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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2004

Or

Commission file number: 0-26190

US Oncology, Inc.

(Exact name of registrant as specified in its charter)

16825 Northchase Drive, Suite 1300

Houston, Texas

77060

(Address of principal executive offices)

(Zip Code)

(832) 601-8766

(Registrant’s telephone number, including area code)

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.    Yes  x    No  ¨

Indicate by check mark whether the Registrant (1) is an accelerated filer (as defined in Rule 12(b)-2 of the Securities Exchange Act of 1934.)    Yes  x    No  ¨

As of April 30, 2004, 86,354,244 shares of the Registrant’s Common Stock were outstanding. In addition, as of April 30, 2004, the Registrant had agreed to deliver 831,058 shares of its Common Stock on certain future dates for no additional consideration.

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US ONCOLOGY, INC.

FORM 10-Q

MARCH 31, 2004

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

US ONCOLOGY, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

(in thousands, except par value)

(unaudited)

The accompanying notes are an integral part of this statement.

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US ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)

The accompanying notes are an integral part of this statement.

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US ONCOLOGY, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(in thousands)

(unaudited)

The accompanying notes are an integral part of this statement

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US Oncology, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and in accordance with Form 10-Q and Rule 10.01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements contained in this report reflect all adjustments that are normal and recurring in nature and considered necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. The preparation of the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as disclosures on contingent assets and liabilities. Because of inherent uncertainties in this process, actual future results could differ from those expected at the reporting date. These unaudited condensed consolidated financial statements, footnote disclosures and other information should be read in conjunction with the financial statements and the notes thereto included in US Oncology, Inc.’s Form 10-K filed with the Securities and Exchange Commission on March 12, 2004.

NOTE 2 – THE MERGER TRANSACTION

On March 20, 2004, US Oncology Holdings, Inc. (“Holdings”) (which was formerly known as Oiler Holding Corp.) and its wholly owned subsidiary, Oiler Acquisition Corp., entered into a merger agreement with US Oncology pursuant to which Oiler Acquisition Corp. will be merged with and into US Oncology, with US Oncology continuing as the surviving corporation. If the transaction is consummated, US Oncology would become a private company owned by Holdings. Members of senior management of the Company, including its Chairman and CEO, will continue as employees, participate in the merger by purchasing equity securities in Holdings, and be awarded equity securities in Holdings. Both Holdings and Oiler Acquisition Corp. are Delaware corporations that were formed by Welsh, Carson, Anderson & Stowe IX, L.P. (“Welsh Carson”) for the purpose of completing the merger and related financing transactions. Currently, Welsh Carson directly owns approximately 14.5% of the Company’s outstanding common stock and, together with its co-investors and the directors and executive officers of US Oncology that participate in the merger, would own all the capital stock of Holdings when and if the merger is consummated.

If the merger is completed, each issued and outstanding share of US Oncology common stock (other than shares owned by Holdings and Oiler Acquisition Corp.) will be converted into the right to receive $15.05 in cash, subject to the rights of dissenting stockholders who exercise and perfect their appraisal rights under Delaware law. Each outstanding option for US Oncology common stock will be canceled in exchange for (1) the excess, if any, of $15.05 over the per share exercise price of the option multiplied by (2) the number of shares of common stock subject to the option, net of any applicable withholding taxes. Outstanding rights to receive shares of common stock under existing delayed stock delivery agreements between US Oncology and certain physicians will be canceled in exchange for an amount in cash equal to (1) $15.05 multiplied by (2) the number of shares of common stock otherwise issuable under the delayed stock delivery agreements on the scheduled delivery dates, net of any applicable withholding taxes.

US Oncology’s Board of Directors approved the merger following the unanimous recommendation of a special committee composed of independent directors Boone Powell, Jr., Burton S. Schwartz, M.D. and Vicki H. Hitzhusen. The special committee and the Board received an opinion from Merrill Lynch & Co. as to the fairness, from a financial point of view, of the consideration to be received by US Oncology stockholders (other than Welsh Carson, its affiliates and members of US Oncology’s board or management that participate in the merger) in the merger transaction.

The closing of the merger is subject to various conditions contained in the merger agreement, including the approval by the holders of a majority of US Oncology’s shares held by stockholders other than Welsh Carson, its co-investors and members of US Oncology’s board or management that participate in the merger, in addition to majority stockholder approval statutorily required for a merger. Additional conditions include the closing of financing arrangements as set forth in bank commitment letters that have been received by Holdings, the tender of not less

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US Oncology, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)

than a majority of the aggregate principal amount of US Oncology’s outstanding 9 5/8% Senior Subordinated Notes due 2012, and other customary conditions.

