---------      ---------      ---------
Net income                                           $     902      $   2,026      $   7,320      $  18,639      $  22,969
                                                     =========      =========      =========      =========      =========
Earnings per share data (3)

     Basic earnings per common share                 $    0.39      $    0.53      $    0.80      $    0.92      $    1.08
                                                     =========      =========      =========      =========      =========
     Diluted earnings per common share               $    0.13      $    0.22      $    0.53      $    0.89      $    1.05
                                                     =========      =========      =========      =========      =========
     Basic weighted average shares outstanding           1,426          3,115          8,773         20,339         21,296
                                                     =========      =========      =========      =========      =========
     Diluted weighted average shares outstanding         7,200          9,014         13,879         21,038         21,828
                                                     =========      =========      =========      =========      =========
CONSOLIDATED BALANCE SHEET DATA:
DECEMBER 31,
(IN THOUSANDS)
                                                        1995           1996           1997           1998           1999
                                                     ---------      ---------      ---------      ---------      ---------
Cash and cash equivalents                            $      58      $   2,262      $     397      $     458      $     620
Total assets                                            20,034        157,854        269,227        361,947        450,146
Long term debt, including current
     portion                                            15,146         97,239         75,074        123,508        164,616
Redeemable equity securities (4)                         6,085         18,427             --             --             --
Stockholders' equity (deficit)                          (2,224)        12,693        144,817        177,824        204,042

</TABLE>

---------

(1)      In connection with the closing of a clinical operation in May 1996, the
         Company recorded a nonrecurring charge to operations aggregating
         $910,000, which included severance payments, write-downs of property,
         equipment and other assets to estimated realizable values, and the
         write-off of the unamortized balances of intangible assets associated
         with the clinical operations.

(2)      In the year ended December 31, 1997, the Company recorded a
         nonrecurring charge of $1.3 million, primarily professional fees and
         printing costs, as a result of the postponement of the Company's
         planned initial public offering of Common Stock. See Note 18 to the
         Consolidated Financial Statements.

                                       18
<PAGE>

(3)      Earnings per share for all periods are computed and presented in
         accordance with Statement of Financial Accounting Standards ("SFAS")
         No. 128, "Earnings Per Share". Basic earnings per share excludes
         dilution and is computed by dividing income attributable to common
         stockholders by the weighted-average number of common shares
         outstanding for the period. Diluted earnings per share reflects the
         potential dilution that could occur if securities or other contracts to
         issue common stock were exercised or converted into common stock or
         resulted in the issuance of common stock that then shared in the
         earnings of the entity. Prior reported earnings per share data have
         been restated in accordance with SFAS No. 128.

(4)      For December 31, 1995 and 1996 amounts include Convertible Preferred
         Stock of $5.2 million plus accrued and unpaid dividends and at December
         31, 1996 $12.2 million of Redeemable Common Stock.

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

         The following discussion of the Company's results of operations and
financial condition should be read together with the consolidated financial
statements and other financial information included elsewhere in this Report.

GENERAL

         AmeriPath operates in a single operating segment as the nation's
leading integrated physician group practice and laboratory management company
focused on providing anatomic pathology diagnostic services. The Company
operates as a large group practice of pathologists in both hospital inpatient
laboratories and outpatient independent laboratories.

         The pathologists provide diagnostic anatomic pathology and related
histologic services with particular emphasis on dermatopathology (study of
diseases of the skin), hematopathology (study of diseases of the blood), and
cytopathology (study of abnormalities of the cells), as well as surgical
pathology (diagnostic services in connection with surgical procedures).

         Outpatient pathology services are performed in licensed freestanding,
independent pathology laboratories owned and operated by the Company. Services
performed are billed to patients, Medicare, Medicaid, other third party payors,
national clinical laboratories and attending physicians primarily on a
fee-for-service basis, which cover both the professional and technical
components of such services.

         Inpatient pathology services are performed under exclusive contractual
arrangements with hospitals. Net revenue for inpatient pathology services is
dependent in large part on the level of inpatient admissions and outpatient
surgeries performed at the hospitals. Such arrangements typically provide that a
pathologist will provide diagnostic pathology services for the hospital's staff
physicians and serve as the Medical Director of the hospital's laboratories with
responsibility for the clinical laboratory and histology departments, as well as
the hospital's blood banking and microbiology services.

         Achieving growth through acquisitions is one of the Company's principal
business strategies. The following table depicts the Company's growth through
acquisition activity:

                                                 YEAR ENDED DECEMBER 31,
                                                 -----------------------
                                           1996       1997       1998       1999
                                           ----       ----       ----       ----
         Number of practices acquired       11          5         15         10
         Pathologists, added                79         45         93         71
         Outpatient laboratories, added     10          3          5          8
         Hospital contracts, added          47         28         47         39

         At December 31, 1999, the Company operated in thirteen states, with 297
pathologists providing services in 164 hospitals and 29 outpatient laboratories.
The Company focuses on developing regional networks, such as in the state of
Florida, and expanding the practices through its internal marketing efforts. The
Company plans to pursue additional acquisitions of inpatient and outpatient
pathology practices in the foreseeable future, which represents a significant
portion of its growth strategy. The Company is also considering starting its own
outpatient laboratories in target market areas and providing esoteric testing
services.

                                       19
<PAGE>

RESULTS OF OPERATIONS

         The following table sets forth, for the periods indicated, certain
consolidated financial data as a percentage of net revenue (billings net of
contractual and other allowances).

PERCENTAGE OF NET REVENUE                             YEAR ENDED DECEMBER 31,
                                                      -----------------------
                                                      1997      1998      1999
                                                     -----     -----     -----
Net revenue                                          100.0%    100.0%    100.0%
                                                     -----     -----     -----
Operating costs:
     Cost of services                                 45.0      44.3      46.5
     Selling, general and administrative expense      18.5      16.8      16.1
     Provision for doubtful accounts                  10.0      10.5      10.9
     Amortization expense                              5.3       5.3       5.3
                                                     -----     -----     -----
              Total operating costs and expenses      78.8      76.9      78.8
                                                     -----     -----     -----
Income from operations                                21.2      23.1      21.2
Interest expense                                      (8.1)     (4.6)     (4.0)
Nonrecurring charge                                   (1.2)       --        --
                                                     -----     -----     -----
Income before income taxes                            11.9      18.5      17.2
Provision for income taxes                             5.1       8.0       7.3
                                                     -----     -----     -----
Net income                                             6.8%     10.5%      9.9%
                                                     =====     =====     =====

         The Company completed the acquisition of ten Practices in 1999, fifteen
Practices in 1998 and five Practices in 1997, the results of which are included
in the Company's operating results from the date of acquisition. Changes in
operations between years were primarily due to these acquisitions.

         NET REVENUES

         The Company derives its net revenue from the net revenue of the
Practices it owns or manages. The majority of services furnished by the
Company's pathologists are anatomic pathology diagnostic services. Medicare
reimbursement for these services represented approximately 22% and 20% of the
Company's cash collections in 1998 and 1999, respectively. The Company typically
bills government programs (principally Medicare and Medicaid), indemnity
insurance companies, managed care organizations, national clinical laboratories,
physicians and patients. Net revenue differs from amounts billed for services
due to:

/bullet/ Medicare and Medicaid reimbursements at annually established rates;
/bullet/ payments from managed care organizations at discounted fee-for-service
         rates;
/bullet/ negotiated reimbursement rates with other third party payors;
/bullet/ rates negotiated under sub-contracts with national clinical
         laboratories for the provision of anatomic pathology services; and
/bullet/ other discounts and allowances.

         In recent years, there has been a shift away from traditional indemnity
insurance plans to managed care as employers and other payors move their
participants into lower cost plans. The Company benefits more from patients
covered by Medicare and traditional indemnity insurance than managed care
organizations and national clinical laboratories, which contract directly under
capitated agreements with managed care organizations to provide clinical as well
as anatomic pathology services. The Company also contracts with national
clinical laboratories and is attempting to increase the number of such contracts
to increase test volume. Since the majority of the Company's operating costs --
principally the compensation of physicians and non-physician technical personnel
-- are relatively fixed, increases in volume, whether from indemnity or
non-indemnity plans, enhance the Company's profitability. Historically, net
revenue from capitated contracts has represented an insignificant amount of
total net revenue.

                                       20
<PAGE>

         Virtually all of the Company's net revenue is derived from the
Practices' charging for services on a fee-for-service basis. Accordingly, the
Company assumes the financial risk related to collection, including potential
uncollectability of accounts, long collection cycles for accounts receivable and
delays in reimbursement by third party payors, such as governmental programs,
private insurance plans and managed care organizations. Increases in write-offs
of doubtful accounts, delays in receiving payments or potential retroactive
adjustments and penalties resulting from audits by payors may require the
Company to borrow funds to meet its current obligations or may otherwise have a
material adverse effect on the Company's financial condition and results of
operations. In addition to services billed on a fee-for-service basis, the
hospital-based pathologists have supervision and oversight responsibility for
their roles as Medical Directors of the hospitals' clinical, microbiology and
blood banking operations. For this role, the Company bills non-Medicare patients
according to a fee schedule for what is referred to as clinical professional
component charges. For Medicare patients, the pathologist is typically paid a
Director's fee or "Part A" fee by the hospital. For the year ended December 31,
1999, the Company recorded approximately $7.0 million of revenue from director
fees. For the year 2000, the Company estimates that director fees will be
approximately $8.2 million. The year 2000 estimate reflects the loss of
approximately $1.0 million of fees from existing contracts. Hospitals and
third-party payors are continuing to increase pressure to reduce the payment of
these clinical component billing charges and "Part A" fees, and in the future
the Company may sustain substantial decreases in these payments.

         Effective January 1, 1992, Medicare began reimbursing all physician
services, including anatomic pathology services, based on a methodology known as
the resource-based relative value system ("RBRVS"), which was to be fully phased
in by 1996. Overall, anatomic pathology reimbursement rates declined during the
fee schedule phase-in period, despite an increase in payment rates for certain
pathology services performed by the Company.

         The Medicare Part B fee schedule payment for each service is determined
by multiplying the total relative value units ("RVUs") established for the
service by a Geographic Practice Cost Index (GPCI). The sum of this value is
multiplied by a statutory conversion factor. The number of RVUs assigned to each
service is in turn calculated by adding three separate components: work RVU
(intensity of work), practice expense RVU (expense related to performing the
service) and malpractice RVU (malpractice costs associated with the service).

         In 1996, the Health Care Financing Administration ("HCFA") completed a
five-year review of the work value component and, as a result, revised the work
value amount assigned to many physician services. In addition, based on a
default formula established by statute, the 1997 conversion factor for
non-surgical services dropped 0.8% to $33.85. As part of its five-year review of
the RBRVS system, HCFA recalculated all of the RBRVS weights. These revisions
generally resulted in a further reduction in Medicare reimbursement. HCFA also
reduced the number of physician fee schedule payment localities from 210 to 89,
effective January 1, 1997. Because of all these changes, there was an overall
decrease in reimbursement rates for pathology services of approximately 5.3%
beginning January 1, 1997.

         BBA added coverage for an annual screening pap smear for Medicare
beneficiaries who are at high risk of developing cervical or vaginal cancer and
for beneficiaries of childbearing age effective January 1, 1998, as well as
coverage for annual prostate cancer screening, including a prostate-specific
antigen blood test, for beneficiaries over age 50, effective January 1, 2000.
Although most women of childbearing age and men under age 65 are not Medicare
beneficiaries, the addition of Medicare coverage for these tests could provide
additional revenues for the Company. With the BBA, Congress merged the three
existing conversion factors into one for all types of services provided
resulting in a single conversion factor for 1998 of $36.69. These changes
effectively provided for an 8.3% increase in reimbursement in 1998.

         In 1997, HCFA published regulations that recalculated a key component
of the RBRVS fee schedule. This recalculation modified the practice overhead
expense RVUs to reflect resource consumption, rather than the historical charge
data used to establish the original practice expense. The implementation of
resource based practice expense RVUs began in 1999, and will be phased in over
the period 1999-2002. Also, in 1999 the physician fee schedule conversion factor
was reduced by 5% from $36.69 in 1998 to $34.73 for 1999. The law provides that
if adjustments to RVUs cause the total physician fee schedule payments to differ
by $20 million from the amount of expenditures that would have been made if such
adjustments had not been made, HCFA must make adjustments to the conversion
factors to preserve budget neutrality. The conversion factor was also affected
by the elimination of the separate 0.917 budget-neutrality adjustment to the
work relative value units and the adjustments made to the practice expense and
malpractice relative value units to ensure that percentages of fee schedule
allowed charges for work, practice expense and malpractice premiums equal the
new percentages that those

                                       21
<PAGE>

categories represent in the revised Medicare Economic Index ("MEI") weights. The
MEI measures the weighted-average annual price change for various inputs needed
to produce physician's services.

         HCFA also provided for a separate pap smear interpretation to be made
for all smears that require interpretation by a pathologist beginning January 1,
1999. The amount of this reimbursement will be approximately $36.00 adjusted for
the payor locality.

         In July 1999, HCFA announced several proposed rule changes, and issued
a final rule on November 2, 1999 that impacts payment for pathology services.
The changes include: (a) the implementation of resource-based malpractice RVUs,
which should not significantly change reimbursement; and (b) as noted above, the
1997 regulations required HCFA to develop a methodology for resource-based
practice expense RVUs for each physician service beginning in 1998. The BBA of
1997 provided for a four-year transition period. HCFA has established, and is
proposing, a new methodology for computing resource-based practice expense that
uses available practice expense data. In the November 2, 1998 final rule, an
interim solution was developed which created a separate practice expense pool
for all services with zero work RVUs. As published in the November 2, 1999 final
rule, certain reimbursement codes were removed from the zero work RVU pool. The
impact of these procedures from the zero work pool varies by procedure and
geographic region. The impact of the changes for pathology revenue were
estimated by HCFA to be 8%, however, the magnitude of the impact that Medicare
has on AmeriPath depends upon the mix of Medicare and non-Medicare services. For
those outpatient facilities that AmeriPath bills globally, the average
percentage increase is 16.6% for a common CPT code 88305. In addition, HCFA
announced that it will cease the direct payment by Medicare for the technical
component of inpatient physician pathology services to an outside independent
laboratory on the basis that it believes that the cost of the technical
component for inpatient services is already included in the payment to hospitals
under the hospital inpatient prospective payment system. Implementation of this
change will commence January 1, 2001 in order to allow independent laboratories
and hospitals sufficient time to negotiate arrangements. Where one of the
Company's facilities is providing technical component for inpatient services, it
will now be required to seek reimbursement directly from the hospital. HCFA also
announced that the physician fee schedule conversion factor will increase from
$34.73 to $36.61 in 2000.

