**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

 

----

 

**FORM 10-Q**

 

----

 

**Quarterly Report Pursuant to Section 13or 15(d)of the Securities Exchange Act of 1934**

 
| **For the Quarter Ended: June 30, 2005** | ** ** | **Commission  File Number: 000-51468** |
|-----------------------------------------------|------------|----------------------------------------|

 

**MWI Veterinary Supply, Inc.**

(Exact name of Registrant as specified in its charter)

 
| **Delaware**                                             | ** ** | **02-0620757**                       |
|----------------------------------------------------------|------------|--------------------------------------|
| (State or other jurisdiction of                          |       | (I.R.S. Employer Identification No.) |
| incorporation or organization)                           |       |                                 |
|                                                     |       |                                 |
| **651 S. Stratford Drive, Suite 100 Meridian,  ID** | ** ** | **83642**                            |
| (Address of principal executive offices)                 |       | (Zip Code)                           |

 

**(800) 824-3703**

(Registrant’s telephone number, including area code)

 

Indicateby check mark whether the Registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theRegistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days. Yes  o    No  ý

 

Indicateby check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2of the Exchange Act). Yes  o    No  ý

 

Thenumber of shares of the registrant’s common stock, $0.01 par value, outstandingat August 11, 2005 was 10,538,280.

 

 

----

 

**MWI VETERINARY SUPPLY, INC.**

**INDEX**

 
| **PART I.** | **FINANCIAL INFORMATION**                                                                       | ** **                                                                                                                  |
|------------------|-------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
|             |                                                                                            |                                                                                                                        |
| **Item 1.**      | **Financial Statements (Unaudited)**                                                            |                                                                                                                        |
|             |                                                                                            | Condensed Consolidated  Statements of Income for the three and nine-months ended June 30, 2005  and 2004               |   |
|             |                                                                                            |                                                                                                                        |   |
|             |                                                                                            | Condensed Consolidated  Statements of Comprehensive Income for the three and nine-months ended June 30,  2005 and 2004 |   |
|             |                                                                                            |                                                                                                                        |   |
|             |                                                                                            | Condensed Consolidated  Balance Sheets as of June 30, 2005 and September 30, 2004                                 |   |
|             |                                                                                            |                                                                                                                        |   |
|             |                                                                                            | Condensed Consolidated  Statements of Cash Flows for the nine-months ended June 30, 2005 and  2004                     |   |
|             |                                                                                            |                                                                                                                        |   |
|             |                                                                                            | Notes to Condensed  Consolidated Financial Statements                                                                       |   |
|             |                                                                                            |                                                                                                                        |   |
|             |                                                                                            | Report of Independent  Registered Public Accounting Firm                                                                    |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 2.**      | **Management’s Discussion and  Analysis of Financial Condition and Results of Operations** |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 3.**      | **Quantitative and Qualitative  Disclosures About Market Risk**                                 |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 4.**      | **Controls and Procedures**                                                                     |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **PART II** | **OTHER INFORMATION**                                                                           |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| ** **       | **Cautionary Statement**                                                                        | ** **                                                                                                                  |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 1.**      | **Legal Proceedings**                                                                           |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 2.**      | **Unregistered Sales of Equity  Securities and Use of Proceeds**                                |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 3.**      | **Defaults Upon Senior  Securities**                                                            |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 4.**      | **Submission of Matters to a  Vote of Security Holders**                                        |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 5.**      | **Other Information**                                                                           |                                                                                                                        |   |
|             |                                                                                            |                                                                                                                        |   |
| **Item 6.**      | **Exhibits**                                                                                    |                                                                                                                        |   |
|                  |                                                                                                 |                                                                                                                             |  |  |

 

2

----

 

**PART I. FINANCIALINFORMATION**

 

**Item 1.****    FinancialStatements**

 

**MWI VETERINARY SUPPLY, INC.**

# **CONDENSED CONSOLIDATED STATEMENTS OF INCOME**

**(in thousands, except per share data)(unaudited)**

 
| ** **                                   | ** ** | **Three-months ended June 30,** | ** ** | **Nine-months ended June 30,** | ** ** |
|----------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                   | ** ** | **2005**                             | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Revenues:                                    |       |                                 |       |                                |       |   |   |   |   |
| Product sales                                |       | $                                    | 130,377    |                                | $          | 99,674 |   | $ | 340,525 |   | $ | 271,145 |   |
| Product sales to related party               |       | 6,433                                |       | 5,236                               |       | 19,380 |   | 16,118 |   |
| Commissions                                  |       | 1,177                                |       | 1,276                               |       | 3,486 |   | 3,140 |   |
| Total revenues                               |       | 137,987                              |       | 106,186                             |       | 363,391 |   | 290,403 |   |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Cost of product sales                        |       | 119,955                              |       | 91,981                              |       | 312,263 |   | 248,841 |   |
| Gross profit                                 |       | 18,032                               |       | 14,205                              |       | 51,128 |   | 41,562 |   |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Selling, general and administrative expenses |       | 13,217                               |       | 10,575                              |       | 37,036 |   | 30,886 |   |
| Depreciation and amortization                |       | 393                                  |       | 306                                 |       | 1,120 |   | 829 |   |
| Operating income                             |       | 4,422                                |       | 3,324                               |       | 12,972 |   | 9,847 |   |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Other income (expense):                      |       |                                 |       |                                |       |   |   |   |   |
| Interest expense                             |       | (1,849                               | )          | (1,485                              | )          | (5,394 | ) | (4,419 | ) |
| Earnings on equity method investees          |       | 30                                   |       | 24                                  |       | 89 |   | 75 |   |
| Other                                        |       | 60                                   |       | 49                                  |       | 184 |   | 161 |   |
| Total other expense                          |       | (1,759                               | )          | (1,412                              | )          | (5,121 | ) | (4,183 | ) |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Income before taxes                          |       | 2,663                                |       | 1,912                               |       | 7,851 |   | 5,664 |   |
| Income tax expense                           |       | (1,256                               | )          | (1,195                              | )          | (4,193 | ) | (3,564 | ) |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Net income                                   |       | $                                    | 1,407      |                                | $          | 717 |   | $ | 3,658 |   | $ | 2,100 |   |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Income Per Common Share:                     |       |                                 |       |                                |       |   |   |   |   |
| Basic                                        |       | $                                    | 0.28       |                                | $          | 0.14 |   | $ | 0.72 |   | $ | 0.42 |   |
| Diluted                                      |       | $                                    | 0.24       |                                | $          | 0.12 |   | $ | 0.62 |   | $ | 0.36 |   |
|                                         |       |                                 |       |                                |       |   |   |   |   |
| Weighted Average Common Shares Outstanding:  |       |                                 |       |                                |       |   |   |   |   |
| Basic                                        |       | 5,063                                |       | 5,038                               |       | 5,062 |   | 5,038 |   |
| Diluted                                      |       | 5,876                                |       | 5,878                               |       | 5,878 |   | 5,878 |   |

 

See Notes to CondensedConsolidated Financial Statements

 

3

----

 

**MWI VETERINARY SUPPLY, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF COMPREHENSIVE INCOME**

**(in thousands)(unaudited)**

 
| ** **                                                                                | ** ** | **Three-months ended June 30,** | ** ** | **Nine-months ended June 30,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                | ** ** | **2005**                             | ** ** | **2004**                            | ** ** | **2005** | ** ** | **2004** | ** ** |
| Net income                                                                                |       | $                                    | 1,407      |                                | $          | 717 |   | $ | 3,658 |   | $ | 2,100 |   |
| Other comprehensive income (loss)                                                         |       |                                 |       |                                |       |   |   |   |   |
| Interest rate swap: Change in fair value, net of tax  of $5, $3, $11 and $6, respectively |       | (8                                   | )          | 5                                   |       | 19 |   | 10 |   |
| Total comprehensive income                                                                |       | $                                    | 1,399      |                                | $          | 722 |   | $ | 3,677 |   | $ | 2,110 |   |

 

See Notes to CondensedConsolidated Financial Statements

4

----

 

