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SECURITIESAND EXCHANGE COMMISSION

WASHINGTON,D.C.  20549

**_____________________________________________________**

**FORM10-K**

**[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIES EXCHANGE ACT OF 1934**

**______________________________________________________**

**For theFiscal Year Ended December 31, 2001**

**Commission File Number 0-8640**

**SYNCORINTERNATIONAL CORPORATION**

(Exact nameof registrant as specified in its charter)
| **Delaware**                                      |  | **85-0229124**      |
|---------------------------------------------------|--|---------------------|
| (State orother jurisdiction of                    |  | (I.R.S.Employer     |
| incorporation or organization)                    |  | Identification No.) |
|                                         |  |                     |
| **6464Canoga Avenue, Woodland Hills, California** |  | **91367-2407**      |
| (Address ofprincipal executive offices)           |  | (ZipCode)           |

**(818)737-4000**(Registrant’s telephone number,including area code)

Securitiesregistered pursuant to Section 12(b) of the Act: None

Securitiesregistered pursuant to Section 12(g) of the Act:

**COMMONSTOCK $.05 PAR VALUE**(Title of Class)

Indicate by check markwhether the Registrant (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. YesÖ   No     

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of RegulationsS-K (§ 229.405 of this chapter) is not contained herein, andwill not be contained, to the best of registrant’s knowledge,in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment to thisForm 10-K.     

The aggregate market valueof the voting stock held by non-affiliates of the Registrant,computed by reference to the average closing bid and asked pricesof such stock on March 25, 2002, was $613,263,495.  Forpurposes of the foregoing calculation, each executive officer anddirector of Registrant was deemed an “affiliate” ofRegistrant. The number of shares outstanding (excluding treasuryshares) of the Registrant’s $0.05 par value common stock asof March 25, 2002 was 24,756,517 shares.

                                                         **DOCUMENTS INCORPORATED BY REFERENCE**

Portions ofRegistrant’s definitive Proxy Statement forRegistrant’s Annual Meeting of Stockholders to be held onJune 17, 2002, are incorporated by reference into Part III of thisreport.

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                                                            **SYNCOR INTERNATIONAL CORPORATION**

**                                                                                 TABLE OF CONTENTS**

**                                                                          FORM 10-K ANNUAL REPORT**

**                                                                                     December 31, 2001**

  
| **PART I**   |       |                                                           |       |     |
|--------------|--------------------------------|-----------------------------------------------------------|--------------------------------|-----|
|              |                                |                                                           |                                |     |
| Item 1.      |                                | BUSINESS                                                  |                                | 1   |
|              |                                |                                                           |                                |     |
| Item 2.      |                                | PROPERTIES                                                |                                | 19  |
|              |                                |                                                           |                                |     |
| Item 3.      |                                | LEGALPROCEEDINGS                                          |                                | 19  |
|              |                                |                                                           |                                |     |
| Item 4.      |                                | SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS        |                                | N/A |
|    |                                |                                                           |                                |     |
| **PART II**  |                                |                                                           |                                |     |
|              |                                |                                                           |                                |     |
| Item 5.      |                                | MARKET FORREGISTRANT’S COMMON EQUITY AND RELATED    |                                |     |
|              |                                | STOCKHOLDERMATTERS                                        |                                | 20  |
|              |                                |                                                           |                                |     |
| Item 6.      |                                | SELECTED FINANCIALDATA                                    |                                | 20  |
|              |                                |                                                           |                                |     |
| Item 7.      |                                | MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL    |                                |     |
|              |                                | CONDITION AND RESULTS OFOPERATIONS                        |                                | 22  |
|              |                                |                                                           |                                |     |
| Item 7A.     |                                | QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK |                                | 31  |
|              |                                |                                                           |                                |     |
| Item 8.      |                                | FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA                |                                | 32  |
|              |                                |                                                           |                                |     |
| Item 9.      |                                | CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON           |                                |     |
|              |                                | ACCOUNTING AND FINANCIALDISCLOSURE                        |                                | N/A |
|    |                                |                                                           |                                |     |
| **PARTIII**  |                                |                                                           |                                |     |
|              |                                |                                                           |                                |     |
| Item 10.     |                                | DIRECTORS AND EXECUTIVEOFFICERS OF THE REGISTRANT         |                                | 33  |
|              |                                |                                                           |                                |     |
| Item 11.     |                                | EXECUTIVECOMPENSATION                                     |                                | 33  |
|              |                                |                                                           |                                |     |
| Item 12.     |                                | SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND        |                                |     |
|              |                                | MANAGEMENT                                                |                                | 33  |
|              |                                |                                                           |                                |     |
| Item 13.     |                                | CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS             |                                | 33  |
|    |                                |                                                           |                                |     |
| **PARTIV**   |                                |                                                           |                                |     |
|              |                                |                                                           |                                |     |
| Item 14.     |                                | EXHIBITS, FINANCIALSTATEMENT SCHEDULES, AND REPORTS       |                                |     |
|              |                                | ON FORM 8-K                                               |                                | 34  |

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**PARTI**

**Item1.     BUSINESS.**

**Overview**

We are a provider ofspecialty services and products used in the diagnosis, treatmentand management of heart disease, cancer and other disorders. We are the nation’s leading provider of radiopharmacyservices and a leading provider of outpatient medical imagingservices. 

***               Radiopharmacy Business***

Our 130 domesticradiopharmacies serve hospitals, medical clinics and medicalimaging centers in 48 states and supply more than 50% of theU.S. market for these specialized services.  We also own oroperate 19 radiopharmacies in 13 foreign countries and in PuertoRico.  Our radiopharmacies compound, dispense and distributepatient-specific radiopharmaceutical prescriptions, or unit doses,used in nuclear diagnostic imaging procedures.  We alsodistribute radiopharmaceuticals in bulk formanufacturers. 

A radiopharmaceutical is aradioactive compound formed by combining precise amounts ofradioactive materials with targeting compounds that concentrate inspecific human organs or tissues.  Radiopharmaceuticals, likeother pharmaceuticals, are prescribed by physicians based on theirpatients’ specific needs.  When administered to thepatient, the radiopharmaceutical can be detected with the use ofspecialized medical imaging equipment. Radiopharmaceutical nuclearimaging procedures are used by physicians primarily to detectirregularities in organ tissue or function in order to diagnoseheart disease, cancer and other disorders. Radiopharmaceuticals are also used in some cases to treat, manageand monitor disease.

The most common use ofnuclear imaging procedures is for the diagnosis of heartdisease.  We distribute Cardiolite®, made by Bristol-MyersSquibb, through a long-standing agreement that we originally hadwith DuPont Pharmaceuticals until it was acquired byBristol-Myers.  We have been instrumental in makingCardiolite® the best-selling cardiology imaging agent in theU.S.  We distribute Cardiolite® on an exclusive basiswithin specified geographic areas under our agreement withBristol-Myers. 

In addition, we haverecently undertaken new initiatives to produce and distribute othercomplex pharmaceuticals and products used in diagnosing andtreating disease and other health problems.  Complexpharmaceuticals are products that have challenging storage orhandling requirements, may require patient specific compounding orultra-precise dispensing accuracy, may require rapid response tocritical conditions or, due to its cost or limited availability,may require a stockless approach to inventory management. These products include F-18 Fluorodeoxyglucose, or FDG, andXigrisTM, which is manufactured by Eli Lilly andCompany.  We produce and distribute FDG, the most commonlyused radiopharmaceutical in positron emission tomography (PET), ahighly sensitive imaging technology used to diagnose cancer andmanage cancer therapies.  We have a strategic partnership withEli Lilly to be their exclusive rapid response provider of Xigris,a biotechnology compound used to treat severe sepsis, alife-threatening condition if not treated immediately.

***               Medical Imaging Business***

We also are a leadingindependent provider of outpatient medical imaging services. Our 65 outpatient medical imaging centers are organized in clusterslocated primarily in Arizona, California, Florida and Texas. We also own or operate 19 medical imaging centers in five foreigncountries and Puerto Rico.  Medical imaging services areprincipally noninvasive procedures that generate representations ofinternal anatomy and convert them to film or digital media to aidin the detection and diagnosis of diseases and otherdisorders.  By concentrating centers in targeted markets, weoffer managed care organizations and other third-party payors afull complement of medical imaging services, including magneticresonance imaging, or MRI, computed tomography, or CT, traditionalX-ray, mammography, ultrasound and fluoroscopy imaging, as well asPET imaging services. 

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**Industries**

***               Radiopharmacy Services Industry***

Radiopharmaceuticals havea short shelf-life, because they utilize radioactive materials thatcontinuously decay.  Through the late 1970s, hospitalstypically operated their own on-site radiopharmacies thatcompounded radiopharmaceuticals as needed for each hospital'simaging needs, which was believed to be the only viable means ofhaving these time-sensitive products available for procedures whenneeded.  In 1974, we pioneered the concept of outsourcingunit-dose radiopharmacy services.  Our outsourcing approachhas been widely adopted because it lowers hospital inventory andother costs and expenses and enhances physician service andsupport.  Today, nearly 90% of radiopharmaceutical unit dosesare compounded off-site.

As the U.S. population hasincreased and life expectancies have continued to increase, thedemand for radiopharmacy services also has increased, particularlyin the areas of cardiology and oncology.  Although used formany imaging procedures, the most common use forradiopharmaceuticals is for cardiology imaging procedures. These procedures are very effective in revealing the size, shapeand other structural characteristics of the heart and other humantissues and have gained widespread clinical acceptance as importanttools in detecting and diagnosing certain heart problems.  Asthe benefits of preventative medicine are becoming more widespread,we believe that cancer-related radiopharmaceutical imagingprocedures and therapies also are gaining wideracceptance. 

Approximately 12 millionradiopharmaceutical imaging procedures were performed in the U.S.in 2001, including more than 150,000 PET imaging procedures. In 2001, the U.S. market for all radiopharmacy services wasapproximately $1.12 billion, of which about 66% related to heartimaging procedures and 11.5% related to cancer imagingprocedures.  From 1994 through 2001, radiopharmacy servicesexpenditures have grown at an estimated compounded annual growthrate of 10%, and we anticipate that the U.S. market forradiopharmacy services will continue to grow due, in part, to agingpopulation demographics and demand for less invasive methods ofdiagnosis and treatment.

We believe that advancesin medical imaging technology and new applications for nuclearimaging procedures also will contribute to increased demand forradiopharmacy services.  For example, PET imaging can revealfunction, or metabolism, at the cellular level, whichdifferentiates it from other imaging procedures such as MRI and CTimaging, which primarily demonstrate structure, or anatomy. PET is a clinically proven, safe method for the imaging of anincreasing number of diseases and disorders, including coloncancer, lung cancer, breast cancer, lymphoma, brain cancer, heartdisease and neurological disorders such as Alzheimer’sDisease.  PET imaging can be used to visualize rapidly growingtumors, to determine tumor response to radiation or chemotherapy,to diagnose recurrence of tumor growth after surgical removal, todecide the best location for a biopsy of a suspected tumor and todifferentiate harmless scarring, or radiation necrosis, from newtumor growth.  PET imaging also is a useful tool fordetermining whether exploratory surgery, radiation therapy, organtransplantation or other procedures may be necessary.

***               Medical Imaging Services Industry***

Medical imaging servicesare principally non-invasive procedures that generaterepresentations of internal anatomy and convert them to film ordigital media for viewing.  Film is transmitted bycomputer.  Medical imaging facilitates the early detection anddiagnosis of diseases and other disorders, helping to minimize thecost and amount of care required and reducing the need for morecostly, invasive diagnostic procedures

There are several types ofmedical imaging services, or modalities, including:

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| *                           * | *Magnetic resonanceimaging (MRI)*– MRI useshigh-strength magnetic fields to produce computer-processed imagesof the body.  MRI offers excellent image quality, and in manycases is the preferred means of imaging tissues and organs such asthe brain, spinal cord and other internal anatomy.                                                                                                                                       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *Computed tomography(CT) imaging*– CT imaging usescomputer analysis of information generated by an X-ray beam toproduce multiple images of a particular organ or area of thebody.  CT imaging is used to detect tumors and otherconditions affecting bones and internal organs.                                                                                                                                                      |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *NuclearImaging*– Nuclear imaging usesspecial equipment, most commonly a gamma camera, to detect gammarays that concentrate in a particular organ or part of thebody.  Nuclear imaging is an effective tool for the earlydiagnosis of heart disease, thyroid disease tumors, bone changesand other conditions.                                                                                                                       |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *Positron emissiontomography (PET) imaging*– PET is anuclear medicine imaging technique that uses radiopharmaceuticalswith shelf-lives that are extremely short.  FDG is the mostcommonly used PET isotope.  PET imaging demonstrates function,or metabolism, at the cellular level, which differentiates it fromother medical imaging procedures such as MRI or CT imaging, whichprimarily demonstrates structure, or anatomy. |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *X-ray–*X-ray uses electromagneticradiation to penetrate the body to form an image on film. Conventional X-ray is used to study soft tissue andbone.                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *Mammography–*Mammography uses a low-dose X-rayof the breast tissue that allows detection of tumors andcysts.                                                                                                                                                                                                                                                                                                                             |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| *                           * | *Ultrasound–*Ultrasound uses high frequencysound waves that are sent out into the body.  The reflected"echoes" create an image from inside the body.  Ultrasound isused on internal organs and, most commonly, fetuses.                                                                                                                                                                                                         |
|                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                               | *Fluoroscopy–*Fluoroscopy uses an enhanced X-rayto study organs, typically in the digestive tract. Fluoroscopy differs from conventional X-ray in that it enables theradiologist to see "live" images of body functions, such as thedigestive system at work on a monitor rather than on a stillfilm.                                                                                                                                |

Total annual spending formedical imaging services in the U.S. for 2001 was estimated at$66 billion.  Demand for all medical imaging services inthe U.S. has increased approximately 8% per year over the past fiveyears primarily due to:

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*****             aging of the general population;

*****             more active lifestyles, resulting in an increase in incidence ofinjuries;

*****             advances in medical imaging equipment and technology;

*****             physician acceptance of advanced medical imagingprocedures;

*****             development of new applications for existing medical imagingtechnologies;

*****             expanded reimbursement for advanced medical imaging procedures;and

*****             a wider acceptance of the benefits of preventativemedicine.

Medical imaging procedurestypically are performed in hospitals, medical clinics,free-standing outpatient medical imaging centers and mobile medicalimaging centers.  Most hospitals and medical clinics own andoperate their own medical imaging systems within their facilitiesto serve their own patients.  These hospitals or clinics billtheir patients’ third-party payors, such as health insurers,Medicare or Medicaid, for the imaging services.

Free-standing outpatientmedical imaging centers, like the imaging centers we own andoperate, are located in permanent facilities outside of hospitalsor medical clinics.  Free-standing centers depend primarily onphysician referrals for patients.  They generally do notcontract with hospitals or medical clinics, and may compete withlocal hospitals and medical clinics in the provision of medicalimaging services.  Like hospitals and medical clinics,independently owned and operated outpatient medical imaging centersbill their patients or third-party payors for their services. The ownership of outpatient medical imaging centers in the U.S. ishighly fragmented, with more than 4,100 independent outpatientcenters nationwide.

**CompetitiveStrengths**

We believe the competitivestrengths of our business include:

***               Market Leadership***

We own and operate 130radiopharmacies nationwide, or more radiopharmacies than our threelargest competitors combined.  Our radiopharmacies can deliverradiopharmaceuticals within 90 minutes to hospitals, medicalclinics and medical imaging centers that perform more than 90% ofall radiopharmaceutical imaging procedures performed in the U.S. in2002.  Radiopharmaceuticals are time-sensitive, withhalf-lives ranging from 110 minutes to eight days, with themajority of the radiopharmaceuticals we dispense having a half lifeof six hours.  Accordingly, our proximity to our customers isone of our principal strengths. 

Our established nationaldistribution channels have enabled us to establish exclusiverelationships with leading companies who seek a nationaldistribution channel.  We are the exclusive distributor ofBristol-Myers' Cardiolite® in specified geographic areassurrounding most of our U.S. radiopharmacies.  Cardiolite®has become the best-selling cardiac imaging agent in the U.S. sincewe began distributing it.  We also recently entered into anexclusive arrangement with Eli Lilly to distribute its Xigrisproduct on an emergency basis nationwide.  Xigris is a complexbiotechnology compound for treating severe sepsis, alife-threatening condition if not treated immediately.  Weoffer Eli Lilly the unique ability to distribute Xigris withinthree hours to most hospitals nationwide. 

Our medical imagingcenters are organized in local clusters within targetedregions.  Regional critical mass results in cost efficienciesfrom higher equipment utilization and lower overhead costs andstaffing expenses.  Our significant regional presence alsoallows us to attract and contract with leading radiologists andnegotiate favorable relationships with third-party payors in theregion.

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***               Superior Service***

Our radiopharmaciesoperate under a single set of business processes and informationsystems that enable us to provide prompt, reliable service, rapidlyimplement new services and products and provide valuableinformation on product usage to manufacturers and othersuppliers.  We can receive and process customer orders anddeliver patient-specific unit doses 24 hours a day, 7 days aweek.  This enables our customers to obtain the correct dosesat the right time in order to effectively scheduleradiopharmaceutical imaging procedures.  In 2001, wecompounded and dispensed more than approximately 7 million unitdoses with a reported dispensing error rate of approximately1/100,000.  We also remove and dispose of the contaminatedsyringes containing radioactive materials from our customersites.  Our tracking systems allow our customers to meetgovernmental reporting requirements.

The local clustering ofour medical imaging centers allows us to offer a range of medicalimaging modalities and services, greater flexibility of scheduling,timely and accurate diagnoses, and the ability to establish andmaintain relationships with referring physicians.

***               Broad Range of Services and Products***

We offer more than 50brand name and generic radiopharmaceuticals.  We are applyingour strengths developed in the marketing and distribution ofCardiolite® to position ourselves to become a major provider ofPET radiopharmaceuticals, brachytherapy seeds and othertime-sensitive, complex pharmaceutical products, such as Xigris,where we believe there are other marketing opportunities. InFebruary 2002, we entered into an agreement with IDECPharmaceuticals Corporation to distribute Zevalin, a novelradioimmunotherapy recently approved by the US Food and DrugAdministration for the treatment of certain Non-Hodgkin'sLymphomas.  We believe that our leading market share andproven ability to enhance product brands will help to assure ouraccess to new radiopharmaceuticals and other products suitable forrapid distribution through our nationwide radiopharmacynetwork.

Local clustering of ourmedical imaging centers allows us to provide convenient schedulingand a full range of medical imaging services within a localizedmarket in a cost-effective manner, because each center is notrequired to offer each type of imaging service.  Further,local clusters of imaging centers facilitate our relationships withreferring physicians because we can serve their patients morequickly and efficiently.

***               Innovation and Product Safety***

We have a long history ofproviding innovative solutions to our customers’ needs withservices and products that enhance the safety and performance ofthe products we distribute.  We pioneered the concept ofoutsourcing radiopharmacy services in 1974.  Our radiopharmacyinnovations also include our patented tungsten radiopharmaceuticaldelivery systems, commonly known as “Pigs,” and ourSECURE® Safety Insert Systems, which set new standards for thesafe handling and delivery of radiopharmaceuticals and ease of usein compliance with rigorous regulations governing ourindustry.

***               Integrated Information Technology and CustomerSupport***

We have developed a numberof proprietary information system technologies, includingSYNtracTM, Unit Dose ManagerTM and NucLinkTM, toassist our customers in the management of their nuclear medicinedepartments and radiopharmaceutical inventories, to make thecalculation of patient-specific radiopharmaceutical prescriptionseasier, and to facilitate electronic communication with our localradiopharmacies.  These systems are used by more than 1,600 ofour radiopharmacy customers to meet the extensive record-keepingand other regulatory requirements applicable to theirbusinesses.  We believe that gaining access to SYNtrac andother systems and our logistics management skills is an importantfactor in many customers’ decisions to enter into multi-yearprimary supplier agreements with us.

**RadiopharmacyBusiness**

Our radiopharmaciesprimarily compound, dispense and distribute patient-specificradiopharmaceutical prescriptions, or unit doses, used in nucleardiagnostic imaging procedures.  Our radiopharmacy customerstypically order individual patient prescriptions forradiopharmaceutical unit doses by telephone or via a directcomputer link-up with our radiopharmacies.  As we receiveprescriptions, we schedule them for compounding, dispensing anddelivery to the customer.  Compounding of unit doses involvesmixing a radioactive isotope, which is constantly

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decaying, with theappropriate pharmaceutical.  Our radiopharmacists calculatethe precise amount of radioisotope that will deliver the correctdosage at the scheduled time of use, taking into account the rateof decay.  Unit doses are typically drawn from a vial into asyringe for transportation and administration.  Because theradioisotopes used in radiopharmaceuticals emit radiation, theymust be stored and delivered in specialized containers.  Wehave developed proprietary, OSHA-compliant, radiopharmaceuticaldelivery systems, including our SECURE® Safety Insert Systemsand our line of tungsten containers, commonly known as "Pigs," thatallow for the safe transport and handling of radioactive substancesand reduced radiation exposure to our radiopharmacy personnel andcustomers.

Once theradiopharmaceutical unit dose is prepared, we coordinate thedelivery of the unit dose directly to the customer’s point ofuse through our staff of 862 customer service assistants and fleetof more than 800 delivery vehicles nationwide.  Mostdeliveries are made next-day, within one to six hours before thescheduled imaging procedure.  Because the radioisotope isconstantly decaying, reliable and timely delivery isessential.  Our 130 radiopharmacies nationwide can deliverradiopharmaceuticals within 90 minutes to hospitals, medicalcenters and medical imaging centers that performed more than 90% ofall radiopharmaceutical imaging procedures performed in the U.S. in2001.  This enables us to process prescription orders forscheduled radiopharmaceutical patient imaging procedures in atimely and cost effective manner and to provide unscheduledemergency services. 

After theradiopharmaceutical has been administered to the patient, thesyringe is placed back into the same container in which wedelivered it to be picked up and returned to our radiopharmacy byour customer service assistants.  We take responsibility fordisposing of the used syringe and maintaining appropriate recordsthat the product was compounded, delivered and disposed of inaccordance with the myriad of regulations covering the use,handling and disposal of radioactive materials.

***               Services and Products***

We compound, dispense anddistribute unit-dose radiopharmaceuticals made by a number ofmanufacturers. We also distribute radiopharmaceuticals in bulk tohospitals and other customers that compound and dispense theproduct themselves.

Our primary products arecardiology imaging agents used in diagnosing heart problems. In 2001, sales of Cardiolite® represented an estimated 58% ofsales of all cardiac imaging agents in the U.S. and 41.2% of ourtotal sales.

We act as the primarydistributor of Cardiolite, as well as a distributor ofBristol-Myers' other radiopharmaceutical products, under the termsof a supply and distribution agreement with Bristol-Myers. Under the terms of the agreement, we have exclusive rights todistribute Cardiolite within specified geographic areas surroundingmost of our existing U.S. radiopharmacies.  Our exclusiverights to distribute Cardiolite also extend to new radiopharmaciesthat we may develop or acquire in local markets where Bristol-Myershas no preexisting distribution arrangement.  In othermarkets, and in areas outside of the specified areas surroundingour radiopharmacies, our rights to distribute Cardiolite arenonexclusive.  Our rights to distribute other Bristol-Myersproducts, including Thallium, also arenonexclusive. 

Our other principalradiopharmacy products include Thallium, a generic cardiac imagingagent, which accounted for 6.3% of our net sales in 2001.  Noother product constitutes more than 1.4% of our netsales.

We also produce FDG, whichwe distribute through our network of radiopharmacies.  FDG isthe most commonly used radioisotope in PETradiopharmaceuticals.  When administered intravenously, FDGcan reveal how certain organs and tissues are functioning bymeasuring glucose metabolism.  It is widely used to studyorgan and tissue functions in neurology, cardiology andoncology.  FDG is produced in cyclotrons and has a half-lifeof only 110 minutes.  In order to effectively provide PETradiopharmaceuticals, it is essential to have adequate supplies ofFDG in proximity to the radiopharmacy where the PETradiopharmaceutical is to be compounded and dispensed.  Toensure an adequate supply of FDG, we have built or acquired 8cyclotron facilities in key markets and have entered intoarrangements with several local universities and other cyclotronowners and operators to supply us with this critical component ofPET radiopharmaceuticals in other markets.

We also produce anddistribute Iodine-123 capsules.  Iodine-123 is aradiopharmaceutical used to diagnose and treat thyroiddisorders.  We manufacture Iodine-123 capsules at our Golden,Colorado facility.  Our radiopharmacies also distributeIodine-125 brachytherapy seeds, which are used to treat prostatecancer.  We manufactured our own line of Iodine-125brachytherapy seeds until February 2002, when we discontinuedproduction of the seeds.  We are currently evaluating whetheror not to re-start the manufacture of seeds.

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We have other businessesthat complement our radiopharmacy services business.  Weprovide radiology technical staff on a temporary or full-time basisto hospitals, radiology clinics, nuclear cardiology clinics andphysician offices in over thirty markets nationwide.  OnAugust 1, 2001, we acquired Inovision Radiation Measurements, LLCand its affiliate, Victoreen, LLC, both of which now operate asSyncor Radiation Management, LLC.  As a result of theacquisition, we now manufacture and supply radiation measurementequipment and related accessories used by nuclear medicinedepartments, radiopharmacies and other businesses that handleradioactive materials.  On August 31, 2001, we acquiredInteCardia, Inc., a provider of cardiovascular services through theoperation of a state-of-the-art cardiac diagnostic facility thatoffers outpatient cardiac catheterization, nuclear cardiology andechocardiography.  InteCardia also offers nuclear cardiologygroups with full turnkey services, including the provision ofimaging and cardiac stress equipment and nuclear medicinetechnologists. 

***               Proprietary Systems and Technologies***

In 1994, we introduced theSECURE® Safety Insert System, which is designed to eliminatethe potential for contamination of lead-lined or tungstenradiopharmaceutical containers with radioactive material or theblood from used radiopharmaceutical syringes.  With oursystem, the risk of needle sticks also is reduced significantly. Webelieve that our patented SECURE® Safety Insert System is theonly system currently available that meets new, more stringent OSHAindustry standards that went into effect in July 2001.  Wealso have patent rights to a family of tungsten radiopharmaceuticaldelivery systems that we refer to as the “Pigs.” The Pigs are radiopharmaceutical containers that are smaller andweigh considerably less than traditional containers used totransport radiopharmaceuticals and set new industry standards forthe safe transport and handling of radiopharmaceuticals, includingFDG.  Our tungsten containers also provide enhanced radiationshielding compared to lead-lined delivery systems typically used byour competitors, resulting in a reduction in radiation exposure toour pharmacy personnel and customers.

We also license to ourcustomers our proprietary Windows-based SYNtrac, Unit Dose Managerand NucLink integrated software and hardware systems to assist themin the management of their nuclear medicine departments and tofacilitate electronic communication with our radiopharmacies. As of December 31, 2001, we licensed our software systems to morethan 1,600 of our radiopharmacy customers.

