# UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

# FORM 10-Q

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

| | For the quarterly period ended       June 30, 2004
| | --------------------------------------------------

| | [ ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES 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 (State or other jurisdiction of incorporation or organization)                         | 59-2280364(IRS Employer Identification Number)
|4345 Southpoint Blvd.          Jacksonville, Florida  (Address of principal executive offices) | 32216 (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 $.01
 per share, of the registrant outstanding as of August 2, 2004 was 64,753,676 shares.

---

# PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

# June 30, 2004

# TABLE OF CONTENTS

|Item |                                                                                       | Page
|---- | ------------------------------------------------------------------------------------- | ----
|     | Information Regarding Forward-Looking Statements                                      | 3   
|    
|     | Part I--Financial Information                                                        
|    
|1.   | Financial Statements:                                                                
|    
|     | Consolidated Balance Sheets--June 30, 2004 and April 2, 2004                          | 6   
|    
|     | Consolidated Statements of Operations for the Three Months Ended                     
|     | June 30, 2004 and June 30, 2003                                                       | 7   
|    
|     | Consolidated Statements of Cash Flows for the Three Months Ended                     
|     | June 30, 2004 and June 30, 2003                                                       | 7   
|    
|     | Notes to Consolidated Financial Statements--June 30, 2004 and June 30, 2003           | 9   
|    
|     | Report of Independent Registered Public Accounting Firm                               | 21  
|    
|2.   | Management's Discussion and Analysis of Financial Condition and Results of Operations | 22  
|    
|3.   | Quantitative and Qualitative Disclosures About Market Risk                            | 35  
|    
|4.   | Controls and Procedures                                                               | 35  
|    
|     | Part II--Other Information                                                           
|    
|1.   | Legal Proceedings                                                                     | 37  
|    
|2.   | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities      | 38  
|    
|6.   | Exhibits and Reports on Form 8-K                                                      | 38  
|    
|     | Signature                                                                             | 40  

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 2, 2004, 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, intends, 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 intent to vigorously defend against the claims from the latex glove product liability litigation and the securities class action lawsuits, among others, which are described in Note 9, Commitments and Contingencies;
- management's belief that the ultimate outcome of the various litigation matters described in Note 9, Commitments and Contingencies, and various other litigation 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 American population;
- management's belief that the physician market is expected to continue to benefit from the shift of procedures and diagnostic testing in hospitals to alternate sites, particularly physician offices and home care providers;
- management's belief that the recent changes to Medicare and Medicaid reimbursement rates and the introduction of the Medicare/Medicaid prescription drug program that became effective beginning in the U.S. government fiscal year 2004 will positively impact the financial condition of elder care providers and financial strength of the elder care industry;
- management's expectation that the Physician Business' sales mix for the three and six months ended October 1, 2004 compared to the three and six months ended October 3, 2003 may be impacted by accelerating the shipment of influenza vaccine orders to its customers;
- nursing home divestitures within the Elder Care Business may continue to impact fiscal year 2005 as large, national chain customers may continue to divest underperforming facilities and facilities located in states with high malpractice claims, insurance costs, and litigation exposure;
- 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;
- 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 fiscal year 2005;
- management's expectation that the results of the Internal Revenue Service ("IRS") audit of the income tax returns for fiscal years 2000, 2001, 2002, and 2003 will not have a material impact on our financial condition or consolidated results of operations;
- 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;

3

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- management's belief that we may, from time-to-time, seek to retire our outstanding debt or equity through cash purchases and/or reduce its debt, in open-market purchases, privately negotiated transactions, or otherwise and such amounts involved may be material;
- the possibility that the Company may seek to issue additional debt or equity to meet its future liquidity requirements; and
- management's expectation that the implementation of the JD Edwards distribution modules at the Elder Care Business distribution centers will be successfully completed without disrupting the operations of the business during the first quarter of fiscal year 2006.

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;
- 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 of our 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 our 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 the ability to obtain financing in the future and may limit flexibility to react to market conditions;
- the potential interest and penalty exposure related to existing and future IRS audits;
- litigation and liability exposure for existing and potential claims;
- the Company's failure to execute its business plan and strategies for growth; and
- the adoption of new accounting pronouncements or Securities and Exchange Commission rules and regulations, including the proposed Emerging Issues Task Force Issue No. 04-08, Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share.

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 2, 2004.

4

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# PART I FINANCIAL INFORMATION ITEM 1.  FINANCIAL STATEMENTS

# PSS WORLD MEDICAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJUNE 30, 2004 AND APRIL 2, 2004 (Dollars in Thousands, Except Share Data)

|ASSETS                                                                        
|------------------------------------------------------------------------------
|
|
|Current Assets:                                                               
|Cash and cash equivalents                                                     
|Accounts receivable, net                                                      
|Inventories                                                                   
|Employee advances                                                             
|Deferred tax assets                                                           
|Prepaid expenses and other                                                    
|                                                                              
|Total current assets                                                          
|                                                                              
|Property and equipment, net                                                   
|Other Assets:                                                                 
|Goodwill                                                                      
|Intangibles, net                                                              
|Deferred tax assets                                                           
|Other                                                                         
|                                                                              
|Total assets                                                                  
|                                                                              
|                                                                              
|LIABILITIES AND SHAREHOLDERS' EQUITY                                          
|                                                                              
|Current Liabilities:                                                          
|Accounts payable                                                              
|Revolving line of credit                                                      
|Accrued expenses                                                              
|Other                                                                         
|                                                                              
|Total current liabilities                                                     
|                                                                              
|Convertible senior notes                                                      
|Other noncurrent liabilities                                                  
|                                                                              
|Total liabilities                                                             
|                                                                              
|Commitments and contingencies (Notes 1, 7, 9 and 10)                          
|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, 64,753,177 and   
|64,833,453 shares issued and outstanding at June 30, 2004 and April 2, 2004,  
|respectively                                                                  
|Additional paid-in capital                                                    
|Accumulated deficit                                                           
|Unearned compensation                                                         
|Accumulated other comprehensive income (loss)                                 
|                                                                              
|Total shareholders' equity                                                    
|                                                                              
|Total liabilities and shareholders' equity                                    
|                                                                              

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

5

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# PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE THREE MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003(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.

