**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

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**FORM 10-Q**

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| **x**                                                                                                                                                                                                                                                                                                          | **QUARTERLY REPORT PURSUANT TO SECTION 13 or  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                                            |
| **For the  quarter ended June 30, 2007**                                                                                                                                                                                                                                                                       |
| ** **                                                                                                                                                                                                                                                                                                     |
| **OR**                                                                                                                                                                                                                                                                                                         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                                            |
| **o**                                                                                                                                                                                                                                                                                                          | **TRANSITION REPORT PURSUANT TO SECTION 13 or  15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                         |
| ** **                                                                                                                                                                                                                                                                                                     | ** **                                                                                                            |
| **For the  transition period  from                      to                      ** |
| ** **                                                                                                                                                                                                                                                                                                     |
| **Commission  File Number:  000-51468**                                                                                                                                                                                                                                                                   |

 

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**MWI VETERINARY SUPPLY, INC.**

(Exact name of Registrantas specified in its Charter)

| **Delaware**                                               |   | **02-0620757**                           |
|------------------------------------------------------------|--------|------------------------------------------|
| (State or other  jurisdiction)                             |   | (I.R.S. Employer  Identification Number) |
|                                                       |   |                                     |
| **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) |

 

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Indicate by check markwhether the Registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports) and (2) has been subject to such filingrequirements for the past 90 days. Yes x No o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. 

| Large Accelerated  Filer  o | Accelerated  Filer  x | Non-Accelerated  Filer  o |
|---------------------------------------|---------------------------------|-------------------------------------|

 

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

The number ofshares of the Registrant’s common stock, $0.01 par value, outstanding as ofJuly 30, 2007 was 12,015,178.

 

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**MWIVETERINARY 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, 2007 and 2006 |       |       |
|         |       |                                                                                                     |       |       |
|         |       | Condensed  Consolidated Balance Sheets as of June 30, 2007 and September 30, 2006                        |       |       |
|         |       |                                                                                                     |       |       |
|         |       | Condensed  Consolidated Statements of Cash Flows for the nine months ended June 30, 2007  and 2006       |       |       |
|         |       |                                                                                                     |       |       |
|         |       | 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 1A.** | ** ** | **Risk Factors**                                                                                         |       |       |
| ** **   | ** ** | ** **                                                                                               | ** ** | ** ** |
| **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**                                                                                             |       |       |

 

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**PARTI.  FINANCIAL INFORMATION**

**Item 1.    Financial Statements**

**MWI VETERINARY SUPPLY, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOMEDollars and shares in thousands, except per share data(unaudited)**
| ** **                                   | ** ** | **Three months ended June 30,** | ** ** | **Nine months ended June 30,** | ** ** |
|----------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                   | ** ** | **2007**                                            | ** ** | **2006**                                           | ** ** | **2007** | ** ** | **2006** | ** ** |
| Revenues:                                    |       |                                                |       |                                               |       |   |   |   |   |
| Product sales                                |       | $                                                   | 173,548    |                                               | $          | 154,295 |   | $ | 486,646 |   | $ | 414,598 |   |
| Product sales to  related party              |       | 7,750                                               |       | 7,467                                              |       | 26,176 |   | 24,823 |   |
| Commissions                                  |       | 2,555                                               |       | 2,190                                              |       | 7,129 |   | 5,696 |   |
| Total revenues                               |       | 183,853                                             |       | 163,952                                            |       | 519,951 |   | 445,117 |   |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Cost of product sales                        |       | 158,391                                             |       | 141,041                                            |       | 444,318 |   | 379,526 |   |
| Gross profit                                 |       | 25,462                                              |       | 22,911                                             |       | 75,633 |   | 65,591 |   |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Selling, general and administrative expenses |       | 18,302                                              |       | 16,389                                             |       | 53,802 |   | 46,040 |   |
| Depreciation and amortization                |       | 603                                                 |       | 495                                                |       | 1,774 |   | 1,410 |   |
| Operating income                             |       | 6,557                                               |       | 6,027                                              |       | 20,057 |   | 18,141 |   |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Other income (expense):                      |       |                                                |       |                                               |       |   |   |   |   |
| Interest expense                             |       | (76                                                 | )          | (466                                               | )          | (505 | ) | (1,599 | ) |
| Earnings of equity  method investees         |       | 35                                                  |       | 35                                                 |       | 122 |   | 117 |   |
| Other                                        |       | 243                                                 |       | 84                                                 |       | 434 |   | 250 |   |
| Total other income  (expense), net           |       | 202                                                 |       | (347                                               | )          | 51 |   | (1,232 | ) |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Income before taxes                          |       | 6,759                                               |       | 5,680                                              |       | 20,108 |   | 16,909 |   |
| Income tax expense                           |       | (2,499                                              | )          | (1,911                                             | )          | (7,556 | ) | (6,346 | ) |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Net income                                   |       | $                                                   | 4,260      |                                               | $          | 3,769 |   | $ | 12,552 |   | $ | 10,563 |   |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Earnings per share:                          |       |                                                |       |                                               |       |   |   |   |   |
| Basic                                        |       | $                                                   | 0.36       |                                               | $          | 0.36 |   | $ | 1.07 |   | $ | 1.00 |   |
| Diluted                                      |       | $                                                   | 0.35       |                                               | $          | 0.35 |   | $ | 1.05 |   | $ | 0.97 |   |
|                                         |       |                                                |       |                                               |       |   |   |   |   |
| Weighted average common shares outstanding:  |       |                                                |       |                                               |       |   |   |   |   |
| Basic                                        |       | 11,904                                              |       | 10,610                                             |       | 11,679 |   | 10,592 |   |
| Diluted                                      |       | 12,168                                              |       | 10,916                                             |       | 11,967 |   | 10,888 |   |

 

See Notes toCondensed Consolidated Financial Statements

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**MWI VETERINARY SUPPLY, INC.CONDENSED CONSOLIDATED BALANCE SHEETSDollars and shares in thousands, except per share data(unaudited)**
| ** **                                                                                                       | ** ** | **June 30,** | ** ** | **September 30,** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                                                                                                       | ** ** | **2007**          | ** ** | **2006**               | ** ** |
| **Assets**                                                                                                       | ** ** | ** **        | ** ** | ** **             | ** ** |
| ** **                                                                                                       | ** ** | ** **        | ** ** | ** **             | ** ** |
| Current Assets:                                                                                                  |       |              |       |                   |       |
| Cash                                                                                                             |       | $                 | 12,329     |                   | $          | 37 |   |
| Receivables, net                                                                                                 |       | 97,170            |       | 99,518                 |       |
| Inventories                                                                                                      |       | 85,444            |       | 85,083                 |       |
| Prepaid expenses and  other current assets                                                                       |       | 1,924             |       | 2,651                  |       |
| Deferred income taxes                                                                                            |       | 886               |       | 502                    |       |
| Total current assets                                                                                             |       | 197,753           |       | 187,791                |       |
|                                                                                                             |       |              |       |                   |       |
| Property and equipment, net                                                                                      |       | 7,799             |       | 7,053                  |       |
| Goodwill                                                                                                         |       | 31,904            |       | 31,562                 |       |
| Intangibles, net                                                                                                 |       | 6,067             |       | 2,381                  |       |
| Other assets, net                                                                                                |       | 2,231             |       | 1,772                  |       |
| Total assets                                                                                                     |       | $                 | 245,754    |                   | $          | 230,559 |   |
|                                                                                                             |       |              |       |                   |       |
| **Liabilities And Stockholders’ Equity**                                                                    | ** ** | ** **        | ** ** | ** **             | ** ** |
| ** **                                                                                                       | ** ** | ** **        | ** ** | ** **             | ** ** |
| Current Liabilities:                                                                                             |       |              |       |                   |       |
| Line-of-credit                                                                                                   |       | $                 | —     |                   | $          | 10,559 |   |
| Accounts payable                                                                                                 |       | 83,804            |       | 82,561                 |       |
| Accrued expenses                                                                                                 |       | 5,849             |       | 6,919                  |       |
| Current maturities of  long-term debt                                                                            |       | 97                |       | 97                     |       |
| Total current  liabilities                                                                                       |       | 89,750            |       | 100,136                |       |
|                                                                                                             |       |              |       |                   |       |
| Deferred income taxes                                                                                            |       | 432               |       | 505                    |       |
|                                                                                                             |       |              |       |                   |       |
| Long-term debt                                                                                                   |       | 195               |       | 292                    |       |
|                                                                                                             |       |              |       |                   |       |
| Commitments and contingencies                                                                                    |       |              |       |                   |       |
|                                                                                                             |       |              |       |                   |       |
| **Stockholders’ Equity**                                                                                    | ** ** | ** **        | ** ** | ** **             | ** ** |
| Common stock $0.01 par  value, 40,000 authorized; 12,015 and 11,549 shares issued and outstanding,  respectively |       | 120               |       | 115                    |       |
| Additional paid in  capital                                                                                      |       | 120,677           |       | 107,483                |       |
| Retained earnings                                                                                                |       | 34,580            |       | 22,028                 |       |
| Total stockholders’  equity                                                                                 |       | 155,377           |       | 129,626                |       |
| Total liabilities and stockholders’ equity                                                                  |       | $                 | 245,754    |                   | $          | 230,559 |   |

