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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 June 26, 2009

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number 0-23832





PSS WORLD MEDICAL, INC.

(Exact name of Registrant as specified in
its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Florida                                                        |  | 59-2280364                          
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification Number)



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

Registrants telephone number, including area code (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 such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit and post such files).     ̈  Yes     ̈  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  | x |  | Accelerated filer         |  |  ̈
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  |  ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No

The number of shares of common stock, par value $0.01 per share, of the registrant outstanding as of July 30, 2009 was 59,497,698 shares.









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PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

JUNE 26, 2009

TABLE OF CONTENTS



|     |  |                                                                                                                       |  |     
|---- |  | --------------------------------------------------------------------------------------------------------------------- |  | ----
|Item |  |                                                                                                                       |  | Page
|     |  |                                                                                                                      
|     |  | Information Regarding Forward-Looking Statements                                                                      |  | 1   
|     |  |                                                                                                                      
|     |  | Part IFinancial Information                                                                                          |  |     
|     |  |                                                                                                                      
|1.   |  | Financial Statements:                                                                                                 |  |     
|     |  |                                                                                                                      
|     |  | Unaudited Condensed Consolidated Balance Sheets June 26, 2009 and March 27, 2009                                     |  | 2   
|     |  |                                                                                                                      
|     |  | Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended June 26, 2009 and June 
27, 2008 |  | 3   
|     |  |                                                                                                                      
|     |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 26, 2009 and June 
27, 2008 |  | 4   
|     |  |                                                                                                                      
|     |  | Unaudited Notes to Condensed Consolidated Financial Statements                                                        |  | 5   
|     |  |                                                                                                                      
|2.   |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 18  
|     |  |                                                                                                                      
|3.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 27  
|     |  |                                                                                                                      
|4.   |  | Controls and Procedures                                                                                               |  | 28  
|     |  |                                                                                                                      
|     |  | Part IIOther Information                                                                                             |  |     
|     |  |                                                                                                                      
|2.   |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 28  
|     |  |                                                                                                                      
|6.   |  | Exhibits                                                                                                              |  | 29  
|     |  |                                                                                                                      
|     |  | Signature                                                                                                             |  | 30  



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CAUTIONARY STATEMENTS

Forward-Looking Statements

Management may from time-to-time make
written or oral statements with respect to the Companys annual or long-term goals, including statements contained in this Quarterly Report on Form 10-Q, the Annual Report on Form 10-K for the fiscal year ended March 27, 2009,
Reports on Form 8-K, and reports to shareholders that are forward-looking statements within the meaning, and subject to the protections of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks
and uncertainties that could cause actual results to differ materially from historical earnings and those currently anticipated or projected. Management cautions readers not to place undue reliance on any of the Companys forward-looking
statements, which speak only as of the date made.

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



| |  | Managements expectation that cash flows from operations, in conjunction with borrowings under the revolving line of credit, capital markets, and/or other
financing arrangements will fund future working capital needs, capital expenditures, and the overall growth in the business; and its belief that the Company continues to be well positioned to weather the current crisis in the financial markets;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Managements belief that the outcome of legal 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;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Managements expectation that the business strategies being executed including the Physician Businesss customer reach program will have a positive impact
on future periods; and
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Managements estimation and expectation of future payouts of long-term incentive compensation.
|- |  | ----------------------------------------------------------------------------------------------

In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, management is identifying important factors that
could affect the Companys financial performance and could cause actual results for future periods to differ materially from any opinions or statements expressed with respect to future periods in any current statements about the Companys
goals or expectations. The Companys future results could be adversely affected by a variety of factors, including those discussed in Item 1A-Risk Factors in the Companys 2009 Form 10-K and this Form 10-Q. In addition,
all forward-looking statements that are made by or attributable to the Company are qualified in their entirety by and should be read in conjunction with this cautionary notice and the risks described or referred to in Item 1A-Risk
Factors of the Companys 2009 Form 10-K and this Form 10-Q. The Company has no obligation to and does not undertake to update, revise, or correct any of the forward-looking statements after the date of this report, or after the
respective dates on which such statements are made.



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PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 26, 2009 AND MARCH 27, 2009

(Dollars in Thousands)

ASSETS



|                                                                                                                                                                        |  |              |         |   |               |   |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ------------- | - | -------
|                                                                                                                                                                        |  | June 26,2009 |         |   | March 27,2009
|Current Assets:                                                                                                                                                         |  |              |         |   |               |   |        
|Cash and cash equivalents                                                                                                                                               |  | $            | 129,631 |   |               | $ | 82,031 
|Investment in available for sale securities                                                                                                                             |  |              |        |   |               |   | 10,592 
|Accounts receivable, net of allowance for doubtful accounts of $7,800 and $7,041 as of June 26, 2009 and March 27, 2009,
respectively                                   |  |              | 230,391 |   |               |   | 230,361
|Inventories                                                                                                                                                             |  |              | 196,160 |   |               |   | 207,593
|Prepaid expenses                                                                                                                                                        |  |              | 5,190   |   |               |   | 3,171  
|Other current assets                                                                                                                                                    |  |              | 27,445  |   |               |   | 28,707 
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total current assets                                                                                                                                                    |  |              | 588,817 |   |               |   | 562,455
|Property and equipment, net of accumulated depreciation of $102,477 and $99,892 as of June 26, 2009 and March 27, 2009, respectively                                    |  |              | 103,552 |   |               |   | 101,205
|Other Assets:                                                                                                                                                           |  |              |         |   |               |   |        
|Goodwill                                                                                                                                                                |  |              | 114,255 |   |               |   | 112,768
|Intangibles, net of accumulated amortization of $21,243 and $19,990 as of June 26, 2009 and March 27, 2009,
respectively                                                |  |              | 22,442  |   |               |   | 22,958 
|Other                                                                                                                                                                   |  |              | 65,065  |   |               |   | 59,238 
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total assets                                                                                                                                                            |  | $            | 894,131 |   |               | $ | 858,624
|                                                                                                                                                                        |  |              |         |   |               |   |        
|                                                                                                                                                                       
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                   
|Current Liabilities:                                                                                                                                                    |  |              |         |   |               |   |        
|Accounts payable                                                                                                                                                        |  | $            | 133,781 |   |               | $ | 127,300
|Accrued expenses                                                                                                                                                        |  |              | 46,196  |   |               |   | 52,718 
|Revolving line of credit and current portion of long-term debt                                                                                                          |  |              | 50,953  |   |               |   | 50,937 
|Other                                                                                                                                                                   |  |              | 12,882  |   |               |   | 7,955  
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total current liabilities                                                                                                                                               |  |              | 243,812 |   |               |   | 238,910
|Long-term debt, excluding current portion                                                                                                                               |  |              | 182,654 |   |               |   | 180,965
|Other noncurrent liabilities                                                                                                                                            |  |              | 70,323  |   |               |   | 60,719 
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total liabilities                                                                                                                                                       |  |              | 496,789 |   |               |   | 480,594
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Commitments and contingencies (Note 8)                                                                                                                                  |  |              |         |   |               |   |        
|Shareholders Equity:                                                                                                                                                   |  |              |         |   |               |   |        
|Preferred stock, $0.01 par value; 1,000,000 shares authorized, no shares issued and outstanding                                                                         |  |              |        |   |               |   |       
|Common stock, $0.01 par value; 150,000,000 shares authorized, 59,486,221 and 59,316,697 shares issued and outstanding at June 26, 2009
and March 27, 2009, respectively |  |              | 585     |   |               |   | 583    
|Additional paid in capital                                                                                                                                              |  |              | 208,292 |   |               |   | 200,175
|Retained earnings                                                                                                                                                       |  |              | 188,926 |   |               |   | 175,620
|Accumulated other comprehensive income                                                                                                                                  |  |              | (461    | ) |               |   | 1,652  
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total shareholders equity                                                                                                                                              |  |              | 397,342 |   |               |   | 378,030
|                                                                                                                                                                        |  |              |         |   |               |   |        
|Total liabilities and shareholders equity                                                                                                                              |  | $            | 894,131 |   |               | $ | 858,624
|                                                                                                                                                                        |  |              |         |   |               |   |        

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



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PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED JUNE 26, 2009 AND JUNE 27, 2008

(In Thousands, Except Per Share Data)



|                                                    |  |              |         |   |              |   |         |  
|--------------------------------------------------- |  | ------------ | ------- | - | ------------ | - | ------- | -
|                                                    |  | June 26,2009 |         |   | June 27,2008 |  
|Net sales                                           |  | $            | 493,554 |   |              | $ | 472,214 |  
|Cost of goods sold                                  |  |              | 347,580 |   |              |   | 333,283 |  
|                                                    |  |              |         |   |              |   |         |  
|Gross profit                                        |  |              | 145,974 |   |              |   | 138,931 |  
|                                                    |  |             
|General and administrative expenses                 |  |              | 91,638  |   |              |   | 89,634  |  
|Selling expenses                                    |  |              | 32,687  |   |              |   | 31,266  |  
|                                                    |  |              |         |   |              |   |         |  
|Income from operations                              |  |              | 21,649  |   |              |   | 18,031  |  
|                                                    |  |              |         |   |              |   |         |  
|                                                    |  |             
|Other (expense) income:                             |  |              |         |   |              |   |         |  
|Interest expense                                    |  |              | (4,261  | ) |              |   | (3,203  | )
|Interest income                                     |  |              | 134     |   |              |   | 122     |  
|Other income, net                                   |  |              | 3,997   |   |              |   | 609     |  
|                                                    |  |              |         |   |              |   |         |  
|Other expense                                       |  |              | (130    | ) |              |   | (2,472  | )
|                                                    |  |              |         |   |              |   |         |  
|Income before provision for income taxes            |  |              | 21,519  |   |              |   | 15,559  |  
|Provision for income taxes                          |  |              | 8,213   |   |              |   | 6,187   |  
|                                                    |  |              |         |   |              |   |         |  
|Net income                                          |  | $            | 13,306  |   |              | $ | 9,372   |  
|                                                    |  |              |         |   |              |   |         |  
|                                                    |  |             
|Basic earnings per common share                     |  | $            | 0.23    |   |              | $ | 0.15    |  
|Diluted earnings per common share                   |  | $            | 0.23    |   |              | $ | 0.15    |  
|                                                    |  |             
|Weighted average common shares outstanding, Basic   |  |              | 58,380  |   |              |   | 61,003  |  
|Weighted average common shares outstanding, Diluted |  |              | 58,859  |   |              |   | 61,723  |  

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



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PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED JUNE 26, 2009 AND JUNE 27, 2008