         Management continuously monitors changes in legislation impacting
reimbursement. The impact of the legislative changes on the Company's results of
operations will depend upon several factors, including comments on proposed
rules, the mix of inpatient and outpatient pathology services furnished by the
Company, the amount of Medicare business and conversion factors (budget
neutrality adjustments) which are published in November of each year.

         In prior years, the Company has been able to mitigate the impact of
reduced Medicare reimbursement rates for anatomic pathology services through the
achievement of economies of scale and the introduction of alternative
technologies that are not dependent upon reimbursement through the RBRVS system.
Despite any offsets, the recent substantial modifications to the physician fee
schedule, along with additional adjustments by Medicare, could have a negative
effect on the Company's average unit reimbursement in the future. In addition,
other third-party payors could adjust their reimbursement based on changes to
the Medicare fee schedule. Any reductions made by other payors could have a
negative impact on the average unit reimbursement.

         Net revenue for 1999 increased by $55.5 million, or 31.3%, from $177.3
million for the year ended December 31, 1998, to $232.8 million for the year
ended December 31, 1999. Of this increase, $49.0 million was attributable to the
acquisitions the Company completed during 1998 and 1999. Same practice net
revenue for 1999 increased by $6.5 million, or 4%. Same practice hospital net
revenue increased $3.1 million, or 2% and same practice outpatient net revenue
increased $4.2 million, or 3%. These increase were offset by a 1% Medicare
reimbursement decrease, which was effective January 1, 1999. Reference to same
practice means practices at which the Company provided services for the entire
period for which the amount is calculated and the entire prior comparable
period, including acquired hospital contracts and expanded ancillary testing
services added to existing practices.

         During 1999, approximately $21.7 million, or 9%, of the Company's net
revenue was from contracts with national labs including Quest and LabCorp.
Although the Company has had these national lab contracts for a number of years,
the decision by Quest and/or LabCorp to discontinue using the Company for
pathology services, at any or all of its practices, could have a material
adverse effect on the Company's financial position and results of operations. In
addition, approximately 17% of the Company's net revenue comes from 27 Columbia
hospitals. Generally, these contracts and other hospital contracts have
remaining terms of less than five years and contain renewal provisions. Some of
the contracts also

                                       22
<PAGE>

contain clauses that allow for termination by either party with relatively short
notice. Columbia has been under government investigation for some time and is
evaluating its operating strategies; including the sale, spin-off or closure of
certain hospitals. During 1999, Columbia closed one hospital and sold another
hospital where the Company provided pathology services. The estimated net
revenue from the loss of these contracts is less than 1% of consolidated net
revenue, however, there can be no assurance that the Company will be able to
make proportionate reductions in operating costs to offset the decrease in net
revenue. In addition, further closures and\or sales of Columbia hospitals could
have a material adverse effect on the Company's financial position and results
of operations. Although the Company, through its acquisitions, has had
relationships with these hospitals for extended periods of time, the termination
of one or more of these contracts could have a material adverse effect on the
Company's financial position and results of operations.

         Net revenue for 1998 increased by $68.9 million, or 63.6%, from $108.4
million for the year ended December 31, 1997, to $177.3 million for the year
ended December 31, 1998. Of this increase, $59.4 million was attributable to the
acquisitions the Company completed during 1997 and 1998. Same practice net
revenue for 1998 increased by $9.5 million, or 10%. Same practice inpatient net
revenue was relatively flat, while the same practice outpatient net revenue
increased approximately 8%. In addition, the Medicare reimbursement increase,
which was effective January 1, 1998, resulted in a 2% increase in same practice
net revenue. During 1998, approximately $14 million, or 8%, of the Company's net
revenue was from contracts with national labs. In addition, approximately 18% of
the Company's net revenue came from 29 Columbia hospitals.

         The percent of the Company's net revenue from outpatient and inpatient
pathology services is presented below. The type and mix of business of the
Company's Practices, inpatient or outpatient, which changes as a result of new
acquisitions, and may affect the changes in the Company's operating costs,
specifically the provision for doubtful accounts, as noted in the sections that
follow.

                                               YEAR ENDED DECEMBER 31,
                                               -----------------------
REVENUE TYPE                                1997        1998         1999
                                            ----        ----         ----
Inpatient                                   45%          52%          57%
Outpatient                                  55%          48%          43%

         COST OF SERVICES

         Cost of services consists principally of the compensation and fringe
benefits of pathologists, licensed technicians and support personnel, laboratory
supplies, shipping and distribution costs and facility costs. Cost of services
for 1999 increased by $29.7 million, or 37.9%, from $78.5 million for the year
ended December 31, 1998, to $108.2 million for the year ended December 31, 1999.
Cost of services, as a percentage of net revenues, increased from 44.3% in 1998
to 46.5% in 1999. Gross margin decreased from approximately 55.7% in 1998 to
53.5% in 1999. A portion of the decline is related to the decrease in Medicare
reimbursement rates. In addition, the Company incurred expenses related to the
start-up of a de novo outpatient dermatopathology laboratory in New York. This
facility commenced operations in late July 1999. Excluding the results of
operations for the New York start up, the Company's gross margin would have been
approximately 54% in 1999.

         Cost of services for 1998 increased by $29.7 million, or 60.7%, from
$48.8 million for the year ended December 31, 1997, to $78.5 million for the
year ended December 31, 1998. Of this increase, $24.6 million was attributable
to the acquisitions the Company completed during 1997 and 1998, and $5.0 million
was in same practice costs. Cost of services, as a percentage of net revenues,
decreased from 45.0% in 1997 to 44.3% in 1998 due in part to cost and
operational efficiencies and the Medicare price increase which went into effect
January 1, 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

         The cost of corporate support, sales and marketing, and billing and
collections comprise the majority of what is classified as selling, general and
administrative expense. Selling, general and administrative expense, as a
percentage of net revenues decreased from 16.8% in 1998 to 16.1% in 1999, as the
Company imposed measures to control the growth in these costs and continued to
spread these costs over a larger revenue base. An objective of the Company is to
decrease these costs as a percentage of net revenues, however, these costs, as a
percentage of net revenue, may increase as the Company continues to invest

                                       23
<PAGE>

in marketing, information systems and billing operations. In addition, the
relocation of CAD to Orlando may result in additional selling, general and
administrative costs.

         Selling, general and administrative expense for 1999 increased by $7.9
million, or 26.4%, from $29.7 million for the year ended December 31, 1998, to
$37.6 million for the year ended December 31, 1999. Of this increase, $1.7
million, or 21.5%, was attributable to the acquisitions the Company completed
during 1998 and 1999. The remaining increase was due to increased staffing
levels in marketing, billing, human resources and accounting and costs incurred
to expand the Company's administrative support infrastructure and to upgrade
information systems.

         Selling, general and administrative expense for 1998 increased by $9.8
million, or 49.2%, from $19.9 million for the year ended December 31, 1997, to
$29.7 million for the year ended December 31, 1998. Of this increase, $6.7
million, or 69%, was attributable to the acquisitions the Company completed
during 1997 and 1998. The remaining increase was due to increased staffing
levels in marketing, billing, human resources and accounting and costs incurred
to expand the Company's administrative support infrastructure and to upgrade
information systems.

         PROVISION FOR DOUBTFUL ACCOUNTS

         The provision for doubtful accounts increased by $6.6 million, or
35.1%, from $18.7 million for the year ended December 31, 1998, to $25.3 million
for the same period in 1999. The dollar increase is primarily due to the
increase in net revenues and accounts receivable from the acquisitions completed
during 1998 and 1999. The provision for doubtful accounts as a percentage of net
revenues was 10.5% and 10.9% for the year ended December 31, 1998 and 1999,
respectively. The increase in the percentage of net revenue was primarily
attributable to an overall increase in hospital based revenues. Net revenue from
hospital inpatient services increased as a percentage of consolidated net
revenue from 52% in 1998 to 57% in 1999. The provision for doubtful accounts as
a percentage of net revenue is higher for inpatient (hospital) services than for
outpatient services due primarily to a larger concentration of indigent and
private pay patients, more difficulties gathering complete and accurate billing
information, and longer billing and collection cycles for inpatient services.

         The provision for doubtful accounts increased by $7.8 million, or
71.7%, from $10.9 million for the year ended December 31, 1997, to $18.7 million
for the year ended December 31, 1998. The provision for doubtful accounts, as a
percentage of net revenue, was 10.0% and 10.5% for the years ended December 31,
1997 and 1998, respectively. This increase in the percentage of net revenue was
primarily attributable to the acquisitions, principally the acquisition of
inpatient hospital based practices, the Company completed during 1997 and 1998.
Net revenue from inpatient services increased as a percentage of consolidated
net revenue from 45% in 1997 to 52% in 1998. As stated above, the provision for
doubtful accounts as a percentage of net revenue is higher for inpatient
services than for outpatient services.

         AMORTIZATION EXPENSE

         The Company's acquisitions completed in 1996, 1997, 1998 and 1999
resulted in significant increases in net identifiable intangible assets and
goodwill. Net identifiable intangible assets and goodwill, which include
hospital contracts, physician client lists and laboratory contracts acquired in
the acquisitions were approximately $305.4 million and $378.4 million at
December 31, 1998 and 1999, respectively, representing approximately 84.4% and
84.1%, respectively, of the Company's total assets. Net identifiable intangible
assets are recorded at fair value on the date of acquisition and are amortized
over periods ranging from 10 to 40 years, with a weighted average of 30.0 years
as of December 31, 1999. The Company amortizes goodwill on a straight-line basis
over periods ranging from 10 to 35 years, with a weighted average of 31.8 years
as of December 31, 1999. There can be no assurance that the value of intangible
assets will ever be realized by the Company. The Company continually evaluates
whether events or circumstances have occurred that may warrant revisions to the
carrying values of its goodwill and other identifiable intangible assets, or to
the estimated useful lives assigned to such assets. Any significant impairment
recorded on the carrying values of the Company's goodwill or other identifiable
intangible assets could have a material adverse effect on the Company's
consolidated financial position and results of operations. Such impairment would
be recorded as a charge to operating profit and reduction in intangible assets.
See the discussion of possible impairment below regarding contracts with Primary
Health Systems.

         During the first quarter of 2000, the Company received information that
Primary Health Systems ("PHS"), a regional hospital network in Cleveland, Ohio
(the "City") that the Company provides services to, began implementing its plan
of

                                       24
<PAGE>

reorganization it filed under Chapter 11 with the U.S. Bankruptcy Court for the
District of Delaware. One of the Company's practices provides services at four
PHS hospitals and an ambulatory care facility. The Company acquired the affected
practice during the fourth quarter of 1998. Information received to date
indicates that PHS, in accordance with its bankruptcy plan, plans to sell two
hospitals and the ambulatory care facility to the Cleveland Clinic Foundation
(the "Foundation"). However, several parties, including the City, are contesting
the bankruptcy plan and sale to the Foundation. Management and the practice's
Managing Director are actively planning to retain the outpatient business and
combine it with the Company's other operations near the City. At this time, we
are still uncertain as to the future operations or cash flows from this
practice. If the final reorganization of PHS results in a reduction of cash flow
and the Company is unable to sufficiently reduce the corresponding operating
costs, an impairment of the intangible assets of this practice may occur. If
impairment were to occur, the maximum non-cash charge would be approximately
$4.7 million offset by a deferred tax benefit of approximately $1.1 million. Net
revenues of this AmeriPath practice were approximately $2.5 million in 1999.
There can be no assurance this practice will continue to derive any revenues
from PHS due to the events described above. The Company will continue to monitor
the status of the reorganization and the effect on cash flows and the carrying
values of the related intangibles on a quarterly basis.

         Amortization expense increased by $3.0 million, or 31.6%, from $9.5
million for the year ended December 31, 1998, to $12.5 million for the year
ended December 31, 1999. This increase is attributable to the amortization of
goodwill and net identifiable intangible assets from the acquisitions the
Company completed during 1999 and a full year of amortization from the
acquisitions the Company completed during 1998. Amortization expense is expected
to increase on an annual basis as a result of identifiable intangible assets and
goodwill arising from acquisitions, and any contingent payments required to be
made pursuant to the contingent notes issued in connection therewith.
Amortization expense, as a percentage of net revenues, was 5.3% in 1998 and
1999.

         Amortization expense increased by $3.7 million, or 64.1%, from $5.8
million for the year ended December 31, 1997, to $9.5 million for the year ended
December 31, 1998. This increase is attributable to the amortization of goodwill
and net identifiable intangible assets from the acquisitions the Company
completed during 1998 and a full year of amortization from the acquisitions the
Company completed during 1997. Amortization expense, as a percentage of net
revenues, was 5.3% in 1997 and 1998.

         NONRECURRING CHARGE

         During the year ended December 31, 1997, the Company wrote-off certain
deferred offering costs aggregating $1.3 million, primarily consisting of
professional fees and printing costs related to a registration statement
(relating to an intended initial public offering of shares of common stock)
filed by the Company with the Securities and Exchange Commission that was
withdrawn in May 1997.

         INTEREST EXPENSE AND OTHER EXPENSE, NET

         Interest expense increased by $1.1 million, or 13.4%, from $8.2 million
for the year ended December 31, 1998, to $9.3 million for the year ended
December 31, 1999. The increase was due in part to an increase in the average
indebtedness outstanding. In 1999, average indebtedness outstanding was $139.4
million, compared to average indebtedness of $101.3 million outstanding in 1998.
This increase in average indebtedness was offset by a reduction in the effective
interest rate from 8.0% to 6.7% primarily due to the interest rate swap that was
in effect for all of 1999. This interest rate swap was entered into in October
1998.

         Interest expense decreased by $600,000, or 6.4%, from $8.8 million for
the year ended December 31, 1997, to $8.2 million for the year ended December
31, 1998. The decrease was due in part to a reduction in the average
indebtedness outstanding. In 1998 average indebtedness outstanding was $101.3
million, compared to average indebtedness of $103.5 million outstanding in 1997.
In addition, the effective interest rate declined from 8.5% to 8.0% due to the
reduction in the prime and LIBOR borrowing rates.

