VCA Inc.
VCA ANTECH INC (Form: 10-Q, Received: 11/07/2007 14:54:32)
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2007
     
o   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: 001-16783
 
VCA Antech, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   95-4097995
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
12401 West Olympic Boulevard
Los Angeles, California 90064-1022

(Address of principal executive offices)
(310) 571-6500
(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 þ       No o .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ      Accelerated filer o       Non-accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o       No þ .
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common stock, $0.001 par value 84,253,313 shares as of November 6, 2007.
 
 

 


 

VCA Antech, Inc.
Form 10-Q
September 30, 2007
Table of Contents
         
    Page  
    Number  
       
       
    1  
    2  
    3  
    4  
    15  
    26  
    26  
       
    27  
    27  
    27  
    27  
    27  
    27  
    27  
    28  
    29  
  EXHIBIT 31.1
  EXHIBIT 31.2
  EXHIBIT 32.1

 


Table of Contents

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VCA Antech, Inc. and Subsidiaries
Condensed, Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value)
                 
    September 30,     December 31,  
    2007     2006  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 87,155     $ 45,104  
Trade accounts receivable, less allowance for uncollectible accounts of $11,297 and $11,195 at September 30, 2007 and December 31, 2006, respectively
    46,503       44,491  
Inventory
    21,332       21,420  
Prepaid expenses and other
    13,616       13,492  
Deferred income taxes
    17,866       14,935  
Prepaid income taxes
          13,523  
 
           
Total current assets
    186,472       152,965  
Property and equipment, less accumulated depreciation and amortization of $126,894 and $111,165 at September 30, 2007 and December 31, 2006, respectively
    206,347       166,033  
Goodwill
    847,942       625,748  
Other intangible assets, net
    16,586       16,293  
Notes receivable, net
    2,897       2,675  
Deferred financing costs, net
    1,623       979  
Other
    11,278       7,264  
 
           
Total assets
  $ 1,273,145     $ 971,957  
 
           
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Current portion of long-term obligations
  $ 7,997     $ 6,648  
Accounts payable
    23,905       23,328  
Accrued payroll and related liabilities
    32,932       33,864  
Accrued interest
    608       388  
Other accrued liabilities
    43,353       30,573  
 
           
Total current liabilities
    108,795       94,801  
Long-term obligations, less current portion
    554,205       384,067  
Deferred income taxes
    45,647       39,804  
Other liabilities
    12,118       13,294  
Minority interest
    10,634       9,686  
Commitments and contingencies
               
Preferred stock, par value $0.001, 11,000 shares authorized, none outstanding
           
Stockholders’ equity:
               
Common stock, par value $0.001, 175,000 shares authorized, 84,210 and 83,560 shares outstanding as of September 30, 2007 and December 31, 2006, respectively
    84       84  
Additional paid-in capital
    292,223       275,013  
Accumulated earnings
    250,975       154,586  
Accumulated other comprehensive (loss) income
    (1,536 )     622  
 
           
Total stockholders’ equity
    541,746       430,305  
 
           
Total liabilities and stockholders’ equity
  $ 1,273,145     $ 971,957  
 
           
The accompanying notes are an integral part of these condensed, consolidated financial statements.

1


Table of Contents

VCA Antech, Inc. and Subsidiaries
Condensed, Consolidated Income Statements
(Unaudited)
(In thousands, except per share amounts)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Revenue
  $ 306,537     $ 251,632     $ 871,987     $ 740,962  
Direct costs
    220,235       181,167       619,887       532,014  
 
                       
Gross profit
    86,302       70,465       252,100       208,948  
Selling, general and administrative expense
    22,295       18,946       65,811       57,315  
Loss (gain) on sale of assets
    333       3       875       (200 )
 
                       
Operating income
    63,674       51,516       185,414       151,833  
Interest expense, net
    8,930       6,084       21,374       18,323  
Other (income) expense
    (1 )     73       226       (24 )
Minority interest in income of subsidiaries
    1,187       846       3,061       2,520  
 
                       
Income before provision for income taxes
    53,558       44,513       160,753       131,014  
Provision for income taxes
    21,329       17,536       64,364       44,825  
 
                       
Net income
  $ 32,229     $ 26,977     $ 96,389     $ 86,189  
 
                       
 
                               
Basic earnings per share
  $ 0.38     $ 0.32     $ 1.15     $ 1.04  
 
                       
Diluted earnings per share
  $ 0.38     $ 0.32     $ 1.13     $ 1.02  
 
                       
 
                               
Weighted-average shares outstanding for basic earnings per share
    83,957       83,339       83,769       83,092  
 
                       
Weighted-average shares outstanding for diluted earnings per share
    85,752       85,187       85,572       84,864  
 
                       
The accompanying notes are an integral part of these condensed, consolidated financial statements.

2


Table of Contents

VCA Antech, Inc. and Subsidiaries
Condensed, Consolidated Statements Of Cash Flows
(Unaudited)
(In thousands)
                 
    Nine Months Ended  
    September 30,  
    2007     2006  
Cash flows from operating activities:
               
Net income
  $ 96,389     $ 86,189  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    19,764       16,347  
Amortization of debt costs
    253       299  
Provision for uncollectible accounts
    3,561       4,174  
Loss (gain) on sale of assets
    875       (200 )
Share-based compensation
    3,429       2,326  
Minority interest in income of subsidiaries
    3,061       2,520  
Distributions to minority interest partners
    (2,262 )     (2,439 )
Deferred income taxes
    4,627       7,222  
Excess tax benefit from exercise of stock options
    (6,576 )     (5,774 )
Other
    (115 )     (750 )
Changes in operating assets and liabilities:
               
Accounts receivable
    (4,823 )     (8,500 )
Inventory, prepaid expenses and other assets
    1,140       (6,816 )
Accounts payable and other accrued liabilities
    (1,195 )     (2,499 )
Accrued payroll and related liabilities
    (3,958 )     (1,928 )
Income taxes
    20,983       567  
 
           
Net cash provided by operating activities
    135,153       90,738  
 
           
Cash flows from investing activities:
               
Business acquisitions, net of cash acquired
    (214,758 )     (37,612 )
Real estate acquired in connection with business acquisitions
    (7,962 )     (2,872 )
Property and equipment additions
    (38,033 )     (23,800 )
Proceeds from sale of assets
    1,774       533  
Other
    (188 )     268  
 
           
Net cash used in investing activities
    (259,167 )     (63,483 )
 
           
Cash flows from financing activities:
               
Repayment of long-term obligations
    (6,282 )     (64,106 )
Proceeds from the issuance of long-term obligations
    160,000        
Payment of financing costs
    (897 )      
Proceeds from issuance of common stock under stock option plans
    6,668       5,410  
Excess tax benefit from exercise of stock options
    6,576       5,774  
 
           
Net cash provided by (used in) financing activities
    166,065       (52,922 )
 
           
Increase (decrease) in cash and cash equivalents
    42,051       (25,667 )
Cash and cash equivalents at beginning of period
    45,104       58,488  
 
           
Cash and cash equivalents at end of period
  $ 87,155     $ 32,821  
 
           
     The accompanying notes are an integral part of these condensed, consolidated financial statements.