The Company has filed preliminary proxy materials with SEC. Once the SEC has given clearance to these proxy materials, they will be sent to stockholders in connection with a special meeting called in connection with the merger. The Company has also filed under the Hart-Scott-Rodino Act and was granted early termination of the waiting period on May 7, 2004.

In addition, as disclosed in Part II, Item 1, under the heading “Legal Proceedings,” several lawsuits naming the Company and each of its directors as defendants have been filed in connection with the proposed merger. The Company believes these suits are without merit and intends to vigorously defend itself. However, there can be no assurance that it will ultimately prevail. In addition, the Company’s bylaws provide for indemnification by the Company of its directors in connection with these lawsuits.

The merger will be accounted for under the purchase method of accounting prescribed in Statement of Financial Accounting Standards No. 141, “Business Combination,” (SFAS No. 141), with intangible assets recorded in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” (SFAS No. 142). The purchase price, including transaction related fees, will be allocated to the Company’s tangible and identifiable intangible assets and liabilities based upon estimates of fair value, with the remainder allocated to goodwill. In accordance with the provisions of SFAS No. 142, no amortization of indefinite-lived intangible assets or goodwill will be recorded.

NOTE 3 – REVENUE

The Company provides the following services to physician practices: medical oncology services, cancer center services, and cancer research services. The Company currently earns revenue from physician practices under two models, the physician practice management (PPM) model and the service line model. Under the PPM model, the Company enters into long term agreements with affiliated practices to provide comprehensive services, including all those described above, and the practices pay the Company a service fee and reimburse it for all expenses related to management services. Under the service line model, the Company offers medical oncology services and cancer research services under separate agreements for each service line.

The following table shows the components of net operating revenue for the three months ended March 31, 2004 and 2003 (in thousands):

Net Patient Revenue. Under the PPM model, the Company is responsible for billing and collecting all practice revenues. The Company discloses “net patient revenue” to give a sense of the size and operating trends of the business which it manages. Net patient revenue comprises all of the revenues for which the Company bills and collects for affiliated practices under the PPM model. The Company collects all of the receivables, controls cash management functions and is responsible for paying all expenses at PPM practices.

The Company retains all the amounts it collects in respect of practice receivables. On a monthly basis, the Company calculates what portion of revenues PPM practices are entitled to retain by subtracting accrued management fees and accrued practice expenses from accrued revenues. The Company pays practices this remainder in cash, which the practices use primarily for physician compensation. These amounts remitted to physician groups are excluded from the Company’s revenue, since they are not part of the Company’s management fees. By paying physicians in cash for accrued amounts that have not necessarily been collected, the Company finances the physicians’ working capital.

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US Oncology, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)

Net patient revenue is recorded when services are rendered based on established or negotiated charges reduced by contractual adjustments and allowances for doubtful accounts. Differences between estimated contractual adjustments and final settlements are reported in the period when final settlements are determined.

Other Revenue. The Company’s other revenues are primarily derived in three areas:

Net operating revenue is reduced by amounts retained by the practices under the Company’s PPM service agreements to arrive at the amount reported as revenue in the Company’s financial statements.

The following presents the amounts included in the determination of the Company’s revenues (in thousands):

For the three months ended March 31, 2004 and 2003, the affiliated practices derived approximately 42% and 41% respectively, of their net patient revenue from services provided under the Medicare program and approximately 3% and 2% respectively, of their net patient revenue from services provided under the state Medicaid programs. Capitation revenues were less than 1% of total net patient revenue in 2004 and 2003. Changes in the payor reimbursement rates, particularly Medicare and Medicaid due to its concentration, or affiliated practices’ payor mix can materially and adversely affect the Company’s revenues.

The Company’s most significant and only service agreement to provide more than 10% of revenues is with Texas Oncology, P.A. (TOPA). TOPA accounted for approximately 25% of the Company’s total revenues for the first quarter of 2004 and 2003.

NOTE 4 - STOCK-BASED COMPENSATION

At March 31, 2004, the Company had eight stock-based employee compensation plans. The Company accounts for those plans under the recognition and measurement principles of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. Stock based employee compensation costs for options granted under those plans with exercise prices less than the market value of the underlying Common Stock on the date of the grant are insignificant for the three months ended March 31, 2004 and 2003.

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US Oncology, Inc.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

(unaudited)

The Company also provides a benefit plan to non-employee affiliates, which is accounted for using fair value based accounting with compensation expense being recognized over the respective vesting period. The Company recognized $0.2 million and $0.4 million for the three months ended March 31, 2004 and 2003, respectively.

The following table illustrates the effect on net income and earnings per share if th