UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

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|ý                                                                             | ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|For the fiscal year ended September 30, 2007
Commission file number 000-51468
|OR                                                                           
|o                                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                              to               

MWI VETERINARY SUPPLY, INC.(Exact name of Registrant as specified in its Charter)

|Delaware(State of incorporation)                                   |  | 02-0620757(IRS Employer Identification No.)
|------------------------------------------------------------------ |  | -------------------------------------------
|651 S. Stratford Drive, Suite 100                                  |  |                                            
|Meridian, ID(Address of principal executive offices)               |  | 83642(Zip Code)                            
|(800) 824-3703(Registrant's telephone number, including area code)

SECURITIES
REGISTERED PURSUANT TO SECTION 12(b)
OF THE SECURITIES EXCHANGE ACT OF 1934:

Title of each class

Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value

The Nasdaq Stock Market, LLC


SECURITIES
REGISTERED PURSUANT TO SECTION 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934:NONE

Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes o No ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act.    Yes o No ý

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, as amended (the "Act") 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 ý No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (17 CFR section 405) is not contained
herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large
accelerated filer o                Accelerated filer ý                Non-accelerated
filer o

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

As of March 31, 2007 (the last business day of the registrant's most recently completed second fiscal quarter), the aggregate market value of the voting
stock held by non-affiliates of the Registrant was approximately $221,315,688. Shares of common stock held by each executive officer and director and by each person who owns 10% or more of
our outstanding common stock have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The
number of shares of the Registrant's common stock, $0.01 par value, outstanding as of November 16, 2007 was approximately 12,047,249.



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Documents Incorporated by Reference

Listed hereunder are the documents, any portions of which are incorporated by reference and the Parts of this Form 10-K into which such
portions are incorporated:

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MWI VETERINARY SUPPLY, INC.

FORM 10-K

TABLE OF CONTENTS

|Item       |  |                                                                                                              |  | Page
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|PART I    
|           |  | Cautionary Statement                                                                                         |  | 1   
|1.         |  | Business                                                                                                     |  | 2   
|1A.        |  | Risk Factors                                                                                                 |  | 17  
|1B.        |  | Unresolved Staff Comments                                                                                    |  | 26  
|2.         |  | Properties                                                                                                   |  | 26  
|3.         |  | Legal Proceedings                                                                                            |  | 26  
|4.         |  | Submission of Matters to a Vote of Security Holders                                                          |  | 27  
|PART II   
|5.         |  | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 28  
|6.         |  | Selected Financial Data                                                                                      |  | 31  
|7.         |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                        |  | 33  
|7A.        |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 49  
|8.         |  | Financial Statements and Supplementary Data                                                                  |  | 50  
|9.         |  | Changes in and Disagreements With Accountants on Accounting and Financial Disclosure                         |  | 76  
|9A.        |  | Controls and Procedures                                                                                      |  | 76  
|9B.        |  | Other Information                                                                                            |  | 79  
|PART III  
|10.        |  | Directors, Executive Officers and Corporate Governance of the Registrant                                     |  | 79  
|11.        |  | Executive Compensation                                                                                       |  | 79  
|12.        |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 79  
|13.        |  | Certain Relationships, Related Transactions and Director Independence                                        |  | 79  
|14.        |  | Principal Accountant Fees and Services                                                                       |  | 80  
|PART IV   
|15.        |  | Exhibits and Financial Statement Schedules                                                                   |  | 81  
|SIGNATURES |  | 82                                                                                                          

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PART I

Cautionary Statement for Purposes of "Safe Harbor Provisions" of the Private Securities Litigation Reform Act of 1995

This annual report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws. Statements that are not
historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the
words "may," "could," "would," "should," "believe," "expect," "anticipate," "plan," "estimate," "target," "project," "intend" and similar expressions. These statements include, among others,
statements regarding our expected business outlook, anticipated financial and operating results, our business strategy and means to implement our strategy, our objectives, the amount and timing of
capital expenditures, the likelihood of our success in expanding our business, financing plans, budgets, working capital needs and sources of liquidity.

Forward-looking
statements are only predictions and are not guarantees of performance. These statements are based on our management's beliefs and assumptions, which in turn are based on
currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding demand for our products, the expansion of product
offerings geographically or through new applications, the timing and cost of planned capital expenditures, competitive conditions and general economic conditions. These assumptions could prove
inaccurate. Forward-looking statements also involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking
statement. Many of these factors are beyond our ability to control or predict. Such factors include, but are not limited to, the following:



Except
as required by applicable law, including the securities laws of the United States and the rules and regulations of the Securities and Exchange Commission ("SEC"), we are under no
obligation to publicly update or revise any forward-looking statements, whether as a result of any new information, future events or otherwise. You should not place undue reliance on our
forward-looking

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statements.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results or performance.

Investors
should also be aware that while we do, from time to time, communicate with securities analysts, it is against our policy to disclose any material non-public
information or other confidential commercial information. Accordingly, stockholders should not assume that we agree with any statement or report issued by any analyst irrespective of the content of
the statement or report. Furthermore, we have a policy against issuing or confirming financial forecasts or projections issued by others. Thus, to the extent that reports issued by securities analysts
contain any projections, forecasts or opinions, such reports are not the responsibility of MWI Veterinary Supply, Inc.

Item 1.    Business.

General

Our business commenced operations as part of a veterinary practice in 1976 and was incorporated as MWI Drug Supply, Inc., an Idaho corporation, in 1980.
MWI Drug Supply, Inc. was acquired by Agri Beef Co. in 1981. MWI Veterinary Supply Co. was incorporated as an independent subsidiary of Agri Beef Co. in September 1994. Effective
June 18, 2002, MWI Holdings, Inc. was formed by Bruckmann, Rosser, Sherrill & Co. II, L.P. ("BRS") for the sole purpose of acquiring all of the outstanding stock of MWI Veterinary
Supply Co. from Agri Beef Co. ("Agri Beef"). As a result of this transaction, MWI Veterinary Supply Co. ("MWI Co.") became a wholly-owned subsidiary of MWI Holdings, Inc. On April 21,
2005, we changed our name from MWI Holdings, Inc. to MWI Veterinary Supply, Inc. References in this report to "we," "us," "our," and "MWI" refer to MWI Veterinary Supply, Inc.
unless
otherwise indicated. Unless otherwise indicated, all statistical information provided about our business in this report is as of September 30, 2007.

We
are a leading distributor of animal health products to veterinarians across the United States. We distribute more than 11,000 products sourced from over 450 vendors to more than
16,000 veterinary practices nationwide from thirteen strategically located distribution centers, including a distribution center in Edwardsville, Kansas which began operations in October 2007.
Products we sell include pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, veterinary pet food and nutritional products. We market these products to veterinarians in
both the companion animal and production animal markets. As of September 30, 2007, we had a sales force of 280 people covering the United States. We also offer our customers a variety of
value-added services, including e-commerce platform, pharmacy fulfillment, inventory management system, equipment procurement consultation, special order fulfillment, educational seminars
and pet cremation, which we believe closely integrates us with our customers' day-to-day operations and provides them with meaningful incentives to continue ordering from us.

Historically,
approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the
production animal market. For the fiscal years ended September 30, 2007, 2006 and 2005, our total revenues were $710.1 million, $606.2 million and $496.7 million,
respectively. Our operating income for the fiscal years ended September 30, 2007, 2006 and 2005, was $26.7 million, $23.7 million and $15.8 million, respectively.

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Industry Overview

According to the Animal Health Institute ("AHI"), an industry group representing manufacturers of animal health products, animal health product sales in the
United States for calendar year 2006 grew nearly 10% over the previously reported total of over $5 billion. The market for animal health products in the United States is split between products
sold for companion and production animals. Companion animals include dogs, cats, other pets and horses, while production animals include cattle and other food-producing animals. AHI
estimates that companion animal products accounted for 53% of the total market for animal health products in the United States in calendar year 2006.

We
believe the companion animal health products market is growing due to the increasing number of households with companion animals, an aging pet population, increased expenditures on
animal health and preventative care, advancements in pharmaceuticals and diagnostic testing and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. We
believe that product sales in the production animal health products market are largely driven by continued spending on animal health products to improve productivity, weight gain and disease
prevention, as well as a growing focus on food safety. We believe that these growth factors are mitigated by the downward influence of generic drugs on pricing.

Veterinarians
are one of the primary purchasers of animal health products, particularly in the companion animal market. As of December 31, 2006, according to the American
Veterinary Medical Association, or AVMA, there were more than 56,000 veterinarians in private practice in more than 27,000 veterinary practices nationwide. We believe that distributors play a vital
role for veterinary practices by providing access to a broad selection of products through a single channel and helping them efficiently manage their inventory levels. Distributors also offer product
vendors substantial value by providing cost-effective access to a highly fragmented and geographically diverse customer base.

Competitive Strengths

We believe that our strengths include:



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Business Strategy

Our mission is to strengthen our position as a leading national animal health products distributor while continuing to efficiently deliver substantial value and
innovation to our customers, increase revenues and improve profitability. Our strategy to achieve our mission is outlined below.

Increase Sales to Existing Customers.We believe that veterinary practices typically purchase animal health products from
multiple distributors. For our fiscal year ended September 30, 2007, our average

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annual
product sales per veterinary practice served was approximately $35,000. We intend to increase our share of these purchases by utilizing our proprietary customer database to focus our marketing
efforts, expanding our sales force, selectively adding products to our portfolio and increasing and expanding the value-added services we provide to our customers. By increasing the dollar value of
purchases made by each customer as well as their average order size, we intend to increase our profitability. Competition for hiring sales representatives who have existing customer relationships is
intense and we focus on retaining our valued staff who have demonstrated the skills needed to successfully market our products and services. If we fail to hire or retain a sufficient number of
qualified sales professionals, it could adversely impact our business.

Expand Business Assistance Services for Veterinarians.We intend to enhance our customer relationships by expanding our
business assistance services for veterinarians. These value-added services include among others our e-commerce platform, pharmacy fulfillment, inventory management system, equipment
procurement consultation, special order fulfillment, educational seminars and pet cremation. In addition, we have upgraded our Internet site, www.mwivet.com, in order to significantly enhance the
e-commerce functionality available to our customers.

Increase the Total Number of Customers.We believe we provide products and services to more than 50% of all domestic
veterinary practices. We intend to raise this percentage by increasing the number and productivity of our sales representatives, selectively acquiring competitors and adding or expanding distribution
centers. We believe the greatest opportunities to add new customers are in the Northeastern, Midwestern and Southeastern regions of the United States, areas where we do not hold the leading market
position. We believe it is important to increase the total number of customers served in order to attain the growth goals that are a feature of many of our vendors' rebate programs. Changes to any
vendor rebate program or our failure to achieve these growth goals may have a material effect on our gross profit and operating results in any given quarter or year.

Continuously Seek to Improve Operations.We continuously evaluate opportunities to increase sales, lower costs and realize
operating efficiencies. Current initiatives include investments in our databases and distribution center management systems. We also plan to pursue alternative product sourcing strategies and have
implemented a private label program on selected products to reduce our procurement costs and increase our profitability, while maintaining strong relationships with key vendors.

Make Selective Acquisitions.The U.S. market for animal health products distribution is highly fragmented, with numerous
national, regional and local distributors. Many of these companies are small, privately-held businesses, some of which may represent attractive acquisition candidates. In fiscal year 2006,
we acquired substantially all of the assets of Northland Veterinary Supply, Ltd. ("Northland") and we integrated their business. In June 2007, we acquired substantially all of the assets
of Securos, Inc. and International Veterinary Distribution Network, Inc. (collectively "Securos") and we integrated their business. In October 2007, we acquired substantially all
of the assets of Tri V Services, Inc. ("Tri V") and we integrated their business. Through our Specialty Resources Group, we will continue to seek acquisitions that will grow and diversify our
business through companies involved in specialty and niche manufacturing of products.

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Products

In fiscal year 2007, we distributed more than 11,000 products, including pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies,
veterinary pet food and nutritional products. For our fiscal year ended September 30, 2007, our product revenues were comprised of approximately 40% pharmaceutical products, 19% vaccine
products, 7% parasiticide products, 8% diagnostic products, 3% capital equipment products and 23% of other supplies. In addition, we sell over 500 products under agency agreements with our vendors.
Under an agency agreement, we typically solicit orders and provide customer service for a commission, while the vendor stocks and ships the products. We also have available on special order over 7,000
products that we do not normally stock in our warehouses. We continually seek to update and improve the range of products we offer to address our customer requirements. Over 95% of our product sales
for our fiscal years ended September 30, 2007, 2006 and 2005 were from the sale of consumable medicines and supplies commonly required by veterinarians in their practice. Historically, this
aspect of our business has resulted in a recurring stream of revenues.

Pharmaceuticals, Vaccines and Parasiticides

We offer our customers a variety of pharmaceuticals, vaccines and parasiticides. Our pharmaceutical products typically include anesthetics, analgesics,
antibiotics, ophthalmics and hormones. Our vaccine products are primarily comprised of small animal, equine and production animal biologicals. Our parasiticides are used for control of fleas, ticks,
flies, mosquitoes and internal parasites.

Diagnostics, Capital Equipment and Supplies

We offer a wide range of diagnostics, capital equipment and supplies to veterinarians. Diagnostic sales typically include consumable in-clinic tests
for detecting heartworm, lyme, feline leukemia and parvovirus, as well as consumable products for measuring blood chemistry, electrolyte balance and cell counts. Our capital equipment sales include
anesthesia machines, surgical monitors, diagnostic equipment, dental machines, cages, lights and x-ray machines. We employ a team of capital equipment specialists to analyze the latest
technologies and recommend equipment that meets our customers' specific needs. Additionally, our capital equipment specialists provide training on our capital equipment lines to our customers and our
sales force. Our sales of supplies include syringes, instruments, bandages, IV products, surgical consumables, grooming materials and other small equipment items used by veterinary practices.

Veterinary Pet Food and Nutritional Products

We offer our customers a broad selection of veterinary pet foods and nutritional products. We consider veterinary pet food to consist of two categories: foods for
specialty diets and premium pet foods. Specialty diets are recommended by veterinarians to address specific medical and nutritional needs. Premium pet foods are recommended by veterinarians to promote
optimal nutrition in healthy animals. Pet foods are typically sold under agency agreements. Nutritional products include dietary supplements, vitamins, dental chews and specialty treats which either
help address specific medical conditions or are compatible with recommended nutritional guidelines.

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Value-Added Services

We offer our customers a variety of value-added services, which we believe closely integrate us with our customers' day-to-day operations
and provide them with meaningful incentives to continue ordering from us. These services include the following:

|Service                            |  | Description                                                                                                                                                                                                                                         
|---------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|E-commerce platform                |  | On-line ordering system that provides information to veterinary practices on products, vendor programs and purchasing history                                                                                                                       
|Pharmacy fulfillment               |  | Shipment of prescription production and companion animal health products to end-users on behalf of veterinarians from our four licensed pharmacies located in Clear Lake, Wisconsin, Grand Prairie, Texas, Harrisburg,
Pennsylvania and Nampa, Idaho
|Inventory management system        |  | Flexible system that facilitates counting, maintaining and ordering inventory in veterinary practices                                                                                                                                               
|Equipment procurement consultation |  | Consultation, demonstrations and training provided by our dedicated capital equipment specialists                                                                                                                                                   
|Special order fulfillment          |  | Procurement and shipment of over 7,000 unique products that we do not normally stock in our warehouses                                                                                                                                              
|Educational seminars               |  | Seminars for our customers covering business and medical topics, frequently sponsored in conjunction with our vendors                                                                                                                               
|Pet cremation                      |  | Business units presently operating with facilities in Idaho and Wisconsin that serve veterinary practices and their clients by providing cremation services                                                                                         

Customers

We currently serve more than 16,000 of the more than 27,000 veterinary practices located throughout the United States. These veterinary practices are typically
small, privately-held businesses that we believe place at least one order per week to avoid storing and managing large volumes of supplies. We believe that these veterinary practices
usually purchase animal health products from multiple distributors. We seek to be the principal provider of animal health products to our customer base.

We
maintain a diverse and stable customer base. Independent veterinary practices have historically accounted for more than 80% of our product sales. Also, for more than eleven years, we
have maintained distribution arrangements with Banfield, the nation's largest private veterinary practice with over 600 veterinary hospitals, and our non-controlled affiliate, Feeders'
Advantage, a buying group composed of several of the largest cattle feeders in the United States. Banfield accounted for approximately 10% of our product sales for our fiscal years ended
September 30, 2007, 2006 and 2005. Feeders' Advantage accounted for approximately 5% of our product sales for our fiscal year ended September 30, 2007 and 6% for our fiscal years ended
September 30, 2006 and 2005. The loss of Banfield or Feeders' Advantage or deterioration in our relations with either of them could significantly affect our financial condition and results of
operations. Our ten largest customers, excluding Banfield

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and
Feeders' Advantage, accounted for approximately 5% of our product sales for our fiscal years ended September 30, 2007, 2006 and 2005, with no single customer representing more than 1% of
our product sales for those years. We typically do not enter into long-term contracts with our independent veterinary customers.

We
are a party to two written agreements with Banfield, an Agreement for Product Purchases and an Agreement for Logistics Services. These contracts are effective from December 1,
2006 through November 30, 2009, and can be terminated by either party with or without cause upon 150 days prior written notice. These contracts provide that we will be the supplier of
logistics to Banfield, and these agreements govern the pricing, shipping and other terms and conditions under which we sell our products and provide logistics to Banfield. Under the Agreement for
Product Purchases, we provide a limited warranty with respect to all goods sold by us and paid for by Banfield that good title to the products is conveyed, that the products are delivered free of any
security interest, that the products will conform to the description, grade and condition of the products invoiced and that all products will be free of any defects arising while the products are
either in our possession or control or in the control of any carrier transporting the goods from us to Banfield. We are also required to maintain insurance
in an amount equal to at least the replacement cost of all property that is purchased by Banfield from third parties and is held by us on their behalf.

Sales and Marketing

Our sales and marketing strategies are designed to establish and maintain strong customer relationships through personal visits by field sales representatives,
frequent telesales contact and direct marketing, emphasizing our broad product lines, competitive pricing, efficient ordering capabilities, high levels of customer support and service and other
value-added services. The key elements of our sales and marketing strategy are:



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Product Sourcing

We currently distribute more than 11,000 products sourced from more than 450 vendors, including most major vendors of animal health products that sell through
distributors. We believe that we are a leading distributor for many of these vendors.

We
currently do not manufacture the vast majority of our products and are dependent on vendors for our supply of products. We believe that effective purchasing is a key factor in
maintaining our position as a leading provider of animal health care products. We regularly assess our purchasing needs and our vendors' product offerings and prices to obtain products at favorable
prices. While we purchase products from many vendors and there is generally more than one vendor for most animal health product categories, our concentration of aggregate purchases with key vendors is
significant. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 43%, 44% and 45% of our revenues for the fiscal years ended September 30,
2007, 2006 and 2005, respectively. Our ten largest vendors accounted for approximately 70%, 70% and 73% of our revenues for the fiscal years ended September 30, 2007, 2006 and 2005,
respectively.

There
are two major types of transactions that can affect the flow of our products from our vendors, through us, to our customers. The method of selling products to veterinarians is
dictated by our vendors. Traditional "buy/sell" transactions, which account for the vast majority of our business,

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involve
the direct purchase of products by us from vendors, which we manage and store in our warehouses. A customer then places an order with us, and the order is then picked, packed, shipped and
invoiced by us to our customer, followed by payment from our customer to us.

We
also sell certain product lines to our customers under agency agreements with some of our vendors. Under this model, when we receive orders for products from the customer, we transmit
the order to the vendor who then picks, packs and ships the products. In some cases our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from
our customer. We receive a commission payment for soliciting the order and for providing other customer service activities. Our operating expenses associated with agency sales transactions are lower
than in traditional "buy/sell" transactions.

We
have written agreements with approximately 40 of our vendors, including Fort Dodge and Pfizer. Our distribution agreement with Fort Dodge provides that we shall act as a distributor
of Fort Dodge products in the United States on a non-exclusive basis. Fort Dodge may reduce the size of our territory upon 30 days written notice. We are required to actively
promote and solicit sales of Fort Dodge products and to include their products in our regular sales promotions. In return, we are entitled to participate in Fort Dodge's current distributor incentive
program. Fort Dodge is required to indemnify us against any claims alleging that the Fort Dodge products are defective, except in certain limited situations. We are required to maintain sufficient
inventory of each Fort Dodge product to meet our anticipated demand and to store the products in accordance with their respective label instructions. Our distribution agreement with Fort Dodge had an
original term that expired on December 31, 2004 but the agreement automatically renews for additional periods of one year. The agreement may be terminated by either party with or without cause
upon 90 days prior written notice.

Our
livestock products agreement with Pfizer provides that we shall supply selected customers in the cattle and swine fields with Pfizer products. In return, we are entitled to certain
service fees and rebates. We are required to maintain sufficient inventory to meet our anticipated demand on a monthly basis and to store the Pfizer products in accordance with their respective label
instructions. Pfizer also reserves the right to sell directly to our customers or any other party. The livestock products agreement has a one year term that expires on December 31, 2007 and can
be terminated by either party with or without cause upon 30 days written notice.

