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



FORM 10-K



ý

ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended September 30, 2008
Commission file number 000-51468ORo

TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                       to


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

Delaware(State or other jurisdiction)

02-0620757(I.R.S. Employer Identification Number)651 S. Stratford Drive, Suite 100Meridian, 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 (Do not check if a smaller reporting company)

Smaller reporting company 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, 2008 (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 $274,303,619. 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 14, 2008 was approximately 12,112,535.

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



PagePART ICautionary Statement


11.

Business


21A.

Risk Factors


181B.

Unresolved Staff Comments


282.

Properties


283.

Legal Proceedings


284.

Submission of Matters to a Vote of Security Holders


28PART II5.

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


296.

Selected Financial Data


327.

Management's Discussion and Analysis of Financial Condition and Results of
Operations


347A.

Quantitative and Qualitative Disclosures About Market Risk


498.

Financial Statements and Supplementary Data


509.

Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure


739A.

Controls and Procedures


739B.

Other Information


76PART III10.

Directors, Executive Officers and Corporate Governance of the
Registrant


7611.

Executive Compensation


7612.

Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters


7613.

Certain Relationships, Related Transactions and Director
Independence


7714.

Principal Accountant Fees and Services


77PART IV15.

Exhibits and Financial Statement
Schedules


78SIGNATURES


79


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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:



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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 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, 2008.

We
are a leading distributor of animal health products to veterinarians across the United States. In fiscal year 2008, we distributed more than 30,000 products, of which over 15,000 are
stocked in our distribution centers, sourced from approximately 500 vendors to more than 19,000 veterinary practices nationwide from thirteen strategically located distribution centers. Products we
sell include pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, specialty products, 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, 2008, we had a sales force of 321 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, 2008, 2007 and 2006, our total revenues were $831.4 million, $710.1 million

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and
$606.2 million, respectively. Our operating income for the fiscal years ended September 30, 2008, 2007 and 2006, was $32.4 million, $26.7 million and
$23.7 million, respectively.

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 2007 grew to $6.8 billion, which represents a 7% compounded annual growth rate since calendar year 2002. 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's growth has slowed recently as a result of a decrease in consumer spending. Historically, the growth in the companion animal
health market has been due to the increasing number of households with companion animals, an aging pet population, increased expenditures on animal health and preventative care, advancements in animal
health products and extensive marketing programs sponsored by companion animal nutrition and pharmaceutical companies. Product sales in the production animal health products market have been heavily
impacted by increasing volatility in commodity prices, changes in weather patterns that allow cattle to graze for longer periods and the changes in the general economy. The impact of unprecedented
commodity price volatility in commodities such as corn, grain and feeder cattle has made it increasingly more difficult to predict the timing of demand for production animal health products.
Historically, sales in this market have been largely driven by 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 have been 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, 2007, according to the American
Veterinary Medical Association, or AVMA, there were more than 58,000 veterinarians in private practice 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, 2008, our average 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 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"). In fiscal year 2007, we acquired substantially all of the assets of Securos, Inc. and International Veterinary Distribution
Network, Inc. (collectively "Securos"). In fiscal year 2008, we

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acquired
substantially all of the assets of Tri V Services, Inc. ("Tri V"). Also in fiscal year 2008, we acquired substantially all of the assets of AAHA Services Corporation, operating as AAHA
MARKETLink ("AAHA MARKETLink").

Products

In fiscal year 2008, we distributed more than 30,000 products with over 15,000 stocked in our thirteen distribution centers, including
pharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment, supplies, veterinary pet food and nutritional products. For our fiscal year ended September 30, 2008, our product
revenues were comprised of approximately 42% pharmaceutical products, 18% vaccine products, 7% parasiticide products, 8% diagnostic products, 3% capital equipment products and 22% 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 approximately 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, 2008, 2007 and 2006 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. 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

DescriptionE-commerce platform

On-line ordering system that provides information to veterinary practices on products, vendor programs and purchasing historyPharmacy fulfillment

Shipment of prescription production and companion animal health products to end-users on behalf of veterinarians from our five licensed pharmacies located in Edwardsville, Kansas; Clear Lake, Wisconsin; Grand Prairie,
Texas; Harrisburg, Pennsylvania and Nampa, Idaho and a licensed veterinary food-animal drug retailer in Visalia, CaliforniaInventory management system

Flexible system that facilitates counting, maintaining and ordering inventory in veterinary practicesEquipment procurement consultation

Consultation and demonstrations provided by our dedicated capital equipment specialistsSpecial order fulfillment

Procurement and shipment of approximately 7,000 unique products that we do not normally stock in our warehousesEducational seminars

Seminars for our customers covering business and medical topics, frequently sponsored in conjunction with our vendorsPet 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 19,000 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 85% of our product sales. Also, for more than twelve years, we
have maintained distribution arrangements with Banfield, the nation's largest private veterinary practice with over 700 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 each of our fiscal years ended
September 30, 2008, 2007 and 2006. Feeders' Advantage accounted for approximately 5% of our product sales for both of our fiscal years ended September 30, 2008 and 2007, and 6% for our
fiscal year ended September 30, 2006. 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,

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excluding
Banfield and Feeders' Advantage, accounted for approximately 4% of our product sales for our fiscal year ended September 30, 2008 and 5% of our product sales for our fiscal years
ended September 30, 2007 and 2006, 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

In fiscal year 2008, we distributed more than 30,000 products, of which over 15,000 are stocked in our distribution centers, sourced
from approximately 500 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 ten largest vendors accounted for approximately 72%, 70% and 70% of our revenues for the fiscal years ended September 30, 2008, 2007 and 2006, respectively. Our top three
vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 43%, 43% and 44% of our revenues for the fiscal years ended September 30, 2008, 2007 and 2006,
respectively. Pfizer supplied products that accounted for approximately 23%, 21% and 19% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, respectively. Pfizer
supplied production animal products under a

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livestock
products agreement that accounted for approximately 17%, 17% and 15% of our revenues for our fiscal years ended September 30, 2008, 2007 and 2006, 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, 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 incentives 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, 2008
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, 2008 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

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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.

Our
companion animal AAHA MARKETLink management agreement with Pfizer provides that we are entitled to purchase designated companion animal products from Pfizer and resell them to
selected veterinary hospitals serviced by MWI who are members of the American Animal Hospital Association. In connection with its resale of the Pfizer companion animal products, MWI will be paid a
logistics fee and may receive certain incentive payments from Pfizer. This agreement expires on December 31, 2008 and may be terminated by either party, with or without cause, upon
30 days written notice. Pfizer may also terminate the agreement on 15 days written notice to MWI in the event it determines that MWI has failed to comply with certain terms and
conditions of the agreement.

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, 2009 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

Over the past several years, we have continued to invest in our technology and information systems, which we believe has created a
competitive advantage when delivering quality service to our customers. In 2007, we launched a new e-commerce platform that offers more enhanced online ordering capabilities for
veterinarians. This platform 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.

Distribution

As of September 30, 2008, we distributed our products from thirteen strategically located distribution centers throughout the
United States. During our fiscal year 2008, we opened our thirteenth distribution center located in Edwardsville, Kansas. We also planned for the move of our distribution center in Dallas, Texas to a
larger facility which took place in November 2008. During our fiscal year 2007, we moved our distribution center in Atlanta, Georgia to a larger facility, expanded the

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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. During our fiscal
year 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 our warehouses. We estimate that as of September 30, 2008, 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.

In
July 2008, we acquired substantially all of the assets of AAHA MARKETLink. Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of the
American Animal Hospital Association.

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

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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.

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.

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Trademarks

We have registered with the United States Patent and Trademark Office the marks "MWI," "MWI Design," "MWIVET.com," "VETONE," "PROXYRx"
and "ANIMAL Rx PHARMACY". 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, 2008, we had 881 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 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 atwww.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

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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.

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, 2008:

Name

Age

TitleJames F. Cleary, Jr.