***               Customers***

We provide radiopharmacyservices and products to hospitals, medical centers and medicalimaging clinics in 48 states in the U.S., Puerto Rico and 13foreign countries.  Our principal radiopharmacy servicecustomers are:

           *****         corporate account customers such as group purchasing organizations,or GPOs;

           *****         local independent hospitals and medical clinics; and

           *****         community-based, multiple-facility integrated healthcare networks,or IHNs.

Corporate accountcustomers, either GPOs or proprietary multi-hospital groups,negotiate contracts on behalf of IHNs, independent hospitals, andclinics.  These contracts are multi-year contracts, althoughcertain contracts have clauses that permit the GPO ormulti-hospital group to cancel the contract if certain conditionsoccur. We estimated that we have 1,165 customers committed under anational or regional contract. Sales to members or affiliates ofour corporate account customers were approximately $225 million in2001, representing nearly 29% of our net sales, compared toapproximately $187 million, or nearly 30% of our net sales in2000.  Our largest corporate account customers includeAmeriNet  Inc. and Health Trust Purchasing Group (formerlyColumbia/HCA).  In 2001, sales to AmeriNet and Health Trustrepresented 10% and 6%, respectively, of our net sales.  Noother corporate account customer accounts for as much as 5% of ournet sales.

We also have customersthat are affiliated with GPOs that do not have contracts withus.  Sales to these customers were approximately $191 millionin 2001, representing nearly 25% of our net sales, compared toapproximately $168 million, or 26.8% of our net sales in2000.  No customers in this sales category accounted for asmuch as 5% of our net sales.

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Despite the fact that themajority of IHN’s and hospitals hold membership or areaffiliated with a GPO or proprietary multi-hospital group, someIHN’s and local independent hospitals choose not toparticipate in a national agreement.  Our sales to thesecustomers were approximately $133 million in 2001, representingnearly 17.2% of our net sales.  This compares to $104 million,representing 16.5% of our net sales, in 2000.  No localindependent hospital or clinic accounted for as much as 5% of ournet sales.

***               Sales and Marketing***

We market and sell ourradiopharmacy services and products and services in the U.S.directly through a dedicated sales force of more than 100 nationaland regional sales and marketing personnel.  Our sales andmarketing personnel are responsible for developing and managingcustomer relationships and for communicating the benefits ofworking with Syncor.  To maintain a highly effective localpresence, our field sales force works closely with localradiopharmacy managers to ensure that our customers’expectations are met on a daily basis.  We also haveindividuals dedicated to targeting and managing contracts withmulti-hospital groups, including GPOs, proprietary hospitalsystems, and multi-hospital alliances.  In addition, we have aspecialty sales team designed to increase our sales in new areasseparate from traditional nuclear medicine, such as brachytherapyand PET. 

We also rely indirectly onthe sales and marketing efforts by manufacturers of theradiopharmaceuticals we distribute.  For example, our salesand marketing force works closely with Bristol-Myers’ salesand marketing personnel to make joint sales calls, preparemarketing and sales materials and educate customers regarding theBristol-Myers products we distribute. 

***               Distribution***

We have a nationwidedistribution network consisting of a national distribution centerin Toledo, Ohio, and three regional distribution centers.  Ournational distribution center maintains a central warehouse ofcritical supplies in order to facilitate bulk-purchasing andminimize warehousing and inventory requirements at ourradiopharmacies.

***               Competition***

Our radiopharmacies in theU.S. compete for both unit-dose sales, which account for 90% of theU.S. market, and sales of bulk products, which account for theremaining 10%.  We compete on a national level withradiopharmaceutical manufacturers that operate their ownradiopharmacies, including Amersham, PLC and MallinckrodtInc.  We also compete with Central Pharmacy Services, Inc., anationwide owner and operator of radiopharmacies.  We alsocompete in local markets across the U.S. with independentradiopharmacies and universities that own and operate their ownradiopharmacies.

The key competitivefactors affecting our radiopharmacy services businessare:

           *****         speed and reliability of radiopharmacy services;

           *****         safety of radiopharmaceutical delivery systems;

           *****         geographic scope of operations;

           *****         range of radiopharmaceuticals and other productsoffered;

           *****         integration of order and delivery functions with customers’operations; and

           *****         record keeping and regulatory compliance.

Our PETradiopharmaceuticals compete with PET radiopharmaceuticals producedand distributed by PETNet Radiopharmaceutical Services, Inc.,Mobile P.E.T. Systems, Inc. and Eastern Isotopes.

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**Medical ImagingBusiness**

We own or operate 65free-standing outpatient medical imaging centers organized inclusters located primarily in Arizona, California, Florida andTexas. Each cluster offers a full complement of medical imagingservices, including MRI, CT imaging, X-ray, ultrasound,mammography, fluoroscopy.  We also own or operate 19 medicalimaging centers in four foreign countries and Puerto Rico. Our foreign medical imaging centers include 2 catheterizationlabs.

Thirty-four of our centersoffer only MRI, and the remaining 31 centers offer one or more ofthe different types of imaging services, including 4 centers thatoffer PET imaging.  At each of our centers, we schedulepatient imaging procedures specified by the referring physician andrecord all patient insurance and billing information.  Thescheduled imaging procedures are performed by our medicaltechnologists under the supervision of licensed radiologists whoperform their services on an independent contractor basis. The radiologists consult with referring physicians regarding thenature of the medical imaging procedures that are performed by ourmedical technologists and interpret the medicalimages. 

***               Customers, Contracts and Payors***

We depend primarily onphysician referrals for patients at our medical imagingcenters.  We focus on developing a strong physician referralnetwork and relationships with leading radiologists.  Webelieve that our regional differentiation, combined with our fullcomplement of medical imaging services, makes us attractive tomanaged care organizations and other payors, who increasinglyprefer to work with fewer healthcare services providers, includingmedical imaging services providers.

Our medical imaging netsales depend to a large extent upon the acceptance of outpatientdiagnostic imaging procedures as covered benefits under variousthird-party payor programs.  In order to be reimbursed forthese services, payment must be approved by private insurers orMedicare and Medicaid programs.  In 2001, Medicare andMedicaid accounted for approximately 15.5% of our total net sales,while managed care organizations accounted for approximately 65.8%,and conventional indemnity insurance companies and workers’compensation each accounted for approximately 8.0%.  Otherplans, including self-pay, account for the remainder.

***               Billing and Collection***

Billing and collection andother administrative functions for most of our medical imagingcenters are performed at regional billing offices located inWestlake Village, California, Plantation, Florida and Jacksonville,Florida.  Our regional offices generally bill and collect bothfor technical services we provide at our centers and forprofessional services performed by radiologists affiliated with ourcenters.  We believe that our ability to provide a single billfor all medical imaging services centers, instead of separatebilling for technical, professional and other services, ispreferred by third-party payors.

Accurate billing iscrucial to reimbursement from third-party payors.  In July2001, we began implementing an enterprise-wide integrated medicalimaging services information management and billing system. This new system will allow us to standardize and implement bestoperating practices and further consolidate billing and collectionfunctions for all our medical imaging centers.  Some of ourrecently acquired centers currently bill and collect on individualsystems, but will be converted to consolidated billing andcollection functions in our regional offices in the nearfuture.

***               Imaging Systems Equipment***

We operate a variety ofmedical imaging systems.  As of December 31, 2001, we operated69 MRI systems, 22 CT systems, 6 PET systems (including 2 systemsin sites we managed but did not own) and 60 other systems,substantially all of which are owned by us.  We have madesignificant investments in purchasing, updating and maintaining oursystems in an effort to offer the latest, most advanced imagingsystems available.  As of December 31, 2001, approximately 44%of our systems were less than three years old.  We have theability to upgrade most of our current MRI and CT systems, which webelieve reduces the potential for technological obsolescence. We continually evaluate our capital needs and periodically purchasenew equipment or update or enhance existing equipment.  Wepurchase our imaging systems from major medical equipmentmanufacturers, including General Electric Medical Systems, HitachiMedical Systems, Siemens Medical Systems, and Phillips MedicalSystems.  As a major purchaser of medical imaging systems, webelieve we receive relatively attractive pricing for equipment andservice contracts from equipment manufacturers.

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***               Sales and Marketing***

We depend primarily onphysician referrals for patients at our medical imagingcenters.  We market and sell our medical imaging servicesthrough local and regional marketing personnel and with the help oflocal radiologists affiliated with our centers.  We focus ourmarketing and sales activities on attracting referrals fromphysicians representing various medical specialties and, to alesser extent, on contracting with managed care organizations andothers.

***               Competition***

The market for diagnosticimaging services is highly fragmented and competitive.  Thereare few national medical imaging service providers and more than4,100 independent outpatient medical imaging centersnationwide.  We compete with independent regional or localowners and operators of medical imaging centers, includinghospitals and private medical clinics and radiology physiciangroups that own their own medical imaging equipment.  Wegenerally do not compete with the national imaging servicesproviders, who tend not to have a significant presence in themarkets we serve.

We believe that the keycompetitive factors affecting our medical imaging business are, inorder of importance:

                       *****      range of medical imagingmodalities and services offered;

                       *****      proximity of imaging centerlocations and flexibility of scheduling;

                       *****      timeliness and accuracy ofdiagnosis by our affiliated radiologists;

                       *****      ability to attract andretain qualified affiliated radiologists andtechnologists;

                       *****      quality and type ofequipment used;

                       *****      price;

                       *****      relationships with referringphysicians;

                       *****      participation in healthcareplans; and

                       *****      access tocapital.

**GovernmentRegulation**

***               Radiopharmacy Business***

Each of ourradiopharmacies in the U.S. is licensed by and must comply with theregulations of the U.S. Nuclear Regulatory Commission, or NRC, orcorresponding state agencies. In addition, each radiopharmacy islicensed and regulated by the Board of Pharmacy in the state whereit is located. Our manufacturing facility in Colorado and our FDGproduction facilities in Florida, California, Massachusetts,Missouri, Ohio, Pennsylvania, Texas and Washington, are licensed bythe respective states to handle radioactive materials and areregistered with the Food and Drug Administration, or FDA, asmanufacturing facilities. As FDA-registered manufacturingfacilities, they must comply with the FDA’s “currentgood manufacturing practices” standards.

Periodic inspections ofour radiopharmacies and manufacturing facilities are conducted bythe NRC, FDA and various other Federal and state agencies. Unsatisfactory inspection results could lead to escalatedenforcement action, the imposition of fines or the suspension,revocation or denial of renewal of the licenses for the locationinspected. We devote substantial human and financial resources toensure continued regulatory compliance by our radiopharmacies andmanufacturing facilities.

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We are subject to variousFederal, state and local regulations relating to occupationalsafety and health and the use and disposal of bio-hazardousmaterials.  In addition, the products we dispense anddistribute through our U.S. radiopharmacies are subject toFederal, state and local regulations relating to drugs and medicaldevices.

Our transport ofradioactive materials is regulated by the U.S. Department ofTransportation, or DOT.  We audit our own radiopharmacies forDOT compliance.  The DOT, and corresponding state regulators,also conduct periodic and unannounced inspections of ourradiopharmacies for compliance with applicable regulations. Although we believe that our safety practices and procedures forstoring, handling, transporting, and disposing of radioactive,bio-hazardous, and other hazardous and non-hazardous materialscomply with applicable laws, regulations, and standards, we cannoteliminate completely the risk of accidental contamination or injuryfrom such materials.  In the event of a spill or release, wecould be held liable for damages that result, and any liabilitycould exceed the limits or fall outside our insurancecoverage.  We also could incur business interruption or otherloss of business as a result of such an event.  Furthermore,there can be no assurance that there will not be future changes tothe regulatory programs applicable to us, and those changes couldforce us to make significant changes to our processes, procedures,or materials or to make investments in capital improvements to ourfacilities.

The need to comply withapplicable environmental laws and regulations, such as thoseregulating the use and disposal of radioactive materials, isinherent in our industry and the normal operations of ourradiopharmacies and our manufacturing facilities. Historically,compliance with such laws and regulations has not had a materialadverse effect on our capital expenditures, earnings or competitiveposition.

The Centers for Medicareand Medicaid Services, or CMS (formerly the Health Care FinancingAdministrations, or HCFA), the U.S. agency that establishesMedicare reimbursement policies, regularly re-evaluatesreimbursement rates for all health care provider services and hasreduced such rates in the past.  Starting August 1, 2000,CMS began using prices submitted by manufacturers to setreimbursements for many hospital outpatient drugs, includingradiopharmaceuticals, instead of reimbursing these products as adirect cost pass-through.  Since our sales ofradiopharmaceuticals are made to hospitals and clinics, we get paidby them, not reimbursed by CMS.  The introduction of setreimbursement rates nevertheless could have an impact on the pricesthat customers will be willing to pay for the radiopharmaceuticalsthat they purchase from us, and that impact, in turn, could affectour revenues.  We are not able to predict the long-term impactof this change in the reimbursement system upon ourbusiness.

We are also subject to theFederal fraud and abuse laws governing provider and supplierrelationships with Federal healthcare programs, including Medicareand Medicaid.  One such law, the Federal Anti-KickbackStatute, prohibits payments made in exchange for referral of itemsor services covered by Federal health care programs, includingMedicare and Medicaid.  This law is extremely broad.  Itprohibits fraudulent claims, kickbacks, rebates and bribes, as wellas payment of any form of remuneration, in cash or in kind, inreturn for referrals of business paid for by Federal health careprograms.  Also prohibited are any payments made to those in aposition to recommendpurchasing, leasing, or ordering any goods,services, or items for which payment may be made under Federalhealth care programs.  Failure to comply with theAnti-Kickback Statute can result in a felony conviction,imprisonment, significant fines, and exclusion from the Medicareand Medicaid programs.

Recognizing that the lawis broad and may technically prohibit beneficial arrangements, theOffice of the Inspector General ("OIG") of the Department of Healthand Human Services developed regulations addressing those types ofbusiness arrangements that will not be subject to scrutiny underthe law.  These "Safe Harbors" describe activities that maytechnically violate the act, but which are not to be consideredillegal when carried on in conformance with the regulations. For example, the Safe Harbors cover activities such as offeringdiscounts to health care providers and contracting with physiciansor other individuals that have the potential to refer business tous that would ultimately be billed to Medicare orMedicaid.

The OIG periodicallyissues Fraud Alerts identifying practices it believes may violateFederal fraud and abuse laws.  One Fraud Alert addressed jointventure and contractual arrangements between healthcareproviders.  Another concerns prescription-drug marketingpractices.  Drug marketing activities may implicate theFederal fraud and abuse laws because the cost of drugs is oftenreimbursed by Medicare and Medicaid.  According to the FraudAlert, questionable practices may include payments to pharmaciststo recommend a particular drug or product.  We try tostructure our business arrangements to comply with Federal fraudand abuse laws.  However, if we are found to have violated anyof these laws, we could suffer penalties, fines or possibleexclusion from Medicare, Medicaid or other governmentalprograms.  For example, our business arrangements may notfully meet the stringent criteria specified in the SafeHarbors.  Failure to qualify for Safe

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Harbor protection does notmean that an arrangement is illegal.  Rather, the arrangementmust be analyzed under the Anti-Kickback Statute to determinewhether there is an intent to pay or receive remuneration in returnfor referrals.  Even though we continuously strive to complywith the requirements of the Anti-Kickback Statute, liability underthe Anti-Kickback Statute may still arise because of the intentionsof the parties with whom we do business.  Conduct and businessarrangements that do not fully satisfy one of the Safe Harbors mayresult in increased scrutiny by government enforcement authoritiessuch as the OIG.

Many states have adoptedlaws similar to the Federal Anti-Kickback Statute.  Some ofthese state prohibitions apply to referral of patients for healthcare services reimbursed by any source, not just government healthcare programs.  Although we believe that we comply with bothFederal and state anti-kickback statutes, any finding of aviolation of these laws could subject us to criminal and civilpenalties or possible exclusion from Federal or state health careprograms.  Such penalties would adversely affect our financialperformance and our ability to operate our business.

The Federal False ClaimsAct and similar state statutes prohibit presenting, or causing tobe presented, a claim for payment under Medicare, Medicaid, andother Federally funded programs containing false or misleadinginformation.  Although our radiopharmacy services segment forthe most part does not submit claims for payment directly toFederally funded programs, the costs of our products are includedin the claims submitted by our customers to Federally fundedprograms.  Thus, liability could accrue to us if a findingwere made that we “caused” a false claim to bepresented to the government.  Violations of the False ClaimsAct can result in significant penalties and exclusion fromparticipation in the Medicare and Medicaid programs. Liability under the False Claims Act arises primarily when anentity knowingly submits a false claim for reimbursement to theFederal government.  Simple negligence should not give rise toliability, but submitting a claim with reckless disregard of itstruth or falsity could result in substantial civil liability. In addition to the civil provisions of the False Claims Act, theFederal government can use several other criminal statutes toprosecute persons who submit false or fraudulent claims for paymentto the Federal government.  The costs of defending claimsunder the False Claims Act, and, if a violation is found, the costof sanctions imposed under the Act, would adversely affect ourfinancial performance.

Our foreignradiopharmacies are subject to the regulations of the countries inwhich they operate.

***               Medical Imaging Services***

The Federal government andall states in which we operate or plan to operate medical imagingcenters regulate various aspects of our medical imaging servicesbusiness.

Reimbursement for medicalimaging services is undergoing change as third-party payors, suchas Medicare and Medicaid, health maintenance organizations andother health insurance carriers, increase effortsto control thecost, utilization and delivery of healthcare services. Legislationhas been proposed or enacted at both the Federal and state levelsto regulate healthcare delivery in general and medical imagingservices in particular.  CMS, the U.S. agency that establishesMedicare reimbursement policies, regularly re-evaluatesreimbursement rates for all health care provider services,including medical imaging services, and has reduced such rates inthe past.  CMS' latest published figures applicable toreimbursement for medical imaging services reflect reductions inrates of up to 4 percent for 2002.  We are not able to predictthe long-term impact of changes in the reimbursement system uponour business.

The medical imagingservices business also is subject to state insurance laws governingthe presentation and payment of insurance claims for medicalimaging services to patients with health insurance.

The establishment andoperation of outpatient diagnostic imaging centers are subject tovarious licensing requirements.  Some states require aCertificate of Need, or CON, in some circumstances to establish,construct, acquire or expand healthcare facilities andservices.  We may also have to comply with Federalcertification requirements, such as the Federal certificationrequirement to provide mammography examinations and the Medicarecertification requirement for our centers to be qualified asIndependent Diagnostic Testing Facilities.  Certificate ofneed regulations may limit or preclude us from providing ourservices in certain jurisdictions.  In practice, certificateof need laws have prevented hospitals and other providers who havebeen unable to obtain a certificate of need from acquiring newmachines or offering new services.  A significant increase inthe number of states regulating our business through certificate ofneed or similar programs could adversely impact us.  Ourmedical imaging centers also are subject to Federal and stateregulations relating to testing standards, personnel accreditationand compliance with government reimbursement programs.

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Our centers are alsosubject to the Federal fraud and abuse laws described above for theradiopharmacy business.  See “GovernmentRegulation-Radiopharmacy Business” above.  Among thetypes of relationships covered by the Safe Harbors developed by theOIG are personal service arrangements, such as the arrangementsbetween radiologists and our medical imaging centers.  Inaddition to the Safe Harbors, the OIG has issued Advisory Opinions,indicating whether the OIG would be likely to view a particulararrangement as violative of the Federal Anti-KickbackStatute.  With respect to payments for marketing services, theOIG has indicated that if an arrangement contains certaincharacteristics, the arrangement may be more likely to beinvestigated by the OIG or found to violate the FederalAnti-Kickback Statute.  Among the characteristics listed bythe OIG are compensation arrangements based on a percentage ofsales and the use of sales agents who are health professionals toexert undue influence on purchasers or patients.  Ourarrangements with physicians and other persons or entities who maybe in a position to refer patients may not fully meet the stringentcriteria specified in the Safe Harbors.  Failure to qualifyfor Safe Harbor protection does not mean that an arrangement isillegal.  Rather, the arrangement must be analyzed under theAnti-Kickback Statute to determine whether there is an intent topay or receive remuneration in return for referrals.  Eventhough we continuously strive to comply with the requirements ofthe Anti-Kickback Statute, liability under the Anti-KickbackStatute may still arise because of the intentions of the partieswith whom we do business.  Conduct and business arrangementsthat do not fully satisfy one of the Safe Harbors may result inincreased scrutiny by government enforcement authorities such asthe OIG.  Our centers are also subject to the Federal FalseClaims Act described above for the radiopharmacy business. See “Government Regulation-Radiopharmacy Business”above.

The“Stark II” statute, enacted under the OmnibusBudget Reconciliation Act of 1993, prohibits a physician frommaking a referral to an entity for the furnishing of designatedhealth services (including diagnostic imaging services) for whichpayment may be made under a Federal health care program, if thephysician has a financial relationship with that entity.  Theterm financial relationship includes both ownership interests andcompensation arrangements.  Any person who presents or causesto be presented a claim to the Medicare or Medicaid programspursuant to a prohibited referral is also subject to significantpenalties and possible exclusion from participation in Federalhealth care programs. In addition, a number of states (includingCalifornia and Florida) have enacted their own versions ofself-referral laws which may require physicians to disclose anyfinancial interest they may have with a healthcare provider totheir patients when referring patients to that provider.  Anysanctions imposed on us under Stark or companion state laws couldadversely affect our financial results and our business.  Ourmedical imaging services business also may be subject to state lawsthat prohibit the practice of medicine by non-physicians or thesplitting of fees between physicians andnon-physicians.  

The Federal HealthInsurance Portability and Accountability Act of 1996 provides thatit is a felony to knowingly and willfully execute any scheme todefraud any healthcare benefit program.  This Act also imposesnew requirements relating to the privacy of medicalinformation.  The government published regulations toimplement these requirements in December 2000, with which healthcare providers are expected to comply by April 2003.  Aviolation of these provisions may result in criminal or civilpenalties, which would adversely affect our financial performanceor our ability to operate our business.  We have begun toaddress compliance with the Act and applicable regulations andexpect the new requirements to have significant effect on themanner in which we handle health data and communicate withpayors.  The cost of compliance with this act could besignificant and could adversely affect our financial performanceand business.

We are also subject tolicensing and regulation under Federal, state and local lawsrelating to the handling and disposal of medical specimens,infectious and hazardous waste and radioactive materials as well asto the safety and health of laboratory employees.  Thesanctions for failure to comply with these regulations may includedenial of the right to conduct business, significant fines andcriminal penalties.

Our foreign medicalimaging centers are subject to the regulations of the countries inwhich they operate.

**Patents, Trademarks,and Licenses**

We own a number oftrademarks and patents, including patent rights to our SECURE®Safety Insert System and our family of radiopharmaceutical deliverysystems known as “Pigs.”  SECURE®Safety Inserts is a registered trademark, and CMI-NetTM,NeRDTM, NucLinkTM, PETPigTM, PigletTM,Piglet2TM, PharmaSeedTM, SYNtracTM and UDMTMare trademarks of the Company. 

We license our SYNtrac,UDM and NucLink systems to our customers to assist in themanagement of their nuclear medicine departments and to facilitateelectronic communication between our radiopharmacies andcustomers.

We believe that ourtrademarks, patents and licenses are important contributors to ourability to differentiate our radiopharmacy services from those ofour competitors and build mutually beneficial long-term customerrelationships.

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**Employees**

As of December 31, 2001,we employed more than 4,200 people in the U.S., of whomapproximately 3,000 were full-time employees.  Of ourfull-time employees, approximately 1,580 are employed in our U.S.radiopharmacy business, 800 are employed in our U.S. medicalimaging business, 400 are employed in our international operations,and the rest are in our corporate headquarters.  Four hundredtwenty of our U.S. radiopharmacy business employees are licensednuclear pharmacists.  With limited exceptions in foreigncountries, none of our employees is covered by a collectivebargaining agreement.  We consider our employee relations tobe good.

**EnvironmentalMatters**

In operating ourfacilities, historically we have not encountered any majordifficulties in effecting compliance with applicable pollutioncontrol laws.  No material capital expenditures forenvironmental control facilities are expected.  While wecannot predict the effect which any future legislation,regulations, or interpretations may have upon our operations, we donot anticipate any changes that would have a material adverseimpact on our operations.

**RiskFactors**

Except for the historicalinformation and discussions, statements contained in this Form 10-Kmay constitute "forward looking statements" within the meaning ofthe Private Securities Litigation Reform Act of 1995.  Thesestatements involve a number of risks, uncertainties and otherfactors that could cause actual results to differ materially fromthose expressed in or implied by such statements due to a number offactors, including the risk factors below.

***Sales ofCardiolite®   account for a significant portionof our net sales and net income, and a reduction in our Cardiolitesales as a result of the expiration of our current exclusivedistribution rights in December 2003 and the expiration of the keypatents for Cardiolite, could have a material adverse impact on ourbusiness and operating results.***

Sales of Cardioliteaccounted for 41.2% of our net sales in 2001. Under the terms ofour supply and distribution agreement with Bristol-Myers, we havethe exclusive right to distribute Cardiolite within specifiedgeographic areas surrounding most of our U.S.radiopharmacies.  These rights expire December 31, 2003, andwe cannot assure you that they will be renewed or extended onsimilar terms, or at all. 

Bristol-Myers'  keyU.S. patents for Cardiolite expire between 2005 and 2008. Once the patents expire, other manufacturers may begin producingand distributing generic versions of Cardiolite  which could compete with Cardiolite.  It is also possible thatnew cardiology imaging agents may be developed in the future thatare superior to Cardiolite.  Our Cardiolite sales coulddecline significantly in the future if our current distributionrights are not renewed or extended after the end of 2003, andthereafter when generic versions of Cardiolite become availableafter Bristol-Myers’ key U.S. patents expire or theintroduction of new cardiology imaging agents.  If we areunable to respond appropriately to the occurrence of any of theseevents, they could have a material adverse impact on our business,operating results and financial condition.

***We depend onBristol-Myers for our principal products and raw materials, and anyloss or interruption in the supply of Bristol-Myers' products orraw materials would have a material adverse impact on our businessand operating results.***

Our radiopharmaciesdispense more than 50 different radiopharmaceutical products withmore than 100 medical indications, which we obtain primarily fromsix suppliers.  Our principal supplier in the U.S. isBristol-Myers, from which we obtain Cardiolite, as well asThallium, a generic cardiology imaging agent that accounted for6.3% of our net sales in 2001.  In the aggregate, productssupplied by Bristol-Myers, including Cardiolite and Thallium,accounted for 53.5% of our net sales in 2001.  Our business,results of operations and financial condition would be materiallyadversely affected if our supply of products from Bristol-Myers isinterrupted for any reason.  In addition, our business,results of operations and financial condition would be materiallyadversely affected if we encounter delays in obtaining alternativeproducts from other suppliers, or if alternate products availableto us are inferior in quality to Bristol-Myers’ products andare not readily accepted by our customers.

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Technetium is aradioactive isotope used to compound radiopharmaceuticals, whichare then dispensed to our customers, generally in unit-doseform.  Sales of technetium-based products (such as Cardiolite)accounted for 50.9% of our net sales in 2001.  We obtain mostof our U.S. supply of technetium from technetium generatorssupplied by Bristol-Myers.  We do not have a long-termcontract with Bristol-Myers for the supply of technetiumgenerators.  Although we believe technetium generators areavailable in sufficient quantity from other suppliers, we haveperiodically experienced minor disruptions in our supply.  Anysignificant disruption in our supply of technetium generators couldhave a material adverse effect on our business, results ofoperations and financial condition, unless and until we obtainalternative sources of supply.