**MWI VETERINARY SUPPLY, INC.**

**CONDENSED CONSOLIDATED BALANCESHEETS**

**(dollars in thousands, except per share data)(unaudited)**

 
| ** **                                                                                    | ** ** | **June 30,** | ** ** | **September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                                                    | ** ** | **2005**          | ** ** | **2004**               | ** ** |
| **Assets**                                                                                    |       |              |       |                   |       |
|                                                                                          |       |              |       |                   |       |
| Current Assets:                                                                               |       |              |       |                   |       |
| Cash                                                                                          |       | $                 | 31         |                   | $          | 28 |   |
| Receivables, net                                                                              |       | 70,060            |       | 59,720                 |       |
| Inventories                                                                                   |       | 60,297            |       | 49,525                 |       |
| Prepaid expenses and other current assets                                                     |       | 3,428             |       | 1,196                  |       |
| Deferred income taxes                                                                         |       | 411               |       | 244                    |       |
| Total current assets                                                                          |       | 134,227           |       | 110,713                |       |
|                                                                                          |       |              |       |                   |       |
| Property and equipment, net                                                                   |       | 6,178             |       | 6,007                  |       |
| Goodwill                                                                                      |       | 29,822            |       | 28,287                 |       |
| Intangibles, net                                                                              |       | 1,692             |       | —                 |       |
| Other assets, net                                                                             |       | 1,527             |       | 1,558                  |       |
|                                                                                          |       |              |       |                   |       |
| Total assets                                                                                  |       | $                 | 173,446    |                   | $          | 146,565 |   |
|                                                                                          |       |              |       |                   |       |
| **Liabilities And Stockholders’ Equity**                                                 |       |              |       |                   |       |
|                                                                                          |       |              |       |                   |       |
| Current Liabilities:                                                                          |       |              |       |                   |       |
| Line-of-credit                                                                                |       | $                 | 45,301     |                   | $          | 49,129 |   |
| Accounts payable                                                                              |       | 72,610            |       | 50,966                 |       |
| Accrued expenses                                                                              |       | 5,274             |       | 4,454                  |       |
| Interest rate swap                                                                            |       | —            |       | 23                     |       |
| Current maturities of long-term debt                                                          |       | 592               |       | 288                    |       |
| Total current liabilities                                                                     |       | 123,777           |       | 104,860                |       |
|                                                                                          |       |              |       |                   |       |
| Deferred income taxes                                                                         |       | 642               |       | 608                    |       |
|                                                                                          |       |              |       |                   |       |
| Long-term debt                                                                                |       | 1,475             |       | 732                    |       |
|                                                                                          |       |              |       |                   |       |
| Redeemable preferred stock                                                                    |       | 39,244            |       | 35,733                 |       |
|                                                                                          |       |              |       |                   |       |
| Commitments and contingencies                                                                 |       |              |       |                   |       |
|                                                                                          |       |              |       |                   |       |
| Stockholders’ Equity                                                                     |       |              |       |                   |       |
| Common stock $0.01 par value, 20,000,000 authorized;  5,560,401 shares issued and outstanding |       | 56                |       | 56                     |       |
| Additional paid in capital                                                                    |       | 955               |       | 955                    |       |
| Accumulated other comprehensive income (loss)                                                 |       | 4                 |       | (14                    | )          |
| Retained earnings                                                                             |       | 7,293             |       | 3,635                  |       |
| Total stockholders’ equity                                                               |       | 8,308             |       | 4,632                  |       |
| Total liabilities and stockholders’ equity                                               |       | $                 | 173,446    |                   | $          | 146,565 |   |

 

SeeNotes to Condensed Consolidated Financial Statements

 

5

----

 

**MWI VETERINARY SUPPLY, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

**For the Nine-months Ended June 30, 2005 and2004**

**(in thousands, except per share data)(unaudited)**

 
| ** **                                                                                          | ** ** | **Nine-months Ended June 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| ** **                                                                                          | ** ** | **2005**                            | ** ** | **2004** | ** ** |
|                                                                                                |       |                                |       |   |   |
| **Cash Flows From Operating Activities:**                                                           |       |                                |       |   |   |
| Net income                                                                                          |       | $                                   | 3,658      |   | $ | 2,100 |   |
| Adjustments to reconcile net income to net cash  provided by (used in) operating activities:        |       |                                |       |   |   |
| Accretion of redeemable preferred stock                                                             |       | 3,510                               |       | 3,106 |   |
| Depreciation and amortization                                                                       |       | 1,126                               |       | 829 |   |
| Amortization of loan origination fees                                                               |       | 105                                 |       | 105 |   |
| Deferred income taxes                                                                               |       | (144                                | )          | 233 |   |
| Earnings on equity method investees                                                                 |       | (89                                 | )          | (75 | ) |
| Gain on disposal of property and equipment                                                          |       | (6                                  | )          | (8 | ) |
| Changes in operating assets and liabilities (net of effects  of acquisitions):                      |       |                                |       |   |   |
| Receivables                                                                                         |       | (8,231                              | )          | (4,543 | ) |
| Inventories                                                                                         |       | (8,936                              | )          | (14,871 | ) |
| Prepaid expenses and other current assets                                                           |       | (2,125                              | )          | (45 | ) |
| Accounts payable                                                                                    |       | 19,707                              |       | 3,481 |   |
| Accrued expenses                                                                                    |       | 820                                 |       | (63 | ) |
| Net cash provided by (used in) operating activities                                                 |       | 9,395                               |       | (9,751 | ) |
|                                                                                                |       |                                |       |   |   |
| **Cash Flows From Investing Activities:**                                                           |       |                                |       |   |   |
| Acquisition of assets of Vetpo Distributors, Inc.  (includes $101 of direct acquisition costs) |       | (4,601                              | )          | — |   |
| Purchases of property and equipment                                                                 |       | (723                                | )          | (1,148 | ) |
| Acquisition of assets of Memorial Pet Care (includes  $32 of direct acquisition costs)              |       | (432                                | )          | — |   |
| Sale of property and equipment                                                                      |       | 564                                 |       | 13 |   |
| Distribution from equity method investee                                                            |       | 43                                  |       | — |   |
| Other                                                                                               |       | (39                                 | )          | — |   |
| Net cash used in investing activities                                                               |       | (5,188                              | )          | (1,135 | ) |
|                                                                                                |       |                                |       |   |   |
| **Cash Flows From Financing Activities:**                                                           |       |                                |       |   |   |
| Net borrowings (payments) on line-of-credit                                                         |       | (3,828                              | )          | 10,836 |   |
| Payment on debt                                                                                     |       | (276                                | )          | (66 | ) |
| Debt issuance costs                                                                                 |       | (100                                | )          | (100 | ) |
| Proceeds from issuance of debt                                                                      |       | —                              |       | 208 |   |
| Net cash provided by (used in) financing activities                                                 |       | (4,204                              | )          | 10,878 |   |
|                                                                                                |       |                                |       |   |   |
| **Increase (Decrease) in Cash**                                                                     |       | 3                                   |       | (8 | ) |
|                                                                                                |       |                                |       |   |   |
| Cash at Beginning of Period                                                                         |       | 28                                  |       | 36 |   |
|                                                                                                |       |                                |       |   |   |
| Cash at End of Period                                                                               |       | $                                   | 31         |   | $ | 28 |   |

 

SeeNotes to Condensed Consolidated Financial Statements

 

6

----

 

**MWI VETERINARY SUPPLY, INC.**

**NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS**

**(dollars and shares in thousands, except per sharedata)**

**(unaudited)**

 

## **NOTE1 – GENERAL**

## ** **

**Basis of Presentation**

 

Theaccompanying unaudited condensed consolidated financial statements include theresults of operations, financial position and cash flows of MWI VeterinarySupply, Inc., formerly named MWI Holdings, Inc., and its subsidiary (“theCompany”). All material intercompany balances have been eliminated.

 

In theopinion of management, the accompanying unaudited condensed consolidatedfinancial statements include all adjustments necessary to present fairly, inall material respects, the results of the Company for the periods presented.These condensed consolidated financial statements have been prepared by theCompany pursuant to the rules and regulations of the Securities andExchange Commission. Certain information and footnote disclosures normallyincluded in financial statements prepared in accordance with accountingprinciples generally accepted in the United States have been condensed oromitted pursuant to such rules and regulations. These condensedconsolidated financial statements should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operations andthe consolidated financial statements and accompanying notes included in the Company’sRegistration Statement on Form S-1 (Reg. No. 333-124264) originallyfiled with the Securities Exchange Commission on April 22, 2005, asamended (“the Registration Statement”). The results of operations for the threeand nine-months ended June 30, 2005 are not necessarily indicative ofresults to be expected for the entire fiscal year.

 

TheCompany’s Condensed Consolidated Balance Sheet as of September 30, 2004has been derived from the audited Consolidated Balance Sheet as of that date.

 

Certainreclassifications have been made in the prior period’s financial statements toconform to classifications used in the current year.

 

**Use of Estimates**

 

Thepreparation of the Company’s consolidated financial statements, in conformitywith accounting principles generally accepted in the United States, requiresmanagement to make estimates and assumptions. Some of these estimates requiredifficult, subjective or complex judgments about matters that are inherentlyuncertain. As a result, actual results could differ from these estimates. Theseestimates and assumptions affect the reported amounts of assets and liabilitiesand the disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses duringthe reporting period.

 

## **NOTE2 – EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS**

## ** **

In November 2004,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 151, “Inventory Costs, an Amendment ofARB No. 43, Chapter 4” (“SFAS No. 151”). SFAS No. 151 clarifiesthat inventory costs that are “abnormal” are required to be charged to expenseas incurred as opposed to being capitalized into inventory as a product cost.SFAS No. 151 provides examples of “abnormal” costs to include costs ofidle facilities, excess freight and handling costs, and wasted material(spoilage). SFAS No. 151 is effective for the Company’s fiscal yearbeginning October 1, 2005. The impact of SFAS No. 151 is not expectedto have a material effect on the Company’s consolidated financial statements.

 

In December 2004,the FASB issued SFAS No. 123 (Revised), “Share-Based Payment” (“SFAS 123-R”).SFAS 123-R replaces SFAS No. 123, “Accounting for Stock-Based Compensation”(“SFAS No. 123”) and supersedes Accounting Principles Board (“APB”)Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”)and related interpretations. Adoption of SFAS 123-R will require the Company torecord a non-cash expense for its stock compensation plans using the fair valuemethod. Historically, the Company has recorded compensation cost in accordancewith APB No. 25, which does not require the recording of an expense forequity related compensation plans if stock options were granted at a priceequal to the fair market value of the Company’s common stock on the grant date.SFAS 123-R is effective for the Company on October 1, 2005. Based onoptions outstanding and expected vesting dates, the adoption of SFAS No. 123-Ris not expected to have a material effect on the Company’s consolidatedfinancial statements.

