# UNITED STATES SECURITIES AND
EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

# FORM 10-Q

| | [X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
| | --- | --------------------------------------------------------------------------------------

# For the quarterly
period ended July 1, 2005

| | [  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES
EXCHANGE ACT OF 1934
| | ---- | ---------------------------------------------------------------------------------------

For the transition
period from ___________ to ____________

Commission File Number 0-23832

# PSS WORLD MEDICAL, INC.(Exact name of
Registrant as specified in its charter)

|                                         |                       
|---------------------------------------- | ----------------------
|Florida                                  | 59-2280364            
|(State or other jurisdiction             | (IRS Employer         
|of incorporation or organization)        | Identification Number)
|4345 Southpoint Blvd.                   
|Jacksonville, Florida                    | 32216                 
|(Address of principal executive offices) | (Zip code)            
|Registrant's telephone number            | (904) 332-3000        

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 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.

[X] Yes [ ] No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

[X] Yes [ ] No

The number of shares of common stock,
par value $0.01 per share, of the registrant outstanding as of August 5, 2005 was
65,447,524 shares.

---

# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES

# JULY 1, 2005

# TABLE OF CONTENTS

|Item |                                                                                                         | Page
|---- | ------------------------------------------------------------------------------------------------------- | ----
|     | Information Regarding Forward-Looking Statements                                                        | 3   
|    
|     | Part I - Financial Information                                                                          |     
|    
|1.   | Financial Statements:                                                                                   |     
|    
|     | Consolidated Balance Sheets July 1, 2005 and April 1, 2005                                              | 6   
|    
|     | Consolidated Statements of Operations for the Three Months Ended July 1, 2005       and June 30, 2004   | 7   
|    
|     | Consolidated Statements of Cash Flows for the Three Months Ended July 1, 2005
        and June 30, 2004 | 8   
|    
|     | Notes to Consolidated Financial Statements                                                              | 9   
|    
|     | Report of Independent Registered Public Accounting Firm                                                 | 20  
|    
|2.   | Managements Discussion and Analysis of Financial Condition and Results of Operations                   | 21  
|    
|3.   | Quantative and Qualitive Disclosures About Market Risk                                                  | 35  
|    
|4.   | Controls and Procedures                                                                                 | 36  
|    
|     | Part II - Other Information                                                                             |     
|    
|1.   | Legal Proceedings                                                                                       | 36  
|    
|2.   | Unregistered Sales of Equity Securities and Use of Proceeds                                             | 36  
|    
|6.   | Exhibits                                                                                                | 37  
|    
|     | Signature                                                                                               | 38  

2

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# CAUTIONARY STATEMENTS

# Forward-Looking
Statements

Management may from time-to-time make
written or oral forward-looking statements with respect to the Companys annual or
long-term goals, including statements contained in this Quarterly Report on
Form 10-Q, the Annual Report on Form 10-K for the fiscal year ended
April 1, 2005, Reports on Form 8-K, and reports to shareholders. These
statements are subject to risks and uncertainties that could cause actual results to
differ materially from historical earnings and those currently anticipated or projected.
Management cautions readers not to place undue reliance on any of the Companys
forward-looking statements, which speak only as of the date made.

Words such as
anticipates, expects, intends, plans,
believes, seeks, estimates, may,
could, and similar expressions identify forward-looking statements.
Forward-looking statements contained in this Quarterly Report on Form 10-Q that
involve risks and uncertainties include, without limitation:

- the Company's consideration of whether to elect to settle the principal amount of its
convertible senior notes in cash;
- the Company's intent to vigorously defend against the claims from the securities class action
lawsuit which is described in Note 7, Commitments and Contingencies;
- management's belief that the ultimate outcome of the various other legal and administrative
proceedings and claims that have arisen in the normal course of business will not have a material
adverse effect on the Company's business, financial condition or results of operations;
- management's belief that the elder care market is expected to continue benefiting from the
increasing growth rate of the elderly U.S. population and the expansion of provider care into the
patient's home;
- management's belief that the physician market is expected to continue benefiting from the shift
of procedures and diagnostic testing in hospitals to alternate sites, particularly physician
offices;
- management's belief that the additional funding under the Medicare and Medicaid programs during
2000 through 2004, or "add-on" reimbursement payments for providers of skilled nursing and
long-term care services, have positively impacted the financial strength of companies providing
these services;
- management's belief that nursing home divestitures within the Elder Care Business may continue
to impact fiscal year 2006 as large, national chain customers may continue to divest facilities
located in states with high malpractice claims, insurance costs, and litigation exposure;
- management's belief that voluntary or involuntary changes in control of national chain
customers may impact net sales in future periods where the acquirer of an existing customer may not
have a previous relationship with the Company;
- management's expectation that gross profit as a percentage of net sales may decrease in future
periods due to an expected increased sales volume of pharmaceutical products and diagnostic
equipment in the Physician Business, which generate lower gross profit margins;
- management's expectation that gross profit as a percentage of net sales may increase in future
periods as a result of growth in ancillary billing services in the Elder Care Business;


3
- management's belief that the Company's global sourcing strategy is expected to improve its cost
competitiveness and increase its gross margins on certain products.
- management's anticipation that rising fuel costs may negatively impact both the Physician
Business' and the Elder Care Business' cost to deliver or expected improvements in cost to deliver
during the remainder of fiscal year 2006;
- management's belief that the Congressional Joint Committee on Taxation will uphold and approve
the agreed-upon settlement with the Appeals Office of the Internal Revenue Service;
- management's expectation that the results of the Internal Revenue Service audit of the Federal
income tax returns for fiscal years 2002 and 2003 will not have a material impact on the financial
condition or consolidated results of operations;
- management's expectation that the remaining net operating loss generated as a result of the
sale of the Imaging Business will be applied against regular taxable income during fiscal year
2006;
- management's expectation that the overall growth in the business will be funded through a
combination of cash flows from operating activities, borrowings under the revolving line of credit,
capital markets, and/or other financing arrangements; and
- management's belief that the Company may seek to retire its outstanding equity through cash
purchases and/or reduce its debt and may also seek to issue additional debt or equity to meet its
future liquidity requirements.

In connection with the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995,
management is identifying important factors that could affect the Companys financial
performance and could cause actual results for future periods to differ materially from
any opinions or statements expressed with respect to future periods in any current
statements. The Companys future results could be adversely affected by a variety of
factors, including:

- pricing and customer credit-quality pressures due to reduced spending budgets by healthcare
              providers;
- government legislation or changes in government regulations that reduce Medicare and Medicaid
            reimbursement rates and have an adverse impact on the Company's customers and potential customers in
            the elder care industry, or the Company's ancillary billing services company;
- the Company's dependence on sophisticated data processing systems that may impair business
            operations if they fail to operate properly or not as anticipated;
- competitive pricing pressures related to the Company's sales to large nursing home chains and
            consolidating provider groups;
- the loss of any significant distributorship agreements, the renegotiation of terms and
            conditions of existing agreements, and the Company's reliance on current relationships with
            vendors;
- maintaining good relations with employees including over 800 sales professionals;
- the concentration of revenues among a limited number of customers in the Elder Care Business
            and the loss of a significant customer;
- the Company's level of indebtedness, which may limit its ability to obtain financing in the
            future and may limit flexibility to react to market conditions;


4
- the potential interest and penalty exposure related to existing and future Internal Revenue
            Service audits;
- litigation and liability exposure for existing and potential claims;
- the Company's failure to execute its business plan and strategies for growth;
- the adoption of new accounting pronouncements or Securities and Exchange Commission rules and
            regulations, including the proposed amendment to Statement of Financial Accounting Standards
            No. 128, Earnings Per Share;
- the ongoing costs of complying with the provisions of Section 404 of the Sarbanes-Oxley Act;
- the Company's failure to comply with Federal and state regulations pertaining to filing claims
            for health care reimbursement or changes in the interpretation of those requirements;
- the Company's inability to obtain certain medical supplies and pharmaceuticals due to vendor
            supply disruptions, including influenza vaccines;
- operational disruptions due to natural disasters, particularly in regions susceptible to
            hurricanes;
- the potential impact of foreign currency revaluation; and
- the potential for a change in a state's legal system that would impact the enforceability of
              the non-solicitation covenants.

In addition, all forward-looking
statements are qualified by and should be read in conjunction with the risks described or
referred to in Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations, under the heading Risk Factors
of the Annual Report on Form 10-K for the fiscal year ended April 1, 2005.

5

---

# PART I 
FINANCIAL INFORMATION ITEM 1.  FINANCIAL
STATEMENTS

# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES CONSOLIDATED BALANCE
SHEETS JULY 1, 2005 AND APRIL 1, 2005 (Dollars in Thousands,
Except Share Data)

# ASSETS

|                                                                                     | July 1, 2005 | April 1, 2005
|------------------------------------------------------------------------------------ | ------------ | -------------
|
|Current Assets:                                                                      |              |              
|Cash and cash equivalents                                                            |              |              
|Accounts receivable, net of allowance for doubtful accounts of $11,434 and $9,605    |              |              
|as of July 1, 2005 and April 1, 2005, respectively                                   |              |              
|Inventories                                                                          |              |              
|Employee advances                                                                    |              |              
|Deferred tax assets, net                                                             |              |              
|Prepaid expenses and other                                                           |              |              
|                                                                                     |              |              
|Total current assets                                                                 |              |              
|                                                                                     |              |              
|Property and equipment, net of accumulated depreciation of $46,305 and $43,398 as of |              |              
|July 1, 2005 and April 1, 2005, respectively                                         |              |              
|Other Assets:                                                                        |              |              
|Goodwill                                                                             |              |              
|Intangibles, net                                                                     |              |              
|Deferred tax assets, net                                                             |              |              
|Other                                                                                |              |              
|                                                                                     |              |              
|Total assets                                                                         |              |              
|                                                                                     |              |              
|LIABILITIES AND SHAREHOLDERS' EQUITY                                                 |              |              
|Current Liabilities:                                                                 |              |              
|Accounts payable                                                                     |              |              
|Accrued expenses                                                                     |              |              
|Revolving line of credit and current portion of long-term debt                       |              |              
|Other                                                                                |              |              
|                                                                                     |              |              
|Total current liabilities                                                            |              |              
|                                                                                     |              |              
|Long-term debt, excluding current portion                                            |              |              
|Other noncurrent liabilities                                                         |              |              
|                                                                                     |              |              
|Total liabilities                                                                    |              |              
|                                                                                     |              |              
|Commitments and contingencies (Notes 1, 4, 5, and 7)                                 |              |              
|Shareholders' Equity:                                                                |              |              
|Preferred stock, $.01 par value; 1,000,000 shares authorized, no shares issued       |              |              
|and outstanding                                                                      |              |              
|Common stock, $.01 par value; 150,000,000 shares authorized, 65,265,311 and          |              |              
|64,961,682 shares issued and outstanding at July 1, 2005 and April 1, 2005,          |              |              
|respectively                                                                         |              |              
|Additional paid-in capital                                                           |              |              
|Accumulated deficit                                                                  |              |              
|Unearned compensation                                                                |              |              
|Accumulated other comprehensive income                                               |              |              
|                                                                                     |              |              
|Total shareholders' equity                                                           |              |              
|                                                                                     |              |              
|Total liabilities and shareholders' equity                                           |              |              
|                                                                                     |              |              

The accompanying notes
are an integral part of these consolidated statements.