Our
equine products marketing agreement with Pfizer provides that we shall distribute certain products to customers in the equine field. In return, we are entitled to receive certain
service incentives and rebates. We are required to maintain sufficient staffing levels of sales representatives and store and handle inventory under appropriate conditions that will maintain the
quality and integrity of the products. The agreement expires on December 31, 2007 and can be terminated by either party with or without cause upon 30 days prior written notice.

Our
Rimadyl/Clavamox distribution agreement with Pfizer provides that we shall distribute the Rimadyl and Clavamox products offered by Pfizer. In return, we are entitled to receive
certain service incentives and rebates. We are required to maintain sufficient staffing levels of sales representatives and store and handle inventory under appropriate conditions that will maintain
the quality and integrity of the products. The agreement expires on December 31, 2008 and can be terminated by Pfizer with or without cause upon 30 days written notice, and either party
can terminate the agreement immediately upon written notice for material breach of the contract.

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Our
independent sales agent agreement with Merial provides that we shall sell, market and provide services related to Merial's companion animal products to the veterinary trade. In
return, we are entitled to receive commissions. The agreement expires on December 31, 2008 and may be terminated by either party without cause and without penalty upon 120 days prior
written notice. The agreement may also be terminated by either party without cause upon less than 120 days prior written notice; however, financial penalties will apply. The agreement prohibits
MWI from representing products that compete with certain of Merial's products, particularly those which are used for the treatment and/or control and/or prevention of fleas, ticks or heartworms.

Animal
health product vendors typically implement sales promotions for products distributed to veterinarians that can affect the timing in which we recognize revenues. In addition, at
the time we negotiate vendor agreements for the upcoming year, our vendors typically establish sales growth goals for us to meet in order to receive performance rebates. These growth goals are based
on quarterly, trimester, semi-annual or annual targets.

Product
returns from our customers and to our vendors occur in the ordinary course of business. We extend our customers the same return of goods policies as are extended to us by our
vendors. We do not believe that our operations will be adversely impacted due to the return of products.

Information Systems

In 2007, we developed a new e-commerce platform that offers more enhanced online ordering capabilities for veterinarians. This platform, implemented
in the fourth quarter of fiscal 2007, provides many new features for our customers while at the same time significantly enhancing security and our capability to provide additional functionality in the
future. We are currently operating both this new platform and our legacy e-commerce platform, and we are transitioning customers over to this new e-commerce platform. We
recently completed installation of our enhanced warehouse systems designed to ensure that our inventory is processed more accurately. We believe that this technology will help us improve order
accuracy for our customers.

Distribution

As of September 30, 2007, we distributed our products from twelve strategically located distribution centers throughout the United States. We opened an
additional distribution center in Edwardsville, Kansas in October 2007. During our fiscal year 2007, we moved our distribution center in Atlanta, Georgia to a larger facility, expanded the
capacity of our distribution centers in Phoenix, Arizona and Nampa, Idaho and added space to our distribution center in Denver, Colorado to allow for additional warehouse capacity. In our fiscal year
ended September 30, 2006, we opened our twelfth distribution center located in Orlando, Florida, expanded operations in Denver, Colorado by moving to a new distribution and call center, and
expanded our existing distribution center in Harrisburg, Pennsylvania. Once a customer's order is entered into our customized order entry system, it is electronically transmitted to the distribution
center that carries the product and is closest to the customer's location. Following receipt of the order, a document is printed in the warehouse which reflects the bin location of the product to
facilitate product fulfillment. The order is then packaged and shipped along with an itemized invoice. We maintain inventory levels in our warehouses appropriate to satisfy customer demand for prompt
delivery and fulfillment of their product orders. Inventory levels are managed on a daily basis through our information systems. In order to meet the rapid delivery requirements of our customers, we
offer next-day delivery service on most of the products we stock in

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our
warehouses. We estimate that as of September 30, 2007, we shipped same day from our warehouses approximately 98% of the dollar value of orders placed by our customers. We currently ship the
majority of our orders through United Parcel Service, Inc., or UPS, with the balance of our orders being shipped by our own delivery trucks, regional carriers and other national carriers.

Acquisitions

In May 2006, we acquired substantially all of the assets of Northland. Northland was located in Clear Lake, Wisconsin and was a distributor of animal
health products to approximately 500 veterinary practices and producers across the Midwestern United States.

In
June 2007, we acquired substantially all of the assets of Securos. Based in Charlton, Massachusetts, Securos was a provider of veterinary orthopedic products in the United
States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment and handheld instruments.

In
October 2007, we acquired substantially all of the assets of Tri V. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of providing
animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

Competition

The distribution and manufacture of animal health products is highly competitive. We compete with numerous vendors and distributors based on customer
relationships, service and delivery, product selection, price and e-commerce capabilities. Most of our products are available from several sources, including other distributors and
vendors, and our customers tend to have relationships with several distributors. In addition, our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to
distribute those products. Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing power,
decrease our revenues and profitability, and increase the competition for customers. Our primary competitors, excluding vendors, include the following:



The
role of the animal health product distributor has changed dramatically during the last decade. Successful distributors are increasingly providing value-added services in addition to
the products they traditionally provided. We believe that to remain competitive we must continue to add value to the distribution channel, while removing unnecessary costs associated with product
movement.

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Distribution
of animal health products is characterized by either "ethical" or "over-the counter," commonly referred to as OTC, channels of product movement. Ethical
distribution is defined as those sales of goods to licensed veterinarians for use in their professional practice. Many of these products are prescription and must be sold or prescribed by a licensed
professional. OTC distribution is the movement of goods to the animal owner and the end-user. Many of these products also are purchased by licensed veterinarians for professional use or
for resale to their client. There are numerous ethical and OTC distribution companies operating throughout the United States and competition in the veterinary distribution industry is intense.

Seasonality in Operating Results

Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues
have typically been higher during the spring and fall months due to increased sales of production animal products. Product use cycles for production animal products are directly related to medical
procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched
during the summer months, particularly in June, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may
reduce our sales in the months these purchases would have otherwise been made. See "Risk FactorsOur quarterly operating results may fluctuate significantly, and these fluctuations may
cause our stock price to fall." Additionally, while we accrue
rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our vendors' rebate programs were designed to include targets to be
achieved near the end of the calendar year. Early in calendar year 2006, certain of our vendors modified their rebate programs with us. These rebate program modifications changed the revenue growth
targets from annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications resulted in rebates previously expected to be earned and recognized in our first
fiscal quarter of 2007 ending on December 31, 2006 to be recognized in our fiscal year 2006.

Trademarks

We have registered with the United States Patent and Trademark Office the marks "MWI," "MWI Design," "MWIVET.com" and "VETONE". We believe that the MWI mark is
well recognized in the animal health products industry and by veterinarians and is therefore a valuable asset of ours.

Employees

As of September 30, 2007, we had 800 employees across the United States. We have not experienced a shortage of qualified personnel in the past, and believe
that we will be able to attract such employees in the future. None of our employees are a party to a collective bargaining agreement, and we consider our relations with our employees to be good.

Website

Our website address iswww.mwivet.comand can be used to access free of charge, through the investor relations
category, our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports, as
soon as reasonably practicable after we electronically file such material with or furnish it to the SEC. The information on our website is not

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incorporated
as a part of this annual report. The public can also obtain copies of these reports by visiting the SEC's Public Reference Room at 100 F Street NE, Washington DC 20549, or by calling the
SEC at 1-800-SEC-0330, or by accessing the SEC's website at http://www.sec.gov.

Governmental Regulation

Our vendors of pharmaceuticals, vaccines, parasiticides and certain controlled substances are typically regulated by federal agencies, such as the Food and Drug
Administration ("FDA"), the United States Department of Agriculture ("USDA"), the Environmental Protection Agency ("EPA"), and the Drug Enforcement Agency ("DEA"), as well as most similar state
agencies. Therefore, we are subject, either directly or indirectly, to regulation by the same agencies. Most states and the DEA require us to be registered or otherwise keep a current permit or
license to handle controlled substances. Manufacturers of vaccines are required by the USDA to comply with various storage and shipping criteria and requirements for vaccines. To the extent we
distribute such products, we must comply with the same requirements, including, without limitation, the storage and shipping requirements for vaccines.

Most
state boards of pharmacy require us to be licensed in their respective states for the sale of pharmaceutical products and medical devices within their jurisdictions. As a
distributor of prescription pharmaceutical products, we are subject to the Prescription Drug Marketing Act ("PDMA"). The PDMA provides governance and authority to the states to provide minimum
standards, terms and conditions for the licensing by state licensing authorities of persons who "engage" in wholesale distribution (as defined by each state regulatory agency) in interstate commerce
of prescription drugs. With this authority, states require site-specific registrations for the parties that engage in the selling and/or physical distribution of pharmaceutical products
into their state in the form of out-of-state registrations. Effective December 1, 2006, the federal drug pedigree requirements of the FDA under the PDMA went into
effect. Although a court injunction was
granted regarding some provisions, the FDA mandated that all distributors that are not the manufacturer's authorized distributor must provide a record of all previous transactions. This transaction
history is also referred to as a pedigree. The federal pedigree regulations require tracking human labeled prescription products through the entire distribution chain and are applicable to
distributors that do not have a written agreement with the manufacturer granting the wholesale distributor status as an "Authorized Distributor of Record." Selling and/or distributing products without
the appropriate registrations may subject us to fines, penalties, misdemeanor or felony convictions, and/or seizure of the products involved. We have a Manager of Regulatory Compliance and have
engaged outside consultants as needed to assist us in meeting and complying with the various state and federal licensure requirements to which we are subject.

Our
pet cremation business is subject to state and local zoning laws, and we are required to maintain permits for the construction and operation of an animal incineration device. We are
also required to have an air pollution permit in connection with the operation of our pet cremation business.

Some
states (as well as certain cities and counties) require us to collect sales taxes/use taxes on certain types of animal products. We are also subject to laws governing our
relationship with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. In addition, we are subject to additional regulations regarding our hiring
practices because several federal, state and local governmental agencies are our customers.

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Environmental Considerations

We do not currently manufacture or alter in any way the composition of the vast majority of the products that we distribute. All products are distributed in
compliance with the relevant rules and regulations as approved by various state and federal agencies.

Executive Officers

The following table sets forth the names, ages and titles, as well as a brief account of the business experience, of each person who was an executive officer of
the Company as of September 30, 2007:

|Name                      |  | Age |  | Title                                                                       
|------------------------- |  | --- |  | ----------------------------------------------------------------------------
|James F. Cleary, Jr.      |  | 44  |  | Board Director, President and Chief Executive Officer                       
|Mary Patricia B. Thompson |  | 44  |  | Senior Vice President of Finance and Administration, Chief Financial Officer
|James W. Culpepper        |  | 53  |  | Vice President of Inventory Management                                      
|Jeffrey J. Danielson      |  | 47  |  | Vice President of Sales                                                     
|John J. Francis           |  | 54  |  | Vice President and General Manager of the Specialty Resources Group         
|James S. Hay              |  | 64  |  | Vice President and Chief Information Officer                                
|Bryan P. Mooney           |  | 39  |  | Vice President of Operations                                                
|John R. Ryan              |  | 38  |  | Vice President of Marketing                                                 

James F. Cleary, Jr.has served as President since March 2000 and Chief Executive Officer since June 2002. Mr. Cleary
has also been a member of the board of directors since June 2002. He joined MWI in January 1998 as Director of National Accounts and was promoted to Vice President of Demand Generation
in 1999. Mr. Cleary was Vice President of Agri Beef Co., MWI's former parent, from 1996 to 1998. From 1990 to 1996, Mr. Cleary was employed in management positions with Morrison Knudsen
Corporation and its affiliate MK Rail Corporation. Mr. Cleary graduated from Dartmouth College in 1985 with a Bachelor of Arts in Economics and received his Masters of Business Administration
from Harvard Business School in 1990. Mr. Cleary is also a member of the board of directors of Agri Beef Co. and Seroyal Holdings, L.P., and a manager of Feeders' Advantage, L.L.C.
Mr. Cleary is the brother-in-law of Mr. Robert Rebholtz, one of our board directors.

Mary Patricia B. Thompsonhas served as Senior Vice President of Finance and Administration, Chief Financial Officer since
August 2006, with oversight of finance, regulatory compliance, inventory management, information technology and human resources. Ms. Thompson was the Vice President, Secretary and Chief
Financial Officer from June 2002 to August 2006. Ms. Thompson joined Agri Beef Co. in 1989 as the Feedlot and Commodity Division Controller. In September 1991,
Ms. Thompson was promoted to Controller of MWI Veterinary Supply Co., then a wholly-owned subsidiary of Agri Beef Co. Prior to joining Agri Beef Co., Ms. Thompson worked for Arthur
Andersen LLP from 1985 to 1989, where she provided auditing and accounting services. Ms. Thompson graduated from the University of Idaho in 1985, summa cum laude, with a Bachelor of Science in
Accounting. Ms. Thompson is a licensed Certified Public Accountant. Ms. Thompson is also a member of the board of directors of the American Veterinary Distributors Association and the
Idaho Youth Ranch Foundation.

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James W. Culpepperhas served as Vice President of Inventory Management since 1998. Mr. Culpepper joined MWI in 1997 as General
Merchandise Manager. Prior to joining MWI, Mr. Culpepper worked for Payless Drug Stores for 20 years. During that period, Mr. Culpepper held various positions, including
pharmacist, merchandiser and buyer of pharmaceutical supplies, and Inventory Control Manager. Mr. Culpepper graduated from Oregon State University's School of Pharmacy in 1977.

Jeffrey J. Danielsonhas served as Vice President of Sales since 2001. Mr. Danielson joined MWI Veterinary Supply Co. in 1985 as an
Outside Sales Representative, serving the state of Washington. From 1989 to 1991, Mr. Danielson served as Assistant Sales Manager and from 1991 to 2001 served as National Sales Manager.
Mr. Danielson graduated from Colorado State University in 1983 with a Bachelor of Science in Agricultural Business.

John J. Francishas served as Vice President and General Manager of the Specialty Resources Group since September 2006. Prior to
joining MWI, Mr. Francis worked for Webster Veterinary Supply as the Vice President of Sales from April 2004 to September 2006. Mr. Francis was the Key Account Manager of
Excel, a division of Cargill, Inc., from June 2002 to April 2004 and was the Vice President of Sales for Future Beef based in Parker, Colorado, from May 2000 to
May 2002. From 1990 until 2000, Mr. Francis served as General Manager and then President of MWI Veterinary Supply Co. Mr. Francis graduated from Michigan State University in 1975
with a Bachelor of Science in Animal Husbandry and holds a Master of Science in Animal Science obtained in 1977 from the University of Illinois.

James S. Hayhas served as Vice President and Chief Information Officer since September 2002. Mr. Hay joined Agri Beef Co.
in 1996 as Vice President of Information Systems. Prior to joining Agri Beef Co., Mr. Hay served as Director of Management Information Systems at Natural Wonders Inc. from 1991 to 1995;
Director of Management Information Systems at the Oakland Tribune from 1989 to 1991; Vice President and Chief Information Officer of Liquor Barn, Inc. from 1987 to 1989; Director of Information
Services at Genstar Corporation from 1974 to 1987; management consultant at Price Waterhouse from 1968 to 1974; and as a systems engineer at IBM Corporation from 1965 to 1968. Mr. Hay graduated
from the University of Manitoba in 1965 with a Bachelor of Science in Mathematics and Physics.

Bryan P. Mooneyhas served as Vice President of Operations since May 2005. Mr. Mooney joined MWI in January 1994 as
the Operations Manager of our Denver, Colorado distribution operation and served in that capacity until May 1998. From May 1998 until February 2005, Mr. Mooney served as
Manager of Transportation and Logistics and from January 2005 until May 2005 as the Western Regional Operations Manager. Mr. Mooney graduated from the University of Wyoming in
1991 with a Bachelor of Science in Agricultural Business.

John R. Ryanhas served as Vice President of Marketing since 2000. Mr. Ryan joined MWI in June 1995 as an Outside Sales
Representative and served in such capacity until June 2000. Prior to joining MWI, Mr. Ryan worked for the Virbac Corporation (a companion animal pharmaceutical company) as a Territory
Manager from 1993 to 1995. Mr. Ryan graduated from the University of California, Davis in 1993 with a Bachelor of Science in Animal Physiology.

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Item 1A.    Risk Factors.

In addition to the factors discussed elsewhere in this Form 10-K, the following are important factors which could cause
actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company.

Our operating results may fluctuate due to factors outside of management's control.

Our future revenues and results of operations may significantly fluctuate due to a combination of factors, many of which are outside of management's control. The
most notable of these factors include:



These
factors could adversely impact our results of operations and financial condition. We may be unable to reduce operating expenses quickly enough to offset any unexpected shortfall in
revenues or gross profit. If we have a shortfall in revenues or gross profit without a corresponding reduction to expenses, operating results may suffer. Our operating results for any particular
fiscal year or quarter may not be indicative of future operating results. You should not rely on year-to-year or quarter-to-quarter comparisons of
results of operations as an indication of our future performance.

An adverse change in vendor rebates could negatively affect our business.

The terms on which we purchase or sell products from many vendors of animal health products entitle us to receive a rebate based on the attainment of certain
growth goals. Vendors may adversely change the terms of some or all of these rebate programs. Because the amount of rebates we earn is directly related to the attainment of pre-determined
sales growth goals, and because the nature of the rebate programs and the amount of rebates available are determined by the vendors, there can be no assurance as to the amount of rebates that we will
earn in any given year. Changes to any rebate program initiated by our vendors may have a material effect on our gross profit and our operating results in any given quarter or year. Vendors may reduce
the amount of rebates offered under their programs, or increase the growth goals or other conditions we must meet to earn rebates to levels that we cannot achieve. Additionally, factors outside of our
control, such as customer preferences or vendor supply issues, can have a material impact on our ability to achieve the growth goals established by our

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vendors,
which may reduce the amount of rebates we receive. The occurrence of any of these events could have an adverse impact on our results of operations.

Our quarterly operating results may fluctuate significantly, and these fluctuations may cause our stock price to fall.

Our quarterly revenues and operating results have varied significantly in the past, and may continue to do so in the future. While we accrue rebates from vendors
as they are earned, our rebates have historically been highest during the quarter ended December 31, since most of our vendors' rebate programs were designed to include targets to be achieved
during the calendar year. During calendar year 2006, certain of our vendors modified their rebate programs with us. These rebate program modifications changed the revenue growth targets from
annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications resulted in rebates previously expected to be earned and recognized in our first fiscal
quarter 2007 ending on December 31, 2006 to be recognized in our fiscal year 2006. Historically, our revenues have been seasonal, with peak sales in the spring and fall months. The seasonal
nature of our business is directly tied to the buying patterns of veterinarians for production animal health products used for certain medical procedures performed on production animals during the
spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched during the summer months, particularly in June, which can cause
veterinarians to purchase production animal health products earlier than those products are used. This kind of early purchasing may reduce our sales in the months these purchases would have otherwise
been made. While companion animal products tend to have a different product use cycle
than production animal health products, and approximately two-thirds of our revenues have been generated from sales to the companion animal market, we cannot assure you that our revenues
and operating results will not continue to fluctuate on a quarter-to-quarter basis. We believe period-to-period comparisons of our results of operations
are not necessarily meaningful as our future revenue and results of operations may vary substantially. It is also possible that in future quarters our results of operations will be below the
expectations of securities analysts and investors. In either case, the price of our common stock could decline, possibly materially.

Our market is highly competitive. Failure to compete successfully could have a material adverse effect on our business, financial condition and results of operations.

The market for veterinary distribution services is highly competitive, continually evolving and subject to technological change. We compete with numerous vendors
and distributors based on customer relationships, service and delivery, product selection, price and e-business capabilities including:



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Some
of our competitors may have more customers, stronger brand recognition or greater financial and other resources than we do. Most of our products are available from several sources,
including other distributors and vendors, and our customers typically have relationships with several distributors and vendors. Many of our competitors have comparable product lines, technical
expertise or distribution strategies that directly compete with us. Our competitors could obtain exclusive rights to distribute certain products, eliminating our ability to distribute those products.
The entry of new distributors in the industry could also have a material adverse effect on our ability to compete. Additionally, some of our vendors may decide to compete with us by selling their
products directly to our customers. If we do not compete successfully against these organizations, it could have a material and adverse effect on our business, financial condition and results of
operations.

Consolidation in the veterinary distribution business and veterinary practices may decrease our revenues and profitability.

Consolidation in the veterinary distribution business could result in existing competitors increasing their market share, which could give them greater pricing
power, decrease our revenues and profitability, and increase the competition for customers. Consolidation of the many small, privately-held veterinary practices would result in an
increasing number of larger veterinary practices, which could have increased purchasing leverage and the ability to negotiate lower product costs. This could reduce our operating margins and
negatively impact our revenues and profitability. Any of these developments could result in increased marketing expenses and have a material adverse effect on our business, financial condition and
results of operations.

Our business, financial condition and results of operations depend upon maintaining our relationships with vendors.

At September 30, 2007 we distributed more than 11,000 products sourced from more than 450 vendors to over 16,000 veterinary practices. We currently do not
manufacture the vast majority of our products and are dependent on these vendors for our supply of products. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for
approximately 43%, 44% and 45% of our revenues for our fiscal years ended September 30, 2007, 2006 and 2005, respectively. Our ten largest vendors supplied products that accounted for
approximately 70%, 70% and 73% of our revenues for the fiscal years ended September 30, 2007, 2006 and 2005, respectively.