6

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# PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED JUNE 30, 2004 AND JUNE 30, 2003(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                                       |                   
|Depreciation                                                                      |                   
|Amortization of intangible assets                                                 |                   
|Amortization of debt issuance costs                                               |                   
|Provision for doubtful accounts                                                   |                   
|Provision for deferred income taxes                                               |                   
|Provision for deferred compensation                                               |                   
|Noncash compensation expense                                                      |                   
|Loss on sales of property and equipment                                           |                   
|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                                                  |                   
|Payment of transaction costs for sale of Imaging Business                         |                   
|Payments on noncompetition agreements                                             |                   
|Proceeds from sales of property and equipment                                     |                   
|                                                                                  |                   
|Net cash used in investing activities                                             |                   
|                                                                                  |                   
|Cash Flows From Financing Activities:                                             |                   
|Purchase of treasury shares                                                       |                   
|Proceeds from issuance of common stock                                            |                   
|Net proceeds (payments) under the revolving line of credit                        |                   
|                                                                                  |                   
|Net cash used in financing activities                                             |                   
|                                                                                  |                   
|Net increase (decrease) in cash and cash equivalents                              |                   
|Cash and cash equivalents, beginning of period                                    |                   
|                                                                                  |                   
|Cash and cash equivalents, end of period                                          |                   
|                                                                                  |                   
|Supplemental disclosures:                                                         |                   
|Cash paid (received) for:                                                         |                   
|Interest                                                                          |                   
|Income taxes, net                                                                 |                   

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

7

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# PSS WORLD MEDICAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 AND JUNE 30, 2003 (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 43 full-service distribution
 centers, 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 31 full-service distribution centers, 21 break-freight locations, and 2 redistribution facilities
 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. As a result of an acquisition completed during
 fiscal year 2004, the Elder Care Business now 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, 1 break-freight location, and
 1 ancillary billing service center 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 accounting principles generally accepted
 in the United States of America (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. and its wholly owned subsidiaries. All significant intercompany balances and transactions have
 been eliminated in consolidation.

The consolidated balance sheet as of April 2,
 2004 has been derived from the Companys audited consolidated financial statements for the fiscal year
 ended April 2, 2004. 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 2, 2004.

The Company reports its year-end financial position,
 results of operations, and cash flows on the Friday closest to March 31. Fiscal year 2005 consists
 of 52 weeks or 253 selling days whereas fiscal year 2004 consisted of 53 weeks or 258 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. The three months
 ended June 30, 2004 and 2003 consist of 62 and 65 selling days, respectively.

8

---

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 Programs

On June 8, 2004, the Companys Board of Directors
 approved a stock repurchase program authorizing the Company to repurchase up to a maximum of 5% of its
 common stock, or approximately 3.2 million common shares. These repurchases depend upon market
 conditions and other factors and are to be made 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.

Previously, the Companys Board of Directors approved
 a stock repurchase program on December 17, 2002, authorizing the Company to repurchase up to a
 maximum of 5% of its common stock, or approximately 3.4 million common shares. During the three
 months ended June 30, 2003, the Company repurchased approximately 1.0 million shares of common
 stock under this program at an average price of $5.92 per common share. This authorized stock repurchase
 program was terminated on February 26, 2004, when the Board of Directors authorized the repurchase
 of up to $35.0 million of common stock in connection with the issuance of the convertible senior
 notes. During the three months ended April 2, 2004, the Company repurchased approximately 3.0 million
 shares of common stock at an average price of $11.79 per common share, which completed the then outstanding
 stock repurchase programs.

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 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.

9

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The following table sets forth basic and diluted earnings
 per share computational data for the three months ended June 30, 2004 and 2003 (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                  |                   
|                                            |                   

| | (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 June 30, 2004, because none of the conditions that would permit conversion were satisfied during the period. 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. Once the notes become convertible, the dilutive effect of the convertible notes may be reflected in diluted earnings per share by application of the treasury stock method. By application of the treasury stock method, approximately 1.5 million shares would be included in the weighted average common
shares outstanding used in computing diluted earnings per share at a contingent conversion price of $20.51.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Options to purchase approximately 1,802 and 5,614 shares of common stock that were outstanding during the three months ended June 30, 2004 and 2003, 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.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

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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) 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.The following table details
 the components of comprehensive income for the periods presented.

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

4.     STOCK-BASED COMPENSATION

The Company applies the intrinsic-value recognition
 and measurement principles of Accounting Principles Board (APB) Opinion No. 25, Accounting
 for Stock Issued to Employees, and related interpretations, in accounting for stock-based compensation
 plans. Under this method, compensation expense is recorded on the date of grant only if the current
 market price of the underlying stock exceeds the exercise price. The Company has adopted the disclosure-only
 provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). The
 following table illustrates the effect on net income and earnings per share if the fair-value-based
 method of accounting prescribed by SFAS 123 had been applied to all outstanding and unvested awards
 in each period.

|                                                      | 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                                             |                   

11

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5.     GOODWILL

The
 change in the carrying value of goodwill during the quarter ended June 30, 2004 is as follows:

|                                       | Physician
Business | Elder Care
Business | Total
|-------------------------------------- | ------------------ | ------------------- | -----
|Balance as of April 2, 2004            |                    |                     | $    
|Purchase business combination earn-out |                    |                    
|payment                                |                    |                     |      
|Purchase price allocation adjustments  |                    |                     |      
|                                       |                    |                     |      
|Balance as of June 30, 2004            |                    |                     | $    
|                                       |                    |                     |      
|                                       |                    |                     |      

The terms of one purchase agreement provided for additional
 consideration to be paid (earn-out payment) if the acquired entitys earnings before interest expense,
 provision for income taxes, depreciation and amortization, as defined, exceeded a targeted level. The
 targeted level was set above the historical experience of the acquired entity at the time of acquisition.
 During the three months ended June 30, 2004, the Elder Care Business paid $1,685 under this agreement,
 and therefore, no remaining earn-out payments will be made.

6.     INTANGIBLES

The following table summarizes the gross carrying amount
 and accumulated amortization for existing intangible assets subject to amortization by business segment
 and major asset class.

|                           | As of June 30, 2004 | As of April 2, 2004
|-------------------------- | ------------------- | -------------------
|
|Noncompetition Agreements: |                     |                    
|                           |                     |                    
|Physician Business         |                     |                    
|Elder Care Business        |                     |                    
|Corporate Shared Services  |                     |                    
|                           |                     |                    
|                           |                     |                    
|                           |                     |                    
|Signing Bonuses:           |                     |                    
|Physician Business         |                     |                    
|Elder Care Business        |                     |                    
|                           |                     |                    
|                           |                     |                    
|                           |                     |                    
|Other Intangibles:         |                     |                    
|Physician Business         |                     |                    
|Elder Care Business        |                     |                    
|                           |                     |                    
|                           |                     |                    
|                           |                     |                    
|Total                      |                     |                    
|                           |                     |                    
|                           |                     |                    

12

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Total amortization of intangible assets for the three
 months ended June 30, 2004 and 2003 was $836, and $502, respectively. The estimated amortization
 expense for the next five fiscal years is as follows:

|                          | 
|------------------------- | 
|Fiscal Year:              | 
|2005 (remaining 9 months) | 
|2006                      | 
|2007                      | 
|2008                      | 
|2009                      | 
|Thereafter                | 
|                          | 
|Total                     | 
|                          | 

The remaining weighted-average amortization period,
 in total and by major asset class, is as follows:

|(in years)                    | June 30, 2004 | April 2, 2004
|----------------------------- | ------------- | -------------
|Noncompetition Agreements     | 5.7           | 5.5          
|Signing Bonuses               | 4.5           | 4.5          
|Other Intangibles             | 8.6           | 8.6          
|                              |               |              
|Total weighted-average period | 7.1           | 7.0          
|                              |               |              

Future minimum payments required under noncompetition
 agreements at June 30, 2004 are as follows:

|                          | 
|------------------------- | 
|Fiscal Year:              | 
|2005 (remaining 9 months) | 
|2006                      | 
|2007                      | 
|2008                      | 
|2009                      | 
|Thereafter                | 
|                          | 
|Total                     | 
|                          | 

7.     DEBT

Debt consists of the following:

|                               | June 30, 2004 | April 2, 2004
|------------------------------ | ------------- | -------------
|2.25% convertible senior notes |               | $150,000     
|Revolving line of credit       |               | 35,052       
|                               |               |              
|                               |               | $185,052     
|                               |               |              

13

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2.25% Convertible Senior Notes

On March 8, 2004, the Company sold $150 million
 principal amount of 2.25% convertible senior notes which mature on March 15, 2024. Interest on
 the notes is payable semiannually in arrears on March 15 and September 15 of each year. Contingent
 interest is also payable during any six-month interest period, beginning with the six-month interest
 period commencing on March 15, 2009, if the average trading price of the notes for the five trading
 days ending on the second trading day immediately preceding such six-month interest period equals or
 exceeds 120% of the principal amount of the notes. The amount of contingent interest payable per note
 in respect of any six-month interest period is equal to 0.25% of the average trading price of a note
 for the trading period referenced above.