6

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# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES

# CONSOLIDATED
STATEMENTS OF OPERATIONS

# FOR THE THREE MONTHS
ENDED JULY 1, 2005 AND JUNE 30, 2004

# (UNAUDITED)

# (Dollars in Thousands, Except
Per Share Data)

|                                                                                | Three Months Ended
|------------------------------------------------------------------------------- | ------------------
|
|Net sales                                                                       |                   
|Cost of goods sold                                                              |                   
|                                                                                |                   
|Gross profit                                                                    |                   
|General and administrative expenses                                             |                   
|Selling expenses                                                                |                   
|                                                                                |                   
|Income from operations                                                          |                   
|                                                                                |                   
|Other (expense) income:                                                         |                   
|Interest expense                                                                |                   
|Interest and investment income                                                  |                   
|Other income                                                                    |                   
|                                                                                |                   
|Other (expense) income                                                          |                   
|                                                                                |                   
|Income from continuing operations before provision for income taxes             |                   
|Provision for income taxes                                                      |                   
|                                                                                |                   
|Income from continuing operations                                               |                   
|Loss on disposal of discontinued operations (net of benefit for income taxes of |                   
|$1,042)                                                                         |                   
|                                                                                |                   
|Net income                                                                      |                   
|                                                                                |                   
|Earnings (loss) per share - Basic:                                              |                   
|Income from continuing operations                                               |                   
|Loss on disposal of discontinued operations                                     |                   
|                                                                                |                   
|Net income                                                                      |                   
|                                                                                |                   
|Earnings (loss) per share - Diluted:                                            |                   
|Income from continuing operations                                               |                   
|Loss on disposal of discontinued operations                                     |                   
|                                                                                |                   
|Net income                                                                      |                   
|                                                                                |                   

The accompanying notes
are an integral part of these consolidated statements.

7

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# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS
ENDED JULY 1, 2005 AND JUNE 30, 2004 (UNAUDITED) (Dollars in Thousands, Except
Per Share Data)

|                                                                                  | Three Months Ended
|--------------------------------------------------------------------------------- | ------------------
|
|Cash Flows From Operating Activities:                                             |                   
|Net income                                                                        |                   
|Adjustments to reconcile net income to net cash provided by operating activities: |                   
|Loss on disposal of discontinued operations                                       |                   
|Provision for deferred income taxes                                               |                   
|Depreciation                                                                      |                   
|Provision for doubtful accounts                                                   |                   
|Amortization of intangible assets                                                 |                   
|Provision for deferred compensation                                               |                   
|Amortization of debt issuance costs                                               |                   
|Noncash compensation expense                                                      |                   
|Loss on sales of property and equipment                                           |                   
|Provision for note receivables                                                    |                   
|Other                                                                             |                   
|Changes in operating assets and liabilities:                                      |                   
|Accounts receivable                                                               |                   
|Inventories                                                                       |                   
|Prepaid expenses and other current assets                                         |                   
|Other assets                                                                      |                   
|Accounts payable                                                                  |                   
|Accrued expenses and other liabilities                                            |                   
|                                                                                  |                   
|Net cash provided by operating activities                                         |                   
|                                                                                  |                   
|Cash Flows From Investing Activities:                                             |                   
|Capital expenditures                                                              |                   
|Payment for business combination                                                  |                   
|Payments on nonsolicitation agreements                                            |                   
|Payments on noncompetition agreements                                             |                   
|Proceeds from sales of property and equipment                                     |                   
|Payment of transaction costs for sale of Imaging Business                         |                   
|                                                                                  |                   
|Net cash used in investing activities                                             |                   
|                                                                                  |                   
|Cash Flows From Financing Activities:                                             |                   
|Proceeds from issuance of common stock                                            |                   
|Net proceeds under the revolving line of credit                                   |                   
|Payments under capital lease obligations                                          |                   
|Purchase of treasury shares                                                       |                   
|                                                                                  |                   
|Net cash provided by (used in) financing activities                               |                   
|                                                                                  |                   
|Net increase in cash and cash equivalents                                         |                   
|Cash and cash equivalents, beginning of period                                    |                   
|                                                                                  |                   
|Cash and cash equivalents, end of period                                          |                   
|                                                                                  |                   
|Supplemental disclosures:                                                         |                   
|Cash paid for:                                                                    |                   
|Interest                                                                          |                   
|Income taxes, net                                                                 |                   

The accompanying notes
are an integral part of these consolidated statements.

8

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# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# JULY 1, 2005 AND JUNE 30,
2004

# (UNAUDITED)

# (Dollars in Thousands,
Except Share and Per Share Data, Unless Otherwise Noted)

# 1.   BACKGROUND AND BASIS
OF PRESENTATION

# Nature of Operations

PSS World Medical, Inc. (the Company or
PSSI), a Florida corporation which began operations in 1983, is a specialty
marketer and distributor of medical products, equipment, and pharmaceutical related
products to alternate-site healthcare providers including physician offices, long-term
care facilities, and home care providers through 41 full-service distribution
centers and 3 redistribution facilities that are shared between the Physician and
Elder Care Businesses, which serve all 50 states throughout the United States of America (U.S.).
The Company currently conducts business through two operating segments, the Physician
Business and the Elder Care Business. These strategic segments serve a diverse customer
base. A third reporting segment, titled Corporate Shared Services, includes allocated and
unallocated costs of corporate departments that provide services to the operating
segments.

The Physician Business, or the
Physician Sales & Service division, is a leading distributor of medical
supplies, diagnostic equipment, and pharmaceutical related products to primary care
office-based physicians in the U.S. The Physician Business currently operates 29 full-service
distribution centers, 26 break-freight locations, and 1 redistribution facility
serving physician offices in all 50 states.

The Elder Care Business, or the Gulf
South Medical Supply, Inc. subsidiary, is a leading national distributor of medical
supplies and related products to the long-term and elder care industry in the U.S. The Elder Care Business
also offers Medicare Part B billing services on a fee for service or a full assignment basis
and provides products reimbursable under Medicare Part B. The Elder Care Business
currently operates 12 full-service distribution centers, 5 break-freight
locations, and 2 ancillary billing service centers serving independent, regional,
and national skilled nursing facilities, assisted living centers, and home care providers
in all 50 states.

Historically, the Company conducted
business under a third operating segment, the Imaging Business. On November 18,
2002, the Company completed the sale of the Imaging Business, or the Diagnostic Imaging,
Inc. subsidiary (DI), a distributor of medical diagnostic imaging supplies,
chemicals, equipment, and services to the acute and alternate-care markets in the U.S.
Refer to Note 10, Discontinued Operations,for a further discussion.

# Basis of Presentation

The accompanying unaudited
consolidated financial statements have been prepared in accordance with the rules and
regulations of the United States Securities and Exchange Commission (the SEC).
Accordingly, certain information and footnote disclosures normally included in financial
statements prepared in accordance with U.S. generally accepted accounting principles (GAAP)
have been omitted pursuant to the SEC rules and regulations. The consolidated financial
statements reflect, in the opinion of management, all adjustments necessary to present
fairly the financial position and results of operations for the periods indicated.

The accompanying consolidated
financial statements have been prepared in accordance with GAAP and include the
consolidated accounts of PSS World Medical, Inc., its wholly owned subsidiaries, and a
variable interest entity. Variable Interest Entities (VIEs), as defined by
the Financial Accounting Standards Board (FASB) Interpretation No. 46
(Revised 2003), Consolidation of Variable Interest Entities-an Interpretationof
Accounting Research Bulletin No. 51, are entities in which equity investors do
not have the characteristics of a controlling financial interest or there is
not sufficient equity at risk for the entity to finance its activities without additional
subordinated financial support. VIEs are consolidated by the Company when it is
determined that it will, as the primary beneficiary, absorb the majority of the VIEs
expected losses and/or expected residual returns. All significant intercompany balances
and transactions have been eliminated in consolidation.

9

---

The consolidated balance sheet as of
April 1, 2005 has been derived from the Companys audited consolidated
financial statements for the fiscal year ended April 1, 2005. The financial
statements and related notes included in this report should be read in conjunction with
the Companys Annual Report on Form 10-K for the fiscal year ended April 1,
2005.

The Company reports its year-end
financial position, results of operations, and cash flows on the Friday closest to March 31.
Fiscal years 2006 and 2005 consist of 52 weeks or 253 selling days. The Company
reports its quarter-end financial position, results of operations, and cash flows on the
Friday closest to month-end for those quarters in which physical inventories are taken
and on the calendar month-end for those quarters in which physical inventories are not
taken. During fiscal year 2006, physical inventories will be conducted on a quarterly
basis. The three months ended July 1, 2005 and June 30, 2004 consisted of 64
and 62 selling days, respectively.

The results of operations for the
interim periods covered by this report may not be indicative of operating results for the
full fiscal year or any other interim periods.

# Stock Repurchase Program

On June 8, 2004, the Companys
Board of Directors approved a stock repurchase program authorizing the Company, depending
upon market conditions and other factors, to repurchase up to a maximum of 5% of its
common stock, or approximately 3.2 million common shares, in the open market, in
privately negotiated transactions, or otherwise. During the three months ended June 30,
2004, the Company repurchased approximately 0.3 million shares of common stock under
this program at an average price of $10.74 per common share. During the three months
ended October 1, 2004, the Company repurchased approximately 0.7 million shares
of common stock under this program at an average price of $9.59 per common share. At July 1,
2005, approximately 2.2 million shares were available to repurchase under this
program.

# Statements of Cash
Flows

The Companys noncash
operating, investing, and financing activities during the three months ended July 1,
2005 and June 30, 2004 were as follows:

|                                           | Three Months Ended
|------------------------------------------ | ------------------
|
|Operating Activities:                      |                   
|Tax benefits related to stock option plans |                   
|Investing Activities:                      |                   
|Business combinations:                     |                   
|Fair value of assets acquired              |                   
|Liabilities assumed                        |                   
|Capital lease assets                       |                   
|Financing Activities:                      |                   
|Capital lease obligation                   |                   

# Recent Accounting
Pronouncements

In October 2004, the EITF issued its
consensus opinion on EITF Issue No. 04-8, The Effect of Contingently      Convertible
Debt on Diluted Earnings Per Share (EITF 04-8).  EITF 04-8 requires that contingently
     convertible debt instruments with embedded conversion features that are contingent
upon market price      triggers be included in diluted earnings per share computations,
if dilutive, regardless of whether the      contingency has been met.  The provisions of
EITF 04-08 were effective for the quarterly period ended      December 31, 2004.  If the
Companys stock price reaches $17.10, the dilutive effect of the Companys $150 million
2.25% convertible senior notes, which have an embedded conversion feature that is
contingent      upon a market price trigger, would be required to be reflected in diluted
earnings per share by application      of the treasury stock method.  By application of
the treasury stock method, a range of approximately 0 to      1.5 million shares (at a
stock price range of $17.10 (conversion price) to $20.51(market price trigger))
     would be included in the weighted average common shares outstanding used in
computing diluted earnings per      share due to the Companys stated policy to settle
the principal amount of the convertible senior notes in      cash.  (Refer to Earnings
Per Share above for a related discussion.)  However, the diluted earnings per      share
calculation may be further

10

---

impacted if the Proposed Statement of Financial Accounting
Standards,  Earnings Per Share, an amendment of FASB Statement No. 128 (SFAS 128(R))
becomes effective.  SFAS 128(R)      eliminates the provisions of SFAS No. 128, Earnings
Per Share that allows an entity to rebut the presumption      that contracts with the
option of settling in either cash or stock will be settled in stock.  Therefore,      SFAS 128(R)
may eliminate the Companys ability to use a stated policy to settle the principal amount
of the      Companys convertible senior notes in cash.  IfSFAS 128(R) becomes effective, the
number of diluted      weighted average shares outstanding will include approximately 8.8
million shares and earnings used to      calculate diluted earnings per share would
increase approximately $2.7 million (after tax) annually for the      interest expense on
the convertible senior notes.  The Company may elect to settle the principal amount of
     its convertible senior notes in cash in accordance with the terms of the indenture.
 If such election is      made, a range of approximately 0 to 1.5 million shares (at a
stock price of $17.10 (conversion price) to      $20.51(market price trigger)) will be
included in the weighted average common shares outstanding used in      computing diluted
earnings per share in accordance with the provisions of EITF 04-08.

