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UNITED
  STATES SECURITIES AND EXCHANGE COMMISSIONWashington,
  D.C. 20549

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FORM
  10-K


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|    | (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, 2002             
|    |                                                               
|OR 
|    |                                                               
||_| | TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|    | SECURITIES
      EXCHANGE ACT OF 1934 (NO FEE REQUIRED)       

Commission
  File Number 0-19946

Lincare
  Holdings Inc.(Exact
  name of registrant as specified in its charter)

|Delaware                                      | 51-0331330                  
|--------------------------------------------- | ----------------------------
|(State
      or other jurisdiction            | (I.R.S.
      Employer      
|of
      incorporation or organization)       | Identification
      Number)
|                                              |                             
|19387
      US 19 North                       |                             
|Clearwater,
      Florida                     | 33764                       
|(Address
      of principal executive office) | (Zip
      Code)            

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

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

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

Indicate
  by check mark whether the registrant is an acclerated filer (as defined in Exchange
  Act Rule 12b-2). Yes |X|  No |_|

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 June 28, 2002, as reported in the NASDAQ National Market
  System, was approximately $3,462,392,202.

As
  of March 26, 2003, there were 104,719,035 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 2003 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, 2002.

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PART
  I

Item 1. Business

General

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 400,000 customers
  in 47 states through 642 operating centers. Lincare Holdings Inc. is a Delaware
  corporation.

The Home Respiratory
  Market

The
  Company estimates that the home respiratory market (including home oxygen equipment
  and respiratory therapy services) represents approximately $5.0 billion in annual
  sales, with growth 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 achieves internal growth in existing geographic
  markets through the addition of new customers and referral sources to its network
  of local operating centers. 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 2002, Lincare acquired 28 local and regional companies with operations in
  25 states. These acquisitions expanded the Companys presence in three
  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 market
  and on the Companys ability to increase market share through effective
  marketing efforts and selective acquisitions. 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 2002, oxygen and other respiratory therapy services accounted
  for approximately 90% 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 durable medical equipment and
  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 compliance with the prescribed
  therapy. Following the initial setup, Company representatives make periodic
  visits to the 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.

1

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The principal products and services provided by Lincare are as follows:

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 customer applications.

- Oxygen concentratorsare stationary units that provide a continuous flow
    of oxygen by filtering ordinary room air. Concentrators are most commonly
    used by customers as their primary source of stationary oxygen. These systems
    are often supplemented with portable gaseous oxygen cylinders to meet the
    ambulatory or emergency needs of the customer.
- Liquid oxygen
    systemsare thermally insulated containers of liquid
    oxygen, generally consisting of a stationary unit and a portable unit, which
    are most commonly used by customers with significant ambulatory requirements.

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

- Nebulizers and
    associated respiratory medicationsprovide aerosol
    therapy for customers suffering from COPD and asthma.
- Non-invasive
    ventilationprovides nocturnal ventilatory support
    for customers with neuromuscular disease and COPD. This therapy improves daytime
    function and decreases incidents of acute illness.
- Ventilatorssupport
    respiratory function in severe cases of respiratory failure where the customer
    can no longer sustain the mechanics of breathing without the assistance of
    a machine.
- Continuous positive
    airway pressure devicesmaintain open airways in customers
    suffering from obstructive sleep apnea by providing airflow at prescribed
    pressures during sleep.
- Apnea monitorsprovide respiratory alarm systems for infants at risk
    for sudden infant death syndrome.

Home
  Infusion Therapy.Lincare provides a variety of home
  infusion therapies in certain geographic markets, which include parenteral
  nutrition, intravenous antibiotic therapy, enteral nutrition, chemotherapy,
  dobutamine infusions, immune globulin (IVIG) therapy, continuous pain management,and central catheter management.

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

2

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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 642 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 on a timely basis 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.

|                                     | Year
      Ended December 31,
|------------------------------------ | -----------------------------
|                                     |                              
|Payors                               | 2002                         
|                                     |                              
|Medicare
      and Medicaid programs | 67                           
|Private
      insurance              | 26                           
|Direct
      payment                 | 7                            
|                                     |                              
|                                     | 100                          
|                                     |                              

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. 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
  that has produced 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.

3

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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 benefits 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 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 400,000 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
  2002, the Company acquired, in unrelated acquisitions, certain operating assets
  of 28 local and regional companies with operations in 25 states. These acquisitions
  resulted in the addition of 26 new operating centers.

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

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 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
  market. The relationships between a home respiratory 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
  company is providing responsive, professional and high-quality service. Other
  key competitive factors are efficiency of reimbursement and accounts receivable
  management systems.

Home
  respiratory 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 companies are typically directed toward
  referral sources which generally do not share financial responsibility for the
  payment of services provided to customers.

4

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|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. Medicare reimburses the Company
      based on established fee schedule amounts that are adjusted for geographical
      markets and based on the equipment and supplies provided.                                                 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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:                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|On
      December 13, 2002, the Centers for Medicare & Medicaid Services (CMS)
      issued an interim final rule establishing a process for adjusting payments
      for Medicare Part B services (other than physician services), pursuant to
      the agencys Inherent Reasonableness (IR) authority, when
      existing payment amounts are determined to be either grossly excessive or
      deficient. The interim final rule describes the factors CMS or its contractors
      will consider in making such determinations and the procedures that will
      be followed in establishing new payment amounts. The interim rule became
      effective on February 11, 2003, but to date, no payment adjustments have
      occurred as a result of the IR authority.
|The
      publication of the interim final rule itself does not trigger payment adjustments
      for any items or services. Nevertheless, the interim final rule puts in
      place a process that eventually could have a significant impact on Medicare
      payments for such Part B services as home oxygen, durable medical equipment,
      and Medicare-covered prescription drugs. The Company cannot predict whether,
      and if so when, CMS will exercise its IR authority with respect to certain
      products and services provided by the Company to Medicare beneficiaries,
      and cannot determine whether such payment adjustments, if enacted, would
      have a material adverse impact on the Companys financial position
      or operating results.
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|5                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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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 customer records and other documents to support
  claims submitted by the Company for payment of services rendered to customers.
  Similarly, government agencies periodically open investigations and obtain information
  from health care providers pursuant to 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.

Numerous federal and state laws and regulations govern the collection, dissemination, use and confidentiality of patient-identifiable health information, including the federal Health Insurance Portability and Accountability Act of 1996 and related rules, or HIPAA. As part of the Companys provision of and billing for health care equipment and services, it collects and maintains patient-identifiable health information. New health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant effect on the manner in which the Company handles health care related data and communicates with payors, and the cost of complying with these standards could be significant. If Lincare does not comply with existing or new laws and regulations related to patient health information it could be subject to criminal or civil sanctions.

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, 2003, the Company had approximately 6,700 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 maintains an Internet website at http://www.lincare.com. Information contained
  in the Companys website is not incorporated by reference into this annual report,
  and information contained in the website should not be considered part of this
  annual report. The Company makes available free of charge through its website
  its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports
  on Form 8-K and amendments to those reports filed pursuant to Sections 13(a)
  and 15(d) of the Securities Exchange Act of 1934, as amended. The Company makes
  these reports available on its website as soon as reasonably practicable after
  such reports are filed with, or furnished to, the Securities and Exchange Commission
  (the SEC).

6

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Materials
  filed by the Company with the SEC are also available to the public to read and
  copy at the SECs Public Reference Room at 450 Fifth Street, NW, Washington,
  DC 20549. The public may obtain information on the operations of the Public
  Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an electronic
  filer with the SEC. The SEC maintains an Internet site that contains reports,
  proxy and information statements, and other information regarding issuers that
  file electronically with the SEC, including the Company, at http://www.sec.gov.

Item 2. Properties

All
  but one of the Companys 642 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 23 separate
  billing centers from unrelated third parties. The Company owns its headquarters
  facility located in Clearwater, Florida and one of its operating center locations.

Item 3. Legal
  Proceedings

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

Private
  litigants may also make claims against the Company for violations of health
  care laws in actions known as qui tamsuits and the government may intervene
  in, and take control of, such actions. The Company is a defendant

in certainqui
  tamproceedings. Lincare is vigorously defending these
  suits. However, 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 2002.

7

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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.

|               | High |       | Low
|-------------- | ---- | ----- | ---
|2002           |      |       |    
|First quarter  | $    | 29.42 |    
|Second quarter |      | 33.25 |    
|Third quarter  |      | 35.25 |    
|Fourth quarter |      | 35.95 |    
|2001           |      |       |    
|First quarter  | $    | 29.50 |    
|Second quarter |      | 33.38 |    
|Third quarter  |      | 33.89 |    
|Fourth quarter |      | 30.31 |    

As
  of March 26, 2003, there
  were approximately 230 holders of record of the 104,719,035 outstanding shares
  of Lincare common stock (excluding 17,124,529 shares held in treasury). The
  closing price of Lincare common stock on March 26, 2003, was $30.84 per share,
  as reported on the NASDAQ National Market System.

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 and from
  time to time, to repurchase its common stock on the open market.

Item 6. Selected
  Financial Data

The
  selected consolidated financial data presented on the following page under the
  caption Statements of Operations Data for the years ended December
  31, 2002, 2001, 2000, 1999 and 1998, is derived from the consolidated financial
  statements of the Company audited by KPMG LLP, independent certified public
  accountants.

The
  data set forth on the following page 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.