45

Board Director, President and Chief Executive OfficerMary Patricia B. Thompson


45

Senior Vice President of Finance and Administration, Chief Financial OfficerJames W. Culpepper


54

Vice President of Inventory ManagementJeffrey J. Danielson


48

Vice President of SalesJohn J. Francis


55

Vice President and General Manager of the Specialty Resources GroupJames S. Hay


65

Vice President and Chief Information OfficerBryan P. Mooney


40

Vice President of OperationsJohn R. Ryan


39

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

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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 Seroyal Holdings, L.P., and a manager of Feeders' Advantage, L.L.C.
Mr. Cleary is the brother-in-law of Mr. Robert Rebholtz, a member 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. Prior to August 2006, Ms. Thompson had been the Vice President, Secretary
and Chief Financial Officer since June 2002. 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.

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 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

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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 at any time without notice. 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 or eliminate rebates

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offered
under their programs, interpret the terms of their rebate programs in a way that is adverse to us 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
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. 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. Additionally, the production
animal market can be affected by volatility in commodity prices such as corn, grain and feeder cattle, changes in weather patterns that allow cattle to graze for longer periods or a change in the
general economy,which can shift the timing of when animals are treated and to what extent they are treated. This shift in treatment may have a significant impact on the timing of purchases. 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. Our primary competitors, excluding vendors, include the following:



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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 or additional 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.

During the year ended September 30, 2008, we distributed more than 30,000 products, of which over 15,000 were stocked in our
distribution centers, sourced from approximately 500 vendors to over 19,000 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 ten largest vendors supplied products that accounted for approximately 72%, 70% and 70% of our revenues for the fiscal years ended September 30, 2008, 2007 and
2006, respectively. Our top three vendors, Fort Dodge, Pfizer and Vedco, supplied products that accounted for approximately 43%, 43% and 44% of our revenues for our fiscal years ended
September 30, 2008, 2007 and 2006, respectively. Pfizer supplied products that accounted for approximately 23%, 21% and 19% of our revenues for our fiscal years ended September 30, 2008,
2007 and 2006, respectively. Pfizer supplied production animal products under a livestock agreement that accounted for approximately 17%, 17% and 15% of our revenues for our fiscal years ended
September 30, 2008, 2007 and 2006, 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

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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.

Vendors
may also choose to change the method in which products are taken to market. For example, a vendor may change our relationship from a complete distribution provider, including
logistics and sales support, to only a logistics provider or only a sales support provider. Only doing one of these services
would reduce our margin on any sale. A change in the method in which products are taken to market caused by any vendor could have a material adverse effect on our business.

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 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, including generic products that may gain increased market share. 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, including generic products, 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

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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:



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%, respectively, of
our product sales for our fiscal years ended September 30, 2008 and 2007, and 10% and 6%, respectively, for our fiscal year ended September 30, 2006. Our ten

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largest
customers, excluding Banfield and Feeders' Advantage, accounted for approximately 4% of our product sales for our fiscal year ended September 30, 2008 and 5% of our product sales for
our fiscal years ended September 30, 2007 and 2006. 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.

Difficulties with the integration of acquisitions or the improvement of the performance of acquired companies 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 or improving the performance of 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.

In
addition, it may be difficult to manage rapid growth from our acquired companies in the future, and the future success of our acquisitions depends on our ability to implement and/or
maintain:



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

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

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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.

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.

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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
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.

An economic downturn could materially adversely affect our business.

Our business may be materially adversely affected by negative trends in the general economy that could reduce consumer discretionary
spending on animal health products. Levels of consumer spending have recently deteriorated significantly in the United States and may remain depressed for the foreseeable future. Some of the factors
that could influence the levels of consumer spending include continuing increases in fuel and other energy costs, conditions in the residential real estate and mortgage markets, unemployment levels,
healthcare costs, access to credit, consumer confidence and other macroeconomic factors affecting consumer spending behavior. In addition, rising prices for commodities such as corn or grain, changes
in weather patterns causing cattle to graze for longer periods and changes in the general economy may adversely impact the amount spent by animal owners in the production animal market. 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.
Additionally, any
cost-cutting measures taken to offset the effects of an economic downturn could materially impact our ability to generate future revenue growth.

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,

26

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Table of Contents

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, 2008 was $0.2 million
(comprised of $0 credit facility and $0.2 million promissory note). Our interest expense for fiscal year 2008 was approximately $0.3 million and was approximately $0.5 million for
fiscal year 2007. 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."

Our lenders may have suffered losses related to the weakening economy and may not be able to fund our borrowings.

Our lenders, including the lenders participating in our revolving credit facility, may have suffered losses related to their lending
and other financial relationships, especially because of the general weakening of the national economy and increased financial instability of many borrowers. As a result, lenders may become insolvent
or tighten their lending standards, which could make it more difficult for us to borrow under our revolving credit facility or to obtain other financing on favorable terms or at all. Our financial
condition and results of operations would be adversely affected if we were unable to draw funds under our revolving credit facility because of a lender default or to obtain other
cost-effective financing.

27

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Table of Contents

Item 1B.    Unresolved Staff Comments.

None.

Item 2.    Properties.

The table below provides a summary of the Company's principal facilities which are all leased as of September 30, 2008:

Location

Total Square
Feet(1)

Principal FunctionMeridian, Idaho


34,000

Headquarters and call centerSturbridge, Massachusetts


15,000

Securos office and call centerAtlanta, Georgia


41,000

Distribution center and call centerClear Lake, Wisconsin


25,000

Distribution center, call center and pharmacyDenver, Colorado


75,000

Distribution center and call centerFife, Washington


30,000

Distribution centerGlendale, Arizona


20,000

Distribution centerGrand Prarie, Texas(2)


70,000

Distribution center, call center and pharmacyHarrisburg, Pennsylvania


40,000

Distribution center and pharmacyHolland, Michigan


25,000

Distribution center and call centerNampa, Idaho


36,000

Distribution center and pharmacyOrlando, Florida


30,000

Distribution centerSan Antonio, Texas


19,000

Distribution center and call centerVisalia, California


52,000

Distribution center and veterinary food-animal drug retailerEdwardsville, Kansas(3)


80,000

Distribution center and pharmacyRochester Hills, Michigan


3,000

Call 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 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.

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

None.

28

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Table of Contents

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, 2007First Quarter

$
37.44

$
30.05Second Quarter

$
34.50

$
30.00Third Quarter

$
40.50

$
32.36Fourth Quarter

$
42.98

$
33.63Fiscal Year Ended September 30, 2008First Quarter

$
44.60

$
36.05Second Quarter

$
43.85

$
32.40Third Quarter

$
39.27

$
32.16Fourth Quarter

$
45.11

$
32.15


At
the close of business on November 14, 2008, we had approximately 12,112,535 shares of common stock issued and outstanding. As of that date, there were approximately 186
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.

29

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Table of Contents

The
table below provides information concerning our repurchase of shares of our common stock during the quarter ended September 30, 2008.

Issuer Purchases of Equity Securities

Period

Total Number
of Shares
Purchased

Average
Price Paid
per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs

Maximum Number (or
Approximate Dollar
Value) of Shares that May
Yet Be Purchased Under
the Plans or ProgramsJuly 1, 2008 to July 31, 2008











August 1, 2008 to August 31, 2008


50
(1)
$
37.37





September 30, 2008 to September 30, 2008


77
(1)
$
39.27





Total


127

$
38.52








---

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Table of Contents

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 30, 2008, 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, the Standard and Poor's SmallCap 600 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

9/30/2008MWI Veterinary Supply, Inc.

