VCA Inc.
VCA ANTECH INC (Form: 10-Q, Received: 05/09/2008 13:47:43)
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 March 31, 2008
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-16783
 
VCA Antech, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware
(State or other jurisdiction of
incorporation or organization)
  95-4097995
(I.R.S. Employer
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, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
             
Large accelerated filer  þ   Accelerated filer  o   Non-accelerated filer  o   Smaller reporting company  o
    (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes  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, 84,351,947 shares as of May 1, 2008.
 
 

 


 

VCA Antech, Inc.
Form 10-Q
March 31, 2008
Table of Contents
             
        Page
        Number
 
           
  Financial Information        
 
           
  Financial Statements (Unaudited)        
 
           
 
  Condensed, Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007     1  
 
           
 
  Condensed, Consolidated Income Statements for the Three Months Ended March 31, 2008 and 2007     2  
 
           
 
  Condensed, Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007     3  
 
           
 
  Notes to Condensed, Consolidated Financial Statements     4  
 
           
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     14  
 
           
  Quantitative and Qualitative Disclosures About Market Risk     27  
 
           
  Controls and Procedures     27  
 
           
  Other Information        
 
           
  Legal Proceedings     28  
 
           
  Risk Factors     28  
 
           
  Unregistered Sales of Equity Securities and Use of Proceeds     28  
 
           
  Defaults Upon Senior Securities     28  
 
           
  Submission of Matters to a Vote of Security Holders     28  
 
           
  Other Information     28  
 
           
  Exhibits     28  
 
           
 
  Signature     29  
 
           
 
  Exhibit Index     30  
  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)
                 
    March 31,     December 31,  
    2008     2007  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 86,244     $ 110,866  
Trade accounts receivable, less allowance for uncollectible accounts of $10,834 and $10,940 at March 31, 2008 and December 31, 2007, respectively
    48,445       42,650  
Inventory
    25,100       25,517  
Prepaid expenses and other
    15,246       15,307  
Deferred income taxes
    14,659       14,402  
Prepaid income taxes
          8,160  
 
           
Total current assets
    189,694       216,902  
Property and equipment, less accumulated depreciation and amortization of $130,832 and $124,884 at March 31, 2008 and December 31, 2007, respectively
    220,879       214,020  
Goodwill
    866,096       821,967  
Other intangible assets, net
    24,548       22,373  
Notes receivable, net
    9,510       3,493  
Deferred financing costs, net
    1,421       1,537  
Other
    15,427       6,419  
 
           
Total assets
  $ 1,327,575     $ 1,286,711  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Current portion of long-term obligations
  $ 7,794     $ 7,886  
Accounts payable
    29,998       28,092  
Accrued payroll and related liabilities
    32,712       38,341  
Income taxes payable
    8,673        
Other accrued liabilities
    49,073       42,074  
 
           
Total current liabilities
    128,250       116,393  
Long-term obligations, less current portion
    550,411       552,294  
Deferred income taxes
    27,871       28,197  
Other liabilities
    10,709       11,236  
Minority interest
    12,015       10,207  
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, 84,350 and 84,335 shares outstanding as of March 31, 2008 and December 31, 2007, respectively
    84       84  
Additional paid-in capital
    297,673       296,037  
Accumulated earnings
    306,800       275,598  
Accumulated other comprehensive loss
    (6,238 )     (3,335 )
 
           
Total stockholders’ equity
    598,319       568,384  
 
           
Total liabilities and stockholders’ equity
  $ 1,327,575     $ 1,286,711  
 
           
The accompanying notes are an integral part of these condensed, consolidated financial statements.

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Table of Contents

VCA Antech, Inc. and Subsidiaries
Condensed, Consolidated Income Statements
(Unaudited)
(In thousands, except per share amounts)
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Revenue
  $ 307,832     $ 265,145  
Direct costs
    224,801       189,225  
 
           
Gross profit
    83,031       75,920  
Selling, general and administrative expense
    23,178       21,473  
Write-down and (gain) loss on sale of assets
    (184 )     122  
 
           
Operating income
    60,037       54,325  
Interest expense, net
    7,615       5,773  
Other expense
    177       55  
 
           
Income before minority interest and provision for income taxes
    52,245       48,497  
Minority interest in income of subsidiaries
    957       846  
 
           
Income before provision for income taxes
    51,288       47,651  
Provision for income taxes
    20,086       19,338  
 
           
Net income
  $ 31,202     $ 28,313  
 
           
 
               
Basic earnings per share
  $ 0.37     $ 0.34  
 
           
Diluted earnings per share
  $ 0.36     $ 0.33  
 
           
 
               
Weighted-average shares outstanding for basic earnings per share
    84,348       83,924  
 
           
Weighted-average shares outstanding for diluted earnings per share
    85,865       85,649  
 
           
The accompanying notes are an integral part of these condensed, consolidated financial statements.

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VCA Antech, Inc. and Subsidiaries
Condensed, Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Cash flows from operating activities:
               
Net income
  $ 31,202     $ 28,313  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation and amortization
    7,263       5,931  
Amortization of debt costs
    116       61  
Provision for uncollectible accounts
    820       1,425  
Write-down and (gain) loss on sale of assets
    (184 )     122  
Share-based compensation
    1,309       1,217  
Minority interest in income of subsidiaries
    957       846  
Distributions to minority interest partners
    (760 )     (645 )
Deferred income taxes
    2,329       1,159  
Excess tax benefit from exercise of stock options
    (133 )     (922 )
Other
    86       (142 )
Changes in operating assets and liabilities:
               
Accounts receivable
    (6,463 )     (6,040 )
Inventory, prepaid expenses and other assets
    (2,351 )     (398 )
Accounts payable and other accrued liabilities
    2,767       (2,279 )
Accrued payroll and related liabilities
    (5,629 )     (2,270 )
Income taxes
    16,946       17,637  
 
           
Net cash provided by operating activities
    48,275       44,015  
 
           
Cash flows used in investing activities:
               
Business acquisitions, net of cash acquired
    (47,826 )     (32,203 )
Real estate acquired in connection with business acquisitions
    (3,612 )     (7,929 )
Property and equipment additions
    (9,463 )     (11,875 )
Proceeds from sale of assets
    1,747       1,564  
Other
    (12,124 )     110  
 
           
Net cash used in investing activities
    (71,278 )     (50,333 )
 
           
Cash flows used in financing activities:
               
Repayment of long-term obligations
    (1,966 )     (2,302 )
Proceeds from issuance of common stock under stock option plans
    214       839  
Excess tax benefit from exercise of stock options
    133       922  
 
           
Net cash used in financing activities
    (1,619 )     (541 )
 
           
Decrease in cash and cash equivalents
    (24,622 )     (6,859 )
Cash and cash equivalents at beginning of period
    110,866       45,104  
 
           
Cash and cash equivalents at end of period
  $ 86,244     $ 38,245  
 
           
The accompanying notes are an integral part of these condensed, consolidated financial statements.