8

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|                                                       |                                             |         | Year
      Ended December 31, |   |         |  
|------------------------------------------------------ | ------------------------------------------- | ------- | ----------------------------- | - | ------- | -
|                                                       |                                             |        
|                                                       | 2002                                        |         | 2001                          |   | 2000    |  
|                                                       |                                             |         |                               |   |         |  
|                                                       | (In
      thousands, except per share data) |        
|Statements
      of Operations Data:                   |                                             |         |                               |   |         |  
|Net revenues                                           | $                                           | 960,904 |                               | $ | 812,442 |  
|Cost of
      goods and services                       |                                             | 144,525 |                               |   | 123,406 |  
|Operating
      expenses                               |                                             | 215,724 |                               |   | 183,385 |  
|Selling,
      general and administrative expenses     |                                             | 201,468 |                               |   | 167,269 |  
|Bad debt
      expense                                 |                                             | 14,414  |                               |   | 12,187  |  
|Depreciation
      expense                             |                                             | 63,299  |                               |   | 54,699  |  
|Amortization
      expense                             |                                             | 1,664   |                               |   | 21,119  |  
|Other charges(1)                                       |                                             |        |                               |   | 10,650  |  
|                                                       |                                             |         |                               |   |         |  
|Operating
      income                                 |                                             | 319,810 |                               |   | 239,727 |  
|Interest
      income                                  |                                             | 164     |                               |   | 365     |  
|Interest
      expense                                 |                                             | 14,165  |                               |   | 16,013  |  
|Net gain
      (loss) on disposal of property and      |                                             |         |                               |   |         |  
|equipment                                              |                                             | (147    | )                             |   | (71     | )
|Realized
      loss on derivative financial instrument |                                             |        |                               |   | 6,004   |  
|                                                       |                                             |         |                               |   |         |  
|Income
      before income taxes                       |                                             | 305,662 |                               |   | 218,004 |  
|Income
      tax expense                               |                                             | 115,234 |                               |   | 83,060  |  
|                                                       |                                             |         |                               |   |         |  
|Net income                                             | $                                           | 190,428 |                               | $ | 134,944 |  
|                                                       |                                             |         |                               |   |         |  
|Income
      per common share:                         |                                             |         |                               |   |         |  
|Basic                                                  | $                                           | 1.78    |                               | $ | 1.26    |  
|                                                       |                                             |         |                               |   |         |  
|Diluted                                                | $                                           | 1.73    |                               | $ | 1.23    |  
|                                                       |                                             |         |                               |   |         |  
|Weighted
      average number of common shares         |                                             |         |                               |   |         |  
|outstanding                                            |                                             | 106,942 |                               |   | 107,439 |  
|                                                       |                                             |         |                               |   |         |  
|Weighted
      average number of common shares and     |                                             |         |                               |   |         |  
|common
      share equivalents outstanding             |                                             | 109,770 |                               |   | 110,071 |  
|                                                       |                                             |         |                               |   |         |  

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

|                                               | At
      December 31,
|---------------------------------------------- | ---------------------
|                                               |                      
|                                               |                      
|                                               |                      
|                                               | (In
      thousands) 
|Balance
      Sheet Data:                      |                      
|Working
      capital                          | $                    
|Total assets                                   |                      
|Long-term
      obligations, excluding current |                      
|installments                                   |                      
|Stockholders
      equity                     |                      

|    |                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------
|(a) | Excluding
      borrowings under the Companys senior secured notes totaling $30,000,000,
      which are due and payable in 2003.     
|(b) | Excluding
      borrowings under the Companys revolving bank credit facility totaling $75,000,000, which were due and payable in 2002.
|9  



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 companies. 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 90% 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 paid by 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s revenue recognition policy is consistent with the criteria set
  forth in Staff Accounting Bulletin 101 *Revenue Recognition in Financial
  Statements* (SAB 101) for determining when revenue is realized
  or realizable and earned. The Company recognizes revenue in accordance with
  the requirements of SAB 101 that:

- persuasive evidence
    of an arrangement exists;
- delivery has occurred;
- the sellers price to
    the buyer is fixed or determinable; and
- collectibility is reasonably
    assured.

Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. Included in accounts receivable are earned but unbilled receivables. Billing delays, ranging from several days to several weeks, can occur due to obtaining certain required payor-specific documentation from internal and external sources.

The Company performs analyses to evaluate the net realizable value of accounts receivable. Specifically, the Company considers historical realization data, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the healthcare industry and third-party reimbursement, it is possible that the Companys estimates could change, which could have an impact on operations and cash flows.

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 accounts and notes receivable subsequent to the service
  dates may not be known for several months. The Company records bad debt expense
  based on a percentage of revenue.

10

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The percentage and amounts used to record
  bad debt expense and the allowance for doubtful accounts are supported by 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
  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. On January 1, 2002,
  SFAS No. 142 became mandatory and requires that goodwill and certain intangible
  assets with indefinite lives no longer be amortized and instead be tested annually for impairment. Accordingly,
  no amortization expense related to goodwill was recorded in 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 significant
  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.

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.

Net Revenues

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

|                                           | Year
      Ended December 31, |        
|------------------------------------------ | ----------------------------- | -------
|                                           |                               |        
|                                           | 2002                          |        
|                                           |                               |        
|                                           | (In
      thousands)          |        
|Oxygen
      and other respiratory therapy | $                             | 868,561
|Home medical
      equipment and other     |                               | 92,343 
|                                           |                               |        
|Total                                      | $                             | 960,904
|                                           |                               |        

11

---



Net
  revenues for the year ended December 31, 2002 increased by $148,462,000 (18.3%)
  over 2001. Net revenues for the year ended December 31, 2001 increased by $109,958,000
  (15.7%) over 2000. 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. Included in the Companys
  net revenues is reimbursement from government sources under Medicare, Medicaid
  and other federally funded programs, which aggregated approximately 67%, 62%
  and 61% of net revenues in 2002, 2001 and 2000, respectively. The Company has
  not experienced any material changes in the prices of its products and services
  over the past three years.

Cost of Goods and
  Services

Cost
  of goods and services as a percentage of net revenues was 15.0% for the year
  ended December 31, 2002 and was 15.2% and 16.1% for the years ended December
  31, 2001 and 2000, respectively. The decreases in cost of goods for the years
  ended December 31, 2002 and 2001 were 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 22.5% for the year ended December 31, 2002 and 22.6% for each of the years ended December 31, 2001 and 2000. The primary components of operating expenses include salaries and related expenses, vehicles and related expenses and facility rent expense, which in 2002 accounted for approximately 64%, 11% and 8% of operating expenses, respectively. Selling, general and administrative (SG&A) expenses expressed as a percentage of net revenues for the years ended December 31, 2002, 2001 and 2000 were 21.0%, 20.6% and 21.0%, respectively. The increase in SG&A as a percentage of net
revenues in 2002 is primarily attributable to the Companys increased investment in selling expense, intended to supplement the Companys internal revenue growth.

Bad
  debt expense as a percentage of net revenues was 1.5% for the years ended December
  31, 2002, 2001 and 2000. The Company has achieved improved results in accounts
  receivable collections over the past three years and overall days sales outstanding
  have decreased to 51 days at December 31, 2002, down from 60 days and 56 days
  at December 31, 2001 and 2000, respectively. While the Company has achieved
  consistent results in managing bad debt expense over the past three years, continued
  growth in the pace of the Companys acquisition program may contribute
  to an increase in the Companys bad debt expense. The integration of acquired
  companies into the Companys regional billing and collections offices may
  temporarily disrupt collections, adversely impacting the amount of accounts
  receivable written off as uncollectible.

Depreciation
  expense as a percentage of net revenues was 6.6% for the year ended December
  31, 2002 compared with 6.7% and 6.8% for the years ended December 31, 2001 and
  2000, respectively. The decrease in depreciation expense as a percentage of
  net revenues in 2002 and 2001 is attributable to reduced capital expenditures
  for respiratory assist devices resulting from changes in Medicare coverage guidelines
  on October 1, 1999 and increased sales of respiratory medications which require
  minimal expenditures on capital equipment.

Amortization Expense

In
  July 2001, the Company adopted 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. Goodwill and other intangible assets resulting from business acquisitions
  before July 1, 2001 have 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 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
  2002, the Company amortized $1,664,000 of its intangible assets compared to
  $21,119,000 in 2001 and $19,495,000 in 2000. The decrease in amortization expense
  in 2002 is attributed to the Companys required adoption of SFAS No. 142.

12

---



The
  Companys net intangible assets were $806,251,000 as of December 31, 2002.
  Of this total, $5,346,000 (consisting of various covenants not to compete) is
  being amortized over a period of one to five 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 modification and extension
  of certain executive officer employment agreements.

Operating Income

As
  shown in the table below, operating income for the years ended December 31,
  2002 and 2001 increased by $80,083,000 and $34,677,000, respectively, over the
  prior year.

|                                 | Year
      Ended December 31, |        
|-------------------------------- | ----------------------------- | -------
|                                 |                               |        
|                                 | 2002                          |        
|                                 |                               |        
|                                 | (In
      thousands)          |        
|Operating
      income           | $                             | 319,810
|Percentage
      of net revenues |                               | 33.3   

Interest Expense

Interest
  expense for the year ended December 31, 2002 was $14,165,000, compared to $16,013,000
  and $18,019,000 for the years ended December 31, 2001 and 2000, respectively.
  The decrease in interest expense in 2002 and 2001 is primarily attributable
  to reductions in amounts outstanding under the Companys revolving credit
  agreement and reductions in applicable interest rates.

Realized Gain and
  Loss on Derivative Financial Instrument

In
  September 2000, 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 fair value by the Company of $1,961,000
  in accordance with Statement of Financial Accounting Standards No. 133, Accounting
  for 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.

