PSS WORLD MEDICAL REPORTS 4TH QTR NET LOSS OF $9.7 MILLION.

PSS World Medical, Inc., Jacksonville, Fla has announced unaudited results for the fourth fiscal quarter and fiscal year ended March 31, 2001.

For the three months ended March 31, 2001, net sales were $447.6 million compared with $446.8 million for the same period last year. Net loss for the quarter was $9.7 million, or $0.14 per diluted share, for the period ended March 31, 2001, compared with a loss of $15.7 million, or $0.22 per diluted share, for the period ended March 31, 2000.

For the year ended March 31, 2001, net sales were $1.81 billion compared with $1.80 billion for the same period last year. Net loss for the year ended March 31, 2001, was $36.1 million, or $0.51 per diluted share, versus net income of $20.7 million, or $0.29 per diluted share, for the prior year period.

In connection with the company's annual audit process, the company expects to make certain adjustments to its financial results for the first three fiscal quarters of fiscal 2001. Full fiscal year and fourth fiscal quarter 2001 results are not affected by the following. As a result of improved inventory control procedures and accounts payable tracking, the company expects to adjust the timing of the recognition of $3.8 million (pre-tax) of expenses for costs of goods sold and liability for accounts payable from the fourth quarter of fiscal 2001 (quarter ended March 31, 2001) to the second quarter of fiscal 2001 (quarter ended September 30, 2000). In addition, as a result of a sampling of the company's accounts receivable records, the company expects to make a number of adjustments to its accounts receivable balances. The company is also recording corresponding income adjustments in the amounts of $1.6 million, $1.9 million, and $0.5 million, for the first, second and third fiscal quarter of fiscal 2001, respectively.

David A. Smith, president of PSS World Medical, Inc., said, "Fiscal 2001 is finally in the past. The lessons learned from the past and the progress made in the last six months to pave the way for future shareholder value are both material and numerous. Historically, we have focused principally on sales with less concern for leveraging operational excellence for greater organization profit and longevity. Today, we are creating a balanced organization, entering fiscal 2002 focused on our associates and all three customer groups - medical professionals, manufacturers and shareholders. Centralization, rationalization, supply chain and operational excellence are no longer negatives, but key points of emphasis on an equal footing with marketing, promotion, growth and sales excellence. Our imperatives for the last six months have been (1) stabilization of balance sheet, cash flow and our 5,000 associates, (2) to initiate aggressive strategic campaigns for customers and manufacturers and (3) to significantly reduce capital deployed and the costs of the business."

The company accomplished the following, preparing it for profitable improvement in each quarter:

STABILIZATION

-- Reduced Debt. By using significant increases in cash flow from operations, the company reduced bank debt by $28 million in the fourth quarter and by $67 million, from $134 million to $67 million, during the fiscal year. It is important to note that 70% of this reduction occurred during the last two quarters under new management. In addition, the company just signed a new secured credit facility with availability of up to $120 million and an option to increase the facility to $150 million. The company received favorable terms that will help reduce debt financing costs during the current fiscal year. The four-year arrangement has initial pricing through December 2001 of LIBOR plus 225 basis points or Prime plus 25 basis points, at the company's option. Under the terms of the agreement, pricing will decrease as the company's profitability increases.

-- Exited European Operations. During the first quarter of fiscal 2002, the company completed the sale of its European Operations. This transaction eliminates negative cash flow and allows management to fully focus on growing and improving domestic operations.

-- Increased Financial Control Environment. The company has implemented new measures and procedures to enhance its system of financial reporting and internal controls. As a result of these measures, the company has identified certain adjustments that are described below and believes that the quality of its financial reporting system has been improved for the future.

-- Implemented New Training, Compensation And Bonus Programs.

-- Sales. Compensation levels were reset to align with strategic growth initiatives that provide ample opportunities for growth and success for our salespeople.

-- Operations. New operating programs have been implemented that facilitate our associates' commitment to reaching attainable new operating excellence goals that drive efficiency into the supply management and delivery process.

-- Training. The company has developed comprehensive training programs that utilize both in-field training personnel and web-based programs, reducing turnover and training costs.

-- Human Resources. Significant changes in human resources capabilities, benefits and communications have reduced turnover and improved morale.

STRATEGIC OFFENSIVE INITIATIVES

-- SRx. SRx is an automated marketing program tailored to physician specialties, combining disease states, pharmaceutical therapeutics, diagnostic tests, and reimbursement. This program provides our Physician business sales representatives with the opportunity to partner with physicians to increase their revenues and profits while improving patient care. We have found the program to be a successful "reach" strategy as evidenced by the signing of over 3,000 new customers. Additionally, successful use of the SRx program by our salesforce has produced 14-15% growth in revenues and gross profit dollars in our selected Family Practice pilot group.