$
100.00

$
117.35

$
197.24

$
222.06

$
227.94S&P SmallCap 600 Index


100.00


97.86


103.89


118.32


100.79Russell 2000 Index


100.00


96.99


105.39


116.98


98.70Peer Group(1)


100.00


101.34


115.03


123.50


108.13


---

31

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Table of Contents

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 30,2008

2007

2006

2005

2004(In thousands, except per share amounts)Revenues:Product sales

$
778,953

$
664,351

$
564,289

$
463,272

$
367,863Product sales to related party


39,452


36,122


34,123


28,473


22,163Commissions


12,959


9,632


7,782


4,910


4,256Total revenues


831,364


710,105


606,194


496,655


394,282Cost of product sales


711,812


607,756


518,068


426,709


338,684Gross profit


119,552


102,349


88,126


69,946


55,598Selling, general and administrative expenses(1)


84,123


73,215


62,470


52,647


41,872Depreciation and amortization


3,078


2,424


1,964


1,528


1,146Operating income


32,351


26,710


23,692


15,771


12,580Other income (expense):Interest expense(2)


(265
)

(545
)

(1,959
)

(6,515
)

(6,098
)Earnings of equity method investees


179


169


161


131


104Other


642


756


338


268


218Total other income (expense)


556


380


(1,460
)

(6,116
)

(5,776
)Income before taxes


32,907


27,090


22,232


9,655


6,804Income tax expense


(12,990
)

(10,215
)

(8,396
)

(5,098
)

(4,280
)Net income

$
19,917

$
16,875

$
13,836

$
4,557

$
2,524Earnings per common share:Basic

$
1.65

$
1.43

$
1.28

$
0.76

$
0.50Diluted

$
1.62

$
1.40

$
1.25

$
0.68

$
0.43Shares used in computing earnings per common share:Basic


12,053


11,764


10,773


5,970


5,038Diluted


12,301


12,044


11,072


6,697


5,878




As of September 30,2008

2007

2006

2005

2004(In thousands)Cash

$
3,419

$
8,599

$
37

$
31

$
28Total assets


314,805


267,194


230,559


188,244


146,565Total debt


194


292


10,948


25,177


50,149Redeemable preferred stock














35,733Total stockholders' equity


181,003


160,011


129,626


86,694


4,632


32

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Table of Contents



Year Ended September 30,2008

2007

2006

2005

2004Other Data (unaudited):(3)Product sales from Internet as a percentage of sales


27
%

24
%

23
%

21
%

18
%Field sales representatives (at end of period)


186


163


155


134


111Telesales representatives (at end of period)


135


117


106


93


79Distribution centers


13


13


12


10


9Fill rate(4)


98
%

98
%

98
%

98
%

98
%


---

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Table of Contents

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. We operate within a
single reporting segment and are primarily located within the United States.

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. The overall economy and consumer spending have impacted both markets, with volatile commodity prices in grain, corn and feeder cattle, and changes in weather patterns also
affecting demand in the production animal market. Both markets have been integral to our financial results and we intend to continue supporting both markets. With the recent acquisition of AAHA
MARKETLink, we demonstrated our commitment to the companion animal market and our intent to continue our growth in that market.

We
believe that the companion animal market has slowed recently as a result of a decrease in consumer spending. Historically, this growth has been 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 intend to continue to penetrate this market through internal growth initiatives and selective acquisitions.

Product
sales in the production animal market have been negatively impacted by increasing volatility in commodity prices such as corn, grain and feeder cattle, changes in weather
patterns that allow cattle to graze for longer periods and changes in the general economy. We believe that this is not a permanent condition in the market and that demand will return as prices
normalize. We intend to continue to support production animal veterinarians with a broad range of products and value-added services. Historically, sales in this market have been largely driven by
spending on animal health products to improve productivity, weight gain and disease prevention, as well as a growing focus on food safety.

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

34

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Table of Contents

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, exclusivity requirements and the manner in which we go to
market. For example, vendors could require us to 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. In
addition, vendors have the ability to expand the distributors that they use which could have a material adverse effect on our business.

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.

We
are currently in annual negotiations with Pfizer on our livestock products agreement for calendar year 2009. The distribution agreement proposed by Pfizer does not meet our
expectations, and we are continuing negotiations. An unfavorable outcome in these negotiations could have a material adverse impact to our business, financial condition, and results of operations.

Total Revenues.Our total revenues increased from $394,282 for our fiscal year ended September 30, 2004 to $831,364 for our fiscal year ended
September 30, 2008. 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.

35

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Table of Contents

Operating Expenses.Our selling, general and administrative expenses increased from $41,872 for our fiscal year ended September 30, 2004 to $84,123 for our
fiscal year ended September 30, 2008. 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 10.6% for our fiscal year ended September 30, 2004, compared to 10.1%
for the same period in 2008.

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, including an ownership interest in Securos Europe. 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.

In
July 2008, we acquired substantially all of the assets of AAHA MARKETLink. Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of
American Animal Health Association.

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.

36

---



Table of Contents

Results of Operations

The following tables summarize our historical results of operations for our fiscal years ended September 30, 2008, 2007 and
2006.

Summary Consolidated Results of Operations Table

Year Ended September 30,2008

%

2007

%

2006

%(In thousands, except per share data)Revenues:Product sales

$
778,953


93.7
%
$
664,351


93.5
%
$
564,289


93.1
%Product sales to related party


39,452


4.7
%

36,122


5.1
%

34,123


5.6
%Commissions


12,959


1.6
%

9,632


1.4
%

7,782


1.3
%Total revenues


831,364


100.0
%

710,105


100.0
%

606,194


100.0
%Cost of product sales


711,812


85.6
%

607,756


85.6
%

518,068


85.5
%Gross profit


119,552


14.4
%

102,349


14.4
%

88,126


14.5
%Selling, general and administrative expenses


84,123


10.1
%

73,215


10.3
%

62,470


10.3
%Depreciation and amortization


3,078


0.4
%

2,424


0.3
%

1,964


0.3
%Operating income


32,351


3.9
%

26,710


3.8
%

23,692


3.9
%Other income (expense):Interest expense


(265
)

0.0
%

(545
)

(0.1
)%

(1,959
)

(0.3
)%Earnings of equity method investees


179


0.0
%

169


0.0
%

161


0.0
%Other


642


0.1
%

756


0.1
%

338


0.1
%Total other income (expense)


556


0.1
%

380


0.0
%

(1,460
)

(0.2
)%Income before taxes


32,907


4.0
%

27,090


3.8
%

22,232


3.7
%Income tax expense


(12,990
)

(1.6
)%

(10,215
)

(1.4
)%

(8,396
)

(1.4
)%Net income

$
19,917


2.4
%
$
16,875


2.4
%
$
13,836


2.3
%Earnings per common share:Basic

$
1.65




$
1.43




$
1.28Diluted

$
1.62




$
1.40




$
1.25Shares used in computing earnings per common share:Basic


12,053





11,764





10,773Diluted


12,301





12,044





11,072


Fiscal 2008 Compared to Fiscal 2007

Total Revenues.Total revenues increased $121,259, or 17.1%, to $831,364 for the fiscal year ended September 30, 2008 from $710,105 for the fiscal year
ended September 30, 2007. 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 57% of the growth in total revenues during the fiscal year ended September 30, 2008. Revenues attributable to existing customers represented approximately
43% of the growth in total revenues during the fiscal year ended September 30, 2008. For the purpose of calculating growth rates of new and existing customer revenue,

37

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Table of Contents

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. Included in the new customer growth
were approximately $2.8 million of revenues attributable to new customers acquired as a result of the acquisition of AAHA MARKETLink on July 1, 2008. Additionally, we had
$5.4 million of incremental revenues as a result of the acquisition of AAHA MARKETLink from customers who had previously been purchasing from both MWI and AAHA MARKETLink.

Commission
revenues increased $3,327, or 34.5%, to $12,959 for the fiscal year ended September 30, 2008 from $9,632 for the fiscal year ended September 30, 2007. The
increase of commission revenues was due to the increase in gross agency billings of $50,694, or 26.1%, to $245,045 for the fiscal year
ended September 30, 2008 from $194,351 for the fiscal year ended September 30, 2007. The growth in commissions was due to an increase in sales volume to customers as well as additional
incentives which were achieved during the fiscal year.

