# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, 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       October 3, 2003
| | ----------------------------------------------------

[
]         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                                                                                                           | 59-2280364                           
|----------------------------------------------------------------------------------------------------------------- | -------------------------------------
|(State or other jurisdiction   
of incorporation or organization)                                                 | (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 November 10, 2003 was
67,046,373 shares.

---

# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES

# OCTOBER 3, 2003

# TABLE OF CONTENTS

|Item |                                                                                       | Page
|---- | ------------------------------------------------------------------------------------- | ----
|     | Information Regarding Forward-Looking Statements                                      | 3   
|    
|     | Part I--Financial Information                                                        
|    
|1.   | Financial Statements:                                                                
|    
|     | Consolidated Balance Sheets--October 3, 2003 and March 28, 2003                       | 4   
|    
|     | Consolidated Statements of Operations for the Three and Six Months Ended October 3,   |     
|     | 2003 and September 27, 2002                                                           | 5   
|    
|     | Consolidated Statements of Cash Flows for the Three and Six Months Ended October 3,  
|     | 2003 and September 27, 2002                                                           | 6   
|    
|     | Notes to Consolidated Financial Statements                                            | 7   
|    
|     | Independent Accountants' Review Report                                                | 21  
|    
|2.   | Management's Discussion and Analysis of Financial Condition and Results of Operations | 22  
|    
|3.   | Quantitative and Qualitative Disclosures About Market Risk                            | 40  
|    
|4.   | Controls and Procedures                                                               | 40  
|    
|     | Part II--Other Information                                                           
|    
|1.   | Legal Proceedings                                                                     | 41  
|    
|2.   | Changes in Securities and Use of Proceeds                                             | 41  
|    
|3.   | Defaults Upon Senior Securities                                                       | 41  
|    
|4.   | Submission of Matters to a Vote of Security Holders                                   | 41  
|    
|5.   | Other Information                                                                     | 41  
|    
|6.   | Exhibits and Reports on Form 8-K                                                      | 42  
|    
|     | Signature                                                                             | 43  

Page 2

---

# CAUTIONARY STATEMENTS

Forward-Looking Statements

This Form 10-Q includes
forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). All statements regarding
the Companys, and its subsidiaries (including subsidiaries that are limited
liability companies and limited partnerships), expected future financial position, results
of operations, cash flows, funds from operations, financing plans, business strategy,
budgets, projected costs, capital expenditures, competitive positions, growth
opportunities, plans and objectives of management for future operations, and statements
that include words such as anticipate, believe, plan,
estimate, expect, intend, may,
could, and other similar expressions are forward-looking statements. Such
forward-looking statements are inherently uncertain, and stockholders must recognize that
actual results may differ from the Companys expectations.

Actual future results and trends for
the Company may differ materially depending on a variety of factors discussed in the
Companys Annual Report on Form 10-K for the year ended March 28, 2003,
this Form 10-Q, and elsewhere in the Companys filings with the Securities and
Exchange Commission (the Commission). Factors that may affect the plans,
financial condition, or results of operations of the Company include, without limitation,
those listed in the Companys Annual Report on Form 10-K for the year ended
March 28, 2003 under the heading Factors That May Affect Future Results,
(refer to Item 7, Managements Discussion and Analysis of Financial Condition
and Results of Operations) and (i) the ability of the Company to successfully
implement its strategic business plan; (ii) the availability of sufficient capital
with satisfactory terms to finance the Companys business plans;
(iii) competitive factors; (iv) the ability of the Company to adequately defend
or reach a settlement of threatened or outstanding litigation; (v) changes in labor,
equipment, and capital costs; (vi) changes in regulations affecting the
Companys business; (vii) changes in Medicare supplemental reimbursements for
services provided by long-term care providers and physicians; (viii) future
acquisitions or strategic partnerships; and (ix) general business and economic
conditions. Many of these factors are outside the control of the Company and its
management. The Company wishes to caution readers not to place undue reliance on any such
forward-looking statements, which are made pursuant to the Private Securities Litigation
Reform Act of 1995 and, as such, speak only as of the date made. The Company undertakes no
duty to update such forward-looking statements.

Page 3

---

# PART I--FINANCIAL
INFORMATION

ITEM 1.    
          FINANCIAL STATEMENTS

# PSS WORLD MEDICAL, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS
OCTOBER 3, 2003 AND MARCH 28, 2003(Dollars in Thousands,
Except Share Data)

# ASSETS

|                            | October 3, 2003 | March 28, 2003
|--------------------------- | --------------- | --------------
|
|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            |                 |               
|Employee advances           |                 |               
|Deferred tax assets         |                 |               
|Other                       |                 |               
|                            |                 |               
|Total assets                |                 |               
|                            |                 |               

|LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                                                              
|Current Liabilities:                                                                                                                                                          
|Accounts payable                                                                                                                                                              
|Revolving line of credit                                                                                                                                                      
|Accrued expenses                                                                                                                                                              
|Other                                                                                                                                                                         
|                                                                                                                                                                              
|Total current liabilities                                                                                                                                                     
|Other noncurrent liabilities                                                                                                                                                  
|                                                                                                                                                                              
|Total liabilities                                                                                                                                                             
|                                                                                                                                                                              
|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, 67,028,150 and 67,870,561 shares issued       and outstanding at October 3, 2003 and March 28, 2003, respectively
|Additional paid-in capital                                                                                                                                                    
|Accumulated deficit                                                                                                                                                           
|Accumulated other comprehensive income                                                                                                                                        
|Unearned compensation                                                                                                                                                         
|                                                                                                                                                                              
|Total shareholders' equity                                                                                                                                                    
|                                                                                                                                                                              
|Total liabilities and shareholders' equity                                                                                                                                    
|                                                                                                                                                                              

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

Page 4

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# PSS WORLD MEDICAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND SIX
MONTHS ENDED OCTOBER 3, 2003 AND SEPTEMBER 27, 2002(Unaudited) (Dollars in Thousands,
Except Per Share Data)

|                                                   | Three Months Ended | Six 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 (expense)                             |                    |                 
|                                                   |                    |                 
|                                                   |                    |                 
|                                                   |                    |                 
|Income from continuing operations before provision |                    |                 
|for income taxes                                   |                    |                 
|Provision for income taxes                         |                    |                 
|                                                   |                    |                 
|Income from continuing operations                  |                    |                 
|                                                   |                    |                 
|Discontinued operations:                           |                    |                 
|Loss from discontinued operations (net of          |                    |                 
|benefit for income taxes of $745, and              |                    |                 
|$1,209, respectively)                              |                    |                 
|Loss on disposal of discontinued operations        |                    |                 
|(net of benefit for income taxes of $206,          |                    |                 
|$34,654, $206, and $34,654, respectively)          |                    |                 
|                                                   |                    |                 
|Total loss from discontinued operations            |                    |                 
|                                                   |                    |                 
|Net income (loss)                                  |                    |                 
|                                                   |                    |                 
|Earnings (loss) per share - Basic:                 |                    |                 
|Income from continuing operations                  |                    |                 
|Total loss from discontinued operations            |                    |                 
|                                                   |                    |                 
|Net income (loss)                                  |                    |                 
|                                                   |                    |                 
|Earnings (loss) per share - Diluted:               |                    |                 
|Income from continuing operations                  |                    |                 
|Total loss from discontinued operations            |                    |                 
|                                                   |                    |                 
|Net income (loss)                                  |                    |                 
|                                                   |                    |                 

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

---

# 

# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED OCTOBER 3, 2003 AND SEPTEMBER 27, 2002

# (Unaudited) (Dollars
in Thousands, Except Per Share Data)

|                                                                      | Six Months Ended
|--------------------------------------------------------------------- | ----------------
|
|Operating Activities:                                                 |                 
|Net income (loss)                                                     |                 
|Adjustments to reconcile net income to net cash (used in) provided by |                 
|operating activities:                                                 |                 
|Loss from discontinued operations                                     |                 
|Depreciation                                                          |                 
|Amortization of intangible assets                                     |                 
|Amortization of debt issuance costs                                   |                 
|Provision for doubtful accounts                                       |                 
|Provision for notes receivable                                        |                 
|Provision (benefit) 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 discontinued operations                          |                 
|                                                                      |                 
|Net cash (used in) provided by operating activities                   |                 
|                                                                      |                 
|Investing Activities:                                                 |                 
|Payment for business combinations                                     |                 
|Capital expenditures                                                  |                 
|Payment of transaction costs for sale of Imaging Business             |                 
|Payments on noncompete agreements                                     |                 
|Proceeds from sales of property and equipment                         |                 
|Net cash used in discontinued operations                              |                 
|                                                                      |                 
|Net cash used in investing activities                                 |                 
|                                                                      |                 
|Financing Activities:                                                 |                 
|Net proceeds from the revolving line of credit                        |                 
|Proceeds from note receivable                                         |                 
|Proceeds from issuance of common stock                                |                 
|Purchase of treasury stock                                            |                 
|Repayment of Senior Subordinated Notes                                |                 
|Payment of premiums for retirement of Senior Subordinated Notes       |                 
|                                                                      |                 
|Net cash provided by (used in) financing activities                   |                 
|                                                                      |                 
|Net decrease in cash and cash equivalents                             |                 
|Cash and cash equivalents, beginning of period                        |                 
|                                                                      |                 
|Cash and cash equivalents, end of period                              |                 
|                                                                      |                 
|                                                                      |                 

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

Page 6

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# PSS WORLD MEDICAL,
INC. AND SUBSIDIARIES

# NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

# (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,
is a specialty marketer and distributor of medical products to alternate-site healthcare
providers including physician offices, long-term care facilities, and home care providers
through 46 full-service distribution centers, which serve all 50 states throughout the
United States of America. 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 and overhead associated with the Imaging Business,
which was sold on November 18, 2002.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Physician Business, or the Physician Sales & Service division, is the leading
distributor of medical supplies, equipment, and pharmaceuticals to primary care
office-based physicians in the United States of America. The Physician Business currently
operates 33 full-service distribution centers, 19 break-freight locations, and 4 other
strategic 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 United States of America. The Elder Care Business currently operates
13 full-service distribution centers and 1 break-freight location 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 United States of America. As a result, DIs results of operations for
the three and six months ended September 27, 2002 have been classified as
discontinued operations. Refer to Note 12, 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 March 28, 2003 has been derived from the Companys
audited consolidated financial statements for the year ended March 28, 2003. 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 year ended
March 28, 2003.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 7