Our
ability to sustain our gross profits has been, and will continue to be, dependent in part upon our ability to obtain favorable terms and access to new and existing products from our
vendors. These terms may be subject to changes from time to time by vendors, such as changing from a "buy/sell" to an agency relationship, or from an agency to a "buy/sell" relationship. In a
"buy/sell" transaction, we purchase or take inventory of products from our vendors. Under an agency relationship, when we receive orders for products from a customer, we transmit the order to the
vendor who then picks, packs and ships the products. Any changes from "buy/sell" to agency or from agency to "buy/sell" could adversely affect our revenues and operating income. The loss of one or
more of our large vendors, a material reduction in their supply of products to us or material changes in the terms we obtain from them could have a material adverse effect on our business, financial
condition and results of operations.

Some
of our current and future vendors may decide to compete with us in the future by pursuing or increasing their efforts in direct marketing and sales of their products. These vendors
could sell their products at lower prices and maintain a higher gross margin on their product sales than we can. In this

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event,
veterinarians or animal owners may elect to purchase animal health products directly from these vendors. Increased competition from any vendor of animal health products could significantly
reduce our market share and adversely impact our financial results.

Exclusivity requirements and failures to continue relationships with vendors may cause us to lose access to certain products and erode our market share.

We may not be able to establish or maintain relationships with key vendors in the animal health industry if we have established relationships with competitors of
these key vendors. We have written agreements with approximately 40 of our vendors, including Fort Dodge and Pfizer. Some of our agreements with vendors are for one-year periods. Upon
expiration, we may not be able to renew our existing agreements on favorable terms, or at all.

In
addition, during the course of our negotiation of these agreements certain vendors may require us to distribute their products on an exclusive basis, which would cause us to forego
distributing competing products that may also be profitable. In this situation we are often forced to project future sales of competing products so that we can elect to distribute the product that we
believe will be more profitable. Our projections may not be correct, and we may be contractually prohibited from distributing products that gain market share at the expense of the products that we
distribute. Competitors of ours could also obtain exclusive rights to market particular products, which we would be unable to market. If we lose the right to distribute products under such agreements,
or are required to exclusively distribute certain products at the expense of others that may be more profitable, we may lose access to certain products and lose a competitive advantage. Potential
competitors could sell products from vendors that we fail to continue with and erode our market share.

We rely substantially on third-party vendors, and the loss of products or delays in product availability from one or more third-party vendors could substantially harm our
business.

We must contract for the supply of current and future products of appropriate quantity, quality and cost. These products must be available on a timely basis and
be in compliance with any regulatory requirements. Failure to do so could substantially harm our business.

We
often purchase products from our vendors under agreements that typically have a term of one year and can be terminated on a periodic basis. There can be no assurance, however, that
our vendors will be able to meet their obligations under these agreements or that we will be able to compel them to do so. Risks of relying on vendors include:



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Potential
problems with vendors such as those discussed above could substantially decrease sales of our products, lead to higher costs and damage our reputation with our customers.

We rely upon third parties to ship products to our customers and interruptions in their operations could harm our business, financial condition and results of operations.

We use UPS as our primary delivery service for our air and ground shipments of products to our customers. If there were any significant service interruptions,
there can be no assurance that we could engage alternative service providers to deliver these products in either a timely or cost-efficient manner, particularly in rural areas where many
of our customers are located. Any labor disputes, slowdowns, transportation disruptions or other adverse conditions in the transportation industry experienced by UPS could impair or disrupt our
ability to deliver our products to our customers on a timely basis, and could have a material adverse effect upon our customer relationships, business, financial condition and results of operations.
In addition, rising fuel costs may result in continued increases in shipping costs charged by UPS, or other delivery service providers, and could have an adverse effect on our financial condition and
results of operations.

The loss of one or more significant customers could adversely affect our profitability.

Our two largest customers, Banfield and Feeders' Advantage (a related party), accounted for approximately 10% and 5% of our product sales for our fiscal year
ended September 30, 2007, respectively, and 10% and 6% for our fiscal years ended September 30, 2006 and 2005, respectively. Our ten largest customers, excluding Banfield and Feeders'
Advantage, accounted for approximately 5% of our product sales for our fiscal years ended September 30, 2007, 2006 and 2005. Our business and results of operations could be adversely affected
if the business of these customers was lost. We cannot guarantee that we will maintain or improve our relationships with these customers or that we will continue to supply these customers at current
levels. Banfield, Feeders' Advantage and other customers may seek to purchase some of the products that we currently sell directly from the vendors or from one or more of our competitors. Furthermore,
our customers are not required to purchase any minimum amount of products from us. The loss of Banfield or Feeders' Advantage or deterioration in our relations with either of them could significantly
affect our financial condition and results of operations. Additionally, deterioration in the financial condition of one or more of our customers could have a material adverse effect on our results of
operations.

Failure to effectively manage growth could impair our business.

Since fiscal 2000, we have experienced rapid growth and expansion, largely due to internal growth initiatives. Our revenues increased from $195.6 million
for our fiscal year ended September 30, 2000 to

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$710.1 million
for our fiscal year ended September 30, 2007. Our number of employees increased by approximately 500 individuals during the same period.

It
may be difficult to manage such rapid growth in the future, and our future success depends on our ability to implement and/or maintain:



Our
ability to successfully offer products and services and implement our business plan in a rapidly evolving market requires an effective planning and management process. We expect that
we will need to continue to improve our financial and managerial controls and reporting systems and procedures and to expand the training of our work force. While we believe our current systems have
sufficient capacity to meet our projected needs, we may need to increase the capacity of our current systems to meet additional or unforeseen demands.

If
we are not able to manage our rapid growth, there is a risk our customer service quality could deteriorate which may in turn lead to decreased sales or profitability. Also, the cost
of our operations could increase faster than growth in our revenues, negatively impacting our profitability.

Difficulties with the integration of acquisitions may impose substantial costs and delays and cause other unanticipated problems for us.

Acquisitions involve a number of risks relating to our ability to integrate an acquired business into our existing operations. The process of integrating the
operations of an acquired business, particularly its personnel, could cause interruptions to our business. Some of the risks we face include:



If
we are unable to successfully integrate the operations of an acquired business into our operations, we could be required to undertake unanticipated changes. These changes could have a
material adverse effect on our business.

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Increases in over-the-counter sales of animal health products could adversely affect our business.

We rely, and will continue to rely, on animal owners who purchase their animal health products directly from veterinarians, which we refer to as the ethical
channel. There can be no assurance that animal owners will continue to use the ethical channel with the same frequency as they have in the past, and will not increasingly purchase animal health
products from sources other than veterinarians, such as the Internet and other over-the-counter channels. Increased competition from any distributor of animal health products
making use of an over-the-counter channel could significantly reduce our market share and adversely impact our financial results.

If we fail to comply with or become subject to more onerous government regulations, our business could be adversely affected.

The veterinary distribution industry is subject to changing political and regulatory influences. Both state and federal government agencies regulate the
distribution of certain animal health products and we are
subject to regulation, either directly or indirectly, by the FDA, the USDA, the EPA, the DEA and comparable state agencies. As a distributor of prescription pharmaceutical products, we are also
subject to the PDMA, which provides for minimum standards, terms and conditions to be maintained for licensing as a distributor. The regulatory stance these agencies take could change. Our vendors are
subject to regulation by the FDA, the USDA, the EPA the DEA, and the PDMA, as well as other federal and state agencies, and material changes to the applicable regulations could affect our vendors'
ability to manufacture certain products, which could adversely impact our product supply. In addition, some of our customers may rely, in part, on farm and agricultural subsidy programs. Changes in
the regulatory positions that impact the availability of funding for such programs could have an adverse impact on our customers' financial positions, which could lead to decreased sales.

We
strive to maintain compliance with these and all other applicable laws and regulations. We retain a Manager of Regulatory Compliance and have engaged outside consultants as needed to
assist us in meeting and complying with the various state licensure requirements to which we are subject. If we are unable to maintain or achieve compliance with these laws and regulations, however,
we could be subject to substantial fines or other restrictions on our ability to provide competitive distribution services, which could have an adverse impact on our financial condition.

We
cannot assure you that existing laws and regulations will not be revised or that new, more restrictive laws will not be adopted or become applicable to us or the products that we
distribute or dispense. Effective December 1, 2006, the federal drug pedigree requirements of the FDA under the PDMA went into effect. Although a court injunction was granted regarding some
provisions, the FDA mandated that all distributors that are not the manufacturers authorized distributor must provide a record of all previous transactions. This transaction history is also referred
to as a pedigree. The federal pedigree regulations require tracking human labeled prescription products through the entire distribution chain and are enforceable for distributors that do not have a
written agreement with the manufacturer granting the wholesale distributor status as an "Authorized Distributor of Record." We cannot assure you that the vendors of products that may become subject to
more stringent laws will not try to recover any or all increased costs of compliance from us by increasing the prices at which we purchase products from them, or, that we will be able to recover any
such increased prices from our customers. We also cannot assure you that our business and financial condition will not be materially and adversely affected by future changes in applicable laws and
regulations.

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Loss of key management or sales representatives could harm our business.

Our future success depends to a significant extent on the skills, experience and efforts of management, including our President and Chief Executive Officer,
Mr. James F. Cleary, Jr. While we have not experienced problems in the past attracting and maintaining members of our management team, the loss of any or all of these individuals could
adversely impact our business. We do not carry key-man life insurance on any member of management. In addition we do not have employment agreements with key members of our senior
management team. We must continue to develop and retain a core group of individuals if we are to realize our goal of continued expansion and growth. We cannot assure you that we will be able to do so
in the future.

Also,
due to the specialized nature of our products and services, generally only highly qualified and trained sales representatives have the necessary skills to market our products and
provide our services. These individuals develop relationships with our customers that could be damaged if these employees are not retained. We face intense competition for the hiring of these
professionals, and many professionals in the field that may otherwise be attractive candidates for us to hire may be bound by non-competition agreements with our competitors. Any failure
on our part to hire, train and retain a sufficient number of qualified professionals would damage our business. We do not generally enter into agreements that contain non-competition
provisions with our employees, other than with members of our senior management team, former owners of acquired companies and certain other employees.

Failure of, or security problems with, our information systems could damage our business.

Our information systems are dependent on third party software, global communications providers, telephone systems and other aspects of technology and Internet
infrastructure that are susceptible to failure. Though we have implemented security measures and some redundant systems, our customer satisfaction and our business could be harmed if we or our vendors
experience any system delays, failures, loss of data, power outages, computer viruses, break-ins, unauthorized access by competitors or similar disruptions. We currently process all
customer transactions and data at our facilities in Meridian, Idaho. Although we have safeguards for emergencies, including, without limitation, sophisticated back-up systems, the
occurrence of a major catastrophic event or other system failure at any of our distribution facilities could interrupt data processing or result in the loss of stored data. This may result in the loss
of customers or a reduction in demand for our services. Only some of our systems are fully redundant and although we do carry business interruption insurance, it may not be sufficient to compensate us
for losses that may occur as a result of system failures. If a disruption occurs, our profitability and results of operations may suffer.

The outbreak of an infectious disease within either the production animal or companion animal population could have a significant adverse effect on our business and our results
of operations.

An outbreak of disease affecting animals, such as foot-and-mouth disease, avian influenza or bovine spongiform encephalopathy, commonly
referred to as "mad cow disease," could result in the widespread destruction of affected animals and consequently result in a reduction in demand for animal health products. In addition, outbreaks of
these or other diseases or concerns of such diseases could create adverse publicity that may have a material adverse effect on consumer demand for meat, dairy and poultry products, and, as a result,
on our customers' demand for the products we distribute. The outbreak of a disease among the companion animal population which could cause a reduction in the demand for companion animals could also
adversely affect our business. Although we have not been

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adversely
impacted by the outbreak of a disease in the past, there can be no assurance that a future outbreak of an infectious disease will not have an adverse effect on our business.

We may be subject to product liability and other claims in the ordinary course of business.

Our business involves a risk of product liability and other claims in the ordinary course of business, for example arising from shipping mislabeled or outdated
product or disputes among competing vendors. We maintain general liability insurance with policy limits of $1.0 million per incident and $2.0 million in the aggregate, and in many cases
we have indemnification rights against such claims from the manufacturers of the products we distribute. We do not maintain a separate product liability insurance policy because we do not currently
manufacture the vast majority of the products that we sell. Our ability to recover under insurance or indemnification arrangements is subject to the financial viability of the insurers and
manufacturers. We cannot assure you that our insurance coverage or the manufacturers' indemnity will be available or sufficient in any future cases brought against us.

A prolonged economic downturn could materially adversely affect our business.

Our business may be materially adversely affected by prolonged, negative trends in the general economy that could reduce consumer discretionary spending on animal
health products. Our business ultimately depends on the ability and willingness of animal owners to pay for our products. This dependence could make us more vulnerable to any reduction in consumer
confidence or disposable income than companies in other industries that are less reliant on consumer spending, such as the human health care industry, in which a large portion of payments are made by
insurance programs.

We may not be able to raise needed capital in the future on favorable terms or at all.

We expect that our existing sources of cash, together with any funds generated from operations, will be sufficient to meet our anticipated capital needs for at
least the next twelve months. However, we may require additional capital to finance our growth strategies or other activities in the future. Our capital requirements will depend on many factors,
including the costs associated with our growth and expansion. Additional financing may not be available when needed and, if such financing is available, it may not be available on terms favorable to
us. Our failure to raise capital when needed could have an adverse effect on our business, financial condition and results of operations.

Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Any borrowings on the revolving credit facility will be at variable rates of interest and expose us to interest rate risk based on market rates. If interest rates
increase, our debt service obligations on any future variable rate indebtedness that we may incur on our revolving credit facility would increase even if the amount borrowed remained the same, and our
net income and cash available for servicing our indebtedness would decrease. Our variable rate debt as of September 30, 2007 was approximately $0.3 million (comprised of $0 credit
facility and $0.3 million promissory note). Our interest expense for fiscal year 2007 was approximately $0.5 million and was approximately $2.0 million for fiscal year 2006. A 1%
increase in the average interest rate would not have a material impact on our operations assuming our current level of debt. However, if we had to borrow additional funds to operate our business, the
change in interest rates could affect our operations. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources."

25

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Item 1B.    Unresolved Staff Comments.

None.

Item 2.    Properties.

The table below provides a summary of the Company's principal facilities as of September 30, 2007:

|Location                  |  | Total Square
Feet(1) |  | Leased or
Owned |  | Principal Function                           
|------------------------- |  | -------------------- |  | --------------- |  | ---------------------------------------------
|Meridian, Idaho           |  | 34,000               |  | Leased          |  | Headquarters and call center                 
|Sturbridge, Massachusetts |  | 15,000               |  | Leased          |  | Securos office                               
|Atlanta, Georgia          |  | 41,000               |  | Leased          |  | Distribution center and call center          
|Clear Lake, Wisconsin     |  | 25,000               |  | Leased          |  | Distribution center, call center and pharmacy
|Denver, Colorado          |  | 75,000               |  | Leased          |  | Distribution center and call center          
|Fife, Washington          |  | 30,000               |  | Leased          |  | Distribution center                          
|Glendale, Arizona         |  | 20,000               |  | Leased          |  | Distribution center                          
|Grand Prarie, Texas       |  | 35,000               |  | Leased          |  | Distribution center, call center and pharmacy
|Harrisburg, Pennsylvania  |  | 40,000               |  | Leased          |  | Distribution center and pharmacy             
|Holland, Michigan         |  | 25,000               |  | Leased          |  | Distribution center and call center          
|Nampa, Idaho              |  | 36,000               |  | Leased          |  | Distribution center and pharmacy             
|Orlando, Florida          |  | 30,000               |  | Leased          |  | Distribution center                          
|San Antonio, Texas        |  | 19,000               |  | Leased          |  | Distribution center and call center          
|Visalia, California       |  | 52,000               |  | Leased          |  | Distribution center                          
|Edwardsville, Kansas(2)   |  | 80,000               |  | Leased          |  | Distribution center                          

---

Item 3.    Legal Proceedings.

From time to time, in the normal course of business, we may become a party to legal proceedings that may have an adverse effect on our financial position, results
of operations and cash flows. Management presently believes that the ultimate outcome of these proceedings, including the proceedings described below, will not have a material adverse effect on our
financial position, cash flows or overall trends in results of operations. However, litigation is subject to inherent uncertainties, and unfavorable outcomes could occur. An unfavorable outcome could
include the payment of monetary damages or, in cases for which injunctive relief is sought, an injunction prohibiting us from selling one or more products or taking certain other actions. Were an
unfavorable outcome to occur, our business or results of operations could be materially harmed.

26

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Putney Inc. v. Pfizer Inc. and MWI Veterinary Supply, Inc., United States District Court, D. Me. 2007

Putney sells to veterinarians and distributors a generic, human-approved form of a pharmaceutical sold by Pfizer. MWI is a party to a Distribution Agreement with
Putney pursuant to which MWI purchases
Putney's product for resale. The term of the agreement expires on December 31, 2007, and MWI has notified Putney that it will not renew the agreement. Pfizer has contended that the sale and
promotion of Putney's product is unlawful. Putney has sued Pfizer and MWI seeking a declaration that the sale and promotion of Putney's product is lawful. Putney also alleges, as against MWI, that MWI
has disparaged Putney's product, has breached the Distribution Agreement, and is obligated to indemnify Putney. No amount of damages is specified. Pfizer has filed a counterclaim, against Putney, in
which it makes no claims of any type against MWI. MWI has yet to answer the complaint, and intends to contest vigorously any allegation that it has breached any agreement, disparaged Putney's product,
or is otherwise liable to Putney in any way. As the action has recently been filed, and as it is not clear to what extent MWI will remain involved in or affected by this dispute, it is not reasonably
possible to evaluate the likely outcome or to estimate damages, if any.

Item 4.    Submission of Matters to a Vote of Security Holders.

None.

27

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock has been quoted on the Nasdaq under the symbol "MWIV" since August 3, 2005. Prior to that date there was no public market for our common
stock. The following table sets forth, for the two most recent fiscal years, the high and low sales prices of our common stock, reported by the Nasdaq Global Select Market.

Common Stock PriceHigh

LowFiscal Year Ended September 30, 2006First Quarter

$
26.49

$
19.87Second Quarter

$
36.31

$
23.79Third Quarter

$
37.29

$
29.25Fourth Quarter

$
38.61

$
30.56Fiscal Year Ended September 30, 2007First Quarter

$
37.44

$
30.05Second Quarter

$
34.50

$
30.00Third Quarter

$
40.50

$
32.36Fourth Quarter

$
42.98

$
33.63


At
the close of business on November 16, 2007, we had approximately 12,047,249 shares of common stock issued and outstanding. As of that date, there were approximately 34
registered holders of record. This does not reflect beneficial stockholders who hold their stock in nominee or "street" name through brokerage firms.

We
have not paid or declared any dividends on our common stock and do not anticipate paying any dividends on our common stock in the foreseeable future. We intend to retain future
earnings to finance the ongoing operations and growth of our business. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend
on conditions at that time, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may
deem relevant.

We
did not make any common stock repurchases during the fiscal year ended September 30, 2007.

28

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Equity Compensation Plan Information

The following table provides information as of September 30, 2007 about the common stock that may be issued under all of our existing equity compensation
plans, including the 2002 Stock Plan and 2005 Stock-Based Incentive Compensation Plans. Both of these plans have been approved by our stockholders.

|                                                           |  | Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
(a) |  | Weighted-average exercise
price of outstanding
options, warrants and
rights
(b) |      | Number of securities remaining
available for future issuance
under equity compensation
plans (excluding securities
reflected in column (a))
(c)
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     |  | 441,502                                                                                         |  | $                                                                               | 3.27 |                                                                                                                                                
|Equity compensation plans not approved by security holders |  |                                                                                                |  |                                                                                 |     |                                                                                                                                                
|                                                           |  |                                                                                                 |  |                                                                                 |      |                                                                                                                                                
|Total                                                      |  | 441,502                                                                                         |  | $                                                                               | 3.27 |                                                                                                                                                

29

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The
graph below compares the cumulative total stockholder return on $100 invested at the market close on August 2, 2005, the date the Company's initial public offering was priced
for initial sale, through and including September 28, 2007, the last trading day before the end of our most recently completed fiscal year, with the cumulative total return of the same time
period on the same amount invested in the Russell 2000 Index and a Peer Group Index, consisting of 10 companies that compete or operate in a comparable industry as the Company. The chart below the
graph sets forth the actual numbers depicted on the graph.

GRAPHIC

|                            |  | 8/2/2005 |        | 9/30/2005 |   | 9/30/2006 |  | 9/30/2007
|--------------------------- |  | -------- | ------ | --------- | - | --------- |  | ---------
|MWI Veterinary Supply, Inc. |  | $        | 100.00 |           | $ | 117.35    |  | $        
|Russell 2000 Index          |  |          | 100.00 |           |   | 96.99     |  |          
|Peer Group(1)               |  |          | 100.00 |           |   | 101.34    |  |          

---

30

---





Item 6.    Selected Financial Data.