The
  Company entered into an interest swap agreement in September 2000, 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.

Income Taxes

The
  Companys effective income tax rate was 37.7% for the year ended December
  31, 2002 compared with 38.1% for the years ended December 31, 2001 and 2000.
  The decrease in the effective income tax rate in 2002 was due primarily to amortization
  expense related to goodwill no longer being recorded for financial reporting
  purposes.

Acquisitions

In
  2002, the Company acquired, in unrelated acquisitions, certain operating assets
  of 28 local and regional companies. The aggregate cost of these acquisitions
  was $119,815,000 and was allocated to acquired assets as follows: $2,495,000
  to current assets, $3,959,000 to property and equipment, $200,000 to intangible
  assets and $113,161,000 to goodwill. These acquisitions resulted in the addition
  of 26 new operating centers.

In
  2001, the Company acquired, in unrelated acquisitions, certain operating assets
  of 18 local and regional companies. The aggregate 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.

13

---



Liquidity and Capital
  Resources

The Companys primary sources of liquidity have been internally generated funds
  from operations, borrowings under credit facilities and proceeds from equity
  and debt transactions. The Company has used those funds to meet its capital requirements,
  which consist primarily of operational needs, capital expenditures, acquisitions
  and debt service.

At
  December 31, 2002, the Companys working capital, excluding current maturities
  of the senior secured notes totaling $30,000,000, was $72,986,000, as compared
  to $74,217,000 at December 31, 2001 and $84,475,000 at December 31, 2000.

Net
  cash provided by operating activities was $287,185,000 for the year ended December
  31, 2002, compared with $233,705,000 for the year ended December 31, 2001 and
  $215,029,000 for the year ended December 31, 2000. A significant portion of
  the Companys assets consists of accounts receivable 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 51 days as of December 31, 2002 and 60 days as of December 31,
  2001.

Net
  cash used in investing and financing activities was $285,604,000, $236,906,000
  and $215,527,000 for the years ended December 31, 2002, 2001 and 2000, respectively.
  Activity in the year ended December 31, 2002 included the Companys investment
  of $94,703,000 in business acquisitions, investment in capital equipment of
  $82,928,000, proceeds of $177,535,000 from its revolving credit agreement and
  other long-term obligations, payments of $206,142,000 related to long-term obligations,
  and $86,499,000 in payments to repurchase stock.

As
  of December 31, 2002, the Companys principal source of liquidity consisted
  of $131,640,000 available under its revolving credit agreement. The revolving
  credit agreement, dated April 25, 2002, makes available to the Company up to
  $200,000,000 over a five-year period, subject to certain terms and conditions
  set forth in the 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.

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. On May 27,
  2002, the Companys Board of Directors authorized the Company to repurchase
  up to an additional $100,000,000 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, 2002, $264,508,000
  of common stock had been repurchased under these programs. The total common
  stock held in treasury was $261,517,000 as of December 31, 2002. In January
  2003, the Company completed the remaining repurchases available under the $100,000,000
  authorization. An additional repurchase of up to $100,000,000 was authorized
  by the Companys Board of Directors on February 25, 2003.

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.

New Accounting
  Standards

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

In
  December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
  Accounting for Stock-Based Compensation  Transition and Disclosure.
  This SFAS amends SFAS No. 123, Accounting for Stock-Based Compensation,
  in order to provide alternative methods of transition for entities electing
  the fair value based method of accounting for stock-based employee compensation.
  This SFAS also requires additional disclosure related to accounting methods
  used for stock-based employee compensation and pro forma amounts related to
  any period accounted for under the recognition and measurement principles of
  APB Opinion 25. The Company does not expect this standard to have a material
  impact on its consolidated financial position or results of operations.

In
  November 2002, the Financial Accounting Standards Board issued Interpretation
  No. 45, Guarantors Accounting and Disclosure Requirements for Guarantees,
  including indirect guarantees of indebtedness of others,

14

---



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

In
  June 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting
  for Costs Associated with Exit or Disposal Activities. This standard nullifies
  Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain
  Employee Termination Benefits and Other Costs to Exit an Activity (including
  Certain Costs Incurred in a Restructuring). This standard requires that
  a liability for a cost associated with an exit or disposal activity be recognized
  when the liability is incurred rather than the date of an entitys commitment
  to an exit plan. The Company was required to implement SFAS No. 146 on January
  1, 2003, and does not expect this standard to have a material impact on its
  consolidated financial position or results of operations.

In
  April 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission
  of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and
  Technical Corrections. This statement provides guidance on the classification
  of gains and losses from the extinguishment of debt and the accounting for certain
  specified lease transactions. The Company does not expect the provisions of
  SFAS 145 to have a material effect on the Companys consolidated financial
  position or results of operations.

On
  January 1, 2002, the Company was required to adopt SFAS 142, Goodwill
  and Other Intangible Assets. SFAS 142 requires that goodwill and intangible
  assets with indefinite lives no longer be amortized but instead be measured for impairment
  at least annually, or when events indicate that an impairment exists. As of
  the adoption date, amortization of outstanding goodwill and other indefinite-lived
  intangible assets ceased. As required by SFAS 142, the Company performs impairment
  tests annually and when events or circumstances indicate that the value of goodwill
  or other indefinite-lived intangible assets might be impaired. In connection
  with the SFAS 142 indefinite-lived intangible asset impairment test, the Company
  utilized the required one-step method to determine whether an impairment existed
  as of the adoption date. Consistent with the SFAS 142 transitional goodwill
  impairment test, the Company utilized the required two-step method for determining
  goodwill impairment as of the adoption date. The adoption of this standard had
  no material adverse effect on the Companys financial position or results
  of operations.

In
  August 2001, the Financial Accounting Standards Board issued SFAS No. 144, Accounting
  for the Impairment or Disposal of Long-Lived Assets. This standard supercedes
  SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
  Long-Lived Assets to Be Disposed Of. The standard retains the previously
  existing accounting requirements related to the recognition and measurement
  of the impairment of long-lived assets held and used while expanding the measurement
  requirements of long-lived assets to be disposed of by sale to include discontinued
  operations. It also expands on the previously existing reporting requirements
  for discontinued operations to include a component of an entity that either
  has been disposed of or is classified as held for sale. The Company adopted
  SFAS No. 144 on January 1, 2002. The adoption of this standard had no material
  effect on the Companys financial position or results of operations.

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.

**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

15

---



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 642 operating centers in 47 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.

Forward-Looking
  Statements

This
  annual report contains statements that are not based on historical facts, or
  forward-looking statements, all of which are uncertain. The Company has based
  those forward-looking statements 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
  making 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. Any forward-looking statement made by the Company in this annual
  report or elsewhere speaks only as of the date that the Company makes it. The
  Company is under no duty to, and does not intend to, update or revise any of
  the forward-looking statements after the date of this Form 10-K except as may
  be required by law.

Item 7A. Quantitative
  and Qualitative Disclosure About Market Risk

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.

The
  following table sets forth the Companys estimate of the impact from a
  10% decrease in interest rates on the fair value of its long-term obligations
  and associated interest expense.

16

---



Estimated fair value of
  financial instruments (in thousands):

|                                     |            |         |                |   |                  |  | (Assuming
      10%Decrease in Interest Rates)
|------------------------------------ | ---------- | ------- | -------------- | - | ---------------- |  | ----------------------------------------------
|                                     |            |         |                |   |                  |  |                                               
|                                     | FaceAmount |         | CarryingAmount |   | Fair
      Value |  | HypotheticalChange inFair Value               
|                                     |            |         |                |   |                  |  |                                               
|December
      31, 2002:             |            |         |                |   |                  |  |                                               
|Revolving
      bank credit facility | $          | 60,000  |                | $ | 60,000           |  | $                                             
|Senior
      secured notes           |            | 125,000 |                |   | 125,000          |  |                                               
|December
      31, 2001:             |            |         |                |   |                  |  |                                               
|Revolving
      bank credit facility | $          | 75,000  |                | $ | 75,000           |  | $                                             
|Senior
      secured notes           |            | 125,000 |                |   | 125,000          |  |                                               

Item 8. Financial
  Statements and Supplementary Data

The
  financial statements required by this item are listed in Item 15(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.

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 19, 2003, 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 19, 2003, under Executive
  Compensation and is herein incorporated by reference.

Item 12. Security
  Ownership of Certain Beneficial Owners and Management and Related Stockholder
  Matters

The
  response to this item will be included in the definitive proxy statement for
  the Annual Meeting of Stockholders to be held May 19, 2003, under Security
  Ownership of Principal Stockholders and Management and Securities
  Authorized for Issuance Under Equity Compensation Plans and is herein
  incorporated by reference.

Item 13. Certain
  Relationships and Related Transactions

None.

Item 14. Controls
  and Procedures

(a)
  The Company has conducted an evaluation of its disclosure controls and procedures,
  as such term is defined under Rules 13a-14(c) and 15d-14(c) of the Securities
  Exchange Act of 1934, as amended, within 90 days of the filing date of this
  report. Based on its evaluation, the Companys principal executive officer
  and principal financial officer have concluded that the Companys disclosure
  controls and procedures are effective to ensure that information required to
  be disclosed by the Company is recorded, processed, summarized and reported
  within the required time periods.

(b)
  There have been no significant changes in the Companys internal controls
  or in other factors that could significantly affect these controls subsequent
  to the date of the evaluation referenced in paragraph (a) above.

