<PAGE>

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

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                   FORM 10-K

<Table>
<C>          <S>
 (Mark One)
    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001



                                   OR




    [ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)



</Table>

                         COMMISSION FILE NUMBER 0-19946

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

                             LINCARE HOLDINGS INC.
             (Exact name of registrant as specified in its charter)

<Table>
<S>                                              <C>
                    DELAWARE                                        51-0331330
        (State or other jurisdiction of                          (I.R.S. Employer
         incorporation or organization)                       Identification Number)

               19387 US 19 NORTH                                      33764
              CLEARWATER, FLORIDA                                   (Zip Code)
    (Address of principal executive office)
</Table>

              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
                                 (727) 530-7700

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                     COMMON STOCK, $.01 PAR VALUE PER SHARE

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     The aggregate market value of the registrant's common stock, $.01 par
value, held by non-affiliates of the registrant, based on the closing sale price
of the common stock on January 31, 2002, as reported in the NASDAQ National
Market System, was approximately $2,859,435,281.

     As of January 31, 2002, there were 107,746,262 outstanding shares of the
registrant's common stock, par value $.01, which is the only class of capital
stock of the registrant outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

     The information called for by Part III of this Form 10-K is incorporated by
reference to the definitive Proxy Statement for the 2002 Annual Meeting of
Stockholders of Lincare Holdings Inc. which will be filed with the Securities
and Exchange Commission not later than 120 days after December 31, 2001.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

GENERAL

     Lincare Holdings Inc. is a Delaware corporation. Lincare Holdings Inc.
together with its subsidiaries ("Lincare" or the "Company"), is one of the
nation's largest providers of oxygen and other respiratory therapy services to
patients in the home. The Company's customers typically suffer from chronic
obstructive pulmonary disease ("COPD"), such as emphysema, chronic bronchitis or
asthma, and require supplemental oxygen or other respiratory therapy services in
order to alleviate the symptoms and discomfort of respiratory dysfunction.
Lincare currently serves over 320,000 customers in 44 states through 564
operating centers.

THE HOME RESPIRATORY MARKET

     The Company estimates that the home respiratory therapy market (including
home oxygen equipment and respiratory therapy services) represents approximately
$4.5 billion in annual sales, with growth in services estimated at approximately
7% per year over the last five years. This growth reflects the significant
increase in the number of persons afflicted with COPD, which is largely
attributable to the increasing proportion of the U.S. population over the age of
65 years. Growth in the home respiratory market is further driven by the
continued trend toward treatment of patients in the home as a lower cost
alternative to the acute care setting.

BUSINESS STRATEGY

     The Company's strategy is to increase its market share through internal
growth and strategic acquisitions. Lincare focuses primarily on growth in
existing and nearby geographic markets, which the Company believes is generally
more profitable than adding additional operating centers in distant markets. In
addition, the Company expands into new geographic markets on a selective basis,
either through acquisitions or by opening new operating centers, when it
believes such expansion will enhance its business. In 2001, Lincare acquired 18
local and regional competitors with operations in 12 states. These acquisitions
expanded the Company's presence in two states where the Company did not
previously operate as well as states where the Company had existing locations.

     Revenue growth is dependent upon the overall growth rate of the home
respiratory care market and on the Company's ability to increase market share
through effective marketing efforts and selective acquisition of local or
regional competitors. Growing cost containment efforts by government and private
insurance reimbursement programs have created an increasingly competitive
environment, accelerating consolidation trends within the home health care
industry.

     The Company will continue to concentrate on providing oxygen and other
respiratory therapy services to patients in the home and to provide home medical
equipment and other services where it believes such services will enhance the
Company's primary business. In 2001, oxygen and other respiratory therapy
services accounted for approximately 88% of the Company's revenues.

PRODUCTS AND SERVICES OF LINCARE

     Lincare primarily provides oxygen and other respiratory therapy services to
patients in the home. Lincare also provides a variety of home infusion therapies
in certain geographic markets. When a patient is referred to one of the
Company's operating centers by a physician, hospital discharge planner or other
source, the Company's customer representative obtains the necessary medical and
insurance coverage information and coordinates the delivery of patient care. The
prescribed therapy is delivered by one of the Company's representatives to the
customer's home, where instructions and training are provided to the customer
and the customer's family regarding appropriate equipment use and maintenance
and the prescribed therapy. Following the initial setup, Company representatives
make periodic visits to the

                                        1
<PAGE>

customer's home, the frequency of which is dictated by the type of therapy. All
services and equipment provided by the Company are coordinated with the
customer's physician. During the period that the Company provides services and
equipment for a customer, the customer remains under the physician's care and
medical supervision. The Company employs respiratory therapists, nurses and
other qualified clinicians to perform certain training and other functions in
connection with the Company's services. All clinicians are licensed where
required by applicable law.

     Home Oxygen Equipment. The major types of oxygen delivery equipment are
oxygen concentrators and liquid oxygen systems. Each method of delivery has
different characteristics that make it more or less suitable to specific patient
applications.

          Oxygen concentrators are stationary units that provide a continuous
     flow of oxygen by filtering ordinary room air. Concentrators are most
     commonly used by patients as their primary source of stationary oxygen.
     These systems are often supplemented with portable gaseous oxygen
     cylinders, to meet the ambulatory needs of the patient.

          Liquid oxygen systems are thermally insulated containers of liquid
     oxygen, generally consisting of a stationary unit and a portable unit,
     which are most commonly used by patients with significant ambulatory
     requirements.

     Other Respiratory Therapy Services.  Other respiratory therapy services
offered by the Company include the following:

          Nebulizers and associated respiratory medications provide aerosol
     therapy for patients suffering from COPD and asthma.

          Non-invasive ventilation provides nocturnal ventilatory support for
     neuromuscular and COPD patients. This therapy improves daytime function and
     decreases incidents of acute illness.

          Apnea monitors provide respiratory alarm systems for infants at risk
     for sudden infant death syndrome.

          Ventilators support respiratory function in severe cases of
     respiratory failure where the patient can no longer sustain the mechanics
     of breathing without the assistance of a machine.

          Continuous positive airway pressure devices maintain open airways in
     patients suffering from obstructive sleep apnea by providing airflow at
     prescribed pressures during sleep.

     Home Infusion Therapy.  Lincare provides a variety of home infusion
therapies in certain geographic markets. These therapies include:

          Parenteral nutrition involves the intravenous feeding of
     life-sustaining nutrients to patients with impaired or altered digestive
     tracts or conditions that prohibit adequate oral nutritional support.

          Intravenous antibiotic therapy is the infusion of anti-infective
     medications into the patient's bloodstream for the treatment of infectious
     diseases.

          Enteral nutrition is administered to patients who cannot eat as a
     result of an obstruction to the upper gastrointestinal tract or other
     medical condition.

          Chemotherapy is the administration of cytotoxic drugs to patients
     suffering from particular types of cancer.

          Dobutamine infusions are provided to patients to treat chronic
     end-stage congestive heart failure that has not responded to standard drug
     therapy. These patients require a long-term venous access device and
     frequent blood chemistry monitoring.

          Immune globulin (IVIG) therapy is utilized for a variety of immune
     disorders such as B-cell and T-cell immune deficiency, acute infections,
     post transplant immunodeficiency and burns.

                                        2
<PAGE>

          Continuous pain management is the administration of analgesic drugs to
     patients suffering from acute or chronic pain.

          Central catheter management provides monitoring and supplies to
     patients requiring access via a peripherally inserted line into the
     superior vena cava.

     Lincare also supplies home medical equipment, such as hospital beds,
wheelchairs and other supplies that may be required by patients.

COMPANY OPERATIONS

     Management.  The Company maintains a decentralized approach to management
of its local business operations. Decentralization of managerial decision-making
enables the Company's operating centers to respond promptly and effectively to
local market demands and opportunities. The Company believes that the
personalized nature of customer requirements and referral relationships
characteristic of the home health care business mandate the Company's localized
operating structure.

     Each of the Company's 564 operating centers is managed by a center manager
who has responsibility and accountability for the operating and financial
performance of the center. Service and marketing functions are performed at the
local operating level, while strategic development, financial control and
operating policies are administered at the corporate level. Reporting mechanisms
are in place at the operating center level to monitor performance and ensure
field accountability.

     A team of area managers directly supervises individual operating center
managers, serving as an additional mechanism for assessing and improving
performance of the Company's operations. The Company's operating centers are
served by regional billing centers which control all of the Company's billing
and reimbursement functions.

     MIS Systems.  The Company believes that the proprietary management
information system developed by the Company is one of its key competitive
advantages. The system provides management with critical information to measure
and evaluate performance levels throughout the Company. Management reviews
monthly reports including revenues and profitability by individual center,
accounts receivable and cash collection performance, equipment controls and
utilization, customer activity, and manpower trends. The Company has an in-house
staff of computer programmers which enables the Company to continually enhance
its computer systems in order to provide timely financial and operational
information and to respond promptly to changes in reimbursement regulations and
policies.

     Accounts Receivable Management.  The Company derives a majority of its
revenues from reimbursement by third party payors. The Company accepts
assignment of insurance benefits from customers and, in most instances, invoices
and collects payments directly from Medicare, Medicaid and private insurance
carriers, as well as from customers under co-insurance provisions. The following
table sets forth, for the periods indicated, the Company's payor mix.

<Table>
<Caption>
                                                               YEAR ENDED DECEMBER 31,
                                                               -----------------------
PAYORS                                                         2001     2000     1999
------                                                         -----    -----    -----
<S>                                                            <C>      <C>      <C>
Medicare and Medicaid programs..............................     62%      61%      62%
Private insurance...........................................     30       30       29
Direct payment..............................................      8        9        9
                                                                ---      ---      ---
                                                                100%     100%     100%
                                                                ===      ===      ===
</Table>

     Third party reimbursement is a complicated process which involves
submission of claims to multiple payors, each having its own claims
requirements. To operate effectively in this environment, the Company has
designed and implemented proprietary computer systems to decrease the time
required for the submission and processing of third party payor claims. The
Company's systems are capable of tailoring the submission of claims to the
specifications of individual payors. The Company's in-house management
information system capability also enables it to adjust quickly to regulatory or
reimbursement changes.

                                        3
<PAGE>

These features serve to decrease the processing time of claims by payors,
resulting in a more rapid collection of accounts receivable. In addition, the
Company is capable of submitting claims electronically to any Medicare carrier
or other third party payor that processes electronic claims.

SALES AND MARKETING

     Favorable trends affecting the U.S. population and home health care have
created an environment which should produce increasing demand for the services
provided by Lincare. The average age of the American population is increasing
and, as a person ages, more health care services are generally required.
Further, well-documented changes occurring in the health care industry show a
trend toward home care rather than institutional care as a matter of patient
preference and cost containment.

     Sales activities are generally carried out by the Company's full-time sales
representatives located at the Company's local operating centers with assistance
from the center managers. In addition to promoting the high quality of the
Company's equipment and services, the sales representatives are trained to
provide information concerning the advantages of home respiratory care. Sales
representatives are often licensed respiratory therapists who are highly
knowledgeable in the provision of supplemental oxygen and other respiratory
therapies.

     The Company primarily acquires new customers through referrals. The
Company's principal sources of referrals are physicians, hospital discharge
planners, prepaid health plans, clinical case managers and nursing agencies. The
Company's sales representatives maintain continual contact with these medical
professionals in order to strengthen these relationships.

     The Company's referral sources recognize the Company's reputation for
providing high-quality equipment and service to patients and provide a steady
flow of customers. While the Company views its referral sources as fundamental
to its business, no single referral source accounts for more than 1.0% of the
Company's revenues. The Company has more than 320,000 active customers, and the
loss of any single customer or group of customers would not materially impact
the Company's business.

     The Company has received accreditation from the Community Health
Accreditation Program.

     Accreditation by a national accrediting body represents a marketing benefit
to the Company's operating centers and provides for a recognized quality
assurance program throughout the Company. Several proposals have been made to
require health care providers to be accredited or licensed by independent
agencies in order to participate in government reimbursement programs. Many
private payors already require such accreditation.

ACQUISITIONS

     In 2001, the Company acquired, in unrelated acquisitions, certain operating
assets of 18 local and regional competitors with operations in 12 states. These
acquisitions resulted in the addition of 15 new operating centers.

     In 2000, the Company acquired, in unrelated acquisitions, certain operating
assets of 15 local and regional competitors with operations in 16 states. These
acquisitions resulted in the addition of 48 new operating centers.

QUALITY CONTROL

     The Company is committed to providing consistently high quality products
and services. The Company's quality control procedures and training programs are
designed to promote greater responsiveness and sensitivity to individual
customer needs and to assure the highest level of quality and convenience to the
customer and the referring physician. Licensed respiratory therapists,
registered nurses and other clinicians provide professional health care support
to customers and assist in the Company's sales and marketing efforts.