 

See Notes to CondensedConsolidated Financial Statements

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**MWI VETERINARY SUPPLY, INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWSDollars in thousands(unaudited)**
| ** **                                                                         | ** ** | **Nine months ended June 30,** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| **Cash Flows From Operating Activities:**                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Net income                                                                         |       | $                                                  | 12,552     |   | $ | 10,563 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                               |       |   |   |
| Depreciation and  amortization                                                     |       | 1,782                                              |       | 1,417 |   |
| Amortization of debt  issuance costs                                               |       | 52                                                 |       | 105 |   |
| Stock-based  compensation expense                                                  |       | 60                                                 |       | — |   |
| Deferred income taxes                                                              |       | (457                                               | )          | (322 | ) |
| Earnings of equity  method investees                                               |       | (122                                               | )          | (117 | ) |
| Loss (gain) on disposal  of property and equipment                                 |       | 18                                                 |       | (61 | ) |
| Tax benefit of common  stock options                                               |       | (1,104                                             | )          | — |   |
| Other                                                                              |       | (10                                                | )          | (3 | ) |
| Changes in operating  assets and liabilities:                                      |       |                                               |       |   |   |
| Receivables                                                                        |       | 2,711                                              |       | (13,104 | ) |
| Inventories                                                                        |       | 369                                                |       | (9,727 | ) |
| Prepaid expenses and  other current assets                                         |       | 763                                                |       | 331 |   |
| Accounts payable                                                                   |       | 942                                                |       | 11,232 |   |
| Accrued expenses                                                                   |       | (158                                               | )          | 690 |   |
| Net cash provided by  operating activities                                         |       | 17,398                                             |       | 1,004 |   |
|                                                                               |       |                                               |       |   |   |
| **Cash Flows From Investing Activities:**                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Business acquisitions                                                              |       | (4,610                                             | )          | (3,549 | ) |
| Purchases of property  and equipment                                               |       | (2,118                                             | )          | (2,830 | ) |
| Deposit for property  and equipment acquisition                                    |       | —                                             |       | (1,429 | ) |
| Sale of property and  equipment                                                    |       | —                                             |       | 1,455 |   |
| Other                                                                              |       | (250                                               | )          | 2 |   |
| Net cash used in  investing activities                                             |       | (6,978                                             | )          | (6,351 | ) |
|                                                                               |       |                                               |       |   |   |
| **Cash Flows From Financing Activities:**                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Issuance of common  stock, net of issuance costs                                   |       | 11,252                                             |       | — |   |
| Proceeds from stock  options                                                       |       | 296                                                |       | 353 |   |
| Tax benefit of common  stock options                                               |       | 1,104                                              |       | 72 |   |
| Payment on long-term  debt                                                         |       | (97                                                | )          | (133 | ) |
| Net  borrowings/(payments) on line-of-credit                                       |       | (10,559                                            | )          | 5,077 |   |
| Debt issuance costs                                                                |       | (124                                               | )          | — |   |
| Net cash provided by  financing activities                                         |       | 1,872                                              |       | 5,369 |   |
|                                                                               |       |                                               |       |   |   |
| **Increase in Cash**                                                               |       | 12,292                                             |       | 22 |   |
| ** **                                                                         | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Cash at Beginning of Period                                                        |       | 37                                                 |       | 31 |   |
|                                                                               |       |                                               |       |   |   |
| Cash at End of Period                                                              |       | $                                                  | 12,329     |   | $ | 53 |   |

 

See Notes toCondensed Consolidated Financial Statements

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**MWI VETERINARY SUPPLY, INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTSDollars in thousands, except per share data(unaudited)**

## **NOTE 1 — GENERAL**

**Basis of Presentation**

Theaccompanying unaudited condensed consolidated financial statements include theresults of operations, financial position and cash flows of MWI VeterinarySupply, Inc. and its wholly-owned subsidiaries (collectively referred to as “we,”“us,” and “our” throughout this Form 10-Q). All material intercompany balances have been eliminated.

In theopinion of our management, the accompanying unaudited condensed consolidatedfinancial statements include all adjustments necessary to present fairly, inall material respects, our results for the periods presented. These condensedconsolidated financial statements have been prepared by us pursuant to therules and regulations of the Securities and Exchange Commission (“SEC”).  Certain information and footnote disclosuresnormally included in financial statements prepared in accordance withaccounting principles generally accepted in the United States have beencondensed or omitted pursuant to such rules and regulations.  These condensed consolidated financialstatements should be read in conjunction with the consolidated financialstatements and accompanying notes included in our 2006 Annual Report on Form10-K filed with the SEC on November 22, 2006. The results of operations for the three and nine months ended June 30,2007 are not necessarily indicative of results to be expected for the entirefiscal year.

Ourunaudited condensed consolidated balance sheet as of September 30, 2006 hasbeen derived from the audited consolidated balance sheet as of that date.

**Use of Estimates**

*The*accompanyingunaudited condensed consolidated financial statements have been prepared on theaccrual basis of accounting using accounting principles generally accepted inthe United States. In preparing financial information, we use certain estimatesand assumptions that may affect the reported amounts and disclosures. Some ofthese estimates require difficult, subjective and complex judgments aboutmatters that are inherently uncertain. As a result, actual results could differfrom these estimates. Estimates are used when accounting for sales returns,allowance for doubtful accounts, customer incentives, vendor rebates,inventories, goodwill and intangible assets, income taxes, impairment oflong-lived assets, depreciation and amortization, employee benefits, unearnedincome and contingencies. The estimates of fair value of assets and liabilitiesand the disclosure of contingent assets and liabilities as of the balance sheetdate and reported amounts of revenue and expenses for the periods are based onassumptions that we believe to be reasonable.

**Revenue Recognition**

*We*sellproducts we source from vendors to our customers through either a “buy/sell”transaction or an agency relationship with our vendors. In a “buy/sell”transaction, we purchase or take inventory of products from the vendor. When acustomer places an order with us, we pick, pack and ship products, and theninvoice the customer for the order. We recognize revenue from “buy/sell”transactions as product sales when the product is delivered to the customer. Weaccept product returns from our customers. We estimate returns based onhistorical experience and recognize these estimated returns as a reduction ofproduct sales. Product returns have not been significant to our financialstatements. In an agency relationship, we generally do not purchase and takeinventory of products from vendors. We receive an order from a customer, thentransmit the order to the vendor, who picks, packs and ships the order to thecustomer. In some cases, the vendor invoices and collects payment from thecustomer, while in other cases we invoice and collect payment from the customeron behalf of the vendor. We receive a commission payment for soliciting theorder from the customer and for providing other customer service activities.Commissions are recognized when the services upon which the commissions arebased are completed. Gross billings from agency contracts were $54,286 and$40,675 for the three months ended June 30, 2007 and 2006, respectively, andgenerated commission revenue of $2,555 and $2,190, respectively. Gross billingsfrom agency contracts were $143,874 and $112,895 for the nine months ended June30, 2007 and 2006, respectively, and generated commission revenue of $7,129 and$5,696, respectively.

**Cost of Product Sales and Vendor Rebates**

*Cost***of product sales consist of ourinventory product cost, including shipping costs to and from our distributioncenters. Vendor rebates are recorded based on the terms of the contracts orprograms with each vendor. We receive quarterly, trimester, semi-annual andannual performance-based rebates from third-party vendors based upon attainmentof certain sales and/or purchase goals. Sales rebates are classified in theaccompanying consolidated statements of income as a reduction to 

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cost of product sales at the time thesales performance measures are achieved. Purchase rebates are measured againstinventory purchases from the vendors and are classified as a reduction ofinventory until the product is sold. When the inventory is sold and purchasemeasures are achieved, purchase rebates are recognized as a reduction to costof product sales.

**Reclassifications**

Certain reclassifications, none of whichaffected results of operations, have been made to the accompanying condensedconsolidated financial statements for prior periods to conform to current yearpresentation.

## **NOTE 2 — EFFECT OF RECENTLY ISSUED ACCOUNTINGSTANDARDS**

In May 2005, theFinancial Accounting Standards Board (the “FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 154, *AccountingChanges and Error Corrections*(“SFAS 154”)*.*SFAS 154replaces FASB Statement No. 3, *ReportingAccounting Changes in Interim Financial Statements*, and replacesAccounting Principles Board (“APB”) Opinion No. 20, *Accounting Changes.*SFAS 154 is effectivefor accounting changes and corrections of errors made in fiscal years beginningafter March 15, 2005 and was effective for us the fiscal year beginningOctober 1, 2006. The adoption of SFAS 154 did not have a materialeffect on our consolidated financial statements.