(Dollars in Thousands)



|                                                                                        |  |                    |         |   |               |   |         |  
|--------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ------------- | - | ------- | -
|                                                                                        |  | Three Months Ended |        
|                                                                                        |  | June 26, 2009      |         |   | June 27, 2008 |  
|Cash Flows From Operating Activities:                                                   |  |                    |         |   |               |   |         |  
|Net income                                                                              |  | $                  | 13,306  |   |               | $ | 9,372   |  
|Adjustments to reconcile net income to net cash provided by operating activities:       |  |                    |         |   |               |   |         |  
|Depreciation                                                                            |  |                    | 5,245   |   |               |   | 4,830   |  
|Provision for deferred income taxes                                                     |  |                    | 86      |   |               |   | 1,631   |  
|Noncash compensation expense                                                            |  |                    | 6,138   |   |               |   | 1,577   |  
|Amortization of intangible assets                                                       |  |                    | 1,252   |   |               |   | 1,344   |  
|Provision for doubtful accounts                                                         |  |                    | 1,211   |   |               |   | 1,847   |  
|Provision for deferred compensation                                                     |  |                    | 341     |   |               |   | 601     |  
|Amortization of debt discount and issuance costs                                        |  |                    | 2,210   |   |               |   | 1,862   |  
|Loss on sales of property and equipment                                                 |  |                    | 29      |   |               |   | 13      |  
|Gain on sale of available for sale securities                                           |  |                    | (3,635  | ) |               |   |        |  
|Changes in operating assets and liabilities, net of effects from business combinations: |  |                    |         |   |               |   |         |  
|Accounts receivable, net                                                                |  |                    | (1,016  | ) |               |   | 8,492   |  
|Inventories                                                                             |  |                    | 11,891  |   |               |   | (1,472  | )
|Prepaid expenses and other current assets                                               |  |                    | (5,120  | ) |               |   | 171     |  
|Other assets                                                                            |  |                    | (459    | ) |               |   | (1,223  | )
|Accounts payable                                                                        |  |                    | 6,284   |   |               |   | (7,888  | )
|Accrued expenses and other liabilities                                                  |  |                    | 7,146   |   |               |   | (7,401  | )
|                                                                                        |  |                    |         |   |               |   |         |  
|Net cash provided by operating activities                                               |  |                    | 44,909  |   |               |   | 13,756  |  
|                                                                                        |  |                    |         |   |               |   |         |  
|                                                                                        |  |                   
|Cash Flows From Investing Activities:                                                   |  |                    |         |   |               |   |         |  
|Capital expenditures                                                                    |  |                    | (7,631  | ) |               |   | (5,893  | )
|Payments for business acquisitions, net of cash acquired                                |  |                    | (2,123  | ) |               |   | (2,597  | )
|Proceeds from sale of available for sale securities                                     |  |                    | 10,681  |   |               |   | 21,000  |  
|Proceeds from sales of property and equipment                                           |  |                    | 27      |   |               |   |        |  
|Other                                                                                   |  |                    | (138    | ) |               |   | (78     | )
|                                                                                        |  |                    |         |   |               |   |         |  
|Net cash provided by investing activities                                               |  |                    | 816     |   |               |   | 12,432  |  
|                                                                                        |  |                    |         |   |               |   |         |  
|                                                                                        |  |                   
|Cash Flows From Financing Activities:                                                   |  |                    |         |   |               |   |         |  
|Proceeds from exercise of stock options                                                 |  |                    | 1,611   |   |               |   | 2,437   |  
|Excess tax benefits from share-based compensation arrangements                          |  |                    | 526     |   |               |   | 426     |  
|Purchase of common stock                                                                |  |                    | (35     | ) |               |   | (24     | )
|Net payments on the revolving line of credit                                            |  |                    |        |   |               |   | (20,000 | )
|Payments under capital lease obligations                                                |  |                    | (227    | ) |               |   | (309    | )
|                                                                                        |  |                    |         |   |               |   |         |  
|Net cash provided by (used in) financing activities                                     |  |                    | 1,875   |   |               |   | (17,470 | )
|                                                                                        |  |                    |         |   |               |   |         |  
|                                                                                        |  |                   
|Net increase in cash and cash equivalents                                               |  |                    | 47,600  |   |               |   | 8,718   |  
|Cash and cash equivalents, beginning of period                                          |  |                    | 82,031  |   |               |   | 21,122  |  
|                                                                                        |  |                    |         |   |               |   |         |  
|Cash and cash equivalents, end of period                                                |  | $                  | 129,631 |   |               | $ | 29,840  |  
|                                                                                        |  |                    |         |   |               |   |         |  

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



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PSS WORLD MEDICAL, INC. AND SUBSIDIARIES

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 26, 2009 AND JUNE 27, 2008

(In Thousands, Except Share and Per Share Data, Unless Otherwise
Noted)



|1. | BACKGROUND AND BASIS OF PRESENTATION
|-- | ------------------------------------

The accompanying unaudited
condensed 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 generally accepted accounting principles in the United States (GAAP) have been omitted pursuant to the SEC rules and regulations. The unaudited condensed 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 preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.

The accompanying unaudited condensed consolidated financial statements have been prepared in
accordance with GAAP and include the consolidated accounts of PSS World Medical, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

The Company conducts business through two operating segments, the Physician Business and the Elder Care Business. These strategic segments serve a broad customer
base. A third segment, Corporate Shared Services, includes allocated and unallocated costs of corporate departments which support the operating activities and various initiatives of the operating segments, and engage in certain other operating
activities.

The consolidated balance sheet as of March 27, 2009 has been derived from the Companys audited consolidated financial statements
for the fiscal year ended March 27, 2009, except as noted in the Recent Accounting Pronouncementand Reclassificationsections, below. 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 27, 2009.

The Company reports its year-end and
quarter-end financial position, results of operations, and cash flows as of the Friday closest to calendar month end, determined using the number of business days. Fiscal years 2010 and 2009 consist of 53 weeks or 258 selling
days and 52 weeks or 253 selling days, respectively. The three months ended June 26, 2009 and June 27, 2008 each consisted of 64 selling days.

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

Change in Accounting Estimate

Equity-Based Long-Term Compensation

The Company has grants of performance-based restricted stock which require the use of certain estimates. Estimates of the Companys future performance and
participant forfeiture rates are utilized to determine the number of shares which will ultimately vest. During the three months ended June 26, 2009, the Company revised its estimate of expected performance and related forfeiture rates based on
current information available, including operating plans, actual financial and operating results, forecasts prepared by management and environmental and market risks. Refer to Footnote 6, Long-Term Incentive Plan and Stock-Based Compensation,
for additional information. The Company recognized this change in estimate prospectively in accordance with SFAS No. 154, Accounting Changes and Error Corrections (SFAS 154).



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Cash-Based Long-Term Compensation

The Company maintains cash-based long-term incentive plans for certain employees. Estimates of the Companys future performance are utilized to determine the amounts ultimately paid under the plans. During the
three months ended June 26, 2009, the Company revised its estimate of expected performance as discussed under Equity-Based Long-Term Compensation above. Refer to Footnote 6, Long-Term Incentive Plan and Stock-Based Compensation,
for additional information. The Company recognized this change in estimate prospectively in accordance with SFAS 154.

Reclassification

Certain items previously reported in combined financial statement captions have been reclassified to conform to the current financial statement presentation.

Recent Accounting Pronouncements

In February 2008,
the FASB issued FSP SFAS No. 157-2, Effective Date of FASB Statement No. 157 (FSP SFAS 157-2), which delayed the effective date of SFAS 157 with respect to nonfinancial assets and
nonfinancial liabilities not remeasured at fair value on a recurring basis until fiscal years beginning after November 15, 2008, or the Companys fiscal year 2010. The Company has applied the requirements of SFAS No. 157,
Fair Value Measurements (SFAS 157), with no material effects, to certain such nonfinancial assets for which fair value measurements are determined only when there is an indication of potential impairment.

In April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142- 3).
FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset and the disclosure requirements under FASB Statement No. 142,
Goodwill and Other Intangibles. FSP 142-3 requires that an entity consider its historical experience in renewing or extending similar arrangements in determining the useful life of a recognized intangible asset. Determining
the useful life of a recognized intangible asset under FSP 142-3 applies prospectively to intangible assets acquired after the effective date. The disclosure requirements of FSP 142-3 will be applied prospectively to all intangible assets
recognized as of, and subsequent to, the effective date. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, or the Companys fiscal year 2010, and interim periods within those
fiscal years. The Company has adopted this standard with no material effects on the Companys statements of financial condition or results of operations.

In May 2008, the FASB issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) and, as
required, was retrospectively applied to all prior periods for which applicable convertible debt was outstanding. FSP APB 14-1 requires entities with convertible debt instruments that may be settled in cash upon conversion (including
partial cash settlement) to separately account for the liability and equity components in a manner that reflects an estimate of the entitys nonconvertible debt borrowing rate when interest expense is recognized in subsequent periods. The
equity components of the senior convertible notes are included in Additional paid-in capital in the Unaudited Condensed Consolidated Balance Sheets, with a corresponding reduction in the carrying values of these convertible notes
as of the date of issuance or modification, as applicable. The reduced carrying values of the convertible notes are accreted to principal amounts through the recognition of non-cash interest expense. This accretion results in recognizing interest
expense on these borrowings at effective rates approximating what would have been incurred had the Company issued nonconvertible debt with otherwise similar terms. FSP APB 14-1 is effective for financial statements issued for fiscal years
beginning after December 15, 2008, or the Companys fiscal year 2010. The Company adopted this FSP during the current period. Refer to Footnote 3, Debt, for additional information.

In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entitys Own
Stock (EITF 07-5). EITF 07-5 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the
instruments contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments



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on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008, or the Companys fiscal year 2010. This
pronouncement was adopted during the current period with no material effects on the Companys statements of financial condition or results of operations.

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly. This FSP provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that
indicate a transaction is not orderly. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. The Company has adopted this FSP with no material effects on the Companys statements of financial condition
or results of operations.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of
Financial Instruments, requiring summarized disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies. This standard is effective for interim reporting periods ending after
June 15, 2009. The Company has adopted this FSP with no material effect on the Companys statements of financial condition or results of operations. See Footnote 9, Fair Value Measurement,for additional information.

In May 2009, the FASB issued SFAS No. 165 Subsequent Events (SFAS 165). SFAS 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth (i) the period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after
June 15, 2009. This pronouncement was adopted during the current period with no material effect on the Companys statements of financial condition or results of operations. Applicable disclosures have been provided in the Subsequent
Events section below.

In June 2009, the FASB issued SFAS No. 168 The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principlesa replacement of FASB Statement No. 162 (SFAS 168). The FASB Accounting Standards Codification (Codification) will be the single source of authoritative
nongovernmental U.S. generally accepted accounting principles. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for interim and
annual periods ending after September 15, 2009. All existing accounting standards are superseded as described in SFAS 168. All other accounting literature not included in the Codification is nonauthoritative. The Codification is not expected to
have a significant impact on the Companys consolidated financial statements.

Subsequent Events

The Company evaluated all events or transactions that occurred after June 26, 2009 up through August 5, 2009, the date the Company issued these financial
statements.

Stock Repurchase Program

On
March 31, 2009, the Companys Board of Directors authorized the purchase of its outstanding common shares. Depending on current market conditions and other factors, the Company is authorized to repurchase up to a maximum of 5% of its total
common stock, or approximately 3.0 million common shares. Repurchases can be made in the open market, privately negotiated transactions, and other transactions that will be disclosed publicly through filings with the Securities and Exchange
Commission (SEC). This authorization is in addition to any shares remaining available under existing repurchase programs. At June 26, 2009, approximately 3.1 million shares were available for repurchase under this program. The share
repurchase program does not have an expiration date.