                                       25
<PAGE>

         INCOME TAX RATE

         The effective income tax rate was approximately 43.0% for the years
ended December 31, 1997 and 1998, and approximately 42.7% for the year ended
December 31, 1999. The effective tax rate is higher than the Company's statutory
rates primarily due to the non-deductibility of the goodwill amortization
related to the Company's acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

         At December 31, 1999, the Company had working capital of $35.2 million,
an increase of $6.6 million from the working capital of $28.6 million at
December 31, 1998. The increase in working capital was due to increases in net
accounts receivable of $9.9 million partially offset by an increase in accounts
payable and accrued expenses of $2.4 million and a decrease in prepaid taxes of
$2.8 million. The majority of these changes resulted from the acquisitions the
Company completed during 1999. The Company manages its cash balances against
amounts available under its revolving credit facility. Cash balances, for the
most part, are managed on a zero-balance basis and all available cash flows are
used to reduce outstanding debt in order to minimize interest cost.

         For the years ended December 31, 1998 and 1999, cash provided by
operations was $21.7 million and $35.1 million, respectively. For the year ended
December 31, 1999, cash flow from operations and borrowings under the Company's
credit facility were used: (i) for capital expenditures aggregating $8.1
million; (ii) to fund the $49.2 million cash portion of the acquisitions the
Company completed during 1999; (iii) to make additional payments of $20.4
million in connection with the Company's acquisition activities, including
contingent note payments of $17.4 million; (iv) to pay $1.2 million of costs
associated with amending the Company's credit facility; and (v) to make $1.3
million in principal payments on long-term debt.

         During October 1997, the Company completed an initial public offering
and issued 5,835,457 shares of common stock at $16 per share resulting in
proceeds, net of underwriter commissions and offering costs, of approximately
$84.7 million. The Company used the proceeds from the offering to repay $11.1
million of outstanding principal and interest on Junior Notes and Senior Notes,
$1.3 million of accrued dividends on the Convertible Preferred Stock, and $72.3
million of indebtedness outstanding under the Company's credit facility.

         During 1999, the Company acquired 10 anatomic pathology practices.
Total consideration in connection with these acquisitions included cash of $49.2
million and approximately 487,000 shares of common stock. Generally, the shares
of common stock are restricted as to transfer, which restrictions lapse over
three to five years, based solely on the passage of time.

         At December 31, 1999, the Company had $66.7 million available under its
credit facility with a syndicate of banks led by BankBoston, N.A., as agent. The
amended facility provides for borrowings of up to $230 million in the form of a
revolving loan that may be used for working capital purposes and to fund
acquisitions to the extent not otherwise used for working capital purposes. As
of December 31, 1999, $163.3 million was outstanding under the revolving loan
with an annual effective interest rate of 7.79%. In October 1998, the Company
entered into two, two year, interest rate swap transactions which involves the
exchange of floating for fixed rate interest payments over the life of the
agreement without the exchange of the underlying principal amounts. The
differential to be paid or received is accrued and is recognized as an
adjustment to interest expense. The agreements are with notional amounts of $75
million and $30 million. Under the $75 and $30 million agreements, the Company
receives interest on the notional amounts if the 30 day LIBOR exceeds 4.675% and
5.425%, respectively, and pays interest on the notional amounts if the 30 day
LIBOR is less than the foregoing rates. These derivative financial instruments
are being used by the Company to reduce interest rate volatility and associated
risks arising from the floating rate structure of its credit facility and is not
held or issued for trading purposes. The Company is required by the terms of its
credit facility to keep these interest swap agreements in place. The Company is
currently evaluating additional interest rate protection arrangements including,
the replacement of these contracts when they expire in October 2000, new types
of protection and increasing the notional amounts. Changes to the Company's
interest rate protections and the recent increases in the prime rate and
potential further tightening of interest rates by the Federal Reserve Bank will
result in an increase in the Company's overall interest cost. At December 31,
1999, the Company believes that it is in compliance with the covenants of the
credit facility. See Note 8 to the consolidated financial statements.

         In connection with the Company's acquisitions, the Company agreed to
pay a minimum purchase price and to pay additional purchase price consideration
to the sellers of the Practices in proportion to their respective ownership
interest in each Practice. The additional payments are generally contingent upon
the achievement of stipulated levels of operating earnings (as

                                       26
<PAGE>

defined) by each of the Practices over periods of three to five years from the
date of the acquisition as set forth in the respective agreements, and are not
contingent on the continued employment of the sellers of the Practices. In
certain cases, the payments are contingent upon other factors such as the
retention of certain hospital contracts for periods ranging from three to five
years. The amount of the payments cannot be determined until the achievement of
the operating earnings levels or other factors during the terms of the
respective agreements. If the maximum specified levels of operating earnings for
each Practice are achieved, the Company would make aggregate maximum payments,
including principal and interest, of approximately $191.2 million over the next
three to five years. At the mid-point level, the aggregate principal and
interest would be approximately $95.6 million over the next three to five years.
A lesser amount or no payments at all would be made if the stipulated levels of
operating earnings specified in each agreement are not met. Through December 31,
1999, the Company made contingent note and interest payments aggregating $26.8
million which amounts represent 60% of the maximum amount available. See Note 3
to the consolidated financial statements.

         Historically, the Company's capital expenditures have been primarily
for laboratory equipment, management information systems and leasehold
improvements. Total capital expenditures were $3.2 million, $3.6 million and $
8.1 million in 1997, 1998 and 1999, respectively. During 1999, capital
expenditures included approximately $1.4 million related to information systems,
$1.4 million for laboratory equipment, $1.7 million for leasehold improvements,
$1.5 million for the construction of the New York lab and $1.2 million for the
new billing system at the consolidated billing office in Fort Lauderdale. During
1998, capital expenditures included approximately $1.5 million related to
information systems, $1.0 million for laboratory equipment and $258,000 for
leasehold improvements. During 1997, the Company spent approximately $600,000
for equipment and leasehold improvements to the Orlando facility to accommodate
the expansion of its contract to provide anatomic pathology services to Quest
which commenced in May 1997. The contract provides that the Company will
maintain the appropriate personnel staffing levels to handle the estimated
workload. The Company assesses and will continue to assess the capabilities of
the various information systems acquired in connection with each of its
acquisitions, and is in the process of replacing, upgrading and integrating
certain of the systems into a single network. Planned capital expenditures for
2000 are estimated to be $6.5 million to $7.5 million, with priority being given
to the new billing system at the consolidated billing office in Fort Lauderdale
and enhancements in financial and lab information systems. Historically, the
Company has funded its capital expenditures with cash flows from operations. For
the years ended December 31, 1997, 1998 and 1999, capital expenditures were
approximately 2.9%, 2.1% and 3.5% of net revenue, respectively. The Company is
consolidating and integrating its financial information, billing and collection
systems, which may result in an increase in capital expenditures as a percentage
of net revenue. The Company believes, however, that such information systems
enhancements will result in cost savings that may enable the Company to continue
to fund its capital expenditures with cash flows from operations.

         The Company expects to continue to use the credit facility to fund
acquisitions. The Company anticipates that funds generated by operations and
funds available under the credit facility will be sufficient to meet working
capital requirements and contingent note obligations, and to finance capital
expenditures, and acquisitions over the next 12 months. Further, in the event
payments under the contingent notes issued in connection with acquisitions
become due, the Company believes that the incremental cash generated from
operations would exceed the cash required to satisfy the Company's payment, if
any, of the contingent obligations in any one year period. Such payments, if
any, will result in a corresponding increase in goodwill and the related amount
of amortization thereof in periods following the payment. Funds generated from
operations and funds available under the credit facility may not be sufficient
to implement the Company's longer-term growth strategy. The Company may be
required to seek additional financing through additional increases in the credit
facility, to negotiate credit facilities with other banks or institutions or to
seek additional capital through private placements or public offerings of equity
or debt securities. No assurances can be given that the Company will be able to
extend or increase the existing credit facility, secure additional bank
borrowings or complete additional debt or equity financings on terms favorable
to the Company or at all.

YEAR 2000 ISSUES

         The Year 2000 issue was a result of computer programs or chipsets being
written using two digits rather than four to define the applicable year.
Computer programs that have time sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could have resulted in a
system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send invoices
or engage in similar activities.

         During 1999, the Company worked to resolve the potential risks and
concerns of the Year 2000 issue before the end of 1999. The Company also
assessed the risks and contingencies for third-party payors, strategic partners,
vendors, contracted

                                       27
<PAGE>

hospitals, large commercial payors (e.g. Medicare, Blue Cross/Blue Shield and
Cigna) and facility safety systems. The Company initiated dialogue with its key
vendors and customers, including hospitals and third-party payors, to determine
the extent of any exposure that the Company may have had with respect to failure
on the part of such third parties to become Year 2000 compliant. The Company
worked directly with strategic partners and third-parties to avoid business
interruptions in the year 2000.

         The majority of the Company's costs to correct the Year 2000 issue
stemmed from professional services and hardware and software replacements. The
cost of new hardware or software purchased in this regard was capitalized and
all other costs associated with such remedial actions were expensed as incurred.
The total cost associated with the Company's Year 2000 project were under $1.0
million, which were funded by cash flow generated by operations and the
Company's credit facility.

         The Company believed that the most likely worst risk scenario relating
to the Year 2000 would have impacted diagnosis reporting or bill generation
causing strategic partners, payors and patients from receiving medical and
billing information in a timely matter. The worst case scenarios could have
resulted in such things as decreased cash flows, claims rejection and untimely
diagnostic reporting. The Company developed contingency plans (i.e. identified
alternate systems and processing capabilities) for any internal Company systems
which were mission critical or business critical systems, if Year 2000
compliance was not achieved. The Year 2000 costs included the contingency plans
and workarounds.

         The Company dedicated significant resources to fix any problems before
the end of 1999, and it successfully transitioned from 1999 to 2000 without any
significant issues arising in its business processes. Through the first two
months of the Year 2000, the Company's operations are fully functioning and have
not experienced any significant problems associated with the Year 2000 issue. We
are pleased by the results of our Year 2000 efforts, and that of our third-party
payors, strategic partners, vendors, contracted hospitals, large commercial
payors and facility safety systems, thus far. However the Company remains
vigilant in its testing and preparations for any follow-up Year 2000 issues that
may arise. There can be no assurance that all systems, including those of
planned acquisitions, will be compliant in the future. Specific factors that
might cause material differences in actual results include, but are not limited
to, the availability and cost of qualified personnel and other required
resources, the ability to identify and correct all relevant computer codes, and
similar uncertainties.

         QUALIFICATION OF FORWARD LOOKING STATEMENTS

         Certain statements contained in this Annual Report on Form 10-K that
are not purely historical are (or contain) forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including without limitation statements
regarding the Company's expectations, beliefs, intentions, plans or strategies
regarding the future. All forward-looking statements included in this document
are based on information available to the Company on the date hereof, and the
Company assumes no obligation to update any such forward-looking statements. The
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause actual results, experience and effects, and the
performance or achievements of the Company, to be materially different from
those anticipated, expressed or implied by the forward-looking statements. In
evaluating the Company's business, the following factors, in addition to the
other information set forth in this Report, should be carefully considered:
competition; success of the Company's operating initiatives and growth strategy;
healthcare regulation; payment and reimbursement rates under government
sponsored healthcare programs; changes in coding; dependence upon pathologists;
labor and technology costs; general economic conditions; advertising and
promotional efforts; availability, location and terms of additional practice
acquisitions, affiliations and/or development and the success of the Company's
acquisition strategy. In addition, the Company's strategy to penetrate and
develop new markets involves a number of risks and challenges and there can be
no assurance that the healthcare regulations of the new states in which the
Company enters and other factors will not have a material adverse effect on the
Company. The factors which may influence the Company's success in each targeted
market in connection with this strategy include: the selection of appropriate
qualified practices; negotiation and execution of definitive acquisition,
management, affiliation and/or employment agreements; the economic stability of
each targeted market; compliance with the healthcare and/or other laws and
regulations in each targeted market, including the regulation of the healthcare
industry in each targeted market on a national, regional and local basis
(including health, safety, waste disposal and zoning laws); compliance with
applicable licensing approval procedures; restrictions on labor and employment
matters, especially non-competition covenants; access to affordable capital;
governmental reimbursement and assistance programs; tax laws and the
availability of appropriate media for marketing efforts. Certain of the risks,
uncertainties and other factors discussed or noted above are more fully
described elsewhere in this Report, including under (Item 1) "GENERAL BUSINESS
-- Anatomic Pathology; Industry Overview", "-- Contracts and Relationships with
Affiliated

                                       28
<PAGE>

Physicians", "-- Government Regulation", "-- Insurance", and "-- Competition";
(Item 3) "LEGAL PROCEEDINGS"; and (this Item 7) "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS".

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is subject to market risk associated principally with
changes in interest rates. Interest rate exposure is principally limited to
$164.6 million of long term debt of the Company at December 31, 1999.

         In October 1998, the Company entered into two, two year, interest rate
swap transactions which involved the exchange of floating for fixed rate
interest payments over the life of the agreement without the exchange of the
underlying principal amounts. The differential to be paid or received is accrued
and is recognized as an adjustment to interest expense. The agreements are with
notional amounts of $75 million and $30 million. Under the $75 and $30 million
agreements, the Company receives interest on the notional amounts if the 30 day
LIBOR exceeds 4.675% and 5.425%, respectively, and pays interest on the notional
amounts if the 30 day LIBOR is less than the foregoing rates. These derivative
financial instruments are being used by the Company to reduce interest rate
volatility and associated risks arising from the floating rate structure of its
Credit Facility and are not held or issued for trading purposes.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA; INDEX TO CONSOLIDATED
         FINANCIAL STATEMENTS

         The Company's consolidated financial statements and financial statement
schedule and independent auditors' report thereon appear beginning on page F-2.
See index to such consolidated financial statements and schedules and reports on
page F-1.

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

         None.

                                       29
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

         The information required by this Item 10 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K by
this reference.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this Item 11 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K by
this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item 12 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K by
this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item 13 will be contained in the
Company's definitive proxy materials to be filed with the Securities and
Exchange Commission and is incorporated in this Annual Report on Form 10-K by
this reference.

                                       30
<PAGE>

                                     PART IV

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

(a)      1.       FINANCIAL STATEMENTS:

                  Reference is made to the index set forth on page F-1 of this
                  Annual Report on Form 10-K.

         2.       FINANCIAL STATEMENT SCHEDULES:

                  Reference is made to the index set forth on page F-1 of this
                  Annual Report on Form 10-K.