Gross Profit.Gross profit increased $17,203, or 16.8%, to $119,552 for the fiscal year ended September 30, 2008 from $102,349 for the fiscal year ended
September 30, 2007. The change in gross profit is a result of increased total revenues as discussed above. Vendor rebates increased by approximately $989 for the fiscal year ended
September 30, 2008 as compared to the fiscal year ended September 30, 2007. Gross profit as a percentage of total revenues was 14.4% for both of the fiscal years ended
September 30, 2008 and 2007.

Selling, General and Administrative Expenses ("SG&A").SG&A increased $10,908, or 14.9%, to $84,123 for the fiscal year ended September 30, 2008 from
$73,215 for the fiscal year ended September 30, 2007. This increase was primarily due to increased compensation and benefits costs and occupancy and location costs. Compensation and benefit
costs increased due to the addition of 81 employees during the fiscal year, which includes 23 new field sales representatives and 18 new telesales representatives. Compensation costs also increased as
a result of increased sales commissions that are directly correlated with the sales growth. Occupancy and location costs increased as a result of the addition of our distribution center in
Edwardsville, Kansas. This distribution center commenced operations in October 2007. We also experienced higher credit card fees as a result of increased revenues and usage. SG&A as a percentage of
revenue was 10.1% for the fiscal year ended September 30, 2008 and 10.3% for the fiscal year ended September 30, 2007.

Depreciation and Amortization.Depreciation and amortization expense increased $654, or 27.0%, to $3,078 for the fiscal year ended September 30, 2008 from
$2,424 for the fiscal year ended September 30, 2007. The addition of the Kansas distribution center 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 Securos, Tri V and AAHA MARKETLink.

Other Income/Expenses.Other income increased $176, or 46.3%, to $556 for the fiscal year ended September 30, 2008 from $380 for the fiscal year ended
September 30, 2007. The increase in other income was primarily due to a reduction in interest expense of $280 in the fiscal year ended September 30, 2008 as compared to the same period
in the prior year. This was a result of the issuance of additional shares of common stock in April 2007, the proceeds of which were partially used to pay down borrowings on our revolving credit
facility. This resulted in less outstanding during fiscal year

38

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Table of Contents

2008
against the revolving credit facility as compared to fiscal year 2007. Additionally, for most of fiscal year 2008, interest rates were lower which also resulted in lower interest expense.

Income Tax Expense.Our effective tax rate was 39.5% for the fiscal year ended September 30, 2008 and 37.7% for the fiscal year ended September 30,
2007. The increase in the effective tax rate for the year ended September 30, 2008 as compared to the year ended September 30, 2007 was primarily attributable to the change in our
estimates related to state taxes as a result of our adoption of FIN 48.

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

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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 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 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 distribution center 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 borrowings on our revolving 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.

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

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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.

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 (unaudited)Dec. 31, 2006

Mar. 31, 2007

Jun. 30, 2007

Sept. 30, 2007

Dec. 31, 2007

Mar. 31, 2008

Jun. 30, 2008

Sept. 30, 2008(In thousands, except per share amounts)(1)Revenues:Product sales

$
149,787

$
163,311

$
173,548

$
177,705

$
189,303

$
182,461

$
196,325

$
210,864Product sales to related party


9,559


8,867


7,750


9,946


11,117


8,922


8,689


10,724Commissions


1,699


2,875


2,555


2,503


2,941


3,577


3,263


3,178Total revenues


161,045


175,053


183,853


190,154


203,361


194,960


208,277


224,766Cost of product sales


135,296


150,631


158,391


163,438


173,576


166,692


177,970


193,574Gross profit


25,749


24,422


25,462


26,716


29,785


28,268


30,307


31,192Selling, general and administrative expenses


17,694


17,806


18,302


19,413


21,303


20,410


20,802


21,608Depreciation and amortization


569


602


603


650


747


746


757


828Operating income


7,486


6,014


6,557


6,653


7,735


7,112


8,748


8,756Other income (expense):Interest expense


(269
)

(160
)

(76
)

(40
)

(51
)

(114
)

(53
)

(47
)Earnings of equity method investees


45


42


35


47


51


41


37


50Other


90


101


243


322


235


117


115


175Total other income (expense)


(134
)

(17
)

202


329


235


44


99


178Income before taxes


7,352


5,997


6,759


6,982


7,970


7,156


8,847


8,934Income tax expense


(2,748
)

(2,309
)

(2,499
)

(2,659
)

(3,270
)

(2,778
)

(3,429
)

(3,513
)Net income

$
4,604

$
3,688

$
4,260

$
4,323

$
4,700

$
4,378

$
5,418

$
5,421Earnings per common share:Basic

$
0.40

$
0.32

$
0.36

$
0.36

$
0.39

$
0.36

$
0.45

$
0.45Diluted

$
0.39

$
0.31

$
0.35

$
0.35

$
0.38

$
0.36

$
0.44

$
0.44


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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, including our ability to borrow funds from our revolving credit facility, will be sufficient to meet our anticipated cash needs for
at least the next twelve months. Bank of America, N.A. and Wells Fargo, N.A. are the lenders for the revolving credit facility. The revolving credit facility allows for borrowings in the aggregate of
$70,000, with the right to request an increase in the commitment 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 plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). 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, 2008 was $0.

Our
lenders may have suffered losses related to their lending and other financial relationships, especially because of the general weakening of the national economy and increased
financial instability of many borrowers. As a result, the lenders may become insolvent or tighten their lending standards, which could make it more difficult for us to borrow under our revolving
credit facility or to obtain
other financing on favorable terms or at all. Our financial condition and results of operations would be adversely affected if we were unable to draw funds under our revolving credit facility because
of a lender default or to obtain other cost-effective financing.

In
the fourth quarter of fiscal year 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 the net proceeds of $27,341 received from this offering to pay down borrowings on our revolving credit facility.

In
the third quarter of fiscal year 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, 2008, cash provided by operating activities was $10,622, and was primarily attributable to net
income of $19,917 and an increase in accounts payable and accrued expenses of $23,163. This amount was partially offset by an increase in receivables of $11,180 and inventories of $23,543. 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. We provide financing
terms to our customers that we believe are customary for our industry. There are occasions when we offer extended terms based on market conditions and customer demand. Our inventory levels increase as
our sales increase as we keep much of the inventory in stock. Additionally, we opened a new distribution center in Edwardsville, Kansas and we increased our inventory levels at that facility during
the year. We also increased our inventory to accommodate the growth in sales to AAHA MARKETLink customers. Our accounts payable is primarily used to offset the increases in inventory.

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

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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.

Investing Activities.For fiscal year ended September 30, 2008, net cash used in investing activities was $16,198. Significant transactions impacting cash
used in investing activities include the acquisition of substantially all of the assets of AAHA MARKETLink for $8,676, net of cash received of $1,320, the acquisition of substantially all of the
assets of Tri V for $4,606 and capital expenditures of $3,246 primarily related to the relocation of our distribution center in Dallas, Texas and expansion and improvements made to our existing
distribution centers. Additionally, we continue to improve our information technology infrastructure and had multiple projects related to improving our technology.

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 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 atwww.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.

Financing Activities.For fiscal year ended September 30, 2008, net cash provided by financing activities was $396, and was primarily attributable to the
proceeds of $218 from stock option exercises. We also had a tax benefit from the stock option exercises of $216.

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.

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Table of Contents

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.

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 plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). 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, 2008 was $0.

From
time to time we issue letters of credit to act as guarantee of payment to specified third parties. We had four letters of credit totaling $400 at September 30, 2008 and
eleven letters of credit totaling $940 at September 30, 2007. There were no outstanding borrowings on these letters of credit at September 30, 2008 or 2007.

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, 2008, we owed $194
on this note payable.