                                        4
<PAGE>

SUPPLIERS

     The Company purchases its oxygen and equipment from a variety of suppliers.
The Company is not dependent upon any single supplier and believes that its
oxygen and equipment needs can be provided by several manufacturers.

COMPETITION

     The home respiratory care market is a fragmented and highly competitive
industry that is served by the Company, other national providers and, by Company
estimates, over 2,000 regional and local providers.

     Quality of service is the single most important competitive factor within
the home respiratory care market. The relationships between a home respiratory
care company and its customers and referral sources are highly personal. There
is no incentive for either the physician or the patient to alter this
relationship so long as the home respiratory care company is providing
responsive, professional and high-quality service. Other key competitive factors
are efficiency of reimbursement and accounts receivable management systems.

     Home respiratory care companies compete primarily on the basis of service
since reimbursement levels are established by fee schedules promulgated by
Medicare, Medicaid or by the individual determinations of private insurance
companies. Furthermore, marketing efforts by home respiratory care companies are
typically directed toward referral sources which generally do not share
financial responsibility for the payment of services provided to customers.

MEDICARE REIMBURSEMENT

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

     In December 2000, an approximately $35 billion Medicare "giveback" package
was signed into law as part of H.R. 4577, the "Consolidated Appropriations Act,
2001." The appropriations act incorporated by reference the text of H.R. 5661,
the Medicare, Medicaid and SCHIP Benefits Improvement and Protection Act of 2000
("BIPA"), which included reimbursement and other policy changes intended to
mitigate the effects of reimbursement cuts contained in the Balanced Budget Act
of 1997 (the "BBA"). Among other things, BIPA:

          (1) modified payments for durable medical equipment ("DME") items. For
     certain items provided in 2001, BIPA updates payments in two steps: for the
     period January 1, 2001 through June 30, 2001, DME payments remained the
     same as were in effect before enactment of BIPA, and for the period of July
     1, 2001 through December 31, 2001, DME items received a CPI-U update of 3.5
     percent increased by a "transitional allowance" of 3.28 percent. Under
     BIPA, the transitional allowance will not be taken into account in
     calculating payment amounts after 2001. No DME payment increase is
     authorized for 2002. The DME payment update specifically did not apply to
     oxygen and oxygen equipment.

          (2) required the U.S. General Accounting Office ("GAO") to study
     Medicare reimbursement for drugs and biologicals and for related services.
     The GAO issued its report to Congress, entitled "Medicare Payments for
     Covered Outpatient Drugs Exceed Providers' Cost", in September 2001. The
     GAO made recommendations designed to improve the accuracy of Medicare
     payments for drugs and related services, including establishing Medicare
     payment levels for prescription drugs and their delivery and administration
     that are more closely related to their costs, examining the benefits and
     risks of expanding the current competitive bidding demonstration projects
     for drugs covered under Medicare Part B, and instituting a process to
     monitor access to Medicare covered drugs to ensure that payment changes do
     not negatively affect access for particular drugs, for groups of
     beneficiaries, or in
                                        5
<PAGE>

     certain geographic areas. The government, acting through legislation or
     regulation, may implement some or all of the GAO's recommendations. The
     Company cannot predict whether the government will take any such action
     and, if so, what effect such action will have on the Company's ability to
     provide respiratory and infusion drugs and related services to Medicare
     beneficiaries in the future.

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

GOVERNMENT REGULATION

     The federal government and all states in which the Company currently
operates regulate various aspects of its business. In particular, the Company's
operating centers are subject to federal laws covering the repackaging of drugs
(including oxygen) and regulating interstate motor-carrier transportation. The
Company's locations also are subject to state laws governing, among other
things, pharmacies, nursing services, distribution of medical equipment and
certain types of home health activities. Certain Company employees are subject
to state laws and regulations governing the ethics and professional practice of
respiratory therapy, pharmacy and nursing.

     As a health care supplier, Lincare is subject to extensive government
regulation, including numerous laws directed at preventing fraud and abuse and
laws regulating reimbursement under various government programs. The marketing,
billing, documentation and other practices of health care companies are all
subject to government scrutiny. To ensure compliance with Medicare and other
regulations, regional carriers often conduct audits and request patient records
and other documents to support claims submitted by the Company for payment of
services rendered to patients. Similarly, government agencies periodically open
investigations and obtain information from health care providers pursuant to the
legal process. Violations of federal and state regulations can result in severe
criminal, civil and administrative penalties and sanctions, including
disqualification from Medicare and other reimbursement programs.

     Health care is an area of rapid regulatory change. Changes in the law and
new interpretations of existing laws may affect permissible activities, the
relative costs associated with doing business, and reimbursement amounts paid by
federal, state and other third party payors. The Company cannot predict the
future of federal, state and local regulation or legislation, including Medicare
and Medicaid statutes and regulations, or possible changes in national health
care policies. Future legislative and regulatory changes could have a material
adverse impact on the Company.

EMPLOYEES

     As of January 31, 2002, the Company had approximately 6,100 employees. None
of the Company's employees are covered by collective bargaining agreements. The
Company believes that the relations between the Company's management and its
employees are good.

ENVIRONMENTAL MATTERS

     Management believes that the Company is currently in compliance, in all
material respects, with applicable federal, state and local statutes and
ordinances regulating the discharge of hazardous materials into the environment.
Management does not believe it will be required to expend any material amounts
in order to remain in compliance with these laws and regulations or that such
compliance will materially affect its capital expenditures, earnings or
competitive position.

AVAILABLE INFORMATION

     The Company files reports with the Securities and Exchange Commission
("SEC") as required by SEC rules and regulations on Form 10-Q, Form 10-K and the
annual proxy statement. These reports are available to the public to read and
copy at the SEC's Public Reference Room at 450 Fifth Street, N.W.,

                                        6
<PAGE>

Washington, D.C. 20549. The Company is an electronic filer with the SEC and
these reports are also available through the SEC internet site
(http://www.sec.gov).

ITEM 2.  PROPERTIES

     All but one of the Company's 564 operating center locations are leased from
unrelated third parties. Each operating center is a combination warehouse and
office, with warehouse space generally comprising approximately 50% of the
facility. Warehouse space is used for storage of adequate supplies of equipment
necessary to conduct the Company's business. The Company also leases 25 separate
billing centers from unrelated third parties. The Company owns its headquarters
facility located in Clearwater, Florida.

ITEM 3.  LEGAL PROCEEDINGS

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

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

     As a health care supplier, Lincare is subject to extensive government
regulation, including numerous laws directed at preventing fraud and abuse and
laws regulating reimbursement under various government programs. The marketing,
billing, documentation and other practices of health care companies are all
subject to government scrutiny. To ensure compliance with Medicare and other
regulations, regional carriers often conduct audits and request patient records
and other documents to support claims submitted by the Company for payment of
services rendered to patients. Similarly, government agencies periodically open
investigations and obtain information from health care providers pursuant to
legal process. Violations of federal and state regulations can result in severe
criminal, civil and administrative penalties and sanctions, including
disqualification from Medicare and other reimbursement programs.

     The Company is also involved in certain other claims and legal actions
arising in the ordinary course of its business.

     The ultimate disposition of all such matters is not expected to have a
material adverse impact on the Company's financial position, results of
operations or liquidity.

     In December 2001, the Company settled an investigation by the U.S.
Attorneys' Office in Sacramento, California, without admitting any wrongdoing.
The government's investigation, which commenced in July 1998, primarily focused
on claims made by certain of the Company's California operating centers for
reimbursement under Medicare for home oxygen and other therapies. As part of the
settlement, Lincare paid the government $3.15 million and a Lincare subsidiary
entered into a Corporate Integrity Agreement with the Office of Inspector
General of the U.S. Department of Health and Human Services.

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

     No matters were submitted to a vote of the Company's stockholders during
the fourth quarter of 2001.

                                        7
<PAGE>

                                    PART II

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

     The Company's Common Stock is traded on the NASDAQ National Market System
under the symbol LNCR. The following table sets forth the high and low closing
sale prices as reported by NASDAQ for the periods indicated.

<Table>
<Caption>
                                                               HIGH     LOW
                                                              ------   ------
<S>                                                           <C>      <C>
2001
First quarter...............................................  $29.50   $23.94
Second quarter..............................................   33.38    24.94
Third quarter...............................................   33.89    24.20
Fourth quarter..............................................   30.31    23.00
2000
First quarter...............................................  $19.50   $10.66
Second quarter..............................................   17.38    11.66
Third quarter...............................................   14.94    12.22
Fourth quarter..............................................   30.53    14.10
</Table>

     There were approximately 221 holders of record of the common stock as of
January 31, 2002.

     The Company has not paid any cash dividends on its capital stock and does
not anticipate paying cash dividends in the foreseeable future. It is the
present intention of the Company's Board of Directors to retain all earnings in
the Company in order to support the future growth of the Company's business.

                                        8
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data presented below under the caption
"Statements of Operations Data" for the years ended December 31, 2001, 2000,
1999, 1998 and 1997, are derived from the consolidated financial statements of
the Company audited by KPMG LLP, independent certified public accountants.

     The data set forth below is qualified by reference to, and should be read
in conjunction with, the consolidated financial statements, accompanying notes
and Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this report.

<Table>
<Caption>
                                                YEAR ENDED DECEMBER 31,
                                  ----------------------------------------------------
                                    2001       2000       1999       1998       1997
                                  --------   --------   --------   --------   --------
                                         (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>        <C>        <C>        <C>        <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues....................  $812,442   $702,484   $581,786   $487,407   $443,181
Cost of goods and services......   123,406    112,949     89,592     76,367     65,932
Operating expenses..............   183,385    158,794    131,240    111,222     93,830
Selling, general and
  administrative expenses.......   167,269    147,699    128,345    107,691     90,225
Bad debt expense................    12,187     10,537      6,981      5,849      4,432
Depreciation expense............    54,699     47,960     41,178     34,430     27,603
Amortization expense............    21,119     19,495     15,954     12,745     14,229
Other charges(1)................    10,650         --         --         --         --
Non-recurring expense(2)........        --         --         --         --     15,557
                                  --------   --------   --------   --------   --------
Operating income................   239,727    205,050    168,496    139,103    131,373
Interest income.................       365      1,763        468        447        202
Interest expense................    16,013     18,019      5,940      1,177      1,161
Net gain/(loss) on disposal of
  property and equipment........       (71)         8       (277)      (113)       (93)
Realized loss on derivative
  financial instrument..........     6,004         --         --         --         --
                                  --------   --------   --------   --------   --------
Income before income taxes......   218,004    188,802    162,747    138,260    130,321
Income tax expense..............    83,060     71,934     62,007     52,954     50,173
                                  --------   --------   --------   --------   --------
Net income......................  $134,944   $116,868   $100,740   $ 85,306   $ 80,148
                                  ========   ========   ========   ========   ========
Income per common share:
  Basic.........................  $   1.26   $   1.10   $   0.89   $   0.74   $   0.71
                                  ========   ========   ========   ========   ========
  Diluted.......................  $   1.23   $   1.08   $   0.87   $   0.72   $   0.68
                                  ========   ========   ========   ========   ========
Weighted average number of
  common shares outstanding.....   107,439    106,174    113,884    115,984    113,674
                                  ========   ========   ========   ========   ========
Weighted average number of
  common shares and common share
  equivalents outstanding.......   110,071    108,302    115,978    118,870    117,310
                                  ========   ========   ========   ========   ========
</Table>

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

(1) In 2001, the Company recorded other charges of $10,650,000 of which
    $4,150,000 was related to the settlement of an investigation by the U.S.
    Attorneys' Office in Sacramento, California, without any admission by the
    Company of wrongdoing, including a $1,000,000 reserve for related legal
    expenses. The remaining $6,500,000 of other charges related to the execution
    by the Company of employment

                                        9
<PAGE>

    agreements with 16 mid-level management employees as well as the modifying
    and extension of certain executive officer employment agreements.

(2) In 1997, the Company recorded a non-recurring expense of $15,557,000, of
    which $11,849,000 was related to the write down of impaired capital
    equipment and $3,708,000 was related to the write down of impaired
    intangible assets.

<Table>
<Caption>
                                                   AT DECEMBER 31,
                                ------------------------------------------------------
                                  2001         2000       1999       1998       1997
                                --------     --------   --------   --------   --------
                                                    (IN THOUSANDS)
<S>                             <C>          <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Working capital...............  $ 74,217(a)  $ 84,475   $ 70,179   $ 49,078   $ 42,106
Total assets..................  1,071,064     877,595    716,824    582,639    440,388
Long-term obligations,
  excluding current
  installments................   125,775      204,024    159,000     22,258      4,602
Stockholders' equity..........   738,958      584,450    486,111    495,656    393,067
</Table>

(a) Excluding borrowings under the Company's revolving credit agreement totaling
    $75,000,000, which are due and payable in 2002.

