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     December 27, 2002
                                            -----------------

[  ]     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                 (IRS employer
               of incorporation)                  Identification number)

             4345 Southpoint Blvd.
             Jacksonville, Florida                         32216
             ---------------------                         -----
    (Address of principal executive offices)             (Zip code)


         Registrant's telephone number                (904) 332-3000

     Indicate  by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the preceding 12 months (or for shorter  period that the  registrant
was  required  to file such  reports),  and (2) has been  subject to such filing
requirements for the past 90 days.

                                 [X] Yes [ ] No

         Indicate by check mark whether the registrant is an accelerated filer
(as defined by Rule 12b-2 of the Securities Exchange Act of 1934).

                                 [X] Yes [ ] No

         The number of shares of common stock, par value $.01 per share, of the
registrant outstanding as of January 31, 2003 was 67,802,717 shares.



<PAGE>



                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

                                December 27, 2002

                                TABLE OF CONTENTS




<TABLE>
<CAPTION>

  Item                                                                                                        Page
<S>                                                                                                            <C>

           Information Regarding Forward-Looking Statements............................................         3

           Part I--Financial Information

   1.      Financial Statements:

               Consolidated Balance Sheets -- December 27, 2002 and March 29, 2002.....................         4

               Consolidated Statements of Operations for the Three and Nine Months Ended
                  December 27, 2002 and December 28, 2001..............................................         5

               Consolidated Statements of Cash Flows for the Nine Months Ended
                  December 27, 2002 and December 28, 2001..............................................         6

               Notes to Consolidated Financial Statements..............................................         8

               Independent Accountants' Review Report..................................................        25

   2.      Management's Discussion and Analysis of Financial Condition and Results of Operations.......        26

   3.      Quantitative and Qualitative Disclosures About Market Risk..................................        43

   4.      Disclosure Controls and Procedures..........................................................        43

           Part II--Other Information

   1.      Legal Proceedings...........................................................................        43

   2.      Changes in Securities and Use of Proceeds...................................................        43

   3.      Defaults Upon Senior Securities.............................................................        43

   4.      Submission of Matters to a Vote of Security Holders.........................................        44

   5.      Other Information...........................................................................        44

   6.      Exhibits and Reports on Form 8-K............................................................        45

           Signatures..................................................................................        49

           Certifications..............................................................................        50
</TABLE>






                                       2
<PAGE>


                              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' expected
future financial position, results of operations, cash flows, funds from
operations, financing plans, business strategy, budgets, projected costs,
capital expenditures, competitive positions, current and pending Medicare and
Medicaid reimbursement levels and legislation, growth opportunities, business
divestiture plans, 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 29, 2002, in this Form 10-Q, and elsewhere in the
Company's filings with the Securities and Exchange Commission. Factors that may
affect the plans or results of the Company include, without limitation, those
listed in the Company's Annual Report on Form 10-K for the year ended March 29,
2002 under the heading "Risk Factors," and (i) the ability of the Company to
successfully implement its strategic business plan; (ii) the availability of
sufficient capital to finance the Company's business plans on terms satisfactory
to the Company; (iii) competitive factors; (iv) the ability of the Company to
adequately defend or reach a settlement of outstanding litigations and
investigations involving the Company or its management; (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.








                                       3
<PAGE>


PART I--FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      DECEMBER 27, 2002 AND MARCH 29, 2002

             (Dollars in Thousands, Except Share and Per Share Data)

                                     ASSETS
<TABLE>
<CAPTION>


                                                                                                  December 27,       March 29,
                                                                                                      2002             2002
                                                                                                  -----------      -----------
                                                                                                  (Unaudited)
<S>                                                                                                <C>             <C>
Current Assets:
   Cash and cash equivalents..............................................................         $  35,792       $  53,574
   Accounts receivable, net...............................................................           156,951         148,340
   Inventories, net.......................................................................            84,022          83,854
   Employee advances......................................................................                80             118
   Prepaid expenses and other.............................................................            26,502          31,096
   Assets of discontinued operations......................................................                --         193,141
                                                                                                  -----------      -----------
           Total current assets...........................................................           303,347         510,123

Property and equipment, net...............................................................            61,181          61,691
Other Assets:
   Goodwill...............................................................................            61,283          59,390
   Intangibles, net.......................................................................             5,543           4,023
   Employee advances......................................................................               187             282
   Deferred tax assets....................................................................            48,928           7,034
   Other..................................................................................            20,096          20,865
                                                                                                  -----------      -----------
           Total assets...................................................................         $ 500,565       $ 663,408
                                                                                                  ===========      ===========
                      LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:
   Accounts payable.......................................................................         $  87,642       $  94,383
   Accrued expenses.......................................................................            33,517          29,976
   Other..................................................................................             6,806           4,616
   Liabilities of discontinued operations and accrued loss on disposal....................             2,654          68,490
                                                                                                  -----------      -----------
           Total current liabilities......................................................           130,619         197,465
Long-term debt............................................................................           106,000         125,000
Other.....................................................................................            16,589          16,495
                                                                                                  -----------      -----------
           Total liabilities..............................................................           253,208         338,960
                                                                                                  -----------      -----------
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, 67,763,440 and 71,270,044
       shares issued and outstanding at December 27, 2002 and March 29, 2002, respectively               678             712
   Additional paid-in capital.............................................................           325,026         350,043
   Accumulated deficit....................................................................           (78,347)        (26,307)
                                                                                                  -----------      -----------
           Total shareholders' equity.....................................................           247,357         324,448
                                                                                                  -----------      -----------
           Total liabilities and shareholders' equity.....................................         $ 500,565       $ 663,408
                                                                                                  ===========      ===========



  The accompanying notes are an integral part of these consolidated statements.
</TABLE>





                                       4
<PAGE>


                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF OPERATIONS

   FOR THE THREE AND NINE MONTHS ENDED DECEMBER 27, 2002 AND DECEMBER 28, 2001

                                   (Unaudited)

                  (Dollars in Thousands, Except Per Share Data)

<TABLE>
<CAPTION>

                                                               Three Months Ended                  Nine Months Ended
                                                        ---------------------------------  ----------------------------------
                                                          December 27,     December 28,      December 27,      December 28,
                                                              2002             2001              2002              2001
                                                        ----------------  ---------------  ----------------  ----------------
<S>                                                       <C>                <C>               <C>               <C>
Net sales..........................................       $  303,893         $ 279,148         $879,178          $818,105
Cost of goods sold.................................          218,701           201,949          631,271           594,634
                                                        ----------------  ---------------  ----------------  ----------------
               Gross profit........................           85,192            77,199          247,907           223,471
General and administrative expenses................           57,348            49,886          166,670           146,008
Selling expenses...................................           21,255            19,572           62,465            56,529
International business exit charge reversal........               --                --               --              (514)
                                                        ----------------  ---------------  ----------------  ----------------
               Income from operations..............            6,589             7,741           18,772            21,448
                                                        ----------------  ---------------  ----------------  ----------------
Other (expense) income:
      Interest expense.............................           (2,268)           (1,544)          (6,732)           (6,158)
      Interest and investment income...............               47                48              441               212
      Other income.................................            1,944               397            2,753             1,532
                                                        ----------------  ---------------  ----------------  ----------------
                                                                (277)           (1,099)          (3,538)           (4,414)
                                                        ----------------  ---------------  ----------------  ----------------
 Income from continuing operations before provision
      for income taxes.............................            6,312             6,642           15,234            17,034
Provision for income taxes.........................            2,370             2,224            5,697             5,974
 Income from continuing operations before
                                                        ----------------  ---------------  ----------------  ----------------
      extraordinary loss...........................            3,942             4,418            9,537            11,060
                                                        ----------------  ---------------  ----------------  ----------------
Discontinued operations:
      Loss from discontinued operations (net of
         benefit for income taxes of $1,366, $617,
         $2,575, and $745, respectively)...........           (2,194)           (1,004)          (4,101)           (1,555)
      Loss on disposal of discontinued operations
         (net of benefit for income taxes of $1,021
         and $35,675)..............................           (1,168)               --          (56,810)               --
      Cumulative effect of accounting change (net
         of benefit for income taxes of $14,444)...               --                --               --           (90,045)
                                                        ----------------  ---------------  ----------------  ----------------
               Total loss from discontinued
               operations..........................           (3,362)           (1,004)         (60,911)          (91,600)
                                                        ----------------  ---------------  ----------------  ----------------
Extraordinary loss (net of benefit for income taxes
      of $424).....................................               --                --             (666)               --
                                                        ----------------  ---------------  ----------------  ----------------
Net income (loss)..................................       $      580         $   3,414         $(52,040)         $(80,540)
                                                        ================  ===============  ================  ================
Earnings (loss) per share - Basic:
      Income from continuing operations before
         extraordinary loss........................          $  0.06            $ 0.06           $ 0.14            $ 0.16
      Total loss from discontinued operations......            (0.05)            (0.01)           (0.87)            (1.29)
      Extraordinary loss...........................             --                --              (0.01)              --
                                                        ----------------  ---------------  ----------------  ----------------
      Net income (loss)............................          $  0.01            $ 0.05           $(0.74)           $(1.13)
                                                        ================  ===============  ================  ================
Earnings (loss) per share - Diluted:
      Income from continuing operations before
         extraordinary loss........................          $  0.06            $ 0.06           $ 0.14            $ 0.15
      Total loss from discontinued operations......            (0.05)            (0.01)           (0.86)            (1.27)
      Extraordinary loss...........................             --                --              (0.01)              --
                                                        ----------------  ---------------  ----------------  ----------------
      Net income (loss)............................          $  0.01            $ 0.05           $(0.73)           $(1.12)
                                                        ================  ===============  ================  ================


The accompanying notes are an integral part of these consolidated statements.
</TABLE>




                                       5
<PAGE>


                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF CASH FLOWS

        FOR THE NINE MONTHS ENDED DECEMBER 27, 2002 AND DECEMBER 28, 2001

                                   (Unaudited)

                             (Dollars in Thousands)


<TABLE>
<CAPTION>

                                                                                              Nine Months Ended
                                                                                       --------------------------------
                                                                                         December 27,     December 28,
                                                                                             2002             2001
                                                                                       ----------------  --------------
<S>                                                                                      <C>               <C>
Cash Flows From Operating Activities:
   Net loss.......................................................................       $(52,040)         $(80,540)
    Adjustments to reconcile net loss to net cash provided by operating activities:
       Total loss from discontinued operations....................................         60,911            91,600
       Extraordinary loss.........................................................            666                --
       Depreciation...............................................................          8,917             5,841
       Amortization of intangible assets..........................................          1,758             1,146
       Amortization of debt issuance costs........................................            818             1,294
       Provision for doubtful accounts............................................          2,634             3,212
       Provision for notes receivables............................................          2,939                --
       Benefit for deferred income taxes..........................................            875            12,083
       Loss on sales of property and equipment....................................            106                25
       Noncash compensation expense...............................................             --               268
       Loss on marketable securities..............................................             --               114
       International Business exit charge reversal................................             --              (514)
       Changes in operating assets and liabilities, net of effect of business
        combination and discontinued operations:
          Accounts receivable, net................................................        (10,015)             (606)
          Inventories, net........................................................            503            (5,768)
          Prepaid expenses and other current assets...............................          3,683             2,078
          Other assets............................................................        (10,390)          (18,521)
          Accounts payable........................................................         10,495            34,916
          Accrued expenses and other liabilities..................................          6,212            14,674
          Net cash (used in) provided by discontinued operations..................           (356)           27,508
                                                                                       ----------------  --------------
              Net cash provided by operating activities...........................         27,716            88,810
                                                                                       ----------------  --------------

Cash Flows From Investing Activities:
    Capital expenditures..........................................................         (8,526)          (13,869)
    Payments on noncompete agreements.............................................           (453)           (1,157)
    Payment for business combination..............................................         (4,464)               --
    Proceeds from sale of Imaging Business, net of transaction costs of $1,309....         14,075                --
    Proceeds from sales of property and equipment.................................             14                42
    Proceeds from sale of International Business..................................             --               221
    Net cash used in discontinued operations......................................         (1,555)           (3,903)
                                                                                       ----------------  --------------
              Net cash used in investing activities...............................           (909)          (18,666)
                                                                                       ----------------  --------------

</TABLE>



                                       6
<PAGE>



                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES


                CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

        FOR THE NINE MONTHS ENDED DECEMBER 27, 2002 AND DECEMBER 28, 2001

                                   (Unaudited)

                             (Dollars in Thousands)

<TABLE>
<CAPTION>

                                                                                              Nine Months Ended
                                                                                       --------------------------------
                                                                                         December 27,     December 28,
                                                                                             2002             2001
                                                                                       ----------------  --------------
<S>                                                                                       <C>              <C>
Cash Flows From Financing Activities:
    Repayment of Senior Subordinated Notes........................................        (19,000)               --
    Payment of premiums for retirement of Senior Subordinated Notes...............           (665)               --
    Purchase of treasury stock shares.............................................        (25,182)               --
    Proceeds from issuance of common stock........................................            258                92
    Net payments under revolving line of credit...................................             --           (65,000)
    Net cash used in discontinued operations......................................             --              (157)
                                                                                       ----------------  --------------
              Net cash used in financing activities...............................        (44,589)          (65,065)
                                                                                       ----------------  --------------
Net (decrease) increase in cash and cash equivalents..............................        (17,782)            5,079

Cash and cash equivalents, beginning of period....................................         53,574            34,374
                                                                                       ----------------  --------------
Cash and cash equivalents, end of period..........................................       $ 35,792          $ 39,453
                                                                                       ================  ==============


 The accompanying notes are an integral part of these consolidated statements.
</TABLE>




                                       7
<PAGE>


                    PSS WORLD MEDICAL, INC. AND SUBSIDIARIES


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)

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



  1. BACKGROUND AND BASIS OF PRESENTATION

     Background

     PSS World Medical, Inc. (the "Company") is a specialty marketer and
     distributor of medical products to physicians, long-term care providers,
     home healthcare providers, and other alternate-site healthcare providers
     through 49 full-service centers to customers in all 50 states.

     The Physician Sales & Service division (the "Physician Supply Business") is
     a distributor of medical supplies, equipment, and pharmaceuticals to
     primary care and other office-based physicians in the United States. At
     December 27, 2002, the Physician Supply Business operated 36 full-service
     centers distributing to physician office sites in all 50 states.

     The Gulf South Medical Supply, Inc. subsidiary (the "Long-Term Care
     Business") is a distributor of medical supplies and related products to
     nursing homes, home healthcare agencies, elder care providers, and other
     long-term care facilities. At December 27, 2002, the Long-Term Care
     Business operated 13 full-service centers serving all 50 states.

     During the three months ended December 27, 2002, the Company completed the
     sale of the Diagnostic Imaging, Inc. subsidiary ("DI" or the "Imaging
     Business"), a distributor of medical diagnostic imaging supplies,
     chemicals, equipment, and services to the acute and alternate-care markets
     in the United States. As a result, DI's results of operations have been
     classified as discontinued operations for all periods presented. Refer to
     Note 2, Discontinued Operations, for a further discussion.

     After giving effect to the sale of the Imaging Business, the Company
     divides its operations into two reportable operating segments: the
     Physician Supply Business and the Long-Term Care Business. A third segment,
     titled Other, includes unallocated corporate overhead and the Company's
     European operations (the "International Business"), which were sold during
     fiscal year 2002.

     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 have been omitted pursuant to 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 consolidated balance sheet as of March 29, 2002 has been derived from
     the Company's audited consolidated financial statements for the fiscal year
     ended March 29, 2002. The financial statements and related notes included
     in this report should be read in conjunction with the Company's Annual
     Report on Form 10-K for the fiscal year ended March 29, 2002.

     The Company reports its quarter-end financial position and results of
     operations and cash flows on the Friday closest to June 30, September 30,
     December 31, and March 31. The three and nine months ended December 27,
     2002 and December 28, 2001 each consisted of 13 weeks and 39 weeks,
     respectively.

                                       8
<PAGE>

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

     Reclassifications

     Certain amounts for prior periods have been  reclassified to conform to the
     current period presentation.

     Recent Accounting Pronouncements

     In April 2002, the Financial Accounting Standards Board (the "FASB") issued
     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 ("SFAS 145"). Among other things, SFAS 145 rescinds
     SFAS No. 4, Reporting Gains and Losses from Extinguishment of Debt. As
     such, gains and losses from extinguishment of debt shall not be reported as
     extraordinary items unless the extinguishment qualifies as an extraordinary
     item under the criteria of Accounting Principles Board ("APB") Opinion No.
     30, Reporting the Results of Operation-Reporting the Effects of Disposal of
     a Segment of a Business, and Extraordinary, Unusual and Infrequently
     Occurring Events and Transactions ("APB 30"). Gains or losses from
     extinguishment of debt that do not meet the criteria of APB 30 should be
     reclassified to income from continuing operations for all prior periods
     presented. The Company will adopt the provisions of SFAS 145 on March 29,
     2003, the first day of fiscal year 2004. Upon adoption, the Company will
     reclassify any gains or losses on early extinguishment of debt and related
     taxes recorded as an extraordinary loss during fiscal year 2003 to other
     (expense) income and provision for income taxes in the consolidated
     statements of operations.

