##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 001-16783
 
 VCA ANTECH, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    95-4097995(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 12401 West Olympic Boulevard
Los Angeles, California 90064-1022  (Address of principal executive offices)
 (310) 571-6500  (Registrants telephone number, including area code)
 þ o
  þ o o
 o þ




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##### 



VCA ANTECH, INC.
FORM 10-Q
JUNE 30, 2007
 TABLE OF CONTENTS
 PageNumberPart I.
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed, Consolidated Balance Sheets as of June 30, 2007 and
December 31, 2006
    
    
    1Condensed, Consolidated Income Statements for the Three and Six Months Ended
June 30, 2007 and 2006
    
    
    2Condensed, Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2007 and 2006
    
    
    3Notes to Condensed, Consolidated Financial Statements
    
    
    4Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4.
    
    Controls and Procedures
    
    
    27Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    27Item 1A.
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 3.
    
    Defaults Upon Senior Securities
    
    
    27Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    28Item 5.
    
    Other Information
    
    
    28Item 6.
    
    Exhibits
    
    
    28Signature
    
    
    29Exhibit Index
    
    
    30EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1




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##### Table of Contents



PART I.
    
    FINANCIAL INFORMATION
 
 ITEM 1.   FINANCIAL STATEMENTS
 VCA ANTECH, INC. AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED BALANCE SHEETS
As of June 30, 2007 and December 31, 2006
 (Unaudited)
(In thousands, except par value)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCurrent assets:Cash and cash equivalents
    
    $
    62,107
    
    
    $
    45,104Trade accounts receivable, less allowance for uncollectible accounts of $11,131
and $11,195 at June 30, 2007 and December 31, 2006, respectively
    
    
    48,071
    
    
    
    44,491Inventory
    
    
    20,832
    
    
    
    21,420Prepaid expenses and other
    
    
    15,617
    
    
    
    13,492Deferred income taxes
    
    
    16,988
    
    
    
    14,935Prepaid income taxes
    
    
    579
    
    
    
    13,523Total current assets
    
    
    164,194
    
    
    
    152,965Property and equipment, less accumulated depreciation and amortization of $121,212
and $111,165 at June 30, 2007 and December 31, 2006, respectively
    
    
    192,081
    
    
    
    166,033Other assets:Goodwill
    
    
    833,336
    
    
    
    625,748Other intangible assets, net
    
    
    17,756
    
    
    
    16,293Deferred financing costs, net
    
    
    1,636
    
    
    
    979Other
    
    
    12,003
    
    
    
    9,939Total assets
    
    $
    1,221,006
    
    
    $
    971,957LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term obligations
    
    $
    7,554
    
    
    $
    6,648Accounts payable
    
    
    25,307
    
    
    
    23,328Accrued payroll and related liabilities
    
    
    36,873
    
    
    
    33,864Other accrued liabilities
    
    
    41,838
    
    
    
    30,961Total current liabilities
    
    
    111,572
    
    
    
    94,801Long-term obligations, less current portion
    
    
    540,658
    
    
    
    384,067Deferred income taxes
    
    
    44,652
    
    
    
    39,804Other liabilities
    
    
    11,855
    
    
    
    13,294Minority interest
    
    
    10,348
    
    
    
    9,686Commitments and contingenciesPreferred stock, par value $0.001, 11,000 shares authorized, none outstanding
    
    
    
    
    
    
    Stockholders equity:Common stock, par value $0.001, 175,000 shares authorized, 83,821 and 83,560
shares outstanding as of June 30, 2007 and December 31, 2006, respectively
    
    
    84
    
    
    
    84Additional paid-in capital
    
    
    282,521
    
    
    
    275,013Retained earnings
    
    
    218,746
    
    
    
    154,586Accumulated other comprehensive income
    
    
    570
    
    
    
    622Total stockholders equity
    
    
    501,921
    
    
    
    430,305Total liabilities and stockholders equity
    
    $
    1,221,006
    
    
    $
    971,957
  1




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VCA ANTECH, INC. AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED INCOME STATEMENTS
For the Three and Six Months Ended June 30, 2007 and 2006
 (Unaudited)
(In thousands, except per share amounts)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue
    
    $
    300,305
    
    
    $
    255,150
    
    
    $
    565,450
    
    
    $
    489,330Direct costs
    
    
    210,427
    
    
    
    180,188
    
    
    
    399,652
    
    
    
    350,847Gross profit
    
    
    89,878
    
    
    
    74,962
    
    
    
    165,798
    
    
    
    138,483Selling, general and administrative expense
    
    
    22,043
    
    
    
    19,484
    
    
    
    43,516
    
    
    
    38,369Write-down and loss (gain) sale of assets
    
    
    420
    
    
    
    (85
    )
    
    
    542
    
    
    
    (203
    )Operating income
    
    
    67,415
    
    
    
    55,563
    
    
    
    121,740
    
    
    
    100,317Interest expense, net
    
    
    6,671
    
    
    
    5,927
    
    
    
    12,444
    
    
    
    12,239Other (income) expense
    
    
    172
    
    
    
    (31
    )
    
    
    227
    
    
    
    (97
    )Income before minority interest and provision
for income taxes
    
    
    60,572
    
    
    
    49,667
    
    
    
    109,069
    
    
    
    88,175Minority interest in income of subsidiaries
    
    
    1,028
    
    
    
    900
    
    
    
    1,874
    
    
    
    1,674Income before provision for income taxes
    
    
    59,544
    
    
    
    48,767
    
    
    
    107,195
    
    
    
    86,501Provision for income taxes
    
    
    23,697
    
    
    
    19,214
    
    
    
    43,035
    
    
    
    27,289Net income
    
    $
    35,847
    
    
    $
    29,553
    
    
    $
    64,160
    
    
    $
    59,212Basic earnings per common share
    
    $
    0.43
    
    
    $
    0.36
    
    
    $
    0.77
    
    
    $
    0.71Diluted earnings per common share
    
    $
    0.42
    
    
    $
    0.35
    
    
    $
    0.75
    
    
    $
    0.70Shares used for computing basic earnings per share
    
    
    83,742
    
    
    