The notes may be converted into shares of the Companys
 common stock under the following circumstances: (i) prior to March 15, 2019, during any calendar
 quarter that the closing sale price of the Companys common stock for at least 20 of the 30 consecutive
 trading days ending the day prior to such quarter is greater than 120% of the applicable conversion
 price of $17.10 per share; (ii) if on any date after March 15, 2019, the closing sale price
 of the Companys common stock is greater than 120% of the then applicable conversion price; (iii) during
 the five consecutive business day period following any five consecutive trading day period in which
 the trading price for a note for each day of that trading period is less than 98% of the closing sale
 price of the Companys common stock on such corresponding trading day multiplied by the applicable conversion
 rate, provided that if the price of the Companys common stock issuable upon conversion is between 100%
 and 120% of the applicable conversion price, then holders will be entitled to receive upon conversion
 only the value of the principal amount of the notes converted plus accrued and unpaid interest, including
 contingent interest, if any; (iv) if the Company has called the notes for redemption; (v) during
 any period in which the Companys long-term issuer rating assigned by Moodys Investor Services (Moodys)
 is at or below Caa1 or the corporate credit rating assigned by Standard & Poors Ratings Services,
 a division of McGraw Hill Companies, Inc. and its successors (S&P), is at or below B-, or if the
 Company is no longer rated by at least one of S&P or Moodys; or (vi) upon the occurrence of
 specified corporate transactions described in the indenture governing the notes. The initial conversion
 rate is 58.4949 shares of common stock per each $1 (in thousands) principal amount of notes and is equivalent
 to an initial conversion price of $17.10 per share. The conversion rate is subject to adjustment if
 certain events occur, such as stock dividends or other distributions of cash, securities, indebtedness
 or assets; stock splits and combinations; issuances of rights or warrants; tender offers; or repurchases.
 Upon conversion, the Company has the right to deliver, in lieu of common stock, cash or a combination
 of cash and common stock. 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. Once the notes become convertible, the dilutive effect of the convertible notes
 may be reflected in diluted earnings per share by application of the treasury stock method. By application
 of the treasury stock method, 1.5 million shares would be included in the weighted average common
 shares outstanding used in computing diluted net income per share at a contingent conversion price of
 $20.51.

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 and matures on March 31, 2006. Availability of borrowings depends upon a borrowing
 base calculation consisting of accounts receivable and inventory, subject to satisfaction of certain
 eligibility requirements. Borrowings under the revolving line of credit bear interest at the Banks
 prime rate plus an applicable margin based on the Companys funded debt to earnings before interest,
 taxes, depreciation, and amortization ( the Leverage Ratio), or at LIBOR plus an applicable margin
 based on the Leverage Ratio. Additionally, the Credit Agreement bears interest at a fixed rate of 0.375%
 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. Borrowings under the revolving line of credit are anticipated to fund future requirements
 for working capital, capital expenditures, and acquisitions, and to issue letters of credit. Although
 the Credit Agreement expires on March 31, 2006, 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 Credit Agreements 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 fiscal year 2006.

14

---

As of June 30, 2004, the Company had sufficient
 assets based on eligible accounts receivable and inventory to borrow up to approximately $159.5 million
 under revolving line of credit and had outstanding borrowings of $35.1 million. The average daily interest
 rate, excluding debt issuance costs and unused line fees, for the three months ended June 30, 2004 and
 June 30, 2003 was 4.22% and 4.00%, respectively.

From time to time, the Company has amended the Credit
 Agreement to meet specific business objectives and requirements. The Credit Agreement dated May 20,
 2003 has been amended as follows:

- The First Amendment dated June 24, 2003 primarily finalized the syndication of the Credit Agreement to the Lenders.
- The Second Amendment dated December 16, 2003 primarily increased the maximum borrowings under the Credit Agreement from $150 million to $200 million. In addition, this amendment redefined the applicable margin applied to the Bank's prime rate or LIBOR.
- The Third Amendment dated March 1, 2004 obtained the Lenders' approval to issue additional indebtedness in the form of the convertible senior notes and to repurchase up to $42.0 million of the Company's common stock, including any repurchases made subsequent to May 20, 2003. In addition, this amendment locked the interest rate on the Credit Agreement at the Bank's prime rate or at LIBOR plus 2.00% for the period of one year, concurrent with the Company's fiscal year 2005.
- The Fourth Amendment dated June 1, 2004 obtained the Lenders' approval to increase the aggregate amount of permitted stock repurchases from $42.0 million to $55.0 million, which includes any stock repurchases made subsequent to May 20, 2003.

During the three months ended June 30, 2003, 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, Accounting
 for 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 (loss) in
 the accompanying consolidated balance sheets.

The swap carries a notional principal amount of $35.0 million
 and effectively fixes the interest rate on a portion of the revolving line of credit to 2.195%, prior
 to applying the Leverage Ratio margin discussed above. The swap agreement expires on March 28,
 2006 and settles monthly until expiration. At June 30, 2004 and April 2, 2004, the Company
 recorded an unrealized gain (loss), net of income tax benefit, of $249 and ($40), respectively, for
 the estimated fair value of the swap agreement in accumulated other comprehensive income (loss) in the
 accompanying consolidated balance sheet.

8.     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 upon
 which management regularly evaluates the Company. These segments are managed separately because of different
 customers and products. See Note 1, Background and 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. 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                         |                   
|                                        |                   
|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                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total provision for doubtful accounts   |                   
|                                        |                   
|INTEREST EXPENSE:                       |                   
|Physician Business                      |                   
|Elder Care Business                     |                   
|Corporate Shared Services               |                   
|                                        |                   
|Total interest expense                  |                   
|                                        |                   
|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              |                   
|                                        |                   

16

---

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

9.     COMMITMENTS AND
 CONTINGENCIES

Litigation

The Company, through its Elder Care Business, its Physician
 Business, and/or predecessor companies, has been named as one of many defendants in latex glove product
 liability claims in various federal and state courts. The defendants are primarily distributors of certain
 brands of latex gloves. Most of the cases have been settled by the Company's insurers, without expense
 to the Company.  Currently, one case remains in the state court in New Hampshire. Defense costs
 are currently allocated by agreement between a consortium of insurers on a pro rata basis for each case
 depending upon policy years and alleged years of exposure. All of the insurance carriers are defending
 subject to a reservation of rights. 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.