The selected consolidated financial and operating data below represent portions of our financial statements and are not complete. You should read this information
together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes to these statements included in
this annual report. Historical results are not necessarily indicative of future performance.

|                                                    |                                | Year Ended September 30,     |        
|--------------------------------------------------- | ------------------------------ | ---------------------------- | -------
|
|
|Revenues:                                           |                                |                              |        
|                                                    | Product sales                  |                              | $      
|                                                    | Product sales to related party |                              |        
|                                                    | Commissions                    |                              |        
|                                                    |                                |                              |        
|                                                    |                                | Total revenues               |        
|Cost of product sales                               |                                |                              | 294,692
|                                                    |                                |                              |        
|                                                    | Gross profit                   |                              |        
|Selling, general and administrative expenses(1)     |                                |                              | 35,886 
|Depreciation and amortization                       |                                |                              | 976    
|                                                    |                                |                              |        
|                                                    | Operating income               |                              |        
|Other income (expense):                             |                                |                              |        
|                                                    | Interest expense(2)            |                              |        
|                                                    | Other                          |                              |        
|                                                    |                                |                              |        
|                                                    |                                | Total other income (expense) |        
|                                                    |                                |                              |        
|Income before taxes                                 |                                |                              | 7,445  
|Income tax expense                                  |                                |                              | (3,116 
|                                                    |                                |                              |        
|Net income                                          |                                |                              | 4,329  
|Accretion of redeemable preferred stock             |                                |                              | (2,714 
|                                                    |                                |                              |        
|Income available to common stockholders             |                                | $                            | 1,615  
|                                                    |                                |                              |        
|Earnings per common share:                          |                                |                              |        
|                                                    | Basic                          |                              | $      
|                                                    | Diluted                        |                              | $      
|Shares used in computing earnings per common share: |                                |                              |        
|                                                    | Basic                          |                              |        
|                                                    | Diluted                        |                              |        

|                           |  | As of September 30,
|-------------------------- |  | -------------------
|
|
|Cash                       |  | $                  
|Total assets               |  |                    
|Total debt                 |  |                    
|Redeemable preferred stock |  |                    
|Total stockholders' equity |  |                    

31

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|                           |                                                      | Year Ended September 30, |   
|-------------------------- | ---------------------------------------------------- | ------------------------ | --
|
|Other Data (unaudited):(3) |                                                      |                          |   
|                           | Product sales from Internet as a percentage of sales |                          | 18
|                           | Field sales representatives (at end of period)       |                          | 94
|                           | Telesales representatives (at end of period)         |                          | 75
|                           | Distribution centers(4)                              |                          | 8 
|                           | Fill rate(5)                                         |                          | 98

---

32

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

All dollar amounts are presented in thousands, except for per share amounts.

Overview

We are a leading distributor of animal health products to veterinarians across the United States. We market our products to veterinarians in both the companion
and production animal markets. Our growth has primarily been from internal growth initiatives and, to a lesser extent, selective acquisitions.

Historically,
approximately two-thirds of our total revenues have been generated from sales to the companion animal market and one-third from sales to the
production animal market. We intend to continue to support production animal veterinarians with a broad range of products and value-added services, however, the increasing maturity of the production
animal market results in lower margins on product sales relative to the companion animal market. We intend to increase our focus on the companion animal market, which we believe is growing due to the
increasing number of households with companion animals, increased expenditures on animal health and preventative care, an aging pet population, advancements in pharmaceuticals and diagnostic testing
and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. While the average order size for companion animal health products is often smaller than
production animal health products, companion animal health products typically have higher margins.

We
sell products that we source from our vendors to our customers through either a "buy/sell" transaction or an agency relationship with our vendors. In a "buy/sell" transaction, we
purchase or take inventory of products from our vendors. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We record sales from "buy/sell"
transactions, which account for the vast majority of our business, as revenues in conformity with generally accepted accounting principles in the United States. In an agency relationship, we generally
do not purchase and take inventory of products from our vendors. When we receive an order from our customer, we transmit the order to our vendor, who picks, packs and ships the order to our customer.
In some cases, our vendor invoices and collects payment from our customer, while in other cases we invoice and collect payment from our customer on behalf of our vendor. We receive a commission
payment for soliciting the order from our customer and for providing other customer service activities. The aggregate revenues we
receive in agency transactions constitute the "commissions" line item on our consolidated statements of income and are recorded in conformity with accounting principles generally accepted in the
United States. Our vendors determine the method we use to sell our products. Historically, vendors have occasionally switched between the "buy/sell" and agency models for particular products in
response to market conditions related to that particular product. A switch between models can impact our revenues and our operating income. We cannot know in advance when a vendor will switch between
the "buy/sell" and agency models or what impact, if any, such a change may have. A switch can occur even with vendors with whom we have written agreements, because most of our agreements with vendors
have relatively short terms and are terminable with or without cause on short notice, normally 30 to 90 days. The impact of any individual change from a "buy/sell" to an agency model depends on
the costs and expenses associated with a particular product, and can have either a positive or a negative effect on our profitability.

We
typically renegotiate vendor contracts annually. These vendor contracts may include terms defining rebates, commissions and exclusivity requirements. For example, vendors could
require us to

33

---



distribute
their products on an exclusive basis, which could cause us to forego distributing competing products which may also be profitable. Conversely, competitors could obtain exclusive rights to
market particular products, which we would be unable to market. If we lose the right to distribute products under such exclusive agreements, we may lose access to certain products and lose a
competitive advantage. Exclusivity agreements could allow potential competitors to sell products that we cannot offer and erode our market share. Additionally, many of our vendors' rebate programs are
based on a calendar year. Historically, the three months ended December 31 has been our most significant quarter for recognition of rebates. During calendar year 2006, certain of our vendors
modified their rebate programs with us. These rebate program modifications changed the revenue growth targets from annual-weighted calendar year targets to either quarterly or trimester growth
targets. These modifications resulted in rebates previously expected to be earned and recognized in our first fiscal quarter 2007 ending December 31, 2006 to be recognized in our fiscal year
2006. Vendor rebates based on sales are classified in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are
achieved. Purchase rebates are measured against inventory purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are
recognized as a reduction to cost of product sales.

Total Revenues.Our total revenues increased from $341,709 for our fiscal year ended September 30, 2003 to $710,105
for our fiscal year ended September 30, 2007. Our revenue growth has been driven by our ability to offer a broad product selection at competitive prices with high levels of customer service and
support and an expansion in the number of veterinary practices to which we distribute products. We have continually added new vendor relationships to expand our product offering and field sales
representatives to increase our customer reach, principally in the Southeast, Northeast and Midwest regions of the United States.

Operating Expenses.Our selling, general and administrative expenses increased from $35,886 for our fiscal year ended
September 30, 2003 to $73,215 for our fiscal year ended September 30, 2007. Selling, general and administrative expenses consist mainly of compensation and benefits, warehouse operating
supplies, occupancy and location expenses and other general corporate expenses. Our selling, general and administrative expenses as a percentage of total revenues were 10.3% for our fiscal year ended
September 30, 2007, compared to 10.5% for the same period in 2003.

Initial Public Offering.On August 3, 2005, we completed our initial public offering in which we sold an aggregate of
4,983,334 shares (including the exercise of the underwriters' over-allotment option) of our common stock at a price of $17 per share. We received net proceeds of $77,159 after deducting
the underwriting discounts and offering expenses. We used the net proceeds to redeem all of our Series A preferred stock for approximately $39,789 and to repay approximately $37,370 of
borrowings outstanding on our revolving credit facility.

Follow-on Offerings.In the fourth quarter ended September 30, 2006, we issued 908,846 shares (including
the shares issued upon the partial exercise of the underwriters' over-allotment option) of our common stock at a price of $32.25 per share. We used net proceeds of $27,341 received from
this offering to pay down our borrowings on our revolving credit facility.

In
the third quarter ended June 30, 2007, we issued 348,974 shares of our common stock at a price to the public of $35.00 per share. We used the net proceeds of $11,252 received
from this offering to pay down our borrowings on our revolving credit facility and for general corporate purposes.

34

---



Acquisitions.In fiscal year 2006, we acquired substantially all of the assets of Northland. Based in Clear Lake, Wisconsin,
Northland was a distributor of animal health products to veterinary practices and producers across the Midwestern portion of the United States.

In
June 2007, we acquired substantially all of the assets of Securos. Based in Charlton, Massachusetts, Securos was a provider of veterinary orthopedic products in the United
States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment and handheld instruments.

In
October 2007, we acquired substantially all of the assets of Tri V. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of providing
animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

Fair
values of the assets acquired and liabilities assumed as a result of these acquisitions are discussed in Note 3 "Business Acquisitions" to the consolidated financial
statements.

35

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Results of Operations

The following tables summarize our historical results of operations for our fiscal years ended September 30, 2005, 2006 and 2007.

Summary Consolidated Results of Operations Table

|                                                |                                     | Year Ended September 30,     |        
|----------------------------------------------- | ----------------------------------- | ---------------------------- | -------
|
|
|Revenues:                                       |                                     |                              |        
|                                                | Product sales                       |                              | $      
|                                                | Product sales to related party      |                              |        
|                                                | Commissions                         |                              |        
|                                                |                                     |                              |        
|                                                |                                     | Total revenues               |        
|Cost of product sales                           |                                     |                              | 426,709
|                                                |                                     |                              |        
|Gross profit                                    |                                     |                              | 69,946 
|Selling, general and administrative expenses(1) |                                     |                              | 52,647 
|Depreciation and amortization                   |                                     |                              | 1,528  
|                                                |                                     |                              |        
|Operating income                                |                                     |                              | 15,771 
|Other income (expense):                         |                                     |                              |        
|                                                | Interest expense(2)                 |                              |        
|                                                | Earnings of equity method investees |                              |        
|                                                | Other                               |                              |        
|                                                |                                     |                              |        
|                                                |                                     | Total other income (expense) |        
|Income before taxes                             |                                     |                              | 9,655  
|Income tax expense                              |                                     |                              | (5,098 
|                                                |                                     |                              |        
|Net income                                      |                                     | $                            | 4,557  
|                                                |                                     |                              |        
|Earnings per common share:                      |                                     |                              |        
|                                                | Basic                               |                              | $      
|                                                | Diluted                             |                              | $      
|Shares used in computing                        |                                     |                              |        
|                                                | earnings per common share:          |                              |        
|                                                | Basic                               |                              |        
|                                                | Diluted                             |                              |        

---

36

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Fiscal 2007 Compared to Fiscal 2006

Total Revenues.Total revenues increased $103,911, or 17.1%, to $710,105 for the fiscal year ended September 30, 2007
from $606,194 for the fiscal year ended September 30, 2006. This increase was attributable to an increase in product sales volumes of a wide variety of products to both existing and new
customers. Revenues attributable to new customers represented approximately 66% of the growth in total revenues during the fiscal year ended September 30, 2007. Revenues attributable to
existing customers represented approximately 34% of the growth in total revenues during the fiscal year ended September 30, 2007. For the purpose of calculating growth rates of new and existing
customer revenue, we have defined a new customer as a customer that did not purchase product from us in the corresponding fiscal quarter of the prior year, with the remaining customer base being
considered an existing customer. Revenues from new customers for each fiscal quarter are summed to arrive at the estimated year-to-date revenue for new customers. Contributing
to the
growth in revenues to both new and existing customers for the fiscal year ended September 30, 2007 as compared to the prior fiscal year was the addition of new product lines, including the
leading antibiotic for dogs and cats. Also, the fiscal year 2007 included all four quarters of revenues resulting from the acquisition of substantially all of the assets of Northland while fiscal year
2006 included approximately two quarters of such revenues.

Commission
revenues increased $1,850, or 23.8%, to $9,632 for the fiscal year ended September 30, 2007 from $7,782 for the fiscal year ended September 30, 2006. The
increase of commission revenues was due to the increase in gross agency billings of $42,975, or 28.4%, to $194,351 for the fiscal year ended September 30, 2007 from $151,376 for the fiscal year
ended September 30, 2006.

Gross Profit.Gross profit increased $14,223, or 16.1%, to $102,349 for the fiscal year ended September 30, 2007 from
$88,126 for the fiscal year ended September 30, 2006. The change in gross profit is a result of increased total revenues as discussed above, offset by decreased vendor rebates. Vendor rebates
decreased by approximately $664 for the fiscal year ended September 30, 2007 as compared to the fiscal year ended September 30, 2006. This decrease was largely offset by an increase in
our product margins for fiscal year 2007 compared to fiscal year 2006. Vendor rebates have historically been highest during our first fiscal quarter ended December 31, since certain significant
vendor rebate programs were designed to include annual targets to be achieved based on the calendar year. Vendor modifications to rebate programs from annual-weighted calendar year growth targets to
either quarterly or trimester growth targets resulted in a shift of rebate dollars that historically would have been earned in our first quarter of fiscal year 2007 ending December 31, 2006 to
be earned in the fiscal year 2006. The growth in vendor rebates during the 2006 fiscal year included approximately $2.5 million ($1.5 million after-tax) due to this shift in
the timing of rebates.

Gross
profit as a percentage of total revenues was 14.4% for the fiscal year ended September 30, 2007, compared to 14.5% for the fiscal year ended September 30, 2006. The
decrease in our gross profit as a percentage of total revenues was primarily due to a decrease in vendor rebates as discussed above.

Selling, General and Administrative Expenses ("SG&A").SG&A increased $10,745, or 17.2%, to $73,215 for the fiscal year ended
September 30, 2007 from $62,470 for the fiscal year ended September 30, 2006. This increase was primarily due to increased compensation and benefits costs and occupancy and location
costs. Compensation costs increased due to the addition of 81 employees, which includes 17 employees from the Securos acquisition and the full year of costs related to the employees

37

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acquired
from Northland. Compensation costs also increased as a result of increased sales commissions that are directly correlated with the sales growth. The increase in benefits costs was a result of
increased headcount as well as higher health insurance costs. These costs increased as a result of higher participant claims than experienced in the past. Occupancy and location costs increased as a
result of changes in our distribution centers. We moved our Atlanta, Georgia to a larger facility to accommodate capacity needs. We also added capacity to our distribution centers in Denver, Colorado,
Phoenix, Arizona, and Nampa, Idaho. Additionally, we prepared for the opening of our distribution center in Edwardsville, Kansas. Certain expenses were incurred in the fourth quarter of fiscal year
2007 in anticipation of the opening of this distribution center that increased our SG&A expenses. The facility did not commence operations until October 2007. SG&A as a percentage of revenue
was 10.3% for each of the fiscal years ended September 30, 2007 and 2006.

Depreciation and Amortization.Depreciation and amortization expense increased $460, or 23.4%, to $2,424 for the fiscal year
ended September 30, 2007 from $1,964 for the fiscal year ended September 30, 2006. The expansion and improvements of our distribution centers as well as the implementation of new
technologies contributed to the increase in depreciation expense. In addition, amortization expense increased as a result of intangible assets acquired in the purchases of Northland and Securos.

Other Expenses.Other expenses decreased $1,840, or 126.0%, to $380 in income for the fiscal year ended September 30,
2007 from $1,460 in expense for the fiscal year ended September 30, 2006. The decrease in other expenses was primarily due to a reduction in interest expense of $1,414 in the fiscal year ended
September 30, 2007 as compared to the same period in the prior year. This was a result of the issuance of additional shares of common stock in July 2006 and April 2007, the
proceeds of both of which were partially used to pay down the credit facility. The issuance of common stock in April 2007 and cash provided by operations also led to a positive cash balance for
the majority of the remainder of the year which contributed to interest income of approximately $424.

Income Tax Expense.Our effective tax rate was 37.7% for the fiscal year ended September 30, 2007 and 37.8% for the
fiscal year ended September 30, 2006.

Fiscal 2006 Compared to Fiscal 2005

Total Revenues.Total revenues increased $109,539, or 22.1%, to $606,194 for the fiscal year ended September 30, 2006
from $496,655 for the fiscal year ended September 30, 2005. This increase was attributable to an increase in product sales volumes of a wide variety of products to both existing and new
customers. Revenues attributable to new customers represented approximately 48.5% of the growth in total revenues during the fiscal year ended September 30, 2006. Revenues attributable to
existing customers represented approximately 51.5% of the growth in total revenues during the fiscal year ended September 30, 2006. For the purpose of calculating growth rates of new and
existing customer revenue, we have defined a new customer as a customer that did not purchase product from us in the corresponding fiscal quarter of the prior year, with the remaining customer base
being considered an existing customer. Revenues from new customers for each fiscal quarter are summed to arrive at the estimated year-to-date revenue for new customers.
Contributing to the growth in revenues to both new and existing customers for the fiscal year ended September 30, 2006 as compared to the prior fiscal year was the addition of
non-steroidal anti-inflammatory drugs for dogs, the addition of new cattle antibiotics and the conversion to a "buy/sell" arrangement for an equine West Nile Virus vaccine

38

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that
was a commission-based agency relationship for part of the prior fiscal year. The integration of Northland in the third quarter of the fiscal year ended September 30, 2006 contributed to
new customer revenue growth of approximately $4,200 for the year. Additionally, the fiscal year 2006 included four quarters of revenues resulting from the acquisition of substantially all the assets
of Vetpo Distributors, Inc. ("Vetpo") in January 2005. Fiscal year 2005 included only three quarters of such revenues.

Commission
revenues increased $2,872, or 58.5%, to $7,782 for the fiscal year ended September 30, 2006 from $4,910 in the prior fiscal year. The increase of commission revenues
was due to the increase in gross agency billings of $48,493, or 47.1%, to $151,376 for the fiscal year ended September 30, 2006 from $102,883 in the prior fiscal year.

Gross Profit.Gross profit increased $18,180, or 26.0%, to $88,126 for the fiscal year ended September 30, 2006 from
$69,946 for the fiscal year ended September 30, 2005. The increase in gross profit was a result of increased total revenues as discussed above and increased vendor rebates. Vendor rebates
contributed to the gross profit dollar improvement by approximately $5,900 for the fiscal year ended September 30, 2006 as compared to the fiscal year ended September 30, 2005. Vendor
rebates have
historically been highest during our first fiscal quarter ended December 31, since certain significant vendor rebate programs were designed to include annual targets to be achieved based on the
calendar year. Vendor modifications to rebate programs from annual-weighted calendar year growth targets to either quarterly or trimester growth targets resulted in a shift of rebate dollars that
historically would have been earned in our first quarter of fiscal year 2007 ending December 31, 2006 to be earned in the fiscal year 2006. The growth in vendor rebates during the 2006 fiscal
year included approximately $2.5 million ($1.5 million after-tax) due to this shift in the timing of rebates. The additional growth was attributable to our sales growth with
key vendors and the addition of new programs related to new product offerings.

Gross
profit as a percentage of total revenues was 14.5% for the fiscal year ended September 30, 2006, compared to 14.1% for the prior fiscal year. The increase in our gross
profit as a percentage of total revenues was primarily due to an increase in vendor rebates and commission revenue on agency products sold. Partially offsetting these improvements were increases in
freight costs as a result of higher fuel and transportation costs.

Selling, General and Administrative Expenses.SG&A increased $9,823, or 18.7%, to $62,470 for the fiscal year ended
September 30, 2006 from $52,647 for the fiscal year ended September 30, 2005. This increase was primarily due to increased compensation costs, outside fees and services, location and
travel and occupancy costs. Compensation costs increased due to the addition of 123 employees, primarily in our distribution centers, corporate office and sales force. Additionally, the increase in
compensation cost was impacted by 50 employees that joined us in January 2005 in connection with the acquisition of Vetpo and the 17 employees that joined us in May 2006 as a result of
the Northland acquisition. Compensation costs also increased as a result of increased sales commissions that are directly correlated with the sales growth. The increase in outside fees and services
was primarily due to our use of a temporary workforce to support our sales growth and demand in our distribution centers, increased professional services fees related to operating as a public company
and increased credit card and other bank fees. Increases in location and travel costs are due to increased headcount and costs associated with supporting our sales growth. Increases in occupancy costs
are due primarily to the relocation of our distribution centers in Nampa, Idaho and Denver, Colorado from owned properties to leased properties; the opening of our new distribution center in Orlando,
Florida, and the leased

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facilities
used as a result of the Vetpo and the Northland acquisitions. SG&A as a percentage of revenue was 10.3% for the fiscal year ended September 30, 2006, down from 10.6% for the fiscal
year ended September 30, 2005. The decrease was primarily due to a $2,000 pre-tax charge incurred in August 2005 for the termination of a management and consulting services
agreement, partially offset by the increase in outside fees and services and location costs.

Depreciation and Amortization.Depreciation and amortization expense increased $436, or 28.5%, to $1,964 for the fiscal year
ended September 30, 2006 from $1,528 for the fiscal year ended September 30, 2005. Depreciation expense increased as a result of the distribution center equipment upgrades at our Nampa,
Idaho and Denver, Colorado facilities in April 2005 and December 2005, respectively, and as a result of the equipment we acquired in the purchases of Vetpo and Northland and the new
distribution center opened in June 2006 in Orlando, Florida. In addition, amortization expense increased as a result of intangible assets acquired in the purchases of Vetpo and Northland.

Other Expenses.Other expenses decreased $4,656, or 76.1%, to $1,460 for the fiscal year ended September 30, 2006 from
$6,116 for the fiscal year ended September 30, 2005. The decrease in other expenses was primarily due to a reduction in interest expense of $4,556 in the fiscal year ended September 30,
2006 as compared to the same period in the prior year. Included in interest expense for the fiscal year ended September 30, 2005 is accretion of dividends on the Series A preferred stock
of $4,055. The Series A preferred stock was redeemed in August 2005.