***We depend on a fewlarge customers for sales of our radiopharmaceutical services andproducts, and the loss of one or more of these customers could havea material adverse impact on our operatingresults.***

Corporate accountcustomers representing multiple-facility integrated healthcarenetworks, or IHN’s, or local independent hospitals, and thatpurchase exclusively through a GPO, accounted for 29% of our netsales in 2001.  Sales to AmeriNet Inc.and Health TrustPurchasing Group (formerly Columbia/HCA) constituted 16% of our netsales in 2001.  Although most of these contracts aremulti-year contracts, certain contracts permit the customers tocancel their contracts on 30 to 90 days notice.  In addition,all of our contracts may be cancelled for a variety of reasons,including our inability to provide the level of quality of serviceand products required by the contract.  Although the loss ofany particular corporate account does not necessarily result in ourlosing each of the individual hospitals or clinics within apurchasing group as customers because they may continue to purchasefrom us outside of the corporate account contracts, often we dolose customers following the termination of corporatecontracts.  The trend toward further consolidation of hospitaland clinic groups and the use of large purchasing groups may putfurther pressure on our future profit margins, and the loss of anysignificant corporate account customers or a material part of suchcustomers’ business (whether as a result of a cancellation ofour contract, an acquisition of our customer by another companythat is served by another provider, a material deterioration in thefinancial condition of our customer or otherwise) may have anadverse short-term or long-term impact on our radiopharmacy netsales, which could have a material adverse impact on our business,operating results or financial condition.

***We depend onreimbursements from third-party payors, and therefore changes inthe mix of payors or in their reimbursement policies could have amaterial adverse impact on our business and operatingresults***.

We depend in significantpart on reimbursements from governmental and non-governmentalthird-party payors.  This reimbursement directly affects ourmedical imaging net sales because we receive direct payments fromthird-party payors for services we provide, and also indirectlyaffects our radiopharmacy services net sales, because it affectsthe amounts our customers are reimbursed for payments they make tous for our radiopharmaceuticals and the amount of thesereimbursements impacts the amount our customers are willing to payus.  Third-party payors are implementing a variety ofapproaches to reduce costs, which could have a material adverseeffect on us.  The increasing prevalence of managed care,centralized purchasing decisions by hospitals, consolidation amongand integration of healthcare providers and competition forpatients is continuing to affect pricing, purchasing, usagepatterns and particular drug treatment decisions based on costconsiderations.  The level of reimbursement we are able toobtain for our services increasingly will depend on our ability toproperly itemize and bill for these items.  Cost-reductionmeasures implemented by third-party payors, decisions by thirdparties limiting the use of diagnostic tests or drug treatments weprovide, the inability of any third-party payors to satisfy theirpayment obligations to us, or a shift in the mix of our privatepayors to managed care organizations which tends to reduce theamount reimbursed for tests and treatments, could have a materialadverse impact on our business, operating results or financialcondition. 

We derive a significantportion of our revenue from governmental programs such as Medicareand Medicaid.  In 2001, 15.5% of our net sales wereattributable to direct reimbursements from these programs.  Inrecent years, changes in these highly regulated programs havelimited and reduced reimbursements to providers and these trendsmay continue.  For example, the Centers for Medicare andMedicaid Services, or CMS, the Federal agency that establishesMedicare reimbursement policies, has considered making significantreductions in reimbursement rates for medical imaging services andradiopharmaceuticals in the past and has indicated that it iscontinuing to evaluate these rates.  We believe newinitiatives by CMS to lower these reimbursement rates can beexpected in the future.  For example, on August 1, 2000,CMS began setting reimbursement rates for radiopharmaceuticalsbased on the prices submitted by manufacturers, which tend to belower than the previous prices based on the pass-throughrate.  Further, CMS recently approved reductions inreimbursement rates for PET studies for hospital outpatientseffective April 1, 2002.  We are not able to predict theeffects of this change in Medicare reimbursement policies, nor canwe predict whether CMS will also make reductions in reimbursementrates for PET studies conducted at independent diagnostic testingfacilities such as our medical imaging centers.  In addition,the Medicare and Medicaid programs are subject to statutory andregulatory changes, retroactive and

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prospective rateadjustments, administrative rulings, executive orders, and freezesand funding reductions, any of which may adversely affect ourbusiness.  For example, for purposes of Medicarereimbursement, recently promulgated Federal regulations affect theability of a Medicare provider such as a hospital to include aservice or facility as provider-based, as opposed to treating theservice as if it were offered offsite from the hospital. Historically, provider-based status has allowed a provider toobtain more favorable Medicare reimbursement for services like theones we provide.  While the Medicare, Medicaid and SCHIPBenefits and Improvement Act of 2000 offers some relief forfacilities recognized as provider-based on October 1, 2000,under these new regulations, some of our customers may havedifficulty qualifying our services for provider-based status. If a client cannot obtain provider-based status for our services,then the provider might decide not to contract with us, which wouldresult in a decline in our revenues.

We also may be subject torate reductions as a result of Federal budgetary or otherlegislation related to the Medicare and Medicaid programs. Various state Medicaid programs periodically experience budgetshortfalls, which may result in Medicaid payment reductions anddelays in payment to us.

***The application orrepeal of state certificate of need regulations could harm ourbusiness.***

Some states require acertificate of need or other similar regulatory approval prior tothe acquisition of high-cost capital items such as some of theequipment we purchase and use to render our services.  In manycases, a limited number of certificates of need are available in agiven jurisdiction, and if we are unable to obtain the applicablecertificate of need or other approval, these regulations may limitor preclude our options in the relevant jurisdiction.  On theother hand, states in which we have obtained a certificate of needor other required approval may repeal certificate of need or otherrelevant regulations or liberalize exemptions from suchregulations, actions which would lower the barrier to entry inthose states and could adversely affect our business.

***Complying withFederal and state health care payment requirements is an expensiveand time-consuming process, and any failure to comply, even ifinadvertent, could result in substantial refund obligations and/orpenalties.***

Because we derive asignificant portion of our revenue from governmental programs suchas Medicare and Medicaid, we are directly subject to extensive andtechnical billing and operations requirements by both the Federalgovernment and the states in which we do business.  In theareas in which we do not directly bill the government for services,we are nevertheless indirectly subject to such requirements throughour customers.  We believe that our billing practicesmaterially comply with applicable state and Federalrequirements.  However, there can be no assurance that suchrequirements will not be interpreted in the future in a mannerinconsistent with our interpretation and application.

The rules that directly orindirectly affect us include, but are not limited to, thefollowing:

                       *****      Federal and state billing,claims submission, and documentation laws andregulations;

                       *****      the Federal Medicare andMedicaid Anti-kickback Law, and similar state laws;

                       *****      the Federal False ClaimsAct, and similar Federal criminal laws;the Federal PhysicianAnti-Self-Referral law (“Stark II”), and similar statelaws;

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The failure to comply,even if inadvertent, with any of these requirements could requireus to refund payments to the government.  Such refunds couldbe significant and could also lead to the imposition of significantpenalties.  Even if we successfully defend against any actionagainst us for violation of these laws or regulations, we wouldlikely be forced to incur significant legal expenses and divert ourmanagement’s attention from the operation of ourbusiness.  Any of these actions, individually or in theaggregate, could adversely affect our ability to operate ourbusiness and our financial results.

***We depend uponhighly trained personnel in the operation of ourradiopharmaceutical and medical imaging businesses, and ourinability to recruit and/or retain a sufficient number of thesepersonnel could restrict our ability to meet the needs of ourcustomers and could have a material adverse impact on our business,operating results and financial condition.***

Each of ourradiopharmacies employs one or more nuclear pharmacists who requirehighly specialized training and must be specially licensed. There is a shortage nationwide of nuclear pharmacists, and we maynot be able to attract or retain sufficient qualified pharmacistsin some geographic areas we serve.  Our loss of ourpharmacists, or our inability to attract a significant number ofnew pharmacists could have a material adverse impact on ourbusiness, operating results or financial condition.

In addition, each of ourmedical imaging center employs a number of technologists whorequire specialized training to operate our diagnosticequipment.  There is a shortage of qualifiedtechnologists.  It is impossible to predict the availabilityof technologists or the compensation levels that will be requiredto hire and retain them.  We may not be able to hire andretain a sufficient number of technologists, and we may be requiredto increase our compensation costs to do so.

***A reduction in thenumber of medical imaging procedures we perform could have amaterial adverse impact on our business and operatingresults.***

The principal operatingcosts in our medical imaging services business are depreciation,fees paid to radiologists, compensation paid to technologists,rent, annual system maintenance costs, and insurance costs. Because most of these costs are relatively fixed, a significantreduction in the number of procedures we perform for any reason(including as a result of increased competition, changes inthird-party payor reimbursement policies, equipment down-time forscheduled or unanticipated maintenance or otherwise) could resultin significantly lower operating margins.

***Changes inradiopharmaceutical and medical imaging technologies or theintroduction of new services and products in the markets we servecould have an adverse impact on our radiopharmacy and medicalimaging businesses.***

Radiopharmaceutical andmedical imaging technologies are subject to constant and oftenrapid changes.  New and more effective radiopharmaceuticalservices and products may be developed for the diagnosis ortreatment of diseases, particularly in the cardiovascular oroncology areas, and we may be unable to obtain marketing rights tothese products or have to pay substantial amounts to acquirethem.  In addition, new diagnostic or treatment modalitiesthat are not based on nuclear medicine may be developed fordiseases currently addressed by our products.  Thesedevelopments could adversely affect our radiopharmacy net sales,which could have a material adverse impact on our business,operating results or financial condition.

The emergence of new typesof equipment or significant improvements to the existing types ofequipment for medical imaging could render our existing medicalimaging equipment obsolete or noncompetitive and require us tosignificantly modify or abandon our existing imagingequipment.  New types of equipment may also render the use ofradiopharmaceuticals as imaging agents unnecessary.  Thesedevelopments could have a material adverse impact on our business,operating results or financial condition.

***Our business and ourindustry are highly regulated, and if government laws orregulations are enforced in a manner adverse to us we may besubject to significant penalties and sanctions.***

The healthcare servicesindustry is extensively regulated by Federal, state and localgovernmental agencies.  We are subject to regulation by theFood and Drug Administration, the Nuclear Regulatory Commission,the Department of Transportation, state nuclear regulatoryagencies, state boards of pharmacy, state health departments andvarious other Federal and state agencies, and similar governmentalagencies in other

17

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countries in which weoperate.  If we do not comply with the laws and regulationsapplicable to us we may be subject to a variety of penalties andsanctions, including substantial civil and criminal penalties,damages and fines and the curtailment of our operations.  Anypenalties, damages, fines or curtailment of our operations,individually or in the aggregate, could have a material adverseimpact on our business, operating results or financialcondition.  The risk of our being found in violation ofapplicable laws and regulations is increased by the fact that manyof them have not been fully interpreted by the regulatoryauthorities or the courts, and their provisions are open to avariety of interpretations.  Any action against us forviolation of these laws or regulations, even if ultimately we aresuccessful in defending against it, could cause us to incursignificant legal expenses and divert our management’sattention from the operation of our businesses. 

***We are subject toeconomic, political and other risks and uncertainties inherent indoing business internationally.***

Our internationaloperations accounted for 6.4% of our net sales in 2001.  Ourinternational operations are subject to various risks anduncertainties of doing business in foreign markets, and these risksand uncertainties may be heightened as a result of our strategy oftargeting emerging market countries.  The risks anduncertainties relating to our international operationsinclude:
|                   | *****              | fluctuations in currencyrates, which may affect our reported earnings;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------------------------------------------------------------------------------------------------------|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                   |     |                                                                                                                                                               |
|                   | *****              | compliance with foreignregulatory requirements which often are subject to frequent changeand not as well defined and developed as in the U.S.;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|                   |     |                                                                                                                                                               |
|                   | *****              | operations through jointventures with local partners over whom we have limitedcontrol;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|                   |     |                                                                                                                                                               |
|                   | *****              | political and economicinstability in the countries where we operate; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                   |     |                                                                                                                                                               |
|                   | *****              | restrictions onremittances of cash from our international operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

***If we become subjectto product liability and malpractice claims that are not adequatelycovered by our insurance, we may have to pay significant damagesand other expenses.***

Our businesses are subjectto the risks of various claims from customers and patients,including claims arising from the distribution and manufacture ofradiopharmaceuticals and medical devices and malpractice claimsarising from the provision of medical imaging services.  Wemay not be able to maintain product liability or malpracticeinsurance in the future on acceptable terms or with adequatecoverage against potential liabilities.  A successful claimnot covered by our insurance, or in excess of our insurancecoverage, could have a material adverse impact on our business,operating results or financial condition.

***Our business dependsin part upon our ability to protect our intellectual property andavoid violating the intellectual property ofothers.***

We rely to a significantextent on various intellectual property rights, including patents,tradenames, trademarks and trade secrets.  We own U.S. patentscovering our proprietary radiopharmaceuticals delivery system,including our SECURE® Safety Insert System and our family oftungsten radiopharmaceutical delivery systems more commonly knownas “Pigs.”  We also license our proprietarySYNtrac and Unit Dose Manager software systems to many of ourcustomers for the management of their nuclear medicine departmentsand to facilitate electronic communication with ourradiopharmacies.  In addition, we rely on certain other tradesecrets and other proprietary know-how that are either notpatentable or that we choose not to patent.  If any of ourcompetitors successfully challenges or circumvents our patents ortrade secrets, our business, operating results or financialcondition could be materially and adversely impacted.  If weviolate the intellectual property rights of others, we could besubjected to costly litigation and be required to pay significantdamages to these parties and to discontinue or substantially modifyour business activities that are in violation of these rights, anyof which could also have a material adverse impact on our business,operating results or financial condition.

18

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***Our stock price maybe volatile*.**

During 2001, the closingprice of our Common Stock ranged from $26.03 to $42.29 pershare.  The market price can be affected by many factors,including reports dealing with our suppliers and customers, ouroperating results, announcements by our competitors, changes ingovernment regulations that affect our businesses, general marketconditions, volume of shares traded on any given day, andstatements by analysts.  We also have 7,646,654 stock optionshares outstanding as of March 8, 2002, of which 3,027,606 arevested.  Of the unvested option shares, 2,691,957 optionshares granted under our Universal Performance Equity ParticipationPlan with exercise prices ranging from $8.34 to $36.38 could vestat any time on or after June 30, 2002 if certain stock pricetargets are met.  If a significant number of employeesexercise and sell their vested stock options at any one time, thiscould have an adverse impact on our stock price.

***Unsuccessful systemimplementation could have an adverse financial impact on ourCompany*.**

We have made significantinvestments in information systems technology to help usefficiently conduct our business on a day-to-day basis, and thefailure of these systems could have a material adverse impact onour business and our financial condition.

We are highly automatedand dependent upon the use of sophisticated hardware and softwareto conduct day-to-day business transactions.  While we believethat we have adequate technical support in-house as well as fromexternal resources and that we have sufficient backup and recoveryplans, there can be no assurance that prolonged interruptions inthe functioning of our information systems technology would nothave an adverse impact on our ability to conduct day-to-daybusiness.  In addition, we have invested substantial resourcesin the development and implementation of proprietary software forour pharmacy services business and in customizing third-partysoftware for our medical imaging business that will allowstandardized information collection and distribution throughout ournetwork of pharmacies and medical imaging centers. These systemsare complex, and despite extensive testing and quality control,will require successful integration with third-party software, aswell as continuing updates to correct errors or defects, to keepcurrent with advances in technology, or to make enhancementsrequested by users.  There can be no assurance that eithersystem will be successfully integrated and produce the expectedbenefits during the next several years.  If the integrationson either of the two systems are not successful or if the systemscannot be properly maintained or upgraded during the next severalyears, we will need to re-evaluate our investments in thesesystems.  This re-evaluation could mean additional financialinvestment to correct deficiencies or upgrade the systems, orresult in a decision to abandon one or both systems, any of whichcould result in an adverse financial impact, especially if thesystems needed to be abandoned prior to the systems being fullydepreciated.

**Item2.     PROPERTIES.**

Our corporate headquartersis located in Woodland Hills, California.  We leaseapproximately 61,000 square feet at that location.  Ourcurrent lease is for a term of ten years, which commenced onMarch 1, 1997, with one five-year renewal option.  InOctober 2000, we entered into an agreement to lease an additional36,000 square feet of office space in a building adjacent to ourcorporate headquarters.  The lease is for a term of six years,with one five-year renewal option. We also lease approximately24,530 square feet of administrative office space in Duluth,Georgia.  The lease, which commenced in June 2001, is for aterm of 10 years.  In connection with our acquisition ofInteCardia, Inc., we assumed an agreement to lease 29,943 squarefeet of space that will house a cardiac diagnostic facility thatwill offer outpatient cardiac catheterization and nuclearcardiology services.  The lease begins on November 1, 2002 andhas a term of 15 years.  We lease all of our 130 radiopharmacysites in the U.S.  The lease terms range from less than oneyear to approximately ten years.

We own five of our 65medical imaging center sites in the U.S.  The remainingmedical imaging center sites are leased for terms ranging fromthree to five years.

Outside of the U.S., weoperate our radiopharmacies, medical imaging centers, and otherbusinesses from 16 owned sites and 21 leased sites.

We believe our facilitiesare sufficient for our current needs and that additional facilitieswill be available as needed to accommodate our futuregrowth.

**Item3.     LEGAL PROCEEDINGS.**

We are party to a numberof lawsuits and legal proceedings involving claims arising in thenormal course of our business. We believe that these claims, in theaggregate, will not have a material adverse effect on our business,financial condition or results of operations.

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**PARTII**

**Item5.     MARKET FOR REGISTRANT’SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**

The Common Stock of theCompany is traded on the Nasdaq National Market under the symbol“SCOR.”  The following table sets forth the rangeof high and low sales prices on the National Market of the CommonStock for the periods indicated, as reported by Nasdaq.  Suchquotations represent inter-dealer prices without retail market,markdown or commission and may not necessarily represent actualtransactions.
|                            |         |          | HIGH($)                                    |        | LOW($)                               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|--------------------------------------------------|--------------------------------------------|--------------------------------------|--------------------------------------|
|                            |         |          |         |        |        |
|                   2000                                             |         |          |              |        |             |
|                            | First Quarter                              |          | 16.50                                      |        | 11.02                                |
|                            | Second Quarter                             |          | 36.00                                      |        | 13.00                                |
|                            | Third Quarter                              |          | 43.94                                      |        | 32.75                                |
|                            | Fourth Quarter                             |          | 39.06                                      |        | 23.75                                |
|                            |              |          |              |        |        |
|                   2001                                             |                   |          |                   |        |        |
|                            | First Quarter                              |          | 38.81                                      |        | 27.25                                |
|                            | Second Quarter                             |          | 42.29                                      |        | 26.64                                |
|                            | Third Quarter                              |          | 38.74                                      |        | 26.63                                |
|                            | Fourth Quarter                             |          | 33.31                                      |        | 26.03                                |

As of December 31, 2001,there were 689 holders of record of the Common Stock.  OnDecember 31, 2001, the last sale price reported on the NasdaqNational Market for the Common Stock was $28.64 per share. The Company has never paid cash dividends on its Common Stock andhas no present intention to do so.

On July 11, 2000, theCompany’s Board of Directors declared a two-for-one stocksplit of the Company’s Common Stock in the form of a stockdividend.  The stock dividend was distributed on August 9,2000 to stockholders of record on July 26, 2000.

All references to pershare amounts have been restated to reflect this stocksplit.

**Item6.     SELECTED FINANCIALDATA.**

The following balancesheet data and income statement data for the five years endedDecember 31, 2001 has been derived from the Company’s auditedconsolidated financial statements.  Consolidated balancesheets at December 31, 2001 and 2000 and the related consolidatedstatements of income and of cash flows for each of the three yearsin the period ended December 31, 2001 and notes thereto appearelsewhere herein.  The data should be read in conjunction withthe annual consolidated financial statements, related notes andother financial information appearing elsewhere herein.

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**SELECTED FINANCIALDATA**
| (IN THOUSANDS, EXCEPT PER SHAREDATA)                               |       | 2001     |       | 2000     |       | 1999     |       | 1998     |       | 1997     |
|--------------------------------------------------------------------|--------------------------------|----------|--------------------------------|----------|--------------------------------|----------|--------------------------------|----------|--------------------------------|----------|
|                                                                    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Net sales                                                          |                                | $774,718 |                                | $629,394 |                                | $520,309 |                                | $449,023 |                                | $380,563 |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Grossprofit                                                        |                                | 294,983  |                                | 224,846  |                                | 169,321  |                                | 131,950  |                                | 90,165   |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Income:                                                            |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Continuingoperations                 |                                | 37,869   |                                | 29,538   |                                | 19,221   |                                | 13,931   |                                | 10,032   |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Discontinued operations, netof taxes |                                | —  |                                | —  |                                | —  |                                | —  |                                | 1,063    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Net income                           |                                | $37,869  |                                | $29,538  |                                | $19,221  |                                | $13,931  |                                | $11,095  |
|                                                                    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Earnings per basicshare:                                           |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Continuingoperations                 |                                | $1.54    |                                | $1.23    |                                | $0.82    |                                | $0.65    |                                | $0.50    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Discontinued operations, netof taxes |                                | —  |                                | —  |                                | —  |                                | —  |                                | 0.05     |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Net income                           |                                | $1.54    |                                | $1.23    |                                | $0.82    |                                | $0.65    |                                | $0.55    |
|                                                                    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Earnings per dilutedshare:                                         |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Continuingoperations                 |                                | $1.40    |                                | $1.11    |                                | $0.75    |                                | $0.61    |                                | $0.49    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Discontinued operations, netof taxes |                                | —  |                                | —  |                                | —  |                                | —  |                                | 0.05     |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Net income                           |                                | $1.40    |                                | $1.11    |                                | $0.75    |                                | $0.61    |                                | $0.54    |
|                                                                    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Cash, cash equivalentsand marketable securities                    |                                | $30,548  |                                | $29,676  |                                | $23,073  |                                | $19,722  |                                | $29,301  |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Workingcapital                                                     |                                | $115,728 |                                | $80,353  |                                | $56,326  |                                | $44,024  |                                | $34,685  |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Totalassets                                                        |                                | $587,841 |                                | $470,571 |                                | $312,642 |                                | $256,567 |                                | $164,563 |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Long-termdebt                                                      |                                | $210,649 |                                | $137,886 |                                | $76,326  |                                | $70,322  |                                | $17,332  |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Stockholders’equity                                          |                                | $234,828 |                                | $185,880 |                                | $140,337 |                                | $111,373 |                                | $87,367  |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Weighted averageshares outstanding:                                |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Basic                                |                                | 24,570   |                                | 23,948   |                                | 23,340   |                                | 21,452   |                                | 19,996   |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
|      Diluted                              |                                | 27,029   |                                | 26,657   |                                | 25,478   |                                | 22,678   |                                | 20,564   |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Currentratio                                                       |                                | 1.88     |                                | 1.56     |                                | 1.61     |                                | 1.59     |                                | 1.60     |
|                                                                    |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Number of domesticradiopharmacies                                  |                                | 130      |                                | 125      |                                | 123      |                                | 120      |                                | 119      |
|                                                          |                                |          |                                |          |                                |          |                                |          |                                |          |
| Number of domesticimaging centers                                  |                                | 65       |                                | 58       |                                | 42       |                                | 37       |                                | —  |
|                                                                    |

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**Item7.     MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS.**

**FORWARD LOOKINGSTATEMENTS**

Except for the historicalinformation and discussions contained herein, statements containedin this Annual Report on Form 10-K may constitute "forward lookingstatements" within the meaning of the Private Securities LitigationReform Act of 1995.  These statements involve a number ofrisks, uncertainties and other factors that could cause actualresults to differ materially, including: changes in the regulationof the healthcare industry at either or both of the Federal andstate levels; changes or delays in the Company's reimbursement forservices by governmental or private payers; the Company's failureto continue to develop and market new products and services and tokeep pace with technological change; competitive pressures; failureto obtain or protect intellectual property rights; quarterlyfluctuations in revenues and volatility of the Company's stockprice; the Company's ability to attract and retain key personnel;currency risks; dependence on certain suppliers; the Company'sability to successfully manage acquisitions and alliances; legal,political and economic changes; and other risks, uncertainties andfactors discussed in the "Risk Factors" section above and elsewhereherein, in the Company's other filings with the SEC or in materialsincorporated by reference.  Given these uncertainties, unduereliance should not be placed on such forward lookingstatements.

**2001 VS.  2000**

Managementhas identified three business segments for separatereporting:  our U.S. Pharmacy Services business, our U.S.Medical Imaging business and our International business.  OurU.S. Pharmacy Services business primarily compounds, dispenses anddistributes radiopharmeceuticals and distributes complexpharmaceuticals in the United States. This segment depends heavilyon one product, Cardiolite, for a high percentage of its sales. Weare currently in discussions with Bristol-Myers Squibb, oursupplier of Cardiolite, to extend our supply agreement beyond 2003upon mutually agreeable terms. To lessen our dependence onCardiolite, we have undertaken several strategic initiatives, suchas the production and distribution of FDG and the distribution ofnew complex pharmaceuticals.  Also, this segment made severalacquisitions in 2001 and anticipates further acquisitions in2002.  From a financial reporting standpoint, this segment hashad to integrate these new entities into its organization. Our U.S.Medical Imaging business provides medical diagnostic imagingservices in the United States. This business segment has grownrapidly as a result of acquisitions.  From a financialaccounting standpoint, integration of these acquisitions has been achallenge for us due to multiple accounting, billing and collectionsystems.  We have had to rely on manual processes and controlsduring the transition from these multiple systems to one commonplatform.  We are still in the process of implementing onebilling and collections system for our imaging network. During 2002, we do not plan to make any acquisitions in the Imagingsegment.  Managements’ focus will be to improve overallprofitability and cash flows of our imaging centers, and to ensurethe successful implementation of the new billing and collectionssystem. Our International business provides both pharmacy andimaging services outside of the United States. This segment hasalso made several acquisitions in 2001, but is not expected to makesignificant acquisitions in 2002.  Financial reporting andintegration of acquisitions are challenging given the geographiclocations and the fact that reliance is placed heavily on localmanagement.  We are now located in 19 countries and PuertoRico and the accounting is performed by local staff.  As withany business, there is turnover of management at theselocations.  Reliance for proper financial reporting is placedon the local management team, with oversight from corporate officemanagement and internal audit.

*  *

**CRITICALACCOUNTING POLICIES**

Our criticalaccounting policies are as follows:

***Revenue Recognition.***We recognize our revenue primarily from twosources: (i) product revenue, which includes sales from ourradiopharmacies and (ii) services revenue, primarily from ourimaging business. As described below, significant judgments andestimates must be used by management in connection with the revenuerecognized in any period for the imaging business. Materialdifferences may impact the amount of revenue recorded in any periodif management judgments or estimates are significantly differentthan actual.