 

7

----

 

**NOTE 3**–**ACQUISITIONS**

 

On November 1,2004, the Company purchased certain assets of Memorial Pet Care, Inc., apet crematorium, for $400 cash (plus approximately $32 of direct acquisitioncosts).

 

On January 3,2005, the Company purchased substantially all of the assets of VetpoDistributors, Inc. (“Vetpo”), a regional animal health productsdistributor located in Holland, Michigan, for $4,500 in cash (plusapproximately $101 of direct acquisition costs) and the issuance of a notepayable for $487.

 

Thefollowing table summarizes the preliminary estimated fair values of the assetsacquired and liabilities assumed at the date of acquisition. These preliminarypurchase price allocations are based on a combination of third-party valuationsand internal analyses and may be adjusted during the allocation period asdefined in SFAS No. 141, “Business Combinations”.

 
| ** **                | ** ** | **Memorial Pet  Care, Inc.** | ** ** | **Vetpo  Distributors, Inc.** | ** ** |
|---------------------------|------------|-----------------------------------|------------|------------------------------------|------------|
|                      |       |                              |       |                               |       |
| Receivables               |       | $                                 | 24         |                               | $          | 2,074 |   |
| Inventories               |       | —                            |       | 1,837                              |       |
| Property and equipment    |       | 107                               |       | 92                                 |       |
| Goodwill                  |       | 66                                |       | 1,469                              |       |
| Intangibles               |       | 246                               |       | 1,543                              |       |
| Total assets acquired     |       | 443                               |       | 7,015                              |       |
|                      |       |                              |       |                               |       |
| Accounts payable          |       | 11                                |       | 1,927                              |       |
| Notes payables            |       | —                            |       | 487                                |       |
| Total liabilities assumed |       | 11                                |       | 2,414                              |       |
|                      |       |                              |       |                               |       |
| Net assets acquired       |       | $                                 | 432        |                               | $          | 4,601 |   |

 

**NOTE 4**–**RECEIVABLES**

 
| ** **                      | ** ** | **June 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|---------------------------------|------------|-------------------------|------------|------------------------------|------------|
|                            |       |                    |       |                         |       |
| Trade                           |       | $                       | 63,475     |                         | $          | 55,682 |   |
| Vendor rebates and programs     |       | 7,227                   |       | 4,237                        |       |
| Related party                   |       | 203                     |       | 366                          |       |
|                            |       | 70,905                  |       | 60,285                       |       |
| Allowance for doubtful accounts |       | (845                    | )          | (565                         | )          |
|                            |       | $                       | 70,060     |                         | $          | 59,720 |   |

 

Approximately10% of the Company’s revenues resulted from transactions with a single customerduring the three and nine-months ended June 30, 2005 and 2004,respectively. Approximately 9% of the Company’s trade receivables resulted fromtransactions with this single customer as of June 30, 2005.

 

8

----

 

**NOTE 5**–**PROPERTY AND EQUIPMENT**

 
| ** **                                | ** ** | **June 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
| ** **                                | ** ** | ** **              | ** ** | ** **                   | ** ** |
| Land                                      |       | $                       | 169        |                         | $          | 322 |   |
| Buildings and leasehold improvements      |       | 2,215                   |       | 3,183                        |       |
| Machinery, furniture and equipment        |       | 7,672                   |       | 6,960                        |       |
| Computer equipment                        |       | 2,676                   |       | 2,939                        |       |
| Construction in progress                  |       | 154                     |       | —                       |       |
|                                      |       | 12,886                  |       | 13,404                       |       |
|                                      |       |                    |       |                         |       |
| Accumulated depreciation and amortization |       | (6,708                  | )          | (7,397                       | )          |
|                                      |       | $                       | 6,178      |                         | $          | 6,007 |   |

 

TheCompany recorded depreciation expense of $348 and $306 for the three-monthsended June 30, 2005 and 2004, respectively, and $1,028 and $829 for thenine-months ended June 30, 2005 and 2004, respectively.

 

**NOTE 6**–**INTANGIBLES**

 
| ** **               | ** ** | **June 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|--------------------------|------------|-------------------------|------------|------------------------------|------------|
| Amortizing:              |       |                    |       |                         |       |
| Customer lists           |       | $                       | 1,590      |                         | $          | — |   |
| Covenants not to compete |       | 162                     |       | —                       |       |
| Other                    |       | 36                      |       | —                       |       |
|                     |       | 1,788                   |       | —                       |       |
|                     |       |                    |       |                         |       |
| Accumulated amortization |       | (148                    | )          | (—                      | )          |
|                     |       | 1,640                   |       | —                       |       |
| Non-Amortizing:          |       |                    |       |                         |       |
| Trade names              |       | 52                      |       | —                       |       |
|                     |       |                    |       |                         |       |
|                     |       | $                       | 1,692      |                         | $          | — |   |

 

Amortizingintangible assets have remaining useful lives from 4 to 10 years. Projectedamortization expense for existing intangible assets is $145, $189, $189, $189and $189 for 2005, 2006, 2007, 2008 and 2009, respectively.

 

**NOTE 7**–**LINE-OF-CREDIT AND LONG-TERM DEBT**

 

**Line of Credit**—On June 18, 2002, the Company entered into aline-of-credit agreement with two lenders for a credit facility that allowsborrowings up to $70,000. The line-of-credit is secured by a security interestin substantially all of the Company’s assets and terminates on June 17,2007. Interest is due monthly at the following rates: 1) the London InterbankOffered Rate (LIBOR) plus a margin for the first $35,000 (4.97% at June 30,2005); or 2) the prime rate (6.25% at June 30, 2005). The Company’soutstanding balance on this facility at June 30, 2005 was $45,301. Theline-of-credit contains certain restrictive financial covenants as well asrestrictions on dividend payments and future debt borrowings. See Note 13 –Subsequent Events for more information. From time to time the Company issuesletters of credit to act as guarantee of payment to specified third parties. AtJune 30, 2005, the Company had three letters of credit totaling $300 andat September 30, 2004 the Company had two letters of credit totaling$3,100. There were no outstanding borrowings on these letters of credit at June 30,2005 or September 30, 2004.

 

On July 7,2004, the Company entered into an interest swap agreement for $12,000 of itsline-of-credit borrowings. Under the swap, the Company received interest at afloating rate based on LIBOR and paid interest at a fixed rate of 2.49%. Netpayments due under the swap were settled monthly. The swap expired on July 7,2005 and was not renewed. The Company received a waiver of the obligation tomaintain an interest rate swap from the lenders effective as of July 7,2005.

 

9

----

 

On July 7,2003, the Company entered into an interest swap agreement for $12,000 of itsline-of-credit borrowings. Under the swap, the Company received interest at afloating rate based on LIBOR and paid interest at a fixed rate of 1.33%. Netpayments due under the swap were settled monthly and the swap expired on July 7,2004.

 

**Long-Term Debt**—On December 19, 2003, the Company amended theline-of-credit agreement to include borrowings up to $2,500 on a loan forcapital equipment purchases. The line-of-credit is secured by a securityinterest in substantially all of the Company’s assets and terminates on June 17,2007. Interest is due monthly at the following rates: 1) the London InterbankOffered Rate (LIBOR) plus a margin; or 2) the prime rate plus a margin.

 

On January 3,2005, the Company issued an unsecured non-negotiable promissory note in theaggregate principal amount of $487 in partial consideration for the purchase ofsubstantially all the assets of Vetpo. The note bears interest at the primerate, payable quarterly. The principal of the note is payable in five equalannual installments, beginning January 1, 2006.

 
| ** **                                                                                                                                            | ** ** | **June 30,  2005** | ** ** | **September 30,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|------------------------------|------------|
|                                                                                                                                                  |       |                    |       |                         |       |
| Capital equipment note payable, monthly principal  payments of $39, plus interest, interest rate 6.75% at June 30, 2005,  due June 17, 2007 |       | $                       | 1,580      |                         | $          | 1,020 |   |
|                                                                                                                                                  |       |                    |       |                         |       |
| Unsecured non-negotiable promissory note, annual  principal payments of $97, interest paid quarterly, interest rate 6.25% at June 30,  2005      |       | 487                     |       | —                       |       |
|                                                                                                                                                  |       | 2,067                   |       | 1,020                        |       |
| Current portion                                                                                                                                       |       | (592                    | )          | (288                         | )          |
| Total long-term debt                                                                                                                                  |       | $                       | 1,475      |                         | $          | 732 |   |

 

**NOTE 8**–**REDEEMABLE PREFERRED STOCK**

 

Theredeemable preferred stock was subject to mandatory redemption on June 18,2012 and has a liquidation preference of $1 per share (plus accumulated,accrued and unpaid dividends). The holders of redeemable preferred stock wereentitled to a cumulative 13% annual dividend based on the liquidationpreference. As of June 30, 2005, the Company had not made any dividendpayments. The Company had the right to redeem any outstanding shares at anytime but all shares were required to be redeemed no later than June 18,2012. Total redemption price as of June 30, 2005 was $39,244. On August 8,2005 the Company used proceeds from the initial public offering to redeem allof the redeemable preferred stock. See Note 13- Subsequent Events.