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements
March 31, 2008
(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 March 31, 2008, we operated 36 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 March 31, 2008, we operated 456 animal hospitals throughout 39 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 months ended March 31, 2008, are not necessarily indicative of the results to be expected for the full year ending December 31, 2008. For further information, refer to our consolidated financial statements and notes thereto included in our 2007 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 three months ended March 31, 2008:
         
Animal hospitals:
       
Acquisitions
    21  
Acquisitions relocated into our existing animal hospitals
    (1 )
 
     
Total
    20  
 
     

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Table of Contents

VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
3. Acquisitions, continued
      Animal Hospital Acquisitions
     The following table summarizes the preliminary purchase price, including acquisition costs, paid by us for the 21 animal hospitals we acquired during the three months ended March 31, 2008, and the preliminary allocation of the purchase price (in thousands):
         
Preliminary Purchase Price:
       
Cash
  $ 45,789  
Liabilities assumed
    2,394  
 
     
Total
  $ 48,183  
 
     
 
       
Preliminary Allocation of the Purchase Price:
       
Tangible assets
  $ 1,918  
Identifiable intangible assets
    3,568  
Goodwill (1)
    42,697  
 
     
Total
  $ 48,183  
 
     
 
(1)   We expect that $38.9 million of the goodwill recorded for these acquisitions as of March 31, 2008 will be fully deductible for income tax purposes.
      Other Acquisition Payments
     In connection with substantially all of our acquisitions, we withheld a portion of the purchase price (“holdback”) as security for indemnification obligations of the sellers under the acquisition agreement. We paid $1.3 million to sellers for the unused portion of holdbacks during the three months ended March 31, 2008. The total outstanding holdbacks at March 31, 2008 and December 31, 2007 were $3.1 million and $2.2 million, respectively.
     We also paid $213,000 for earn-out payments during the three months ended March 31, 2008.
4. 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 three months ended March 31, 2008 (in thousands):
                                 
            Animal     Medical        
    Laboratory     Hospital     Technology     Total  
Balance as of December 31, 2007
  $ 95,344     $ 707,463     $ 19,160     $ 821,967  
Goodwill acquired
          42,697             42,697  
Goodwill related to partnership interests (1)
          2,168             2,168  
Other (2)
          (736 )           (736 )
 
                       
Balance as of March 31, 2008
  $ 95,344     $ 751,592     $ 19,160     $ 866,096  
 
                       
 
(1)   In various circumstances we are required to, or elect to, purchase the minority interest in certain of our partnership arrangements.
 
(2)   Other includes purchase price adjustments and earn-out payments.

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
4. Goodwill and Other Intangible Assets, continued
      Other Intangible Assets
     In addition to goodwill, we have amortizable intangible assets at March 31, 2008 and December 31, 2007 as follows (in thousands):
                                                 
    As of March 31, 2008     As of December 31, 2007  
    Gross             Net     Gross             Net  
    Carrying     Accumulated     Carrying     Carrying     Accumulated     Carrying  
    Amount     Amortization     Amount     Amount     Amortization     Amount  
Covenants not-to-compete
  $ 15,275     $ (7,223 )   $ 8,052     $ 13,487     $ (6,928 )   $ 6,559  
Non-contractual customer relationships
    14,336       (3,161 )     11,175       12,992       (2,755 )     10,237  
Favorable lease asset
    5,612       (1,174 )     4,438       5,594       (1,019 )     4,575  
Technology
    1,270       (885 )     385       1,270       (822 )     448  
Trademarks
    582       (199 )     383       582       (185 )     397  
Contracts
    380       (333 )     47       380       (309 )     71  
Client lists
    116       (48 )     68       137       (51 )     86  
 
                                   
Total
  $ 37,571     $ (13,023 )   $ 24,548     $ 34,442     $ (12,069 )   $ 22,373  
 
                                   
     The following table summarizes our aggregate amortization expense related to other intangible assets (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Aggregate amortization expense
  $ 1,204     $ 965  
 
           
     The estimated amortization expense related to intangible assets for each of the five succeeding years and thereafter as of March 31, 2008 is as follows (in thousands):
         
Remainder of 2008
  $ 4,059  
2009
    4,391  
2010
    3,581  
2011
    2,761  
2012
    1,563  
Thereafter
    8,193  
 
     
Total
  $ 24,548  
 
     

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
5. Other Accrued Liabilities
     Other accrued liabilities consisted of the following (in thousands):
                 
    March 31,     December 31,  
    2008     2007  
Accrued workers’ compensation insurance
  $ 6,218     $ 6,051  
Deferred revenue
    7,476       7,018  
Interest rate swap liability
    10,573       5,827  
Accrued health insurance
    3,532       3,273  
Holdbacks
    3,100       2,215  
Accrued lease payments
    2,168       2,329  
Accrued liability insurance
    1,897       1,787  
Accrued post-retirement healthcare
    1,562       1,281  
Accrued accounting fees
    1,038       690  
Other
    11,509       11,603  
 
           
 
  $ 49,073     $ 42,074  
 
           
6. Interest Rate Swap Agreements
     We have entered into interest rate swap agreements whereby we pay to the counterparties amounts based on fixed interest rates and set notional principal amounts in exchange for the receipt of payments from counterparties based on current LIBOR and the same set notional principal amounts. The purpose of these hedges is to offset the variability of cash flows due to our outstanding variable rate debt under our senior term notes. A summary of these agreements is as follows:
                                                 
    Interest Rate Swap Agreements    
     
Fixed interest rate
    4.07%       3.98%       5.51%       4.95%       5.34%       2.64%  
Notional amount (in millions)
    $50.0       $50.0       $50.0       $75.0       $100.0       $100.0  
Effective date
    5/26/2005       6/2/2005       6/20/2006       4/30/2007       6/11/2007       2/12/2008  
Expiration date
    5/26/2008       5/31/2008       6/30/2009       4/30/2009       12/31/2009       2/26/2010  
Counterparties
  Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo
Qualifies for hedge accounting
  Yes   Yes   Yes   Yes   Yes   Yes
     The following table summarizes cash received or cash paid and unrealized gains or losses recognized as a result of our interest rate swap agreements (in thousands):
                 
    Three Months
    Ended March 31,
    2008   2007
Cash paid (received) (1)
  $ 782     $ (489 )
Recognized loss (2)
  $ 177     $ 55  
 
(1)   These amounts are included in interest expense in our consolidated income statements.
 