Income Tax Expense.Our effective tax rate was 37.8% for the fiscal year ended September 30, 2006 and 52.8% for the
fiscal year ended September 30, 2005. The decrease was primarily a result of the elimination of the non-deductible accretion of dividends on the Series A preferred stock that
was redeemed in August 2005, as well as a decrease in the state income taxes related to the utilization of state tax credits.

Seasonality in Operating Results

Our quarterly sales and operating results have varied significantly in the past, and will likely continue to do so in the future. Historically, our total revenues
have typically been higher during the spring and fall months due to increased sales of production animal products. Product use cycles for production animal products are directly related to medical
procedures performed by veterinarians on production animals during the spring and fall months. These buying patterns can also be affected by vendors' and distributors' marketing programs launched
during the summer months, particularly in June, which can cause veterinarians to purchase production animal health products earlier than those products are needed. This kind of early purchasing may
reduce our sales in the months these purchases would have otherwise been made. See "Risk FactorsOur quarterly operating results may fluctuate significantly, and these fluctuations may
cause our stock price to fall." Additionally, while we accrue rebates as they are earned, our rebates have historically been highest during the quarter ended December 31, since some of our
vendors' rebate programs were designed to include targets to be achieved near the end of the calendar year. Early in calendar year 2006, certain of our vendors modified their rebate programs with us.
These rebate program modifications changed the revenue growth targets from annual-weighted calendar year targets to either quarterly or trimester growth targets. These modifications resulted in
rebates previously expected to be earned and recognized in our first fiscal quarter of 2007 ending on December 31, 2006 to be recognized in our fiscal year 2006.

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Our
companion animal products tend to have a different product use cycle that minimally overlaps with that of production animal products. In the companion animal market, sales of flea,
tick and mosquito products are highest during the spring and summer months. The differing product use cycles of companion animal products partially offsets the seasonality we typically experience due
to our sales of production animal products.

For
the reasons and factors discussed above our quarterly operating results may fluctuate significantly. Accordingly, results for any one quarter are not necessarily indicative of
results to be expected for any other quarter or for any year and our sales for any particular future period may decrease. In the future, operating results may fall below the expectations of securities
analysts and investors. If this occurs, the price of our stock would likely decrease.

|                                             |                                     | For the three-months ended   |        
|-------------------------------------------- | ----------------------------------- | ---------------------------- | -------
|
|
|Revenues:                                    |                                     |                              |        
|                                             | Product sales                       |                              | $      
|                                             | Product sales to related party      |                              |        
|                                             | Commissions                         |                              |        
|                                             |                                     |                              |        
|                                             |                                     | Total revenues               |        
|Cost of product sales                        |                                     |                              | 115,064
|                                             |                                     |                              |        
|Gross profit                                 |                                     |                              | 22,752 
|Selling, general and administrative expenses |                                     |                              | 14,553 
|Depreciation and amortization                |                                     |                              | 442    
|                                             |                                     |                              |        
|Operating income                             |                                     |                              | 7,757  
|Other income (expense):                      |                                     |                              |        
|                                             | Interest expense                    |                              |        
|                                             | Earnings of equity method investees |                              |        
|                                             | Other                               |                              |        
|                                             |                                     |                              |        
|                                             |                                     | Total other income (expense) |        
|Income before taxes                          |                                     |                              | 7,337  
|Income tax expense                           |                                     |                              | (2,898 
|                                             |                                     |                              |        
|Net income                                   |                                     | $                            | 4,439  
|                                             |                                     |                              |        
|Earnings per common share:                   |                                     |                              |        
|                                             | Basic                               |                              | $      
|                                             | Diluted                             |                              | $      

---

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows generated from operations and borrowings on our revolving credit facility under our credit agreement. We use
capital primarily to fund day-to-day operations and to maintain sufficient inventory levels in order to promptly fulfill customer orders and to expand our operations and sales
growth. We believe our capital resources will be sufficient to meet our anticipated cash needs for at least the next twelve months.

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On
August 3, 2005, we completed our initial public offering in which we sold an aggregate of 4,983,334 shares (including the exercise of the underwriters'
over-allotment option) of our common stock at a price of $17 per share. We received net proceeds of $77,159 after deducting the underwriting discounts and offering expenses. We used the
net proceeds to redeem all of our Series A
preferred stock for approximately $39,789 and to repay approximately $37,370 of borrowings outstanding on our revolving credit.

In
the fourth quarter ended September 30, 2006, we issued 908,846 shares (including the shares issued upon the partial exercise of the underwriters' over-allotment
option) of our common stock at a price of $32.25 per share. We used net proceeds of $27,341 received from this offering to pay down borrowings on our revolving credit facility.

In
the third quarter ended June 30, 2007, we issued 348,974 shares of our common stock at a price to the public of $35.00 per share. We used the net proceeds of $11,252 received
from this offering to pay down our borrowings on our revolving credit facility and for general corporate purposes.

Operating Activities.For fiscal year ended September 30, 2007, cash provided by operating activities was $15,379, and
was primarily attributable to net income of $16,875 and an increase in accounts payable and accrued expenses of $17,311. This amount was partially offset by an increase in receivables of $11,797 and
inventories of $8,795. The increase in net income is a result of the factors discussed above in "Results of Operations." The increase in accounts receivable is primarily related to the increase in
sales and the continued offering of extended payment terms to production animal veterinarians in response to market conditions. The increased levels of inventory and accounts payable are related to
purchases to correspond to increased sales, purchases to achieve target volumes and service levels, and the opening of a new distribution center located in Edwardsville, Kansas.

For
fiscal year ended September 30, 2006, cash used in operating activities was $7,751, and was primarily attributable to an increase in receivables of $21,022 and inventories of
$15,114. This amount was partially offset by net income of $13,836 and an increase in accounts payable of $12,839. The increase in net income is a result of the factors discussed above in "Results of
Operations". The increase in accounts receivable is primarily related to the increase in sales and the continued offering of extended payment terms to production animal veterinarians in response to
market conditions. The increased levels of inventory and accounts payable are related to purchases to correspond to increased sales; purchases to achieve target volumes and service levels; and
purchases related to the new distribution center acquired in the Northland acquisition and the opening of a new distribution center located in Orlando, Florida.

For
fiscal year ended September 30, 2005, cash used in operating activities was $5,611 and was primarily attributable to increases in inventories of $17,334 and accounts
receivable of $15,276. This amount was partially offset by an increase in accounts payable of $15,837, non-cash accretion of the Series A preferred stock dividends of $4,055
(included in interest expense) and net income of $4,557. The increased levels of inventory and accounts payable resulted from moving certain products we sell from a commission-based agency arrangement
to a "buy/sell" arrangement, increased sales growth
requiring higher levels of inventory and new product offerings. Increased accounts receivables are directly related to the increase in sales. Additionally, we provided extended payment terms to
production animal veterinarians in June and July of 2005 in response to market conditions.

Investing Activities.For fiscal year ended September 30, 2007, net cash used in investing activities was $8,749.
Significant transactions impacting cash used in investing activities include the acquisition of

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substantially
all of the assets of Securos for $4,661 and capital expenditures of $3,872 primarily related to the new distribution center in Edwardsville, Kansas and expansion and improvements made to
our existing distribution centers. Additionally, we added new technology to our distribution centers to improve receiving inventory. We also used cash to improve our e-commerce site at www.mwivet.com.

For
fiscal year ended September 30, 2006, net cash used in investing activities was $6,065. Significant transactions impacting cash used in investing activities include the
acquisition of substantially all of the assets of Northland for $3,551 and capital expenditures of $3,663 primarily related to the relocation of our existing distribution center to a new larger
distribution center in Denver, Colorado, the opening of a new distribution center in Orlando, Florida and the expansion of the Northland facility. Additionally, we completed the sale of a distribution
center previously operated in Denver, Colorado for $1,455.

For
fiscal year ended September 30, 2005, net cash used in investing activities was $6,529 and was primarily attributable to the acquisition of certain assets of Vetpo and
Memorial Pet Care, Inc. ("Memorial Pet Care"). In addition, in April 2005, we relocated from an existing distribution center facility to a larger distribution center facility in Nampa,
Idaho. The capital expenditures for the equipment for this facility were approximately $657. We also began the relocation of our Denver, Colorado distribution center to a new, larger, 58,737
square-foot facility that was opened in December 2005.

Financing Activities.For fiscal year ended September 30, 2007, net cash provided by financing activities was $1,932,
and was primarily attributable to net proceeds of $11,252 from the issuance of 348,974 shares of common stock completed in the third quarter ended June 30, 2007. The proceeds were primarily
used to reduce outstanding debt under our revolving credit facility, which had a balance of $10,559 at September 30, 2006.

For
fiscal year ended September 30, 2006, net cash provided by financing activities was $13,822, and was primarily attributable to net proceeds of $27,341 from the issuance of
908,846 shares of common stock completed in the fourth quarter ended September 30, 2006. The proceeds were primarily used to reduce outstanding debt under our revolving credit facility.

For
fiscal year ended September 30, 2005 net cash provided by financing activities was $12,143 and was primarily due to the net proceeds of $77,159 received from our initial
public offering in August 2005. These proceeds were used to redeem all of our Series A preferred stock for $39,789 and to repay approximately $37,370 of borrowings outstanding on our
revolving credit facility.

Capital Resources.On December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an
unsecured credit agreement with us and Memorial Pet Care, as guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit
facility (the "facility"). The facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a
maturity date of December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate (at our option) plus a margin ranging from 0.7%
to 1.25%. The lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30,
2007 was $0. This facility replaced the five-year Credit Agreement dated June 18, 2002 between MWI Co. and Bank of America, N.A., which had an outstanding balance at
September 30, 2006 of $10,559.

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From time to time we issue letters of credit to act as guarantee of payment to specified third parties. We had eleven letters of credit totaling $940 and $780 at September 30,
2007 and 2006, respectively. There were no outstanding borrowings on these letters of credit at September 30, 2007 or 2006.

In
January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of substantially all the assets of Vetpo. The note
bears interest at the prime rate, payable quarterly. The principal of the note is payable in five equal annual installments, which began on January 1, 2006. At September 30, 2007, we
owed $292 on this note payable.

Contractual Obligations

Contractual Obligations

Our contractual obligations at September 30, 2007 mature as follows (in thousands):

|                                                       |  | Payments Due by Period
|------------------------------------------------------ |  | ----------------------
|
|Line-of-credit(1)                                      |  | $                     
|Operating lease commitments(2)                         |  |                       
|Long-term debt obligations (including current portion) |  |                       
|Interest on long-term debt and line-of-credit(3)       |  |                       
|Other long-term obligations(4)                         |  |                       
|                                                       |  |                       
|Total contractual obligations                          |  | $                     
|                                                       |  |                       

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Guarantees

We provide guarantees, indemnifications and assurances to others in the ordinary course of our business. We have evaluated our agreements that contain guarantees
and indemnification clauses in accordance with the guidance of Financial Accounting Standards Board ("FASB") Interpretation No. 45,Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.

We
enter into a wide range of indemnification arrangements in the ordinary course of business. These include tort indemnities, tax indemnities, indemnities against third party claims
arising out of

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arrangements
to provide services to us, indemnities in merger and acquisition agreements and indemnities in agreements related to the sale of our securities. Also, our governance documents and the
governance documents of all of our subsidiaries provide for the indemnification of individuals made party to any suit or proceeding by reason of the fact that the individual was acting as an officer,
director or agent of the relevant company or as a fiduciary of a company-sponsored welfare benefit plan. We also provide guarantees and indemnifications for the benefit of our wholly-owned
subsidiaries for the satisfaction of performance obligations, including certain lease obligations. It is difficult to quantify the maximum potential liability under these indemnification arrangements.
Except for any liability that may arise under the case of Putney Inc. v. Pfizer Inc. and MWI Veterinary Supply, Inc. which is described under "Item 3Legal
Proceedings," we are not aware of any material liabilities arising from these indemnification arrangements.

Inflation

Most of our operating expenses are inflation-sensitive, with inflation generally producing increased costs of operations. During the past three years, the most
significant effects of inflation have been on employee wages, costs of products and fuel-intensive costs including freight, packing supplies and travel. We managed the effects of inflation
by controlling increases in compensation expense, renegotiating freight carrier contracts and utilizing a central source for warehouse shipping supplies.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to sales
returns, allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes, impairment of long-lived assets, depreciation and
amortization, employee benefits, unearned income and contingencies. We base our estimates on historical experience and on various other assumptions and factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We, based on our
ongoing review, will make adjustments to our judgments and estimates where facts and circumstances dictate. Historically, actual results have not significantly deviated from those determined using the
estimates described above.

We
believe the following critical accounting policies are important to understand our financial condition and results of operations and require management's most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Revenue Recognition

We sell products that we source from vendors to our customers through either a "buy/sell" transaction or an agency relationship with our vendors. In a "buy/sell"
transaction, we purchase and take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice the customer for the order. We recognize revenue from
"buy/sell" transactions as

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product
sales when the product is delivered to the customer. We accept product returns from our customers. We estimate sales returns based on historical experience, and returns are recognized as a
reduction of product sales. Product returns have not been significant to our financial statements. In an agency relationship, we generally do not purchase and take inventory of products from our
vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some cases, the vendor invoices and collects payment from
the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for soliciting the order from the customer and for
providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete.

Vendor Rebates

Vendor rebates are recorded based on the terms of the contracts with each vendor and in accordance with the provisions of Emerging Issues Task Force ("EITF")
Issue No. 02-16,Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor.We receive
quarterly, trimester, semi-annual and annual performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified
in our accompanying consolidated statements of income as a reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory
purchases from the vendors and are a reduction of inventory until the product is sold. When the inventory is sold, purchase rebates are recognized as a reduction to cost of product sales.

Historically,
actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be
reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change rebate programs from
year to year.

Customer Incentives

Customer incentives are accrued based on the terms of the contracts with each customer and in accordance with the provisions of EITF Issue
No. 01-9,Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products).These
incentive programs provide that the customer receives an incentive based on their product purchases or attainment of performance goals. Incentives are estimated based on the specific terms in each
agreement, historical experience and product growth rates.

Goodwill and Intangible Assets

We assess the potential impairment of goodwill and non-amortizing intangible assets annually and on an interim basis whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors that we consider important and may trigger an interim impairment review include:



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If
we determine through the impairment review process that goodwill or non-amortizing intangible assets are impaired, an impairment charge is recognized in our consolidated
statement of income.

Goodwill
and non-amortizing intangible assets were evaluated for impairment in our fourth quarter of 2007 and we determined that the recorded amount was not impaired. The
fair value calculations used for these tests require us to make assumptions about items that are inherently uncertain. Assumptions related to future market demand, market prices and product costs
could vary from actual results, and the impact of such variations could be material. Factors that could affect the assumptions include changes in economic conditions, changes in government
regulations, success in marketing products and competitive conditions in our industry. The factors that most significantly affect the fair value calculation are market multiples and estimates of
future cash flows. Fair value was determined using the discounted cash flow method.

Stock Based Awards

Effective October 1, 2005, we adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 123 (Revised), Share-Based
Payment("SFAS 123-R") for our share-based compensation plans using the modified prospective method. We previously
accounted for these plans under the recognition and measurement principles of Accounting Principles Board Opinion ("APB") No. 25,Accounting for Stock Issued to
Employeesand related interpretations (collectively "APB 25") and disclosure requirements established by SFAS No. 123,Accounting for Stock-based
Compensation,as amended by SFAS No. 148,Accounting for Stock Based CompensationTransition and Disclosure
("SFAS 148").Under APB 25, no compensation expense was recorded in earnings for our stock-based awards granted under our
stock-based award plans. The pro forma effects on net income and earnings per share for stock-based awards were instead disclosed in a footnote to the financial statements. Under
SFAS 123-R, all share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in earnings over the requisite service
period. The fair value of a stock award is determined using an option valuation model such as the Black-Scholes-Merton Option Pricing Model or a lattice model such as the Binomial Stock Option Pricing
Model. These fair value calculations require us to make assumptions about items that are inherently uncertain. Assumptions related to future expected volatility, life, dividends, risk-free
interest rates, forfeitures and other assumptions could vary from actual results, and the impact of such variations could be material.

Under
the modified prospective method, compensation expense includes the expense for all share-based awards granted prior to, but not yet vested as of October 1, 2005 excluding
those options initially valued using the minimum value method. At October 1, 2005, all of our options to purchase common stock were either vested and exercisable or were initially valued using
the minimum value method.
There have been no grants of options since October 1, 2005, however, there have been stock award grants.

Recently Issued and New Accounting Pronouncements

In June 2006, the FASB ratified EITF Issue 06-3,How Taxes Collected From Customers and Remitted to Governmental
Authorities Should Be Presented in the Income Statement("EITF 06-3"). The scope of EITF 06-3 includes any tax assessed by a governmental authority that
is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, including but

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not
limited to sales and value-added taxes. In EITF 06-3 a consensus was reached that entities may adopt a policy of presenting these taxes in the income statement on either a gross or net
basis. If these taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes if reflected on a gross basis in the income statement. EITF 06-3 was
effective for interim and annual reporting periods beginning after December 15, 2006. We present revenues net of sales taxes in our consolidated statement of income and did not change our
policy as a result of the adoption of EITF 06-3.

In
July 2006, the FASB issued Interpretation No. 48 ("FIN 48"),Accounting for Uncertainty in Income Taxes, which clarifies
the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109,Accounting for Income
Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for our fiscal year beginning October 1, 2007.
We are currently evaluating the impact of this statement on our consolidated financial statements.

In
September 2006, the FASB issued SFAS 157,Fair Value Measurements("SFAS 157"). SFAS 157 defines fair
value, establishes a framework for measuring fair value according to generally accepted accounting principles, and expands disclosure requirements regarding fair value measurements. This statement
emphasizes that fair value should be determined based on assumptions market participants would use to price the asset or liability. SFAS 157 is effective for our fiscal year and interim period
beginning October 1, 2008. We are currently evaluating the impact, if any, that SFAS 157 will have on our consolidated financial statements.

In
September 2006, the SEC issued Staff Accounting Bulletin No. 108 ("SAB 108") which provides guidance on quantifying and evaluating the materiality of unrecorded
misstatements. SAB 108 is effective for our fiscal year beginning October 1, 2007. The adoption of SAB 108 is not expected to have a material effect on our consolidated financial statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"). SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value. The provisions of SFAS 159 are effective for our fiscal year
beginning October 1, 2008. We are currently evaluating the expected impact, if any, that SFAS 159 will have on our consolidated financial statements.

Credit Agreement

On December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an unsecured credit agreement with us and Memorial Pet Care, as
guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit facility (the "facility"). The facility allows for borrowings in
the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a maturity date of December 1, 2011 and a variable interest rate
equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate (at our option) plus a margin ranging from 0.7% to 1.25%. The lenders also receive an unused line fee and letter of
credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2007 was $0. This facility replaced the five-year

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Credit
Agreement dated June 18, 2002 between MWI Co. and Bank of America, N.A., which had an outstanding balance at September 30, 2006 of $10,559.

The
line-of-credit contains certain financial covenants as well as other restrictive covenants. The facility allows for the issuance of up to $10,000 in letters
of credit. The letters of credit typically act as a guarantee of payment to certain third-parties in accordance with specified terms and conditions. We had eleven letters of credit totaling $940 and
$780 at September 30, 2007 and 2006, respectively. There were no outstanding borrowings on these letters of credit at either September 30, 2007 or 2006.

Promissory Note

In January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of substantially all the
assets of Vetpo. The note bears interest at the prime rate, payable quarterly. The principal of the note is payable in five equal annual installments, beginning on January 1, 2006. At
September 30, 2007, we owed $292 on this note payable.

Off Balance Sheet Arrangements

At September 30, 2007, we had no significant investments that were accounted for under the equity method in accordance with accounting principles generally
accepted in the United States except for Feeders Advantage. Feeders Advantage has no liabilities associated with them that were guaranteed by or that would be considered material to us. Accordingly,
we do not have any off balance sheet arrangements with unconsolidated entities.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to market risks primarily from changes in interest rates in the United States. We have managed this risk by, pursuant to the terms of our credit
agreement, converting the interest rate payable on the majority of the outstanding loan balance on the revolving credit facility into a lower LIBOR interest rate. We do not engage in financial
transactions for trading or speculative purposes.

The
interest payable on the revolving credit facility is based on variable interest rates and is affected by changes in market interest rates. The outstanding balance on the facility as
of September 30, 2007 was $0. Therefore, there was no exposure to market risks as of this date. If there had been a balance on the facility of $70,000, which is the maximum available amount on
the facility, a change of 10% from the interest rate as of September 30, 2007, which was 6.0% (Daily LIBOR Floating Rate plus .70%), would have changed interest by $420.

49

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Item 8.    Financial Statements and Supplementary Data.

MWI Veterinary Supply, Inc.