In July 2006, theFASB issued Interpretation No. 48 (“FIN 48”), *Accountingfor Uncertainty in Income Taxes*, which clarifies the accounting foruncertainty in income taxes recognized in the financial statements inaccordance with FASB Statement No. 109, *Accountingfor Income Taxes*. FIN 48 provides guidance on the financialstatement recognition and measurement of a tax position taken or expected to betaken in a tax return. FIN 48 also provides guidance on derecognition,classification, interest and penalties, accounting in interim periods,disclosures, and transition. FIN 48 is effective for our fiscal year beginningOctober 1, 2007. We are currently evaluating the expected impact, if any,that FIN 48 will have on our consolidated financial statements.

In September 2006,the FASB issued SFAS No. 157, *Fair Value Measurements*(“SFAS 157”). SFAS 157 defines fair value, establishes a framework formeasuring fair value according to accounting principles generally accepted inthe United States, and expands disclosure requirements regarding fair valuemeasurements. This statement emphasizes that fair value should be determinedbased on assumptions market participants would use to price the asset orliability. SFAS 157 is effective for our fiscal year and interim periodbeginning October 1, 2008. We are currently evaluating the expectedimpact, if any, that SFAS 157 will have on our consolidated financialstatements.

In September 2006,the Securities and Exchange Commission (“SEC”) issued Staff Accounting BulletinNo. 108 (“SAB 108”), which provides guidance on quantifying and evaluatingthe materiality of unrecorded misstatements. SAB 108 is effective for ourfiscal year beginning October 1, 2007. We are currently evaluating theexpected impact, if any, that SAB 108 will have on our consolidated financialstatements.

In February 2007, theFASB issued SFAS No. 159, *The Fair Value Option forFinancial Assets and Financial Liabilities* (“SFAS 159”).  SFAS 159 permits entities to choose tomeasure certain financial assets and liabilities at fair value. The provisionsof SFAS 159 are effective for our fiscal year beginning October 1, 2008. We arecurrently evaluating the expected impact, if any, that SFAS 159 will have onour consolidated financial statements.

**NOTE 3**—**BUSINESS ACQUISITION**

In June 2007, we acquiredsubstantially all of the assets of Securos, Inc. (“Securos”) and InternationalVeterinary Distribution Network, Inc. (“IVDN”) for approximately $5,096,consisting of $4,610 in cash and 13,058 shares of restricted common stockvalued at the time of the issuance at approximately $486.  Additional contingent consideration will bepaid to Securos and IVDN shareholders if certain defined financial targets areachieved in each year through 2011 and is currently estimated to beapproximately $1.1 million. These additional payments will increase thepurchase price and goodwill at the time the financial targets areachieved.  Based in Charlton, MA, Securosis a provider of veterinary orthopedic products in the United States and selectcountries abroad.  Also based inCharlton, MA, IVDN sources private label products in the categories ofveterinary surgical consumables and equipment and handheld instruments.

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The following tablesummarizes the preliminary estimated fair values of the assets acquired andliabilities assumed at the date of the acquisition.  These preliminary purchase price allocationsare based on a combination of third-party valuations and internal analyses andmay be adjusted during the allocation period as defined in SFAS No. 141, *Business Combinations*.
| Receivables                |   | $      | 353    |   |
|----------------------------|--------|--------|--------|--------|
| Inventories                |   | 731    |   |
| Property and  equipment    |   | 286    |   |
| Intangibles                |   | 3,907  |   |
| Goodwill                   |   | 343    |   |
| Other assets               |   | 60     |   |
| Total assets  acquired     |   | 5,680  |   |
|                       |   |   |   |
| Accounts payable           |   | 569    |   |
| Other  liabilities         |   | 15     |   |
| Total  liabilities assumed |   | 584    |   |
|                       |   |   |   |
| Net assets acquired        |   | $      | 5,096  |   |

 

**NOTE 4**—**RECEIVABLES**
|                                  | ** ** | **June 30,** | ** ** | **September 30,** | ** ** |
|----------------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                       | ** ** | **2007**          | ** ** | **2006**               | ** ** |
| Trade                            |       | $                 | 89,758     |                   | $          | 90,454 |   |
| Vendor rebates  and programs     |       | 8,240             |       | 9,818                  |       |
| Interest                         |       | 69                |       | —                 |       |
| Related party                    |       | 18                |       | 400                    |       |
|                             |       | 98,085            |       | 100,672                |       |
| Allowance for  doubtful accounts |       | (915              | )          | (1,154                 | )          |
|                             |       | $                 | 97,170     |                   | $          | 99,518 |   |

 

Product sales resulting from transactions with asingle customer were 10% of total product sales during both the three and ninemonths ended June 30, 2007 and 2006. Approximately 11% and 10% of our tradereceivables resulted from transactions with this single customer as of June 30,2007 and September 30, 2006, respectively.

Product sales resulting from transactions with Feeders’Advantage LLC (“Feeders’ Advantage”), a related party, were 4% and 5% of totalproduct sales during the three and nine months ended June 30, 2007,respectively.  Product sales resultingfrom transactions with Feeders’ Advantage were 5% and 6% of total product salesduring the three and nine months ended June 30, 2006, respectively.

**NOTE 5**—**PROPERTY AND EQUIPMENT**
|                                            | ** ** | **June 30,** | ** ** | **September 30,** | ** ** |
|--------------------------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                                 | ** ** | **2007**          | ** ** | **2006**               | ** ** |
| Land                                       |       | $                 | 20         |                   | $          | 20 |   |
| Buildings and  leasehold improvements      |       | 2,161             |       | 1,779                  |       |
| Machinery,  furniture and equipment        |       | 10,423            |       | 9,138                  |       |
| Computer  equipment                        |       | 3,035             |       | 2,899                  |       |
| Construction in  progress                  |       | 827               |       | 377                    |       |
|                                       |       | 16,466            |       | 14,213                 |       |
| Accumulated  depreciation and amortization |       | (8,667            | )          | (7,160                 | )          |
|                                       |       | $                 | 7,799      |                   | $          | 7,053 |   |

 

8

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Depreciation expense for the three months ended June30, 2007 and 2006 was $529 and $440, respectively, and $1,551 and $1,266 forthe nine months ended June 30, 2007 and 2006, respectively.

During the fiscal year 2006, the Company relocatedfrom its existing, owned distribution center to a new larger leased facilitylocated in Denver, Colorado and sold the owned distribution center. The sale ofthe distribution center closed in February 2006, resulting in a gain ofapproximately $62 that is recorded in selling, general and administrativeexpenses in the condensed consolidated statement of income.

**NOTE 6**—**INTANGIBLES**
|                           | ** ** | **June 30,** | ** ** | **September 30,** | ** ** |
|---------------------------|------------|-------------------|------------|------------------------|------------|
| ** **                | ** ** | **2007**          | ** ** | **2006**               | ** ** |
| Amortizing:               |       |              |       |                   |       |
| Customer lists            |       | $                 | 4,145      |                   | $          | 2,410 |   |
| Covenants not to compete  |       | 356               |       | 256                    |       |
| Other                     |       | 168               |       | 36                     |       |
|                      |       | 4,669             |       | 2,702                  |       |
| Accumulated  amortization |       | (604              | )          | (373                   | )          |
|                      |       | 4,065             |       | 2,329                  |       |
| Non-Amortizing:           |       |              |       |                   |       |
| Trade names and Patents   |       | 2,002             |       | 52                     |       |
|                      |       | $                 | 6,067      |                   | $          | 2,381 |   |

 

Amortizationexpense was $78 and $57 for the three months ended June 30, 2007 and 2006,respectively, and $231 and $151 for the nine months ended June 30, 2007 and2006, respectively.  Intangible assetsare amortized over their expected useful life, which generally ranges from 5-20years.  Estimated future annual amortizationexpense related to intangible assets as of June 30, 2007 follows:
|                    | ** ** | **Amount** | ** ** |
|--------------------|------------|------------|------------|
| Remainder of  2007 |       | $          | 109        |   |
| 2008               |       | 438        |       |
| 2009               |       | 438        |       |
| 2010               |       | 416        |       |
| 2011               |       | 398        |       |
| Thereafter         |       | 2,266      |       |
|               |       | $          | 4,065      |   |

 

The above projection ofamortization expense includes preliminary estimates of intangible assets andlives associated with the acquisition of Securos and IVDN.  These amounts may be adjusted during theallocation period as defined in SFAS No. 141, *BusinessCombinations*.

**NOTE 7**—**CREDIT FACILITY AND LONG-TERM DEBT**

**Line-of-Credit**—OnDecember 13, 2006, MWI Veterinary Supply Co., (our wholly-owned subsidiary) asborrower, entered into an unsecured credit agreement with us and Memorial PetCare, Inc., as guarantors, and Bank of America, N.A. and Wells Fargo Bank,N.A., (collectively, the “lenders”) for the provision of a revolving creditfacility (the “facility”).  The facilityallows for borrowings in the aggregate of $70,000, with the right to request anincrease in the commitment of the lenders to $100,000.  The facility has a maturity date of December1, 2011 and a variable interest rate equal to the Daily LIBOR Floating Rate orthe LIBOR 1-month fixed rate (at our option) plus a margin ranging from 0.7% to1.25%.  The lenders also receive an unusedline fee and letter of credit fee equal to 0.125% of the unused amount of thefacility. Our outstanding balance on the facility at June 30, 2007 was zero andthe interest rate for the facility was 6.2% as of that date.  This facility replaced the five-year CreditAgreement dated June 18, 2002 between MWI Veterinary Supply Co. and Bank ofAmerica, N.A., which had an outstanding balance at September 30, 2006 of$10,559.