3


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements
September 30, 2007
(Unaudited)
1. Nature of Operations
     Our company, VCA Antech, Inc. (“VCA”) is a Delaware corporation formed in 1986 and is based in Los Angeles, California. We are an animal healthcare company with three strategic segments: veterinary diagnostic laboratories (“Laboratory”), animal hospitals (“Animal Hospital”) and veterinary medical technology (“Medical Technology”).
     We operate a full-service veterinary diagnostic laboratory network serving all 50 states. Our laboratory network provides sophisticated testing and consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment and prevention of diseases and other conditions affecting animals. At September 30, 2007, we operated 35 laboratories of various sizes located strategically throughout the United States.
     Our animal hospitals offer a full range of general medical and surgical services for companion animals. Our animal hospitals treat diseases and injuries, provide pharmaceutical products and perform a variety of pet-wellness programs, including health examinations, diagnostic testing, vaccinations, spaying, neutering and dental care. At September 30, 2007, we operated 441 animal hospitals throughout 38 states.
     Our medical technology segment sells digital radiography and ultrasound imaging equipment, provides education and training on the use of that equipment, and provides consulting and mobile imaging services.
2. Basis of Presentation
     Our accompanying unaudited, condensed, consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission. Accordingly, they do not include all of the information and notes required by GAAP in the United States for annual financial statements as permitted under applicable rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 2007, are not necessarily indicative of the results to be expected for the full year ending December 31, 2007. For further information, refer to our consolidated financial statements and notes thereto included in our 2006 Annual Report on Form 10-K.
     The preparation of our condensed, consolidated financial statements in accordance with GAAP in the United States requires management to make estimates and assumptions that affect the amounts reported in our condensed, consolidated financial statements and notes thereto. Actual results could differ from those estimates.
3. Acquisitions
     We acquired the following animal hospitals during the nine months ended September 30, 2007:
         
Hospital acquisitions, excluding Healthy Pet (1)
    29  
Healthy Pet (1)
    44  
Acquisitions relocated into our existing animal hospitals
    (7 )
 
     
Total
    66  
 
     
 
(1)   Healthy Pet Corp. (“Healthy Pet”) was acquired on June 1, 2007.
     We acquired two laboratories during the nine months ended September 30, 2007, one of which was acquired with Healthy Pet and was merged into our existing operations.

4


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
3. Acquisitions, continued
Animal Hospital and Laboratory Acquisitions, Excluding Healthy Pet
     The following table summarizes the preliminary purchase price, including acquisition costs, paid by us for the 29 animal hospitals and one laboratory we acquired during the nine months ended September 30, 2007, and the preliminary allocation of the purchase price (in thousands):
         
Preliminary Purchase Price:
       
Cash
  $ 57,990  
Liabilities assumed
    2,755  
 
     
Total
  $ 60,745  
 
     
 
       
Preliminary Allocation of the Purchase Price:
       
Tangible assets
  $ 2,662  
Identifiable intangible assets
    2,906  
Goodwill (1)
    55,177  
 
     
Total
  $ 60,745  
 
     
 
(1)   We expect that $45.7 million of the goodwill recorded for these acquisitions as of September 30, 2007 will be deductible for income tax purposes.
Healthy Pet
     On June 1, 2007, we acquired Healthy Pet, which operated at the time of its acquisition, 44 animal hospitals and a small laboratory, which primarily serviced its own animal hospitals. This acquisition allowed us to expand our animal hospital operations, particularly in Massachusetts, Connecticut, Virginia and Georgia. Our condensed, consolidated financial statements reflect the operating results of Healthy Pet since June 1, 2007.
     We acquired Healthy Pet for a preliminary purchase price of $184.7 million. The following table summarizes the preliminary purchase price and the preliminary allocation of the purchase price (in thousands):
         
Preliminary Purchase Price:
       
Cash paid to holders of Healthy Pet stock and debt, net of cash acquired
  $ 153,568  
Cash paid for professional services
    1,216  
Debt and capital leases assumed
    17,761  
Liabilities assumed
    8,708  
Liabilities for our plan to eliminate duplicate functions and to close certain animal hospitals
    3,432  
 
     
Total
  $ 184,685  
 
     
 
       
Preliminary Allocation of the Purchase Price:
       
Tangible assets
  $ 15,110  
Identifiable intangible assets
    383  
Goodwill (1)
    169,192  
 
     
Total
  $ 184,685  
 
     
 
(1)   As of September 30, 2007, we have not finalized the determination of the amount of goodwill that will be deductible for income tax purposes.

5


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
3. Acquisitions, continued
     The final purchase price and the valuation of the net assets acquired is expected to be completed as soon as practicable, but no later than one year from the date of acquisition. The final calculation of the purchase price, which is based on Healthy Pet’s working capital at June 1, 2007, is currently pending review by an independent accounting firm. In addition, given the relative size and complexity of the acquisition, the fair value of certain assets and liabilities acquired, primarily fixed and intangible assets, lease obligations, the 2007 tax liability and deferred tax balances, is still preliminary. We have engaged various third-parties to provide valuation expertise where necessary and have not yet received their completed analyses. With respect to lease obligations, we are currently engaged in negotiating the termination of certain contracts. Also, we have not received final billings related to professional services used in the acquisition as the service provider has not completed its billing process or the work has not yet been completed.
Other Acquisition Payments
     In connection with certain acquisitions, we withheld a portion of the purchase price (“holdback”) as security for indemnification obligations of the sellers under the acquisition agreement. We paid $1.2 million to sellers for the unused portion of the holdbacks during the nine months ended September 30, 2007.
     During the nine months ended September 30, 2007, we paid $745,000 to purchase the ownership interest in two partially-owned subsidiaries.
4. Long-Term Obligations and Interest Rate Swap Agreements
     On June 1, 2007, we amended our senior credit facility to allow for additional senior term notes in the amount of $160.0 million. The funds borrowed from the additional senior term notes were primarily used to fund the acquisition of Healthy Pet on June 1, 2007. The terms, including the interest rate, of these additional senior term notes are the same as the senior term notes existing prior to the amendment. Principal payments on the additional senior term notes are due quarterly in the amount of $400,000 and a final payment in the amount of $153.6 million is due on May 16, 2011. In connection with this amendment, we incurred debt-issue costs in the amount of $897,000.
     During the nine months ended September 30, 2007, we entered into the following interest rate swap agreements to mitigate our exposure to the risk of interest rates increasing:
         
Fixed interest rate
  4.95%   5.34%
Notional amount (in millions)
  $75.0   $100.0
Effective date
  4/30/2007   6/11/2007
Expiration date
  4/30/2009   12/31/2009
Counterparties
  Wells Fargo   Goldman Sachs
Qualifies for hedge accounting
  Yes   Yes

6


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
5. Goodwill and Other Intangible Assets
     Goodwill represents the excess of the cost of an acquired entity over the net of the fair value of identifiable assets acquired and liabilities assumed. The following table presents the changes in the carrying amount of our goodwill for the nine months ended September 30, 2007 (in thousands):
                                 
            Animal     Medical        
    Laboratory     Hospital     Technology     Total  
Balance as of December 31, 2006
  $ 95,310     $ 511,278     $ 19,160     $ 625,748  
Goodwill acquired
    21       224,348             224,369  
Goodwill related to partnership interests
          753             753  
Other (1)
          (2,928 )           (2,928 )
 
                       
Balance as of September 30, 2007
  $ 95,331     $ 733,451     $ 19,160     $ 847,942  
 
                       
 
(1)   Comprised of purchase price adjustments and the contribution of assets in return for a minority interest in a partially-owned subsidiary.
     In addition to goodwill, we have amortizable intangible assets at September 30, 2007 and December 31, 2006 as follows (in thousands):
                                                 
    As of September 30, 2007     As of December 31, 2006  
    Gross             Net     Gross             Net  
    Carrying     Accumulated     Carrying     Carrying     Accumulated     Carrying  
    Amount     Amortization     Amount     Amount     Amortization     Amount  
Covenants not-to-compete
  $ 14,110     $ (6,890 )   $ 7,220     $ 12,687     $ (6,169 )   $ 6,518  
Non-contractual customer relationships
    10,459       (2,204 )     8,255       9,869       (1,553 )     8,316  
Technology
    1,270       (758 )     512       1,270       (568 )     702  
Trademarks
    582       (170 )     412       569       (127 )     442  
Contracts
    380       (285 )     95       397       (231 )     166  
Client lists
    136       (44 )     92       506       (357 )     149  
 
                                   
Total
  $ 26,937     $ (10,351 )   $ 16,586     $ 25,298     $ (9,005 )   $ 16,293  
 
                                   
     The following table summarizes our aggregate amortization expense related to other intangible assets (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Aggregate amortization expense
  $ 967     $ 933     $ 2,997     $ 2,661  
 
                       

7


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
5. Goodwill and Other Intangible Assets, continued
     The estimated amortization expense related to intangible assets for each of the five succeeding years and thereafter as of September 30, 2007 is as follows (in thousands):
         
Remainder of 2007
  $ 997  
2008
    3,556  
2009
    2,512  
2010
    1,739  
2011
    1,250  
Thereafter
    6,532  
 
     
Total
  $ 16,586  
 
     
6. Share-Based Compensation
Stock Option Activity
     A summary of our stock option activity for the nine months ended September 30, 2007 is as follows (in thousands, except weighted-average exercise price and weighted-average remaining contractual term):
                                 