---

| | The Company reports its year-end financial position, results of operations, and cash flows on
the Friday closest to March 31. Fiscal year 2004 consists of 53 weeks or 258 selling
days whereas fiscal year 2003 consisted of 52 weeks or 253 selling days. As a
result of the increase in selling days during fiscal year 2004, the Company changed the
reporting of its quarter-end financial results to distribute the 5 additional
selling days among all four quarters. During fiscal year 2004, the Company will report
its quarter-end financial position, results of operations, and cash flows on the calendar
month-end for those quarters in which physical inventories are not taken and on the
Friday closest to month-end for those quarters in which physical inventories are taken.
During fiscal year 2003, the Company reported its quarter-end financial position, results
of operations, and cash flows on the Friday closest to June 30, September 30,
and December 31. The following table summarizes the number of selling days in each
period presented.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       | Three Months Ended | Six Months Ended
|---------------------- | ------------------ | ----------------
|
|Number of selling days | 67                 | 63              

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

| | Reclassification
| | ----------------

| | Certain amounts reported in prior years have been reclassified to conform to the fiscal year 2004
presentation. The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 145, Rescission of FASB Statements No. 4, 44,
and 64, Amendment of FASB Statement No. 13, and Technical Corrections, on March 29,
2003, the first day of fiscal year 2004. As a result, the loss from the early
extinguishment of the 8 1⁄2% Senior Subordinated Notes (the Notes),
which was reported as an extraordinary loss during fiscal year 2003, was reclassified to
income from continuing operations. The premiums paid to retire the Notes early, the
accelerated amortization of debt issuance costs, and the related income tax benefit were
reclassified to other income (expense), interest expense, and provision for income taxes,
respectively, in the consolidated statements of operations. The following tables
summarize the impact of this reclassification.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | Three Months Ended September 27, 2002
|-------------------------- | -------------------------------------
|
|Interest expense           |                                      
|Other income (expense)     |                                      
|Provision for income taxes |                                      

|                           | Six Months Ended September 27, 2002
|-------------------------- | -----------------------------------
|
|Interest expense           |                                    
|Other income (expense)     |                                    
|Provision for income taxes |                                    

Page 8

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| | Revenue Recognition
| | -------------------

| | Revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the selling price is fixed or determinable, and
collectibility is reasonably assured. The Company assesses collectibility based upon a
thorough evaluation of current and prospective customers credit history and ability
to pay. The Company establishes and adjusts credit terms and limits to reflect customer
credit worthiness based upon this evaluation. Customer credit evaluations are updated
periodically and for specific events or circumstances such as, deterioration in the aging
of balances due, bankruptcy filings, or notice of financial difficulties.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | There
are two primary sources of revenue: the sale of consumable products and equipment.
Revenue from the sale of consumable products is recognized when products are shipped or
delivered. Revenue from the sale of single deliverable equipment is generally recognized
when the equipment is shipped, unless there are multiple deliverables, in which case
revenue is recognized when all obligations to the customer are fulfilled and when
installation and training are complete.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
Companys customers have the right to return consumable products and equipment.
Sales are reported net of returns. The Company maintains an allowance for potential
product returns and records a provision for estimated product returns, which is based on
historical experience as well as specific identification of significant returns, as a
reduction to net sales.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Recent Accounting Pronouncements
| | --------------------------------

| | Financial
Accounting Standards Board Interpretation (FIN) No. 46, Consolidation of
Variable Interest Entities (FIN 46), clarified the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, to certain
entities in which equity investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support from other parties. FIN 46
is applicable immediately for variable interest entities created after January 31,
2003. For variable interest entities created prior to January 31, 2003, the
provisions of FIN 46 are applicable no later than July 1, 2003. This
Interpretation will not have an effect on the Companys consolidated financial
statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2003, the Financial Accounting Standards Board (FASB) issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS 149).
SFAS 149 amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging activities
under SFAS 133. In particular, this Statement clarifies under what circumstances a
contract with an initial net investment meets the characteristic of a derivative and when
a derivative contains a financing component that warrants special reporting in the
statement of cash flows. This Statement is generally effective for contracts entered into
or modified after June 30, 2003 and is not expected to have a material impact on the
Companys financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
FASB recently issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity (SFAS 150). This
Statement requires issuers to classify as liabilities (or assets in some circumstances)
three classes of freestanding financial instruments that embody obligations for the
issuer. Previously, many such instruments had been classified as equity. A freestanding
financial instrument is an instrument that is entered into separately and apart from any
of the entitys other financial instruments or equity transactions, or that is
entered into in conjunction with some other transaction and is legally detachable and
separately exercisable, such as certain put and call options. These provisions are
effective for financial instruments entered into or modified after May 31, 2003, and
otherwise is effective at the beginning of the second quarter. The Company does not
currently have any financial instruments that are affected by this statement.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | EARNINGS
PER SHARE
|-- | ------------------

| | In
accordance with SFAS No. 128, Earnings Per Share, the calculation of basic earnings
per common share and diluted earnings per common share is presented below (amounts in
thousands, except per share data):
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 9

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|                                        | Three Months Ended | Six Months Ended
|--------------------------------------- | ------------------ | ----------------
|
|Income from continuing operations       |                    |                 
|Total loss from discontinued operations |                    |                 
|(net of benefit for income taxes of     |                    |                 
|$206, $35,399, $206, and $35,863)       |                    |                 
|                                        |                    |                 
|Net income (loss)                       |                    |                 
|                                        |                    |                 
|Earnings (loss) per share - Basic:      |                    |                 
|Income from continuing operations       |                    |                 
|before extraordinary loss               |                    |                 
|Total loss from discontinued            |                    |                 
|operations                              |                    |                 
|                                        |                    |                 
|Net income (loss)                       |                    |                 
|                                        |                    |                 
|Earnings (loss) per share - Diluted:    |                    |                 
|Income from continuing operations       |                    |                 
|Total loss from discontinued            |                    |                 
|operations                              |                    |                 
|                                        |                    |                 
|Net income (loss)                       |                    |                 
|                                        |                    |                 
|Weighted average shares outstanding:    |                    |                 
|Common shares                           |                    |                 
|Assumed exercise of stock options       |                    |                 
|Assumed vesting of restricted stock .   |                    |                 
|                                        |                    |                 
|Diluted shares outstanding              |                    |                 
|                                        |                    |                 

| | Diluted earnings per share assumes options to purchase shares of common stock have been exercised
using the treasury stock method. The following table summarizes the options to purchase
common stock that were outstanding and not included in the computation of diluted
earnings per share for each of the periods because the options exercise prices
exceeded the fair market value of the Companys common stock.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     | Three Months Ended | Six Months Ended
|------------------------------------ | ------------------ | ----------------
|
|                                    
|Out-of-the-money options outstanding | 4.0                | 5.1             

| | On December 17, 2002, 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 3.4 million
common shares, in the open market, in privately negotiated transactions, or otherwise.
During the six months ended October 3, 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. During the six months ended September 27, 2002, the Company
repurchased approximately 1.3 million shares of common stock at an average price of
$7.72 per common share under a separate share repurchase program that authorized the
Company to repurchase up to a maximum of 5% or 3.6 million common shares, which was
completed in December 2002.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 10

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|3. | COMPREHENSIVE INCOME (LOSS)
|-- | ---------------------------

| | Comprehensive
income (loss) is defined as net income (loss) plus direct adjustments to shareholders equity.
The following details the components of comprehensive income (loss) for the periods
presented.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|4. | STOCK-BASED COMPENSATION
|-- | ------------------------

| | The
Company applies the intrinsic-value-based method of accounting prescribed by Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations including FIN No. 44, Accounting for Certain
Transactions Involving Stock Compensation, an Interpretation of APB Opinion No. 25,
to account for its fixed-plan stock options. 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. SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123),
established accounting and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. As allowed by SFAS 123, the
Company has elected to continue to apply the intrinsic-value-based method of accounting
described above, and has only adopted the disclosure requirements of SFAS 123. The
following table illustrates the effect on net income and earnings per share if the
fair-value-based method had been applied to all outstanding and unvested awards in each
period.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Page 11

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|5. | 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 October 3, 2003 | As of March 28, 2003
|-------------------------- | --------------------- | --------------------
|
|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                      |                       |                     
|                           |                       |                     

| | Total amortization expense for intangible assets for the three months ended October 3,
2003 and September 27, 2002 was $599, and $570, respectively. Total amortization
expense for intangible assets for the six months ended October 3, 2003 and September 27,
2002 was $1,100 and $1,188, respectively. The estimated amortization expense for the next
five fiscal years is as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | 
|------------------------- | 
|Fiscal Year:              | 
|2004 (remaining 6 months) | 
|2005                      | 
|2006                      | 
|2007                      | 
|2008                      | 
|Thereafter                | 
|                          | 
|Total                     | 
|                          | 

Page 12

---

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

|(in years)                    | October 3,
2003 | March 28,
2003
|----------------------------- | --------------- | --------------
|                             
|Noncompetition Agreements     |                 | 6.6           
|Signing Bonuses               |                 | 4.2           
|Other Intangibles             |                 | 8.9           
|                              |                 |               
|Total weighted-average period |                 | 7.4           
|                              |                 |               

| | Future minimum payments required under noncompetition agreements at October 3, 2003 are as
follows:
| | ---------------------------------------------------------------------------------------------------

|                          |     
|------------------------- | ----
|Fiscal Year:              |     
|2004 (remaining 6 months) | $289
|2005                      | 219 
|2006                      | 36  
|2007                      | 35  
|2008                      | 28  
|Thereafter                | 114 
|                          |     
|Total                     | $721
|                          |     

|6. | REVOLVING
LINE OF CREDIT
|-- | ------------------------

| | On
May 20, 2003, the Company entered into an amended and restated Credit Agreement (the
Credit Agreement), by and among the Company, as borrower thereunder (the
Borrower), the subsidiaries of the Borrower party thereto, the lenders from
time to time party thereto (the Lenders), and Bank of America, N.A., as Agent
for the Lenders. The Credit Agreement provides for a three-year credit facility
consisting of an aggregate $150 million revolving line of credit and letters of
credit (the Credit Facility). Availability of borrowings under the Credit
Facility depends upon the amount of a borrowing base consisting of accounts receivable
and, upon satisfaction of certain requirements, inventory. The Credit Facility bears
interest at the Banks prime rate plus a margin of between 0.00% and 1.00% based on
the Companys ratio of funded debt to earnings before interest, taxes, depreciation,
and amortization (EBITDA), as defined in the Credit Agreement, or at LIBOR
plus a margin of between 1.75% and 3.00% based on the Companys ratio of funded debt
to EBITDA. 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. Initial proceeds from the Credit
Facility were used to refinance existing indebtedness outstanding under the original
credit facility and future proceeds will be used to issue letters of credit and finance
the ongoing working capital requirements of the Company. The Credit Facility matures on
March 28, 2006. At October 3, 2003 and March 28, 2003, there was $111,949
and $83,000, respectively, outstanding under the revolving line of credit.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the three months ended June 28, 2003, the Company entered into an interest rate swap
agreement to hedge the variable interest rate debt 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 the 1-month LIBOR. The changes in
market value of this financial instrument are highly correlated with changes in market
values 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, and SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB
Statement No. 133, 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 13