17

---



PART
  IV

Item 15. 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, 2002 and 2001
>   Consolidated Statements
>     of Operations  Years ended December 31, 2002, 2001 and 2000
>   Consolidated Statements
>     of Stockholders Equity  Years ended December 31, 2002, 2001 and
>     2000
>   Consolidated Statements
>     of Cash Flows  Years ended December 31, 2002, 2001 and 2000
>   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 regulations
  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, 2002.

18

---



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
  31, 2003 on its behalf by the undersigned, thereunto duly authorized.

| | LINCARE HOLDINGS
      INC.                                                         
| | ------------------------------------------------------------------------------------
| |                                                                                     
| | /s/
      PAUL G. GABOS                                                             
| |                                                                                     
| | Paul
      G. GabosSecretary, 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.

|Signature                     |      | Position                              |  | Date                
|----------------------------- | ---- | ------------------------------------- |  | --------------------
|                              |      |                                       |  |                     
|                              |      |                                       |  |                     
|/s/
      JOHN P. BYRNES      |      | Director,
      President, Chief      |  | March
      31, 2003
|                              |      | Executive
      Officer and Principal |  |                     
|John
      P. Byrnes          |      | Executive
      Officer               |  |                     
|                              |      |                                       |  |                     
|                              |      |                                       |  |                     
|/s/
      PAUL G. GABOS       |      | Secretary,
      Chief Financial and  |  | March
      31, 2003
|                              |      | Principal
      Accounting Officer    |  |                     
|Paul
      G. Gabos           |      |                                       |  |                     
|                              |      |                                       |  |                     
|*                             |      | Director                              |  | March
      31, 2003
|                              |      |                                       |  |                     
|Chester
      B. Black        |      |                                       |  |                     
|                              |      |                                       |  |                     
|*                             |      | Director                              |  | March
      31, 2003
|                              |      |                                       |  |                     
|Frank
      T. Cary           |      |                                       |  |                     
|                              |      |                                       |  |                     
|*                             |      | Director                              |  | March
      31, 2003
|                              |      |                                       |  |                     
|William
      F. Miller, III  |      |                                       |  |                     
|                              |      |                                       |  |                     
|*                             |      | Director                              |  | March
      31, 2003
|                              |      |                                       |  |                     
|Frank
      D. Byrne, M.D.    |      |                                       |  |                     
|                              |      |                                       |  |                     
|*                             |      | Director                              |  | March
      31, 2003
|                              |      |                                       |  |                     
|Stuart
      H. Altman, Ph.D. |      |                                       |  |                     
|                              |      |                                       |  |                     
|                              | *By: | /s/
      JOHN P. BYRNES              |  |                     
|                              |      |                                       |  |                     
|                              |      | Attorney
      in fact                |  |                     

19

---



|CERTIFICATIONS                        
|--------------------------------------
|I,
      John P. Byrnes, certify that:
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      
|                                      

|Date:
      March 31, 2003 | By | /s/
      JOHN P. BYRNES                          
|-------------------------- | -- | --------------------------------------------------
|                           |    |                                                   
|                           |    | John
      P. Byrnes
      Chief Executive Officer

20

---



|I,
      Paul G. Gabos, certify that:
|-------------------------------------
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     
|                                     

|Date:
      March 31, 2003 | By | /s/
      PAUL G. GABOS                          
|-------------------------- | -- | -------------------------------------------------
|                           |    |                                                  
|                           |    | Paul
      G. Gabos
      Chief Financial Officer

21

---



INDEPENDENT
  AUDITORS REPORT

The Board of Directors and
  Stockholders
  Lincare Holdings Inc.:

We
  have audited the consolidated financial statements listed in the index on page
  18 of Lincare Holdings Inc. and subsidiaries. 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 18. These consolidated
  financial statements and the 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, 2002 and 2001, and the results of their
  operations and their cash flows for each of the years in the three-year period
  ended December 31, 2002, 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.

As
  discussed in note 1 to the consolidated financial statements, the Company adopted
  Statement of Financial Accounting Standards 142, *Goodwill and Other Intangible
  Assets*, effective January 1, 2002.

| | KPMG LLP
| | --------

Tampa, Florida
  February 10, 2003

F-1

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED
  BALANCE SHEETSDecember
  31, 2002 and 2001

|                                                                          | 2002                         |           | 2001
|------------------------------------------------------------------------- | ---------------------------- | --------- | ----
|                                                                          |                              |           |     
|                                                                          | (Dollars
      in thousands)
|ASSETS                                                                    |                              |           |     
|Current
      assets:                                                     |                              |           |     
|Cash
      and cash equivalents                                           | $                            | 1,581     |     
|Restricted
      cash                                                     |                              |          |     
|Accounts
      and notes receivable (note 2)                              |                              | 142,740   |     
|Income
      taxes receivable                                             |                              | 1,816     |     
|Inventories                                                               |                              | 2,987     |     
|Other                                                                     |                              | 4,527     |     
|                                                                          |                              |           |     
|Total
      current assets                                                |                              | 153,651   |     
|                                                                          |                              |           |     
|Property
      and equipment (notes 3 and 4)                              |                              | 515,272   |     
|Less accumulated
      depreciation                                       |                              | (279,762  | )   
|                                                                          |                              |           |     
|Net
      property and equipment                                          |                              | 235,510   |     
|                                                                          |                              |           |     
|Other assets:                                                             |                              |           |     
|Goodwill                                                                  |                              | 800,905   |     
|Intangible
      assets, less accumulated amortization of $54,371 in 2001 |                              |          |     
|Covenants
      not to compete, less accumulated amortization of $15,010  |                              |           |     
|in
      2002 and $13,346 in 2001                                         |                              | 5,346     |     
|Other                                                                     |                              | 3,189     |     
|                                                                          |                              |           |     
|Total
      other assets                                                  |                              | 809,440   |     
|                                                                          |                              |           |     
|Total
      assets                                                        | $                            | 1,198,601 |     
|                                                                          |                              |           |     
|                                                                          |                              |           |     
|LIABILITIES
      AND STOCKHOLDERS EQUITY                                |                              |           |     
|Current
      liabilities:                                                |                              |           |     
|Current
      installments of long-term obligations (note 5)              | $                            | 53,718    |     
|Accounts
      payable                                                    |                              | 26,962    |     
|Accrued
      expenses:                                                   |                              |           |     
|Compensation
      and benefits                                           |                              | 17,569    |     
|Other                                                                     |                              | 12,416    |     
|Income
      taxes payable                                                |                              |          |     
|                                                                          |                              |           |     
|Total
      current liabilities                                           |                              | 110,665   |     
|                                                                          |                              |           |     
|Long-term
      obligations, excluding current installments (note 5)      |                              | 155,525   |     
|Deferred
      income taxes (note 6)                                      |                              | 75,375    |     
|Minority
      interest                                                   |                              | 746       |     
|Stockholders equity
      (notes 6, 7, and 8):                           |                              |           |     
|Common
      stock,$.01
      par value. Authorized 200,000,000 shares;   |                              |           |     
|issued
      and outstanding: 121,715,964 and                             |                              |           |     
|105,798,086
      in 2002, 121,040,314 and 107,743,762 in 2001            |                              | 1,217     |     
|Additional
      paid-in capital                                          |                              | 206,525   |     
|Retained
      earnings                                                   |                              | 910,065   |     
|Less treasury stock,
      at cost: 15,917,878 shares in 2002 and         |                              |           |     
|13,259,000
      shares in 2001                                           |                              | (261,517  | )   
|                                                                          |                              |           |     
|Total
      stockholders equity                                          |                              | 856,290   |     
|Commitments and contingencies
      (notes 4, 5 and 14)                   |                              |           |     
|Total
      liabilities and stockholders equity                          | $                            | 1,198,601 |     
|                                                                          |                              |           |     

See accompanying
  notes to consolidated financial statements.

F-2

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED
  STATEMENTS OF OPERATIONSYears
  Ended December 31, 2002, 2001 and 2000

|                                                                | 2002                                        |         | 2001 |   | 2000    |  
|--------------------------------------------------------------- | ------------------------------------------- | ------- | ---- | - | ------- | -
|                                                                |                                             |         |      |   |         |  
|                                                                | (In
      thousands, except per share data) |        
|Net revenues
      (note 9)                                     | $                                           | 960,904 |      | $ | 812,442 |  
|                                                                |                                             |         |      |   |         |  
|Costs and
      expenses:                                       |                                             |         |      |   |         |  
|Cost
      of goods and services                                |                                             | 144,525 |      |   | 123,406 |  
|Operating
      expenses                                        |                                             | 215,724 |      |   | 183,385 |  
|Selling,
      general and administrative expenses              |                                             | 201,468 |      |   | 167,269 |  
|Bad
      debt expense                                          |                                             | 14,414  |      |   | 12,187  |  
|Depreciation
      expense                                      |                                             | 63,299  |      |   | 54,699  |  
|Amortization
      expense                                      |                                             | 1,664   |      |   | 21,119  |  
|Other
      charges (note 13)                                   |                                             |        |      |   | 10,650  |  
|                                                                |                                             |         |      |   |         |  
|                                                                |                                             | 641,094 |      |   | 572,715 |  
|                                                                |                                             |         |      |   |         |  
|Operating
      income                                          |                                             | 319,810 |      |   | 239,727 |  
|                                                                |                                             |         |      |   |         |  
|Other income
      (expenses):                                  |                                             |         |      |   |         |  
|Interest
      income                                           |                                             | 164     |      |   | 365     |  
|Interest
      expense                                          |                                             | (14,165 | )    |   | (16,013 | )
|Net
      gain/(loss) on disposal of property and equipment     |                                             | (147    | )    |   | (71     | )
|Realized
      loss on derivative financial instrument (note 5) |                                             |        |      |   | (6,004  | )
|                                                                |                                             |         |      |   |         |  
|                                                                |                                             | (14,148 | )    |   | (21,723 | )
|                                                                |                                             |         |      |   |         |  
|Income
      before income taxes                                |                                             | 305,662 |      |   | 218,004 |  
|Income
      tax expense (note 6)                               |                                             | 115,234 |      |   | 83,060  |  
|                                                                |                                             |         |      |   |         |  
|Net
      income                                                | $                                           | 190,428 |      | $ | 134,944 |  
|                                                                |                                             |         |      |   |         |  
|Income
      per common share (note 10):                        |                                             |         |      |   |         |  
|Basic                                                           | $                                           | 1.78    |      | $ | 1.26    |  
|                                                                |                                             |         |      |   |         |  
|Diluted                                                         | $                                           | 1.73    |      | $ | 1.23    |  
|                                                                |                                             |         |      |   |         |  
|Weighted
      average number of common shares outstanding      |                                             | 106,942 |      |   | 107,439 |  
|                                                                |                                             |         |      |   |         |  
|Weighted
      average number of common shares and common       |                                             |         |      |   |         |  
|share
      equivalents outstanding                             |                                             | 109,770 |      |   | 110,071 |  
|                                                                |                                             |         |      |   |         |  