                    Weighted-        
                    Average        
            Weighted-     Remaining        
            Average     Contractual     Aggregate  
    Stock     Exercise     Term     Intrinsic  
    Options     Price     (Years)     Value  
Outstanding at December 31, 2006
    5,290     $ 15.72       5.0     $ 87,136  
 
                           
Granted
                           
Exercised
    (650 )     10.26                  
Forfeited/Canceled
    (83 )     20.59                  
 
                           
Outstanding at September 30, 2007
    4,557     $ 16.41       4.3     $ 115,472  
 
                       
 
Exercisable at September 30, 2007
    4,030     $ 16.32       4.4     $ 102,487  
 
                       
 
Expected to vest at September 30, 2007
    510     $ 17.10       3.5     $ 12,580  
 
                       
     The following table summarizes information about the options outstanding at September 30, 2007 (in thousands, except per share amounts and the weighted-average remaining contractual life):
                                                 
Options Outstanding   Options Exercisable
                    Weighted-Avg.            
                    Remaining            
            Number   Contractual   Weighted-Avg.   Number   Weighted-Avg.
Exercise Price           Outstanding   Life   Exercise Price   Exercisable   Exercise Price
   $0.50
            149       3.0     $ 0.50       149     $ 0.50  
  $6.26 - $7.97
            1,114       5.2     $ 7.01       1,114     $ 7.01  
$15.33 - $30.70
            3,294       4.0     $ 20.30       2,767     $ 20.92  
 
                                               
 
            4,557                       4,030          
 
                                               

8


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
6. Share-Based Compensation, continued
     At September 30, 2007, there was $1.8 million of total unrecognized compensation cost related to our stock options. This cost is expected to be recognized over a weighted-average period of 1.0 years.
Non-vested Stock Activity
     During the nine months ended September 30, 2007, we granted 351,432 non-vested shares of common stock with a weighted-average grant date fair value of $32.75 per share. At September 30, 2007, there was $9.1 million of unrecognized compensation cost related to these non-vested shares that will be recognized over a weighted-average period of 3.3 years.
7. Income Taxes
     The effective tax rate for the nine months ended September 30, 2007 and 2006 was 40.0% and 34.2%, respectively. The effective tax rate for the nine months ended September 30, 2006 includes a tax benefit in the amount of $6.8 million recognized during the first quarter of 2006 due to the outcome of an income tax audit that resulted in a reduction to our estimated tax liabilities.
8. Comprehensive Income
     Comprehensive income consists of net income and other comprehensive loss. The following table provides a summary of comprehensive income (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Net income
  $ 32,229     $ 26,977     $ 96,389     $ 86,189  
Other comprehensive loss:
                               
Unrealized loss on hedging instruments, net of tax
    (2,171 )     (1,262 )     (2,359 )     (517 )
Loss (gain) on hedging instruments reclassified to income, net of tax
    65       44       201       (14 )
 
                       
Other comprehensive loss
    (2,106 )     (1,218 )     (2,158 )     (531 )
 
                       
Total comprehensive income
  $ 30,123     $ 25,759     $ 94,231     $ 85,658  
 
                       

9


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
9. Calculation of Earnings per Share
     Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during each period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding after giving effect to all dilutive potential common shares outstanding during each period. Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Net income
  $ 32,229     $ 26,977     $ 96,389     $ 86,189  
 
                       
 
                               
Weighted-average common shares outstanding:
                               
Basic
    83,957       83,339       83,769       83,092  
Effect of dilutive potential common shares:
                               
Stock options and non-vested shares
    1,795       1,848       1,803       1,772  
 
                       
Diluted
    85,752       85,187       85,572       84,864  
 
                       
 
                               
Basic earnings per share
  $ 0.38     $ 0.32     $ 1.15     $ 1.04  
 
                       
Diluted earnings per share
  $ 0.38     $ 0.32     $ 1.13     $ 1.02  
 
                       
     For the nine months ended September 30, 2007 and the three and nine months ended September 30, 2006, potential common shares of 49,729 and 39,341, respectively, were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. There were no anti-dilutive shares for the three months ended September 30, 2007.
10. Segment Reporting
     Our reportable segments are Laboratory, Animal Hospital, and Medical Technology. These segments are strategic business units that have different services, products and/or functions. The segments are managed separately because each is a distinct and different business venture with unique challenges, risks and rewards. Our laboratory segment provides diagnostic laboratory testing services for veterinarians, both associated with our animal hospitals and those independent of us. Our animal hospital segment provides veterinary services for companion animals and sells related retail and pharmaceutical products. Our medical technology segment sells digital radiography and ultrasound imaging equipment, related computer hardware, software and ancillary services to the veterinary market. We also operate a corporate office that provides general and administrative support services for our other segments.
     The accounting policies of our segments are the same as those described in the summary of significant accounting policies included in our 2006 Annual Report on Form 10-K. We evaluate the performance of our segments based on gross profit and operating income. For purposes of reviewing the operating performance of our segments, all intercompany sales and purchases are accounted for as if they were transactions with independent third parties at current market prices.

10


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
10. Segment Reporting, continued
     Below is a summary of certain financial data for each of our segments (in thousands):
                                                 
            Animal     Medical             Intercompany        
    Laboratory     Hospital     Technology     Corporate     Eliminations     Total  
Three Months Ended September 30, 2007
                                               
 
                                               
External revenue
  $ 66,964     $ 229,409     $ 10,164     $     $     $ 306,537  
Intercompany revenue
    7,302             927             (8,229 )      
 
                                   
Total revenue
    74,266       229,409       11,091             (8,229 )     306,537  
Direct costs
    38,628       181,825       7,830             (8,048 )     220,235  
 
                                   
Gross profit
    35,638       47,584       3,261             (181 )     86,302  
Selling, general and administrative expense
    4,859       5,411       2,761       9,264             22,295  
Loss on sale of assets
    14       312       6       1             333  
 
                                   
Operating income (loss)
  $ 30,765     $ 41,861     $ 494     $ (9,265 )   $ (181 )   $ 63,674  
 
                                   
 
                                               
Depreciation and amortization
  $ 1,742     $ 4,461     $ 409     $ 512     $ (100 )   $ 7,024  
Capital expenditures
  $ 2,084     $ 7,383     $ 142     $ 1,468     $ (280 )   $ 10,797  
 
                                               
Three Months Ended September 30, 2006
                                               
 
                                               
External revenue
  $ 60,261     $ 183,592     $ 7,779     $     $     $ 251,632  
Intercompany revenue
    5,793             1,177             (6,970 )      
 
                                   
Total revenue
    66,054       183,592       8,956             (6,970 )     251,632  
Direct costs
    36,041       146,132       5,530             (6,536 )     181,167  
 
                                   
Gross profit
    30,013       37,460       3,426             (434 )     70,465  
Selling, general and administrative expense
    4,350       5,161       2,534       6,901             18,946  
Loss (gain) on sale of assets
    6       (3 )                       3  
 
                                   
Operating income (loss)
  $ 25,657     $ 32,302     $ 892     $ (6,901 )   $ (434 )   $ 51,516  
 
                                   
 
                                               
Depreciation and amortization
  $ 1,221     $ 3,577     $ 315     $ 424     $ (41 )   $ 5,496  
Capital expenditures
  $ 2,388     $ 4,747     $ 404     $ 1,354     $ (160 )   $ 8,733  

11


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
10. Segment Reporting, continued
                                                 
            Animal     Medical             Intercompany        
    Laboratory     Hospital     Technology     Corporate     Eliminations     Total  
Nine Months Ended September 30, 2007
                                               
External revenue
  $ 206,233     $ 635,046     $ 30,708     $     $     $ 871,987  
Intercompany revenue
    20,840             2,190             (23,030 )      
 
                                   
Total revenue
    227,073       635,046       32,898             (23,030 )     871,987  
Direct costs
    115,467       505,581       21,541             (22,702 )     619,887  
 
                                   
Gross profit
    111,606       129,465       11,357             (328 )     252,100  
Selling, general and administrative expense
    14,872       16,292       8,389       26,258             65,811  
Loss on sale of assets
    72       756       46       1             875  
 
                                   
Operating income (loss)
  $ 96,662     $ 112,417     $ 2,922     $ (26,259 )   $ (328 )   $ 185,414  
 