# 2.   EARNINGS PER SHARE

Basic and diluted earnings per share
are presented in accordance with Statement of Financial Accounting Standards (SFAS)
No. 128, Earnings Per Share. Basic earnings per share is computed by dividing
net income by the weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed by dividing net income by the weighted average
number of common and common equivalent shares outstanding during the year adjusted for
the potential dilutive effect of stock options and restricted stock using the treasury stock method and the
conversion of the convertible senior notes if the conditions that would permit conversion
have been satisfied. Common equivalent shares are excluded from the computation in
periods in which they have an antidilutive effect.

The following table sets forth basic
and diluted earnings per share computational data for the three months ended July 1,
2005 and June 30, 2004 (share amounts in thousands, except per share data):

|                                            | Three Months Ended
|------------------------------------------- | ------------------
|
|Income from continuing operations           |                   
|Loss on disposal of discontinued operations |                   
|                                            |                   
|Net income                                  |                   
|                                            |                   
|Earnings (loss) per share - Basic:          |                   
|Income from continuing operations           |                   
|Loss on disposal of discontinued operations |                   
|                                            |                   
|Net income                                  |                   
|                                            |                   
|Earnings (loss) per share  Diluted:(a):    |                   
|Income from continuing operations           |                   
|Loss on disposal of discontinued operations |                   
|                                            |                   
|Net income                                  |                   
|                                            |                   
|Weighted average shares outstanding:        |                   
|Common shares                               |                   
|Assumed exercise of stock options (b)       |                   
|Assumed vesting of restricted stock         |                   
|                                            |                   
|Diluted shares outstanding                  |                   
|                                            |                   

11

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| | (a) | The
effect of the assumed conversion of the $150 million convertible senior
          notes, which were issued in March 2004, has been excluded from diluted
          earnings per share for the three months ended July 1, 2005 and
          June 30, 2004, because none of the conditions that would permit conversion
          were satisfied during the period and the Companys stock price did not
          reach the applicable conversion price of $17.10. The Companys stated
          policy is to satisfy the Companys obligation upon a conversion of the
          notes first, in cash, in an amount equal to the principal amount of the notes
          converted and second, in shares of the Companys common stock, to satisfy
          the remainder, if any, of the Companys conversion obligation. If the
          Companys stock price reaches $17.10, the dilutive effect of the
          convertible notes will be reflected in diluted earnings per share by
application           of the treasury stock method. By application of the treasury stock
method, a           range of approximately 0 to 1.5 million shares (at a stock price
range of           $17.10 (conversion price) to $20.51(market price trigger)) will be
included in           the weighted average common shares outstanding used in computing
diluted           earnings per share because of the Companys stated policy to
settle the           principal amount of the convertible senior notes in cash.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Options
to purchase approximately 1,617 and 1,802 shares of common stock that           were
outstanding during the three months ended July 1, 2005 and           June 30,
2004, respectively, were not included in the computation of           diluted earnings
per share for each of the respective periods because the           options exercise
prices exceeded the fair market value of the           Companys common stock.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# 3.  COMPREHENSIVE INCOME

Comprehensive income represents all
changes in equity of an enterprise that result from recognized transactions and other
economic events during the period. Other comprehensive income (loss) refers to revenues,
expenses, gains, and losses that under GAAP are included in comprehensive income but
excluded from net income, such as the unrealized gain or loss on the interest rate swap.
(Refer to Note 5, Debt, for a related discussion on the interest rate swap.)
The following table details the components of comprehensive income for the periods
presented.

|                                                     | Three Months Ended
|---------------------------------------------------- | ------------------
|
|Net income                                           |                   
|                                                     |                   
|Other comprehensive (loss) income:                   |                   
|Unrealized (loss) gain on interest rate swap, net of |                   
|tax                                                  |                   
|                                                     |                   
|Comprehensive income                                 |                   
|                                                     |                   

# 4.   STOCK-BASED COMPENSATION

There are two categories of
stock-based awards: restricted stock and stock options. Stock-based awards are accounted
for using the intrinsic-value recognition and measurement principles of Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees(APB 25), and related interpretations. The intrinsic value
method of accounting results in compensation expense to the extent option exercise prices
are set below the current market price of the underlying stock on the date of grant.

Restricted stock is generally
measured at fair value on the date of grant based on the number of shares granted and the
quoted market price of the Companys common stock. Such value is recognized as
expense on a straight-line basis over the vesting period. To the extent restricted stock
is forfeited prior to vesting, the corresponding previously recognized expense is
reversed as a reduction to stock-based compensation expense.

The following table summarizes
relevant information as if the fair value recognition provisions of SFAS No. 123, Accounting
for Stock-Based Compensation(SFAS 123), as amended by SFAS No. 148,
Accounting forStock-Based Compensation-Transition and Disclosure(SFAS 148)
had been applied to all outstanding and unvested stock-based awards in each period.

12

---

|                                                      | Three Months Ended
|----------------------------------------------------- | ------------------
|
|Net income, as reported                               |                   
|Stock-based employee compensation expense included in |                   
|reported net income, net of related tax effects       |                   
|Total stock-based employee compensation expense       |                   
|determined under fair value based method for all      |                   
|awards, net of related tax effects                    |                   
|                                                      |                   
|Pro forma net income                                  |                   
|                                                      |                   
|Earnings per share  Basic:                           |                   
|As reported                                           |                   
|Pro forma                                             |                   
|Earnings per share  Diluted:                         |                   
|As reported                                           |                   
|Pro forma                                             |                   
|                                                      |                   

On June 7, 2004, the
Compensation Committee of the Board of Directors approved an amendment to all outstanding
stock options granted to employees. This amendment accelerated the vesting of all
unvested stock options outstanding as of April 1, 2005, which is prior to the
effective date of SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS 123(R)).
The Company took this action to reduce compensation expense in future periods in light of
SFAS 123(R), which is effective for the Company on April 1, 2006. Under SFAS 123(R),
the Company estimated that a compensation charge of approximately $2,833, net of tax,
would have been recorded in future periods if the vesting of the stock options was not
accelerated. As a result of the acceleration, the Company recognized a contingent
compensation expense equal to the difference between the fair market value of the common
stock on the modification date and the option exercise price for the estimated number of options that, absent the
acceleration, would have expired unexercisable as a result of the termination of the
holders employment prior to the original vesting dates of the options. As of July 1,
2005, the maximum stock-based compensation expense would be approximately $2,547 if all
holders benefited from this amendment with respect to outstanding options. Since June 7,
2004, the date the options were modified, the Company has estimated and recognized
compensation expense of approximately $140 based on its historical option forfeiture
rate. This liability may be adjusted in future periods based on actual experience and
changes in management assumptions. For pro forma disclosure requirements under SFAS 148,
the Company recognized approximately $4,562 of stock-based compensation during fiscal
year 2005 for all options whose vesting was accelerated.

# 5.   DEBT

Debt consists of the following:

|                                         | As of
|---------------------------------------- | -----
|
|2.25% convertible senior notes           |      
|Revolving line of credit                 |      
|Capital lease obligations                |      
|                                         |      
|Total debt                               |      
|Less:  Current portion of long-term debt |      
|                                         |      
|Long-term debt                           |      
|                                         |      

13

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# Revolving
Line of Credit

The Company maintains an asset-based
revolving line of credit by and among the Company, as borrower thereunder (the Borrower),
the subsidiaries of the Company, the lenders from time to time party thereto (the Lenders),
and Bank of America, N.A. (the Bank), as agent for the Lenders (the Credit
Agreement), which permits maximum borrowings of up to $200 million, which may
be increased to $250 million at the Companys discretion, and matures on June 30,
2010. Availability of borrowings (Availability) depends upon a borrowing base
calculation consisting of accounts receivable and inventory, subject to satisfaction of
certain eligibility requirements less any outstanding letters of credit. Borrowings under
the revolving line of credit bear interest at the Banks prime rate plus an
applicable margin based on Availability, or at LIBOR plus an applicable margin based on
Availability. Additionally, the Credit Agreement bears interest at a fixed rate of 0.25%
for any unused portion of the facility. Under the Credit Agreement, the Company and its
subsidiaries are subject to certain covenants, including but not limited to, limitations
on (i) paying dividends and repurchasing stock, (ii) selling or transferring
assets, (iii) making certain investments including acquisitions, (iv) incurring
additional indebtedness and liens, and (v) annual capital expenditures. However, as
a result of the Sixth Amendment, which is discussed below, these covenants may not apply
if the Company maintains sufficient Availability under the credit facility. Borrowings
under the revolving line of credit are anticipated to fund future requirements for
working capital, capital expenditures, acquisitions, and the issuance of letters of
credit. Although the Credit Agreement expires on June 30, 2010, the revolving line
of credit is classified as a current liability in accordance with Emerging Issues Task
Force No. 95-22, Balance Sheet Classification of Borrowings Outstanding under
Revolving CreditAgreements That Include both a Subjective Acceleration Clause and
a Lock-Box Arrangement.The Company is not obligated to repay or refinance amounts
outstanding under the revolving line of credit until June 30, 2010.

As of July 1, 2005, the Company
had sufficient assets based on eligible accounts receivable and inventory to borrow up to
$174.8 million (excluding the additional increase of $50 million) under the
revolving line of credit and had outstanding borrowings of $25,182 and outstanding
letters of credit in the amount of $156. The average daily interest rate, excluding debt
issuance costs and unused line fees, for the three months ended July 1, 2005 and June 30,
2004 was 4.25% and 4.23%, respectively.

From time-to-time, the Company has
amended the Credit Agreement to meet specific business objectives and requirements. The
Credit Agreement, originally dated May 20, 2003, was amended on July 1, 2004.  This amendment
(i) extended the term of the agreement to June 30, 2010,
(ii) created a feature to expand and increase the maximum borrowings to $250 million at the discretion
of the Company, (iii) increased the advance rates for accounts receivable and inventory, (iv) eased
the covenant restrictions described above when excess Availability is greater than $50 million,
(v) implemented a fixed charge coverage ratio covenant when Availability is less than $40 million,
(vi) set the determination of applicable margin level for Base Rate loans and LIBOR loans to
Availability rather than a funded debt to earnings before interest, taxes, depreciation and
amortization ratio, (vii) reduced the unused line fee from 0.375 % to 0.25%, and (viii) increased the
letter of credit sub-facility from $15 million to $20 million.

During fiscal year 2004, the Company
entered into an interest rate swap agreement to hedge the variable interest rate of its
revolving line of credit. Under the terms of the interest rate swap agreement, the
Company makes payments based on the fixed rate and will receive interest payments based
on 1-month LIBOR. The changes in market value of this financial instrument are highly
correlated with changes in market value of the hedged item both at inception and over the
life of the agreement. Amounts received or paid under the interest rate swap agreement
are recorded as reductions or additions to interest expense. In accordance with SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,SFAS No. 138,
Accountingfor Certain Derivative Instruments and Certain Hedging Activities,
an amendment of FASB Statement No. 133, and SFAS No. 149,Amendment
of Statement 133 on Derivative Instruments and Hedging Activities, the Companys
interest rate swap agreement has been designated as a cash flow hedge with changes in
fair value recognized in accumulated other comprehensive income in the accompanying
consolidated balance sheets.

On July 19, 2004, the Company
elected to reduce the notional amount of the interest rate swap from $35 million to
$25 million. As of July 1, 2005, the swap carries a notional principal amount
of $25 million and effectively fixes the interest rate on a portion of the revolving
line of credit to 2.195%, prior to applying the applicable margin discussed above. The
swap agreement expires on March 28, 2006 and settles monthly until expiration.
During the three months ended July 1, 2005 and June 30, 2004, the Company
recorded an unrealized (loss) gain, net of related tax effects, for the estimated fair
value of the swap agreement in accumulated other comprehensive income of ($45) and $289,
respectively.