We provideimaging services to patients that generally have medical insurancethrough a governmental payor, managed care payor, or a commercialthird-party payor.  Our Medical imaging business has severalhundred contracts.  These contracts can change or be amendedfrequently due to changes in the payors or governmental agenciesreimbursement.  Additionally, as we acquire medical imagingcenters, new contracts have to be entered into our computersystems.  If the contracts have not been updated in oursystems, we need to make estimates about the anticipated contractedamounts that we will ultimately receive from all of our variouspayors.  This requires us  to record estimates whenrecording imaging revenues based upon historical data andtrends.   These estimates have to be continuallyevaluated and compared to actual reimbursements from the variouspayors to ensure that we have properly recorded revenues andappropriately adjusted for shifts in our

22

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payormix.  Accordingly, these recorded revenues are based oncurrent information available, but subject to estimation, which maylead to adjustments in future periods as actual reimbursement ratesare determined, such adjustments have not been material in 2001 and2000.

***Estimating Valuation Allowances for DoubtfulAccounts****.*The preparation of financialstatements requires our management to make estimates andassumptions on the collectibility of our accounts receivable.Management specifically analyzes historical bad debts, customerconcentrations, customer credit-worthiness, current economictrends, aging of accounts and changes in payment terms whenevaluating the adequacy of the allowance for doubtful accounts. Anychanges in these estimates or assumptions could cause materialdifferences in recorded allowances.

***Valuation of Long-Lived Assets andGoodwill.*** We assess the impairment of identifiable intangibles,long-lived assets and related goodwill and enterprise levelgoodwill whenever events or changes in circumstances indicate thatthe carrying value may not be recoverable. Factors we considerimportant which could trigger an impairment review include thefollowing:
|        | •     | significantunderperformance relative to expected historical or projectedfuture operating results;           |
|--------|--------------------------------|-------------------------------------------------------------------------------------------------------------|
|   |                                |                                                                                                             |
|   | •     | significantchanges in the manner of our use of the acquired assets or thestrategy for our overall business; |
|   |                                |                                                                                                             |
|   | •     | significantnegative industry or economic trends;                                                            |
|   |                                |                                                                                                             |
|   | •     | our marketcapitalization relative to net book value.                                                        |

When wedetermine that the carrying value of intangibles, long-lived assetsand related goodwill and enterprise level goodwill may not berecoverable based upon the existence of one or more of the aboveindicators of impairment, we measure any impairment based on aprojected undiscounted cash flow method using a discount ratedetermined by our management to be commensurate with the riskinherent in our current business model. Net intangible assets,long-lived assets, and goodwill amounted to $339.5 million asof December 31, 2001.

The cost inexcess of net assets of acquired businesses is being amortized on astraight-line basis over periods of 15 to 40 years.

In the firstquarter of 2002, Statement of Financial Accounting Standards(“SFAS”) No. 142, “Goodwill and Other IntangibleAssets” will become effective and as a result, we will ceaseto amortize approximately $162.1 million of goodwill. We hadrecorded approximately $6.6 million, $4.5 million, and $4.9million of goodwill amortization during 2001, 2000 and 1999,respectively.  We would have recorded approximately$7.0 million of goodwill amortization during 2002. Under theprovisions of the Statement, we did not record amortization relatedto the six post-June 30, 2001 acquisitions. Such amortization wouldhave amounted to $0.9 million. In lieu of amortization, we arerequired to perform an initial impairment review of our goodwill in2002 and an annual impairment review thereafter. We expect tocomplete our initial review during the second quarter of2002.

We currentlydo not expect to record an impairment charge upon completion of theinitial impairment review. However, there can be no assurance thatat the time the review is completed a material impairment chargewill not be recorded.  

**NETSALES**

Net sales increased 23.1%,or $145.3 million, to $774.7 million. All three of our businesssegments had double-digit sales growth during the year. Pharmacyservices revenue increase was primarily from organic growth whileImaging services and International growth was primarily fromacquisitions.

23

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|                                |                                                        |          | Revenues                                                                                             |
|--------------------------------|--------------------------------------------------------|----------|------------------------------------------------------------------------------------------------------|
|                                |           | 2001     |                 2000 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $565,309 | $489,405                                                                                             |
| U.S. MedicalImaging Business   |                                                        | 160,054  | 100,848                                                                                              |
| International Operations       |                                                        | 49,355   | 39,141                                                                                               |
|                                |
| Total                          |                                                        | $774,718 | $629,394                                                                                             |
|                                |

***U.S.Radiopharmacy Business***

Net salesincreased 15.5%, or $75.9 million, to  $565.3 million drivenprimarily by increased sales of cardiology imaging agents. This business realized both volume and price increases during theyear in its cardiology imaging agents.  The price increasesranged between 3.0% and 3.5% for 2000 and 2001.  Sales ofcardiology imaging agents increased 11.5%, or $40.1 million,compared to the prior year and represented 70.6% of our U.S.radiopharmacy business net sales in 2001. Sales of oncologyproducts which includes FDG and brachytherapy seeds, increased by25.0% or $13.1 million as compared to the prior year.  Of theremaining sales increase, acquisitions made during 2001 accountedfor $15.5 million of the increase.  For 2002, we anticipatesales growth to continue in the 10-12% range for our cardiologyproducts.  We anticipate higher sales growth in oncology,primarily as the result of our continued expansion of our FDGbusiness that we started in mid 2000.  We are growing our FDGbusiness by adding cyclotrons and signing new FDG distributionagreements.  Finally, we expect to realize sales growth in2002 due to the delivery of complex pharmaceuticals, such as Xigrisand Zevalin.

***U.S.Medical Imaging Business***

Net salesincreased 58.7%, or $59.2 million, to $160.0 million.  Salesat existing centers, which means centers open all twelve months in2000 and 2001, increased by 10.0% or $6.7 million compared to theprior year.  The remaining increase in sales was the result ofacquisitions and start-up centers.  The volume of imagingprocedures performed at our existing centers increased 8% for MRIand 17% for CT compared to the same period in 2000.  Thesevolume increases are due to new contracts, which expanded ourphysician referral base, and new equipment or upgraded equipment,which increased the efficiencies and scope of testing in many ofthese centers. We anticipate our 2002 sales growth to be in therange of 8% to 10%; this growth will be primarily the result ofimprovements in same store sales and also due to the opening ofseveral company-built imaging centers.  We anticipate thatthis business will not make any acquisitions in2002. 

***International Operations***

Net salesincreased 26.1%, or $10.2 million, to $49.4 million due primarilyto start-up businesses and acquisitions.  Net sales at ourexisting centers or facilities were flat during the year primarilyas a result of a slowdown in healthcare spending in Taiwan. Radiopharmacy services continue to represent the greatestpercentage of our international net sales at 36.3%.  Wecontinued our expansion into the radiology product and serviceareas, which include the operation of nuclear medicine departmentsand equipment, as well as the ownership and operation offreestanding outpatient imaging centers.  Net sales ofradiology products and services represented 17.9% of our 2001international net sales. Service and distribution businessesrepresented 35.5% of our international sales in 2001, primarily asa result of an acquisition made in late 2001. We anticipate thatour Overseas segment will have improved sales in 2002 due toimproved economic conditions and expanded healthcare spending inTaiwan.  Taiwan accounts for 26.7% of this segment’sbusiness.  On an overall segment basis, we anticipate thatsales growth will be 15%-20% for 2002 due to the improvements inTaiwan and contributions from start-ups and acquisitions thatcontributed sales for a partial year in 2001 but will becontributing sales for all twelve months in 2002.

24

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**GROSSPROFIT**

Gross profitincreased 31.2%, or $70.1 million, to $295.0 million.   Ourconsolidated gross profit margin as a percentage of sales improvedto 38.1% in 2001 as compared to 35.7% in 2000 driven by continuedimprovement in product mix, price increases, and operatingefficiencies at our radiopharmacies.  Additionally, our marginas a percentage of sales improved in 2001 due to increased netsales from our medical imaging business and internationaloperations, both of which have higher gross profit margins than ourU.S. radiopharmacy business. 
|                                |                                                        | GrossProfit         |
|--------------------------------|--------------------------------------------------------|-------------------------------------------------------------|
|                                |           | 2001                                                        |                 2000 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $166,579                                                    | $138,510 |
| U.S. MedicalImaging Business   |                                                        | 107,719                                                     | 70,208 |
| International Operations       |                                                        | 20,685                                                      | 16,128 |
|                                |
| Total                          |                                                        | $294,983                                                    | $224,846 |
|                                |

***U.S.Radiopharmacy Business***

Gross profitincreased 20.3%, or $28.1 million, to $166.6 million. Gross profitmargin as a percentage of sales improved to 29.5% in 2001 ascompared to 28.3% in 2000. This increase was due primarily togrowth in sales of cardiology imaging agents resulting from highervolumes combined with price increases.  Our gross profitincreased as a result of continued leveraging of our existingradiopharmacy infrastructure which increased volumes withoutcomparable increases in material, labor and deliverycosts.   Going forward, we plan to leverage ourradiopharmacy distribution network and deliver complexpharmaceutical products. We expect the gross profit margin growththat we have experienced the last several years will slow becausecomplex pharmaceuticals traditionally have lower margins than ourtraditional nuclear imaging products.

***U.S.Medical Imaging Business***

Gross profitincreased 53.4%, or $37.5 million, to $107.7 million. Our grossprofit increased due to acquisitions and improved sales performanceat existing imaging sites, offset by higher fees paid toradiologists.  During 2001, acquisitions and start-up sitesaccounted for $37.3 million of the increase in gross profit andincreased sales at our existing centers accounted for theremainder.  Our gross profit margin as a percentage of salesdecreased in 2001 to 67.3% compared to 69.6% in 2000.  Thisdecrease is primarily due to the increase in the number ofmulti-modality sites during 2001.  These multi-modality sitestraditionally have lower margins than MRI-only sites.  Ourimaging business added multi-modality sites in many markets during2001 in order to secure new payor contracts.

***International Operations***

Gross profitincreased 28.3%, or $4.6 million, to $20.7 million.  Grossprofit increased due to acquisitions and new businesses.  Ourgross profit margin as a percentage of sales increased in 2001 to41.9% compared to 41.2% in 2000. Margin growth at our existingradiopharmacy sites and imaging centers was flat in 2001 comparedto the prior year. Our business was impacted by a slowdown inhealthcare reimbursement in Taiwan, which is our largest salesvolume location overseas. 

**OPERATING, SELLING AND ADMINISTRATIVEEXPENSES**

Operating,selling and administrative expenses increased 26.9%, or $38.3million, to $180.5 million.  The ratio of these expenses tonet sales for the year ended December 31, 2001 was 23.3% comparedto 22.6% for the same period in 2000. Operating, selling andadministrative costs at our medical imaging business are higherthan such costs at our radiopharmacy business.  As the imagingbusiness becomes a larger share of our overall business, theconsolidated ratio of these expenses to net salesincreases.

25

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|                                |                                                        | Operating, Selling and Administrative Expenses |
|--------------------------------|--------------------------------------------------------|------------------------------------------------|
|                                |           | 2001                                           |                 2000 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $86,917                                        | $76,698 |
| U.S. MedicalImaging Business   |                                                        | 67,806                                         | 44,609 |
| International Operations       |                                                        | 14,724                                         | 11,125 |
| UnallocatedCorporate           |                                                        | 11,098                                         | 9,790 |
|                                |
| Total                          |                                                        | $180,545                                       | $142,222 |
|                                |

***U.S.Radiopharmacy Business***

Operating,selling and administrative costs increased 13.3%, or $10.2 million,to $86.9 million.  This increase was due primarily toincreased costs associated with acquired businesses, whichaccounted for $6.1 million of this increase. Start up costsassociated with opening six new cyclotrons, used in the productionof FDG, accounted for an additional $2.2 million.  As apercentage of sales, operating, selling and administrative expensesdecreased from 15.7% in 2000 to 15.4% in 2001. 

***U.S.Medical Imaging Business***

Operating,selling and administrative costs increased 52.0%, or $23.2 million,to $67.8 million.  These expenses increased primarily as aresult of acquisitions made in 2000 and 2001.  As a percentageof sales, these expenses declined from 44.2% in 2000 to 42.4% in2001.

***International Business*         **

Operating,selling and administrative expenses increased 32.4%, or $3.6million, to $14.7 million. Of this amount, $3.0 million wasattributable to the costs of acquiring new businesses and startingnew centers during 2001.  The remaining $0.6 million of theincrease was attributable to the expansion of services and productsoffered at our existing facilities and the addition of newmanagement resources to support the expanded operations. As apercentage of sales, these expenses increased from 28.4% in 2000 to29.8% in 2001. 

**DEPRECIATION AND AMORTIZATION**

Depreciationand amortization increased 50.4%, or $13.3 million, to $39.6million. Of the increase, $8.6 million was attributable to ourmedical imaging business and acquisitions made in 2000 and 2001 tosupport this segment’s expansion.  The remainder of theincrease was attributable to expansions in: our internationaloperations, with an increase of $2.0 million; our pharmacy servicesbusiness, primarily in new FDG production facilities, with anincrease of $1.9 million; and our corporate operations, with anincrease of $0.8 million.
|                                |                                                        | Depreciation and Amortization |
|--------------------------------|--------------------------------------------------------|-------------------------------|
|                                |           | 2001                          |                 2000 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $7,367                        | $5,508 |
| U.S. MedicalImaging Business   |                                                        | 21,726                        | 13,132 |
| International Operations       |                                                        | 4,733                         | 2,763 |
| UnallocatedCorporate           |                                                        | 5,735                         | 4,906 |
|                                |
| Total                          |                                                        | $39,561                       | $26,309 |
|                                |

                                                                                                           26

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**2000 VS.1999**

**NETSALES**

Net salesincreased 21.0%, or $109.1 million, to $629.4 million.  Netsales increased in each of our three business segments due to highgrowth in the cardiology sector of our Pharmacy Services businessand primarily through acquisitions in our Medical Imaging andInternational businesses.
|                                |                                                        | Revenues |
|--------------------------------|--------------------------------------------------------|----------|
|                                |           | 2000     |                 1999 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $489,405 | $440,385 |
| U.S. MedicalImaging Business   |                                                        | 100,848  | 55,187 |
| International Operations       |                                                        | 39,141   | 24,737 |
|                                |
| Total                          |                                                        | $629,394 | $520,309 |
|                                |

***U.S.Radiopharmacy Business***

Net salesincreased 11.1%, or $49.0 million, to $489.4 million. This businessrealized both volume and price increases during the year from itscardiology imaging agents.  The price increases ranged between3.0% and 3.5% for 2000 and 1999.  Sales of cardiology imagingagents increased 12.0%, compared to the prior year and represented71.0% of our U.S. radiopharmacy business net sales in 2000 comparedto 70.4% in 1999. 

***U.S.Medical Imaging Business***

Net salesincreased 82.7%, or $45.7 million, to $100.9 million. Existing centers accounted for $6.9 million of the increase in netsales, with acquisitions and start-up centers accounting for theremaining increase.  The volume of imaging proceduresperformed at our existing centers increased 18% for MRI and 21.0%for CT over the same period in 1999, due to the expansion in thescope of the clinical applications for these procedures and theexpansion of our physician referral base.   We alsoimproved our market penetration, particularly in Arizona,California and Florida, through acquisitions during2000.

***International Operations***

Net salesincreased 58.2%, or $14.4 million, to $39.1 million.  Thisincrease in net sales was due to a combination of acquisitions,start-ups, higher net sales at our existing facilities andexpansion of the services and products we offered.  Net salesat our existing facilities increased 25.0%.  Radiopharmacyservices continue to represent the greatest portion of ourinternational net sales, at 36%.  We continued our expansioninto the radiology product and service areas, which include theoperation of nuclear medicine departments and equipment, as well asthe ownership and operation of free-standing outpatient imagingcenters.  Net sales of radiology services and productsconstituted 21.0% of our 2000 international net sales.

**GROSSPROFIT**

Gross profitincreased 32.8%, or $55.5 million, to $224.8 million.  Ourconsolidated gross profit margin as a percentage of sales improvedto 35.7% in 2000 as compared to 32.5% in 1999.  This increasewas due primarily to continued improvement in product mix(primarily increased sales of Cardiolite®), and price increasesfor Cardiolite® and other cardiology imaging agents.  Wealso increased net sales from our medical imaging business andinternational operations, both of which have higher gross profitmargins than our U.S. radiopharmacy business.

27

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|                                |                                                        | Gross Profit |
|--------------------------------|--------------------------------------------------------|--------------|
|                                |           | 2000         |                 1999 |
|                                |
| U.S.Pharmacy Services Business |                                                        | $138,510     | $118,682 |
| U.S. MedicalImaging Business   |                                                        | 70,208       | 41,052 |
| International Operations       |                                                        | 16,128       | 9,587 |
|                                |
| Total                          |                                                        | $224,846     | $169,321 |
|                                |

***U.S.Radiopharmacy Business***

Gross profitincreased 16.7%, or $19.8 million, to $138.5 million. Gross profitmargin as a percentage of sales improved to 28.3% in 2000 ascompared to 26.9% in 1999.  This increase was due primarily togrowth in sales of cardiology imaging agents combined with priceincreases.  We incurred start-up costs of $2.1 million in 2000associated with FDG radioisotope and brachytherapy seedsproduction.

***U.S.Medical Imaging Business***

Gross profitincreased 71.0%, or $29.2 million, to $70.2 million.  Thisincrease corresponded with increased net sales attributable toacquisitions and existing centers, which were offset by increasesin the reading fees that we paid radiologists and the start-upcosts of new centers.  Acquisitions accounted for $16.5million of the increase in gross profit, and increased sales at ourexisting centers accounted for the remainder. Our gross profitmargin as a percentage of sales decreased in 2000 to 69.6% comparedto 74.4% in 1999.

***International Operations***

Gross profitincreased 68.2%, or $6.5 million, to $16.1 million.  Thisincrease was due primarily to increased sales at our existingradiopharmacies, which contributed $1.3 million of the increase,increased net sales of medical imaging services, which contributed$2.2 million, and acquisitions and new businesses, whichcontributed the remaining $3.0 million of the increase. Our grossprofit margin as a percentage of sales increased in 2000 to 41.2%compared to 38.8% in 1999.  This margin increased at a higherrate than our net sales as a result of more efficient utilizationof raw materials and labor.

**OPERATING, SELLING AND ADMINISTRATIVEEXPENSES**

Operating,selling and administrative expenses increased 28.9%, or $31.9million, to $142.2 million.  The ratio of these expenses tonet sales for the year ended December 31, 2000 was 22.6% comparedto 21.2% over the same period in 1999.  The increase was dueprimarily to the start-up and acquisition of certain businesses in2000, the expansion of services and products we offer, increasedcorporate staffing to support our expansion and general corporateinfrastructure costs.  Operating, selling and administrativecosts associated with medical imaging services were higher than forradiopharmacy services.

28

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|                                | Operating, Selling and   Administrative Expenses |
|--------------------------------|------------------------------------------------------------|
|                                |               | 2000 |                 1999 |
|                                |
| U.S.Pharmacy Services Business |                                                            | $76,698 | $65,551 |
| U.S. MedicalImaging Business   |                                                            | 44,609 | 27,497 |
| International Operations       |                                                            | 11,125 | 7,741 |
| UnallocatedCorporate           |                                                            | 9,790 | 9,519 |
|                                |
| Total                          |                                                            | $142,222 | $110,308 |
|                                |

***U.S.Radiopharmacy Business***

Operating,selling and administrative costs increased 17.0%, or $11.1 million,to $76.7 million.  This increase was due primarily toincreased costs of our expanded sales force and increasedlabor-related expenses, including merit increases andbonuses.

***U.S.Medical Imaging Business***

**Operating, selling and administrative costsincreased 62.2%, or $17.1 million, to $44.6 million.  Of thisamount, $8.9 million was attributable to the costs of acquiredcenters during 2000.  This increase compared favorably withour net sales increase of 82.7%.**

**InternationalOperations**

Operating, selling andadministrative expenses increased 43.7% or $3.4 million, to $11.1million.  Of this amount, $1.5 million was attributable to thecosts of acquiring and starting-up new centers during 2000. The remaining $1.9 million of the increase was attributable to theexpansion of services and products offered at our existingfacilities and the addition of new management resources to supportthe expanded operations.

**DEPRECIATION ANDAMORTIZATION**

Depreciationand amortization increased 34.8%, or $6.8 million, to $26.3million. Of this amount, $5.5 million was attributable to theacquisition of new medical imaging centers.  The remainder ofthe increase was attributable to the expansion of our internationaloperations and for corporate information systems.
|                                | Depreciation and Amortization                          |
|--------------------------------|--------------------------------------------------------|
|                                |           | 2000 |                 1999 |   |
|                                |                                                   |
| U.S.Pharmacy Services Business |                                                        | $5,508 | $4,751 |   |
| U.S. MedicalImaging Business   |                                                        | 13,132 | 7,674 |   |
| International Operations       |                                                        | 2,763 | 2,249 |   |
| UnallocatedCorporate           |                                                        | 4,906 | 4,841 |   |
|                                |                                                   |
| Total                          |                                                        | $26,309 | $19,515 |   |
|                                |                                                   |

29

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**LIQUIDITY**

The Company believesthat sufficient resources are available through a combination ofinternal and external sources to fund all of its 2002 operating andbusiness expansion needs.  Cash flow from operations improvedto $65.0 million in 2001 from  $39.0 million in 2000. Our net cash provided by operating activities has improved forthree straight years and during this time the compounded growthrate has been 72.3%. The improvements continue to be due toincreased profitability and management of our working capitalaccounts.

Trade receivables,which relate to our U.S. Pharmacy and International businesses,have increased due to overall sales increases and from receivablesacquired through acquisitions. Patient receivables, which relate toour Imaging business, have also increased due to organic salesgrowth but primarily as a result of acquisitions made in 2000 and2001. 

The Company increasedits line of credit from $150 million in 2000 to $200 million as ofDecember 31, 2001.  The Company has traditionally used itscash provided from operations to fund its capital assetpurchases.  The Company’s credit line has been utilizedto fund significant acquisitions.

In 2001, the Companyacquired additional imaging centers and additional businesses inthe pharmacy business segment for approximately $55 millionutilizing its line of credit.  The Company also assumedapproximately $6 million in debt in these acquisitiontransactions.  The results of these acquisitions are partlyreflected in the change in the categories of “Property andEquipment”, “Goodwill”, and “Other”assets.  The Company had  $28.5 million available butunused for borrowing under the line of credit at December 31,2001.

On January 17, 2002,the Company completed an asset securitization agreement using thetrade receivables as collateral. This securitization program allowsthe Company to borrow up to $65 million at rates generally morefavorable than the credit line agreement. Upon execution of thesecuritization agreement, our credit line had a provision thatrequired a 50% reduction of the securitization amount, or $32.5 million.  Therefore, the credit line has a currentborrowing limit of $167.5 million.  At January 17, 2002, theCompany had $52.6 million combined credit available but unused fromits credit line and asset securitization line.

The Company plans toslow the pace of acquisitions during 2002 in the Imaging andInternational business segments so that the focus can be onimproving the profitability and cash flows of these lines ofbusiness.  As mentioned above, the Company believes it hassufficient resources available to fund its 2002 acquisition needsand purchases of capital assets.

**STOCK REPURCHASEPROGRAM**

On June 23, 1999, ourboard of directors authorized the repurchase of up to 1,075,600shares of our common stock. Through December 31, 2001, we hadrepurchased 761,662 shares of our common stock leaving 313,938shares remaining for repurchase under the program. The timing andsize of any future stock repurchases are subject to marketconditions, stock prices and cash availability. A portion of suchrepurchases are expected to cover future issuances in ourEmployees’ Savings and Stock Ownership Plan(ESSOP).

**CAPITALSPENDING**

The Company’smedical imaging operations, both foreign and domestic, are capitalintensive. The Company may, from time to time, purchase newequipment or upgrade existing equipment. The cost of these capitalpurchases or upgrades can vary from several thousand dollars toamounts well over $1 million per piece of equipment. The Company,on an on-going basis, evaluates its needs for acquiring newequipment or upgrading existing equipment.  We have madesignificant investments during the last three years in newequipment and upgrades of existing equipment. The Company expectsthat capital investments during 2002 for the Medical Imaging andPharmacy Services business segments will be less than historicallevels.

**RECENT DEVELOPMENTSIN MEDICARE REIMBURSEMENT**

We derive asignificant portion of our revenue from governmental programs suchas Medicare and Medicaid.  In 2001, 15.5% of our net saleswere attributable to direct reimbursements from theseprograms.  In recent years, changes in these highly regulatedprograms have limited and reduced reimbursements to providers andthese trends may continue.  For example, the Centers forMedicare and Medicaid Services, or CMS, the federal agency thatestablishes Medicare reimbursement policies, has considered makingsignificant reductions in reimbursement rates for medical imagingservices and radiopharmaceuticals in the past and has indicatedthat it is continuing to evaluate these rates.  CMS' latestpublished figures applicable to reimbursement for medical imagingservices reflect reductions in rates of up to 4 percent for2002.

30

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On August 1,2000, CMS began setting reimbursement rates forradiopharmaceuticals based on the prices submitted bymanufacturers, which tend to be lower than the previous pricesbased on the pass-through rate.  Since our sales ofradiopharmaceuticals are made to hospitals and clinics, we get paidby them, not reimbursed by CMS.  The introduction of setreimbursement rates nevertheless could have an impact on the pricesthat customers will be willing to pay for the radiopharmaceuticalsthat they purchase from us, and that impact, in turn, could affectour revenues.  We cannot predict at this time what impactthose changes will have on our radiopharmacy business.

Further, CMS recentlyapproved reductions in reimbursement rates for PET studies forhospital outpatients effective April 1, 2002.  We are not ableto predict the effects of this change in Medicare reimbursementpolicies, nor can we predict whether CMS will also make reductionsin reimbursement rates for PET studies conducted at independentdiagnostic testing facilities such as our medical imagingcenters.

**SAFE HARBORSTATEMENT**

Statements which arenot historical facts, including statements about our confidence,strategies and expectations, opportunities, industry and marketgrowth, demand and acceptance of new and existing products, andreturn on investments are forward-looking statements that involverisks and uncertainties, including without limitation, the effectof general economic and market conditions, supply and demand forour products, competitor pricing, maintenance of our current marketposition and other risk factors documented in the section entitled“Risk Factors” in Part I of the Form 10-K. Given theseuncertainties, undue reliance should not be placed on suchforward-looking statements.