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|2. | EQUITY INVESTMENT
|-- | -----------------

In April 2009, the Company sold its remaining
investment in athenahealth, Inc. (athena) for $10,681, resulting in a gain of $3,635, or $2,254 net of tax. As of March 27, 2009, the aggregate fair value of the investment was $10,592, with cumulative unrealized holding gains of
$3,547. The Company previously classified this investment as available-for-sale in accordance with SFAS 115.

During the fourth
quarter of fiscal year 2008, the Company sold a portion of its investment in athena. Proceeds of $21,000 were received during the three months ended June 27, 2008 in relation to the sale.



|3. | DEBT
|-- | ----

In August 2008, the Company issued $230.0 million
principal amount 3.125% senior convertible notes, which mature on August 1, 2014 (the 2008 Notes). Interest on the notes is payable semiannually in arrears on February 1 and August 1 of each year. The notes will be
convertible into cash up to the principal amount of the notes and shares of the Companys common stock for any conversion value in excess of the principal amount under certain circumstances. The ability of note holders to convert is assessed on
a quarterly basis and is dependent on the trading price of the Companys stock during the last 30 trading days of each quarter. The Contingent Conversion Trigger was not met during the three months ended June 26, 2009; therefore, the notes
may not be converted. As of June 26, 2009, the fair value of the 2008 Notes was approximately $243,133.

During fiscal year 2004, the Company issued
$150.0 million principal amount of 2.25% senior convertible notes (the 2004 Notes). On March 15, 2009, the holders of $149.98 million in principal face value of 2.25% senior convertible notes exercised the notes put
option, requiring the Company to purchase the notes at 100% of the principal amount of the notes plus accrued and unpaid interest.

Adoption of FSP APB
14-1

On March 28, 2009, the Company adopted FSP APB 14-1 (See Footnote 1, Background and Basis of Presentation). The following illustrates
the impact of adopting FSP APB 14-1 on the Unaudited Condensed Consolidated Statement of Operations for the three months ended June 26, 2009 and June 27, 2008:



|                                         |  |                                    |        |      |                       |   |        |                                    |  |   |                       |   |  |                       |        |   |             |   |        |   |  |   |        |  
|---------------------------------------- |  | ---------------------------------- | ------ | ---- | --------------------- | - | ------ | ---------------------------------- |  | - | --------------------- | - |  | --------------------- | ------ | - | ----------- | - | ------ | - |  | - | ------ | -
|                                         |  | For the Three Months Ended         |       
|                                         |  | June 26, 2009                      |        |      | June 27, 2008         |  
|(in thousands, except per share amounts) |  | Excluding theEffect of FSPAPB 14-1 |        |      | Effect of FSPAPB 14-1 |   |        | Including theEffect of FSPAPB 14-1 |  |   | As OriginallyReported |   |  | Effect of FSPAPB 14-1 |        |   | As Restated |  
|Operating income                         |  | $                                  | 21,704 |      |                       | $ | (55    | )                                  |  | $ | 21,649                |   |  | $                     | 18,086 |   |             | $ | (55    | ) |  | $ | 18,031 |  
|Other income (expense)                   |  |                                    | 1,573  |      |                       |   | (1,703 | )                                  |  |   | (130                  | ) |  |                       | (1,003 | ) |             |   | (1,469 | ) |  |   | (2,472 | )
|                                         |  |                                    |        |      |                       |   |        |                                    |  |   |                       |   |  |                       |        |   |             |   |        |   |  |   |        |  
|Income before income taxes               |  |                                    | 23,277 |      |                       |   | (1,758 | )                                  |  |   | 21,519                |   |  |                       | 17,083 |   |             |   | (1,524 | ) |  |   | 15,559 |  
|Provision for income taxes               |  |                                    | 8,881  |      |                       |   | (668   | )                                  |  |   | 8,213                 |   |  |                       | 6,766  |   |             |   | (579   | ) |  |   | 6,187  |  
|                                         |  |                                    |        |      |                       |   |        |                                    |  |   |                       |   |  |                       |        |   |             |   |        |   |  |   |        |  
|Net income                               |  | $                                  | 14,396 |      |                       | $ | (1,090 | )                                  |  | $ | 13,306                |   |  | $                     | 10,317 |   |             | $ | (945   | ) |  | $ | 9,372  |  
|                                         |  |                                    |        |      |                       |   |        |                                    |  |   |                       |   |  |                       |        |   |             |   |        |   |  |   |        |  
|Earnings per share:                      |  |                                    |        |      |                       |   |        |                                    |  |   |                       |   |  |                       |        |   |             |   |        |   |  |   |        |  
|Basic                                    |  | $                                  |        | 0.25 |                       | $ | (0.02  | )                                  |  | $ | 0.23                  |   |  | $                     | 0.17   |   |             | $ | (0.02  | ) |  | $ | 0.15   |  
|Diluted(a)                               |  | $                                  |        | 0.24 |                       | $ | (0.02  | )                                  |  | $ | 0.23                  |   |  | $                     | 0.17   |   |             | $ | (0.02  | ) |  | $ | 0.15   |  



|(a) | Effects on diluted earnings per share may not cross-foot due to rounding
|--- | ------------------------------------------------------------------------

The debt discount associated with the 2008 Notes will be amortized over periods that end on the scheduled maturity date and result in effective interest rates of approximately 8.25%. For the three months ended
June 26, 2009, interest expense was approximately $1,817 based on the contractual coupon rates and debt discount amortization was approximately $1,933.



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For the three months ended June 27, 2008, interest expense on the 2004 Notes was $844, based on the contractual
coupon rates and debt discount amortization was $1,591.

The following illustrates the impact of adopting FSP APB 14-1 on theUnaudited Condensed
Consolidated Balance Sheets as of June 26, 2009 and March 27, 2009:



|                                |  |                                    |         |                       |   |         |                                    |  |                       |         |                       |   |         |             |   |         |   |  |   |        
|------------------------------- |  | ---------------------------------- | ------- | --------------------- | - | ------- | ---------------------------------- |  | --------------------- | ------- | --------------------- | - | ------- | ----------- | - | ------- | - |  | - | -------
|                                |  | As of                             
|                                |  | June 26, 2009                      |         | March 27, 2009       
|                                |  | Excluding theEffect of FSPAPB 14-1 |         | Effect of FSPAPB 14-1 |   |         | Including theEffect of FSPAPB 14-1 |  | As OriginallyReported |         | Effect of FSPAPB 14-1 |   |         | As Restated
|                                |  |                                    |         |                       |   |         |                                    |  |                       |         |                       |   |         |             |   |         |   |  |   |        
|Property and equipment, net(a)  |  | $                                  | 102,516 |                       | $ | 1,036   |                                    |  | $                     | 103,552 |                       | $ | 100,115 |             | $ | 1,090   |   |  | $ | 101,205
|Other assets(b)                 |  |                                    | 80,402  |                       |   | (15,337 | )                                  |  |                       | 65,065  |                       |   | 73,534  |             |   | (14,297 | ) |  |   | 59,237 
|Long-term debt                  |  |                                    | 231,568 |                       |   | (48,914 | )                                  |  |                       | 182,654 |                       |   | 231,812 |             |   | (50,847 | ) |  |   | 180,965
|Other noncurrent liabilities(c) |  |                                    | 65,294  |                       |   | 5,029   |                                    |  |                       | 70,323  |                       |   | 54,598  |             |   | 6,121   |   |  |   | 60,719 
|Additional paid in capital      |  |                                    | 157,453 |                       |   | 50,839  |                                    |  |                       | 208,292 |                       |   | 149,336 |             |   | 50,839  |   |  |   | 200,175
|Retained earnings               |  |                                    | 209,336 |                       |   | (20,410 | )                                  |  |                       | 188,926 |                       |   | 194,939 |             |   | (19,319 | ) |  |   | 175,620



|(a) | Reflects the impact of increased capitalized interest
|--- | -----------------------------------------------------

|(b) | Reflects the impact of deferred taxes and deferred debt costs
|--- | -------------------------------------------------------------

|(c) | Reflects the impact of deferred taxes
|--- | -------------------------------------

As a result
of the accounting change, retained earnings as of March 29, 2008, decreased from $136,718, as originally reported, to $123,929. Conversely, additional paid in capital increased from $195,657 as originally reported, to $212,768.

The principal balances, unamortized discounts and net carrying amounts of the liability components and the equity components for the Companys 2008 Notes as of
June 26, 2009 and March 27, 2009 are as follows:



|               |  |                     |         |                     |   |                    |  |                 |         |  |   |       
|-------------- |  | ------------------- | ------- | ------------------- | - | ------------------ |  | --------------- | ------- |  | - | ------
|               |  | Liability Component |         | Equity Component   
|June 26, 2009  |  | PrincipalBalance    |         | UnamortizedDiscount |   | Net CarryingAmount |  | Carrying Amount
|2008 Notes     |  | $                   | 230,000 |                     | $ | 48,914             |  | $               | 181,086 |  | $ | 55,636
|               |  |                     |         |                    
|March 27, 2009 |  |                     |         |                     |   |                    |  |                
|2008 Notes     |  | $                   | 230,000 |                     | $ | 50,847             |  | $               | 179,153 |  | $ | 55,636

Convertible Note Hedge Transactions

In connection with the offering of the 2008 Notes, the Company also entered into convertible note hedge transactions with respect to its common stock (the purchased options) with a major financial
institution (the counterparty). The purchased options cover, subject to anti-dilution adjustments substantially identical to those in the notes, approximately 10.8 million shares of common stock at a strike price that
corresponds to the initial conversion price of the notes, also subject to adjustment, and are exercisable at each conversion date of the notes. The purchased options will expire upon the earlier of (i) the last day the notes remain outstanding
or (ii) the second scheduled trading day immediately preceding the maturity date of the notes.

The purchased options are intended to reduce the
potential dilution upon conversion of the notes in the event that the market value per share of the common stock, as measured under the notes, at the time of exercise is greater than the



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conversion price of the notes. The options have been accounted for as an adjustment to the Companys stockholders equity, net of deferred tax
assets of $20,993, recorded in Other long term assets on the Unaudited Condensed Consolidate Balance Sheets.

The purchased options are
separate transactions, entered into by the Company with the counterparty, and are not part of the terms of the notes. Holders of the notes will not have any rights with respect to the purchased options.

Warrant Transactions

The Company also entered into warrant
transactions (the warrants), whereby the Company sold to the counterparty warrants to acquire, subject to anti-dilution adjustments, up to 10.8 million shares of common stock at a strike price of $28.29 per share of common
stock. The warrants will expire after the purchased options in approximately ratable portions on a series of expiration dates commencing on November 3, 2015.

If the market value per share of the common stock, as measured under the warrants, exceeds the strike price of the warrants, the warrants will have a dilutive effect on the Companys earnings per share. The warrants have been accounted
for as an adjustment to the Companys stockholders equity.