    83,118
    
    
    
    83,674
    
    
    
    82,966Shares used for computing diluted earnings per share
    
    
    85,605
    
    
    
    84,838
    
    
    
    85,481
    
    
    
    84,699
  2




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VCA ANTECH, INC. AND SUBSIDIARIES
 
 CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2007 and 2006
 (Unaudited)
(In thousands)
 Six Months EndedJune 30,2007
    
    
    2006Cash flows from operating activities:Net income
    
    $
    64,160
    
    
    $
    59,212Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    12,740
    
    
    
    10,851Amortization of debt issue costs
    
    
    137
    
    
    
    226Provision for uncollectible accounts
    
    
    2,110
    
    
    
    2,976Write-down and loss (gain) on sale of assets
    
    
    542
    
    
    
    (203
    )Share-based compensation
    
    
    2,300
    
    
    
    1,445Excess tax benefit from exercise of stock options
    
    
    (2,680
    )
    
    
    (3,939
    )Minority interest in income of subsidiaries
    
    
    1,874
    
    
    
    1,674Distributions to minority interest partners
    
    
    (1,364
    )
    
    
    (1,339
    )Deferred income taxes
    
    
    3,025
    
    
    
    4,701Other
    
    
    (173
    )
    
    
    (561
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,244
    )
    
    
    (6,182
    )Inventory, prepaid expenses and other assets
    
    
    45
    
    
    
    (4,555
    )Accounts payable and other accrued liabilities
    
    
    (173
    )
    
    
    (6,480
    )Accrued payroll and related liabilities
    
    
    1,105
    
    
    
    (526
    )Income taxes
    
    
    15,789
    
    
    
    6,841Net cash provided by operating activities
    
    
    94,193
    
    
    
    64,141Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (203,322
    )
    
    
    (30,172
    )Real estate acquired in connection with business acquisitions
    
    
    (7,962
    )
    
    
    (1,781
    )Property and equipment additions
    
    
    (27,236
    )
    
    
    (15,067
    )Proceeds from sale of assets
    
    
    1,564
    
    
    
    297Other
    
    
    (256
    )
    
    
    161Net cash used in investing activities
    
    
    (237,212
    )
    
    
    (46,562
    )Cash flows from financing activities:Repayment of long-term obligations
    
    
    (4,224
    )
    
    
    (62,781
    )Proceeds from the issuance of long-term obligations
    
    
    160,000
    
    
    
    Payment of debt issue costs
    
    
    (794
    )
    
    
    Proceeds from issuance of common stock under stock option plans
    
    
    2,360
    
    
    
    3,576Excess tax benefit from exercise of stock options
    
    
    2,680
    
    
    
    3,939Net cash provided by (used in) financing activities
    
    
    160,022
    
    
    
    (55,266
    )Increase (decrease) in cash and cash equivalents
    
    
    17,003
    
    
    
    (37,687
    )Cash and cash equivalents at beginning of period
    
    
    45,104
    
    
    
    58,488Cash and cash equivalents at end of period
    
    $
    62,107
    
    
    $
    20,801
  3




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VCA ANTECH, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
 June 30, 2007
(Unaudited)
 1. General
   2. Acquisitions
  Hospital acquisitions, excluding Healthy Pet (1)
    
    
    24Healthy Pet (1)
    
    
    44Acquisitions relocated into our existing animal hospitals
    
    
    (7
    )Total
    
    
    61
 
 (1)
    
    Healthy Pet Corp. (Healthy Pet) was acquired on June 1, 2007. Animal Hospital Acquisitions, Excluding Healthy Pet
  Preliminary Purchase Price:Cash
    
    $
    47,055Liabilities assumed
    
    
    2,147Total
    
    $
    49,202Preliminary Allocation of the Purchase Price:Tangible assets
    
    $
    2,293Identifiable intangible assets
    
    
    2,146Goodwill (1)
    
    
    44,763Total
    
    $
    49,202
 
 (1)
    
    We expect that $43.1 million of the goodwill recorded for these acquisitions as of June 30,
2007 will be deductible for income tax purposes. 4




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Healthy Pet
   Preliminary Purchase Price:Cash paid to holders of Healthy Pet stock and debt, net of cash acquired
    
    $
    153,189Cash paid for professional services
    
    
    1,187Debt and capital leases assumed
    
    
    1,721Liabilities assumed
    
    
    10,262Liabilities for our plan to eliminate duplicate functions and to close certain
animal hospitals
    
    
    2,952Total
    
    $
    169,311Preliminary Allocation of the Purchase Price:Tangible assets
    
    $
    3,204Identifiable intangible assets
    
    
    1,348Goodwill (1)
    
    
    164,759Total
    
    $
    169,311
 
 (1)
    
    As of June 30, 2007, we have not finalized the determination of the amount of goodwill that
will be deductible for income tax purposes.  Other Acquisition Payments
   3. Long-Term Obligations and Interest Rate Swap Agreements
  5




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Fixed interest rate
    
    4.95%
    
    5.34%Notional amount (in millions)
    
    $75.0
    
    $100.0Effective date
    
    4/30/2007
    
    6/11/2007Expiration date
    
    4/30/2009
    
    12/31/2009Counterparties
    
    Wells Fargo
    
    Goldman SachsQualifies for hedge accounting
    
    Yes
    
    Yes
 4. Goodwill and Other Intangible Assets
  Animal
    
    
    MedicalLaboratory
    
    
    Hospital
    
    
    Equipment
    
    
    TotalBalance as of December 31, 2006
    
    $
    95,310
    
    
    $
    511,278
    
    
    $
    19,160
    
    
    $
    625,748Goodwill acquired
    
    
    
    
    
    
    209,928
    
    
    
    
    
    
    