                                   
 
                                               
Depreciation and amortization
  $ 4,688     $ 12,751     $ 1,216     $ 1,390     $ (281 )   $ 19,764  
Capital expenditures
  $ 9,808     $ 23,663     $ 566     $ 4,604     $ (608 )   $ 38,033  
 
                                               
Nine Months Ended September 30, 2006
                                               
 
                                               
External revenue
  $ 177,964     $ 540,117     $ 22,881     $     $     $ 740,962  
Intercompany revenue
    17,100             2,467             (19,567 )      
 
                                   
Total revenue
    195,064       540,117       25,348             (19,567 )     740,962  
Direct costs
    103,977       430,409       16,276             (18,648 )     532,014  
 
                                   
Gross profit
    91,087       109,708       9,072             (919 )     208,948  
Selling, general and administrative expense
    12,793       15,107       7,734       21,681             57,315  
Loss (gain) on sale of assets
    14       (214 )                       (200 )
 
                                   
Operating income (loss)
  $ 78,280     $ 94,815     $ 1,338     $ (21,681 )   $ (919 )   $ 151,833  
 
                                   
 
                                               
Depreciation and amortization
  $ 3,373     $ 10,674     $ 1,089     $ 1,320     $ (109 )   $ 16,347  
Capital expenditures
  $ 5,352     $ 16,124     $ 489     $ 2,294     $ (459 )   $ 23,800  
 
                                               
At September 30, 2007
                                               
Total assets
  $ 178,942     $ 933,828     $ 50,069     $ 117,801     $ (7,495 )   $ 1,273,145  
 
                                   
 
                                               
At December 31, 2006
                                               
Total assets
  $ 167,363     $ 671,975     $ 53,161     $ 85,533     $ (6,075 )   $ 971,957  
 
                                   
11. Commitments and Contingencies
     We have certain commitments, including operating leases and supply purchase agreements. These items are discussed in detail in our consolidated financial statements and notes thereto included in our 2006 Annual Report on Form 10-K. We also have contingencies as follows:
a. Earn-out Payments
     We have contractual arrangements in connection with certain acquisitions, whereby additional cash may be paid to former owners of acquired companies upon attainment of specified financial criteria as set forth in the respective agreements. The amount to be paid cannot be determined until the earn-out periods expire and the attainment of

12


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
11. Commitments and Contingencies, continued
criteria is established. If the specified financial criteria are attained, we will be obligated to pay an additional $938,000.
  b.   Officers’ Compensation
     Our Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) and Chief Financial Officer (“CFO”) have entered into employment agreements with our company that provide for base salaries and annual bonuses set by our Compensation Committee of the Board of Directors.
     As of any given date, under their contracts, each officer has the remaining term: five years for the CEO, three years for the COO and two years for the CFO. The contracts have the following additional provisions:
    In the event any of these officers’ employment is terminated due to death or disability, each officer, or their estate, is entitled to receive the remaining base salary during the remaining scheduled term of his employment agreement, the acceleration of the vesting of his options, which options shall remain exercisable for the full term, and the right to continue receiving specified benefits and perquisites.
 
    In the event any of these officers terminate their employment agreements for cause, we terminate any of their employment agreements without cause or a change of control occurs (in which case such employment agreements terminate automatically), each officer is entitled to receive the remaining base salary during the remaining scheduled term of his employment agreement, a bonus based on past bonuses, the acceleration of the vesting of his options, which options shall remain exercisable for the full term, and the right to continue receiving specified benefits and perquisites.
 
    In the event of a change of control, the cash value of all benefits due under their employment contracts as a result of the termination would be immediately payable to the officers. In addition, if any of the amounts payable to these officers under these provisions constitute “excess parachute payments” under the Internal Revenue Code, each officer is entitled to an additional payment to cover the tax consequences associated with the excess parachute payment.
     In addition to the agreements described above, we entered into an agreement with one of our Senior Vice Presidents whereby in the event his employment is terminated for any reason other than cause, he is entitled to receive an amount equal to one year’s base salary in effect at the date of termination and the right to continue receiving specified benefits and perquisites for a period of one year. Our Senior Vice President’s base salary and annual bonus are set by our Compensation Committee of the Board of Directors.
  c.   Other Contingencies
     We have certain contingent liabilities resulting from litigation and claims incidental to the ordinary course of our business that we believe will not have a material adverse effect on our future consolidated financial position, results of operations or cash flows.
12. Recent Accounting Pronouncements
     In June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 prescribes recognition thresholds and measurement attributes for the financial statement recognition of uncertain income tax positions. In the first quarter of 2007, we adopted FIN 48. We did not have any unrecognized tax benefits at September 30, 2007, and the adoption of FIN 48 did not have a material effect on our condensed, consolidated financial statements.

13


Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
12. Recent Accounting Pronouncements, continued
     In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements (“SFAS No. 157”), which establishes a framework for using and disclosing estimates in accounting for certain assets, liabilities and transactions at fair value. The provisions of SFAS No. 157 will be effective for our company on January 1, 2008. We are currently evaluating the impact of adopting SFAS No. 157 on our consolidated financial statements.
     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB No.115 (“SFAS No. 159”), which permits entities to choose to measure certain financial instruments and other items at fair value. The provisions of SFAS No. 159 will be effective for our company on January 1, 2008. We are currently evaluating the impact of adopting SFAS No. 159 on our consolidated financial statements.

14


Table of Contents

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
     
    Page
    Number
Introduction
  16
 
   
Executive Overview
  16
 
   
Consolidated Results of Operations
  18
 
   
Segment Results
  20
 
   
Liquidity and Capital Resources
  23
 
   
Critical Accounting Policies
  25
 
   
Recent Accounting Pronouncements
  26
 
   
Forward-Looking Statements
  26

15


Table of Contents

Introduction
      The following discussion should be read in conjunction with our condensed, consolidated financial statements provided under Part I, Item I of this Quarterly Report on Form 10-Q . We have included herein statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. We generally identify forward-looking statements in this report using words like “believe,” “intend,” “expect,” “estimate,” “may,” “plan,” “should plan,” “project,” “contemplate,” “anticipate,” “predict,” “potential,” “continue,” or similar expressions. You may find some of these statements below and elsewhere in this report. These forward-looking statements are not historical facts and are inherently uncertain and outside of our control. Any or all of our forward-looking statements in this report may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. Factors that may cause our plans, expectations, future financial condition and results to change are described throughout this report and in our Annual Report on Form 10-K , particularly in “Risk Factors,” Part I, Item 1A of that report.
      The forward-looking information set forth in this Quarterly Report on Form 10-Q is as of November 6, 2007, and we undertake no duty to update this information. Shareholders and prospective investors can find information filed with the SEC after November 6, 2007 at our website at www.investor.vcaantech.com or at the SEC’s website at www.sec.gov .
     We are a leading national animal healthcare company that provides veterinary services and diagnostic testing to support veterinary care and we sell diagnostic imaging equipment, other medical technology products and related services to veterinarians. Our reportable segments are as follows:
    Our laboratory segment operates the largest network of veterinary diagnostic laboratories in the nation. Our laboratories provide sophisticated testing and consulting services used by veterinarians in the detection, diagnosis, evaluation, monitoring, treatment and prevention of diseases and other conditions affecting animals. At September 30, 2007, our laboratory network consisted of 35 laboratories serving all 50 states.
 
    Our animal hospital segment operates the largest network of freestanding, full-service animal hospitals in the nation. Our animal hospitals offer a full range of general medical and surgical services for companion animals. We treat diseases and injuries, offer pharmaceutical and retail products and perform a variety of pet wellness programs, including health examinations, diagnostic testing, routine vaccinations, spaying, neutering and dental care. At September 30, 2007, our animal hospital network consisted of 441 animal hospitals in 38 states.
 