9

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The line-of-credit contains certain financialcovenants as well as other restrictive covenants. The facility allows for theissuance of up to $10,000 in letters of credit. The letters of credit typicallyact as a guarantee of payment to certain third-parties in accordance withspecified terms and conditions. We had eleven letters of credit totaling $780at both June 30, 2007 and September 30, 2006. There were no outstandingborrowings on these letters of credit at either June 30, 2007 or September 30,2006.

**Long-Term Debt**—InJanuary 2005, we issued a promissory note in the aggregate principal amount of$487 in partial consideration for the purchase of substantially all the assetsof Vetpo Distributors, Inc. The note bears interest at the prime rate (8.25% atJune 30, 2007), payable quarterly. The principal of the note is payable in fiveequal annual installments, the first of which was due on January 1, 2006.  The balance on this promissory note was $292at June 30, 2007 and $389 at September 30, 2006.

**NOTE 8**—**STOCK OPTIONS**

We havetwo stock-based award plans, the 2002 Stock Option Plan and the Amended andRestated 2005 Stock-Based Incentive Compensation Plan (the “2005 Plan”).  The 2005 Plan allows our Board of Directorsto grant common stock options, restricted stock, deferred units and otherstock-based awards to directors, executives and other key employees.  These plans have been developed to provideadditional incentives by allowing equity ownership in our company and, as aresult, encouraging participants to contribute to our success.  At June 30, 2007, 444,113 options to purchasecommon stock were outstanding (274,889 options vested and exercisable) with aweighted average exercise price of $3.35 and expiring through September2015.  During the three months ended June30, 2007, we did not grant any shares of restricted stock under the 2005Plan.  At June 30, 2007, 1,566,528 shareswere available to be issued under our stock-based award plans.

EffectiveOctober 1, 2005, we adopted the provisions of SFAS No. 123-(Revised), *Share-Based Payment* (“SFAS 123-R”) forour share-based compensation plans. We previously accounted for these plansunder the recognition and measurement principals of APB No. 25, *Accounting for Stock Issued to Employees* (“APB No. 25”), asamended by SFAS No. 148, *Accounting for Stock BasedCompensation—Transition and Disclosure* (“SFAS 148”). Under APB No.25, no compensation expense was recorded in earnings for the stock-based awardsgranted under our stock-based award plans. The pro forma effects on net incomeand earnings per share for stock-based awards were instead disclosed in afootnote to the financial statements. Under SFAS 123-R, all share-basedcompensation is measured at the grant date, based on the fair value of theaward, and is recognized as an expense in earnings over the requisite serviceperiod.

Weadopted SFAS 123-R using the modified prospective method. Under this transitionmethod, compensation expense includes the expense for all share-based awardsgranted prior to, but not yet vested as of October 1, 2005, excluding thoseoptions initially valued using the minimum value method.  At October 1, 2005, all of our options topurchase common stock were either vested and exercisable or were initiallyvalued using the minimum value method. Therefore no compensation expense was recognized for these stock-based awardsin our fiscal year ended September 30, 2006. We granted no common stock options during the three and nine monthsended June 30, 2007.  During the threeand nine months ended June 30, 2007, we recognized $23 and $65 of compensationexpense related to restricted stock grants, respectively.  During the three and nine months ended June30, 2006, we recognized $6 and $7 of compensation expense related to restrictedstock grants, respectively.

**NOTE 9**—**INCOME TAXES**

Oureffective tax rate for the three months ended June 30, 2007 and 2006 was 37.0%and 33.6%, respectively.  Our effectivetax rate for the nine months ended June 30, 2007 and 2006 was 37.6% and 37.5%,respectively.  The change in theeffective rate for the three and nine months ended June 30, 2007 as compared tothe same period in the prior fiscal year was primarily a result of changes inour estimated state income tax rate partially due to the utilization of statetax credits.

10

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## **NOTE 10 — COMPUTATION OF EARNINGS PER SHARE***(In thousands, except per sharedata)*

|                                                                   | ** ** | **Three months ended June 30,** | ** ** |
|-------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                        | ** ** | **2007**                                            | ** ** | **2006** | ** ** |
| ** **                                                        | ** ** | **Basic**                                           | ** ** | **Diluted** | ** ** | **Basic** | ** ** | **Diluted** | ** ** |
|                                                              |       |                                                |       |   |   |   |   |   |   |
| Net income                                                        |       | $                                                   | 4,260      |   | $ | 4,260 |   | $ | 3,769 |   | $ | 3,769 |   |
| Weighted average common  shares outstanding                       |       | 11,904                                              |       | 11,904 |   | 10,610 |   | 10,610 |   |
| Effect of diluted  securities  Stock options and restricted stock |       |                                                |       | 264 |   |   |   | 306 |   |
| Weighted average shares  outstanding                              |       |                                                |       | 12,168 |   |   |   | 10,916 |   |
| Earnings per share                                                |       | $                                                   | 0.36       |   | $ | 0.35 |   | $ | 0.36 |   | $ | 0.35 |   |
| Anti-dilutive shares excluded from calculation                    |       |                                                |       | — |   |   |   | 1 |   |

 
|                                                                   | ** ** | **Nine months ended June 30,** | ** ** |
|-------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                        | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| ** **                                                        | ** ** | **Basic**                                          | ** ** | **Diluted** | ** ** | **Basic** | ** ** | **Diluted** | ** ** |
| Net income                                                        |       | $                                                  | 12,552     |   | $ | 12,552 |   | $ | 10,563 |   | $ | 10,563 |   |
| Weighted average common  shares outstanding                       |       | 11,679                                             |       | 11,679 |   | 10,592 |   | 10,592 |   |
| Effect of diluted  securities  Stock options and restricted stock |       |                                               |       | 288 |   |   |   | 296 |   |
| Weighted average shares  outstanding                              |       |                                               |       | 11,967 |   |   |   | 10,888 |   |
| Earnings per share                                                |       | $                                                  | 1.07       |   | $ | 1.05 |   | $ | 1.00 |   | $ | 0.97 |   |
| Anti-dilutive shares excluded from calculation                    |       |                                               |       | — |   |   |   | 1 |   |

 

**NOTE 11**—**RELATED PARTIES**

MWI VeterinarySupply Co., our wholly-owned subsidiary, holds a 50.0% membership interest inFeeders’ Advantage. MWI Veterinary Supply Co. charged Feeders’ Advantage forcertain operating and administrative services in the amounts of $116 and $120for the three months ended June 30, 2007 and 2006, respectively, and $402 and$398 for the nine months ended June 30, 2007 and 2006, respectively.  Sales of products to Feeders’ Advantage were$7,746 and $7,467 for the three months ended June 30, 2007 and 2006, respectively,and $26,170 and $24,822 for the nine months ended June 30, 2007 and 2006,respectively.

MWI VeterinarySupply Co. provides Feeders’ Advantage with a line-of-credit to finance itsday-to-day operations. This line-of-credit bears interest at the prime rate.The interest due on the line-of-credit is calculated and charged to Feeders’Advantage on the last day of each month. Conversely, to the extent MWIVeterinary Supply Co. has a payable balance due to Feeders’ Advantage, thepayable balance accrues interest in favor of Feeders’ Advantage at the averagefederal funds rates in effect for that month. As of June 30, 2007, MWIVeterinary Supply Co. had a payable balance with Feeders’ Advantage of$357.  As of September 30, 2006, MWIVeterinary Supply Co. had a receivable balance with Feeder’s Advantage of $397.

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**NOTE 12— STATEMENTS OF CASH FLOWS – SUPPLEMENTAL AND NON CASH DISCLOSURES**
|                                                                         | ** ** | **Nine months ended June 30,** | ** ** |
|-------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                              | ** ** | **2007**                                           | ** ** | **2006** | ** ** |
| *Supplemental  Disclosures*                                             | * *   | * *                                           | * *   | * * | * * |
| Cash paid for  interest                                                 |       | $                                                  | 482        |   | $ | 1,433 |   |
| Cash paid for  income taxes                                             |       | 7,057                                              |       | 6,296 |   |
| *Noncash  Activities*                                                   | * *   | * *                                           | * *   | * * | * * |
| Issuance of  unregistered restricted common stock for asset acquisition |       | 486                                                |       | 995 |   |
| Equipment acquisitions  financed with accounts payable                  |       | 41                                                 |       | 50 |   |
|                                                                         |            |                                                    |            |  |  |  |  |

 

**NOTE 13**—**CONTINGENCIES AND COMMITMENTS**

## From time to time, in the normal course of business, we may become aparty to legal proceedings that may have an adverse effect on our financialposition, results of operations and cash flows. Management presently believesthat the ultimate outcome of these proceedings, including the proceedingsdescribed below, will not have a material adverse effect on our financialposition, cash flows or overall trends in results of operations.  However, litigation is subject to inherentuncertainties, and unfavorable outcomes could occur. An unfavorable outcomecould include the payment of monetary damages or, in cases for which injunctiverelief is sought, an injunction prohibiting us from selling one or moreproducts or taking certain other actions. Were an unfavorable outcome to occur, our business or results ofoperations could be materially harmed.