See accompanying
  notes to consolidated financial statements.

F-3

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED
  STATEMENTS OF STOCKHOLDERS EQUITYYears
  Ended December 31, 2002, 2001 and 2000

|                                                  | CommonStock                  |       | AdditionalPaid-inCapital |   | RetainedEarnings |  | TreasuryStock |         | TotalStockholdersEquity
|------------------------------------------------- | ---------------------------- | ----- | ------------------------ | - | ---------------- |  | ------------- | ------- | ------------------------
|                                                  |                              |       |                          |   |                  |  |               |         |                         
|                                                  | (Dollars
      in thousands)
|Balances
      at December 31, 1999               | $                            | 1,168 |                          | $ | 135,157          |  | $             | 467,825 |                         
|Exercise
      of stock options (note 8)          |                              | 32    |                          |   | 21,823           |  |               |        |                         
|Proceeds
      from sale of put options (note 7)  |                              |      |                          |   | 280              |  |               |        |                         
|Tax benefit
      related to exercise of employee |                              |       |                          |   |                  |  |               |         |                         
|stock
      options (notes 6 and 8)               |                              |      |                          |   | 18,142           |  |               |        |                         
|Net income                                        |                              |      |                          |   |                 |  |               | 116,868 |                         
|Treasury
      stock issued                       |                              |      |                          |   |                 |  |               |        |                         
|Treasury
      stock acquired                     |                              |      |                          |   |                 |  |               |        |                         
|                                                  |                              |       |                          |   |                  |  |               |         |                         
|Balances
      at December 31, 2000               |                              | 1,200 |                          |   | 175,402          |  |               | 584,693 |                         
|Exercise
      of stock options (note 8)          |                              | 10    |                          |   | 11,103           |  |               |        |                         
|Tax benefit
      related to exercise of employee |                              |       |                          |   |                  |  |               |         |                         
|stock
      options (notes 6 and 8)               |                              |      |                          |   | 7,659            |  |               |        |                         
|Net income                                        |                              |      |                          |   |                 |  |               | 134,944 |                         
|Treasury
      stock issued                       |                              |      |                          |   |                 |  |               |        |                         
|                                                  |                              |       |                          |   |                  |  |               |         |                         
|Balances
      at December 31, 2001               |                              | 1,210 |                          |   | 194,164          |  |               | 719,637 |                         
|Exercise
      of stock options (note 8)          |                              | 7     |                          |   | 7,260            |  |               |        |                         
|Tax benefit
      related to exercise of employee |                              |       |                          |   |                  |  |               |         |                         
|stock
      options (notes 6 and 8)               |                              |      |                          |   | 5,101            |  |               |        |                         
|Net income                                        |                              |      |                          |   |                 |  |               | 190,428 |                         
|Treasury
      stock issued                       |                              |      |                          |   |                 |  |               |        |                         
|Treasury
      stock acquired                     |                              |      |                          |   |                 |  |               |        |                         
|                                                  |                              |       |                          |   |                  |  |               |         |                         
|Balances
      at December 31, 2002               | $                            | 1,217 |                          | $ | 206,525          |  | $             | 910,065 |                         
|                                                  |                              |       |                          |   |                  |  |               |         |                         

See accompanying
  notes to consolidated financial statements.

F-4

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

CONSOLIDATED
  STATEMENTS OF CASH FLOWSYears
  Ended December 31, 2002, 2001 and 2000

|                                                                    | 2002                         |          | 2001 |   | 2000     |  
|------------------------------------------------------------------- | ---------------------------- | -------- | ---- | - | -------- | -
|                                                                    |                              |          |      |   |          |  
|                                                                    | (Dollars
      in thousands) |         
|Cash
      flows from operating activities:                         |                              |          |      |   |          |  
|Net
      income                                                    | $                            | 190,428  |      | $ | 134,944  |  
|Adjustments
      to reconcile net income to net cash provided by   |                              |          |      |   |          |  
|operating
      activities:                                         |                              |          |      |   |          |  
|Increase
      in provision for losses on accounts and notes        |                              |          |      |   |          |  
|receivable                                                          |                              | 14,414   |      |   | 12,187   |  
|Depreciation
      expense                                          |                              | 63,299   |      |   | 54,699   |  
|Gain/loss
      on disposal of property and equipment               |                              | 147      |      |   | 71       |  
|Amortization
      expense                                          |                              | 1,664    |      |   | 21,119   |  
|Amortization
      of interest swap contracts                       |                              | (785     | )    |   | (785     | )
|Realized
      loss on interest rate derivative (note 5)            |                              |         |      |   | 6,004    |  
|Deferred
      income taxes                                         |                              | 31,807   |      |   | 8,983    |  
|Minority
      interest in net earnings of subsidiary               |                              | 96       |      |   | 86       |  
|Change
      in operating assets and liabilities (net of effects of |                              |          |      |   |          |  
|acquired
      businesses):                                         |                              |          |      |   |          |  
|Increase
      in accounts and notes receivable                     |                              | (10,948  | )    |   | (37,276  | )
|Decrease
      in inventories                                       |                              | 19       |      |   | 1,205    |  
|(Increase)
      decrease in other current assets                   |                              | 1,658    |      |   | 936      |  
|Increase
      (decrease) in accounts payable                       |                              | (2,984   | )    |   | 10,134   |  
|Increase
      in accrued expenses                                  |                              | 305      |      |   | 3,309    |  
|Increase
      (decrease) in income taxes                           |                              | (1,935   | )    |   | 18,089   |  
|                                                                    |                              |          |      |   |          |  
|Net
      cash provided by operating activities                     |                              | 287,185  |      |   | 233,705  |  
|                                                                    |                              |          |      |   |          |  
|Cash flows
      from investing activities:                         |                              |          |      |   |          |  
|Proceeds
      from sale of property and equipment                  |                              | 244      |      |   | 150      |  
|Capital
      expenditures                                          |                              | (82,928  | )    |   | (74,206  | )
|(Increase)
      decrease in other assets                           |                              | (1,316   | )    |   | 648      |  
|Business
      acquisitions, net of cash acquired (note 12)         |                              | (94,703  | )    |   | (149,375 | )
|Cash
      restricted for future payments                           |                              |         |      |   | (8,350   | )
|                                                                    |                              |          |      |   |          |  
|Net
      cash used by investing activities                         |                              | (178,703 | )    |   | (231,133 | )
|                                                                    |                              |          |      |   |          |  
|Cash flows
      from financing activities:                         |                              |          |      |   |          |  
|Proceeds
      from long-term obligations                           |                              | 177,535  |      |   | 175,534  |  
|Payment
      of long-term obligations                              |                              | (206,142 | )    |   | (185,111 | )
|Payment
      of interest rate derivative (note 5)                  |                              |         |      |   | (7,965   | )
|Decrease
      in minority interest                                 |                              | (97      | )    |   | (136     | )
|Proceeds
      from issuance of common stock                        |                              | 7,267    |      |   | 11,113   |  
|Proceeds
      from put options                                     |                              |         |      |   |         |  
|Proceeds
      from issuance of treasury stock                      |                              | 1,035    |      |   | 792      |  
|Payment
      to acquire treasury stock                             |                              | (86,499  | )    |   |         |  
|                                                                    |                              |          |      |   |          |  
|Net
      cash used by financing activities                         |                              | (106,901 | )    |   | (5,773   | )
|                                                                    |                              |          |      |   |          |  
|Net
      increase (decrease) in cash and cash equivalents          |                              | 1,581    |      |   | (3,201   | )
|Cash and
      cash equivalents, beginning of year                  |                              |         |      |   | 3,201    |  
|                                                                    |                              |          |      |   |          |  
|Cash and
      cash equivalents, end of year                        | $                            | 1,581    |      | $ |         |  
|                                                                    |                              |          |      |   |          |  

See accompanying
  notes to consolidated financial statements.