**Item7A.     QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK.**

Interest income earnedon the Company's investment portfolio is affected by changes in thegeneral level of U.S. interest rates. The Company's line of creditborrowings, effectively bear interest at variable rates andtherefore, changes in U.S. interest rates affect interest expenseincurred thereon. Changes in interest rates do not affect interestexpense incurred on the Company's fixed rate debt. The followingtable provides information about the Company's financial debtinstruments that are sensitive to changes in interest rates. Thetable presents principal cash flows and related weighted-averageinterest rates by expected maturity dates. The Company did engagein an interest rate swap during 2001, but the dollar amount of theswap was not significant.  The gain or loss on thistransaction did not materially affect the financial results. Thefair value of the financial instruments approximates the carryingvalue.

 
| DECEMBER 31, 2001 (IN THOUSANDS)                   |       | 2002    |        | 2003    |        | 2004    |        | 2005    |        | 2006     |    | Thereafter |        | Total    |
|----------------------------------------------------|--------------------------------|---------|--------------------------------------|---------|--------------------------------------|---------|--------------------------------------|---------|--------------------------------------|----------|--------------|------------|--------------------------------------|----------|
|                                                    |
|                                          |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
| Long-termdebt                                      |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
|                                          |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
|      Fixed rate           |                                | $11,473 |                                      | $17,238 |                                      | $10,298 |                                      | $7,948  |                                      | $3,103   |              | $2,612     |                                      | $52,672  |
|                                          |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
|      Average interestrate |                                | 8.47%   |                                      | 8.51%   |                                      | 6.67%   |                                      | 5.30%   |                                      | 4.38%    |              | 3.14%      |                                      |          |
|                                          |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
|      Variable rate        |                                | $4,575  |                                      | — |                                      | — |                                      | — |                                      | $169,450 |              | —    |                                      | $174,025 |
|                                          |                                |         |                                      |         |                                      |         |                                      |         |                                      |          |              |            |                                      |          |
|      Average interestrate |                                | 3.67%   |                                      | 3.69%   |                                      | 3.69%   |                                      | 3.69%   |                                      | 3.69%    |              |            |                                      |          |
|                                                    |

31

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Based uponthe Company’s variable rate borrowing levels, a 1% change ininterest rates would have resulted in a pre-tax fluctuation ofapproximately $1.4 million and $0.9 million, in 2001 and 2000respectively.

**Item8.     FINANCIAL STATEMENTS ANDSUPPLEMENTARY DATA.**

The Company’sconsolidated financial statements at December 31, 2001 and 2000 andthe Report of KPMG LLP, Independent Accountants, are included inthis Annual Report on Form 10-K on pages F-1 throughF-6.

32

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**PARTIII**

**Item10.     DIRECTORS AND EXECUTIVE OFFICERSOF THE REGISTRANT.**

The information called forby this Item 10 is incorporated by reference from our definitiveProxy Statement for our Annual Meeting of Stockholders, to be heldon June 17, 2002, which will be filed with the Commission pursuantto Regulation 14A of the Securities and Exchange Commission(“Regulation 14A”) within 120 days from December 31,2001.

Based solely upon ourreview of Forms 3, 4 and 5 furnished to us, we believe that allreports required to be filed during 2001 pursuant to Section 16(b)of the Securities Exchange Act of 1934 were timely filed, exceptthat Robert Funari was 25 days late in filing his Form 4 to reporta zero cost collar transaction in December2001.    

**Item11.     EXECUTIVECOMPENSATION.**

The information called forby this Item 11 is hereby incorporated by reference from ourdefinitive Proxy Statement for our Annual Meeting of Stockholdersto be held on June 17, 2002.

**Item12.     SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT.**

The information called forby this Item 12 is hereby incorporated by reference from ourdefinitive Proxy Statement for our Annual Meeting of Stockholdersto be held on June 17, 2002.

**Item13.     CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS.**

The information called forby this Item 13 is hereby incorporated by reference from ourdefinitive Proxy Statement for our Annual Meeting of Stockholdersto be held on June 17, 2002.

                                                                                                                33

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**PARTIV**

**Item14.     EXHIBITS, FINANCIAL STATEMENTSCHEDULES AND REPORTS ON FORM 8-K.**

The following documentsare filed as part of this report:

**       (a)   1.  Consolidated FinancialStatements.**
|                                                          |                                                                                                            | Page |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------|
|                                                          | Independent Auditors'Report                                                                                                                                                                                                                                                                                                                                | F-1  |
|                                                          | Consolidated BalanceSheets                                                                                                                                                                                                                                                                                                                            | F-2  |
|                                                          | Consolidated Statements ofIncome                                                                                                                                                                                                                                                                                                                                                                        | F-3  |
|                                                          | Consolidated Statements ofStockholders' Equityand                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |      |
|                                                          |        ComprehensiveIncome                                                                                                                                                                                                                                                                                    | F-4  |
|                                                          | Consolidated Statements ofCashFlows                                                                                                                                                                                                                                                                                                                                                                                                        | F-5  |
|                                                          | Notes to ConsolidatedFinancialStatements                                                                                                                                                                                                                                                                                                                                                                                                                                 | F-6  |

**               2.  Financial Statement Schedules.**

                               The following schedule supporting the financial statements of theCompany is included herein:
|                                                           |                    |                |                                                                                                                                                                                                                                                                |                | Page |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|------|
|                                                                                                                                                                                                                                          |                                                  |                                                                                      |                                              |                                                                                      |      |
|                                                                                                                                                                                                                                                    | Schedule II                                                                                                  |                                                                                      | Valuation and QualifyingAccounts                                                                                                                                                                                                                                         |                                                                                      | S-1  |
|  | All other schedules andfinancial statements of the Company are omitted because they arenot applicable or not required or because the required informationis included in the consolidated financial statements or notesthereto. |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**       (b)   Reports on Form 8-K filed in the Quarter EndedDecember 31, 2001.**

                None.

34

----

**       (c)   Exhibits.**
|                 | Exhibit                                                                              |                                                                                                                                                                                                                                                       |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 | No.                                                                                  | Description                                                                                                                                                                                                                                           |
|                                                                                            |                                                                                      |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 3.                                                                                   | Certificate ofIncorporation and By-Laws                                                                                                                                                                                                               |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 3.1                                                                                  | Restated Certificate ofIncorporation of the Company filed as Exhibit 3.1 to the Form 10-Qfor the quarter ended June 30, 1999, and incorporated herein byreference.                                                                                    |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 3.2                                                                                  | Restated By-Laws of theCompany, filed as Exhibit 3.2 to the Form 10-K for the year endedDecember 31, 1995, and incorporated herein by reference.                                                                                                      |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 4.                                                                                   | Instruments Defining theRights of Security Holders                                                                                                                                                                                                    |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 4.1                                                                                  | Stock Certificate forCommon Stock of the Company filed as Exhibit 4.1 to the Form 10-Kfor the year ended May 31, 1986, and incorporated herein byreference.                                                                                           |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 4.2                                                                                  | Rights Agreement dated asof September 28, 1999 between the Company and American StockTransfer & Trust Company filed as Exhibit 4 to the Form 8-Kdated September 28, 1999 and filed on October 12, 1999, andincorporated herein by reference.      |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.                                                                                  | MaterialContracts                                                                                                                                                                                                                                     |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.1                                              | Form of IndemnityAgreement substantially as entered into between the Company andeach Director and Officer, filed as Exhibit 3.2 Appendix A to theForm 10-K for the year ended December 31, 1995, and incorporatedherein by reference.*                |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.2                                                                                 | Form of Benefits Agreementsubstantially as entered into between the Company and eachDirector, filed as Exhibit 10.8 to the Form 10-K for the year endedDecember 31, 1995, and incorporated herein byreference.*                                       |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.3                                                                                 | Form of Benefits Agreementsubstantially as entered into between the Company and certainemployees, filed as Exhibit 10.8 to the Form 10-K for the yearended December 31, 1995, and incorporated herein byreference.*                                   |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.4                                                                                 | Syncor InternationalCorporation 1990 Master Stock Incentive Plan, as amended andrestated as of June 18, 1997, filed as Exhibit 10.1 to theCompany’s Form 10-Q for the quarter ended June 30, 1997, andincorporated herein by reference.*        |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.5                                                                                 | First Amendment to theSyncor International Corporation 1990 Master Stock Incentive Plan,as amended and restated as of June 23, 1999, filed as Exhibit 10.4to the Form 10-Q for the quarter ended June 30, 1999, andincorporated herein by reference.* |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.6                                                                                 | Form of Stock OptionAgreement substantially as entered into between the Company andcertain employee Directors and employees filed as Exhibit 10.15 tothe Form 10-K for year ended December 31, 1993, and incorporatedherein by reference.*            |
|                 |                |                                                                                                                                                                                                                                                       |
|                 | 10.7                                                                                 | Form of Stock OptionAgreement substantially as entered into between the Company andcertain non-employee Directors filed as Exhibit 10.16 to the Form10-K for the year ended December 31, 1993, and incorporated hereinby reference.*                  |
|                 |                |                                                                                                                                                                                                                                                       |

__________________________

Management contract orcompensatory plan

35

----

|                 | 10.8                                                                                 | Non-Employee Director 1995Stock Incentive Award Agreement dated January 24, 1995 entered intobetween the Company and Arnold E. Spangler, filed as Exhibit 10.17to the Form 10-K for the year ended December 31, 1995, andincorporated herein by reference.*                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.9                                                                                 | Non-Employee Director 1995Stock Incentive Award Agreement dated January 24, 1995 entered intobetween the Company and George S. Oki, filed as Exhibit 10.18 tothe Form 10-K for the year ended December 31, 1995, andincorporated herein by reference.*                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.10                                                                                | Non-Employee Director 1995Stock Incentive Award Agreement dated April 29, 1996, entered intobetween the Company and Gail Wilensky, filed as Exhibit 4.3(b) tothe Registration Statement on Form S-8 filed on December 20, 1996to register the shares underlying said Award Agreement, andincorporated herein by reference.*                                                                                                                                                                                                                                                                                                                                                   |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.11                                                                                | Non-Employee Director 1995Stock Incentive Award Agreement dated April 29, 1996, entered intobetween the Company and Steven Gerber, filed as Exhibit 4.3(a) tothe Registration Statement on Form S-8 filed on December 20, 1996to register the shares underlying said Award Agreement, andincorporated herein by reference.*                                                                                                                                                                                                                                                                                                                                                   |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.12                                                                                | Subscription Agreement,dated July 15, 1996, executed by Syncor Management Corporation infavor of American Tax Credit Corporate Fund III, L.P., togetherwith a Promissory Note, dated July 15, 1996, executed by SyncorManagement Corporation in favor of John Hancock Mutual LifeInsurance Company, as assignee of Corporate Credit, Inc., and theGuarantee of Parent Corporation, dated July 15, 1996, executed bythe Company in favor of John Hancock Mutual Life Insurance Company,as assignee of Corporate Credit, Inc.  These agreements werefiled as Exhibit 10.15 to the Form 10-K for the year ended December31, 1996, and are incorporated herein by reference. |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.13                                                                                | The Office Lease, dated asof September 30, 1996, between Massachusetts Life Insurance Companyand the Company, relating to the office lease for theCompany’s corporate headquarters in Woodland Hills,California, filed as Exhibit 10.19 to the Form 10-K for the yearended December 31, 1996, and incorporated herein byreference.                                                                                                                                                                                                                                                                                                                                      |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.14                                                                                | Office Lease, datedOctober 19, 2000, between the Company and Nomura-Warner CenterAssociates, L.P., filed as Exhibit 10.16 to the Form 10-K for theyear ended December 31, 2000, and incorporated herein byreference.                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.15                                                                                | Non-Employee DirectorStock Compensation Plan, dated August 27, 1996, filed as Exhibit4.3 to the Form S-8 Registration Statement filed by the Companywith the SEC on December 20, 1996, and incorporated herein byreference.*                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.16                                                                                | Loan Agreement, datedMarch 31, 1997, among Syncor Pharmaceuticals, Inc., as borrower,the Company, as guarantor, and Bank One, NA (formerly The FirstNational Bank of Chicago), as lender, filed as Exhibit 10.1 to theForm 10-Q for the quarter ended March 31, 1997, and incorporatedherein by reference.                                                                                                                                                                                                                                                                                                                                                                    |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.17                                                                                | Syncor InternationalCorporation Deferred Compensation Plan effective January 1, 1998,filed as Exhibit 10.24 to the Form 10-K for the year ended December31, 1997, and incorporated herein by reference.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                           | 10.18                                                                                | Amendment No. 1 to SyncorInternational Corporation Deferred Compensation Plan, datedNovember 21, 2000, filed as Exhibit 10.21 to the Form 10-K for theyear ended December 31, 2000, and incorporated herein byreference.*                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                           |                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

_________________________

Management contract orcompensatory plan

36

----

|                           | 10.19                                                                                | Amendment No. 2 to SyncorInternational Corporation Deferred Compensation Plan, datedNovember 1, 2001.*                                                                                                                                                                              |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                           |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.20                                                                                | Executive Long-TermPerformance Equity Plan, effective as of January 1, 1998, filed asExhibit 10.1 to the Form 10-Q for the quarter ended March 31, 1998,and incorporated herein by reference.*                                                                                      |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.21                                                                                | First Amendment toExecutive Long-Term Performance Equity Plan, dated as of November17, 1998, filed as Exhibit 10.25 to the Form 10-K for the yearended December 31, 1998, and incorporated herein byreference.*                                                                     |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.22                                                                                | Second Amendment toExecutive Long-Term Performance Equity Plan, dated as of June 23,1999, filed as Exhibit 10.1 to the Form 10-Q for the quarter endedJune 30, 1999, and incorporated herein by reference.*                                                                         |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.23                                                                                | Third Amendment toExecutive Long-Term Performance Equity Plan, dated as of June 20,2000, filed as Exhibit 10.1 to the Form 10-Q for the quarter endedJune 30, 2000, and incorporated herein by reference.*                                                                          |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.24                                                                                | Fourth Amendment toExecutive Long-Term Performance Equity Plan, dated as of June 20,2000, filed as Exhibit 10.2 to the Form 10-Q for the quarter endedJune 30, 2000, and incorporated herein by reference.*                                                                         |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.25                                                                                | Fifth Amendment toExecutive Long-Term Performance Equity Plan, dated August 22, 2000,filed as Exhibit 10.1 to the Form 10-Q for the quarter endedSeptember 30, 2000, and incorporated herein byreference.*                                                                          |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.26                                                                                | 1998 Senior ManagementStock Purchase Plan, effective as of June 16, 1998, filed asExhibit 10.1 to the Form 10-Q for the quarter ended June 30, 1998,and incorporated herein by reference.*                                                                                          |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.27                                                                                | Universal PerformanceEquity Participation Plan, effective as of June 16, 1998, filed asExhibit 10.2 to the Form 10-Q for the quarter ended June 30, 1998,and incorporated herein by reference.*                                                                                     |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.28                                                                                | First Amendment to theUniversal Performance Equity Participation Plan, dated as of June16, 1998, filed together with the Universal Performance Equity Planthat was filed as Exhibit 10.2 to the Form 10-Q for the quarterended June 30, 1998, and incorporated herein byreference.* |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.29                                                                                | Second Amendment to theUniversal Performance Equity Participation Plan, dated as of June23, 1999, filed as Exhibit 10.2 to the Form 10-Q for the quarterended June 30, 1999, and incorporated herein byreference.*                                                                  |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.30                                                                                | Third Amendment to theUniversal Performance Equity Participation Plan, dated as of June23, 1999, filed as Exhibit 10.3 to the Form 10-Q for the quarterended June 30, 1999, and incorporated herein byreference.*                                                                   |
|                 |                |                                                                                                                                                                                                                                                                                     |
|                 | 10.31                                                                                | New Employee Stock OptionPlan, dated as of June 1, 1998, filed as Exhibit 10.1 to the Form10-Q for the quarter ended September 30, 1998, and incorporatedherein by reference.*                                                                                                      |
|                 |                |                                                                                                                                                                                                                                                                                     |

_________________________

Management contract orcompensatory plan

37

----

|                 | 10.32                                                                                | First Amendment to theSyncor International Corporation New Employee Stock Option Plan,dated December 5, 2000, filed as Exhibit 10.34 to the Form 10-K forthe year ended December 31, 2000, and incorporated herein byreference.*                                                                                  |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.33                                                                                | Form of Stock OptionAgreement under the New Employee Stock Option Plan as entered intobetween the Company and certain employees, filed as Exhibit 10.31to the Form 10-K for the year ended December 31, 1998, andincorporated herein by reference.*                                                               |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.34                                                                                | Non-Qualified Stock OptionAward Agreement, dated February 24, 1999, between the Company andRobert G. Funari, filed as Exhibit 10.1 to the Form 10-Q for thequarter ended March 31, 1999, and incorporated herein byreference.*                                                                                    |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.35                                                                                | Non-Employee Director 1999Stock Incentive Plan, dated November 11, 1999, filed as Exhibit10.35 to the Form 10-K for the year ended December 31, 1999, andincorporated herein by reference.*                                                                                                                       |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.36                                                                                | Form of Non-EmployeeDirector 1999 Stock Incentive Award Agreement, dated November 11,1999, entered into between the Company and each of the non-employeedirectors (excluding Ronald Williams), filed as Exhibit 10.36 tothe Form 10-K for the year ended December 31, 1999, andincorporated herein by reference.* |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.37                                                                                | Split Dollar Agreementbetween the Company and the Monty and Wendy Fu 1998 IrrevocableTrust, dated January 8, 1999, filed as Exhibit 10.37 to the Form10-K for the year ended December 31, 1999, and incorporated hereinby reference.*                                                                             |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.38                                                                                | Employment Agreement ofRobert G. Funari, dated as of January 1, 2000, filed as Exhibit10.1 to the Form 10-Q for the quarter ended March 31, 2000, andincorporated herein by reference.*                                                                                                                           |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.39                                                                                | Employment Agreement ofMonty Fu, dated as of January 1, 2000, filed as Exhibit 10.2 to theForm 10-Q for the quarter ended March 31, 2000, and incorporatedherein by reference.*                                                                                                                                   |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.40                                                                                | Severance Agreement datedAugust 24, 2001 between Haig Bagerdjian and the Company, filed asExhibit 10.2 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                           |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.41                                                                                | Severance Agreement datedAugust 24, 2001 between John S. Baumann and the Company, filed asExhibit 10.3 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                           |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.42                                                                                | Severance Agreement datedAugust 24, 2001 between Rodney Boone and the Company, filed asExhibit 10.4 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                              |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.43                                                                                | Severance Agreement datedAugust 24, 2001 between Jack Coffey and the Company, filed asExhibit 10.5 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                               |
|                 |                |                                                                                                                                                                                                                                                                                                                   |
|                 | 10.44                                                                                | Severance Agreement datedAugust 24, 2001 between Sheila Coop and the Company, filed asExhibit 10.6 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                               |
|                 |                |                                                                                                                                                                                                                                                                                                                   |

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Management contract orcompensatory plan

38

----

|                 | 10.45                                                                                      | Severance Agreement datedAugust 24, 2001 between William Forster and the Company, filed asExhibit 10.7 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                                                                             |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                      |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.46                                                                                      | Severance Agreement datedAugust 24, 2001 between Monty Fu and the Company, filed as Exhibit10.8 to the Form 10-Q for the quarter ended September 30, 2001, andincorporated herein by reference.*                                                                                                                                                                    |
|                 |                      |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.47                                                                                      | Severance Agreement datedAugust 24, 2001 between Robert Funari and the Company, filed asExhibit 10.9 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                                                                               |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.48                                                                                      | Severance Agreement datedAugust 24, 2001 between Lewis William Terry, Jr. and the Company,filed as Exhibit 10.10 to the Form 10-Q for the quarter endedSeptember 30, 2001, and incorporated herein byreference.*                                                                                                                                                    |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.49                                                                                      | Severance Agreement datedAugust 24, 2001 between David Ward and the Company, filed asExhibit 10.11 to the Form 10-Q for the quarter ended September 30,2001, and incorporated herein by reference.*                                                                                                                                                                 |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.50                                                                                      | Syncor InternationalCorporation Special Severance Plan, filed as Exhibit 10.12 to theForm 10-Q for the quarter ended September 30, 2001, andincorporated herein by reference.*                                                                                                                                                                                      |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.51                                                                                      | Term Loan CreditAgreement, dated as of May 5, 2000, between Bank One, N.A. andSyncor Management Corporation, filed as Exhibit 10.7 to the Form10-Q for the quarter ended June 30, 2000, and incorporated hereinby reference.                                                                                                                                        |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.52                                                                                      | Credit Agreement, dated asof October 17, 2000, among the Company, Bank One, N.A., asAdministrative Agent, Bank One Capital Markets, Inc., as LeadArranger, The Bank of Nova Scotia, as Documentation Agent, andother lenders signatories thereto, filed as Exhibit 10.43 to theForm 10-K for the year ended December 31, 2000, and incorporatedherein by reference. |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.53                                                                                      | Letter Amendment to CreditAgreement, dated February 5, 2001, between the Company and BankOne, N.A., filed as Exhibit 10.44 to the Form 10-K for the yearended December 31, 2000, and incorporated herein byreference.                                                                                                                                               |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.54                                                                                      | First Amended and RestatedCredit Agreement, dated as of May 10, 2001 with Bank One, N.A. asLender and the Bank of Nova Scotia as Document Agent, filed asExhibit 10.1 to the Form 10-Q for the quarter ended June 30, 2001,and incorporated herein by reference.                                                                                                    |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.55                                                                                      | First Amendment to FirstAmended and Restated Credit Agreement dated as of September 13,2001, among Bank One, N.A. as Lender, The Bank of Nova Scotia asDocument Agent, the Company and Syncor Management Corporation,filed as Exhibit 10.1 to the Form 10-Q for the quarter endedSeptember 30, 2001, and incorporated herein byreference.                           |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |
|                 | 10.56                                                                                      | Second Amendment to FirstAmended and Restated Credit Agreement dated as of December 21,2001, among Bank One, N.A. as Lender, The Bank of Nova Scotia asDocument Agent, the Company and Syncor ManagementCorporation.                                                                                                                                                |
|                 |                 |                                                                                                                                                                                                                                                                                                                                                                     |

__________________________

Management contract orcompensatory plan

39

----

|                 | 10.57                                                                                      | Receivables FinancingAgreement dated January 4, 2002 among Syncor Financing Corporation,as Seller, Syncor Management Corporation, as Servicer, JupiterSecuritization Corporation, the Financial Institutions listedtherein and Bank One, N.A., as Agent. |
|--------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                 |                                                                                                                                                                                                                                                          |
|                 | 21.                                                                                        | Subsidiaries of theRegistrant                                                                                                                                                                                                                            |
|                 |                 |                                                                                                                                                                                                                                                          |
|                 | 23.                                                                                        | Independent Auditors'Consent                                                                                                                                                                                                                             |

_________________________

Management contract orcompensatory plan

40

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Actof 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

  
| Date:  March 31,2002                                                                           | SYNCOR INTERNATIONALCORPORATION                                                                                                                                                                                                                                                   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | By /s/Robert G.Funari                                           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      Robert G.Funari                                                                                                                                                                                                                                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |      President and ChiefExecutive Officer                                                                                                                                                                                                                |

Pursuant to therequirements of the Securities Exchange Act of 1934, this reporthas been signed below by the following persons on behalf of theRegistrant and in the capacities and on the datesindicated.
|                                                                                                                                                                                                                                                                                                                                                                    |       |                                                             |         |                                                                  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                    |                                |                                                             |                                            |                                                                  |
| /s/MontyFu                                                                                                                                                                                         |                                | Chairman of the Board                                                                                                                                                                                                                                |                                            | Date: March 31,2002                                                                                                                                                                                                                                                                                                                                                |
|               MontyFu                                                                                                                            |                                | andDirector                                                                                                                                                     |                                            |                                                                  |
|                                                             |                                |                                                             |                                            |                                                                  |
|                                                             |                                |                                                             |                                            |                                                                  |
| /s/Robert G.Funari                                                                                                                                                                                                                                             |                                | President, Chief Executive                                                                                                                                                                                                                                                              |                                            | Date: March 31,2002                                                                                                                                                                                                                                                                                                                                                |
|             RobertG.Funari                                                                                                                                                                         |                                | Officer (PrincipalExecutive Officer)                                                                                                                                                                                                                                                                                                                          |                                            |                                                                  |
|                                                             |                                | andDirector                                                                                                                                                     |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/William P.Forster                                                                                                                                                                                                                                                     |                                | Senior Vice President,Chief                                                                                                                                                                                                                                                                       |                                            | Date: March 31,2002                                                                                                                                                                                                                                                                                                                                                |
|           WilliamP.Forster                                                                                                                                                                                        |                                | Financial Officer andTreasurer                                                                                                                                                                                                                                                                                                  |                                            |                                                             |
|                                                             |                                | (Principal Financial                                                                                                                                                                                                             |                                            |                                                             |
|                                                             |                                | and AccountingOfficer)                                                                                                                                                                                                                                    |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/Steven B.Gerber                                                                                                                                                                                                                                                  |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                             |
|        StevenB. Gerber,M.D.                                                                                                                                                                                                                               |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/George S.Oki                                                                                                                                                                                                                            |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                             |
|            GeorgeS. Oki                                                                                                                                                             |                                |                                                             |                                            |                                                             |
|                                                                  |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/Arnold E.Spangler                                                                                                                                                                                                                                                          |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                             |
|         ArnoldE.Spangler                                                                                                                                                                                               |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/Henry N. Wagner,Jr.                                                                                                                                                                                                                                                                            |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                             |
|      Henry N. Wagner,Jr.,M.D.                                                                                                                                                                                                                                                           |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/Gail R.Wilensky                                                                                                                                                                                                                                             |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                             |
|          Dr.Gail R.Wilensky                                                                                                                                                                                                                |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
|                                                             |                                |                                                             |                                            |                                                             |
| /s/Ronald A.Williams                                                                                                                                                                                                                                                               |                                | Director                                                                                                                     |                                            | Date: March 31,2002                                                                                                                                                                                                                                  |
|           RonaldA.Williams                                                                                                                                                                                                       |                                |                                                             |                                            |                                                             |

41

----

  

**INDEPENDENT AUDITORS’ REPORT**

The Board of Directorsand Stockholders, Syncor International Corporation

We have audited theaccompanying consolidated balance sheets of Syncor InternationalCorporation and subsidiaries as of December 31, 2001 and 2000, andthe related consolidated statements of income, stockholders’equity and comprehensive income and cash flows for each of theyears in the three-year period ended December 31, 2001. Theseconsolidated financial statements are the responsibility of theCompany’s management. Our responsibility is to express anopinion on these consolidated financial statements based on ouraudits.

We conducted ouraudits in accordance with auditing standards generally accepted inthe United States of America. Those standards require that we planand perform the audit to obtain reasonable assurance about whetherthe financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting theamounts and disclosures in the financial statements. An audit alsoincludes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overallfinancial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion, theconsolidated financial statements referred to above present fairly,in all material respects, the financial position of SyncorInternational Corporation and subsidiaries as of December 31, 2001and 2000, and the results of their operations and their cash flowsfor each of the years in the three-year period ended December 31,2001, in conformity with accounting principles generally acceptedin the United States of America.

As discussed in Note 1to the consolidated financial statements, effective July 1, 2001,the Company adopted the provisions of Statement of FinancialAccounting Standards (“SFAS”) No. 141, “BusinessCombinations,” and certain provisions of SFAS No. 142,“Goodwill and Other Intangible Assets,” as required forgoodwill and intangible assets, resulting from businesscombinations consummated after June 30, 2001.

  

                                                                                                                                               /s/KPMGLLP

Los Angeles,CaliforniaFebruary 15, 2002

  

42

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**MANAGEMENT’S REPORT**

The Management ofSyncor International Corporation is responsible for theconsolidated financial statements and all other informationpresented in this report. The consolidated financial statementshave been prepared in conformity with generally accepted accountingprinciples appropriate in the circumstances and, therefore,included in the consolidated financial statements are certainamounts based on management's informed estimates and judgments.Management is responsible for establishing and maintaining a systemof internal control designed to provide reasonable assurance as tothe integrity and reliability of financial reporting. The conceptof reasonable assurance is based on the recognition that there areinherent limitations in all systems of internal control, and thatthe cost of such systems should not exceed the benefits to bederived there from. Other financial information in this report isconsistent with that in the consolidated financial statements. Theconsolidated financial statements have been audited by SyncorInternational Corporation's independent certified publicaccountants and have been reviewed by the Audit Committee of theBoard of Directors.