*Putney Inc. v. Pfizer Inc. andMWI Veterinary Supply, Inc., United States District Court, D. Me. 2007*

Putney sells to veterinarydistributors a generic, human-approved form of a pharmaceutical sold by Pfizer.Since December of 2006, MWI has been party to a Distribution Agreement withPutney pursuant to which MWI purchases Putney’s product for resale.  Pfizer has contended that the sale andpromotion of Putney’s product is unlawful. Putney has sued Pfizer and MWI seeking a declaration that the sale andpromotion of Putney’s product is lawful. Putney also alleges, as against MWI, that MWI has disparaged Putney’sproduct, has breached the Distribution Agreement, and is obligated to indemnifyPutney. No amount of damages is specified. Pfizer has filed a counterclaim,against Putney, in which it makes no claims of any type against MWI. MWI hasyet to answer the complaint, and intends to contest vigorously any allegationthat it has breached any agreement, disparaged Putney’s product, or isotherwise liable to Putney in any way. As the action has just been filed, andas it is not clear to what extent MWI will remain involved in or affected bythis dispute, it is not possible to evaluate the likely outcome or to estimatedamages, if any.

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**REPORT OF INDEPENDENTREGISTERED PUBLIC ACCOUNTING FIRM**

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

We have reviewed theaccompanying condensed consolidated balance sheet of MWI Veterinary Supply,Inc. and subsidiaries (the “Company”) as of June 30, 2007, and the relatedcondensed consolidated statements of income for the three-month and nine-monthperiods ended June 30, 2007 and 2006, and of cash flows for the nine-monthperiods ended June 30, 2007 and 2006. These interim financial statements arethe responsibility of the Company’s management.

We conducted our reviewsin accordance with the standards of the Public Company Accounting OversightBoard (United States). A review of interim financial information consistsprincipally of applying analytical procedures and making inquiries of personsresponsible for financial and accounting matters. It is substantially less inscope than an audit conducted in accordance with the standards of the PublicCompany Accounting Oversight Board (United States), the objective of which isthe expression of an opinion regarding the financial statements taken as awhole. Accordingly, we do not express such an opinion.

Based on our reviews, weare not aware of any material modifications that should be made to suchcondensed consolidated interim financial statements for them to be inconformity with accounting principles generally accepted in the United Statesof America.

We have previouslyaudited, in accordance with the standards of the Public Company AccountingOversight Board (United States), the consolidated balance sheet of MWIVeterinary Supply, Inc. and subsidiaries as of September 30, 2006, and therelated consolidated statements of income, comprehensive income, stockholders’equity, and cash flows for the year then ended (not presented herein); and inour report dated November 21, 2006, we expressed an unqualified opinion onthose consolidated financial statements. In our opinion, the information setforth in the accompanying condensed consolidated balance sheet as ofSeptember 30, 2006, is fairly stated, in all material respects, inrelation to the consolidated balance sheet from which it has been derived.

 
| /s/ DELOITTE & TOUCHE LLP |
|-------------------------------|
| Boise, Idaho                  |
| July 30, 2007                 |

 

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

*Alldollar amounts are presented in thousands, except for per share amounts.*

**Overview**

Weare a leading distributor of animal health products to veterinarians across theUnited States.  We distribute more than11,000 products sourced from over 400 vendors to approximately 15,000veterinary practices nationwide from twelve strategically located distributioncenters.  Products we sell includepharmaceuticals, vaccines, parasiticides, diagnostics, capital equipment,supplies, veterinary pet food and nutritional products.  We market these products to veterinarians inboth the companion animal and production animal markets. Historically,approximately two-thirds of our total revenues have been generated from salesto the companion animal market and one-third from sales to the productionanimal market.  The increasing maturityof the production animal market results in lower margins on product salesrelative to the companion animal market. While the average order size for companion animal health products isoften smaller than production animal health products, companion animal healthproducts typically have higher margins.

*Common Stock Offerings *

On August 3, 2005, we completed our initial public offering in which wesold an aggregate of 4,983,334 shares (including the exercise of theunderwriters’ over-allotment option) of our common stock at a price to thepublic of $17 per share.  We received netproceeds of $77,159 after deducting the underwriting discounts and offeringexpenses.  We used the net proceeds toredeem all of our Series A preferred stock for approximately $39,789 and torepay approximately $37,370 of borrowings outstanding on the revolving credit facilityunder our former credit agreement.  Inthe fourth quarter of our fiscal year 2006, we issued 908,846 shares (includingthe shares issued upon the partial exercise of the underwriters’ over-allotmentoption) of our common stock at a price to the public of $32.25 per share.  We used the net proceeds of $27,341 receivedfrom this offering to pay down our borrowings on our former revolving creditfacility.  On April 20, 2007, we issued348,974 shares of our common stock at a price to the public of $35.00 pershare.  We used the net proceeds receivedfrom this offering to pay down our borrowings on our revolving credit facilityand for general corporate purposes.

*Sales*

Wesell products that we source from our vendors to our customers through either a“buy/sell” transaction or an agency relationship with our vendors. In a “buy/sell”transaction, we purchase or take inventory of products from our vendors. When acustomer places an order, we pick, pack and ship products, and then invoice thecustomer for the order. We record sales from “buy/sell” transactions, whichaccount for the majority of our business, as revenue in conformity withaccounting principles generally accepted in the United States. In an agencyrelationship, we generally do not purchase and take inventory of products fromvendors. When we receive an order from a customer, we transmit the order to thevendor, who picks, packs and ships the order to our customer. In some cases,the vendor invoices and collects payment from the customer, while in othercases we invoice and collect payment from the customer on behalf of the vendor.We receive a commission payment for soliciting the order from the customer andfor providing other customer service activities. The aggregate revenue wereceive in agency transactions constitutes the “commissions” line item on ourstatement of income and is recorded in conformity with accounting principlesgenerally accepted in the United States. The vendor determines the method weuse to sell the products. Historically, vendors have occasionally switchedbetween the “buy/sell” and agency models for particular products in response tomarket conditions related to that particular product. A switch between modelscan impact our revenues, gross margin, gross margin percentage and operatingincome.

*Vendor Rebates*

We typically renegotiatevendor contracts annually.  These vendorcontracts may include terms defining rebates, commissions and exclusivityrequirements. Vendor rebates based on sales are classified in our accompanying consolidatedstatements of income as a reduction to cost of product sales at the time thesales performance measures are achieved. Purchase rebates are measured against inventory purchases from thevendors and are a reduction of inventory until the product is sold.  When the inventory is sold, purchase rebatesare recognized as a reduction to cost of product sales. Many of our vendors’rebate programs are based on a calendar year. Historically, the three monthsended December 31 has been our most significant quarter for recognition ofrebates. During the calendar year 2006, certain of our vendors modified their 

14

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rebate programs with us.These rebate program modifications changed the revenue growth targets fromannual-weighted calendar year targets to either quarterly or trimester growthtargets. These modifications resulted in rebates previously expected to beearned and recognized in our first 2007 fiscal quarter ended December 31, 2006,to be recognized in our fiscal year 2006.

*Securos, Inc. and International VeterinaryDistribution Network, Inc. Acquisition*

In June 2007, we acquiredsubstantially all of the assets of Securos, Inc. (“Securos”) and InternationalVeterinary Distribution Network, Inc. (“IVDN”) for approximately $5,096,consisting of $4,610 in cash and 13,058 shares of restricted common stockvalued at the time of the issuance at approximately $486.  Additionalcontingent consideration will be paid to Securos and IVDN shareholders ifcertain defined financial targets are achieved in each year through 2011 and iscurrently estimated to be approximately $1.1 million. These additionalpayments will increase the purchase price and goodwill at the time thefinancial targets are achieved.  Basedin Charlton, MA, Securos is a provider of veterinary orthopedic products in theUnited States and select countries abroad. Also based in Charlton, MA, IVDN sources private label products in thecategories of veterinary surgical consumables and equipment and handheldinstruments.  Our headcount increased by20 employees as a result of this acquisition.

*Northland Veterinary Supply, Ltd. Acquisition*

In May 2006, we acquiredsubstantially all of the assets of Northland Veterinary Supply, Ltd. (“Northland”)for approximately $4,546, consisting of $3,551 in cash (including directacquisition costs of approximately $116) and 28,744 shares of restricted commonstock valued at the time of issuance at approximately $995.  Based in Clear Lake, Wisconsin, Northland isa distributor of animal health products to veterinary practices and producersacross the Midwestern portion of the United States.