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

GENERAL

     The Company continues to pursue its strategy of increasing market share in
existing and surrounding geographic markets through internal growth and
selective acquisition of local and regional competitors. In addition, the
Company will continue to expand into new geographic markets on a selective
basis, either through acquisition or by opening new operating centers, when the
Company believes it will enhance its business. The Company's focus remains
primarily on oxygen and other respiratory therapy services, which represent
approximately 88% of the Company's revenues.

CRITICAL ACCOUNTING POLICIES

     The consolidated financial statements of the Company include accounts of
all majority-owned subsidiaries. The Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.

Revenue Recognition

     The Company's revenues are recognized on an accrual basis in the period in
which services and related products are provided to customers and are recorded
at net realizable amounts estimated to be received from customers and third
party payors. If the payment amount received differs from the net realizable
amount, an adjustment is made to the net realizable amount in the period that
these payment differences are determined. The Company reports revenues in its
financial statements net of such adjustments. The Securities and Exchange
Commission's Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition",
provides guidance on the application of generally accepted accounting principles
to selected revenue recognition issues. The Company has concluded that its
revenue recognition policy is appropriate and in accordance with generally
accepted accounting principles and SAB No. 101.

Bad Debt Expense and Allowance for Uncollectible Accounts and Notes Receivable

     The Company's accounts and notes receivable are reported net of allowance
for uncollectible accounts and notes receivable. The majority of the Company's
accounts and notes receivable are due from Medicare, Medicaid and private
insurance carriers, as well as from customers under co-insurance provisions.
Third party reimbursement is a complicated process which involves submission of
claims to multiple payors, each having its own claims requirements. In some
cases, the ultimate collection of
                                        10
<PAGE>

accounts and notes receivable subsequent to the service dates may not be known
for several months. The Company records bad debt expense and the allowance for
doubtful accounts based on a percentage of revenue. Various methods are used to
evaluate the collectibility of accounts and notes receivable including current
and historical cash collections, bad debt write-offs, and aging of accounts and
notes receivable. The Company's proprietary management information systems are
utilized to provide this data in order to assess bad debts. In the event that
collection results of existing accounts and notes receivable are not consistent
with historical experience, there may be a need to establish an additional
allowance for doubtful accounts, which may materially impact the Company's
financial position or results of operations.

Business Acquisition Accounting and Amortization Expense

     The Company's business strategy is to increase its market share through
internal growth and strategic acquisitions. The Financial Accounting Standards
Board's Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets", provide
guidance on the application of generally accepted accounting principles for
business acquisitions completed by the Company. The Company applies the purchase
method of accounting for its business acquisitions. The Company uses available
cash from operations and borrowings under the Company's revolving credit
agreement as the consideration for business acquisitions. The Company allocates
the purchase price of its business acquisitions based on the fair market value
of identifiable tangible and intangible assets. The difference between the total
cost of the acquisition and the sum of the fair values of acquired tangible and
identifiable intangible assets less liabilities is recorded as goodwill. Until
the end of 2001, goodwill was amortized over a period of 40 years. The
assignment of a 40 year life was based on each acquisition's ability to generate
sufficient operating results to support the recorded goodwill balance. In
accordance with SFAS No. 142, the Company will cease to amortize approximately
$684,771,000 of goodwill beginning January 1, 2002.

     The Company assesses the impairment of goodwill, intangibles and long-lived
assets whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors the Company considers important which
could trigger an impairment review include, without limitation, (i) significant
under-performance relative to expected historical or projected future operating
results; (ii) significant changes in the manner or use of the acquired assets or
the strategy for the Company's overall business; (iii) significant negative
industry or economic trends; (iv) increased competitive pressures; (v) a decline
in the Company's stock price for a sustained period; and (vi) technological and
regulatory changes.

     When the Company determines that the carrying value of intangibles,
long-lived assets and related goodwill may be impaired, the Company evaluates
the ability to recover those assets. If those assets are determined to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. In
accordance with SFAS No. 142, the Company is required to perform an initial
impairment review of its goodwill in the first quarter of 2002.

Contingencies

     The Company is involved in certain claims and legal matters arising in the
ordinary course of its business. The Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 5, "Accounting for
Contingencies", provides guidance on the application of generally accepted
accounting principles related to contingencies. The Company evaluates and
records liabilities for contingencies based on known claims and legal actions
when it is probable a liability has been incurred and the liability can be
reasonably estimated. The Company has concluded that its accrued liabilities
related to contingencies are appropriate and in accordance with generally
accepted accounting principles.

                                        11
<PAGE>

NET REVENUES

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

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2001       2000       1999
                                                        --------   --------   --------
                                                                (IN THOUSANDS)
<S>                                                     <C>        <C>        <C>
Oxygen and other respiratory therapy..................  $715,123   $607,071   $521,870
Home medical equipment and other......................    97,319     95,413     59,916
                                                        --------   --------   --------
          Total.......................................  $812,442   $702,484   $581,786
                                                        ========   ========   ========
</Table>

     Net revenues for the year ended December 31, 2001 increased by $109,958,000
(15.7%) over 2000. Net revenues for the year ended December 31, 2000 increased
by $120,698,000 (or 20.8%) over 1999. The increases in net revenues are
attributable to the Company's sales and marketing efforts that emphasize quality
and customer service, and the effect of acquisitions completed by the Company.

COST OF GOODS AND SERVICES

     Cost of goods and services as a percentage of net revenues was 15.2% for
the year ended December 31, 2001 and was 16.1% and 15.4% for the years ended
December 31, 2000 and 1999, respectively. The decrease in cost of goods for the
year ended December 31, 2001 was the result of the higher proportion of revenues
attributable to oxygen and other respiratory therapy, which generally carry
higher gross margins than other home medical equipment and supplies.

OPERATING AND OTHER EXPENSES

     The Company continues to maintain a cost structure that, with increased net
revenues, has permitted the Company to spread its fixed operating expenses and
overhead over a larger base of revenues, resulting in improvement in operating
income. Operating expenses expressed as a percentage of net revenues was 22.6%
for each of the years ended December 31, 2001, 2000 and 1999. Selling, general
and administrative expenses expressed as a percentage of net revenues for the
years ended December 31, 2001, 2000 and 1999 were 20.6%, 21.0% and 22.1%,
respectively.

     Bad debt expense as a percentage of net revenues was 1.5% for the years
ended December 31, 2001 and 2000 and 1.2% for the year ended December 31, 1999.
Continued growth in the pace of the Company's acquisition program has
contributed to the increase in the Company's bad debt expense. The integration
of these acquired companies into the Company's regional billing and collections
offices can temporarily disrupt collections, thus adversely impacting the amount
of accounts receivable written off as uncollectible.

     Depreciation expense as a percentage of net revenues was 6.7% for the year
ended December 31, 2001 compared with 6.8% and 7.1% for the years ended December
31, 2000 and 1999, respectively. The decrease in depreciation expense as a
percentage of net revenues in 2001 and 2000 is attributable to reduced capital
expenditures for respiratory assist devices resulting from changes in Medicare
coverage guidelines on October 1, 1999.

AMORTIZATION EXPENSE

     In July 2001, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 141, "Business Combinations". SFAS No. 141 provides
guidance regarding the initial recognition and measurement of goodwill and other
intangible assets. In accordance with SFAS 141, goodwill resulting from business
acquisitions completed after June 30, 2001 has not been amortized. For the
six-month period ended December 31, 2001, $96,304,000 of the Company's goodwill
was affected by the SFAS 141 provisions. Goodwill and other intangible assets
resulting from business acquisitions before July 1, 2001 has been amortized
through December 31, 2001. In June 2001, the Financial Accounting Standards
Board issued SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142
requires that goodwill and

                                        12
<PAGE>

certain intangible assets with indefinite lives no longer be amortized and
instead be tested annually for impairment. The provisions of SFAS No. 142 apply
to all business combinations completed after June 30, 2001. The Company adopted
SFAS No. 142 effective January 1, 2002.

     During 2001, the Company amortized $21,119,000 of its intangible assets
compared to $19,495,000 in 2000 and $15,954,000 in 1999. The increase in
amortization expense in 2001 (including the effect of SFAS No. 141) is
attributed to the amortization of intangible assets associated with business
combinations in 2001.

     The Company's net intangible assets were $695,530,000 as of December 31,
2001. Of this total, $3,949,000 (consisting of the value assigned to customer
lists) was being amortized over a period of three years, $6,810,000 (consisting
of various covenants not to compete) over a period of one to five years and
$684,771,000 (consisting of goodwill) over a period of 40 years.

OTHER CHARGES

     In 2001, the Company recorded other charges of $10,650,000 of which
$4,150,000 was related to the settlement of an investigation by the U.S.
Attorneys' Office in Sacramento, California, without any admission by the
Company of wrongdoing, including a $1,000,000 reserve for related legal
expenses. The remaining $6,500,000 of other charges related to the execution by
the Company of employment agreements with 16 mid-level management employees as
well as the modifying and extension of certain executive officer employment
agreements.

OPERATING INCOME

     As shown in the table below, operating income for the year ended December
31, 2001 increased by $34,677,000 from 2000 and by $36,554,000 from 1999 for the
year ended December 31, 2000.

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                        ------------------------------
                                                          2001       2000       1999
                                                        --------   --------   --------
                                                                (IN THOUSANDS)
<S>                                                     <C>        <C>        <C>
Operating income......................................  $239,727   $205,050   $168,496
Percentage of net revenues............................      29.5%      29.2%      29.0%
</Table>

INTEREST EXPENSE

     Interest expense for the year ended December 31, 2001 was $16,013,000,
compared to $18,019,000 and $5,940,000 for the years ended December 31, 2000 and
1999, respectively. The decrease in interest expense in 2001 is primarily
attributable to reductions in amounts outstanding under the Company's revolving
credit agreement and reductions in applicable interest rates. The increase in
interest expense in 2000 was primarily attributable to additional borrowings
utilized on the Company's revolving credit agreement in 2000 related to open
market repurchases of approximately 13.4 million shares of its outstanding
common stock.

REALIZED GAIN AND LOSS ON DERIVATIVE FINANCIAL INSTRUMENT

     In September 2000, the Company entered into an interest swap agreement
whereby the interest rates on its $125,000,000 of senior secured notes were
effectively converted to variable interest rates. In December 2000, the Company
terminated the interest rate swap agreement prior to its maturity at a realized
gain of $3,018,000. The gain was deferred and is being recognized over the
maturity period of the senior secured notes.

     In addition, the Company entered into an interest rate collar transaction
with an initial notional amount of $125,000,000. The collar had a floor and cap
rate with a floating rate option based on three-month LIBOR. At December 31,
2000, the collar was recorded at a fair value by the Company for $1,961,000 in
accordance with Statement of Financial Accounting Standards No. 133, "Accounting
for

                                        13
<PAGE>

Derivative Instruments and Hedging Activities". In 2001, the Company terminated
the interest rate collar agreement prior to its maturity and paid $7,965,000
realizing a loss of $6,004,000.

INCOME TAXES

     The Company's effective income tax rate was 38.1% for the years ended
December 31, 2001, 2000 and 1999.

ACQUISITIONS

     In 2001, the Company acquired, in unrelated acquisitions, certain operating
assets of 18 local and regional competitors. The cost of these acquisitions was
$173,021,000 and was allocated to acquired assets as follows: $2,114,000 to
current assets, $4,978,000 to property and equipment, $6,330,000 to intangible
assets and $159,599,000 to goodwill. These acquisitions resulted in the addition
of 15 new operating centers.

     In 2000, the Company acquired, in unrelated acquisitions, certain operating
assets of 15 local and regional competitors. The cost of these acquisitions was
$162,387,000 and was allocated to acquired assets as follows: $7,318,000 to
current assets, $6,562,000 to property and equipment, $6,142,000 to intangible
assets, and $142,365,000 to goodwill. These acquisitions resulted in the
addition of 48 new operating centers.

LIQUIDITY AND CAPITAL RESOURCES

     At December 31, 2001, the Company's working capital, excluding current
maturities of the revolving credit agreement totaling $75,000,000, was
$74,217,000, as compared to $84,475,000 at December 31, 2000 and $70,179,000 at
December 31, 1999.