Off Balance Sheet Arrangements

At September 30, 2008, 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.

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Contractual Obligations

Contractual Obligations

Our contractual obligations at September 30, 2008 mature as follows (in thousands):

Payments Due by PeriodTotal

1 Year or less

2-3 Years

4-5 Years

More than 5 YearsLine-of-credit(1)

$


$


$


$


$
Operating lease commitments(2)


15,518


2,958


5,204


3,736


3,620Long-term debt obligations (including current portion)


194


97


97





Interest on long-term debt and line-of-credit(3)


284


94


175


15


Other long-term obligations(4)


1,295


916


377


2


Total contractual obligations

$
17,291

$
4,065

$
5,853

$
3,753

$
3,620


---

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 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. We are not aware of any material liabilities arising from these indemnification arrangements.

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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
manage 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 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

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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. The incentives are recognized as a reduction of product sales.

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:



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 2008 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.

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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.

Recently Issued and New Accounting Pronouncements

On October 1, 2007, we adopted the provisions of FASB 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. The adoption of FIN 48 as of October 1, 2007, resulted in a cumulative effect adjustment of $257 which reduced our retained earnings. See
Note 10 "Income Taxes" in the Notes to the Financial Statements.

In
September 2006, the FASB issued Statement of Financial Accounting Standards ("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 market participants would use to price the asset or liability. SFAS 157 is
effective for financial assets for our fiscal year beginning October 1, 2008. FASB Staff Position 157-2 ("FSP 157-2") delayed the implementation of SFAS 157 for
nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 is effective
for nonfinancial assets
and liabilities for our fiscal year beginning October 1, 2009. The adoption of this statement is not expected to have a material impact 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. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (Revised),Business Combinations("SFAS 141-R").
SFAS 141-R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the
purchase accounting. It changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at
fair value and requires the expensing of acquisition-related costs as incurred, among other items. The statement will apply prospectively to any business combinations occurring in our fiscal year
beginning October 1, 2009.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
51("SFAS 160"). This statement amends Accounting Research Bulletin No. 51,Consolidated Financial Statements, to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Noncontrolling interests shall be reclassified to equity,
consolidated net income shall be adjusted to include net income attributable to noncontrolling interests and consolidated comprehensive income

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shall
be adjusted to include comprehensive income attributable to the noncontrolling interests. SFAS 160 is effective for our fiscal year beginning October 1, 2009. We are currently
evaluating the expected impact, if any, that SFAS 160 will have on our consolidated financial statements.

In
April 2008, the FASB issued FASB Staff Position FAS 142-3 ("FSP 142-3"), which amends the list of factors an entity should consider in determining the
useful life of recognized intangible assets under FASB Statement 142. FSP 142-3 is effective for our fiscal year beginning October 1, 2009. We are currently evaluating the expected
impact, if any, that FSP 142-3 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, the LIBOR 1-month fixed rate plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). 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, 2008 was $0.

From
time to time we issue letters of credit to act as guarantee of payment to specified third parties. We had four letters of credit totaling $400 at September 30, 2008 and
eleven letters of credit totaling $940 at September 30, 2007. There were no outstanding borrowings on these letters of credit at September 30, 2008 or 2007.

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, 2008, we owed $194 on this note payable.

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 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, 2008 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, 2008, which was 5.0% (Prime Rate), would have changed interest by $350. Since September 30, 2008, the Daily LIBOR
Floating Rate has decreased and this would be the preferred rate based on current conditions. As of November 14, 2008, the Daily LIBOR Floating Rate was .4125%. Our rate as of this date was
1.1125%, including the 0.7% margin per our credit facility. Assuming that the maximum available amount on the facility was outstanding at this rate, a change of 10% from this interest rate would have
changed interest by $78.

49

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Table of Contents

Item 8.    Financial Statements and Supplementary Data.

MWI Veterinary Supply, Inc.
Index to Consolidated Financial Statements



Page
NumberReport of Independent Registered Public Accounting Firm


51Consolidated Statements of Income for the years ended September 30, 2008,
2007 and 2006


52Consolidated Balance Sheets as of September 30, 2008 and
2007


53Consolidated Statements of Stockholders' Equity for the years ended
September 30, 2008, 2007 and 2006


54Consolidated Statements of Cash Flows for the years ended September 30,
2008, 2007 and 2006


55Notes to Consolidated Financial Statements


56


50

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Table of Contents

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, 2008 and 2007, and the
related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2008. 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 financial statements and 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 the Company as of September 30, 2008 and 2007, and the
results of its operations and its cash flows for each of the three years in the period ended September 30, 2008, 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.

As
discussed in Note 2, the Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty
in Income Taxesan interpretation of FASB Statement No. 109, effective October 1, 2007.

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, 2008, based on the criteria established inInternal ControlIntegrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission and our report dated November 21, 2008, expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/
DELOITTE & TOUCHE LLP
Boise, Idaho
November 21, 2008

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Table of Contents

MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF INCOME        For the Years Ended September 30, 2008, 2007 and 2006        Dollars
and shares in thousands, except per share amounts

2008

2007

2006Revenues:Product sales

$
778,953

$
664,351

$
564,289Product sales to related party


39,452


36,122


34,123Commissions


12,959


9,632


7,782Total revenues


831,364


710,105


606,194Cost of product sales


711,812


607,756


518,068Gross profit


119,552


102,349


88,126Selling, general and administrative expenses


84,123


73,215


62,470Depreciation and amortization


3,078


2,424


1,964Operating income


32,351


26,710


23,692Other income (expense):Interest expense


(265
)

(545
)

(1,959
)Earnings of equity method investees


179


169


161Other


642


756


338Total other income (expense), net


556


380


(1,460
)Income before taxes


32,907


27,090


22,232Income tax expense


(12,990
)

(10,215
)

(8,396
)Net income

$
19,917

$
16,875

$
13,836Earnings per common share:Basic

$
1.65

$
1.43

$
1.28Diluted

$
1.62

$
1.40

$
1.25Weighted average common shares outstanding:Basic


12,053


11,764


10,773Diluted


12,301


12,044


11,072


See
notes to consolidated financial statements

52

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Table of Contents

MWI VETERINARY SUPPLY, INC.        CONSOLIDATED BALANCE SHEETS        As of September 30, 2008 and 2007        Dollars and shares in thousands,
except per share amounts

2008

2007AssetsCurrent Assets:Cash and cash equivalents

$
3,419

$
8,599Receivables, net


128,564


111,676Inventories


118,403


94,623Prepaid expenses and other current assets


3,168


2,362Deferred income taxes


809


518Total current assets


254,363


217,778Property and equipment, net


9,687


9,206Goodwill


37,727


32,964Intangibles, net


10,945


5,014Other assets, net


2,083


2,232Total assets

$
314,805

$
267,194Liabilities And Stockholders' EquityCurrent Liabilities:Line-of-credit

$


$
Accounts payable


123,003


98,724Accrued expenses


9,854


7,693Current maturities of long-term debt


97


97Total current liabilities


132,954


106,514Deferred income taxes


751


474Long-term debt


97


195Commitments and contingenciesStockholders' EquityCommon stock $0.01 par value, 40,000 authorized; 12,098 and 12,024 shares issued and outstanding, respectively


121


120Additional paid in capital


122,319


120,988Retained earnings


58,563


38,903Total stockholders' equity


181,003


160,011Total liabilities and stockholders' equity

$
314,805

$
267,194


See
notes to consolidated financial statements

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Table of Contents

MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY        For the Years Ended September 30, 2008, 2007 and 2006        Dollars and shares in thousands