(2)   These recognized losses are included in other expense in our consolidated income statements.
     On January 1, 2008, we adopted the applicable provisions of SFAS No. 157, Fair Value Measurement s (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements related to financial instruments. In December 2007, the FASB provided a one-year deferral of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
6. Interest Rate Swap Agreements, continued
disclosed at fair value on a recurring basis, at least annually. Accordingly, our adoption of SFAS No. 157 was limited to our financial assets and liabilities, which consist of our interest rate swap agreements.
     We use the market approach to measure fair value for our interest rate swap agreements. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
     SFAS No. 157 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. SFAS No. 157 establishes a three-tiered fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:
    Level 1. Observable inputs such as quoted prices in active markets;
 
    Level 2. Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
 
    Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
     The following table reflects the fair value as defined by SFAS No. 157, of our interest rate swap agreements which are measured on a recurring basis (in thousands):
                                 
            Basis of Fair Value Measurement  
            Quoted Prices     Significant Other     Significant  
    Balance at     In Active Markets     Observable     Unobservable  
    March 31,     for Identical Items     Inputs     Inputs  
    2008     (Level 1)     (Level 2)     (Level 3)  
Interest rate swap agreements:
                               
Other accrued liabilities
  $ 10,573     $     $ 10,573     $  
 
                       
7. Share-Based Compensation
      Stock Option Activity
     There were no stock options granted during the three months ended March 31, 2008. The aggregate intrinsic value of our stock options exercised during the three months ended March 31, 2008 was $415,000 and the actual tax benefit realized on options exercised during this period was $162,000. The total fair value of options vested during the three months ended March 31, 2008 was $36,000.
     At March 31, 2008 there was $953,000 of total unrecognized compensation cost related to our stock options. This cost is expected to be recognized over a weighted-average period of less than one year.
     The compensation cost that has been charged against income for stock options for the three months ended March 31, 2008 and 2007 was $437,000 and $572,000, respectively. The corresponding income tax benefit recognized was $170,000 and $217,000 for the three months ended March 31, 2008 and 2007, respectively.

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
7. Share-Based Compensation, continued
      Non-vested Stock Activity
     During the three months ended March 31, 2008, we granted 410,780 shares of non-vested common stock, 177,000 of which were issued to certain of our executives and contain performance conditions. These awards provide that the number of shares that will ultimately vest will be between 0% and 100% of the total granted based upon the attainment of performance targets. Assuming continued service through each vesting date, these awards vest in three installments as follows: 25% in March 2010, 50% in March 2011 and 25% in March 2012.
     Total compensation cost charged against income related to non-vested stock awards was $872,000 and $645,000 for the three months ended March 31, 2008 and 2007, respectively. The corresponding income tax benefit recognized in the income statement was $339,000 and $256,000 for the three months ended March 31, 2008 and 2007, respectively. At March 31, 2008, there was $19.2 million of unrecognized compensation cost related to these non-vested shares that will be recognized over a weighted-average period of 3.5 years, assuming the performance conditions are met. A summary of our non-vested stock activity for the three months ended March 31, 2008 is as follows (in thousands, except per share amounts):
                 
            Weighted-  
            Average Fair  
            Value  
    Shares     Per Share  
Outstanding at December 31, 2007
    352,832     $ 32.90  
Granted
    410,780       30.30  
Vested
           
Forfeited/Canceled
    (1,500 )     32.34  
 
           
Outstanding at March 31, 2008
    762,112     $ 31.50  
 
           
8. Calculation of Earnings per Share
     Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the 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 the period. Basic and diluted earnings per share were calculated as follows (in thousands, except per share amounts):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Net income
  $ 31,202     $ 28,313  
 
           
 
               
Weighted-average common shares outstanding:
               
Basic
    84,348       83,924  
Effect of dilutive potential common shares:
               
Stock options and non-vested shares
    1,517       1,725  
 
           
Diluted
    85,865       85,649  
 
           
 
               
Basic earnings per share
  $ 0.37     $ 0.34  
 
           
Diluted earnings per share
  $ 0.36     $ 0.33  
 
           

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
8. Calculation of Earnings per Share, continued
     For the three months ended March 31, 2008 and 2007, potential common shares of 39,997 and 39,341, respectively, were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect.
9. Comprehensive Income
     Total comprehensive income consists of net income and the other comprehensive loss. The following table provides a summary of comprehensive income (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Net income
  $ 31,202     $ 28,313  
Other comprehensive loss:
               
Unrealized loss on hedging instruments, net of tax benefit of $1,919 in 2008 and $178 in 2007
    (3,011 )     (374 )
Loss on hedging instruments reclassified to income, net of tax benefit of $70 in 2008 and $22 in 2007
    108       33  
 
           
Other comprehensive loss
    (2,903 )     (341 )
 
           
Total comprehensive income
  $ 28,299     $ 27,972  
 
           
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 2007 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.

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
10. Segment Reporting, continued
     The following 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 March 31, 2008
                                               
 
                                               
External revenue
  $ 69,058     $ 226,100     $ 12,674     $     $     $ 307,832  
Intercompany revenue
    7,671             1,175             (8,846 )      
 
                                   
Total revenue
    76,729       226,100       13,849             (8,846 )     307,832  
Direct costs
    39,387       184,963       8,936             (8,485 )     224,801  
 
                                   
Gross profit
    37,342       41,137       4,913             (361 )     83,031  
Selling, general and administrative expense
    4,951       5,478       3,434       9,315             23,178  
Write-down and (gain) loss on sale of assets
    (11 )     (193 )     20                   (184 )
 
                                   
Operating income (loss)
  $ 32,402     $ 35,852     $ 1,459     $ (9,315 )   $ (361 )   $ 60,037  
 
                                   
 
                                               
Depreciation and amortization
  $ 1,647     $ 4,883     $ 397     $ 459     $ (123 )   $ 7,263  
Capital expenditures
  $ 1,778     $ 7,055     $ 82     $ 825     $ (277 )   $ 9,463  
 