    209,928Goodwill related to partnership interests
    
    
    
    
    
    
    345
    
    
    
    
    
    
    
    345Other (1)
    
    
    
    
    
    
    (2,685
    )
    
    
    
    
    
    
    (2,685
    )Balance as of June 30, 2007
    
    $
    95,310
    
    
    $
    718,866
    
    
    $
    19,160
    
    
    $
    833,336
 
 (1)
    
    Comprised of purchase price adjustments and the contribution of assets in return for a
minority interest in a partially-owned subsidiary.  As of June 30, 2007
    
    
    As of December 31, 2006Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountCovenants not-to-compete
    
    $
    14,801
    
    
    $
    (6,476
    )
    
    $
    8,325
    
    
    $
    12,687
    
    
    $
    (6,169
    )
    
    $
    6,518Non-contractual customer
relationships
    
    
    9,869
    
    
    
    (1,984
    )
    
    
    7,885
    
    
    
    9,869
    
    
    
    (1,553
    )
    
    
    8,316Technology
    
    
    1,270
    
    
    
    (695
    )
    
    
    575
    
    
    
    1,270
    
    
    
    (568
    )
    
    
    702Trademarks
    
    
    582
    
    
    
    (156
    )
    
    
    426
    
    
    
    569
    
    
    
    (127
    )
    
    
    442Contracts
    
    
    380
    
    
    
    (261
    )
    
    
    119
    
    
    
    397
    
    
    
    (231
    )
    
    
    166Client lists
    
    
    471
    
    
    
    (45
    )
    
    
    426
    
    
    
    506
    
    
    
    (357
    )
    
    
    149Total
    
    $
    27,373
    
    
    $
    (9,617
    )
    
    $
    17,756
    
    
    $
    25,298
    
    
    $
    (9,005
    )
    
    $
    16,293
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Aggregate amortization expense
    
    $
    1,065
    
    
    $
    868
    
    
    $
    2,030
    
    
    $
    1,728
 6




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Remainder of 2007
    
    $
    2,1932008
    
    
    3,9242009
    
    
    2,7712010
    
    
    1,7492011
    
    
    1,143Thereafter
    
    
    5,976Total
    
    $
    17,756
 5. Share-Based Compensation
  6. Income Taxes
  7. Calculation of Earnings per Common Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    35,847
    
    
    $
    29,553
    
    
    $
    64,160
    
    
    $
    59,212Weighted-average common shares outstanding:Basic
    
    
    83,742
    
    
    
    83,118
    
    
    
    83,674
    
    
    
    82,966Effect of dilutive potential common shares:Stock options and nonvested shares
    
    
    1,863
    
    
    
    1,720
    
    
    
    1,807
    
    
    
    1,733Diluted
    
    
    85,605
    
    
    
    84,838
    
    
    
    85,481
    
    
    
    84,699Basic earnings per common share
    
    $
    0.43
    
    
    $
    0.36
    
    
    $
    0.77
    
    
    $
    0.71Diluted earnings per common share
    
    $
    0.42
    
    
    $
    0.35
    
    
    $
    0.75
    
    
    $
    0.70
 8. Segment Reporting
  7




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8




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Animal
    
    
    Medical
    
    
    
    
    
    
    IntercompanyLaboratory
    
    
    Hospital
    
    
    Technology
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalThree Months Ended June 30, 2007External revenue
    
    $
    72,027
    
    
    $
    218,466
    
    
    $
    9,812
    
    
    $
    
    
    
    $
    
    
    
    $
    300,305Intersegment revenue
    
    
    7,183
    
    
    
    
    
    
    
    823
    
    
    
    
    
    
    
    (8,006
    )
    
    
    Total revenue
    
    
    79,210
    
    
    
    218,466
    
    
    
    10,635
    
    
    
    
    
    
    
    (8,006
    )
    
    
    300,305Direct costs
    
    
    39,244
    
    
    
    172,165
    
    
    
    6,850
    
    
    
    
    
    
    
    (7,832
    )
    
    
    210,427Gross profit
    
    
    39,966
    
    
    
    46,301
    
    
    
    3,785
    
    
    
    
    
    
    
    (174
    )
    
    
    89,878Selling, general and administrative
expense
    
    
    5,046
    
    
    
    5,321
    
    
    
    2,693
    
    
    
    8,983
    
    
    
    
    
    
    
    22,043Write-down and loss on
sale of assets
    
    
    58
    
    
    
    322
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    420Operating income (loss)
    
    $
    34,862
    
    
    $
    40,658
    
    
    $
    1,052
    
    
    $
    (8,983
    )
    
    $
    (174
    )
    
    $
    67,415Depreciation and amortization
    
    $
    1,593
    
    
    $
    4,420
    
    
    $
    428
    
    
    $
    460
    
    
    $
    (92
    )
    
    $
    6,809Capital expenditures
    
    $
    4,601
    
    
    $
    9,324
    
    
    $
    176
    
    
    $
    1,526
    
    
    $
    (266
    )
    
    $
    15,361Three Months Ended June 30, 2006External revenue
    
    $
    61,577
    
    
    $
    186,002
    
    
    $
    7,571
    
    
    $
    
    
    
    $
    
    
    
    $
    255,150Intersegment revenue
    
    
    5,896
    
    
    
    
    
    
    
    829
    
    
    
    
    
    
    
    (6,725
    )
    
    
    Total revenue
    
    
    67,473
    
    
    
    186,002
    
    
    
    8,400
    
    
    
    
    
    
    
    (6,725
    )
    
    
    255,150Direct costs
    
    
    34,949
    
    
    
    146,351
    
    
    
    5,256
    
    
    
    
    
    
    
    (6,368
    )
    
    
    180,188Gross profit
    
    
    32,524
    
    
    
    39,651
    
    
    
    3,144
    
    
    
    
    
    
    
    (357
    )
    
    
    74,962Selling, general and administrative
expense
    
    
    4,349
    
    
    
    5,123
    
    
    