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 seeks indeterminate damages, including costs and expenses. 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 were based upon 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, during which the parties were not able to resolve
 their dispute. The case is set for trial in October 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.

The Company was named along with certain present and
 former directors and officers as a defendant in ten related class action complaints, the first of which
 was filed on July 13, 2001, in the United States District Court for the Middle District of Florida.
 Those ten actions were consolidated into a single action under the caption In Re PSS World Medical
 Inc. Securities Litigation. The amended complaint was filed as a purported class action on behalf of
 persons who purchased or acquired PSS World Medical, Inc. common stock at various times during the period
 between October 26, 1999 and October 3, 2000 and alleged, among other things, violations of
 Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder.
 The plaintiffs alleged that the Company issued false and misleading statements and failed to disclose
 material facts concerning, among other things, the Companys financial condition and that because of
 the issuance of false and misleading statements and/or failure to disclose material facts, the price
 of PSS World Medical, Inc. common stock was artificially inflated during the class period. The Court
 granted the plaintiffs motion for class certification in November 2002. The parties have signed
 a settlement agreement pursuant to which the Company has agreed to pay $6.75 million for the benefit
 of the class members, of which $6.5 million was covered by the Companys insurance policy. The
 settlement agreement has received court approval.

17

---

The Company has been named as a defendant in a suit
 brought by three former and present employees of the Company, entitled Angione, et al. v. PSS World
 Medical, Inc., which was filed on or about June 4, 2002 in the U.S. District Court for the
 Central District of California, Santa Ana Division. The court approved the transfer of venue, and the
 case is now pending in the United States Court for the Middle District of Florida, Jacksonville Division.
 The plaintiffs allege that the Company wrongfully classified its purchasers, operations leader trainees,
 and accounts receivable representatives as exempt from the overtime requirements imposed by the Fair
 Labor Standards Act and the California Wage Orders, and they seek to recover back pay, interest, costs
 of suit, declaratory and injunctive relief, and applicable statutory penalties. On February 21,
 2003, the court conditionally allowed the case to proceed as a collective action under the Fair Labor
 Standards Act. Two of the three original named plaintiffs also brought, but subsequently have settled,
 individual claims for gender discrimination and retaliation under Title VII of the Civil Rights
 Act of 1964 and the Equal Pay Act of 1963. The parties have engaged in extensive discovery on these
 claims. As a result of mediation in March 2004, the parties agreed on a framework for mediation
 or arbitration in October 2004 on the issue of the plaintiffs attorneys fees. If the attorneys
 fee issue is resolved, the parties have established a framework to discuss resolution of the overtime
 compensation claimed by the plaintiffs. A status hearing is set before the court on November 5,
 2004. No definitive settlement has been reached as of June 30, 2004.

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.

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 three-fourths 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 one and a half 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
 nine months to three years.

During July 2003, the Physician Business entered
 into an agreement with a supplier to purchase a minimum of $39,500 of influenza vaccines during the
 second and third quarters of fiscal year 2005. Currently, the Company has obtained non-binding, customer
 orders for 100% of the committed influenza vaccine purchases. As of June 30, 2004, the Physician
 Business has not purchased any inventory from this supplier related to the fiscal year 2005 purchase
 commitment.

On September 2, 2003, the Elder Care Business
 entered into an exclusive distribution agreement with a strategic vendor. Under the agreement, the Elder
 Care Business is required to purchase a minimum of $7,000 of product by September 30, 2004. For
 each one-year period thereafter through September 2008, the purchases shall not be less than the
 sum of $7,000 plus 7.0% compounded annually. As of June 30, 2004, the Elder Care Business has purchased
 approximately $6,038 of inventory from this strategic vendor. Under the terms of the distribution agreement,
 the vendor agrees to repurchase any products purchased by the Elder Care Business but not sold for any
 reason within 150 days after the delivery date. In addition, the Elder Care Business has the right to
 terminate the distribution agreement for any reason and without cause by providing written notice to
 the vendor 180 days prior to the effective date of such termination. Such termination would relieve
 the Elder Care Business of the purchase commitment described above.

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.

10.     DISCONTINUED
 OPEREATIONS

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, which offer attractive opportunities
 for growth and profitability.

18

---

On November 18, 2002, the Company completed the
 sale of 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
 (the Purchase Price). The cash proceeds received during fiscal year 2003 were reduced by approximately
 $5,815 for transaction costs. In connection with the closing of the transaction, the Company and the
 Buyer entered into a transitional services agreement, pursuant to which the Company provided certain
 reimbursable services to the Buyer for a period of one year. This agreement terminated during fiscal
 year 2004. The costs incurred related to providing services under the transition services agreement
 were included in general and administrative expenses and the reimbursement for these expenses were included
 in other income in the accompanying statements of operations. During the three months ended June 30,
 2003, the Company recognized approximately $1,854 of other income related to the transition services
 agreement.

The results of operations of the Imaging Business and
 the estimated loss on disposal have been classified as discontinued operations in accordance with
 SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The estimated
 loss on disposal, which was subject to change based on the final Purchase Price adjustments, was finalized
 during the three months ended June 30, 2004. The accompanying financial statements have been restated
 to conform to discontinued operations treatment for all historical periods presented.

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. Of this amount, the arbitrator ruled in favor of the Buyer for a purchase price adjustment
 of $1,821. During the settlement process, management estimated the net asset adjustment based on available
 information and revised its estimate on a quarterly basis, if needed. Managements estimated net asset
 adjustment of approximately $2,000 was recorded in prior periods. 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. Accordingly, a cash payment of approximately $4,279 was made to the Buyer during the second
 quarter of fiscal year 2005.

The loss on disposal of discontinued operations for
 the three months ended June 30, 2004 is as follows:

|                                 | Three Months Ended
June 30, 2004
|-------------------------------- | --------------------------------
|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 June 30, 2004, the related consolidated statements
 of operations and cash flows for the three-month periods ended June 30, 2004 and 2003. 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 2, 2004, 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 7, 2004, 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, and Statement of Financial Accounting Standards No. 145, Rescission of FASB
 Statements No.4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections, effective
 March 29, 2003. In our opinion, the information set forth in the accompanying consolidated balance
 sheet as of April 2, 2004, 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 5, 2004

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 43 full-service distribution
 centers, 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 may selectively make acquisitions to broaden its reach and leverage its infrastructure.

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 healthcare
 industry in the United States of America is approximately $43 billion. This market is comprised
 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 the $19 billion market for 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
 American population. For example, the January 2000 U.S. Bureau of the Census estimates that the elderly
 population in America will more than double by the year 2040. In 2000, four million Americans age 85
 years and older represented the segment of the population which is in the greatest need of long-term
 care and elder care services. By the year 2040, this segment of the population is projected to more
 than triple to over 14 million. 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 to benefit
 from the shift of procedures and diagnostic testing in hospitals to alternate sites, particularly physician
 offices and home care providers. Furthermore, as the cosmetic surgery and elective procedure markets
 continue to grow, physicians are increasingly performing more of these procedures in their offices.
 Currently, the estimated growth rate for the future of the physician and elder care markets is approximately
 4.0% and 1.5%, respectively. As a result of these market dynamics, the annual expenditures for healthcare
 services continue to increase in the United States of America. 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. Health care spending is
 projected to reach $2.6 trillion in 2010, or 16.8% of the estimated gross domestic product.