F-5

---



|LINCARE
      HOLDINGS INC. AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTSDecember 31, 2002, 2001 and 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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 47 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|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 paid by 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s revenue recognition policy is consistent with the criteria
        set forth in Staff Accounting Bulletin 101  Revenue Recognition
        in Financial Statements (SAB 101) for determining when revenue
        is realized or realizable and earned. The Company recognizes revenue in
        accordance with the requirements of SAB 101 that:
      persuasive evidence
          of an arrangement exists;
        delivery has occurred;
        the sellers
          price to the buyer is fixed or determinable; and
        collectibility
          is reasonably assured.Due to the nature of the industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenues and accounts receivable at their net realizable values. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are typically identified and recorded at the point of cash application, claim denial or account review. Included in accounts receivable are earned but unbilled receivables. Billing delays, ranging from several days to several weeks, can occur due to obtaining certain required payor-specific documentation from internal and external sources.
      The Company performs analyses to evaluate the net realizable value of accounts receivable. Specifically, the Company considers historical realization data, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the healthcare industry and third-party reimbursement, it is possible that the Companys estimates could change, which could have an impact on operations and cash flows.
|F-6                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(1)   
  Description of Business and Summary of Significant Accounting Policies (Continued)

(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, 2002 and 2001 was $129,390,000
      and $126,931,000, respectively.

(f)Inventories

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

(g)Property and Equipment

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

|Building
      and improvements | 5 to
      40 years
|------------------------------- | -------------------
|Equipment and furniture         | 3 to
      20 years

Leasehold
  improvements are amortized using 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 and Impairment

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

On
  January 1, 2002, the Company adopted SFAS 142, Goodwill and Other Intangible
  Assets. SFAS 142 requires that goodwill and intangible assets with indefinite
  lives no longer be amortized but instead be measured for impairment at least
  annually, or when events indicate that an impairment exists. As of the adoption
  date, amortization of outstanding goodwill and other indefinite-lived intangible
  assets ceased. As required by SFAS 142, the Company performs impairment tests
  annually and when events or circumstances indicate that the value of goodwill
  or other indefinite-lived intangible assets might be impaired. In connection
  with the SFAS 142 indefinite-lived intangible asset impairment test, the Company
  utilized the required one-step method to determine whether an impairment existed
  as of the adoption date. In connection with the SFAS 142 transitional goodwill
  impairment test, the Company utilized the required two-step method for determining that there was no
  goodwill impairment as of the adoption date.

Had
  SFAS 142 been in effect for the years ended December 31, 2001 and 2000, pro
  forma net income and net income per share would have been as follows:

|                                             | **Year
      Ended December 31,**
|-------------------------------------------- | ---------------------------------
|                                             |                                  
|                                             | **2002**                         
|                                             |                                  
|                                             | **(in
      thousands)**         
|Net income,
      as reported                | $                                
|Add:
      Goodwill amortization, net of tax |                                  
|Pro forma
      net income                   | $                                
|                                             |                                  

F-7

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(1)Description of
  Business and Summary of Significant Accounting Policies (Continued)

|                            | **Year
      Ended December 31,**
|--------------------------- | ---------------------------------
|                            |                                  
|                            | **2002**                         
|                            |                                  
|                            | **(in
      thousands)**         
|Net income
      per share: |                                  
|As
      reported:          |                                  
|Basic                       | $                                
|Diluted                     | $                                
|                            |                                  
|Pro
      Forma:            |                                  
|Basic                       | $                                
|Diluted                     | $                                
|                            |                                  

The Company
  annually evaluates whether events or circumstances have occurred that would
  indicate an impairment in the value or the life of goodwill. The Company also
  evaluates the useful lives of property and equipment and certain intangibles
  to determine whether events or circumstances warrant revised depreciation or
  amortization periods. If there is an indication that the carrying value of an
  asset, including goodwill, is not recoverable, the Company estimates the projected
  undiscounted cash flows, excluding interest, of the asset to determine if an
  impairment loss should be recognized. In this evaluation, the Company considers
  the effects of external changes to the Companys business environment,
  including competitive pressures, market erosion and technological and regulatory
  changes. The impairment loss is determined by comparing the carrying amount
  of the asset to its estimated fair value. No impairment loss have been recorded
  for the year ended December 31, 2002.

(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 $6,116,000 in 2002, $5,527,000 in 2001, and $4,093,000 in 2000.

(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 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.

F-8

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(1)Description of
  Business and Summary of Significant Accounting Policies (Continued)

(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 642 operating centers in 47 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
  January 2003, the Financial Accounting Standards Board issued Interpretation
  No. 46, Consolidation of Variable Interest Entities. The interpretation
  addresses the consolidation of variable interest entities. Variable interest
  entities are identified by reviewing the Companys equity investment at
  risk, the ability to make decisions about the entitys activities and the
  obligation to absorb the entitys losses or right to receive expected residual
  returns. The Company does not expect this interpretation to have a material
  impact on its consolidated financial position or results of operations.

In
  December 2002, the Financial Accounting Standards Board issued SFAS No. 148,
  Accounting for Stock-Based Compensation  Transition and Disclosure.
  This SFAS amends SFAS No. 123, Accounting for Stock-Based Compensation,
  in order to provide alternative methods of transition for entities electing
  the fair value based method of accounting for stock-based employee compensation.
  This SFAS also requires additional disclosure related to accounting methods
  used for stock-based employee compensation and pro forma amounts related to
  any period accounted for under the recognition and measurement principles of
  APB Opinion 25. The Company does not expect this standard to have a material
  impact on its consolidated financial position or results of operations.

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

In
  June 2002, the Financial Accounting Standards Board issued SFAS No. 146, Accounting
  for Costs Associated with Exit or Disposal Activities. This standard nullifies
  Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain
  Employee Termination Benefits and Other Costs to Exit an Activity (including
  Certain Costs Incurred in a Restructuring). This standard requires that
  a liability for a cost associated with an exit or disposal activity be recognized
  when the liability is incurred rather than the date of an entitys commitment
  to an exit plan. The Company was required to implement SFAS No. 146 on January
  1, 2003, and does not expect this standard to have a material impact on its
  consolidated financial position or results of operations.

F-9

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(1)Description of
  Business and Summary of Significant Accounting Policies (Continued)

|In
      April 2002, the Financial Accounting Standards Board issued SFAS No. 145,
      Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
      Statement No. 13, and Technical Corrections. This statement provides
      guidance on the classification of gains and losses from the extinguishment
      of debt and the accounting for certain specified lease transactions. The
      Company does not expect the provisions of SFAS 145 to have a material effect
      on the Companys consolidated financial position or results of operations.                                                                                      
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|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.                                                                                          
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|The
      Companys revenues are generated through locations in 47 states. The Company
      generally does not require collateral or other security in extending credit
      to patients; however, the Company routinely obtains assignment of (or is
      otherwise entitled to receive) benefits receivable under the health insurance
      programs, plans or policies of customers. Included in the Companys net
      revenues is reimbursement from government sources under Medicare, Medicaid
      and other federally funded programs, which aggregated approximately 67%,
      62% and 61% of net revenues in 2002, 2001 and 2000, respectively.
|(2)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|Accounts
      and notes receivable at December 31, 2002 and 2001 consist of:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

|                                                | 2002                 |         | 2001 |  
|----------------------------------------------- | -------------------- | ------- | ---- | -
|                                                |                      |         |      |  
|                                                | (In
      thousands) |        
|Trade                                           | $                    | 154,044 |      | $
|Other                                           |                      | 20      |      |  
|                                                |                      |         |      |  
|                                                |                      | 154,064 |      |  
|Less allowance
      for uncollectible accounts |                      | 11,324  |      |  
|                                                |                      |         |      |  
|                                                | $                    | 142,740 |      | $
|                                                |                      |         |      |  

(3)   Property
  and Equipment

Property
  and equipment at December 31, 2002 and 2001 consist of:

|                                | 2002                 |         | 2001 |  
|------------------------------- | -------------------- | ------- | ---- | -
|                                |                      |         |      |  
|                                | (In
      thousands) |        
|Land and
      improvements     | $                    | 3,072   |      | $
|Building
      and improvements |                      | 18,871  |      |  
|Equipment
      and furniture   |                      | 493,329 |      |  
|                                |                      |         |      |  
|                                | $                    | 515,272 |      | $
|                                |                      |         |      |  

Rental
  equipment of approximately $389,901,000 in 2002 and $324,327,000 in 2001 is
  included with equipment and furniture.

F-10

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(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 $34,064,000 in 2002,
  $31,078,000 in 2001 and $27,763,000 in 2000.