         3.       EXHIBITS:

EXHIBIT NO.                          DESCRIPTION
-----------                          -----------

   2.1        Asset Purchase Agreement, dated February 13, 1998, by and among
              AmeriPath, Inc., Anatomic Pathology Associates, LLP, Robert P.
              Hooker, M.D., Ralph F. Winkler, M.D., Steven A. Clark, M.D.,
              Edward R. Wills, M.D. Robin A. Helmuth, M.D., Garry A. Bolinger,
              M.D., T. Max Warner II, M.D., F. Donald McGovern Jr., M.D.,
              Richard O. McClure, M.D., Ann Moriarty, M.D., Janis K. Fitzharris,
              M.D., Ph. D., James E. McDermott III, M.D., Robert A. Quirey,
              M.D., Isabelle A. Buehl, M.D.(1)

   3.1        AmeriPath's Amended and Restated Bylaws (2)

   3.2        Certificate of Designations of Series A Junior Participating
              Preferred Stock (8)

   3.3        AmeriPath's Certificate of Amendment to the Amended and Restated
              Certificate of Incorporation (2)

   4.1        Rights Agreement, dated as of April 8, 1999, between the
              Registrant and American Stock Transfer & Trust Company, as Rights
              Agent including the form of Certificate of Designations of Series
              A Junior Participating Preferred Stock, the form of Rights
              Certificate, and the form of Summary of Rights (8)

   10.1       Amended and Restated 1996 Stock Option Plan (5)

   10.2       Employment Agreement, dated as of October 24, 1995, between
              AmeriPath and James C. New (2)

   10.3       Employment Agreement, dated as of August 2, 1993, as amended,
              between ALA and Robert P. Wynn (2)

   10.5       Employment Agreement, dated June 30, 1996, between AmeriPath and
              Alan Levin, M.D. (2)

   10.6       Employment Agreement, dated as of September 30, 1996, between
              AmeriPath Florida and Alan Levin, M.D., as amended (2)

   10.7       Employment Agreement, dated as of June 30, 1996, between AmeriPath
              Florida and Timothy Kilpatrick, M.D. (2)

   10.8       Employment Agreement, dated as of June 30, 1996, between AmeriPath
              Florida and Les Rosen, M.D. (2)

   10.9       Credit Agreement originally dated as of May 29, 1996 and amended
              and restated as of June 27, 1997, among AmeriPath, Inc., the
              subsidiaries of AmeriPath, Inc. from time to time party thereto,
              the lenders from time to time party thereto and Bank of Boston,
              N.A. (2)

   10.10      Amended and Restated Credit Agreement dated as of April 28,1998,
              among AmeriPath, Inc., certain of its subsidiaries, BankBoston
              N.A. and certain other lenders (4)

                                       31
<PAGE>

   10.11      Management Agreement by and between AmeriPath APA, L.L.C. and
              AmeriPath Indiana, Inc., dated February 1, 1998 (1)

   10.12      Stock Purchase Agreement, dated as of May 23, 1996, among
              AmeriPath, Inc., Derrick & Associates and the shareholders of
              Derrick & Associates (2)

   10.13      Stock Purchase Agreement, dated as of September 30, 1996, by and
              among AmeriPath, Inc., David R. Barron, M.D., Inc., Ruth S.
              Kleier, M.D. and David R. Barron, M.D. (2)

   10.14      Stock Purchase Agreement, dated as of October 31, 1996 among
              AmeriPath, Inc., Gulf Coast Pathology Associates, Inc., Richard
              Fernandez, M.D., and George Kalemeris, M.D. (2)

   10.15      Form of Stock Rights Surrender & Restricted Stock Grant Agreement.
              (2)

   10.16      1996 Director Stock Option Plan (2)

   10.17      American Laboratory Associates, Inc. Series A Preferred Stock,
              Common Stock and Junior Subordinated Note Purchase Agreement,
              dated as of January 1, 1994 (2)

   10.18      Letter Agreement, dated September 18, 1996, between Acquisition
              Management Services, Inc. and AmeriPath, Inc. (2)

   10.19      AmeriPath Management Agreement by and between AmeriPath
              Cincinnati, Inc. and AmeriPath Ohio, Inc., dated September 30,
              1996 (2)

   10.20      Management Agreement by and between Beno Michel, M.D., Inc. and
              AmeriPath, Inc., dated October 15, 1996 (2)

   10.21      Management Agreement by and between Clay J. Cockerell, M.D., P.A.
              and AmeriPath Texas, Inc., dated September 30, 1996, as amended
              January 16, 1997 (2)

   10.22      Agreement for Professional Pathology Services between SmithKline
              Beecham Clinical Laboratories, Inc. and Derrick and Associates
              Pathology, P.A., dated April 1, 1992 (2)

   10.23      Agreement for Medical Directorship between SmithKline Beecham
              Clinical Laboratories, Inc. and Derrick and Associates Pathology,
              P.A., dated April 1, 1992 (2)

   10.24      Agreement for Professional Pathology Services between SmithKline
              Beecham Clinical Laboratories, Inc. and AmeriPath Florida, Inc.,
              dated November 1, 1996 (2)

   10.25      Share Exchange Agreement, dated as of February 15, 1996, by and
              among American Laboratory Associates, Inc., AmeriPath, Inc. and
              the holders of common and convertible preferred stock of American
              Laboratory Associates, Inc. (2)

   10.26      Trust Agreement, dated as of October 15, 1996, between AmeriPath,
              Inc. and Beno Michel, as trustee (2)

   10.27      Trust Agreement, dated as of September 30, 1996, between
              AmeriPath, Inc. and David R. Barron, M.D. as trustee (2)

   10.28      Form of Nonqualified Stock Option Agreement (2)

   10.29      Stock Purchase Agreement, dated as of October 15, 1996, by and
              among AmeriPath, Inc., Beno Michel, M.D., Inc. and Beno Michel,
              M.D. (2)

                                       32
<PAGE>

   10.30      Stock Purchase Agreement, dated as of October 10, 1996, by and
              among AmeriPath, Inc., Drs. Seidenstein, Levine and Associates,
              Inc., Seidenstein, Levine Real Estate Partnership, Lawrence
              Seidenstein, M.D., Steven E. Levine, M.D. and David M. Reardon,
              M.D. (2)

   10.31      Stock Issuance Agreement, dated as of June 26, 1996, among
              AmeriPath, Inc., The First National Bank of Boston, FSC Corp.,
              NationsBank, N.A. (South) and Atlantic Equity Corporation (2)

   10.32      Stock Issuance Agreement, dated as of August 29, 1996, among
              AmeriPath, Inc., The First National Bank of Boston, FSC Corp.,
              NationsBank, N.A. (South) and Atlantic Equity Corporation (2)

   10.33      Stock Issuance Agreement, dated as of November 4, 1996, among
              AmeriPath, Inc., The First National Bank of Boston and FSC Corp.
              (2)

   10.34      Stock Purchase Agreement, dated August 21, 1997, by and among
              AmeriPath, Inc., J. Sloan Leonard, M.D., Joseph A. Sonnier, M.D.,
              Van Q. Telford, M.D., William C. Burton, M.D., James Scot
              Milvenan, M.D., Leslie L. Walters, M.D., Thomas M. James, M.D.,
              Stephen W. Aldred, M.D., John E. McDonald, M.D. and Barbara A.
              Shinn, M.D. (2)

   10.35      Stock Purchase Agreement, dated August 15, 1997, by and among
              AmeriPath, Inc., Colab Incorporated Professional Corporation,
              Anatomical Pathology Services, P.C., Microdiagnostics, P.C. and
              the sellers set forth therein (2)

   10.36      Lease effective June 1, 1995 by and between Dallas Pathology
              Leasing and Unipath, Ltd. (2)

   10.37      Trust Agreement, dated August 29, 1997, between AmeriPath, Inc.
              and Jeffery A. Mossler, M.D. (2)

   10.38      Management Agreement, by and between Colab, Inc. and AmeriPath
              Indianapolis, L.L.C., effective September 1, 1997 (2)

   10.39      Management Agreement by and between AmeriPath Texas, Inc. and DFW
              5.01, effective September 1, 1997 (2)

   10.40      Form of Executive Retention Agreement dated August 12, 1999,
              between AmeriPath and each of James C. New, Alan Levin, M.D. and
              Robert P. Wynn. (6)

   10.41      Letter Agreement dated November 1, 1999 between AmeriPath, Inc.
              and James C. New. (7)

   10.42      Consulting and Non-competition Agreement dated November 1, 1999
              between AmeriPath, Inc. and James C. New. (7)

   10.43      Amended and Restated Credit Agreement dated as of December
              16,1999, among AmeriPath, Inc., certain of its subsidiaries,
              BankBoston N.A. and certain other lenders (3)

   21.1       Subsidiaries of AmeriPath (3)

   23.2       Independent Auditors' Consent of Deloitte & Touche LLP (3)

   27.1       Financial Data Schedule for 12 months ended December 31, 1999 (for
              SEC use only.) (3)

----------------------------

(1)      Incorporated by reference and filed with the AmeriPath Form 8-K, dated
         February 13, 1998.

(2)      Incorporated by reference to the exhibit referenced and filed with the
         AmeriPath Form S-1 (File No. 333-34265), effective October 21, 1997,
         and the AmeriPath Form 8-A (File No. 000-22313), filed September 8,
         1997.

(3)      Filed herewith.

                                       33
<PAGE>

(4)      Incorporated by reference to the exhibit referenced and filed with
         AmeriPath Form 10-Q for the quarter ended June 30, 1998 dated August
         14, 1998.

(5)      Incorporated by reference to the Company's Proxy Statement for its 1999
         Annual Meeting of Shareholders.

(6)      Incorporated by reference to the exhibit referenced and filed with
         AmeriPath Form 10-Q for the quarter ended June 30, 1999 dated August
         16, 1999.

(7)      Incorporated by reference to the exhibit referenced and filed with
         AmeriPath Form 10-Q for the quarter ended September 30, 1999 dated
         November 15, 1999.

(8)      Incorporated by reference to the exhibit referenced and filed with
         AmeriPath Form 8-K, dated April 8, 1999.


(b)      REPORTS ON FORM 8-K

         None

                                       34
<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, in Riviera Beach,
Florida, on March 27, 2000.

                                               AMERIPATH, INC.
                                               /s/ JAMES C. NEW
                                               --------------------------------
                                               James C. New,
                                               CHAIRMAN, PRESIDENT AND
                                               CHIEF EXECUTIVE OFFICER

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the Registrant
in the capacities and on the date indicated.

SIGNATURE                                TITLE                         DATE
---------                                -----                         ----

/s/ JAMES C. NEW                   Chairman, President,           March 27, 2000
-------------------------------    and Chief Executive Officer
James C. New

/s/ ROBERT P. WYNN                 Executive Vice President,      March 27, 2000
-------------------------------    Chief Financial Officer
Robert P. Wynn                     and Secretary


/s/ ALAN LEVIN, M.D.               Chief Operating Officer        March 27, 2000
-------------------------------    and Director
Alan Levin, M.D.

/s/ THOMAS S. ROBERTS              Director                       March 27, 2000
-------------------------------
Thomas S. Roberts

/s/ E. ROE STAMPS, IV              Director                       March 27, 2000
-------------------------------
E. Roe Stamps, IV

/s/ C. ARNOLD RENSCHLER, M.D.      Director                       March 27, 2000
-------------------------------
C. Arnold Renschler, M.D.

/s/ TIMOTHY M. KILPATRICK, M.D.    Director                       March 27, 2000
-------------------------------
Timothy M. Kilpatrick, M.D.

                                       35
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE

                                                                       PAGE
                                                                       ----
Independent Auditors' Report                                            F-2

Consolidated Balance Sheets as of December 31, 1998 and 1999        F-3 to F-4

Consolidated Statements of Operations for the years ended
  December 31, 1997, 1998 and 1999                                      F-5

Consolidated Statements of Convertible Preferred Stock and
  Common Stockholders' Equity for the years ended
  December 31, 1997, 1998 and 1999                                      F-6

Consolidated Statements of Cash Flows for the years ended
  December 31, 1997, 1998 and 1999                                      F-7

Notes to Consolidated Financial Statements                          F-8 to F-23

Schedules:

Schedule II - Valuation and Qualifying Accounts                         S-1

All other schedules called for by Regulation S-X have been omitted because they
are not applicable or because the required information is included in the
financial statements or the notes thereto.

                                      F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of AmeriPath, Inc.:

We have audited the accompanying consolidated balance sheets of AmeriPath, Inc.
and Subsidiaries (the "Company") as of December 31, 1998 and 1999 and the
related consolidated statements of operations, convertible preferred and
redeemable common stock and common stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. Our audits also
included the financial statement schedule listed on the index on page F-1. The
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1998
and 1999 and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1999 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP
Certified Public Accountants
Fort Lauderdale, Florida

February 22, 2000

                                      F-2
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                            DECEMBER 31,
                                         1998         1999
                                       --------     --------
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents           $    458     $    620
   Accounts receivable, net              36,090       45,969
   Inventories                              526          482
   Deferred tax asset                     4,409        5,142
   Prepaid income taxes                   2,764           --
   Other current assets                   1,787        2,002
                                       --------     --------
              Total current assets       46,034       54,215
                                       --------     --------
PROPERTY AND EQUIPMENT, NET               8,584       14,129
                                       --------     --------
OTHER ASSETS:
   Goodwill, net                        112,388      142,767
   Identifiable intangibles, net        193,078      235,668
   Other                                  1,863        3,367
                                       --------     --------
              Total other assets        307,329      381,802
                                       --------     --------
TOTAL ASSETS                           $361,947     $450,146
                                       ========     ========

See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                                              DECEMBER 31,
                                                           1998         1999
                                                         --------     --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued expenses                 $ 16,127     $ 18,508
   Current portion of long-term debt                        1,315          539
                                                         --------     --------
              Total current liabilities                    17,442       19,047

LONG-TERM LIABILITIES:
   Revolving loan                                         121,087      163,300
   Subordinated notes                                       1,106          777
   Deferred tax liability                                  44,488       62,980
                                                         --------     --------
              Total liabilities                           184,123      246,104
                                                         --------     --------
COMMITMENTS AND CONTINGENCIES (Notes 3, 10 and 13)

COMMON STOCKHOLDERS' EQUITY
   Common stock, $.01 par value, 30,000 shares
     authorized, 21,062 and 21,581 shares issued and
     outstanding at December 31, 1998 and 1999,
     respectively                                             211          216
   Additional paid-in capital                             148,943      152,187
   Retained earnings                                       28,670       51,639
                                                         --------     --------
              Total common stockholders' equity           177,824      204,042
                                                         --------     --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               $361,947     $450,146
                                                         ========     ========

