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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|  |  |                                                        
|- |  | -------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|  |  | SECURITIES EXCHANGE ACT OF 1934                        

|                                            
|--------------------------------------------
|For the quarterly period ended June 30, 2003

|  |  |                                                         
|- |  | --------------------------------------------------------
|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 |  | (I.R.S. Employer   
|incorporation or organization)  |  | 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)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common stock, $0.001 par value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x   No o.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes x No o.

Indicate the number of shares outstanding of each of the issuers class of
common stock as of the latest practicable date: Common stock, $0.001 par
value 40,640,159 shares as of August 11, 2003.





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TABLE OF CONTENTS



|                              |                                                                                               |                                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED, CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
|                              | 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   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES                                                                
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                    
|EXHIBIT INDEX                
|Exhibit 31.1                 
|Exhibit 31.2                 
|Exhibit 32.1                 
|Exhibit 32.2                 



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##### Table of Contents



VCA ANTECH, INC.
FORM 10-Q
JUNE 30, 2003

TABLE OF CONTENTS

|         |  |                                                                                              |  |                                                                                                                        |    |             |    | 
|-------- |  | -------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | -- | ----------- | -- | 
|         |  |                                                                                              |  |                                                                                                                        |    | Page Number
|         |  |                                                                                              |  |                                                                                                                        |    |            
|Part I.  |  | Financial Information                                                                        |  |                                                                                                                        |    |            
|Item 1.  |  | Financial Statements                                                                         |  |                                                                                                                        |    |            
|         |  | Condensed, Consolidated Balance Sheets as of June 30, 2003 and
December 31, 2002
(Unaudited) |  |                                                                                                                        | 1  |            
|         |  |                                                                                              |  | Condensed, Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 2003 and 2002 (Unaudited) |    |             | 2  | 
|         |  |                                                                                              |  | Condensed, Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2003 and 2002
(Unaudited)           |    |             | 3  | 
|         |  |                                                                                              |  | Notes to Condensed, Consolidated Financial
Statements                                                                  |    |             | 4  | 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations        |  |                                                                                                                        | 24 |            
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market
Risk                                   |  |                                                                                                                        | 49 |            
|Item 4.  |  | Controls and
Procedures                                                                      |  |                                                                                                                        | 50 |            
|Part II. |  | Other Information                                                                            |  |                                                                                                                        |    |            
|Item 1.  |  | Legal
Proceedings                                                                            |  |                                                                                                                        | 50 |            
|Item 2.  |  | Changes in
Securities                                                                        |  |                                                                                                                        | 51 |            
|Item 3.  |  | Defaults Upon Senior
Securities                                                              |  |                                                                                                                        | 51 |            
|Item 4.  |  | Submission of Matters to a Vote of Security
Holders                                          |  |                                                                                                                        | 51 |            
|Item 5.  |  | Other
Information                                                                            |  |                                                                                                                        | 51 |            
|Item 6.  |  | Exhibits and Reports on Form
8-K                                                             |  |                                                                                                                        | 52 |            
|         |  |                                                                                              |  | Signature                                                                                                              |    |             | 53 | 
|         |  |                                                                                              |  | Exhibit
Index                                                                                                          |    |             | 54 | 





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PART I. FINANCIAL INFORMATION







ITEM 1. FINANCIAL STATEMENTS

VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED BALANCE SHEETS
As of June 30, 2003 and December 31, 2002
(Unaudited)
(In thousands, except par value)

|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |         | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | -------- | ------- | ------------ | ------- | -------- | ------- | 
|                                            |                                                                                                                                                            |                                            |         | June 30, |         | December
31,
|                                            |                                                                                                                                                            |                                            |         | 2003     |         | 2002        
|                                            |                                                                                                                                                            |                                            |         |          |         |             
|ASSETS                                      |                                                                                                                                                            |                                            |         |          |         |              |         |         
|Current assets:                             |                                                                                                                                                            |                                            |         |          |         |              |         |         
|                                            | Cash and cash equivalents                                                                                                                                  |                                            | $       | 22,512   |         |              | $       | 6,462    |        
|                                            | Trade accounts receivable, less allowance for uncollectible accounts of $6,550
and $6,408 at June 30, 2003 and December 31, 2002, respectively             |                                            |         | 25,537   |         |              |         | 20,727   |        
|                                            | Inventory, prepaid expenses and other                                                                                                                      |                                            |         | 8,593    |         |              |         | 8,643    |        
|                                            | Deferred income taxes                                                                                                                                      |                                            |         | 10,405   |         |              |         | 9,528    |        
|                                            | Prepaid income taxes                                                                                                                                       |                                            |         | 2,704    |         |              |         | 7,614    |        
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|                                            |                                                                                                                                                            | Total current assets                       |         |          | 69,751  |              |         |          | 52,974  | 
|Property and equipment, net                 |                                                                                                                                                            |                                            | 96,845  |          |         |              | 95,303  |         
|Other assets:                               |                                                                                                                                                            |                                            |         |          |         |              |         |         
|                                            | Goodwill, net                                                                                                                                              |                                            |         | 363,229  |         |              |         | 342,614  |        
|                                            | Covenants not to compete, net                                                                                                                              |                                            |         | 5,041    |         |              |         | 4,735    |        
|                                            | Deferred financing costs, net                                                                                                                              |                                            |         | 5,952    |         |              |         | 6,778    |        
|                                            | Other                                                                                                                                                      |                                            |         | 4,435    |         |              |         | 5,024    |        
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|                                            |                                                                                                                                                            | Total assets                               |         | $        | 545,253 |              |         | $        | 507,428 | 
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                                                                                                                                            |                                            |         |          |         |              |         |         
|Current liabilities:                        |                                                                                                                                                            |                                            |         |          |         |              |         |         
|                                            | Current portion of long-term obligations                                                                                                                   |                                            | $       | 2,698    |         |              | $       | 9,622    |        
|                                            | Accounts payable                                                                                                                                           |                                            |         | 10,130   |         |              |         | 10,223   |        
|                                            | Accrued payroll and related liabilities                                                                                                                    |                                            |         | 12,538   |         |              |         | 14,734   |        
|                                            | Accrued interest                                                                                                                                           |                                            |         | 1,533    |         |              |         | 1,565    |        
|                                            | Other accrued liabilities                                                                                                                                  |                                            |         | 18,440   |         |              |         | 13,464   |        
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|                                            |                                                                                                                                                            | Total current liabilities                  |         |          | 45,339  |              |         |          | 49,608  | 
|Long-term obligations, less current portion |                                                                                                                                                            |                                            | 335,792 |          |         |              | 371,935 |         
|Deferred income taxes                       |                                                                                                                                                            |                                            | 19,028  |          |         |              | 15,376  |         
|Other liabilities                           |                                                                                                                                                            |                                            | 2,007   |          |         |              | 2,007   |         
|Minority interest                           |                                                                                                                                                            |                                            | 5,138   |          |         |              | 5,416   |         
|Stockholders equity:                       |                                                                                                                                                            |                                            |         |          |         |              |         |         
|                                            | Common stock, par value $0.001, 75,000 shares authorized, and 40,633 and 36,765
shares outstanding as of June 30, 2003 and December 31, 2002, respectively |                                            |         | 41       |         |              |         | 37       |        
|                                            | Additional paid-in capital                                                                                                                                 |                                            |         | 243,327  |         |              |         | 188,941  |        
|                                            | Accumulated deficit                                                                                                                                        |                                            |         | (105,221 | )       |              |         | (125,754 | )      
|                                            | Accumulated comprehensive loss - unrealized loss on hedging instruments                                                                                    |                                            |         | (103     | )       |              |         |         |        
|                                            | Notes receivable from stockholders                                                                                                                         |                                            |         | (95      | )       |              |         | (138     | )      
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|                                            |                                                                                                                                                            | Total stockholders equity                 |         |          | 137,949 |              |         |          | 63,086  | 
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        
|                                            |                                                                                                                                                            | Total liabilities and stockholders equity |         | $        | 545,253 |              |         | $        | 507,428 | 
|                                            |                                                                                                                                                            |                                            |         |          |         |              |         |          |        

The accompanying notes are an integral part of these condensed, consolidated financial statements.