    2,549
    
    
    
    7,463
    
    
    
    
    
    
    
    19,484Gain on sale of assets
    
    
    (2
    )
    
    
    (83
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (85
    )Operating income (loss)
    
    $
    28,177
    
    
    $
    34,611
    
    
    $
    595
    
    
    $
    (7,463
    )
    
    $
    (357
    )
    
    $
    55,563Depreciation and amortization
    
    $
    1,080
    
    
    $
    3,569
    
    
    $
    373
    
    
    $
    444
    
    
    $
    (37
    )
    
    $
    5,429Capital expenditures
    
    $
    2,194
    
    
    $
    4,647
    
    
    $
    38
    
    
    $
    500
    
    
    $
    (172
    )
    
    $
    7,207
 9




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##### Table of Contents



Animal
    
    
    Medical
    
    
    
    
    
    
    IntercompanyLaboratory
    
    
    Hospital
    
    
    Technology
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalSix Months Ended June 30, 2007External revenue
    
    $
    139,269
    
    
    $
    405,637
    
    
    $
    20,544
    
    
    $
    
    
    
    $
    
    
    
    $
    565,450Intersegment revenue
    
    
    13,538
    
    
    
    
    
    
    
    1,263
    
    
    
    
    
    
    
    (14,801
    )
    
    
    Total revenue
    
    
    152,807
    
    
    
    405,637
    
    
    
    21,807
    
    
    
    
    
    
    
    (14,801
    )
    
    
    565,450Direct costs
    
    
    76,839
    
    
    
    323,756
    
    
    
    13,711
    
    
    
    
    
    
    
    (14,654
    )
    
    
    399,652Gross profit
    
    
    75,968
    
    
    
    81,881
    
    
    
    8,096
    
    
    
    
    
    
    
    (147
    )
    
    
    165,798Selling, general and administrative
expense
    
    
    10,013
    
    
    
    10,881
    
    
    
    5,628
    
    
    
    16,994
    
    
    
    
    
    
    
    43,516Write-down and loss on
sale of assets
    
    
    58
    
    
    
    444
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    542Operating income (loss)
    
    $
    65,897
    
    
    $
    70,556
    
    
    $
    2,428
    
    
    $
    (16,994
    )
    
    $
    (147
    )
    
    $
    121,740Depreciation and amortization
    
    $
    2,946
    
    
    $
    8,290
    
    
    $
    807
    
    
    $
    878
    
    
    $
    (181
    )
    
    $
    12,740Capital expenditures
    
    $
    7,724
    
    
    $
    16,280
    
    
    $
    424
    
    
    $
    3,136
    
    
    $
    (328
    )
    
    $
    27,236Six Months Ended June 30, 2006External revenue
    
    $
    117,703
    
    
    $
    356,525
    
    
    $
    15,102
    
    
    $
    
    
    
    $
    
    
    
    $
    489,330Intersegment revenue
    
    
    11,307
    
    
    
    
    
    
    
    1,290
    
    
    
    
    
    
    
    (12,597
    )
    
    
    Total revenue
    
    
    129,010
    
    
    
    356,525
    
    
    
    16,392
    
    
    
    
    
    
    
    (12,597
    )
    
    
    489,330Direct costs
    
    
    67,936
    
    
    
    284,277
    
    
    
    10,746
    
    
    
    
    
    
    
    (12,112
    )
    
    
    350,847Gross profit
    
    
    61,074
    
    
    
    72,248
    
    
    
    5,646
    
    
    
    
    
    
    
    (485
    )
    
    
    138,483Selling, general and administrative
expense
    
    
    8,443
    
    
    
    9,946
    
    
    
    5,200
    
    
    
    14,780
    
    
    
    
    
    
    
    38,369Loss (gain) on sale of assets
    
    
    8
    
    
    
    (211
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (203
    )Operating income (loss)
    
    $
    52,623
    
    
    $
    62,513
    
    
    $
    446
    
    
    $
    (14,780
    )
    
    $
    (485
    )
    
    $
    100,317Depreciation and amortization
    
    $
    2,152
    
    
    $
    7,097
    
    
    $
    774
    
    
    $
    896
    
    
    $
    (68
    )
    
    $
    10,851Capital expenditures
    
    $
    2,964
    
    
    $
    11,377
    
    
    $
    85
    
    
    $
    940
    
    
    $
    (299
    )
    
    $
    15,067At June 30, 2007Total assets
    
    $
    182,718
    
    
    $
    905,655
    
    
    $
    47,629
    
    
    $
    92,160
    
    
    $
    (7,156
    )
    
    $
    1,221,006At December 31, 2006Total assets
    
    $
    167,363
    
    
    $
    671,975
    
    
    $
    53,161
    
    
    $
    85,533
    
    
    $
    (6,075
    )
    
    $
    971,957
 9. Commitments and Contingencies
  a. Earn-out Payments
  10




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##### Table of Contents



b. Officers Compensation
   
    
    In the event any of these officers employment is terminated due to death or disability,
each officer, or their estate, is entitled to receive the remaining base salary during the
remaining scheduled term of his employment agreement, the acceleration of the vesting of
his options, which options shall remain exercisable for the full term, and the right to
continue receiving specified benefits and perquisites.
    
    In the event any of these officers terminate their employment agreements for cause, we
terminate any of their employment agreements without cause or a change of control occurs
(in which case such employment agreements terminate automatically), each officer is
entitled to receive the remaining base salary during the remaining scheduled term of his
employment agreement, a bonus based on past bonuses, the acceleration of the vesting of his
options, which options shall remain exercisable for the full term, and the right to
continue receiving specified benefits and perquisites.
    