Shares of Common Stock

Common Stock

Additional Paid In Capital

Retained Earnings

TotalBalance at October 1, 2005


10,576

$
106

$
78,396

$
8,192

$
86,694Net income











13,836


13,836Issuance of common stock, net of issuance costs of $1,969


909


9


27,332





27,341Issuance of restricted stock for purchase of Northland


29





995





995Exercises of common stock options


31





597





597Tax benefit of common stock exercises








148





148Other


4





15





15Balance at September 30, 2006


11,549


115


107,483


22,028


129,626Net income











16,875


16,875Issuance of common stock, net of issuance costs of $383


349


4


11,248





11,252Issuance of restricted stock for purchase of Securos


13





486





486Exercises of common stock options


98


1


337





338Tax benefit of common stock exercises








1,122





1,122Issuance of stock awards


15





312





312Balance at September 30, 2007


12,024


120


120,988


38,903


160,011Net income











19,917


19,917FIN 48 adoption adjustment











(257
)

(257
)Issuance of common stock


2





59





59Issuance of restricted stock for purchase of Tri V


13





505





505Exercises of common stock options


19





218





218Tax benefit of common stock exercises








216





216Issuance of stock awards


40


1


333





334Balance at September 30, 2008


12,098

$
121

$
122,319

$
58,563

$
181,003


See
notes to consolidated financial statements

54

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Table of Contents

MWI VETERINARY SUPPLY, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        For the Years Ended September 30, 2008, 2007 and 2006    
Dollars in thousands

2008

2007

2006Cash Flows From Operating Activities:Net income

$
19,917

$
16,875

$
13,836Adjustments to reconcile net income to net cash provided by/(used in) operating activities:Depreciation and amortization


3,089


2,435


1,973Amortization of debt issuance costs


43


63


140Stock-based compensation


334


312


Deferred income taxes


(14
)

(47
)

(165
)Earnings of equity method investees


(179
)

(169
)

(161
)Tax benefit of common stock options


(216
)

(1,122
)

(148
)Loss/(gain) on disposal of property and equipment


2


18


(51
)Other





(9
)

5Changes in operating assets and liabilities (net of effects of business acquisitions):Receivables


(11,180
)

(11,797
)

(21,022
)Inventories


(23,543
)

(8,795
)

(15,114
)Prepaid expenses and other current assets


(794
)

304


(639
)Accounts payable


22,203


15,654


12,839Accrued expenses


960


1,657


756Net cash provided by/(used in) operating activities


10,622


15,379


(7,751
)Cash Flows From Investing Activities:Business acquisitions, net of cash received of $1,320


(13,224
)

(4,661
)

(3,551
)Purchases of property and equipment


(3,246
)

(3,872
)

(3,663
)Sale of property and equipment








1,455Other


272


(216
)

(306
)Net cash used in investing activities


(16,198
)

(8,749
)

(6,065
)Cash Flows From Financing Activities:Issuance of common stock, net of issuance costs


59


11,252


27,341Proceeds from stock options


218


338


597Tax benefit of common stock options


216


1,122


148Payment on debt


(97
)

(97
)

(133
)Net payments on line-of-credit





(10,559
)

(14,131
)Debt issuance costs





(124
)

Net cash provided by financing activities


396


1,932


13,822Net (Decrease)/Increase in Cash and Cash Equivalents


(5,180
)

8,562


6Cash and Cash Equivalents at Beginning of Period


8,599


37


31Cash and Cash Equivalents at End of Period

$
3,419

$
8,599

$
37


See notes to consolidated financial statements

55

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Table of Contents

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 operate thirteen distribution centers located in the Western United States, Texas, Kansas, Michigan, Georgia, Pennsylvania, Wisconsin, and Florida. 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 primarily
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" transactions as product sales when the product is delivered to the customer. We accept product returns

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

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 $245,045, $194,351 and $151,376 for the years ended September 30, 2008,
2007 and 2006, respectively, and generated commission revenue of $12,959, $9,632 and $7,782 for the years ended September 30, 2008, 2007 and 2006, 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. Incentives are recognized as a reduction to product sales.

Cash and Cash EquivalentsCash equivalents consist primarily of highly liquid investments with a maturity of three months or less from the date of purchase. Our
banking arrangements allow us to fund outstanding checks when presented to the financial institution for payment. At September 30, 2008 and 2007, we had net cash book overdrafts of $0
classified in accounts payable.

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

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:

Machinery, 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, 2008 and 2007.

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, 2008 or 2007. 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 or contractual term which range from 1-20 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 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.

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

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 2008, 2007 and 2006. Product sales to another customer, a related party (See Note 13), were
approximately 5% of our total product sales in the fiscal years 2008 and 2007, and 6% of our total product sales in the fiscal year 2006.

AdvertisingAdvertising costs are expensed when incurred and are included as part of selling, general and administrative expenses. Advertising costs were $563, $392
and $257 in fiscal years 2008, 2007 and 2006, respectively.

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.

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. Therefore, we have recognized no compensation expense for stock-based option awards in the fiscal years ended September 30, 2008, 2007 and 2006.

We
granted no common stock options under either plan during our fiscal years ended September 30, 2008, 2007 and 2006.

Recently Issued and New Accounting PronouncementsOn October 1, 2007, we adopted the provisions of Financial Accounting Standards Board ("FASB")
Interpretation No. 48,Accounting for Uncertainty in Income Taxes("FIN 48"). See Note 10 "Income Taxes".

In
September 2006, the FASB issued Statement of Financial Accounting Standards ("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

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

2. Summary of Significant Accounting Policies (Continued)

determined
based on assumptions market participants would use to price the asset or liability. SFAS 157 is effective for financial assets for our fiscal year beginning October 1, 2008.
FASB Staff Position 157-2 ("FSP 157-2") delayed the implementation of SFAS 157 for nonfinancial assets and liabilities, except for items that are recognized or disclosed
at fair value in the financial statements on a recurring basis (at least annually). SFAS 157 is effective for nonfinancial assets and liabilities for our fiscal year beginning October 1,
2009. The adoption of this statement is not expected to have a material impact 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. The adoption of this statement is not expected to have a material impact on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (Revised),Business Combinations("SFAS 141-R").
SFAS 141-R retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the
purchase accounting. It changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at
fair value and requires the expensing of acquisition-related costs as incurred, among other items. The statement will apply prospectively to any business combinations occurring in our fiscal year
beginning October 1, 2009.

In
December 2007, the FASB issued SFAS No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB
51("SFAS 160"). This statement amends Accounting Research Bulletin No. 51,Consolidated Financial Statements, to
establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Noncontrolling interests shall be reclassified to equity,
consolidated net income shall be adjusted to include net income attributable to noncontrolling interests and consolidated comprehensive income shall be adjusted to include comprehensive income
attributable to the noncontrolling interests. SFAS 160 is effective for our fiscal year beginning October 1, 2009. The adoption of this statement is not expected to have a material
impact on our consolidated financial statements.

In
April 2008, the FASB issued FASB Staff Position FAS 142-3 ("FSP 142-3"), which amends the list of factors an entity should consider in determining the
useful life of recognized intangible assets under FASB Statement 142. FSP 142-3 is effective for our fiscal year beginning October 1, 2009. We are currently evaluating the expected
impact, if any, that FSP 142-3 will have on our consolidated financial statements.

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

3. Business Acquisitions

In June 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. The
purchase price was reduced by $50 as a result of a post closing working capital adjustment. 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 Services, Inc. ("Tri V") for approximately $5,111, consisting of $4,606 in cash (including direct acquisition
costs of approximately $106) and 12,692 shares of restricted common stock valued at the time of the issuance at approximately $505. The purchase price was reduced by $8 as a result of a post closing
working capital adjustment. 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.

In
July 2008, we acquired substantially all of the assets of AAHA Services Corporation, operating as AAHA MARKETLink ("AAHA MARKETLink") for approximately $8,676, net of cash acquired of
$1,320 (including direct acquisition costs of approximately $212). Based near Denver, Colorado, AAHA MARKETLink was a distributor of animal health products to members of the American Animal Hospital
Association.

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

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MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

3. Business Acquisitions (Continued)

valuations
and internal analyses. The impact of our acquisitions was not material to our consolidated financial statements.