Index to Consolidated Financial Statements

|                                                                                                      |  | Page
Number
|----------------------------------------------------------------------------------------------------- |  | -----------
|Report of Independent Registered Public Accounting Firm                                               |  | 51         
|Consolidated Statements of Income for the years ended September 30, 2007, 2006 and 2005               |  | 52         
|Consolidated Statements of Comprehensive Income for the years ended September 30, 2007, 2006 and 2005 |  | 53         
|Consolidated Balance Sheets as of September 30, 2007 and 2006                                         |  | 54         
|Consolidated Statements of Stockholders' Equity for the years ended September 30, 2007, 2006 and 2005 |  | 55         
|Consolidated Statements of Cash Flows for the years ended September 30, 2007, 2006 and 2005           |  | 56         
|Notes to Consolidated Financial Statements                                                            |  | 57         

50

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Meridian, Idaho

We
have audited the accompanying consolidated balance sheets of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of September 30, 2007 and 2006, and the
related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2007. Our audits also
included the consolidated financial statement schedule listed in the Index at Item 15. These consolidated financial statements and consolidated financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on the consolidated financial statements and consolidated financial statement schedule based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of MWI Veterinary Supply, Inc. and subsidiaries as of
September 30, 2007 and 2006, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2007, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
September 30, 2007, based on the criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated November 20, 2007 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP
Boise, Idaho
November 20, 2007

51

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MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF INCOME        For the Years Ended September 30, 2007, 2006 and 2005        Dollars and shares in thousands, except
per share amounts

|                                             |                                     | 2007                              |         | 2006    |         | 2005    |        
|-------------------------------------------- | ----------------------------------- | --------------------------------- | ------- | ------- | ------- | ------- | -------
|Revenues:                                    |                                     |                                   |         |         |         |         |        
|                                             | Product sales                       |                                   | $       | 664,351 |         | $       | 564,289
|                                             | Product sales to related party      |                                   |         | 36,122  |         |         | 34,123 
|                                             | Commissions                         |                                   |         | 9,632   |         |         | 7,782  
|                                             |                                     |                                   |         |         |         |         |        
|                                             |                                     | Total revenues                    |         |         | 710,105 |         |        
|Cost of product sales                        |                                     |                                   | 607,756 |         |         | 518,068 |        
|                                             |                                     |                                   |         |         |         |         |        
|Gross profit                                 |                                     |                                   | 102,349 |         |         | 88,126  |        
|Selling, general and administrative expenses |                                     |                                   | 73,215  |         |         | 62,470  |        
|Depreciation and amortization                |                                     |                                   | 2,424   |         |         | 1,964   |        
|                                             |                                     |                                   |         |         |         |         |        
|Operating income                             |                                     |                                   | 26,710  |         |         | 23,692  |        
|Other income (expense):                      |                                     |                                   |         |         |         |         |        
|                                             | Interest expense                    |                                   |         | (545    | )       |         | (1,959 
|                                             | Earnings of equity method investees |                                   |         | 169     |         |         | 161    
|                                             | Other                               |                                   |         | 756     |         |         | 338    
|                                             |                                     |                                   |         |         |         |         |        
|                                             |                                     | Total other income (expense), net |         |         | 380     |         |        
|                                             |                                     |                                   |         |         |         |         |        
|Income before taxes                          |                                     |                                   | 27,090  |         |         | 22,232  |        
|Income tax expense                           |                                     |                                   | (10,215 | )       |         | (8,396  | )      
|                                             |                                     |                                   |         |         |         |         |        
|Net income                                   |                                     | $                                 | 16,875  |         | $       | 13,836  |        
|                                             |                                     |                                   |         |         |         |         |        
|Earnings per common share:                   |                                     |                                   |         |         |         |         |        
|                                             | Basic                               |                                   | $       | 1.43    |         | $       | 1.28   
|                                             | Diluted                             |                                   | $       | 1.40    |         | $       | 1.25   
|Weighted average common shares outstanding:  |                                     |                                   |         |         |         |         |        
|                                             | Basic                               |                                   |         | 11,764  |         |         | 10,773 
|                                             | Diluted                             |                                   |         | 12,044  |         |         | 11,072 

See
notes to consolidated financial statements

52

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MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME        For the Years Ended September 30, 2007, 2006 and 2005        Dollars in thousands

|                            |                     | 2007                                                             |                            | 2006 |   | 2005  
|--------------------------- | ------------------- | ---------------------------------------------------------------- | -------------------------- | ---- | - | ------
|Net income                  |                     | $                                                                | 16,875                     |      | $ | 13,836
|Other comprehensive income: |                     |                                                                  |                            |      |   |       
|                            | Interest rate swap: |                                                                  |                            |      |   |       
|                            |                     | Amount reclassified into net income, net of tax of $0, $0 and $9 |                            |      |  |       
|                            |                     |                                                                  |                            |      |   |       
|                            |                     |                                                                  | Total comprehensive income |      | $ | 16,875
|                            |                     |                                                                  |                            |      |   |       

See
notes to consolidated financial statements

53

---





MWI VETERINARY SUPPLY, INC.        CONSOLIDATED BALANCE SHEETS        As of September 30, 2007 and 2006        Dollars and shares in thousands, except per share amounts

|                                           |                                                                                                                | 2007                       |         | 2006   
|------------------------------------------ | -------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | -------
|Assets                                     |                                                                                                                |                            |         |        
|Current Assets:                            |                                                                                                                |                            |         |        
|                                           | Cash and cash equivalents                                                                                      |                            | $       | 8,599  
|                                           | Receivables, net                                                                                               |                            |         | 111,676
|                                           | Inventories                                                                                                    |                            |         | 94,623 
|                                           | Prepaid expenses and other current assets                                                                      |                            |         | 2,362  
|                                           | Deferred income taxes                                                                                          |                            |         | 518    
|                                           |                                                                                                                |                            |         |        
|                                           |                                                                                                                | Total current assets       |         |        
|Property and equipment, net                |                                                                                                                |                            | 9,206   |        
|Goodwill                                   |                                                                                                                |                            | 32,964  |        
|Intangibles, net                           |                                                                                                                |                            | 5,014   |        
|Other assets, net                          |                                                                                                                |                            | 2,232   |        
|                                           |                                                                                                                |                            |         |        
|Total assets                               |                                                                                                                | $                          | 267,194 |        
|                                           |                                                                                                                |                            |         |        
|Liabilities And Stockholders' Equity       |                                                                                                                |                            |         |        
|Current Liabilities:                       |                                                                                                                |                            |         |        
|                                           | Line-of-credit                                                                                                 |                            | $       |       
|                                           | Accounts payable                                                                                               |                            |         | 98,724 
|                                           | Accrued expenses                                                                                               |                            |         | 7,693  
|                                           | Current maturities of long-term debt                                                                           |                            |         | 97     
|                                           |                                                                                                                |                            |         |        
|                                           |                                                                                                                | Total current liabilities  |         |        
|Deferred income taxes                      |                                                                                                                |                            | 474     |        
|Long-term debt                             |                                                                                                                |                            | 195     |        
|Commitments and contingencies              |                                                                                                                |                            |         |        
|Stockholders' Equity                       |                                                                                                                |                            |         |        
|                                           | Common stock $0.01 par value, 40,000 authorized; 12,024 and 11,549 shares issued and outstanding, respectively |                            |         | 120    
|                                           | Additional paid in capital                                                                                     |                            |         | 120,988
|                                           | Retained earnings                                                                                              |                            |         | 38,903 
|                                           |                                                                                                                |                            |         |        
|                                           |                                                                                                                | Total stockholders' equity |         |        
|                                           |                                                                                                                |                            |         |        
|Total liabilities and stockholders' equity |                                                                                                                | $                          | 267,194 |        
|                                           |                                                                                                                |                            |         |        

See
notes to consolidated financial statements.

54

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MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        For the Years Ended September 30, 2007, 2006 and 2005        Dollars and shares in
thousands

|                                                          |  | Shares of
Common
Stock |  | Common
Stock |     | Additional
Paid In
Capital |   | Accumulated
Other
Comprehensive
Income/(Loss) |  | Retained
Earnings |     | Total
|--------------------------------------------------------- |  | ---------------------- |  | ------------ | --- | -------------------------- | - | --------------------------------------------- |  | ----------------- | --- | -----
|Balance at October 1, 2004                                |  | 5,560                  |  | $            | 56  |                            | $ | 955                                           |  | $                 | (14 | )    
|Net income                                                |  |                       |  |              |    |                            |   |                                              |  |                   |    |      
|Issuance of common stock, net of issuance costs of $7,558 |  | 4,983                  |  |              | 50  |                            |   | 77,109                                        |  |                   |    |      
|Exercises of common stock options                         |  | 33                     |  |              |    |                            |   | 30                                            |  |                   |    |      
|Tax benefit of common stock exercises                     |  |                       |  |              |    |                            |   | 302                                           |  |                   |    |      
|Other comprehensive income                                |  |                       |  |              |    |                            |   |                                              |  |                   | 14  |      
|                                                          |  |                        |  |              |     |                            |   |                                               |  |                   |     |      
|Balance at September 30, 2005                             |  | 10,576                 |  |              | 106 |                            |   | 78,396                                        |  |                   |    |      
|Net income                                                |  |                       |  |              |    |                            |   |                                              |  |                   |    |      
|Issuance of common stock, net of issuance costs of $1,969 |  | 909                    |  |              | 9   |                            |   | 27,332                                        |  |                   |    |      
|Issuance of restricted stock for purchase of Northland    |  | 29                     |  |              |    |                            |   | 995                                           |  |                   |    |      
|Exercises of common stock options                         |  | 31                     |  |              |    |                            |   | 597                                           |  |                   |    |      
|Tax benefit of common stock exercises                     |  |                       |  |              |    |                            |   | 148                                           |  |                   |    |      
|Other                                                     |  | 4                      |  |              |    |                            |   | 15                                            |  |                   |    |      
|                                                          |  |                        |  |              |     |                            |   |                                               |  |                   |     |      
|Balance at September 30, 2006                             |  | 11,549                 |  |              | 115 |                            |   | 107,483                                       |  |                   |    |      
|Net income                                                |  |                       |  |              |    |                            |   |                                              |  |                   |    |      
|Issuance of common stock, net of issuance costs of $383   |  | 349                    |  |              | 4   |                            |   | 11,248                                        |  |                   |    |      
|Issuance of restricted stock for purchase of Securos      |  | 13                     |  |              |    |                            |   | 486                                           |  |                   |    |      
|Exercises of common stock options                         |  | 98                     |  |              | 1   |                            |   | 337                                           |  |                   |    |      
|Tax benefit of common stock exercises                     |  |                       |  |              |    |                            |   | 1,122                                         |  |                   |    |      
|Other                                                     |  | 15                     |  |              |    |                            |   | 312                                           |  |                   |    |      
|                                                          |  |                        |  |              |     |                            |   |                                               |  |                   |     |      
|Balance at September 30, 2007                             |  | 12,024                 |  | $            | 120 |                            | $ | 120,988                                       |  | $                 |    |      
|                                                          |  |                        |  |              |     |                            |   |                                               |  |                   |     |      

See
notes to consolidated financial statements

55

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MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        For the Years Ended September 30, 2007, 2006 and 2005        Dollars in thousands

|                                                 |                                                                                             | 2007                                                                                   |                                                     | 2006                                                |        | 2005    |       
|------------------------------------------------ | ------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------- | --------------------------------------------------- | --------------------------------------------------- | ------ | ------- | ------
|Cash Flows From Operating Activities:            |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 | Net income                                                                                  |                                                                                        | $                                                   | 16,875                                              |        | $       | 13,836
|                                                 | Adjustments to reconcile net income to net cash provided by/(used in) operating activities: |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             | Accretion of redeemable preferred stock                                                |                                                     |                                                     |       |         |       
|                                                 |                                                                                             | Depreciation and amortization                                                          |                                                     |                                                     | 2,435  |         |       
|                                                 |                                                                                             | Amortization of debt issuance costs                                                    |                                                     |                                                     | 63     |         |       
|                                                 |                                                                                             | Stock-based compensation                                                               |                                                     |                                                     | 312    |         |       
|                                                 |                                                                                             | Deferred income taxes                                                                  |                                                     |                                                     | (47    | )       |       
|                                                 |                                                                                             | Earnings of equity method investees                                                    |                                                     |                                                     | (169   | )       |       
|                                                 |                                                                                             | Distribution from equity method investee                                               |                                                     |                                                     |       |         |       
|                                                 |                                                                                             | Tax benefit of common stock options                                                    |                                                     |                                                     | (1,122 | )       |       
|                                                 |                                                                                             | (Gain) loss on disposal of property and equipment                                      |                                                     |                                                     | 18     |         |       
|                                                 |                                                                                             | Other                                                                                  |                                                     |                                                     | (9     | )       |       
|                                                 |                                                                                             | Changes in operating assets and liabilities (net of effects of business acquisitions): |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        | Receivables                                         |                                                     |        | (11,797 | )     
|                                                 |                                                                                             |                                                                                        | Inventories                                         |                                                     |        | (8,795  | )     
|                                                 |                                                                                             |                                                                                        | Prepaid expenses and other current assets           |                                                     |        | 304     |       
|                                                 |                                                                                             |                                                                                        | Accounts payable                                    |                                                     |        | 15,654  |       
|                                                 |                                                                                             |                                                                                        | Accrued expenses                                    |                                                     |        | 1,657   |       
|                                                 |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        |                                                     | Net cash provided by/(used in) operating activities |        |         | 15,379
|Cash Flows From Investing Activities:            |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        | Business acquisitions                               |                                                     |        | (4,661  | )     
|                                                 |                                                                                             |                                                                                        | Purchases of property and equipment                 |                                                     |        | (3,872  | )     
|                                                 |                                                                                             |                                                                                        | Sale of property and equipment                      |                                                     |        |        |       
|                                                 |                                                                                             |                                                                                        | Other                                               |                                                     |        | (216    | )     
|                                                 |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        |                                                     | Net cash used in investing activities               |        |         | (8,749
|Cash Flows From Financing Activities:            |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        | Issuance of common stock, net of issuance costs     |                                                     |        | 11,252  |       
|                                                 |                                                                                             |                                                                                        | Proceeds from stock options                         |                                                     |        | 338     |       
|                                                 |                                                                                             |                                                                                        | Tax benefit of common stock options                 |                                                     |        | 1,122   |       
|                                                 |                                                                                             |                                                                                        | Proceeds from issuance of debt                      |                                                     |        |        |       
|                                                 |                                                                                             |                                                                                        | Redemption of preferred stock and accrued dividends |                                                     |        |        |       
|                                                 |                                                                                             |                                                                                        | Payment on debt                                     |                                                     |        | (97     | )     
|                                                 |                                                                                             |                                                                                        | Net payments on line-of-credit                      |                                                     |        | (10,559 | )     
|                                                 |                                                                                             |                                                                                        | Debt issuance costs                                 |                                                     |        | (124    | )     
|                                                 |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|                                                 |                                                                                             |                                                                                        |                                                     | Net cash provided by financing activities           |        |         | 1,932 
|Increase in Cash and Cash Equivalents            |                                                                                             |                                                                                        | 8,562                                               |                                                     |        | 6       |       
|Cash and Cash Equivalents at Beginning of Period |                                                                                             |                                                                                        | 37                                                  |                                                     |        | 31      |       
|                                                 |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       
|Cash and Cash Equivalents at End of Period       |                                                                                             | $                                                                                      | 8,599                                               |                                                     | $      | 37      |       
|                                                 |                                                                                             |                                                                                        |                                                     |                                                     |        |         |       

See notes to consolidated financial statements

56

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MWI VETERINARY SUPPLY, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        Dollars in thousands, except share and per share data

1. Business Description and Basis of Presentation

MWI Veterinary Supply, Inc. is a leading distributor of animal health products to veterinarians across the United States. We market our products to
veterinarians in both the companion and production animal markets. We now operate thirteen distribution centers located in the Western United States, Texas, Kansas, Michigan, Georgia, Pennsylvania,
Wisconsin, and Florida. Our thirteenth distribution center was opened in October 2007 in Edwardsville, Kansas. We also provide supplies to Feeders' Advantage, L.L.C. ("Feeders'Advantage"), a
50% owned entity that sells to various feedlot companies.

MWI
Veterinary Supply, Inc. (formerly named MWI Holdings, Inc.) was formed on June 18, 2002 for the sole purpose of acquiring all of the outstanding stock of MWI
Veterinary Supply Co. ("MWI Co.") from its then owner, Agri Beef Co. ("Agri Beef").

2. Summary of Significant Accounting Policies

Principles of ConsolidationThe accompanying consolidated financial statements consist of MWI Veterinary Supply, Inc.
and its wholly-owned subsidiaries, collectively referred to herein as "MWI." All intercompany transactions have been eliminated. We use the equity method of accounting
for our investments in entities in which we have significant influence; generally this represents an ownership interest between 20% and 50%. Our share of income or loss from these investments is
reported as increases or decreases in the respective investment with a corresponding amount reported as other income.

Basis of Accounting and Use of EstimatesThe accompanying consolidated financial statements have been prepared on the accrual
basis of accounting using accounting principles generally accepted in the United States. In preparing financial information, we use certain estimates and assumptions that may affect the reported
amounts and disclosures. Some of these estimates require difficult, subjective and complex judgments about matters that are inherently uncertain. As a result, actual results could differ from these
estimates. Estimates are used when accounting for sales returns, allowance for doubtful accounts, customer incentives, vendor rebates, inventories, goodwill and intangible assets, income taxes,
impairment of long-lived assets, depreciation and amortization, employee benefits, unearned income and contingencies. The estimates of fair value of assets and liabilities and the
disclosure of contingent assets and liabilities as of the balance sheet date and reported amounts of revenue and expenses for the periods are based on assumptions that we believe to be reasonable.

Segment InformationWe are a distributor of animal health products to veterinarians. These operations are within a single
reporting segment and are located within the United States.

Revenue RecognitionWe sell products we source from vendors to our customers through either a "buy/sell" transaction or an
agency relationship with our vendors. In a "buy/sell" transaction, we purchase or take inventory of products from the vendor. When a customer places an order with us, we pick, pack, ship and invoice
the customer for the order. We recognize revenue from "buy/sell"

57

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transactions
as product sales when the product is delivered to the customer. We accept product returns from our customers. We estimate returns based on historical experience and recognize these
estimated returns as a reduction of product sales. Product returns have not been significant to our financial statements. We record revenues net of sales tax. In an agency relationship, we generally
do not purchase and take inventory of products from vendors. We receive an order from a customer, then transmit the order to the vendor, who picks, packs and ships the order to the customer. In some
cases, the vendor invoices and collects payment from the customer, while in other cases we invoice and collect payment from the customer on behalf of the vendor. We receive a commission payment for
soliciting the order from the customer and for providing other customer service activities. Commissions are recognized when the services upon which the commissions are based are complete. Gross
billings from agency contracts were $194,351, $151,376 and $102,883 for the years ended September 30, 2007, 2006 and 2005, respectively, and generated commission revenue of $9,632, $7,782 and
$4,910 for the years ended September 30, 2007, 2006 and 2005, respectively.

Cost of Product Sales and Vendor RebatesCost of product sales consist of our inventory product cost, including shipping costs
to and from our distribution centers. Vendor rebates are recorded based on the terms of the contracts or programs with each vendor. We receive quarterly, trimester, semi-annual and annual
performance-based rebates from third-party vendors based upon attainment of certain sales and/or purchase goals. Sales rebates are classified in the accompanying consolidated statements of income as a
reduction to cost of product sales at the time the sales performance measures are achieved. Purchase rebates are measured against inventory purchases from the vendors and are classified as a reduction
of inventory until the product is sold. When the inventory is sold and purchase measures are achieved, purchase rebates are recognized as a reduction to cost of product sales.

Historically,
actual results have not significantly deviated from those determined using the estimates described above. We expect that our estimates in the future will continue to be
reasonable as our rebates are based on specific vendor program goals and are principally recorded upon achievement of sales or purchase performance measures. Vendors may change rebate programs from
year to year.

Customer IncentivesCustomer incentives are accrued based on the terms of the contracts with each
customer.These incentive programs provide that the customer receive an incentive based on their product purchases or attainment of performance goals.
Incentives are estimated based on the specific terms in each agreement, historical experience and product growth rates.

Cash and Cash EquivalentsCash equivalents consist primarily of highly liquid investments with a maturity of three months or
less. Our banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment. This cash management practice frequently results in a net cash book
overdraft position, which occurs when total issued checks exceed available cash balances at a single financial institution. We have recorded our cash disbursement accounts with a net

58

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cash
book overdraft position in accounts payable. At September 30, 2007 and 2006, we had net cash book overdrafts of $0 and $4,224, respectively, classified in accounts payable.

InventoriesInventories, consisting of pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies and
nutritional products, are stated at the lower of cost (on a moving-average basis) or market.

Property and EquipmentProperty and equipment are stated at cost and depreciation is computed using the
straight-line method over the estimated useful lives of the related assets as follows:

Buildings

25 yearsMachinery, furniture and equipment

3 to 7 yearsComputer hardware and software

3 to 7 yearsLeasehold improvements

Shorter of useful life
or lease term


The
cost and accumulated depreciation of items sold or retired are removed from the property accounts and any resulting gain or loss is reflected in net income. Repairs and maintenance
are expensed as incurred and renewals and improvements are capitalized.

We
periodically review long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. No
impairments were identified during the fiscal years ended September 30, 2007 and 2006.