 

**NOTE 9**–**STOCK-OPTIONS**

 

TheCompany accounts for stock-based awards to employees using the intrinsic valuemethod in accordance with APB No. 25 and related interpretations. TheCompany has adopted the disclosure-only requirements of SFAS No. 123 forstock-based awards to employees. Accordingly, the Company records nocompensation expense in the consolidated financial statements upon grant ofemployee stock awards when the exercise price is equal to fair market value atthe date of grant.

 

SFAS No. 123requires the disclosure of pro forma net income or loss as if the Company hadadopted the fair value method since inception. Under SFAS No. 123, thefair value of stock-based awards to employee is calculated through the use ofoption pricing models, even through such models were developed to estimate thefair value of freely tradable, fully transferable options without vestingrestriction, which significantly differ from the characteristics of the Company’sstock option awards. These models also require subjective assumptions includingexpected time to exercise, which greatly affect the calculation.

 

10

----

 

**NOTE 9**–**STOCK-OPTIONS-CONT.**

 

If thefair value-based accounting method was utilized for stock-based compensation,the Company’s pro forma net income and earnings per share for the periodspresented below would have been as follows:

 
| ** **                                                                                                                              | ** ** | **Three-months ended**  | ** ** | **Nine-months ended**   | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **                                                                                                                              | ** ** | **June 30,  2005** | ** ** | **June 30,  2004** | ** ** | **June 30,  2005** | ** ** | **June 30,  2004** | ** ** |
| Net income                                                                                                                              |       | $                       | 1,407      |                    | $          | 717 |   | $ | 3,658 |   | $ | 2,100 |   |
| Deduct: Stock-based employee compensation expense  determined under fair-value-based method for all awards, net of related tax  effects |       | —                  |       | —                  |       | (1 | ) | (1 | ) |
| Add: Stock-based employee compensation expense  included in reported net income, net of related tax effects                             |       | —                  |       | —                  |       | — |   | — |   |
| Pro Forma net income                                                                                                                    |       | $                       | 1,407      |                    | $          | 717 |   | $ | 3,657 |   | $ | 2,099 |   |
|                                                                                                                                    |       |                    |       |                    |       |   |   |   |   |
| Basic Earnings  Per Share:                                                                                                              |       |                    |       |                    |       |   |   |   |   |
| As Reported                                                                                                                             |       | $                       | 0.28       |                    | $          | 0.14 |   | $ | 0.72 |   | $ | 0.42 |   |
| Pro Forma                                                                                                                               |       | $                       | 0.28       |                    | $          | 0.14 |   | $ | 0.72 |   | $ | 0.42 |   |
|                                                                                                                                    |       |                    |       |                    |       |   |   |   |   |
| Diluted Earnings  Per Share:                                                                                                            |       |                    |       |                    |       |   |   |   |   |
| As Reported                                                                                                                             |       | $                       | 0.24       |                    | $          | 0.12 |   | $ | 0.62 |   | $ | 0.36 |   |
| Pro Forma                                                                                                                               |       | $                       | 0.24       |                    | $          | 0.12 |   | $ | 0.62 |   | $ | 0.36 |   |

 

Thepro forma net income resulted from reported net income less pro forma after-taxcompensation expense. The pro forma effect on net income is not representativeof the pro forma effect on net earnings in future years. To calculate pro formastock-based compensation expense under SFAS No. 123, the Company estimatedthe fair value of each option grant on the date of grant, using the singleoption valuation approach with the following weighted average assumptions usedfor grants in 2003 (no new grants in 2004 or for the nine months ended June, 302005): risk-free interest rate of 2.97%; expected lives of 5 years; no expecteddividends and no expected stock price volatility.

 

**NOTE 10**–**INCOME TAXES**

 

TheCompany’s effective tax rate for the three-months ended June 30, 2005 and2004 was 47.2% and 62.5%, respectively. The Company’s effective income tax ratefor the nine-months ended June 30, 2005 and 2004 was 53.4% and 62.9%,respectively. The decrease in the effective tax rate was primarily attributableto a state income tax benefit as a result of filing tax returns during June 2005and anticipated lower nondeductible accretion of dividends on the Series Apreferred stock for fiscal 2005 due to the redemption of all of the Series Apreferred stock in connection with the initial public offering. See Note 13 –Subsequent Events.

 

11

----

 

## **NOTE11 – COMPUTATION OF EARNINGS PER SHARE**

 
| ** **                                     | ** ** | **Three-months ended** | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **June 30, 2005** | ** ** | **June 30, 2004** | ** ** |
| ** **                                     | ** ** | **Basic**              | ** ** | **Diluted** | ** ** | **Basic** | ** ** | **Diluted** | ** ** |
|                                           |       |                   |       |   |   |   |   |   |   |
| Net income                                     |       | $                      | 1,407      |   | $ | 1,407 |   | $ | 717 |   | $ | 717 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Weighted average common shares outstanding     |       | 5,063                  |       | 5,063 |   | 5,038 |   | 5,038 |   |
| Effect of dilutive securities:                 |       |                   |       |   |   |   |   |   |   |
| Contingent stock                               |       |                   |       | 497 |   |   |   | 522 |   |
| Stock options                                  |       |                   |       | 316 |   |   |   | 318 |   |
| Weighted average shares outstanding            |       |                   |       | 5,876 |   |   |   | 5,878 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Earnings per share                             |       | $                      | 0.28       |   | $ | 0.24 |   | $ | 0.14 |   | $ | 0.12 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Anti-dilutive shares excluded from calculation |       |                   |       | — |   |   |   | — |   |

 
| ** **                                     | ** ** | **Nine-months ended**  | ** ** |
|------------------------------------------------|------------|------------------------|------------|
| ** **                                     | ** ** | **June 30, 2005** | ** ** | **June 30, 2004** | ** ** |
| ** **                                     | ** ** | **Basic**              | ** ** | **Diluted** | ** ** | **Basic** | ** ** | **Diluted** | ** ** |
|                                           |       |                   |       |   |   |   |   |   |   |
| Net income                                     |       | $                      | 3,658      |   | $ | 3,658 |   | $ | 2,100 |   | $ | 2,100 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Weighted average common shares outstanding     |       | 5,062                  |       | 5,062 |   | 5,038 |   | 5,038 |   |
| Effect of dilutive securities:                 |       |                   |       |   |   |   |   |   |   |
| Contingent stock                               |       |                   |       | 498 |   |   |   | 522 |   |
| Stock options                                  |       |                   |       | 318 |   |   |   | 318 |   |
| Weighted average shares outstanding            |       |                   |       | 5,878 |   |   |   | 5,878 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Earnings per share                             |       | $                      | 0.72       |   | $ | 0.62 |   | $ | 0.42 |   | $ | 0.36 |   |
|                                           |       |                   |       |   |   |   |   |   |   |
| Anti-dilutive shares excluded from calculation |       |                   |       | — |   |   |   | — |   |

 

**NOTE 12**–**CONTINGENCIES AND COMMITTMENTS**

 

From time to time, in thenormal course of business, the Company may become a party to legal proceedingsthat may have an adverse effect on the Company’s financial position, results ofoperations and cash flows. At June 30, 2005 the Company is not a party toany material pending legal proceedings and is not aware of any claims thatcould have a material adverse effect on the Company’s financial position,results of operations, or cash flows.

 

**NOTE 13**–**SUBSEQUENT EVENTS**

 

In June 2005,the Company signed an agreement with Bruckmann, Rosser, Sherrill &Co., L.L.C. (“BRS LLC”), its majority shareholder, and Agri Beef to terminatefees paid to both parties for management services. The agreement becameeffective immediately prior to the time the Company’s Registration Statementwas declared effective by the Securities and Exchange Commission on August 2,2005. The Company will be required to pay BRS LLC $1,600 and Agri Beef $400under the agreement.

 

On July 28,2005, the Company amended its Amended and Restated Certificate of Incorporationto authorize 20 million shares of common stock and declared a 5.5-to-1 commonstock split in the form of a common stock dividend. All numbers of common stockand per share data in the accompanying consolidated financial statements andrelated notes have been retroactively restated to give effect to the amendmentof the Amended and Restated Certificate of Incorporation and stock split.

 

On July 28,2005, the Company approved the 2005 Stock-Based Incentive Compensation Plan. Thepurpose of the stock incentive plan is to promote the Company’s long-termfinancial success by attracting, retaining and rewarding eligible participants.This plan provides for the Company to issue restricted stock or stock options. OnAugust 3, 2005 the Company granted approximately 100 options to purchasecommon stock to employees with an exercise price of $17 per share and a life of10 years. These options vest on September 15, 2005.

 

12

----

 

**NOTE 13**–**SUBSEQUENT EVENTS – CONT.**

 

On August 2,2005 a Registration Statement relating to the Company’s initial public offeringof common stock was declared effective by the Securities and Exchange Commission.As a result, the Company issued 4,333 shares of common stock which weresubsequently sold to the public for $17 per share. The Company receivedestimated net proceeds of $66,493 after deducting the underwriting discountsand offering expenses. On August 5, 2005, the underwriters exercised theirover-allotment option that caused the Company to sell an additional 650 sharesfor estimated net proceeds of $10,277. As disclosed in the Company’sRegistration Statement, the Company used these net proceeds to redeem all ofthe Company’s Series A preferred stock for approximately $39,789 and torepay approximately $36,981 of borrowings on the revolving credit facilityunder the amended credit agreement.