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VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2003 and 2002
(Unaudited)
(In thousands, except per share amounts)

|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | - | ------------------ | ------ | ---------------- | - | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                                                                                                                                                                                                         |                                          |   | Three Months Ended |        | Six Months Ended
|                                                                                                                                                                                                                         |                                          |   | June 30,           |        | June 30,        
|                                                                                                                                                                                                                         |                                          |   |                    |        |                 
|                                                                                                                                                                                                                         |                                          |   | 2003               |        | 2002             |   | 2003    |        | 2002
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |     
|Revenue                                                                                                                                                                                                                  |                                          | $ | 132,363            |        |                  | $ | 117,225 |        |      | $ | 248,363 |        |  | $ | 221,920 |       
|Direct costs (excludes operating depreciation of $2,665
and $2,360 for the three months ended June 30, 2003
and 2002, respectively, and $5,419 and $4,608
for the six months ended June 30, 2003 and 2002,
respectively) |                                          |   | 86,504             |        |                  |   | 77,004  |        |      |   | 166,255 |        |  |   | 149,592 |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|                                                                                                                                                                                                                         |                                          |   | 45,859             |        |                  |   | 40,221  |        |      |   | 82,108  |        |  |   | 72,328  |       
|Selling, general and administrative expense                                                                                                                                                                              |                                          |   | 9,090              |        |                  |   | 8,539   |        |      |   | 18,453  |        |  |   | 17,161  |       
|Depreciation and amortization                                                                                                                                                                                            |                                          |   | 3,497              |        |                  |   | 3,139   |        |      |   | 7,074   |        |  |   | 6,302   |       
|Loss (gain) on sale of
assets                                                                                                                                                                                            |                                          |   | 78                 |        |                  |   |        |        |      |   | (160    | )      |  |   |        |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|                                                                                                                                                                                                                         | Operating income                         |   |                    | 33,194 |                  |   |         | 28,543 |      |   |         | 56,741 |  |   |         | 48,865 | 
|Interest expense, net                                                                                                                                                                                                    |                                          |   | 6,418              |        |                  |   | 10,344  |        |      |   | 13,410  |        |  |   | 20,333  |       
|Debt retirement costs                                                                                                                                                                                                    |                                          |   |                   |        |                  |   |        |        |      |   | 7,417   |        |  |   |        |       
|Other (income)
expense                                                                                                                                                                                                   |                                          |   | 131                |        |                  |   | (61     | )      |      |   | 258     |        |  |   | (154    | )     
|Minority interest in income of subsidiaries                                                                                                                                                                              |                                          |   | 462                |        |                  |   | 528     |        |      |   | 823     |        |  |   | 930     |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|                                                                                                                                                                                                                         | Income before provision for income taxes |   |                    | 26,183 |                  |   |         | 17,732 |      |   |         | 34,833 |  |   |         | 27,756 | 
|Provision for income taxes                                                                                                                                                                                               |                                          |   | 10,833             |        |                  |   | 7,237   |        |      |   | 14,300  |        |  |   | 11,626  |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|                                                                                                                                                                                                                         | Net income                               |   | $                  | 15,350 |                  |   | $       | 10,495 |      |   | $       | 20,533 |  |   | $       | 16,130 | 
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|Basic earnings per common share                                                                                                                                                                                          |                                          | $ | 0.38               |        |                  | $ | 0.29    |        |      | $ | 0.52    |        |  | $ | 0.44    |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|Diluted earnings per common share                                                                                                                                                                                        |                                          | $ | 0.37               |        |                  | $ | 0.28    |        |      | $ | 0.51    |        |  | $ | 0.43    |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|Shares used for computing basic earnings per share                                                                                                                                                                       |                                          |   | 40,606             |        |                  |   | 36,739  |        |      |   | 39,818  |        |  |   | 36,738  |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       
|Shares used for computing diluted earnings per share                                                                                                                                                                     |                                          |   | 41,136             |        |                  |   | 37,087  |        |      |   | 40,288  |        |  |   | 37,084  |       
|                                                                                                                                                                                                                         |                                          |   |                    |        |                  |   |         |        |      |   |         |        |  |   |         |       

The accompanying notes are an integral part of these condensed, consolidated financial statements.

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VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2003 and 2002
(Unaudited)
(In thousands)

|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |        |         |  
|------------------------------------------------ | ------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------------- | --------------------------------------------------- | ------- | ---------------- | ------- | ------ | ------ | ------ | ------- | -
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         | Six Months Ended
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         | June 30,        
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                 
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         | 2003             |         | 2002  
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |       
|Cash flows from operating activities:            |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |       
|                                                 |                                                               | Net income                                                                        |                                                                     | $                                                   | 20,533  |                  |         | $      | 16,130 |       
|                                                 |                                                               | Adjustments to reconcile net income to net cash provided by operating
activities: |                                                                     |                                                     |         |                  |         |        |        |       
|                                                 |                                                               |                                                                                   | Depreciation and amortization                                       |                                                     |         | 7,074            |         |        |        | 6,302  |        
|                                                 |                                                               |                                                                                   | Amortization of deferred financing costs and debt discount          |                                                     |         | 456              |         |        |        | 847    |        
|                                                 |                                                               |                                                                                   | Provision for uncollectible accounts                                |                                                     |         | 1,557            |         |        |        | 1,420  |        
|                                                 |                                                               |                                                                                   | Debt retirement
costs                                               |                                                     |         | 7,417            |         |        |        |       |        
|                                                 |                                                               |                                                                                   | Interest paid in kind on 15.5% senior
notes                         |                                                     |         |                 |         |        |        | 4,645  |        
|                                                 |                                                               |                                                                                   | Gain on sale of
assets                                              |                                                     |         | (160             | )       |        |        |       |        
|                                                 |                                                               |                                                                                   | Minority interest in income of subsidiaries                         |                                                     |         | 823              |         |        |        | 930    |        
|                                                 |                                                               |                                                                                   | Distributions to minority interest partners                         |                                                     |         | (797             | )       |        |        | (805   | )      
|                                                 |                                                               |                                                                                   | Increase in trade accounts receivable                               |                                                     |         | (5,351           | )       |        |        | (5,845 | )      
|                                                 |                                                               |                                                                                   | Decrease (increase) in inventory, prepaid expenses and other assets |                                                     |         | 168              |         |        |        | (362   | )      
|                                                 |                                                               |                                                                                   | Increase in accounts payable and other accrued liabilities          |                                                     |         | 1,343            |         |        |        | 825    |        
|                                                 |                                                               |                                                                                   | Decrease in accrued payroll and related liabilities                 |                                                     |         | (2,196           | )       |        |        | (238   | )      
|                                                 |                                                               |                                                                                   | Decrease in accrued interest                                        |                                                     |         | (32              | )       |        |        | (270   | )      
|                                                 |                                                               |                                                                                   | Decrease in prepaid income taxes                                    |                                                     |         | 4,910            |         |        |        | 2,782  |        
|                                                 |                                                               |                                                                                   | Increase in income taxes
payable                                    |                                                     |         |                 |         |        |        | 1,901  |        
|                                                 |                                                               |                                                                                   | Increase in deferred income taxes asset                             |                                                     |         | (877             | )       |        |        | (946   | )      
|                                                 |                                                               |                                                                                   | Increase in deferred income taxes liability                         |                                                     |         | 3,652            |         |        |        | 4,498  |        
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|                                                 |                                                               |                                                                                   |                                                                     | Net cash provided by operating activities           |         |                  | 38,520  |        |        |        | 31,814  |  
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|Cash flows from investing activities:            |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |       
|                                                 | Business acquisitions, net of cash acquired                   |                                                                                   |                                                                     | (19,926                                             | )       |                  |         | (9,997 | )     
|                                                 | Real estate acquired in connection with business
acquisitions |                                                                                   |                                                                     | (589                                                | )       |                  |         |       |       
|                                                 | Property and equipment additions,
net                         |                                                                                   |                                                                     | (6,168                                              | )       |                  |         | (6,204 | )     
|                                                 | Proceeds from sale of
assets                                  |                                                                                   |                                                                     | 355                                                 |         |                  |         |       |       
|                                                 | Other                                                         |                                                                                   |                                                                     | 361                                                 |         |                  |         | 129    |       
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|                                                 |                                                               |                                                                                   |                                                                     | Net cash used in investing activities               |         |                  | (25,967 | )      |        |        | (16,072 | )
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|Cash flows from financing activities:            |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |       
|                                                 |                                                               | Repayment of long-term obligations, including redemption fees                     |                                                                     |                                                     | (50,511 | )                |         |        | (2,485 | )     
|                                                 |                                                               | Payment of deferred financing and recapitalization costs                          |                                                                     |                                                     | (382    | )                |         |        | (2,673 | )     
|                                                 |                                                               | Proceeds from issuance of common stock under stock option plans                   |                                                                     |                                                     | 67      |                  |         |        | 17     |       
|                                                 |                                                               | Proceeds from issuance of common stock                                            |                                                                     |                                                     | 54,323  |                  |         |        |       |       
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|                                                 |                                                               |                                                                                   |                                                                     | Net cash provided by (used in) financing activities |         |                  | 3,497   |        |        |        | (5,141  | )
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|Increase in cash and cash equivalents            |                                                               |                                                                                   | 16,050                                                              |                                                     |         |                  | 10,601  |       
|Cash and cash equivalents at beginning of period |                                                               |                                                                                   | 6,462                                                               |                                                     |         |                  | 7,103   |       
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       
|Cash and cash equivalents at end of period       |                                                               | $                                                                                 | 22,512                                                              |                                                     |         | $                | 17,704  |       
|                                                 |                                                               |                                                                                   |                                                                     |                                                     |         |                  |         |        |        |       

The accompanying notes are an integral part of these condensed, consolidated financial statements.