    Our medical technology segment sells digital radiography and ultrasound imaging equipment, related computer hardware, software and ancillary services.
     The practice of veterinary medicine is subject to seasonal fluctuation. In particular, demand for veterinary services is significantly higher during the warmer months because pets spend a greater amount of time outdoors where they are more likely to be injured and are more susceptible to disease and parasites. In addition, use of veterinary services may be affected by levels of flea infestation, heartworm and ticks, and the number of daylight hours.
Executive Overview
     The three and nine months ended September 30, 2007 was marked by continued growth in our laboratory and animal hospital operating segments achieved through a combination of internal growth and acquisitions, including the acquisition of Healthy Pet Corp. (“Healthy Pet”) on June 1, 2007. For the three and nine months ended September 30, 2007, our laboratory internal revenue growth was 11.6% and 14.9%, respectively, and our animal hospital same-store revenue growth, adjusted for one less business day in the current periods, was 5.7% and 6.0%, respectively.

16


Table of Contents

   Acquisitions and Facilities
     Our growth strategy includes the acquisition of independent animal hospitals. We currently anticipate that animal hospital acquired revenue for 2007 (exclusive of our acquisition of Healthy Pet discussed below) will range from $60.0 million to $65.0 million. In addition, we also evaluate the acquisition of animal hospital chains, laboratories or related businesses if favorable opportunities are presented. In accordance with that strategy, on June 1, 2007, we acquired Healthy Pet, which operated at the time of its acquisition, 44 animal hospitals and a small laboratory, which primarily serviced its own animal hospitals. The acquisition of Healthy Pet allowed us to expand our animal hospital operations, particularly in Massachusetts, Connecticut, Virginia and Georgia. The following table summarizes the changes in the number of facilities operated by our laboratory and animal hospital segments during the nine months ended September 30, 2007:
         
Laboratories:
       
Beginning of period
    33  
Acquisitions
    2  
Acquisitions relocated into our exising laboratories
    (1 )
New facilities
    1  
 
     
End of period
    35  
 
     
 
       
Animal hospitals :
       
Beginning of period
    379  
Acquisitions, excluding Healthy Pet
    29  
Healthy Pet
    44  
Acquisitions relocated into our existing animal hospitals
    (7 )
Closed
    (4 )
 
     
End of period
    441  
 
     
   Financing Transaction
     On June 1, 2007, we amended our senior credit facility to allow for additional senior term notes in the amount of $160.0 million. We used the funds borrowed from the additional senior term notes to fund the acquisition of Healthy Pet on June 1, 2007. The terms, including the interest rate, of these additional senior term notes are the same as the senior term notes existing prior to the amendment. Principal payments on the additional senior term notes are due quarterly in the amount of $400,000 and a final payment in the amount of $153.6 million is due on May 16, 2011.

17


Table of Contents

Consolidated Results of Operations
     The following table sets forth components of our condensed, consolidated income statements expressed as a percentage of revenue:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Revenue:
                               
Laboratory
    24.2 %     26.3 %     26.0 %     26.3 %
Animal hospital
    74.8       73.0       72.8       72.9  
Medical technology
    3.6       3.6       3.8       3.4  
Intercompany
    (2.6 )     (2.9 )     (2.6 )     (2.6 )
 
                       
Total revenue
    100.0       100.0       100.0       100.0  
Direct costs
    71.8       72.0       71.1       71.8  
 
                       
Gross profit
    28.2       28.0       28.9       28.2  
Selling, general and administrative expense
    7.3       7.5       7.5       7.7  
Loss on sale of assets
    0.1             0.1        
 
                       
Operating income
    20.8       20.5       21.3       20.5  
Interest expense, net
    2.9       2.4       2.5       2.5  
Other expense
          0.1              
Minority interest in income of subsidiairies
    0.4       0.3       0.4       0.3  
 
                       
Income before provision for income taxes
    17.5       17.7       18.4       17.7  
Provision for income taxes
    7.0       7.0       7.3       6.1  
 
                       
Net income
    10.5 %     10.7 %     11.1 %     11.6 %
 
                       
Revenue
     The following table summarizes our revenue (in thousands, except percentages):
                                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006             2007     2006        
            % of             % of                     % of             % of        
    $     Total     $     Total     % Change     $     Total     $     Total     % Change  
Laboratory
  $ 74,266       24.2 %   $ 66,054       26.3 %     12.4 %   $ 227,073       26.0 %   $ 195,064       26.3 %     16.4 %
Animal hospital
    229,409       74.8 %     183,592       73.0 %     25.0 %     635,046       72.8 %     540,117       72.9 %     17.6 %
Medical technology
    11,091       3.6 %     8,956       3.6 %     23.8 %     32,898       3.8 %     25,348       3.4 %     29.8 %
Intercompany
    (8,229 )     (2.6 )%     (6,970 )     (2.9 )%     18.1 %     (23,030 )     (2.6 )%     (19,567 )     (2.6 )%     17.7 %
 
                                                                       
 
                                                                               
Total revenue
  $ 306,537       100.0 %   $ 251,632       100.0 %     21.8 %   $ 871,987       100.0 %   $ 740,962       100.0 %     17.7 %
 
                                                           
     Consolidated revenue increased $54.9 million for the three months ended September 30, 2007, and $131.0 million for the nine months ended September 30, 2007. The increases in revenue were attributable to revenue from acquired animal hospitals, including Healthy Pet, and organic growth. Our laboratory internal revenue growth was 11.6% and 14.9% for the three and nine months ended September 30, 2007, respectively. Our animal hospital same-store revenue growth, adjusted for one less business day in the current periods, was 5.7% and 6.0% for the three and nine months ended September 30, 2007.

18


Table of Contents

   Gross Profit
     The following table summarizes our gross profit and our gross profit as a percentage of applicable revenue, or gross margin (in thousands, except percentages):
                                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006             2007     2006        
            Gross             Gross     %             Gross             Gross     %  
    $     Margin     $     Margin     Change     $     Margin     $     Margin     Change  
Laboratory
  $ 35,638       48.0 %   $ 30,013       45.4 %     18.7 %   $ 111,606       49.1 %   $ 91,087       46.7 %     22.5 %
Animal hospital
    47,584       20.7 %     37,460       20.4 %     27.0 %     129,465       20.4 %     109,708       20.3 %     18.0 %
Medical technology
    3,261       29.4 %     3,426       38.3 %     (4.8 )%     11,357       34.5 %     9,072       35.8 %     25.2 %
Intercompany
    (181 )             (434 )                     (328 )             (919 )                
 
                                                                       
Total gross profit
  $ 86,302       28.2 %   $ 70,465       28.0 %     22.5 %   $ 252,100       28.9 %   $ 208,948       28.2 %     20.7 %
 
                                                                       
     Consolidated gross profit increased $15.8 million for the three months ended September 30, 2007, and $43.2 million for the nine months ended September 30, 2007. The increases were primarily due to the increase in consolidated revenue discussed above and an increase in consolidated gross margins in comparison to the previous year. The improvement in our consolidated gross margins were primarily attributable to the operating leverage realized by our laboratory segment due to the fixed cost nature of its business.
   Selling, General and Administrative Expense
     The following table summarizes our selling, general and administrative expense (“SG&A”), and our expense as a percentage of applicable revenue (in thousands, except percentages):
                                                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006             2007     2006        
            % of             % of     %             % of             % of     %  
    $     Revenue     $     Revenue     Change     $     Revenue     $     Revenue     Change  
Laboratory
  $ 4,859       6.5 %   $ 4,350       6.6 %     11.7 %   $ 14,872       6.5 %   $ 12,793       6.6 %     16.3 %
Animal hospital
    5,411       2.4 %     5,161       2.8 %     4.8 %     16,292       2.6 %     15,107       2.8 %     7.8 %
Medical technology
    2,761       24.9 %     2,534       28.3 %     9.0 %     8,389       25.5 %     7,734       30.5 %     8.5 %
Corporate
    9,264       3.0 %     6,901       2.7 %     34.2 %     26,258       3.0 %     21,681       2.9 %     21.1 %
 
                                                                       
Total SG&A
  $ 22,295       7.3 %   $ 18,946       7.5 %     17.7 %   $ 65,811       7.5 %   $ 57,315       7.7 %     14.8 %
 
                                                                       
     Consolidated selling, general and administrative expense increased $3.3 million for the three months ended September 30, 2007, and $8.5 million for the nine months ended September 30, 2007. The increases were primarily attributable to expanding our administrative operations in order to manage our recent acquisitions, an increase in share-based compensation expense due to non-vested shares granted in 2007, and an increase in commissions as a result of our laboratory’s strong operating performance. In addition, we incurred integration costs in connection with the acquisition of Healthy Pet. These integration costs consisted primarily of salaries and occupancy costs for operating Healthy Pet’s corporate office subsequent to the acquisition date and totaled $700,000 and $1.4 million for the three and nine months ended September 30, 2007, respectively.
   Loss (Gain) on Sale of Assets
     During the nine months ended September 30, 2007 and 2006, we sold certain assets, including real estate, for a net loss of $875,000 and a gain of $200,000, respectively.