     Net cash provided by operating activities was $233,705,000 for the year
ended December 31, 2001, compared with $215,029,000 for the year ended December
31, 2000 and $149,155,000 for the year ended December 31, 1999. A significant
portion of the Company's assets consists of accounts receivables from third
party payors that are responsible for payment for the equipment and services
provided by the Company. The Company's net accounts receivable in terms of days
sales outstanding was 60 days as of December 31, 2001 and 56 days as of December
31, 2000.

     Net cash used in investing and financing activities was $236,906,000,
$215,527,000 and $150,556,000 for the years ended December 31, 2001, 2000 and
1999, respectively. Activity in the year ended December 31, 2001 included the
Company's investment of $157,725,000 in business acquisitions, investment in
capital equipment of $74,206,000, proceeds of $175,534,000 from its revolving
credit agreement and other long-term obligations, and payments of $185,111,000
related to long-term obligations.

     As of December 31, 2001, the Company's principal sources of liquidity
consisted of $159,500,000 available under its revolving credit agreement. The
Company believes that internally generated funds, together with funds that may
be borrowed under its revolving credit agreement will be sufficient to meet the
Company's anticipated capital requirements and financial obligations. The
Company believes that its credit standing provides it with adequate access to
financial markets. The Company anticipates refinancing its $240,000,000
revolving credit agreement which is payable in 2002.

     On June 11, 1999, the Company's Board of Directors authorized the Company
to repurchase up to $200,000,000 of its outstanding common stock. Purchases are
made through open market or privately negotiated transactions, subject to market
conditions and trading restrictions. As of December 31, 2001, $178,007,000 of
common stock had been repurchased under this program. The total common stock
held in treasury was $176,053,000 as of December 31, 2001.

     The Company's future liquidity will continue to be dependent upon its
operating cash flow and management of accounts receivable. The Company does not
expect any impact on liquidity due to pending litigation.

                                        14
<PAGE>

NEW ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that
an entity account for business combinations using the purchase method and
eliminates the pooling method. In addition, SFAS No. 141 provides guidance
regarding the initial recognition and measurement of goodwill and other
intangible assets. The Company adopted SFAS No. 141 on July 1, 2001. In
accordance with SFAS No. 141, goodwill resulting from business acquisitions
completed after June 30, 2001 has not been amortized. For the six-month period
ended December 31, 2001, $96,304,000 of the Company's goodwill was affected by
the SFAS No. 141 provisions. Goodwill and other intangible assets resulting from
business acquisitions before July 1, 2001 have been amortized through December
31, 2001. SFAS No. 142 requires that goodwill and certain intangible assets with
indefinite lives no longer be amortized and instead be tested annually for
impairment. SFAS No. 142 also requires that intangible assets with estimable
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and subsequently, SFAS No. 144, "Accounting for the
Impairment of Long-Lived Assets", after its adoption on January 1, 2002. The
Company will adopt SFAS No. 142 in the first quarter of 2002.

     Upon adoption of SFAS No. 142, the Company is required to evaluate its
existing goodwill and intangible assets and make any necessary reclassifications
in order to conform with the new criteria in SFAS No. 141. The Company will be
required to reassess the useful lives and residual values of all intangible
assets acquired and make any necessary amortization period adjustments by the
end of the first interim period after adoption. For intangible assets determined
to have indefinite lives, the Company will be required to test the assets for
impairment in accordance with SFAS No. 142 within the first interim period.
Impairment is measured as the excess of carrying value over the fair value of an
intangible asset with an indefinite life. Any transitional impairment loss will
be measured as of January 1, 2002 and would be recognized as a cumulative effect
of a change in accounting principle in the first interim period in the Company's
statement of operations. Under SFAS No. 142, the Company is also required to
evaluate goodwill for impairment as of January 1, 2002. To accomplish this, the
Company must identify the operating center(s) ("reportable units") associated
with the goodwill and determine the carrying value of these reportable units by
assigning assets and liabilities (including the existing goodwill and intangible
assets) to those reporting units as of January 1, 2002. The Company will then
have six months from January 1, 2002 to determine the fair value of each
reporting unit and compare it to the carrying amount of the reporting unit. To
the extent the carrying amount of a reporting unit exceeds the fair value of the
reporting unit, an indication exists that the reporting unit goodwill may be
impaired and the Company must perform the second step of the impairment test.
The second step is required to be completed as soon as possible, but no later
than December 31, 2002. In the second step, the Company must compare the implied
fair value of the reporting unit goodwill with the carrying amount of the
reporting unit goodwill, both of which would be measured as of the date of
adoption. The implied fair value of goodwill is determined by allocating the
fair value of the reporting unit to all of the assets (recognized and
unrecognized) and liabilities of the reporting unit in a manner similar to a
purchase price allocation, in accordance with SFAS No. 141. The residual fair
value after this allocation is the implied fair value of the reporting unit
goodwill. Any transitional impairment loss will be recognized as a cumulative
effect of a change in accounting principle in the Company's statement of
operations. As of January 1, 2002, the Company expects to have $684,771,000 in
unamortized goodwill and $3,949,000 in unamortized intangible assets. Because of
the extensive effort needed to comply with adopting SFAS No. 142, it is not
practicable to reasonably estimate the impact of adopting this Statement on the
Company's financial statements at the date of this report, including whether the
Company will be required to recognize any transitional impairment losses.

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses

                                        15
<PAGE>

the accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated retirement costs. It is effective
for fiscal years beginning after June 30, 2002. The Company does not believe the
adoption of SFAS No. 143 will have any effect on its financial statements.

     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. SFAS
No. 144 requires companies to separately report discontinued operations and
extends that reporting to a component of an entity that either has been disposed
of (by sale, abandonment, or in a distribution to owners) or is classified as
held for sale. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. The Company will adopt SFAS
No. 144 in the first quarter of 2002. The Company has not yet determined the
effect SFAS No. 144 will have on its financial statements.

INFLATION

     The Company has not experienced large increases in either the cost of
supplies or operating expenses due to inflation. With reductions in
reimbursement by government and private medical insurance programs and pressure
to contain the costs of such programs, the Company bears the risk that
reimbursement rates set by such programs will not keep pace with inflation.

QUANTITATIVE AND QUALITATIVE DISCLOSURE REGARDING MARKET RISK

     During September 1999 as part of the Company's stock repurchase program,
the Company sold European Put Options ("Puts") on underlying shares of the
Company's common stock. The Puts had a six-month maturity period and the Company
was paid a $4,454,000 premium in advance which was accounted for as additional
paid-in capital. The Company had the option to settle the Puts in cash or in
shares of common stock. In March 2000, the Company amended the terms of the Puts
to extend the maturity date of the Puts by two months. In connection with
extending the maturity period of the Puts, the Company was paid an additional
cash premium of $280,000. In May 2000, the Puts expired out-of-the-money with no
obligation on the part of the Company.

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

                                        16
<PAGE>

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

     Estimated fair value of financial instruments (in thousands):

<Table>
<Caption>
                                                                         (ASSUMING 10%
                                                                  DECREASE IN INTEREST RATES)
                                                                -------------------------------
                                                                HYPOTHETICAL     HYPOTHETICAL
                               FACE     CARRYING                 CHANGE IN        CHANGE IN
                              AMOUNT     AMOUNT    FAIR VALUE    FAIR VALUE    INTEREST EXPENSE
                             --------   --------   ----------   ------------   ----------------
<S>                          <C>        <C>        <C>          <C>            <C>
December 31, 2001:
  Three year revolving
     credit agreement......  $ 75,000   $ 75,000    $ 75,000       $    0          $  (240)
  Senior secured notes.....   125,000    125,000     126,931          435                0
December 31, 2000:
  Three year revolving
     credit agreement......  $ 78,000   $ 78,000    $ 78,000       $    0          $  (624)
  Senior secured notes.....   125,000    125,000     125,820          447                0
  Interest rate collar.....         0      1,961       1,961        1,717              635
</Table>

FORWARD-LOOKING STATEMENTS

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

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

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

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements required by this item are listed in Item 14(a)(1)
and are submitted at the end of this Annual Report on Form 10-K. The
supplementary data required by this Item is included on page S-1. The financial
statements and supplementary data are herein incorporated by reference.

                                        17
<PAGE>

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

     None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The response to this item will be included in the definitive proxy
statement for the Annual Meeting of Stockholders to be held May 20, 2002, under
"Information Regarding the Board of Directors and Executive Officers" and is
herein incorporated by reference.

ITEM 11. EXECUTIVE COMPENSATION

     The response to this item will be included in the definitive proxy
statement for the Annual Meeting of Stockholders to be held May 20, 2002, under
"Executive Compensation" and is herein incorporated by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The response to this item will be included in the definitive proxy
statement for the Annual Meeting of Stockholders to be held May 20, 2002, under
"Security Ownership of Principal Stockholders and Management" and is herein
incorporated by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     None.

                                        18
<PAGE>

                                    PART IV

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

     (a) (1) The following consolidated financial statements of Lincare Holdings
Inc. and subsidiaries are filed as part of this Form 10-K starting at page F-1:

          Independent Auditors' Report

          Consolidated Balance Sheets -- December 31, 2001 and 2000

          Consolidated Statements of Operations -- Years ended December 31,
     2001, 2000 and 1999.

        Consolidated Statements of Stockholders' Equity -- Years ended December
        31, 2001, 2000 and 1999

          Consolidated Statements of Cash Flows -- Years ended December 31,
     2001, 2000 and 1999

          Notes to Consolidated Financial Statements

         (2) The following consolidated financial statement schedule of Lincare
Holdings Inc. and subsidiaries is included in this Form 10-K at page S-1:

          Schedule VIII -- Valuation and Qualifying Accounts

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

         (3) Exhibits included or incorporated herein:

          See Exhibit Index.

     (b) The Company did not file a Current Report on Form 8-K during the three
months ended December 31, 2001.

                                        19
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
effective March 28, 2002 on its behalf by the undersigned, thereunto duly
authorized.

                                          LINCARE HOLDINGS INC.

                                                   /s/ PAUL G. GABOS
                                          --------------------------------------
                                                      Paul G. Gabos
                                              Secretary, Chief Financial and
                                               Principal Accounting Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

<Table>
<Caption>
                     SIGNATURE                                   POSITION                    DATE
                     ---------                                   --------                    ----
<S>      <C>                                          <C>                               <C>

                /s/ JOHN P. BYRNES                      Director, President, Chief      March 28, 2002
---------------------------------------------------   Executive Officer and Principal
                  John P. Byrnes                             Executive Officer


                 /s/ PAUL G. GABOS                    Secretary, Chief Financial and    March 28, 2002
---------------------------------------------------    Principal Accounting Officer
                   Paul G. Gabos


                         *                                       Director               March 28, 2002
---------------------------------------------------
                 Chester B. Black


                         *                                       Director               March 28, 2002
---------------------------------------------------
                   Frank T. Cary


                         *                                       Director               March 28, 2002
---------------------------------------------------
              William F. Miller, III


                         *                                       Director               March 28, 2002
---------------------------------------------------
               Frank D. Byrne, M.D.


                                                                 Director
---------------------------------------------------
              Stuart H. Altman, Ph.D.