3



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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)



|(1) |  | General
|--- |  | -------

The accompanying unaudited condensed, consolidated financial statements of
VCA Antech, Inc. and subsidiaries (the Company or VCA) have been prepared
in accordance with generally accepted accounting principles in the United
States for interim financial information and in accordance with the rules and
regulations of the United States Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles in the United States for complete
financial statements as permitted under applicable rules and regulations. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. The results of operations for the three and
six months ended June 30, 2003 are not necessarily indicative of the results to
be expected for the full year. For further information, refer to the Companys
consolidated financial statements and footnotes thereto included in the
Companys 2002 Annual Report on Form 10-K.



|(2) |  | Acquisitions
|--- |  | ------------

During the three months ended June 30, 2003, the Company purchased 11
animal hospitals and five veterinary diagnostic laboratories. Five of the
acquired animal hospitals and two of the acquired laboratories were merged into
existing VCA facilities upon acquisition. Including acquisition costs, the
Company paid an aggregate consideration of $16.4 million, consisting of $13.8
million in cash, $2.3 million in an obligation to be settled in either cash or
shares of the Companys common stock, and $385,000 in certain obligations to
sellers and other liabilities assumed. The $16.4 million aggregate purchase
price was allocated as follows: $1.1 million to tangible assets, $14.6 million
to goodwill and $791,000 to other intangible assets. Goodwill was assigned to
the animal hospital and laboratory reporting units in the amounts of $8.6
million and $6.0 million, respectively. The Company expects that $6.5 million
of the goodwill recorded will be fully deductible for income tax purposes.

During the six months ended June 30, 2003, the Company purchased 16 animal
hospitals and six veterinary diagnostic laboratories. Five of the acquired
animal hospitals and two of the acquired laboratories were merged into existing
VCA facilities upon acquisition. Including acquisition costs, the Company paid
an aggregate consideration of $22.5 million, consisting of $19.4 million in
cash, $2.3 million in an obligation to be settled in either cash or shares of
the Companys common stock, and $907,000 in certain obligations to sellers and
other liabilities assumed. The $22.5 million aggregate purchase price was
allocated as follows: $1.2 million to tangible assets, $20.1 million to
goodwill and $1.2 million to other intangible assets. Goodwill was assigned to
the animal hospital and laboratory reporting units in the amounts of $13.8
million and $6.3 million, respectively. The Company expects that $11.0 million
of the goodwill recorded will be fully deductible for income tax purposes.

During the six months ended June 30, 2003, the Company purchased the total
ownership interest of partners in two non-wholly owned subsidiaries of the
Company for approximately $910,000, consisting of $106,000 in cash, $763,000
in a note payable, and $41,000 in the forgiveness of certain notes owed to the
Company by the partner. The Company recorded goodwill of $362,000 related to
the purchase and expects that it will be fully deductible for income tax
purposes.

The Company also made payments of $465,000 during the six months ended
June 30, 2003 related to certain other obligations incurred at the time of
acquisition.

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|(3) |  | Calculation of Earnings per Common Share
|--- |  | ----------------------------------------

Basic and diluted earnings per common share were computed as follows (in
thousands, except per share amounts):

|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |        |     | 
|------------------------------------------- | --------------------------------- | ---------------------------------------------- | ------ | ------------------ | --- | ---------------- | ------ | ------ | --- | ---- | ------ | ------ | --- | - | ------ | ------ | --- | 
|                                            |                                   |                                                |        | Three Months Ended |     | Six Months Ended
|                                            |                                   |                                                |        | June 30,           |     | June 30,        
|                                            |                                   |                                                |        |                    |     |                 
|                                            |                                   |                                                |        | 2003               |     | 2002             |        | 2003   |     | 2002
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |     
|Net income                                  |                                   | $                                              | 15,350 |                    |     | $                | 10,495 |        |     | $    | 20,533 |        |     | $ | 16,130 |       
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|Weighted average common shares outstanding: |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|                                            | Basic                             |                                                |        | 40,606             |     |                  |        | 36,739 |     |      |        | 39,818 |     |   |        | 36,738 |    
|                                            | Effect of dilutive common shares: |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |        |    
|                                            |                                   | Stock options                                  |        |                    | 494 |                  |        |        | 348 |      |        |        | 452 |   |        |        | 346 | 
|                                            |                                   | Contracts that may be settled in stock or cash |        |                    | 36  |                  |        |        |    |      |        |        | 18  |   |        |        |    | 
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|                                            | Diluted                           |                                                |        | 41,136             |     |                  |        | 37,087 |     |      |        | 40,288 |     |   |        | 37,084 |    
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|Earnings per common share:                  |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|                                            | Basic                             |                                                | $      | 0.38               |     |                  | $      | 0.29   |     |      | $      | 0.52   |     |   | $      | 0.44   |    
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       
|                                            | Diluted                           |                                                | $      | 0.37               |     |                  | $      | 0.28   |     |      | $      | 0.51   |     |   | $      | 0.43   |    
|                                            |                                   |                                                |        |                    |     |                  |        |        |     |      |        |        |     |   |        |       



|(4) |  | Comprehensive Income
|--- |  | --------------------

Below is a calculation of comprehensive income (in thousands):

|                         |                                                   |   |                    |      |                  |   |        |     |      |   |        |      |   |   |        |       |  
|------------------------ | ------------------------------------------------- | - | ------------------ | ---- | ---------------- | - | ------ | --- | ---- | - | ------ | ---- | - | - | ------ | ----- | -
|                         |                                                   |   | Three Months Ended |      | Six Months Ended
|                         |                                                   |   | June 30,           |      | June 30,        
|                         |                                                   |   |                    |      |                 
|                         |                                                   |   | 2003               |      | 2002             |   | 2003   |     | 2002
|                         |                                                   |   |                    |      |                  |   |        |     |     
|Net income               |                                                   | $ | 15,350             |      |                  | $ | 10,495 |     |      | $ | 20,533 |      |   | $ | 16,130 |      
|                         | Unrealized gain (loss) on hedging instruments     |   |                    | (114 | )                |   |        | 590 |      |   |        | (114 | ) |   |        | 1,050 |  
|                         | Less portion of unrealized loss (gain) recognized |   |                    | 11   |                  |   |        | (61 | )    |   |        | 11   |   |   |        | (154  | )
|                         |                                                   |   |                    |      |                  |   |        |     |      |   |        |      |   |   |        |      
|Net comprehensive income |                                                   | $ | 15,247             |      |                  | $ | 11,024 |     |      | $ | 20,430 |      |   | $ | 17,026 |      
|                         |                                                   |   |                    |      |                  |   |        |     |      |   |        |      |   |   |        |      

All unrealized gains and losses presented are the result of changes in the
fair market value of interest rate hedging agreements (see footnote 5, Interest
Rate Hedging Agreements). The agreements are two-year agreements that will
have zero market value at the end of their terms. Accordingly, all unrealized
gains and losses will net to zero over the life of the contract. As a result,
the Company has not recognized an income tax expense or benefit relating to
these gains and losses.