Future minimum lease
  payments under noncancelable operating leases as of December 31, 2002 are as
  follows:

|                                   | (In
      thousands)
|---------------------------------- | --------------------
|                                   |                     
|2003                               |                     
|2004                               |                     
|2005                               |                     
|2006                               |                     
|2007                               |                     
|                                   |                     
|Total minimum
      lease payments |                     
|                                   |                     

(5)   Long-Term
  Obligations

Long-term
  obligations at December 31, 2002 and 2001 consist of:

|                                                                              | 2002                 |         | 2001
|----------------------------------------------------------------------------- | -------------------- | ------- | ----
|                                                                              |                      |         |     
|                                                                              | (In
      thousands)
|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                          | $                    |        |     
|Borrowings
      under five-year revolving credit facility bearing interest   |                      |         |     
|(2.7%
      at December 31, 2002) 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 2007                          |                      | 60,000  |     
|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                   |                      | 125,525 |     
|Unsecured,
      deferred acquisition obligations net of imputed interest,    |                      |         |     
|payable
      in various installments through 2003                            |                      | 23,718  |     
|                                                                              |                      |         |     
|Total
      long-term obligations                                             |                      | 209,243 |     
|Less
      current installments                                               |                      | 53,718  |     
|                                                                              |                      |         |     
|Long-term
      debt, excluding current installments                          | $                    | 155,525 |     
|                                                                              |                      |         |     

The
  Companys current revolving credit agreement with several lenders and Bank
  of America N.A. as agent, dated April 25, 2002, as amended, permits the Company
  to borrow amounts up to $200,000,000 on a five-year revolving credit facility.
  The five-year revolving credit facility contains a $20,000,000 letter of credit
  sub-facility which reduces the principal amount available under the five-year
  revolving credit facility by the amount of outstanding letters of credit. As
  of December 31, 2002, $8,360,000 was outstanding under the letter of credit
  sub-facility. The revolving credit agreement has a termination date of April
  24, 2007. Upon entering into the revolving credit agreement, an origination

F-11

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(5)   
  Long-Term Obligations (Continued)

fee of $1,660,000 was paid and is being amortized over five years. (Any remaining
  portion of the previous amendment fees were recalculated to be amortized over
  the new five-year time period.) Commitment fees on the unused portion of the
  facility (.300% at December 31, 2002) 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-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 its 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, 2002 are as follows:

|     | (In
      thousands)
|---- | --------------------
|     |                     
|2003 | $                   
|2004 |                     
|2005 |                     
|2006 |                     
|2007 |                     
|     |                     
|     | $                   
|     |                     

F-12

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(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, 2002 and
  2001 are presented below:

|                                                                      | 2002                 |         | 2001 |  
|--------------------------------------------------------------------- | -------------------- | ------- | ---- | -
|                                                                      |                      |         |      |  
|                                                                      | (In
      thousands) |        
|Deferred
      tax assets:                                            |                      |         |      |  
|Accrued
      expenses, principally due to deferral for income tax    |                      |         |      |  
|reporting
      purposes                                              | $                    | (352    | )    | $
|Intangible
      assets and covenants not to compete, principally due |                      |         |      |  
|to
      differences in amortization                                  |                      | (10,589 | )    |  
|Net
      operating loss carryforward                                 |                      | (17     | )    |  
|                                                                      |                      |         |      |  
|Total
      gross deferred tax assets                                 |                      | (10,958 | )    |  
|                                                                      |                      |         |      |  
|Deferred
      tax liabilities:                                       |                      |         |      |  
|Property
      and equipment, principally due to differences in       |                      |         |      |  
|depreciation                                                          |                      | 36,627  |      |  
|Goodwill,
      principally due to differences in amortization        |                      | 45,351  |      |  
|Other                                                                 |                      | 1,402   |      |  
|                                                                      |                      |         |      |  
|Total
      gross deferred tax liabilities                            |                      | 83,380  |      |  
|                                                                      |                      |         |      |  
|Net
      deferred tax liability                                      | $                    | 72,422  |      | $
|                                                                      |                      |         |      |  

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.

Income tax expense attributable
  to operations consists of:

|                                                            | Year
      Ended December 31, |        
|----------------------------------------------------------- | ----------------------------- | -------
|                                                            |                               |        
|                                                            | 2002                          |        
|                                                            |                               |        
|                                                            | (In
      thousands)          |        
|Current:                                                    |                               |        
|Federal                                                     | $                             | 79,211 
|State                                                       |                               | 6,079  
|                                                            |                               |        
|Total
      current                                         |                               | 85,290 
|                                                            |                               |        
|Deferred:                                                   |                               |        
|Federal                                                     |                               | 27,771 
|State                                                       |                               | 2,173  
|                                                            |                               |        
|Total
      deferred                                        |                               | 29,944 
|                                                            |                               |        
|Total
      income tax expense                              | $                             | 115,234
|                                                            |                               |        
|Total income
      tax expense allocation:                  |                               |        
|Income
      from operations                                | $                             | 115,234
|Stockholders
      equity for compensation expense for tax |                               |        
|purposes                                                    |                               | (5,101 
|                                                            |                               |        
|                                                            | $                             | 110,133
|                                                            |                               |        

F-13

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(6)   
  Income Taxes (Continued)

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:

|                                                            | Year
      Ended December 31,
|----------------------------------------------------------- | -----------------------------
|                                                            |                              
|                                                            | 2002                         
|                                                            |                              
|                                                            | (In
      thousands)         
|Computed
      expected tax expense                       | $                            
|State income
      taxes, net of federal income tax benefit |                              
|Other                                                       |                              
|                                                            |                              
|Total
      income tax expense                              | $                            
|                                                            |                              

|(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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(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 eight year terms and generally vest
      over two to 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, 2002, 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, 2002, there were options for
      65,800 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, 2002, there were options for 354,500 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, 2002, there
      were options for 2,081,150 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, 2002, there were options for 2,467,350 shares
      outstanding and 72,000 shares available for issuance 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, 2002, there were options for 1,689,400 shares outstanding and options
      for 45,500 shares available for issuance under the 2000 Plan. The Company
      has reserved a total of 4,000,000 shares of common stock for issuance under
      the 2001 Stock Plan (the 2001 Plan). At December 31, 2002, there
      were options for 3,696,500 shares outstanding and options for 291,500 shares
      available for issuance under the 2001 Plan.
|F-14                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(8)    Stock
  Options (Continued)

The
  per share weighted average fair value of stock options granted during 2002,
  2001, and 2000 was $17.56, $12.32 and $8.35 on the date of grant using the Black
  Scholes option pricing model with the following weighted average assumptions:
  2002  expected dividend yield 0%, risk-free interest rate of 2.8%, expected
  life of 8 years, and volatility of 58.8%; 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%.

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 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:

|                               | 2002                                        |         | 2001 |   | 2000   
|------------------------------ | ------------------------------------------- | ------- | ---- | - | -------
|                               |                                             |         |      |   |        
|                               | (In
      thousands, except per share data)
|Net income:                    |                                             |         |      |   |        
|As
      reported              | $                                           | 190,428 |      | $ | 134,944
|                               |                                             |         |      |   |        
|Pro
      forma                | $                                           | 171,550 |      | $ | 118,513
|                               |                                             |         |      |   |        
|Income
      per common share: |                                             |         |      |   |        
|Basic
       as reported      | $                                           | 1.78    |      | $ | 1.26   
|                               |                                             |         |      |   |        
|Diluted
       as reported    | $                                           | 1.73    |      | $ | 1.23   
|                               |                                             |         |      |   |        
|Basic
       pro forma        | $                                           | 1.60    |      | $ | 1.10   
|                               |                                             |         |      |   |        
|Diluted
       pro forma      | $                                           | 1.56    |      | $ | 1.08   
|                               |                                             |         |      |   |        

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 is not considered.

Information related to the
  plans is as follows:

|                                       | Number
      of
      Options |   | Weighted
      Average
      Exercise Price
|-------------------------------------- | ----------------------------- | - | -------------------------------------------
|                                       |                               |   |                                            
|Outstanding
      at December 31, 1999 | 9,103,000                     |   |                                            
|Exercised
      in 2000                | (3,047,000                    | ) |                                            
|Canceled
      in 2000                 | (150,000                      | ) |                                            
|Options
      issued in 2000           | 2,163,000                     |   |                                            
|                                       |                               |   |                                            
|Outstanding
      at December 31, 2000 | 8,069,000                     |   |                                            
|Exercised
      in 2001                | (1,073,650                    | ) |                                            
|Canceled
      in 2001                 | (100,000                      | ) |                                            
|Options
      issued in 2001           | 3,066,000                     |   |                                            
|                                       |                               |   |                                            
|Outstanding
      at December 31, 2001 | 9,961,350                     |   |                                            
|Exercised
      in 2002                | (675,650                      | ) |                                            
|Canceled
      in 2002                 | (253,000                      | ) |                                            
|Options
      issued in 2002           | 1,332,000                     |   |                                            
|                                       |                               |   |                                            
|Outstanding
      at December 31, 2002 | 10,364,700                    |   |                                            
|                                       |                               |   |                                            

F-15

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(8) Stock Options
  (Continued)

At
  December 31, 2002, the range of exercise prices and weighted average remaining
  contractual life of outstanding options were as follows:

|Range
      of Exercise Prices | Options
      Outstanding
      as of
      December 31, 2002 |  | Weighted
      Average
      Remaining
      Contractual Life
|------------------------------ | ------------------------------------------------------------- |  | -------------------------------------------------------------
|                               |                                                               |  |                                                              
|$                              | 4.75$
      12.25                                            |  | 2,997,450                                                    
|$                              | 12.31$
      17.81                                           |  | 3,036,750                                                    
|$                              | 24.45$
      29.68                                           |  | 4,330,500                                                    
|                               |                                                               |  |                                                              
|$                              | 4.75$
      29.68                                            |  | 10,364,700                                                   
|                               |                                                               |  |                                                              

At
  December 31, 2002, 2001 and 2000, the number of options exercisable was 5,460,200,
  3,028,350 and 2,761,500, respectively, and the weighted average exercise price
  of those options was $14.47, $11.05 and $9.59, respectively. All of the securities to be issued upon exercise of outstanding options were the result of options granted under equity compensation plans approved by the Companys stockholders.

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 $5,101,000 in 2002, $7,659,000 in 2001 and $18,142,000 in 2000
  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 67% in 2002, 62% in 2001, and 61% in 2000 of such net revenues.

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

|                                           | Year
      Ended December 31,
|------------------------------------------ | -----------------------------
|                                           |                              
|                                           | 2002                         
|                                           |                              
|                                           | (In
      thousands)         
|Oxygen
      and other respiratory therapy | $                            
|Home medical
      equipment and other     |                              
|                                           |                              
|Total                                      | $                            
|                                           |                              

(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, 2002 and 2001.