</Table>

*By:                             /s/ JOHN P. BYRNES
      -----------------------------------------
                                   Attorney in fact

                                        20
<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Lincare Holdings Inc.:

     We have audited the consolidated financial statements of Lincare Holdings
Inc. and subsidiaries as listed in the index on page 19. In connection with our
audits of the consolidated financial statements, we also have audited the
consolidated financial statement schedule listed in the index on page 19. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used, and
significant estimates made, by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lincare
Holdings Inc. and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. Also, in our opinion, the
related consolidated financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

                                          KPMG LLP

St. Petersburg, Florida
February 8, 2002

                                       F-1
<PAGE>

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 2001 AND 2000

<Table>
<Caption>
                                                                 2001         2000
                                                              -----------   ---------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>           <C>
                                       ASSETS
Current assets:
  Cash and cash equivalents.................................  $       --    $  3,201
  Restricted cash...........................................       8,350          --
  Accounts and notes receivable (note 2)....................     143,840     116,838
  Income taxes receivable...................................          --       5,210
  Inventories...............................................       2,857       3,882
  Other.....................................................       6,185       7,121
                                                              ----------    --------
         Total current assets...............................     161,232     136,252
                                                              ----------    --------
Property and equipment (notes 3 and 4)......................     441,391     364,819
Less accumulated depreciation...............................     229,076     176,770
                                                              ----------    --------
         Net property and equipment.........................     212,315     188,049
                                                              ----------    --------
Other assets:
  Goodwill, less accumulated amortization of $64,539 in 2001
    and $48,644 in 2000.....................................     684,771     540,637
  Intangible assets, less accumulated amortization of
    $54,371 in 2001 and $49,819 in 2000.....................       3,949       8,501
  Covenants not to compete, less accumulated amortization of
    $13,346 in 2001 and $12,673 in 2000.....................       6,810       1,153
  Other.....................................................       1,987       3,003
                                                              ----------    --------
         Total other assets.................................     697,517     553,294
                                                              ----------    --------
                                                              $1,071,064    $877,595
                                                              ==========    ========

                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current installments of long-term obligations (note 5)....  $   97,489    $  6,328
  Accounts payable..........................................      29,946      19,812
  Accrued expenses:
    Compensation and benefits...............................      18,488      15,455
    Other...................................................      10,873      10,182
    Income taxes payable....................................       5,219          --
                                                              ----------    --------
         Total current liabilities..........................     162,015      51,777
                                                              ----------    --------
Long-term obligations, excluding current installments (note
  5)........................................................     125,775     204,024
Interest rate derivative financial instrument...............          --       1,961
Deferred income taxes (note 6)..............................      43,568      34,585
Minority interest...........................................         748         798
Stockholders' equity (notes 6, 7, and 8):
  Common stock, $.01 par value. Authorized 400,000,000
    shares; issued and outstanding: 121,040,314 and
    107,743,762 in 2001, 119,966,664 and 106,635,434 in
    2000....................................................       1,210       1,200
  Additional paid-in capital................................     194,164     175,402
  Retained earnings.........................................     719,637     584,693
  Less treasury stock, at cost: 13,259,000 shares in 2001
    and 13,331,230 shares in 2000...........................     176,053     176,845
                                                              ----------    --------
       Total stockholders' equity...........................     738,958     584,450
Commitments and contingencies (notes 4 and 14)
                                                              ----------    --------
                                                              $1,071,064    $877,595
                                                              ==========    ========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<Table>
<Caption>
                                                                 2001          2000          1999
                                                              -----------   -----------   -----------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>           <C>
Net revenues (note 9).......................................   $812,442      $702,484      $581,786
                                                               --------      --------      --------
Costs and expenses:
  Cost of goods and services................................    123,406       112,949        89,592
  Operating expenses........................................    183,385       158,794       131,240
  Selling, general and administrative expenses..............    167,269       147,699       128,345
  Bad debt expense..........................................     12,187        10,537         6,981
  Depreciation expense......................................     54,699        47,960        41,178
  Amortization expense......................................     21,119        19,495        15,954
  Other charges (note 13)...................................     10,650            --            --
                                                               --------      --------      --------
                                                                572,715       497,434       413,290
                                                               --------      --------      --------
          Operating income..................................    239,727       205,050       168,496
                                                               --------      --------      --------
Other income (expenses):
  Interest income...........................................        365         1,763           468
  Interest expense..........................................    (16,013)      (18,019)       (5,940)
  Net gain/(loss) on disposal of property and equipment.....        (71)            8          (277)
  Realized loss on derivative financial instrument (note
     5).....................................................     (6,004)           --            --
                                                               --------      --------      --------
                                                                (21,723)      (16,248)       (5,749)
                                                               --------      --------      --------
          Income before income taxes........................    218,004       188,802       162,747
Income tax expense (note 6).................................     83,060        71,934        62,007
                                                               --------      --------      --------
          Net income........................................   $134,944      $116,868      $100,740
                                                               ========      ========      ========
Income per common share (note 10):
  Basic.....................................................   $   1.26      $   1.10      $   0.89
                                                               ========      ========      ========
  Diluted...................................................   $   1.23      $   1.08      $   0.87
                                                               ========      ========      ========
Weighted average number of common shares outstanding........    107,439       106,174       113,884
                                                               ========      ========      ========
Weighted average number of common shares and common share
  equivalents outstanding...................................    110,071       108,302       115,978
                                                               ========      ========      ========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-3
<PAGE>

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<Table>
<Caption>
                                                   ADDITIONAL                             TOTAL
                                          COMMON    PAID-IN     RETAINED   TREASURY   STOCKHOLDERS'
                                          STOCK     CAPITAL     EARNINGS    STOCK        EQUITY
                                          ------   ----------   --------   --------   -------------
                                                           (DOLLARS IN THOUSANDS)
<S>                                       <C>      <C>          <C>        <C>        <C>
Balances at December 31, 1998...........  $1,166    $128,245    $367,085   $    840     $495,656
Exercise of stock options (note 8)......      2        1,846          --         --        1,848
Proceeds from sale of put options (note
  7)....................................     --        4,454          --         --        4,454
Tax benefit related to exercise of
  employee stock options (notes 6 and
  8)....................................     --          612          --         --          612
Net income..............................     --           --     100,740         --      100,740
Treasury stock issued...................     --           --          --      1,061        1,061
Treasury stock acquired.................     --           --          --    118,260      118,260
                                          ------    --------    --------   --------     --------
Balances at December 31, 1999...........  1,168      135,157     467,825    118,039      486,111
Exercise of stock options (note 8)......     32       21,823          --         --       21,855
Proceeds from sale of put options (note
  7)....................................     --          280          --         --          280
Tax benefit related to exercise of
  employee stock options (notes 6 and
  8)....................................     --       18,142          --         --       18,142
Net income..............................     --           --     116,868         --      116,868
Treasury stock issued...................     --           --          --        941          941
Treasury stock acquired.................     --           --          --     59,747       59,747
                                          ------    --------    --------   --------     --------
Balances at December 31, 2000...........  1,200      175,402     584,693    176,845      584,450
Exercise of stock options (note 8)......     10       11,103          --         --       11,113
Tax benefit related to exercise of
  employee stock options (notes 6 and
  8)....................................     --        7,659          --         --        7,659
Net income..............................     --           --     134,944         --      134,944
Treasury stock issued...................     --           --          --        792          792
                                          ------    --------    --------   --------     --------
Balances at December 31, 2001...........  $1,210    $194,164    $719,637   $176,053     $738,958
                                          ======    ========    ========   ========     ========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-4
<PAGE>

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

<Table>
<Caption>
                                                               2001       2000        1999
                                                             --------   ---------   ---------
                                                                  (DOLLARS IN THOUSANDS)
<S>                                                          <C>        <C>         <C>
Cash flows from operating activities:
  Net income...............................................  $134,944   $ 116,868   $ 100,740
  Adjustments to reconcile net income to net cash provided
     by operating activities:
     Increase in provision for losses on accounts and notes
       receivable..........................................    (3,969)     (1,390)     (6,260)
     Depreciation expense..................................    54,699      47,960      41,178
     Gain/loss on disposal of property and equipment.......        71          (8)        277
     Amortization expense..................................    21,119      19,495      15,954
     Amortization of imputed interest......................        --          --          15
     Amortization of interest swap contracts...............      (785)        (33)         --
     Realized loss on interest rate derivative (note 5)....     6,004          --          --
     Deferred income taxes.................................     8,983      13,092       8,539
     Minority interest in net earnings of subsidiary.......        86         137          83
     Change in operating assets and liabilities (net of
       effects of acquired businesses):
       Increase in accounts and notes receivable...........   (21,120)     (3,939)     (9,302)
       (Increase) decrease in inventories..................     1,205       1,685        (225)
       (Increase) decrease in other current assets.........       936      (5,456)     (1,435)
       Increase in accounts payable........................    10,134       2,901       1,430
       Increase (decrease) in accrued expenses.............     3,309       4,948        (167)
       (Increase) decrease in income taxes.................    18,089      18,769      (1,672)
                                                             --------   ---------   ---------
          Net cash provided by operating activities........   233,705     215,029     149,155
                                                             --------   ---------   ---------
Cash flows from investing activities:
  Proceeds from sale of property and equipment.............       150         310         632
  Capital expenditures.....................................   (74,206)    (58,622)    (66,882)
  (Increase) decrease in other assets......................       648        (445)     (1,884)
  Business acquisitions, net of cash acquired (note 12)....  (149,375)   (150,326)    (73,426)
  Cash restricted for future payments......................    (8,350)         --          --
                                                             --------   ---------   ---------
          Net cash used by investing activities............  (231,133)   (209,083)   (141,560)
                                                             --------   ---------   ---------
Cash flows from financing activities:
  Proceeds from long-term obligations......................   175,534     314,018     273,000
  Payment of long-term obligations.........................  (185,111)   (283,663)   (170,879)
  Payment of interest rate derivative (note 5).............    (7,965)         --          --
  Decrease in minority interest............................      (136)       (128)       (220)
  Proceeds from issuance of common stock...................    11,113      21,855       1,848
  Proceeds from put options................................        --         280       4,454
  Proceeds from issuance of treasury stock.................       792         941       1,061
  Payment to acquire treasury stock........................        --     (59,747)   (118,260)
                                                             --------   ---------   ---------
          Net cash used by financing activities............    (5,773)     (6,444)     (8,996)
                                                             --------   ---------   ---------
          Net decrease in cash and cash equivalents........    (3,201)       (498)     (1,401)
Cash and cash equivalents, beginning of year...............     3,201       3,699       5,100
                                                             --------   ---------   ---------
Cash and cash equivalents, end of year.....................  $     --   $   3,201   $   3,699
                                                             ========   =========   =========
</Table>

          See accompanying notes to consolidated financial statements.

                                       F-5
<PAGE>

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000 AND 1999

(1)  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (A) DESCRIPTION OF BUSINESS

     Lincare Holdings Inc. and subsidiaries (the "Company") provides oxygen,
respiratory therapy services, infusion therapy services and home medical
equipment such as hospital beds, wheelchairs and other medical supplies to the
home health care market. The Company's customers are located in 44 states. The
Company's equipment and supplies are readily available and the Company is not
dependent on a single supplier or even a few suppliers.

  (B) USE OF ESTIMATES

     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

  (C) PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of Lincare
Holdings Inc. and its majority-owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation. Certain amounts
in the prior years financial statements have been reclassified to conform to the
current year presentation.

  (D) REVENUE RECOGNITION

     Revenues are recognized on an accrual basis in the period in which services
and related products are provided to customers and are recorded at net
realizable amounts estimated to be received from customers and third party
payors. If the payment amount received differs from the net realizable amount,
an adjustment is made to the net realizable amount in the period that these
payment differences are determined. The Company reports revenues in its
financial statements net of such adjustments. The Company records bad debt
expense and the allowance for uncollectible accounts as a percentage of net
revenues.

  (E) FINANCIAL INSTRUMENTS

     The Company believes the book value of its cash equivalents, accounts and
notes receivable, income taxes receivable, accounts payable and accrued expenses
approximate fair value due to their short-term nature. The book value of the
Company's revolving credit agreement and deferred acquisition obligations
approximate their fair value as the current interest rates approximate rates at
which similar types of borrowing arrangements could be currently obtained by the
Company. The fair value of the Company's senior secured notes are estimated
based on the discounted value of the future cash flows expected to be paid over
the maturity period of the notes. The estimated fair value of the senior secured
notes at December 31, 2001 and 2000 was $126,931,000 and $125,820,000,
respectively.

  (F) INVENTORIES

     Inventories, consisting of equipment, supplies and replacement parts, are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.

                                       F-6
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  (G) PROPERTY AND EQUIPMENT

     Property and equipment is stated at cost. Depreciation on property and
equipment is calculated on the straight-line method over the estimated useful
lives of the assets as set forth in the table below.

<Table>
<S>                                                            <C>
Building and improvements...................................   5 to 40 years
Equipment and furniture.....................................   3 to 20 years
</Table>

     Leasehold improvements are amortized on the straight-line method over the
lesser of the lease term or estimated useful life of the asset. Amortization is
included with depreciation expense.

  (H) OTHER ASSETS

     Goodwill results from the excess of cost over net assets of acquired
businesses and until December 31, 2001 was amortized on a straight-line basis
over 40 years.

     Intangible assets (customer base) are amortized on a straight-line basis
over the estimated life of three years.

     Covenants not to compete are amortized on a straight-line basis over the
life of the respective covenants, one to five years.

     The Company periodically evaluates the ability to recover goodwill and
other intangible assets by utilizing an undiscounted cash flow from operating
income test. In addition, the Company considers the effects of external changes
to the Company's business environment, including competitive pressures, market
changes and technological and regulatory changes. If goodwill and other
intangible assets are determined to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets.

  (I) INCOME TAXES

     Deferred income taxes are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to be
recovered or settled. The effect on deferred taxes of a change in tax rate is
recognized in income in the period that includes the enactment date.

  (J) PENSION PLAN

     The Company has a defined contribution pension plan covering substantially
all employees. The Company makes monthly contributions to the plan equal to the
amount accrued for pension expense. Employer contributions (net of applied
forfeitures) were approximately $5,527,000 in 2001, $4,093,000 in 2000, and
$3,537,000 in 1999.