    In the event of a change of control, the cash value of all benefits due under their
employment contracts as a result of the termination would be immediately payable to the
officers. In addition, if any of the amounts payable to these officers under these
provisions constitute excess parachute payments under the Internal Revenue Code, each
officer is entitled to an additional payment to cover the tax consequences associated with
the excess parachute payment.
  c. Other Contingencies
  10. Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement No. 109
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB No.115
 11




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 PageNumberIntroduction
    
    
    13Executive Overview
    
    
    13Results of Operations
    
    
    15Liquidity and Capital Resources
    
    
    21Critical Accounting Policies
    
    
    23Recent Accounting Pronouncements
    
    
    26Forward-Looking Statements
    
    
    26
 12




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##### Table of Contents



Introduction
 The following discussion should be read in conjunction with our condensed, consolidated
financial statements provided under Part I, Item I of this quarterly report on Form 10-Q . We have
included herein statements that constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. We generally identify forward-looking statements
in this report using words like believe, intend, expect, estimate, may, plan, should
plan, project, contemplate, anticipate, predict, potential, continue, or similar
expressions. You may find some of these statements below and elsewhere in this report. These
forward-looking statements are not historical facts and are inherently uncertain and outside of our
control. Any or all of our forward-looking statements in this report may turn out to be wrong.
They can be affected by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in our discussion in this report will be important in
determining future results. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. Factors that may cause our plans, expectations, future
financial condition and results to change are described throughout this report and in our annual
report on Form 10-K , particularly in Risk Factors, Part I, Item 1A of that report.
 The forward-looking information set forth in this quarterly report on Form 10-Q is as of
August 7, 2007, and we undertake no duty to update this information. Shareholders and prospective
investors can find information filed with the SEC after August 7, 2007 at our website at http://.investor.vcaantech.com or at the SECs website at www.sec.gov .
  
    
    Our laboratory segment operates the largest network of veterinary diagnostic
laboratories in the nation. Our laboratories provide sophisticated testing and consulting
services used by veterinarians in the detection, diagnosis, evaluation, monitoring,
treatment and prevention of diseases and other conditions affecting animals. At June 30,
2007, our laboratory network consisted of 33 laboratories serving all 50 states.
    
    Our animal hospital segment operates the largest network of freestanding, full-service
animal hospitals in the nation. Our animal hospitals offer a full range of general medical
and surgical services for companion animals. We treat diseases and injuries, offer
pharmaceutical and retail products and perform a variety of pet wellness programs,
including health examinations, diagnostic testing, routine vaccinations, spaying, neutering
and dental care. At June 30, 2007, our animal hospital network consisted of 437 animal
hospitals in 38 states.
    
    Our medical technology segment sells digital radiography and ultrasound imaging
equipment, related computer hardware, software and ancillary services.
    
    Our corporate segment provides general and administrative support for our other
segments.
  
 Executive Overview
  13




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##### Table of Contents



Acquisitions and Facilities
  Laboratories:Beginning of period
    
    
    33Acquisitions
    
    
    1Acquisitions
relocated into our existing laboratories
    
    
    (1
    )End of period
    
    
    33Animal hospitals:Beginning of period
    
    
    379Acquisitions, excluding Healthy Pet
    
    
    24Healthy Pet
    
    
    44Acquisitions relocated into our existing animal hospitals
    
    
    (7
    )Closed
    
    
    (3
    )End of period
    
    
    437
 Financing Transaction
  14




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##### Table of Contents



Results of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenue:Laboratory
    
    
    26.4
    %
    
    
    26.4
    %
    
    
    27.0
    %
    
    
    26.4
    %Animal hospital
    
    
    72.7
    
    
    
    72.9
    
    
    
    71.7
    
    
    
    72.9Medical technology
    
    
    3.5
    
    
    
    3.3
    
    
    
    3.9
    
    
    
    3.3Intercompany
    
    
    (2.6
    )
    
    
    (2.6
    )
    
    
    (2.6
    )
    
    
    (2.6
    )Total revenue
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Direct costs
    
    
    70.1
    
    
    
    70.6
    
    
    
    70.7
    
    
    
    71.7Gross profit
    
    
    29.9
    
    
    
    29.4
    
    
    
    29.3
    
    
    
    28.3Selling, general and administrative expense
    
    
    7.3
    
    
    
    7.6
    
    
    
    7.7
    
    
    
    7.8Write-down and loss on sale of assets
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    Operating income
    
    
    22.4
    
    
    
    21.8
    
    
    
    21.5
    
    
    
    20.5Interest expense, net
    
    
    2.2
    
    
    
    2.3
    
    
    
    2.3
    
    
    
    2.5Other expense
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    Income before minority interest and provision
for income taxes
    
    
    20.1
    
    
    
    19.5
    
    
    
    19.2
    
    
    
    18.0Minority interest in income of subsidiaries
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.3Income before provision for income taxes
    
    
    19.8
    
    
    
    19.1
    
    
    
    18.9
    
    
    
    17.7Provision for income taxes
    
    
    7.9
    
    
    
    7.5
    
    
    
    7.6
    
    
    
    5.6Net income
    
    
    11.9
    %
    
    
    11.6
    %
    
    
    11.3
    %
    
    
    12.1
    %
 Revenue
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    
    
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    %
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    %$
    
    
    Total
    
    
    $
    
    
    Total
    
    
    Change
    
    
    $
    
    
    Total
    
    
    $
    
    
    Total
    
    
    ChangeLaboratory
    
    $
    79,210
    
    
    
    26.4
    %
    
    $
    67,473
    
    
    
    26.4
    %
    
    
    17.4
    %
    
    $
    152,807
    
    
    
    27.0
    %
    
    $
    129,010
    
    
    
    26.4
    %
    
    
    18.4
    %Animal hospital
    
    
    218,466
    
    
    
    72.7
    %
    
    
    186,002
    
    
    
    72.9
    %
    
    
    17.5
    %
    
    
    405,637
    
    
    
    71.7
    %
    
    
    356,525
    
    
    
    72.9
    %
    
    
    13.8
    %Medical technology
    
    
    10,635
    
    
    
    3.5
    %
    
    
    8,400
    
    
    
    3.3
    %
    
    
    26.6
    %
    
    
    21,807
    
    
    