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
     with Exit or Disposal Activities ("SFAS 146"). SFAS 146 addresses the
     financial accounting and reporting for costs associated with exit or
     disposal activities, and eliminates the definition and requirements for
     recognition of exits costs in Emerging Issues Task Force ("EITF") Issue No.
     94-3, Liability Recognition for Certain Employee Termination Benefits and
     Other Costs to Exit an Activity (including Certain Costs Incurred in a
     Restructuring). SFAS 146 will require that a liability for a cost
     associated with an exit or disposal activity be recognized when the
     liability is incurred and that fair value is the objective for initial
     measurement of a liability. The Company will apply the provisions of SFAS
     146 for exit or disposal activities that are initiated after December 31,
     2002, the effective date of this statement.

     In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
     Accounting and Disclosure Requirements for Guarantees, Including Indirect
     Guarantees ("FIN 45"). FIN 45 elaborates on the disclosures to be made by a
     guarantor in its interim and annual financial statements about its
     obligations under certain guarantees that it has issued. It also clarifies
     that a guarantor is required to recognize, at the inception of a guarantee,
     a liability for the fair value of the obligation undertaken in issuing the
     guarantee. FIN 45 does not prescribe a specific approach for subsequently
     measuring the guarantor's recognized liability over the term of the related
     guarantee. It also incorporates, without change, the guidance in FASB
     Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of
     Others, which is being superseded. The Company will apply the recognition
     and measurement provisions of FIN 45 on a prospective basis to guarantees
     issued or modified after December 31, 2002. Refer to Note 11, Long-Term
     Debt, where the Company complied with the additional disclosure
     requirements under FIN 45.

     In November 2002, the EITF reached a consensus on Issue 00-21,
     Multiple-Deliverable Revenue Arrangements ("EITF 00-21"). EITF 00-21
     addresses how to account for arrangements that may involve the delivery or
     performance of multiple products, services, and/or rights to use assets.
     The consensus mandates how to identify whether goods or services or both
     that are to be delivered separately in a bundled sales arrangement should
     be accounted for separately because they are separate units of accounting.
     EITF 00-21 can affect the timing of revenue recognition for such
     arrangements, even though it does not change rules governing the timing or
     pattern of revenue recognition of individual items accounted for
     separately. The final consensus will be applicable to agreements entered
     into beginning fiscal year 2005 with early adoption permitted.
     Additionally, companies will be permitted to apply the consensus guidance
     to all existing arrangements as the cumulative effect of a change in
     accounting principle in accordance with APB Opinion No. 20, Accounting
     Changes. The Company is currently evaluating the impact, if any, of the
     adoption of EITF 00-21 on its financial condition and results of
     operations.

                                       9
<PAGE>


     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
     Compensation - Transition and Disclosure ("SFAS 148"). SFAS 148 amends SFAS
     No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), to provide
     alternative methods of transition for an entity that voluntarily changes to
     the fair value based method of accounting for stock-based employee
     compensation. In addition, it also amends the disclosure provisions of SFAS
     123 to require prominent disclosure about the effects on reported net
     income of an entity's accounting policy decisions with respect to
     stock-based employee compensation. SFAS 148 also amends APB Opinion No. 28,
     Interim Financial Reporting, to require disclosure about the effect in
     interim financial information. The Company is currently in the process of
     evaluating the impact of SFAS 148 on its financial condition and results of
     operations. However, additional disclosures will be included in the
     Company's annual financial statements for the fiscal year ended 2003 and
     interim financial statements for the first quarter of fiscal year 2004.

2.   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 Supply and
     Long-Term 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 the
     nine months ended December 27, 2002 were reduced by approximately $1,309
     for transaction costs. Approximately $2,654 of additional transaction
     costs, which are accrued in the accompanying balance sheet as an accrued
     loss on disposal, will be paid subsequent to December 27, 2002. Cash
     proceeds, net of these adjustments, received from the transaction were
     approximately $14,075. 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.

     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.

                                       10
<PAGE>

     Net sales  and  total  loss from  discontinued  operations  of the  Imaging
     Business are as follows:
<TABLE>
<CAPTION>

                                                      Three Months Ended              Nine Months Ended
                                                  -----------------------------   ----------------------------
                                                   December 27,   December 28,    December 27,    December 28,
                                                       2002           2001            2002            2001
                                                  -------------  --------------   -------------  -------------
<S>                                                  <C>           <C>             <C>             <C>
      Net sales............................          $93,162       $176,165        $445,630        $532,317

      Pretax loss from operations..........           (3,560)        (1,621)         (6,676)         (2,300)
      Pretax loss on disposal of
         discontinued operations...........           (2,189)            --         (92,485)             --
      Benefit for income taxes.............            2,387            617          38,250             745
      Cumulative effect of accounting
         change (net of income tax benefit
         of $14,444) ......................               --             --              --         (90,045)
      Total loss from discontinued
      operations                                  -------------  --------------   -------------  -------------
                                                     $(3,362)      $ (1,004)       $(60,911)       $(91,600)
                                                  =============  ==============   =============  =============
</TABLE>

     As a result of the sale of DI on November 18, 2002, net sales for the three
     months ended December 27, 2002 included 35 days of sales compared to 62
     days of sales during the three months ended December 28, 2001. Net sales
     for the nine months ended December 27, 2002 included 162 days of sales
     compared to 189 days of sales during the nine months ended December 28,
     2001.

     In accordance with EITF 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 $454 and $1,022 for the
     three months ended December 27, 2002 and December 28, 2001, respectively,
     and $2,157 and $3,591 for the nine months ended December 27, 2002 and
     December 28, 2001, respectively. Income taxes related to continuing
     operations have been calculated for each of the periods presented. The
     difference between this amount and the total tax provision, as previously
     reported, has been allocated to discontinued operations.

     The cumulative effect of accounting change for the nine months ended
     December 28, 2001 primarily related to a goodwill impairment charge of
     $90,045, net of a benefit for income taxes of $14,444, recorded as a result
     of adopting SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS
     142").

     The following table summarizes the carrying amounts of the major classes of
     assets and liabilities classified as discontinued operations in the
     accompanying balance sheets.

<TABLE>
<CAPTION>

                                                                                             As of
                                                                                  ---------------------------
                                                                                  December 27,     March 29,
                                                                                      2002           2002
                                                                                  ------------   ------------
<S>                                                                                 <C>           <C>
       Accounts receivable, net..........................................           $   --        $ 78,615
       Inventories, net..................................................               --          69,069
       Prepaid expenses and other current assets.........................               --           7,655
       Property and equipment, net.......................................               --          23,149
       Goodwill and intangibles..........................................               --          12,425
       Other noncurrent assets...........................................               --           2,228
                                                                                  ------------   ------------
           Assets of discontinued operations.............................           $   --        $193,141
                                                                                  ============   ============

       Accounts payable..................................................           $   --        $ 52,311
       Accrued expenses..................................................               --           5,815
       Other current liabilities.........................................               --          10,364
                                                                                  ------------   ------------
           Liabilities of discontinued operations........................               --          68,490
       Accrued loss on disposal..........................................            2,654              --
                                                                                  ------------   ------------
           Liabilities of discontinued operations and accrued loss on
              disposal...................................................           $2,654        $ 68,490
                                                                                  ============   ============
</TABLE>
                                       11
<PAGE>

3.   ACCRUED RESTRUCTURING COSTS AND EXPENSES


     Plan Adopted During the Third Quarter of Fiscal Year 2003--Other Segment.

     As a result of the sale of the Imaging Business, management and the Board
     of Directors approved and adopted a formal plan to restructure certain
     positions within the Company during the three months ended December 27,
     2002. As a result of the plan, approximately 21 employees, including
     leaders and administrative personnel, will be involuntarily terminated. As
     of December 27, 2002, 7 employees had been terminated.

     Accrued restructuring costs and expenses related to the Other segment's
     plan, classified as accrued expenses in the accompanying consolidated
     balance sheets, was $342 at December 27, 2002. The following is a summary
     of the restructuring activity related to the plan described above:

                                                      Involuntary
                                                       Employee
                                                      Termination
                                                         Costs
                                                     --------------

           Balance at September 27, 2002.........         $ --
                 Additions.......................          382
                 Utilized........................          (40)
                                                     --------------
           Balance at December 27, 2002..........         $342
                                                     ==============

     Plan  Adopted  During the Fourth  Quarter  of Fiscal  Year  2002--Physician
     Supply Business.

     During the quarter ended March 29, 2002, management and the Board of
     Directors approved and committed to a plan to restructure the Physician
     Supply Business. To improve the distribution infrastructure, certain
     administrative functions, such as accounts receivable billing and
     collections and inventory management, at 13 service center locations are
     being consolidated into larger existing facilities within a geographic
     location. The operations in the affected facilities will be reduced to
     receiving and distributing inventory, customer service, and sales support.
     Such locations will be referred to as "break-freight" locations. As of
     December 27, 2002, certain administrative functions at 10 of the 13 service
     center locations were consolidated into existing facilities. To improve the
     inventory purchasing structure and to leverage purchasing volumes, the
     purchasing function for 33 service locations is being centralized to the
     corporate office located in Jacksonville, Florida. As of December 27, 2002,
     the purchasing function for 25 of the 33 service center locations was
     centralized to Jacksonville, Florida. Management anticipates that this plan
     will be substantially completed by the end of the fourth quarter of fiscal
     year 2003. As a result of the plan, approximately 75 employees, including
     operations leaders, administrative and warehouse personnel, will be
     involuntarily terminated. As of December 27, 2002, 61 employees had been
     terminated.

                                       12
<PAGE>

     Accrued restructuring costs and expenses related to the Physician Supply
     Business plan, classified as accrued expenses in the accompanying
     consolidated balance sheets, were $2,381 and $3,666 at December 27, 2002
     and March 29, 2002, respectively. The following is a summary of the
     restructuring activity related to the plan described above:
<TABLE>
<CAPTION>

                                                      Involuntary
                                                        Employee        Lease         Branch
                                                      Termination    Termination     Shutdown
                                                         Costs          Costs         Costs        Total
                                                      ------------   -----------   -----------  -----------
<S>                                                      <C>           <C>             <C>         <C>
           Balance at March 29, 2002.............        $ 783         $2,535          $ 348       $3,666
                 Additions.......................          174             --             --          174
                 Utilized........................         (106)           (51)           (18)        (175)
                                                      ------------   -----------   -----------  -----------
           Balance at June 28, 2002..............          851          2,484            330        3,665
                 Adjustments.....................         (464)            --           (317)        (781)
                 Additions.......................           29             15             --           44
                 Utilized........................         (103)           (98)             3         (198)
                                                      ------------   -----------   -----------  -----------
           Balance at September 27, 2002.........          313          2,401             16        2,730
                 Adjustments.....................          (32)           (20)            24          (28)
                 Additions.......................           22             --             --           22
                 Utilized........................         (113)          (219)           (11)        (343)
                                                      ------------   -----------   -----------  -----------
           Balance at December 27, 2002..........        $ 190         $2,162          $  29       $2,381
                                                      ============   ===========   ===========  ===========
</TABLE>

     Management reevaluates its estimates of the total costs related to this
     plan and makes any necessary adjustments on a quarterly basis. During the
     three months ended September 27, 2002, the original total estimated costs
     of $6,505 related to this plan were revised to be approximately $5,753, of
     which approximately $4,174 and $773 was recognized during fiscal year 2002
     and the nine months ended December 27, 2002, respectively. Approximately
     $806 will be expensed as incurred during the remaining three months of
     fiscal year 2003.

     The revision to the total estimated costs of the plan related to
     involuntary employee termination costs and branch shutdown costs. Certain
     employees, who were previously identified to be involuntarily terminated,
     either ceased employment prior to the distribution center closure or were
     transferred within the Company. Therefore, these employees were not
     entitled to severance. In addition, accrued branch shutdown costs are
     estimated to be less than previous estimates as the Company was able to
     sell the warehouse racking rather than incur the removal and disposal
     expenses. As a result, the Company reversed approximately $781 of
     restructuring costs and expenses during the three months ended September
     27, 2002.

     The amount of severance that involuntarily terminated employees receive is
     based on the number of months of service. Employees earn additional
     severance during the period from March 30, 2002 until closure of their
     service center. This additional severance is being accrued when earned
     throughout fiscal year 2003. The Physician Supply Business accrued an
     additional $22 and $225 of involuntary employee termination costs during
     the three and nine months ended December 27, 2002, respectively.

                                       13
<PAGE>

     Prior Fiscal Years

     During the prior fiscal years, management and the Board of Directors
     approved and committed to several plans to restructure the Physician Supply
     and the Long-Term Care Businesses. Accrued restructuring costs and expenses
     related to plans adopted in the prior fiscal years, classified as accrued
     expenses in the accompanying consolidated balance sheets, totaled $672 and
     $1,399 at December 27, 2002 and March 29, 2002, respectively. The following
     is a summary of the restructuring activity related to the plans adopted in
     prior fiscal years:
<TABLE>
<CAPTION>

                                                           Involuntary
                                                            Employee        Lease
                                                           Termination   Termination
                                                              Costs         Costs        Total
                                                           -----------   -----------   -----------
<S>                                                          <C>            <C>           <C>
                 Balance at March 29, 2002............       $1,385         $  14         $1,399
                       Adjustments....................           --           (14)           (14)
                       Utilized.......................         (258)           --           (258)
                                                           -----------   -----------   -----------
                 Balance at June 28, 2002.............        1,127            --          1,127
                       Utilized.......................         (270)           --           (270)
                                                           -----------   -----------   -----------
                 Balance at September 27, 2002........          857            --            857
                       Utilized.......................         (185)           --           (185)
                                                           -----------   -----------   -----------
                 Balance at December 27, 2002.........       $  672         $  --         $  672
                                                           ===========   ===========   ===========
</TABLE>

     The accrued involuntary employee termination costs at December 27, 2002 and
     March 29, 2002 relate to a restructuring plan that was adopted during the
     third quarter of fiscal year 2001. The remaining $672 will be paid to the
     terminated employees through fiscal year 2005 in accordance with their
     severance agreements.

4.   PURCHASE BUSINESS COMBINATION

     On September 16, 2002, the Company acquired certain assets and assumed
     certain liabilities of a long-term care medical supply distributor. The
     acquisition was accounted for under the purchase method of accounting in
     accordance with SFAS No. 141, Business Acquisitions, and 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 this acquisition was 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.

     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
                                                                      ========

     The $1,893 of goodwill was assigned to the Long-Term 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 at the
     time of acquisition of approximately 5.6 years.

                                       14
<PAGE>

5.   GOODWILL

     In accordance with SFAS 142, the changes in the carrying value of goodwill
     for the nine months ended December 27, 2002 are as follows:


<TABLE>
<CAPTION>

                                                          Physician      Long-Term
                                                            Supply          Care
                                                           Business       Business       Total
                                                         -----------    -----------    ---------
               <S>                                        <C>            <C>           <C>
                Balance as of March 29, 2002........       $ 9,788        $49,602       $59,390
                     Purchase business combination..            --          1,893         1,893
                                                         -----------    -----------    ---------
                Balance as of December 27, 2002.....       $ 9,788        $51,495       $61,283
                                                         ===========    ===========    =========
</TABLE>

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

6.   INTANGIBLES

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

                                                 As of December 27, 2002               As of March 29, 2002
                                            ----------------------------------   ---------------------------------
                                             Gross                                Gross
                                            Carrying    Accumulated               Carrying   Accumulated
                                             Amount     Amortization     Net       Amount    Amortization    Net
                                            ----------  ------------  ---------   --------  -------------  -------
<S>                                           <C>        <C>           <C>        <C>         <C>          <C>
     Noncompetition Agreements:
        Physician Supply Business......       $ 4,628    $(3,512)      $1,116     $ 4,053     $(3,073)     $  980
        Long-Term Care Business........         2,035     (1,021)       1,014       2,070        (876)      1,194
                                            ----------  ------------  ---------   --------  -------------  -------
                                                6,663     (4,533)       2,130       6,123      (3,949)      2,174
                                            ----------  ------------  ---------   --------  -------------  -------
     Signing Bonuses:
        Physician Supply Business......         1,985     (1,020)         965       1,027        (426)        601
        Long-Term Care Business........           250       (183)          67         200        (150)         50
                                            ----------  ------------  ---------   --------  -------------  -------
                                                2,235     (1,203)       1,032       1,227        (576)        651
                                            ----------  ------------  ---------   --------  -------------  -------
     Other Intangibles:
        Physician Supply Business......         2,993     (1,964)       1,029       2,993      (1,795)      1,198
        Long-Term Care Business........         1,429        (77)       1,352          --          --          --
                                            ----------  ------------  ---------   --------  -------------  -------
                                                4,422     (2,041)       2,381       2,993      (1,795)      1,198
                                            ----------  ------------  ---------   --------  -------------  -------
               Total...................       $13,320    $(7,777)      $5,543     $10,343     $(6,320)     $4,023
                                            ==========  ============  =========   ========  =============  =======
</TABLE>


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



                                                   December 27,      March 29,
                                                      2002             2002
     (in years)                                    ------------    ------------

     Noncompetition agreements............             6.8             7.1
     Signing bonuses.......................            3.4             3.5
     Other intangibles.....................           10.4            12.4
                                                   ------------    ------------
       Total weighted-average period......             7.4             8.2
                                                   ============    ============

                                       15
<PAGE>

     Total amortization expense for intangible assets for the three months ended
     December 27, 2002 and December 28, 2001 was $570 and $427, respectively.
     Total amortization expense for intangible assets for the nine months ended
     December 27, 2002 and December 28, 2001 was $1,758 and $1,146,
     respectively. The estimated amortization expense for the next five fiscal
     years and thereafter is as follows:


          Fiscal Year:
             2003 (remaining 3 months)...................        $  550
             2004........................................         1,569
             2005........................................         1,167
             2006........................................           830
             2007........................................           691
             Thereafter..................................           736
                                                                 ------
                      Total..............................        $5,543
                                                                 ======

     Total payments made under noncompetition agreements during the nine months
     ended December 27, 2002 were $453. Future minimum payments required under
     noncompetition agreements at December 27, 2002 are as follows:


          Fiscal Year:
             2003 (remaining 3 months)...................        $  193
             2004........................................           238
             2005........................................            93
             2006........................................            35
             2007........................................            34
             Thereafter..................................           115
                                                                 ------
                      Total..............................        $  708
                                                                 ======

7.   NOTES RECEIVABLE

     The Company has three notes receivables (the "Loans") outstanding from its
     former Chairman and Chief Executive Officer, which bear interest at the
     applicable Federal rate for long-term obligations. These Loans 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 repay personal debt. One of the Loans is
     unsecured and the other two Loans are secured by common stock of the
     Company and a split-dollar life insurance policy. As part of the Company's
     ongoing review of the realization of the Loans, the Company determined that
     an allowance for doubtful accounts was required for the unsecured loan. As
     a result, during the nine months ended December 27, 2002, the Company
     recorded an allowance for doubtful accounts of $2,939 against the unsecured
     Loan. This allowance does not represent a forgiveness of debt.