 

13

----

 

**REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM**

** **

To theBoard of Directors and Stockholders of MWI Veterinary Supply, Inc.

Meridian,Idaho

 

Wehave reviewed the accompanying condensed consolidated balance sheet of MWIVeterinary Supply, Inc. and subsidiary (“the Company”) as of June 30,2005, and the related condensed consolidated statements of income andcomprehensive income for the three-month and nine-month periods ended June 30,2005 and 2004, and of cash flows for the nine-month periods ended June 30,2005 and 2004. These interim financial statements are the responsibility of theCompany’s management.

 

Weconducted our reviews in accordance with standards of the Public CompanyAccounting Oversight Board (United States) (“the PCAOB”). A review of interimfinancial information consists principally of applying analytical proceduresand making inquiries of persons responsible for financial and accountingmatters. It is substantially less in scope than an audit conducted inaccordance with standards of the PCAOB, the objective of which is theexpression of an opinion regarding the financial statements taken as a whole.Accordingly, we do not express such an opinion.

 

Basedon our reviews, we are not aware of any material modifications that should bemade to such condensed consolidated interim financial statements for them to bein conformity with accounting principles generally accepted in the UnitedStates of America.

 

Wehave previously audited, in accordance with standards of the PCAOB, theconsolidated balance sheet of MWI Veterinary Supply, Inc. and subsidiaryas of September 30, 2004, and the related consolidated statements ofincome, comprehensive income, stockholders’ equity and cash flows for the yearthen ended (not presented herein); and in our report dated April 15, 2005(June 10, 2005 as to the effects of the restatement described in Note 15and July 28, 2005 as to Note 14), we expressed an unqualified opinion andincluded an explanatory paragraph that describes the formation and acquisitionof the Company and the adoption of Statement of Financial Accounting Standards No. 150,*Accounting for Certain Financial Instrumentswith Characteristics of Both Liabilities and Equity* and a paragraph related to therestatement described in Note 15 to the consolidated financial statements. Inour opinion, the information set forth in the accompanying condensedconsolidated balance sheet as of September 30, 2004, is fairly stated, inall material respects, in relation to the consolidated balance sheet from whichit has been derived.

 
| /s/ DELOITTE & TOUCHE LLP |   |
|------------------------------------|--------|
| Boise, Idaho                       |
| August 10, 2005               |

 

14

----

 

**Item 2.****    Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

TheCompany is a leading distributor of animal health products to veterinariansacross the United States. The Company markets its products to veterinarians inboth the companion and production animal markets. The Company’s growth hasprimarily been from internal growth initiatives and, to a lesser extent,selective acquisitions.

 

TheCompany sells products that it sources from its vendors to its customersthrough either a “buy/sell” transaction or an agency relationship with itsvendors. In a “buy/sell” transaction, the Company purchases or takes inventoryof products from its vendors. When a customer places an order, the Companypicks, packs, ships and invoices the customer for the order. The Company recordsales from “buy/sell” transactions, which account for the vast majority of theCompany’s business, as revenue in conformity with generally accepted accountingprinciples in the United States. In an agency relationship, the Company doesnot purchase and take inventory of products from vendors. When the Companyreceives an order from a customer, the Company transmits the order to thevendor, who picks, packs and ships the order to the Company’s customer. In somecases, the vendor invoices and collects payment from the customer, while inother cases the Company invoices and collects payment from the customer onbehalf of the vendor. The Company receives a commission payment for solicitingthe order from the customer and for providing other customer serviceactivities. The aggregate revenue the Company receives in agency transactionsconstitute the “commissions” line item on the Company’s statement of income andis recorded in conformity with accounting principles generally accepted in theUnited States. The vendor determines the method the Company uses to sell itsproducts. Historically, vendors have occasionally switched between the “buy/sell”and agency models for particular products in response to market conditionsrelated to that particular product. A switch between models can impact theCompany’s revenues, gross margin, gross margin percentage and operating income.For more information on the Company’s business see the Company’s RegistrationStatement on Form S-1 (Reg. No. 333-124264) originally filed with theSecurities Exchange Commission on April 22, 2005, as amended (“the RegistrationStatement”).

 

*Initial Public Offering*

 

On August 2,2005 a Registration Statement relating to the Company’s initial public offeringof common stock was declared effective by the Securities and ExchangeCommission. As a result, the Company issued 4,333,334 shares of common stockwhich were subsequently sold to the public for $17 per share. The Companyreceived estimated net proceeds of $66,493 after deducting the underwritingdiscounts and offering expenses. On August 5, 2005, the underwriters exercisedtheir over-allotment option causing the Company to sell an additional 650,000shares for estimated net proceeds of $10,277. As disclosed in the CompanyRegistration Statement, the Company used these net proceeds to redeem all ofthe Company’s Series A preferred stock for approximately $39,789 and torepay approximately $36,981 of borrowings on the revolving credit facilityunder the amended credit agreement.

 

*Acquisitions*

 

On January 3,2005, the Company acquired substantially all of the assets of VetpoDistributors, Inc. (“Vetpo”), a regional animal health productsdistributor located in Holland, Michigan. This acquisition has enabled us tosubstantially expand the Company’s market presence and improve the Company’sdistribution capabilities in Michigan, Illinois, Indiana, Ohio and Wisconsin.

 

On November 1,2004, the Company acquired certain assets of Memorial Pet Care, Inc., apet crematorium located in Meridian, Idaho. Memorial Pet Care presentlyoperates in southwest Idaho and eastern Oregon and serves veterinary practicesand their clients by providing pet cremation services.

 

15

----

 

**Results of Operations**

 

Thefollowing table summarizes the Company’s results of operations for the threeand nine-months ended June 30, 2005 and 2004 in dollars and as apercentage of total revenues. 

 
|                                                 |   | **Three-months ended June 30,** |    | **Nine-months ended June 30,** |   |
|------------------------------------------------------|--------|--------------------------------------|---------|-------------------------------------|--------|
|                                                 |   | **2005**                             |    | **2004**                            |   | **2005** |   | **2004** |   |
| Revenues:                                            |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Product sales                                        |   | $                                    | 130,377 |                                | 94.5   | % | $ | 99,674 |   | 93.9 | % | $ | 340,525 |   | 93.7 | % | $ | 271,145 |   | 93.4 | % |
| Product sales to related party                       |   | 6,433                                |    | 4.7                                 |   | 5,236 |   | 4.9 |   | 19,380 |   | 5.3 |   | 16,118 |   | 5.6 |   |
| Commissions                                          |   | 1,177                                |    | 0.8                                 |   | 1,276 |   | 1.2 |   | 3,486 |   | 1.0 |   | 3,140 |   | 1.0 |   |
| Total revenues                                       |   | 137,987                              |    | 100.0                               |   | 106,186 |   | 100.0 |   | 363,391 |   | 100.0 |   | 290,403 |   | 100.0 |   |
|                                                 |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of product sales                                |   | 119,955                              |    | 86.9                                |   | 91,981 |   | 86.6 |   | 312,263 |   | 85.9 |   | 248,841 |   | 85.7 |   |
| Gross profit                                         |   | 18,032                               |    | 13.1                                |   | 14,205 |   | 13.4 |   | 51,128 |   | 14.1 |   | 41,562 |   | 14.3 |   |
|                                                 |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general and administrative expenses (1)     |   | 13,217                               |    | 9.6                                 |   | 10,575 |   | 10.0 |   | 37,036 |   | 10.2 |   | 30,886 |   | 10.6 |   |
| Depreciation and amortization                        |   | 393                                  |    | 0.3                                 |   | 306 |   | 0.3 |   | 1,120 |   | 0.3 |   | 829 |   | 0.3 |   |
| Operating income                                     |   | 4,422                                |    | 3.2                                 |   | 3,324 |   | 3.1 |   | 12,972 |   | 3.6 |   | 9,847 |   | 3.4 |   |
| Other income (expense):                              |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense (2)                                 |   | (1,849                               | )       | (1.3)                               | )      | (1,485 | ) | (1.3 | ) | (5,394 | ) | (1.5 | ) | (4,419 | ) | (1.5 | ) |
| Earnings on equity method investees                  |   | 30                                   |    | —                              |   | 24 |   | — |   | 89 |   | — |   | 75 |   |   |   |
| Other                                                |   | 60                                   |    | —                              |   | 49 |   | — |   | 184 |   | 0.1 |   | 161 |   | 0.1 |   |
| Total other expense                                  |   | (1,759                               | )       | (1.3                                | )      | (1,412 | ) | (1.3 | ) | (5,121 | ) | (1.4 | ) | (4,183 | ) | (1.4 | ) |
| Income before taxes                                  |   | 2,663                                |    | 1.9                                 |   | 1,912 |   | 1.8 |   | 7,851 |   | 2.2 |   | 5,664 |   | 2.0 |   |
| Income tax expense                                   |   | (1,256                               | )       | (0.9                                | )      | (1,195 | ) | (1.1 | ) | (4,193 | ) | (1.2 | ) | (3,564 | ) | (1.3 | ) |
| Net income                                           |   | $                                    | 1,407   |                                | 1.0    | % | $ | 717 |   | 0.7 | % | $ | 3,658 |   | 1.0 | % | $ | 2,100 |   | 0.7 | % |
|                                                 |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| **Other Data:**                                      |   |                                 |    |                                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Product sales from Internet as a percentage of sales |   | 20.7                                 | %       |                                |   | 17.4 | % |   |   | 20.6 | % |   |   | 17.8 | % |   |   |
| Field sales representatives  (at end of period)      |   | 132                                  |    |                                |   | 106 |   |   |   | 132 |   |   |   | 106 |   |   |   |
| Telesales representatives  (at end of period)        |   | 91                                   |    |                                |   | 78 |   |   |   | 91 |   |   |   | 78 |   |   |   |
| Fill rate (3)                                        |   | 97.8                                 | %       |                                |   | 98.1 | % |   |   | 97.9 | % |   |   | 98.1 | % |   |   |

 

----

(1)   Includesmanagement fees expense of $85 and $101 for three-months ended June 30,2005 and 2004, respectively, and $351 and $300 for the nine-months ended June 30,2005 and 2004, respectively as a result of payments to Bruckmann, Rosser,Sherrill & Co. LLC and Agri Beef Co. This management and consultingservices agreement was terminated in connection with the effectiveness of theCompany’s Registration Statement and will result in a $2,000 charge in theCompany’s fourth quarter of 2005.