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 the cost of a significant portion of medical care in the United States of America. In
 recent years, federal and state-imposed limits on reimbursement to hospitals, long-term care facilities,
 and other healthcare providers have affected spending budgets in certain markets within the medical
 products industry. The nursing home and home healthcare industry have been impacted by these changes
 and a general economic downturn over the last few years. However, management believes that the recent
 changes to Medicare and Medicaid reimbursement rates and the introduction of the Medicare/Medicaid prescription
 drug program that became effective beginning in the U.S. government fiscal year 2004 will positively
 impact the financial condition of elder care providers and financial strength of the elder care industry.

21

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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           |           
|Elder Care Business          |           
|                             |           
|Days On Hand:(c)             |           
|Physician Business           |           
|Elder Care Business          |           
|                             |           
|Days in Accounts Payable:(d) |           
|Physician Business           |           
|Elder Care Business          |           
|                             |           
|Cash Conversion Days:(e)     |           
|Physician Business           |           
|Elder Care Business          |           
|                             |           
|Inventory Turnover:(f)       |           
|Physician Business           |           
|Elder Care Business          |           

22

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| | (a) | Net sales per billing day are net sales divided by the number of selling days in the fiscal quarter. The three months ended June 30, 2004 and 2003 consisted of 62 and 65 days, respectively.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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 JUNE 30, 2004 VERSUS THREE MONTHS
 ENDED JUNE 30, 2003

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 June 30, 2004 and
 2003 consist of 62 and 65 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       |                           | 
|                    |                           | 

23

---

Physician Business

The increase in net sales is primarily attributable
 to (i) an increase in pharmaceutical product sales of approximately $9.3 million, (ii) an
 increase in branded consumable product sales of approximately $7.5 million, (iii) an increase
 in equipment sales of approximately $2.8 million, and (iv) an increase in private label consumable
 product sales of approximately $1.4 million, offset by a decrease in immunoassay sales of approximately
 $1.0 million. Net sales continued to be positively impacted by revenue growth programs that were
 launched in June 2003 and that focus on consumable products, pharmaceutical products, and equipment.
 These programs include:

|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 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.
|---------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 and Immunoassay |                           
|                          |                           
|Total                     |                           
|                          |                           

Consumable product sales and pharmaceutical product
 sales growth quarter over quarter was approximately 6.6% and 36.5%, respectively, or 11.8% and 43.1%,
 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. Management expects the sales mix for the three and six months ended
 October 1, 2004 compared to the three and six months ended October 3, 2003 to be impacted
 by accelerating the shipment of influenza vaccine orders to its customers. Influenza vaccine
 orders for fiscal year 2004 were delivered to customers during the three months ended December 31,
 2003.

Elder Care Business

The increase in net sales is primarily attributable
 to (i) an increase in sales to home care facilities of $1.7 million, (ii) an increase
 in ancillary billing service fees of $1.6 million as a result of an acquisition by the Company
 consummated during fiscal year 2004, (iii) an increase of sales to independent nursing home facilities
 of approximately $5.8 million, offset by a decrease in sales to corporate-owned facilities of approximately
 $8.1 million. The growth in net sales to independent nursing home facilities primarily resulted
 from new customers, acquisitions, increased penetration in existing customer facilities, and the introduction
 of new product lines. The decrease in net sales to corporate accounts (national and regional nursing
 home facilities) is primarily attributable to national chain customers divesting nursing home facilities.
 Net sales during the three months ended June 30, 2004 decreased approximately $5.0 million
 as a result of the loss of Integrated Health Services, Inc., a national chain customer, during fiscal
 year 2004.

24

---

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

|ANSWERS |  | 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
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|ANSWERS HousekeepingANSWERS Home Medical Equipment |  | 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.
|-------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Partners in Efficiency |  | A product program designed to reduce customers product procurement costs and increase operating efficiencies in their businesses by committing to certain purchasing levels and standardized ordering procedures.
|---------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Fast Accurate Supply Technology |  | An ordering, bar-code scanning, inventory management software that utilizes a Palm Pilot to track inventory on hand at the customer locations and facilitate the automated replenishment of medical supplies.
|------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

During fiscal year 2004, management focused on growing
 independent and regional accounts to offset the impact of large, national chain customer divestitures.
 During fiscal year 2005, national nursing home chain customers may continue to divest underperforming
 facilities and facilities located in states with high malpractice claims, insurance costs, and litigation
 exposure.

During fiscal year 2004, the Elder Care Business focused
 on increasing sales to the home care market by establishing a dedicated sales force to service home
 care customers and introducing a new home care marketing program. As a result of the increased focus,
 the sales mix for fiscal year 2005 has changed based on a comparison to the same period during the prior
 year.

Net sales quarter over quarter were also positively
 impacted by business combinations consummated during fiscal years 2004. As a result of these business
 combinations, approximately $6.6 million of additional net sales were recognized during the three
 months ended June 30, 2004 compared to the three months ended June 30, 2003.

GROSS PROFIT

Gross profit for the three months ended June 30,
 2004 totaled $95.8 million, an increase of $7.9 million, or 9.0%, from gross profit of $87.9 million
 for the three months ended June 30, 2003. Gross profit as a percentage of net sales increased 50
 basis points to 29.0% during the three months ended June 30, 2004 from 28.5% during the three months
 ended June 30, 2003.

25

---

Physician Business

Gross profit dollars increased primarily due to the
 growth in net sales discussed above as well as an increase in vendor incentives and cash discounts earned
 of approximately $1.3 million. The growth in net sales combined with increased volume purchasing
 allowed the Physician Business to achieve higher vendor incentive targets compared to the prior period.
 Gross profit as a percentage of net sales decreased slightly as a result of the increase in sales of
 pharmaceutical products that generate lower gross margins compared to consumable products. Gross profit
 as a percentage of net sales may continue to 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.

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 primarily as
 a result of the replacement of revenues from lower margin national accounts with higher margin regional
 and independent accounts. In addition, gross profit margin has been positively impacted by providing
 ancillary billing services. Such services typically generate higher gross profit margins. Gross profit
 as a percentage of net sales may increase in future periods as a result of growth in ancillary billing
 services.

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 160 basis points quarter over quarter. This decrease in percentage 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 3.1% and 3.3% during the
 three months ended June 30, 2004 and 2003, respectively. This percentage decrease is a result of
 a decrease in freight costs due to negotiated lower freight rates and optimization of shipments between branches,
 offset by an increase in fuel costs. Management anticipates that rising fuel
 costs may continue to negatively impact the cost to deliver or expected improvements in cost to deliver
 during fiscal year 2005.

There were relatively insignificant changes in the
 other various components of general and administrative expenses quarter over quarter . Bad debt expense
 increased approximately $0.4 million primarily as a result of the increased sales volume which
 was offset by a decrease in restructuring costs of approximately $0.4 million as a result of completing
 certain plans during fiscal year 2004.