                                       16
<PAGE>

8.   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):
<TABLE>
<CAPTION>

                                                         Three Months Ended                Nine Months Ended
                                                    -----------------------------    ----------------------------
                                                    December 27,    December 28,     December 27,    December 28,
                                                        2002            2001             2002            2001
                                                    -------------- --------------    -------------   ------------
<S>                                                    <C>            <C>             <C>             <C>
     Income from continuing operations
        before extraordinary loss............          $3,942         $ 4,418         $  9,537        $ 11,060
     Total loss from discontinued operations
        (net of benefit for income taxes of
        $2,387 $617, $38,250, and $15,189)...          (3,362)         (1,004)         (60,911)        (91,600)
     Extraordinary loss (net of benefit for
        income taxes of $424)................              --              --             (666)             --
                                                    -------------- --------------    -------------   ------------
     Net income (loss).......................          $  580         $ 3,414         $(52,040)       $(80,540)
                                                    ============== ==============    =============   ============
     Earnings (loss) per share - Basic:
        Income from continuing operations
         before extraordinary loss...........           $0.06           $0.06           $ 0.14          $ 0.16
        Total loss from discontinued
         operations..........................           (0.05)          (0.01)           (0.87)          (1.29)
        Extraordinary loss...................              --              --            (0.01)             --
                                                    -------------- --------------    -------------   ------------
        Net (loss) income....................           $0.01           $0.05           $(0.74)         $(1.13)
                                                    ============== ==============    =============   ============

     Earnings (loss) per share - Diluted:
        Income from continuing operations
         before extraordinary loss...........           $0.06           $0.06            $0.14          $ 0.15
        Total loss from discontinued
         operations..........................           (0.05)          (0.01)           (0.86)          (1.27)
        Extraordinary loss...................              --              --            (0.01)             --
                                                    -------------- --------------    -------------   ------------
        Net (loss) income....................           $0.01           $0.05           $(0.73)         $(1.12)
                                                    ============== ==============    =============   ============

     Weighted average shares outstanding:
        Common shares........................          68,698          71,168           70,294          71,166
        Assumed exercise of stock options....             586           1,033              770             667
                                                    -------------- --------------    -------------   ------------
        Diluted shares outstanding...........          69,284          72,201           71,064          71,833
                                                    ============== ==============    =============   ============
</TABLE>


     Diluted earnings per share assume options to purchase shares of common
     stock have been exercised using the treasury stock method. Options to
     purchase approximately 5.2 million and 4.6 million shares of common stock
     that were outstanding during the three and nine months ended December 27,
     2002, respectively, were not included in the computation of diluted
     earnings per share for each of the respective periods because the options'
     exercise prices exceeded the fair market value of the Company's common
     stock.

     On July 30, 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 3.6 million common shares, in the open
     market, in privately negotiated transactions, or otherwise. As of December
     27, 2002, the Company had completed the repurchase of the 3.6 million
     common shares under this program at an average price of $7.12 per common
     share. On December 17, 2002, the Company's Board of Directors authorized an
     additional purchase of up to 5% of its common stock, or approximately 3.4
     million common shares, in the open market, in privately negotiated
     transactions, or otherwise. As of December 27, 2002, no shares have been
     purchased under this program.

                                       17
<PAGE>

9.   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:
<TABLE>
<CAPTION>

                                                         Three Months Ended               Nine Months Ended
                                                    ----------------------------    -----------------------------
                                                    December 27,    December 28,    December 27,     December 28,
                                                        2002            2001            2002             2001
                                                    ------------    ------------    ------------     ------------
<S>                                                     <C>            <C>              <C>             <C>
     NET SALES:
         Physician Supply Business.............         $195,191       $180,696         $562,182        $528,153
         Long-Term Care Business...............          108,702         98,452          316,996         289,521
         Other.................................               --             --               --             431
                                                    ------------    ------------    ------------     ------------
              Total net sales..................         $303,893       $279,148         $879,178        $818,105
                                                    ============    ============    ============     ============
     INCOME FROM OPERATIONS:
         Physician Supply Business.............         $  5,851       $  6,172         $ 17,070        $ 18,305
         Long-Term Care Business...............            4,583          3,554           13,155           7,582
         Other.................................           (3,845)        (1,985)         (11,453)         (4,439)
                                                    ------------    ------------    ------------     ------------
              Total income from operations.....         $  6,589       $  7,741         $ 18,772        $ 21,448
                                                    ============    ============    ============     ============

     DEPRECIATION:
         Physician Supply Business.............         $  2,292       $  1,561         $  6,532        $  3,858
         Long-Term Care Business...............              397            449            1,255           1,372
         Other.................................              401            248            1,130             611
                                                    ------------    ------------    ------------     ------------
              Total depreciation...............         $  3,090       $  2,258         $  8,917        $  5,841
                                                    ============    ============    ============     ============

     AMORTIZATION OF INTANGIBLE ASSETS:
         Physician Supply Business.............         $    370       $    323         $  1,202        $    835
         Long-Term Care Business...............              200            104              556             311
                                                    ------------    ------------    ------------     ------------
              Total amortization of intangible
                   assets......................         $    570       $    427         $  1,758        $  1,146
                                                    ============    ============    ============     ============

     PROVISION FOR DOUBTFUL ACCOUNTS:
         Physician Supply Business.............         $    370       $    412         $    822        $  1,022
         Long-Term Care Business...............              551            294            1,812           2,190
                                                    ------------    ------------    ------------     ------------
              Total provision for doubtful
                   accounts....................         $    921       $    706         $  2,634        $  3,212
                                                    ============    ============    ============     ============

     INTEREST EXPENSE:
         Physician Supply Business.............         $  1,000       $     19         $  2,970        $    486
         Long-Term Care Business...............            1,225          1,208            3,683           3,853
         Other.................................               43            317               79           1,819
                                                    ------------    ------------    ------------     ------------
              Total interest expense...........         $  2,268       $  1,544         $  6,732        $  6,158
                                                    ============    ============    ============     ============

     INTEREST AND INVESTMENT INCOME:
         Physician Supply Business.............         $     --       $      1         $     23        $      3
         Long-Term Care Business...............               --             --                1              --
         Other.................................               47             47              417             209
                                                    ------------    ------------    ------------     ------------
              Total interest and investment
                   income......................         $     47       $     48         $    441        $    212
                                                    ============    ============    ============     ============

</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>

                                                         Three Months Ended               Nine Months Ended
                                                    ----------------------------    -----------------------------
                                                    December 27,    December 28,    December 27,     December 28,
                                                        2002            2001            2002             2001
                                                    ------------    ------------    ------------     ------------

<S>                                                     <C>            <C>              <C>             <C>
     PROVISION FOR INCOME TAXES:
         Physician Supply Business.............         $  1,766       $  2,502         $  5,595        $  7,596
         Long-Term Care Business...............            1,157            905            3,537           1,587
         Other.................................             (553)        (1,183)          (3,435)         (3,209)
                                                    ------------    ------------    ------------     ------------
              Total provision for income taxes.         $  2,370       $  2,224         $  5,697        $  5,974
                                                    ============    ============    ============     ============

     CAPITAL EXPENDITURES:
         Physician Supply Business.............         $  2,075       $  2,842         $  6,942        $  8,356
         Long-Term Care Business...............              158             67              471             287
         Other.................................              133            696            1,113           5,226
                                                    ------------    ------------    ------------     ------------
              Total capital expenditures.......         $  2,366       $  3,605         $  8,526        $ 13,869
                                                    ============    ============    ============     ============



                                                      December 27,     March 29,
                                                          2002           2002
                                                     ------------      ---------
     ASSETS:
         Physician Supply Business.............         $230,822       $ 223,216
         Long-Term Care Business...............          162,426         155,038
         Other.................................          107,317          92,013
         Discontinued Operations...............             --           193,141
                                                    ------------       ---------
                 Total assets..................         $500,565       $ 663,408
                                                     ============      =========
</TABLE>


10.  COMMITMENTS AND CONTINGENCIES

     Litigation

     The Company, through its Long-Term 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 California, Washington,
     Georgia, New Hampshire, Pennsylvania 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 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 on or about May 28, 1998, is
     pending in the United States District Court for the Middle District of
     Florida, Jacksonville Division. An amended complaint was filed on December
     11, 1998. The plaintiff alleges, for himself and for a purported class of
     similarly situated stockholders who allegedly 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 thereunder. The allegations are based upon a decline in the
     Company's stock price following announcement by the Company in May 1998
     regarding the Gulf South Merger, which resulted in earnings below analyst's
     expectations. The plaintiff seeks indeterminate damages, including costs
     and expenses. The Company filed a motion to dismiss the first amended
     complaint on January 25, 1999. The court granted that motion without
     prejudice by order dated February 9, 2000. Plaintiffs filed their second
     amended complaint on March 15, 2000, and the Company filed a motion to
     dismiss the second amended complaint on May 1, 2000. By order dated
     December 18, 2002, the Court granted the motion to dismiss the second
     amended complaint with prejudice with respect to the Section 10(b) claims.
     The Order granted the motion to dismiss the second amended complaint
     without prejudice as to the Section 14(a) and 20(a) claims and gave the
     plaintiffs leave to file a third amended complaint. The plaintiffs filed
     their third amended complaint on January 17, 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.
     The Company intends to move to dismiss the third amended complaint. There
     can be no assurance that this litigation will be ultimately resolved on
     terms that are favorable to the Company.
                                       19
<PAGE>

     The Company has been named as a defendant in ten, related class action
     complaints, the first of which was filed on July 13, 2001 and all of which
     had been filed in the United States District Court for the Middle District
     of Florida. By Order of the Court dated January 14, 2002, 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. On May 14, 2002, defendants filed their
     motion to dismiss the Amended Complaint, and, on August 1, 2002, the Court
     entered an Order denying that motion and directing the Company to answer
     the Amended Complaint by August 12, 2002. 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 thereunder, and seeks unspecified damages. The plaintiffs
     allege that the Company 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. By order of the Court dated
     November 14, 2002, Plaintiff's Motion for Class Certification was granted.
     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 (Case No.
     CV SA 02-533 AHS (ANx)). In response to the Motion to Transfer Venue filed
     by the Company, the plaintiffs stipulated that venue of the case is proper
     in the United States District Court in Jacksonville, Florida. The Court
     approved the transfer 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
     plaintiffs seek court approval to proceed as a collective action under the
     Fair Labor Standards Act, a representative action under California's Unfair
     Competition Act, and/or a class action on behalf of all persons in the
     United States who have occupied any one of the three positions within the
     pertinent limitations period. The Company opposed this motion. It is
     unknown whether the Court will tentatively approve a collective action and
     allow discovery on the issue of who is eligible to participate in the
     collective action. The Plaintiffs seek to recover back pay, interest, costs
     of suit, declaratory and injunctive relief, and applicable statutory
     penalties. In addition, two of the three named plaintiffs bring individual
     claims for gender discrimination and retaliation under Title VII of the
     Civil Rights Act of 1964 and the Equal Pay Act of 1963. The Company is
     vigorously defending against the claims and is working with human resource
     personnel to collect personnel and payroll information necessary to
     determine (i) the employees who are potentially eligible to participate in
     the suit and (ii) the extent of overtime liability, if any. There can be no
     assurance that this litigation will be ultimately resolved on terms that
     are favorable to the Company.

     On December 7, 2001, the Company filed an arbitration proceeding with the
     American Arbitration Association against Candela Corporation (PSS World
     Medical, Inc. d/b/a Physician Sales & Service, Claimant, v. Candela
     Corporation, Respondent) for breach of contract, promissory estoppel,
     intentional interference with contractual/advantageous relations, and
     violation of the Massachusetts Unfair Business Practices Act, arising out
     of Candela's termination of the distribution agreement between the two
     companies. Candela has filed counterclaims in the arbitration for breach of
     contract, seeking payment of $2,350 in outstanding invoices and alleged
     trademark infringement and violation of the Massachusetts Unfair Business
     Practices Act. Final ruling by the arbitration panel is presently expected
     to be rendered by February 28, 2003. The Company believes that Candela's
     counterclaims are without merit and intends to defend vigorously 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
     accompanying consolidated balance sheets include the liability for the
     $2,350 of outstanding invoices.

                                       20
<PAGE>

     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 continue salary payments
     and provide insurance for a period ranging from 3 to 12 months for certain
     executives and to repurchase a portion or all of the shares of common stock
     held by the executives upon their demand at the fair market value at the
     time of repurchase. The period of salary and insurance continuation and the
     level of stock repurchases are based on the conditions of the termination
     or resignation.

     During fiscal 2000, the Board of Directors approved and adopted the PSS
     World Medical, Inc. Officer Retention Bonus Plan and a Corporate Office
     Employee Retention Bonus Plan. As part of the Company's strategic
     alternatives process, management adopted these plans to retain certain
     officers and key employees during the strategic alternatives transition
     period. The total cash compensation costs related to these plans is
     approximately $8,238, of which $6,807 was expensed in prior fiscal years
     and $1,288 was expensed during the nine months ended December 27, 2002.
     Approximately $143 will be expensed during the remaining three months of
     fiscal year 2003.

11.  LONG-TERM DEBT

     During fiscal year 1998,  the Company  issued  $125,000 in debt  securities
     ("Senior Subordinated Notes") under a registration statement filed with the
     Securities and Exchange Commission.  Interest on the Notes accrues from the
     date of  original  issuance  and is  payable  semiannually  on  April 1 and
     October 1 of each  year,  at a rate of 8.5% per annum.  Gulf South  Medical
     Supply, Inc.,  Physician Sales & Service Limited Partnership,  PSS Service,
     Inc.,  and  PSS  Holding,  Inc.,  (collectively,  "Subsidiary  Guarantors")
     guarantee  the  payment of  principal  and accrued  interest  due under the
     Senior  Subordinated  Notes issued by PSS World  Medical,  Inc.  ("Parent")
     through  October 1, 2007, the maturity date. If the Parent  defaulted under
     the Senior Subordinated Note obligation, the Subsidiary Guarantors would be
     required to make such payments in accordance  with the Indenture.  However,
     the obligations of the Subsidiary Guarantors are expressly  subordinated to
     all guarantor senior  indebtedness.  The maximum potential amount of future
     payments under the guarantee as of December 27, 2002 would be approximately
     $108,253,  which represents  outstanding  principal and accrued interest of
     approximately $106,000 and $2,253, respectively.  The Subsidiary Guarantors
     have not recorded a liability in their financial statements related to this
     obligation.

     During the nine months ended December 27, 2002, the Company retired $19,000
     principal amount of its Senior Subordinated Notes. An extraordinary loss of
     $666 was incurred as a result of the early extinguishment of debt,
     consisting of $665 of redemption premiums, $425 of accelerated amortization
     of debt issuance costs, net of a benefit for income taxes of $424. The
     principal amount and accrued interest outstanding at December 27, 2002, was
     approximately $106,000 and $2,253, respectively.

                                       21
<PAGE>

     The following tables present condensed consolidating financial information
     for the Parent or issuer of the debt, the Subsidiary Guarantors, and the
     nonguarantor subsidiary of the Senior Subordinated Notes. The nonguarantor
     subsidiary was the International Business, which was divested during the
     three months ended June 29, 2001. Separate financial statements of the
     Subsidiary Guarantors are not presented because the guarantors are jointly,
     severally and unconditionally liable under the guarantees and the Company
     believes the condensed consolidating financial information is more
     meaningful in understanding the financial position, results of operations,
     and cash flows of the Subsidiary Guarantors. In addition, the Subsidiary
     Guarantors are 100% owned subsidiaries of the Company.