14

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# Capital Lease
Obligations

| | The
Company leases various equipment under thirty-nine month leases at an aggregate annual
rental of approximately $564. The equipment has been capitalized at its fair market value
of $1,672, which approximates the present value of the minimum lease payments. The
following table is schedule by year of future minimum lease payments under capital leases,
together with the present value of the net minimum lease payments as of July 1, 2005.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | 
|------------------------------------------- | 
|Fiscal Year:                                | 
|2006 (remaining 9 months)                   | 
|2007                                        | 
|2008                                        | 
|2009                                        | 
|                                            | 
|Total minimum lease payments                | 
|Less:  amount representing interest         | 
|                                            | 
|Present value of net minimum lease payments | 
|                                            | 

# 6. SEGMENT INFORMATION

The Companys reportable
segments are strategic businesses that offer different products to different segments of
the healthcare industry, and are the basis on which management regularly evaluates the
Company. These segments are managed separately because of different customers and
products. See Note 1, Backgroundand Basis of Presentation, for
descriptive information about the Companys operating segments. The Company
primarily evaluates the operating performance of its segments based on net sales and
income from operations. Corporate Shared Services allocates amounts to the two operating
segments for general corporate overhead costs and intercompany interest expense. The
corporate overhead allocation is generally proportional to the revenues of each operating
segment. Intercompany interest is allocated based on (i) an internally calculated
carrying value of historical capital used to acquire or develop the operating segments operations
and (ii) budgeted operating cash flow. The following table presents financial
information about the Companys business segments:

15

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|                                        | Three Months Ended
|--------------------------------------- | ------------------
|
|NET SALES:                              |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|                                        |                   
|Total net sales                         |                   
|                                        |                   
|NET SALES BY TYPE:                      |                   
|Consumable products                     |                   
|Pharmaceutical products                 |                   
|Equipment                               |                   
|Billing services                        |                   
|Customer freight charges                |                   
|Vendor incentive income                 |                   
|                                        |                   
|Total net sales by product type         |                   
|                                        |                   
|INCOME FROM OPERATIONS:                 |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total income from operations            |                   
|                                        |                   
|DEPRECIATION:                           |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total depreciation                      |                   
|                                        |                   
|AMORTIZATION OF INTANGIBLE ASSETS:      |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total amortization of intangible assets |                   
|                                        |                   
|PROVISION FOR DOUBTFUL ACCOUNTS:        |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|                                        |                   
|Total provision for doubtful accounts   |                   
|                                        |                   
|INTEREST EXPENSE:                       |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total interest expense                  |                   
|                                        |                   

16

---

|                                 | Three Months Ended
|-------------------------------- | ------------------
|
|PROVISION FOR INCOME TAXES:      |                   
|Physician Business               |                   
|Elder Care Business              |                   
|Corporate Shared Services        |                   
|                                 |                   
|Total provision for income taxes |                   
|                                 |                   
|CAPITAL EXPENDITURES:            |                   
|Physician Business               |                   
|Elder Care Business              |                   
|Corporate Shared Services        |                   
|                                 |                   
|Total capital expenditures       |                   
|                                 |                   

|                          | As of
|------------------------- | -----
|
|ASSETS:                   |      
|Physician Business        |      
|Elder Care Business       |      
|Corporate Shared Services |      
|                          |      
|Total assets              |      
|                          |      

# 7.   COMMITMENTS AND
CONTINGENCIES

# Litigation

The Company and certain of its
current and former officers and directors are named as defendants in a securities class
action lawsuit entitled Jack Hirsch v. PSS World Medical, Inc., et al., Civil
Action No. 3:98-CV 502-J-32TEM. The action, which was filed in May 1998, is
pending in the United States District Court for the Middle District of Florida,
Jacksonville Division. The plaintiff initially alleged, for himself and for a purported
class of similarly situated stockholders who purchased the Companys stock between
December 23, 1997 and May 8, 1998 that the defendants engaged in violations of
certain provisions of the Securities Exchange Act, and Rule 10b-5 promulgated
thereunder. The allegations reference a decline in the Companys stock price
following an announcement by the Company in May 1998 regarding the Gulf South
Medical Supply, Inc. merger, which resulted in earnings below analysts expectations.
In December 2002, the Court granted the Companys motion to dismiss the
plaintiffs second amended complaint with prejudice with respect to the Section
10(b) claims. The plaintiffs filed their third amended complaint in January 2003
alleging claims under Sections 14(a) and 20(a) of the Exchange Act on behalf of a
putative class of all persons who were shareholders of the Company as of March 26,
1998. In May 2003, the Court denied the defendants motion to dismiss. By order
dated February 18, 2004, the Court granted plaintiffs motion for class
certification. Court ordered mediation occurred on June 10, 2004 and April 6,
2005, during which the parties were not able to resolve their dispute. The parties all
served motions for summary judgment and motions in limine to strike the opposing experts
on May 11, 2005. Additional motions in limine to strike the defendants
rebuttal experts were served on July 6, 2005. All of these motions are currently
pending and the case is set for trial in November 2005. The Company intends to
vigorously defend the proceedings; however, there can be no assurance that this
litigation will be ultimately resolved on terms that are favorable to the Company. Based
on recent developments, managements estimate of the potential range of uninsured
loss increased to $2,600 to $5,300. Changes to facts and assumptions and other developments in this matter in future periods,
may result in adjustments that will increase or decrease the accrual for the estimated range of loss.

The Company is also a party to
various other legal and administrative proceedings and claims arising in the normal
course of business. While any litigation contains an element of uncertainty, the Company,
after consultation with outside legal counsel, believes that the outcome of such other
proceedings or claims which are pending or known to be threatened will not have a
material adverse effect on the Companys consolidated financial position, liquidity,
or results of operations.

17

---

The Company has various insurance
policies, including product liability insurance, covering risks and in amounts it
considers adequate. In many cases in which the Company has been sued in connection with
products manufactured by others, the Company is provided indemnification by the
manufacturer. There can be no assurance that the insurance coverage maintained by the
Company is sufficient or will be available in adequate amounts or at a reasonable cost,
or that indemnification agreements will provide adequate protection for the Company.

# Commitments and Other
Contingencies

The Company has employment
agreements with certain executive officers which provide that in the event of their
termination or resignation, under certain conditions, the Company may be required to pay
severance to the executive officers in amounts ranging from one-fourth to two times their
base salary and target annual bonus. In the event that a termination or resignation
follows or is in connection with a change in control, the Company may be required to pay
severance to the executive officers in amounts ranging from three-fourths to three times
their base salary and target annual bonus. The Company may also be required to continue
welfare benefit plan coverage for the executive officers following a termination or
resignation for a period ranging from three months to three years.

If the Physician Business or the
Elder Care Business were to terminate a contract with a private label vendor for any
reason, the Company may be required to purchase the remaining inventory of private label
products from the vendor, provided that, in no event would the Company be required to
purchase quantities of such products which exceed the aggregate amount of such products
ordered by the Company in the ninety day period immediately preceding the date of
termination. As of July 1, 2005, the Company has not terminated any contracts with a
private label vendor that had a material impact to the Companys results of
operations and financial condition.

# 8.   PURCHASE BUSINESS
COMBINATION

On October 7, 2004, the Elder Care
Business acquired certain assets and assumed certain liabilities of a long-term care
medical supply distributor and ancillary billing service provider. The aggregate purchase
price, which was subject to certain adjustments as set forth in the purchase agreement,
was approximately $26,887 (net of cash acquired) of which approximately $22,682 was paid
during fiscal year 2005. A cash payment of $4,148, which primarily related to meeting the
minimum revenue thresholds, was made during the three months ended July 1, 2005. The
remaining purchase price of $57 will be paid during the three months ended September 30,
2005.

# 9.   NOTES RECEIVABLE

The Company has two notes receivable
(the Loans) outstanding from its former chairman and chief executive officer,
which bear interest at the applicable Federal rate for long-term obligations. One Loan is
unsecured and the other Loan is secured by a split-dollar life insurance policy. During
fiscal year 2003, the Company recorded an allowance for doubtful accounts of $2,939
against the unsecured Loan. On June 30, 2005, the Company received a cash interest
payment of $278 that was due on the unsecured Loan. As of July 1, 2005, there were
no past due principal or interest payments outstanding under the Loans. As part of the
Companys ongoing review of the realization of the Loans, the Company determined
that the allowance for doubtful accounts of $2,939, or $1,825 net of income taxes, was no
longer required for the unsecured loan.

# 10.   DISCONTINUED
OPERATIONS

On September 26, 2002, the
Companys Board of Directors adopted a plan to dispose of the Imaging Business,
reflecting a strategic decision by management to focus the Companys efforts on its
Physician and Elder Care Businesses. Accordingly, the results of operations of the
Imaging Business and the loss on disposal of discontinued operations were classified as
discontinued operations in accordance with SFAS 144. On November 18,
2002, the Company completed the sale of the DI to Imaging Acquisition Corporation (the
Buyer), a wholly owned subsidiary of Platinum Equity, LLC, a private equity
firm (Platinum). The sale was completed pursuant to a Stock Purchase
Agreement, dated as of October 28, 2002, among the Company, the Buyer, and Platinum,
as amended on November 18, 2002 (the Stock Purchase Agreement). Under
the Stock Purchase Agreement, the purchase price was $45,000 less (i) an adjustment
for any change in net asset value from the initial net asset value target date and (ii) an
adjustment for any change in the net cash from the initial net cash target date
(collectively Purchase Price).

18

---

On March 14, 2003, the Company
received a letter from the Buyer claiming a Purchase Price adjustment of $32,257. The
claimed Purchase Price adjustment was based on an accounting of the net asset statement
as of the closing date, which was delivered to the Buyer in January 2003. Pursuant
to the terms of the Stock Purchase Agreement, the matter was referred to an independent
accounting firm of national reputation for arbitration. Subsequent to March 14,
2003, the Buyer provided an adjusted claim to the arbitrator claiming a purchase price
adjustment of $28,222. During the three months ended June 30, 2004, the arbitrator
ruled in favor of the Buyer for a purchase price adjustment of $1,821. As a result of the
final ruling from the arbitrator, the Company paid approximately $4,279 of settlement
costs to the Buyer during fiscal year 2005. During the settlement process, management
estimated the net asset adjustment based on available information and revised its
estimate on a quarterly basis, if needed. The cash proceeds received during fiscal year
2003 were reduced by approximately $10,219 for transaction and settlement costs that were
paid during fiscal years 2005, 2004, and 2003. Approximately $450 of transaction and
settlement costs were paid during the three months ended June 30, 2004.

The pretax loss on disposal of
discontinued operations recorded during the three months ended June 30, 2004
represented (i) a true-up of managements estimated net asset adjustment to the
actual net asset adjustment as indicated in the arbitrators final ruling of $1,821,
(ii) interest of $458, and (iii) legal and professional fees of $471. The loss
on disposal of discontinued operations for the three months ended July 1, 2005 and June 30,
2004 is as follows:

|                                 | Three Months Ended
|-------------------------------- | ------------------
|
|Pretax loss on disposal of       |                   
|discontinued operations          |                   
|Benefit for income taxes         |                   
|                                 |                   
|Loss on disposal of discontinued |                   
|operations                       |                   
|                                 |                   

19

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# Report of Independent
Registered Public Accounting Firm

The Board of Directors
and ShareholdersPSS World Medical, Inc.:

We have reviewed the consolidated
balance sheet of PSS World Medical, Inc. and subsidiaries as of July 1, 2005, the
related consolidated statements of operations and cash flows for the three-month periods
ended July 1, 2005 and June 30, 2004. These consolidated financial statements
are the responsibility of the Companys management.

We conducted our reviews in
accordance with the standards of the Public Company Accounting Oversight Board (United
States). A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with the standards of the Public Company Accounting Oversight Board (United
States), the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not
aware of any material modifications that should be made to the consolidated financial
statements referred to above for them to be in conformity with U.S. generally accepted
accounting principles.

We have previously audited, in
accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheet of PSS World Medical, Inc. and subsidiaries as of
April 1, 2005, and the related consolidated statements of operations,
shareholders equity, and cash flows for the year then ended (not presented herein);
and in our report dated June 8, 2005, we expressed an unqualified opinion on those
consolidated financial statements. Our report referred to the adoption of Emerging Issues
Task Force No. 02-16, Accounting by a Customer (Including a Reseller) for Certain
Consideration Received from a Vendor, effective November 21, 2002. In our
opinion, the information set forth in the accompanying consolidated balance sheet as of
April 1, 2005, is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.