---

| | 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 funded debt to EBITDA margin discussed above. The swap agreement expires on March 28,
2006 and settles monthly until expiration. At October 3, 2003, the Company recorded
an unrealized gain, net of taxes, of $16 for the estimated fair value of the swap
agreement in accumulated other comprehensive income in the accompanying balance sheet.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | PURCHASE BUSINESS COMBINATIONS
|-- | ------------------------------

| | The
following acquisitions were accounted for under the purchase method of accounting in
accordance with SFAS No. 141, Business Acquisitions (SFAS 141);
accordingly, the operations of the acquired company have been included in the Companys
results of operations subsequent to the date of acquisition. The assets acquired and
liabilities assumed were recorded at their estimated fair values at the date of the
acquisition as determined by management based on information currently available.
Supplemental unaudited pro forma information, assuming these acquisitions were made at
the beginning of the immediate preceding period, is not presented as the results would
not differ materially from the amounts reported in the accompanying consolidated
statements of operations.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fiscal
Year 2004
| | ----------------

| | On
September 4, 2003, the Company acquired certain assets and assumed certain
liabilities of a long-term care medical supply distributor. The aggregate purchase price
was $13,452. The Company obtained independent valuations of certain intangible assets;
however, the allocation of the purchase price is subject to revision. The following table
summarizes the estimated fair values of the assets acquired and liabilities assumed at
the date of acquisition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      |         
|--------------------- | --------
|Accounts receivable   | $  3,743
|Inventory             | 1,339   
|Other current assets  | 915     
|Goodwill              | 6,486   
|Intangibles           | 4,600   
|                      |         
|Total assets acquired | 17,083  
|Current liabilities   | 3,631   
|                      |         
|Net assets acquired   | $13,452 
|                      |         

| | The $6,486 of goodwill was assigned to the Elder Care Business and is expected to be
nondeductible for tax purposes. Of the $4,600 of acquired intangible assets, $700 and
$3,900 was assigned to noncompete agreements and customer relationships, respectively.
The acquired intangible assets have a weighted-average useful life of approximately 6.2
years.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fiscal Year 2003
| | ----------------

| | On
September 16, 2002, the Company acquired certain assets and assumed certain
liabilities of a long-term care medical supply distributor. The aggregate purchase price
was $4,464. The Company obtained independent valuations of certain intangible assets and
finalized the allocation of the purchase price during the three months ended December 27,
2002. The following table summarizes the estimated fair values of the assets acquired and
liabilities assumed at the date of acquisition.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                      |       
|--------------------- | ------
|Accounts receivable   | $1,230
|Inventory             | 671   
|Goodwill              | 1,893 
|Intangibles           | 1,694 
|                      |       
|Total assets acquired | 5,488 
|Current liabilities   | 1,024 
|                      |       
|Net assets acquired   | $4,464
|                      |       

Page 14

---

| | The
$1,893 of goodwill was assigned to the Elder Care Business and is expected to be
deductible for tax purposes. Of the $1,694 of acquired intangible assets, $265, $538, and
$891 was assigned to noncompete agreements, customer contracts, and customer
relationships, respectively. The acquired intangible assets have a weighted-average
useful life of approximately 5.6 years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8. | GOODWILL
|-- | --------

| | In
accordance with SFAS 142, Goodwill and Other Intangible Assets, the changes in the
carrying value of goodwill for the six months ended October 3, 2003 are as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Physician
Business | Elder Care
Business | Total
|----------------------------- | ------------------ | ------------------- | -----
|Balance as of March 28, 2003  |                    |                     | $    
|Purchase business combination |                    |                     |      
|                              |                    |                     |      
|Balance as of October 3, 2003 |                    |                     | $    
|                              |                    |                     |      

| | The Company performs its annual impairment test for each reporting unit on the last day of
each fiscal year.
| | ------------------------------------------------------------------------------------------------------------

|9. | NOTE RECEIVABLES
|-- | ----------------

| | At March 28, 2003, the Company had three note receivables (the Loans)
outstanding from its former Chairman and Chief Executive Officer. The Loans, which bear
interest at the applicable Federal rate for long-term obligations, were issued to the
former Chairman and Chief Executive Officer in order to consolidate debt incurred in
relation to certain real estate activities, as well as to provide the cash needed to
pay-off personal debt. One Loan is unsecured, one Loan is secured by common stock of the
Company, and the other Loan is secured by a split-dollar life insurance policy. As part
of the Companys ongoing review of the realization of the Loans during fiscal year
2003, during the three months ended September 27, 2002, the Company recorded an
allowance for doubtful accounts of $2,939 against the unsecured Loan. This allowance did
not represent a forgiveness of debt.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
October 2, 2003 the Loan secured by common stock matured. As a result, the Company
received a cash payment of $1,190, which consisted of principal and interest payments of
$997 and $193, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | SEGMENT INFORMATION
|--- | -------------------

| | The
Companys reportable segments are strategic businesses that offer different products
and services to different segments of the healthcare industry, and are the basis for
which management regularly evaluates the Company. These segments are managed separately
because of different customers and products. 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:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Corporate
Shared Services, includes allocated and unallocated costs of corporate departments that
provide services to the operating segments and overhead associated with the Imaging
Business, which was sold on November 18, 2002.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 15

---

|                                        | Three Months Ended | Six 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                     |                    |                 
|                                        |                    |                 
|Total provision for doubtful accounts   |                    |                 
|                                        |                    |                 
|INTEREST EXPENSE:                       |                    |                 
|Physician Business                      |                    |                 
|Elder Care Business                     |                    |                 
|Corporate Shared Services               |                    |                 
|                                        |                    |                 
|Total interest expense                  |                    |                 
|                                        |                    |                 
|PROVISION (BENEFIT) FOR INCOME TAXES:   |                    |                 
|Physician Business                      |                    |                 
|Elder Care Business                     |                    |                 
|Corporate Shared Services               |                    |                 
|                                        |                    |                 
|Total provision for income taxes        |                    |                 
|                                        |                    |                 
|CAPITAL EXPENDITURES:                   |                    |                 
|Physician Business                      |                    |                 
|Elder Care Business                     |                    |                 
|Corporate Shared Services               |                    |                 
|                                        |                    |                 
|Total capital expenditures              |                    |                 
|                                        |                    |                 
|                                        |                    |                 

---

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

|11. | COMMITMENTS
AND CONTINGENCIES
|--- | -----------------------------

| | Litigation
| | ----------

| | The
Company, through its Elder Care Business, its Physician Supply 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. Currently, state litigation exists in New
Hampshire and California, while Federal litigation is present in Washington, New
Hampshire, and Ohio. 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 purported 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 Exchange Act, and Rule 10b-5 promulgated
there under. 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. By
order dated December 18, 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. The Court will conduct a hearing
on class certification on December 5, 2003. Mediation is to occur during the week of June
15, 2004. The case is set for trial in April 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 has been named 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. Following
that consolidation, on March 22, 2002, lead plaintiffs served their amended class
action complaint for violation of securities laws. After denial of their motion to
dismiss the amended complaint, the Company and the other defendants served their answer
to the amended complaint on August 12, 2002, and the parties are now engaged in
discovery. The amended complaint named the Company along with certain present and former
directors and officers. 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.
The amended complaint alleges, among other things, violations of Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated there under, and
seeks indeterminate damages. The plaintiffs allege that the Company
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 17

---

| | issued
false and misleading statements and failed to disclose material facts concerning, among
other things, the Companys financial condition. The plaintiffs further allege 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 plaintiffs motion for class
certification on November 14, 2002. On December 10, 2002, the Court entered an order
approving plaintiffs method of notifying class members that a class has been
certified and further set a schedule of dates for such notice. On December 10, 2002, the
court also entered an order setting forth a schedule of dates for pre-trial procedures
and trial. Pursuant to that order, a jury trial in the case is scheduled for the trial
term commencing October 18, 2004. The Company believes that the allegations contained in
the amended complaint are without merit and intends to defend vigorously against the
claims. There can be no assurance that this litigation will be ultimately resolved on
terms that are favorable to the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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, Case Number 02-CV-854. The plaintiffs allege that the Company
wrongfully classifies 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. The California state law claims apply to
only 11 of the plaintiffs. The plaintiffs 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. Following a series of amended complaints, a total of 57
plaintiffs are now parties to the action. 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. Limited discovery is underway following mediation on May 20, 2003. The Court
has approved a two-tiered approach to discovery in the case. There will be a
first trial on claims of 13 of the plaintiffs. These plaintiffs are from each
of the three challenged categories. The trial of these first trial plaintiffs
is scheduled for June 2004. The results of that trial will be binding on the 13
plaintiffs. Following that trial, the claims of the remaining plaintiffs will be
mediated. If those claims are not settled the claims of the remaining plaintiffs will
proceed through discovery and ultimately trial. The Company is vigorously defending
against the claims; however, there can be no assurance that this litigation will be
ultimately resolved on terms that are favorable to the Company.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 one 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 two 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 one to three years.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