                            Condensed Balance Sheets
                      December 27, 2002 and March 29, 2002

<TABLE>
<CAPTION>

                                                                       As of December 27, 2002
                                                                             (Unaudited)
                                                      ------------------------------------------------------------
                                                                         Guarantor
                                                         Parent         Subsidiaries  Eliminations   Consolidated
                                                      ------------     -------------  ------------   ------------
<S>                                                     <C>              <C>          <C>             <C>
     Current Assets:
           Cash and cash equivalents............        $ 32,819         $  2,973              --      $ 35,792
           Accounts receivable, net.............          78,223           78,728              --       156,951
           Inventories, net.....................          50,420           33,602              --        84,022
           Intercompany receivables.............          31,821          (31,821)             --            --
           Other current assets.................          12,938           13,644              --        26,582
                                                      ------------     -------------  ------------   ------------
                    Total current assets........         206,221           97,126              --       303,347
     Property and equipment, net................          55,833            5,348              --        61,181
     Other Assets:
           Goodwill.............................           9,787           51,496              --        61,283
           Intangibles, net.....................           3,109            2,434              --         5,543
           Investment in subsidiaries...........             285           28,084         (28,369)           --
           Deferred tax assets..................          47,065            1,863              --        48,928
           Other................................          18,697            1,586              --        20,283
                                                      ------------     -------------  ------------   ------------
                    Total assets................        $340,997         $187,937        $(28,369)     $500,565
                                                      ============     =============  ============   ============

     Current Liabilities:
           Accounts payable.....................        $ 54,862         $ 32,780        $     --      $ 87,642
           Other current liabilities............          33,783            6,540              --        40,323
           Liabilities of discontinued operations
              and accrued loss on disposal......           2,654               --              --         2,654
                                                      ------------     -------------  ------------   ------------
                    Total current liabilities...          91,299           39,320              --       130,619

     Long-term debt.............................         106,000               --              --       106,000
     Other......................................          15,256            1,333              --        16,589
                                                      ------------     -------------  ------------   ------------
                    Total liabilities...........         212,555           40,653              --       253,208
                                                      ------------     -------------  ------------   ------------

     Shareholders' Equity:
           Common stock.........................             678              166            (166)          678
           Additional paid-in capital...........         168,199          148,665           8,162       325,026
           Accumulated deficit..................         (40,435)          (1,547)        (36,365)      (78,347)
                                                      ------------     -------------  ------------   ------------
                    Total shareholders' equity..         128,442          147,284         (28,369)      247,357
                                                      ------------     -------------  ------------   ------------
                    Total liabilities and
                    shareholders' equity........        $340,997         $187,937        $(28,369)     $500,565
                                                      ============     =============  ============   ============

</TABLE>






                                       22
<PAGE>


                      Condensed Balance Sheets (Continued):

<TABLE>
<CAPTION>

                                                                        As of March 29, 2002
                                                      -----------------------------------------------------------
                                                                         Guarantor
                                                         Parent         Subsidiaries  Eliminations   Consolidated
                                                      ------------     -------------  ------------   ------------

<S>                                                     <C>              <C>           <C>            <C>
     Current Assets:
           Cash and cash equivalents.............       $ 39,531         $ 14,043              --      $ 53,574
           Accounts receivable, net..............         78,911           69,429              --       148,340
           Inventories, net......................         48,706           35,148              --        83,854
           Intercompany receivables..............        134,418         (134,418)             --              --
           Other current assets..................         14,242           16,972              --        31,214
           Assets of discontinued operations.....             --          193,141              --       193,141
                                                      ------------     -------------  ------------   ------------
                    Total current assets.........        315,808          194,315              --       510,123
     Property and equipment, net.................         55,449            6,242              --        61,691
     Other Assets
           Goodwill..............................          9,788           49,602              --        59,390
           Intangibles, net......................          2,777            1,246              --         4,023
           Investment in subsidiaries............            286           28,083        $(28,369)           --
           Deferred tax assets...................          5,326            1,708              --         7,034
           Other.................................          4,039           17,108              --        21,147
                                                      ------------     -------------  ------------   ------------
                    Total assets.................       $393,473         $298,304        $(28,369)     $663,408
                                                      ============     =============  ============   ============

     Current Liabilities:
           Accounts payable......................       $ 62,181         $ 32,202        $     --      $ 94,383
           Other current liabilities.............         24,439           10,153              --        34,592
           Liabilities of discontinued operations
              and accrued loss on disposal.......             --           68,490              --        68,490
                                                      ------------     -------------  ------------   ------------
                    Total current liabilities....         86,620          110,845              --       197,465

     Long-term debt..............................        125,000               --              --       125,000
     Other.......................................         13,845            2,650              --        16,495
                                                      ------------     -------------  ------------   ------------
                    Total liabilities............        225,465          113,495              --       338,960
                                                      ------------     -------------  ------------   ------------

     Shareholders' Equity:
           Common stock..........................            713              329            (330)          712
           Additional paid-in capital............        191,568          150,149           8,326       350,043
           Accumulated (deficit) earnings........        (24,273)          34,331         (36,365)      (26,307)
                                                      ------------     -------------  ------------   ------------
                    Total shareholders' equity...        168,008          184,809         (28,369)      324,448
                                                      ------------     -------------  ------------   ------------
                    Total liabilities and
                    shareholders' equity.........       $393,473         $298,304        $(28,369)     $663,408
                                                      ============     =============  ============   ============

</TABLE>



                                       23
<PAGE>



                  Unaudited Condensed Statements of Operations
   For the Three and Nine Months Ended December 27, 2002 and December 28, 2001

<TABLE>
<CAPTION>

                                                                    Three Months Ended December 27, 2002
                                                                  --------------------------------------------
                                                                                   Guarantor
                                                                      Parent     Subsidiaries    Consolidated
                                                                  ------------   ------------    ------------
<S>                                                                  <C>           <C>             <C>
     Net sales..............................................         $166,440      $137,453        $303,893
     Cost of goods sold.....................................          116,139       102,562         218,701
                                                                  ------------   ------------    ------------
                    Gross profit............................           50,301        34,891          85,192
     General and administrative expenses....................           35,446        21,902          57,348
     Selling expenses.......................................           15,350         5,905          21,255
                                                                  ------------   ------------    ------------
                    (Loss) income from operations...........             (495)        7,084           6,589
     Other (expense) income ................................          (11,174)       10,897            (277)
                                                                  ------------   ------------    ------------
     (Loss) income from continuing operations before provision
        for income taxes....................................          (11,669)       17,981           6,312
     Provision for income taxes.............................            1,212         1,158           2,370
                                                                  ------------   ------------    ------------
     (Loss) income from continuing operations before
        extraordinary loss..................................          (12,881)       16,823           3,942
     Total loss from discontinued operations................               --        (3,362)         (3,362)
                                                                  ------------   ------------    ------------
     Net (loss) income......................................         $(12,881)      $13,461        $    580
                                                                  ============   ============    ============
</TABLE>


<TABLE>
<CAPTION>

                                                                    Three Months Ended December 28, 2001
                                                                  --------------------------------------------
                                                                                   Guarantor
                                                                      Parent     Subsidiaries    Consolidated
                                                                  ------------   ------------    ------------

<S>                                                                  <C>           <C>             <C>
     Net sales..............................................         $152,287      $126,861        $279,148
     Cost of goods sold.....................................          107,068        94,881         201,949
                                                                  ------------   ------------    ------------
                    Gross profit............................           45,219        31,980          77,199
     General and administrative expenses....................           30,042        19,844          49,886
     Selling expenses.......................................           13,977         5,595          19,572
                                                                  ------------   ------------    ------------
                    Income from operations..................            1,200         6,541           7,741
     Other income (expense).................................              341        (1,440)         (1,099)
                                                                  ------------   ------------    ------------
     Income from continuing operations before provision for
        income taxes........................................            1,541         5,101           6,642
     Provision for income taxes.............................            1,319           905           2,224
                                                                  ------------   ------------    ------------
     Income from continuing operations......................              222         4,196           4,418
     Total loss from discontinued operations................               --        (1,004)         (1,004)
                                                                  ------------   ------------    ------------
     Net income.............................................         $    222      $  3,192        $  3,414
                                                                  ============   ============    ============

</TABLE>


                                       24
<PAGE>






            Unaudited Condensed Statements of Operations (continued)

<TABLE>
<CAPTION>


                                                                     Nine Months Ended December 27, 2002
                                                                  -------------------------------------------
                                                                                  Guarantor
                                                                    Parent      Subsidiaries    Consolidated
                                                                  ------------   ------------    ------------

<S>                                                                  <C>           <C>             <C>
     Net sales..............................................         $478,094      $401,084        $879,178
     Cost of goods sold.....................................          332,578       298,693         631,271
                                                                  ------------   ------------    ------------
                    Gross profit............................          145,516       102,391         247,907
     General and administrative expenses....................          102,075        64,595         166,670
     Selling expenses.......................................           45,193        17,272          62,465
                                                                  ------------   ------------    ------------
                    (Loss) income from operations...........           (1,752)       20,524          18,772
     Other (expense) income.................................          (11,584)        8,046          (3,538)
                                                                  ------------   ------------    ------------
     (Loss) income from continuing operations before provision
        for income taxes....................................          (13,336)       28,570          15,234
     Provision for income taxes.............................            2,160         3,537           5,697
                                                                  ------------   ------------    ------------
     (Loss) income from continuing operations before
        extraordinary loss..................................          (15,496)       25,033           9,537
     Total loss from discontinued operations................                --      (60,911)        (60,911)
     Extraordinary loss.....................................             (666)            --           (666)
                                                                  ------------   ------------    ------------
     Net loss...............................................         $(16,162)     $(35,878)       $(52,040)
                                                                  ============   ============    ============

</TABLE>


<TABLE>
<CAPTION>


                                                                     Nine Months Ended December 28, 2001
                                                             -----------------------------------------------------
                                                                          Guarantor    Nonguarantor
                                                             Parent     Subsidiaries    Subsidiary    Consolidated
                                                            --------    ------------   ------------   ------------
<S>                                                         <C>             <C>              <C>         <C>
     Net sales.........................................     $444,575        $373,099         $ 431       $818,105
     Cost of goods sold................................      314,531         279,808           295        594,634
                                                            --------    ------------   ------------   ------------
                    Gross profit.......................      130,044          93,291           136        223,471
     General and administrative expenses...............       85,289          60,666            53        146,008
     Selling expenses..................................       40,125          16,391            13         56,529
     International Business exit charge................           --              --          (514)          (514)
                                                            --------    ------------   ------------   ------------
                    Income from operations.............        4,630          16,234           584         21,448
     Other expense.....................................          (56)         (4,344)          (14)        (4,414)
                                                            --------    ------------   ------------   ------------
     Income from continuing operations before provision
        for income taxes...............................        4,574          11,890           570         17,034
     Provision for income taxes........................        4,387           1,587            --          5,974
                                                            --------    ------------   ------------   ------------
     Income from continuing operations.................          187          10,303           570         11,060
     Total loss from discontinued operations...........           --         (91,600)           --        (91,600)
                                                            --------    ------------   ------------   ------------
     Net income (loss).................................     $    187        $(81,297)        $ 570       $(80,540)
                                                            ========    ============   ============   ============

</TABLE>
                                       25
<PAGE>

                  Unaudited Condensed Statements of Cash Flows
        For the Nine Months Ended December 27, 2002 and December 28, 2001

<TABLE>
<CAPTION>
                                                                        Nine Months Ended December 27, 2002
                                                                    ----------------------------------------------
                                                                                      Guarantor
                                                                      Parent        Subsidiaries     Consolidated
                                                                    ---------       -------------    -------------
<S>                                                                 <C>                 <C>             <C>
     Net loss...............................................        $(16,162)           $(35,878)       $(52,040)
                                                                    ---------       -------------    -------------
     Net cash provided by operating activities..............             116              27,600          27,716
                                                                    ---------       -------------    -------------
     Cash Flows From Investing Activities:
           Capital expenditures.............................          (7,930)               (596)         (8,526)
           Payments on noncompete agreements................            (303)               (150)           (453)
           Payment for business combination.................              --              (4,464)         (4,464)
           Proceeds from sale of Imaging Business...........          36,055             (21,980)         14,075
           Proceeds from sales of property and equipment....               1                  13              14
           Net cash used in discontinued operations.........              --              (1,555)         (1,555)
                                                                    ---------       -------------    -------------
                    Net cash provided by (used in) investing
                    activities..............................          27,823             (28,732)           (909)
                                                                    ---------       -------------    -------------
     Cash Flows From Financing Activities:
           Repayment of Senior Subordinated Notes...........         (19,000)                 --         (19,000)
           Payment of premiums for retirement of Senior
              Subordinated Notes............................            (665)                 --            (665)
           Purchase of treasury stock shares................         (25,182)                 --         (25,182)
           Intercompany borrowings..........................           9,938              (9,938)             --
           Proceeds from issuance of common stock...........             258                  --             258
                                                                    ---------       -------------    -------------
                    Net cash used in financing activities...         (34,651)             (9,938)        (44,589)
                                                                    ---------       -------------    -------------
     Net decrease in cash and cash equivalents..............          (6,712)            (11,070)        (17,782)
     Cash and cash equivalents, beginning of period.........          39,531              14,043          53,574
                                                                    ---------       -------------    -------------
     Cash and cash equivalents, end of period...............        $ 32,819            $  2,973        $ 35,792
                                                                    =========       =============    =============
</TABLE>
            Unaudited Condensed Statements of Cash Flows (continued)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended December 28, 2001
                                                             -----------------------------------------------------
                                                                          Guarantor    Nonguarantor
                                                              Parent    Subsidiaries    Subsidiary    Consolidated
                                                             ---------  ------------   ------------   ------------

<S>                                                          <C>           <C>            <C>          <C>
    Net income (loss)...................................     $    187      $(81,297)      $   570      $(80,540)
                                                             ---------  ------------   ------------   ------------
    Net cash provided by (used in) operating activities        41,502        47,862          (554)       88,810
                                                             ---------  ------------   ------------   ------------
    Cash Flows From Investing Activities:
           Capital expenditures.........................      (13,418)         (451)           --       (13,869)
           Payments on noncompete agreements............         (420)         (737)           --        (1,157)
           Proceeds from sale of property and equipment.        1,905        (1,863)           --            42
           Proceeds from sale of International Business.           --            --           221           221
           Net cash used in discontinued operations.....           --        (3,903)           --        (3,903)
                                                             ---------  ------------   ------------   ------------
                   Net cash (used in) provided by
                    investing activities................      (11,933)       (6,954)          221       (18,666)
                                                             ---------  ------------   ------------   ------------
    Cash Flows From Financing Activities:
           Net borrowings...............................      (65,000)           --            --       (65,000)
           Intercompany borrowings......................       45,117       (35,451)       (9,666)           --
           Investment in Sub............................       (9,999)           --         9,999            --
           Transfer of equity...........................          611          (611)           --            --
           Proceeds from issuance of common stock.......           81            11            --            92
           Net cash used in discontinued operations.....           --          (157)           --          (157)
                                                             ---------  ------------   ------------   ------------
                   Net cash (used in) provided by
                    financing activities................      (29,190)      (36,208)          333       (65,065)
                                                             ---------  ------------   ------------   ------------
    Net increase in cash and cash equivalents..........           379         4,700            --         5,079
     Cash and cash equivalents, beginning of period.....       31,725         2,649            --        34,374
                                                             ---------  ------------   ------------   ------------
    Cash and cash equivalents, end of period...........      $ 32,104      $  7,349       $    --      $ 39,453
                                                             =========  ============   ============   ============

</TABLE>
                                       26
<PAGE>




                     INDEPENDENT ACCOUNTANTS' REVIEW REPORT




The Board of Directors and Shareholders
PSS World Medical, Inc.:

We have reviewed the consolidated balance sheet of PSS World Medical, Inc. and
subsidiaries as of December 27, 2002, and the related consolidated statements of
operations and cash flows for the three and nine-month periods ended December
27, 2002. 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 to financial
data 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 29, 2002, 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,
2002, 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 29, 2002, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.


                                                       /s/ KPMG LLP
Jacksonville, Florida
February 6, 2003





                                       27
<PAGE>



ITEM 2. Management's  Discussion and Analysis Of Financial Condition and Results
        of Operations


General

PSS World Medical, Inc. (the "Company"), a Florida corporation, is a specialty
marketer and distributor of medical products to physician offices, long-term
care and home care providers, and other alternate-site healthcare providers
through 49 full-service centers to customers in all 50 states. Since its
inception in 1983, the Company has become a leader in the two market segments it
serves as a result of a focused and differentiated approach to customer service,
a consultative sales force, unique arrangements with product manufacturers,
innovative information systems, and a culture of performance.

Physician Sales & Service (the "Physician Supply Business"), a division of the
Company, is a leading distributor of medical supplies, equipment, and
pharmaceuticals to primary care office-based physicians in the United States of
America based on revenues, number of physician-office customers, number and
quality of sales representatives, and number of products distributed under
unique arrangements. The Physician Supply Business currently operates 36
full-service centers with 716 sales representatives serving physician offices in
all 50 states.

Gulf South Medical Supply, Inc. (the "Long-Term Care Business"), a wholly owned
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 based on revenues and number of sales representatives. The Long-Term
Care Business currently operates 13 full-service centers with 129 sales
representatives serving long-term care accounts in all 50 states. The Long-Term
Care Business' primary markets are independent, regional, and national skilled
nursing facilities, assisted living centers, and home care providers.

During the three months ended December 27, 2002, the Company completed the sale
of the Diagnostic Imaging, Inc. subsidiary ("DI" or the "Imaging Business"), a
distributor of medical diagnostic imaging supplies, chemicals, equipment, and
services to the acute and alternate-care markets in the United States. As a
result, DI's results of operations have been classified as discontinued
operations for all periods presented. Refer to Note 2, Discontinued Operations,
for a further discussion.