-- ANSWERS. ANSWERS is our best-practice marketing program, which aligns the best practices of nursing homes with the most efficient distribution activities, producing savings for both customers and distributors. The ANSWERS program was rolled out this month at the national sales meeting for our Long-Term Care business. In addition to reducing our distribution cost by encouraging more efficient buying patterns, ANSWERS provides real opportunities for category-leading brand vendors to increase volumes and for customers to purchase top products at reduced pricing. These market-leading products promote the best quality patient care, resulting in improved outcomes at a faster pace, thus helping customers improve profitability. Support by our salesforce and our vendors has been overwhelmingly enthusiastic.

-- Strategic business units (SBUs). Our Imaging business has completed the reorganization of its salesforce into six distinct business units focusing on Commodities, Women's Health, Surgical, Imaging, Technical Service and Telesales. The establishment of six business units has resulted in:

-- Leveraging of core competencies;

-- Alignment of capabilities and resources;

-- New sales initiatives with lower selling costs; and

-- Increased focus on higher margin business.

In commenting on the company's Imaging business, Mr. Smith added, "Our Imaging business represents over 50 acquired companies with a diverse base of product capabilities, but all sharing a common excellence in delivering service and building relationships. Our SBU initiative leverages off our core competency of servicing our customers by aligning leadership, marketing, and sales compensation with resource channels that maximize our product capabilities. Even though we expect the Imaging business to depress our EPS by $0.07 to $0.09 during fiscal 2002, we believe it will generate $6-7 million of operating cash flow while we reorganize and return this business to profitability.

"In addition, we are very excited about the expertise our new division president, Joseph W. Pepper, brings to bear on the Imaging business. Joe is a perfect fit for our organization, and his previous success and credentials speak for themselves. While serving as chief executive officer of OEC Medical Systems, revenue increased 18% per year, operating income increased 17% per year and US market share increased from 55% to 70%. In addition, his 15-year tenure with The BOC Group, Plc., where he served as president of Ohmeda Medical Devices, the healthcare subsidiary of BOC responsible for international selling and distribution of medical devices, should be invaluable to us. Joe will spearhead the turnaround mission for our imaging business, and we expect Mark Adrian, the general manager, to continue to be a major contributor to this process. We are looking forward to a very successful relationship."

CAPITAL AND COST REDUCTION

-- Working Capital Reductions. Working capital was reduced during the last six months by a total of $76 million, or 20%. Working capital reductions will continue to be a high priority. The company reported the following results for fiscal 2001:

-- Receivable days decreased from 61 to 49;

-- Inventory turns increased from 7.2 to 8.4;

-- Cash conversion cycle dropped from 73 days to 60 days; and

-- Debt-to-capitalization ratio improved from 37% at March 31, 2000, to 32% at March 31, 2001.

-- Supply Chain Management. With a goal of $20 million in cost reduction and savings, we are systematically reinventing our supply chain with leading edge technology, leveraging our ERP systems. This initiative improves identification of demand signals that will offer our vendor partners the ability to better plan production schedules and reduce finished goods. The program will give us greater scale in the ordering process, resulting in lower administrative costs associated with centralized purchasing and elimination of rebates, as well as shared savings with vendors due to greater order efficiency.

-- Centralized Sourcing. In combination with the supply chain initiative, the company established its centralized sourcing unit in April. Centralized negotiating and purchasing of our indirect spend is expected to reduce costs by $10 million for the company. We expect both the supply chain and centralized sourcing initiatives to be fully implemented in the next 24 to 36 months.

-- Optimized Distribution Model with Customer Satisfaction Top Priority. The company has engaged Philadelphia-based Pembroke Consulting to assist in validating the company's long-range strategic plan including distribution rationalization. As an integral part of this process, we have begun surveying and interviewing thousands of our customers to ensure that we continue to meet and exceed their expectations while optimizing our distribution model. Progress will be made gradually for the next 24 to 36 months. PSS World Medical, Inc. is a specialty marketer and distributor of medical products to physicians, long-term care providers and imaging consumers through its three business units to customers in all 50 states. Since its inception in 1983, PSS has become a leader in all three market segments that it serves with a focused market approach to customer services, a consultative sales force, strategic acquisitions, strong arrangements with product manufacturers and a unique culture of performance.

For more information, call 904/332-3287.