43

----

**CONSOLIDATED BALANCESHEETS**
| (IN THOUSANDS EXCEPT PER SHARE DATA)                                                                    |            | DECEMBER 31, 2001 |            | DECEMBER 31, 2000 |   |
|---------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-------------------|--------------------------------------------------------------|-------------------|---|
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| ASSETS                                                                                                  |                                                              |                   |                                                              |                   |   |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| CurrentAssets:                                                                                          |                                                              |                   |                                                              |                   |   |
|      Cash and cash equivalents                                                 |                                                              | $17,634           |                                                              | $24,330           |   |
|      Short-terminvestments                                                     |                                                              | 11,908            |                                                              | 4,156             |   |
|      Trade receivables, lessallowance for doubtful                             |                                                              |                   |                                                              |                   |   |
|           accountsof $3,749 and $2,485, respectively  |                                                              | 102,759           |                                                              | 81,716            |   |
|      Patient receivables, lessallowance for doubtful                           |                                                              |                   |                                                              |                   |   |
|           accountsof $12,968 and $6,543, respectively |                                                              | 52,944            |                                                              | 37,686            |   |
|      Inventory                                                                 |                                                              | 30,630            |                                                              | 59,926            |   |
|      Prepaids and other currentassets                                          |                                                              | 31,521            |                                                              | 16,023            |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
|           Totalcurrent assets                         |                                                              | 247,396           |                                                              | 223,837           |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| Marketable investmentsecurities                                                                         |                                                              | 1,006             |                                                              | 1,190             |   |
| Property andequipment, net                                                                              |                                                              | 177,364           |                                                              | 114,286           |   |
| Excess of purchaseprice over net assets acquired, net of                                                |                                                              |                   |                                                              |                   |   |
|      accumulated amortization of$21,097 and $14,524, respectively              |                                                              | 141,333           |                                                              | 108,530           |   |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| Otherassets                                                                                             |                                                              | 20,742            |                                                              | 22,728            |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
|                                                                                                         |                                                              | 587,841           |                                                              | $470,571          |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| LIABILITIES ANDSTOCKHOLDERS' EQUITY                                                                     |                                                              |                   |                                                              |                   |   |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| CurrentLiabilities:                                                                                     |                                                              |                   |                                                              |                   |   |
|      Accounts payable                                                          |                                                              | $65,853           |                                                              | $83,683           |   |
|      Accruedliabilities                                                        |                                                              | 20,763            |                                                              | 22,371            |   |
|      Accrued wages and relatedcosts                                            |                                                              | 22,522            |                                                              | 19,796            |   |
|      Federal and state taxespayable                                            |                                                              | 6,482             |                                                              | 5,543             |   |
|      Current maturities oflong-term debt                                       |                                                              | 16,048            |                                                              | 12,091            |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
|           Totalcurrent liabilities                    |                                                              | 131,668           |                                                              | 143,484           |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| Long-term debt, net ofcurrent maturities                                                                |                                                              | 210,649           |                                                              | 137,886           |   |
| Deferredtaxes                                                                                           |                                                              | 10,696            |                                                              | 3,321             |   |
|                                                                                               |                                                              |                   |                                                              |                   |   |
| Stockholders'Equity:                                                                                    |                                                              |                   |                                                              |                   |   |
|      Common stock $.05 par value;authorized 200,000                            |                                                              |                   |                                                              |                   |   |
|           shares;issued 24,831 and 24,425 shares at   |                                                              |                   |                                                              |                   |   |
|           December31, 2001 and 2000, respectively     |                                                              | 1,420             |                                                              | 1,376             |   |
|      Additional paid-incapital                                                 |                                                              | 124,909           |                                                              | 107,268           |   |
|      Notes receivables fromrelated parties                                     |                                                              | (6,197            | )                                                            | (16,796           | ) |
|      Accumulated othercomprehensive loss                                       |                                                              | (3,653            | )                                                            | (1,245            | ) |
|      Employee savings and stockownership loan guarantee                        |                                                              | —           |                                                              | (1,685            | ) |
|      Retained earnings                                                         |                                                              | 151,888           |                                                              | 114,019           |   |
|   

     Treasury stock, at cost,3,575 and 3,072 shares              |                                                              |                   |                                                              |                   |   |
|           atDecember 31, 2001 and 2000, respectively  |                                                              | (33,539           | )                                                            | (17,057           | ) |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
|           Totalstockholders' equity                   |                                                              | 234,828           |                                                              | 185,880           |   |
|                                                                                                         |
|                                                                                               |                                                              |                   |                                                              |                   |   |
|                                                                                                         |                                                              | $587,841          |                                                              | $470,571          |   |
|                                                                                                         |

See accompanying Notesto Consolidated Financial Statements

44

----

**CONSOLIDATEDSTATEMENTS OF INCOME**
| (IN THOUSANDS,EXCEPT PER SHARE DATA)                             |            | YEARENDED DECEMBER 31, 2001 |            | YEARENDED DECEMBER 31, 2000 |            | YEARENDED DECEMBER 31, 1999 |   |
|------------------------------------------------------------------|--------------------------------------------------------------|-----------------------------|--------------------------------------------------------------|-----------------------------|--------------------------------------------------------------|-----------------------------|---|
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Net sales                                                        |                                                              | $774,718                    |                                                              | $629,394                    |                                                              | $520,309                    |   |
| Cost ofsales                                                     |                                                              | 479,735                     |                                                              | 404,548                     |                                                              | 350,988                     |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Gross profit                       |                                                              | 294,983                     |                                                              | 224,846                     |                                                              | 169,321                     |   |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Operating, selling andadministrative expenses                    |                                                              | 180,545                     |                                                              | 142,222                     |                                                              | 110,308                     |   |
| Depreciation andamortization                                     |                                                              | 39,561                      |                                                              | 26,309                      |                                                              | 19,515                      |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Operating income                   |                                                              | 74,877                      |                                                              | 56,315                      |                                                              | 39,498                      |   |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Other income(expense):                                           |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Interest income                    |                                                              | 2,265                       |                                                              | 2,298                       |                                                              | 2,188                       |   |
|      Interest expense                   |                                                              | (13,374                     | )                                                            | (10,248                     | )                                                            | (7,014                      | ) |
| Other, net                                                       |                                                              | (1,687                      | )                                                            | 863                         |                                                              | (756                        | ) |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Other income(expense), net                                       |                                                              | (12,796                     | )                                                            | (7,087                      | )                                                            | (5,582                      | ) |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Income before incometaxes                                        |                                                              | 62,081                      |                                                              | 49,228                      |                                                              | 33,916                      |   |
| Provision for incometaxes                                        |                                                              | 24,212                      |                                                              | 19,690                      |                                                              | 14,695                      |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Net income                                                       |                                                              | $37,869                     |                                                              | $29,538                     |                                                              | $19,221                     |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Net income per share– basic:                               |                                                              |                             |                                                              |                             |                                                              |                             |   |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Net income                         |                                                              | $1.54                       |                                                              | $1.23                       |                                                              | $0.82                       |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Weighted average sharesoutstanding |                                                              | 24,570                      |                                                              | 23,948                      |                                                              | 23,340                      |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
| Net income per share– diluted:                             |                                                              |                             |                                                              |                             |                                                              |                             |   |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Net income                         |                                                              | $1.40                       |                                                              | $1.11                       |                                                              | $0.75                       |   |
|                                                                  |
|                                                        |                                                              |                             |                                                              |                             |                                                              |                             |   |
|      Weighted average sharesoutstanding |                                                              | 27,029                      |                                                              | 26,657                      |                                                              | 25,478                      |   |
|                                                                  |

See accompanying Notesto Consolidated Financial Statements

45

----

  

**CONSOLIDATEDSTATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVEINCOME**
|                                               |                          |             |              |         |              |            |              |             |              | Accumulated Other    |              |            |              |          |              |          |              |                     |
|-----------------------------------------------|--------------------------|-------------|--------------|---------|--------------|------------|--------------|-------------|--------------|----------------------|--------------|------------|--------------|----------|--------------|----------|--------------|---------------------|
|                                               |                          |             |              |         |              |            |              |             |              | Comprehensive Income |              |            |              |          |              |          |              |                     |
|                                               |                          |             |              |         |              |            |              | Employee    |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
|                                               |                          |             |              |         |              |            |              | Savings     |              |                      |              |            |              |          |              |          |              | Notes               |  |  |  |
|                                               |                          |             |              |         |              |            |              | & Stock |              | Unrealized           |              | Foreign    |              |          |              |          |              | Receivable          |  |  |  |
|                                               |                          |             |              |         |              | Additional |              | Ownership   |              | Gain or              |              | Currency   |              |          |              |          |              | From                |  | Total |  |
|                                               |                          | CommonStock |              | Paid-In |              | Loan       |              | (Loss) on   |              | Translation          |              | Retained   |              | Treasury |              | Related  |              | Stockholders’ |  |
| (INTHOUSANDS)                                 |                          | Shares      |              | Amount  |              | Capital    |              | Guarantee   |              | Investments          |              | Adjustment |              | Earnings |              | Stock    |              | Parties             |  | Equity |  |
|                                               |
|                                     |      |             |    |         |    |            |    |             |    |                      |    |            |    |          |    |          |    |                     |    |  |  |
| Balance at December31, 1998                   |                          | 22,322      |              | $1,252  |              | $71,996    |              | $(5,056     | )            | $(317                | )            | $(210      | )            | $65,260  |              | $(12,524 | )            | $(9,028             | ) | $111,373 |  |
| Issuance of commonstock                       |                          | 1,578       |              | 78      |              | 15,865     |              |             |              |                      |              |            |              |          |              |          |              | (9,664              | ) | 6,279 |  |
| Tax benefit from theexercise of stock options |                          |             |              |         |              | 2,743      |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 2,743 |  |
| Reacquisition ofcommon stock for treasury     |                          | (74         | )            |         |              |            |              |             |              |                      |              |            |              |          |              | (1,082   | )            |                     |  | (1,082 | ) |
| Amortization of loanguarantee                 |                          |             |              |         |              |            |              | 1,686       |              |                      |              |            |              |          |              |          |              |                     |  | 1,686 |  |
| ComprehensiveIncome:                          |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Unrealized gain oninvestments                 |                          |             |              |         |              |            |              |             |              | 172                  |              |            |              |          |              |          |              |                     |  |  |  |
| Foreign currencytranslation adjustment        |                          |             |              |         |              |            |              |             |              |                      |              | (55        | )            |          |              |          |              |                     |  |  |  |
| Net income                                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              | 19,221   |              |          |              |                     |  |  |  |
| Total ComprehensiveIncome:                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 19,338 |  |
|                                               |
|                                     |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Balance at December31, 1999                   |                          | 23,826      |              | $1,330  |              | $90,604    |              | $(3,370     | )            | $(145                | )            | $(265      | )            | $84,481  |              | $(13,606 | )            | $(18,692            | ) | $140,337 |  |
| Issuance of commonstock                       |                          | 885         |              | 46      |              | 10,400     |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 10,446 |  |
| Tax benefit from theexercise of stock options |                          |             |              |         |              | 6,264      |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 6,264 |  |
| Reacquisition ofcommon stock for treasury     |                          | (286        | )            |         |              |            |              |             |              |                      |              |            |              |          |              | (3,451   | )            |                     |  | (3,451 | ) |
| Amortization of loanguarantee                 |                          |             |              |         |              |            |              | 1,685       |              |                      |              |            |              |          |              |          |              |                     |  | 1,685 |  |
| Payment from relatedparties                   |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              | 1,896               |  | 1,896 |  |
| ComprehensiveIncome:                          |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Unrealized gain oninvestments                 |                          |             |              |         |              |            |              |             |              | 138                  |              |            |              |          |              |          |              |                     |  |  |  |
| Foreign currencytranslation adjustment        |                          |             |              |         |              |            |              |             |              |                      |              | (973       | )            |          |              |          |              |                     |  |  |  |
| Net income                                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              | 29,538   |              |          |              |                     |  |  |  |
| Total ComprehensiveIncome:                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 28,703 |  |
|                                               |
|                                     |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Balance at December31, 2000                   |                          | 24,425      |              | $1,376  |              | $107,268   |              | $(1,685     | )            | $(7                  | )            | $(1,238    | )            | $114,019 |              | $(17,057 | )            | $(16,796            | ) | $185,880 |  |
| Issuance of commonstock                       |                          | 908         |              | 44      |              | 12,770     |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 12,814 |  |
| Tax benefit from theexercise of stock options |                          |             |              |         |              | 4,871      |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 4,871 |  |
| Reacquisition ofcommon stock for treasury     |                          | (502        | )            |         |              |            |              |             |              |                      |              |            |              |          |              | (16,482  | )            |                     |  | (16,482 | ) |
| Payment from relatedparties                   |                          |             |              |         |              |            |              |        |              |                      |              |            |              |          |              |          |              | 10,599              |  | 10,599 |  |
| Amortization of loanguarantee                 |                          |             |              |         |              |            |              | 1,685       |              |                      |              |            |              |          |              |          |              |                     |  | 1,685 |  |
| ComprehensiveIncome:                          |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Unrealized gain oninvestments                 |                          |             |              |         |              |            |              |             |              | 20                   |              |            |              |          |              |          |              |                     |  |  |  |
| Foreign currencytranslation adjustment        |                          |             |              |         |              |            |              |             |              |                      |              | (2,428     | )            |          |              |          |              |                     |  |  |  |
| Net income                                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              | 37,869   |              |          |              |                     |  |  |  |
| Total ComprehensiveIncome:                    |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  | 35,461 |  |
|                                               |
|                                     |                          |             |              |         |              |            |              |             |              |                      |              |            |              |          |              |          |              |                     |  |  |  |
| Balance at December31, 2001                   |                          | 24,831      |              | $1,420  |              | $124,909   |              | $0          |              | $13                  |              | $(3,666    | )            | $151,888 |              | $(33,539 | )            | $(6,197             | ) | $234,828 |  |
|                                               |

See accompanying Notesto Consolidated Financial Statements

46

----

  

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**
| (INTHOUSANDS)                                                                                        |       | YEARENDED DECEMBER 31, 2001 |       | YEARENDED DECEMBER 31, 2000 |      | YEARENDED DECEMBER 31, 1999 |   |
|------------------------------------------------------------------------------------------------------|--------------------------------|-----------------------------|--------------------------------|-----------------------------|--------------------------|-----------------------------|---|
|                                                                                                      |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Cash flows fromoperating activities:                                                                 |                                |                             |                                |                             |                          |                             |   |
| Net income                                                                                           |                                | $37,869                     |                                | $29,538                     |                          | $19,221                     |   |
| Adjustments toreconcile net income to net cash provided operatingactivities:                         |                                |                             |                                |                             |                          |                             |   |
|      Depreciation andamortization                                           |                                | 39,561                      |                                | 26,309                      |                          | 19,515                      |   |
|      Provision for losses onreceivables                                     |                                | 9,720                       |                                | 7,232                       |                          | 466                         |   |
|      Amortization of loanguarantee                                          |                                | 1,685                       |                                | 1,685                       |                          | 1,686                       |   |
|      Decrease (increase)in:                                                 |                                |                             |                                |                             |                          |                             |   |
|           Accountsreceivable – trade         |                                | (15,453                     | )                              | (9,690                      | )                        | (9,592                      | ) |
|           Accountsreceivable – patient       |                                | (22,251                     | )                              | (20,615                     | )                        | (1,348                      | ) |
|           Inventory                                |                                | 35,605                      |                                | (38,153                     | )                        | (10,219                     | ) |
|           Prepaidsand other current assets         |                                | (12,955                     | )                              | (626                        | )                        | (2,369                      | ) |
|           Otherassets                              |                                | (157                        | )                              | (3,966                      | )                        | (9,032                      | ) |
|      Increase (decrease)in:                                                 |                                |                             |                                |                             |                          |                             |   |
|           Accountspayable                          |                                | (20,513                     | )                              | 29,969                      |                          | 8,647                       |   |
|           Accruedliabilities                       |                                | 2,167                       |                                | 5,102                       |                          | 1,597                       |   |
|           Accruedwages and related costs           |                                | (3,514                      | )                              | 2,821                       |                          | 4,427                       |   |
|           Deferreditems                            |                                | 5,831                       |                                | —                     |                          | (312                        | ) |
|           Federaland state tax payable             |                                | 7,375                       |                                | 9,408                       |                          | 4,001                       |   |
|                                                                                                      |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
|           Netcash provided by operating activities |                                | 64,970                      |                                | 39,014                      |                          | 26,688                      |   |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Cash flows frominvesting activities:                                                                 |                                |                             |                                |                             |                          |                             |   |
|      Purchase of property andequipment, net                                 |                                | (64,892                     | )                              | (31,389                     | )                        | (24,463                     | ) |
|      Payments for acquisitions,net of cash                                  |                                | (54,779                     | )                              | (51,498                     | )                        | (18,031                     | ) |
|      Net (decrease) increase inshort-term investments                       |                                | (7,726                      | )                              | 4,368                       |                          | (3,823                      | ) |
|      Net decrease (increase) inlong-term investments                        |                                | 260                         |                                | (5                          | )                        | 6                           |   |
|      Unrealized gain ininvestments                                          |                                | 20                          |                                | 138                         |                          | 171                         |   |
|                                                                                                      |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
|       Net cash used ininvesting activities                             |                                | (127,117                    | )                              | (78,386                     | )                        | (46,140                     | ) |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Cash flows fromfinancing activities:                                                                 |                                |                             |                                |                             |                          |                             |   |
|      Issuance of commonstock                                                |                                | 12,814                      |                                | 10,445                      |                          | 6,279                       |   |
|      Reacquisition of commonstock                                           |                                | (16,482                     | )                              | (3,451                      | )                        | (1,082                      | ) |
|      Proceeds from long-termdebt                                            |                                | 62,657                      |                                | 44,270                      |                          | 23,643                      |   |
|      Repayment of long-termdebt                                             |                                | (13,713                     | )                              | (2,420                      | )                        | (9,955                      | ) |
|      Note receivable relatedparties                                         |                                | 10,599                      |                                | 1,896                       |                          | —                     |   |
|                                                                                                      |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
|      Net cash provided byfinancing activities                               |                                | 55,875                      |                                | 50,740                      |                          | 18,885                      |   |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Net (decrease)increase in cash and cash equivalents                                                  |                                | (6,272                      | )                              | 11,368                      |                          | (567                        | ) |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Effect of exchangerate on cash                                                                       |                                | (424                        | )                              | (390                        | )                        | 95                          |   |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Cash and cashequivalents at beginning of period                                                      |                                | 24,330                      |                                | 13,352                      |                          | 13,824                      |   |
|                                                                                            |                                |                             |                                |                             |                          |                             |   |
| Cash and cashequivalents at end of period                                                            |                                | $17,634                     |                                | $24,330                     |                          | $13,352                     |   |
|                                                                                                      |

See accompanying Notesto Consolidated Financial Statements

47

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**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

Oursignificant accounting policies are as follows:

**RevenueRecognition*.***Werecognize our revenue primarily from two sources: (i) productrevenue, which includes sales from our radiopharmacies and (ii)services revenue, primarily from our imaging business. As describedbelow, significant judgments and estimates must be used bymanagement in connection with the revenue recognized in any periodfor the imaging business. Material differences may impact theamount of revenue recorded in any period if management judgments orestimates that are significantly different than actual.

We provideimaging services to patients that generally have medical insurancethrough a governmental payor, managed care payor, or a commercialthird-party payor.  Our Medical imaging business has severalhundred contracts.  These contracts can change or be amendedfrequently due to changes in the payors or governmental agenciesreimbursement.  Additionally, as we acquire medical imagingcenters, new contracts have to be entered into our computersystems.  If the contracts have not been updated in oursystems, we need to make estimates about the anticipated contractedamounts that we will ultimately receive from all of our variouspayors.  This requires us to record estimates when recordingimaging revenues based upon historical data and trends.  These estimates have to be continually evaluated and compared toactual reimbursements from the various payors to ensure that wehave properly recorded revenues and appropriately adjusted forshifts in our payor mix.  Accordingly, these recorded revenuesare based on current information available, but subject toestimation, which may lead to adjustments in future periods asactual reimbursement rates are determined, such adjustments havenot been material in 2001 and 2000.

**Estimating Valuation Allowances for DoubtfulAccounts***.*The preparation of financialstatements requires our management to make estimates andassumptions on the collectibility of our accounts receivable.Management specifically analyzes historical bad debts, customerconcentrations, customer credit-worthiness, current economictrends, aging of accounts and changes in payment terms whenevaluating the adequacy of the allowance for doubtful accounts. Anychanges in these estimates or assumptions could cause materialdifferences in recorded allowances.

**Valuation of Long-LivedAssets and Goodwill*.*** We assess the impairment of identifiableintangibles, long-lived assets and related goodwill and enterpriselevel goodwill whenever events or changes in circumstances indicatethat the carrying value may not be recoverable. Factors we considerimportant which could trigger an impairment review include thefollowing:
|   | •     | significantunderperformance relative to expected historical or projectedfuture operating results;           |
|--------|--------------------------------|-------------------------------------------------------------------------------------------------------------|
|   |                                |                                                                                                             |
|   | •     | significantchanges in the manner of our use of the acquired assets or thestrategy for our overall business; |
|   |                                |                                                                                                             |
|   | •     | significantnegative industry or economic trends;                                                            |
|   |                                |                                                                                                             |
|   | •     | our marketcapitalization relative to net book value.                                                        |

When wedetermine that the carrying value of intangibles, long-lived assetsand related goodwill and enterprise level goodwill may not berecoverable based upon the existence of one or more of the aboveindicators of impairment, we measure any impairment based on aprojected undiscounted cash flow method using a discount ratedetermined by our management to be commensurate with the riskinherent in our current business model. Net intangible assets,long-lived assets, and goodwill amounted to $339.5 million asof December 31, 2001.

48

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The cost inexcess of net assets of acquired businesses is being amortized on astraight-line basis over periods of 15 to 40 years.

In the firstquarter of 2002, Statement of Financial Accounting Standards(“SFAS”) No. 142, “Goodwill and Other IntangibleAssets” will become effective and as a result, we will ceaseto amortize approximately $162.1 million of goodwill. We hadrecorded approximately $6.6 million, $4.5 million, and $4.9million of goodwill amortization during 2001, 2000 and 1999,respectively.  We would have recorded approximately$7.0 million of goodwill amortization during 2002. Under theprovisions of the Statement, we did not record amortization relatedto the six post-June 30, 2001 acquisitions. Such amortization wouldhave amounted to $0.9 million. In lieu of amortization, we arerequired to perform an initial impairment review of our goodwill in2002 and an annual impairment review thereafter. We expect tocomplete our initial review during the second quarter of2002.

We currently do not expectto record an impairment charge upon completion of the initialimpairment review. However, there can be no assurance that at thetime the review is completed a material impairment charge will notbe recorded.  

**Principles ofConsolidation:**  The consolidated financial statements include theassets, liabilities and operations of the Company and itssubsidiaries. All significant inter-company accounts andtransactions have been eliminated in consolidation.

**Cash and CashEquivalents and Short-Term Investments:**  The Company considers all highlyliquid investments purchased with an original maturity of threemonths or less to be cash equivalents. Short-term investmentsconsist principally of time deposits and tax-exempt municipalsecurities and are carried at cost, which approximates marketvalue.

**FinancialInstruments:**  The carrying value of financial instruments such ascash and cash equivalents, trade receivables, payables and floatingrate short and long-term debt, approximate fair value.

**Patient Revenuesand Receivables:**  The Company's medical imaging facilities haveentered into agreements with third-party payors, includinggovernment programs and managed care health care plans, under whichthe facilities are paid based upon established charges,predetermined rates per service or discounts from establishedcharges.

Revenues are recordedat estimated amounts due from patients and third-party payors forthe services provided.  Management believes that adequateprovisions have been made for any potential adustments.

During the years endedDecember 31, 2001, 2000 and 1999 approximately 15.5%, 11.4% and9.1% of the Company's patient revenues related to patientsparticipating in the Medicare and Medicaid programs. The Companydoes not believe that there are any other significantconcentrations of revenues from any particular payor that wouldsubject the Company to any significant credit risk in thecollection of its patient accounts receivable.

**Inventory:**  Inventories, primarily consisting of purchasedproducts, are stated at the lower of cost (first-in, first-out) ormarket.

**Property andEquipment:**  Property and equipment are stated at cost anddepreciated or amortized on a straight-line basis over estimateduseful lives ranging from two to fifteen years.

**Self Insurance:**  The Company historically has purchased insurance inexcess of self-insured retentions or deductibles for losses andliabilities related to vehicle claims, medical claims and generalproduct liability claims. Losses accrued under self-insured anddeductible plans are based upon the Company’s estimates ofaggregated liability claims incurred using certain actuarialassumptions followed in the insurance industry and the Company'sown experience.

**MarketableInvestment Securities:**  Marketable investment securities consistprimarily of corporate debt and United States governmentobligations. The Company classifies debt and marketable equitysecurities in one of three categories: trading, available-for-saleor held-to-maturity. Trading securities are bought and heldprincipally for the purpose of selling them in the near term.Held-to-maturity securities are those securities that the Companyhas the ability and intent to hold until maturity. All othersecurities not included in trading or held-to-maturity areclassified as available-for-sale.

Held-to-maturitysecurities are recorded at amortized cost, adjusted for theamortization or accretion of premiums or discounts. Unrealizedholding gains and losses on trading securities are included inearnings. Unrealized holding gains and losses, net of the relatedtax effect, on available-for-sale securities are excluded fromearnings and are reported as a component of accumulated othercomprehensive income until realized.

49

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**Foreign CurrencyTranslation:**  Assets and liabilities of foreign operations aretranslated into U.S. dollars based upon the prevailing exchangerates in effect at the balance sheet date. Foreign exchange gainsand losses resulting from these translations are included as acomponent of accumulated other comprehensive income. Actual gainsor losses incurred on currency transactions in other than thecountry's functional currency are included in net incomecurrently.  During 2001, the Company’s fixed assetsdecreased by $2.1 million due to currency translation adjustmentswhen we corrected our policy of using historical exchange rates tocurrent exchanges rates.  This change did not have an earningsimpact but impacted the valuation of fixed assets of ourInternational business and accumulated other comprehensive incomeon the balance sheet.

**StockOptions:** The Company measures stock-based compensation using the intrinsicvalue method, which assumes that options granted at market price atthe date of grant have no intrinsic value. Proforma net income andearnings per share are presented in Note 9 as if the fair valuemethod had been applied.

**IncomeTaxes:**Incometaxes are accounted for under the asset and liability method.Deferred tax assets and liabilities are recognized for the futuretax consequences attributable to differences between the financialstatement carrying amounts of existing assets and liabilities andtheir respective tax bases. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to apply to taxableincome in the years in which those temporary differences areexpected to be recovered or settled. The effect on deferred taxassets and liabilities of a change in tax rates is recognized inincome in the period that includes the enactment date.