See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                             1997           1998           1999
                                                           ---------      ---------      ---------
<S>                                                        <C>            <C>            <C>
NET REVENUE                                                $ 108,406      $ 177,304      $ 232,753
                                                           ---------      ---------      ---------
OPERATING COSTS:
   Cost of services                                           48,833         78,460        108,177
   Selling, general and administrative expense                19,929         29,731         37,590
   Provision for doubtful accounts                            10,892         18,698         25,262
   Amortization expense                                        5,762          9,461         12,453
                                                           ---------      ---------      ---------
      Total operating costs                                   85,416        136,350        183,482
                                                           ---------      ---------      ---------
INCOME FROM OPERATIONS                                        22,990         40,954         49,271
Interest expense                                              (8,763)        (8,201)        (9,299)
Nonrecurring charge                                           (1,289)            --             --
Other (expense) income, net                                      (96)            10            114
                                                           ---------      ---------      ---------
Income before income taxes                                    12,842         32,763         40,086
Provision for income taxes                                     5,522         14,124         17,117
                                                           ---------      ---------      ---------
NET INCOME                                                 $   7,320      $  18,639      $  22,969
                                                           =========      =========      =========
Basic Earnings Per Common Share:
           Basic weighted average shares outstanding           8,773         20,339         21,296
                                                           =========      =========      =========
           Basic earnings per common share                 $    0.80      $    0.92      $    1.08
                                                           =========      =========      =========
Diluted Earnings Per Common Share:
           Diluted weighted average shares outstanding        13,879         21,038         21,828
                                                           =========      =========      =========
           Diluted earnings per common share               $    0.53      $    0.89      $    1.05
                                                           =========      =========      =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED AND REDEEMABLE
COMMON STOCK AND COMMON STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                           CONVERTIBLE              REDEEMABLE
                                         PREFERRED STOCK           COMMON STOCK           COMMON STOCK      ADDITIONAL
                                       --------------------    --------------------    -------------------  PAID - IN   RETAINED
                                        SHARES      AMOUNT      SHARES      AMOUNT      SHARES     AMOUNT    CAPITAL    EARNINGS
                                       --------    --------    --------    --------    --------   --------   --------   --------
<S>                                      <C>       <C>           <C>       <C>           <C>      <C>        <C>        <C>
BALANCE, DECEMBER 31, 1996                3,088    $  6,217       1,494    $ 12,210       4,299   $     43   $  9,898   $  3,022
   Accrued dividends on
     convertible preferred stock             --         311          --          --          --         --         --       (311)
   Dividends paid on convertible
     preferred stock                         --      (1,330)         --          --          --         --         --         --
   Conversion of convertible
     preferred stock to common stock     (3,088)     (5,198)         --          --       5,559         56      5,143         --
   Common stock issued in initial
     public offering                         --          --          --          --       5,835         59     83,388         --
   Conversion of redeemable common
     stock to common stock                   --          --      (1,494)    (12,210)      1,494         15     12,195         --
   Stock issued in connection with
     acquisitions                            --          --          --          --       2,341         23     23,941         --
   Exercise of options                       --          --          --          --          23         --         25         --
   Net income                                --          --          --          --          --         --         --      7,320
                                       --------    --------    --------    --------    --------   --------   --------   --------
BALANCE, DECEMBER 31, 1997                   --          --          --          --      19,551        196    134,590     10,031
   Stock issued in connection with
     acquisitions                            --          --          --          --       1,484         15     13,981         --
   Exercise of options                       --          --          --          --          27         --        263         --
   Tax benefit from stock options            --          --          --          --          --         --        109         --
   Net income                                --          --          --          --          --         --         --     18,639
                                       --------    --------    --------    --------    --------   --------   --------   --------
BALANCE, DECEMBER 31, 1998                   --          --          --          --      21,062        211    148,943     28,670
   Stock issued in connection with
     acquisitions                            --          --          --          --         511          5      3,144         --
   Exercise of options                       --          --          --          --           8         --          9         --
   Tax benefit from stock options            --          --          --          --          --         --         91         --
   Net income                                --          --          --          --          --         --         --     22,969
                                       --------    --------    --------    --------    --------   --------   --------   --------
BALANCE, DECEMBER 31, 1999                   --    $     --          --    $     --      21,581   $    216   $152,187   $ 51,639
                                       ========    ========    ========    ========    ========   ========   ========   ========

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                                  ------------------------
                                                                                1997        1998        1999
                                                                              --------    --------    --------
<S>                                                                           <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                 $  7,320    $ 18,639    $ 22,969
   Adjustments to reconcile net income to net
     cash flows provided by operating activities:
        Depreciation and amortization                                            7,589      12,070      15,707
        (Gain) loss on disposal of assets                                          (17)         --          --
        Deferred income taxes                                                   (2,474)     (3,395)     (2,364)
        Provision for doubtful accounts                                         10,892      18,698      25,262
        Non-recurring charge                                                     1,289          --          --
        Changes in assets and liabilities (net of effects of acquisitions):
          Increase in accounts receivable                                      (12,194)    (23,009)    (29,675)
          Decrease (increase) in inventories                                         1        (258)         44
          (Increase) decrease in other current assets                              (93)     (3,430)      2,549
          Decrease (increase) in other assets                                      563         296        (731)
          (Decrease) increase in accounts payable and
            accrued expenses                                                      (206)      2,131       1,308
                                                                              --------    --------    --------
            Net cash flows provided by operating
            activities                                                          12,670      21,742      35,069
                                                                              --------    --------    --------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of property and equipment                                        (3,190)     (3,639)     (8,120)
   Cash paid for acquisitions and acquisition costs, net of cash acquired      (68,824)    (58,311)    (49,229)
   Payments of contingent notes                                                 (1,523)     (7,789)    (17,440)
                                                                              --------    --------    --------
            Net cash flows used in investing activities                        (73,537)    (69,739)    (74,789)
                                                                              --------    --------    --------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Issuance of common stock                                                     86,831          --          --
   Principal repayment on junior notes                                          (7,500)         --          --
   Principal repayment on senior notes                                          (3,500)         --          --
   Debt issuance costs                                                          (1,080)       (294)     (1,168)
   Offering costs                                                               (3,548)         --          --
   Principal payments on long-term debt                                         (1,118)     (1,504)     (1,263)
   Net borrowings (payments) under revolving loan                              (75,048)     49,484      42,213
   Borrowing under term loan                                                    65,000          --          --
   Note receivable from officer                                                    270          --          --
   Dividends paid to convertible preferred stockholders                         (1,330)         --          --
   Tax benefit from stock options                                                   --         109          91
   Issuance of common stock under stock option plan                                 25         263           9
                                                                              --------    --------    --------
            Net cash flows provided by financing activities                     59,002      48,058      39,882
                                                                              --------    --------    --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                (1,865)         61         162
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                   2,262         397         458
                                                                              --------    --------    --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $    397    $    458    $    620
                                                                              ========    ========    ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
   Interest                                                                   $  9,027    $  7,759    $  8,957
   Income taxes                                                               $  7,713    $ 17,830    $ 15,890

</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1.       BUSINESS AND ORGANIZATION

AmeriPath, Inc. ("AmeriPath" or "The Company") was incorporated in February 1996
to be the largest integrated physician group practice focused on anatomic
pathology diagnostic services, based on an analysis of geographic breadth,
number of physicians, number of hospital contracts, number of practices and net
revenues. Since inception, the Company acquired or affiliated with 44 physician
practices located in thirteen states. The 297 pathologists employed by the
Company provide medical diagnostic services in 29 outpatient laboratories owned
and operated by the Company, and in 164 hospitals and associated outpatient
surgery centers.

Anatomic and clinical pathology diagnostic services are provided under
contractual arrangements with hospitals and in free-standing, independent
laboratory settings. The contractual arrangements with hospitals vary, but
essentially provide that, in exchange for physician representatives of the
Company serving as the medical director of a hospital's anatomic and clinical
laboratory operations, the Company is able to bill and collect the professional
component of the charges for medical services rendered by the Company's
pathologists. In some cases, the Company is also paid an annual fee for
providing the medical director for the hospital's clinical laboratory. The
Company also owns and operates outpatient pathology laboratories, for which it
bills patients and third party payors, principally on a fee-for-service basis,
covering both the professional and technical components of such services. In
addition, the Company contracts directly with national clinical laboratories,
principally on a fee-for-service basis.

On January 13, 1997, the Company effected a 1.8 for 1 stock split for its common
stock in the form of a stock dividend. The effect of such stock split is
reflected in all common share amounts.

On April 30, 1997, the authorized shares of common stock were increased to
30,000,000. In October 1997, the Company completed its initial public offering
whereby 6,440,000 shares of common stock were sold, 604,543 of which were sold
by selling shareholders of the Company. The offering resulted in net cash
proceeds to the Company of $84,732, which was principally used to repay
outstanding indebtedness.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies followed by the Company are as
follows:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements of the Company include the accounts of
AmeriPath, Inc., its wholly-owned subsidiaries, and companies in which the
Company has the controlling financial interest by means other than the direct
record ownership of voting stock, as discussed in Note 3. All significant
intercompany accounts and transactions have been eliminated.

ACCOUNTING ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue
and expenses. Because of the inherent uncertainties in this process, actual
results could differ from those estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist mainly of cash and cash equivalents,
accounts receivable, accounts payable and the credit facility. The carrying
amounts of the Company's cash and cash equivalents, accounts receivable and
accounts payable approximate fair value due to the short-term nature of these
instruments. Approximately $58,000 of the credit facility bears interest at a
variable market rate, and thus has a carrying amount that approximates fair
value. The remaining $105,000 of the credit facility was subject to interest
rate swaps as described in Note 8. The estimated fair value of the interest rate
swaps was

                                      F-8
<PAGE>

approximately $227 and $1,100 as of December 31, 1998 and 1999, respectively.
The estimated fair value of the Company's interest rate swaps was obtained from
outside sources.

CASH AND CASH EQUIVALENTS

Cash equivalents consist of highly liquid instruments with maturities at the
time of purchase of three months or less.

INVENTORIES

Inventories, consisting primarily of laboratory supplies, are stated at the
lower of cost, determined on a first-in-first-out basis, or market.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Routine maintenance and repairs are
charged to expense as incurred, while cost of betterments and renewals are
capitalized.

Depreciation and amortization are calculated on a straight-line basis and
accelerated methods, over the estimated useful lives of the respective assets
which lives range from 3 to 7 years. Leasehold improvements are amortized over
the shorter of the term of the related lease, including renewal options, or the
useful life of the asset.

INTANGIBLE ASSETS

The allocation of the purchase price of the 1999 acquisitions is preliminary,
while the Company continues to obtain the information necessary to determine the
fair value of the assets acquired and liabilities assumed. When the Company
obtains final information, management believes that adjustments, if any, will
not be material in relation to the consolidated financial statements.

Identifiable intangible assets include hospital contracts, physician referral
lists and laboratory contracts acquired in connection with acquisitions. Such
assets are recorded at fair value on the date of acquisition as determined by
management based on independent consultants' reports performed to assist
management in this determination and are being amortized over the estimated
periods to be benefited, ranging from 10 to 40 years. In determining these lives
the Company considered each practice's operating history, contract renewals,
stability of physician referral lists and industry statistics.

Goodwill relates to the excess of cost over the fair value of net assets of the
businesses acquired. The amortization periods for goodwill were determined by
the Company with consideration given to the lives assigned to the identifiable
intangibles, the reputation of the practice, the length of the practice's
operating history, and the potential of the market in which the acquired
practice is located. Amortization is calculated on a straight line basis over
periods ranging from 10 to 35 years.

Management assesses on an ongoing basis if there has been an impairment in the
carrying value of its intangible assets. If the undiscounted future cash flows
over the remaining amortization period of the respective intangible asset
indicates that the value assigned to the intangible asset may not be
recoverable, the carrying value of the respective intangible asset will be
reduced. The amount of any such impairment would be determined by comparing
anticipated discounted future cash flows from acquired businesses with the
carrying value of the related assets. In performing this analysis, management
considers such factors as current results, trends and future prospects, in
addition to other relevant factors.

DEFERRED DEBT ISSUANCE COSTS

The Company incurred costs in connection with bank financing. These costs have
been capitalized and are being amortized on a straight-line basis, which
approximates the interest method, over the five year term. Such amounts are
included in other assets in the consolidated balance sheet. Prior to 1998 the
Company had deferred debt issuance costs in connection with other debt. These
costs were written off in conjunction with the initial public offering in 1997.

                                      F-9
<PAGE>

REVENUE RECOGNITION

The Company recognizes revenue at the time services are performed. Unbilled
receivables are recorded for services rendered during, but billed subsequent to,
the reporting period. Net revenue is reported at the estimated realizable
amounts from patients, third-party payors and others for services rendered.
Revenue under certain third-party payor agreements is subject to audit and
retroactive adjustments. Provision for estimated third-party payor settlements
and adjustments are estimated in the period the related services are rendered
and adjusted in future periods as final settlements are determined. The
provision and the related allowance are adjusted periodically, based upon an
evaluation of historical collection experience with specific payors for
particular services, anticipated collection levels with specific payors for new
services, industry reimbursement trends, and other relevant factors.

Unbilled receivables, net of allowances, as of December 31, 1998 and 1999
amounted to approximately $3,296 and $5,200, respectively.

INCOME TAXES

The Company's provision for income taxes includes federal and state income taxes
currently payable and changes in deferred tax assets and liabilities, excluding
the establishment of deferred tax assets and liabilities related to
acquisitions. Deferred income taxes are accounted for in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 109, ACCOUNTING FOR
INCOME TAXES and represent the estimated future tax effects resulting from
temporary differences between financial and tax reporting bases of assets and
liabilities.

SEGMENT REPORTING

The Financial Accounting Standards Board ("FASB") issued SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION effective
for fiscal years beginning after December 15, 1997. The Company has only one
discernable reportable segment, based upon management reporting and the
consolidated reporting structure.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133 modifies the accounting for
derivatives and hedging activities and is effective for fiscal years beginning
after June 15, 2000. SFAS No. 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. The Company plans to adopt the provisions of this
Statement in the first quarter of fiscal year 2001. Management is currently
analyzing the impact of adopting this Statement on the Company's financial
position and results of operations.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the 1999
presentation.