Goodwill and Intangible AssetsWe recognize the excess purchase price over the fair value of net assets acquired and
liabilities assumed in a business combination as goodwill on the consolidated balance sheet. Goodwill and non-amortizing intangible assets, consisting of trade names and patents, are
tested for impairment at least annually. We perform an annual impairment test as of September 30 each year and we have concluded that there was no impairment at September 30, 2007 or
2006. These impairment tests will continue to be performed at least annually and more frequently if circumstances indicate a possible impairment. Amortizing intangible assets primarily include
customer relationships and covenants not to compete and are amortized over their useful lives which range from 5-20 years.

Other AssetsIncluded in other assets are investments that consist of our equity method investment in one entity and two
entities accounted for under the cost method of accounting. Other assets also consist of debt issuance costs that are being amortized over the life of the related debt.

Earnings Per Common ShareBasic earnings per common share is calculated based on the weighted-average number of outstanding
common shares during the applicable period. Diluted earnings per common share is based on the weighted-average number of outstanding common shares plus the weighted-average number of potential
outstanding common shares. Potential common shares that would

59

---



increase
earnings per share amounts or decrease loss per share amounts are antidilutive and are, therefore, excluded from the earnings per common share computations. Earnings per common share is
computed separately for each period presented.

Income TaxesIncome taxes are accounted for under the asset and liability method. Deferred income taxes are recognized to
provide for temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred taxes are measured using enacted tax rates in effect during the years in which the
temporary differences are expected to reverse.

Concentrations of RiskOur financial instruments that are exposed to concentrations of credit risk consist primarily of our
receivables. Our customers are geographically dispersed throughout the United States. We routinely assess the financial strength of our customers and review their credit history before extending
credit. In addition, we establish an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

Product
sales to one customer were approximately 10% of our total product sales in 2007, 2006 and 2005. Product sales to another customer, a related party (See Note 14), were
approximately 5% of our total product sales in the fiscal years 2007, and 6% of our total product sales in the fiscal year 2006 and 2005.

Comprehensive IncomeComponents of our comprehensive income include net income and changes in fair value of interest rate
swaps.

AdvertisingAdvertising costs are expensed when incurred and are included as part of selling, general and administrative
expenses. Advertising costs were $392, $257 and $142 in fiscal years 2007, 2006 and 2005,

Stock-Based CompensationEffective October 1, 2005, we adopted the provisions of SFAS No. 123 (Revised), Share Based
Payment("SFAS 123-R") for our share-based compensation plans using the modified prospective method. We previously
accounted for these plans under the recognition and measurement principals of Accounting Principles Board Opinion ("APB") No. 25,Accounting for Stock Issued to
Employees("APB No. 25") and related interpretations and disclosure requirements established by SFAS No. 123,Accounting for Stock-based
Compensation("SFAS 123"), as amended by SFAS No. 148,Accounting for Stock Based CompensationTransition and
Disclosure("SFAS 148"). Under APB No. 25, no compensation expense was recorded in earnings for our stock-based awards granted under our stock-based award plans.
The pro forma effects on net income and earnings per share for stock-based awards were instead disclosed in a footnote to the financial statements. Under SFAS 123-R, all share-based
compensation is measured at the grant date, based on the fair value of the award, and is recognized as an expense in earnings over the requisite service period. Under SFAS 123-R,
the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully
transferable

60

---



options
without vesting restrictions, which significantly differ from the characteristics of our stock option awards. These models also require subjective assumptions, including volatility and
expected time to exercise, which greatly affect the calculation.

We
adopted SFAS 123-R using the modified prospective method. Under this transition method, compensation expense includes the expense for all share-based awards granted
prior to, but not yet vested as of October 1, 2005 excluding those options initially valued using the minimum value method. At October 1, 2005, all of our options to purchase common
stock were either vested and exercisable or were initially valued using the minimum value method. Therefore, we have recognized no compensation expense for stock-based option awards in the fiscal
years ended September 30, 2007 and 2006. The following table summarizes the effect on fiscal year 2005 net income and earnings per common share had we recognized compensation expense for
options using the fair value method:

2005Net income

$
4,557Deduct: Stock-based employee compensation expense determined under fair-value-based method for all awards, net of related tax effects


(602
)Add: Stock-based employee compensation expense included in reported net income, net of related tax effects


Pro Forma net income

$
3,955Basic Earnings Per Common Share:As Reported

$
0.76Pro Forma

$
0.66Diluted Earnings Per Common Share:As Reported

$
0.68Pro Forma

$
0.59


Calculations
of the pro forma fair value of stock-based awards granted under the 2002 Stock Option Plan (See Note 9 "Common Stock and Stock-Based Awards") were based on a single
option valuation approach as a non-public company. Forfeitures are recognized as they occur. Our calculations were made using the minimum value method with the following weighted average
assumptions at September 30, 2003:

Risk-free interest rate

2.97
%Expected life in years

5Expected volatility

NoneDividends

None


61

---



In
our fourth quarter of 2005 we granted 135,103 nonqualified options (that were fully vested by September 30, 2005) to purchase our common stock. We utilized the
Black-Scholes-Merton Option Pricing Model to value these post initial public offering grants for pro forma presentation of net income and earnings per share as if the fair value-based accounting
method in SFAS 123 had been used. Our computations used the following assumptions to derive the options fair value and related compensation expense:

Risk-free interest rate

4.1% to 4.2%Expected life in years

5Expected volatility

36.7%Dividends

None


We
granted no common stock options under either plan during our fiscal years ended September 30, 2007 and 2006.

Recently Issued and New Accounting PronouncementsIn June 2006, the FASB ratified EITF Issue 06-3, How Taxes Collected
From Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement("EITF 06-3"). The scope of EITF 06-3 includes any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing
transaction between a seller and a customer, including but not limited to sales and value-added taxes. In EITF 06-3 a consensus was reached that entities may adopt a policy of
presenting these taxes in the income statement on either a gross or net basis. If these taxes are significant, an entity should disclose its policy of presenting taxes and the amount of taxes if
reflected on a gross basis in the income statement. EITF 06-3 was effective for interim and annual reporting periods beginning after December 15, 2006. We present revenues net of
sales taxes in our consolidated statement of income and did not change our policy as a result of the adoption of EITF 06-3.

In
July 2006, the FASB issued Interpretation No. 48 ("FIN 48"),Accounting for Uncertainty in Income Taxes, which clarifies
the accounting for uncertainty in income taxes recognized in the financial statements in accordance with FASB Statement No. 109,Accounting for Income
Taxes. FIN 48 provides guidance on the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition. FIN 48 is effective for our fiscal year beginning October 1, 2007.
We are currently evaluating the impact of this statement on our consolidated financial statements.

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS 157"). SFAS 157 defines fair
value, establishes a framework for measuring fair value according to generally accepted accounting principles, and expands disclosure requirements regarding fair value measurements. This statement
emphasizes that fair value should be determined based on assumptions

62

---



market
participants would use to price the asset or liability. SFAS 157 is effective for our fiscal year and interim period beginning October 1, 2008. We are currently evaluating the
impact, if any, that SFAS 157 will have on our consolidated financial statements.

In
September 2006, the Securities and Exchange Commissions (SEC) issued Staff Accounting Bulletin No. 108 ("SAB 108"), which provides guidance on quantifying and evaluating
the materiality of
unrecorded misstatements. SAB 108 is effective for our fiscal year beginning October 1, 2007. The adoption of SAB 108 is not expected to have a material effect on our consolidated financial
statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"). SFAS 159 permits entities to choose to measure certain financial assets and liabilities at fair value. The provisions of SFAS 159 are effective for our fiscal year
beginning October 1, 2008. We are currently evaluating the expected impact, if any, that SFAS 159 will have on our consolidated financial statements.

3. Business Acquisitions

On May 8, 2006, we acquired substantially all of the assets of Northland Veterinary Supply, Ltd. ("Northland") for approximately $4,546 consisting
of $3,551 in cash (including direct acquisition costs of approximately $116) and 28,744 shares of restricted common stock valued at the time of issuance at approximately $995. Based in Clear Lake,
Wisconsin, Northland was a distributor of animal health products to veterinary practices and producers across the Midwestern portion of the United States.

On
June 8, 2007, we acquired substantially all of the assets of Securos Inc. and International Veterinary Distribution Network, Inc. (collectively "Securos") for
approximately $5,147 consisting of $4,661 in cash (including direct acquisition costs of approximately $177) and 13,058 shares of restricted common stock valued at the time of issuance at
approximately $486. Additional contingent consideration will be paid to Securos shareholders if certain defined financial targets are achieved in each year through 2011 and is currently estimated to
be approximately $1.1 million. These additional payments will increase the purchase price and goodwill at the time the financial targets are achieved. Based in Charlton, Massachusetts, Securos
was a provider of veterinary orthopedic products in the United States and select countries abroad and sourced private label products in the categories of veterinary surgical consumables and equipment
and handheld instruments.

The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of each acquisition, as adjusted during the allocation period as
defined in SFAS

63

---



No. 141, Business Combinations. These purchase price allocations are based on a combination of valuations and internal analyses.

Securos

NorthlandReceivables

$
352

$
1,298Inventories


746


1,182Property and equipment


286


137Intangibles


2,947


965Goodwill


1,403


1,823Other assets


39


25Total assets acquired


5,773


5,430Accounts payable


611


849Other liabilities


15


35Total liabilities assumed


626


884Net assets acquired

$
5,147

$
4,546


The
amount recorded in goodwill for all acquisitions is expected to be deductible for tax purposes over 15 years.

4. Receivables

Receivables consist of the following at September 30:

2007

2006Trade

$
100,422

$
90,454Vendor rebates and programs


11,725


9,818Interest


61


Related party


342


400112,550


100,672Allowance for doubtful accounts


(874
)

(1,154
)$
111,676

$
99,518


Approximately
10% of our trade receivables resulted from transactions with a single customer as of September 30, 2007 and 2006.

64

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5. Property and Equipment

Property and equipment consists of the following at September 30:

2007

2006Land

$
20

$
20Leasehold improvements


2,257


1,779Machinery, furniture and equipment


10,744


9,138Computer hardware and software


3,825


2,899Construction in progress


1,586


37718,432


14,213Accumulated depreciation and amortization


(9,226
)

(7,160
)$
9,206

$
7,053


We
recorded depreciation expense of $2,110, $1,744 and $1,392 for the years ended September 30, 2007, 2006 and 2005, respectively.

6. Intangibles

Intangible assets consists of the following at September 30:

Useful Lives

2007

2006Amortizing:Customer relationships

9-20 years

$
3,186

$
2,410Covenants not to compete

5 years


356


256Other

5 years


168


363,710


2,702Accumulated amortization




(698
)

(373
)3,012


2,329Non-Amortizing:Trade names and patents




2,002


52$
5,014

$
2,381


65

---



We
recorded amortization expense of $325, $229 and $145 for the years ended September 30, 2007, 2006 and 2005, respectively. Estimated amortization expense related to intangible
assets as of September 30, 2007 follows:

Amount2008

$
3742009


3742010


3522011


3342012


309Thereafter


1,269$
3,012


7. Line-of-Credit and Long-Term Debt

Line-of-CreditOn December 13, 2006, MWI Co., (our wholly-owned subsidiary) as borrower, entered into an unsecured
credit agreement with us and Memorial Pet Care, as guarantors, and Bank of America, N.A. and Wells Fargo Bank, N.A., (collectively, the "lenders") for the provision of a revolving credit facility (the
"facility"). The facility allows for borrowings in the aggregate of $70,000, with the right to request an increase in the commitment of the lenders to $100,000. The facility has a maturity date of
December 1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixed rate (at our option) plus a margin ranging from 0.7% to 1.25%. The
lenders also receive an unused line fee and letter of credit fee equal to 0.125% of the unused amount of the facility. Our outstanding balance on the facility at September 30, 2007 was $0. This
facility replaced the five-year Credit Agreement dated June 18, 2002 between MWI Co. and Bank of America, N.A., which had an outstanding balance at September 30, 2006 of
$10,559.

The
line-of-credit contains certain financial covenants as well as other restrictive covenants. As of September 30, 2007, we were in compliance with all
covenants. The facility allows for the issuance of up to $10,000 in letters of credit. The letters of credit typically act as a guarantee of payment to certain third-parties in accordance with
specified terms and conditions. We had eleven letters of credit totaling $940 and $780 at September 30, 2007 and 2006, respectively. There were no outstanding borrowings on these letters of
credit at either September 30, 2007 or 2006.

Long-Term
DebtIn January 2005, we issued a promissory note in the aggregate principal amount of $487 in partial consideration for the purchase of
substantially all the assets of Vetpo. The note bears interest at the prime rate (7.75% at September 30, 2007), payable quarterly. The principal of the note is payable in five equal annual
installments, the first of which was due on January 1, 2006. The balance on this promissory note was $292 and $389 at September 30, 2007 and 2006, respectively.

66

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8. Redeemable Preferred Stock

We authorized 30,000 shares of $1 par value Series A preferred stock, with 26,786 shares issued and outstanding at September 30, 2004. The
redeemable preferred stock was subject to mandatory redemption on June 18, 2012 and had a liquidation preference of $1,000 per share (plus accumulated, accrued and unpaid dividends). The
holders of redeemable preferred stock were entitled to a cumulative 13% annual dividend based on the liquidation preference. We had the right to redeem any outstanding shares at any time but all
shares were required to be redeemed no later than June 18, 2012. In August 2005, we used a portion of the proceeds from our initial public offering (See Note 9 "Common Stock and
Stock-Based Awards") to redeem all of the redeemable preferred stock.

9. Common Stock and Stock-Based Awards

Initial Public Offering

On August 3, 2005, we completed our initial public offering in which we sold an aggregate of 4,983,334 shares (including the exercise of the underwriters'
over-allotment option) of our common stock at a price of $17 per share. We received net proceeds of $77,159 after deducting the underwriting discounts and offering expenses. We used the
net proceeds to redeem all of our Series A preferred stock for approximately $39,789 and to repay approximately $37,370 of borrowings outstanding on our revolving credit facility.

Follow-on Offerings

On July 25, 2006 we issued 869,565 shares of common stock and certain selling stockholders sold 2,117,814 shares of common stock which were subsequently
sold to the public for $32.25 per share in our follow-on offering. We received net proceeds of $26,100 after deducting the underwriting discounts and offering expenses. We did not receive
any of the proceeds from the shares of common stock sold by the selling stockholders. Under the terms of the underwriting agreement, we
and the selling stockholders granted the underwriters a thirty day over-allotment option to purchase an additional 130,435 shares of common stock from us and 317,671 shares from the
selling stockholders on the same terms as the original offering. On July 28, 2006, the underwriters exercised a portion of their over-allotment option that required us to sell an
additional 39,281 shares for net proceeds of approximately $1,200 after deducting the underwriting discounts, and the selling stockholders to sell to the underwriters an additional 95,669 shares. This
transaction was completed on August 2, 2006. We used the net proceeds from these transactions to repay borrowings on our revolving credit and for general corporate purposes.

On
April 20, 2007, certain selling stockholders sold 2,326,493 shares of common stock which were subsequently sold to the public for $35.00 per share. We did not receive any of
the proceeds from the shares of common stock sold by the selling stockholders. Under the terms of the underwriting agreement, we granted the underwriters a thirty day over-allotment option
to purchase an additional 348,974 shares of common stock from us on the same terms as the original offering. On April 20, 2007,

67

---



the
underwriters exercised all of the over-allotment that required us to sell the 348,974 shares and we received net proceeds of $11,252 after deducting the underwriting discounts and
offering expenses. We used the net proceeds received from this offering to pay down our borrowings on our revolving credit facility and for general corporate purposes.

2002 Stock Plan

We have a 2002 Stock Plan (the "2002 Plan") to provide our directors, executives and other key employees with additional incentives by allowing them to acquire an
ownership interest in us and, as a result, encouraging them to contribute to our success. At September 30, 2007 and 2006, we had 426,094 and 507,688 shares, respectively, of our common stock
reserved for issuance under the 2002 Plan. The options granted under the 2002 Plan are nonqualified stock options that have an exercise price per share equal to fair market value of the common stock
at the time of grant. The term of each option is determined by our board of directors or by a designated committee of the board. The term of any option may not exceed ten years from the date of grant.
In 2002, we granted 543,951 nonqualified stock options with an exercise price of $0.18 per share under the 2002 Plan. The stock options generally lapse ten years after issuance or 120 days
after the option holder ceases to be an employee depending upon the cause of termination. The options vest in various amounts over three to five-year periods beginning upon the achievement
of annual financial targets as established by the option agreement beginning with the year ended September 30, 2002 and ending with the year ended September 30, 2006. All unvested
options as of June 18, 2009 become fully vested if the option holder is employed with us on such date. Unvested options for which the annual financial targets had been
achieved became fully vested upon the completion of our initial public offering in August 2005. In 2006, no options were granted, exercised or forfeited under the 2002 Plan. In 2007, no options
were granted, 81,594 options were exercised and no options were forfeited.

2005 Stock Plan

In July 2005, we adopted the 2005 Stock-Based Award and Incentive Compensation Plan (the "2005 Plan"). Under the 2005 Plan as amended, we may offer
restricted shares of our common stock and grant options to purchase shares of our common stock to selected employees and non-employee directors. The purpose of the 2005 Plan is to promote
our long-term financial success by attracting, retaining and rewarding eligible participants. At September 30, 2007 and 2006 we had 1,131,128 and 1,166,990 shares, respectively, of
our common stock available for issuance under the 2005 Plan.

The
2005 Plan permits us to grant stock options (both incentive stock options and non-qualified stock options), restricted stock and deferred stock. The compensation
committee will determine the number and type of stock-based awards to each participant, the exercise price of each award, the duration of the award (not to exceed ten years), vesting provisions and
all other terms and conditions of such award in individual award agreements. The 2005 Plan provides that upon termination of

68

---



employment
with us, unless determined otherwise by the compensation committee at the time options are granted, the exercise period for vested awards will generally be limited, provided that vested
awards will be canceled immediately upon a termination for cause or voluntary termination. The 2005 Plan provides for the cancellation of all unvested awards upon termination of employment with us,
unless determined otherwise by the compensation committee at the time awards are granted.

During
the fourth quarter of 2005, we granted 135,103 nonqualified stock options with a weighted average exercise price of $18.43 and a term of ten years. The options were fully vested
by September 30, 2005.

A
summary of activity under the 2002 and 2005 Plans are as follows:

|                                 |  | 2007    |   | 2006 |       | 2005
|-------------------------------- |  | ------- | - | ---- | ----- | ----
|
|Outstanding at beginning of year |  | 540,895 |   | $    | 3.32  |     
|Granted                          |  |        |   |      |      |     
|Exercised                        |  | (98,533 | ) |      | 3.42  |     
|Cancelled or expired             |  | (860    | ) |      | 17.00 |     
|                                 |  |         |   |      |       |     
|Outstanding at end of year       |  | 441,502 |   | $    | 3.27  |     
|Exercisable at end of year       |  | 328,686 |   | $    | 4.33  |     
|Expected to vest                 |  | 112,816 |   | $    | 0.18  |     

|                 |  | Outstanding options |  | Exercisable options
|---------------- |  | ------------------- |  | -------------------
|
|$  0.18 - $16.99 |  | 365,654             |  | 4.7                
|$17.00 - $19.99  |  | 60,688              |  | 7.8                
|$20.00 - $23.06  |  | 15,160              |  | 8.0                

During
the fiscal years ended September 30, 2007 and 2006, we made stock grants of 15,000 and 3,923 shares, respectively.

69

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10. Computation Of Earnings Per Common Share(In thousands, except per share data)

|                                               |                                    | 2007 |        | 2006 |   | 2005  
|---------------------------------------------- | ---------------------------------- | ---- | ------ | ---- | - | ------
|
|Net income                                     |                                    | $    | 16,875 |      | $ | 16,875
|                                               |                                    |      |        |      |   |       
|Weighted average common shares outstanding     |                                    |      | 11,764 |      |   | 11,764
|Effect of diluted securities                   |                                    |      |        |      |   |       
|                                               | Contingent stock                   |      |        |      |   |       
|                                               | Stock options and restricted stock |      |        |      |   |       
|                                               |                                    |      |        |      |   |       
|Weighted average shares outstanding            |                                    |      |        |      |   | 12,044
|Earnings per share                             |                                    | $    | 1.43   |      | $ | 1.40  
|                                               |                                    |      |        |      |   |       
|Anti-dilutive shares excluded from calculation |                                    |      |        |      |   |      
|                                               |                                    |      |        |      |   |       

11. Income Taxes

The components of the U.S. Federal and state income tax expense consist of the following:

2007

2006

2005Current payable:U.S. Federal

$
9,367

$
7,726

$
4,601State


895


835


70210,262


8,561


5,303Deferred:U.S. Federal


(42
)

(139
)

(168
)State


(5
)

(26
)

(37
)(47
)

(165
)

(205
)$
10,215

$
8,396

$
5,098


70

---



Our
deferred tax assets and liabilities consist of the following at September 30:

2007

2006Deferred tax assets:Investments

$
144

$
144Allowance for doubtful accounts


329


442Inventories


278


251Revenue recognition


83


86Lease expense


153


99Other


81


19Total deferred tax assets


1,068


1,041Deferred tax liabilities:Property and equipment


(618
)

(653
)Prepaid expenses


(359
)

(383
)Other


(47
)

(8
)Total deferred tax liabilities


(1,024
)

(1,044
)Net deferred tax assets (liabilities)

$
44

$
(3
)


We
believe realization of these deferred assets is more likely than not. Accordingly, no valuation allowance has been recorded.