                                               
Three Months Ended March 31, 2007
                                               
 
                                               
External revenue
  $ 67,242     $ 187,171     $ 10,732     $     $     $ 265,145  
Intercompany revenue
    6,355             440             (6,795 )      
 
                                   
Total revenue
    73,597       187,171       11,172             (6,795 )     265,145  
Direct costs
    37,595       151,591       6,861             (6,822 )     189,225  
 
                                   
Gross profit
    36,002       35,580       4,311             27       75,920  
Selling, general and administrative expense
    4,967       5,560       2,935       8,011             21,473  
Write-down and loss on sale of assets
          122                         122  
 
                                   
Operating income (loss)
  $ 31,035     $ 29,898     $ 1,376     $ (8,011 )   $ 27     $ 54,325  
 
                                   
 
                                               
Depreciation and amortization
  $ 1,353     $ 3,870     $ 379     $ 418     $ (89 )   $ 5,931  
Capital expenditures
  $ 3,123     $ 6,956     $ 248     $ 1,610     $ (62 )   $ 11,875  
 
                                               
At March 31, 2008
                                               
Total assets
  $ 184,071     $ 969,392     $ 49,063     $ 132,351     $ (7,302 )   $ 1,327,575  
 
                                   
At December 31, 2007
                                               
Total assets
  $ 178,846     $ 934,366     $ 54,954     $ 125,173     $ (6,628 )   $ 1,286,711  
 
                                   
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 2007 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 criteria is established. If the specified financial criteria are attained, at March 31, 2008, we will be obligated to pay an additional $1.0 million.

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
11. Commitments and Contingencies, continued
      b. Officers’ Compensation
     Each of our Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) and Chief Financial Officer (“CFO”) has entered into an employment agreement with our company. The agreements provide for a base salary 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 following remaining term: five years for the CEO, three years for the COO and two years for the CFO. Our Senior Vice President (“SVP”) has entered into a letter agreement with the Company pursuant to which certain payments will be made to our SVP in the event his employment is terminated.
     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 (and in the case of our SVP, for two years), the continued vesting of his non-vested stock, the acceleration of the vesting of his options that would have vested during the 24 months following the date of termination, 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 (or, in the case of our SVP, he terminates his employment for good reason), we terminate any of their employment agreements (or, in the case of our SVP, we terminate his employment) without cause or a change of control occurs (in which case such employment agreements, and our SVP’s employment with us, terminate automatically), each officer is entitled to receive the remaining base salary during the remaining scheduled term of his employment agreement (and in the case of our SVP, for two years), a bonus based on past bonuses, the continued vesting of his non-vested stock, 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. Notwithstanding the foregoing, if the CFO’s employment agreement or our SVP’s employment is terminated by us without cause, accelerated vesting of their respective options will be limited to those options that would have vested during the 24 months following the date of termination.
     In the event of a change of control, the cash value of all benefits due under their employment contracts (or, in the case of our SVP, his letter agreement) 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.
      c. Other Contingencies
     We have certain contingent liabilities resulting from litigation and claims incident to the ordinary course of our business. We believe that the probable resolution of such contingencies will not have a material adverse effect on our consolidated financial position, results of operations or cash flows.
12. Recent Accounting Pronouncements
     In September 2006, the FASB issued SFAS No. 157 which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, it eliminates inconsistencies in the guidance provided in previous accounting pronouncements. In December 2007, the FASB provided a one-year deferral of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis, at least annually. Accordingly, we adopted SFAS No. 157 on January 1, 2008, as required for our financial assets and financial liabilities, which did not have a material impact on our consolidated financial statements. The provisions of SFAS No. 157 as it related to our non-financial assets and liabilities will be effective for our company on January 1, 2009. We are currently evaluating the impact of SFAS No. 157 with respect to our non-financial assets and liabilities on our consolidated financial statements.
     In February 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”), which permits entities to choose to measure certain financial instruments and other

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VCA Antech, Inc. and Subsidiaries
Notes To Condensed, Consolidated Financial Statements (Continued)
12. Recent Accounting Pronouncements, continued
eligible items at fair value when the items are not otherwise currently required to be measured at fair value. We adopted SFAS No. 159 on January 1, 2008. Upon adoption, we did not elect the fair value option for any items within the scope of SFAS No. 159 and, therefore, the adoption of SFAS No. 159 did not have an impact on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. The provisions of SFAS No. 141R will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 141R on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. This new standard will significantly change the accounting for transactions with minority interest holders. The provisions of SFAS No. 160 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 160 on our consolidated financial statements.
     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of SFAS No. 133 (“SFAS No. 161”). SFAS No. 161 will change the disclosure requirement for derivative instruments and hedging activities to enhance the current disclosure framework in SFAS No. 133. The additional disclosures will require information about how derivatives and hedging activities affect an entity’s financial position, financial performance, and cash flows. The provisions of SFAS No. 161 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 161 on our consolidated financial statements.
     In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends FASB Statement No. 142, Goodwill and Other Intangible Assets, to improve the consistency between the useful life of a recognized intangible asset under Statement No. 142 and the period of expected cash flows used to measure the fair value of the asset under Statement No 141, Business Combinations , and other U.S. GAAP. The provisions of FSP FAS 142-3 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting FSP FAS 142-3 on our consolidated financial statements.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
         
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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 May 9, 2008, and we undertake no duty to update this information. Shareholders and prospective investors can find information filed with the SEC after May 9, 2008 at our website at http://investor.vcaantech.com or at the SEC’s website at www.sec.gov .
     We are a leading national animal healthcare company. We provide 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 March 31, 2008, our laboratory network consisted of 36 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 March 31, 2008, our animal hospital network consisted of 456 animal hospitals in 39 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 company delivered strong operating results during the three months ended March 31, 2008, achieved through a combination of continued internal revenue growth and acquisitions. Although we experienced some impact from both economic factors and high internal revenue comparisons related to the 2007 pet food recall, our laboratory internal revenue growth was 4.1%, while our animal hospital same-store revenue growth was 1.9%.