For more information onour business, see our Annual Report on Form 10-K filed with the SEC on November22, 2006.

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**Results of Operations**

The following table summarizes ourresults of operations for the three and nine months ended June 30, 2007 and2006, in dollars and as a percentage of total revenues.
| ** **                                                  | ** ** | **Three Months Ended June 30,** | ** ** | **Nine Months Ended June 30,** | ** ** |
|-------------------------------------------------------------|------------|-----------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                  | ** ** | **2007**                                            | ** ** | **%**                                              | ** ** | **2006** | ** ** | **%** | ** ** | **2007** | ** ** | **%** | ** ** | **2006** | ** ** | **%** | ** ** |
| Revenues:                                                   |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Product sales                                               |       | $                                                   | 173,548    |                                               | 94.4       | % | $ | 154,295 |   | 94.1 | % | $ | 486,646 |   | 93.6 | % | $ | 414,598 |   | 93.1 | % |
| Product sales to related party                              |       | 7,750                                               |       | 4.2                                                | %          | 7,467 |   | 4.6 | % | 26,176 |   | 5.0 | % | 24,823 |   | 5.6 | % |
| Commissions                                                 |       | 2,555                                               |       | 1.4                                                | %          | 2,190 |   | 1.3 | % | 7,129 |   | 1.4 | % | 5,696 |   | 1.3 | % |
| Total revenues                                              |       | 183,853                                             |       | 100.0                                              | %          | 163,952 |   | 100.0 | % | 519,951 |   | 100.0 | % | 445,117 |   | 100.0 | % |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of product  sales                                      |       | 158,391                                             |       | 86.1                                               | %          | 141,041 |   | 86.0 | % | 444,318 |   | 85.5 | % | 379,526 |   | 85.3 | % |
| Gross profit                                                |       | 25,462                                              |       | 13.9                                               | %          | 22,911 |   | 14.0 | % | 75,633 |   | 14.5 | % | 65,591 |   | 14.7 | % |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling, general  and administrative expenses               |       | 18,302                                              |       | 10.0                                               | %          | 16,389 |   | 10.0 | % | 53,802 |   | 10.3 | % | 46,040 |   | 10.3 | % |
| Depreciation and  amortization                              |       | 603                                                 |       | 0.3                                                | %          | 495 |   | 0.3 | % | 1,774 |   | 0.3 | % | 1,410 |   | 0.3 | % |
| Operating income                                            |       | 6,557                                               |       | 3.6                                                | %          | 6,027 |   | 3.7 | % | 20,057 |   | 3.9 | % | 18,141 |   | 4.1 | % |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income  (expense):                                    |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                            |       | (76                                                 | )          | 0.0                                                | %          | (466 | ) | -0.3 | % | (505 | ) | -0.1 | % | (1,599 | ) | -0.4 | % |
| Earnings of equity method investees                         |       | 35                                                  |       | 0.0                                                | %          | 35 |   | 0.0 | % | 122 |   | 0.0 | % | 117 |   | 0.0 | % |
| Other                                                       |       | 243                                                 |       | 0.1                                                | %          | 84 |   | 0.1 | % | 434 |   | 0.1 | % | 250 |   | 0.1 | % |
| Total other income (expense), net                           |       | 202                                                 |       | 0.1                                                | %          | (347 | ) | -0.2 | % | 51 |   | 0.0 | % | (1,232 | ) | -0.3 | % |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Income before  taxes                                        |       | 6,759                                               |       | 3.7                                                | %          | 5,680 |   | 3.5 | % | 20,108 |   | 3.9 | % | 16,909 |   | 3.8 | % |
| Income tax  expense                                         |       | (2,499                                              | )          | -1.4                                               | %          | (1,911 | ) | -1.2 | % | (7,556 | ) | -1.5 | % | (6,346 | ) | -1.4 | % |
| Net income                                                  |       | $                                                   | 4,260      |                                               | 2.3        | % | $ | 3,769 |   | 2.3 | % | $ | 12,552 |   | 2.4 | % | $ | 10,563 |   | 2.4 | % |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per  share:                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                       |       | $                                                   | 0.36       |                                               |       |   | $ | 0.36 |   |   |   | $ | 1.07 |   |   |   | $ | 1.00 |   |   |   |
| Diluted                                                     |       | $                                                   | 0.35       |                                               |       |   | $ | 0.35 |   |   |   | $ | 1.05 |   |   |   | $ | 0.97 |   |   |   |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average  common shares outstanding (in thousands): |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                       |       | 11,904                                              |       |                                               |       | 10,610 |   |   |   | 11,679 |   |   |   | 10,592 |   |   |   |
| Diluted                                                     |       | 12,168                                              |       |                                               |       | 10,916 |   |   |   | 11,967 |   |   |   | 10,888 |   |   |   |
|                                                        |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Data:                                                 |       |                                                |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Product sales from Internet as a percentage of sales        |       | 25                                                  | %          |                                               |       | 22 | % |   |   | 24 | % |   |   | 23 | % |   |   |
| Field sales representatives (at  end of period)        |       | 165                                                 |       |                                               |       | 146 |   |   |   | 165 |   |   |   | 146 |   |   |   |
| Telesales representatives (at  end of period)          |       | 117                                                 |       |                                               |       | 99 |   |   |   | 117 |   |   |   | 99 |   |   |   |
| Fill rate (1)                                               |       | 98                                                  | %          |                                               |       | 98 | % |   |   | 98 | % |   |   | 98 | % |   |   |

 

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(1)          Defined as,for any period, the dollar value of orders shipped the same day they wereplaced from any distribution center expressed as a percentage of the totaldollar value of the orders placed by customers in the period.

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**Three Months Ended June 30, 2007 Compared to Three MonthsEnded June 30, 2006**

*Total Revenues*. Total revenues increased 12.1% to $183,853 for the three months endedJune 30, 2007 from $163,952 for the three months ended June 30, 2006.  Revenue growth was negatively impacted latein the quarter because one of our key vendors offered a significant marketingprogram late in the third quarter of fiscal 2006 that was not offered in thethird quarter of fiscal 2007, and another key vendor announced a July 1, 2007price increase that was less comprehensive than their July 1, 2006 priceincrease.  The increase in revenues forthe quarter ended June 30, 2007 was attributable to an increase in productsales volumes of a wide variety of products to both new and existingcustomers.  Revenues attributable to newcustomers represented approximately 83% of the growth in total revenues duringthe three months ended June 30, 2007. Revenues attributable to existing customersrepresented approximately 17% of the growth in total revenues during the threemonths ended June 30, 2007.  For thepurpose of calculating growth rates of new and existing customer revenue, wehave defined a new customer as a customer that did not purchase product from usin the corresponding fiscal quarter of the prior year, with the remainingcustomer base being considered an existing customer.  Also contributing to revenue growth was theincrease in commissions on our agency sales of 16.7% to $2,555 for the threemonths ended June 30, 2007 from $2,190 for the same period of the prior fiscalyear.

*Gross Profit*. Gross profit increased by 11.1% to $25,462 for the three months endedJune 30, 2007 from $22,911 for the three months ended June 30, 2006.  This increase in gross profit was a result ofincreased total revenues as discussed above as compared to the three monthsended June 30, 2006.  Gross profit as apercentage of total revenues decreased 0.1% to 13.9% for the three months endedJune 30, 2007 compared to 14.0% for the same period in the prior year.  Actual rebate dollars decreased approximately$1,000 for the three months ended June 30, 2007 as compared to the same periodin the prior fiscal year, due to lower sales growth in the current quarter witha key vendor.  The decrease in rebatedollars was largely offset by improvements in our cost of product sales as ourproduct margin improved in the quarter ended June 30, 2007 as compared to thequarter ended June 30, 2006.

*Selling, General and Administrative (“SG&A”)*.  SG&A expenses increased 11.7% to $18,302for the three months ended June 30, 2007 from $16,389 for the three monthsended June 30, 2006.  SG&A expensesas a percentage of revenues remained consistent at 10.0%.  The dollar increase was primarily due toincreased compensation costs as a result of additional headcount of 97 teammembers, including 19 new field sales and 18 telesales representatives.  The increase in total headcount also includesan additional 20 employees added as a result of the Securos and IVDNacquisitions in June 2007.  Employeebenefits increased as a result of the growth in headcount, as well as higherhealth insurance costs due to growth in the volume and magnitude of individualclaims.  Also contributing to the growthin SG&A expenses were increased occupancy and location costs due to theexpansion of a number of distribution centers and sales growth and highercredit card fees as a result of customer usage.

*Depreciation and Amortization. *Depreciation and amortization expenseincreased 21.8% to $603 for the three months ended June 30, 2007 from $495 forthe three months ended June 30, 2006. This increase was primarily the result of a number of capitalexpenditures, with the majority of those coming from new or expandeddistribution centers.  These additions orexpansions include facilities in Orlando, Florida; Atlanta, Georgia; ClearLake, Wisconsin; Denver, Colorado; and Glendale, Arizona.  Additionally, we have also made improvementsto our information technology infrastructure.