INDUSTRY

According to industry estimates, the United States of America medical supply and
equipment  segment of the healthcare  industry  represents  approximately  a $22
billion market comprised of medical products and equipment which 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 and care centers,
podiatrists, and veterinarians.  The Company's primary focus is the distribution
of medical products to physician offices,  long-term care,  assisted living, and
home care providers as well as other  alternate site healthcare  providers.  The
Company's served market is  approximately $9 billion,  focused on the physicians
and long-term care markets.

Revenues of the medical products distribution industry are estimated to be
growing as a result of a growing and aging population, increased healthcare
awareness, the proliferation of medical technology and testing, and expanding
third-party insurance coverage. In addition, the physician market continues to
benefit from the shift of procedures and diagnostic testing from hospitals to
alternate sites, particularly physician offices, despite a migration of
significantly lower hospital medical product pricing into the physician office
market. Also, as the cosmetic surgery and elective procedure markets continue to
grow, physicians are increasingly performing more procedures in their offices.

                                       28
<PAGE>

The healthcare industry is subject to extensive government regulation,
licensure, and operating procedures. National healthcare reform has been the
subject of a number of legislative initiatives by Congress. Additionally,
government and private insurance programs fund the cost of a significant portion
of medical care in the United States. In recent years, government-imposed limits
on reimbursement of hospitals, long-term care facilities, and other healthcare
providers have affected spending budgets in certain markets within the medical
products industry. During 1997, the Balanced Budget Act passed by Congress made
significant changes to reimbursements for nursing homes and home care providers.
The industry continues to be impacted by these changes. Currently, the industry
is being impacted by the October 1, 2002 expiration of certain Medicare
supplemental reimbursements for services provided by operators of long-term care
facilities. There are no assurances that any Medicare reimbursement relief will
be provided by Congress, which may have a financial impact on the Company's
customers that provide long-term care healthcare services.

Over the past few years, the healthcare industry has undergone significant
consolidation. Physician provider groups, long-term care facilities, and other
alternate-site providers continue to consolidate, creating new and larger
customers. The majority of the market serviced by the Company continues to
include small customers, with no single customer exceeding 10% of the
consolidated Company's net sales. However, the Long-Term Care Business depends
on a limited number of large customers for a significant portion of its net
sales, and approximately 31% of Long-Term Care Business' revenues for the nine
months ended December 27, 2002 represented sales to its top five customers.


RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the Financial Accounting Standards Board (the "FASB") issued
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 ("SFAS 145"). Among other things, SFAS 145 rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishment of Debt. As such, gains and
losses from extinguishment of debt shall not be reported as extraordinary items
unless the extinguishment qualifies as an extraordinary item under the criteria
of Accounting Principles Board ("APB") Opinion No. 30, Reporting the Results of
Operation-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB
30"). Gains or losses from extinguishment of debt that do not meet the criteria
of APB 30 should be reclassified to income from continuing operations for all
prior periods presented. The Company will adopt the provisions of SFAS 145 on
March 29, 2003, the first day of fiscal year 2004. Upon adoption, the Company
will reclassify any gains or losses on early extinguishment of debt and related
taxes recorded as an extraordinary loss during fiscal year 2003 to other
(expense) income and provision for income taxes in the consolidated statements
of operations.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities ("SFAS 146"). SFAS 146 addresses the financial
accounting and reporting for costs associated with exit or disposal activities,
and eliminates the definition and requirements for recognition of exits costs in
Emerging Issues Task Force ("EITF") Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS 146 will require
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred and that fair value is the objective
for initial measurement of a liability. The Company will apply the provisions of
SFAS 146 for exit or disposal activities that are initiated after December 31,
2002, the effective date of this statement.

In November 2002, the FASB issued FASB Interpretation No. 45, Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees ("FIN 45"). FIN 45 elaborates on the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under certain guarantees that it has issued. It also clarifies that a guarantor
is required to recognize, at the inception of a guarantee, a liability for the
fair value of the obligation undertaken in issuing the guarantee. FIN 45 does
not prescribe a specific approach for subsequently measuring the guarantor's
recognized liability over the term of the related guarantee. It also
incorporates, without change, the guidance in FASB Interpretation No. 34,
Disclosure of Indirect Guarantees of Indebtedness of Others, which is being
superseded. The Company will apply the recognition and measurement provisions of
FIN 45 on a prospective basis to guarantees issued or modified after December
31, 2002. Refer to Note 11, Long-Term Debt, where the Company complied with the
additional disclosure requirements under FIN 45.

                                       29
<PAGE>

In November 2002, the EITF reached a consensus on Issue 00-21,
Multiple-Deliverable Revenue Arrangements ("EITF 00-21"). EITF 00-21 addresses
how to account for arrangements that may involve the delivery or performance of
multiple products, services, and/or rights to use assets. The consensus mandates
how to identify whether goods or services or both that are to be delivered
separately in a bundled sales arrangement should be accounted for separately
because they are separate units of accounting. EITF 00-21 can affect the timing
of revenue recognition for such arrangements, even though it does not change
rules governing the timing or pattern of revenue recognition of individual items
accounted for separately. The final consensus will be applicable to agreements
entered into beginning fiscal year 2005 with early adoption permitted.
Additionally, companies will be permitted to apply the consensus guidance to all
existing arrangements as the cumulative effect of a change in accounting
principle in accordance with APB Opinion No. 20, Accounting Changes. The Company
is currently evaluating the impact, if any, of the adoption of EITF 00-21 on its
financial condition and results of operations.


In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure ("SFAS 148"). SFAS 148 amends SFAS No.
123, Accounting for Stock-Based Compensation ("SFAS 123"), to provide
alternative methods of transition for an entity that voluntarily changes to the
fair value based method of accounting for stock-based employee compensation. In
addition, it also amends the disclosure provisions of SFAS 123 to require
prominent disclosure about the effects on reported net income of an entity's
accounting policy decisions with respect to stock-based employee compensation.
SFAS 148 also amends APB Opinion No. 28, Interim Financial Reporting, to require
disclosure about the effect in interim financial information. The Company is
currently in the process of evaluating the impact of SFAS 148 on its financial
condition and results of operations. However, additional disclosures will be
included in the Company's annual financial statements for the fiscal year ended
2003 and interim financial statements for the first quarter of fiscal year 2004.


APPLICATION OF CRITICAL ACCOUNTING POLICIES

The consolidated financial statements require management 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 the audit committee and the
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 29, 2002 under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations". During the nine months ended
December 27, 2002, management determined that accounting for discontinued
operations is also a critical accounting policy.

Accounting for 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 Supply and Long-Term 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 $45.0 million 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 ("Purchase Price"). Cash proceeds, net of these adjustments,
received from the transaction were approximately $14.1 million. The Purchase
Price is subject to further adjustment based on the net assets and net cash held
by DI as of the closing date.

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.

                                       30
<PAGE>


THREE MONTHS ENDED DECEMBER 27, 2002 VERSUS THREE MONTHS ENDED DECEMBER 28, 2001

Net Sales.

<TABLE>
<CAPTION>

                                           Three Months Ended
                                      ---------------------------
                                      December 27,   December 28,            Percent
(dollars in millions)                     2002          2001       Increase  Change
                                      ------------   ------------  --------  -------

<S>                                      <C>          <C>           <C>        <C>
Physician Supply Business.............   $195.2       $180.7        $14.5      8.0%
Long-Term Care Business...............    108.7         98.4         10.3     10.4%
                                      ------------   ------------  --------  -------
               Total Company..........   $303.9       $279.1        $24.8      8.9%
                                      ============   ============  ========  =======
</TABLE>

Physician Supply Business--The change in net sales is primarily attributable to
an increase in medical disposable sales of approximately $20.0 million, of which
branded consumables, private label consumables, and pharmaceuticals increased
$12.0 million, $2.0 million, and $6.0 million, respectively. This increase was
offset by a decrease in equipment and Immunoassay sales of approximately $5.0
million. Medical disposable sales were positively impacted by (i) the continued
success of the SRxSM modules, (ii) an increase in the sale of flu vaccines
compared to the prior period, and (iii) expanded focus on pharmaceuticals.

Long-Term Care Business--The increase in net sales is primarily attributable to
the success of the ANSWERS(TM) marketing program that aligns improved business
processes ("best practices"), typically in the ordering process of nursing home
operations and purchasing, with efficient distribution activities of the
Long-Term Care Business. During the three months ended December 27, 2002, 37
customers adopted the program, which generated approximately $3.6 million of
incremental revenue during the period. In addition, net sales increased due to
growth initiatives focused on regional accounts and product line expansion. The
acquisition that was completed during the three months ended September 27, 2002
provided approximately $2.5 million of net sales during the three months ended
December 27, 2002.

Gross Profit. Gross profit for the three months ended December 27, 2002 totaled
$85.2 million, an increase of $8.0 million, or 10.4%, from gross profit of $77.2
million for the three months ended December 28, 2001. Gross profit as a
percentage of net sales was 28.0% and 27.7% for the three months ended December
27, 2002 and December 28, 2001, respectively. The increase in gross profit is
primarily attributable to the overall increase in net sales described above and
(i) a change in sales mix to higher gross profit consumable products in the
Physician Supply Business, (ii) enhanced margins in the Physician Supply
Business on certain Abbott products, and (iii) an increase in vendor incentive
rebates earned by the Physician Supply and Long-Term Care Businesses, offset by
the impact of a charge recorded by the Physician Supply Business related to
discontinuing a product line.

General and Administrative Expenses.

<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                 ------------------------------------------------
                                                    December 27, 2002       December 28, 2001
                                                 ------------------------------------------------
                                                              % of Net                % of Net
(dollars in millions)                               Amount      Sales       Amount       Sales      Increase
                                                 ----------   ---------    --------   -----------   ---------
<S>                                                 <C>          <C>        <C>          <C>          <C>
Physician Supply Business....................       $35.4        18.1%      $31.4        17.4%        $4.0
Long-Term Care Business......................        18.1        16.7%       16.5        16.8%         1.6
Other........................................         3.8        --           2.0         --           1.8
                                                 ----------   ---------    --------   -----------   ---------
               Total Company.................       $57.3        18.9%      $49.9        17.9%        $7.4
                                                 ==========   =========    ========   ===========   =========
</TABLE>

Physician Supply Business--The increase in general and administrative expenses
is primarily attributable to (i) an overall increase in expenses due to the
growth in net sales, (ii) additional salary and travel expenses as a result of
the conversion to the new Enterprise Resource Planning ("ERP") system,
centralized purchasing, and the restructuring plan that was adopted during the
fourth quarter of fiscal year 2002 ("Rationalization Programs" or "Transition
Period"), (iii) additional warehouse salary expenses at consolidated
full-service centers during the Transition Period, offset by the savings from
closed centers, (iv) additional depreciation for completed phases of its ERP
system, myPSS.com electronic commerce platform, and supply chain initiatives,
(v) temporarily increased freight expenses as a result of the Rationalization
Programs, and (vi) an increase in business and medical insurance premiums.
                                       31
<PAGE>

Long-Term Care Business--The increase in general and administrative expenses is
primarily attributable to (i) an overall increase in expenses due to the growth
in net sales, (ii) an increase in expenses and resources focused on expanding
regional accounts and housekeeping product sales, (iii) an increase in business
and medical insurance rates, and (iv) an increase in the provision for doubtful
accounts. The decrease in general and administrative expenses as a percent of
net sales is due to the focus on leveraging its existing capacity to effectively
service the increase in net sales.

Other--The  increase  in  general  and  administrative   expenses  is  primarily
attributable  to (i) an increase in  depreciation  expense for the supply  chain
initiative and leasehold  improvements  related to the centralization of certain
administrative  functions to the corporate headquarters located in Jacksonville,
Florida, (ii) an increase in business insurance expense due to rate increases on
the corporate umbrella and director and officer policies,  and (iii) an increase
in  medical  insurance  premiums.  Furthermore,  during the three  months  ended
December 27, 2002,  general and  administrative  expenses of approximately  $2.8
million,  which  include both direct and indirect  overhead  expenses,  normally
would have been allocated to the Imaging Business.  However,  in accordance with
EITF No.  87-24,  Allocation  of  Interest  to  Discontinued  Operations  ("EITF
87-24"),  the Company was only permitted to allocate  approximately $1.2 million
of these expenses to discontinued operations,  which represent overhead expenses
directly  attributable to the Imaging Business for the period from September 28,
2002 to November  818,  2002.  As a result of a  transition  services  agreement
executed upon the sale of the Imaging Business,  a portion of the remaining $1.6
million of general  administrative  expenses were  reimbursed by the Buyer.  The
reimbursement  of these expenses is recorded in other income in the accompanying
Statements  of  Operations.  During the three  months  ended  December 28, 2001,
approximately  $2.6  million  of  expenses  normally  allocated  to the  Imaging
Business  were  included  in  general  and  administrative   expenses  of  which
approximately $1.9 million was directly attributable to the Imaging Business and
allocated  to  discontinued  operations.  The  timing  of  the  closing  of  the
transaction  impacted the amount allocated to discontinued  operations period to
period.

General and administrative expenses also include charges related to
restructuring activity, merger activity, and other items. These charges
increased approximately $0.7 million during the three months ended December 27,
2002 compared to the same period of the prior fiscal year. The following table
summarizes charges that are included in general and administrative expenses in
the accompanying consolidated statements of operations (in millions):

<TABLE>
<CAPTION>

                                                             Three Months Ended December 27, 2002
                                                    ----------------------------------------------------
                                                    Physician         Long-
                                                      Supply        Term Care
                                                     Business        Business        Other         Total
                                                    ---------       ---------     -----------  ---------

<S>                                                      <C>            <C>             <C>        <C>
         Restructuring costs and expenses....            $0.5           $ --            $0.5       $1.0
         Merger costs and expenses...........              --             --             0.5        0.5
         Reversal of operational tax charge..              --             --            (0.1)      (0.1)
         Other...............................              --             --             --          --
                                                    ---------       ---------     -----------  ---------
                        Total.................           $0.5           $ --            $0.9       $1.4
                                                    =========       =========     ===========  =========
</TABLE>

<TABLE>
<CAPTION>


                                                             Three Months Ended December 28, 2001
                                                    ----------------------------------------------------
                                                    Physician         Long-
                                                      Supply        Term Care
                                                     Business        Business        Other         Total
                                                    ---------       ---------     -----------  ---------

<S>                                                      <C>            <C>             <C>        <C>
         Restructuring costs and expenses....            $ --           $0.1            $ --       $0.1
         Merger costs and expenses...........              --             --             0.6        0.6
         Reversal of operational tax charge..              --             --            (0.4)      (0.4)
         Other...............................             0.2            0.2              --        0.4
                                                    ---------       ---------     -----------  ---------
                        Total.................           $0.2           $0.3            $0.2       $0.7
                                                    =========       =========     ===========  =========
</TABLE>

                                       32
<PAGE>

         Restructuring Costs and Expenses

         Restructuring costs and expenses for the three months ended December
         27, 2002 and December 28, 2001 primarily include (i) costs expensed
         related to the restructuring plan that was adopted as a result of the
         sale of the Imaging Business and (ii) costs expensed as incurred
         related to the Physician Supply Business restructuring plan that was
         adopted during the fourth quarter of fiscal year 2002.

         Plan Adopted During the Third Quarter of Fiscal Year 2003--Other
         Segment. As a result of the sale of the Imaging Business, management
         and the Board of Directors approved and adopted a formal plan to
         restructure certain positions within the Company during the three
         months ended December 27, 2002. As a result of the plan, approximately
         21 employees, including leaders and administrative personnel, will be
         involuntarily terminated. As of December 27, 2002, 7 employees had been
         terminated. During the three months ended December 27, 2002, the
         Company expensed $0.5 million related to this plan, which includes
         approximately $0.4 million of involuntary employee termination costs
         and $0.1 million of direct transaction costs.

         Plan Adopted During the Fourth Quarter of Fiscal Year 2002--Physician
         Supply Business. During the three months ended December 27, 2002, the
         Physician Supply Business recorded charges of $0.5 million, which
         includes branch shut down costs of $0.3 million, $0.1 million of lease
         termination costs, and $0.1 million of involuntary employee benefit
         costs. Refer to Note 3, Accrued Restructuring Costs and Expenses, for a
         discussion of the status of this plan.

         Management reevaluates its estimates of the total costs related to this
         plan and makes any necessary adjustments on a quarterly basis. During
         the three months ended September 27, 2002, the original total estimated
         costs of $6.5 million have been revised to be approximately $5.7
         million, of which approximately $4.2 million and $0.7 million was
         recognized during fiscal year 2002 and the nine months ended December
         27, 2002, respectively. Approximately $0.8 million will be expensed as
         incurred during the remaining three months of fiscal year 2003. The
         revision to the total estimated costs of the plan related to
         involuntary employee termination costs and branch shutdown costs.
         Certain employees, who were previously identified to be involuntarily
         terminated, either ceased employment prior to the distribution center
         closure or were transferred within the Company. Therefore, these
         employees were not entitled to severance. In addition, accrued branch
         shutdown costs are estimated to be less than previous estimates as the
         Company was able to sell the warehouse racking rather than incur the
         removal and disposal expenses.