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      Acquisitions and Facilities
     Our growth strategy includes the acquisition of independent animal hospitals. We currently anticipate that animal hospital acquired revenue for 2008 will range from $60.0 million to $70.0 million. In addition, we also evaluate the acquisition of animal hospital chains, laboratories or related businesses if favorable opportunities are presented. The following table summarizes the changes in the number of facilities operated by our animal hospital segment during the three months ended March 31, 2008:
         
Animal hospitals:
       
Beginning of period
    438  
Acquisitions
    21  
Acquisitions relocated into our existing animal hospitals
    (1 )
Sold or closed
    (2 )
 
     
End of period
    456  
 
     
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 revenue recognition, valuation of goodwill and other intangible assets, income taxes, and self-insured liabilities can be found in our Annual Report on Form 10-K for the year ended December 31, 2007. There have been no material changes to those policies as of this Quarterly Report on Form 10-Q for the period ended March 31, 2008.

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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  
    March 31,  
    2008     2007  
Revenue:
               
Laboratory
    24.9 %     27.8 %
Animal hospital
    73.4       70.6  
Medical technology
    4.5       4.2  
Intercompany
    (2.8 )     (2.6 )
 
           
Total revenue
    100.0       100.0  
Direct costs
    73.0       71.4  
 
           
Gross profit
    27.0       28.6  
Selling, general and administrative expense
    7.5       8.1  
 
           
Operating income
    19.5       20.5  
Interest expense, net
    2.5       2.2  
 
           
Income before minority interest and provision for income taxes
    17.0       18.3  
Minority interest in income of subsidiairies
    0.3       0.3  
 
           
Income before provision for income taxes
    16.7       18.0  
Provision for income taxes
    6.6       7.3  
 
           
Net income
    10.1 %     10.7 %
 
           
      Revenue
     The following table summarizes our revenue (in thousands, except percentages):
                                         
    Three Months Ended March 31,        
    2008     2007        
            % of             % of        
    $     Total     $     Total     % Change  
Laboratory
  $ 76,729       24.9 %   $ 73,597       27.8 %     4.3 %
Animal hospital
    226,100       73.4 %     187,171       70.6 %     20.8 %
Medical technology
    13,849       4.5 %     11,172       4.2 %     24.0 %
Intercompany
    (8,846 )     (2.8 )%     (6,795 )     (2.6 )%     30.2 %
 
                                   
Total revenue
  $ 307,832       100.0 %   $ 265,145       100.0 %     16.1 %
 
                                   
     Consolidated revenue increased $42.7 million for the three months ended March 31, 2008. The increase in consolidated revenue was attributable primarily to revenue from acquired animal hospitals, including Healthy Pet which was acquired on June 1, 2007. The increase was also due to an increase in organic revenues. During the three months ended March 31, 2008, we experienced animal hospital same-store revenue growth of 1.9% driven mainly by an increase in the average revenue per order which resulted from the overall mix of business as discussed further below under Segment Results . Also contributing to the increase in organic revenues were medical technology revenue growth of 24.0% and laboratory internal revenue growth of 4.1%.

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      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 March 31,        
    2008     2007        
            Gross             Gross        
    $     Margin     $     Margin     % Change  
Laboratory
  $ 37,342       48.7 %   $ 36,002       48.9 %     3.7 %
Animal hospital
    41,137       18.2 %     35,580       19.0 %     15.6 %
Medical technology
    4,913       35.5 %     4,311       38.6 %     14.0 %
Intercompany
    (361 )             27                  
 
                                   
Total gross profit
  $ 83,031       27.0 %   $ 75,920       28.6 %     9.4 %
 
                                   
     Consolidated gross profit increased $7.1 million for the three months ended March 31, 2008. The increase was primarily due to acquired animal hospitals as discussed above and organic growth. The increase in organic gross profit was due primarily to growth in the year over year requisitions in our laboratory business combined with an increase in the average revenue per order in our hospital business. Our hospital same-store gross margin remained relatively flat in comparison to the previous year totaling 19.0%.
      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 March 31,        
    2008     2007        
            % of             % of        
    $     Revenue     $     Revenue     % Change  
Laboratory
  $ 4,951       6.5 %   $ 4,967       6.7 %     (0.3 )%
Animal hospital
    5,478       2.4 %     5,560       3.0 %     (1.5 )%
Medical technology
    3,434       24.8 %     2,935       26.3 %     17.0 %
Corporate
    9,315       3.0 %     8,011       3.0 %     16.3 %
 
                                   
Total SG&A
  $ 23,178       7.5 %   $ 21,473       8.1 %     7.9 %
 
                                   
     Consolidated selling, general and administrative expense increased $1.7 million for the three months ended March 31, 2008. The increase was primarily attributable to expanding our administrative operations in order to manage our recent acquisitions, compensation and benefits related to annual salary increases, share-based compensation expense due to non-vested shares granted in 2007, and commissions as a result of our medical technology segment’s strong operating performance.
      Write-down and (Gain) Loss on Sale of Assets
     During the three months ended March 31, 2008, we sold certain assets, including real estate, for a net gain of $303,000 and wrote-off certain other assets totaling $119,000.

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      Operating Income
     The following table summarizes our operating income (in thousands, except percentages):
                                         
    Three Months Ended March 31,        
    2008     2007        
            % of             % of        
    $     Revenue     $     Revenue     % Change  
Laboratory
  $ 32,402       42.2 %   $ 31,035       42.2 %     4.4 %
Animal hospital
    35,852       15.9 %     29,898       16.0 %     19.9 %
Medical technology
    1,459       10.5 %     1,376       12.3 %     6.0 %
Corporate
    (9,315 )     (3.0 )%     (8,011 )     (3.0 )%     16.3 %
Intercompany
    (361 )     4.1 %     27       (0.4 )%     (1,437.0 )%
 
                                   
Total operating income
  $ 60,037       19.5 %   $ 54,325       20.5 %     10.5 %
 
                                   
     The increase in our consolidated operating income was primarily due to both revenue growth and our ability to leverage our existing cost structure.
      Interest Expense, Net
     The following table summarizes our interest expense, net of interest income (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Interest expense (income):
               
Senior term notes
  $ 7,013     $ 6,405  
Interest rate hedging agreements
    782       (489 )
Capital leases and other
    641       350  
Amortization of debt costs
    116       61  
 
           
 
    8,552       6,327  
Interest income
    937       554  
 
           
Total interest expense, net of interest income
  $ 7,615     $ 5,773  
 
           
     The increase in net interest expense was primarily attributable to interest payments related to our fixed rate interest rate swap agreements. During the prior year we received interest income from our swap agreements however due to the overall reduction in LIBOR rates during the current year we have been required to record interest expense related to these agreements. In addition, we incurred incremental interest expense related to the June 1, 2007 borrowing of $160.0 million under our senior credit facility related to the Healthy Pet acquisition.
      Provision for Income Taxes
     Our effective tax rate was 39.2% and 40.6% for the three months ended March 31, 2008 and 2007, respectively. The effective tax rate is subject to ongoing review and evaluation by management and could change in future quarters.