**Use ofEstimates:**  The Company’s management has made a number ofestimates and assumptions relating to the reporting of assets andliabilities, the reporting of sales and expenses and the disclosureof contingent assets and liabilities to prepare these financialstatements in conformity with generally accepted accountingprinciples. Actual results could differ from thoseestimates.

**Reclassifications:**  Certain items in the prior years’consolidated financial statements have been reclassified to conformto the current year's presentation.

**NewAccounting Standards.** In July 2001, the FASB issued Statement No. 141, BusinessCombinations, and Statement No. 142, Goodwill and Other IntangibleAssets.  Statement 141 requires that the purchase method ofaccounting be used for all business combinations initiated afterJune 30, 2001 as well as all purchase method business combinationscompleted after June 30, 2001.  Statement 141 also specifiescriteria intangible assets acquired in a purchase method businesscombination must meet to be recognized and reported apart fromgoodwill, noting that any purchase price allocable to an assembledworkforce may not be accounted for separately.  Statement 142will require that goodwill and intangible assets with indefiniteuseful lives no longer be amortized, but instead tested forimpairment at least annually in accordance with the provisions ofStatement 142.  Statement 142 will also require thatintangible assets with definite useful lives be amortized overtheir respective estimated useful lives to their estimated residualvalues, and reviewed for impairment in accordance with SFAS No.121, Accounting for the Impairment of Long-Lived Assets and forLong-Lived Assets to Be Disposed Of. 

The Companyis required to adopt the provisions of Statement 141 immediately,except with regard to business combinations initiated prior to July1, 2001, which it expects to account for using thepooling-of-interests method, and Statement 142 effective January 1,2002.   Furthermore, any goodwill and any intangibleasset determined to have an indefinite useful life that areacquired in a purchase business combination completed after June30, 2001 will not be amortized, but will continue to be evaluatedfor impairment in accordance with the appropriate pre-Statement 142accounting literature.  Goodwill and intangible assetsacquired in business combinations completed before July 1, 2001will continue to be amortized prior to the adoption of Statement142.

Statement141 will require upon adoption of Statement 142, that the Companyevaluate its existing intangible assets and goodwill that wereacquired in a prior purchase business combination, and to make anynecessary reclassifications in order to conform with the newcriteria in Statement 141 for recognition apart fromgoodwill.  Upon adoption of Statement 142, the Company will berequired to reassess the useful lives and residual values of allintangible assets acquired in purchase business combinations, andmake any necessary amortization period adjustments by the end ofthe first interim period after adoption.  In addition, to theextent an intangible asset is identified as having an indefiniteuseful life, the Company will be required to test the intangibleasset for impairment in accordance with the provisions of Statement142 within the first interim period.  Any impairment loss willbe measured as of the date of adoption and recognized as thecumulative effect of a change in accounting principle in the firstinterim period.

50

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Inconnection with the transitional goodwill impairment evaluation,Statement 142 will require the Company to perform an assessment ofwhether there is an indication that goodwill is impaired as of thedate of adoption.  To accomplish this the Company mustidentify its reporting units and determine the carrying value ofeach reporting unit by assigning the assets and liabilities,including the existing goodwill and intangible assets, to thosereporting units as of the date of adoption.  The Company willthen have up to six months from the date of adoption to determinethe fair value of each reporting unit and compare it to thereporting unit’s carrying amount.  To the extent areporting unit’s carrying amount exceeds its fair value, anindication exists that the reporting unit’s goodwill may beimpaired and the Company must perform the second step of thetransitional impairment test.

In thesecond step, the Company must compare the implied fair value of thereporting unit’s goodwill, determined by allocating thereporting unit’s fair value to all of it assets (recognizedand unrecognized) and liabilities in a manner similar to a purchaseprice allocation in accordance with Statement 141, to its carryingamount, both of which would be measured as of the date ofadoption.   This second step is required to be completedas soon as possible, but no later than the end of the year ofadoption.  Any transitional impairment loss will be recognizedas the cumulative effect of a change in accounting principle in theCompany’s statement of earnings. 

In August2001, the Financial Accounting Standards Board issued FASBStatement No. 144, *Accounting for the Impairment or Disposal ofLong-Lived Assets* (Statement 144), which supersedes both FASBStatement No. 121, *Accounting for the Impairment of Long-LivedAssets and for Long-Lived Assets to Be Disposed Of* (Statement121) and the accounting and reporting provisions of APB Opinion No.30, *Reporting the Results of Operations—Reporting theEffects of Disposal of a Segment of a Business, and Extraordinary,Unusual and Infrequently Occurring Events and Transactions*(Opinion 30), for the disposal of a segment of a business (aspreviously defined in that Opinion).  Statement 144 retainsthe fundamental provisions in Statement 121 for recognizing andmeasuring impairment losses on long-lived assets held for use andlong-lived assets to be disposed of by sale, while also resolvingsignificant implementation issues associated with Statement121.  Statement 144 retains the basic provisions of Opinion 30on how to present discontinued operations in the income statementbut broadens that presentation to include a component of an entity(rather than a segment of a business).  Unlike Statement 121,an impairment assessment under Statement 144 will never result in awrite-down of goodwill.  Rather, goodwill is evaluated forimpairment under Statement No. 142, *Goodwill and OtherIntangible Assets.*

The Companyis required to adopt Statement 144 no later than the year beginningafter December 15, 2001.  Accordingly, the Company will adoptStatement 144 in the first quarter of 2002.  Management doesnot expect the adoption of Statement 144 for long-lived assets heldfor use to have a material impact on the Company’s financialstatements because the impairment assessment under Statement 144 islargely unchanged from Statement 121.  The provisions of theStatement for assets held for sale or other disposal generally arerequired to be applied prospectively after the adoption date tonewly initiated disposal activities.Wecurrently do not expect to record an impairment charge uponcompletion of the initial impairment review. However, there can beno assurance that at the time the review is completed a materialimpairment charge will not be recorded.

**Note 2. ACQUISITIONS**

During 2000 and 2001,the Company made several acquisitions.   Our 2000acquisitions were made primarily by CMI, our U.S. medical imagingsubsidiary.  During 2001, significant acquisitions were madeby Syncor Overseas Ltd., our International subsidiary, by our USPharmacy business, and by CMI.

**2001Acquisitions:**

During January 2001,we acquired three imaging center sites in California for a purchaseprice of $13.4 million.

In March 2001, weacquired a Gamma knife venture in Brazil for a purchase price of$2.0 million and a distributor of radiopharmceuticals in NewZealand for a purchase price of $0.3 million plus the assumption of$0.2 million of debt.

During May 2001, weentered a management service agreement with an oncology clinic inBrazil for an investment of $1.8 million.

During June 2001, weacquired a distributor and manufacturer of diagnosticradiopharmeceuticals in Australia for an acquisition price of $0.7million.

51

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During July 2001, weacquired a manufacturer of radiation detection and measurementequipment in Ohio for an acquisition price of $10.8 million. We also acquired two imaging centers in Texas for $4.3 million plusthe assumption of $3.6 million of debt. In addition, we acquired animaging center in Florida for a purchase price of  $5.1million plus the assumption of $2.0 million of debt.

During September 2001,we acquired a cardiovascular service company in North Carolina foran acquisition price of $13.7 million plus the assumption of $0.2million of debt. In addition, we acquired a radiology andcardiology distribution company in Belgium for an acquisition priceof $2.0 million.

During October 2001,we acquired a nuclear services company for an acquisition price of$0.8 million.

**2000Acquisitions:**

During March 2000, weacquired four imaging center sites.  The first was theacquisition of three sites previously managed by CMI for a price of$2.1 million plus the assumption of $2.7 million in debt.  Thesecond was a site acquisition in Boynton Beach, FL for a purchaseprice of $0.2 million plus the assumption of $1.3 million indebt.

During April 2000, weacquired the remaining interest in seven managed imaging centersites for a total acquisition price of $8.7 million plus theassumption of $1.0 million of debt.

During September 2000,we acquired thirteen imaging centers located in California andFlorida for a total acquisition price of $31 million plus theassumption of $1.3 million in debt.  In addition, the Companyacquired certain PET production facilities for an acquisition priceof $0.9 million plus the assumption of $5.8 million indebt.

During November 2000,we acquired an imaging center and a catheterization laboratory inTrinidad and Tobago for an acquisition price of $2.0 million. In addition, we acquired a nuclear medicine business in Puerto Ricofor $0.75 million.  In December 2000, we acquired an imagingcenter in Phoenix, AZ for an acquisition price of $4.7 million plusthe assumption of $4.2 million in debt.

The following tablerepresents the allocation of purchase price for acquisitions in2001 and 2000:
|                         |                                                              | Allocation of Acquisitions            PurchasePrice             |                                                              |
|-------------------------|--------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|
|                         |                                                              | 2001                                                                                                                                                                                    |                                                              | 2000 |   |   |
|                         |                                                         |
| AccountsReceivable      |            | $8,510                                                                                                                                                                                  |            | $6,822 |  |   |
| Goodwill                |                                                              | 37,762                                                                                                                                                                                  |                                                              | 35,608 |  |   |
| Inventory               |                                                              | 6,374                                                                                                                                                                                   |                                                              | - |  |   |
| Property &Equipment |                                                              | 10,854                                                                                                                                                                                  |                                                              | 32,354 |  |   |
| OtherLiabilities        |                                                              | (2,823                                                                                                                                                                                  | )                                                            | (7,280 | ) |   |
|                         |                                                         |
|                         |                                                              |                                                                                                                                                                                         |                                                              |  |  |   |
| Sub-Total               |                                                              | 60,677                                                                                                                                                                                  |                                                              | 67,504 |  |   |
|                         |                                                              |                                                                                                                                                                                         |                                                              |  |  |   |
| Less Assumption ofDebt  |                                                              | (5,898                                                                                                                                                                                  | )                                                            | (16,006 | ) |   |
|                         |                                                         |
| Total                   |                                                              | $54,779                                                                                                                                                                                 |                                                              | $51,498 |  |   |
|                         |                                                         |

The Company accountedfor these transactions as purchases and the purchase prices wereallocated as indicated above.  Goodwill for these acquisitionsis being amortized from 15 to 20 years period.  The results ofoperations related to the above 2001 and 2000 transactions areincluded in the Company’s consolidated financial statementsfrom the effective acquisition dates.

The followingunaudited pro forma information presents a summary of ourconsolidated results of operation’s for 2001 and 2000 as ifthe acquisitions had occurred at the beginning of thoseyears.

52

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| (IN THOUSANDS, EXCEPT PER SHARE)                      |            | YEAREND DECEMBER 31, 2001                 |            | YEAREND DECEMBER 31, 2000                 |
|-------------------------------------------------------|--------------------------------------------------------------|-------------------------------------------|--------------------------------------------------------------|-------------------------------------------|
|                                                       |
|                                             |                                                              |                                           |                                                              |                                           |
| Sales                                                 |                                                              | $810,543                                  |                                                              | $679,093                                  |
| Netearnings                                           |                                                              | $  39,428                       |                                                              | $  30,755                       |
| Net earnings perdiluted share (continuing operations) |                                                              | $      1.46 |                                                              | $      1.15 |

  

These unauditedproforma results have been prepared for comparative purposes onlyand do not purport to be indicative of the results of operationsthat would have occurred or the future results of operations of theconsolidated entities.

  

**Note 3. PROPERTY AND EQUIPMENT, NET**

The major classes ofproperty were as follows:
|                                               |            | DECEMBER31,         |            | DECEMBER31,         |   |
|-----------------------------------------------|--------------------------------------------------------------|---------------------|--------------------------------------------------------------|---------------------|---|
| (INTHOUSANDS)                                 |                                                              | 2001                |                                                              | 2000                |   |
|                                               |
|                                     |                                                              |                     |                                                              |                     |   |
| Land andbuildings                             |                                                              | $  17,962 |                                                              | $  14,197 |   |
| Furniture andequipment                        |                                                              | 197,934             |                                                              | 142,486             |   |
| Leaseholdimprovements                         |                                                              | 44,609              |                                                              | 27,290              |   |
| Construction inprogress                       |                                                              | 16,161              |                                                              | 7,463               |   |
|                                               |
|                                     |                                                              |                     |                                                              |                     |   |
|                                               |                                                              | 276,666             |                                                              | 191,436             |   |
|                                               |
| Less accumulateddepreciation and amortization |                                                              | (99,302             | )                                                            | (77,150             | ) |
|                                     |                                                              |                     |                                                              |                     |   |
|                                               |
|                                               |                                                              | $177,364            |                                                              | $114,286            |   |
|                                               |

  

**Note 4. MARKETABLE INVESTMENT SECURITIES**

Marketable investmentsecurities consist of:
|                                                      |                      | DECEMBER31, |                 | DECEMBER31, |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------------------------|-------------|
| (INTHOUSANDS)                                        |                                                                                                                          | 2001        |                                                                                            | 2000        |
|                                                      |
| Available-for-sale, at fair value, net of tax effect |                                                                                                                          | $506        |                                                                                            | $690        |
| Held-to-maturity, atamortized cost                   |                                                                                                                          | $500        |                                                                                            | 500         |
|                                                      |
|                                            |                                                                                                                          |             |                                                                                            |             |
|                                                      |                                                                                                                          | $1,006      |                                                                                            | $1,190      |
|                                                      |

53

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The amortized cost,gross unrealized holding gains and losses and fair value foravailable-for-sale and held-to-maturity securities by majorsecurity type at December 31, 2001 and 2000 were asfollows:

  
|                          |                                |                  | 2001UNREALIZED                 |
|--------------------------|--------------------------------|------------------|--------------------------------|
| (IN THOUSANDS)           |       | AMORTIZED COST   |       | HOLDING GAINS |       | HOLDING LOSSES |       | FAIR VALUE |
|                          |
| Available-for-sale:      |                                |                  |                                |  |  |  |  |  |
| Corporate debtsecurities |                                | $  493 |                                | $13 |  | $— |  | $  506 |
|                          |
| Held-to-maturity:        |                                |                  |                                |  |  |  |  |  |
| U.S. Treasurysecurities  |                                | 500              |                                | $— |  | $— |  | 500 |
|                          |
|                          |                                | $  993 |                                | $13 |  | $— |  | $1,006 |
|                          |
|                |                                |                  |                                |  |  |  |  |  |
|                          |                                |                  | 2000UNREALIZED                 |
| (IN THOUSANDS)           |                                | AMORTIZED COST   |                                | HOLDING GAINS |  | HOLDING LOSSES |  | FAIR VALUE |
|                          |
| Available-for-sale:      |                                |                  |                                |  |  |  |  |  |
| Corporate debtsecurities |                                | $  697 |                                | $— |  | $ (7 | ) | $  690 |
|                          |
| Held-to-maturity:        |                                |                  |                                |  |  |  |  |  |
| U.S. Treasurysecurities  |                                | 500              |                                | — |  | — |  | 500 |
|                          |
|                          |                                | $1,197           |                                | — |  | $ (7 | ) | $1,190 |
|                          |

  

The unrealized holdinglosses on held-to-maturity securities have not been recognized inthe accompanying consolidated financial statements.

Maturities ofinvestment securities classified as available-for-sale andheld-to-maturity at December 31, 2001 and 2000 were asfollows:

  
|                                       |                                | 2001                       |                                                                    | 2000                       |
|---------------------------------------|--------------------------------|----------------------------|--------------------------------------------------------------------|----------------------------|
| (IN THOUSANDS)                        |       | AMORTIZED COST             |             | FAIR VALUE                 |             | AMORTIZED COST |             | FAIR VALUE |
|                                       |
| Available-for-sale:                   |                                |                            |                                                                    |                            |  |  |  |  |
| Due after one year throughfive years  |                                | $493                       |                                                                    | $506                       |  | $499 |  | $499 |
| Due after five yearsthrough ten years |                                | $    0 |                                                                    | $    0 |  | $198 |  | $191 |
|                                       |
|                                       |                                |                            |                                                                    |                            |  |  |  |  |
| Held-to-maturity:                     |                                |                            |                                                                    |                            |  |  |  |  |
| Due within oneyear                    |                                | $500                       |                                                                    | $500                       |  | $500 |  | $500 |
|                                       |

  

**Note 5.  LINEOF CREDIT**

At December 31, 2001,the Company had an unsecured revolving line of credit forshort-term borrowings aggregating $200,000,000. The line of creditwas increased from $150,000,000 to $200,000,000 effective May 10,2001. The terms of this revolving credit line include two interestrate borrowing options, the Eurodollar rate plus an applicablemargin or the bank's Prime rate (4.75 percent at December 31,2001). At December 31, 2001, the availability of the line of creditwas reduced by $2.0 million as a result of outstanding standbyletters of credit resulting in available credit of $28.5 million.To maintain this line of credit, the Company is required to pay aquarterly commitment fee of 1/4 of one percent per annum on theunused portion.

54

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The line of creditagreement specifies that certain covenants be maintained, includinglimitations on investments and acquisitions, new borrowings andissuance of new stock. Certain financial ratios also need to bemaintained under this agreement, including minimum Net Worth,EBITDA ratio and Fixed Charge Coverage ratio. At December 31, 2001,the Company was in compliance with all debt covenants under thecredit line agreement.

**  **

**Note 6. LONG-TERM DEBT**

The Company'slong-term debt was as follows:
|                                                                                                         |            | DECEMBER31,        |            | DECEMBER31,                              |
|---------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|--------------------|--------------------------------------------------------------|------------------------------------------|
| (INTHOUSANDS)                                                                                           |                                                              | 2001               |                                                              | 2000                                     |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Notes payable,unsecured, payable in installments through 2015,                                          |                                                              |                    |                                                              |                                          |
|      with effective interest ratesranging from 2.15% to 9%                     |                                                              | $  2,905 |                                                              | $      905 |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Note payable,unsecured, payable in installments through 2001,                                           |                                                              |                    |                                                              |                                          |
|      with a floating interest rateof either the lower of prime rate or         |                                                              |                    |                                                              |                                          |
|      LIBOR plus .75%, 6.57% atDecember 31, 2000                                |                                                              | 0                  |                                                              | 1,685                                    |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Notes payable,secured, payable in installments through 2003,                                            |                                                              |                    |                                                              |                                          |
|      with a non-interest bearingrate, net of unamortized discount              |                                                              |                    |                                                              |                                          |
|      at 8.38% to 9.58% of $11 and$47 at December 31, 2001                      |                                                              |                    |                                                              |                                          |
|      and 2000,respectively                                                     |                                                              | 2,017              |                                                              | 2,519                                    |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Note payable,unsecured, payable in installments through 2002,                                           |                                                              |                    |                                                              |                                          |
|      with a floating interest rateof LIBOR plus .95%, 2.85% and                |                                                              |                    |                                                              |                                          |
|      7.39% at December 31, 2001and 2000, respectively                          |                                                              | 4,575              |                                                              | 5,275                                    |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Note payable,unsecured, payable in lump sum on May 1, 2006                                              |                                                              |                    |                                                              |                                          |
|      with a floating interest rateof LIBOR plus 1.625% or prime rate,          |                                                              |                    |                                                              |                                          |
|      with interest rates rangingfrom 3.56% to 3.88% at December 31, 2001       |                                                              |                    |                                                              |                                          |
|      and with average interestrate for 2001 of  6.37%, and 7.82% for 2000 |                                                              | 169,450            |                                                              | 108,100                                  |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Notes payable, payablein varying installments through 2012                                              |                                                              |                    |                                                              |                                          |
|      with effective interest ratesranging from 5.28% to 12.01%                 |                                                              | 5,460              |                                                              | 6,817                                    |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Non-Compete agreementpaid in varying installments through 2002,                                         |                                                              |                    |                                                              |                                          |
|      with effective interest rateof 6%                                         |                                                              | 20                 |                                                              | 264                                      |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Capital Leaseobligations, payable in installments through 2006,                                         |                                                              |                    |                                                              |                                          |
|      with effective interest ratesfrom 5.50% to 15.57%                         |                                                              | 42,270             |                                                              | 24,412                                   |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Total debt                                                                                              |                                                              | 226,697            |                                                              | 149,977                                  |
|                                                                                                         |
|                                                                                                         |                                                              |                    |                                                              |                                          |
| Less currentmaturities of long-term debt                                                                |                                                              | 16,048             |                                                              | 12,091                                   |
|                                                                                                         |
|                                                                                               |                                                              |                    |                                                              |                                          |
| Long-term debt, net ofcurrent maturities                                                                |                                                              | $210,649           |                                                              | $137,886                                 |
|                                                                                                         |

55

----

At December 31, 2001,long-term debt maturing over the next five years is as follows:2002, $16,048; 2003, $17,238; 2004, $10,298; 2005, $7,948; 2006,$172,553; and $2,612 thereafter.

Interest paid was$13,148, $10,128, and $6,945 for the years ended December 31, 2001,2000 and 1999, respectively.

  

**Note 7. INCOME TAXES**

Total income taxexpense for the years ended December 31, 2001, 2000 and 1999 wasallocated as follows:
|                                                                                                                                                                                  |           | YEARENDED   |        | YEARENDED   |        | YEARENDED   |      |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|-------------|--------------------------------------|-------------|--------------------------------------|-------------|--------------------------|
|                                                                                                                                                                                  |                                                        | DECEMBER31, |                                      | DECEMBER31, |                                      | DECEMBER31, |                          |
| (INTHOUSANDS)                                                                                                                                                                    |                                                        | 2001        |                                      | 2000        |                                      | 1999        |                          |
|                                                                                                                                                                                  |
|                                                                                                                                                                        |                                                        |             |                                      |             |                                      |             |                          |
| Domesticincome                                                                                                                                                                   |                                                        | $22,695     |                                      | $18,155     |                                      | $13,914     |                          |
| Foreignincome                                                                                                                                                                    |                                                        | 1,517       |                                      | 1,535       |                                      | 781         |                          |
| Total income fromcontinuing operations                                                                                                                                           |                                                        | 24,212      |                                      | 19,690      |                                      | 14,695      |                          |
| Stockholders' equityfor compensation expense for tax      purposes in excess of amountsrecognized for financial      reporting |                                                        | (4,871      | )                                    | (6,264      | )                                    | (2,743      | )                        |
|                                                                                                                                                                                  |
|                                                                                                                                                                        |                                                        |             |                                      |             |                                      |             |                          |
|                                                                                                                                                                                  |                                                        | $19,341     |                                      | $13,426     |                                      | $11,952     |                          |
|                                                                                                                                                                                  |

Income tax expense(benefit) attributable to income from continuing operationsconsisted of:
| (IN THOUSANDS)                        |                      | YEARENDED DECEMBER 31, 2001 |            | YEARENDED DECEMBER 31, 2000 |            | YEARENDED DECEMBER 31, 1999 |
|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------|-----------------------------|--------------------------------------------------------------|-----------------------------|--------------------------------------------------------------|-----------------------------|
|                                       |
|                             |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
| Current:                              |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
|      Federal |                                                                                                                          | $15,328                     |                                                              | $16,963                     |                                                              | $9,281                      |
|      Foreign |                                                                                                                          | 1,517                       |                                                              | 1,551                       |                                                              | 781                         |
|      State   |                                                                                                                          | 3,038                       |                                                              | 3,863                       |                                                              | 2,324                       |
|                                       |
|                             |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
|                                       |                                                                                                                          | 19,883                      |                                                              | 22,377                      |                                                              | 12,386                      |
|   

Deferred:               |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
|      Federal |                                                                                                                          | 3,476                       |                                                              | (2,212                      | )                                                            | 2,163                       |
|      Foreign |                                                                                                                          | 0                           |                                                              | (16                         | )                                                            | 0                           |
|      State   |                                                                                                                          | 853                         |                                                              | (459                        | )                                                            | 146                         |
|                                       |
|                             |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
|                                       |                                                                                                                          | 4,329                       |                                                              | (2,687                      | )                                                            | 2,309                       |
|                                       |
|                             |                                                                                                                          |                             |                                                              |                             |                                                              |                             |
|                                       |                                                                                                                          | $24,212                     |                                                              | $19,690                     |                                                              | $14,695                     |
|                                       |

56

----

The amounts differedfrom the amounts computed by applying the federal income tax rateof 35 percent to pretax income from continuing operations as aresult of the following:

  
|                                                                                                             |            | YEARENDED DECEMBER 31, 2001 |          | YEARENDED DECEMBER 31, 2000 |          | YEARENDED DECEMBER 31, 1999 |   |
|-------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------|-----------------------------|--------------------------------------------------|-----------------------------|--------------------------------------------------|-----------------------------|---|
|                                                                                                             |                                                              |                             |                                                  |                             |
| (INTHOUSANDS)                                                                                               |                                                              |                             |                                                  |                             |
|                                                                                                             |
|                                                                                                   |                                                              |                             |                                                  |                             |                                                  |                             |   |
| Federal income taxesat “expected” rate                                                          |                                                              | $21,728                     |                                                  | $17,230                     |                                                  | $11,871                     |   |
|      Increase (reduction) inincome taxes resulting from:                           |                                                              |                             |                                                  |                             |                                                  |                             |   |
|           Mealsand entertainment                          |                                                              | 311                         |                                                  | 273                         |                                                  | 221                         |   |
|           Taxexempt interest                              |                                                              | (44                         | )                                                | (53                         | )                                                | (50                         | ) |
|           Non-deductibleamortization of intangible assets |                                                              | 315                         |                                                  | 407                         |                                                  | 365                         |   |
|           Foreignlosses and foreign tax rate differential |                                                              | 702                         |                                                  | 926                         |                                                  | 1,027                       |   |
| State taxes, net ofFederal benefit                                                                          |                                                              | 2,529                       |                                                  | 2,213                       |                                                  | 1,605                       |   |
| Utilization of generalbusiness credits                                                                      |                                                              | (1,483                      | )                                                | (1,340                      | )                                                | (631                        | ) |
| Other                                                                                                       |                                                              | 154                         |                                                  | 34                          |                                                  | 287                         |   |
|                                                                                                             |
|                                                                                                   |                                                              |                             |                                                  |                             |                                                  |                             |   |
|                                                                                                             |                                                              | $24,212                     |                                                  | $19,690                     |                                                  | $14,695                     |   |
|                                                                                                             |

The tax effect oftemporary differences that give rise to significant portions of thedeferred tax assets and deferred tax liabilities at December 31,2001 and 2000, are presented below:
|                                                                                                                                                  |              | DECEMBER31,                                        |            | DECEMBER31,                                   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|----------------------------------------------------|--------------------------------------------------------------|-----------------------------------------------|
| (INTHOUSANDS)                                                                                                                                    |                                                                          | 2001                                               |                                                              | 2000                                          |
|                                                                                                                                                  |
|                                                                                                                                        |                                                                          |                                                    |                                                              |                                               |
| Deferred taxassets:                                                                                                                              |                                                                          |                                                    |                                                              |                                               |
| Net operating loss andcredit carryforwards                                                                                                       |                                                                          | $        0 |                                                              | $       66 |
| Compensated absences,principally due to accrual      for financial reportingpurposes                                    |                                                                          | 2,714                                              |                                                              | 2,253                                         |
| Accounts receivable,due to allowance for doubtful accounts                                                                                       |                                                                          | 6,246                                              |                                                              | 3,469                                         |
| Accrued liabilities,primarily due to self-insurance and other      contingency accruals for financialreporting purposes |                                                                          | 2,479                                              |                                                              | 3,536                                         |
| Deferred compensation,due to accrual for financial reporting purposes                                                                            |                                                                          | 3,336                                              |                                                              | 3,341                                         |
| Covenant not tocompete due to difference in amortization                                                                                         |                                                                          | 466                                                |                                                              | 542                                           |
| Other                                                                                                                                            |                                                                          | 314                                                |                                                              | 754                                           |
|                                                                                                                                                  |
|                                                                                                                                        |                                                                          |                                                    |                                                              |                                               |
| Total gross deferredtax asset                                                                                                                    |                                                                          | $15,555                                            |                                                              | $13,961                                       |
|                                                                                                                                                  |
|   

                                                                                                                         |                                                                          |                                                    |                                                              |                                               |
|                                                                                                                                                  |                                                                          | DECEMBER31,                                        |                                                              | DECEMBER31,                                   |
| (INTHOUSANDS)                                                                                                                                    |                                                                          | 2001                                               |                                                              | 2000                                          |
|                                                                                                                                                  |
|                                                                                                                                        |                                                                          |                                                    |                                                              |                                               |
| Deferred taxliabilities:                                                                                                                         |                                                                          |                                                    |                                                              |                                               |
| Plant, equipment andinternal software, due to differences in depreciation &amortization                                                      |                                                                          | $  6,483                                 |                                                              | $  1,801                            |
| Partnership basis, dueto book to tax differences at partnership level                                                                            |                                                                          | 812                                                |                                                              | 621                                           |
| Deferredexpenses                                                                                                                                 |                                                                          | 101                                                |                                                              | 126                                           |
| Goodwill                                                                                                                                         |                                                                          | 4,338                                              |                                                              | 3,147                                         |
| Other                                                                                                                                            |                                                                          | 139                                                |                                                              | 255                                           |
|                                                                                                                                                  |
|                                                                                                                                        |                                                                          |                                                    |                                                              |                                               |
| Total gross deferredtax liabilities                                                                                                              |                                                                          | $11,873                                            |                                                              | $  5,950                            |
|                                                                                                                                                  |
|                                                                                                                                        |                                                                          |                                                    |                                                              |                                               |
| Net deferred taxasset                                                                                                                            |                                                                          | $  3,682                                 |                                                              | $  8,011                            |
|                                                                                                                                                  |

57

----

Management hasreviewed the recoverability of deferred income tax assets and hasdetermined that it is more likely than not that the deferred taxassets will be fully realized through future taxable earnings. Thegross deferred tax asset is recorded on the balance sheet inPrepaid and other current assets. Income tax payments amounted to$13,670, $12,299, and $7,704 for the years ended December 31, 2001,2000, and 1999 respectively.