         Management anticipates that this plan will be substantially completed
         by the end of the fourth quarter of fiscal year 2003. Management is
         also currently evaluating whether to extend its branch rationalization
         program, which may result in recording additional restructuring charges
         during the fourth quarter of fiscal year 2003. If a restructuring plan
         is adopted subsequent to December 31, 2002, such charges will be
         recorded in accordance with SFAS 146.

         Various Restructuring Plans Adopted in Prior Fiscal Years. During the
         three months ended December 28, 2001, the Long-Term Care Business
         recorded $0.1 million of restructuring costs as incurred for lease
         termination costs.

         Merger Costs and Expenses

         Merger costs and expenses for the three months ended December 27, 2002
         and December 28, 2001 include costs related to employee retention
         bonuses. On February 1, 2000, the Board of Directors approved and
         adopted an Officer Retention Bonus Plan and a Corporate Office Employee
         Retention Bonus Plan (collectively the "Retention Plans"). As part of
         the Company's strategic alternatives process, management adopted these
         plans to retain certain officers and key employees during the strategic
         alternatives transition period. The total cash compensation costs
         related to these plans is approximately $8.2 million, of which $6.8
         million was expensed in prior fiscal years and $0.7 million was
         expensed during the six months ended September 27, 2002. Approximately
         $0.5 million and $0.6 million was recognized during the three months
         ended December 27, 2002 and December 28, 2001, respectively. An
         additional $0.2 million will be expensed during the remaining three
         months of fiscal year 2003.

                                       33
<PAGE>

         Reversal of Operational Tax Charge

         During the three months ended December 27, 2002 and December 28, 2001,
         the Company performed an analysis and reversed approximately $0.1
         million and $0.4 million, respectively, of a previously recorded
         operating tax charge reserve.

         Other

         During the three months ended December 28, 2001, the Company incurred
         $0.4 million related to certain lease termination costs for locations
         that were previously vacated in connection with prior restructuring
         plans.

Selling Expenses.

<TABLE>
<CAPTION>

                                                            Three Months Ended
                                             ------------------------------------------------
                                                December 27, 2002         December 28, 2001
                                             ----------------------    ----------------------
                                                           % of Net                  % of Net
(dollars in millions)                         Amount       Sales        Amount       Sales       Increase
                                             --------     ---------    --------    ----------   --------

<S>                                          <C>           <C>         <C>           <C>          <C>
Physician Supply Business..............       $18.1         9.3%        $16.5         9.1%         $1.6
Long-Term Care Business................         3.2         2.9%          3.1         3.2%          0.1
                                             --------     ---------    --------    ----------   --------
               Total Company...........       $21.3         7.0%        $19.6         7.0%         $1.7
                                             ========     =========    ========    ==========   ========
</TABLE>

Physician Supply Business--The change in selling expenses is primarily
attributable to an increase in commission expense due to (i) the increased sales
volume discussed above, (ii) the addition of 7 new sales representatives, and
(iii) the sales representatives' focus on enhancing overall margins. Commissions
are generally paid to sales representatives based on gross profit as a
percentage of net sales.

Long-Term Care Business--Although net sales increased, selling expenses remained
relatively constant from period to period. Commissions are generally paid to
sales representatives based on gross profit as a percentage of net sales and on
total gross profit dollars versus established quotas.

Income from Operations.

<TABLE>
<CAPTION>

                                                                Three Months Ended
                                                           ------------------------------
                                                           December 27,     December 28,      Increase
(dollars in millions)                                          2002             2001         (Decrease)
                                                           ------------     -------------   ------------
<S>                                                               <C>           <C>           <C>
Physician Supply Business............................             $5.9          $ 6.2         $(0.3)
Long-Term Care Business..............................              4.6            3.6           1.0
Other................................................             (3.9)          (2.1)         (1.8)
                                                           ------------     -------------   ------------
               Total Company.........................             $6.6          $ 7.7         $(1.1)
                                                           ============     =============   ============
</TABLE>

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

Interest Expense. Interest expense for the three months ended December 27, 2002
totaled $2.3 million, an increase of $0.8 million, or 46.9%, from interest
expense of $1.5 million for the three months ended December 28, 2001. 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 $0.5 million and $1.0 million
for the three months ended December 27, 2002 and December 28, 2001,
respectively. In addition, during the three months ended December 28, 2001,
approximately $0.6 million of interest was capitalized, which reduced interest
expense, in connection with the Company's purchase and development of its ERP
systems. Excluding the effects of the allocation of interest to discontinued
operations and the capitalized interest, interest expense decreased
approximately $0.3 million. This decrease in interest expense is primarily
attributable to lower outstanding debt balances under the Company's revolving
credit agreement and the Company's $125 million Senior Subordinated Notes (the
"Notes") over the prior period and an overall reduction in interest rates.

                                       34
<PAGE>

Interest and Investment Income. Interest and investment income remained constant
from period to period.

Other Income. Other income for the three months ended December 27, 2002 totaled
$1.9 million, an increase of $1.5 million from other income of $0.4 million for
the three months ended December 28, 2001. During the three months ended December
27, 2002, approximately $1.6 million of other income was recorded as a result of
the transition services agreement associated with the sale of the Imaging
Business. The increase in other income was offset by a decrease in the amount of
customer finance charge income and an increase in the loss on sales of property
and equipment recorded at the Physician Supply Business.

Provision for Income Taxes.  Provision for income taxes was $2.4 million for the
three  months  ended  December  27,  2002,  a change  of $0.2  million  from the
provision  for income taxes of $2.2 million for the three months ended  December
28, 2001. The effective  income tax rate was  approximately  37.5% and 33.5% for
the three  months ended  December 27, 2002 and December 28, 2001,  respectively.
The increase in the effective rate is primarily  attributable  to an increase in
unfavorable  permanent  items  and a  decrease  in the  income  from  continuing
operations  before  provision  for  income  taxes,  excluding  the effect of the
International Business.

The Company is currently under an Internal Revenue Service audit for the fiscal
years ended March 31, 2000 and March 30, 2001. Fieldwork is anticipated to be
completed during the fourth quarter of fiscal year 2003, with anticipated final
audit results by the first quarter of fiscal year 2004. 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 $93.2 million for the three months ended
December 27, 2002, a decrease of $83.0 million from net sales of $176.2 million
for the three months ended December 28, 2001. The timing of the sale of the
Imaging Business, which was November 18, 2002, resulted in 35 days of sales
during the three months ended December 27, 2002 compared to 62 days of sales
during the three months ended December 28, 2001.

The pretax loss from operations was $3.6 million for the three months ended
December 27, 2002, an increase of $2.0 million from a pretax loss from
operations of $1.6 million for the three months ended December 28, 2001. This
increase in the loss from operations is primarily related to the reduction in
net sales discussed above.

Net Income. Net income for the three months ended December 27, 2002 totaled $0.6
million compared to $3.4 million for the three months ended December 28, 2001.
The net income for the three months ended December 27, 2002 included a charge of
$1.2 million for the loss on disposal of discontinued operations. Otherwise,
variances are due to the factors discussed above.


NINE MONTHS ENDED DECEMBER 27, 2002 VERSUS NINE MONTHS ENDED DECEMBER 28, 2001

Net Sales.
<TABLE>
<CAPTION>

                                                     Nine Months Ended
                                               -----------------------------
                                               December 27,     December 28,       Increase      Percent
(dollars in millions)                             2002              2001          (Decrease)     Change
                                               ------------     ------------    ------------    ---------
<S>                                             <C>                <C>              <C>             <C>
Physician Supply Business..............         $562.2             $528.2           $34.0           6.4 %
Long-Term Care Business................          317.0              289.5            27.5           9.5 %
Other..................................           --                  0.4            (0.4)       (100.0)%
                                               ------------     ------------    ------------    ---------
               Total Company...........         $879.2             $818.1           $61.1           7.5 %
                                               ============     ============    ============    =========
</TABLE>

                                       35
<PAGE>

Physician Supply Business--The change in net sales is primarily attributable to
an increase in medical disposables sales of approximately $43.0 million, of
which branded consumables, private label consumables, and pharmaceuticals
increased $28.0 million, $6.0 million, and $9.0 million, respectively. This
increase was offset by a decrease in equipment and Immunoassay sales of
approximately $9.0 million. Medical disposable sales were positively impacted by
(i) the continued success of the SRxSM modules, (ii) an increase in the sale of
flu vaccines compared to the prior period, and (iii) the addition of 29 new
sales representatives.

Long-Term Care Business--The increase in net sales is primarily attributable to
the growth generated by the ANSWERS(TM) marketing program. To date, over 270
customers have adopted the program, which generated approximately $10.4 million
of incremental revenue during the nine months ended December 27, 2002. In
addition, net sales increased due to growth initiatives focused on regional
accounts and product line expansion. The acquisition that was completed during
the three months ended September 27, 2002 provided approximately $2.9 million of
net sales during the nine months ended December 27, 2002.

Gross Profit. Gross profit for the nine months ended December 27, 2002 totaled
$247.9 million, an increase of $24.4 million, or 10.9%, from gross profit of
$223.5 million for the nine months ended December 28, 2001. Gross profit as a
percentage of net sales was 28.2% and 27.3% for the nine months ended December
27, 2002 and December 28, 2001, respectively. The increase in gross profit is
primarily attributable to the overall increase in net sales described above. In
addition, gross profit was positively impacted by (i) a change in sales mix to
higher gross profit consumable products in the Physician Supply Business and
(ii) an increase in vendor incentive rebates earned by the Physician Supply and
Long-Term Care Businesses, offset by the impact of a charge recorded by the
Physician Supply Business related to discontinuing a product line.

General and Administrative Expenses.
<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                  ----------------------------------------------
                                                     December 27, 2002        December 28, 2001
                                                  ----------------------     -------------------
                                                               % of Net                 % of Net
(dollars in millions)                               Amount       Sales       Amount       Sales       Increase
                                                  ---------    ---------     -------    --------      --------
<S>                                                <C>           <C>          <C>         <C>          <C>
Physician Supply Business....................      $102.0        18.1%        $90.2       17.1%        $11.8
Long-Term Care Business......................        53.2        16.8%         50.8       17.5%          2.4
Other........................................        11.5        --             5.0       --             6.5
                                                  ---------    ---------     -------    --------      --------
               Total Company.................      $166.7        19.0%       $146.0       17.8%        $20.7
                                                  =========    =========     =======    ========      ========
</TABLE>


Physician Supply Business--The increase in general and administrative expenses
is primarily attributable to (i) an overall increase in expenses due to the
growth in net sales, (ii) additional salary and travel expenses as a result of
the Rationalization Programs, (iii) additional warehouse salary expenses at
consolidated full-service centers during the Transition Period, offset by the
savings from closed centers, (iv) additional depreciation for completed phases
of its ERP system, myPSS.com electronic commerce platform, and supply chain
initiatives, (v) temporarily increased freight expenses as a result of the
Rationalization Programs, (vi) an increase in business and medical insurance
premiums, and (vii) additional amortization expense as a result of the signing
bonuses given to new sales representatives.

Long-Term Care Business--The change in general and administrative expenses is
primarily attributable to (i) an overall increase in expenses due to the growth
in net sales, (ii) a corresponding increase in salary expense and employee
incentive compensation, (iii) an increase in amortization expense for an
impaired noncompete intangible asset, (iv) an increase in fees charged by a
Long-Term Care eCommerce network provider as a result of more customers using
the network to purchase products, (v) an increase in expenses and resources
focused on expanding regional accounts and housekeeping product sales, and (vi)
an increase in business and medical insurance premiums. The decrease in general
and administrative expenses as a percent of net sales is due the focus on
leveraging its existing capacity to effectively service the increase in net
sales.

                                       36
<PAGE>

Other--  The  increase  in general  and  administrative  expenses  is  primarily
attributable  to (i) an increase in  depreciation  expense for the supply  chain
initiative and leasehold  improvements  related to the centralization of certain
administrative  functions to the corporate headquarters located in Jacksonville,
Florida,  (ii) an  increase  in salary  expense as a result of the supply  chain
initiative  and two executive  positions  filled during fiscal year 2002,  (iii)
investments  in  enterprise-wide   learning  initiatives  to  increase  employee
competencies and knowledge and to ensure consistent business practices,  (iv) an
increase in business  insurance  expense due to rate  increases on the corporate
umbrella  and  director  and  officer  policies,  and (v) an increase in medical
insurance premiums. Furthermore, during the nine months ended December 27, 2002,
general and administrative expenses of approximately $8.5 million, which include
both direct and indirect overhead expenses, normally woud have been allocated to
the Imaging  Business.  However,  in accordance with EITF 87-24, the Company was
only  permitted  to allocate  approximately  $5.5  million of these  expenses to
discontinued operations, which represent overhead expenses directly attributable
to the Imaging Busienss for the period from March 30, 2002 to November 18, 2002.
As a result of a transition  services  agreement  executed  upon the sale of the
Imaging Business,  approximately $1.6 million of general administrative expenses
were reimbursed by the Buyer. The reimbursement of these expenses is recorded in
other  income in the  accompanying  Statements  of  Operations.  During the nine
months ended December 28, 2001,  approximately $7.8 million of expenses normally
allocated to the Imaging  Business were  included in general and  administrative
expenses of which  approximately  $5.6 million was directly  attributable to the
Imaging  Business and allocated to  discontinued  operations.  The timing of the
closing  of the  transaction  impacted  the  amount  allocated  to  discontinued
operations period to period to period.

General and administrative expenses also include charges related to
restructuring activity, merger activity, and other items. These charges
increased approximately $4.7 million during the nine months ended December 27,
2002 compared to the same period of the prior fiscal year. The following table
summarizes charges that are included in general and administrative expenses in
the accompanying consolidated statements of operations (in millions):

<TABLE>
<CAPTION>

                                                           Nine Months Ended December 27, 2002
                                                 --------------------------------------------------------
                                                   Physician       Long-
                                                    Supply       Term Care
                                                   Business       Business       Other         Total
                                                 ------------- -------------- ------------ --------------

<S>                                                     <C>          <C>           <C>         <C>
         Restructuring costs and expenses...            $0.8         $--           $0.5        $1.3
         Merger costs and expenses..........              --          --            1.3         1.3
         Accelerated depreciation...........             0.2          --             --         0.2
         Reversal of operational tax charge.              --          --           (0.2)       (0.2)
         Other..............................             0.3          --            2.9         3.2
                                                 ------------- -------------- ------------ --------------
                       Total................            $1.3         $--           $4.5        $5.8
                                                 ============= ============== ============ ==============
</TABLE>

<TABLE>
<CAPTION>

                                                           Nine Months Ended December 28, 2001
                                                 --------------------------------------------------------
                                                   Physician       Long-
                                                    Supply       Term Care
                                                   Business       Business       Other         Total
                                                 ------------- -------------- ------------ --------------

<S>                                                     <C>           <C>           <C>          <C>
         Restructuring costs and expenses...            $0.6          $0.2          $  --        $0.8
         Merger costs and expenses..........              --            --            1.7         1.7
         Reversal of operational tax charge.              --            --           (1.8)       (1.8)
         Other..............................             0.2           0.2             --         0.4
                                                 ------------- -------------- ------------ --------------
                       Total................           $0.8          $0.4           $(0.1)      $ 1.1
                                                 ============= ============== ============ ==============
</TABLE>


         Restructuring Costs and Expenses

         Plan Adopted During the Third Quarter of Fiscal Year 2003--Other
         Segment. During the nine months ended December 27, 2002, the Company
         expensed $0.5 million related to this plan, which includes
         approximately $0.4 million of involuntary employee termination costs
         and $0.1 million of direct transaction costs.

                                       37
<PAGE>

         Plan Adopted During the Fourth Quarter of Fiscal Year 2002--Physician
         Supply Business. During the nine months ended December 27, 2002, the
         Physician Supply Business recorded charges of $1.5 million, which
         include branch shut down costs of $0.8 million, involuntary employee
         termination costs of $0.4 million, and employee relocation costs of
         $0.3 million. Management revaluated its previous estimates and reversed
         approximately $0.7 million, which includes involuntary employee
         termination costs of $0.4 million and branch shutdown costs of $0.3
         million. (Refer to Note 3, Accrued Restructuring Costs and Expenses,
         for a discussion of the status of this plan.)

         Various Restructuring Plans Adopted in Prior Fiscal Years. During the
         nine months ended December 28, 2001, the Company recorded $0.9 million
         of restructuring costs as incurred. The costs during the nine months
         ended December 28, 2001 primarily resulted from the involuntary
         termination of 63 employees, branch shutdown costs and lease
         termination costs for the merger into existing locations of three
         distribution centers of the Company's Physician Supply Business. During
         the nine months ended December 28, 2001, the Company reversed
         approximately $0.1 million of restructuring costs, which primarily
         relate to lease termination costs.

         Merger Costs and Expenses

         As a result of the Retention Plans, approximately $1.3 million and $1.7
         million was recognized during the nine months ended December 27, 2002
         and December 28, 2001, respectively.

         Accelerated Depreciation

         The Physician Supply Business identified certain assets that would be
         replaced or disposed of as a result of the restructuring plan that was
         implemented during the fourth quarter of fiscal year 2002. Pursuant to
         SFAS No. 121, Accounting for the Impairment of Long-Lived Assets to Be
         Disposed Of, the Company evaluated the recoverability of the assets and
         determined that impairment did not exist at the division level.
         Therefore, management revised the estimated useful lives of certain
         assets in accordance with APB No. 20, Accounting Changes. As a result
         of shortening the useful lives during the fourth quarter of fiscal year
         2002 to coincide with the planned disposal date, the Company recorded
         $0.2 million of accelerated depreciation during the nine months ended
         December 27, 2002. This change in estimate decreased basic and diluted
         earnings per share by less than $0.01 for the nine months ended
         December 27, 2002.