Page 18

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|12. | DISCONTINUED OPERATIONS
|--- | -----------------------

| | On
September 26, 2002, the Companys Board of Directors adopted a plan to dispose
of the Imaging Business, reflecting a strategic decision by management to focus the
Companys efforts on its Physician and Elder Care Businesses, which offer attractive
opportunities for growth and profitability.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 $4,343 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 will provide certain reimbursable
services to the Buyer for a period not to exceed one year. The costs incurred related to
providing services under the transition services agreement are included in general and
administrative expenses and the reimbursement for these expenses are included in other
income in the accompanying statements of operations. During the three and six months
ended October 3, 2003, the Company recognized approximately $895 and $2,750,
respectively, 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 is subject to change based on the final Purchase Price adjustments that will be
recorded in the period in which they become known. The accompanying financial statements
have been restated to conform to discontinued operations treatment for all historical
periods presented.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Net sales and total loss from discontinued operations of the Imaging Business are as follows:
| | ---------------------------------------------------------------------------------------------

|                                        | Three Months Ended
September 27, 2002 | Six Months Ended
September 27, 2002
|--------------------------------------- | ------------------------------------- | -----------------------------------
|Net sales                               |                                       |                                    
|Pretax loss from operations             |                                       |                                    
|Pretax loss on disposal of              |                                       |                                    
|discontinued operations                 |                                       |                                    
|Benefit (provision) for income taxes    |                                       |                                    
|                                        |                                       |                                    
|Total loss from discontinued operations |                                       |                                    
|                                        |                                       |                                    

| | In
accordance with Emerging Issues Task Force Issue No. 87-24, Allocation of Interest
to Discontinued Operations (EITF 87-24), a portion of the Companys
interest expense that is not directly attributable to or related to other operations of
the Company has been allocated to discontinued operations based upon the ratio of net
assets to be sold to the sum of consolidated net assets plus consolidated debt. In
addition, in accordance with EITF 87-24, general corporate overhead was not
allocated to discontinued operations. Interest expense allocated to discontinued
operations was $873 and $1,703 during the three and six months ended September 27,
2002, respectively. The provision for income taxes related to continuing operations has
been calculated for the periods presented. The difference between this amount and the
total provision for income taxes, as previously reported, has been allocated to
discontinued operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 is 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 has been referred to an independent accounting firm of national reputation for
arbitration. The Company intends to defend vigorously against these claims; however,
there can be no assurance that this claim will be ultimately resolved on terms that are
favorable to the Company.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 19

---

|13. | SUBSEQUENT EVENT
|--- | ----------------

| | On
October 31, 2003, the Company acquired certain assets and assumed certain
liabilities of ProClaim, Inc. (ProClaim), a Franklin, Tennessee-based
business service company providing ancillary billing services to the long-term care
industry. ProClaim provides services to more than 750 skilled nursing facilities in 46
states. The acquisition will be accounted for under the purchase method of accounting in
accordance with SFAS 141; accordingly, the operations of the acquired company will
be included in the Companys results of operations subsequent to the date of
acquisition.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 20

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# INDEPENDENT ACCOUNTANTS REVIEW
REPORT

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 October 3, 2003 and
the related consolidated statements of operations and cash flows for the three- and six-
month periods ended October 3, 2003. These consolidated financial statements are the
responsibility of the Companys management.

We conducted our review in accordance
with standards established by the American Institute of Certified Public Accountants. 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
generally accepted auditing standards, 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 review, 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 accounting principles generally
accepted in the United States of America.

We have previously audited, in
accordance with auditing standards generally accepted in the United States of America, the
consolidated balance sheet of PSS World Medical, Inc. and subsidiaries as of
March 28, 2003, 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 May 22, 2003, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet as of March 28, 2003, is fairly stated, in
all material respects, in relation to the consolidated balance sheet from which it has
been derived.

KPMG LLP

Jacksonville, FloridaNovember 7, 2003

---

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, is a specialty marketer
and distributor of medical products to alternate-site healthcare providers including
physician offices, long-term care facilities, and home care providers through 46
full-service distribution centers, which serve all 50 states throughout the United States
of America. Since its inception in 1983, PSSI has become 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, acquisitions, and a culture of performance. During fiscal years 2000
through 2003, the Company has focused on business operations, growing through innovative
solution-based marketing programs, maximizing its core distribution capability and
efficiency, and improving management business processes.

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 and overhead
associated with the Imaging Business, which was sold on November 18, 2002.

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. As a result, DIs results of operations have been classified as
discontinued operations for all periods presented. Refer to Note 12, Discontinued
Operations, in the accompanying financial statements for a further discussion.

THE INDUSTRY

According to industry estimates, the
medical supply and equipment segment of the healthcare industry in the United States of
America represents an approximate $34 billion market. This market is comprised of medical
products and equipment that are distributed to alternate-site healthcare providers,
including physician offices, long-term care and assisted living facilities, home
healthcare agencies, dental offices, and other alternate-site providers, such as
outpatient surgery centers, podiatrists, and veterinarians. The Companys primary
focus is the distribution of medical products and equipment to physician offices,
long-term care and assisted living facilities, and home healthcare providers, which
represents an approximate $10 billion market.

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. In addition, the physician market
continues to benefit from the shift of procedures and diagnostic testing in hospitals to
the alternate site, particularly physician offices, despite significantly lower pricing of
hospital medical products. As the cosmetic surgery and elective procedure markets continue
to grow, physicians are increasingly performing more of these procedures in their offices.
The elder care market continues to benefit from the increasing growth rate of the
population of elderly Americans. 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 were age 85 years and older, the part of the population most in need of
long-term care and elder care services. By the year 2040, that number is projected to more
than triple to over 14 million. The population age 65 to 84 years is projected to more
than double in the same time period. As of December 31, 2002, the estimated growth rate
for the physician and elder care markets was approximately 3.8% and 2.3%, respectively.

As a result of these market dynamics,
the annual expenditures for healthcare services continues to increase in the United States
of America. The Centers for Medicaid and Medicare Services (CMS), Office of the Actuary,
National Health Statistics Group, cited in its 2002 study, Trends and Indicators in the
Changing Health Care Marketplace, that 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, an estimated 16.8% of the gross
domestic product, the benchmark measure for annual production of goods and services in the
United States of America.

Page 22

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The healthcare industry is subject to
extensive government regulation, licensure, and operating compliance procedures. National
healthcare reform has been the subject of a number of legislative initiatives by Congress.
Additionally, government and private insurance programs fund a large portion of the total
cost of medical care. During 1997, the Balanced Budget Act passed by Congress
significantly reduced reimbursement rates for nursing homes and home healthcare providers,
affecting spending levels and overall financial viability of these institutions. The
Company has responded by tightening credit policies and increasing its allowance for
doubtful accounts. While there have been recent announcements from Washington, DC of
increases in Medicaid funding and reimbursement rates for long-term care facilities, there
can be no assurances that such relief will increase the level of spending of these
institutions, or improve their overall financial condition.

OPERATING HIGHLIGHTS AND TRENDS

The following tables set forth
certain financial information by business segment and give retroactive effect to the
restatement of the Imaging Business as discontinued operations. All dollar amounts
presented below are in thousands unless otherwise indicated.

|                             | Three Months Ended | Six Months Ended
|---------------------------- | ------------------ | ----------------
|
|Net Sales:                   |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|                             |                    |                 
|Total Company                |                    |                 
|                             |                    |                 
|Income from Operations:      |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|Corporate Shared Services    |                    |                 
|                             |                    |                 
|Total Company                |                    |                 
|                             |                    |                 
|Days Sales Outstanding:(a)   |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|                             |                    |                 
|Days On Hand:(b)             |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|                             |                    |                 
|Days in Accounts Payable:(c) |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|                             |                    |                 
|Cash Conversion Days:(d)     |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 
|                             |                    |                 
|Inventory Turnover:(e)       |                    |                 
|Physician Business           |                    |                 
|Elder Care Business          |                    |                 

Page 23

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|                               | Three Months Ended | Six Months Ended
|------------------------------ | ------------------ | ----------------
|
|Cash Flow Information:         |                    |                 
|Net cash (used in) provided by |                   
|operating activities           |                    | (19,696         
|Net cash used in investing     |                   
|activities                     |                    | (17,671         
|Net cash provided by (used in) |                   
|financing activities           |                    | 30,846          

|                                | As of
|------------------------------- | -----
|
|Net Debt:                       |      
|Bank debt                       |      
|Cash and cash equivalents       |      
|                                |      
|Net bank debt                   |      
|                                |      
|Asset Management:               |      
|Operational working capital (f) |      
|Working capital (g)             |      

| | (a) | Days
sales outstanding (DSO) is average accounts receivable divided           by
average net sales. Average accounts receivable is the sum of accounts
          receivable, net of allowance for doubtful accounts, at the beginning and ending
          of the second quarter divided by two. Average net sales is the sum of net sales
          for each of the three months in the second quarter divided by ninety.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Days
on hand (DOH) is average inventory divided by average cost of           goods
sold (COGS). Average inventory is the sum of inventory at the
          beginning and ending of the second quarter divided by two. Average COGS is COGS
          for each of the three months in the second quarter divided by ninety.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | Days
in accounts payable (DIP) is average accounts payable divided           by
average COGS. Average accounts payable is the sum of accounts payable at the
          beginning and ending of the second quarter divided by two.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | (f) | Operational working capital is the sum of accounts receivable and inventory,
          less accounts payable.
| | --- | -------------------------------------------------------------------------------------------------------------

| | (g) | Working capital is current assets less current liabilities.
| | --- | -----------------------------------------------------------

Page 24

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THREE MONTHS ENDED OCTOBER 3, 2003 VERSUS THREE
MONTHS ENDED SEPTEMBER 27, 2002

NET SALES

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

The comparability of net sales
quarter over quarter was impacted by the number of selling days in each quarter. The three
months ended October 3, 2003 and September 27, 2002 consisted of 67 and 63
selling days, respectively. The following table summarizes the impact of the number of
selling days on net sales quarter over quarter.

|                    | Average Daily Net Sales |  |  
|------------------- | ----------------------- |  | -
|
|Physician Business  |                         |  | $
|Elder Care Business |                         |  |  
|                    |                         |  |  
|Total Company       |                         |  | $
|                    |                         |  |  

Physician Business

The change in net sales is primarily
attributable to (i) an increase in branded consumable product sales of approximately
$19.0 million, (ii) an increase in private label consumable product sales of
approximately $2.9 million, (iii) an increase in pharmaceutical sales of
approximately $12.2 million, of which approximately $3.4 million was
attributable to seasonal flu vaccine sales, and (iv) an increase in equipment sales
of approximately $7.0 million. Net sales continued to be positively impacted by the
following revenue growth programs focused on consumable products, pharmaceuticals, and
equipment.