5



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##### Table of Contents





|(5) |  | Interest Rate Hedging Agreements
|--- |  | --------------------------------

The Company entered into the following no-fee swap agreements (Swap
Agreements), which swap monthly variable London interbank offer rates
(LIBOR) for the fixed rates indicated below:

|                    |  |                  |            |                  |  |               |           |  |  |  |           | 
|------------------- |  | ---------------- | ---------- | ---------------- |  | ------------- | --------- |  |  |  | --------- | 
|                    |  | Swap #1          |            | Swap #2          |  | Swap #3      
|                    |  |                  |            |                  |  |              
|Fixed interest rate |  |                  | 2.22%      |                  |  |               | 1.72%     |  |  |  | 1.51%     | 
|Notional amount     |  | $40.0 million    |            | $20.0 million    |  | $20.0 million
|Effective date      |  |                  | 11/29/2002 |                  |  |               | 5/30/2003 |  |  |  | 5/30/2003 | 
|Expiration date     |  |                  | 11/29/2004 |                  |  |               | 5/31/2005 |  |  |  | 5/31/2005 | 
|Counter party       |  | Wells Fargo Bank |            | Wells Fargo Bank |  | Goldman Sachs

Swap #2 and Swap #3 qualify for hedge accounting and the Company considers
these to be cash flow hedging instruments. However, in May 2003 management
determined that Swap #1 was no longer an effective tool to hedge against
interest rate risk because LIBOR projections were considerably below the
initial LIBOR forecasts used to price the swap at inception of the contract.
As a result of this determination, Swap #1 no longer qualifies for hedge
accounting and all changes in its market value are recognized as income or
expense in the period of change.

On November 13, 2000, the Company entered into a no-fee interest rate
collar agreement with Wells Fargo Bank, which expired on November 15, 2002,
(Collar Agreement). The Collar Agreement reset monthly and had a cap and
floor notional amount of $62.5 million with a cap and floor interest rate of
7.5% and 5.9%, respectively. The Collar Agreement qualified for hedge
accounting and the Company considered it a cash flow hedging instrument.

The valuations of the Swap Agreements and the Collar Agreement were
determined by the counter parties. At June 30, 2003 and December 31, 2002, the
fair market values of the Swap Agreements resulted in a liability from interest
rate hedging activities of $674,000 and $313,000, respectively. As a result of
the Companys interest rate hedging activities, it recognized an unrealized
loss of $131,000 and an unrealized gain of $61,000 during the three months
ended June 30, 2003 and 2002, respectively, and it recognized an unrealized
loss of $258,000 and an unrealized gain of $154,000 during the six months ended
June 30, 2003 and 2002, respectively. These charges have been reported as part
of other (income) expense.

The Company made payments under the Swap Agreements amounting to $102,000
for the three months ended June 30, 2003 and $187,000 for the six months ended
June 30, 2003, resulting from LIBOR being below the fixed interest rate. The
Company made payments under the Collar Agreement amounting to $639,000 for the
three
months ended June 30, 2002 and $1.3 million for the six months ended June
30, 2002 resulting from LIBOR being below the floor interest rate of 5.9%.
These payments have been reported as part of interest expense.



|(6) |  | Lines of Business
|--- |  | -----------------

During the three and six months ended June 30, 2003 and 2002, the Company
had three reportable segments: Laboratory, Animal Hospital and Corporate.
These segments are strategic business units that have different products,
services and functions. The segments are managed separately because each is a
distinct and different business venture with unique challenges, rewards and
risks. The Laboratory segment provides testing services for veterinarians both
associated with the Company and independent of the Company. The Animal
Hospital segment provides veterinary services for companion animals and sells
related retail and pharmaceutical products. Corporate provides selling,
general and administrative support for the other two segments.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies as detailed in the Companys
consolidated financial statements and footnotes thereto included in the 2002
Annual Report on Form 10-K. The Company evaluates performance of segments
based on operating income. For purposes of reviewing the operating performance
of the segments, all intercompany sales and purchases are accounted for as if
they were transactions with independent third parties at current market prices.

6



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##### Table of Contents



Below is a summary of certain financial data for each of the three
segments (in thousands):

|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |   |        | 
|-------------------------------- | ----------------------------------------------- |  | ----------------------- | ------- | ---------- | ------ | -------- | ------- | --------- | ------ | ------------ | ------ | ----- | ------ | ------------ | ------ | - | - | - | ------- | - | ------ | 
|                                 |                                                 |  |                         |         |            |        |          |         | Animal    |        |              |        |       |        | Intercompany |        |   |   |  
|                                 |                                                 |  |                         |         | Laboratory |        | Hospital |         | Corporate |        | Eliminations |        | Total
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |      
|Three Months Ended June 30, 2003 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Revenue                                         |  | $                       | 46,691  |            |        | $        | 88,424  |           |        | $            |       |       |        | $            | (2,752 | ) |   | $ | 132,363 |  
|                                 | Direct costs (excluding
operating depreciation) |  |                         | 24,816  |            |        |          | 64,440  |           |        |              |       |       |        |              | (2,752 | ) |   |   | 86,504  |  
|                                 | Selling, general and administrative             |  |                         | 2,797   |            |        |          | 2,519   |           |        |              | 3,774  |       |        |              |       |   |   |   | 9,090   |  
|                                 | Loss (gain) on sale of assets                   |  |                         | 21      |            |        |          | 58      |           |        |              | (1     | )     |        |              |       |   |   |   | 78      |  
|                                 | Depreciation and amortization                   |  |                         | 799     |            |        |          | 2,304   |           |        |              | 394    |       |        |              |       |   |   |   | 3,497   |  
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 |                                                 |  | Operating income (loss) |         | $          | 18,258 |          |         | $         | 19,103 |              |        | $     | (4,167 | )            |        | $ |  |   |         | $ | 33,194 | 
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 | Capital expenditures                            |  | $                       | 590     |            |        | $        | 2,165   |           |        | $            | 588    |       |        | $            |       |   |   | $ | 3,343   |  
|                                
|Three Months Ended June 30, 2002 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Revenue                                         |  | $                       | 40,604  |            |        | $        | 78,621  |           |        | $            | 500    |       |        | $            | (2,500 | ) |   | $ | 117,225 |  
|                                 | Direct costs (excluding
operating depreciation) |  |                         | 22,134  |            |        |          | 57,370  |           |        |              |       |       |        |              | (2,500 | ) |   |   | 77,004  |  
|                                 | Selling, general and administrative             |  |                         | 2,396   |            |        |          | 2,478   |           |        |              | 3,665  |       |        |              |       |   |   |   | 8,539   |  
|                                 | Depreciation and amortization                   |  |                         | 726     |            |        |          | 2,069   |           |        |              | 344    |       |        |              |       |   |   |   | 3,139   |  
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 |                                                 |  | Operating income (loss) |         | $          | 15,348 |          |         | $         | 16,704 |              |        | $     | (3,509 | )            |        | $ |  |   |         | $ | 28,543 | 
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 | Capital expenditures                            |  | $                       | 825     |            |        | $        | 1,818   |           |        | $            | 393    |       |        | $            |       |   |   | $ | 3,036   |  
|                                
|Six Months Ended June 30, 2003   |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Revenue                                         |  | $                       | 88,389  |            |        | $        | 165,152 |           |        | $            |       |       |        | $            | (5,178 | ) |   | $ | 248,363 |  
|                                 | Direct costs (excluding
operating depreciation) |  |                         | 48,272  |            |        |          | 123,161 |           |        |              |       |       |        |              | (5,178 | ) |   |   | 166,255 |  
|                                 | Selling, general and administrative             |  |                         | 5,504   |            |        |          | 5,022   |           |        |              | 7,927  |       |        |              |       |   |   |   | 18,453  |  
|                                 | Loss (gain) on sale of assets                   |  |                         | 19      |            |        |          | (178    | )         |        |              | (1     | )     |        |              |       |   |   |   | (160    | )
|                                 | Depreciation and amortization                   |  |                         | 1,553   |            |        |          | 4,781   |           |        |              | 740    |       |        |              |       |   |   |   | 7,074   |  
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 |                                                 |  | Operating income (loss) |         | $          | 33,041 |          |         | $         | 32,366 |              |        | $     | (8,666 | )            |        | $ |  |   |         | $ | 56,741 | 
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 | Capital expenditures                            |  | $                       | 1,764   |            |        | $        | 3,358   |           |        | $            | 1,046  |       |        | $            |       |   |   | $ | 6,168   |  
|                                
|Six Months Ended June 30, 2002   |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Revenue                                         |  | $                       | 78,261  |            |        | $        | 147,265 |           |        | $            | 1,000  |       |        | $            | (4,606 | ) |   | $ | 221,920 |  
|                                 | Direct costs (excluding
operating depreciation) |  |                         | 43,696  |            |        |          | 110,502 |           |        |              |       |       |        |              | (4,606 | ) |   |   | 149,592 |  
|                                 | Selling, general and administrative             |  |                         | 5,069   |            |        |          | 4,992   |           |        |              | 7,100  |       |        |              |       |   |   |   | 17,161  |  
|                                 | Depreciation and amortization                   |  |                         | 1,423   |            |        |          | 4,205   |           |        |              | 674    |       |        |              |       |   |   |   | 6,302   |  
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 |                                                 |  | Operating income (loss) |         | $          | 28,073 |          |         | $         | 27,566 |              |        | $     | (6,774 | )            |        | $ |  |   |         | $ | 48,865 | 
|                                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |         |  
|                                 | Capital expenditures                            |  | $                       | 1,430   |            |        | $        | 3,955   |           |        | $            | 819    |       |        | $            |       |   |   | $ | 6,204   |  
|                                
|At June 30, 2003                 |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Identifiable assets                             |  | $                       | 130,146 |            |        | $        | 365,880 |           |        | $            | 49,227 |       |        | $            |       |   |   | $ | 545,253 |  
|At December 31, 2002             |                                                 |  |                         |         |            |        |          |         |           |        |              |        |       |        |              |        |   |   |   |        
|                                 | Identifiable assets                             |  | $                       | 117,443 |            |        | $        | 350,980 |           |        | $            | 39,005 |       |        | $            |       |   |   | $ | 507,428 |  