Deferred income taxeshave not been provided on the undistributed earnings of foreignsubsidiaries and other foreign investments carried at equity. The amount of such earnings included in consolidated retainedearnings amounted to  $6,938 and $4,325, at December 31, 2001and 2000 respectively.  These earnings have been substantiallyreinvested, and we do not plan to initiate any action that wouldprecipitate the payment of income taxes thereon.

  

**Note 8. COMMITMENTS**

The Company leasesfacilities, vehicles and equipment with terms ranging from threeyears to fifteen years. The majority of property leases containrenewal options and some have escalation clauses for increases inproperty taxes, Consumer Price Index and other items.

The Company leases certainitems of equipment under capital leases which had a cost of$47,023, $29,039, and $17,144, at December 31, 2001, 2000 and 1999respectively, and accumulated depreciation of $8,759, $7,139, and$5,603, respectively. The increase in equipment leases in 2001 wasdue primarily to continued expansion of our medical imagingbusinesses and for FDG (fluorodeoxyglucose) productionequipment.

Future minimum leasepayments under capital leases and non-cancelable operating leaseswith terms greater than one year and related sublease income atDecember 31, 2001 were as follows:
| YEAR ENDING DECEMBER31,                                                |              |               |          |                  |         |                                  |
|------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------|--------------------------------------------------|------------------|--------------------------------------------|----------------------------------|
| (INTHOUSANDS)                                                          |                                                                          | CAPITALLEASES |                                                  | OPERATING LEASES |                                            | SUBLEASEINCOME                   |
|                                                                        |
|                                                              |                                                                          |               |                                                  |                  |                                            |                                  |
|           2002       |                                                                          | $12,662       |                                                  | $12,475          |                                            | $     5 |
|           2003       |                                                                          | 14,858        |                                                  | 9,386            |                                            | —                          |
|           2004       |                                                                          | 10,920        |                                                  | 7,763            |                                            | —                          |
|           2005       |                                                                          | 7,865         |                                                  | 5,679            |                                            | —                          |
|           2006       |                                                                          | 2,450         |                                                  | 3,809            |                                            | —                          |
|           Thereafter |                                                                          | —       |                                                  | 9,979            |                                            | —                          |
|                                                                        |
|                                                              |                                                                          |               |                                                  |                  |                                            |                                  |
|                                                                        |                                                                          | $48,755       |                                                  | $49,091          |                                            | $     5 |
|                                                                        |
|                                                              |                                                                          |               |                                                  |
| Less amountrepresenting interest                                       |                                                                          | $(6,485       | )                                                |
|                                                                        |
|                                                              |                                                                          |               |                                                  |
| Present value of netminimum lease payments                             |                                                                          | $42,270       |                                                  |
|                                                                        |

Rental expense underoperating leases was $15,864, $11,450, and $10,173 for the yearsended December 31, 2001, 2000 and 1999, respectively.

  

**Note 9.  STOCKOPTIONS AND RIGHTS**

Options to purchasecommon stock have been granted under various plans to officers,directors and other employees at prices equal to the market pricesat date of grant. An aggregate of 10,267,000 shares have beenauthorized for issuance under the various plans as of December 31,2001. Options are generally exercisable at a rate of 25 percent peryear beginning one year from the date of grant and expire ten yearsafter the date of grant. At December 31, 2001, 2,516,000 shareswere reserved for issuance under the various plans.

58

----

The per shareweighted-average fair value of stock options granted during 2001,2000 and 1999 was $19.91, $20.14, and $21.47, respectively, on thedate of grant using the Black Scholes option-pricing model with thefollowing weighted-average assumptions: 2001 expected dividendyield of 0%, risk-free interest rate of 4.72%, expected volatilityof 61.66% and an expected life of 5.32 years. 2000 expecteddividend yield of 0%; risk-free interest rate of 6.33%; expectedvolatility of 63.25% and an expected life of 5.63 years; 1999expected dividend yield of 0%; risk-free interest rate of 5.62%;expected volatility of 58.7% and an expected life of 5.21years.

The Company appliesAPB Opinion No. 25 in accounting for its plans and, accordingly, nocompensation cost has been recognized for its stock options in theConsolidated Statements of Operations. Had the Company determinedcompensation cost based on the fair value at the grant date for itsstock options under SFAS No. 123, the Company's net income wouldhave been reduced to the pro forma amounts indicated in thefollowing table:

  
|                                           |                 | YEARENDED                     |            | YEARENDED                     |            | YEARENDED                     |
|-------------------------------------------|--------------------------------------------------------------------------------------------|-------------------------------|--------------------------------------------------------------|-------------------------------|--------------------------------------------------------------|-------------------------------|
|                                           |                                                                                            | DECEMBER31,                   |                                                              | DECEMBER31,                   |                                                              | DECEMBER31,                   |
| (IN THOUSANDS, EXCEPTPER SHARE DATA)      |                                                                                            | 2001                          |                                                              | 2000                          |                                                              | 1999                          |
|                                           |
|                                 |                                                                                            |                               |                                                              |                               |                                                              |                               |
| Net income                                |                                                                                            |                               |                                                              |                               |                                                              |                               |
|      As reported |                                                                                            | $37,869                       |                                                              | $29,538                       |                                                              | $19,221                       |
|      Pro forma   |                                                                                            | $33,441                       |                                                              | $11,307                       |                                                              | $15,545                       |
|   

Earnings pershare           |                                                                                            |                               |                                                              |                               |                                                              |                               |
| Basic:                                    |                                                                                            |                               |                                                              |                               |                                                              |                               |
|      As reported |                                                                                            | $    1.54 |                                                              | $    1.23 |                                                              | $    0.82 |
|      Pro forma   |                                                                                            | $    1.36 |                                                              | $    0.47 |                                                              | $    0.66 |
|   

Diluted:                    |                                                                                            |                               |                                                              |                               |                                                              |                               |
|      As reported |                                                                                            | $    1.40 |                                                              | $    1.11 |                                                              | $    0.75 |
|      Pro forma   |                                                                                            | $    1.24 |                                                              | $    0.42 |                                                              | $    0.61 |
|                                           |

A summary of employeestock options is as follows:
| (IN THOUSANDS, EXCEPT SHARE PRICE) |                      | NUMBER OF SHARES |                 | WEIGHTED AVERAGE EXERCISE PRICE |
|------------------------------------|--------------------------------------------------------------------------------------------------------------------------|------------------|--------------------------------------------------------------------------------------------|---------------------------------|
|                                    |
|                          |                                                                                                                          |                  |                                                                                            |                                 |
| Outstanding atDecember 31, 1998    |                                                                                                                          | 5,698            |                                                                                            | $  6.88               |
| Granted                            |                                                                                                                          | 2,144            |                                                                                            | $15.60                          |
| Exercised                          |                                                                                                                          | (806             | )                                                                                          | $  4.63               |
| Cancelled                          |                                                                                                                          | (482             | )                                                                                          | $  8.68               |
|                                    |
|                          |                                                                                                                          |                  |                                                                                            |                                 |
| Outstanding atDecember 31, 1999    |                                                                                                                          | 6,554            |                                                                                            | $  9.47               |
| Granted                            |                                                                                                                          | 2,818            |                                                                                            | $29.71                          |
| Exercised                          |                                                                                                                          | (865             | )                                                                                          | $  6.87               |
| Cancelled                          |                                                                                                                          | (630             | )                                                                                          | $10.46                          |
|                                    |
|                          |                                                                                                                          |                  |                                                                                            |                                 |
| Outstanding atDecember 31, 2000    |                                                                                                                          | 7,877            |                                                                                            | $16.70                          |
| Granted                            |                                                                                                                          | 1,072            |                                                                                            | $31.88                          |
| Exercised                          |                                                                                                                          | (815             | )                                                                                          | $13.19                          |
| Cancelled                          |                                                                                                                          | (383             | )                                                                                          | $21.28                          |
|                                    |
| Outstanding atDecember 31, 2001    |                                                                                                                          | 7,751            |                                                                                            | $18.55                          |
|                                    |

59

----

At December 31, 2001,the range of exercise prices and weighted average remainingcontractual life of outstanding options was $4.25 to $38.59 and6.97 years, respectively.

At December 31, 2001,2000, and 1999, the number of options exercisable was approximately3,071,000, 3,269,000, and 1,976,000, respectively, and the weightedaverage price of those options was $15.18, $14.86, and $6.40,respectively.

The Company derives atax benefit from the options exercised and sold by employees andthe benefit is credited to additional paid-in capital.

In September 1999, theCompany adopted a new Rights Plan and declared a dividenddistribution of one right for each outstanding share of theCompany’s common stock. The new Rights Plan replaced theCompany’s original rights plan, which was set to expire inSeptember 1999. The rights under the new Rights Plan are set toexpire in September 2009, unless redeemed earlier by the Board. Atleast once every three years, an independent committee of the Boardwill review the Rights Plan and, if the committee deems itappropriate, recommend to the entire Board that the Rights Plan bemodified or terminated. Each right represents the right topurchase, if and when the right becomes exercisable, a unitconsisting of one share of Syncor common stock at a per unit priceof $90 (the “Purchase Price”). The rights generallywill be exercisable only if a person or group (an “AcquiringPerson”) acquires beneficial ownership of 15% or more ofSyncor’s common stock or commences a tender or exchange offerupon consummation of which such person or group would beneficiallyown 15% or more of Syncor’s common stock (other than as aresult of repurchases of stock by Syncor, or certain purchases byinstitutional or similar stockholders so long as they do not own20% or more). In the event any person becomes an Acquiring Person(other than pursuant to an offer for all shares that the majorityof the independent directors not associated or affiliated with theAcquiring Person determines to be adequate and otherwise in thebest interest of the Company and its stockholders), each of therights becomes a discount right entitling the holder (other thanthe Acquiring Person) upon payment of the Purchase Price, to commonstock having a value equal to twice the Purchase Price (i.e., $180worth of Syncor stock for a purchase price of $90). If followingsomeone becoming an Acquiring Person, the Company engages in amerger or other business combination in which the Company does notsurvive or the common stock is changed or exchanged, or transfersmore than 50% of its assets, cash flow or earning power in onetransaction or a series of related transactions, each right becomesa right (except for the Acquiring Person) to acquire common sharesof the other party to the transaction having a value equal to twicethe Purchase Price.

  

**Note 10. EMPLOYEE BENEFIT PLANS**

The Company’s401(k) plan is open to all employees who are at least 18 years ofage and have a minimum of three consecutive months of service. In1989, the Company's Board of Directors amended the plan to anEmployees’ Savings and Stock Ownership Plan (ESSOP) to allowthe plan to acquire one million of the Company's shares through aleveraged employee stock ownership plan transaction. In June 1995,September 1996, and August 1997, an additional 1,500,000 shares, intotal, which were purchased in the open market, were contributed tothe plan. These shares were originally classified as“treasury stock.” The contributions totaled $8,657,000and reflected the fair market value at the time of contribution. Inconnection with these transactions, the Company made a loan to theESSOP. The ESSOP loan was paid off as of December 31,2001.

Under the ESSOP,participants may contribute one percent to fourteen percent oftheir compensation to 401(k) investment options and an additionaltwo percent of their compensation to purchase Company stock. TheCompany makes matching contributions to 50 percent of theemployees’ 401(k) investment contributions up to a maximum offour percent of the employee’s compensation and to 100percent of the employees’ Company stock purchases up to twopercent of the employee’s compensation. The Company’smatching contribution is made in Company stock. If an ESSOP loanpayment is outstanding, the number of shares available to matchemployee contributions is directly related to the amount ofprincipal payments made on the ESSOP loan. Once the number ofavailable shares is determined, the Company matches theemployees’ contributions based on the fair market value ofthe shares and the remainder of any shares not allocated after allmatching is complete is allocated to all eligible employees basedon relative compensation.

Participants are fullyand immediately vested in their contributions and vest in employercontributions over a five-year period of continuous employment.After five years of continuous employment, any further employercontributions are fully and immediately vested. The Company’scontributions for the years ended December 31, 2001, 2000 and 1999amounted to $1,735,000, $1,895,000, and $1,957,000, respectively,of which $1,685,000, $1,685,000, and $1,686,000, respectively, wereused to pay down principal on the ESSOP loan and $50,000, $210,000,and $271,000 respectively, to pay interest.

60

----

  

**Note 11.  NETINCOME PER SHARE**

The following tablepresents the computation of basic earnings per share(EPS):

  
| (IN THOUSANDSEXCEPT                         | FOR THEYEAR ENDED  | FOR THEYEAR ENDED  | FOR THEYEAR ENDED  |
|---------------------------------------------|--------------------|--------------------|--------------------|
| PER SHAREDATA)                              | DECEMBER 31, 2001  | DECEMBER 31, 2000  | DECEMBER 31, 1999  |
|                                             |
|                                             |     | Income (Numerator) |     | Shares (Denominator) |     | PerShare Amount |     | Income (Numerator) |     | Shares (Denominator) |     | PerShare Amount |     | Income (Numerator) |     | Shares (Denominator) |     | PerShares Amount |
|                                             |
| Income fromcontinuing                       |                    |                    |                    |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|      Operations    |                    | $37,869            |                    |  |  |  |  | $29,538 |  |  |  |  |  | $19,221 |  |  |  |  |
| Basic EPS                                   |                    | $37,869            |                    | 24,570 |  | **$1.54** |  | $29,538 |  | 23,948 |  | **$1.23** |  | $19,221 |  | 23,340 |  | **$0.82** |
|                                   |                    |                    |                    |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Effect ofDilutive                           |                    |                    |                    |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|      Stock Options |                    |                    |                    | 2,459 |  |  |  |  |  | 2,709 |  |  |  |  |  | 2,138 |  |  |
| Diluted EPS                                 |                    | $37,869            |                    | 27,029 |  | **$1.40** |  | $29,538 |  | 26,657 |  | **$1.11** |  | $19,221 |  | 25,478 |  | **$0.75** |

  

**Note 12. LITIGATION AND CONTINGENCIES**

There are variouslitigation proceedings in which the Company and its subsidiariesare involved. Many of the claims asserted against the Company inthese proceedings are covered by insurance. The results oflitigation proceedings cannot be predicted with certainty. However,in the opinion of the Company’s general counsel, suchproceedings either are without merit or do not have a potentialliability which would materially affect the financial condition ofthe Company and its subsidiaries on a consolidatedbasis.

  

**Note 13. SUBSEQUENT EVENT**

On January 17, 2002,the Company completed an asset securitization agreement with one ofour banks using the U.S. Pharmacy business segment’s tradereceivables as collateral. This securitization program will allowthe Company to borrow up to $65 million at rates generally morefavorable than under the credit line agreement. Upon execution ofthe securitization agreement, our credit line had a provision thatrequired a 50% reduction of the securitization amount, or $32.5 million.  Therefore, the credit line has a currentborrowing limit of $167.5 million.

**  **

**Note 14. BUSINESS SEGMENTS**

The Company iscurrently in three different business segments: The first segmentis the compounding, dispensing, and distribution of complexpharmaceuticals in the United States. The second segment is themanagement and provision of medical diagnostic imaging services inthe United States. The third segment is the compounding,dispensing, and distribution of complex pharmaceuticals and theprovision of radiology services outside of the UnitedStates.

61

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| (INTHOUSANDS)                                           |                       |          |                  |          |   |
|---------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------|----------|--------------------------------------------------------------------------------------------------|----------|---|
| U.S. PHARMACY SERVICESBUSINESS                          |                                                                                                                                | 2001     |                                                                                                  | 2000     |   |
|                                                         |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
|      Revenues                  |                                                                                                                                | $565,309 |                                                                                                  | $489,405 |   |
|      Operating Income          |                                                                                                                                | $72,295  |                                                                                                  | $56,304  |   |
|      Total Assets              |                                                                                                                                | $189,840 |                                                                                                  | $160,256 |   |
|      CapitalExpenditures       |                                                                                                                                | $25,655  |                                                                                                  | $4,707   |   |
|      Depreciation/Amortization |                                                                                                                                | $7,367   |                                                                                                  | $5,508   |   |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
| U.S. MEDICAL IMAGINGBUSINESS                            |                                                                                                                                | 2001     |                                                                                                  | 2000     |   |
|                                                         |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
|      Revenues                  |                                                                                                                                | $160,054 |                                                                                                  | $100,848 |   |
|      Operating Income          |                                                                                                                                | $18,187  |                                                                                                  | $12,467  |   |
|      Total Assets              |                                                                                                                                | $265,437 |                                                                                                  | $192,826 |   |
|      CapitalExpenditures       |                                                                                                                                | $19,874  |                                                                                                  | $9,815   |   |
|      Depreciation/Amortization |                                                                                                                                | $21,726  |                                                                                                  | $13,132  |   |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
| INTERNATIONALOPERATIONS                                 |                                                                                                                                | 2001     |                                                                                                  | 2000     |   |
|                                                         |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
|      Revenues                  |                                                                                                                                | $49,355  |                                                                                                  | $39,141  |   |
|      Operating Income          |                                                                                                                                | $1,228   |                                                                                                  | $2,240   |   |
|      Total Assets              |                                                                                                                                | $76,432  |                                                                                                  | $66,806  |   |
|      CapitalExpenditures       |                                                                                                                                | $6,903   |                                                                                                  | $9,300   |   |
|      Depreciation/Amortization |                                                                                                                                | $4,733   |                                                                                                  | $2,763   |   |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
| UNALLOCATEDCORPORATE                                    |                                                                                                                                | 2001     |                                                                                                  | 2000     |   |
|                                                         |
|                                               |                                                                                                                                |          |                                                                                                  |          |   |
|      Operating Loss            |                                                                                                                                | $(16,833 | )                                                                                                | $(14,696 | ) |
|      Total Assets              |                                                                                                                                | $56,132  |                                                                                                  | $50,683  |   |
|      CapitalExpenditures       |                                                                                                                                | $12,460  |                                                                                                  | $7,567   |   |
|      Depreciation/Amortization |                                                                                                                                | $5,735   |                                                                                                  | $4,906   |   |

  
|                                                           |                      |                     |            | OPERATING          |            | TOTAL               |
|-----------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|---------------------|--------------------------------------------------------------|--------------------|--------------------------------------------------------------|---------------------|
| GEOGRAPHICSEGMENTS                                        |                                                                                                                          | REVENUES            |                                                              | INCOME             |                                                              | ASSETS              |
|                                                           |
|   

     United States |                                                                                                                          |                     |                                                              |                    |                                                              |                     |
|      2001                        |                                                                                                                          | $725,363            |                                                              | $73,649            |                                                              | $511,409            |
|      2000                        |                                                                                                                          | $590,253            |                                                              | $54,075            |                                                              | $403,765            |
|                                                 |                                                                                                                          |                     |                                                              |                    |                                                              |                     |
|      Rest of World               |                                                                                                                          |                     |                                                              |                    |                                                              |                     |
|      2001                        |                                                                                                                          | $  49,355 |                                                              | $  1,228 |                                                              | $  76,432 |
|      2000                        |                                                                                                                          | $  39,141 |                                                              | $  2,240 |                                                              | $  66,806 |
|                                                           |

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**SELECTED QUARTERLYRESULTS OF OPERATIONS**

The unauditedquarterly operating results in the Selected Quarterly Results ofOperations have been prepared on the same basis as the auditedconsolidated financial statements and, in the opinion ofmanagement, include all adjustments necessary for a fairpresentation for the periods presented.

Unaudited calendarquarterly information is summarized below:
| (IN THOUSANDS, EXCEPTPER SHARE DATA)  |        | MARCH31,                                             |      | JUNE30,                                              |      | SEPTEMBER 30,                                        |       | DECEMBER31,                                          |      | 2001                                      |
|---------------------------------------|--------------------------------------|------------------------------------------------------|--------------------------|------------------------------------------------------|--------------------------|------------------------------------------------------|--------------------------------|------------------------------------------------------|--------------------------|-------------------------------------------|
|                                       |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Net sales                             |                                      | $181,416                                             |                          | $187,692                                             |                          | $193,794                                             |                                | $211,816                                             |                          | $774,718                                  |
| Grossprofit                           |                                      | $  68,689                                  |                          | $  72,179                                  |                          | $72,789                                              |                                | $81,326                                              |                          | $294,983                                  |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Net income                            |                                      | $  10,207                                  |                          | $  10,982                                  |                          | $    7,834                       |                                | $    8,846                       |                          | $  37,869                       |
| Net income pershare:                  |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      Basic   |                                      | $        .42 |                          | $        .45 |                          | $        .32 |                                | $        .36 |                          | $      1.54 |
|      Diluted |                                      | $        .38 |                          | $        .41 |                          | $        .29 |                                | $        .33 |                          | $      1.40 |
| Weighted averageshares outstanding:   |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      Basic   |                                      | 24,473                                               |                          | 24,405                                               |                          | 24,603                                               |                                | 24,798                                               |                          | 24,570                                    |
|      Diluted |                                      | 27,101                                               |                          | 26,936                                               |                          | 27,024                                               |                                | 26,985                                               |                          | 27,029                                    |
|                                       |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Market price pershare:                |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      High    |                                      | $    38.81                       |                          | $    42.29                       |                          | $    38.74                       |                                | $    33.31                       |                          | $  42.29                        |
|      Low     |                                      | $    27.25                       |                          | $    26.64                       |                          | $    26.63                       |                                | $    26.03                       |                          | $  26.03                        |
|                                       |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| (IN THOUSANDS, EXCEPTPER SHARE DATA)  |                                      | MARCH31,                                             |                          | JUNE30,                                              |                          | SEPTEMBER 30,                                        |                                | DECEMBER31,                                          |                          | 2000                                      |
|                                       |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Net sales                             |                                      | $148,958                                             |                          | $154,366                                             |                          | $155,462                                             |                                | $170,608                                             |                          | $629,394                                  |
| Grossprofit                           |                                      | $  50,958                                  |                          | $  55,479                                  |                          | $  55,418                                  |                                | $  62,991                                  |                          | $224,846                                  |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Net income                            |                                      | $    7,480                       |                          | $    9,078                       |                          | $    6,258                       |                                | $    6,722                       |                          | $  29,538                       |
| Net income pershare:                  |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      Basic   |                                      | $        .32 |                          | $        .38 |                          | $        .26 |                                | $        .28 |                          | $      1.23 |
|      Diluted |                                      | $        .30 |                          | $        .34 |                          | $        .23 |                                | $        .25 |                          | $      1.11 |
| Weighted averageshares outstanding:   |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      Basic   |                                      | 23,726                                               |                          | 23,772                                               |                          | 24,091                                               |                                | 24,201                                               |                          | 23,948                                    |
|      Diluted |                                      | 25,190                                               |                          | 26,328                                               |                          | 27,374                                               |                                | 26,936                                               |                          | 26,657                                    |
|                                       |
|                             |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
| Market price pershare                 |                                      |                                                      |                          |                                                      |                          |                                                      |                                |                                                      |                          |                                           |
|      High    |                                      | $    16.50                       |                          | $    36.00                       |                          | $    43.94                       |                                | $    39.06                       |                          | $    43.94            |
|      Low     |                                      | $    11.02                       |                          | $    13.00                       |                          | $    32.75                       |                                | $    23.75                       |                          | $    11.02            |
|                                       |

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**SYNCORINTERNATIONAL CORPORATION AND SUBSIDIARIES**

**ScheduleII. Valuation and Qualifying Accounts**

**(Inthousands)**
|                                |
|--------------------------------|
| **Description**                |  | **Balance At Beginning Of Period** |  | **Costs And Expenses (A)** |  | **Deductions (B)** |  | **Balance At End Of Period** |
|                                |
| Year Ended                     |                   |  |          |  |          |  |          |  |
| December 31,2001               |     |  |     |  |     |  |     |  |
| Allowance for doubtfulaccounts |     | $9,028 |     | $9,720 |     | $2,031 |     | $16,717 |
|                                |     |  |     |  |     |  |     |  |
| Year Ended                     |     |  |     |  |     |  |     |  |
| December 31,2000               |     |  |     |  |     |  |     |  |
| Allowance for doubtfulaccounts |      | $4,648 |     | $7,232 |     | $2,852 |     | $9,028 |
|                                |     |  |     |  |     |  |     |  |
| Year Ended                     |      |  |     |  |     |  |     |  |
| December 31,1999               |     |  |     |  |     |  |     |  |
| Allowance for doubtfulaccounts |     | $3,774 |     | $2,362 |     | $1,488 |      | $4,648 |

(A) Estimated baddebt.(B) Uncollectible accounts written-off, net of recoveries andchange in reserve.

64

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