KPMG LLP

Jacksonville, Florida August 4, 2005

20

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# ITEM 2.    MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

# THE COMPANY

PSS World Medical, Inc. (the
Company or PSSI), a Florida corporation which began operations in
1983, is a specialty marketer and distributor of medical products, equipment, and
pharmaceutical related products to alternate-site healthcare providers including physician
offices, long-term care facilities, and home care providers through 41 full-service
distribution centers and 3 redistribution facilities that are shared between the Physician
and Elder Care Businesses, which serve all 50 states throughout the United States of
America. PSSI is a leader in the two market segments it serves as a result of value-added,
solution-based marketing programs, a customer differentiated distribution and service
model, a consultative sales force with extensive product knowledge, unique arrangements
with product manufacturers, innovative information systems, and a culture of performance.
The Company is focused on improving business operations and management processes,
maximizing its core distribution capability and efficiency, and developing and
implementing innovative marketing strategies. In addition, the Company has recently made
several acquisitions to broaden its reach and leverage its infrastructure and may continue
to make acquisitions in the future.

The Company currently conducts
business through two operating segments, the Physician Business and the Elder Care
Business. These strategic segments serve a diverse customer base. Historically, the
Company conducted business under a third operating segment, the Imaging Business. On
November 18, 2002, the Company completed the sale of the Imaging Business, or the
Diagnostic Imaging, Inc. subsidiary (DI), a distributor of medical diagnostic
imaging supplies, chemicals, equipment, and services to the acute and alternate-care
markets in the United States of America.

# THE INDUSTRY

According to industry estimates, the
market size of the medical supply and equipment, home care and office-administered
pharmaceutical segments of the United States (U.S.) healthcare industry is
approximately $45 billion. These market segments consist of medical products, medical
equipment, and pharmaceutical products administered in an out-patient setting, which are
distributed to alternate-site healthcare providers, including physician offices, long-term
care and assisted living facilities, home healthcare providers and agencies, dental
offices, and other alternate-site providers, such as outpatient surgery centers,
podiatrists, and veterinarians. The Companys primary focus is a sub-segment of this
larger market, which is a $26.5 billion market that includes the distribution of
medical products, medical equipment, and office-administered pharmaceutical products to
physician offices, long-term care and assisted living facilities, and home healthcare
providers and equipment dealers.

The medical products distribution
industry continues to experience growth due to the aging population, increased healthcare
awareness, the proliferation of medical technology and testing, new pharmacology
treatments, and expanded third-party insurance coverage. The elder care market is expected
to continue benefiting from the increasing growth rate of the elderly U.S. population and
the expansion of provider care into the patients home. For example, the
January 2000 U.S. Bureau of the Census estimated that the elderly population in the
U.S. will more than double by the year 2040. In 2000, four million Americans age 85 years
and older represented the segment of the population that is in the greatest need of
long-term and elder care services and this segment is projected to more than triple to
over 14 million by the year 2040. The segment of the population who is age 65 to 84
years is projected to more than double in the same time period. The physician market is
expected to continue benefiting from the shift of procedures and diagnostic testing in
hospitals to alternate sites, particularly physician offices. Furthermore, as the cosmetic
surgery and elective procedure markets continue to grow, physicians are increasingly
performing these procedures in their offices. Current estimated growth rates for the
physician and elder care markets are approximately 4.0% and 1.5%, respectively. The
nursing home and homecare segments of the elder care market are growing at estimated rates
ranging from 1% to 2% and 5% to 7%, respectively. As a result of these market dynamics,
annual expenditures for healthcare services continue to increase in the United States. As
cited in The Centers for Medicaid and Medicare Services (CMS), Office of the
Actuary, National Health Statistics Group 2002 study, Trends and Indicators in the
Changing Health Care Marketplace, total national health care spending reached
$1.3 trillion in 2000, or 13.2% of the nations gross domestic product, and was
expected to have reached $1.8 trillion in 2004. Health care spending is projected to
reach $3.4 trillion in 2013, or 18.4% of the estimated gross domestic product. These
statistics are generally released approximately 18 months subsequent to the
measurement period in reports issued by CMS and the Office of the Actuary.

21

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The healthcare industry is subject to
extensive government regulation, licensure, and operating compliance procedures. National
healthcare reform has been the subject of a number of legislative initiatives by Congress.
Additionally, government and private insurance programs fund a significant portion of
medical care costs in the United States. In recent years, Federal and state-imposed limits
on reimbursement to hospitals, long-term care and assisted living facilities, home
healthcare and other healthcare providers have affected spending budgets in certain
markets within the medical products industry. In addition to these changes, the nursing
home and home healthcare industries have been impacted by shifts in operations and
business strategies, facility divestitures of elder care providers as well as overall
general economic conditions over the last few years.

However, management believes that the
additional funding under the Medicare and Medicaid programs during 2000 through 2004, or
add-on reimbursement payments for providers of skilled nursing and long-term
care services, has positively impacted the financial strength of companies providing these
services. The add-on reimbursement payments were scheduled to expire in
September 2005, concurrently with the expected refinement of the Resource Utilization
Groups (RUGs) during October 2005. The RUGs, which commenced as part of
the Balanced Budget Act of 1997 and were further refined under the Balanced Budget
Refinement Act of 1999, are used by CMS to classify skilled nursing facility residents
into Medicare payment groups. In May 2005, the U.S. House of Representatives and
Senate voted to delay the October 2005 expiration of the RUGs and add on
reimbursement payments in phases beginning in January 2006 and extending through
October 2006. In May 2005, CMS also issued its recommendation to refine the RUGs
and expand the number of RUGs from 44 to 53, which included an overall reduction in
reimbursements for elder care providers beginning in October 2005. Additionally, CMS
recommended a 3% market basket increase (inflationary-related increase that is recommended
by CMS and modified, approved or not approved by Congress annually) for all services
administered by skilled nursing and other elder care service providers. The net effect of
these changes in reimbursement as recommended by CMS, and approved by Congress, is
estimated to be essentially neutral or possibly no change in the effective reimbursement
rates for fiscal year 2006 (beginning October 1, 2005). On July 28, 2005, CMS
issued its final reimbursement rates for providers of skilled nursing care, confirming the
May 2005 proposed rates with the addition of one dollar per day in daily average
reimbursement above the May 2005 proposed rates.

The 2006 Federal budget presented for
approval to Congress includes a reduction in funding for Medicaid by $10 billion over
five years, commencing in 2007. Congress also established a Medicaid commission to
recommend changes to modernize the Medicaid program to ensure the reduction in funding
will be achieved over fiscal years 2007 through 2011. It is believed that the majority of
the $10 billion reduction in funding will come from prescription drug pricing, with
indications that the primary source would be realized under the Medicare/Medicaid
prescription drug program. The $10 billion planned reduction represents approximately
3.5% of the estimated $290 billion Medicaid Program annual expenditures in 2004.

22

---

# OPERATING HIGHLIGHTS AND
TRENDS

The following tables set forth
certain financial information by business segment. All dollar amounts presented below are
in thousands unless otherwise indicated.

|                               | Three Months Ended
|------------------------------ | ------------------
|
|Net Sales:                     |                   
|Physician Business             |                   
|Elder Care Business            |                   
|                               |                   
|Total Company                  |                   
|                               |                   
|Net Sales Per Billing Day: (a) |                   
|Physician Business             |                   
|Elder Care Business            |                   
|                               |                   
|Total Company                  |                   
|                               |                   
|Income from Operations:        |                   
|Physician Business             |                   
|Elder Care Business            |                   
|Corporate Shared Services      |                   
|                               |                   
|Total Company                  |                   
|                               |                   

|                             | Annualized
|---------------------------- | ----------
|
|Days Sales Outstanding:(b)   |           
|Physician Business           | 41.6      
|Elder Care Business          | 59.2      
|                            
|Days On Hand:(c)            
|Physician Business           | 45.5      
|Elder Care Business          | 36.1      
|                            
|Days in Accounts Payable:(d)
|Physician Business           | 42.4      
|Elder Care Business          | 24.9      
|                            
|Cash Conversion Days:(e)    
|Physician Business           | 44.7      
|Elder Care Business          | 70.4      
|Inventory Turnover:(f)      
|Physician Business           | 7.9x      
|Elder Care Business          | 10.0      

| | (a) | Net sales per billing
day are net sales divided by the number of selling days in the fiscal quarter.  The three months
ended July 1, 2005 and June 30, 2004 consisted of 64 and 62 days, respectively.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

23

---

| | (b) | Days
sales outstanding (DSO) is average accounts receivable divided
               by average daily net sales. Average accounts receivable is the sum of
accounts                receivable, net of the allowance for doubtful accounts, at the
beginning and end                of the most recent four quarters divided by five.
Average daily net sales are                net sales for the most recent four quarters
divided by 360.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Days
on hand (DOH) is average inventory divided by average daily
               cost of goods sold (COGS). Average inventory is the sum of
inventory                at the beginning and end of the most recent four quarters
divided by five.                Average daily COGS is COGS for the most recent four
quarters divided by 360.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Days
in accounts payable (DIP) is average accounts payable divided
               by average daily COGS. Average accounts payable is the sum of accounts
payable                at the beginning and end of the most recent five quarters divided
by five.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | Cash
conversion days is the sum of DSO and DOH, less DIP.
| | --- | ---------------------------------------------------------

| | (f) | Inventory
turnover is 360 divided by DOH.
| | --- | -----------------------------------------

# THREE MONTHS ENDED
JULY 1, 2005 VERSUS THREE MONTHS ENDED JUNE 30, 2004

# NET SALES

|                    | For the Three Months Ended |  |  
|------------------- | -------------------------- |  | -
|
|Physician Business  |                            |  | $
|Elder Care Business |                            |  |  
|                    |                            |  |  
|Total Company       |                            |  | $
|                    |                            |  |  

The comparability of net sales
quarter over quarter is impacted by the number of selling days in each quarter. The three
months ended July 1, 2005 and June 30, 2004 consisted of 64 and 62 selling days,
respectively. The following table summarizes same day sales results quarter over quarter:

|                    | Net Sales Per Billing Day | 
|------------------- | ------------------------- | 
|
|Physician Business  |                           | 
|Elder Care Business |                           | 
|                    |                           | 
|Total Company       |                           | 
|                    |                           | 

# Physician Business

The increase in net sales is
primarily attributable to (i) an increase in branded consumable product sales of
approximately $16.6 million, (ii) an increase in pharmaceutical product sales
(excluding influenza vaccine sales) of approximately $10.9 million, (iii) an
increase in private label consumable product sales of approximately $3.9 million, and
(iv) an increase in equipment sales of approximately $2.6 million, offset by a
decrease in immunoassay sales of approximately $0.3 million. Net sales continued to
be positively impacted by revenue growth programs that were launched in June 2003 to
increase the sale of consumable products, pharmaceutical products, and equipment. These
programs include:

24

---

- Advantage Club- a customer membership club that enables customers to participate in exclusive
promotions for a broad selection of commonly used products.
- Rx Extreme-a comprehensive program offering pharmaceutical, vaccine and general injectibles
products to new and existing customers. The term "Extreme" symbolizes the Physician Business'
significant commitment to its sales force and customers to become the leading provider of these products
in the physician office market.
- Can-Do-an equipment marketing program that enables customers to access a broad portfolio of
industry-leading laboratory and diagnostic equipment, as well as certain exclusive products available
only through the Physician Business.

The following table compares the
product sales mix quarter over quarter:

|                        | For the Three Months Ended
|----------------------- | --------------------------
|
|Consumable products     |                           
|Pharmaceutical products |                           
|Equipment               |                           
|                        |                           
|Total                   |                           
|                        |                           

Consumable product sales and pharmaceutical
product sales growth quarter over quarter was approximately 14.3% and 31.1%, respectively,
or 10.8% and 27.0%, respectively, on a same day sales growth basis. Over the last fiscal
year, the Physician Business sales mix changed due to managements focus on
growing pharmaceutical product sales by establishing the Rx Extreme revenue growth
program.