The warrants are separate transactions, entered into by the Company with the
counterparties, and are not part of the terms of the notes. Holders of the notes do not have any rights with respect to the warrants.

Interest Rate
Swap Agreement

During fiscal year 2008, the Company entered into an interest rate swap agreement which matures on February 19, 2010. The purpose
of this swap agreement is to hedge the variable interest rate of its asset-based revolving line of credit (the Credit Agreement). The notional amount of the swap is $50.0 million. The interest rate swap effectively fixes the interest
rate on a portion of the revolving line of credit to 2.70%, plus an applicable margin as determined by the Credit Agreement. The interest rate swap has been designated as a cash flow hedge.Therefore, changes in fair value are recognized in
Accumulated other comprehensive income. See Footnote 5, Comprehensive Income,for additional information. Under the terms of the interest rate swap agreement, the Company makes monthly interest payments based on the fixed rate and
receives monthly interest payments based on one-month LIBOR. The changes in market value of these financial instruments were highly correlated with changes in market value of the hedged item both at inception and over the lives of the agreements.
Amounts received or paid under this interest rate swap agreement are recorded as reductions or additions to interest expense.

The following table presents
the fair value of the Companys derivative instrument:



|                                              |  |                           |  |                |     |                        |                           |           |   |    
|--------------------------------------------- |  | ------------------------- |  | -------------- | --- | ---------------------- | ------------------------- | --------- | - | ---
|                                              |  | June 26, 2009             |  | March 27, 2009
|(in thousands)                                |  | Balance Sheet Location    |  | FairValue      |     | Balance Sheet Location |                           | FairValue
|Derivatives designated as hedging instrument: |  |                           |  |                |     |                        |                           |           |   |    
|Interest rate swap                            |  | Other current liabilities |  | $              | 744 |                        | Other current liabilities |           | $ | 891
|                                              |  |                           |  |                |     |                        |                           |           |   |    
|Total derivatives                             |  |                           |  | $              | 744 |                        |                           |           | $ | 891
|                                              |  |                           |  |                |     |                        |                           |           |   |    



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The following tables present the effect of the Companys derivative instrument on the consolidated financial
statements:



|                                               |  |                                                                   |    |               |   |    
|---------------------------------------------- |  | ----------------------------------------------------------------- | -- | ------------- | - | ---
|Derivatives in Cash Flow Hedging Relationships |  | Amount of Gain Recognized in OCI onDerivative (Effective Portion)
|                                               |  | For the Three Months Ended                                       
|(in thousands)                                 |  | June 26, 2009                                                     |    | June 27, 2008
|Interest rate swap, net of tax                 |  | $                                                                 | 91 |               | $ | 443
|                                               |  |                                                                   |    |               |   |    
|Total                                          |  | $                                                                 | 91 |               | $ | 443
|                                               |  |                                                                   |    |               |   |    



|4. | EARNINGS PER SHARE
|-- | ------------------

Basic and diluted earnings per share are
presented in accordance with SFAS No. 128, Earnings Per Share. Basic earnings per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings
per common share is computed by dividing net income by the weighted average number of common and common equivalent shares outstanding during the period adjusted for the potential dilutive effect of stock options and restricted stock using the
treasury stock method and the potential impact of outstanding convertible senior notes. Common equivalent shares are excluded from the computation in periods in which they have an antidilutive effect.

The following table sets forth computational data for the denominator in the basic and diluted earnings per common share calculation for the three months ended
June 26, 2009 and June 27, 2008:



|                                                                                                       |  |                            |  |              
|------------------------------------------------------------------------------------------------------ |  | -------------------------- |  | -------------
|                                                                                                       |  | For the Three Months Ended
|(in thousands)                                                                                         |  | June 26, 2009              |  | June 27, 2008
|Denominator-weighted average shares outstanding used in computing basic earnings per common share      |  | 58,380                     |  | 61,003       
|Assumed exercise of stock options(a)                                                                   |  | 326                        |  | 503          
|Assumed vesting of restricted stock                                                                    |  | 153                        |  | 151          
|Assumed conversion of the 2004 Notes                                                                   |  |                           |  | 66           
|                                                                                                       |  |                            |  |              
|Denominator-weighted average shares outstanding used in computing diluted earnings per common share(b) |  | 58,859                     |  | 61,723       
|                                                                                                       |  |                            |  |              



|(a) | Options to purchase approximately 200,000 and 79 shares of outstanding common stock at June 26, 2009 and June 27, 2008, respectively, were not included in
the computation of diluted earnings per share for each of the respective periods because the options inclusion would be antidilutive.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The assumed conversion of the 2008 Notes was not included in the computation of diluted earnings per share for the three months ended June 26, 2009, as the
Companys average stock price for the period did not exceed the conversion price.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|5. | COMPREHENSIVE INCOME
|-- | --------------------

The following table includes the components
of comprehensive income for the three months ended June 26, 2009 and June 27, 2008:



|                                                                                                                                       |  |                            |        |   |              |   |       
|-------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------ | - | ------
|                                                                                                                                       |  | For the Three Months Ended
|(in thousands)                                                                                                                         |  | June 26,2009               |        |   | June 27,2008
|Net income                                                                                                                             |  | $                          | 13,306 |   |              | $ | 9,372 
|Add:                                                                                                                                   |  |                            |        |   |              |   |       
|Unrealized holding gains on available-for-sale investments, net of income taxes                                                        |  |                            | 50     |   |              |   | 1,809 
|Unrealized holding gains on interest rate swap, net of income taxes                                                                    |  |                            | 91     |   |              |   | 443   
|Less:                                                                                                                                  |  |                            |        |   |              |   |       
|Reclassification of gains on available for sale investments included in net income previously recognized in other comprehensive
income |  |                            | (2,254 | ) |              |   |      
|                                                                                                                                       |  |                            |        |   |              |   |       
|Comprehensive income                                                                                                                   |  | $                          | 11,193 |   |              | $ | 11,624
|                                                                                                                                       |  |                            |        |   |              |   |       

The unrealized holding gains and losses on available-for-sale investments relate to the Companys investment
in athena, as discussed in Footnote 2, Equity Investment.

The unrealized holding gains and losses on the interest rate swap relate to the
Companys revolving line of credit, as discussed in Footnote 3, Debt.



|6. | LONG-TERM INCENTIVE PLAN AND STOCK BASED COMPENSATION
|-- | -----------------------------------------------------

Stock-based compensation represents the cost related to stock-based awards granted to employees and non-employee directors. The Company measures stock-based compensation at the grant date, based on the estimated fair value of the
award, and recognizes the cost as compensation expense on a straight-line basis (net of estimated forfeitures) over the awards estimated vesting period. The Companys stock-based compensation expense is reflected in general and administrative
expenses in the Unaudited Condensed Consolidated Statements of Operations.

Restricted Stock Awards

The Company issues (i) restricted stock which vests based on the recipients continued service over time (Time-Based Awards) and
(ii) restricted stock or restricted stock units which vest based on the Company achieving specified performance measurements (Performance-Based Awards).

Time-Based Awards

The Company measures the fair value of Time-Based Awards on the date of grant
based on the closing stock price. The related compensation expense is recognized on a straight-line basis net of estimated forfeitures over the vesting period, which normally ranges from 2 to 5 years.

Performance-Based Awards

During the
first quarter of fiscal year 2010, the Companys Compensation Committee of the Board of Directors (the Committee), approved awards of performance-based restricted stock units (Performance Shares) and
performance-accelerated restricted stock units (PARS Units) to the Companys top six officers. These awards were granted under the Companys 2006 Incentive Plan.



12



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Fiscal Year 2010 Issuances

The Performance Shares will vest after three years and convert to shares of common stock based on the Companys achievement of certain cumulative
earnings per share growth targets, the calculation of which will not be impacted by any change in generally accepted accounting principles promulgated by standard setting bodies. These awards, which are denominated in terms of a target number
of shares, will be forfeited if performance falls below a designated threshold level and may vest for up to 250% of the target number of shares for exceptional performance. The ultimate number of shares delivered to recipients and the related
compensation cost recognized as expense will be based on actual performance.

The PARS Units will vest on the five-year anniversary of the
grant date and convert to shares of common stock, subject to accelerated vesting after three years if the Company achieves a cumulative earnings per share growth target, the calculation of which will not be impacted by any change in generally
accepted accounting principles promulgated by standard setting bodies. Upon vesting, the grantee may defer acceptance of the units to a later date, whereas the units will remain outstanding. The PARS units are estimated to vest on the three-year
anniversary of the grant date. This estimate may be adjusted in future periods based on actual experience and changes in management assumptions.

Fiscal Year 2010 Change in Estimate

During the three months ended June 26, 2009, the Company changed the
estimated shares to be delivered on previously issued awards due to a change in estimated achievement of performance conditions based on actual and forecasted financial performance above previous estimates. The change in estimate increased
performance shares by 194,000 shares.

Due to a change in estimated achievement of performance conditions based on actual and forecasted
financial performance above previous estimates, PARS awards issued during fiscal years 2008 and 2009 are now estimated to vest on the three-year anniversary of the grant date. As such, the Company adjusted the forfeiture rate related to certain PARS
awards to reflect a reduction in expected forfeitures over the remaining vesting period. These estimates may be adjusted in future periods based on actual experience and changes in management assumptions.

As a result of the change in accounting estimates, stock based compensation expense was increased $4,255 ($2,638 net of tax), or $0.04 per diluted share.

Total stock-based compensation expense during the three months ended June 26, 2009 and June 27, 2008 was approximately $5,912 and $1,295,
respectively, with related income tax benefits of $2,247 and $437, respectively.

As of June 26, 2009, there was $19,163 of unrecognized compensation
cost related to non-vested restricted stock and restricted stock units granted under the stock incentive plans. The compensation cost related to these non-vested restricted stock grants is expected to be recognized over a weighted average period of
1.8 years.

The Companys Unaudited Condensed Consolidated Statements of Cash Flows present the stock-based compensation expense as an
adjustment to reconcile net income to net cash used in operating activities for all periods presented. Income tax benefits of $526 and $426 associated with tax deductions in excess of recognized compensation expense are presented as a cash inflow
from financing activities for the three months ended June 26, 2009 and June 27, 2008, respectively.