3.       ACQUISITIONS

During 1999, the Company acquired ten anatomic pathology practices. The total
consideration paid by the Company in connection with these acquisitions included
cash of $49,332 and 486,796 shares of common stock (aggregate value of $2,954).
In addition, the Company issued additional purchase price consideration in the
form of contingent notes. During 1998, the Company acquired fifteen anatomic
pathology practices. The total consideration paid by the Company in connection
with these acquisitions included cash of $55,333 and 1,483,848 shares of common
stock (aggregate value of $13,996). In addition, the Company issued additional
purchase price consideration in the form of contingent notes. During the year
ended December 31, 1999, the Company issued an additional 23,930 shares of
common stock, valued at $195, and made contingent note payments of $17,440 and
other purchase price adjustments of $2,965 in connection with certain
post-closing adjustments and acquisition costs. During the year ended December
31, 1998, the Company made contingent note payments of $7,789 and other purchase
price adjustments of approximately $3,767 in connection with certain
post-closing adjustments and acquisition costs.

                                      F-10
<PAGE>

The acquisitions have been accounted for using the purchase method of
accounting. The aggregate consideration paid, and to be paid, is based on a
number of factors, including each practice's demographics, size, local
prominence, position in the marketplace and historical cash flows from
operations. Assessment of these and other factors, including uncertainties
regarding the health care environment, resulted in the sellers of each of the
practices and the Company being unable to reach agreement on the final purchase
price. The Company agreed to pay a minimum purchase price and to pay additional
purchase price consideration to the sellers of the practices in proportion to
their respective ownership interest in each practice. The additional payments
are contingent upon the achievement of stipulated levels of operating earnings
(as defined) by each of the practices over periods of three to five years from
the date of the acquisition as set forth in the respective agreements, and are
not contingent on the continued employment of the sellers of the practices. In
certain cases, the payments are contingent upon other factors such as the
retention of certain hospital contracts for periods ranging from three to five
years. The amount of the payments cannot be determined until the achievement of
the operating earnings levels or other factors during the terms of the
respective agreements. If the maximum specified levels of operating earnings for
each practice are achieved, the Company would make aggregate maximum payments,
including principal and interest, of approximately $191,204 over the next three
to five years. At the mid-point level, the aggregate principal and interest
would be approximately $95,604 over the next three to five years. A lesser
amount or no payments at all would be made if the maximum levels of operating
earnings specified in each agreement are not met. Through December 31, 1999, the
Company made contingent note payments aggregating $26,752, which represent 60%
of the maximum amount available. Additional payments are accounted for as
additional purchase price, which increases the recorded goodwill.

The Company does not have technical majority ownership of the common stock of
the practices in North Carolina, Ohio, Indiana, Texas, New York, Michigan,
Wisconsin and Pennsylvania. All of the common stock of the Ohio and Indiana PA
Contractors is held in trust. AmeriPath is the sole beneficiary of each trust
and receives all income from the trusts. The Company, at its sole discretion,
can replace the trustees, withdraw any asset from the trusts, modify the terms
of the trust agreements, or terminate the trusts, and direct the trustees to
distribute income and any asset from the trusts. No assets of the trusts can be
sold or otherwise disposed of without AmeriPath's consent.

In Pennsylvania, North Carolina, Wisconsin, New York and Michigan the
shareholder of the practice is a physician affiliated with AmeriPath, who has
entered into a shareholders' agreement restricting the transfer or other
disposition of such shares by the shareholder, and granting the Company an
exclusive and irrevocable option to require the shareholder to sell the shares
for nominal consideration. Additionally, wholly-owned subsidiaries of the
Company entered into 40-year management agreements with each of these practices,
under which such subsidiaries provide all management and other non-medical
services to these practices for a fee equal to the practice's net revenue less
practice expenses, including physician salaries, which are fixed by employment
agreements, and related professional expenses. Therefore, the Company is
entitled to all of the net income of these practices.

Based on the provisions of the purchase agreements, trust agreements and
management agreements, consolidation of the practices in North Carolina, Ohio,
Indiana, Wisconsin, New York, Michigan and Pennsylvania is required to present
the Company's financial position and results of operations in conformity with
generally accepted accounting principles because the Company has the controlling
financial interest in these practices by means other than direct record
ownership of voting stock. Accordingly, these acquisitions are accounted for as
purchase business combinations and included in the consolidated financial
statements.

In connection with the acquisitions in Texas, a wholly-owned subsidiary of the
Company (the "Texas subsidiary") acquired all of the laboratory facilities,
testing equipment and other assets used in connection with the pathology
services performed by the Texas physicians. The Texas subsidiary employs all of
the technical and non-technical administrative and support personnel. The Texas
subsidiary has also entered into 40-year management services agreements with the
Texas 5.01(a) non-profit corporations, under which it provides, on an exclusive
basis, the technical laboratory services, management and all other non-medical
practice services to its Texas 5.01(a) non-profit corporations which employ all
of the physicians who are solely responsible for the provision of medical
services. The Company is the sole member and appoints the members of the Board
of Directors of the Texas 5.01(a) corporations. The Company has direct voting
control over the 5.01(a) corporations and they are included in the consolidated
financial statements.

The Texas 5.01(a) corporations' payments to the Company under the management
service agreements are comprised of the reimbursement of the costs and expenses
for providing services, a base fee and a performance fee based on the
achievement of goals and objectives established annually. Assuming the Texas
5.01(a) corporations achieve their goals and objectives, such fees will result
in the Company receiving substantially all net revenue less practice expenses of
the Texas 5.01(a) corporations.

                                      F-11
<PAGE>

Practice expenses include physician salaries which are fixed by employment
agreement and related professional expenses. Therefore, the Company is the
direct beneficiary of substantially all of the net income of the 5.01(a)
corporations which is reported in the consolidated statement of operations.

The accompanying consolidated financial statements include the results of
operations of the acquisitions from the date acquired through December 31, 1999.
The following unaudited pro forma information presents the consolidated results
of the Company's operations and the results of operations of the 1998 and 1999
acquisitions for the years ended December 31, 1998 and 1999 after giving effect
to amortization of goodwill and identifiable intangible assets, interest expense
on long-term debt incurred in connection with these acquisitions, and the
reduced level of certain specific operating expenses (primarily compensation and
related expenses attributable to former owners) as if the acquisitions had been
consummated on January 1, 1998. Such unaudited pro forma information is based on
historical financial information with respect to the 1998 and 1999 acquisitions
and does not include operational or other changes which might have been effected
by the Company.

The unaudited pro forma information for the years ended December 31, 1998 and
1999 presented below is for illustrative information purposes only and is not
necessarily indicative of results which would have been achieved or results
which may be achieved in the future:

                                                            PRO FORMA
                                                           DECEMBER 31,
                                                           ------------
                                                         1998         1999
                                                      ---------    ---------
Net revenue                                           $ 242,077    $ 256,407
                                                      =========    =========
Net income                                            $  24,878    $  25,171
                                                      =========    =========
Net income per share (diluted)                        $    1.12    $    1.14
                                                      =========    =========

4.       ACCOUNTS RECEIVABLE AND NET REVENUE

Accounts receivable are recorded at net realizable value. The allowance for
contractual and other adjustments and uncollectible accounts is based on
historical experience and judgments about future events. Accordingly, the actual
amounts experienced could vary significantly from the recorded allowances.

                                                            DECEMBER 31,
                                                            ------------
Accounts receivable consisted of the following:          1998         1999
                                                      ---------    ---------
Gross accounts receivable                             $  79,738    $ 100,978
Less:  Allowance for contractual
         and other adjustments                          (23,334)     (32,052)
       Allowance for uncollectible accounts             (20,314)     (22,957)
                                                      ---------    ---------
       Accounts receivable, net                       $  36,090    $  45,969
                                                      =========    =========

                                      F-12
<PAGE>

The Company grants credit without collateral to individual patients, most of
whom are insured under third party payor agreements. The estimated mix of
receivables from patients and third-party payors are as follows:

                                                             DECEMBER 31,
                                                             ------------
                                                           1998         1999
                                                          ------       ------
Government programs                                        19.9%        17.8%
Third-party payors                                         45.9         50.4
Private pay patients                                       26.6         25.3
Other                                                       7.6          6.5
                                                          ------       ------
                                                          100.0%       100.0%
                                                          ======       ======

                                                YEARS ENDED DECEMBER 31,
                                                ------------------------
Net revenue consisted of the following:      1997         1998         1999
                                          ---------    ---------    ---------
Gross revenue                             $ 148,698    $ 257,968    $ 360,879
Less contractual and other adjustments      (40,292)     (80,664)    (128,126)
                                          ---------    ---------    ---------
         Net revenue                      $ 108,406    $ 177,304    $ 232,753
                                          =========    =========    =========

A significant portion of the Company's net revenue is generated by the
hospital-based practices through contracts with 75, 125 and 164 hospitals as of
December 31, 1997, 1998 and 1999, respectively. Columbia / HCA Healthcare
Corporation ("Columbia") owned 25, 29 and 27 of these hospitals as of December
31, 1997, 1998 and 1999, respectively. For the years ended December 31, 1997,
1998 and 1999, approximately 27%, 18% and 17%, respectively of net revenue was
generated directly from contracts with hospitals owned by Columbia. Generally,
these contracts and other hospital contracts have remaining terms of less than
five years and contain renewal provisions. Some of the contracts also contain
clauses that allow for termination by either party with relatively short notice.
Columbia has been under government investigation for some time and is evaluating
its operating strategies; including the sale, spin-off or closure of certain
hospitals. Although the Company, through its acquisitions, has had relationships
with these hospitals and national labs for extended periods of time, the
termination of one or more of these contracts could have a material adverse
effect on the Company's financial position and results of operations. The
Company from time to time evaluates the carrying values of identified
intangibles and goodwill and the related useful lives assigned to such assets
and has concluded that no adjustments are necessary at this time.

5.       PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

                                                                ESTIMATED
                                            USEFUL LIFE        DECEMBER 31,
                                              (YEARS)      1998        1999
                                             --------    --------    --------
Laboratory, office and data
   processing equipment                         3-5      $ 12,665    $ 16,103
Construction in progress                                       --       2,693
Leasehold improvements                         5-10         1,788       3,349
Furniture and fixtures                            7         1,720       2,070
Mobile lab units                                  3           204         175
Automotive vehicles                               3           921         988
                                                         --------    --------
                                                           17,298      25,378
Less accumulated depreciation                              (8,714)    (11,249)
                                                         --------    --------
Property and equipment, net                              $  8,584    $ 14,129
                                                         ========    ========

Depreciation expense was $1,543, $2,292 and $2,877 for the years ended December
31, 1997, 1998 and 1999, respectively.

                                      F-13
<PAGE>

6.       INTANGIBLE ASSETS

Intangible assets and the related accumulated amortization and amortization
periods are as follows:
                                                        AMORTIZATION PERIODS
                                                              (YEARS)
                                      DECEMBER 31,            -------
                                      ------------                  WEIGHTED
                                  1998         1999      RANGE      AVERAGE
                               ---------    ---------   -------    ---------
Hospital contracts             $ 150,076    $ 191,524    25-40        33.3
Physician client lists            50,701       54,558    10-30        21.0
Laboratory contracts               1,800        7,317       10        10.0
Management agreements              2,481        2,478       25        25.0
                               ---------    ---------
                                 205,058      255,877
Accumulated amortization         (11,980)     (20,209)
                               ---------    ---------
Balance, net                   $ 193,078    $ 235,668
                               =========    =========
Goodwill                       $ 118,523    $ 153,128    10-35        31.8
Accumulated amortization          (6,135)     (10,361)
                               ---------    ---------
Balance, net                   $ 112,388    $ 142,767
                               =========    =========

The amortization periods for the identifiable intangible assets were determined
by the Company based on reports of independent consultants, performed to assist
management in this determination. In determining these lives, the Company
considered each practice's operating history, contract renewals, stability of
physician referral lists and industry statistics.

The amortization periods for goodwill were determined by the Company with
consideration given to the lives assigned to the identifiable intangibles, the
reputation of the practice, the length of the practice's operating history, and
the potential of the market in which the acquired practice is located.

The weighted average amortization period for identifiable intangible assets and
goodwill is 30.6 years.

During the first quarter of 2000, the Company received information that Primary
Health Systems ("PHS"), a regional hospital network in Cleveland, Ohio (the
"City") that the Company provides services to, began implementing its plan of
reorganization it filed under Chapter 11 with the U.S. Bankruptcy Court for the
District of Delaware. One of the Company's practices provides services at four
PHS hospitals and an ambulatory care facility. The Company acquired the affected
practice during the fourth quarter of 1998. Information received to date
indicates that PHS, in accordance with its bankruptcy plan, plans to sell two
hospitals and the ambulatory care facility to the Cleveland Clinic Foundation
(the "Foundation"). However, several parties, including the City, are contesting
the bankruptcy plan and sale to the Foundation. Management and the practice's
Managing Director are actively planning to retain the outpatient business and
combine it with the Company's other operations near the City. At this time, we
are still uncertain as to the future operations or cash flows from this
practice. If the final reorganization of PHS results in a reduction of cash flow
and the Company is unable to sufficiently reduce the corresponding operating
costs, an impairment of the intangible assets of this practice may occur. If
impairment were to occur, the maximum non-cash charge would be approximately
$4,700 offset by a deferred tax benefit of approximately $1,100. Net revenues of
this AmeriPath practice were approximately $2,500 in 1999. There can be no
assurance this practice will continue to derive any revenues from PHS due to the
events described above. The Company will continue to monitor the status of the
reorganization and the effect on cash flows and the carrying values of the
related intangibles on a quarterly basis.