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Below is a reconciliation between total segment operating income after
eliminations and consolidated income before provision for income taxes as
reported on the condensed, consolidated statements of operations (in
thousands):

|                                                  |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|------------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | -
|                                                  |  | Three Months Ended |        | Six Months Ended
|                                                  |  | June 30,           |        | June 30,        
|                                                  |  |                    |        |                 
|                                                  |  | 2003               |        | 2002             |  | 2003 |        | 2002
|                                                  |  |                    |        |                  |  |      |        |     
|Total segment operating income after eliminations |  | $                  | 33,194 |                  |  | $    | 28,543 |      |  | $ | 56,741 |  |  | $ | 48,865 |  
|Interest expense, net                             |  |                    | 6,418  |                  |  |      | 10,344 |      |  |   | 13,410 |  |  |   | 20,333 |  
|Debt retirement costs                             |  |                    |       |                  |  |      |       |      |  |   | 7,417  |  |  |   |       |  
|Other (income) expense                            |  |                    | 131    |                  |  |      | (61    | )    |  |   | 258    |  |  |   | (154   | )
|Minority interest in income of subsidiaries       |  |                    | 462    |                  |  |      | 528    |      |  |   | 823    |  |  |   | 930    |  
|                                                  |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Income before provision for income taxes          |  | $                  | 26,183 |                  |  | $    | 17,732 |      |  | $ | 34,833 |  |  | $ | 27,756 |  
|                                                  |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  



|(7) |  | Secondary Offering and Debt Retirement
|--- |  | --------------------------------------

In February 2003, the Company completed a secondary offering of 10.1
million shares of its common stock. As part of this offering, the Company
granted its underwriters an over-allotment option to purchase an additional 1.5
million shares of its common stock that was exercised in full in February 2003.
In conjunction with these transactions, the Company sold 3.8 million primary
shares of its common stock in exchange for net proceeds of approximately $54.3
million. The Company used approximately $42.7 million of the net proceeds to
voluntarily retire the remaining principal amount outstanding of its 15.5%
senior notes due 2010 at a price of 110% of the principal amount plus accrued
and unpaid interest resulting in debt retirement costs of approximately $7.4
million. The Company is using the remaining $11.6 million of net proceeds for
general corporate purposes.



|(8) |  | Goodwill and Other Intangible Assets
|--- |  | ------------------------------------

Goodwill represents the purchase price paid and the fair market value of
liabilities assumed for animal hospital and laboratory acquisitions in excess
of the fair market value of the net assets acquired. Other intangible assets
represent covenants not to compete and client lists, both of which are
associated with acquisitions.

The following table presents the changes in the carrying amount of
goodwill for the six months ended June 30, 2003 (in thousands):

|                                                 |  |            |        |          |  |        |         |  |  |   |         | 
|------------------------------------------------ |  | ---------- | ------ | -------- |  | ------ | ------- |  |  | - | ------- | 
|                                                 |  |            |        |          |  | Animal |         |  |  |  
|                                                 |  | Laboratory |        | Hospital |  | Total 
|                                                 |  |            |        |          |  |       
|Balance as of January 1, 2003                    |  | $          | 87,313 |          |  | $      | 255,301 |  |  | $ | 342,614 | 
|Goodwill acquired and purchase price adjustments |  |            | 6,321  |          |  |        | 14,294  |  |  |   | 20,615  | 
|                                                 |  |            |        |          |  |        |         |  |  |   |         | 
|Balance as of June 30, 2003                      |  | $          | 93,634 |          |  | $      | 269,595 |  |  | $ | 363,229 | 
|                                                 |  |            |        |          |  |        |         |  |  |   |         | 

In addition to goodwill, the Company has other intangible assets as
follows (in thousands):

|                         |  |                     |        |              |  |              |        |   |  |   |       | 
|------------------------ |  | ------------------- | ------ | ------------ |  | ------------ | ------ | - |  | - | ----- | 
|                         |  | As of June 30, 2003
|                         |  |                    
|                         |  | Gross Carrying      |        | Accumulated  |  | Net Carrying
|                         |  | Amount              |        | Amortization |  | Amount      
|                         |  |                     |        |              |  |             
|Covenants not to compete |  | $                   | 12,924 |              |  | $            | (7,883 | ) |  | $ | 5,041 | 
|Client lists             |  |                     | 592    |              |  |              | (499   | ) |  |   | 93    | 
|                         |  |                     |        |              |  |              |        |   |  |   |       | 
|Total                    |  | $                   | 13,516 |              |  | $            | (8,382 | ) |  | $ | 5,134 | 
|                         |  |                     |        |              |  |              |        |   |  |   |       | 

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The aggregate amortization related to other intangible assets was as follows (in thousands):

|                               |  |                    |     |                  |  |      |     |      |  |   |     |  |  |   |       | 
|------------------------------ |  | ------------------ | --- | ---------------- |  | ---- | --- | ---- |  | - | --- |  |  | - | ----- | 
|                               |  | Three Months Ended |     | Six Months Ended
|                               |  | June 30,           |     | June 30,        
|                               |  |                    |     |                 
|                               |  | 2003               |     | 2002             |  | 2003 |     | 2002
|                               |  |                    |     |                  |  |      |     |     
|Aggregate amortization expense |  | $                  | 438 |                  |  | $    | 435 |      |  | $ | 915 |  |  | $ | 1,020 | 
|                               |  |                    |     |                  |  |      |     |      |  |   |     |  |  |   |       | 

Based on balances at June 30, 2003, estimated amortization expense for
other intangible assets for the current year and the next four fiscal years is
as follows (in thousands):

|     |  |   |       | 
|---- |  | - | ----- | 
|2003 |  | $ | 1,815 | 
|2004 |  | $ | 1,478 | 
|2005 |  | $ | 1,087 | 
|2006 |  | $ | 712   | 
|2007 |  | $ | 501   | 



|(9) |  | Accounting Pronouncements
|--- |  | -------------------------



| | a. |  | Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity
| | -- |  | ------------------------------------------------------------------------------------------------

In May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.SFAS No. 150 clarifies the accounting for certain financial
instruments with characteristics of both liabilities and equity and requires
that those instruments be classified as liabilities. SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company currently has a $2.3 million obligation to be
settled in either cash or common stock that is classified as a liability. It
does not have any immediate plans to enter into other financial instruments
subject to the accounting requirements of SFAS No. 150. The adoption of SFAS
No. 150 will not have a material impact on the Companys financial statements.



| | b. |  | Accounting for Derivative Instruments and Hedging Activities
| | -- |  | ------------------------------------------------------------

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.SFAS No. 149 clarifies
financial accounting and reporting requirements for derivative instruments and
hedging activities as set forth under SFAS No. 133. SFAS No. 149 is effective
for contracts entered into or modified after June 30, 2003 and for hedging
relationships entered into after June 30, 2003. The adoption of SFAS No. 149
will not have a material impact on the Companys financial statements.



| | c. |  | Consolidations of Variable Interest Entities
| | -- |  | --------------------------------------------

In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities,requiring that companies
consolidate variable interest entities if they are the primary beneficiaries,
as defined under FIN No. 46, of the activities of the variable interest
entities. Companies are required to apply FIN No. 46 immediately for all
variable interest entities created after January 31, 2003 and as of the
beginning of the first interim period beginning after June 15, 2003 for all
other variable interest entities.

The Company provides management services to certain veterinary medical
groups in states with laws that prohibit business corporations from providing,
or holding themselves out as providers of, veterinary medical care. As of June
30, 2003, the Company operated in 11 of these states. In these states, the
Company provides management services to veterinary medical groups pursuant to
long-term management agreements (the Management Agreements), ranging from 10
to 40 years with non-binding renewal options, where allowable. Pursuant to
these Management Agreements, the veterinary medical groups are each solely
responsible for all aspects of veterinary medicine, as defined by their
respective state. The Company provides administrative and other support
services.