         Reversal of Operational Tax Charge

         During the nine months ended December 27, 2002 and December 28, 2001,
         the Company performed an analysis and reversed approximately $0.2
         million and $1.8 million, respectively, of a previously recorded
         operating tax charge reserve.

         Other

         As part of the Company's ongoing review of the realization of the three
         notes receivables outstanding from the Company's former Chairman and
         Chief Executive Officer, the Company determined that an allowance for
         doubtful accounts was required for the unsecured note receivable. As a
         result, during the nine months ended December 27, 2002, the Company
         recorded an allowance for doubtful accounts of $2.9 million against the
         unsecured note receivable. This allowance does not represent a
         forgiveness of debt.

         During the nine months ended December 27, 2002, the Physician Supply
         Business incurred $0.3 million of lease termination costs for locations
         that were previously vacated in connection with prior restructuring
         plans. During the nine months ended December 28, 2001, the Company
         incurred $0.4 million of lease termination costs for locations that
         were previously vacated in connection with prior restructuring plans.

                                       38
<PAGE>

Selling Expenses.

<TABLE>
<CAPTION>

                                                        Nine Months Ended
                                            ---------------------------------------------
                                            December 27, 2002        December 28, 2001
                                            --------------------   ----------------------

                                                        % of Net                % of Net
(dollars in millions)                        Amount       Sales       Amount      Sales      Increase
                                            --------    --------   -----------  ---------    --------
<S>                                           <C>          <C>         <C>        <C>         <C>
Physician Supply Business..............       $53.2        9.5%        $47.6      9.0%        $5.6
Long-Term Care Business................         9.3        2.9%          8.9      3.1%         0.4
                                            --------    --------   -----------  ---------    --------
               Total Company...........       $62.5        7.1%        $56.5      6.9%        $6.0
                                            ========    ========   ===========  =========    ========
</TABLE>

Physician Supply Business--The change in selling expenses is primarily
attributable to an increase in commission expense due to (i) the increased sales
volume discussed above, (ii) the addition of 29 new sales representatives, and
(iii) the sales representatives' focus on enhancing overall margins. Commissions
are generally paid to sales representatives based on gross profit as a
percentage of net sales.

Long-Term Care Business--Although net sales increased, selling expenses remained
relatively constant from period to period. Commissions are generally paid to
sales representatives based on gross profit as a percentage of net sales and on
total gross profit dollars versus established quotas.

International Business Exit Charge Reversal. During fiscal year 2001, the
Company adopted a plan for divesting the International Business and recorded a
charge of approximately $14.9 million. The sale of the International Business
was completed during the three months ended June 29, 2001. Upon completion of
the sale, the Company recorded a reversal of $0.5 million of the previously
established charge due to lower than expected costs to exit the operations.

Income from Operations.

<TABLE>
<CAPTION>
                                                            Nine Months Ended
                                                    --------------------------------
                                                     December 27,     December 28,      Increase
(dollars in millions)                                    2002             2001         (Decrease)
                                                    --------------- ---------------- --------------

<S>                                                      <C>             <C>              <C>
Physician Supply Business.......................         $17.1           $18.3            $(1.2)
Long-Term Care Business.........................          13.2             7.6              5.6
Other...........................................         (11.5)           (4.5)            (7.0)
                                                    --------------- ---------------- --------------
               Total Company....................         $18.8           $21.4            $(2.6)
                                                    =============== ================ ==============
</TABLE>


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

Interest Expense. Interest expense for the nine months ended December 27, 2002
totaled $6.7 million, an increase of $0.5 million, or 9.3%, from interest
expense of $6.2 million for the nine months ended December 28, 2001. Interest
expense allocated to discontinued operations was $2.2 million and $3.6 million
for the nine months ended December 27, 2002 and December 28, 2001, respectively.
In addition, during the nine months ended December 28, 2001, approximately $1.6
million of interest was capitalized, which reduced interest expense, in
connection with the Company's purchase and development of its ERP systems and
approximately $0.4 million of accelerated amortization of debt issuance costs
was recorded as a result of refinancing the prior credit facility on May 24,
2001. Excluding the effects of the allocation of interest to discontinued
operations, the capitalized interest, and the accelerated amortization of debt
issuance costs, interest expense decreased approximately $2.1 million. This
decrease is primarily attributable to lower outstanding debt balances under the
Company's revolving credit agreement and the Senior Subordinated Notes over the
prior period and an overall reduction in interest rates.

Interest and Investment Income. Interest and investment income for the nine
months ended December 27, 2002 totaled $0.4 million, an increase of $0.2
million, or 108.0%, from interest and investment income of $0.2 million for the
nine months ended December 28, 2001.

                                       39
<PAGE>

Other Income. Other income for the nine months ended December 27, 2002 totaled
$2.8 million, an increase of $1.3 million, or 79.7%, from other income of $1.5
million for the nine months ended December 28, 2001. During the nine months
ended December 27, 2002, approximately $1.6 million of other income was recorded
as a result of the transition services agreement associated with the sale of the
Imaging Business. The increase in other income was offset by a decrease in the
amount of customer finance charge income on the Long-Term Care and Physician
Supply Businesses customer accounts and an increase in the loss on sales of
property and equipment recorded at the Physician Supply Business.

Provision for Income Taxes. Provision for income taxes was $5.7 million for the
nine months ended December 27, 2002, a change of $0.3 million from the provision
for income taxes of $6.0 million for the nine months ended December 28, 2001.
The effective income tax rate was approximately 37.4% and 35.1% for the nine
months ended December 27, 2002 and December 28, 2001, respectively. The increase
in the effective rate is primarily attributable to (i) an increase in
unfavorable permanent items and (ii) a decrease in the income from continuing
operations before provision for income taxes, excluding the effect of the
International Business, offset by a valuation allowance recorded during fiscal
year 2002 against certain deferred tax assets resulting from capital loss
carryforwards generated from the sale of the International Business.

Total Loss from Discontinued Operations.

Net sales for the Imaging Business were $445.6 million for the nine months ended
December 27, 2002, a decrease of $86.7 million from net sales of $532.3 million
for the nine months ended December 28, 2001. The timing of the sale of the
Imaging Business, which was November 18, 2002, resulted in 162 days of sales
during the three months ended December 27, 2002 compared to 189 days of sales
during the nine months ended December 28, 2001.

The pretax loss from operations was $6.7 million for the nine months ended
December 27, 2002, an increase of $4.4 million from a pretax loss from
operations of $2.3 million for the nine months ended December 28, 2001. This
increase in the loss from operations is primarily related to a reduction in net
sales discussed above.

The Company has recorded a $35.7 million income tax benefit related to the
disposal of the Imaging Business during the nine months ended December 27, 2002.
The Company has a total deferred tax asset of approximately $57.6 million, which
represents the tax effect of the anticipated income tax net operating loss
("NOL") to be generated as a result of the sale of the Imaging Business. Under
the terms of the Stock Purchase Agreement, the Company made a joint election
with the Buyer to treat the transaction as a sale of assets in accordance with
ss.338(h)(10) of the Internal Revenue Code. Management estimates that this NOL
will be carried forward and applied against regular taxable income for fiscal
years 2004, 2005, and 2006. The NOL is classified as a deferred tax asset in
other noncurrent assets in the Other segment's accompanying balance sheet. 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.

Extraordinary Loss. During the nine months ended December 27, 2002, the Company
retired $19.0 million principal amount of its $125.0 million Senior Subordinated
Notes. An extraordinary loss of $0.7 million was incurred as a result of the
early extinguishment of debt, consisting of $0.7 million redemption premiums and
the accelerated amortization of associated debt issuance costs of $0.4 million,
net of an income tax benefit of $0.4 million.

Net Loss. Net loss for the nine months ended December 27, 2002 totaled $52.0
million compared to a net loss of $80.5 million for the nine months ended
December 28, 2001. The net loss for the nine months ended December 27, 2002
included a charge of $60.9 million for the total loss from discontinued
operations and $0.7 million extraordinary loss on early extinguishment of debt.
The net loss for the nine months ended December 28, 2001 primarily related to a
goodwill impairment charge of $90.0 million, net of a benefit for income taxes
of $14.4 million, recorded as a cumulative effect of an accounting change due to
the implementation of SFAS 142. Otherwise, variances are due to the factors
discussed above.

                                       40
<PAGE>

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 this growth will be funded through a combination
of cash flows from operating activities, revolving credit borrowings, and other
financing arrangements.

Statement of Cash Flows Discussion

Net cash provided by operating activities was $27.7 million and $88.8 million
for the nine months ended December 27, 2002 and December 28, 2001, respectively.
During the nine months ended December 27, 2002 and December 28, 2001, cash flows
from operating activities were positively impacted by noncash items of $18.0
million and $23.6 million, respectively, related to depreciation, amortization
of intangible assets, amortization of debt issuance costs, provisions for
doubtful accounts and notes receivables, benefit for deferred income taxes, and
loss on sales of property and equipment. During the nine months ended December
28, 2001, cash flows from operating activities were positively impacted by the
implementation of working capital reduction initiatives that started in the last
half of fiscal year 2001.

Net cash used in investing activities was $1.0 million and $18.7 million for the
nine months ended December 27, 2002 and December 28, 2001, respectively. During
the nine months ended December 27, 2002 and December 28, 2001, capital
expenditures totaled $8.5 million and $13.9 million, respectively. Capital
expenditures related to the continued development of the Company's ERP system,
electronic commerce platforms, and supply chain integration were approximately
$1.1 million and $9.5 million during the nine months ended December 27, 2002 and
December 28, 2001. During the nine months ended December 27, 2002, approximately
$4.0 million of the capital expenditures relate to the distribution center
expansions and software development for centralizing the purchasing function as
a result of the Rationalization Programs. In addition, during the three months
ended September 27, 2002, the Long-Term Care Business purchased a business for
approximately $4.5 million. During the three months ended December 27, 2002,
cash flows from investing activities were positively impacted by the sale of the
Imaging Business. The original purchase price was estimated to be $45.0 million
cash subject to adjustment based on the net assets sold and net cash held by the
Imaging Business as of the closing date. Under the Stock Purchase Agreement, the
purchase price was $45.0 million 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 cash
proceeds received during the nine months ended December 27, 2002 were reduced by
approximately $1.3 million for transaction costs. Approximately $2.7 million of
additional transaction costs, which are accrued in the accompanying balance
sheet as an accrued loss on disposal, will be paid subsequent to December 27,
2002.

Net cash used in financing activities was $44.6 million for the nine months
ended December 27, 2002 compared to net cash used in financing activities of
$65.1 million for the nine months ended December 28, 2001. During the nine
months ended December 27, 2002, the Company paid $19.7 million to retire a
portion of the Notes and $25.2 million to repurchase approximately 3.6 million
shares of the Company's common stock under approved stock repurchase programs.
During fiscal year 2002, the Company repaid a significant amount of debt
outstanding under the revolving line of credit agreement using cash flows from
operating activities.

Operating Trends

Excluding the assets and liabilities of discontinued operations, the Company had
working capital of $175.4 million and $188.0 million as of December 27, 2002 and
March 29, 2002, respectively. Accounts receivable, net of allowances, were
$157.0 million and $148.3 million at December 27, 2002 and March 29, 2002,
respectively. The average number of days sales in accounts receivable
outstanding was approximately 46.2 and 46.7 days for the three months ended
December 27, 2002 and March 29, 2002, respectively. For the three months ended
December 27, 2002, the Company's Physician Supply and Long-Term Care Businesses
had days sales in accounts receivable outstanding of approximately 42.6 and 52.6
days, respectively.

Inventories were $84.0 million and $83.9 million as of December 27, 2002 and
March 29, 2002, respectively. The Company had inventory turnover of 10.1x and
9.4x for the three months ended December 27, 2002 and March 29, 2002,
respectively. For the three months ended December 27, 2002, the Company's
Physician Supply and Long-Term Care Businesses had inventory turnover of 9.2x
and 12.2x, respectively.

                                       41
<PAGE>

The following table presents Adjusted EBITDA and other financial data for the
three and nine months ended December 27, 2002 and December 28, 2001 (in
thousands):

Other Financial Data:

<TABLE>
<CAPTION>

                                                         Three Months Ended               Nine Months Ended
                                                   -----------------------------    -----------------------------
                                                   December 27,     December 28,    December 27,     December 28,
                                                       2002             2001            2002             2001
                                                   ------------     ------------    -------------    ------------

<S>                                                    <C>             <C>              <C>            <C>
Income from operations........................         $ 6,589         $ 7,741          $18,772        $ 21,448
Plus:  Other income...........................           1,944             397            2,753           1,532
Plus:  Depreciation and amortization of
   intangible assets..........................           3,660           2,685           10,675           6,986
Plus:  Charges included in general and
   administrative expenses (d)................           1,385             696            5,643           1,096
Plus:  International Business exit charge
   reversal                                                 --              --               --            (514)
                                                   ------------     ------------    -------------    ------------
Adjusted EBITDA (a)...........................         $13,578         $11,519          $37,843        $ 30,548

Interest expense..............................         $ 2,268         $ 1,544          $ 6,732        $  6,158
Interest coverage (b).........................            6.0x            7.5x             5.6x            5.0x
Adjusted EBITDA Margin (c)....................            4.5%            4.1%             4.3%            3.7%

Net cash provided by operating activities.....                                         $ 27,716        $ 80,111
Net cash used in investing activities.........                                         $   (909)       $(18,666)
Net cash used in financing activities.........                                         $(44,589)       $(65,065)
</TABLE>

<TABLE>
<CAPTION>
                                                                                       As of
                                                                           -----------------------------
                                                                           December 27,     December 28,
                                                                               2002             2001
                                                                           ------------     ------------

<S>                                                                            <C>             <C>
         Return on committed capital (e) (d)..........................         21.4%           17.4%
         Ratio of debt to capitalization (f)..........................         30.0%           38.5%
</TABLE>


(a)      Adjusted EBITDA represents income from operations, plus other income,
         depreciation and amortization of intangible assets, charges included in
         general and administrative expenses, and International Business exit
         charge reversal. Adjusted EBITDA excludes interest expense and
         provision for income taxes. Adjusted EBITDA is not a measure of
         performance or financial condition under generally accepted accounting
         principles ("GAAP").

         Adjusted EBITDA is not intended to represent cash flows from operations
         and should not be considered as an alternative measure to income from
         operations or net income computed in accordance with GAAP, as an
         indicator of the Company's operating performance, as an alternative to
         cash flows from operating activities, or as a measure of liquidity. In
         addition, Adjusted EBITDA does not provide information regarding cash
         flows from investing and financing activities which are integral to
         assessing the effects on the Company's financial position and liquidity
         as well as understanding the Company's historical growth. The Company
         believes that Adjusted EBITDA is a standard measure of liquidity
         commonly reported and widely used by analysts, investors, and other
         interested parties in the financial markets. However, not all companies
         calculate Adjusted EBITDA using the same method and the Adjusted EBITDA
         numbers set forth above may not be comparable to Adjusted EBITDA
         reported by other companies.

(b)      Interest coverage represents the ratio of Adjusted EBITDA to interest
         expense.

(c)      Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to net
         sales.

(d)      Charges included in general and administrative expenses for the three
         and nine months ended December 27, 2002 excludes $31 and $169 of
         accelerated depreciation, respectively. Accelerated depreciation is
         included in depreciation and amortization in the Adjusted EBITDA
         calculation.

                                       42
<PAGE>

(e)      Return on committed capital equals Adjusted EBITDA less depreciation
         divided by the average of the two most recent fiscal quarters of total
         assets less the sum of cash and cash equivalents, goodwill, net
         intangibles, accounts payable, accrued expenses, and other current and
         noncurrent liabilities. The deferred tax asset of $35,675 generated
         from the estimated loss on disposal of the Imaging Business is excluded
         from this calculation. The result of this calculation is then
         annualized.

(f)      Ratio of debt to capitalization is calculated as long-term debt plus
         current portion of long-term debt divided by the sum of long-term debt,
         current portion of long-term debt, and shareholders' equity.

Senior Subordinated Notes

The Company's Notes are unconditionally guaranteed on a senior subordinated
basis by all of the Company's domestic subsidiaries. Interest on the Notes
accrues from the date of original issuance and is payable semiannually on April
1 and October 1 of each year, commencing on April 1, 1998, at a rate of 8.5% per
annum. The semiannual payments of approximately $5.3 million are expected to be
funded by the cash flows from operating activities of the Company. The Notes
mature on October 1, 2007, and contain certain restrictive covenants that, among
other things, limit the Company's ability to incur additional indebtedness. The
Company may incur indebtedness up to certain specified levels and, provided that
no event of default exists, additional indebtedness may be incurred if the
Company maintains a consolidated fixed charge coverage ratio, after giving
effect to such additional indebtedness, of greater than 2 to 1.

During the three months ended September 27, 2002, the Company retired $19.0
million principal amount of its Notes in a privately negotiated transaction. An
extraordinary loss of $0.7 million was incurred as a result of the early
extinguishment of debt, consisting of $0.7 million of redemption premiums, $0.4
million of accelerated amortization of debt issuance costs, net of a benefit for
income taxes of $0.4 million.