# Elder Care Business

The Elder Care Business continues to
implement strategies to diversify its revenue sources and customers through expansion into
the home care market and other non-facilities based care and equipment providers. The
increase in net sales reflects these business strategies and industry trends, and is
primarily attributable to (i) an increase in sales to skilled nursing home facilities
of approximately $15.1 million, (ii) an increase in sales to providers of home
care services and equipment of $6.4 million, and (iii) an increase in
ancillary billing service fees of $1.2 million. The growth in net sales to skilled
nursing home facilities primarily resulted from acquisitions, new customers, increased
penetration in existing customer facilities, and the introduction of new product lines.
The growth in net sales to providers of home care services and equipment is a result of
the Companys continuing focus to diversify its revenue sources and customers.

Net sales were also impacted by the
continued implementation of the following innovative Elder Care customer specific solution
programs:

- ANSWERS, ANSWERS Housekeeping ("ANSWERS HK"), and ANSWERS Home Medical Equipment ("ANSWERS
HME")-marketing programs that align improved business processes in the nursing home operations and
purchasing, with more efficient distribution activities of the Elder Care Business. In addition to
reducing distribution costs by encouraging more efficient buying patterns, these programs provide
opportunities for manufacturing partners to increase sales volume of category-leading, name-brand
products while providing customers the opportunity to purchase higher quality products at reduced
prices, which improve patient care outcomes for the Elder Care customers.
- ANSWERS Plus-an enhanced version of the ANSWERS marketing programs described above that
provides additional resources to the nursing home, home health, and hospice provider, in an effort to
directly impact the quality of care provided to residents and patients. This is accomplished through
combining all the resources provided by the ANSWERS manufacturer partners and the Elder Care Business to
address the major issues facing the Elder Care Business.
- Partners in Efficiency ("P.I.E.")-a product program designed to reduce customers' product
procurement costs and increase operating efficiencies through implementation of standardized ordering
procedures.


25
- Fast Accurate Supply Technology ("F.A.S.T")-ordering, bar-code scanning, inventory management
software that utilizes a Palm Pilot to track inventory on hand at customer locations and facilitate
automatic replenishment of medical supplies.
- AccuSCAN-a bar-code driven inventory management and ancillary billing system for tracking
products, treatments, therapies, dietary activity, and rentals.

A national chain customer
discontinued its medical supply contractual relationship, effective June 23, 2005.
The trailing twelve months of net sales to this customer was approximately
$27.0 million. Net sales during the three months ended July 1, 2005 decreased
approximately $0.7 million as a result of the loss of this national chain customer
during fiscal year 2006. Nursing home divestitures may continue to impact net sales during
fiscal year 2006 as large, national chain customers may continue to divest facilities
located in states with high malpractice claims, high insurance costs, and litigation
exposure. Furthermore, voluntary or involuntary changes in control of national chain
customers may impact net sales in future periods where the acquirer of an existing
customer may not have a previous relationship with the Company.

The following table compares the
customer segment sales mix quarter over quarter:

|                                            | For the Three Months Ended
|------------------------------------------- | --------------------------
|
|Nursing home and assisted living facilities |                           
|National accounts                           |                           
|Regional accounts                           |                           
|Independent accounts                        |                           
|                                            |                           
|Subtotal                                    |                           
|Home care                                   |                           
|                                            |                           
|Total                                       |                           
|                                            |                           

The customer segment sales mix has
been impacted by strategic initiatives that are being implemented to increase sales to
independent and regional accounts while increasing the account penetration and sales in
the home care market, a strategy to mitigate the impact of large, national chain customer
divestitures. Net sales quarter over quarter were also positively impacted by business
combinations consummated during fiscal year 2005. As a result of these business
combinations, approximately $10.9 million of additional net sales were recognized
during the three months ended July 1, 2005 compared to the three months ended
June 30, 2004.

# GROSS PROFIT

Gross profit for the three months
ended July 1, 2005 totaled $110.5 million, an increase of $14.7 million, or
15.3%, from gross profit of $95.8 million for the three months ended June 30,
2004. Gross profit as a percentage of net sales decreased 50 basis points to 28.5%
during the three months ended July 1, 2005 from 29.0% during the three months ended
June 30, 2004 .

# Physician Business

Gross profit dollars increased
primarily due to the growth in net sales discussed above. Gross profit as a percentage of
net sales decreased approximately 110 basis points quarter over quarter as a result
of change in sales mix offset by an increase in vendor incentives earned of approximately
$1.0 million. Gross margin on pharmaceutical product sales is typically lower than
the gross margin on consumable products. Gross profit as a percentage of net sales may
decrease in future periods due to an expected increased sales volume of pharmaceutical
products and diagnostic equipment. However, the Companys global sourcing strategy is
expected to improve its cost competitiveness and increase its gross margins on certain
products.

26

---

# Elder Care Business

Gross profit dollars increased
primarily due to the growth in net sales discussed above. Gross profit as a percentage of
net sales increased 90 basis points primarily due to replacing lower margin sales to
larger accounts with higher margin sales to smaller accounts. In addition, ancillary
billing service revenues have increased which typically generate higher gross profit
margins. Furthermore, vendor incentives increased approximately $1.0 million quarter
over quarter as a result of the revenue growth and changes in contract terms with vendors.
Gross profit as a percentage of net sales may continue to increase in future periods as a
result of net sales growth in ancillary billing services. In addition, the Companys
global sourcing strategy is expected to improve its cost competitiveness and increase its
gross margins on certain products.

# GENERAL AND
ADMINISTRATIVE EXPENSES

|                             | For the Three Months Ended | 
|---------------------------- | -------------------------- | 
|
|
|Physician Business(a)        |                            | 
|Elder Care Business(a)       |                            | 
|Corporate Shared Services(b) |                            | 
|                             |                            | 
|Total Company(b)             |                            | 
|                             |                            | 

| | (a) | General and administrative expenses as a percentage of net sales is calculated
                    based on divisional net sales.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------

| | (b) | General and administrative expenses as a percentage of net sales is calculated
                    based on consolidated net sales.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------

# Physician Business

General and administrative expenses
as a percentage of net sales decreased 100 basis points quarter over quarter. This
percentage decrease is attributable to leveraging the net sales growth across various
fixed costs and the Companys focus on reducing its cost to deliver. Cost to deliver
represents all costs associated with the transportation and delivery of products to
customers. Cost to deliver as a percentage of net sales was 3.0% and 3.1% during the three
months ended July 1, 2005 and June 30, 2004, respectively. This percentage
decrease is attributable to the optimization of routes and shipments between distribution
centers as well as leveraging net sales growth across transportation and delivery costs.
In addition, cost to deliver increased as a result of an increase in fuel costs related to
the Companys fleet of leased delivery vehicles. Management anticipates that rising
fuel costs may continue to negatively impact the cost to deliver or expected improvements
in cost to deliver during the remainder of fiscal year 2006.

General and administrative expenses
quarter over quarter increased primarily related to an increase in salary, incentive
compensation, and payroll tax expenses of approximately $0.6 million due to
additional employees and general wage increases. In addition, general and administrative
expenses increased as a result of an increase in the corporate overhead allocation from
Corporate Shared Services (refer to discussion below under Corporate Shared
Services).

# Elder Care Business

General and administrative expenses
as a percentage of net sales increased 220 basis points quarter over quarter. This
percentage increase is primarily attributable to an increase in cost to deliver. Cost to
deliver as a percentage of net sales was 4.5% and 4.1% during the three months ended
July 1, 2005 and June 30, 2004, respectively. Significant increases in fuel
costs related to the Companys fleet of leased delivery vehicles and fuel surcharges
from third parties have increased cost to deliver quarter over quarter. Management
anticipates that rising fuel costs may continue to negatively impact the cost to deliver
or expected improvements in cost to deliver during the remainder of fiscal year 2006.

27

---

Changes in the other components of
general and administrative expenses quarter over quarter are primarily related to the
acquisition of an ancillary billing company during fiscal year 2004 and the acquisition of
a long-term medical supply distributor during the three months ended December 31,
2004, including (i) increased bad debt expense of approximately $1.5 million,
(ii) increased salary, incentive compensation, and payroll tax expenses of
approximately $1.1 million due to additional employees and general wage increases,
and (iii) an increase in the corporate overhead allocation from Corporate Shared
(refer to discussion below under Corporate Shared Services). The increase in bad
debt expense was primarily a result of a large customer balance that was placed in
collections. In accordance with the Companys reserve policy, a significant portion
of the outstanding accounts receivable balances that are placed in collections are
reserved.

# Corporate Shared Services

General and administrative expenses
quarter over quarter increased primarily due to (i) an increase of approximately
$1.6 million to the reserve for an estimated loss on an outstanding litigation
matter, (ii) an increase in salary expenses of approximately $0.8 million due to
additional employees and general wage increases, (iii) an increase in medical
insurance costs of approximately $0.7 million, and (iv) an increase in corporate
overhead to support the divisional net sales growth and other strategic initiatives. Such
strategic initiatives include: global product sourcing, expansion of the corporate
headquarters facility, increased training of employees, continued enhancement and
implementation of various modules of the JD Edwards XE®, and various information
technology related projects. These increases were offset by the reversal of the allowance
for doubtful accounts of approximately $2.9 million related to an outstanding note
receivable from the former chairman and chief executive officer of the Company. Excluding
the effect of this reversal, general and administrative expenses as a percentage of
consolidated net sales remained relatively constant quarter over quarter.

# SELLING EXPENSES

|                    | For the Three Months Ended | 
|------------------- | -------------------------- | 
|
|
|                    |                            | 
|Physician Business  |                            | 
|Elder Care Business |                            | 
|                    |                            | 
|Total Company       |                            | 
|                    |                            | 

Overall, the change in selling
expenses is primarily attributable to an increase in commission expense due to the growth
in net sales discussed above. Commissions are generally paid to sales representatives
based on gross profit dollars and gross profit as a percentage of net sales.

# Physician Business

Selling expenses as a percentage of
net sales decreased approximately 60 basis points, which is primarily attributable to
leveraging the net sales growth across certain fixed selling expenses. A portion of the
decrease is also attributable to the change in the sales mix. Pharmaceutical product sales
as a percentage of total sales increased quarter over quarter. Commission rates on
pharmaceutical product sales are generally lower as these sales generate lower gross
profit margins.

# Elder Care Business

Selling expenses as a percentage of
net sales were relatively consistent quarter over quarter.

28

---

# INCOME FROM OPERATIONS

|                          | For the Three Months Ended | 
|------------------------- | -------------------------- | 
|
|
|                          |                            | 
|Physician Business        |                            | 
|Elder Care Business       |                            | 
|Corporate Shared Services |                            | 
|                          |                            | 
|Total Company             |                            | 
|                          |                            | 

Income from operations for each
business segment changed due to the factors discussed above.

# INTEREST EXPENSE

Interest expense for the three months
ended July 1, 2005 totaled $1.5 million, a decrease of $0.4 million, or
22.3%, from interest expense of $1.9 million for the three months ended June 30,
2004. Capitalized interest was approximately $0.2 million during the three months
ended July 1, 2005. The Companys debt structure during these periods consisted
of the $150 million of 2.25% senior convertible notes and variable rate borrowings
under its revolving line of credit agreement. The overall decrease in interest expense
quarter over quarter is primarily related to an overall decrease in outstanding
borrowings.

Interest expense and amortization of
debt issuance costs related to the Companys 2.25% convertible senior notes totaled
approximately $1.1 million during the three months ended July 1, 2005 and
June 30, 2004. Interest expense, debt issuance costs, and unused line fees related to
the revolving line of credit totaled approximately $0.6 million during the three
months ended July 1, 2005 compared to $0.8 million during the three months ended
June 30, 2004.