9



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Currently, the Company does not consolidate the operations of the
veterinary medical groups since it has no ownership interests in them.
However, the Company is finalizing its analysis of FIN No. 46, and it is
reasonably possible that the operations of the veterinary medical groups will
be consolidated. If the veterinary medical groups were to be consolidated into
the Companys operating results, there would be no effect on operating income
and the Company would not be exposed to additional losses. A comparative
analysis of the Companys animal hospital operations both as currently reported
and as would be reported if we consolidated the veterinary medical groups is as
follows (in thousands):

|                                                |  |                                        |         |                 |  |            |         |  |  |   |        | 
|----------------------------------------------- |  | -------------------------------------- | ------- | --------------- |  | ---------- | ------- |  |  | - | ------ | 
|                                                |  | For the Six Months Ended June 30, 2003
|                                                |  |                                       
|                                                |  | As Reported                            |         | As Consolidated |  | Difference
|                                                |  |                                        |         |                 |  |           
|Revenue                                         |  | $                                      | 165,152 |                 |  | $          | 185,129 |  |  | $ | 19,977 | 
|Direct costs (excluding operating depreciation) |  | $                                      | 123,161 |                 |  | $          | 143,138 |  |  | $ | 19,977 | 
|Operating income                                |  | $                                      | 32,366  |                 |  | $          | 32,366  |  |  | $ |       | 



| | d. |  | Guarantors Accounting and Disclosure Requirements for Guarantees
| | -- |  | -----------------------------------------------------------------

In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002 for periods ending after
December 15, 2002. The Company does not have any obligations subject to the
provisions of FIN No. 45.



| | e. |  | Consideration Received from a Vendor
| | -- |  | ------------------------------------

In November 2002, the Emerging Issues Task Force (EITF) reached a
consensus regarding two issues raised by EITF Issue No. 02-16, Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a
Vendor.The EITF concluded that:



| |  |  | cash received by a vendor is presumed to be a reduction of
the cost of the vendors products or services, however that
presumption is overcome when the consideration is either a) payment
for assets or services, in which case the consideration is
characterized as revenue, or b) a reimbursement of specific and
identifiable costs incurred on behalf of the vendor in selling the
vendors products or services, in which case the consideration is a
reduction of that cost; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | rebates offered to a customer or reseller should be
recognized as a reduction of the cost of sales based on a systematic
and rational allocation provided that the amounts recognized are
probable and reasonably estimable.                                                                                                                                                                                                                                                            

EITF Issue No. 02-16 is effective for changes made to existing agreements
or new agreements entered into on or after January 1, 2003. The Company
adopted EITF Issue No. 02-16 on January 1, 2003 without a material impact on
its financial statements and does not expect it to have a material impact on
its financial statements in the future.



| | f. |  | Costs Associated with Exit or Disposal Activities
| | -- |  | -------------------------------------------------

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.SFAS No. 146 requires that
liabilities associated with exit or disposal activities be recognized when a
company is committed to future payment of those liabilities under a binding,
legal obligation. SFAS No. 146 nullifies EITF No. 94-3, Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring),which required that exit
and disposal costs be recognized as liabilities when a company formalized its
plan for exiting or disposing of an activity even if no legal obligation had
been established.

10



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##### Table of Contents



SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Currently, the Company has no plans to exit
or dispose of any of its business activities that would require the use of SFAS
No. 146 nor does it anticipate that SFAS No. 146 will change any of its
business practices.



| | g. |  | Gains and Losses from Extinguishment of Debt and Capital Leases
| | -- |  | ---------------------------------------------------------------

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections,to be applied in fiscal years beginning after May 15, 2002.

Under SFAS No. 145, gains and losses from extinguishment of debt should be
classified as extraordinary items only if they meet the criteria of Accounting
Principles Board Opinion (APB) No. 30. Under APB No. 30, events are
considered extraordinary only if they possess a high degree of abnormality and
are not likely to recur in the foreseeable future.

In February 2003, the Company redeemed the remaining principal amount
outstanding of its 15.5% senior notes. This voluntary repayment resulted in
the recognition of a loss on the early extinguishment of debt of $7.4 million.
The Company does not believe the loss meets the criteria of APB No. 30 as it
has historically and may continue to change its capital structure to take
advantage of current market conditions. As a result of adopting SFAS No. 145
on January 1, 2003, the Company recorded the debt retirement costs as a
component of income from recurring operations.

SFAS No. 145 also amends SFAS No. 13, Accounting for Leases.Under SFAS
No. 145, if a capital lease is modified such that it becomes an operating
lease, a gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At June 30,
2003, the Company had capital lease obligations of $454,000; however, the
Company currently has no plans to modify these or any future capital leases.



| | h. |  | Asset Retirement Obligations
| | -- |  | ----------------------------

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations.SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Company adopted SFAS No.
143 on January 1, 2003 without a material impact on its financial statements.

11



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##### Table of Contents





|(10) |  | Stock-Based Compensation
|---- |  | ------------------------

The Company has granted stock options to various employees and accounts
for these options under APB Opinion No. 25, Accounting for Stock Issued to
Employees.Under this method, when options are issued with a strike price
equal to or greater than the market price on the date of issuance, there is no
impact on earnings either on the date of issuance or thereafter regardless of
strike price. This method is not a fair-value-based method of accounting as
defined by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and
Disclosure, and Amendment of FASB Statement No. 123.Fair-value-based methods
of accounting require compensation expense to be recognized annually equal to
the fair value of the options granted divided by their vesting period. Had the
Company accounted for their stock options under SFAS No. 148 and the
fair-value-based method of accounting, the Companys net income and earnings
per share on a pro forma basis would be as indicated below (in thousands,
except per share amounts):

|                           |                                                                                                                                             |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|-------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ---------------- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                           |                                                                                                                                             |   | Three Months Ended |        | Six Months Ended
|                           |                                                                                                                                             |   | June 30,           |        | June 30,        
|                           |                                                                                                                                             |   |                    |        |                 
|                           |                                                                                                                                             |   | 2003               |        | 2002             |   | 2003   |        | 2002
|                           |                                                                                                                                             |   |                    |        |                  |   |        |        |     
|As reported                |                                                                                                                                             | $ | 15,350             |        |                  | $ | 10,495 |        |      | $ | 20,533 |        |  | $ | 16,130 |       
|                           | Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |   | (215               | )      |                  |   | (23    | )      |      |   | (428   | )      |  |   | (37    | )     
|                           |                                                                                                                                             |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|                           | Pro forma net income available to common stockholders                                                                                       |   | $                  | 15,135 |                  |   | $      | 10,472 |      |   | $      | 20,105 |  |   | $      | 16,093 | 
|                           |                                                                                                                                             |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |        | 
|Earnings per common share: |                                                                                                                                             |   |                    |        |                  |   |        |        |      |   |        |        |  |   |        |       
|                           | Basic - as reported                                                                                                                         |   | $                  | 0.38   |                  |   | $      | 0.29   |      |   | $      | 0.52   |  |   | $      | 0.44   | 
|                           | Basic - pro forma                                                                                                                           |   | $                  | 0.37   |                  |   | $      | 0.29   |      |   | $      | 0.50   |  |   | $      | 0.44   | 
|                           | Diluted - as reported                                                                                                                       |   | $                  | 0.37   |                  |   | $      | 0.28   |      |   | $      | 0.51   |  |   | $      | 0.43   | 
|                           | Diluted - pro forma                                                                                                                         |   | $                  | 0.37   |                  |   | $      | 0.28   |      |   | $      | 0.50   |  |   | $      | 0.43   | 



|(11) |  | Commitments and Contingencies
|---- |  | -----------------------------



| | a. |  | State Laws
| | -- |  | ----------

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws
vary from state to state and are enforced by the courts and by regulatory
authorities with broad discretion. The Company operates 64 animal hospitals in
11 states with these laws. The Company may experience difficulty in expanding
operations into other states with similar laws. Given varying and uncertain
interpretations of the veterinary laws of each state, the Company may not be in
compliance with restrictions on the corporate practice of veterinary medicine
in all states. A determination that the Company is in violation of applicable
restrictions on the practice of veterinary medicine in any state in which it
operates could have a material adverse effect, particularly if the Company were
unable to restructure its operations to comply with the requirements of that
state.