- Advantage Clubis the Physician Business' customer membership club that enables customers to
participate in exclusive promotions for a broad selection of commonly used products. Advantage Club
was launched in June 2003.
- Rx Extremeis the Physician Business' comprehensive program offering pharmaceutical, vaccine and
general injectibles products to office-based physicians in all 50 states. The term "Extreme"
symbolizes the Physician Business' significant commitment to its customers to become the leading
provider of these products and related services to the U.S. physician market. Rx Extreme was
launched in June 2003.
- Can-Do is the Physician Business' 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.

Page 25

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Elder Care Business

During the three months ended
October 3, 2003, net sales to nursing home facilities increased $6.6 million, of
which approximately $4.4 million was attributable to regional nursing home
facilities. In addition, net sales to homecare providers increased $6.8 million,
while housekeeping product sales increased approximately $1.1 million. This growth in
net sales resulted from new customers, increased penetration in existing customer
facilities, and the introduction of new product lines. However, the growth was partially
offset by the loss of revenues attributable to national chain customers divesting
unprofitable nursing home facilities and the loss of Integrated Health Services, Inc.
(IHS), a national chain customer. The net sales growth was achieved through
the continued implementation of the following innovative customer solutions:

- ANSWERS and ANSWERS Housekeeping (ANSWERS HK)are marketing programs that align improved business
processes typically in the ordering process of nursing home operations and purchasing, with
efficient distribution activities of the Elder Care Business. The goals of the programs are to
produce savings for the customer, vendor, and distributor. In addition to reducing distribution
costs by encouraging more efficient buying patterns, ANSWERS and ANSWERS HK 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.
- Partners in Efficiency (P.I.E.)is a product program designed to reduce customers' product
procurement costs and drive operating efficiencies in their businesses by committing to certain
purchasing levels and standardized ordering procedures.
- Fast Accurate Supply Technology (F.A.S.T)is an ordering, bar-code scanning, inventory management
system that utilizes a Palm Pilot-based operating platform.

In addition, on September 4,
2003, the Company acquired certain assets and assumed certain liabilities of a long-term
care medical supply distributor, which positively impacted net sales. The acquired company
provided approximately $2.0 million of additional net sales during the three months
ended October 3, 2003.

During the three months ended
October 3, 2003, the Company signed an exclusive distribution agreement with Graham
Field Health Products, Inc. (Graham Field) to market durable medical equipment
(DME) to the long-term care, assisted living, and home care markets.
Management expects to begin selling DME equipment under this agreement beginning in the
third quarter of fiscal year 2004.

GROSS PROFIT

Gross profit for the three months
ended October 3, 2003 totaled $98.1 million, an increase of $15.6 million,
or 18.9%, from gross profit of $82.5 million for the three months ended
September 27, 2002. Gross profit as a percentage of net sales decreased 20 basis
points to 28.3% during the three months ended October 3, 2003 from 28.5% during the
three months ended September 27, 2002. Gross profit increased primarily due to the
growth in net sales discussed above. Gross profit as a percentage of net sales slightly
decreased as a result of the increased sales volume of pharmaceutical products and
equipment in the Physician Business, which generate lower gross profit. In addition, gross
profit was positively impacted by higher discounts earned due to increased volume
purchasing as a result of centralizing the purchasing function.

Page 26

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GENERAL AND ADMINISTRATIVE EXPENSES

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

Physician Business

General and administrative expenses
decreased 2.0% as a percentage of net sales quarter over quarter.  This decrease in percentage is attributable to
leveraging the net sales growth associated with various fixed costs and the benefit of
cost savings as a result of completing the Rationalization Programs. Warehouse expenses
increased $1.1 million period over period while warehouse expense as a percent of net
sales decreased. This decrease is a result of a reduction in the Companys delivery
fleet and optimization of shipments between branches, offset by an increase in salary
expenses for two positions that were created as a result of the centralization of the
purchasing function and the consolidation of the distribution centers. The following
details other significant dollar increases or decreases in various components of general and
administrative expenses: (i) incentive compensation increased approximately
$0.5 million as a result of improved branch profitability, (ii) employee
benefits and insurance increased approximately $0.5 million as a result of increased
medical claims quarter over quarter, (iii) other general and administrative expenses
decreased approximately $0.7 million which is discussed below under the caption Other
General and Administrative Expenses, and (iv) salary expenses decreased approximately
$0.6 million related to lower head count as a result of the Rationalization Programs
and the centralization of the accounts payable function to corporate headquarters in
Jacksonville, Florida, offset by general wage increases.

Elder Care Business

General and administrative expenses
as a percentage of net sales remained relatively constant quarter over quarter. Warehouse
expenses increased $0.8 million period over period while warehouse expense as a
percent of net sales decreased. This decrease is a result of leveraging the net sales
growth across the fixed payroll costs for warehouse personnel and delivery costs. The
following details other significant dollar increases in various components of general and
administrative expenses: (i) the provision for bad debt expense increased
approximately $0.9 million primarily due to an increase in the overall accounts
receivable base of approximately $10.0 million resulting from the net sales growth
discussed above and an increase in past due amounts, and (ii) salary expense
increased approximately $0.3 million for general wage increases and additional
employees as a result of the long-term care distributor acquisition on September 4,
2003.

Corporate Shared Services

The decrease in general and
administrative expenses is primarily attributable to (i) a decrease in other general
and administrative expenses of approximately $4.5 million which is discussed below
under the caption Other General and Administrative Expenses, (ii) a decrease in the
cost of the private data network of approximately $0.3 million as a result of
reducing the number of service center locations and the conversion to a virtual private
network for data transmission, offset by (iii) an increase in incentive compensation
of approximately $0.5 million which is primarily related to the adoption of the
Shareholder Value Plan during fiscal year 2003, (iv) an increase in legal and
professional fees of approximately $0.6 million, and (v) an increase in
franchise tax expense of approximately $0.5 million.

Page 27

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The comparability of general and
administrative expenses period over period is impacted by (i) the accounting for the
disposition of the Imaging Business and (ii) the costs incurred in connection with
providing certain services to the buyer under the transition services agreement. In
accordance with Emerging Issues Task Force (EITF) Issue No. 87-24,
Allocation of Interest to Discontinued Operations (EITF 87-24), the
Company is permitted to allocate corporate overhead expenses to discontinued operations
that are directly attributable to the operations of the Imaging Business. EITF 87-24
specifically states that indirect expenses are not allocable to discontinued operations.
During the three months ended September 27, 2002, the Company incurred approximately
$2.8 million of general and administrative expenses, which included both direct and
indirect overhead expenses that were attributable to the Imaging Business. However, the
Company only allocated approximately $2.1 million of these expenses to discontinued
operations, which represented direct overhead expenses for the period from June 29,
2002 to September 27, 2002. Subsequent to the sale of the Imaging Business, expenses
continued to be incurred by the Company for services provided to the buyer under a
transition services agreement and were no longer allocated to discontinued operations.
These expenses are recorded as a component of general and administrative expenses and the
reimbursement is recorded in other income in the accompanying statements of operations.

Other General and Administrative
Expenses

General and administrative expenses
include charges related to restructuring activity, merger activity, and other items. These
charges decreased approximately $5.2 million during the three months ended
October 3, 2003 compared to the same period in the prior fiscal year. The following
tables summarize other general and administrative expenses (in millions) by business
segment:

|                                   | Three Months Ended October 3, 2003
|---------------------------------- | ----------------------------------
|
|                                   |                                   
|Reversal of operational tax charge |                                   
|Rationalization expenses           |                                   
|                                   |                                   
|Total                              |                                   
|                                   |                                   

|                                   | Three Months Ended September 27, 2002
|---------------------------------- | -------------------------------------
|
|                                   |                                      
|Restructuring costs and expenses   |                                      
|Merger costs and expenses          |                                      
|Reversal of operational tax charge |                                      
|Rationalization expenses           |                                      
|Other                              |                                      
|                                   |                                      
|Total                              |                                      
|                                   |                                      

Page 28

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The Elder Care Business recorded
charges totaling $9.5 million during fiscal years 1998, 1997, and 1996 primarily
related to state and local, sales and use, unclaimed property, and property tax payments that were not
remitted on a timely basis to taxing authorities.  These charges related to periods prior to the acquisition of Gulf South Medical Supply, Inc. in March, 1998.  The Company reviewed all
available information, including tax exemption notices received, and recorded charges to
general and administrative expenses during the period in which the tax noncompliance
issues arose. On a quarterly basis, management performs an analysis of the estimated
remaining exposure and records adjustments to general and administrative expenses based on
the expiration of various states statutes of limitations, the resolution of compliance
audits, and current available information. During the three months ended October 3,
2003 and September 27, 2002, the Company reversed $1.3 million and
$0.1 million of the previously recorded operating tax charge reserve, respectively.
At October 3, 2003, there was no remaining balance in the reserve.

Rationalization expenses are costs
incurred as a result of the conversion to the new ERP system, the centralization of the
purchasing function, and a restructuring plan that was adopted during the fourth quarter
of fiscal year 2002.

Restructuring costs and expenses for
the three months ended September 27, 2002 primarily relate to charges recorded for
the plans adopted by the Physician Business during the fourth quarter of fiscal year 2002.
During the three months ended September 27, 2002, the Physician Business recorded
charges of $0.5 million. In addition, during the quarter, management re-evaluated its
estimates for previously adopted plans and reversed approximately $0.7 million of
previously recorded charges.

During the three months ended
September 27, 2002, the Company recorded an allowance for doubtful accounts of
$2.9 million against the unsecured note receivable from the Companys former
Chairman and Chief Executive Officer. This allowance did not represent a forgiveness of
debt.