The daily average outstanding
borrowings under the revolving line of credit during the three months ended July 1,
2005 and June 30, 2004 were approximately $26.9 million and $36.9 million,
respectively. The interest rate swap arrangement established an interest rate at 4.195%
(consisting of a fixed interest rate of 2.195% and a credit spread of 2.00%) for a
notional amount of $35 million for the three months ended June 30, 2004. In
July 2004, the Company terminated $10 million in notional amount of the interest
rate swap. The amended interest rate swap arrangement established an interest rate at
3.945% (consisting of a fixed interest rate of 2.195% and a credit spread of 1.75%) for a
notional amount of $25 million for the three months ended July 1, 2005. Interest
expense related to the interest rate swap was approximately $0.3 million and
$0.4 million during the three months ended July 1, 2005 and June 30, 2004,
respectively. Variable interest expense related to the daily average outstanding
borrowings of $1.9 million (weighted average interest rate of 4.25%) during the three
months ended July 1, 2005 and June 30, 2004 was less than $0.1 million each
period. Amortization of the debt issuance costs and fees on the unused portion of the line
of credit were approximately $0.3 million and $0.4 million during the three
months ended July 1, 2005 and June 30, 2004, respectively.

# OTHER INCOME

Other income for the three months
ended July 1, 2005 totaled $0.5 million, an increase of $0.2 million from
other income of $0.3 million for the three months ended June 30, 2004.

# PROVISION FOR INCOME
TAXES

Provision for income taxes was
$5.3 million for the three months ended July 1, 2005, an increase of
$1.3 million from the provision for income taxes of $4.0 million for the three
months ended June 30, 2004. The effective income tax rate was approximately 39.3% and
40.1% for the three months ended July 1, 2005 and June 30, 2004, respectively.
The increase in the provision for income taxes and the decrease in the effective rate is
primarily attributable to an increase in the projected annual income from continuing
operations before provision for income taxes.

29

---

During fiscal year 2002, the Company
sold its International Business, which generated a capital loss carryforward. At the time
of sale, management believed it was more likely than not that the Company would be unable
to use the capital loss before its expiration in fiscal year 2007 and, accordingly, a
valuation allowance was recorded. Also during fiscal year 2002, the IRS notified the
Company that the Federal income tax returns for the fiscal years ended March 31, 2000
and March 30, 2001 would be examined. During the three months ended December 31,
2003, fieldwork was completed and the Company received the IRSs report. The Company
appealed certain audit findings, which primarily related to timing of tax deductions, with
the Appeals Office of the IRS. Based on recent Tax Court rulings, the Company filed a
refund claim with the IRS during the three months ended December 31, 2003, to report
an ordinary worthless stock deduction on the sale of the International Business. The
refund claim reflected a reclassification of the nondeductible capital loss to a
tax-deductible ordinary loss.

During the three months ended
December 31, 2004, the Company reached a settlement with the Appeals Office of the
IRS regarding its audit findings for the fiscal years ended March 31, 2000 and
March 30, 2001and the refund claim. This settlement, which is subject to final review
and approval by the Congressional Joint Committee on Taxation (Joint
Committee), resulted in a reduction to the provision for income taxes of
approximately $5.6 million. Management believes that the Joint Committee will approve
the agreed-upon settlement with the Appeals Office of the IRS.

During the three months ended
December 31, 2004, the IRS completed fieldwork on the audit of the Federal income tax
returns for the fiscal years ended March 29, 2002 and March 28, 2003. The
Company has appealed certain findings, which primarily related to timing of tax
deductions, with the Appeals Office of the IRS. Management does not anticipate the results
of the audit to have a material impact on the financial condition or consolidated results
of operations of the Company.

# LOSS ON DISPOSAL OF
DISCONTINUED OPERATIONS

During the three months ended
June 30, 2004, the Company recorded a pretax loss on disposal of discontinued
operations of approximately $2.7 million, which primarily related to the final
arbitration settlement on the disputed net asset calculation between the Company and the
buyer of the Imaging Business. The initial claim was for a purchase price adjustment of
$32.3 million, based on an accounting of the net assets of the business as of the
closing date, and was later reduced to $28.2 million. The loss on disposal of
discontinued operations recorded during the three months ended June 30, 2004
represented (i) a true-up of managements estimated net asset adjustment to the
actual net asset adjustment as indicated in the arbitrators final ruling of
$1.8 million, (ii) interest of $0.4 million, and (iii) legal and
professional fees of $0.5 million, offset by a benefit for income taxes of
$1.0 million.

The deferred tax asset that was
recorded for the tax effect of the actual loss generated as a result of the sale of the
Imaging Business was approximately $58.0 million at April 1, 2005. Under the
terms of the Stock Purchase Agreement, the Company made a joint election with the buyer to
treat the transaction as a sale of assets in accordance with Section 338(h)(10) of the
Internal Revenue Code.

# NET INCOME

Net income for the three months ended
July 1, 2005 totaled $8.1 million compared to net income of $4.2 million
for the three months ended June 30, 2004. Net income for the three months ended
June 30, 2004 included a charge of $1.7 million, net of the benefit for income
taxes, related to the loss on disposal of discontinued operations. Otherwise, variances
are due to the factors discussed above.

30

---

# LIQUIDITY AND CAPITAL
RESOURCES

# Liquidity and Capital
Resources Highlights

|                                          | For the Three Months Ended
|----------------------------------------- | --------------------------
|
|                                          |                           
|Cash Flow Information:                    |                           
|Net cash provided by operating activities |                           
|Net cash used in investing activities     |                           
|Net cash provided by (used in) financing  |                           
|activities                                |                           
|                                          |                           
|Net increase in cash and cash equivalents |                           
|                                          |                           

|                             | As of
|---------------------------- | -----
|
|                             |      
|Capital Structure:           |      
|Debt                         |      
|Cash and cash equivalents    |      
|                             |      
|Net debt                     |      
|Shareholders' equity         |      
|                             |      
|Total capital                |      
|                             |      
|Operational Working Capital: |      
|Accounts receivable          |      
|Inventories                  |      
|Accounts payable             |      
|                             |      
|                             |      
|                             |      

# Cash Flows From
Operating Activities

The primary components of net cash
provided by operating activities consist of net income adjusted to reflect the effect of
non-cash expenses and changes in operational working capital. Overall, net cash provided
by operating activities during the three months ended July 1, 2005 and June 30,
2004 was impacted by an increase in overall operating profit which was partially offset by
operational working capital needs to support net sales growth. The changes in operating
working capital during the three months ended July 1, 2005 were due to the following:

- The decrease in accounts receivable during the three months ended July 1, 2005 primarily
related to strong collection efforts offset by the increase in accounts receivable due to the net sales
growth discussed above. The decrease in accounts receivable during the three months ended June 30, 2004
primarily related to four fewer billing days in the three months ended June 30, 2004 compared to the
three months ended April 2, 2004 and strong collection efforts.


31
- The decrease in inventories during the three months ended July 1, 2005 corresponds to the
decrease in net sequential quarter net sales offset by (i) an increase in inventory purchases in
anticipation of price increases from certain vendors, and (ii) an increase in inventory of approximately
$1.4 million as a result of the global sourcing initiative. During the three months ended June 30,
2004, the increase in inventories was primarily related to supporting the pharmaceutical sales growth in
the Physician Business and supporting the further expansion into the durable medical equipment and
homecare markets by the Elder Care Business.
- The decrease in accounts payable during the three months ended July 1, 2005 did not directly
correspond to the change in inventories primarily as a result of timing of vendor payments. Accounts
payable increased approximately $13.9 million during the three months ended June 30, 2004 which
generally corresponded with the overall change in inventory levels.
- The decrease in accrued expenses and other liabilities of approximately $10.8 million during
the three months ended July 1, 2005 primarily related to the payment of incentive compensation of
approximately $8.5 million under the Shareholder Value Plan, a long-term, cash-based performance award
program.

Cash flows from operating activities
during three months ended July 1, 2005 and June 30, 2004 reflect the
Companys utilization of $5.3 million (tax-effected) and $4.0 million
(tax-effected), respectively, of net operating loss (NOL) carryforwards
(primarily generated during fiscal year 2003 as a result of the disposition of the Imaging
Business) to offset cash payments due for Federal and state tax liabilities based on
estimated taxable income. As of July 1, 2005, the Company has $14.2 million
(tax-effected) of NOL carryforwards remaining and expects to utilize the remaining Federal
NOL carryforward, as well as a portion of the remaining state NOL carryforwards, during
fiscal year 2006. Cash flows from operating activities were also impacted by cash payments
made or refunds received for Federal and state taxes. During the three months ended
July 1, 2005 and June 30, 2004, the Company paid cash taxes, net of refunds, of
approximately $0.4 million and $0.1 million, respectively, which primarily
related to Federal alternative minimum tax and state estimated tax payments.

# Cash Flows From
Investing Activities

Net cash used in investing activities
was $9.6 million and $7.2 million during the three months ended July 1,
2005 and June 30, 2004, respectively, and was primarily impacted by the following.

- Capital expenditures totaled $4.7 million during the three months ended July 1, 2005 and
        June 30, 2004, of which approximately $3.5 million and $3.8 million, respectively, related to development
        and enhancement of the Company's ERP system, electronic commerce platforms, and supply chain
        integration.
- Payments for business combinations, net of cash acquired, were $4.1 million and $1.7 million
        during the three months ended July 1, 2005 and June 30, 2004, respectively.  During fiscal year 2005,
        the Elder Care Business acquired certain assets and assumed certain liabilities of a long-term care
        medical supply distributor and ancillary billing service provider.  The aggregate purchase price was
        approximately $26.9 million (net of cash acquired of approximately $0.4 million) of which approximately
        $22.7 million was paid during fiscal year 2005.  The remaining purchase price of $4.1 million, which
        primarily related to meeting minimum revenue thresholds, was paid during the three months ended July 1,
        2005.  During fiscal year 2004, the Company completed three acquisitions with a total aggregate purchase
        price, net of cash acquired, of approximately $21.8 million (net of cash acquired of approximately
        $0.1 million), of which $19.3 million was paid in cash during fiscal year 2004.  Approximately
        $1.7 million of purchase price, which related to an earn-out provision included in the purchase
        agreement, was paid during the three months ended June 30, 2004 and the remaining purchase price of
        $0.8 million is expected to be paid during fiscal year 2006.
- During the three months ended July 1, 2005 and June 30, 2004, the Company paid approximately
        $0.5 million and $0.3 million to sales representatives for execution of nonsolicitation agreements.
- Transaction and settlement costs related to the sale of the Imaging Business of approximately
         $0.5 million, was paid during the three months ended June 30, 2004.

32

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# Cash Flows From
Financing Activities

Net cash provided by financing
activities was $2.4 million during the three months ended July 1, 2005 compared
to net cash used in financing activities of $2.0 million during the three months
ended June 30, 2004. Net cash provided by/used in financing activities during the
three months ended July 1, 2005 and June 30, 2004 was primarily impacted by the
following:

- Proceeds received from the exercise of stock options were approximately $2.2 million and
        $0.9 million during the three months ended July 1, 2005 and June 30, 2004, respectively.
- During the three months ended June 30, 2004, the Company paid $3.0 million to repurchase
         approximately 0.3 million shares of the Company's common stock at an average price of $10.74 per common
         share.

# Capital Resources

Senior management and the Board of
Directors determine the amount of capital resources that the Company maintains. Management
allocates resources to new long-term business commitments when returns, considering the
risks, look promising and when the resources available to support the existing business
are adequate.

The Companys two primary
sources of capital are the proceeds from the 2.25% convertible senior notes offering and
the revolving line of credit. These instruments furnish the financial resources to support
the business strategies of customer service and revenue growth. The revolving line of
credit, which is an asset-based agreement, uses the Companys working capital as
collateral to support necessary liquidity. Over the long-term, the Companys
priorities for use of capital are internal growth, acquisitions, and repurchase of the
Companys common stock.