All of the states in which the Company operates impose various
registration requirements. To fulfill these requirements, each facility has
been registered with appropriate governmental agencies and, where required, has
appointed a licensed veterinarian to act on behalf of each facility. All
veterinarians practicing in the Companys clinics are required to maintain
valid state licenses to practice.



| | b. |  | Other Contingencies
| | -- |  | -------------------

The Company has certain contingent liabilities resulting from litigation
and claims incident to the ordinary course of its business. Management
believes that the probable resolution of such contingencies will not
significantly affect the Companys financial position or results of operations.

12



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On November 30, 2001, two majority stockholders of a company that merged
with Zoasis Corporation (Zoasis) in June 2000 filed a civil complaint against
VCA, Zoasis and Robert Antin. Robert Antin, VCAs Chief Executive Officer,
President and Chairman of the Board, is the majority stockholder of Zoasis and
serves on its Board of Directors. The complaint alleges various tort claims
under California law arising from the plaintiffs investment in Zoasis. Zoasis
filed a counter claim alleging breach of contract and claim and delivery. On
March 25, 2003, the parties settled all claims in the litigation and executed a
Settlement Agreement, Mutual Release and Covenant Not to Sue. Under the terms
of the settlement, the parties dismissed their claims in the litigation with
prejudice on April 17, 2003, and VCA paid plaintiffs $2.0 million. Concurrent
with the settlement, plaintiffs surrendered all of their Zoasis common stock.
The $2.0 million settlement and other related legal fees were fully accrued at
December 31, 2002.



|(12) |  | Reclassifications
|---- |  | -----------------

Certain 2002 balances have been reclassified to conform to the 2003
financial statement presentation.



|(13) |  | Subsequent Events
|---- |  | -----------------

From July 1, 2003 through August 11, 2003, the Company acquired one animal
hospital and one veterinary diagnostic laboratory, which was merged into an
existing laboratory upon acquisition. Including acquisition costs, the Company
paid an aggregate consideration of $3.6 million, consisting of $2.9 million
in cash and $770,000 in certain obligations to sellers and other
liabilities assumed.



|(14) |  | Condensed, Consolidating Information
|---- |  | ------------------------------------

The Company has a legal structure comprised of a holding company and an
operating company. VCA is the holding company. Vicar Operating, Inc.
(Vicar) is the operating company and wholly-owned by VCA. Vicar owns the
capital stock of all of the Companys subsidiaries.

In connection with Vicars issuance in November 2001 of $170.0 million of
9.875% senior subordinated notes, VCA and each existing and future domestic
wholly-owned restricted subsidiary of Vicar (the Guarantor Subsidiaries)
have, jointly and severally, fully and unconditionally guaranteed the 9.875%
senior subordinated notes. These guarantees are unsecured and subordinated in
right of payment to all existing and future indebtedness outstanding under the
Credit and Guaranty Agreement dated September 20, 2000 and any other
indebtedness permitted to be incurred by Vicar under the terms of the indenture
agreement for the 9.875% senior subordinated notes.

Vicars subsidiaries are composed of wholly-owned restricted subsidiaries
and partnerships. The partnerships may elect to serve as guarantors of Vicars
obligations, however, none of the partnerships have elected to do so (the
Non-Guarantor Subsidiaries). Vicar conducts all of its business through and
derives virtually all of its income from its subsidiaries. Therefore, Vicars
ability to make required payments with respect to its indebtedness (including
the 9.875% senior subordinated notes) and other obligations depends on the
financial results and condition of its subsidiaries and its ability to receive
funds from its subsidiaries.

Pursuant to Rule 3-10 of Regulation S-X, the following condensed,
consolidating information is for VCA, Vicar, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries with respect to the 9.875% senior subordinated
notes. This condensed financial information has been prepared from the books
and records maintained by VCA, Vicar, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries. The condensed financial information may not
necessarily be indicative of results of operations or financial position had
the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries operated as
independent entities. The separate financial statements of the Guarantor
Subsidiaries are not presented because management has determined they would not
be material to investors.

13



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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of June 30, 2003
(Unaudited)
(In thousands)

|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |          |         | 
|------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------ | ------ | -------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ------ | ------ | ------ |  | ----- | -------- | -------- | - | ------- | -------- | ------- | 
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        | Non-   |        |  |       |          |          |   |         |         
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |        |        |        |  |       |          |          |  
|                                            |                                                                         |                                            |        | VCA      |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |             
|Current assets:                             |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Cash and cash equivalents                                               |                                            | $      |         |         |       | $        | 20,355       |         |              | $       | 1,977       |         |              | $      | 180    |        |  | $     |         |          |   | $       | 22,512   |        
|                                            | Trade accounts receivable, net                                          |                                            |        |         |         |       |          | 9            |         |              |         | 24,889      |         |              |        | 639    |        |  |       |         |          |   |         | 25,537   |        
|                                            | Inventory, prepaid expenses and other                                   |                                            |        |         |         |       |          | 2,180        |         |              |         | 5,925       |         |              |        | 488    |        |  |       |         |          |   |         | 8,593    |        
|                                            | Deferred income taxes                                                   |                                            |        |         |         |       |          | 10,405       |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 10,405   |        
|                                            | Prepaid income taxes                                                    |                                            |        |         |         |       |          | 2,704        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 2,704    |        
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                                                         | Total current assets                       |        |          |        |       |          |              | 35,653  |              |         |             | 32,791  |              |        |        | 1,307  |  |       |          |         |   |         |          | 69,751  | 
|                                            | Property and equipment, net                                             |                                            |        |         |         |       |          | 7,056        |         |              |         | 88,231      |         |              |        | 1,558  |        |  |       |         |          |   |         | 96,845   |        
|                                            | Goodwill, net                                                           |                                            |        |         |         |       |          |             |         |              |         | 342,439     |         |              |        | 20,790 |        |  |       |         |          |   |         | 363,229  |        
|                                            | Covenants not to compete, net                                           |                                            |        |         |         |       |          |             |         |              |         | 4,438       |         |              |        | 603    |        |  |       |         |          |   |         | 5,041    |        
|                                            | Deferred financing costs, net                                           |                                            |        |         |         |       |          | 5,952        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 5,952    |        
|                                            | Other                                                                   |                                            |        | 69       |         |       |          | 497          |         |              |         | 2,988       |         |              |        | 1,796  |        |  |       | (915     | )        |   |         | 4,435    |        
|                                            | Investment in subsidiaries                                              |                                            |        | 180,231  |         |       |          | 277,747      |         |              |         | 21,901      |         |              |        |       |        |  |       | (479,879 | )        |   |         |         |        
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                                                         | Total assets                               |        | $        | 180,300 |       |          | $            | 326,905 |              |         | $           | 492,788 |              |        | $      | 26,054 |  |       | $        | (480,794 | ) |         | $        | 545,253 | 
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|Current liabilities:                        |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Current portion of long-term obligations                                |                                            | $      |         |         |       | $        | 1,743        |         |              | $       | 955         |         |              | $      |       |        |  | $     |         |          |   | $       | 2,698    |        
|                                            | Accounts payable                                                        |                                            |        |         |         |       |          | 7,383        |         |              |         | 2,747       |         |              |        |       |        |  |       |         |          |   |         | 10,130   |        
|                                            | Accrued payroll and related liabilities                                 |                                            |        |         |         |       |          | 5,416        |         |              |         | 6,818       |         |              |        | 304    |        |  |       |         |          |   |         | 12,538   |        
|                                            | Accrued interest                                                        |                                            |        |         |         |       |          | 1,493        |         |              |         | 40          |         |              |        |       |        |  |       |         |          |   |         | 1,533    |        
|                                            | Other accrued liabilities                                               |                                            |        |         |         |       |          | 12,146       |         |              |         | 6,199       |         |              |        | 95     |        |  |       |         |          |   |         | 18,440   |        
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                                                         | Total current liabilities                  |        |          |        |       |          |              | 28,181  |              |         |             | 16,759  |              |        |        | 399    |  |       |          |         |   |         |          | 45,339  | 
|Long-term obligations, less current portion |                                                                         |                                            |       |          |         |       | 335,021  |              |         |              | 1,686   |             |         |              |       |        |        |  | (915  | )        |          |   | 335,792 |         
|Deferred income taxes                       |                                                                         |                                            |       |          |         |       | 19,028   |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 19,028  |         
|Other liabilities                           |                                                                         |                                            |       |          |         |       | 2,007    |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 2,007   |         
|Intercompany payable/(receivable)           |                                                                         |                                            | 42,351 |          |         |       | (237,563 | )            |         |              | 196,596 |             |         |              | (1,384 | )      |        |  |      |          |          |   |        |         
|Minority interest                           |                                                                         |                                            |       |          |         |       |         |              |         |              |        |             |         |              |       |        |        |  | 5,138 |          |          |   | 5,138   |         
|Stockholders equity:                       |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Common stock                                                            |                                            |        | 41       |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 41       |        
|                                            | Additional paid-in capital                                              |                                            |        | 243,327  |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 243,327  |        
|                                            | Notes receivable from stockholders                                      |                                            |        | (95      | )       |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | (95      | )      
|                                            | Accumulated equity (deficit)                                            |                                            |        | (105,221 | )       |       |          | 180,334      |         |              |         | 277,747     |         |              |        | 27,039 |        |  |       | (485,120 | )        |   |         | (105,221 | )      
|                                            | Accumulated comprehensive loss -
unrealized loss on hedging instruments |                                            |        | (103     | )       |       |          | (103         | )       |              |         |            |         |              |        |       |        |  |       | 103      |          |   |         | (103     | )      
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                                                         | Total stockholders equity                 |        |          | 137,949 |       |          |              | 180,231 |              |         |             | 277,747 |              |        |        | 27,039 |  |       |          | (485,017 | ) |         |          | 137,949 | 
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                                                         | Total liabilities and stockholders
equity |        | $        | 180,300 |       |          | $            | 326,905 |              |         | $           | 492,788 |              |        | $      | 26,054 |  |       | $        | (480,794 | ) |         | $        | 545,253 | 
|                                            |                                                                         |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         