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 80 basis points due
to a decrease in gross profit as a percentage of net sales resulting from an increased
sales volume of pharmaceutical products and equipment, which generate lower gross profit.
The Elder Care Business selling expenses as a percentage of net sales increased 30 basis
points due to the addition of sales representatives and regional account executives who
receive guaranteed salaries and the launch of commission promotion programs to support the
sales initiatives discussed above.

Page 29

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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 October 3, 2003 totaled $1.3 million, a decrease of $1.3 million, or
48.1%, from interest expense of $2.6 million for the three months ended
September 27, 2002. In accordance with EITF 87-24, a portion of the
Companys interest expense that is not directly attributable to or related to other
operations of the Company has been allocated to discontinued operations based upon the
ratio of net assets to be sold to the sum of consolidated net assets plus consolidated
debt. Interest expense allocated to discontinued operations was $0.9 million during
the three months ended September 27, 2002. In addition, interest expense for the
three months ended September 27, 2002 includes $0.4 million of accelerated
amortization of debt issuance costs related to retiring $19.0 million of the 8
1⁄2% Senior Subordinated Notes (the Notes). Excluding the effects of the
allocation of interest expense to discontinued operations and the accelerated amortization
of debt issuance costs, interest expense decreased approximately $1.8 million due to
a lower average total debt outstanding and a general reduction in interest rates as a
result of refinancing the Notes. The average interest rate for the three months ended
October 3, 2003 was approximately 5.5% compared to 9.0% for the three months ended
September 27, 2002.

OTHER INCOME (EXPENSE)

Other income for the three months
ended October 3, 2003 totaled $1.1 million, an increase of $1.4 million
from other expense of $0.3 million for the three months ended September 27,
2002. During the three months ended October 3, 2003, approximately $0.9 million
of other income was recorded as a result of the transition services agreement associated
with the sale of the Imaging Business. The Company expects such transitional services to
decrease during the third quarter of fiscal year 2004. Other expense for the three months
ended September 27, 2002 includes $0.7 million of redemption premiums that were
paid as a result of the early extinguishment of the Notes.

PROVISION FOR INCOME TAXES

Provision for income taxes was
$5.4 million for the three months ended October 3, 2003, an increase of
$4.5 million from the provision for income taxes of $0.9 million for the three
months ended September 27, 2002. The effective income tax rate was approximately
39.4% and 35.5% for the three months ended October 3, 2003 and September 27,
2002, respectively. The increase in the effective rate is primarily attributable to the
expected increase in annual income from continuing operations before provision for income
taxes. The provision for income taxes increased approximately $4.4 million as a
result of an increase in income from continuing operations before provision for income
taxes. The provision for income taxes for the three months ended September 27, 2002
is net of a benefit of approximately $0.4 million related to the loss on
extinguishment of the Notes of $1.1 million.

Page 30

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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 October 3, 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 intends to appeal 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.

TOTAL LOSS FROM DISCONTINUED
OPERATIONS

Net sales for the Imaging Business
were $175.7 million for the three months ended September 27, 2002. The pretax
loss from operations was $1.9 million for the three months ended September 27,
2002. An estimated pretax loss on disposal of approximately $90.3 million was
recorded during the three months ended September 27, 2002, the period in which
management adopted a formal plan to dispose of the Imaging Business. The Imaging Business
was sold on November 18, 2002.

The Company recorded a
$35.4 million income tax benefit related to the operations and disposal of the
Imaging Business during the three months ended September 27, 2002. As a result of the
sale of the Imaging Business, the Company recorded a total deferred tax asset of
approximately $56.5 million, which represents the tax effect of the anticipated
income tax net operating loss (NOL) generated from the transaction. 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.

During the three months ended
October 3, 2003, the Company recorded a charge of approximately $0.3 million,
net of a benefit of income taxes of $0.2 million, for additional legal and
professional fees associated with the arbitration proceedings. (Refer to Note 12,
Discontinued Operations.)

NET INCOME

Net income for the three months ended
October 3, 2003 totaled $8.0 million compared to a net loss of
$55.2 million for the three months ended September 27, 2002. The net loss for
the three months ended September 27, 2002 included a charge of $56.8 million for
the loss from discontinued operations. Otherwise, variances are due to the factors
discussed above.

SIX MONTHS ENDED OCTOBER 3, 2003
VERSUS SIX MONTHS ENDED SEPTEMBER 27, 2002

NET SALES

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

The comparability of net sales period over
period was impacted by the number of selling days in each period. The six months ended
October 3, 2003 and September 27, 2002 consisted of 132 and 127 selling days,
respectively. The following table summarizes the impact of the number of selling days on
net sales period over period.

Page 31

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

Physician Business

The change in net sales is primarily
attributable to (i) an increase in branded consumable product sales of approximately
$28.1 million, (ii) an increase in private label consumable sales of
approximately $5.0 million, (ii) an increase in pharmaceutical sales of
approximately $15.8 million, of which approximately $3.4 million was
attributable to seasonal flu vaccine sales, (iii) an increase in equipment sales of
approximately $7.8 million, offset by (iv) a decrease in immunoassay sales of
approximately $2.2 million, of which approximately $1.2 million was related to
the United States Food and Drug Administration recall of glycated hemoglobin in
July 2002. Net sales continued to be positively impacted by the launch of the revenue
growth programs during June 2003, which were discussed in the three-month net sales
discussion above.

Elder Care Business

During the six months ended
October 3, 2003, net sales to nursing home facilities increased approximately
$10.8 million, of which approximately $7.6 million was attributable to regional
nursing home facilities. In addition, net sales to homecare providers increased
approximately $10.1 million, while housekeeping product sales increased approximately
$2.9 million. This growth in net sales resulted from new customers, increased
penetration in existing customer facilities, and the introduction of new product lines.
However, the growth was partially offset by the loss of revenues attributable to national
chain customers divesting unprofitable nursing home facilities and the loss of IHS. This
sales growth was achieved through the continued implementation of the innovative customer
solutions discussed in the three-month net sales discussion above.

In addition, on September 4,
2003, the Company acquired certain assets and assumed certain liabilities of a long-term
care medical supply distributor, which positively impacted net sales. The acquired company
provided approximately $2.0 million of additional net sales during the six months
ended October 3, 2003. Furthermore, on September 16, 2002, the Company acquired
a long-term care medical supply distributor, which contributed to an increase in net sales
of approximately $4.5 million period over period.

GROSS PROFIT

Gross profit for the six months ended
October 3, 2003 totaled $186.0 million, an increase of $22.7 million, or
13.9%, from gross profit of $163.3 million for the six months ended
September 27, 2002. Gross profit as a percentage of net sales decreased 10 basis
points to 28.3% during the six months ended October 3, 2003 from 28.4% during the six
months ended September 27, 2002. Gross profit increased primarily due to the growth
in net sales discussed above and gross profit as a percentage of net sales remained
relatively constant period over period. Gross profit during the six months ended
October 3, 2003 was positively impacted by higher discounts earned due to increased
volume purchasing as a result of centralizing the purchasing function. Gross profit during
the six months ended September 27, 2002 was negatively impacted by a charge of
approximately $1.4 million recorded by the Physician Business to terminate the
Candela Corporation distribution agreement. Gross profit as a percentage of net sales may
decrease during the remainder of fiscal year 2004 due to an expected increased sales
volume of pharmaceutical products and equipment in the Physician Business, which generate
lower gross profit.

Page 32

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GENERAL AND
ADMINISTRATIVE EXPENSES

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

Physician Business

General and administrative expenses
decreased 1.2% as a percentage of net sales period over period.  This decrease in percentage is attributable to
leveraging the net sales growth associated with various fixed costs and the benefit of
cost savings as a result of completing the Rationalization Programs. Warehouse expenses
increased $2.4 million period over period while warehouse expense as a percent of net
sales decreased. This decrease is a result of a reduction in the Companys delivery
fleet and optimization of shipments between branches, offset by an increase in salary
expenses for two positions that were created as a result of the centralization of the
purchasing function and the consolidation of the distribution centers. The following
details other significant dollar increases or decreases in various components of general and
administrative expenses: (i) depreciation expense increased approximately
$0.5 million for completed phases of the ERP system, myPSS.com electronic commerce
platform, and supply chain initiatives, (ii) incentive compensation increased
approximately $0.6 million as a result of improved branch profitability,
(iii) employee benefits and insurance increased approximately $0.8 million as a
result of increased medical claims quarter over quarter, (iv) meeting expenses
increased approximately $1.0 million primarily as a result of the two regional sales
meetings held to launch the new sales growth programs, offset by (v) a decrease in
other general and administrative expenses of approximately $1.4 million which is
discussed below under the caption Other General and Administrative Expenses, and
(vi) a decrease in salary expenses of approximately $1.3 million related to
lower head count as a result of the Rationalization Programs and the centralization of the
accounts payable function to corporate headquarters in Jacksonville, Florida, offset by
general wage increases.

Elder Care Business

General and administrative expenses
as a percentage of net sales remained relatively constant period over period. Warehouse
expenses increased $1.8 million period over period while warehouse expense as a
percent of net sales was relatively constant. The following details the significant dollar
increases in various components of general and administrative expenses: (i) the
provision for bad debt expense increased approximately $1.4 million primarily due to
an overall increase in the accounts receivable base of approximately $12.0 million
resulting from the net sales growth discussed above, an increase in past due amounts, and
a customer filing for bankruptcy during the three months ended June 30, 2003, and
(ii) salary expense increased approximately $0.4 million due to general wage
increases.

Corporate Shared Services

The increase in general and
administrative expenses is primarily attributable to (i) an increase in incentive
compensation of approximately $1.2 million which is primarily related to the adoption
of the Shareholder Value Plan during fiscal year 2003, (ii) an increase in business
insurance expense of approximately $0.7 million due to rate increases on the
corporate umbrella and director and officer policies, offset by (iii) a decrease in
other general and administrative expenses of approximately $4.9 million which is
discussed below under the caption Other General and Administrative Expenses, and
(iv) a decrease in the cost of the private data network of approximately
$0.7 million as a result of reducing the number of service center locations and the
conversion to a virtual private network for data transmission.