26

---

Elder Care Business

General and administrative expenses as a percentage
 of net sales increased 130 basis points quarter over quarter. Cost to deliver as a percentage of net
 sales was 4.1% and 4.3% during the three months ended June 30, 2004 and 2003, respectively. During
 fiscal year 2004, managements focused on reducing the cost to deliver. This percentage decrease is
 primarily a result of a decrease in freight costs due to negotiated lower freight rates offset by an
 increase in fuel costs. Management anticipates that rising fuel costs may negatively impact the cost
 to deliver or expected improvements in cost to deliver during fiscal year 2005.

There were general increases in the other various
 components of general and administrative expenses quarter over quarter . Such increases are primarily
 related to the acquisition of the ancillary billing company during fiscal year 2004, including (i) increased
 salary expense of approximately $0.7 million due to additional employees as a result of the business
 combinations completed during fiscal year 2004 and (ii) increased amortization of intangible assets
 of approximately $0.4 million as a result of the recent business combinations.

Corporate Shared Services

General and administrative expenses remained relatively
 constant quarter over quarter. In addition, general and administrative expenses as a percentage of consolidated
 net sales remained consistent quarter over quarter.

SELLING EXPENSES

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

Physician Business and Elder Care Business

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. The Physician Business selling expenses as a percentage of net sales decreased 50 basis
 points due to an increased sales volume of pharmaceutical products, which generate lower gross profit
 margins. In addition, the decrease is attributable to leveraging the net sales growth across fixed selling
 expenses. The Elder Care Business selling expenses as a percentage of net sales increased 80 basis
 points due to the addition of higher margin business, the addition of sales representatives primarily
 in the home care market and corporate account executives, and selling expenses as a percentage of net
 sales is higher for the ancillary billing company that was acquired during fiscal year 2004.

27

---

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 June 30,
 2004 totaled $1.9 million, an increase of $0.8 million, or 74.3%, from interest expense of
 $1.1 million for the three months ended June 30, 2003.  Interest expense and related
 debt issuance costs attributable to the Companys 2.25% convertible senior notes totaled approximately
 $1.1 million during the three months ended June 30, 2004. In addition, the Company maintained
 $35 million of its revolving credit facility under an interest rate swap arrangement at a fixed
 rate of 4.195% (consisting of an interest rate swap of 2.195% and a fixed credit spread of 2.0%) which
 resulted in $0.5 million of interest expense. The remaining interest expense of $0.3 million
 is attributable to amortization of the debt issuance costs and interest payments on short term working
 capital borrowings under the revolving credit agreement. During the three months ended June 30,
 2003, the Companys debt structure comprised of variable rate borrowings under its revolving credit
 agreement. During this period, the Company incurred approx $0.9 million of interest expense due
 to average outstanding borrowings of $82.7 million at a weighted average interest rate of 4.0%
 and an additional $0.2 million of interest expense related to the amortization of debt issuance costs.

OTHER INCOME

Other income for the three months ended June 30,
 2004 totaled $0.3 million, a decrease of $1.8 million from other income of $2.1 million
 for the three months ended June 30, 2003. The decrease is primarily related to the $1.9 million
 of other income that was recorded as a result of the transition services agreement associated with the
 sale of the Imaging Business. This agreement was terminated during fiscal year 2004.

PROVISION FOR INCOME TAXES

Provision for income taxes was $4.0 million for
 the three months ended June 30, 2004, an increase of $0.9 million from the provision for income
 taxes of $3.1 million for the three months ended June 30, 2003. The effective income tax rate
 was approximately 40.1% and 39.9% for the three months ended June 30, 2004 and 2003, respectively.
 The increase in the effective rate is primarily attributable to an increase in unfavorable permanent
 adjustments offset by an increase in the projected annual income from continuing operations before provision
 for income taxes. The change in the permanent adjustments primarily relates to an increase in nondeductible
 amortization of intangible assets and the decrease in the value of cash surrender value of life insurance
 policies.

28

---

During fiscal year 2002, the Internal Revenue Service
 (IRS) notified the Company that the 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 related to the fiscal years ended March 31,
 2000 and March 30, 2001. The Company appealed certain findings, which primarily relate 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.

During the three months ended December 31, 2003,
 the IRS began fieldwork on the audit of the fiscal years ended March 29, 2002 and March 28,
 2003. Management anticipates fieldwork for these tax years to be completed during the second quarter
 of fiscal year 2005. 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.

During fiscal year 2002, the Company sold the 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. Therefore, a valuation allowance was recorded. However, based on recent Tax Court
 rulings, the Company subsequently filed a refund claim during the three months ended December 31,
 2003 with the IRS to report an ordinary worthless stock deduction on the sale of the International Business.
 The filing reflects a reclassification of the nondeductible capital loss to a tax-deductible ordinary
 loss. The IRS formally denied this claim as part of the audit of the fiscal years ended March 31,
 2000 and March 30, 2001; therefore, the valuation allowance related to this item remains unchanged
 at June 30, 2004. The claim has been combined with the formal protest to the results of the audit
 and has been received by the Appeals Office of the IRS. If the Company is successful in defending its
 claim filed with the IRS in Appeals, the valuation allowance would be reversed against the provision
 for income taxes, which would reduce the provision for income taxes by approximately $5.2 million
 during the period in which the final ruling is obtained.

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 Company recorded a deferred tax asset of approximately
 $58.1 million at June 30, 2004, which represented the tax effect of the actual loss generated
 as a result of the sale of the Imaging Business. 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 §338(h)(10) of the Internal Revenue Code. Management estimates that this NOL will be carried forward
 and applied against regular taxable income in future years. In future periods, the provision for income
 taxes will be recorded in the statements of operations at the appropriate effective tax rate based on
 income generated by the Company.

NET INCOME

Net income for the three months ended June 30,
 2004 totaled $4.2 million compared to net income of $4.7 million for the three months ended
 June 30, 2003. 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.

29

---

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 used in financing activities     |                           
|                                          |                           
|Net increase (decrease) 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             |      
|                             |      
|                             |      
|                             |      
|                             |      

Discussion of Cash Flows From Operating, Investing,
 and Financing Activities

The primary components of net cash provided by operating
 activities consist of net income adjusted to reflect the effect of non-cash expenses, loss on the sale
 of property and equipment, and changes in operating working capital. During the three months ended June 30,
 2004:

- Accounts receivable decreased by approximately $4.4 million primarily due 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.
- Inventories increased by approximately $12.8 million primarily to support pharmaceutical sales growth in the Physician Business, and further expansion into the durable medical equipment and homecare markets by the Elder Care Business.
- Accounts payable increased approximately $13.9 million, which generally corresponds to the overall change in inventory levels.

30

---

Overall, net cash provided by operating activities
 during the three months ended June 30, 2004 was impacted by an increase in overall operating profit
 and the decrease in operational working capital needs to support net sales growth.