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Segment Results
      Laboratory Segment
     The following table summarizes revenue and gross profit for our laboratory segment (in thousands, except percentages):
                                         
    Three Months Ended March 31,    
    2008   2007    
            Gross           Gross    
    $   Margin   $   Margin   % Change
 
                                       
Revenue
  $ 76,729             $ 73,597               4.3 %
Gross profit
  $ 37,342       48.7 %   $ 36,002       48.9 %     3.7 %
     Laboratory revenue increased $3.1 million for the three months ended March 31, 2008 as compared to the same period in the prior year. The components of the increase in laboratory revenue are detailed below (in thousands, except percentages and average price per requisition):
                         
    Three Months Ended March 31,  
    2008     2007     % Change  
Laboratory Revenue:
                       
Internal growth:
                       
Number of requisitions (1)
    3,224       3,118       3.4 %
Average revenue per reqisition (2)
  $ 23.76     $ 23.60       0.7 %
 
                   
Total internal revenue (1)
  $ 76,615     $ 73,597       4.1 %
Acquired revenue (3)
    114                
 
                   
Total
  $ 76,729     $ 73,597       4.3 %
 
                   
 
(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 them in the prior year.
 
(2)   Computed by dividing internal revenue by the number of requisitions.
 
(3)   Acquired revenue represents revenue from acquired laboratories for each day in the current period for which we did not own the laboratories in the comparable prior year period.
     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.
     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 16,000 clients 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 the veterinary hospitals, the type and number of tests performed per requisition and price increases. The price increases for most tests ranged from 3% to 4% in both February 2008 and February 2007.
     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,

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technicians and other laboratory-based personnel, transportation and delivery costs, facilities rent, occupancy costs, depreciation and amortization and supply costs.
      Animal Hospital Segment
     The following table summarizes revenue and gross profit for the animal hospital segment (in thousands, except percentages):
                                         
    Three Months Ended March 31,    
    2008   2007    
            Gross           Gross    
    $   Margin   $   Margin   % Change
 
                                       
Revenue
  $ 226,100             $ 187,171               20.8 %
Gross profit
  $ 41,137       18.2 %   $ 35,580       19.0 %     15.6 %
     Animal hospital revenue increased $38.9 million for the three months ended March 31, 2008 as compared to the same period in the prior year. The components of the increase are summarized in the following table (in thousands, except percentages and average price per order):
                         
    Three Months Ended March 31,  
Animal Hospital Revenue:   2008     2007     % Change  
Same-store facilities:
                       
Orders (1)(2)
    1,293       1,326       (2.5 )%
Average revenue per order (3)
  $ 144.23     $ 138.01       4.5 %
 
                   
Same-store revenue (1)
  $ 186,490     $ 183,001       1.9 %
Net acquired revenue (4)
    39,610       4,170          
 
                   
Total
  $ 226,100     $ 187,171       20.8 %
 
                   
 
(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 period. 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.
 
(4)   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 January 1, 2008 for the above 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. During the three months ended March 31, 2008, we experienced a decrease in the number of orders primarily due to the reasons discussed above. We expect that this trend may continue in future periods.
     Price increases, which approximated 5% to 6% on most services at most hospitals in both February 2008 and February 2007, 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.

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     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 expenses and costs of goods sold associated with the retail sales of pet food and pet supplies.
     Consistent with our growth strategies, over the last several years we have acquired a significant number of animal hospitals. Many of these newly acquired animal hospitals had lower gross margins at the time of acquisition than those previously operated by us. Historically, these lower gross margins, in the aggregate, have been favorably impacted subsequent to the acquisition by improvements in animal hospital revenue, increased operating leverage and our integration efforts. However, due to the substantial amount of acquisition activity that has occurred in a relatively short period of time, our gross margins have declined. Our animal hospital gross margin for the three months ended March 31, 2008 and 2007 was 18.2% and 19.0%, respectively. Our animal hospital same-store gross margins remained relatively unchanged totaling 19.0% and 19.1% for the three months ended March 31, 2008 and 2007, respectively.
      Medical Technology Segment
     The following table summarizes revenue and gross profit for the medical technology segment (in thousands, except percentages):
                                         
    Three Months Ended March 31,    
    2008   2007    
            Gross           Gross    
    $   Margin   $   Margin   % Change
 
                                       
Revenue
  $ 13,849             $ 11,172               24.0 %
Gross profit
  $ 4,913       35.5 %   $ 4,311       38.6 %     14.0 %
     Medical technology revenue increased $2.7 million for the three months ended March 31, 2008 as compared to the same period in the prior year which was primarily attributable to revenue on sales of our digital radiography and ultrasound imaging equipment. Although we recognized an increase in ultrasound revenue, we believe the business life cycle for this 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.
     Medical technology gross profit increased $0.6 million for the three months ended March 31, 2008 as compared to the same period in the prior year, which was attributable to an increase in revenue as discussed above. Our medical technology gross margin declined to 35.5% for the three months ended March 31, 2008 as compared to 38.6% in the same period in the prior year, which was primarily the result of an increase in material costs related to the sale of our digital radiography imaging equipment. In 2007, we implemented a strategic shift in our pricing model in an effort to mitigate the effects of increasing competition by providing better value to our customers through additional functionality.
      Intercompany Revenue
     Laboratory revenue for the three months ended March 31, 2008 included intercompany revenue of $7.7 million that was generated by providing laboratory services to our animal hospitals. Medical technology revenue for the three months ended March 31, 2008 included intercompany revenue of $1.2 million that was generated by providing products and 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.