2008

2007Receivables

$
5,705

$
352Inventories


237


746Property and equipment


5


286Intangibles


6,569


2,947Goodwill


4,763


1,403Other assets


12


39Total assets acquired


17,291


5,773Accounts payable


3,562


611Other liabilities





15Total liabilities assumed


3,562


626Net assets acquired

$
13,729

$
5,147


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:

2008

2007Trade

$
118,227

$
100,422Vendor rebates and programs


11,200


11,725Interest


1


61Related party


14


342129,442


112,550Allowance for doubtful accounts


(878
)

(874
)$
128,564

$
111,676


Approximately
10% of our trade receivables resulted from transactions with a single customer as of September 30, 2008 and 2007.

62

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

5. Property and Equipment

Property and equipment consists of the following at September 30:

2008

2007Land

$
20

$
20Leasehold improvements


3,094


2,257Machinery, furniture and equipment


11,587


10,744Computer hardware and software


3,428


3,825Construction in progress


1,626


1,58619,755


18,432Accumulated depreciation and amortization


(10,068
)

(9,226
)$
9,687

$
9,206


We
recorded depreciation expense of $2,441, $2,110 and $1,744 for the years ended September 30, 2008, 2007 and 2006, respectively.

6. Intangibles

Intangible assets consists of the following at September 30:

Useful Lives

2008

2007Amortizing:Customer relationships

9-20 years

$
9,076

$
3,186Covenants not to compete

1-5 years


686


356Other

3-5 years


257


16810,019


3,710Accumulated amortization




(1,346
)

(698
)8,673


3,012Non-Amortizing:Trade names and patents




2,272


2,002$
10,945

$
5,014


63

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

6. Intangibles (Continued)

We
recorded amortization expense of $648, $325 and $229 for the years ended September 30, 2008, 2007 and 2006, respectively. Estimated amortization expense related to intangible
assets as of September 30, 2008 is as follows:

Amount2009

$
8292010


8032011


7862012


7602013


675Thereafter


4,820$
8,673


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 plus a margin ranging from 0.7% to 1.25% or the Prime Rate (at our option). 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, 2008 was $0.

The
line-of-credit contains certain financial covenants as well as other restrictive covenants. As of September 30, 2008, 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 four letters of credit totaling $400 at September 30, 2008 and eleven letters of credit totaling $940 at September 30, 2007. There were no
outstanding borrowings on these letters of credit at either September 30, 2008 or 2007.

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 (5.0% at September 30, 2008), 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 $194 and $292 at September 30, 2008 and 2007, respectively.

64

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

8. Common Stock and Stock-Based Awards

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, 2008 and 2007, we had 417,798 and 426,094 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 2008, no options were granted, 8,296 options were exercised and no options were 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, 2008 and 2007 we had 1,089,706 and 1,131,128 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 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.

65

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

8. Common Stock and Stock-Based Awards (Continued)

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

2008

2007

2006Number of
Shares

Weighted
average
exercise
price

Number of
Shares

Weighted
average
exercise
price

Number of
Shares

Weighted
average
exercise
priceOutstanding at beginning of year


441,502

$
3.27


540,895

$
3.32


580,335

$
4.37Granted

















Exercised


(19,618
)

11.11


(98,533
)

3.42


(31,600
)

18.88Cancelled or expired


(986
)

17.00


(860
)

17.00


(7,840
)

18.64Outstanding at end of year


420,898

$
2.87


441,502

$
3.27


540,895

$
3.32Exercisable at end of year


364,490

$
3.28


328,686

$
4.33


371,671

$
4.75Expected to vest


56,408

$
0.18


112,816

$
0.18


169,224

$
0.18


The
intrinsic value of the shares outstanding and exercisable as of September 30, 2008 was $13,124.

Outstanding options

Exercisable optionsRange of exercise prices

Number of
Shares

Weighted
average
remaining
contractual
life (in years)

Weighted
average
exercise
price

Number of
Shares

Weighted
average
exercise
price$  0.18 - $16.99


357,358


3.7

$
0.18


300,950

$
0.18$17.00 - $19.99


52,080


6.8

$
17.00


52,080

$
17.00$20.00 - $23.06


11,460


7.0

$
22.44


11,460

$
22.44


During
the fiscal years ended September 30, 2008 and 2007, we made stock grants of 40,100 and 15,000 shares, respectively.

2008 Employee Stock Purchase Plan

In February 2008, we approved the 2008 Employee Stock Purchase Plan (the "ESPP"). The plan allows substantially all employees to
purchase shares of our common stock at 95% of the fair market value on the date of purchase. The purchase date is the last trading date of the purchase period, which begins in March, June, September
and December. Employees accumulate amounts through payroll deductions during the purchase period of between 1% and 10% but no more than $20,000 annually. An employee is allowed to purchase a maximum
of 200 shares per purchase period. In August 2008, we issued 1,571 shares of our common stock under the ESPP.

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

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

2008

2007

2006Basic

Diluted

Basic

Diluted

Basic

DilutedNet income

$
19,917

$
19,917

$
16,875

$
16,875

$
13,836

$
13,836Weighted average common shares outstanding


12,053


12,053


11,764


11,764


10,773


10,773Effect of diluted securities Stock options and restricted stock





248





280





299Weighted average shares outstanding





12,301





12,044





11,072Earnings per share

$
1.65

$
1.62

$
1.43

$
1.40

$
1.28

$
1.25Anti-dilutive shares excluded from calculation




















10. Income Taxes

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

2008

2007

2006Current payable:U.S. Federal

$
10,752

$
9,367

$
7,726State


1,964


895


83512,716


10,262


8,561Deferred:U.S. Federal


236


(42
)

(139
)State


38


(5
)

(26
)274


(47
)

(165
)$
12,990

$
10,215

$
8,396


67

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

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

2008

2007Deferred tax assets:Investments

$
144

$
144Allowance for doubtful accounts


339


329Inventories


341


278Revenue recognition


185


83Lease expense


183


153Federal benefit of state taxes


56


Other


93


81Total deferred tax assets


1,341


1,068Deferred tax liabilities:Property and equipment


(895
)

(618
)Prepaid expenses


(269
)

(359
)Other


(119
)

(47
)Total deferred tax liabilities


(1,283
)

(1,024
)Net deferred tax assets

$
58

$
44


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:

2008

2007

2006Taxes computed at statutory rate


35.0
%

35.0
%

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


3.8


2.0


2.0Other


0.7


0.7


0.839.5
%

37.7
%

37.8
%


The
increase in the effective tax rate for the year ended September 30, 2008 as compared to the year ended September 30, 2007 was primarily attributable to the change in
our estimates related to state taxes as a result of our adoption of FIN 48.

In
2006, the FASB issued FIN 48, which clarifies the accounting for uncertainty in tax positions. FIN 48 requires that management evaluate its tax positions for all open
tax years to determine if the position is more likely than not to be sustained upon examination by taxing authorities having full

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

knowledge
of all relevant information. We adopted the provisions of FIN 48 as of October 1, 2007, the beginning of our 2008 fiscal year. As a result of the adoption of FIN 48, we
reported a cumulative effect adjustment of $257 which reduced our retained earnings.

On
October 1, 2007, we had $449 of unrecognized tax benefits, of which $292 would impact our effective rate, if recognized. Our policy for classifying interest and penalties
associated with unrecognized tax benefits is to include such items in income tax expense. As of the date of adoption, gross interest and penalties associated with unrecognized tax benefits were $122
and $38, respectively.

A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Unrecognized tax benefitsOctober 1, 2007

$
449Gross increases related to prior period tax positions


Gross decreases related to prior period tax positions


(8
)Gross increases related to current period tax positions


185Settlements


(103
)Unrecognized tax benefitsSeptember 30, 2008

$
523


For
the year ended September 30, 2008 our income tax expense included $40 of tax-related interest and penalties. Of the $523 unrecognized tax benefits ending balance,
$220 would impact our effective rate, if recognized.