*Other Expenses*. Other expenses decreased 158.2% to $202 in income for the three monthsended June 30, 2007 from $347 in expense for the three months ended June 30,2006. This decrease in other expenses was due to a decline in interest expenseof $390 to $76 for the three months ended June 30, 2007 compared to $466 forthe three months ended June 30, 2006. This decrease was a result of the lower average loan balance on thefacility.  We used the proceeds from thesale of common stock in our follow-on offerings in the fourth quarter of ourfiscal year 2006 and the third quarter of our fiscal year 2007 to pay down theloan balance.  The follow-on offering inthe third quarter of fiscal year 2007 coupled with positive cash fromoperations allowed us to maintain a positive cash balance during much of thequarter.

*Income Tax Expense*.  Our effective tax rate for the three monthsended June 30, 2007 and 2006 was 37.0% and 33.6%, respectively.   The change in the effective rate in thethree months ended June 30, 2007 as compared to the same period in the priorfiscal year was primarily a result of a change in our estimated state incometax rate partially due to the utilization of state tax credits.

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**Nine Months Ended June 30, 2007 Compared to Nine Months EndedJune 30, 2006**

*Total Revenues*. Total revenues increased 16.8% to $519,951 for the nine months endedJune 30, 2007 from $445,117 for the nine months ended June 30, 2006.  This increase was attributable to an increasein product sales volumes of a wide variety of products to both new and existingcustomers.  Revenues attributable to newcustomers represented approximately 73% of the growth in total revenues duringthe nine months ended June 30, 2007. Revenues attributable to existingcustomers represented approximately 27% of the growth in total revenues duringthe nine months ended June 30, 2007.  Forthe purpose of calculating growth rates of new and existing customer revenue,we have defined a new customer as a customer that did not purchase product fromus in the corresponding nine months of the prior year, with the remainingcustomer base being considered an existing customer.  Also contributing to revenue growth was theincrease in commissions on our agency sales of 25.2% to $7,129 for the ninemonths ended June 30, 2007 from $5,696 for the same period of the prior fiscalyear.

*Gross Profit*. Gross profit increased by 15.3% to $75,633 for the nine months endedJune 30, 2007 from $65,591 for the nine months ended June 30, 2006.  This increase in gross profit was a result ofincreased total revenues as discussed above as compared to the nine monthsended June 30, 2006.  Gross profit as apercentage of total revenues decreased approximately 0.2% to 14.5% for the ninemonths ended June 30, 2007 from 14.7% for the same period in the prioryear.  This decrease was due to decreasedvendor rebates as a percentage of total revenues.  Vendor rebates have historically been highestduring our first fiscal quarter ended December 31, since certain significantvendor rebate programs were designed to include annual targets to be achievedbased on the calendar year.  Vendormodifications to rebate programs during the calendar year 2006 fromannual-weighted calendar year growth targets to either quarterly or trimestergrowth targets resulted in a shift of rebate dollars that historically wouldhave been earned in our first quarter of our fiscal year 2007 ended December31, 2006 to be earned in our fiscal year 2006. Included in vendor rebates for the fiscal year 2006 were approximately$2,500 ($1,500 after tax) due to this shift in the timing of rebates.  Actual rebate dollars decreased $643 for thenine months ended June 30, 2007 as compared to the same period of the priorfiscal year.

*Selling, General and Administrative (“SG&A”)*.  SG&A expenses increased 16.9% to $53,802for the nine months ended June 30, 2007 from $46,040 for the nine months endedJune 30, 2006.  This dollar increase wasprimarily due to increased compensation costs as a result of additionalheadcount of 97 team members, including 19 new field sales and 18 telesalesrepresentatives.  The increase in totalheadcount also includes an additional 20 employees added as a result of theSecuros and IVDN acquisitions in June 2007. Other changes are the same as those described above under the threemonth explanation.

*Depreciation and Amortization. *Depreciation and amortization expenseincreased 25.8% to $1,774 for the nine months ended June 30, 2007 from $1,410for the nine months ended June 30, 2006. The changes are the same as those described above under the three monthexplanation.

*Other Expenses*. Other expenses decreased 104.1% to $51 in income for the nine monthsended June 30, 2007 from $1,232 in expense for the nine months ended June 30,2006. This decrease in other expenses was due to a reduction in interestexpense of $1,094 to $505 for the nine months ended June 30, 2007 compared to$1,599 for the nine months ended June 30, 2006. The change in interest expense is a result of the same reasons describedabove in the three month explanation.

*Income Tax Expense*.  Our effective tax rate for the nine monthsended June 30, 2007 and 2006 was 37.6% and 37.5%, respectively.

**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.  The accompanying condensed consolidatedfinancial statements are prepared using the same critical accounting policiesdiscussed in our Annual Report on Form 10-K filed with the SEC on November 22,2006.

**Liquidity and Capital Resources**

Ourprincipal sources of liquidity are cash flow generated from operations andborrowings on the revolving credit facility under the credit agreement. We usecapital primarily to fund day-to-day operations and to maintain sufficientinventory levels in order to promptly fulfill customer orders and to expand ouroperations and sales.  We believe ourcapital resources will be sufficient to meet our anticipated cash needs for atleast the next twelve months.

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MWI Veterinary Supply Co., (our wholly-ownedsubsidiary) has a line-of-credit under a revolving credit facility with twolenders.  The facility allows forborrowings in the aggregate of $70,000, with the right to request an increasein the commitment of the lenders to $100,000. The facility has a maturity date of December 1, 2011 and a variableinterest rate equal to the Daily LIBOR Floating Rate or the LIBOR 1-month fixedrate (at our option) plus a margin ranging from 0.7% to 1.25%.  The lenders also receive an unused line feeand letter of credit fee equal to 0.125% of the unused amount of the facility.Our outstanding balance on the facility at June 30, 2007 was zero and theinterest rate on the facility was 6.2% as of this date.  The line-of-credit contains certain financialcovenants as well as other restrictive covenants.

The facility allows for the issuance of up to $10,000in letters of credit. The letters of credit typically act as a guarantee ofpayment to certain third parties in accordance with specified terms andconditions. We had eleven letters of credit totaling $780 at June 30, 2007 andSeptember 30, 2006. There were no outstanding borrowings on these letters ofcredit at either June 30, 2007 or September 30, 2006.

*Operating Activities*.  For the nine months ended June 30, 2007, cashprovided by operations was $17,398 and was primarily attributable to net incomeof $12,552 and a reduction in receivables of $2,711 due to positive collectionsfor the period with slower revenue growth as previously discussed in thequarter ended June 30, 2007.  The slowdown in revenue growth also gave rise to improvements in other key areas on thebalance sheet, including inventories.

For the nine-months ended June 30, 2006, cash providedby operations was $1,004 and was primarily attributable to net income of$10,563 and an increase in accounts payable of $11,232, partially offset byincreases in receivables of $13,104 and inventories of $9,727.  The increase in accounts payable was directlytied to the increase in inventory levels as a result of us purchasing productsin advance of vendor price increases and purchases related to the newdistribution center from the Northland acquisition and the opening of a newdistribution center located in Orlando, Florida.  Increases in receivables were a result of theCompany’s sales growth and due to extended payment terms to production animalveterinarians in response to market conditions.

*Investing Activities.*  For the nine months ended June 30, 2007, netcash used in investing activities was $6,978 and was primarily due to theacquisition of Securos and IVDN for $4,610 coupled with capital expenditures of$2,118.  We had approximately $1,600 inexpenditures related to our facilities and approximately $450 in expendituresrelated to information technology projects.

For the nine-months ended June 30, 2006, net cash usedin investing activities was $6,351. Significant transactions impacting cash used in investing activitiesduring the nine-months ended June 30, 2006 included the acquisition ofNorthland for $3,549 in cash, capital expenditures of $2,830 primarily relatedto relocating our existing distribution center to a new larger distributioncenter in Denver, Colorado and due to the purchase of equipment for a newdistribution center in Orlando, Florida. During the three-months ended March 31, 2006 we completed the sale of adistribution center previously operated in Denver, Colorado for $1,455.

*FinancingActivities.*  For the nine months ended June 30,2007, net cash provided by financing activities was $1,872.  In April 2007, we issued 348,974 shares ofcommon stock resulting in cash of $11,252. This cash was used to pay down our credit facility.  Our credit facility had a zero balance atJune 30, 2007.

For the nine-months ended June 30, 2006, net cashprovided by financing activities was $5,369, and was primarily attributable toborrowing on our credit facility.

**Contractual Obligations andGuarantees**

For information on our contractualobligations and guarantees, see our Annual Report on Form 10-K filed onNovember 22, 2006 with the SEC. During the nine months ended June 30, 2007 weentered into the following leasing arrangements:

·                  InNovember 2006, we leased approximately 16,000 square feet of additionaldistribution center space located in Denver, Colorado with an incrementalaverage annual lease of $72 per year and expiring in 2013.