  (K) STATEMENTS OF CASH FLOWS

     For purposes of the statements of cash flows, the Company considers all
short-term investments with a purchased maturity of three months or less to be
cash equivalents.

  (L) STOCK OPTIONS

     The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations, in accounting for its fixed
plan stock options. As such, compensation expense would be recorded on the

                                       F-7
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

date of grant only if the current market price of the underlying stock exceeded
the exercise price. Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation", established accounting and
disclosure requirements using a fair value-based method of accounting for
stock-based employee compensation plans. As allowed by SFAS No. 123, the Company
has elected to continue to apply the intrinsic value-based method of accounting
described above, and has adopted the disclosure requirements of SFAS No. 123.

  (M) SEGMENT INFORMATION

     The Company follows Financial Accounting Standards Board Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 utilizes the "management"
approach for determining reportable segments. The management approach designates
the internal organization that is used by management for making operating
decisions and assessing performance as the source of the Company's reportable
segments. The Company maintains a decentralized approach to management of its
local business operations. Decentralization of managerial decision-making
enables the Company's operating centers to respond promptly and effectively to
local market demands and opportunities. The Company provides home health care
equipment and services through 564 operating centers in 44 states. The Company
views each operating center as a distinct part of a single "operating segment,"
as each operating center provides the same products to customers. Management
reporting and analysis occurs at an individual operating center level and senior
management reviews statements of operation for each of the Company's operating
centers on a monthly basis. As a result, all of the Company's operating centers
are aggregated into one reportable segment.

  (N) NEW ACCOUNTING STANDARDS

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that
an entity account for business combinations using the purchase method and
eliminates the pooling method. In addition, SFAS No. 141 provides guidance
regarding the initial recognition and measurement of goodwill and other
intangible assets. The Company adopted SFAS No. 141 on July 1, 2001. In
accordance with SFAS No. 141, goodwill resulting from business acquisitions
completed after June 30, 2001 has not been amortized. For the six-month period
ended December 31, 2001, $96,304,000 of the Company's goodwill was affected by
the SFAS No. 141 provisions. Goodwill and other intangible assets resulting from
business acquisitions before July 1, 2001 have been amortized through December
31, 2001. SFAS No. 142 requires that goodwill and certain intangible assets with
indefinite lives no longer be amortized and instead be tested annually for
impairment. SFAS No. 142 also requires that intangible assets with estimable
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and subsequently, SFAS No. 144, "Accounting for the
Impairment of Long-Lived Assets", after its adoption on January 1, 2002. The
Company will adopt SFAS No. 142 in the first quarter of 2002.

     Upon adoption of SFAS No. 142, the Company is required to evaluate its
existing goodwill and intangible assets and make any necessary reclassifications
in order to conform with the new criteria in SFAS No. 141. For intangible assets
determined to have indefinite lives, the Company will be required to test the
assets for impairment in accordance with SFAS No. 142 within the first interim
period. Impairment is measured as the excess of carrying value over the fair
value of an intangible asset with an indefinite life. Any transitional
impairment loss will be measured as of January 1, 2002 and would be recognized
as a cumulative effect of a change in accounting principle in the first interim
period in the

                                       F-8
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company's statement of operations. Under SFAS No. 142, the Company is also
required to evaluate goodwill for impairment as of January 1, 2002. To
accomplish this, the Company must identify the operating center(s) ("reportable
units") associated with the goodwill and determine the carrying value of these
reportable units by assigning assets and liabilities (including the existing
goodwill and intangible assets) to those reporting units as of January 1, 2002.
The Company will then have six months from January 1, 2002 to determine the fair
value of each reporting unit and compare it to the carrying amount of the
reporting unit. To the extent the carrying amount of a reporting unit exceeds
the fair value of the reporting unit, an indication exists that the reporting
unit goodwill may be impaired and the Company must perform the second step of
the impairment test. The second step is required to be completed as soon as
possible, but no later than the December 31, 2002. In the second step, the
Company must compare the implied fair value of the reporting unit goodwill with
the carrying amount of the reporting unit goodwill, both of which would be
measured as of the date of adoption. The implied fair value of goodwill is
determined by allocating the fair value of the reporting unit to all of the
assets (recognized and unrecognized) and liabilities of the reporting unit in a
manner similar to a purchase price allocation, in accordance with SFAS No. 141.
The residual fair value after this allocation is the implied fair value of the
reporting unit goodwill. Any transitional impairment loss will be recognized as
a cumulative effect of a change in accounting principle in the Company's
statement of operations. As of January 1, 2002, the Company expects to have
$684,771,000 in unamortized goodwill and $3,949,000 in unamortized intangible
assets. Because of the extensive effort needed to comply with adopting SFAS No.
142, it is not practicable to reasonably estimate the impact of adopting this
Statement on the Company's financial statements at the date of this report,
including whether the Company will be required to recognize any transitional
impairment losses.

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses the accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated retirement costs. It is effective for fiscal years beginning after
June 30, 2002. The Company does not believe the adoption of SFAS No. 143 will
have any effect on its financial statements.

     In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, " Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 requires that
long-lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If the carrying amount of an asset exceeds its
estimated future cash flows, an impairment charge is recognized by the amount by
which the carrying amount of the asset exceeds the fair value of the asset. SFAS
No. 144 requires companies to separately report discontinued operations and
extends that reporting to a component of an entity that either has been disposed
of (by sale, abandonment, or in a distribution to owners) or is classified as
held for sale. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. The Company will adopt SFAS
No. 144 in the first quarter of 2002. The Company has not yet determined the
effect SFAS No. 144 will have on its financial statements.

 (O) CONTINGENCIES

     The Company is involved in certain claims and legal matters arising in the
ordinary course of its business. The Company uses Statement of Financial
Accounting Standards No. 5, "Accounting for Contingencies", as guidance on the
application of generally accepted accounting principles related to
contingencies. The Company evaluates and records liabilities for contingencies
based on known claims and legal actions when it is probable a liability has been
incurred and the liability can be reasonably estimated.

                                       F-9
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(2)  ACCOUNTS AND NOTES RECEIVABLE

     Accounts and notes receivable at December 31, 2001 and 2000 consist of:

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Trade.......................................................  $151,030   $126,069
Other.......................................................       254        258
                                                              --------   --------
                                                               151,284    126,327
Less allowance for uncollectible accounts...................     7,444      9,489
                                                              --------   --------
                                                              $143,840   $116,838
                                                              ========   ========
</Table>

(3)  PROPERTY AND EQUIPMENT

     Property and equipment at December 31, 2001 and 2000 consist of:

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Land and improvements.......................................  $  3,072   $  3,063
Building and improvements...................................    17,706      9,483
Equipment and furniture.....................................   420,613    352,273
                                                              --------   --------
                                                              $441,391   $364,819
                                                              ========   ========
</Table>

     Rental equipment of approximately $324,327,000 in 2001 and $267,812,000 in
2000 is included with equipment and furniture.

(4)  LEASES

     The Company has several noncancelable operating leases, primarily for
buildings, office equipment and vehicles, that expire over the next five years
and provide renewal options. Operating lease expense was approximately
$31,078,000 in 2001, $27,763,000 in 2000 and $24,118,000 in 1999.

     Future minimum lease payments under noncancelable operating leases as of
December 31, 2001 are as follows:

<Table>
<Caption>
                                                              (IN THOUSANDS)
                                                              --------------
<S>                                                           <C>
2002........................................................     $22,232
2003........................................................      13,382
2004........................................................       6,844
2005........................................................       3,181
2006........................................................         646
                                                                 -------
  Total minimum lease payments..............................     $46,285
                                                                 =======
</Table>

                                       F-10
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(5)  LONG-TERM OBLIGATIONS

     Long-term obligations at December 31, 2001 and 2000 consist of:

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Borrowings under three year revolving credit agreement
  bearing interest (3.2% at December 31, 2001) at the
  Interbank Offered Rate, adjusted for changes in reserve
  requirements, plus an applicable margin based upon the
  Company's consolidated leverage ratio (consolidated funded
  indebtedness to consolidated earnings before interest,
  taxes, depreciation and amortization) payable in 2002.....  $ 75,000   $ 78,000
Borrowings under senior secured notes bearing fixed interest
  maturing over three, four and five years: $30,000,000 at
  8.91% due 2003, $50,000,000 at 9.01% due 2004 and
  $45,000,000 at 9.11% due 2005 and proceeds from the sale
  of interest swap contracts................................   125,775    126,024
Unsecured, deferred acquisition obligations net of imputed
  interest, payable in various installments through 2002....    22,489      6,328
                                                              --------   --------
          Total long-term obligations.......................   223,264    210,352
          Less current installments.........................    97,489      6,328
                                                              --------   --------
          Long-term debt, excluding current installments....  $125,775   $204,024
                                                              ========   ========
</Table>

     The Company's current revolving credit agreement with several lenders and
Bank of America N.A. as agent, dated August 23, 1999, as amended, permits the
Company to borrow amounts up to $240,000,000 on a three year revolving credit
facility. The three year revolving credit facility contains a $20,000,000 letter
of credit sub facility which reduces the principal amount available under the
three year revolving credit facility by the amount of outstanding letters of
credit. As of December 31, 2001, $5,500,000 was outstanding under the letter of
credit sub facility. The revolving credit agreement has a termination date of
August 22, 2002. Upon entering into the revolving credit agreement, an
origination fee of $1,840,000 was paid and is being amortized over three years.
Commitment fees on the unused portion of the facility (.425% at December 31,
2001) are based upon the Company's consolidated leverage ratio for the most
recent four fiscal quarters. Interest accrued on the outstanding principal
balance that is not termed for repayment is payable monthly. The revolving
credit agreement contains several financial and other covenants and is secured
by a pledge of the stock of the wholly-owned subsidiaries of Lincare Holdings
Inc.

     The Company's $60,000,000 364-day revolving credit agreement expired on
August 22, 2000 and was replaced on September 6, 2000 by $125,000,000 of senior
secured notes offered through a private placement. The senior secured notes have
a fixed interest rate and mature over three, four and five years: $30,000,000 at
8.91% due September 15, 2003, $50,000,000 at 9.01% due September 15, 2004 and
$45,000,000 at 9.11% due September 15, 2005. Upon entering into the senior
secured note agreement, a placement fee of $893,000 was paid and is being
amortized over the periods of the notes. The senior secured notes contain
several financial and other covenants and are secured by a pledge of the stock
of the wholly-owned subsidiaries of Lincare Holdings Inc. On September 6, 2000,
the Company entered into an interest swap agreement whereby the interest rate on
its $125,000,000 of senior secured notes were effectively converted to variable
interest rates. On December 14, 2000, the Company terminated the interest rate
swap agreement prior to its maturity at a realized gain of $3,018,000. The gain
was deferred and is being recognized over the maturity period of the senior
secured notes.

     In addition, the Company entered into an interest rate collar transaction
with an initial notional amount of $125,000,000. The collar had a floor and cap
rate with a floating rate option based on three-

                                       F-11
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

month LIBOR. At December 31, 2000, the collar was recorded at a fair value by
the Company for $1,961,000 in accordance with Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities". On November 27, 2001, the Company terminated the interest rate
collar agreement prior to their maturity and paid $7,965,000 realizing a loss of
$6,004,000.

     The aggregate maturities of long-term obligations for each of the five
years subsequent to December 31, 2001 are as follows:

<Table>
<Caption>
                                                               (IN THOUSANDS)
                                                               --------------
<S>                                                            <C>
2002........................................................      $ 97,489
2003........................................................        30,492
2004........................................................        50,196
2005........................................................        45,087
2006........................................................            --
                                                                  --------
                                                                  $223,264
                                                                  ========
</Table>

(6)  INCOME TAXES

     The tax effects of temporary differences that account for significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
2001 and 2000 are presented below:

<Table>
<Caption>
                                                               2001       2000
                                                              -------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>       <C>
Deferred tax assets:
  Accrued expenses, principally due to deferral for income
     tax reporting purposes.................................  $(2,452)  $ (3,728)
  Intangible assets and covenants not to compete,
     principally due to differences in amortization.........  (10,565)    (8,713)
  Net operating loss carryforward...........................      (31)       (73)
                                                              -------   --------
          Total gross deferred tax assets...................  (13,048)   (12,514)
                                                              -------   --------
Deferred tax liabilities:
  Property and equipment, principally due to differences in
     depreciation...........................................   25,733     25,798
  Goodwill, principally due to differences in
     amortization...........................................   28,420     19,141
  Other.....................................................    1,373        755
                                                              -------   --------
          Total gross deferred tax liabilities..............   55,526     45,694
                                                              -------   --------
          Net deferred tax liability........................  $42,478   $ 33,180
                                                              =======   ========
</Table>

     There is no valuation allowance for deferred tax assets. The Company
expects that the results of future operations will generate sufficient taxable
income to allow for the utilization of deferred tax assets.