    3.9
    %
    
    
    16,392
    
    
    
    3.3
    %
    
    
    33.0
    %Intercompany
    
    
    (8,006
    )
    
    
    (2.6
    )%
    
    
    (6,725
    )
    
    
    (2.6
    )%
    
    
    19.0
    %
    
    
    (14,801
    )
    
    
    (2.6
    )%
    
    
    (12,597
    )
    
    
    (2.6
    )%
    
    
    17.5
    %Total revenue
    
    $
    300,305
    
    
    
    100.0
    %
    
    $
    255,150
    
    
    
    100.0
    %
    
    
    17.7
    %
    
    $
    565,450
    
    
    
    100.0
    %
    
    $
    489,330
    
    
    
    100.0
    %
    
    
    15.6
    %
 15




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##### Table of Contents



Laboratory Revenue
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeLaboratory Revenue:Internal growth:Number of requisitions (1)
    
    
    3,441
    
    
    
    3,000
    
    
    
    14.7
    %
    
    
    6,511
    
    
    
    5,624
    
    
    
    15.8
    %Average revenue per
requisition (2)
    
    $
    22.72
    
    
    $
    22.49
    
    
    
    1.0
    %
    
    $
    23.10
    
    
    $
    22.94
    
    
    
    0.7
    %Total internal revenue (1)
    
    $
    78,186
    
    
    $
    67,473
    
    
    
    15.9
    %
    
    $
    150,403
    
    
    $
    129,010
    
    
    
    16.6
    %Acquired revenue (3)
    
    
    1,024
    
    
    
    
    
    
    
    
    
    
    
    2,404
    
    
    
    Total
    
    $
    79,210
    
    
    $
    67,473
    
    
    
    17.4
    %
    
    $
    152,807
    
    
    $
    129,010
    
    
    
    18.4
    %
 
 (1)
    
    Internal revenue and requisitions were calculated using laboratory operating results,
adjusted to exclude the operating results of acquired laboratories for the comparable periods
that we did not own those laboratories in the prior year, and adjusted for the impact
resulting from any differences in the number of billing days in the comparable periods.(2)
    
    Computed by dividing internal revenue by the number of requisitions.(3)
    
    Acquired revenue represents revenue recognized from our acquired laboratories for the
comparable current year period that we did not own them in the prior year.    16




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##### Table of Contents



Animal Hospital Revenue
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    % Change
    
    
    2007
    
    
    2006
    
    
    % ChangeAnimal Hospital Revenue:Same-store facilities:Orders (1)(2)
    
    
    1,381
    
    
    
    1,375
    
    
    
    0.5
    %
    
    
    2,598
    
    
    
    2,589
    
    
    
    0.3
    %Average revenue per order (3)
    
    $
    141.75
    
    
    $
    133.61
    
    
    
    6.1
    %
    
    $
    141.25
    
    
    $
    133.57
    
    
    
    5.7
    %Same-store revenue (1)
    
    $
    195,827
    
    
    $
    183,712
    
    
    
    6.6
    %
    
    $
    366,949
    
    
    $
    345,869
    
    
    
    6.1
    %Net acquired revenue (4)
    
    
    22,639
    
    
    
    2,290
    
    
    
    
    
    
    
    38,688
    
    
    
    10,656Total
    
    $
    218,466
    
    
    $
    186,002
    
    
    
    17.5
    %
    
    $
    405,637
    
    
    $
    356,525
    
    
    
    13.8
    %
 
 (1)
    
    Same-store revenue and orders were calculated using animal hospital operating results,
adjusted to exclude the operating results for newly acquired animal hospitals that we did not
own as of the beginning of the comparable period in the prior year and adjusted for the impact
resulting from any differences in the number of business days in the comparable periods.
Same-store revenue also includes revenue generated by customers referred from our relocated or
combined animal hospitals, including those merged upon acquisition.(2)
    
    The change in orders may not calculate exactly due to rounding.(3)
    
    Computed by dividing same-store revenue by same-store orders. The average revenue per order
may not calculate exactly due to rounding.(4)
    
    Net acquired revenue represents the revenue from those animal hospitals acquired, net of
revenue from those animal hospitals sold or closed, on or after the beginning of the
comparable period, which was April 1, 2006 for the three-month analysis, and January 1, 2006
for the six-month analysis. Fluctuations in net acquired revenue occur due to the volume,
size and timing of acquisitions and dispositions during the periods from this date through the
end of the applicable period.   Medical Technology Revenue
 Critical Accounting Policies
 Intercompany Revenue
  17




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##### Table of Contents



Gross Profit
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    
    
    
    
    2007
    
    
    2006Gross
    
    
    
    
    
    
    Gross
    
    
    %
    
    
    
    
    
    
    Gross
    
    
    
    
    
    
    Gross
    
    
    %$
    
    
    Margin
    
    
    $
    
    
    Margin
    
    
    Change
    
    
    $
    
    
    Margin
    
    
    $
    
    
    Margin
    
    
    ChangeLaboratory
    
    $
    39,966
    
    
    
    50.5
    %
    
    $
    32,524
    
    
    
    48.2
    %
    
    
    22.9
    %
    
    $
    75,968
    
    
    
    49.7
    %
    
    $
    61,074
    
    
    
    47.3
    %
    
    
    24.4
    %Animal hospital
    
    
    46,301
    
    
    
    21.2
    %
    
    
    39,651
    
    
    
    21.3
    %
    
    
    16.8
    %
    
    
    81,881
    
    
    
    20.2
    %
    
    
    72,248
    
    
    
    20.3
    %
    
    
    13.3
    %Medical technology
    
    
    3,785
    
    
    
    35.6
    %
    
    
    3,144
    
    
    
    37.4
    %
    
    
    20.4
    %
    
    
    8,096
    
    
    
    37.1
    %
    
    
    5,646
    
    
    
    34.4
    %
    
    
    43.4
    %Intercompany
    
    
    (174
    )
    