At July 1, 2005, the Company
maintained a $200 million revolving line of credit, which may be increased to
$250 million at the Companys discretion. Availability of borrowings under the
revolving line of credit depends upon the amount of a borrowing base consisting of
accounts receivable and inventory, subject to satisfaction of certain eligibility
requirements. At July 1, 2005, the Company had sufficient assets based on eligible
accounts receivable and inventories to borrow up to $174.8 million (excluding the
additional increase of $50 million) under the revolving line of credit and had
outstanding borrowings of $25.2 million.

The Credit Agreement, originally
dated May 20, 2003, was amended on July 1, 2005.  This amendment (i) extended the
term of the agreement to June 30, 2010, (ii) created a feature to expand and increase the
maximum borrowings to $250 million at the discretion of the Company, (iii) increased the
advance rates for accounts receivable and inventory, (iv) eased the covenant restrictions
described above when excess Availability is greater than $50 million, (v) implemented a
fixed charge coverage ratio covenant when Availability is less than $40 million, (vi) set
the determination of applicable margin level for Base Rate loans and LIBOR loans to
Availability rather than a funded debt to earnings before interest, taxes, depreciation
and amortization ratio, (vii) reduced the unused line fee from 0.375 % to 0.25%, and
(viii) increased the letter of credit sub-facility from $15 million to $20 million.

As the Companys business grows,
its cash and working capital requirements will also continue to increase. The Company
normally meets its operating requirements by maintaining appropriate levels of liquidity
under its revolving line of credit and using cash flows from operating activities. The
Company expects that the overall growth in the business will be funded through a
combination of cash flows from operating activities, borrowings under the revolving line
of credit, capital markets, and/or other financing arrangements. As of July 1, 2005,
the Company has not entered into any material working capital commitments that require
funding, other than the items discussed below and the obligations included in the future
minimum obligation table below.

# Debt Rating

The Companys debt is rated by
nationally recognized rating agencies. Companies that have assigned ratings at the top end
of the range have, in the opinion of the rating agency, the strongest capacity for
repayment of debt or payment of claims, while companies at the bottom end of the range
have the weakest capability.

33

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During fiscal year 2005, the Company
maintained ratings with two leading corporate and credit rating agencies: Standard and
Poors Ratings Services, a division of McGraw Hill Companies, Inc. and its successors
(S&P) and Moodys Investor Services (Moodys). On
December 3, 2003, the Company received a revised outlook from S&P from stable to
positive. Additionally, S&P affirmed its corporate credit and senior secured debt
rating of BB-. During fiscal year 2005, the Company maintained a stable outlook from
Moodys and a senior implied rating of Ba3 and a long-term issuer rating of B1.
Ratings are always subject to change, and there can be no assurance that a ratings agency
will continue to rate the Companys debt and/or maintain their current ratings. On
May 20, 2005, Moodys withdrew the Ba3 senior implied and B1 issuer ratings for
the Company because they do not rate any of the Companys debt.

# Variable Interest Entity

In January 2005, the Company
entered into a Sourcing Services Agreement (the Sourcing Agreement) with Tiger
Specialty Sourcing Limited, Tiger Shanghai Specialty Sourcing Co. Ltd., and its principals
(collectively Tiger Medical). The exclusive Sourcing Agreement focuses on two
primary objectives  delivery of consistent, high-quality medical products and
lowering the acquisition cost of those products. Subject to the terms and conditions of
the Sourcing Agreement, the Company has agreed to purchase certain medical and other
products from Chinese suppliers and manufacturers using the exclusive sourcing services of
Tiger Medical. Pursuant to the terms of the Sourcing Agreement, the Company acquired a
minority interest in Tiger Medical in January 2005 for $1.0 million. The Company
ultimately has the right to increase its ownership interest in Tiger Medical to 100%
during fiscal years 2006 through 2009 if certain performance targets are achieved. If at
any time during the term of the Sourcing Agreement, the Company achieves the agreed-upon
cost of goods savings target in any twelve-month period prior to achieving the agreed-upon
sales target, then either party has the right to trigger an early buy-out of Tiger Medical
by the Company. The total purchase price to be paid by the Company for 100% ownership of
Tiger Medical ranges between $1.0 million and $32.5 million and depends on the
satisfaction of certain performance targets. Cash payments made by the Company during
fiscal years 2006 through 2008 for additional interests in Tiger Medical will be credited
against the final purchase price to be paid by the Company.

# Stock Repurchase Program

On June 8, 2004, the
Companys Board of Directors approved a stock repurchase program authorizing the
Company, depending upon market conditions and other factors, to repurchase up to a maximum
of 5% of its common stock, or approximately 3.2 million common shares, in the open
market, in privately negotiated transactions, or otherwise. During the three months ended
June 30, 2004, the Company repurchased approximately 0.3 million shares of
common stock under this program at an average price of $10.74 per common share.
During the three months ended October 1, 2004, the Company repurchased approximately
0.7 million shares of common stock under this program at an average price of $9.59
per common share. At July 1, 2005, approximately 2.2 million shares were
available to repurchase under this program.

# Liquidity and Capital
Resource Outlook

Based on prevailing market
conditions, liquidity requirements, contractual restrictions, and other factors, the
Company may seek to retire its outstanding equity through cash purchases and/or reduce its
debt. The Company may also seek to issue additional debt or equity to meet its future
liquidity requirements. Such transactions may occur in the open market, privately
negotiated transactions, or otherwise. The amounts involved may be material.

# Future Minimum
Obligations

In the normal course of business, the
Company enters into obligations and commitments that require future contractual payments.
The commitments primarily result from repayment obligations for borrowings under the
revolving line of credit, as well as contractual lease payments for facility, vehicle, and
equipment leases, and contractual payments under noncompetition agreements. The following
table presents, in aggregate, scheduled payments under contractual obligations for the
Physician Business, the Elder Care Business, and Corporate Shared Services (in thousands):

34

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|                                 | Fiscal Years |  |  
|-------------------------------- | ------------ |  | -
|
|                                 |              |  |  
|Revolving line of credit(a)      |              |  | $
|2.25% convertible senior notes   |              |  |  
|Letters of credit outstanding(b) |              |  |  
|Operating lease obligations(c)   |              |  |  
|Capital lease obligations(d)     |              |  |  
|Noncompetition agreements        |              |  |  
|Purchase commitments(b),(c),(e)  |              |  |  
|                                 |              |  |  
|Total                            |              |  | $
|                                 |              |  |  

| | (a) | The
revolving line of credit is classified as a current liability in accordance
               with Emerging Issues Task Force No. 95-22, Balance Sheet
Classification                of Borrowings Outstanding under RevolvingCredit
Agreements That Include                both a Subjective Acceleration Clause and a
Lock-Box Arrangement; however,                the credit facility does not expire
until June 30, 2010. The Company is not                obligated to repay or
refinance amounts outstanding under the revolving line of                credit until June 30,
2010. Interest expense has been estimated using                current level borrowings
outstanding at current effective interest rates. Actual                interest expense
may differ due to changes in interest rates or levels of                borrowings.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The
Company typically issues letters of credits with expirations of less than
               one year.
| | --- | ------------------------------------------------------------------------------------------------------

| | (c) | Amounts
represent contractual obligations for operating leases of the Company as
               of July 1, 2005. Currently, it is managements intent to either
               renegotiate existing leases or execute new leases upon the expiration date
of                such agreements.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | Amounts
include interest expense.
| | --- | ---------------------------------

| | (e) | If
the Physician Business or the Elder Care Business were to terminate a
               contract with a private label vendor for any reason, the Company may be
required                to purchase the remaining inventory of private label products
from the vendor,                provided that, in no event would the Company be required
to purchase quantities                of such products which exceed the aggregate amount
of such products ordered by                the Company  in a negotiated time period immediately preceding the date of termination. As of July 1,
2005, the Company has not terminated any contracts with a private label vendor that had a
material impact to the Companys results of operations and financial condition.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# APPLICATION OF CRITICAL
ACCOUNTING POLICIES

There has been no material change in
the Companys Critical Accounting Policies, as disclosed in the Annual Report on
Form 10-K for the fiscal year ended April 1, 2005 filed on June 15, 2005.

# RECENT ACCOUNTING
PRONOUNCEMENTS

Refer to Note 1, Background
and Basis of Presentation, for a discussion of recent accounting pronouncements and
their impact on the Companys financial condition and results of operations.

# ITEM 3.  QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company believes there has been
no material change in its exposure to market risk from that discussed in Item 7A in
the Annual Report on Form 10-K for the fiscal year ended April 1, 2005 filed on
June 15, 2005.

35

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# ITEM 4.  CONTROLS
AND PROCEDURES

# Evaluation of disclosure
controls and procedures

The Companys management, with
the participation of the Companys Principal Executive Officer and Principal
Financial Officer, has evaluated the effectiveness of the Companys disclosure
controls and procedures (as defined in Exchange Act Rule 240.13a-15(c)) as of the end
of the period covered by this report (the Evaluation Date). Based on the
evaluation, the Principal Executive Officer and the Principal Financial Officer have
concluded that the Companys current disclosure controls and procedures were
effective at July 1, 2005 to provide reasonable assurance that information required
to be disclosed by the Company in reports that it filed or submitted under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in Securities and Exchange Commission rules and forms.

In designing and evaluating the
disclosure controls and procedures, Company management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. Because of the inherent limitation in any control system, no
evaluation or implementation of a control system can provide complete assurance that all
control issues and all possible instances of fraud have been or will be detected.

# Changes in Internal
Control Over Financial Reporting

The following change in the
Companys internal control over financial reporting was identified in connection with
the foregoing evaluation that occurred during the last quarter and that has materially
affected, or is reasonably likely to materially affect, the Companys internal
control over financial reporting:

- As part of management's evaluation of internal control over financial reporting as of the
fiscal year ended April 1, 2005, management decided that during fiscal year 2006 the Physician and Elder
Care Businesses will conduct physical inventory observations and reconciliations to inventory per the
general ledger on a quarterly rather than on a semi-annual basis.

# PART II 
OTHER INFORMATION

# ITEM 1.  LEGAL
PROCEEDINGS

See Note 7, Commitments and
Contingencies, of this Quarterly Report on Form 10-Q and Item 3 of the
Companys Annual Report on Form 10-K for the fiscal year ended on April 1,
2005 filed on June 15, 2005.

# ITEM 2.  UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

# Issuer Purchases of
Equity Securities

On June 8, 2004, the
Companys Board of Directors approved a stock repurchase program authorizing the
Company, depending upon market conditions and other factors, to repurchase up to a maximum
of 5% of its common stock, or approximately 3.2 million common shares, in the open
market, in privately negotiated transactions, or otherwise. The Company did not repurchase
any stock during the three months ended July 1, 2005.

36

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# ITEM 6.  EXHIBITS

(a)    
          Exhibits required by Item 601 of Regulation S-K: <PRE>

|ExhibitNumber | Description                                                                                                               
|------------- | --------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                           
|10.1          | Shareholder Value Plan (Portions omitted pursuant to a request for confidential treatment - Separately filed with the SEC)
|             
|15            | Awareness Letter from KPMG LLP                                                                                            
|             
|31.1          | Rule 13a-14(a) Certification of the Chief Executive Officer                                                               
|             
|31.2          | Rule 13a-14(a) Certification of the Chief Financial Officer                                                               
|             
|32.1          | Section 1350 Certification of the Chief Executive Officer                                                                 
|             
|32.2          | Section 1350 Certification of the Chief Financial Officer                                                                 

37

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# SIGNATURE

Pursuant to the requirements of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Jacksonville,
State of Florida, on August 10, 2005.

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | PSS WORLD MEDICAL, INC                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | By:  /s/ David M. Bronson
                                                                     David M. Bronson 
                                                                     Executive Vice President and Chief Financial 
                                                                     Officer (Duly Authorized Officer and Principal 
                                                                     Financial and Accounting Officer)

38