Page 33

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As discussed above, the comparability
of general and administrative expenses period over period is impacted by (i) the
accounting for the disposition of the Imaging Business and (ii) the costs incurred in
connection with providing certain services to the buyer under the transition services
agreement. During the six months ended September 27, 2002, the Company incurred
approximately $5.7 million of general and administrative expenses, which included
both direct and indirect overhead expenses that were attributable to the Imaging Business.
However, the Company only allocated approximately $4.3 million of these expenses to
discontinued operations, which represented direct overhead expenses for the period from
March 30, 2002 to September 27, 2002. The expenses associated with providing
services under the transition services agreement are recorded as a component of general
and administrative expenses and the reimbursement is recorded in other income in the
accompanying statements of operations.

Other General and Administrative
Expenses

General and administrative expenses
include charges related to restructuring activity, merger activity, and other items. These
charges decreased approximately $6.3 million period over period. The following tables
summarize other general and administrative expenses (in millions) by business segment:

|                                   | Six Months Ended October 3, 2003
|---------------------------------- | --------------------------------
|
|                                   |                                 
|Restructuring costs and expenses   |                                 
|Accelerated depreciation           |                                 
|Reversal of operational tax charge |                                 
|Rationalization expenses           |                                 
|Other                              |                                 
|                                   |                                 
|Total                              |                                 
|                                   |                                 

|                                   | Six Months Ended October 3, 2003
|---------------------------------- | --------------------------------
|
|                                   |                                 
|Restructuring costs and expenses   |                                 
|Merger costs and expenses          |                                 
|Accelerated depreciation           |                                 
|Reversal of operational tax charge |                                 
|Rationalization expenses           |                                 
|Other                              |                                 
|                                   |                                 
|Total                              |                                 
|                                   |                                 

Restructuring costs and expenses for
the six months ended October 3, 2003 and September 27, 2002 primarily relate to
charges recorded for the plans adopted by the Physician Business during the fourth quarter
of fiscal year 2003 and the fourth quarter of fiscal year 2002. Management does not expect
material charges related to these plans during the remainder of fiscal year 2004. During
the six months ended September 27, 2002, the Physician Business recorded charges of
$1.0 million related to the plan that was adopted during the fourth quarter of fiscal
year 2002. In addition, during the quarter, management re-evaluated its estimates for
previously adopted plans and reversed approximately $0.7 million.

During the six months ended
October 3, 2003 and September 27, 2002, the Company reversed $1.4 million
and $0.1 million of the previously recorded operating tax charge reserve,
respectively. At October 3, 2003, there was no remaining balance in the reserve.

---

Rationalization expenses are costs
incurred as a result of the conversion to the new ERP system, the centralization of the
purchasing function, and a restructuring plan that was adopted during the fourth quarter
of fiscal year 2002.

Merger costs and expenses for the six
months ended September 27, 2002 include costs related to employee retention bonuses
to retain certain officers and key employees that were fully paid during fiscal year 2003.

During the six months ended
September 27, 2002, the Company recorded an allowance for doubtful accounts of
$2.9 million against the unsecured note receivable from the Companys former
Chairman and Chief Executive Officer.

SELLING EXPENSES

|                    | For the Six 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 a decrease in gross profit as a percentage of net sales resulting from an increased
sales volume of pharmaceutical products and equipment, which generate lower gross profit.
The Elder Care Business selling expenses as a percentage of net sales increased 20 basis
points due to the addition of sales representatives and regional account executives who
receive guaranteed salaries and the launch of commission promotion programs to support the
sales initiatives discussed above.

INCOME FROM OPERATIONS

|                          | For the Six 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.

Page 35

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INTEREST EXPENSE

Interest expense for the six months
ended October 3, 2003 totaled $2.5 million, a decrease of $2.4 million, or
49.7%, from interest expense of $4.9 million for the six months ended
September 27, 2002. Interest expense allocated to discontinued operations was
$1.7 million during the six months ended September 27, 2002. In addition,
interest expense for the six months ended September 27, 2002 includes
$0.4 million of accelerated amortization of debt issuance costs related to retiring
$19.0 million of the Notes. Excluding the effects of the allocation of interest
expense to discontinued operations and the accelerated amortization of debt issuance
costs, interest expense decreased approximately $3.7 million due to lower average
total debt outstanding and a general reduction of interest rates primarily due to
refinancing the Notes. The average interest rate for the six months ended October 3,
2003 was approximately 5.1% compared to 8.5% for the six months ended September 27,
2002.

OTHER INCOME

Other income for the six months ended
October 3, 2003 totaled $3.2 million, an increase of $3.1 million from
other income of $0.1 million for the six months ended September 27, 2002. During
the six months ended October 3, 2003, approximately $2.8 million of other income
was recorded as a result of the transition services agreement associated with the sale of
the Imaging Business. The Company expects such transitional services to decrease during
the third quarter of fiscal year 2004. The increase in other income was offset by a
decrease in the amount of customer finance charge income of approximately
$0.2 million on the Physician Business customer accounts. Other income for the
six months ended September 27, 2002 includes $0.7 million of redemption premiums
that were paid as a result of the early extinguishment of the Notes.

PROVISION FOR INCOME TAXES

Provision for income taxes was
$8.5 million for the six months ended October 3, 2003, an increase of
$5.6 million from the provision for income taxes of $2.9 million for the six
months ended September 27, 2002. The effective income tax rate was approximately
39.6% and 37.1% for the six months ended October 3, 2003 and September 27, 2002,
respectively. The increase in the effective rate is primarily attributable to the expected
increase in annual income from continuing operations before provision for income taxes.
The provision for income taxes increased approximately $4.9 million as a result of an
increase in income from continuing operations before provision for income taxes. The
provision for income taxes for the six months ended September 27, 2002 is net of a
benefit of approximately $0.4 million related to the loss on extinguishment of the
Notes of $1.1 million.

TOTAL LOSS FROM DISCONTINUED
OPERATIONS

Net sales for the Imaging Business
were $352.5 million for the six months ended September 27, 2002. The pretax loss
from operations was $3.1 million for the six months ended September 27, 2002. An
estimated pretax loss on disposal of approximately $90.3 million was recorded during
the three months ended September 27, 2002, the period in which management adopted a
formal plan to dispose of the Imaging Business. The Imaging Business was sold on
November 18, 2002.

The Company recorded a
$35.9 million income tax benefit related to the operations and disposal of the
Imaging Business during the six months ended September 27, 2002. As a result of the
sale of the Imaging Business, the Company has recorded a total deferred tax asset of
approximately $56.5 million, which represents the tax effect of the anticipated
income tax NOL to be generated from the transaction.

During the six months ended
October 3, 2003, the Company recorded a charge of approximately $0.3 million,
net of a benefit of income taxes of $0.2 million, for additional legal and
professional fees associated with the arbitration proceedings. (Refer to Note 12,
Discontinued Operations.)

NET INCOME

Net income for the six months ended
October 3, 2003 totaled $12.6 million compared to a net loss of
$52.6 million for the six months ended September 27, 2002. The net loss for the
six months ended September 27, 2002 included a charge of $57.5 million for the
loss from discontinued operations. Otherwise, variances are due to the factors discussed
above.

Page 36

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LIQUIDITY AND CAPITAL RESOURCES

As the Companys business grows,
its cash and working capital requirements will also continue to increase as a result of
the anticipated growth of the Companys operations. The Company expects 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, and other financing
arrangements.

Cash Flows From Operating,
Investing, and Financing Activities

|                     | Six Months Ended
|-------------------- | ----------------
|
|                     |                 
|Operating activities |                 
|Investing activities |                 
|Financing activities |                 

Cash used in operations during the
six months ended October 3, 2003 was primarily related to an increase in accounts
receivable and inventories and a decrease in accounts payable. Accounts receivable
increased approximately $30.7 million as a result of the successful sales growth
initiatives launched during the first quarter of fiscal year 2004 in the Physician and
Elder Care Businesses. Inventories increased approximately $15.5 million primarily
related to support the Physician Business pharmaceutical sales initiative, the Elder
Care Business DME sales initiative as a result of the Graham Field exclusive
distribution agreement, and the Elder Care Business investment in the housekeeping
product line. In an effort to recognize additional cash discounts, the Company accelerated its payments to selected vendors
to take advantage of more favorable discount terms, which decreased accounts payable approximately $2.4 million.

Days sales outstanding for the
Physician and Elder Care Businesses decreased quarter over quarter and inventory turnover
increased quarter over quarter. However, days in accounts payable decreased quarter over
quarter, which reflected the Company accelerating payments to take advantage of early pay
discounts.

Cash provided by operations during
the six months ended September 27, 2002 was positively impacted by the continued
implementation of working capital reduction initiatives that started in the last half of
fiscal year 2001 and continued into fiscal year 2003. During the six months ended
September 27, 2002, accounts payable increased approximately $9.4 million,
accounts receivable increased approximately $6.9 million, and inventories decreased
approximately $4.7 million, resulting in a net $7.2 million decrease in
operating working capital, which positively impacted operating cash flows.

Cash used in investing activities was
higher during the six months ended October 3, 2003 compared to the six months ended
September 27, 2002 primarily due to the payment for the acquired company and the
payment of transaction costs related to the sale of the Imaging Business. Capital
expenditures during the six months ended October 3, 2003 and September 27, 2002
totaled $6.3 million and $6.2 million, respectively, of which approximately
$3.6 million and $2.1 million related to the continued development and
enhancement of the Companys ERP system, electronic commerce platforms, and supply
chain integration. Capital expenditures related to the distribution center expansions as a
result of the Rationalization Programs were approximately $1.3 million and
$2.8 million during the six months ended October 3, 2003 and September 27,
2002, respectively.

Cash provided by financing activities
during the six months ended October 3, 2003 was primarily a result of increasing the
amount outstanding under the revolving line of credit. These proceeds were used to fund
the purchase of the long-term care medical supply distributor and the growth in the
overall business. Cash used for the repurchase of the Companys common stock was
$5.6 million and $9.5 million during the six months ended October 3, 2003
and September 27, 2002, respectively. Repurchases of common stock were made under the
approved share repurchase programs. The repurchases were primarily funded by cash flows
from operations. During the six months ended October 3, 2003, the Company repurchased approximately 1.0 million shares of common stock at an average price of $5.92 per
common share. During the six months

Page 37

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ended September 27, 2002, the
Company repurchased approximately 1.3 million shares of the Companys common
stock at an average price of $7.72 per common share. Cash used to retire the Notes was
approximately $19.7 million during the six months ended September 27 2002. The
Company used its availability under the revolving line of credit to retire the Notes. In
addition, on October 1, 2003, the Company received approximately $1.2 million
from the former Chairman and Chief Executive Officer for full payment of one of his
outstanding notes receivable.