 

(2)   Includesaccretion of our Series A preferred stock dividends of $1,195 and $1,053for the three-months ended June 30, 2005 and 2004 respectively, and $3,510and $3,106 for the nine-months ended June 30, 2005 and 2004 respectively,which are non-deductible for income tax purposes.

 

(3)   Definedas, for any period, the dollar value of orders shipped the same day they wereplaced from any warehouse expressed as a percentage of the total dollar valueof the orders placed by customers in the period.

 

16

----

 

**Three-months Ended June 30, 2005 Compared toThree-months Ended June 30, 2004**

 

*Total Revenues*. Total revenues increased29.9%, or $31,801 to $137,987 for the three-months ended June 30, 2005from $106,186 for the three-months ended June 30, 2004. This increase was attributableto an increase in product sales volumes of a wide variety of products to bothexisting and new customers. The amount of the increase in product salesattributable to customers obtained subsequent to the end of the priorcomparative period was approximately $12,996 with the remaining increaseattributable to existing customers. Revenues improved in the three-months endedJune 30, 2005 as compared to the prior year as a result of the conversionto a buy/sell arrangement for an equine West Nile Virus vaccine that was acommission-based agency relationship in the prior year, the addition of a newcattle antibiotic and the addition of a new leading non-steroidalanti-inflammatory drug for dogs that previously had been sold directly from themanufacturer to the veterinarian. Aggregate revenues for the three-months endedJune 30, 2005 for the West Nile Virus vaccine, the cattle antibiotic, andthe anti-inflammatory drug for dogs were approximately $8,965. Additionally,revenues improved in the three-months ended June 30, 2005 as a result ofthe acquisition of Vetpo on January 3, 2005. This acquisition has allowedthe Company to expand its market presence and product sales in Michigan,Illinois, Indiana, Ohio and Wisconsin. For the three-months ended June 30,2005, the field sales representatives who joined the Company from Vetpoproduced sales of approximately $4,773. The Company’s growth in total revenueswas partially offset by the voluntary recall of an injectable heartwormpreventative product by the manufacturer in September 2004. Sales of thisproduct had been approximately $1,554 for the three-months ended June 30,2004.

 

*Gross Profit*. Gross profit increased by26.9%, or $3,827, to $18,032 for the three-months ended June 30, 2005 from$14,205 for the three-months ended June 30, 2004. The increase in grossprofit is a result of increased total revenues as discussed above. Gross profitas a percentage of total revenues was 13.1% for the three-months ended June 30,2005, compared to 13.4% for the same period in the prior year. The Company’sgross profit margin declined by 30 basis points principally due to a reductionin commissions as a percentage of sales as a result of the conversion to abuy/sell arrangement for an equine West Nile Virus vaccine that was acommission-based agency arrangement in the prior year. The decrease in grossprofit margin was partially offset from an increase of $410 in vendor rebatesbased on the attainment of certain growth goals and a decrease in freightexpense as a percentage of total revenues.

 

*Selling, General and Administrative (“SG&A”)*.SG&A increased 25.0%, or $2,642, to $13,217 for the three-months ended June 30,2005 from $10,575 for the three-months ended June 30, 2004. However, asmeasured on a percent of total revenue, SG&A expenses decreased to 9.6% forthe three-months ended June 30, 2005, compared to 10.0% for the sameperiod in the prior year. The dollar increase was primarily due to increasedcompensation costs, outside fees and services, location and travel costs andoccupancy costs. Compensation costs increased as a result of additionalheadcount of 72 associates, primarily related to the acquisition of Vetpo andthe expansion of the Company’s operations in the northeastern United States. Compensationcosts also increased as a result of increased sales commissions that aredirectly correlated with the sales growth and annual performance wage increases.The increase in outside fees and services were primarily driven by temporaryworkforce costs used to support the Company’s sales growth and demands in theCompany’s warehouse facilities, increased credit card and other bank fees andincreased professional services fees related to the Company’ efforts to becomea public company. Increases in location and travel cost are due to increasedheadcount and costs to support the Company’s sales growth. Increases inoccupancy costs are due primarily to the opening of a new facility in Nampa,Idaho in April 2005 and a facility acquired in the Vetpo acquisitionlocated in Holland, Michigan. Management fees included in SG&A were $85 forthe three-months ended June 30, 2005, compared to $101 for the same periodin the prior year and are the result of a management and consulting servicesagreement between us, Bruckmann, Rosser, Sherrill & Co., L.L.C. (“BRSLLC”) and Agri Beef Co. The management and consulting services were terminatedin connection with the Company’s initial public offering. In connection withthis termination the Company will record a termination fee of $2,000 in thefourth quarter of 2005.

 

*Depreciation and Amortization.*Depreciationand amortization expense increased 28.4%, or $87, to $393 for the three-monthsended June 30, 2005 from $306 for the three-months ended June 30,2004. This increase was due primarily to amortization of intangible assetsacquired with the purchase of Vetpo and Memorial Pet Care. In additiondepreciation expense increased as a result of capital expenditures for deliverytrucks used at the Company’s warehouse facilities to support its sales growth.

 

*Other Expenses*. Other expenses increased24.6%, or $347, to $1,759 for the three-months ended June 30, 2005 from$1,412 for the three-months ended June 30, 2004. The increase in otherexpenses was primarily due to an increase in interest expense of $364 to $1,849in the three-months ended June 30, 2005 from $1,485 for the same period inthe prior year. Included in interest expense is the accretion of dividends onthe Series A preferred stock of $1,195 and $1,053 for the three-monthsended June 30, 2005 and 2004, respectively, that was redeemed on August 8,2005 with the proceeds from the initial public offering. The Company expectsinterest expense to decline as compared to historical amounts as a result ofthe redemption of all the Series A preferred stock and the pay down of therevolving credit facility.

 

17

----

 

*Income Tax Expense*. The Company’seffective tax rate was 47.2% and 62.5% for the three-months ended June 30,2005 and 2004, respectively. The decrease in the effective tax rate wasprimarily attributable to a state income tax benefit as a result of filing taxreturns during June 2005 and lower nondeductible accretion of dividends onthe Series A preferred stock for fiscal 2005 due to the redemption of allof the Series A preferred stock on August 8, 2005.

 

**Nine-Months Ended June 30, 2005 Compared to Nine-MonthsEnded June 30, 2004**

 

*Total Revenues.*Total revenues increased$72,988, or 25.1%, to $363,391 for the nine-months ended June 30, 2005 from$290,403 for the nine-months ended June 30, 2004. This increase wasattributable to an increase in product sales volumes of a wide variety ofproducts to both existing and new customers. The amount of the increase inproduct sales attributable to customers obtained subsequent to the end of theprior comparative period was approximately $25,647 with the remaining increaseattributable to existing customers. Revenues improved in the nine-months ended June 30,2005 as compared to the prior year as a result of the conversion to a buy/sellarrangement for an equine West Nile Virus vaccine that was a commission-basedagency relationship in the prior year, the addition of a new cattle antibioticand the addition of a new leading non-steroidal anti-inflammatory drug for dogsthat previously had been sold directly from the manufacturer to theveterinarian. The Company increased the number of field sales representativesto 132 at June 30, 2005 from 106 at June 30, 2004, allowing us totarget additional customers and to extend geographic reach, principally in thenortheast and southeast regions of the United States. In addition, on January 3,2005, the Company acquired substantially all the assets of Vetpo. Thisacquisition has enabled the Company to substantially expand the Company’smarket presence in Michigan, Illinois, Indiana, Ohio and Wisconsin. From theacquisition date through June 30, 2005, the field sales representativeswho joined the Company from Vetpo produced sales of approximately $8,671. TheCompany’s growth in total revenues was partially offset by the voluntary recallof an injectable heartworm preventative product by the manufacturer in September 2004.Sales of this product had been approximately $3,905 for the nine-months ended June 30,2004.