                                      F-14
<PAGE>

7.       ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

                                                              DECEMBER 31,
                                                              ------------
                                                            1998      1999
                                                           -------   -------
Accounts payable                                           $ 2,195   $ 3,066
Accrued compensation                                         4,582     6,913
Accrued acquisition costs                                    1,645     1,739
Accrued interest                                               862       828
Income taxes payable                                         2,109       942
Other accrued expenses                                       4,734     5,020
                                                           -------   -------
                                                           $16,127   $18,508
                                                           =======   =======

8.       LONG-TERM DEBT

Long-term debt consisted of the following:

                                                            DECEMBER 31,
                                                            ------------
                                                         1998         1999
                                                      ---------    ---------
Revolving loan                                        $ 121,087    $ 163,300
Capitalized lease obligations                               118          259
Subordinated notes issued and assumed in
     connection with acquisitions, payable
     in varying amounts through 2001,
     with interest at rates of 7% and 8%                  2,303        1,057
                                                      ---------    ---------
                                                      $ 123,508    $ 164,616
Less current portion                                     (1,315)        (539)
                                                      ---------    ---------
Long term debt, net of current portion                $ 122,193    $ 164,077
                                                      =========    =========

At December 31, 1999 maturities of long term debt were as follows:

 2000                                                               $    539
 2001                                                                    648
 2002                                                                     81
 2003                                                                163,348
                                                                    --------
Total                                                               $164,616
                                                                    ========

On June 26, 1997, the Company replaced its line of credit with a new revolving
line of credit and term loan agreement (the "Credit Facility") with a syndicate
of banks led by BankBoston N.A., as lender and agent (the "Agent"), which
provided for borrowings of up to $150,000 in the form of: (i) a term loan of
$65,000; and (ii) a revolving loan of up to $85,000 that may be used for working
capital purposes (in an amount limited to 80% of the Company's eligible
receivables), and to fund acquisitions if not otherwise used for working capital
purposes.

On April 28, 1998, the Company amended its Credit Facility. The amended facility
provides for borrowings of up to $200,000 in the form of a revolving loan that
may be used for working capital purposes (in an amount limited to 75% of the
Company's net accounts receivable, as reflected on the Company's quarterly
consolidated balance sheet) and to fund acquisitions to the extent not otherwise
used for working capital purposes.

On December 16, 1999, the Company again amended its Credit Facility. The amended
facility provides for borrowings of up to $230,000 in the form of a revolving
loan that may be used for working capital purposes and to fund acquisitions to
the extent not otherwise used for working capital purposes. The Company must
comply with certain requirements as defined in the credit agreement to utilize
the Credit Facility to fund acquisitions.

All outstanding advances under the Credit Facility are due and payable on April
30, 2003. Interest is payable monthly at variable rates which are based, at the
Company's option, on the Agents' base rate (8.75% at December 31, 1999) or the
Eurodollar rate plus a premium that is based on the Company's quarterly ratio of
total debt to cash flow. The amended Credit

                                      F-15
<PAGE>

Facility also requires a commitment fee to be paid quarterly equal to 0.375% of
the annualized unused portion of the total commitment. The Company has used a
portion of the funds available under the amended Credit Facility to refinance
previously outstanding indebtedness, to fund acquisitions and for working
capital purposes. The Company intends to use the remaining availability for its
acquisition program.

In October 1998, the Company entered into two, two year, interest rate swap
transactions which involved the exchange of floating for fixed rate interest
payments over the life of the agreement without the exchange of the underlying
principal amounts. The differential to be paid or received is accrued and is
recognized as an adjustment to interest expense. The agreements have notional
amounts of $75,000 and $30,000. Under the $75,000 and $30,000 agreements, the
Company receives interest on the notional amounts if the 30 day LIBOR exceeds
4.675% and 5.425%, respectively, and pays interest on the notional amounts if
the 30 day LIBOR is less than the foregoing rates. These derivative financial
instruments are being used by the Company to reduce interest rate volatility and
associated risks arising from the floating rate structure of its Credit Facility
and are not held or issued for trading purposes.

The amended Credit Facility contains covenants which, among other things,
require the Company to maintain certain financial operating ratios and impose
certain limitations or prohibitions on the Company with respect to the
incidence, guaranty or assumption of indebtedness, the payment of dividends,
cash distributions, new debt issuance, sale of assets, leasing commitments and
annual capital expenditures, and contains provisions which preclude mergers and
acquisitions under certain circumstances. All of the Company's assets are
pledged as collateral under the Credit Facility. The Company believes that it is
in compliance with all of the covenants at December 31, 1999.

9.       CONVERTIBLE PREFERRED STOCK

The Convertible Preferred Stock had an annual dividend rate of 6% of the
original purchase price and such dividends were cumulative from the date of
original issuance and payable when and as declared by the Company's Board of
Directors. In connection with the Company's initial public offering in October
1997, the shares of Convertible Preferred Stock were converted into shares of
common stock at a conversion rate of 1.8 shares of common stock for each
preferred share. Upon conversion, all accumulated and unpaid dividends, up to
the date of conversion were paid in cash.

During the year ended December 31, 1996 the Company paid accrued dividends in
the amount of $32 with respect to the 120,004 shares of Convertible Preferred
Stock that were converted into 216,007 shares of common stock by the holders of
the Convertible Preferred Stock in their sale of shares of common stock to the
Company's President and Chief Executive Officer (See Note 14). During the year
ended December 31, 1997, the Company paid accrued dividends of $1,330.

10.      LEASE COMMITMENTS

The Company leases various office and laboratory space, and certain equipment
pursuant to operating lease agreements. The following information includes the
related party leases discussed in Note 14. Future minimum lease commitments
consisted of the following at December 31, 1999:

 2000                                                        $ 2,338
 2001                                                          2,044
 2002                                                          1,759
 2003                                                          1,402
 2004                                                            821
 Thereafter                                                    3,902
                                                             -------
                                                             $12,266
                                                             =======

Rent expense under operating leases for the years ended December 31, 1997, 1998
and 1999 was $1,093, $1,412, and $1,733 respectively.

                                      F-16
<PAGE>

11.      OPTION PLAN

The Company's Stock Option Plan (the "Option Plan") provides for the grant of
options to purchase shares of common stock to key employees and others. The plan
provides that the option price shall not be less than the fair market value of
the shares on the date of the grant. At December 31, 1999, 2,322,040 shares of
common stock are reserved for issuance pursuant to options granted under the
Option Plan. All options granted have 10 year terms and vest and become
exercisable at the rate of 20% a year, following the date of grant.

The Company's Director Option Plan provides for the grant of options to purchase
shares of common stock to Directors who are not employees of the Company. All
options granted under the Director Option Plan have 10 year terms and are
exercisable during the period specified in the agreement evidencing the grant of
such Director Option. At December 31, 1999, 5,000 options have been granted
under the Director Option Plan.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), and the related
interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123, "Accounting for Stock-Based Compensation," requires use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options approximates the fair value of the underlying stock on the date of
grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using the
Black-Scholes Option Pricing Model with the following weighted-average
assumptions for 1997, 1998 and 1999:

                                                1997      1998      1999
                                               ------    ------    ------
Risk free interest rate                           6.5%      6.5%      6.5%
Dividend yield                                     --        --        --
Volatility factors                               47.0%    107.0%    120.0%
Weighted average life (years)                     4.1       4.1       4.1

Using the Black-Scholes Option Pricing Model, the estimated weighted-average
fair value per option granted in 1997, 1998 and 1999 were $7.08, $10.65 and
$6.28 respectively

The pro forma net income assuming the amortization of the estimated fair values
over the option vesting period and diluted earnings per common share, had the
fair value method of accounting for stock options been used, would have been as
follows:

                                                      1998        1999
                                                   ---------   ----------
Pro forma net income                               $  17,225   $   20,001
Pro forma diluted earnings per share               $    0.82   $     0.92

The Black-Scholes Option Pricing 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 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 assumptions can materially affect
the fair value estimate, in management's opinion, the existing models may not
necessarily provide a reliable single measure of the fair value of its employee
stock options.

                                      F-17
<PAGE>

A summary of the status of the option plans as of and for the changes during
each of the three years in the period ended December 31, 1999 is presented
below:

<TABLE>
<CAPTION>
                                                            OPTION PRICE PER SHARE
                                           NUMBER           ----------------------
                                          OF SHARES      LOW        HIGH      WEIGHTED
                                          ---------      ---        ----      --------
<S>                                      <C>           <C>         <C>           <C>
Outstanding December 31, 1996              970,211     $ 1.11      $10.00        $ 4.12
Granted in 1997                            258,000      10.00       10.00         10.00
Granted in 1997                             48,000      16.75       16.75         16.75
Cancelled in 1997                          (41,400)      8.33        8.33          8.33
Exercised in 1997                          (22,400)      1.11        1.11          1.11
                                         ---------
Outstanding December 31, 1997            1,212,411       1.11       16.75          5.78
Granted in 1998                            254,050      14.06       14.06         14.06
Granted in 1998                              2,000      16.13       16.13         16.13
Granted in 1998                              1,000      11.38       11.38         11.38
Cancelled in 1998                          (12,900)      8.33       16.75         11.45
Exercised in 1998                          (27,560)      8.33       10.00          8.98
                                         ---------
Outstanding December 31, 1998            1,429,001       1.11       16.75          7.16
Granted in 1999                             26,000       9.31        9.31          9.31
Granted in 1999                            259,500       7.63        7.63          7.63
Granted in 1999                              5,000       9.56        9.56          9.56
Granted in 1999                              2,000       9.16        9.16          9.16
Granted in 1999                              2,000       9.06        9.06          9.06
Granted in 1999                              9,000       7.75        7.75          7.75
Cancelled in 1999                          (41,800)      8.33        8.33          8.33
Exercised in 1999                           (8,000)      1.11        1.11          1.11
                                         ---------
Outstanding December 31, 1999            1,682,701      $1.11      $16.75         $7.23
                                         =========
</TABLE>

The following table summarizes the information about options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>
                      OPTIONS OUTSTANDING                                   OPTIONS EXERCISABLE
 ---------------------------------------------------------------         --------------------------
                                         WEIGHTED
                                          AVERAGE         WEIGHTED                          WEIGHTED
                                         REMAINING         AVERAGE                           AVERAGE
    RANGE OF           NUMBER        CONTRACTUAL LIFE     EXERCISE         NUMBER           EXERCISE
 EXERCISE PRICES     OUTSTANDING        (IN YEARS)         PRICE         EXERCISABLE          PRICE
 ---------------     -----------        ----------         -----         -----------          -----
      <S>            <C>                    <C>           <C>              <C>               <C>
      $  1.11          203,600              4.6           $  1.11          203,600           $  1.11
      $  1.67          378,011              6.1           $  1.67          230,407           $  1.67
      $  7.63          244,500              9.3           $  7.63               --                --
      $  7.75            9,000              9.9           $  7.75               --                --
      $  8.33          230,040              6.6           $  8.33          136,440           $  8.33
      $  9.06            2,000              9.9           $  9.06               --                --
      $  9.16            2,000              9.7           $  9.16               --                --
      $  9.31           26,000              9.2           $  9.31               --                --
      $  9.56            5,000              9.6           $  9.56               --                --
      $10.00           292,000              7.5           $ 10.00          119,000           $ 10.00
      $11.65             1,000              8.5           $ 11.65              200           $ 11.65
      $14.06           238,050              8.4           $ 14.06           47,610           $ 14.06
      $16.13             2,000              8.4           $ 16.13              400           $ 16.13
      $16.63             6,000              7.9           $ 16.63            2,400           $ 16.63
      $16.75            43,500              7.9           $ 16.75           17,400           $ 16.75
                     ---------                                             -------
  $1.11 - $16.75     1,682,701              7.2           $  7.23          757,457           $  5.21
                     =========                                             =======
</TABLE>

As of December 31, 1997 and 1998 exercisable options were 263,442 and 469,064,
respectively.

                                      F-18
<PAGE>

12.      EMPLOYEE BENEFIT PLANS

Effective July 1, 1997, the Company consolidated its previous 401(k) plans into
a new qualified 401(k) retirement plan (the "401(k) Plan") covering
substantially all eligible employees as defined in the 401(k) plan. The new 401
(k) Plan requires employer matching contributions equal to 25% of the employees'
contributions up to a maximum of one thousand dollars per employee. The Company
expensed matching contributions aggregating $219, $379 and $451 to the new plan
in 1997, 1998 and 1999, respectively. Also, in connection with acquisitions, the
Company assumes the obligations under certain defined contribution plans which
cover substantially all eligible employees of the acquired practices. The
Company has not made any contributions from the dates of acquisition through
December 31, 1999.

During 1999, the Company introduced a Supplemental Employee Retirement Plan
("SERP") which covers only selected employees. The SERP is a non-qualified
deferred compensation plan which was established to aid in the retention of the
non-selling physicians and other key employees. In 1999, the eligible
participants were allowed to defer up to ten thousand dollars of compensation
and/or eligible bonuses. If the subscription to the plan fell below an
established deferral range, the participating individuals were allowed to defer
additional funds. The Company may also make discretionary contributions to the
SERP. Employee and employer contributions to the SERP for the year ended
December 31, 1999, were $428 and $20, respectively.

13.      COMMITMENTS AND CONTINGENCIES

LIABILITY INSURANCE -- The Company is insured with respect to general liability
on an occurrence basis and medical malpractice risks on a claims made basis. The
Company records an estimate of its liabilities for claims incurred but not
reported. Such liabilities are not discounted. Effective July 1, 1999, the
Company changed its medical malpractice carrier. At December 31, 1999, the
Company is in dispute with its former insurance carrier on an issue related to
applicability of the insurance coverage. The Company believes that an
unfavorable resolution, if any, of such dispute will not have a material adverse
effect on the Company's financial position and results of operations.

HEALTHCARE REGULATORY ENVIRONMENT AND RELIANCE ON GOVERNMENT PROGRAMS -- The
healthcare industry in general, and the services that the Company provides are
subject to extensive federal and state laws and regulations. Additionally, a
significant portion of the Company's net revenue is from payments by
government-sponsored health care programs, principally Medicare and Medicaid,
and is subject to audit and adjustments by applicable regulatory agencies.
Failure to comply with any of these laws or regulations, the results of
increased regulatory audits and adjustments, or changes in the interpretation of
the coding of services or the amounts payable for the Company's services under
these programs could have a material adverse effect on the Company's financial
position and results of operations.

INTERNAL REVENUE SERVICE EXAMINATIONS -- The Internal Revenue Service ("IRS") is
conducting an examination of the Company's federal income tax return for the tax
years ended December 31, 1997 and 1996. The examination is continuing and the
IRS has not issued any notice of proposed adjustments, and the amount of any
payments required as a result thereof cannot presently be determined. Although
the Company believes it is in compliance with all applicable IRS rules and
regulations, if the IRS should determine the Company is not in compliance, it
could have a material adverse effect on the Company's financial position and
results of operations.