Income
tax expense differed from income taxes at the U.S. federal statutory tax rate for all periods presented as follows:

2007

2006

2005Taxes computed at statutory rate

35.0
%
35.0
%
34.0
%State income taxes (net of federal income tax benefit)

2.0

2.0

4.3Redeemable preferred stock dividend accretion





14.3Other

0.7

0.8

0.237.7
%
37.8
%
52.8
%


The
decrease in the effective tax rate for the year ended September 30, 2006 as compared to the year ended September 30, 2005 was primarily attributable to the redemption
of all Series A preferred stock in
August 2005, which eliminated the nondeductible accretion of dividends for 2006 as well as a decrease in the state income taxes related to the utilization of state tax credits.

71

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12. Statements of Cash FlowsSupplemental and Noncash Disclosures

2007

2006

2005Supplemental DisclosuresCash paid for interest

$
531

$
1,785

$
2,034Cash paid for income taxes


8,842


9,138


4,122Noncash ActivitiesIssuance of restricted common stock for asset acquisition


486


995


Equipment acquisitions financed with accounts payable


254


132


642


13. Commitments and Contingencies

We have operating leases for office and distribution center space and equipment for varying periods. Certain leases have renewal options and require contingent
payments for increases, including executory costs, property taxes, insurance and certain other costs in excess of a base year amount. Total rent expense for the years ended September 30, 2007,
2006 and 2005 were $3,048, $2,377 and $1,800, respectively.

The
aggregate future noncancelable minimum rental payments on operating leases at September 30, 2007 are as follows:

2008

$
2,6782009


2,5522010


2,2912011


1,8252012


1,591Thereafter


3,246$
14,183


Legal Proceedings

Putney Inc. v. Pfizer Inc. and MWI Veterinary Supply, Inc., United States District Court, D. Me. 2007

Putney sells to veterinarians and distributors a generic, human-approved form of a pharmaceutical sold by Pfizer. MWI is a party to a Distribution Agreement with
Putney pursuant to which MWI purchases Putney's product for resale. The term of the agreement expires on December 31, 2007, and MWI has notified Putney that it will not renew the agreement.
Pfizer has contended that the sale and promotion of Putney's product is unlawful. Putney has sued Pfizer and MWI seeking a declaration that the sale and promotion of Putney's product is lawful. Putney
also alleges, as against MWI, that MWI has disparaged Putney's product, has breached the Distribution Agreement, and is obligated to

72

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indemnify
Putney. No amount of damages is specified. Pfizer has filed a counterclaim, against Putney, in which it makes no claims of any type against MWI. MWI has yet to answer the complaint, and
intends to contest vigorously any allegation that it has breached any agreement, disparaged Putney's product, or is otherwise liable to Putney in any way. As the action has recently been filed, and as
it is not clear to what extent MWI will remain involved in or affected by this dispute, it is not reasonably possible to evaluate the likely outcome or to estimate damages, if any.

14. Related Party Transactions

MWI Co., our subsidiary, holds a 50% membership interest in Feeders' Advantage that is accounted for as an investment using the equity method. Sales of products
to Feeders' Advantage, which are at our cost, were $36,116, $34,121 and $28,473 in 2007, 2006 and 2005, respectively. MWI Co. charged Feeders' Advantage for certain operating and administrative
services of $550, $591 and $428 in 2007, 2006 and 2005, respectively. Our President and Chief Executive Officer and a member of our Board of Directors are each members of the board of managers of
Feeders' Advantage.

On
June 18, 2002, we entered into a management services and consulting agreement (the "agreement") with Bruckmann, Rosser, Sherrill & Co. LLC ("BRS"), a major shareholder,
and Agri Beef, a major shareholder. The agreement stated that BRS would provide certain management, consulting and financial planning services to our board of directors and management. In
August 2005, we, BRS and Agri Beef terminated the agreement for a termination fee of $1,600 to BRS and $400 to Agri Beef. BRS received $365 and Agri Beef received $91 for services performed
under the agreement in 2005.

15. Employee Benefit Plans

We have a multi-employer defined contribution profit sharing plan with a 401(k) arrangement. To become eligible for the profit sharing portion of the plan, an
employee must complete two years of service and attain the age of twenty-one. Participation is automatic beginning the following January or July. To become eligible for the 401(k) portion
of the plan, the employee must complete three-months of service and attain the age of twenty-one.

Both
portions of the plan allow for employer contributions. We are required to match 50% of the employee's contribution to the 401(k) portion of the plan up to 6% of the employee's
salary. Our matching contributions for the 401(k) portion of the plan were $794, $633 and $549 in 2007, 2006 and 2005, respectively. Employee's contributions are fully vested immediately while
employer contributions vest over a five-year period.

Contributions
to the profit sharing portion of the Plans are discretionary, ranging from 0% to 3%, and are approved by our Board of Directors. Total contributions for 2007, 2006 and 2005
were $817, $677 and $598, respectively. Employer contributions are fully vested immediately.

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16. Financial Instruments

Financial InstrumentsThe following disclosure of the estimated fair value of financial instruments is made in accordance with
the requirements of SFAS No. 107,Disclosures About Fair Value of Financial Instruments. The estimated fair value amounts have been determined by
us, using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop the estimate of fair value.
Accordingly, the estimates presented herein are not necessarily indicative of the amounts we could realize in a current market exchange. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.

The
carrying amounts of cash and cash equivalents, receivables, investments, accounts payable, long-term debt and the line-of-credit are a reasonable
estimate of their fair value.

Derivative Financial InstrumentsWe entered into interest rate swaps that qualified as derivatives and were designated as cash
flow hedges. Our interest rate swaps expired on July 7, 2005 and were not renewed.

17. Quarterly Financial Data (Unaudited)

|                                                                                              |  | Three-Months Ended |         | 
|--------------------------------------------------------------------------------------------- |  | ------------------ | ------- | 
|
|
|2007                                                                                          |  |                    |         | 
|Total revenues                                                                                |  | $                  | 161,045 | 
|Gross profit                                                                                  |  |                    | 25,749  | 
|Operating income                                                                              |  |                    | 7,486   | 
|Net income                                                                                    |  |                    | 4,604   | 
|Earnings per common sharebasic                                                               |  | $                  | 0.40    | 
|Earnings per common sharediluted                                                             |  | $                  | 0.39    | 
|Weighted average common shares outstanding used in the basic earnings per share calculation   |  |                    | 11,559  | 
|Weighted average common shares outstanding used in the diluted earnings per share calculation |  |                    | 11,860  | 
|                                                                                              |  |                    |         | 

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|2006                                                                                          |  |   |         |  |   |         |  |   |         |  |   |         |  |   |        
|--------------------------------------------------------------------------------------------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | -------
|Total revenues                                                                                |  | $ | 137,816 |  | $ | 143,349 |  | $ | 163,952 |  | $ | 161,077 |  | $ | 606,194
|Gross profit                                                                                  |  |   | 22,752  |  |   | 19,928  |  |   | 22,911  |  |   | 22,535  |  |   | 88,126 
|Operating income                                                                              |  |   | 7,757   |  |   | 4,356   |  |   | 6,027   |  |   | 5,552   |  |   | 23,692 
|Net income                                                                                    |  |   | 4,439   |  |   | 2,355   |  |   | 3,769   |  |   | 3,274   |  |   | 13,836 
|Earnings per common sharebasic                                                               |  | $ | 0.42    |  | $ | 0.22    |  | $ | 0.36    |  | $ | 0.29    |  | $ | 1.28   
|Earnings per common sharediluted                                                             |  | $ | 0.41    |  | $ | 0.22    |  | $ | 0.35    |  | $ | 0.28    |  | $ | 1.25   
|Weighted average common shares outstanding used in the basic earnings per share calculation   |  |   | 10,578  |  |   | 10,586  |  |   | 10,610  |  |   | 11,317  |  |   | 10,773 
|Weighted average common shares outstanding used in the diluted earnings per share calculation |  |   | 10,864  |  |   | 10,884  |  |   | 10,916  |  |   | 11,623  |  |   | 11,072 

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18. Subsequent Event

On October 5, 2007, we acquired substantially all of the assets of Tri V Services, Inc. ("Tri V") for approximately $5,005 consisting of $4,500 in
cash and 12,692 shares of restricted common stock valued at the time of issuance at approximately $505. Based near Detroit, Michigan, Tri V was a distributor with an 11-year history of
providing animal health products to approximately 850 veterinary practices, with a particular focus on emergency clinics and ophthalmology specialists.

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Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A.    Controls and Procedures.

Our management, including the Chief Executive Officer and the Chief Financial Officer, have evaluated the effectiveness of the our disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of September 30, 2007. Based on this evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that our Company's disclosure controls and procedures, including the accumulation and communication of disclosures to the Company's Chief Executive Officer and Chief
Financial Officer as appropriate to allow timely decisions regarding required disclosure, are effective to provide reasonable assurance that information required to be disclosed by the us in the
reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission's rules and forms.

Management's
annual report on internal control over financial reporting and the attestation report of our independent registered public accounting firm are set forth below on this Annual
Report on Form 10-K.

There
were no changes in our internal controls over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.

Management's Report on Internal Control Over Financial Reporting

The management of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") is responsible for establishing and maintaining effective internal control
over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f)).

There
are inherent limitations in the effectiveness of any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even
effective internal control can provide only reasonable assurance with respect to financial statement preparation. Further, because of changes in conditions, the effectiveness of internal control may
vary over time.

Management
assessed the effectiveness of the Company's internal control over financial reporting as of September 30, 2007. This assessment was based on criteria for effective
internal control over financial reporting described in "Internal ControlIntegrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on
this assessment, management believes that, as of September 30, 2007, we maintained effective internal control over financial reporting.

Management's
assessment of the effectiveness of the Company's internal control over financial reporting has been audited by Deloitte & Touche LLP, an independent registered public
accounting firm, in accordance with the standards of the Public Company Accounting Oversight Board (United States). Their report is included herein.

76

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To
the Board of Directors and Stockholders of
MWI Veterinary Supply, Inc.
Meridian, Idaho

We
have audited the internal control over financial reporting of MWI Veterinary Supply, Inc. and subsidiaries (the "Company") as of September 30, 2007, based on criteria
established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining
effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or
persons performing similar functions, and effected by the company's board of directors, management, and other personnel 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. A company's internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the
financial statements.

Because
of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material
misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2007, based on the criteria established
in Internal Control

77

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Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We
have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and consolidated financial
statement schedule as of and for the year ended September 30, 2007 of the Company and our report dated November 20, 2007 expressed an unqualified opinion on those consolidated financial
statements and consolidated financial statement schedule.

/s/
DELOITTE & TOUCHE LLP
Boise, Idaho
November 20, 2007

78

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Item 9B.    Other Information.

None.

PART III

Item 10.    Directors, Executive Officers and Corporate Governance of the Registrant.

The information regarding directors and nominees for directors of the Company, including identification of the audit committee and audit committee financial
expert, is presented under the headings "Corporate GovernanceCommittees of the Board of Directors," and "Election of DirectorsNominees For Directors" in the Company's
definitive proxy statement for use in connection with the 2008 Annual Meeting of Stockholders (the "Proxy Statement") to be filed within 120 days after the end of the Company's fiscal year
ended September 30, 2007. The information contained under these headings is incorporated herein by reference. Information regarding the executive officers of the Company is included in this
Annual Report on Form 10-K under Item 1 of Part I as permitted by Instruction 3 to Item 401(b) of Regulation S-K.

The
Company has adopted a code of conduct that applies to its Chief Executive Officer and Chief Financial Officer. This code of conduct is available on the Company's Web site at www.mwivet.com.If the Company makes any amendments to this code other than technical, administrative or other
non-substantive amendments, or grants any waivers, including implicit waivers, from a provision of this code to the Company's Chief Executive Officer or Chief Financial Officer, the
Company will disclose the nature of the amendment or waiver, its effective date and to whom it applies in a report on Form 8-K filed with the SEC.

Item 11.    Executive Compensation.

Information concerning executive compensation is presented under the headings "Executive Compensation" in the Proxy Statement. Information concerning director
compensation is presented under the heading "Corporate GovernanceDirector Compensation" in the Proxy Statement. The information contained under these headings is incorporated herein by
reference.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information
with respect to security ownership of certain beneficial owners and management is set forth under the heading "Security Ownership of Certain Beneficial Owners and Directors
and Officers" in the Proxy Statement. Information with respect to equity compensation plans is set forth under the heading "Equity Compensation Plan Information" in this Annual Report on
Form 10-K under Item 5 of Part II. The information contained under these headings is incorporated herein by reference.

Item 13.    Certain Relationships, Related Transactions and Director Independence.

Information concerning related transactions is presented under the heading "Certain Relationships, Related Transactions and Director Independence" in the Proxy
Statement. The information contained under this heading is incorporated herein by reference.

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Item 14.    Principal Accountant Fees and Services.

Information concerning principal accountant fees and services is presented under the heading "Ratification of Appointment of Independent Registered Public
Accountant" in the Proxy Statement. The information contained under this heading is incorporated herein by reference.

80

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PART IV

Item 15.    Exhibits and Financial Statement Schedules.

MWI VETERINARY SUPPLY, INC.
SCHEDULE IICONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(Amounts in thousands)

|                                |                               | Balance at
Beginning of
Period |   | Charged
(Credited) to
Costs and
Expenses |  | Deductions/
Write-offs |     | Balance at
End of Period
|------------------------------- | ----------------------------- | ------------------------------ | - | ---------------------------------------- |  | ---------------------- | --- | ------------------------
|Allowance for Doubtful Accounts |                               |                                |   |                                          |  |                        |     |                         
|                                | Year ended September 30, 2005 |                                | $ | 565                                      |  | $                      | 978 |                         
|                                | Year ended September 30, 2006 |                                |   | 1,181                                    |  |                        | 214 |                         
|                                | Year ended September 30, 2007 |                                |   | 1,154                                    |  |                        | 208 |                         

81

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Signatures

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.

|                        |  | MWI VETERINARY SUPPLY, INC.
|----------------------- |  | ---------------------------
|                        |  | BY:                        
|Date: November 21, 2007 |  |                            

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities
indicated as of November 21, 2007.

|/s/JAMES F. CLEARY, JR.James F. Cleary, Jr.
Director, President and
Chief Executive Officer
(Principal Executive Officer) |  | /s/MARY PATRICIA B. THOMPSONMary Patricia B. Thompson
Senior Vice President of Finance and
Administration, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
|------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|/s/KEITH E. ALESSIKeith E. Alessi (Director)                                                                              |  | /s/BRUCE C. BRUCKMANNBruce C. Bruckmann (Director)                                                                                                                                               
|/s/JOHN F. MCNAMARAJohn F. McNamara (Director)                                                                            |  | /s/A. CRAIG OLSONA. Craig Olson (Director)                                                                                                                                                       
|/s/ROBERT N. REBHOLTZRobert N. Rebholtz (Director)                                                                        |  | /s/WILLIAM J. ROBISONWilliam J. Robison (Director)                                                                                                                                               

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Index to Exhibits

Filed with the Annual Report
on Form 10-K for the
Year Ended September 30, 2007

|Number |  | Description                                                                                                                                                                                                                                                                                                  
|------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1    |  | Form of Amended and Restated Certificate of Incorporation of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.1 of the Company's Quarterly Report on Form 10-Q, filed August 1,
2007.                                                                                              
|3.2    |  | Form of Amended and Restated Bylaws of MWI Veterinary Supply, Inc., incorporated herein by reference to Exhibit 3.2 of the Company's Quarterly Report on Form 10-Q, filed August 1, 2007.                                                                                                                    
|4.1    |  | Form of MWI Veterinary Supply, Inc. common stock certificate, incorporated herein by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).                                                                                                                      
|4.2    |  | Registration Rights Agreement dated as of June 18, 2002 by and between MWI Holdings, Inc., Bruckmann, Rosser, Sherrill & Co. II, L.P., Agri Beef Co. and the other parties thereto, incorporated herein by reference to
Exhibit 4.3 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).
|4.3    |  | Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Cleary, incorporated herein by reference to Exhibit 4.4 of the Company's Registration Statement on
Form S-1 (Reg No. 333-124264).*                                                  
|4.4    |  | Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Jeff Danielson, incorporated herein by reference to Exhibit 4.5 of the Company's Registration Statement on
Form S-1 (Reg No. 333-124264).*                                                
|4.5    |  | Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Hay, incorporated herein by reference to Exhibit 4.6 of the Company's Registration Statement on Form
S-1 (Reg No. 333-124264).*                                                     
|4.6    |  | Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and James Ross, incorporated herein by reference to Exhibit 4.7 of the Company's Registration Statement on
Form S-1 (Reg No. 333-124264).*                                                    
|4.7    |  | Executive Stock Agreement dated as of June 18, 2002 by and among MWI Veterinary Supply Co., MWI Holdings, Inc. and Mary Pat Thompson, incorporated herein by reference to Exhibit 4.8 of the Company's Registration Statement
on Form S-1 (Reg No. 333-124264).*                                             
|4.8    |  | First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James F. Cleary, Jr., incorporated herein by reference to Exhibit 4.9 of the
Company's Registration Statement on Form S-1 (Reg No. 333-124264).*                
|4.9    |  | First Amendment to Executive Stock Agreement dated as of May 5, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Jeffrey J. Danielson, incorporated herein by reference to Exhibit 4.10 of the
Company's Registration Statement on Form S-1 (Reg No. 333-124264).*               
|       |  |                                                                                                                                                                                                                                                                                                              

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|4.10 |  | First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James S. Hay, incorporated herein by reference to Exhibit 4.11 of the Company's
Registration Statement on Form S-1 (Reg No. 333-124264).*                       
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.11 |  | First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and James M. Ross, incorporated herein by reference to Exhibit 4.12 of the Company's
Registration Statement on Form S-1 (Reg No. 333-124264).*                      
|4.12 |  | First Amendment to Executive Stock Agreement dated as of May 6, 2005 by and among MWI Veterinary Supply, Inc., MWI Veterinary Supply Co. and Mary Patricia B. Thompson, incorporated herein by reference to Exhibit 4.13 of
the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*          
|10.1 |  | 2002 Stock Option Plan, incorporated herein by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).*                                                                                                                                                         
|10.2 |  | Lease Agreement dated June 20, 2003 between Rafanelli and Nahas and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.13 of the Company's Registration Statement on Form S-1 (Reg No.
333-124264).                                                                                   
|10.3 |  | Ethical Distribution Agreement dated as of January 1, 2004 by and between Fort Dodge Animal Health and MWI Veterinary Supply Co., as amended, incorporated herein by reference to Exhibit 10.16 of the Company's Registration
Statement on Form S-1 (Reg No. 333-124264).                                    
|10.4 |  | MWI Veterinary Supply, Inc. 2005 Stock-Based Incentive Compensation Plan, adopted July 27, 2005, as Amended and Restated, effective July 24, 2006, incorporated herein by reference to Exhibit 10.21 of the Company's Current
Report on Form 8-K, filed February 8, 2007.*                                   
|10.5 |  | Form of Option Letter, incorporated herein by reference to Exhibit 10.22 of the Company's Registration Statement on Form S-1 (Reg No. 333-124264).                                                                                                                                                           
|10.6 |  | 2007-2008 Merial Independent Sales Agent Agreement dated as of November 16, 2006 by and between Merial Limited and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly
Report on From 10-Q, filed February 5, 2007.                                       
|10.7 |  | Agreement for Product Purchases dated as of December 1, 2006 by and between MWI Veterinary Supply Co. and Medical Management International, Inc., dba Banfield, The Pet Hospital®, incorporated herein by reference to
Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007. 
|10.8 |  | Agreement for Logistics Services dated as of December 1, 2006 by and between MWI Veterinary Supply Co. and Medical Management International, Inc., dba Banfield, The Pet Hospital®, incorporated herein by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007.
|     |  |                                                                                                                                                                                                                                                                                                              

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|10.9  |  | Credit Agreement dated as of December 13, 2006 by and between MWI Veterinary Supply Co., as Borrower, MWI Veterinary Supply, Inc. and Memorial Pet Care, Inc. as Guarantors, Bank of America, N.A. and Wells Fargo Bank, N.A.,
 as Lenders, incorporated herein by reference to Exhibit 10.4 of the Company's Quarterly Report on Form 10-Q, filed February 5, 2007.
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.10 |  | Livestock Products Agreement effective as of December 23, 2006 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q,
filed August 1, 2007.                                                                                                                    
|10.11 |  | Pfizer Equine Products Marketing Agreement dated as of January 1, 2007 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10. 3 of the Company's Quarterly Report on Form
10-Q, filed August 1, 2007.                                                                                                           
|10.12 |  | Rimadyl/Clavamox Distribution Agreement dated as of March 15, 2007 by and between Pfizer Inc. and MWI Veterinary Supply Co., incorporated herein by reference to Exhibit 10.2 of the Company's Quarterly Report on Form 10-Q,
filed August 1, 2007.                                                                                                                
|21.1  |  | Subsidiaries of MWI Veterinary Supply, Inc.                                                                                                                                                                                                                                                                                                                         
|23    |  | Consent of Deloitte & Touche LLP.                                                                                                                                                                                                                                                                                                                                   
|31.1  |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                             
|31.2  |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                             
|32    |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                             

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