    
    
    
    
    
    (357
    )
    
    
    
    
    
    
    
    
    
    
    (147
    )
    
    
    
    
    
    
    (485
    )Total gross profit
    
    $
    89,878
    
    
    
    29.9
    %
    
    $
    74,962
    
    
    
    29.4
    %
    
    
    19.9
    %
    
    $
    165,798
    
    
    
    29.3
    %
    
    $
    138,483
    
    
    
    28.3
    %
    
    
    19.7
    %
 Laboratory Gross Profit
   Animal Hospital Gross Profit
   Medical Technology Gross Profit
  18




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##### Table of Contents



Critical
Accounting Policies
 Selling, General and Administrative Expense
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    
    
    
    
    2007
    
    
    2006% of
    
    
    
    
    
    
    % of
    
    
    %
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    

Change
    
    
    $
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    ChangeLaboratory
    
    $
    5,046
    
    
    
    6.4
    %
    
    $
    4,349
    
    
    
    6.4
    %
    
    
    16.0
    %
    
    $
    10,013
    
    
    
    6.6
    %
    
    $
    8,443
    
    
    
    6.5
    %
    
    
    18.6
    %Animal hospital
    
    
    5,321
    
    
    
    2.4
    %
    
    
    5,123
    
    
    
    2.8
    %
    
    
    3.9
    %
    
    
    10,881
    
    
    
    2.7
    %
    
    
    9,946
    
    
    
    2.8
    %
    
    
    9.4
    %Medical technology
    
    
    2,693
    
    
    
    25.3
    %
    
    
    2,549
    
    
    
    30.3
    %
    
    
    5.6
    %
    
    
    5,628
    
    
    
    25.8
    %
    
    
    5,200
    
    
    
    31.7
    %
    
    
    8.2
    %Corporate
    
    
    8,983
    
    
    
    3.0
    %
    
    
    7,463
    
    
    
    2.9
    %
    
    
    20.4
    %
    
    
    16,994
    
    
    
    3.0
    %
    
    
    14,780
    
    
    
    3.0
    %
    
    
    15.0
    %Total SG&A
    
    $
    22,043
    
    
    
    7.3
    %
    
    $
    19,484
    
    
    
    7.6
    %
    
    
    13.1
    %
    
    $
    43,516
    
    
    
    7.7
    %
    
    $
    38,369
    
    
    
    7.8
    %
    
    
    13.4
    %
 Laboratory SG&A
   Animal Hospital SG&A
   Medical Technology SG&A
   19




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##### Table of Contents



Corporate SG&A
   Write-down and Loss (Gain) on Sale of Assets
  Interest Expense, Net
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest expense:Senior term notes
    
    $
    7,369
    
    
    $
    6,504
    
    
    $
    13,774
    
    
    $
    12,918Interest rate hedging agreements
    
    
    (529
    )
    
    
    (370
    )
    
    
    (1,018
    )
    
    
    (571
    )Capital leases and other
    
    
    349
    
    
    
    197
    
    
    
    699
    
    
    
    609Amortization of debt costs
    
    
    76
    
    
    
    94
    
    
    
    137
    
    
    
    2277,265
    
    
    
    6,425
    
    
    
    13,592
    
    
    
    13,183Interest income
    
    
    594
    
    
    
    498
    
    
    
    1,148
    
    
    
    944Total interest expense, net of interest income
    
    $
    6,671
    
    
    $
    5,927
    
    
    $
    12,444
    
    
    $
    12,239
  Provision for Income Taxes
  20




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##### Table of Contents



Liquidity and Capital Resources
  Six Months EndedJune 30,2007
    
    
    2006Cash provided by (used in):Operating activities
    
    $
    94,193
    
    
    $
    64,141Investing activities
    
    
    (237,212
    )
    
    
    (46,562
    )Financing activities
    
    
    160,022
    
    
    
    (55,266
    )Increase (decrease) in cash and cash equivalents
    
    
    17,003
    
    
    
    (37,687
    )Cash and cash equivalents at beginning of year
    
    
    45,104
    
    
    
    58,488Cash and cash equivalents at end of period
    
    $
    62,107
    
    
    $
    20,801
 Cash Flows from Operating Activities
   Cash Flows from Investing Activities
   Cash Flows from Financing Activities
  21




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##### Table of Contents



Future Contractual Cash Requirements
  Total
    
    
    2007 (1)
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    ThereafterLong-term debt
    
    $
    533,014
    
    
    $
    3,285
    
    
    $
    6,106
    
    
    $
    5,828
    
    
    $
    5,855
    
    
    $
    511,940
    
    
    $
    Capital lease obligations
    
    
    15,198
    
    
    
    639
    
    
    
    1,216
    
    
    
    1,243
    
    
    
    1,361
    
    
    
    1,402
    
    
    
    9,337Operating leases
    
    
    567,277
    
    
    
    18,284
    
    
    
    37,121
    
    
    
    36,774
    
    
    
    34,757
    
    
    
    34,497
    
    
    
    405,844Fixed cash interest expense
    
    
    6,155
    
    
    
    672
    
    
    
    1,421
    
    
    
    1,127
    
    
    
    790
    
    
    
    523
    
    
    
    1,622Variable cash interest expense (2)
    
    
    132,414
    
    
    
    17,902
    
    
    
    33,606
    
    
    
    33,344
    
    
    
    34,344
    
    
    
    13,218
    
    
    
    Swap agreements (2)
    
    
    376
    
    
    
    (651
    )
    
    
    435
    
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations
    
    
    44,957
    
    
    
    12,178
    
    
    
    8,134
    
    
    
    8,899
    
    
    
    9,744
    
    
    
    6,002
    
    
    
    Other long-term liabilities (3)
    
    
    46,637
    
    
    
    
    
    
    
    65
    
    
    
    65
    
    
    
    65
    
    
    
    
    
    
    
    46,442Earn-out payments (4)
    