F-16

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(10) Income Per
  Common Share (Continued)

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

|                                                             | Income
      (Numerator)                    |         | Shares
      (Denominator) |         | Per
      Share
      Amount
|------------------------------------------------------------ | ------------------------------------------- | ------- | -------------------------- | ------- | ----------------------------
|                                                             |                                             |         |                            |         |                             
|                                                             | (In
      thousands, except per share data)
|YEAR
      ENDED DECEMBER 31, 2002                           |                                             |         |                            |         |                             
|Basic:                                                       |                                             |         |                            |         |                             
|Income
      available to common stockholders                | $                                           | 190,428 |                            | 106,942 |                             
|                                                             |                                             |         |                            |         |                             
|Effect
      of dilutive securities:                         |                                             |         |                            |         |                             
|Stock
      options                                          |                                             |        |                            | 2,828   |                             
|                                                             |                                             |         |                            |         |                             
|Diluted:                                                     |                                             |         |                            |         |                             
|Income
      available to common stockholders and holders of |                                             |         |                            |         |                             
|dilutive
      securities                                    | $                                           | 190,428 |                            | 109,770 |                             
|                                                             |                                             |         |                            |         |                             
|YEAR
      ENDED DECEMBER 31, 2001                           |                                             |         |                            |         |                             
|Basic:                                                       |                                             |         |                            |         |                             
|Income
      available to common stockholders                | $                                           | 134,944 |                            | 107,439 |                             
|                                                             |                                             |         |                            |         |                             
|Effect
      of dilutive securities:                         |                                             |         |                            |         |                             
|Stock
      options                                          |                                             |        |                            | 2,632   |                             
|                                                             |                                             |         |                            |         |                             
|Diluted:                                                     |                                             |         |                            |         |                             
|Income
      available to common stockholders and holders of |                                             |         |                            |         |                             
|dilutive
      securities                                    | $                                           | 134,944 |                            | 110,071 |                             
|                                                             |                                             |         |                            |         |                             
|YEAR
      ENDED DECEMBER 31, 2000                           |                                             |         |                            |         |                             
|Basic:                                                       |                                             |         |                            |         |                             
|Income
      available to common stockholders                | $                                           | 116,868 |                            | 106,174 |                             
|                                                             |                                             |         |                            |         |                             
|Effect
      of dilutive securities:                         |                                             |         |                            |         |                             
|Stock
      options                                          |                                             |        |                            | 2,128   |                             
|                                                             |                                             |         |                            |         |                             
|Diluted:                                                     |                                             |         |                            |         |                             
|Income
      available to common stockholders and holders of |                                             |         |                            |         |                             
|dilutive
      securities                                    | $                                           | 116,868 |                            | 108,302 |                             
|                                                             |                                             |         |                            |         |                             

(11)   Supplemental
  Statements of Cash Flows Information

|                     | Year
      Ended December 31, |       
|-------------------- | ----------------------------- | ------
|                     |                               |       
|                     | 2002                          |       
|                     |                               |       
|                     | (In
      thousands)          |       
|Cash paid
      for: |                               |       
|Interest             | $                             | 15,241
|                     |                               |       
|Income
      taxes   | $                             | 86,887
|                     |                               |       

(12)  Business
  Combinations

The Companys strategy is to increase its market share through internal growth and strategic acquisitions. Lincare achieves internal growth in existing geographic markets through the addition of new customers and referral sources to its network of local operating centers. 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.

F-17

---



LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

NOTES
  TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(12)  
  Business Combinations (Continued)

During
  2002, the Company acquired certain assets of 28 businesses in separate transactions.
  During 2001, the Company acquired certain assets of 18 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 2002 and 2001 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:

|                                       | 2002                 |         | 2001
|-------------------------------------- | -------------------- | ------- | ----
|                                       |                      |         |     
|                                       | (In
      thousands)
|Cash                                   | $                    | 94,703  |     
|Deferred
      acquisition obligations |                      | 24,689  |     
|Assumption
      of liabilities        |                      | 423     |     
|                                       |                      |         |     
|                                       | $                    | 119,815 |     
|                                       |                      |         |     

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

|                             | 2002                 |         | 2001
|---------------------------- | -------------------- | ------- | ----
|                             |                      |         |     
|                             | (In
      thousands)
|Current
      assets         | $                    | 2,495   |     
|Property
      and equipment |                      | 3,959   |     
|Intangible
      assets      |                      | 200     |     
|Goodwill                     |                      | 113,161 |     
|                             |                      |         |     
|                             | $                    | 119,815 |     
|                             |                      |         |     

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 adopted SFAS No. 142 in the first quarter
  of 2002 (see previous discussion in note (1)(n)).

The
  following unaudited pro forma supplemental information on the results of operations
  for the years ended December 31, 2002 and 2001 includes the acquisitions as
  if they had been combined at the beginning of 2001.

|                                        | 2002                                              |           | 2001
|--------------------------------------- | ------------------------------------------------- | --------- | ----
|                                        |                                                   |           |     
|                                        | (In
      thousands, except
      per share data)
|Net revenues                            | $                                                 | 1,000,239 |     
|                                        |                                                   |           |     
|Net income                              | $                                                 | 199,224   |     
|                                        |                                                   |           |     
|Basic 
      income per common share   | $                                                 | 1.86      |     
|                                        |                                                   |           |     
|Diluted
       income per common share | $                                                 | 1.81      |     
|                                        |                                                   |           |     

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 2001 or of future results of operations of the
  combined companies.

F-18

---



|LINCARE
      HOLDINGS INC. AND SUBSIDIARIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
      December 31, 2002, 2001 and 2000                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(13)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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 modification and extension of certain executive officer employment
      agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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 tamsuits and the government may
      intervene in, and take control of, such actions. The Company is a defendant
      in certain qui tamproceedings. Lincare is vigorously defending these
      suits. However, the government has declined to intervene in all unsealed
      qui tamactions 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 customer
      records and other documents to support claims submitted by the Company for
      payment of services rendered to customers. Similarly, government agencies
      periodically open investigations and obtain information from health care
      providers pursuant to legal process (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.
|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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|F-19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

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LINCARE HOLDINGS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
  December 31, 2002, 2001 and 2000

(15)  Quarterly Financial Data (Unaudited)

The
  following is a summary of quarterly financial results for the years ended December
  31, 2002 and 2001:

|                               | First
      Quarter                         |         | Second
      Quarter |   | Third
      Quarter |  | Fourth
      Quarter
|------------------------------ | ------------------------------------------- | ------- | -------------------- | - | ------------------- |  | --------------------
|                               |                                             |         |                      |   |                     |  |                     
|                               | (In
      thousands, except per share data)
|2002:                          |                                             |         |                      |   |                     |  |                     
|Net
      revenues             | $                                           | 228,521 |                      | $ | 234,455             |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Operating
      income         | $                                           | 76,271  |                      | $ | 78,112              |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Net
      income               | $                                           | 45,191  |                      | $ | 46,490              |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Income
      per common share: |                                             |         |                      |   |                     |  |                     
|Basic                          | $                                           | 0.42    |                      | $ | 0.43                |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Diluted                        | $                                           | 0.41    |                      | $ | 0.42                |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|2001:                          |                                             |         |                      |   |                     |  |                     
|Net
      revenues             | $                                           | 191,661 |                      | $ | 198,371             |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Operating
      income(1)      | $                                           | 57,101  |                      | $ | 60,276              |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Net
      income(1)            | $                                           | 31,524  |                      | $ | 35,326              |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Income
      per common share: |                                             |         |                      |   |                     |  |                     
|Basic                          | $                                           | 0.30    |                      | $ | 0.33                |  | $                   
|                               |                                             |         |                      |   |                     |  |                     
|Diluted                        | $                                           | 0.29    |                      | $ | 0.32                |  | $                   
|                               |                                             |         |                      |   |                     |  |                     

|   
|---
|(1)

F-20

---



SCHEDULE
  VIII

LINCARE
  HOLDINGS INC. AND SUBSIDIARIES

VALUATION
  AND QUALIFYING ACCOUNTS

|Description                                | Balance
      at
      Beginning
      of Period |       | Charged
      to
      Costs and
      Expenses |   | Charged
      to
      Other
      Accounts |  |   | Deductions |     |  | Balance
      at
      End of
      Period
|------------------------------------------ | ------------------------------------------------ | ----- | ----------------------------------------------- | - | ------------------------------------------- |  | - | ---------- | --- |  | ------------------------------------------
|                                           |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|                                           | (In
      thousands)                            
|Year
      Ended December 31, 2002         |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Deducted
      from asset accounts:        |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Allowance
      for uncollectible accounts | $                                                | 7,444 |                                                 | $ | 14,414                                      |  | $ | 6,911      | (1) |  | $                                         
|                                           |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Year
      Ended December 31, 2001         |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Deducted
      from asset accounts:        |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Allowance
      for uncollectible accounts | $                                                | 9,489 |                                                 | $ | 12,187                                      |  | $ | 1,924      | (1) |  | $                                         
|                                           |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Year
      Ended December 31, 2000         |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Deducted
      from asset accounts:        |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           
|Allowance
      for uncollectible accounts | $                                                | 4,897 |                                                 | $ | 10,537                                      |  | $ | 5,816      | (1) |  | $                                         
|                                           |                                                  |       |                                                 |   |                                             |  |   |            |     |  |                                           

|   
|---
|(1)
|(2)
|S-1

---



INDEX
  OF EXHIBITS

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

| 
|-
|A
|B
|C
|D
|E
|F
|G
|H
|I

---