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Outstanding stock-based awards granted under equity incentive plans as of June 26, 2009 and March 27, 2009 are
as follows:



|                                 |  |                          |  |       |                   |        |               |  |        |   |  |               |  |        |  
|-------------------------------- |  | ------------------------ |  | ----- | ----------------- | ------ | ------------- |  | ------ | - |  | ------------- |  | ------ | -
|                                 |  | Performance-Based Awards |  |       | Time-Based Awards |        | Stock Options | 
|                                 |  | PerformanceShares        |  | PARS  |                   | PARS   |               |  |        |   |  |               |  |        |  
|(in thousands)                   |  | Units                    |  | Units |                   | Shares |               |  | Shares |   |  | DeferredUnits |  | Shares |  
|Balance, March 27, 2009          |  | 221                      |  |      |                   | 767    |               |  | 248    |   |  | 9             |  | 1,306  |  
|Granted                          |  | 242                      |  | 132   |                   |       |               |  | 8      |   |  |              |  |       |  
|Addition from change in estimate |  | 194                      |  |       |                   |        |               |  |        |   |  |               |  |        |  
|Vested / Exercised               |  |                         |  |      |                   |       |               |  | (7     | ) |  |              |  | (177   | )
|Forfeited                        |  |                         |  |      |                   | (19    | )             |  | (1     | ) |  |              |  |       |  
|                                 |  |                          |  |       |                   |        |               |  |        |   |  |               |  |        |  
|Balance, June 26, 2009           |  | 657                      |  | 132   |                   | 748    |               |  | 248    |   |  | 9             |  | 1,129  |  
|                                 |  |                          |  |       |                   |        |               |  |        |   |  |               |  |        |  

Certain Officer Long-Term Executive Cash-Based Incentive Plans

During fiscal year 2009, the Compensation Committee of the Board of Directors approved the 2008 Shareholder Value Plan (2008 SVP), a cash based
performance award program under the 2006 Incentive Plan. The performance period under the 2008 SVP is the 36-month period from March 31, 2008 to March 25, 2011. The Company had approximately $3,062 and $1,937 of accrued compensation
cost related to the 2008 SVP as of June 26, 2009 and March 27, 2009, respectively. As a result of the change in accounting estimate, long-term incentive based compensation expense was increased by $612, $380 net of tax, or $0.01 per
diluted share for the three months ended June 26, 2009.



|7. | SEGMENT INFORMATION
|-- | -------------------

The Companys reportable segments are
strategic businesses that offer different products to different segments of the healthcare industry, and are the basis on which management regularly evaluates the Company. These segments are managed separately based on different customers and
products. The Company primarily evaluates the operating performance of its segments based on net sales and income from operations. Corporate Shared Services allocates a portion of its costs and interest expense to the operating segments. The
allocation of shared operating costs is generally proportionate to the revenues of each operating segment. Interest expense is allocated based on (i) an internal carrying value of historical capital used to acquire or develop the operating
segments operations and (ii) budgeted operating cash flow. The following tables present financial information about the Companys business segments:



|                             |  |                            |         |   |              |   |         |  
|---------------------------- |  | -------------------------- | ------- | - | ------------ | - | ------- | -
|                             |  | For the Three Months Ended |        
|                             |  | June 26,2009               |         |   | June 27,2008 |  
|Net Sales:                   |  |                            |         |   |              |   |         |  
|Physician Business           |  | $                          | 342,292 |   |              | $ | 331,386 |  
|Elder Care Business          |  |                            | 150,381 |   |              |   | 140,406 |  
|Corporate Shared Services    |  |                            | 881     |   |              |   | 423     |  
|                             |  |                            |         |   |              |   |         |  
|Total net sales              |  | $                          | 493,554 |   |              | $ | 472,215 |  
|                             |  |                            |         |   |              |   |         |  
|                             |  |                           
|Income from Operations:      |  |                            |         |   |              |   |         |  
|Physician Business           |  | $                          | 28,718  |   |              | $ | 22,209  |  
|Elder Care Business          |  |                            | 7,124   |   |              |   | 5,454   |  
|Corporate Shared Services    |  |                            | (14,193 | ) |              |   | (9,632  | )
|                             |  |                            |         |   |              |   |         |  
|Total income from operations |  | $                          | 21,649  |   |              | $ | 18,031  |  
|                             |  |                            |         |   |              |   |         |  



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|                                               |  |                            |         |   |               |   |         |  
|---------------------------------------------- |  | -------------------------- | ------- | - | ------------- | - | ------- | -
|                                               |  | For the Three Months Ended |        
|                                               |  | June 26,2009               |         |   | June 27,2008  |  
|Income Before Provision for Income Taxes:      |  |                            |         |   |               |   |         |  
|Physician Business                             |  | $                          | 27,994  |   |               | $ | 21,701  |  
|Elder Care Business                            |  |                            | 5,175   |   |               |   | 3,492   |  
|Corporate Shared Services                      |  |                            | (11,650 | ) |               |   | (9,634  | )
|                                               |  |                            |         |   |               |   |         |  
|Total income before provision for income taxes |  | $                          | 21,519  |   |               | $ | 15,559  |  
|                                               |  |                            |         |   |               |   |         |  
|                                               | 
|                                               |  | As of                      |        
|                                               |  | June 26,2009               |         |   | March 27,2009 |  
|Total Assets:                                  |  |                            |         |   |               |   |         |  
|Physician Business                             |  | $                          | 411,129 |   |               | $ | 423,211 |  
|Elder Care Business                            |  |                            | 280,562 |   |               |   | 275,658 |  
|Corporate Shared Services                      |  |                            | 202,440 |   |               |   | 159,755 |  
|                                               |  |                            |         |   |               |   |         |  
|Total assets                                   |  | $                          | 894,131 |   |               | $ | 858,624 |  
|                                               |  |                            |         |   |               |   |         |  



|8. | COMMITMENTS AND CONTINGENCIES
|-- | -----------------------------

Litigation

The Company is party to various legal and administrative proceedings and claims arising in the normal course of business. While any litigation contains an element of
uncertainty, the Company believes the outcome of 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, including agreements with foreign vendors.

Commitments and Other Contingencies

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

If the Physician Business or the Elder Care Business were to terminate a contract with a vendor of its Select Medical Products brand (Select) for any reason,
the Company may be required to purchase the remaining inventory of Select products from the vendor, provided that, in no event would the Company be required to purchase quantities of such products which exceed the aggregate amount of such products
ordered by the Company in a negotiated time period immediately preceding the date of termination. As of June 26, 2009, the Company had no material obligations to purchase inventory from Select vendors due to contract terminations.



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##### Table of Contents

|9. | FAIR VALUE MEASUREMENTS
|-- | -----------------------

As discussed in the Recent Accounting
Pronouncementssection of Footnote 1, Background and Basis of Presentation, the Company adopted SFAS 157 (as impacted by FSP SFAS 157-2) with respect to fair value measurements of (i) nonfinancial assets and liabilities and
(ii) all financial assets and liabilities.

SFAS 157 provides a framework for measuring fair value, expands disclosures about fair value
measurements, and establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value summarized as follows:

Level
1: Inputs using unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

Level 2: Inputs or other than quoted prices in markets that are observable for the asset or liability, either directly or indirectly.

Level 3: Inputs that are both significant to the fair value measurement and unobservable.

As of June 26, 2009, the fair value of the
Companys financial assets and/or liabilities is measured using Level 1 or Level 2 inputs. The following table presents the Companys assets and liabilities which are measured at fair value on a recurring basis as of June 26, 2009, by
level within the fair value hierarchy:



|                         |  |         |        |         |   |       |  |   |       
|------------------------ |  | ------- | ------ | ------- | - | ----- |  | - | ------
|(in thousands)           |  | Level 1 |        | Level 2 |   | Total
|Liabilities:             |  |         |        |         |   |       |  |   |       
|Interest rate swap(a)    |  | $       |       |         | $ | 744   |  | $ | 744   
|Deferred compensation(b) |  |         | 54,548 |         |   |      |  |   | 54,548
|                         |  |         |        |         |   |       |  |   |       
|Total liabilities        |  | $       | 54,548 |         | $ | 744   |  | $ | 55,292
|                         |  |         |        |         |   |       |  |   |       

| | 
| | 

| | (a) | Relates to the Companys interest rate swap on its revolving line of credit. The interest rate swap is valued using an internal model that utilizes at its
basis readily observable market inputs such as credit spreads, current market interest rates, and forward interest rates.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Relates to the Companys obligation to pay benefits under its non-qualified deferred compensation plans, which is included in Other noncurrent
liabilities on the Companys Unaudited Condensed Consolidated Balance Sheets. The obligation to pay benefits is based off of participants allocation percentages to plan investments. The investments are measured using quoted
market prices.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The carrying amounts of the Companys financial instruments, including cash and cash equivalents, short-term trade
receivables, and accounts payable, approximate their fair values due to the short-term nature of these assets and liabilities. The gross carrying value of the Companys 2008 Notes at June 26, 2009 was $230,000 and the fair value, which is
estimated using a third party valuation model, was approximately $243,133.



|10. | INCOME TAXES
|--- | ------------

The Company classifies interest and penalties related
to income tax matters as a component of income tax expense. The total amount of accrued interest and penalties was approximately $475 as of March 27, 2009. There have been no material changes to this balance during the three months ended
June 26, 2009.

The tax years subject to examination by major tax jurisdictions include the fiscal year ended March 31, 2006 and forward by the
U.S. Internal Revenue Service, and the fiscal year ended April 1, 2005 and forward for certain states.



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##### Table of Contents

The Companys deferred tax asset and liability balances as of June 26, 2009 and March 27, 2009 are
presented in the following table:



|                                       |  |               |       |                |   |      
|-------------------------------------- |  | ------------- | ----- | -------------- | - | -----
|                                       |  | As of        
|(in thousands)                         |  | June 26, 2009 |       | March 27, 2009
|Current deferred tax assets(a)         |  | $             | 8,249 |                | $ | 8,059
|Noncurrent deferred tax liabilities(b) |  | $             | 5,029 |                | $ | 6,121

| | 
| | 

| | (a) | Current deferred tax assets are included in Other current assets on the Unaudited Condensed Consolidated Balance Sheets. The change in accounting as discussed in
Footnote 3,Debt, had no impact on the March 27, 2009 balance.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | Current deferred tax liabilities are included in Other current liabilities on the Unaudited Condensed Consolidated Balance Sheets. The March 27, 2009 balance
has been restated in accordance with the change in accounting as discussed in Footnote 3,Debt.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

FIN 48 Disclosures

There were no significant changes to the Companys uncertain tax positions in the three months ended June 26, 2009. For a detail of the Companys
uncertain tax positions, please refer to Footnote 12, Income Taxes in the Companys Annual Report Form 10-K for the fiscal year ended March 27, 2009, filed on May 20, 2009.



|11. | SUPPLEMENTAL CASH FLOW INFORMATION
|--- | ----------------------------------

The Companys supplemental
disclosures for the three months ended June 26, 2009 and June 27, 2008 are as follows:



|                  |  |                    |     |              |   |      
|----------------- |  | ------------------ | --- | ------------ | - | -----
|                  |  | Three Months Ended
|                  |  | June 26,2009       |     | June 27,2008
|Cash paid for:    |  |                    |     |              |   |      
|Interest          |  | $                  | 651 |              | $ | 770  
|Income taxes, net |  | $                  | 318 |              | $ | 4,028

During the three months ended June 26, 2009 and June 27, 2008, the Company did not have any material
non-cash transactions.

For the three months ended June 27, 2008, the Company paid $3,593 in extension payments related the Companys fiscal year
2008 federal and state tax liabilities.