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Liquidity and Capital Resources
Introduction
     We generate cash primarily from payments made by customers for our veterinary services, payments from animal hospitals and other clients for our laboratory services, and from proceeds received from the sale of our imaging equipment and other related services. Our business historically has experienced strong liquidity, as fees for services provided in our animal hospitals are due at the time of service and fees for laboratory services are collected under standard industry terms. Our cash disbursements are primarily for payments related to the compensation of our employees, supplies and inventory purchases for our operating segments, occupancy and other administrative costs, interest expense, payments on long-term borrowings, capital expenditures and animal hospital acquisitions. Cash outflows fluctuate with the amount and timing of the settlement of these transactions.
     We manage our cash, investments and capital structure so we are able to meet the short-term and long-term obligations of our business while maintaining financial flexibility and liquidity. We forecast, analyze and monitor our cash flows to enable investment and financing within the overall constraints of our financial strategy.
     At March 31, 2008, our consolidated cash and cash equivalents totaled $86.2 million, representing an increase of $48.0 million as compared to the prior year. In addition, cash flows generated from operating activities totaled $48.3 million in 2008, representing an increase of $4.3 million as compared to the three months ended March 31, 2007.
     We also have access to an unused $75.0 million revolving credit facility, which allows us to maintain further operating and financial flexibility. Historically we have been able to obtain cash from other borrowings. The availability of financing in the form of debt or equity however is influenced by many factors including our profitability, operating cash flows, debt levels, debt ratings, contractual restrictions, and market conditions. Although in the past we have been able to obtain financing for material transactions on terms that we believe to be reasonable, there is a possibility that we may not be able to obtain financing on favorable terms in the future.
Future Cash Flows
      Short-term
     Other than our acquisitions of hospital chains, we historically have funded our working capital requirements, capital expenditures and investments in animal hospital acquisitions from internally generated cash flow and our revolving credit facility. We anticipate that our cash on hand, net cash provided by operations and our revolving credit facility will be sufficient to meet our anticipated cash requirements for the next 12 months. If we consummate one or more significant acquisitions during this period, we may seek additional debt or equity financing.
     In 2008, we expect to spend $60.0 million to $70.0 million related to the acquisition of independent animal hospitals. The ultimate number of acquisitions is largely dependent upon the attractiveness of the candidates and the strategic fit with our existing operations. From January 1, 2008 through March 31, 2008, we spent $45.8 million in connection with the acquisition of 21 animal hospitals. In addition, we expect to spend approximately $50.0 million in 2008 for both property and equipment additions and capital costs necessary to maintain our existing facilities.
      Long-term
     Our long-term liquidity needs, other than those related to the day-to-day operations of our business, including commitments for operating leases, generally are comprised of scheduled principal and interest payments for our outstanding long-term indebtedness, capital expenditures related to the expansion of our business and acquisitions in accordance with our growth strategy. In addition to the scheduled payments on our senior term notes, we are required to make mandatory prepayments in the event we have excess cash flow. Pursuant to the terms of our senior credit facility, mandatory prepayments are due on our senior term notes equal to 75% of any excess cash flow at the end of 2008, 2009 and 2010. Excess cash flow is defined as earnings before interest, taxes, depreciation and amortization less voluntary and scheduled debt repayments, capital expenditures, interest payable in cash, taxes payable in cash and cash paid for acquisitions. These payments reduce on a pro rata basis the remaining scheduled principal payments.
     We are unable to project with certainty whether our long-term cash flow from operations will be sufficient to repay our long-term debt when it comes due. If this cash flow is insufficient, we expect that we will need to

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refinance such indebtedness, amend its terms to extend the maturity dates, or issue common stock in our company. Our management cannot make any assurances that such refinancing or amendments, if necessary, will be available on attractive terms, if at all.
      Debt Related Covenants
     Our senior credit facility contains certain financial covenants pertaining to fixed charge coverage and leverage ratios. In addition, the senior credit facility has restrictions pertaining to capital expenditures, acquisitions and the payment of cash dividends. As of March 31, 2008, we were in compliance with these covenants.
     At March 31, 2008, we had a fixed charge coverage ratio of 1.61 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 March 31, 2008, we had a leverage ratio of 1.99 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.
Historical Cash Flows
     The following table summarizes our cash flows (in thousands):
                 
    Three Months Ended  
    March 31,  
    2008     2007  
Cash provided by (used in):
               
Operating activities
  $ 48,275     $ 44,015  
Investing activities
    (71,278 )     (50,333 )
Financing activities
    (1,619 )     (541 )
 
           
Decrease in cash and cash equivalents
    (24,622 )     (6,859 )
Cash and cash equivalents at beginning of period
    110,866       45,104  
 
           
Cash and cash equivalents at end of period
  $ 86,244     $ 38,245  
 
           
      Cash Flows from Operating Activities
     Net cash provided by operating activities increased $4.3 million in the three months ended March 31, 2008 as compared to the same period in the prior year. This increase was due primarily to improved operating performance, and additional cash generated from acquired businesses, partially offset by changes in working capital and an increase in cash paid for interest of $2.2 million.

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      Cash Flows from Investing Activities
     The table below presents the components of the changes in investing cash flows (in thousands):
                         
    Three Months Ended        
    March 31,        
Investing Cash Flows:   2008     2007     Variance  
Acquisition of independent animal hospitals
  $ (45,789 )   $ (31,092 )   $ (14,697 )(1)
Other
    (2,037 )     (1,111 )     (926 )
 
                 
Total cash used for acquisitions
    (47,826 )     (32,203 )     (15,623 )
 
                       
Property and equipment additions
    (9,463 )     (11,875 )     2,412 (2)
Real estate acquired with acquisitions
    (3,612 )     (7,929 )     4,317 (3)
Proceeds from sale of assets
    1,747       1,564       183  
Other
    (12,124 )     110       (12,234 )(4)
 
                 
Net cash used in investing activities
  $ (71,278 )   $ (50,333 )   $ (20,945 )
 
                 
 
(1)   The number of acquisitions will vary from year to year based upon the available pool of suitable candidates. A discussion of our acquisitions is provided above in the Executive Overview .
 
(2)   The decrease in cash used to acquire property and equipment was primarily due to a reduction in costs related to certain technology related initiatives in 2007 aimed at creating operational efficiencies.
 
(3)   The decrease in cash used to acquire real estate was due primarily to a decline in the number of favorable opportunities presented.
 