19


Table of Contents

Interest Expense, Net
     The following table summarizes our interest expense, net of interest income (in thousands):
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2007     2006     2007     2006  
Interest expense:
                               
Senior term notes
  $ 9,432     $ 6,597     $ 23,205     $ 19,515  
Interest rate swap agreements
    (433 )     (484 )     (1,450 )     (1,054 )
Capital leases and other
    811       432       1,510       1,041  
Amortization of debt costs
    116       73       253       299  
 
                       
 
    9,926       6,618       23,518       19,801  
Interest income
    996       534       2,144       1,478  
 
                       
Interest expense, net
  $ 8,930     $ 6,084     $ 21,374     $ 18,323  
 
                       
     The increase in interest expense was primarily attributable to additional senior term notes in the amount of $160.0 million borrowed under our senior credit facility on June 1, 2007 and increases in LIBOR. These factors were partially offset by principal repayments, including $60.0 million of voluntary debt repayments throughout 2006.
   Provision for Income Taxes
     Our effective tax rates for the three months ended September 30, 2007 and 2006 were 39.8% and 39.4%, respectively, and our effective tax rates for the nine months ended September 30, 2007 and 2006 were 40.0% and 34.2%, respectively. The effective tax rate for the nine months ended September 30, 2006 included a tax benefit in the amount of $6.8 million recognized during the first quarter of 2006 due to the outcome of an income tax audit that resulted in a reduction to our estimated tax liabilities.
Segment Results
   Laboratory Segment
     Laboratory revenue increased $8.2 million for the three months ended September 30, 2007, and $32.0 million for the nine months ended September 30, 2007. The components of the increases in laboratory revenue are detailed below (in thousands, except percentages and average price per requisition):
                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006     % Change     2007     2006     % Change  
Internal growth:
                                               
Number of requisitions (1)
    3,104       2,822       10.0 %     9,615       8,446       13.8 %
Average revenue per requisition (2)
  $ 23.74     $ 23.41       1.4 %   $ 23.31     $ 23.10       0.9 %
 
                                       
Total internal revenue (1)
  $ 73,686     $ 66,054       11.6 %   $ 224,089     $ 195,064       14.9 %
Acquired revenue (3)
    580                     2,984                
 
                                       
Total
  $ 74,266     $ 66,054       12.4 %   $ 227,073     $ 195,064       16.4 %
 
                                       
 
(1)   Internal revenue and requisitions were calculated using laboratory operating results, adjusted to exclude the operating results of acquired laboratories for the comparable periods that we did not own those laboratories in the prior year, and adjusted for the impact resulting from any differences in the number of billing days in the comparable periods.
 
(2)   Computed by dividing internal revenue by the number of requisitions.
 
(3)   Acquired revenue represents revenue recognized from our acquired laboratories for the comparable current year period that we did not own them in the prior year.

20


Table of Contents

     The increase in requisitions from internal growth is the result of a continued trend in veterinary medicine to focus on the importance of laboratory diagnostic testing in the diagnosis, early detection and treatment of diseases, and the migration of certain tests to outside laboratories that have historically been performed in veterinary hospitals. This trend is driven by an increase in the number of specialists in the veterinary industry relying on diagnostic testing, the increased focus on diagnostic testing in veterinary schools and general increased awareness through ongoing marketing and continuing education programs provided by us, pharmaceutical companies and other service providers in the industry. Also contributing to the year-to-date increase in the number of requisitions was testing related to the pet food recall that occurred in March 2007.
     No single customer represented more than 10% of our laboratory revenues during the periods presented. We derive our laboratory revenue from services provided to over 15,000 independently owned animal hospitals and shifts in the purchasing habits of any individual animal hospital or small group of animal hospitals is not material to our laboratory revenues. Other companies are developing networks of animal hospitals, however, and shifts in the purchasing habits of these networks have the potential of a greater impact on our laboratory revenues.
     The change in the average revenue per requisition is attributable to changes in the mix, including performing lower-priced tests historically performed at veterinary hospitals, type and number of tests performed per requisition and price increases. The price increases for most tests ranged from 3% to 5% in February 2007 and February 2006.
     Laboratory gross profit is calculated as laboratory revenue less laboratory direct costs. Laboratory direct costs are comprised of all costs of laboratory services, including but not limited to, salaries of veterinarians, specialists, technicians and other laboratory-based personnel, transportation and delivery costs, supply costs, facilities rent, occupancy costs, depreciation and amortization.
     The increase in laboratory gross margin was primarily attributable to increases in laboratory revenue combined with operating leverage associated with our laboratory business. Our operating leverage comes from the incremental margins we realize on additional tests ordered by the same client, as well as when more comprehensive tests are ordered. We are able to benefit from these incremental margins due to the relative fixed cost nature of our laboratory business.
   Animal Hospital Segment
     Animal hospital revenue increased $45.8 million for the three months ended September 30, 2007, and $94.9 million for the nine months ended September 30, 2007. The components of the increases are summarized in the following table (in thousands, except percentages and average price per order):
                                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2007     2006     % Change     2007     2006     % Change  
Same-store facilities:
                                               
Orders (1)(2)
    1,380       1,385       (0.3 )%     3,919       3,911       0.2 %
Average revenue per order (3)
  $ 138.48     $ 130.59       6.0 %   $ 140.80     $ 133.12       5.8 %
 
                                       
Same-store revenue (1)
  $ 191,135     $ 180,842       5.7 %   $ 551,853     $ 520,689       6.0 %
Business day adjustment (4)
          1,619                     1,550          
Net acquired revenue (5)
    38,274       1,131               83,193       17,878          
 
                                       
Total
  $ 229,409     $ 183,592       25.0 %   $ 635,046     $ 540,117       17.6 %
 
                                       
 
(1)   Same-store revenue and orders were calculated using animal hospital operating results, adjusted to exclude the operating results for newly acquired animal hospitals that we did not own as of the beginning of the comparable period in the prior year and adjusted for the impact resulting from any differences in the number of business days in the comparable periods. Same-store revenue also includes revenue generated by customers referred from our relocated or combined animal hospitals, including those merged upon acquisition.
 
(2)   The change in orders may not calculate exactly due to rounding.
 
(3)   Computed by dividing same-store revenue by same-store orders. The average revenue per order may not calculate exactly due to rounding.

21


Table of Contents

 
(4)   The 2006 business day adjustment reflects the impact of one additional business day in 2006 as compared to 2007 for both 2007 periods presented.
 