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##### Table of Contents

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

THE COMPANY

PSS World Medical, Inc. (the Company or PSSI), a Florida
corporation, began operations in 1983. The Company is a national distributor of medical products and equipment, pharmaceutical products, healthcare information technology and billing services to alternate-site healthcare providers including
physician offices, long-term care and assisted living facilities, home health care and hospice providers through 39 full-service distribution centers, which serve all 50 states throughout the United States (U.S.). The Company currently
conducts business through two operating segments, the Physician Business and the Elder Care Business, which serve a diverse customer base. For information on comparative segment revenue, segment profit and related financial information, refer to
Footnote 7, Segment Information, of the consolidated financial statements.

PSSI is a market-leading company in the two alternate-site segments it
serves as a result of value-added, solutions-based marketing programs; a differentiated customer distribution and service model; a consultative sales force with extensive product, disease state, reimbursement, and supply chain knowledge; unique
arrangements with manufacturers; a full line of the Companys own brand, Select Medical Products and specialty brand products (Select); innovative information systems and technology that serve its core markets; and a culture
of performance.

EXECUTIVE OVERVIEW

During the first
quarter of fiscal year 2010, net sales grew 4.5% at the consolidated level and 3.3% and 7.1% in the Physician and Elder Care Businesses, respectively, compared to the first quarter of fiscal year 2009. This was primarily due to progress in the
Companys sales growth initiatives as well as the impact from the sale of products related to the H1N1 influenza (swine flu) pandemic.

The Company recognized sales growth on the disposables, lab diagnostics, and pharmaceuticals product lines within the Physician Business and across the largest customer segments within the Elder Care Business during the first quarter
compared to the same quarter in the prior year. Select brand product sales grew 15.0% and 24.8% during the quarter in the Physician and Elder Care Businesses, respectively, reflecting the Companys efforts to promote its globally-sourced brand
through sales and marketing initiatives.

Income from operations of $21.6 million during the first quarter of fiscal year 2010 increased 20.1% or $3.6
million compared with the same period in prior year. This was primarily the result of net sales growth discussed above and a decrease in general and administrative expenses due to implemented cost savings initiatives partially offset by increased
incentive compensation accruals.

Cash flow from operations during the three months ended June 26, 2009 was approximately $44.9 million. This was
primarily the result of growth in profitability, a reduction in inventory levels, and improved accounts receivable collections.

The following significant
events impacted the Company during the three months ended June 26, 2009:

Swine Flu Pandemic

During the three months ended June 26, 2009, the Physician Business experienced increased sales in influenza test kits, surgical masks, medical gloves and hand
sanitizers, related to the swine flu pandemic. This resulted in an increase of approximately $9.0 million in net sales or $1.6 million in pre-tax income for the current period, when compared to the same period in the prior year.

Adoption of New Accounting Pronouncement

As discussed in Footnote 1,
Background and Basis of Presentation, effective March 28, 2009, the Company adopted FSP APB 14-1 and, as required by this new standard the Company retrospectively applied this change in accounting to all prior periods for which the
Company had applicable outstanding convertible debt. As a result of the adoption of FSP APB 14-1, pre-tax income decreased $1.8 million ($1.1 million net of tax) and $1.5 million ($0.9 million net of tax) for the three months ended June 26,
2009 and June 27, 2008, respectively. See Footnote 3, Debt, for additional information.



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##### Table of Contents

Investment in athenahealth, Inc.

In April 2009, the Company sold its remaining investment in athenahealth, Inc. (athena), a leading provider of internet-based healthcare information technology and business services to physician practices,
for $10.7 million, resulting in a gain of $3.6 million located in Other income, net on the Unaudited Condensed Consolidated Statements of Operations, or $2.3 million net of tax. See Footnote 2, Equity Investment, for
additional information.

Change in Long-Term Compensation Estimate

Based on the financial results of the three months ended June 26, 2009, management raised its expectations for probable achievement and over-achievement of performance conditions related to long-term incentive
compensation plans. Due to this change in estimate, the Company recognized an additional $4.9 million in incentive-based compensation expense during the current period and expects to recognize an additional $3.2 million in expense in fiscal year
2010. See Footnote 6, Long-Term Incentive Plan and Stock-Based Compensation, for additional information.

NET SALES

The following table summarizes net sales period over period.



|                          |  |                            |       |                        |   |        |  |                        |       |                             |   |     |  |       |  
|------------------------- |  | -------------------------- | ----- | ---------------------- | - | ------ |  | ---------------------- | ----- | --------------------------- | - | --- |  | ----- | -
|                          |  | For the Three Months Ended |      
|                          |  | June 26, 2009              |       | June 27, 2008          |   |        | 
|(dollars in millions)     |  | Amount                     |       | Average DailyNet Sales |   | Amount |  | Average DailyNet Sales |       | PercentChange ofTotal Sales |  
|Physician Business        |  | $                          | 342.3 |                        | $ | 5.3    |  | $                      | 331.4 |                             | $ | 5.2 |  | 3.3   | %
|Elder Care Business       |  |                            | 150.4 |                        |   | 2.3    |  |                        | 140.4 |                             |   | 2.2 |  | 7.1   | %
|Corporate Shared Services |  |                            | 0.9   |                        |   |       |  |                        | 0.4   |                             |   |    |  | 108.5 | %
|                          |  |                            |       |                        |   |        |  |                        |       |                             |   |     |  |       |  
|Total Company             |  | $                          | 493.6 |                        | $ | 7.6    |  | $                      | 472.2 |                             | $ | 7.4 |  | 4.5   | %
|                          |  |                            |       |                        |   |        |  |                        |       |                             |   |     |  |       |  

Physician Business

Management evaluates the Physician Business by product category. The following table summarizes the growth rate by product category period over period.



|                      |  |                            |       |              |   |               |  |       |   
|--------------------- |  | -------------------------- | ----- | ------------ | - | ------------- |  | ----- | --
|                      |  | For the Three Months Ended |      
|(dollars in millions) |  | June 26,2009               |       | June 27,2008 |   | PercentChange | 
|Branded(a)            |  | $                          | 183.7 |              | $ | 173.7         |  | 5.8   | % 
|Select(b)             |  |                            | 46.5  |              |   | 40.4          |  | 15.0  | % 
|Pharmaceuticals       |  |                            | 77.4  |              |   | 75.9          |  | 1.9   | % 
|Equipment             |  |                            | 26.8  |              |   | 31.7          |  | (15.4 | )%
|Immunoassay           |  |                            | 6.5   |              |   | 7.2           |  | (10.1 | )%
|Other                 |  |                            | 1.4   |              |   | 2.5           |  | (42.9 | )%
|                      |  |                            |       |              |   |               |  |       |   
|Total                 |  | $                          | 342.3 |              | $ | 331.4         |  | 3.3   | % 
|                      |  |                            |       |              |   |               |  |       |   



|(a) | Branded products are comprised of disposables and lab diagnostics from branded manufacturers.
|--- | ---------------------------------------------------------------------------------------------

|(b) | Select products are comprised of the Companys brand of disposables and lab diagnostics.
|--- | ----------------------------------------------------------------------------------------

Net sales growth during the three months ended June 26, 2009 was driven by momentum in the consumable and pharmaceutical sales growth programs and the effects from
the swine flu pandemic. During the three months ended June 26, 2009, the Physician Business experienced increased sales in influenza test kits, surgical masks, medical



19



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##### Table of Contents

gloves and hand sanitizer, related to the swine flu pandemic. This resulted in an increase of approximately $9.0 million in net sales, with approximately
$7.2 million of the increase relating to the sale of branded lab diagnostics and $0.6 million related to the sale of Select disposables. In addition to the effect of the swine flu, Select product sales increased during the three months ended
June 26, 2009 due to the Companys continued focus on promoting its globally-sourced Select products, which resulted in new customer sales as well as customer conversions from other manufacturers branded products to Select brand products.
The Physician Business introduced a program to add new customers during the quarter which resulted in approximately 5,000 new customers. The Company expects this program to have a positive impact on future periods. Equipment sales decreased due to
the current economic conditions including a decrease in discretionary spending and procedures and tight credit policies which negatively impacted customers ability to obtain equipment financing.

Elder Care Business

Management evaluates the Elder Care business by
customer segment. The following table summarizes the change in net sales by customer segment period over period.



|                                            |  |                            |       |              |   |               |  |       |   
|------------------------------------------- |  | -------------------------- | ----- | ------------ | - | ------------- |  | ----- | --
|                                            |  | For the Three Months Ended |      
|(dollars in millions)                       |  | June 26,2009               |       | June 27,2008 |   | PercentChange | 
|Nursing home and assisted living facilities |  | $                          | 91.9  |              | $ | 86.1          |  | 6.7   | % 
|Hospice and home health care agencies       |  |                            | 43.9  |              |   | 38.2          |  | 14.9  | % 
|Billing services                            |  |                            | 3.0   |              |   | 3.5           |  | (13.4 | )%
|Other                                       |  |                            | 11.6  |              |   | 12.6          |  | (8.2  | )%
|                                            |  |                            |       |              |   |               |  |       |   
|Total                                       |  | $                          | 150.4 |              | $ | 140.4         |  | 7.1   | % 
|                                            |  |                            |       |              |   |               |  |       |   

Net sales during the three months ended June 26, 2009 compared to the same period in the prior year increased
approximately $10.0 million. The Companys net sales were impacted by the continued utilization of innovative customer-specific solution programs and a focus on regional and independent customer segments within the nursing home market. Net
sales growth in the hospice and home health care lines of business during the quarter reflects the continued successful execution of strategies to diversify its customer base through expansion in the home health care market and other non-facility
based care. The Companys net sales reduction in billing services is attributable to decreases in Medicaid reimbursements.

Across its Elder Care
customer segments, Select product sales increased 24.8% during the three months ended June 26, 2009, when compared to the same period in the prior year due to the Companys focus on promoting its globally sourced products which resulted in
additional sales to new and existing customers.

GROSS PROFIT

Gross profit for the Physician and Elder Care Businesses increased $5.6 million and $1.5 million, respectively, from the same quarter in the prior year. These increases were primarily due to the growth in net sales discussed above, as well
as the Companys continued focus on its sourcing strategies and margin enhancement initiatives. The Companys sourcing strategies are designed to improve the Physician and Elder Care Business cost competitiveness and increase its
gross margins on certain products.