(4)   The increase in other investing cash flows was due primarily to certain investments in related businesses.
      Cash Flows from Financing Activities
     The table below presents the components of the changes in financing cash flows (in thousands):
                         
    Three Months Ended        
    March 31,        
Financing Cash Flows:   2008     2007     Variance  
Repayment of long-term obligations
  $ (1,966 )   $ (2,302 )   $ 336  
Proceeds from stock options exercises
    214       839       (625 )(1)
Excess tax benefits from stock options
    133       922       (789 )(1)
 
                 
Net cash used in financing activities
  $ (1,619 )   $ (541 )   $ (1,078 )
 
                 
 
(1)   The number of stock option exercises has declined in comparison to the prior year. Accordingly, there has been a decline in the amount of excess tax benefits as well.
      Off-Balance Sheet Arrangements
     Other than operating leases as of March 31, 2008, we do not have any off-balance sheet financing arrangements.
      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

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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. All of our interest rate swap agreements at March 31, 2008 qualify for hedge accounting and are summarized as follows:
                                                 
Fixed interest rate
    4.07%     3.98%       5.51%       4.95%       5.34%       2.64%  
Notional amount (in millions)
  $50.0       $50.0       $50.0       $75.0       $100.0       $100.0  
Effective date
    5/26/2005       6/2/2005       6/20/2006       4/30/2007       6/11/2007       2/12/2008  
Expiration date
    5/26/2008       5/31/2008       6/30/2009       4/30/2009       12/31/2009       2/26/2010  
Counterparties
  Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo
     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 March 31, 2008, we had $526.3 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 and Capital Lease Obligations
     At March 31, 2008, we had seller notes secured by assets of certain animal hospitals, unsecured debt and capital leases that totaled $31.9 million.
Recent Accounting Pronouncements
     In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements. However, it eliminates inconsistencies in the guidance provided in previous accounting pronouncements. In December 2007, the FASB provided a one-year deferral of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value on a recurring basis, at least annually. The provisions of SFAS No. 157 as it related to our non-financial assets and liabilities will be effective for us on January 1, 2009. Accordingly, we adopted SFAS No. 157 on January 1, 2008, as required for our financial assets and financial liabilities, which did not have a material impact on our consolidated financial statements. In accordance with the new standard, we have provided additional disclosures which are included in the discussion of our interest rate swap agreements included in our notes to consolidated financial statements. We are currently evaluating the impact of SFAS No. 157 with respect to our non-financial assets and liabilities on our consolidated financial statements.
     In February 2007, the FASB issued SFAS No. 159, Fair Value Option for Financial Assets and Financial Liabilities (“SFAS No. 159”), which permits entities to choose to measure certain financial instruments and other eligible items at fair value when the items are not otherwise currently required to be measured at fair value. We adopted SFAS No. 159 on January 1, 2008. Upon adoption, we did not elect the fair value option for any items within the scope of SFAS No. 159 and, therefore, the adoption of SFAS No. 159 did not have an impact on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (“SFAS No. 141R”). SFAS No. 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, in-process research and development and restructuring costs. In addition, under SFAS No. 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will

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impact income tax expense. The provisions of SFAS No. 141R will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 141R on our consolidated financial statements.
     In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51 (“SFAS No. 160”). SFAS No. 160 will change the accounting and reporting for minority interests, which will be re-characterized as non-controlling interests and classified as a component of equity. This new standard will significantly change the accounting for transactions with minority interest holders. The provisions of SFAS No. 160 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 160 on our consolidated financial statements.
     In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of SFAS No. 133 (“SFAS” No. 161”). SFAS No. 161 will change the disclosure requirement for derivative instruments and hedging activities to enhance the current disclosure framework in SFAS No. 133. The additional disclosures will require information about how derivatives and hedging activities affect an entity’s financial position, financial performance, and cash flows. The provisions of SFAS No. 161 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting SFAS No. 161 on our consolidated financial statements.
     In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”). FSP FAS 142-3 amends FASB Statement No. 142, Goodwill and Other Intangible Assets, to improve the consistency between the useful life of a recognized intangible asset under Statement No. 142 and the period of expected cash flows used to measure the fair value of the asset under Statement No 141, Business Combinations , and other U.S. GAAP. The provisions of FSP FAS 142-3 will be effective for our company on January 1, 2009. We are currently evaluating the impact of adopting FSP FAS 142-3 on our consolidated financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     At March 31, 2008, we had borrowings of $526.3 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 the following interest rate swap agreements:
                                                 
Fixed interest rate
    4.07%     3.98%     5.51%     4.95%     5.34%     2.64%
Notional amount (in millions)
    $50.0       $50.0       $50.0       $75.0       $100.0       $100.0  
Effective date
    5/26/2005       6/2/2005       6/20/2006       4/30/2007       6/11/2007       2/12/2008  
Expiration date
    5/26/2008       5/31/2008       6/30/2009       4/30/2009       12/31/2009       2/26/2010  
Counterparties
  Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo   Goldman Sachs   Wells Fargo
     These interest rate swap agreements have the effect of reducing the amount of our debt exposed to variable interest rates. During the three months ended March 31, 2008 we entered into an additional $100.0 million notional amount interest rate swap agreement. As a result, for every 1.0% increase in LIBOR we will pay an additional $1.8 million in pre-tax interest expense on an annualized basis and conversely for every 1.0% decrease in LIBOR we will save $1.8 million in pre-tax interest expense on an annualized basis. This represents a reduction of $0.8 million in both additional interest payments and interest savings in comparison to our estimate included in Item 7A of our 2007 Form 10-K .
     In the future, we may enter 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
     We carried out an evaluation required by the Exchange Act, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our

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principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
     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.
     Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
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
     There have been no material changes in our risk factors from those disclosed in our 2007 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
     
10.1
  Letter Agreement, dated as of April 25, 2008, by and between VCA Antech, Inc. and Neil Tauber. Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed April 28, 2008.
 
   
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.

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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 May 9, 2008.
         
     
Date: May 9, 2008  By:   /s/ Tomas W. Fuller    
    Tomas W. Fuller    
    Chief Financial Officer   

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EXHIBIT INDEX
     
Exhibit No.   Description
 
   
10.1*
  Letter Agreement, dated as of April 25, 2008, by and between VCA Antech, Inc. and Neil Tauber. Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed April 28, 2008.
 
   
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.
 
*   Management contract or compensatory plan or arrangement

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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: May 9, 2008
         
/s/ Robert L. Antin    
Robert L. Antin    
Chief Executive Officer   

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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: May 9, 2008
         
/s/ Tomas W. Fuller    
Tomas W. Fuller    
Chief Financial Officer   

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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 March 31, 2008 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: May 9, 2008
         
  /s/ Robert L. Antin    
  Robert L. Antin    
  Chief Executive Officer   
 
     
  /s/ Tomas W. Fuller    
  Tomas W. Fuller    
  Chief Financial Officer   
 

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