Revolving Credit Agreement

On May 20, 2003, the Company
entered into an amended and restated Credit Agreement (the Credit Agreement),
by and among the Company, as borrower thereunder (the Borrower), the
subsidiaries of the Borrower party thereto, the lenders from time to time party thereto
(the Lenders), and Bank of America, N.A., as Agent for the Lenders. The Credit
Agreement provides for a three-year credit facility consisting of an aggregate
$150 million revolving line of credit and letters of credit (the Credit
Facility). Availability of borrowings under the Credit Facility depends upon the
amount of a borrowing base consisting of accounts receivable and, upon satisfaction of
certain requirements, inventory. The Credit Facility bears interest at the Banks
prime rate plus a margin of between 0.00% and 1.00% based on the Companys ratio of
funded debt to earnings before interest, taxes, depreciation, and amortization
(EBITDA), as defined in the Credit Agreement, or at LIBOR plus a margin of
between 1.75% and 3.00% based on the Companys ratio of funded debt to EBITDA. 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. Initial proceeds from the Credit Facility were used
to refinance existing indebtedness outstanding under the original credit facility and
future proceeds will be used to issue letters of credit and finance the ongoing working
capital requirements of the Company. The Credit Facility matures on March 28, 2006.
At October 3, 2003 and March 28, 2003, there was $111.9 million and
$83.0 million, respectively, outstanding under the revolving line of credit.

During the three months ended
June 28, 2003, the Company entered into an interest rate swap agreement to hedge the
variable interest rate debt 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 the 1-month LIBOR. The changes in market value of this
financial instrument are highly correlated with changes in market values 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 No. 133,
Accounting for Derivative Instruments and Hedging Activities, and SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment
of FASB Statement No. 133, 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 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 funded debt to EBITDA margin
discussed above. The swap agreement expires on March 28, 2006 and settles monthly
until expiration. At October 3, 2003, the Company recorded an unrealized gain, net of
taxes, for the estimated fair value of the swap agreement in accumulated other
comprehensive loss in the accompanying balance sheet.

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 and employment
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):

Page 38

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|                            | Fiscal Years |  |  
|--------------------------- | ------------ |  | -
|
|                            |              |  |  
|Revolving line of credit(a) |              |  | $
|Operating leases:           |              | 
|Operating                   |              |  |  
|Restructuring               |              |  |  
|Noncompetition agreements   |              |  |  
|Employment agreements       |              |  |  
|Purchase commitments(b)     |              |  |  
|                            |              |  |  
|Total                       |              |  | $
|                            |              |  |  

| | (a) | The
revolving line of credit is classified as a current liability in accordance
               with EITF 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
New Credit Facility does not                expire until March 26, 2006. The Company
is not obligated to repay the                amount outstanding under the revolving line
of credit during fiscal year 2004.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other

As of March 28, 2003, the
Company has not entered into any material working capital commitments that require
funding. The Company believes that the expected cash flows from operations, availability
under the revolving line of credit, and capital markets are sufficient to meet the
Companys anticipated future requirements for working capital, capital expenditures,
and acquisitions for the foreseeable future. Currently, the Company is in the process of
increasing its revolving line of credit from $150 million to $200 million. The
Company believes this will be completed during the quarter ended December 31, 2003.

The Company may, from time-to-time,
seek to retire its outstanding debt or equity through cash purchases and/or exchanges for
equity securities, in open market purchases, privately negotiated transactions or
otherwise. Such repurchases or exchanges, if any, will depend on prevailing market
conditions, the Companys liquidity requirements, contractual restrictions and other
factors. The amounts involved may be material.

APPLICATION OF CRITICAL ACCOUNTING
POLICIES

The consolidated financial statements
require us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses and related disclosure of contingent assets and
liabilities. Management evaluates the estimates, judgments and the policies underlying
these estimates on a periodic basis as situations change, and regularly discusses
financial events, policies, and issues with members of our audit committee and our
independent accountants. The significant accounting policies, which management and the
audit committee believe are the most critical to fully understand and evaluate the
Companys financial position and results of operations, include those detailed in the
Companys Annual Report on Form 10-K for the year ended March 28, 2003
under the heading Managements Discussion and Analysis of Financial Condition
and Results of Operations. During the three months ended October 3, 2003, the
following disclosure was updated to reflect changes in the long-term care industry.

Page 39

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Estimating Allowances for Doubtful
Accounts

The Company maintains allowances for
doubtful accounts for estimated losses resulting from the inability to collect outstanding
amounts due from its customers. The allowances include specific amounts for those accounts
that are likely to be uncollectible, such as bankruptcies, and general allowances for
those accounts that management currently believes to be collectible but later become
uncollectible. Estimates are used to determine the allowances for bad debts and are based
on historical collection experience, current economic trends, credit-worthiness of
customers, changes in customer payment terms, and percentages applied to the accounts
receivable aging categories. The percentage of each aging category that is reserved is
determined by analyzing historical write-offs and current trends in the credit quality of
the customer base. Management performs ongoing credit evaluations by reviewing the
customers current financial information. A credit review is performed on new
customers in the Physician Business and an annual credit review is performed on all major
customers in the Elder Care Business. At a minimum, each Elder Care customer account is
reviewed annually. Adjustments to credit limits and allowances for bad debts are made
based upon payment history and the customers current credit worthiness. If the
financial condition of the Companys customers were to deteriorate or improve,
allowances may be adjusted which will impact general and administrative expenses and
accounts receivable.

The United States Federal Government
recently enacted changes to the Medicare Prospective Pay System (PPS) that
became effective October 1, 2003. PPS, originally enacted in July 1998, limited
government payments to long-term care providers to federally established cost levels. The
recent changes to Medicare resulted in an approximate $850 million addition to
reimbursement funding for providers of elder care services that are part of the federal
Medicare annual budget. In addition, the United States Federal Government also increased
state Medicaid funding by $10 billion for providers of elder care services. As a
result of the recent Medicare changes, providers of elder care services and the elder care
industry are anticipated to receive increased reimbursement from these sources. However,
there can be no assurances that the elder care industry will gain greater financial
stability or that these levels of reimbursement will continue in future periods.

No material revisions have been made
to the allowance methodology for the Elder Care Business subsequent to the quarter ended
December 29, 2000. However, management believes that the recent change to PPS that
became effective October 1, 2003, may positively impact the financial condition for
elder care providers and financial strength of the entire elder care industry. Therefore,
adjustments to the allowance methodology may be required during the remainder of fiscal
year 2004 as management expects improvement in the credit quality of the customer base and
less bad debt write-offs as a result of the recent Medicare changes. Any adjustments will
be considered a change in accounting estimate and will be recorded prospectively in
accordance with Accounting Principles Board Opinion No. 20, Accounting Changes.

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 March 28, 2003.

ITEM 4.    
 CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.
The Companys Principal Executive Officer and Principal Financial Officer have
reviewed and evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Exchange Act Rules 240.13a-14(c) and 15d-14(c)) as of the
end of the period covered by this report (the Evaluation Date). Based on that
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 controls 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 material affect,
the Companys internal controls over financial reporting.

Page 40

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# PART II  OTHER
INFORMATION

ITEM 1.    
 LEGAL PROCEEDINGS

See Note 11, Commitments and
Contingencies, of this Form 10-Q and Item 3 of the Companys Annual Report
on Form 10-K for the year ended on March 28, 2003.

ITEM 2.    
 CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3.    
 DEFAULTS UPON SENIOR SECURITIES

Not applicable.

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

|(a) | The
2003 Annual Meeting of Stockholders was held on September 4, 2003.
|--- | ----------------------------------------------------------------------

|(b) | The
following directors were elected to serve a three-year term of office until
                    the 2006 Annual Meeting of Stockholders or until their successors
have been duly                     elected and qualified. Of the 57,398,803 shares (1
vote per share) of common                     stock represented at the meeting, the
directors were elected by the following                     votes:
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  | Votes Received |           |   
|----------------- | -------------- | --------- | --
|
|                  |                |           |   
|T. O'Neal Douglas | 55,124,174     | 2,274,629 | --
|Clark A. Johnson  | 56,764,173     | 634,630   | --

Immediately following the meeting,
the directors of the Company consisted of the following:

| | Name                                                                                                                          
| | ------------------------------------------------------------------------------------------------------------------------------
| | Charles E. Adair
 T. O'Neal Douglas
 Melvin L. Hecktman
 Clark A. Johnson
 Delores P. Kesler
 Charles R. Scott
 David A. Smith

ITEM 5.    
 OTHER INFORMATION

Not applicable.

Page 41

---

ITEM 6.    
 EXHIBITS AND REPORTS ON FORM 8-K

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

|Exhibit
Number | Description                                                                                                                                                              
|-------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                          
|10.1           | Distributorship Agreement between Abbott Laboratories and the Company (Portions omitted pursuant to a request for confidential treatment - Separately filed with the SEC)
|              
|              
|10.2           | Fourth Amendment to the Amended and Restated Savings Plan                                                                                                                
|              
|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                                                                                                                
|              
|               | * Represents a management contract or compensatory plan or arrangement                                                                                                   

|(b) | Reports
on Form 8-K:
|--- | --------------------

The
following current reports on Form 8-K were furnished during the quarter ended
October 3, 2003:

|Date of Report    | Item Reported                                                                                                                                                                   
|----------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|July 30, 2003     | Furnished to announce the Companys financial
  results for the quarter ended June 30, 2003.                                                                                    
|August 28, 2003   | Furnished to announce the new, three-year
  distribution agreement with Abbott Laboratories.                                                                                    
|September 8, 2003 | Furnished to announce the Company acquired
  Highpoint Healthcare Distribution.                                                                                                 
|September 9, 2003 | Furnished to announce the formation of an
  exclusive five-year distribution alliance between
  the Company and Graham Field Health Products, Inc.                              
|September 9, 2003 | Furnished to announce that Integrated Health
  Services notified the Elder Care Business that
  they would discontinue their medical products
  supply contractual relationship.

Page 42

---

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 November 13, 2002.

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

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