Net cash used in investing activities was $7.2 million
 and $3.7 million during the three months ended June 30, 2004 and 2003, respectively. Net cash
 used in investing activities primarily increased quarter over quarter due to increased capital expenditures
 and an earn-out payment made for a business combination completed during fiscal year 2004. During the
 three months ended June 30, 2004 and 2003, capital expenditures totaled $4.7 million and $2.6 million,
 respectively, of which approximately $3.8 million and $1.5 million, respectively, related to development
 and enhancement of the Companys ERP system, electronic commerce platforms, and supply chain integration.
 During the three months ended June 30, 2004, the Company paid approximately $1.7 million to
 the prior owners of a company acquired during fiscal year 2004 in accordance with an earn-out provision
 included in the purchase agreement. During the three months ended June 30, 2004 and 2003, the cash
 proceeds from the sale of the Imaging Business were reduced by approximately $0.5 million and $1.0 million,
 respectively, for the payment of transaction costs. During the three months ended October 1, 2004,
 a payment of approximately $4.3 million will be made as a result of the final ruling from the arbitrator
 regarding the disputed net asset calculation.

Net cash used in financing activities was $2.0 million
 and $6.0 million during the three months ended June 30, 2004 and 2003, respectively. Net cash
 used in financing activities was primarily impacted by the stock repurchase programs approved by the
 Board of Directors offset by the proceeds received from employees exercising stock options. The Company
 paid $3.0 million during the three months ended June 30, 2004 to repurchase approximately
 0.3 million shares of the Companys common stock at an average price of $10.74 per common share
 and paid $5.6 million during the three months ended June 30, 2003 to repurchase approximately
 1.0 million shares of common stock at an average price of $5.92 per common share. During the three
 months ended June 30, 2004, proceeds from the exercise of stock options were approximately $0.9 million.

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 and customer service levels in a
 time of rapid revenue growth. The revolving line of credit, which is an asset-based agreement, uses
 the strength of 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 June 30, 2004, the Company maintained a $200 million
 revolving line of credit. Availability of borrowings under the revolving line of credit depends upon
 the amount of a borrowing base consisting of accounts receivable and, upon satisfaction of certain requirements,
 inventory. At June 30, 2004, the Company had sufficient assets based on eligible accounts receivable
 and inventories to borrow up to $159.5 million of the $200.0 million revolving line of credit.

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 (i) maintaining appropriate levels of liquidity under its revolving line of credit and (ii) 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 June 30, 2004, the
 Company has not entered into any material working capital commitments, other than those that are disclosed
 in the future minimum obligation table below, that require funding.

2.25% Convertible Senior Notes

On March 8, 2004, the Company sold $150 million
 principal amount of 2.25% convertible senior notes which mature on March 15, 2024. Interest on
 the notes is payable semiannually in arrears on March 15 and September 15 of each year. Contingent
 interest is also payable during any six-month interest period, beginning with the six-month interest
 period commencing on March 15, 2009, if the average trading price of the notes for the five trading
 days ending on the second trading day immediately preceding such six-month interest period equals or
 exceeds 120% of the principal amount of the notes. The amount of contingent interest payable per note
 in respect of any six-month interest period is equal to 0.25% of the average trading price of a note
 for the trading period referenced above.

31

---

The notes may be converted into shares of the Companys
 common stock under the following circumstances: (i) prior to March 15, 2019, during any calendar
 quarter that the closing sale price of the Companys common stock for at least 20 of the 30 consecutive
 trading days ending the day prior to such quarter is greater than 120% of the applicable conversion
 price of $17.10 per share; (ii) if on any date after March 15, 2019, the closing sale price
 of the Companys common stock is greater than 120% of the then applicable conversion price; (iii) during
 the five consecutive business day period following any five consecutive trading day period in which
 the trading price for a note for each day of that trading period is less than 98% of the closing sale
 price of the Companys common stock on such corresponding trading day multiplied by the applicable conversion
 rate, provided that if the price of the Companys common stock issuable upon conversion is between 100%
 and 120% of the applicable conversion price, then holders will be entitled to receive upon conversion
 only the value of the principal amount of the notes converted plus accrued and unpaid interest, including
 contingent interest, if any; (iv) if the Company has called the notes for redemption; (v) during
 any period in which the Companys long-term issuer rating assigned by Moodys Investor Services (Moodys)
 is at or below Caa1 or the corporate credit rating assigned by Standard & Poors Ratings Services,
 a division of McGraw Hill Companies, Inc. and its successors (S&P), is at or below B-, or if the
 Company is no longer rated by at least one of S&P or Moodys; or (vi) upon the occurrence of
 specified corporate transactions described in the indenture governing the notes. The initial conversion
 rate is 58.4949 shares of common stock per each $1,000 (one thousand) principal amount of notes and
 is equivalent to an initial conversion price of $17.10 per share. The conversion rate is subject to
 adjustment if certain events occur, such as stock dividends or other distributions of cash, securities,
 indebtedness or assets; stock splits and combinations; issuances of rights or warrants; tender offers;
 or repurchases. Upon conversion, the Company has the right to deliver, in lieu of common stock, cash
 or a combination of cash and common stock. 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. Once the notes become convertible, the dilutive effect of the convertible
 notes may be reflected in diluted earnings per share by application of the treasury stock method. By
 application of the treasury stock method, 1.5 million shares would be included in the weighted
 average common shares outstanding used in computing diluted net income per share at a contingent conversion
 price of $20.51.

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 and matures on March 31, 2006. Availability of borrowings depends upon a borrowing
 base calculation consisting of accounts receivable and inventory, subject to satisfaction of certain
 eligibility requirements. Borrowings under the revolving line of credit bear interest at the Banks
 prime rate plus an applicable margin based on the Companys funded debt to earnings before interest,
 taxes, depreciation, and amortization ( the Leverage Ratio), or at LIBOR plus an applicable margin
 based on the Leverage Ratio. Additionally, the Credit Agreement bears interest at a fixed rate of 0.375%
 for any unused portion of the facility. The average daily interest rate, excluding debt issuance costs
 and unused line fees, for the three months ended June 30, 2004 and June 30, 2003 was 4.22% and 4.00%,
 respectively.  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. Borrowings
 under the revolving line of credit are anticipated to fund future requirements for working capital,
 capital expenditures, and acquisitions, and to issue letters of credit.

From time to time, the Company has amended the Credit
 Agreement to meet specific business objectives and requirements. The Credit Agreement dated May 20,
 2003 has been amended as follows:

- The First Amendment dated June 24, 2003 primarily finalized the syndication of the Credit Agreement to the Lenders.
- The Second Amendment dated December 16, 2003 primarily increased the maximum borrowings under the Credit Agreement from $150 million to $200 million. In addition, this amendment redefined the applicable margin applied to the Bank's prime rate or LIBOR.
- The Third Amendment dated March 1, 2004 obtained the Lenders' approval to issue additional indebtedness in the form of the convertible senior notes and to repurchase up to $42.0 million of the Company's common stock, including any repurchases made subsequent to May 20, 2003. In addition, this amendment locked the interest rate on the Credit Agreement at the Bank's prime rate or at LIBOR plus 2.00% for the period of one year, concurrent with the Company's fiscal year 2005.