(5)   Net acquired revenue represents the revenue from those animal hospitals acquired, net of revenue from those animal hospitals sold or closed, on or after the beginning of the comparable period, which was July 1, 2006 for the three-month analysis, and January 1, 2006 for the nine-month analysis. Fluctuations in net acquired revenue occur due to the volume, size and timing of acquisitions and dispositions during the periods from this date through the end of the applicable period.
     Our business strategy is to place a greater emphasis on comprehensive wellness visits and advanced medical procedures, which typically generate higher-priced orders. Over the last few years, some pet-related products traditionally sold in our animal hospitals are now widely available in retail stores and other distribution channels. In addition, there has been a decline in the number of vaccinations as some recent professional literature and research has suggested that vaccinations can be given to pets less frequently. These trends have resulted in a decrease in lower-priced orders and an increase in higher-priced orders. Although we experienced an increase in the number of orders for the nine months ended September 30, 2007, we may continue to experience a decrease in the number of orders in future periods for the reasons discussed above.
     Price increases, which approximated 5% to 6% on most services at most of our hospitals in February 2007 and February 2006, also contributed to the increase in the average revenue per order. Prices are reviewed on an annual basis for each hospital and adjustments are made based on market considerations, demographics and our costs.
     Animal hospital gross profit is calculated as animal hospital revenue less animal hospital direct costs. Animal hospital direct costs are comprised of all costs of services and products at the animal hospitals, including, but not limited to, salaries of veterinarians, technicians and all other animal hospital-based personnel, facilities rent, occupancy costs, supply costs, depreciation and amortization, certain marketing and promotional expense and costs of goods sold associated with the retail sales of pet food and pet supplies.
     During the three and nine months ended September 30, 2007, our animal hospital gross margin increased primarily as a result of improvements in our same-store animal hospital revenue and operating leverage. Our animal hospital same-store gross margins were 21.0% and 20.5% for the three months ended September 30, 2007 and 2006, respectively, and 20.8% and 20.5% for the nine months ended September 30, 2007 and 2006, respectively.
Medical Technology Segment
     Medical technology revenue increased $2.1 million and $7.6 million for the three and nine months ended September 30, 2007 as compared to the prior year. The increase was primarily due to a rise in the amount of revenue recognized on sales of our digital radiography and ultrasound imaging equipment. The increase due to sales of digital radiography imaging equipment was primarily due to the structure of digital radiography sale agreements in the prior year that resulted in more revenue being deferred as compared to the current period. We recognize revenue on deferred sales ratably over a period ranging from one to five years. These deferred transactions are discussed in greater detail in the Critical Accounting Policies section of our 2006 Annual Report on Form 10-K. Although we recognized an increase in ultrasound revenue, we believe the business life cycle for ultrasound imaging equipment is maturing and accordingly, the demand for these types of products and related services may decline in the near term.
     Medical technology gross profit is calculated as medical technology revenue less medical technology direct costs. Medical technology direct costs are comprised of all product and service costs, including, but not limited to, all costs of equipment, related products and services, salaries of technicians, support personnel, trainers, consultants and other non-administrative personnel depreciation and amortization and supply costs.
     The changes in medical technology gross profit and gross margin are the result of changes in the mix of products and services sold and an increase in material cost as a percentage of revenue related to the sale of our digital radiography and ultrasound imaging equipment.
Intercompany Revenue
     Laboratory revenue for the three and nine months ended September 30, 2007 included intercompany revenue of $7.3 million and $20.8 million, respectively, that was generated by providing laboratory services to our animal hospitals. Medical technology revenue for the three and nine months ended September 30, 2007 included intercompany revenue of $927,000 and $2.2 million, respectively, that was generated by providing products and

22


Table of Contents

services to our animal hospitals and laboratories. For purposes of reviewing the operating performance of our business segments, all intercompany transactions are accounted for as if the transaction was with an independent third party at current market prices. For financial reporting purposes, intercompany transactions are eliminated as part of our consolidation.
Liquidity and Capital Resources
     The following table summarizes our cash flows (in thousands):
                 
    Nine Months Ended  
    September 30,  
    2007     2006  
Cash provided by (used in):
               
Operating activities
  $ 135,153     $ 90,738  
Investing activities
    (259,167 )     (63,483 )
Financing activities
    166,065       (52,922 )
 
           
Increase (decrease) in cash and cash equivalents
    42,051       (25,667 )
Cash and cash equivalents at beginning of year
    45,104       58,488  
 
           
Cash and cash equivalents at end of period
  $ 87,155     $ 32,821  
 
           
Cash Flows from Operating Activities
     Net cash provided by operating activities increased $44.4 million in the nine months ended September 30, 2007, in comparison to the prior year. The increase was primarily due to acquisitions and improved operating performance, a decline in taxes paid of $5.1 million, changes in working capital, partially offset by an increase in interest paid of $3.6 million.
Cash Flows from Investing Activities
     Our growth strategy includes the acquisition of independent animal hospitals. We currently anticipate that we will spend $60.0 million to $65.0 million in 2007 on the acquisition of animal hospitals (exclusive of our acquisition of Healthy Pet discussed below). For the nine months ended September 30, 2007, we spent $59.2 million primarily related to the acquisition of independent animal hospitals, excluding Healthy Pet. In addition, we also evaluate the acquisition of animal hospital chains, laboratories or related businesses if favorable opportunities are presented. In accordance with that strategy, we spent $154.8 million for the acquisition of Healthy Pet. We intend to primarily use cash in our acquisitions but, depending on the timing and amount of our acquisitions, we may use stock or debt.
     Our investing activities include expenditures for property and equipment additions and we expect to spend approximately $45.0 million in 2007 for such expenditures (exclusive of real estate acquired in connection with business acquisitions). For the nine months ended September 30, 2007, we spent $38.0 million on property and equipment additions. In addition, due to favorable opportunities presented, we also purchased real estate in connection with certain animal hospital acquisitions in the amount of $8.0 million during the nine months ended September 30, 2007.
Cash Flows from Financing Activities
     Net cash provided by our financing activities for the nine months ended September 30, 2007 included $160.0 million of borrowings under our senior credit facility in the form of additional senior term notes. We used these borrowings to fund the acquisition of Healthy Pet on June 1, 2007. We used net cash in our financing activities for the nine months ended September 30, 2006 primarily to prepay a portion of our senior term notes in the amount of $60.0 million.

23


Table of Contents

Future Cash Requirements
     The following table sets forth our scheduled principal, interest and other contractual cash obligations for each of the years indicated (in thousands):
                                                         
    Total     2007 (1)     2008     2009     2010     2011     Thereafter  
Long-term debt
  $ 531,485     $ 1,755     $ 6,106     $ 5,828     $ 5,855     $ 511,941     $  
Capital lease obligations
    30,717       465       1,837       1,909       2,073       2,181       22,252  
Operating leases
    564,508       8,396       37,348       37,013       35,067       34,822       411,862  
Fixed cash interest expense
    14,874       600       2,469       2,131       1,750       1,434       6,490  
Variable cash interest expense (2)
    113,837       8,427       30,882       30,306       31,815       12,407        
Swap agreements (2)
    3,284             1,816       1,468                    
Purchase obligations
    44,442       11,663       8,134       8,899       9,744       6,002        
Other long-term liabilities (3)
    53,264       531       1,003       934       826       665       49,305  
Earn-out payments (4)
    938       213       375       350                    
 
                                         
 
  $ 1,357,349     $ 32,050     $ 89,970     $ 88,838     $ 87,130     $ 569,452     $ 489,909  
 
                                         
 
(1)   Consists of the period from October 1, 2007 through December 31, 2007.
 
(2)   We have variable-rate debt. The interest payments on our variable-rate debt are based on a variable-rate component plus a margin of 1.50%. For purposes of this computation, we have assumed that the interest rate on our variable-rate debt (including the margin of 1.50%) will be 6.37%, 5.88%, 5.83%, 6.18% and 6.43% for years 2007 through 2011, respectively. These estimates are based on interest rate projections used to price our interest rate swap agreements. Our consolidated financial statements included in our 2006 Annual Report on Form 10-K discuss these variable-rate notes in more detail.
 
(3)   Includes deferred income taxes of $45.6 million.
 
(4)   Represents contractual arrangements whereby additional cash may be paid to former owners of acquired businesses upon attainment of specified performance targets.
     We anticipate that our cash on-hand, net cash provided by operations and, if needed, our revolving credit facility, will provide sufficient cash resources to fund our operations for more than the next 12 months. If we consummate one or more significant acquisitions during this period we may need to seek additional debt or equity financing.
Debt Related Covenants
     Our senior credit facility contains certain financial covenants pertaining to fixed charge coverage and leverage ratios. In addition, our senior credit facility has restrictions pertaining to capital expenditures, acquisitions and the payment of cash dividends. As of September 30, 2007, we were in compliance with these covenants, including the two covenant ratios, the fixed charge coverage ratio and the leverage ratio.
     At September 30, 2007, we had a fixed charge coverage ratio of 1.52 to 1.00, which was in compliance with the required ratio of no less than 1.20 to 1.00. The senior credit facility defines the fixed charge coverage ratio as that ratio that is calculated on a last 12-month basis by dividing pro forma earnings before interest, taxes, depreciation and amortization, as defined by the senior credit facility (“pro forma earnings”), by fixed charges. Fixed charges are defined as cash interest expense, scheduled principal payments on debt obligations, capital expenditures, and provision for income taxes. Pro forma earnings include 12 months of operating results for businesses acquired during the period.
     At September 30, 2007, we had a leverage ratio of 2.12 to 1.00, which was in compliance with the required ratio of no more than 3.25 to 1.00. The senior credit facility defines the leverage ratio as that ratio which is calculated as total debt divided by pro forma earnings.