MEDICARE PROGRAM SAFEGUARDS -- An inspection was conducted in April 1997 at the
Company's laboratory facility in Fort Lauderdale, Florida by representatives of
federal and state agencies (Medicare (Florida) Program Safeguards ("MPS")) under
Operation Restore Trust, regarding the Company's 1996 Medicare billing
practices. As the result of the 1997 inspection, in 1998 MPS attempted to recoup
$2,950 on in alleged Medicare overpayments for the use of an improper procedure
code. The government alleged that many of the skin biopsies performed by the
Company should have been coded as an 88304, rather than the 88305 code used by
the Company. The Company mounted a vigorous protest and defense and argued that
its coding practice and procedure codes were accurate and consistent with
accepted CPT code assignment guidelines. As support for its position, the
Company provided MPS with the reports of two reputable coding experts who
independently concluded that the Company's coding practices were in conformity
with accepted CPT assignment guidelines. After review of the Company's position
and the studies presented by the Company, MPS determined that $204.05 was due as
a result of improper documentation. MPS concluded that no fraud or intentional
abuse was demonstrated. AmeriPath promptly paid the $204.05 to resolve the
matter.

Due to the uncertain nature of coding for pathology services, the Company cannot
assure that issues such as those addressed in the 1997 Operation Restore Trust
inspection will not arise again. If negative findings are made as a result of
such an investigation,

                                      F-19
<PAGE>

the Company could be required to change coding practices or repay amounts paid
for incorrect practices either of which could have a materially adverse effect
on the operating results and financial condition of the Company.

14.      RELATED PARTY TRANSACTIONS

OPERATING LEASES -- The Company leases laboratory and administrative facilities
used in the operations of eight practices from entities beneficially owned by
some of the Company's common stockholders. The terms of the leases expire from
1999 to 2003 and some contain options to renew for additional periods. Lease
payments made under leases with related parties were $439, $453 and $502 in
1997, 1998 and 1999, respectively.

NOTE RECEIVABLE FROM OFFICER -- In connection with the employment of the
Company's President and Chief Executive Officer, the Company provided financing
of $270 to facilitate the purchase of 216,007 shares of the Company's issued and
outstanding stock from certain holders of the Convertible Preferred Stock. The
note was repaid in full in 1997.

15.      INCOME TAXES

The provision for income taxes for the years ended December 31, 1997, 1998 and
1999 consists of the following:

                                                    YEAR ENDED DECEMBER 31,
                                                    -----------------------
                                                 1997        1998        1999
                                               --------    --------    --------
Current:
     Federal                                   $  6,828    $ 15,152    $ 17,465
     State                                        1,168       2,367       2,016
                                               --------    --------    --------
            Total current provision               7,996      17,519      19,481
                                               --------    --------    --------
Deferred:
     Federal                                     (2,113)     (3,044)     (2,119)
     State                                         (361)       (351)       (245)
                                               --------    --------    --------
            Total deferred benefit               (2,474)     (3,395)     (2,364)
                                               --------    --------    --------
            Total provision for income taxes   $  5,522    $ 14,124    $ 17,117
                                               ========    ========    ========

The effective tax rate on income before income taxes is reconciled to the
statutory federal income tax rate as follows:

                                                   YEAR ENDED DECEMBER 31,
                                                   -----------------------
                                                  1997       1998      1999
                                                 ------     ------    ------
Statutory federal rate                             35.0%      35.0%     35.0%
State income taxes, net of federal
     income tax benefit                             3.9        4.0       4.0
Non-deductible items, primarily amortization
     of goodwill                                    4.9        2.8       3.3
Other                                              (0.8)       1.3       0.4
                                                 ------     ------    ------
                                                   43.0%      43.1%     42.7%
                                                 ======     ======    ======

                                      F-20
<PAGE>

The following is a summary of the deferred income tax assets and liabilities as
of December 31, 1998 and 1999:

                                                               DECEMBER 31,
                                                               ------------
                                                             1998        1999
                                                          --------    --------
Deferred tax assets (short term):
     Allowance for doubtful accounts                      $  6,316    $  6,093
     Accrued liabilities                                       586         620
                                                          --------    --------
         Deferred tax assets (short term)                    6,902       6,713
                                                          --------    --------
Deferred tax liabilities (short term):
     481 (a) adjustment                                     (2,333)     (1,570)
     Other                                                    (160)         (1)
                                                          --------    --------
         Deferred tax liabilities (short term)              (2,493)     (1,571)
                                                          --------    --------
              Net short term deferred tax assets             4,409       5,142
                                                          --------    --------
Deferred tax liabilities (long term):
     Change from cash to accrual basis of accounting
         by the acquisitions                                (1,580)     (1,355)
     Intangible assets acquired                            (42,663)    (61,238)
        Property and equipment                                (245)       (387)
                                                          --------    --------
         Deferred tax liabilities (long term)              (44,488)    (62,980)
                                                          --------    --------
              Net long term deferred tax liability         (44,488)    (62,980)
                                                          --------    --------
Net deferred tax assets / (liabilities)                   $(40,079)   $(57,838)
                                                          ========    ========

16.      EARNINGS PER SHARE

Earnings per share are computed and presented in accordance with SFAS No. 128,
EARNINGS PER SHARE, which the Company adopted in the fourth quarter of 1997.
Basic earnings per share excludes dilution and is computed by dividing income or
loss attributable to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock or resulted in
the issuance of common stock that then shared in the earnings of the entity. The
effects of Convertible Preferred Stock are calculated using the as if converted
method and the effects of stock options are calculated using the treasury stock
method. All prior reported earnings per share data has been restated in
accordance with SFAS No. 128.

                                                     YEARS ENDED DECEMBER 31,
                                                     ------------------------
                                                   1997        1998       1999
                                                 --------    --------   --------
Basic Earnings Per Common Share:
   Net income                                    $  7,320    $ 18,639   $ 22,969
   Preferred stock dividends                         (311)         --         --
                                                 --------    --------   --------
   Income attributable to common stockholders    $  7,009    $ 18,639   $ 22,969
                                                 ========    ========   ========
   Basic weighted average shares outstanding        8,773      20,339     21,296
                                                 --------    --------   --------
   Basic earnings per common share               $   0.80    $   0.92   $   1.08
                                                 ========    ========   ========

Diluted Earnings Per Common Share:
   Net income                                    $  7,320    $ 18,639   $ 22,969
                                                 ========    ========   ========
   Weighted average shares outstanding              8,773      20,339     21,296
   Effects of Convertible Preferred Stock
       and Stock Options                            5,106         699        532
                                                 --------    --------   --------
   Diluted weighted average shares outstanding     13,879      21,038     21,828
                                                 ========    ========   ========
   Diluted earnings per common share             $   0.53    $   0.89   $   1.05
                                                 ========    ========   ========

Options to purchase 617,550 shares of common stock at prices between $9.06 and
$16.75 per share which were outstanding at December 31, 1999 have been excluded
from the calculation of diluted earnings per share for the year ended December
31, 1999 because their effect would be anti-dilutive. Options to purchase
303,050 shares of common stock at prices between $14.06 and $16.75 per share
which were outstanding at December 31, 1998 have been excluded from the
calculation of diluted earnings per share for the year ended December 31, 1998
because their effect would be anti-dilutive.

                                      F-21
<PAGE>

17.      SUPPLEMENTAL CASH FLOW INFORMATION

The following supplemental information presents the non-cash impact on the
balance sheet of assets acquired and liabilities assumed in connection with
acquisitions consummated during the years ended December 31, 1998 and 1999:

<TABLE>
<CAPTION>
                                                                       YEARS ENDED DECEMBER 31,
                                                                       ------------------------
                                                                           1998        1999
                                                                         --------    --------
<S>                                                                      <C>         <C>
Assets acquired                                                          $ 82,418    $ 72,174
Liabilities assumed                                                       (13,089)    (19,693)
Common stock issued                                                       (13,996)     (3,149)
                                                                         --------    --------
Cash paid for acquisitions                                                 55,333      49,332
Less cash acquired                                                           (789)     (1,541)
                                                                         --------    --------
     Net cash paid for acquisitions                                        54,544      47,791
Costs related to completed and pending acquisitions                         3,767       1,438
                                                                         --------    --------
Cash paid for acquisitions and acquisition costs, net of cash acquired   $ 58,311    $ 49,229
                                                                         ========    ========
</TABLE>

18.      NONRECURRING CHARGE

In May 1997, the Company withdrew its registration statement filed with the
Securities and Exchange Commission and postponed its planned initial public
offering of common stock. During the year ended December 31, 1997, the Company
recorded a nonrecurring charge of $1,289, primarily professional fees and
printing costs, which represented offering costs incurred prior to the
postponement that did not have continuing benefit after the postponement.

19.      PREFERRED SHARE PURCHASE RIGHTS PLAN

On April 8, 1999, the Board of Directors of the Company adopted a Preferred
Share Purchase Rights Plan (the "Rights Plan") and, in connection therewith,
declared a dividend distribution of one preferred share purchase right ("Right")
on each outstanding share of the Company's common stock to shareholders of
record at the close of business on April 19, 1999. The Rights will expire on
April 8, 2009. The adoption of the Rights Plan and the distribution of the
Rights is not dilutive, does not affect reported earnings per share, and is not
taxable to shareholders.

Subject to the terms of the Rights Plan, each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of the
Company's Series A Junior Participating Preferred Stock (the "Preferred
Shares"). Each Right has an initial exercise price of $45.00 for one
one-thousandth of a Preferred Share (subject to adjustment). The Rights will be
exercisable only if a person or group acquires 15% or more of the Company's
common stock or announces a tender or exchange offer the consummation of which
would result in ownership by a person or group of 15% or more of the common
stock. Upon any such occurrence, each Right will entitle its holder (other than
such person or group of affiliated or associated persons) to purchase, at the
Right's then current exercise price, a number of the Company's common shares
having a market value of twice such price.

20.      SUBSEQUENT EVENTS

CONTINGENT NOTE PAYMENTS -- Subsequent to December 31, 1999, the Company paid
approximately $9,081 on contingent notes issued in connection with acquisitions.

                                      F-22
<PAGE>

21.      QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table presents certain unaudited quarterly financial data for each
of the quarters in the years ended December 31, 1998 and 1999. This information
has been prepared on the same basis as the Consolidated Financial Statements and
includes, in the opinion of the Company, all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly the quarterly results
when read in conjunction with the Consolidated Financial Statements and related
Notes thereto. The operating results for any quarter are not necessarily
indicative of results for any future period or for the full year.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                          1998 CALENDAR QUARTERS                     1999 CALENDAR QUARTERS
                                          ----------------------                     ----------------------
                                       FIRST      SECOND     THIRD      FOURTH     FIRST     SECOND      THIRD      FOURTH
                                      --------   --------   --------   --------   --------   --------   --------   --------
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>        <C>        <C>
Net revenue                           $ 37,991   $ 40,826   $ 47,005   $ 51,482   $ 52,336   $ 55,406   $ 59,866   $ 65,145
                                      --------   --------   --------   --------   --------   --------   --------   --------
Operating costs:
   Cost of services                     17,188     18,024     20,677     22,571     23,747     24,912     27,931     31,587
   Selling, general and
     administrative expense              6,190      6,598      8,093      8,850      8,785      8,941      9,790     10,074
   Provision for  doubtful accounts      3,932      4,112      4,843      5,811      5,963      6,578      6,005      6,716
   Amortization expense                  2,051      2,274      2,507      2,629      2,684      2,845      3,317      3,607
                                      --------   --------   --------   --------   --------   --------   --------   --------
        Total                           29,361     31,008     36,120     39,861     41,179     43,276     47,043     51,984
                                      --------   --------   --------   --------   --------   --------   --------   --------
Income from operations                   8,630      9,818     10,885     11,621     11,157     12,130     12,823     13,161
Interest expense                        (1,820)    (1,929)    (2,167)    (2,285)    (1,922)    (2,118)    (2,528)    (2,731)
Other income (expense), net                 13        (49)        83        (37)         6         (1)        50         59
                                      --------   --------   --------   --------   --------   --------   --------   --------
Income before income taxes               6,823      7,840      8,801      9,299      9,241     10,011     10,345     10,489
Provision for income taxes               3,036      3,342      3,793      3,953      3,974      4,304      4,448      4,391
                                      --------   --------   --------   --------   --------   --------   --------   --------
Net income                            $  3,787   $  4,498   $  5,008   $  5,346   $  5,267   $  5,707   $  5,897   $  6,098
                                      ========   ========   ========   ========   ========   ========   ========   ========
Per share data:
   Basic earnings per common share    $    .19   $    .23   $    .24   $    .26   $    .25   $    .27   $    .28   $    .28
                                      ========   ========   ========   ========   ========   ========   ========   ========
   Diluted earnings per common share  $    .19   $    .22   $    .23   $    .25   $    .24   $    .26   $    .27   $    .28
                                      ========   ========   ========   ========   ========   ========   ========   ========
</TABLE>

Certain reclassifications have been made to the quarterly consolidated
statements of operations to conform to the annual presentations.

                                      F-23
<PAGE>

AMERIPATH, INC. AND SUBSIDIARIES

SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   CHARGED TO                 WRITE-OFFS
                                                   STATEMENT        OTHER        AND
                                       BEGINNING       OF         INCREASES     OTHER        ENDING
            DESCRIPTION                 BALANCE    OPERATIONS        (1)      ADJUSTMENTS    BALANCE
            -----------                 -------    ----------        ---      -----------    -------
<S>                                     <C>           <C>          <C>         <C>           <C>
Year ended December 31, 1997:
Allowances for contractual, other
   adjustments and uncollectible
   accounts                             $16,150       $51,184      $ 9,331     $(50,142)     $26,523
                                        =======       =======      =======     ========      =======
Year ended December 31, 1998:
Allowances for contractual, other
   adjustments and uncollectible
   accounts                             $26,523       $99,362      $14,852     $(97,089)     $43,648
                                        =======       =======      =======     ========      =======
Year ended December 31, 1999:
Allowances for contractual, other
   adjustments and uncollectible
   accounts                             $43,648      $153,388      $12,103    $(154,130)     $55,009
                                        =======      ========      =======    ==========     =======
</TABLE>

---------------

(1)     Represents the allowances for contractual, other adjustments and
        uncollectible accounts related to the 1997, 1998, and 1999 acquisitions.

                                       S-1
<PAGE>

                                  EXHIBIT INDEX

 EXHIBIT NO.                          DESCRIPTION
 -----------                          -----------

   10.43      Amended and Restated Credit Agreement dated as of December
              16,1999, among AmeriPath, Inc., certain of its subsidiaries,
              BankBoston N.A. and certain other lenders

   21.1       Subsidiaries of AmeriPath

   23.2       Independent Auditors' Consent of Deloitte & Touche LLP

   27.1       Financial Data Schedule for 12 months ended December 31, 1999