 

*Gross Profit*. Gross profit increased by$9,566, or 23.0%, to $51,128 for the nine-months ended June 30, 2005 from$41,562 for the nine-months ended June 30, 2004. Gross profit as apercentage of total revenues was 14.1% for the nine-months ended June 30,2005, compared to 14.3% for the same period in the prior year. The 20 basispoint decrease in gross profit margin is attributable to the loss of $764 ofgross profit related to the injectable heartworm preventative productvoluntarily recalled by the manufacturer in September 2004. This waspartially offset by an increase of $2,102 in vendor rebates based on theattainment of certain growth goals and a decrease in freight expense as apercentage of total revenues.

 

*Selling, General and Administrative (“SG&A”)*.SG&A expenses increased by $6,150, or 19.9%, to $37,036 for the nine-monthsended June 30, 2005 from $30,886 for the nine-months ended June 30,2004. SG&A expenses as a percentage of total revenues decreased to 10.2%for the nine-months ended June 30, 2005, compared to 10.6% for the sameperiod in the prior year. The dollar increase was primarily due to increasedcompensation costs, outside fees and services, location and travel costs, andoccupancy costs. Compensation costs increased as a result of additionalheadcount of 72 associates, primarily related to the acquisition of Vetpo andthe expansion of the Company’s operations in the northeastern United States. Compensationcosts also increased as a result of increased sales commissions that aredirectly correlated with the sales growth and annual performance wage increases.The increase in outside fees and services were primarily due to increasedcredit card and other bank fees, increased usage of temporary workforce costsused to support the Company’s sales growth in the Company’s warehousefacilities and increased professional services fees related to the Company’efforts to become a public company. Increases in location, travel and occupancycosts are due to the opening of new facilities in Harrisburg, Pennsylvania;Meridian, Idaho; Nampa, Idaho and a facility acquired in the Vetpo acquisitionlocated in Holland, Michigan. To a lesser extent, location and travel costincreases are due to increased headcount and costs to support the sales growth.Management fees included in SG&A were $351 for the nine-months ended June 30,2005, compared to $300 for the same period in the prior year and are the resultof a management and consulting services agreement between us, BRS LLC and AgriBeef Co. The management and consulting services were terminated in connectionwith the Company’s initial public offering. In connection with this terminationthe Company will record a termination fee of $2,000 in the fourth quarter of2005.

 

*Depreciation and Amortization.*Depreciationand amortization expense increased 35.1%, or $291, to $1,120 for thenine-months ended June 30, 2005 from $829 for the nine-months ended June 30,2004. This increases was due primarily to amortization of intangible assetsacquired with the purchases of Vetpo and Memorial Pet Care. In addition,depreciation expense increased as a result of capital expenditures for deliverytrucks used at the Company’s warehouse facilities to support its sales growth.

 

18

----

 

*Other Expenses*. Other expenses increased$938, or 22.4%, to $5,121 for the nine-months ended June 30, 2005 from$4,183 for the nine-months ended June 30, 2004. The increase in otherexpenses was primarily due to an increase in interest expense of $975 to $5,394in the nine-months ended June 30, 2005 from $4,419 for the same period inthe prior year. Included in interest expense is the accretion of dividends onthe Series A preferred stock of $3,510 and $3,106 for the nine-monthsended June 30, 2005 and 2004, respectively, that was redeemed on August 8,2005 with the proceeds from the initial public offering. Going forward theCompany expects interest expense to decline as compared to historical amountsas a result of the redemption of all the Series A preferred stock and thepay down of the revolving credit facility.

 

*Income Tax Expense*. The Company’seffective tax rate was 53.4% and 62.9% for the nine-months ended June 30,2005 and 2004, respectively. The decrease in the effective tax rate wasprimarily attributable to the lower nondeductible accretion of dividends on theSeries A preferred stock for fiscal 2005 due to the redemption of all ofthe Series A preferred stock on August 8, 2005 and to a state incometax benefit as a result of filing tax returns during June 2005.

 

**Critical Accounting Policies**

 

Thepreparation of financial statements requires management to make estimates andjudgments that affect the reported amounts of assets, liabilities, revenues andexpenses and related disclosure of contingent assets and liabilities. Theaccompanying condensed consolidated financial statements are prepared using thesame critical accounting policies discussed in the Company’s RegistrationStatement.

 

**Liquidity and Capital Resources**

 

TheCompany’s principal sources of liquidity are cash flow generated fromoperations and borrowings on the revolving credit facility under the amendedcredit agreement. The Company uses capital primarily to fund day-to-dayoperations and to maintain sufficient inventory levels in order to promptlyfulfill customer orders and to expand the Company’s operations and salesgrowth.

 

On August 2,2005 a Registration Statement relating to the Company’s initial public offeringof common stock was declared effective by the Securities and Exchange Commission.As a result, the Company issued 4,333,334 shares of common stock which wassubsequently sold to the public for $17 per share. The Company receivedestimated net proceeds of $66,493 after deducting the underwriting discountsand offering expenses. On August 5, 2005, the underwriters exercised itsover-allotment option causing the Company to sell an additional 650,000 sharesfor estimated net proceeds of $10,277. As disclosed in the Company RegistrationStatement, the Company used these net proceeds to redeem all of the Company’s Series Apreferred stock for approximately $39,789 and repay approximately $36,981 ofborrowings on the revolving credit facility under the amended credit agreement.

 

TheCompany has a line-of-credit agreement with two lenders for a credit facilitythat allows for borrowings up to $70,000. The line-of-credit is secured by asecurity interest in substantially all of the Company’s assets and terminateson June 17, 2007. Interest is due monthly at the following rates: 1) theLondon Interbank Offered Rate (LIBOR) plus a margin for the first $35,000(4.97% at June 30, 2005); or 2) the prime rate (6.25% at June 30,2005). The Company’s outstanding balance on this facility at June 30, 2005was $45,301. The line-of-credit contains certain restrictive financialcovenants as well as restrictions on dividend payments and future debtborrowings. As discussed above, the Company used the proceeds of its initialpublic offering to pay down approximately $36,981 of borrowings on therevolving credit facility.

 

Fromtime to time the Company issues letters of credit to act as guarantee ofpayment to specified third parties. At June 30, 2005, the Company hadthree letters of credit totaling $300 and at September 30, 2004 theCompany had two letters of credit totaling $3,100. There were no outstandingborrowings on these letters of credit at June 30, 2005 or September 30,2004.

 

In December 2003,the Company amended the line-of-credit agreement to include borrowings up to$2,500 on a loan for capital equipment purchases. The line-of-credit is securedby a security interest in substantially all of the Company’s assets andterminates on June 17, 2007. Interest is due monthly at the followingrates: 1) the London Interbank Offered Rate (LIBOR) plus a margin; or 2) theprime rate plus a margin. The Company had an outstanding balance of $1,580 at June 30,2005.

 

On January 3,2005, the Company issued an unsecured non-negotiable promissory note in theaggregate principal amount of $487 in partial consideration for the purchase ofsubstantially all the assets of Vetpo. The note bears interest at the primerate, payable quarterly. The principal of the note is payable in five equalannual installments, beginning January 1, 2006.

 

TheCompany believes its capital resources will be sufficient to meet itsanticipated cash needs for at least the next twelve months.

 

19

----

 

*Operating Activities*. For the nine-monthsended June 30, 2005, cash provided by operations was $9,395, and wasprimarily attributable to an increase in accounts payable of $19,707, non-cashaccretion of the Series A preferred stock dividends of $3,510 (included ininterest expense) and net income of $3,658 partially offset by increasedinventory levels of $8,936. The increase in accounts payable and inventorieswere related to certain products the Company sells moving from acommission-based agency arrangement to a buy/sell arrangement, productpurchases for the Company’s new distribution center in Holland, Michigan andnew product offerings. For the nine-months ended June 30, 2004 net cashused by operating activities was $9,751, and was primarily attributable toincreases of $14,871 in inventories and $4,543 in accounts receivable. Theincrease in inventories was primarily related to supporting increased salesgrowth and adding a warehouse in Harrisburg, Pennsylvania. During this timeperiod, the Company offered extended payment terms to production animalveterinarians in response to market conditions and experienced increased salesthat led to the increase in accounts receivable balances. The increases inaccounts receivable and inventories were partially offset by an increase of$3,481 in accounts payable, the non-cash accretion of the Series Apreferred stock dividends of $3,106 (included in interest expense) and netincome of $2,100.

 

*Investing Activities.*For the nine-monthsended June 30, 2005, net cash used by investing activities was $5,188 andwas primarily attributable to the acquisition of certain assets of Vetpo andMemorial Pet Care, Inc. In addition, in April 2005, the Companyrelocated from an existing warehouse facility to a larger warehouse facility inNampa, Idaho. The capital expenditures for the equipment for this facility wereapproximately $657. Net cash used by investing activities was $1,135 for thenine-months ended June 30, 2004 and was primarily attributable toinvestments in equipment, including the purchase of office, warehouse andcomputer equipment. In November 2003, the Company relocated from anexisting warehouse facility to a larger warehouse facility in Visalia,California. The capital expenditure for the equipment for this facility wasapproximately $507. In December 2003, the Company signed a new warehouselease for a Harrisburg, Pennsylvania location. The capital expenditure for theequipment for this facility was approximately $684. The Company uses thesefacilities to ship products to its customers in their respective areas of theUnited States. Also, during the nine-months ended June 30, 2004, theCompany upgraded its enterprise information system at a cost of approximately$234. The implementation was effective July 2004.