    
    813
    
    
    
    213
    
    
    
    300
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    $
    1,346,841
    
    
    $
    52,522
    
    
    $
    88,404
    
    
    $
    88,172
    
    
    $
    86,916
    
    
    $
    567,582
    
    
    $
    463,245
 
 (1)
    
    Consists of the period from July 1, 2007 through December 31, 2007.(2)
    
    We have variable-rate debt. The interest payments on our variable-rate debt are based on a
variable-rate component plus a margin of 1.50%. For purposes of this computation, we have
assumed that the interest rate on our variable-rate debt (including the margin of 1.50%) will
be 6.8%, 6.4%, 6.4%, 6.7%, and 6.9% for years 2007 through 2011, respectively. These
estimates are based on interest rate projections used to price our interest rate swap
agreements. Our consolidated financial statements included in our 2006 annual report on Form
10-K discuss these variable-rate notes in more detail.(3)
    
    Includes deferred income taxes of $44.7 million.(4)
    
    Represents contractual arrangements whereby additional cash may be paid to former owners of
acquired businesses upon attainment of specified performance targets.  Debt Related Covenants
    22




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##### Table of Contents



Interest Rate Swap Agreements
  Fixed interest rate
    
    4.07%
    
    3.98%
    
    5.51%
    
    4.95%
    
    5.34%Notional amount (in millions)
    
    $50.0
    
    $50.0
    
    $50.0
    
    $75.0
    
    $100.0Effective date
    
    5/26/2005
    
    6/2/2005
    
    6/20/2006
    
    4/30/2007
    
    6/11/2007Expiration date
    
    5/26/2008
    
    5/31/2008
    
    6/30/2009
    
    4/30/2009
    
    12/31/2009Counterparties
    
    Goldman Sachs
    
    Wells Fargo
    
    Goldman Sachs
    
    Wells Fargo
    
    Goldman Sachs
  Description of Indebtedness
 Senior Credit Facility
    Other Debt
  
 Critical Accounting Policies
  Revenue
 Laboratory and Animal Hospital Revenue
  Medical Technology Revenue
  23




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##### Table of Contents



Revenue Recognition Software
Revenue Recognition
 
    
    Evidence of an arrangement: We consider a non-cancelable agreement signed by
the customer and us to be evidence of an arrangement.
    
    Delivery: We consider delivery to have occurred when the ultrasound imaging
equipment is delivered. We consider delivery to have occurred when the digital radiography
imaging equipment is delivered or accepted by the customer if installation is required. We
consider delivery to have occurred with respect to professional services when those
services are provided or on a straight-line basis over the service contract term, based on
the nature of the service or the terms of the contract.
    
    Fixed or determinable fee: We assess whether fees are fixed or determinable at
the time of sale and recognize revenue if all other revenue recognition requirements are
met. We generally consider payments that are due within six months to be fixed or
determinable based upon our successful collection history. We only consider fees to be
fixed or determinable if they are not subject to refund or adjustment.
    
    Collection is deemed probable: We conduct a credit review for all significant
transactions at the time of the arrangement to determine the credit worthiness of the
customer. Collection is deemed probable if we expect that the customer will be able to pay
amounts under the arrangement as payments become due. If we determine that collection is
not probable, we defer the revenue and recognize the revenue upon cash collection.
 Modification of SOP No. 97-2, Software
Revenue Recognition, With Respect to Certain Transactions
 Digital Radiography Imaging Equipment
  24




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##### Table of Contents



Ultrasound Imaging Equipment
  Digital Radiography And Ultrasound Imaging Equipment Sold Together
  Other Services
  Goodwill Impairment
   Income Taxes
 Accounting for Income Taxes
 25




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##### Table of Contents



Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109
 
 Recent Accounting Pronouncements
  Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an amendment of FASB No.115
 
 Forward-Looking Statements
 Risk Factors
 26




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##### Table of Contents



ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Fixed interest rate
    
    4.07%
    
    3.98%
    
    5.51%
    
    4.95%
    
    5.34%Notional amount (in millions)
    
    $50.0
    
    $50.0
    
    $50.0
    
    $75.0
    
    $100.0Effective date
    
    5/26/2005
    
    6/2/2005
    
    6/20/2006
    
    4/30/2007
    
    6/11/2007Expiration date
    
    5/26/2008
    
    5/31/2008
    
    6/30/2009
    
    4/30/2009
    
    12/31/2009Counterparties
    
    Goldman Sachs
    
    Wells Fargo
    
    Goldman Sachs
    
    Wells Fargo
    
    Goldman Sachs
   
 ITEM 4.
    
    CONTROLS AND PROCEDURES
   
 PART II. OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 1A.
    
    RISK FACTORS
  Managements Discussion and
Analysis of Financial Condition and Results of Operations Forward-Looking Statements.
 
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  27




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##### Table of Contents



ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
    
    elected Robert L. Antin as a Class II director;
    
    ratified KPMG LLP as our independent auditors; and
    
    approved the VCA Antech, Inc. 2007 Annual Cash Incentive Plan.
  Candidate
    
    Yes Votes
    
    No Votes
    
    Abstain
    
    Broker Non-VoteRobert L. Antin
    
    
    67,052,698
    
    
    
    
    
    
    
    2,440,376
    
    
    
    
  Proposal
    
    Yes Votes
    
    No Votes
    
    Abstain
    
    Broker Non-VoteRatify KPMG LLP as our independent
auditors
    
    
    68,942,135
    
    
    
    509,900
    
    
    
    41,039
    
    
    
    Approve the VCA Antech, Inc. 2007
Annual Cash Incentive Plan
    
    
    60,794,944
    
    
    
    2,810,171
    
    
    
    64,860
    
    
    
    5,823,099
 
 ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
 31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 28




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##### Table of Contents



SIGNATURE
  Date: August 7, 2007
    
    By:
    
    /s/ Tomas W. FullerTomas W. FullerChief Financial Officer
 29




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 30