24


Table of Contents

Interest Rate Swap Agreements
     We have interest rate swap agreements whereby we pay counterparties amounts based on fixed interest rates and set notional principal amounts in exchange for the receipt of payments from the counterparties based on London Interbank Offer Rates (“LIBOR”) and the same set notional principal amounts. We entered into these interest rate swap agreements to hedge against the risk of increasing interest rates. The contracts effectively convert a certain amount of our variable-rate debt under our senior credit facility to fixed-rate debt for purposes of controlling cash paid for interest. That amount is equal to the notional principal amount of the interest rate swap agreements, and the fixed-rate conversion period is equal to the terms of the contract. The impact of these interest rate swap agreements has been factored into our future contractual cash requirements table above. All of our interest rate swap agreements at September 30, 2007 qualify for hedge accounting and are summarized as follows:
                                         
Fixed interest rate
    4.07%       3.98%       5.51%       4.95%       5.34%  
Notional amount (in millions)
    $50.0       $50.0       $50.0       $75.0       $100.0  
Effective date
    5/26/2005       6/2/2005       6/20/2006       4/30/2007       6/11/2007  
Expiration date
    5/26/2008       5/31/2008       6/30/2009       4/30/2009       12/31/2009  
Counterparties
  Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo   Goldman Sachs
     In the future, we may enter into additional interest rate strategies. However, we have not yet determined what those strategies will be or their possible impact.
Description of Indebtedness
Senior Credit Facility
     At September 30, 2007, we had $529.0 million principal amount outstanding under our senior term notes and no borrowings outstanding under our revolving credit facility.
     We pay interest on our senior term notes and our revolving credit facility based on the interest rate offered to our administrative agent on LIBOR plus a margin of 1.50% per annum.
     The senior term notes mature in May 2011 and the revolving credit facility matures in May 2010.
Other Debt
     At September 30, 2007, we had seller notes secured by assets of certain animal hospitals, unsecured debt and capital leases that totaled $33.2 million.
Critical Accounting Policies
 
     Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, which require management to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and on other factors that management believes to be reasonable. Actual results may differ from those estimates. Critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements. A discussion of such critical accounting policies, which include goodwill, revenue recognition, and income taxes can be found in our Annual Report on Form 10-K for the year ended December 31, 2006. Except for income taxes, there have been no material changes to those policies as of this Quarterly Report on Form 10-Q for the period ended September 30, 2007. The methodology applied to management’s estimate for income taxes has changed due to the implementation of a new accounting pronouncement as described below.
     Effective January 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We did not have any unrecognized tax benefits at January 1, 2007, and accordingly, the adoption of FIN 48 did not have a material effect on our condensed, consolidated financial statements.

25


Table of Contents

Recent Accounting Pronouncements
     As mentioned above, in the first quarter of 2007, we adopted FIN 48.
     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which establishes a framework for using and disclosing estimates in accounting for certain assets, liabilities and transactions at fair value. The provisions of SFAS No. 157 will be effective for our company on January 1, 2008. We are currently evaluating the impact of adopting SFAS No. 157 on our consolidated financial statements.
     In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB No.115 (“SFAS No. 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The provisions of SFAS No. 159 will be effective for our company on January 1, 2008. We are currently evaluating the impact of adopting SFAS No. 159 on our consolidated financial statements.
Forward-Looking Statements
     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties, as well as assumptions that, if they materialize or prove incorrect, could cause our results and the results of our consolidated subsidiaries to differ materially from those expressed or implied by these forward-looking statements. We generally identify forward-looking statements in this report using words like “believe,” “intend,” “expect,” “estimate,” “may,” “plan,” “should plan,” “project,” “contemplate,” “anticipate,” “predict,” “potential,” “continue,” or similar expressions. You may find some of these statements in this report. These forward-looking statements are not historical facts and are inherently uncertain and outside of our control. Any or all of our forward-looking statements in this report may turn out to be wrong. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties. Many factors mentioned in our discussion in this report will be important in determining future results. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially. Factors that may cause our plans, expectations, future financial condition and results to change are described throughout this report and in our Annual Report on Form 10-K, particularly in Risk Factors , Part I, Item 1A of that report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     At September 30, 2007, we had borrowings of $529.0 million under our senior credit facility with fluctuating interest rates based on market benchmarks such as LIBOR. For our variable-rate debt, changes in interest rates generally do not affect the fair market value, but do impact earnings and cash flow. To reduce the risk of increasing interest rates, we entered into $325.0 million of interest rate swap agreements. Currently, we have entered into the following interest rate swap agreements:
                                         
Fixed interest rate
    4.07%       3.98%       5.51%       4.95%       5.34%  
Notional amount (in millions)
    $50.0       $50.0       $50.0       $75.0       $100.0  
Effective date
    5/26/2005       6/2/2005       6/20/2006       4/30/2007       6/11/2007  
Expiration date
    5/26/2008       5/31/2008       6/30/2009       4/30/2009       12/31/2009  
Counterparties
  Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo   Goldman Sachs
     These interest rate swap agreements have the effect of reducing the amount of our debt exposed to variable interest rates from $529.0 million to $204.0 million. For the 12-month period ending September 30, 2008, for every 1.0% increase in LIBOR we will pay an additional $2.4 million in interest expense and for every 1.0% decrease in LIBOR we will save $2.4 million in interest expense.
     We may consider entering into additional interest rate strategies. However, we have not yet determined what those strategies may be or their possible impact.
ITEM 4. CONTROLS AND PROCEDURES
     As of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer, based on their evaluation as of the end of the period covered by this Form 10-Q, concluded that our disclosure

26


Table of Contents

controls and procedures are effective in timely alerting them to information we are required to include in our periodic reports filed with the SEC.
     During our most recent fiscal quarter, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
     We are not subject to any legal proceedings other than ordinarily routine litigation incidental to the conduct of our business.
ITEM 1A. RISK FACTORS
     For information regarding risk factors, please refer to Item 1A in our 2006 Annual Report on Form 10-K. There have not been any material changes in the risk factors disclosed in our 2006 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
     None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
     None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     None
ITEM 5. OTHER INFORMATION
     None
ITEM 6. EXHIBITS
  31.1   Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
  31.2   Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
  32.1   Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

27


Table of Contents

SIGNATURE
     Pursuant to the requirements of Section 13 or 15(d) 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 on November 6, 2007.
             
Date: November 6, 2007
  By:   /s/ Tomas W. Fuller    
 
           
    Tomas W. Fuller    
    Chief Financial Officer    

28


Table of Contents

EXHIBIT INDEX
     
Exhibit No.   Description
 
31.1
  Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

29


 

EXHIBIT 31.1
Certification of
Chief Executive Officer
of VCA Antech, Inc.
I, Robert L. Antin, certify that:
1.   I have reviewed this Quarterly Report on Form 10-Q of VCA Antech, Inc.;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2007
     
/s/ Robert L. Antin
 
    
Robert L. Antin
   
Chief Executive Officer
   

 


 

EXHIBIT 31.2
Certification of
Chief Financial Officer
of VCA Antech, Inc.
I, Tomas W. Fuller, certify that:
1.   I have reviewed this Quarterly Report on Form 10-Q of VCA Antech, Inc.;
 
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  a.   Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
  b.   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
  c.   Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
  d.   Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  a.   All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
  b.   Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 6, 2007
     
/s/ Tomas W. Fuller
 
    
Tomas W. Fuller
Chief Financial Officer
   

 


 

EXHIBIT 32.1
Certification of
Chief Executive Officer & Chief Financial Officer
of VCA Antech, Inc.
     This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and accompanies this Quarterly Report on Form 10-Q (the “Report”) for the period ended September 30, 2007 of VCA Antech, Inc. (the “Issuer”).
     Each of the undersigned, who are the Chief Executive Officer and Chief Financial Officer, respectively, of VCA Antech, Inc., hereby certify that, to the best of each such officer’s knowledge:
  (i)   the Report fully complies with the requirements of section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and
 
  (ii)   the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
Dated: November 6, 2007
         
 
  /s/ Robert L. Antin
 
   
 
  Robert L. Antin
Chief Executive Officer
   
 
       
 
  /s/ Tomas W. Fuller
 
   
 
  Tomas W. Fuller    
 
  Chief Financial Officer