 

*Financing Activities.*Forthe nine-months ended June 30, 2005, net cash used by financing activitieswas $4,204, and was primarily attributable to payments made on the Company’srevolving credit facility. For the nine-months ended June 30, 2004, netcash provided by financing activities was $10,878, which was generated fromborrowings under the Company’s revolving credit facility. The Company’srevolving credit facility is used to finance the Company working capitalrequirements and fluctuates based on timing of payables and collection ofreceivables.

 

**Related Party Transactions**

 

MWI Veterinary Supply Co.(“MWI Co.”), a subsidiary of the Company, holds a 50.0% membership interest inFeeders’ Advantage, L.L.C (“Feeders’ Advantage”). MWI Co. charged Feeders’Advantage for certain operating and administrative services of $92 and $138 forthe three-months ended June 30, 2005 and 2004, respectively and $288 and$333 for the nine-months ended June 30, 2005 and 2004, respectively. Salesof products to Feeders’ Advantage were $6,433 and $5,236 for the three-monthsended June 30, 2005 and 2004 and $19,380 and $16,118 for the nine-monthsended June 30, 2005 and 2004, respectively. Mr. Cleary, the Company’sPresident and Chief Executive Officer, and Mr. Rebholtz, one of theCompany’s directors, are each members of the board of managers of Feeders’Advantage.

 

MWI Co. provides Feeders’Advantage with a line-of-credit to finance its day-to-day operations. Thisline-of-credit bears interest at the prime rate. The interest due on theline-of-credit is calculated and charged to Feeders’ Advantage on the last dayof each month. Conversely, to the extent MWI Co. has a payable balance due toFeeders’ Advantage, the payable balance accrues interest in favor of Feeders’Advantage at the average federal funds rates in effect for that month.

 

TheCompany had a management and consulting services agreement with BRS LLC andAgri Beef Co., both related parties. For the three-months ended June 30,2005 and 2004 the Company expensed $68 and $81, respectively, related to BRSLLC and expensed $17 and $20, respectively, related to Agri Beef Co. inmanagement and other service fees. For the nine-months ended June 30, 2005and 2004 the Company expensed $281 and $240, respectively, related to BRS LLCand expensed $70 and $60, respectively, related to Agri Beef Co. in managementand other service fees. In June 2005, the Company signed an agreement withBRS LLC and Agri Beef to terminate fees paid to both parties for managementservices that became effective immediately prior to the time the Company’sRegistration Statement was declared effective by the Securities and ExchangeCommission on August 2, 2005. The Company will be required to make aone-time payment to BRS LLC of $1,600 and Agri Beef of $400 under the agreementthat will be recorded as a charge to earnings in the Company’s fourth quarterof 2005.

 

20

----

 

**Item 3. Quantitativeand Qualitative Disclosures About Market Risk**

 

TheCompany is exposed to market risks primarily from changes in interest rates inthe United States. The Company manages this risk by, pursuant to the terms ofthe amended credit agreement, converting the interest rate payable on themajority of the outstanding loan balance on the revolving credit facility intoa lower LIBOR interest rate. The Company does not engage in financial transactionsfor trading or speculative purposes.

 

Theinterest payable on the revolving credit facility under the amended creditagreement is based on variable interest rates and is therefore affected bychanges in market interest rates. If the weighted average interest rate on thevariable rate indebtedness rose 53 basis points (a 10.0% change from thecalculated weighted average interest rate as of June 30, 2005), assumingno change in the outstanding balance on the revolving credit facility under theamended credit agreement (approximately $46,881 comprised of $45,301 creditfacility and $1,580 capital equipment note as of June 30, 2005), theannualized income before taxes and cash flows from operating activities woulddecline by approximately $249. If the weighted average interest rate on thevariable rate indebtedness decreased 53 basis points (a 10.0% change from thecalculated weighted average interest rate as of June 30, 2005), assumingno change in the outstanding balance on the revolving credit facility under theamended credit agreement, the annualized income before taxes and cash flowsfrom operating activities would increase by approximately $249.

 

**Item 4. Controls and Procedures**

 

Managementof the Company, including the Chief Executive Officer and the Chief FinancialOfficer of the Company, have evaluated the effectiveness of the Company’sdisclosure controls and procedures (as defined in Rule 13a-15(e) ofthe Securities Exchange Act of 1934) as of June 30, 2005. Based on thisevaluation, the Chief Executive Officer and Chief Financial Officer concludedthat the Company’s disclosure controls and procedures are effective to providereasonable assurance that information required to be disclosed by the Companyin the reports that it files or submits under the Securities Exchange Act of1934 is recorded, processed, summarized and reported within the time periodsspecified by the Securities and Exchange Commission’s rules and forms.

 

There were no changes inthe Company’s internal control over financial reporting that occurred duringthe Company’s most recently completed fiscal quarter that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

21

----

 

**PART II. OTHER INFORMATION**

 

**CautionaryStatement for Purposes of “Safe Harbor Provisions” of the Private SecuritiesLitigation Reform Act of 1995**

 

*This quarterly report on Form 10Q containsforward-looking statements within the meaning of the federal securities laws.Statements that are not historical facts, including statements about theCompany’s beliefs and expectations, are forward-looking statements.Forward-looking statements include statements preceded by, followed by or thatinclude the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,”“plan,” “estimate,” “target,” “project,” “intend” and similar expressions.These statements include, among others, statements regarding the Company’sexpected business outlook, anticipated financial and operating results, theCompany’s business strategy and means to implement its strategy, the Company’sobjectives, the amount and timing of capital expenditures, the amount andtiming of interest expense, the likelihood of the Company’s success inexpanding the Company’s business, financing plans, budgets, working capitalneeds and sources of liquidity.*

 

*Forward-looking statements are only predictions and are notguarantees of performance. These statements are based on management’s beliefsand assumptions, which in turn are based on currently available information.Important assumptions relating to the forward-looking statements include, amongothers assumptions regarding demand for the Company’s products, the expansionof product offerings geographically or through new applications, the timing andcost of planned capital expenditures, competitive conditions and generaleconomic conditions. These assumptions could prove inaccurate. Forward-lookingstatements also involve known and unknown risks and uncertainties, which couldcause actual results that differ materially from those contained in anyforward-looking statement. Many of these factors are beyond the Company’sability to control or predict. Such factors include, but are not limited to,the following: vendor rebates based upon attaining certain growth goals;changes in the way vendors introduce products to market; the recall of asignificant product by one of the Company’s vendors; seasonality; the impact ofgeneral economic trends on the Company’s business; the timing and effectivenessof marketing programs offered by the Company’s vendors; the timing of theintroduction of new products and services by the Company’s vendors; andcompetition.*

 

*Except as required by applicable law, including thesecurities laws of the United States and the rules and regulations of theSecurities and Exchange Commission, or SEC, the Company is under no obligationto publicly update or revise any forward-looking statements, whether as aresult of any new information, future events or otherwise. Potential investorsshould not place undue reliance on the Company’s forward-looking statements.Before you invest in the Company’s common stock, you should be aware that theoccurrence of the events described in the “Risk Factors” section filed inthe Company’s Registration Statement could harm the Company’s business,prospects, operating results, and financial condition. Although the Companybelieves that the expectations reflected in the forward-looking statements arereasonable, the Company cannot guarantee future results or performance.*

 

## **Item1. Legal Proceedings**

 

## **TheCompany is not currently a party to any material pending legal proceedings andis not aware of any claims that could have a materially adverse effect on theCompany’s financial position, results of operations, or cash flows.**

 

## **Item 2. Unregistered Sales of Equity Securitiesand Use of Proceeds**

 

None.

 

## **Item 3. Defaults Upon Senior Securities**

 

None.

 

## **Item 4. Submission of Matters to a Vote of SecurityHolders**

 

On April 20, 2005, amajority of the Company’s stockholders approved a change of the name of theCompany from MWI Holdings, Inc. to MWI Veterinary Supply, Inc.

 

## **Item5. Other Information**

 

None.

 

22

----

 

**Item 6. Exhibits**

 
|   | 10.1   | Agreement for  Product Purchases dated as of June 30, 2005 by and between MWI  Veterinary Supply Co. and Medical Management International, Inc., dba  Banfield, The Pet Hospital, incorporated by reference to Exhibit 10.19  of Amendment No. 2 of the Registrant’s Registration Statement on Form S-1,  filed July 5, 2005.  |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 10.2   | Agreement for  Logistics Services dated as of June 30, 2005 by and between MWI  Veterinary Supply Co. and Medical Management International, Inc., dba  Banfield, The Pet Hospital, incorporated by reference to Exhibit 10.20  of Amendment No. 2 of the Registrant’s Registration Statement on Form S-1,  filed July 5, 2005. |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 31.1   | Certification of  CEO Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                              |
|   |   |                                                                                                                                                                                                                                                                                                                                                              |
|   | 31.2   | Certification of  CFO 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                                                                                                                                                                                                                                |

 

SIGNATURE

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the Registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                        | MWI Veterinary Supply, Inc.                                                                  |   |
|-----------------------------|---------------------------------------------------------------------------------------------------|--------|
|                        | (Registrant)                                                                                      |   |
|                        |                                                                                              |   |
|                        |                                                                                              |   |
| Date: August 12,  2005 | /S/  James F. Cleary, Jr.                                                                    |   |
|                        | James  F. Cleary, Jr.*President and Chief Executive Officer  (Principal  Executive Officer)* |   |

 

23

----