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·                  Alsoin November 2006, we renewed one lease agreement and entered into a secondlease agreement for a combined 19,500 square foot distribution center locatedin Glendale, Arizona.  The lease expenseaverages $115 per year and the leases expire in 2009.

·                  InMarch 2007, we leased approximately 5,500 square feet of additionaldistribution center space located in Nampa, Idaho with an incremental averageannual lease of $28 per year and expiring in 2012.

·                  InJune 2007, we entered into a lease agreement for approximately 105,000 squarefeet for a distribution center located in Edwardsville, Kansas.  We agreed to lease approximately 80,000square feet for the first eighteen (18) months and approximately 105,000 squarefeet for the remaining 102 months.  Thelease expense averages $356 per year for the first part of the lease and $487for the second part of the lease expiring in 2017.  The lease will commence on October 1, 2007.

·                  InJuly 2007, we leased approximately 15,000 square feet for a building inSturbridge, Massachusetts in connection with the acquisitions of substantiallyall of the assets of Securos and IVDN. The average annual lease is $77 and expires in 2012.  We expect Securos to relocate to this largerfacility during our fiscal fourth quarter.

**Item 3. Quantitative and Qualitative Disclosures About Market Risk**

TheCompany is exposed to market risks primarily from changes in interest rates inthe United States. The Company does not engage in financial transactions fortrading or speculative purposes.

Theinterest payable on the facility is based on variable interest rates and istherefore affected by changes in market interest rates. The outstanding balanceon the facility as of June 30, 2007 was zero. Therefore, there was no exposure to market risks as of this date.  If there had been a balance on the facility,a change of 10% from the interest rate as of June 30, 2007, which was 6.2%,would have impacted financial results. We would not have expected the change to be material.

**Item4.  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) of theSecurities Exchange Act of 1934) as of June 30, 2007.  Based on this evaluation, the Chief ExecutiveOfficer and Chief Financial Officer concluded that the Company’s disclosurecontrols and procedures, including the accumulation and communication ofdisclosures to the Company’s Chief Executive Officer and Chief FinancialOfficer as appropriate to allow timely decisions regarding required disclosure,are effective to provide reasonable assurance that information required to bedisclosed by the Company in the reports that it files or submits under theSecurities Exchange Act of 1934 is recorded, processed, summarized and reportedwithin the time periods specified by the SEC’s rules and forms.

There were nochanges in the Company’s internal control over financial reporting thatoccurred during the Company’s most recently completed fiscal quarter that havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

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**PART II. OTHER INFORMATION**

**Cautionary Statement for Purposesof “Safe Harbor Provisions” of the Private Securities Litigation Reform Act of1995**

*Thisquarterly report on Form 10-Q contains forward-looking statements within themeaning of the federal securities laws. Statements that are not historicalfacts, including statements about our beliefs and expectations, areforward-looking statements. Forward-looking statements include statementspreceded by, followed by or that include the words “may,” “could,” “would,” “should,”“believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend”and similar expressions. These statements include, among others, statementsregarding our expected business outlook, anticipated financial and operatingresults, our business strategy and means to implement our strategy, ourobjectives, the amount and timing of capital expenditures, the amount andtiming of interest expense, the likelihood of our success in expanding ourbusiness, financing plans, budgets, working capital needs and sources ofliquidity.*

*Forward-looking statements are only predictions and are notguarantees of our performance. These statements are based on our management’sbeliefs and assumptions, which in turn are based on currently availableinformation. Important assumptions relating to the forward-looking statementsinclude, among others assumptions regarding demand for our products, theexpansion of product offerings geographically or through new applications, thetiming and cost of planned capital expenditures, competitive conditions andgeneral economic conditions. These assumptions could prove inaccurate.Forward-looking statements also involve known and unknown risks anduncertainties, which could cause actual results that differ materially fromthose contained in any forward-looking statement. Many of these factors arebeyond our ability to control or predict. Such factors include, but are notlimited to, the following:*

·                  *vendor rebates based upon attaining certain growth goals;*

·                  *changes in the way vendors introduce products to market;*

·                  *the recall of a significant product by one of our vendors;*

·                  *regulatory changes;*

·                  *seasonality;*

·                  *the impact of general economic trends on our business;*

·                  *the timing and effectiveness of marketing programs offered by ourvendors;*

·                  *the timing of the introduction of new products and services by ourvendors; and*

·                  *competition.*

*Except as required by applicable law, including thesecurities laws of the United States and the rules and regulations of the SEC,we are under no obligation to publicly update or revise any forward-lookingstatements, whether as a result of any new information, future events orotherwise. You should not place undue reliance on our forward-lookingstatements. Although we believe that the expectations reflected in theforward-looking statements are reasonable, we cannot guarantee future resultsor performance.*

## **Item 1. Legal Proceedings**

## From time to time, in the normal course of business, we may become aparty to legal proceedings that may have an adverse effect on our financialposition, results of operations and cash flows. Management presently believesthat the ultimate outcome of these proceedings, including the proceedingsdescribed below, will not have a material adverse effect on our financial position,cash flows or overall trends in results of operations.  However, litigation is subject to inherentuncertainties, and unfavorable outcomes could occur. An unfavorable outcomecould include the payment of monetary damages or, in cases for which injunctiverelief is sought, an injunction prohibiting us from selling one or moreproducts or 

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## taking certain other actions. Were an unfavorable outcome to occur, our business or results ofoperations could be materially harmed.

*Putney Inc. v. Pfizer Inc. andMWI Veterinary Supply, Inc., United States District Court, D. Me. 2007*

Putney sells to veterinarydistributors a generic, human-approved form of a pharmaceutical sold by Pfizer.Since December of 2006, MWI has been party to a Distribution Agreement withPutney pursuant to which MWI purchases Putney’s product for resale.  Pfizer has contended that the sale andpromotion of Putney’s product is unlawful. Putney has sued Pfizer and MWI seeking a declaration that the sale andpromotion of Putney’s product is lawful. Putney also alleges, as against MWI, that MWI has disparaged Putney’sproduct, has breached the Distribution Agreement, and is obligated to indemnifyPutney. No amount of damages is specified. Pfizer has filed a counterclaim, againstPutney, in which it makes no claims of any type against MWI. MWI has yet toanswer the complaint, and intends to contest vigorously any allegation that ithas breached any agreement, disparaged Putney’s product, or is otherwise liableto Putney in any way. As the action has just been filed, and as it is not clearto what extent MWI will remain involved in or affected by this dispute, it isnot possible to evaluate the likely outcome or to estimate damages, if any.

## **Item 1A. Risk Factors**

**There have been no materialchanges from our risk factors as previously reported in our Annual Report onForm 10-K for the year ended September 30, 2006*.***

## **Item 2. Unregistered Sales of Equity Securities and Use of Proceeds**

## On June 8, 2007, we issued an aggregate of 13,058 shares of restrictedcommon stock to Securos, Inc. and International Veterinary DistributionNetwork, Inc. as part of the consideration for the purchase of substantiallyall the assets of Securos, Inc. and International Veterinary DistributionNetwork, Inc.  The securities describedin this paragraph were issued in reliance upon the exemption from theregistration requirements of the Securities Act, as set forth in Section 4(2)under the Securities Act and Regulation D promulgated thereunder relative to salesby an issuer not involving any public offering.

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

None.

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

None.

## **Item 5. Other Information**

None.

**Item 6.  Exhibits**

3.1                 MWI VeterinarySupply, Inc. Amended and Restated Certificate of Incorporation, as amended onJuly 30, 2007

3.2                 MWI VeterinarySupply, Inc. Amended and Restated Bylaws, as amended on July 30, 2007

10.1           Livestock ProductsAgreement  between MWI Veterinary Supply,Inc. and Pfizer, Inc. effective as of December 23, 2006  †

10.2           Rimadyl/ClavamoxDistribution Agreement between MWI Veterinary Supply, Inc. and Pfizer, Inc.effective as of March 15, 2007 †

10.3           EquineProducts Marketing Agreement between MWI Veterinary Supply, Inc. and Pfizer,Inc. effective as of January 1, 2007 †

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15                    Letter re:Unaudited Interim Financial Information

31.1           Certification of CEOPursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2           Certification of CFOPursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32                    CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-OxleyAct of 2002

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† Certain portions of theexhibit have been omitted pursuant to a confidential treatment requestsubmitted to the SEC

SIGNATURE

Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized.

 
|                       | MWI Veterinary  Supply, Inc.                                                     |     |
|-----------------------|----------------------------------------------------------------------------------|----------|
|                  | (Registrant)                                                                     |     |
|                  |                                                                             |     |
|                  |                                                                             |     |
| Date: August 1,  2007 | /s/ Mary Patricia B. Thompson                                                    |     |
|                  | Mary Patricia B. Thompson                                                        |     |
|                  | *Senior  Vice President of Finance and  Administration, Chief Financial Officer* | * * |

 

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