                                       F-12
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Income tax expense attributable to operations consists of:

<Table>
<Caption>
                                                           YEAR ENDED DECEMBER 31,
                                                         ----------------------------
                                                          2001       2000      1999
                                                         -------   --------   -------
                                                                (IN THOUSANDS)
<S>                                                      <C>       <C>        <C>
Current:
  Federal..............................................  $67,760   $ 55,345   $47,574
  State................................................    6,003      4,902     4,215
                                                         -------   --------   -------
          Total current................................   73,763     60,247    51,789
                                                         -------   --------   -------
Deferred:
  Federal..............................................    8,541     10,737     9,387
  State................................................      756        950       831
                                                         -------   --------   -------
          Total deferred...............................    9,297     11,687    10,218
                                                         -------   --------   -------
          Total income tax expense.....................  $83,060   $ 71,934   $62,007
                                                         =======   ========   =======
Total income tax expense allocation:
  Income from operations...............................  $83,060   $ 71,934   $62,007
  Stockholders' equity for compensation expense for tax
     purposes..........................................   (7,659)   (18,142)     (612)
                                                         -------   --------   -------
                                                         $75,401   $ 53,792   $61,395
                                                         =======   ========   =======
</Table>

     Total income tax expense differs from the amounts computed by applying a
U.S. federal income tax rate of 35% to income before income taxes as a result of
the following:

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                           2001      2000      1999
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Computed "expected" tax expense.........................  $76,302   $66,081   $56,961
State income taxes, net of federal income tax benefit...    4,393     3,804     3,280
Other...................................................    2,365     2,049     1,766
                                                          -------   -------   -------
  Total income tax expense..............................  $83,060   $71,934   $62,007
                                                          =======   =======   =======
</Table>

(7)  STOCKHOLDERS' EQUITY

     The Company has 5,000,000 authorized shares of preferred stock, all of
which are unissued. The Board of Directors has the authority to issue up to such
number of shares of preferred stock in one or more series and to fix the rights,
preferences, privileges, qualifications, limitations and restrictions thereof
without any further vote or action by the stockholders but subject to
restrictions imposed by the Company's revolving credit agreement and senior
secured note agreement.

     During September 1999 as part of the Company's stock repurchase program,
the Company sold European Put Options ("Puts") on underlying shares of the
Company's common stock. The Puts had a six-month maturity period and the Company
was paid a $4,454,000 premium in advance which was accounted for as additional
paid-in capital. The Company had the option to settle the Puts in cash or in
shares of common stock. In March 2000, the Company amended the terms of the Puts
to extend the maturity date of the Puts by two months. In connection with
extending the maturity period of the Puts, the Company was paid an additional
cash premium of $280,000. In May 2000, the Puts expired out-of-the-money with no
obligation on the part of the Company.

                                       F-13
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(8)  STOCK OPTIONS

     The Company has seven stock option plans that provide for the grant of
options to directors, officers and employees. To date, stock options have been
granted with an exercise price equal to the stock's fair value at the date of
grant. Stock options generally have ten-year terms and generally vest over four
years.

     The Company has reserved a total of 11,895,072 shares of common stock for
issuance under its Non-Qualified Stock Option Plan (the "Plan"). At December 31,
2001, there were options for 10,000 shares outstanding and no options available
for issuance under the Plan. The Company has reserved a total of 6,400,000
shares of common stock for issuance under its 1991 Stock Plan (the "1991 Plan").
At December 31, 2001, there were options for 168,800 shares outstanding and no
options available for issuance under the 1991 Plan. The Company has reserved a
total of 2,000,000 shares of common stock for issuance under its 1994 Stock Plan
(the "1994 Plan"). At December 31, 2001, there were options for 370,000 shares
outstanding and no options available for issuance under the 1994 Plan. The
Company has reserved a total of 4,000,000 shares of common stock for issuance
under its 1996 Stock Plan (the "1996 Plan"). At December 31, 2001, there were
options for 2,313,200 shares outstanding and no options available for issue
under the 1996 Plan. The Company has reserved a total of 3,000,000 shares of
common stock for issuance under its 1998 stock plan (the "1998 Plan"). At
December 31, 2001, there were options for 2,587,350 shares outstanding and no
options available for issue under the 1998 Plan. The Company has reserved a
total of 2,000,000 shares of common stock for issuance under the 2000 Stock Plan
(the "2000 Plan"). At December 31, 2001, there were options for 1,980,000 shares
outstanding and options for 20,000 shares available for issuance under the 2000
Plan. The Company has reserved a total of 3,000,000 shares of common stock for
issuance under the 2001 Stock Plan (the "2001 Plan"). At December 31, 2001,
there were options for 2,532,000 shares outstanding and options for 468,000
shares available for issuance under the 2001 Plan.

     The per share weighted average fair value of stock options granted during
2001, 2000, and 1999 was $12.32, $8.35 and $8.81 on the date of grant using the
Black Scholes option pricing model with the following weighted average
assumptions: 2001 -- expected dividend yield 0%, risk-free interest rate of
3.7%, expected life of 4 years, and volatility of 61.4%; 2000 -- expected
dividend yield 0%, risk-free interest rate of 4.9%, expected life of 7 years,
and volatility of 62.6%; 1999 -- expected dividend yield 0%, risk-free interest
rate of 6.9%, expected life of 8 years, and volatility of 60.6%.

     The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock plans and, accordingly, no compensation cost has been
recognized for its stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant date for

                                       F-14
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

its stock options under Statement of Financial Accounting Standards No. 123, the
Company's net income would have been reduced to the pro forma amounts indicated
below:

<Table>
<Caption>
                                                         2001       2000       1999
                                                       --------   --------   --------
                                                               (IN THOUSANDS,
                                                           EXCEPT PER SHARE DATA)
<S>                                                    <C>        <C>        <C>
Net income:
  As reported........................................  $134,944   $116,868   $100,740
                                                       ========   ========   ========
  Pro forma..........................................  $118,513   $106,207   $ 93,103
                                                       ========   ========   ========
Income per common share:
  Basic -- as reported...............................  $   1.26   $   1.10   $   0.89
                                                       ========   ========   ========
  Diluted -- as reported.............................  $   1.23   $   1.08   $   0.87
                                                       ========   ========   ========
  Basic -- pro forma.................................  $   1.10   $   1.00   $   0.82
                                                       ========   ========   ========
  Diluted -- pro forma...............................  $   1.08   $   0.98   $   0.80
                                                       ========   ========   ========
</Table>

     Pro forma net income reflects only options granted since December 31, 1994.
Therefore, the full impact of calculating compensation cost for stock options
under Statement of Financial Accounting Standards No. 123 is not reflected in
the pro forma net income or per share amounts presented above because
compensation cost is reflected over the options vesting period of four years and
compensation cost for options granted prior to January 1, 1995 are not
considered.

     Information related to the plans is as follows:

<Table>
<Caption>
                                                                              WEIGHTED
                                                              NUMBER OF       AVERAGE
                                                               OPTIONS     EXERCISE PRICE
                                                              ----------   --------------
<S>                                                           <C>          <C>
Outstanding at December 31, 1998............................   8,077,600       $ 9.94
Exercised in 1999...........................................    (229,600)        8.20
Canceled in 1999............................................    (107,000)       14.40
Options issued in 1999......................................   1,362,000        12.25
                                                              ----------
Outstanding at December 31, 1999............................   9,103,000        10.28
Exercised in 2000...........................................  (3,047,000)        7.16
Canceled in 2000............................................    (150,000)       16.06
Options issued in 2000......................................   2,163,000        12.39
                                                              ----------
Outstanding at December 31, 2000............................   8,069,000        12.00
Exercised in 2001...........................................  (1,073,650)       10.37
Canceled in 2001............................................    (100,000)       16.71
Options issued in 2001......................................   3,066,000        25.59
                                                              ----------
Outstanding at December 31, 2001............................   9,961,350       $16.31
                                                              ==========
</Table>

                                       F-15
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At December 31, 2001, the range of exercise prices and weighted average
remaining contractual life of outstanding options were as follows:

<Table>
<Caption>
                                                                OPTIONS       WEIGHTED
                                                              OUTSTANDING      AVERAGE
                                                                 AS OF        REMAINING
                          RANGE OF                            DECEMBER 31,   CONTRACTUAL
                      EXERCISE PRICES                             2001          LIFE
                      ---------------                         ------------   -----------
<S>                                                           <C>            <C>
$ 4.75-$12.25...............................................   3,388,000     4.7 years
$12.31-$17.81...............................................   3,507,350     5.9 years
$24.45-$26.99...............................................   3,066,000     8.2 years
                                                               ---------
$ 4.75-$26.99...............................................   9,961,350     6.2 years
                                                               =========
</Table>

     At December 31, 2001, 2000 and 1999, the number of options exercisable was
3,028,350, 2,761,500 and 4,148,000, respectively, and the weighted average
exercise price of those options was $11.05, $9.59 and $7.05, respectively.

     In connection with the exercise of certain stock options, the Company
receives a tax deduction for the difference between the fair value of the common
stock at the date of exercise and the exercise price. The related income tax
benefit of approximately $7,659,000 in 2001, $18,142,000 in 2000 and $612,000 in
1999 has been recorded as a reduction of income taxes payable and an increase to
additional paid-in capital.

(9)  NET REVENUES

     Included in the Company's net revenues is reimbursement from the federal
government under Medicare, Medicaid and other federally funded programs, which
aggregated approximately 62% in 2001, 61% in 2000, and 62% in 1999 of such net
revenues.

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

<Table>
<Caption>
                                                          YEAR ENDED DECEMBER 31,
                                                       ------------------------------
                                                         2001       2000       1999
                                                       --------   --------   --------
                                                               (IN THOUSANDS)
<S>                                                    <C>        <C>        <C>
Oxygen and other respiratory therapy.................  $715,123   $607,071   $521,870
Home medical equipment and other.....................    97,319     95,413     59,916
                                                       --------   --------   --------
          Total......................................  $812,442   $702,484   $581,786
                                                       ========   ========   ========
</Table>

(10)  INCOME PER COMMON SHARE

     Basic income per common share is computed by dividing earnings available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted income per common share reflects the potential dilution
of securities that could share in earnings, including stock options. When the
exercise of stock options is anti-dilutive, they are excluded from the
calculation. There were no anti-dilutive stock options excluded from the
calculation at December 31, 2001 and 2000. At December 31, 1999, 689,500 shares
of outstanding stock options (granted at $17.82 price) were anti-dilutive.

                                       F-16
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

<Table>
<Caption>
                                                     INCOME         SHARES       PER SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>           <C>             <C>
YEAR ENDED DECEMBER 31, 2001
  Basic:
     Income available to common stockholders.....   $134,944        107,439        $1.26
                                                    ========        =======        =====
  Effect of dilutive securities:
     Stock options...............................         --          2,632
                                                    --------        -------
  Diluted:
     Income available to common stockholders and
       holders of dilutive securities............   $134,944        110,071        $1.23
                                                    ========        =======        =====
YEAR ENDED DECEMBER 31, 2000
  Basic:
     Income available to common stockholders.....   $116,868        106,174        $1.10
                                                    ========        =======        =====
  Effect of dilutive securities:
     Stock options...............................         --          2,128
                                                    --------        -------
  Diluted:
     Income available to common stockholders and
       holders of dilutive securities............   $116,868        108,302        $1.08
                                                    ========        =======        =====
YEAR ENDED DECEMBER 31, 1999
  Basic:
     Income available to common stockholders.....   $100,740        113,884        $0.89
                                                    ========        =======        =====
  Effect of dilutive securities:
     Stock options...............................         --          2,094
                                                    --------        -------
  Diluted:
     Income available to common stockholders and
       holders of dilutive securities............   $100,740        115,978        $0.87
                                                    ========        =======        =====
</Table>

(11)  SUPPLEMENTAL STATEMENTS OF CASH FLOWS INFORMATION

<Table>
<Caption>
                                                            YEAR ENDED DECEMBER 31,
                                                          ---------------------------
                                                           2001      2000      1999
                                                          -------   -------   -------
                                                                (IN THOUSANDS)
<S>                                                       <C>       <C>       <C>
Cash paid for:
  Interest..............................................  $12,651   $14,434   $ 5,823
                                                          =======   =======   =======
  Income taxes..........................................  $55,847   $44,451   $53,461
                                                          =======   =======   =======
</Table>

                                       F-17
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(12)  BUSINESS COMBINATIONS

     The Company's strategy is to increase its market share through internal
growth and strategic acquisitions. Lincare focuses primarily on growth in
existing and nearby geographic markets, which the Company believes is generally
more profitable than adding additional operating centers in distant markets. In
addition, the Company expands into new geographic markets on a selective basis,
either through acquisitions or by opening new operating centers, when it
believes such expansion will enhance its business.