Under the Notes Indenture, beginning October 1, 2002, the Company has the right
to call the Notes at a call premium of 4.25% of face value. The Company is
currently evaluating the economic feasibility of calling the Notes using cash
flows from operations, availability under the Revolving Credit Agreement, cash
from obtaining an alternate financing facility, or a combination of these
sources.

Revolving Credit Agreement

On May 24, 2001, the Company entered into a 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"), Bank of America, N.A., as Agent for the Lenders
(in such capacity, the "Agent", or the "Bank") and Banc of America Securities
LLC, as Arranger.

The Credit Agreement provides for a four-year credit facility consisting of an
aggregate $120 million revolving line of credit and letters of credit (the
"Credit Facility"). Availability of borrowings under the Credit Facility depends
upon (a) the amount of a borrowing base consisting of accounts receivable and,
upon satisfaction of certain requirements, inventory and (b) compliance with
certain debt incurrence tests under the Company's Indenture, dated as of October
7, 1997, relating to the Notes. The Credit Facility bears interest at the Bank's
prime rate plus a margin of between 0.25% and 1.0% based on the Company's ratio
of funded debt to EBITDA (as defined in the Agreement) or at LIBOR plus a margin
of between 1.75% and 3.5% 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 (a) paying
dividends and repurchasing stock, (b) repurchasing its Notes, (c) selling or
transferring assets, (d) making certain investments (including acquisitions) and
(e) incurring additional indebtedness and liens. Initial proceeds from the
Credit Facility were used to refinance existing indebtedness outstanding under
the Company's prior credit agreement, and future proceeds will be used to issue
letters of credit, finance ongoing working capital requirements and general
corporate purposes of the Company. The Credit Facility matures on May 24, 2005.

                                       43
<PAGE>

On June 28, 2001, the Company entered into a First Amendment to the Credit
Agreement (the "Amendment"), by and among the Company, as borrower thereunder,
the subsidiaries of the Company party thereto, the Lenders and the Agent for the
Lenders. The Amendment amended the Credit Agreement to increase the maximum
available borrowings under the Credit Agreement from $120 million to $150
million. The Amendment also, among other things, increased the percentage of
Lenders whose consent was required for an amendment of the Credit Agreement from
more than 50% to more than 55% and amended certain provisions relating to
protective advances, limitations on issuances of letters of credit,
indemnification, and landlord consents.

On August 12, 2002, the Company received a consent from the Lenders and the
Agent for the Lenders for the repurchase of up to $35.0 million of its common
stock through June 30, 2003.

On October 24, 2002, the Company received a consent from the Lenders and the
Agent for the Lenders for the sale of all the outstanding capital stock of DI.

As of December 27, 2002, the Company has not entered into any material working
capital commitments that require funding. The Company believes that the expected
cash flows from operations, borrowing availability under the credit facility,
and capital markets are sufficient to meet the Company's anticipated future
requirements for working capital, capital expenditures, and acquisitions for the
foreseeable future.

The Company may from time to time seek to retire its outstanding debt 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.

The Company is currently evaluating alternative debt structures with a goal of
reducing its overall cost of debt.

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 Notes and Credit
Facility, as well as contractual lease payments for facility, vehicle, and
equipment leases, and contractual payments under noncompetition agreements and
employment agreements. As of December 27, 2002, the Company had no borrowings
outstanding under the credit facility. The following table presents, in
aggregate, scheduled payments under contractual obligations for the Physician
Supply Business, the Long-Term Care Business, and Other (in thousands):
<TABLE>
<CAPTION>


                                                       Fiscal Years
                                 -------------------------------------------------------
                                 (remaining
                                  3 months)
                                    2003        2004        2005       2006       2007      Thereafter     Total
                                 ----------   ----------  ---------  ----------  --------   ----------   ----------

<S>                                 <C>        <C>         <C>         <C>        <C>        <C>          <C>
Long-term debt................      $   --     $    --     $    --     $   --     $   --     $106,000     $106,000
Operating leases:
    Restructuring.............         306       1,184         722        330         29           --        2,571
    Operating.................       5,284      16,239      12,340      8,235      6,147        7,022       55,267
Noncompetition agreements.....         193         238          93         35         34          115          708
Employment agreements.........       1,779         162         162         --         --           --        2,103
                                 ----------   ----------  ---------  ----------  --------   ----------   ----------
         Total................      $7,562     $17,823     $13,317     $8,600     $6,210     $113,137     $166,649
                                 ==========   ==========  =========  ==========  ========   ==========   ==========
</TABLE>


Other

On July 30, 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 3.6 million common shares, in the open market, in privately
negotiated transactions, or otherwise. As of December 27, 2002, the Company had
completed the repurchase of the 3.6 million common shares under this program at
an average price of $7.12 per common share. On December 17, 2002, the Company's
Board of Directors authorized an additional purchase of up to 5% of its common
stock, or approximately 3.4 million common shares, in the open market, in
privately negotiated transactions, or otherwise. As of December 27, 2002, no
shares have been purchased under this program.





                                       44
<PAGE>




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 29, 2002.


ITEM 4.  DISCLOSURE CONTROLS AND PROCEDURES

(a)  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 a date within ninety days before the filing date of this quarterly
     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.

(b)  Changes in internal controls. There were no significant changes in the
     Company's internal controls or in other factors that could significantly
     affect those controls subsequent to the Evaluation Date.


PART II--OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

Refer to Note 10, 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 29, 2002.


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

Not applicable.


ITEM 5.  OTHER INFORMATION

Not applicable.

                                       45
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

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


   Exhibit
    Number     Description
----------    -----------------------------------------------------------------

<S>             <C>
  3.1          Amended and Restated Articles of Incorporation, dated as of March 15, 1994.  (7)

  3.1a         Articles of Amendment to Articles of Incorporation, dated as of September 24, 2001.  (16)

  3.1b         Articles of Amendment to Articles of Incorporation, dated as of November 9, 2001.  (16)

  3.2          Amended and Restated Bylaws, dated as of March 15, 1994.  (3)

  4.1          Form of  Indenture,  dated  as of  October 7,  1997,  by and  among  the  Company,  the  Subsidiary
               Guarantors named therein,  and SunTrust Bank, Central Florida,  National  Association,  as Trustee.
               (6)
  4.1a         Supplemental Indenture, dated as of February 15, 2001, by and
               among the New Subsidiary Guarantors named therein and SunTrust
               Bank (formerly known as SunTrust Bank, Central Florida, National
               Association), as Trustee. (11)

  4.2          Registration  Rights  Agreement,  dated as of  October 7,  1997,  by and  among  the  Company,  the
               Subsidiary  Guarantors  named  therein,  BT Alex.  Brown  Incorporated,  Salomon  Brothers Inc. and
                NationsBanc Montgomery Securities, Inc.  (6)

  4.3          Form of 8 1/2% Senior Subordinated Notes due 2007, including Form of Guarantee (Exchange Notes).  (6)

  4.4          Shareholder  Protection  Rights  Agreement,  dated as of  April 20,  1998,  between the Company and
               Continental Stock Transfer & Trust Company, as Rights Agent.  (8)

  4.4a         Amendment to  Shareholder  Protection  Rights  Agreement,  dated as of June 21,  2000,  between the
               Company and Continental Stock Transfer & Trust Company as Rights Agent.  (10)

  4.4b         Amendment to Shareholder  Protection  Rights  Agreement,  dated as of April 12,  2002,  between the
               Company and First Union National Bank, as Successor Rights Agent.  (18)

  10.1         Incentive Stock Option Plan, dated as of May 14, 1986.  (1)

  10.2         Amended and Restated Directors Stock Plan.  (5)

  10.3         Amended and Restated 1994 Long-Term Incentive Plan.  (5)

  10.4         Amended and Restated 1994 Long-Term Stock Plan.  (5)

  10.5         1994 Employee Stock Purchase Plan.  (4)

  10.6         1994 Amended Incentive Stock Option Plan.  (1)

  10.7         1999 Long-term Incentive Plan.  (9)

  10.8         Distributorship  Agreement  between Abbott  Laboratories and the Company (Portions omitted pursuant
               to a request for confidential treatment - Separately filed with the SEC).  (2)

  10.9         Amended and Restated Savings Plan.  (19)
</TABLE>

                                       46
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>

  10.9a        First Amendment to the Amended and Restated Savings Plan (21).

  10.10        Credit Agreement, dated as of May 24, 2001, by and among the Company, each of the Company's
               subsidiaries therein named, the Lenders from time to time party thereto, Bank of America, N.A., as
               Agent, and Banc of America Securities LLC, as Arranger.  (12)

  10.10a       Amendment No. 1 to Credit Agreement, dated as of June 28, 2001,
               by and among the Company, each of the Company's subsidiaries
               therein named, the Lenders from time to time party thereto, Bank
               of America, N.A., as Agent, and Banc of America Securities LLC,
               as Arranger. (14)

  10.11        Employment Agreement, dated as of March 4, 1998, by and between the Company and David A. Smith.
               (13)

  10.11a       Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and
               David A. Smith.  (13)

  10.12        Employment Agreement, dated as of April 1, 1998, by and between the Company and John F. Sasen,
               Sr.  (13)

  10.12a       Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and John
               F. Sasen, Sr.  (13)

  10.13        Consulting Agreement, dated as of June 13, 2002, by and between the Company and Douglas J.
               Harper.  (19)

  10.14        Employment Agreement, dated as of April 1, 1998, by and between the Company and Gary A. Corless.
               (15)

  10.14a       Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and
               Gary A. Corless.  (15)

  10.15        Employment Agreement, dated as of April 1, 1998, by and between the Company and Kevin P. English.
               (15)

  10.15a       Amendment to Employment Agreement, dated as of April 17, 2000, by and between the Company and
               Kevin P. English.  (15)

  10.16        Employment Agreement, dated as of January 7, 2002, by and between the Company and David M.
               Bronson.  (17)

  10.18        Severance Agreement, dated as of March 21, 2001, by and between the Company and Patrick C. Kelly.
               (13)

  10.19        Stock Purchase  Agreement,  dated as of October 28,  2002, among PSS World Medical,  Inc.,  Imaging
               Acquisition Corporation, and Platinum Equity, LLC.  (20)

  10.19a       Amendment to Stock Purchase Agreement, dated as of November 18, 2002, among PSS World Medical,
               Inc., Diagnostic Imaging, Inc., Imaging Acquisition Corporation and Platinum Equity, LLC. (22)

  15           Awareness Letter from KPMG LLP.
</TABLE>

                                       47
<PAGE>

<TABLE>
<CAPTION>
<S>            <C>

  21           List of Subsidiaries of the Company.  (18)

               (1) Incorporated by Reference to the Company's Registration
               Statement on Form S-1, Registration No. 33-76580.

               (2) Incorporated by Reference to the Company's Annual Report on
               Form 10-K for the year ended March 30, 1995.

               (3) Incorporated by Reference to the Company's Registration
               Statement on Form S-3, Registration No. 33-97524.

               (4) Incorporated by Reference to the Company's Registration
               Statement on Form S-8, Registration No. 33-80657.

               (5) Incorporated by Reference to the Company's Quarterly Report
               on Form 10-Q for the quarter ended June 30, 1996.

               (6) Incorporated by Reference to the Company's Registration
               Statement on Form S-4, Registration No. 333-39679.

               (7) Incorporated by Reference to the Company's Current Report on
               Form 8-K, filed April 8, 1998.

               (8) Incorporated by Reference to the Company's Current Report on
               Form 8-K, filed April 22, 1998.

               (9) Incorporated by Reference to the Company's Quarterly Report
               on Form 10-Q for the quarter ended September 30, 1999.

               (10) Incorporated by Reference to the Company's Quarterly Report
               on Form 10-Q for the quarter ended June 30, 2000.

               (11) Incorporated by Reference to the Company's Quarterly Report
               on Form 10-Q for the quarter ended December 29, 2000.

               (12) Incorporated by Reference to the Company's Current Report
               on Form 8-K, filed June 5, 2001.

               (13)  Incorporated by Reference to the Company's Annual Report
               on Form 10-K for the year ended March 30, 2001.

               (14) Incorporated by Reference to the Company's Current Report
               on Form 8-K, filed July 3, 2001.

               (15) Incorporated by Reference to the Company's Quarterly Report
               on Form 10-Q for the quarter ended June 29, 2001.

               (16) Incorporated by Reference to the Company's  Quarterly Report
               on Form 10-Q for the quarter ended December 28, 2001.

               (17) Incorporated by Reference to the Company's  Quarterly Report
               on Form 10-Q for the quarter ended December 28, 2001.

               (18)  Incorporated by Reference to the Company's Annual Report on
               Form 10-K for the year ended March 29, 2002.

               (19) Incorporated by Reference to the Company's  Quarterly Report
               on Form 10-Q for the quarter ended June 28, 2002.

               (20) Incorporated by Reference to the Company's Current Report on
               Form 8-K, filed October 30, 2002.

               (21) Incorporated by Reference to the Company's Current Report on
               Form 10-Q, for the quarter ended September 27, 2002.

               (22) Incorporated by Reference to the Company's Current Report on
               Form 8-K, filed November 20, 2002.

</TABLE>

                                       48
<PAGE>

(b)


Reports on Form 8-K:

     The  following  current  reports on Form 8-K were filed  during the quarter
     ended December 27, 2002:
<TABLE>
<CAPTION>
               <S>                          <C>

         ----------------------------- --------------------------------------------------------
              Date of Report                Items Reported
         ----------------------------- --------------------------------------------------------
              October 30, 2002              Filing to announce the Stock Purchase Agreement
                                            to sell all of the outstanding capital stock of
                                            the Company's wholly owned subsidiary, Diagnostic
                                            Imaging, Inc. to Imaging Acquisition Corporation,
                                            a wholly owned subsidiary of Platinum Equity, LLC.
         ----------------------------- --------------------------------------------------------
              November 12, 2002             Filing of the Chief Executive Officer's and Chief
                                            Financial Officer's written certifications
                                            regarding the Company's Quarterly Report on Form
                                            10-Q, as required under Section 906 of the
                                            Sarbanes-Oxley Act of 2002.
         ----------------------------- --------------------------------------------------------
              November 20, 2002             Filing to announce the completion of the sale of
                                            Diagnostic Imaging, Inc. to Imaging Acquisition
                                            Corporation.
         ----------------------------- --------------------------------------------------------
              December 3, 2002              Filing to amend the current report filed of the
                                            November 20, 2002 filing to include Pro Forma
                                            financial information.
         ----------------------------- --------------------------------------------------------

</TABLE>



                                       49
<PAGE>





SIGNATURES

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 February 7, 2003.

                             PSS WORLD MEDICAL, INC

                             By:     /s/ David M. Bronson
                                     -----------------------------------------
                                     David M. Bronson
                                     Senior Vice President and Chief Financial
                                     Officer (Duly Authorized Officer and
                                     Principal Financial and Accounting Officer)




                                       50
<PAGE>




                                  CERTIFICATION


I, David A. Smith, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of PSS World
         Medical, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.    Designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

         b.    Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

         c.    Presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a.    All  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

         b.    Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.



February 6, 2003

                                 /s/ David A. Smith
                                 -----------------------------------
                                 David A. Smith
                                 President and Chief Executive Officer





                                       51
<PAGE>




                                  CERTIFICATION


I, David M. Bronson, certify that:

1.       I have reviewed this quarterly report on Form 10-Q of PSS World
         Medical, Inc.;

2.       Based on my knowledge, this quarterly report does not contain any
         untrue statement of a material fact or omit to state a material fact
         necessary to make the statements made, in light of the circumstances
         under which such statements were made, not misleading with respect to
         the period covered by this quarterly report;

3.       Based on my knowledge, the financial statements, and other financial
         information included in this quarterly report, fairly present in all
         material respects the financial condition, results of operations and
         cash flows of the registrant as of, and for, the periods presented in
         this quarterly report;

4.       The registrant's other certifying officers and I are responsible for
         establishing and maintaining disclosure controls and procedures (as
         defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
         we have:

         a.    Designed such  disclosure  controls and procedures to ensure that
               material  information  relating to the registrant,  including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               quarterly report is being prepared;

         b.    Evaluated  the  effectiveness  of  the  registrant's   disclosure
               controls and  procedures as of a date within 90 days prior to the
               filing date of this quarterly report (the "Evaluation Date"); and

         c.    Presented  in this  quarterly  report our  conclusions  about the
               effectiveness of the disclosure  controls and procedures based on
               our evaluation as of the Evaluation Date;

5.       The registrant's other certifying officers and I have disclosed, based
         on our most recent evaluation, to the registrant's auditors and the
         audit committee of registrant's board of directors (or persons
         performing the equivalent function):

         a.    All  significant  deficiencies  in the  design  or  operation  of
               internal  controls which could adversely  affect the registrant's
               ability to record,  process,  summarize and report financial data
               and have  identified for the  registrant's  auditors any material
               weaknesses in internal controls; and

         b.    Any fraud,  whether or not material,  that involves management or
               other employees who have a significant  role in the  registrant's
               internal controls; and

6.       The registrant's other certifying officers and I have indicated in this
         quarterly report whether or not there were significant changes in
         internal controls or in other factors that could significantly affect
         internal controls subsequent to the date of our most recent evaluation,
         including any corrective actions with regard to significant
         deficiencies and material weaknesses.



February 6, 2003

                               /s/ David M. Bronson
                               -----------------------------------
                               David M. Bronson
                               Senior Vice President and Chief Financial Officer



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