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GENERAL AND ADMINISTRATIVE EXPENSES



|                             |  |                            |      |              |               |   |        |          |              |  |      |   |  |   |      |  
|---------------------------- |  | -------------------------- | ---- | ------------ | ------------- | - | ------ | -------- | ------------ |  | ---- | - |  | - | ---- | -
|                             |  | For the Three Months Ended |     
|                             |  | June 26, 2009              |      |              | June 27, 2008 |   |        | Increase |             
|(dollars in millions)        |  | Amount                     |      | % ofNetSales |               |   | Amount |          | % ofNetSales |  |     
|Physician Business(a)        |  | $                          | 48.2 |              | 14.1          | % |        | $        | 50.5         |  | 15.2 | % |  | $ | (2.3 | )
|Elder Care Business(a)       |  |                            | 29.2 |              | 19.4          | % |        |          | 29.5         |  | 21.0 | % |  |   | (0.3 | )
|Corporate Shared Services(b) |  |                            | 14.2 |              | 2.9           | % |        |          | 9.6          |  | 2.0  | % |  |   | 4.6  |  
|                             |  |                            |      |              |               |   |        |          |              |  |      |   |  |   |      |  
|Total Company(b)             |  | $                          | 91.6 |              | 18.6          | % |        | $        | 89.6         |  | 19.0 | % |  | $ | 2.0  |  
|                             |  |                            |      |              |               |   |        |          |              |  |      |   |  |   |      |  



|(a) | General and administrative expenses as a percentage of net sales are calculated based on reportable segment net sales.
|--- | ----------------------------------------------------------------------------------------------------------------------

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

Physician Business

General and administrative expenses as a
percentage of net sales decreased period over period due to leveraging of the Companys infrastructure over increased sales. Decreases in general and administrative expenses are discussed below.

General and administrative expenses decreased $2.3 million during the three months ended June 26, 2009, when compared to the same period in the prior year. This
decrease was attributable to (i) a decrease in cost to deliver of $0.6 million due to favorable renegotiations with third party freight carriers and decline in fuel prices, and (ii) a decrease in relocation expenses of $0.7 million due to
the Companys realignment of its divisional branches from four regions to six regions in the prior year period.

Elder Care Business

General and administrative expenses decreased $0.3 million during the three months ended June 26, 2009, when compared to the same period in the
prior year. This decrease was primarily attributable to (i) a decrease in bad debt expense of $0.6 million primarily related to the bankruptcy of one of the Elder Care Business customers that occurred during the three months ended
June 27, 2008 and (ii) a decrease in expenses incurred for the National Meeting of $0.5 million. These decreases were partially offset by an increase of $0.9 million in payroll and bonus related charges primarily due to performance
accruals.

Corporate Shared Services

General and
administrative expenses for the three months ended June 26, 2009 increased $4.5 million when compared to the same period in the prior year. This increase is primarily attributable to an increase of $4.9 million in long-term incentive
based compensation expense related to a change in estimate. This was partially offset by a decrease in payroll and payroll related costs of $0.3 million.



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##### Table of Contents

SELLING EXPENSES

The
following table summarizes selling expenses as a percentage of net sales period over period.



|                      |  |                            |      |              |               |   |        |          |              |  |     |   |  |   |    
|--------------------- |  | -------------------------- | ---- | ------------ | ------------- | - | ------ | -------- | ------------ |  | --- | - |  | - | ---
|                      |  | For the Three Months Ended
|                      |  | June 26, 2009              |      |              | June 27, 2008 |   |        | Increase
|(dollars in millions) |  | Amount                     |      | % ofNetSales |               |   | Amount |          | % ofNetSales |  |    
|Physician Business    |  | $                          | 27.6 |              | 8.1           | % |        | $        | 26.2         |  | 7.9 | % |  | $ | 1.4
|Elder Care Business   |  |                            | 5.1  |              | 3.4           | % |        |          | 5.1          |  | 3.6 | % |  |   |   
|                      |  |                            |      |              |               |   |        |          |              |  |     |   |  |   |    
|Total Company         |  | $                          | 32.7 |              | 6.6           | % |        | $        | 31.3         |  | 6.6 | % |  | $ | 1.4
|                      |  |                            |      |              |               |   |        |          |              |  |     |   |  |   |    

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

PROVISION FOR INCOME TAXES

The following table
summarizes the provision for income taxes period over period.



|                      |  |                            |     |               |               |   |        |          |               |  |      |   |  |   |    
|--------------------- |  | -------------------------- | --- | ------------- | ------------- | - | ------ | -------- | ------------- |  | ---- | - |  | - | ---
|                      |  | For the Three Months Ended
|                      |  | June 26, 2009              |     |               | June 27, 2008 |   |        | Increase
|(dollars in millions) |  | Amount                     |     | EffectiveRate |               |   | Amount |          | EffectiveRate |  |     
|Total Company         |  | $                          | 8.2 |               | 38.2          | % |        | $        | 6.2           |  | 39.8 | % |  | $ | 2.0

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources Highlights

Cash flows from operations are primarily impacted by segment
profitability and operating working capital. Management monitors operating working capital performance through the following:



|                             |  |               |   |  |               |  
|---------------------------- |  | ------------- | - |  | ------------- | -
|                             |  | As of         |  
|                             |  | June 26, 2009 |   |  | June 27, 2008 |  
|Days Sales Outstanding:(a)   |  |               |   |  |               |  
|Physician Business           |  | 39.1          |   |  | 41.0          |  
|Elder Care Business          |  | 49.7          |   |  | 49.9          |  
|                             |  |              
|Days On Hand:(b)             |  |               |   |  |               |  
|Physician Business           |  | 54.7          |   |  | 52.2          |  
|Elder Care Business          |  | 52.0          |   |  | 53.1          |  
|                             |  |              
|Days in Accounts Payable:(c) |  |               |   |  |               |  
|Physician Business           |  | 39.8          |   |  | 41.1          |  
|Elder Care Business          |  | 23.3          |   |  | 28.1          |  
|                             |  |              
|Cash Conversion Days:(d)     |  |               |   |  |               |  
|Physician Business           |  | 54.0          |   |  | 52.1          |  
|Elder Care Business          |  | 78.4          |   |  | 74.9          |  
|                             |  |              
|Inventory Turnover:(e)       |  |               |   |  |               |  
|Physician Business           |  | 6.6           | x |  | 6.9           | x
|Elder Care Business          |  | 6.9           | x |  | 6.8           | x



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

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

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

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

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

In
addition to cash flow, the Company monitors other components of liquidity, including the following:



|                              |  |               |        |   |                |   |        |  
|----------------------------- |  | ------------- | ------ | - | -------------- | - | ------ | -
|                              |  | As of         |       
|(dollars in millions)         |  | June 26, 2009 |        |   | March 27, 2009 |  
|Capital Structure:            |  |               |        |   |                |   |        |  
|Convertible senior notes, net |  | $             | 181.1  |   |                | $ | 179.2  |  
|Revolving line of credit      |  |               | 50.0   |   |                |   | 50.0   |  
|Other debt                    |  |               | 2.5    |   |                |   | 2.7    |  
|Cash and cash equivalents     |  |               | (129.6 | ) |                |   | (82.0  | )
|                              |  |               |        |   |                |   |        |  
|Net debt                      |  |               | 104.0  |   |                |   | 149.9  |  
|Shareholders equity          |  |               | 397.3  |   |                |   | 378.0  |  
|                              |  |               |        |   |                |   |        |  
|Total capital                 |  | $             | 501.3  |   |                | $ | 527.9  |  
|                              |  |               |        |   |                |   |        |  
|                              |  |              
|Operating Working Capital:    |  |               |        |   |                |   |        |  
|Accounts receivable, net      |  | $             | 230.4  |   |                | $ | 230.4  |  
|Inventories                   |  |               | 196.2  |   |                |   | 207.6  |  
|Accounts payable              |  |               | (133.8 | ) |                |   | (127.3 | )
|                              |  |               |        |   |                |   |        |  
|                              |  | $             | 292.8  |   |                | $ | 310.7  |  
|                              |  |               |        |   |                |   |        |  

Cash Flows from Operating Activities

Net cash provided by operating activities was $44.9 million and $13.8 million for the three months ended June 26, 2009 and June 27, 2008, respectively.

Net cash provided by operating activities during the three months ended June 26, 2009 was primarily the result of overall operating profits in addition to benefits
of approximately $17.2 million provided by previous investments in operating working capital.

As of June 26, 2009, the Company has a deferred income
tax liability of $18.2 million (tax effected) related to interest deductions taken for tax purposes on its 2.25% $150.0 million convertible senior notes. The liability will be fully deferred for 5 years and paid ratably from fiscal year
2014 to fiscal year 2018 in accordance with the American Recovery and Reinvestment Act of 2009.



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Cash Flows from Investing Activities

Net cash provided by investing activities was $0.8 million and $12.4 million during the three months ended June 26, 2009 and June 27, 2008, respectively, and was primarily impacted by the following factors:



| |  |  | During the three months ended June 26, 2009, the Company sold its remaining investment in athenahealth for $10.7 million, resulting in a gain of approximately
$3.6 million or $2.3 million, net of taxes. During the fourth quarter of fiscal year 2008, the Company sold a portion of its investment in athenahealth, resulting in a gain of approximately $4.6 million, $2.8 million, net of taxes. Proceeds of $21.0
million were received during the three months ended June 27, 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Capital expenditures totaled $7.6 million and $5.9 million during the three months ended June 26, 2009 and June 27, 2008, respectively, of which
approximately $6.4 million and $3.8 million, respectively, related to development and enhancement of the Companys ERP system, electronic commerce platforms, and supply chain integration. Capital expenditures related to distribution
center expansions were approximately $0.6 million and $1.5 million during the three months ended June 26, 2009 and June 27, 2008.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash Flows from Financing Activities

Net cash provided (used) by financing activities was $1.9 million and $(17.5) million during the
three months ended June 26, 2009 and June 27, 2008, respectively. Net cash provided or used by financing activities during the three months ended June 26, 2009 and June 27, 2008, respectively, were mainly impacted by the
following factors:



| |  |  | The Company received proceeds from the exercise of stock options of approximately $1.6 million and $2.4 million during the three months ended June 26,
2009 and June 27, 2008, respectively. The Company recognized related excess tax benefits of $0.5 million and $0.4 million during the three months ended June 26, 2009 and June 27, 2008, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company made net repayments of approximately $20.0 million on its revolving line of credit during the three months ended June 27, 2008.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------

Capital Resources

The capital and
credit markets have recently experienced adverse conditions. The resulting restricted access to capital along with significant volatility within capital markets have increased the costs associated with issuing or refinancing debt because of
increased risk spreads over relevant interest rate benchmarks. The Company continues to be well positioned; however, there can be no guarantee the recent disruptions in the overall economy and the financial markets will not adversely impact the
business and results of operations.

The Company finances its business primarily through cash generated from operations, proceeds from the
$230.0 million senior convertible notes offering and the $200.0 million revolving line of credit. The ability to generate sufficient cash flows from operations is dependent on the continued demand for the Companys products and
services, and access to products and services from suppliers. Given current operating, economic and industry conditions, management believes demand for products and services will grow at slower rates. The Companys capital structure provides
the financial resources to support the business strategies of customer service and revenue growth. The revolving line of credit, which is an asset-based agreement, is primarily collateralized by the Companys accounts receivable and inventory.
The Companys long-term priorities for use of capital are internal growth, acquisitions, and repurchase of the Companys common stock.

As the
Companys business grows, its cash and working capital requirements are expected to increase. The Company expects the overall growth in the business will be funded through a combination of cash flows from operating activities, borrowings under
the revolving line of credit, capital markets, and/or other financing arrangements.



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

Future Contractual Obligations

In the normal course of business, the Company enters into obligations and commitments that require future contractual payments. There were no material changes outside the
normal course of business from the obligations reported as of March 27, 2009.