We
file income tax returns in the U.S. federal jurisdiction and other various state and local jurisdictions. A number of years may elapse before an uncertain tax position is audited and
finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, we believe that our liability for uncertain tax
benefits reflects the most probable outcome. We adjust the liability, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position would usually
require the use of cash. The resolution of a matter would be recognized as an adjustment to our income tax expense and our effective tax rate in the period of resolution. We have begun the process to
enter into voluntary disclosure agreements with certain state jurisdictions and it is reasonably possible that these will be settled within the next twelve months, which would decrease the liability
for uncertain tax benefits by approximately $338 as a result of the payment of additional tax expected to be due. The gross increases in the current period relates to a Form 3115 Application
for Change in Accounting Method filed with the Internal Revenue Service. We filed an advance consent request for a non-automatic account method change for tax purposes for which we had not
received approval prior to our reporting period end. The method change will make revenue recognition for tax purposes the same as revenue recognized for book purposes. We expect resolution within the
next twelve months which would decrease the liability for uncertain tax benefits by approximately $185. With few exceptions, we are no

69

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

10. Income Taxes (Continued)

longer
subject to income tax examination for years before 2003 in the U.S. and significant state and local jurisdictions.

11. Statements of Cash FlowsSupplemental and Noncash Disclosures

2008

2007

2006Supplemental DisclosuresCash paid for interest

$
189

$
531

$
1,785Cash paid for income taxes


12,865


8,842


9,138Noncash ActivitiesIssuance of restricted common stock for asset acquisition


505


486


995Equipment acquisitions financed with accounts payable


580


254


132


12. 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, 2008, 2007 and 2006 were
$3,629, $3,048 and $2,377, respectively.

The
aggregate future noncancelable minimum rental payments on operating leases at September 30, 2008 are as follows:

2009

$
2,9582010


2,8292011


2,3752012


2,1292013


1,607Thereafter


3,620$
15,518


13. 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 $39,443, $36,116 and $34,121 in 2008, 2007 and 2006, respectively. MWI Co. charged Feeders' Advantage for certain operating and administrative services of
$562, $550

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

13. Related Party Transactions (Continued)

and
$591 in 2008, 2007 and 2006, 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.

14. 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 $911, $794 and $633 in 2008, 2007 and 2006, 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 2008, 2007 and 2006
were $956, $817 and $677, respectively. Employer contributions are fully vested immediately.

15. 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. 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 based on their short-term nature.

71

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Table of Contents

MWI VETERINARY SUPPLY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

Dollars in thousands, except share and per share data

16. Quarterly Financial Data (Unaudited)

Three-Months EndedDec. 31,

Mar. 31,

June 30,

Sept. 30,

Year(Dollars and shares in thousands, except per share data)(1)2008Total revenues

$
203,361

$
194,960

$
208,277

$
224,766

$
831,364Gross profit


29,785


28,268


30,307


31,192


119,552Operating income


7,735


7,112


8,748


8,756


32,351Net income


4,700


4,378


5,418


5,421


19,917Earnings per common sharebasic

$
0.39

$
0.36

$
0.45

$
0.45

$
1.65Earnings per common sharediluted

$
0.38

$
0.36

$
0.44

$
0.44

$
1.62Weighted average common shares outstanding used in the basic earnings per share calculation


12,046


12,050


12,051


12,063


12,053Weighted average common shares outstanding used in the diluted earnings per share calculation


12,296


12,298


12,298


12,311


12,3012007Total revenues

$
161,045

$
175,053

$
183,853

$
190,154

$
710,105Gross profit


25,749


24,422


25,462


26,716


102,349Operating income


7,486


6,014


6,557


6,653


26,710Net income


4,604


3,688


4,260


4,323


16,875Earnings per common sharebasic

$
0.40

$
0.32

$
0.36

$
0.36

$
1.43Earnings per common sharediluted

$
0.39

$
0.31

$
0.35

$
0.35

$
1.40Weighted average common shares outstanding used in the basic earnings per share calculation


11,559


11,566


11,904


12,020


11,764Weighted average common shares outstanding used in the diluted earnings per share calculation


11,860


11,863


12,168


12,276


12,044


---

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Table of Contents

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, 2008. 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, 2008. 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, 2008, we maintained effective internal control over financial reporting.

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.

73

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Table of Contents

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, 2008, based on criteria
established inInternal ControlIntegrated Frameworkissued 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 accounting principles generally accepted in the United States of America ("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, 2008, based on the criteria established
inInternal Control

74

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Table of Contents

Integrated Frameworkissued 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, 2008, of the Company, and our report dated November 21, 2008 expressed an unqualified opinion on those consolidated
financial statements and consolidated financial statement schedule and included an explanatory paragraph regarding the
Company's adoption of Financial Accounting Standards Board Interpretation No. 48,Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement 109.

/s/
DELOITTE & TOUCHE LLP
Boise, Idaho
November 21, 2008

75

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Table of Contents

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 2009 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, 2008. 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.

Equity Compensation Plan Information

The following table provides information as of September 30, 2008 about the common stock that may be issued under all of our
existing equity compensation plans, including the 2002 Stock Plan and

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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


420,898

$
2.87


1,086,606Equity compensation plans not approved by security holders








Total


420,898

$
2.87


1,086,606


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.

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.

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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 PeriodAllowance for Doubtful AccountsYear ended September 30, 2006

$
1,181

$
214

$
(241
)
$
1,154Year ended September 30, 2007


1,154


208


(488
)

874Year ended September 30, 2008


874


454


(450
)

878


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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:

/s/ MARY PATRICIA B. THOMPSON Mary Patricia B. Thompson (Senior Vice President of Finance and Administration, Chief Financial Officer)Date: November 21, 2008


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, 2008.

/s/ JAMES F. CLEARY, JR. James F. Cleary, Jr.
Director, President and
Chief Executive Officer
(Principal Executive Officer)

/s/ MARY PATRICIA B. THOMPSON Mary Patricia B. Thompson
Senior Vice President of Finance and
Administration, Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)/s/ KEITH E. ALESSI Keith E. Alessi (Director)

/s/ BRUCE C. BRUCKMANN Bruce C. Bruckmann (Director)/s/ JOHN F. MCNAMARA John F. McNamara (Director)

/s/ A. CRAIG OLSON A. Craig Olson (Director)/s/ ROBERT N. REBHOLTZ Robert N. Rebholtz (Director)

/s/ WILLIAM J. ROBISON William J. Robison (Director)


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Table of Contents

Index to Exhibits

Filed with the Annual Report
on Form 10-K for the
Year Ended September 30, 2008

Number

Description2.1

Asset Purchase Agreement among MWI Veterinary Supply Co., AAHA Services Corporation and American Animal Hospital Association effective July 1, 20083.1

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).*


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Table of Contents

Number

Description4.9

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).*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

First Amendment to 2007 - 2008 Merial Independent Sales Agent Agreement effective as of January 1, 2008 by and between Merial Limited and MWI Veterinary Supply Co., incorporated herein by reference to
Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q, filed May 1, 2008.10.7

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.


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Number

Description10.8

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.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 22, 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 May 1, 2008.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.10.13

MWI Veterinary Supply, Inc. 2008 Employee Stock Purchase Plan, incorporated herein by reference to Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q, filed May 1, 2008.10.14

License Agreement dated and effective July 1, 2008 between MWI Veterinary Supply Co. and American Animal Hospital Association.10.15

Sponsorship Letter Agreement dated June 30, 2008 between American Animal Hospital Association and MWI Veterinary Supply Co.10.16

Companion Animal AAHA MARKETLink Management Agreement dated and effective as of July 1, 2008 between Pfizer, Inc. and MWI Veterinary Supply Co.21.1

Subsidiaries of MWI Veterinary Supply, Inc.23

Consent of Deloitte & Touche LLP31.1

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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