32

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- The Fourth Amendment dated June 1, 2004 obtained the Lenders' approval to increase the aggregate amount of permitted stock repurchases from $42.0 million to $55.0 million, which includes any stock repurchases made subsequent to May 20, 2003.

During the three months ended June 30, 2003, 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 Statement
 of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and
 Hedging Activities, SFAS No. 138, Accounting for 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.

The swap carries a notional principal amount of $35.0 million
 and effectively fixes the interest rate on a portion of the revolving line of credit to 2.195%, prior
 to applying the Leverage Ratio margin discussed above. The swap agreement expires on March 28,
 2006 and settles monthly until expiration. At June 30, 2004 and April 2, 2004, the unrealized
 gain (loss), net of income tax benefit, for the estimated fair value of the swap agreement, which is
 recorded in accumulated other comprehensive income (loss) in the accompanying balance sheet, was immaterial.

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. Ratings are always subject to change and
 there can be no assurance that the Companys ratings will continue for any given period of time.

The Company maintains ratings with two leading corporate
 and credit rating agencies: Standard and Poors and Moodys Investor Services. On December 3, 2003,
 the Company received a revised outlook from Standard and Poors from stable to positive. Additionally,
 Standard and Poors affirmed its corporate credit and senior secured debt rating of BB-. The Company
 maintains a stable outlook from Moodys Investor Services and a senior implied rating of Ba3 and a long-term
 issuer rating of B1.

Stock Repurchase Programs

On June 8, 2004, the Companys Board of Directors
 approved a stock repurchase program authorizing the Company to repurchase up to a maximum of 5% of its
 common stock, or approximately 3.2 million common shares. These repurchases depend upon market
 conditions and other factors and are to be made 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.

Previously, the Companys Board of Directors approved
 a stock repurchase program on December 17, 2002, authorizing the Company to repurchase up to a
 maximum of 5% of its common stock, or approximately 3.4 million common shares. During the three
 months ended June 30, 2003, the Company repurchased approximately 1.0 million shares of common
 stock under this program at an average price of $5.92 per common share. This authorized stock repurchase
 program was terminated on February 26, 2004, when the Board of Directors authorized the repurchase
 of up to $35.0 million of common stock in connection with the issuance of the convertible senior
 notes. During the three months ended April 2, 2004, the Company repurchased approximately 3.0 million
 shares of common stock at an average price of $11.79 per common share, which completed the then outstanding
 stock repurchase programs.

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.

33

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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):

|                                  | Fiscal Years |        |  
|--------------------------------- | ------------ | ------ | -
|
|                                  |              |        |  
|Revolving line of credit(a)       |              |        | $
|2.25% convertible senior notes    |              |        |  
|Operating leases:                 |              |       
|Operating                         |              |        |  
|Restructuring                     |              |        |  
|Noncompetition agreements         |              |        |  
|Purchase commitments(b), (c), (d) |              | 44,297 |  
|                                  |              |        |  
|Total                             |              |        | $
|                                  |              |        |  

| | (a) | The revolving line of credit is classified as a current liability in accordance with Emergency Issues Task Force No. 95-22, Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements That Include both a Subjective Acceleration Clause and a Lock-Box Arrangement; however, the credit facility does not expire until March 31, 2006. The Company is not obligated to repay or refinance amounts outstanding under the revolving line of credit until fiscal year 2006.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The purchase commitments primarily relate to an exclusive distribution agreement entered into by the Elder Care Business, whereby a minimum purchase of $7.0 million of product by September 30, 2004 is required. For each one year period thereafter through September 2008, the purchases shall not be less than the sum of $7.0 million plus 7.0% compounded annually. Under the terms of the distribution agreement, the vendor agrees to repurchase any products purchased by the Elder Care Business but not sold for any reason within 150 days after the delivery date. In addition, the Elder Care Business has the right to terminate the distribution agreement for any reason and without cause by providing written notice to the vendor 180 days prior to the effective date of such termination. Such termination would relieve the Elder Care Business of the purchase commitment described above.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | The purchase commitments for fiscal year 2005 include an agreement entered into by the Physician Business, whereby a minimum purchase of approximately $39.5 million of influenza vaccines is required.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | 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 June 30, 2004, 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 2, 2004 filed on June 14, 2004.

34

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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 2, 2004.

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, have 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 are effective,
 providing them with material information relating to the Company, including its consolidated subsidiaries,
 as required to be disclosed in the reports the Company files or submits under the Exchange Act on a
 timely basis.

Changes in internal controls. There has been
 no significant change in the Companys internal control over financial reporting 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.
 However, during the fiscal quarter ended April 2, 2004, the following change in the Companys internal
 control over financial reporting was identified, which materially affected, or is reasonably likely
 to materially affect, the Companys internal controls over financial reporting:

| | During the quarter ended April 2, 2004, the Elder Care Business implemented the JD Edwards XE® platform at one of its full-service distribution center. The new operating system has different and effective internal controls over financial reporting compared to the effective controls of the old operating system. The implementation of this new operating system at the remaining full-service distribution centers will continue through fiscal year 2005 and is expected to be completed during the first quarter of fiscal year 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

See Note 9, 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 2, 2004.

# ITEM 2.   CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

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.

35

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The following table summarizes the Companys repurchase
 activity during the three months ended June 30, 2004.

|Period              | Total Numberof SharesPurchased | Average Price
Paid per Share | Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms | MaximumNumber (orApproximateDollar Value)of Shares thatMay Yet BePurchasedUnder thePlans orPrograms
|------------------- | ------------------------------ | ---------------------------- | ------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------
|                    |                                |                              |                                                                           |                                                                                                    
|April 3-April 30    |                                | --                           |                                                                           | --                                                                                                 
|May 1-May 31        |                                | --                           |                                                                           | --                                                                                                 
|June 1-June 30      |                                | 279,600                      |                                                                           | $     10.74                                                                                        
|                    |                                |                              |                                                                           |                                                                                                    
|Total first quarter |                                | 279,600                      |                                                                           | $     10.74                                                                                        
|                    |                                |                              |                                                                           |                                                                                                    

# ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

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

|ExhibitNumber | Description                                                                                                                                                                                                                     
|------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|              |                                                                                                                                                                                                                                 
|10.1          | Fourth Amendment to Credit Agreement, dated as of June 1, 2004, among the Company, each of the Company's subsidiaries therein named, the Lenders party to the amendment, and the Bank of America, N.A., as agent for the Lenders
|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                                                                                                                                                                       

36

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(b)     Reports on Form 8-K:

The
 following current reports on Form 8-K were filed or furnished during the three months ended June 30,
 2004:

|Date of Report | Item Reported                                                                                                                                                                                                                                          
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|April 28, 2004 | Item 9. Furnished to announce an online Web simulcast of the Companys Investor Day meeting to be held on Thursday, April 29, 2004. Item 12. Furnished to announce the Companys preliminary financial results for the fiscal year ended April 2, 2004.
|May 26, 2004   | Item 12. Furnished to announce the Company's financial results for the quarter and fiscal year ended April 2, 2004.                                                                                                                                    
|June 8, 2004   | Items 5 and 7. Filed to announce that the Board of
 Directors authorized management to repurchase up to 5% of the outstanding common stock of the Company.                                                                                             

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 9, 2004.

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

37