APPLICATION OF CRITICAL ACCOUNTING ESTIMATES

Critical Accounting Estimates are disclosed in the Annual Report on Form 10-K for the fiscal year ended March 27, 2009 filed on May 20, 2009 under the
heading Managements Discussion and Analysis of Financial Condition and Results of Operations.There have been no material changes in the Companys Critical Accounting Estimates, as disclosed in the Annual Report,
outside of the long-term incentive compensation estimate change discussed below.

Long-Term Incentive Compensation

Equity Incentive Plans

As of June 26, 2009, the Company has
grants of incentive stock options, nonqualified stock options, time-based restricted stock and performance-based restricted stock outstanding.

Estimates
are required to determine the number of share-based awards which will ultimately vest, and, in the case of performance-based restricted stock, estimates of the Companys goals. Changes in the estimated forfeiture rate, differences between
actual and estimated forfeitures when an award vests or changes in estimates regarding the Companys performance can have material effects on share-based compensation expense. For this reason, management has determined that the estimates used
to determine equity-based compensation expense are critical accounting estimates.

When estimating the Companys expected earnings per share
performance for performance-based restricted stock, the Company reviews the most current information available, including operating plans, actual financial and operating results, forecasts prepared by management and environmental and market risks.
These performance goals are re-assessed periodically throughout the service period. Such estimates are revised, if necessary, if they differ materially from the original assessment and may have an impact on the vesting of an award. If actual
performance differs significantly from managements estimates, it could have a material impact on equity-based compensation expense recognized in future years.

Based on the financial results of the three months ended June 26, 2009, management revised its assessment for probable achievement and over-achievement of performance conditions related to long-term incentive
compensation plans. Management reviewed the current quarter results impacted by: (i) the impact of revenue growth programs (ii) the impact of implemented cost savings initiatives, (iii) the increase in sales of swine flu related
products, and (iv) the sale of shares in athenahealth, as well as the potential impact on future earnings, and determined the cumulative impact of these events required the Company to adjust its estimate of probable achievement of incentive
compensation performance conditions, and to adjust the accruals related to these plans based on those estimates.

The change in estimate increased the
Companys fiscal year 2008 and 2009 performance shares by 194,000 shares. Additionally, PARS awards issued during fiscal years 2008 and 2009 are now estimated to vest on the three-year anniversary of the grant date. As such, the Company
adjusted the forfeiture rate related to certain PARS awards to reflect a reduction in expected forfeitures over the remaining vesting period. These estimates may be adjusted in future periods based on actual experience and changes in management
assumptions.



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The change in estimate for these awards resulted in an increase in stock-based compensation expense of $4.3 million
during the current period and is expected to increase stock-based compensation expense by an additional $2.8 million during fiscal year 2010.

Cash-Based Incentive Plans

The Company maintains cash-based long-term incentive plans, for certain employees. The plans provide incentive
to enhance shareholder value through the achievement of cumulative earnings per share goals.

Estimates are required to determine the Companys
expected future performance and cumulative earnings per share at the end of the three- year performance period. Changes in estimates regarding the Companys performance can have a material effect on cash-based incentive compensation expense.
For this reason, management has determined that the estimates used to determine the amounts accrued for cash-based compensation expense are critical accounting estimates.

When estimating the Companys expected earnings per share performance, the Company reviews the most current information available, including operating plans, actual financial and operating results, forecasts
prepared by management and environmental and market risks. These performance goals are re-assessed throughout the service period. Such estimates are revised, if necessary, if they differ materially from the original assessment. If actual performance
differs significantly from managements estimates, it could have a material impact on cash-based compensation expense recognized in future years.

Based upon current results and expected future results as discussed above, the Company recognized an additional $0.6 million recognized in compensation expense during the three months ended June 26, 2009. As a result of this change in
estimate compensation expense is expected to increase by an additional $0.4 million during fiscal year 2010.

Recent Accounting Pronouncements

In April 2009, the FASB issued FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or
Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value when the volume and level of activity for an asset or liability have significantly
decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP is effective for interim and annual reporting periods ending after June 15, 2009. The Company has adopted this FSP with
no material effects on the Companys statements of financial condition or results of operations.

In April 2009, the FASB issued FSP No. FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments, requiring summarized disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies. This
standard is effective for interim reporting periods ending after June 15, 2009. The Company has adopted this FSP with no material effect on the Companys statements of financial condition or results of operations. See Footnote 9, Fair
Value Measurement,for additional information.

In February 2008, the FASB issued FSP SFAS No. 157-2, Effective Date of FASB
Statement No. 157 (FSP SFAS 157-2), which delayed the effective date of SFAS 157 with respect to nonfinancial assets and nonfinancial liabilities not remeasured at fair value on a recurring basis until
fiscal years beginning after November 15, 2008, or the Companys fiscal year 2010. The Company has applied the requirements of SFAS No. 157, Fair Value Measurements (SFAS 157), with no material
effects, to certain such nonfinancial assets for which fair value measurements are determined only when there is an indication of potential impairment.

In
April 2008, the FASB issued FSP No. 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset and the disclosure requirements under FASB Statement No. 142, Goodwill and Other Intangibles. FSP 142-3 requires that an entity consider its historical experience in



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renewing or extending similar arrangements in determining the useful life of a recognized intangible asset. Determining the useful life of a recognized
intangible asset under FSP 142-3 applies prospectively to intangible assets acquired after the effective date. The disclosure requirements of FSP 142-3 will be applied prospectively to all intangible assets recognized as of, and subsequent
to, the effective date. FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, or the Companys fiscal year 2010, and interim periods within those fiscal years. The Company has
adopted this standard with no material effects on the Companys statements of financial condition or results of operations.

In May 2008, the FASB
issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP APB 14-1) and, as required, was retrospectively
applied to all prior periods for which applicable convertible debt was outstanding. FSP APB 14-1 requires entities with convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) to
separately account for the liability and equity components in a manner that reflects an estimate of the entitys nonconvertible debt borrowing rate when interest expense is recognized in subsequent periods. The equity components of the senior
convertible notes are included in Additional paid-in capital in the Unaudited Condensed Consolidated Balance Sheets, with a corresponding reduction in the carrying values of these convertible notes as of the date of issuance or
modification, as applicable. The reduced carrying values of the convertible notes are accreted to principal amounts through the recognition of non-cash interest expense. This accretion results in recognizing interest expense on these borrowings at
effective rates approximating what would have been incurred had the Company issued nonconvertible debt with otherwise similar terms. FSP APB 14-1 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, or the Companys fiscal year 2010. The Company adopted this FSP during the current period. Refer to Footnote 3, Debt, for additional information.

In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5). EITF 07-5
provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instruments contingent exercise and settlement
provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15,
2008, or the Companys fiscal year 2010. This pronouncement was adopted during the current period with no material effects on the Companys statements of financial condition or results of operations.

In May 2009, the FASB issued SFAS No. 165 Subsequent Events (SFAS 165). SFAS 165 establishes general standards of accounting for and
disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS 165 sets forth (i) the period after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet
date in its financial statements and (iii) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim or annual financial periods ending after
June 15, 2009. This pronouncement was adopted during the current period with no material effect on the Companys statements of financial condition or results of operations.

In June 2009, the FASB issued SFAS No. 168 The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement
No. 162 (SFAS 168). The FASB Accounting Standards Codification (Codification) will be the single source of authoritative nongovernmental U.S. generally accepted accounting principles. Rules and interpretive
releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. All existing accounting standards
are superseded as described in SFAS 168. All other accounting literature not included in the Codification is nonauthoritative. The Codification is not expected to have a significant impact on the Companys consolidated financial statements.



|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 27, 2009 filed on May 20, 2009.



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|ITEM 4. | CONTROLS AND PROCEDURES
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures

The Companys management, with the participation of the Companys Principal Executive Officer and Principal Financial Officer, has
evaluated the effectiveness of the Companys disclosure controls and procedures (as defined in Rules 240.13a-15(e) and 240.15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the
period covered by this report (the Evaluation Date). Based on the evaluation, the Principal Executive Officer and the Principal Financial Officer concluded that, as of the Evaluation Date, the Companys disclosure controls and
procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and are effective in ensuring that
information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, is accumulated and communicated to the Companys management, including the Companys Principal Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial
Reporting

There have been no changes in the Companys internal control over financial reporting that occurred during the three months ended
June 26, 2009 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.

PART II  OTHER INFORMATION



|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Issuer Sales and Purchases of Equity Securities

The Company repurchases its common stock under stock repurchase programs authorized by the
Companys Board of Directors. As of March 27, 2009, there were 0.1 million shares available for repurchase under existing stock repurchase programs. On March 31 2009, 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 3.0 million common shares, in the open market, in privately negotiated
transactions, or otherwise. The share repurchase program does not have an expiration date.

The following table summarizes the Companys repurchase
activity during the three months ended June 26, 2009.



|                    |  |                                |     |  |                            |       |                                                                          |       |                                                                          |          
|------------------- |  | ------------------------------ | --- |  | -------------------------- | ----- | ------------------------------------------------------------------------ | ----- | ------------------------------------------------------------------------ | ---------
|Period              |  | Total Numberof SharesPurchased |     |  | Average PricePaid perShare |       | TotalNumberof SharesPurchased asPart
ofPubliclyAnnouncedPlans orPrograms |       | MaximumNumberof Shares thatMay yet
bePurchasedUnder the Plansor Programs
|March 28April 26   |  |                               |     |  |                            |      |                                                                          |      |                                                                          | 3,084,260
|April 27May 26     |  |                               |     |  |                            |      |                                                                          |      |                                                                          | 3,084,260
|May 27June 26      |  | 1,960                          | (a) |  | $                          | 16.26 |                                                                          | 1,960 |                                                                          | 3,082,300
|                    |  |                                |     |  |                            |       |                                                                          |       |                                                                          |          
|Total third quarter |  | 1,960                          |     |  | $                          | 16.26 |                                                                          | 1,960 |                                                                          | 3,082,300
|                    |  |                                |     |  |                            |       |                                                                          |       |                                                                          |          



|(a) | Includes shares repurchased for net share settlement of employee share-based awards.
|--- | ------------------------------------------------------------------------------------



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|ITEM 6. | EXHIBITS
|------- | --------



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



|              |  |                                                                
|------------- |  | ---------------------------------------------------------------
|ExhibitNumber |  | Description                                                    
|10.1          |  | Form of Performance-Accelerated Restricted Stock Unit Agreement
|              | 
|31.1          |  | Rule 13a-14(a) Certification of the Chief Executive Officer.   
|              | 
|31.2          |  | Rule 13a-14(a) Certification of the Chief Financial Officer.   
|              | 
|32.1          |  | Section 1350 Certification of the Chief Executive Officer.     
|              | 
|32.2          |  | Section 1350 Certification of the Chief Financial Officer.     



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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Jacksonville,
State of Florida, on August 5, 2009.



PSS WORLD MEDICAL, INC.By:

/s/ David M. BronsonDavid M. BronsonExecutive Vice President and Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer)




30