     During 2001, the Company acquired certain assets of 18 businesses in
separate transactions. During 2000, the Company acquired certain assets of 15
businesses in separate transactions. Consideration for the acquisitions
generally included cash, unsecured non-interest bearing obligations and the
assumption of certain liabilities.

     None of the businesses acquired were related to the Company prior to
acquisition. Each acquisition during 2001 and 2000 was accounted for as a
purchase. The results of operations of the acquired companies are included in
the accompanying consolidated statements of operations since the respective
dates of acquisition. Each of the acquired companies conducted operations
similar to that of the Company.

     The aggregate cost of the acquisitions described above was as follows:

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Cash........................................................  $149,375   $150,326
Deferred acquisition obligations............................    22,863      9,261
Assumption of liabilities...................................       783      2,800
                                                              --------   --------
                                                              $173,021   $162,387
                                                              ========   ========
</Table>

     The aggregate purchase price of the acquisitions described above was
allocated as follows:

<Table>
<Caption>
                                                                2001       2000
                                                              --------   --------
                                                                (IN THOUSANDS)
<S>                                                           <C>        <C>
Current assets..............................................  $  2,114   $  7,318
Property and equipment......................................     4,978      6,562
Intangible assets...........................................     6,330      6,142
Goodwill....................................................   159,599    142,365
                                                              --------   --------
                                                              $173,021   $162,387
                                                              ========   ========
</Table>

     In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets". The Company adopted SFAS
No. 141 on July 1, 2001 and will adopt SFAS No. 142 in the first quarter of 2002
(see previous discussion in note (1)(n)).

     As of January 1, 2002, the Company expects to have $684,771,000 in
unamortized goodwill and $3,949,000 in unamortized intangible assets. All the
goodwill recorded for 2001 and 2000 was fully deductible for tax purposes.
Because of the extensive effort needed to comply with adopting SFAS No. 142, it
is not practicable to reasonably estimate the impact of adopting this Statement
on the Company's financial statements at the date of this report, including
whether the Company will be required to recognize any transitional impairment
losses.

                                       F-18
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The following unaudited pro forma supplemental information on the results
of operations for the years ended December 31, 2001 and 2000 includes the
acquisitions as if they had been combined at the beginning of 2000.

<Table>
<Caption>
                                                                 2001         2000
                                                              ----------   ----------
                                                                  (IN THOUSANDS,
                                                              EXCEPT PER SHARE DATA)
<S>                                                           <C>          <C>
Net revenues................................................   $886,593     $816,194
                                                               ========     ========
Net income..................................................   $149,363     $138,992
                                                               ========     ========
Basic -- income per common share............................   $   1.39     $   1.31
                                                               ========     ========
Diluted -- income per common share..........................   $   1.36     $   1.28
                                                               ========     ========
</Table>

     This unaudited pro forma financial information is not necessarily
indicative of either the results of operations that would have occurred had the
transactions been affected at the beginning of 2000 or of future results of
operations of the combined companies.

(13)  OTHER CHARGES

     In 2001, the Company recorded other charges of $10,650,000 of which
$4,150,000 was related to the settlement of an investigation by the U.S.
Attorneys' Office in Sacramento, California, without any admission by the
Company of wrongdoing, including a $1,000,000 reserve for related legal
expenses. The remaining $6,500,000 of other charges related to the execution by
the Company of employment agreements with 16 mid-level management employees as
well as the modifying and extension of certain executive officer employment
agreements.

(14)  CONTINGENCIES

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

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

     As a health care provider, Lincare is subject to extensive government
regulation, including numerous laws directed at preventing fraud and abuse and
laws regulating reimbursement under various government programs. The marketing,
billing, documentation and other practices of health care companies are all
subject to government scrutiny. To ensure compliance with Medicare and other
regulations, regional carriers often conduct audits and request patient records
and other documents to support claims submitted by the Company for payment of
services rendered to patients. Similarly, government agencies periodically open
investigations and obtain information from health care providers pursuant to
legal process (see note 13 above). Violations of federal and state regulations
can result in severe criminal, civil and administrative penalties and sanctions,
including disqualification from Medicare and other reimbursement programs.

                                       F-19
<PAGE>
                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The Company is also involved in certain other claims and legal actions in
the ordinary course of its business.

     The ultimate disposition of all such matters is not expected to have a
material adverse impact on the Company's financial position, results of
operations or liquidity.

(15)  QUARTERLY FINANCIAL DATA (UNAUDITED)

     The following is a summary of quarterly financial results for the years
ended December 31, 2001 and 2000:

<Table>
<Caption>
                                              FIRST      SECOND     THIRD      FOURTH
                                             QUARTER    QUARTER    QUARTER    QUARTER
                                             --------   --------   --------   --------
                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                          <C>        <C>        <C>        <C>
2001:
  Net revenues.............................  $191,661   $198,371   $206,780   $215,630
                                             ========   ========   ========   ========
  Operating income(1)......................  $ 57,101   $ 60,276   $ 64,729   $ 57,621
                                             ========   ========   ========   ========
  Net income(1)............................  $ 31,524   $ 35,326   $ 34,764   $ 33,330
                                             ========   ========   ========   ========
  Income per common share:
  Basic....................................  $   0.30   $   0.33   $   0.32   $   0.31
                                             ========   ========   ========   ========
  Diluted..................................  $   0.29   $   0.32   $   0.31   $   0.30
                                             ========   ========   ========   ========
2000:
  Net revenues.............................  $159,497   $167,621   $186,022   $189,344
                                             ========   ========   ========   ========
  Operating income.........................  $ 47,113   $ 48,956   $ 53,386   $ 55,595
                                             ========   ========   ========   ========
  Net income...............................  $ 27,136   $ 28,217   $ 29,671   $ 31,844
                                             ========   ========   ========   ========
  Income per common share:
  Basic....................................  $   0.25   $   0.26   $   0.28   $   0.30
                                             ========   ========   ========   ========
  Diluted..................................  $   0.25   $   0.26   $   0.28   $   0.30
                                             ========   ========   ========   ========
</Table>

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

(1) The 2001 fourth quarter operating income included other charges of
    $10,650,000 ($6,592,000 after-tax) (see note 13).

                                       F-20
<PAGE>

                                                                   SCHEDULE VIII

                     LINCARE HOLDINGS INC. AND SUBSIDIARIES

                       VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>
                                  BALANCE AT   CHARGED TO   CHARGED TO                BALANCE AT
                                  BEGINNING    COSTS AND      OTHER                     END OF
DESCRIPTION                       OF PERIOD     EXPENSES     ACCOUNTS    DEDUCTIONS     PERIOD
-----------                       ----------   ----------   ----------   ----------   ----------
                                                          (IN THOUSANDS)
<S>                               <C>          <C>          <C>          <C>          <C>
YEAR ENDED DECEMBER 31, 2001
Deducted from asset accounts:
  Allowance for uncollectible
     accounts...................    $9,489      $12,187       $1,924(1)   $16,156(2)   $ 7,444
                                    ======      =======       ======      =======      =======
YEAR ENDED DECEMBER 31, 2000
Deducted from asset accounts:
  Allowance for uncollectible
     accounts...................    $4,897      $10,537       $5,816(1)   $11,761(2)   $ 9,489
                                    ======      =======       ======      =======      =======
YEAR ENDED DECEMBER 31, 1999
Deducted from asset accounts:
  Allowance for uncollectible
     accounts...................    $9,353      $ 6,981       $1,891(1)   $13,328(2)   $ 4,897
                                    ======      =======       ======      =======      =======
</Table>

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

(1) To record allowance on business combinations

(2) To record write-offs

                                       S-1
<PAGE>

                               INDEX OF EXHIBITS

<Table>
<Caption>
                                                                               SEQUENTIALLY
 EXHIBIT                                                                         NUMBERED
  NUMBER                                   EXHIBIT                                 PAGE
 -------                                   -------                             ------------
<S>  <C>    <C>  <C>                                                           <C>
A    3.10   --   Amended and Restated Certificate of Incorporation of Lincare
                 Holdings Inc................................................
F    3.11   --   Certificate of Amendment to the Amended and Restated
                 Certificate of Incorporation of Lincare Holdings Inc........
A    3.20   --   Amended and Restated By-Laws of Lincare Holdings Inc........
A    10.20  --   Non-Qualified Stock Option Plan of Registrant...............
A    10.21  --   Lincare Holdings Inc. 1991 Stock Plan.......................
I    10.22  --   Lincare Holdings Inc. 1994 Stock Plan.......................
I    10.23  --   Lincare Holdings Inc. 1996 Stock Plan.......................
I    10.24  --   Lincare Holdings Inc. 1998 Stock Plan.......................
I    10.25  --   Lincare Holdings Inc. 2000 Stock Plan.......................
J    10.26       Lincare Holdings Inc. 2001 Stock Plan.......................
A    10.30  --   Lincare Inc. 401(k) Plan....................................
E    10.31  --   Employment Stock Purchase Plan..............................
E    10.40  --   Employment Agreement dated as of January 1, 1997 between
                 Lincare Holdings Inc. and John P. Byrnes....................
E    10.41  --   Employment Agreement dated as of June 1, 1997 between
                 Lincare Holdings Inc. and Paul G. Gabos.....................
I    10.43  --   Employment Agreement dated as of January 1, 1998 between
                 Lincare Holdings Inc. and Shawn S. Schabel..................
     10.44  --   Form of Executive Employment Agreement dated December 15,
                 2001........................................................
E    10.50  --   Form of Non-employee Director Stock Option Agreement........
E    10.51  --   Form of Non-qualified Stock Option Agreement................
C    10.52  --   Non-Qualified Stock Option Agreements dated as of January
                 23, 1995 between the Registrant and James M. Emanuel........
D    10.53  --   Non-Qualified Stock Option Agreements dated as of January
                 26, 1996 between the Registrant and John P. Byrnes..........
D    10.54  --   Non-Qualified Stock Option Agreements dated as of July 15,
                 1996 between the Registrant and John P. Byrnes..............
G    10.60  --   Three-Year Credit Agreement among Lincare Holdings Inc., as
                 Borrower, Certain Subsidiaries of Borrower from time to time
                 party thereto, as Guarantors, the several Lenders from time
                 to time party thereto and Bank of America, N.A., as Agent...
H    10.61  --   First Amendment to the Three-Year Credit Agreement dated
                 June 20, 2000...............................................
H    10.62  --   Second Amendment to the Three-Year Credit Agreement dated
                 August 21, 2000.............................................
     10.63  --   Third Amendment and waiver to Three-Year Credit Agreement
                 dated as of December 12, 2001...............................
H    10.70  --   Senior Secured Note Purchase Agreement among Lincare
                 Holdings Inc., as Borrower, and several note holders with
                 Bank of America, N.A., as Agent.............................
</Table>
<PAGE>

<Table>
<Caption>
                                                                               SEQUENTIALLY
 EXHIBIT                                                                         NUMBERED
  NUMBER                                   EXHIBIT                                 PAGE
 -------                                   -------                             ------------
<S>  <C>    <C>  <C>                                                           <C>
H    10.71  --   Form of Series A Note.......................................
H    10.72  --   Form of Series B Note.......................................
H    10.73  --   Form of Series C Note.......................................
     22.10  --   List of Subsidiaries of Lincare Holdings Inc................
     23.10  --   Consent of KPMG LLP.........................................
     99.0   --   Powers of Attorney..........................................
</Table>

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

A   Incorporate by reference to the corresponding exhibit to the Registrant's
    Registration Statement on Form S-1 (No. 33-44672)
B   Incorporate by reference to the Registrant's Form 10-K dated March 22, 1994.
C   Incorporate by reference to the Registrant's Form 10-K dated March 27, 1996.
D   Incorporate by reference to the Registrant's Form 10-K dated March 25, 1997.
E   Incorporate by reference to the Registrant's Form 10-K dated March 26, 1998.
F   Incorporate by reference to the Registrant's Form 10-Q dated August 12,
    1998.
G   Incorporate by reference to the Registrant's Form 10-Q dated November 12,
    1999.
H  Incorporate by reference to the Registrant's Form 10-Q dated November 13,
   2000.
I   Incorporate by reference to the Registrant's Form 10-K dated March 29, 2001.
J   Incorporate by reference to the Registrant's Form 10-Q dated August 1, 2001.