14



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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of December 31, 2002
(In thousands)

|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |          |         | 
|------------------------------------------- | ---------------------------------------- | ------------------------------------------ | ------ | -------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ------ | ------ | ------ |  | ----- | -------- | -------- | - | ------- | -------- | ------- | 
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        | Non-   |        |  |       |          |          |   |         |         
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |        |        |        |  |       |          |          |  
|                                            |                                          |                                            |        | VCA      |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |             
|Current assets:                             |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Cash and cash equivalents                |                                            | $      |         |         |       | $        | 5,083        |         |              | $       | 1,233       |         |              | $      | 146    |        |  | $     |         |          |   | $       | 6,462    |        
|                                            | Trade accounts receivable, net           |                                            |        |         |         |       |          | 5            |         |              |         | 20,085      |         |              |        | 637    |        |  |       |         |          |   |         | 20,727   |        
|                                            | Inventory, prepaid expenses and other    |                                            |        |         |         |       |          | 2,684        |         |              |         | 5,414       |         |              |        | 545    |        |  |       |         |          |   |         | 8,643    |        
|                                            | Deferred income taxes                    |                                            |        |         |         |       |          | 9,528        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 9,528    |        
|                                            | Prepaid income taxes                     |                                            |        |         |         |       |          | 7,614        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 7,614    |        
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                          | Total current assets                       |        |          |        |       |          |              | 24,914  |              |         |             | 26,732  |              |        |        | 1,328  |  |       |          |         |   |         |          | 52,974  | 
|                                            | Property and equipment, net              |                                            |        |         |         |       |          | 6,727        |         |              |         | 86,077      |         |              |        | 2,499  |        |  |       |         |          |   |         | 95,303   |        
|                                            | Goodwill, net                            |                                            |        |         |         |       |          |             |         |              |         | 321,887     |         |              |        | 20,727 |        |  |       |         |          |   |         | 342,614  |        
|                                            | Covenants not to compete, net            |                                            |        |         |         |       |          |             |         |              |         | 4,098       |         |              |        | 637    |        |  |       |         |          |   |         | 4,735    |        
|                                            | Deferred financing costs, net            |                                            |        | 386      |         |       |          | 6,392        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 6,778    |        
|                                            | Other                                    |                                            |        | 139      |         |       |          | 447          |         |              |         | 2,679       |         |              |        | 1,759  |        |  |       |         |          |   |         | 5,024    |        
|                                            | Investment in subsidiaries               |                                            |        | 155,115  |         |       |          | 239,671      |         |              |         | 23,403      |         |              |        |       |        |  |       | (418,189 | )        |   |         |         |        
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                          | Total assets                               |        | $        | 155,640 |       |          | $            | 278,151 |              |         | $           | 464,876 |              |        | $      | 26,950 |  |       | $        | (418,189 | ) |         | $        | 507,428 | 
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|Current liabilities:                        |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Current portion of long-term obligations |                                            | $      |         |         |       | $        | 9,240        |         |              | $       | 382         |         |              | $      |       |        |  | $     |         |          |   | $       | 9,622    |        
|                                            | Accounts payable                         |                                            |        |         |         |       |          | 6,706        |         |              |         | 3,517       |         |              |        |       |        |  |       |         |          |   |         | 10,223   |        
|                                            | Accrued payroll and related liabilities  |                                            |        |         |         |       |          | 7,068        |         |              |         | 7,339       |         |              |        | 327    |        |  |       |         |          |   |         | 14,734   |        
|                                            | Accrued interest                         |                                            |        |         |         |       |          | 1,547        |         |              |         | 18          |         |              |        |       |        |  |       |         |          |   |         | 1,565    |        
|                                            | Other accrued liabilities                |                                            |        |         |         |       |          | 10,325       |         |              |         | 3,124       |         |              |        | 15     |        |  |       |         |          |   |         | 13,464   |        
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                          | Total current liabilities                  |        |          |        |       |          |              | 34,886  |              |         |             | 14,380  |              |        |        | 342    |  |       |          |         |   |         |          | 49,608  | 
|Long-term obligations, less current portion |                                          |                                            | 35,145 |          |         |       | 335,895  |              |         |              | 895     |             |         |              |       |        |        |  |      |          |          |   | 371,935 |         
|Deferred income taxes                       |                                          |                                            |       |          |         |       | 15,376   |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 15,376  |         
|Other liabilities                           |                                          |                                            |       |          |         |       | 2,007    |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 2,007   |         
|Intercompany payable/(receivable)           |                                          |                                            | 57,409 |          |         |       | (265,128 | )            |         |              | 209,930 |             |         |              | (2,211 | )      |        |  |      |          |          |   |        |         
|Minority interest                           |                                          |                                            |       |          |         |       |         |              |         |              |        |             |         |              |       |        |        |  | 5,416 |          |          |   | 5,416   |         
|Stockholders equity:                       |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            | Common stock                             |                                            |        | 37       |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 37       |        
|                                            | Additional paid-in capital               |                                            |        | 188,941  |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 188,941  |        
|                                            | Accumulated equity (deficit)             |                                            |        | (125,754 | )       |       |          | 155,115      |         |              |         | 239,671     |         |              |        | 28,819 |        |  |       | (423,605 | )        |   |         | (125,754 | )      
|                                            | Notes receivable from stockholders       |                                            |        | (138     | )       |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | (138     | )      
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                          | Total stockholders equity                 |        |          | 63,086  |       |          |              | 155,115 |              |         |             | 239,671 |              |        |        | 28,819 |  |       |          | (423,605 | ) |         |          | 63,086  | 
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         
|                                            |                                          | Total liabilities and stockholders
equity |        | $        | 155,640 |       |          | $            | 278,151 |              |         | $           | 464,876 |              |        | $      | 26,950 |  |       | $        | (418,189 | ) |         | $        | 507,428 | 
|                                            |                                          |                                            |        |          |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         

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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2003
(Unaudited)
(In thousands)

|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |        |        | 
|------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------- | ------ | ------ | ------ | ----- | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------ | ------------ | ----- | ----- | ----- | - | ------- | ------- | ------- | - | ------- | ------ | ------ | 
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       | Non-  |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         | Guarantor   |        | Guarantor    |       |       |       |   |         |         |         |  
|                                            |                                          |                                                                |        | VCA    |        | Vicar |        | Subsidiaries |        | Subsidiaries |         | Elimination |        | Consolidated
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |             
|Revenue                                     |                                          | $                                                              |       |        |        | $     |       |              |        | $            | 123,295 |             |        | $            | 9,317 |       |       | $ | (249    | )       |         | $ | 132,363 |       
|Direct costs                                |                                          |                                                                |       |        |        |       |       |              |        |              | 80,012  |             |        |              | 6,741 |       |       |   | (249    | )       |         |   | 86,504  |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |       |        |        |       |       |              |        |              | 43,283  |             |        |              | 2,576 |       |       |   |        |         |         |   | 45,859  |       
|Selling, general and administrative         |                                          |                                                                |       |        |        |       | 3,774  |              |        |              | 4,930   |             |        |              | 386   |       |       |   |        |         |         |   | 9,090   |       
|Depreciation and amortization               |                                          |                                                                |       |        |        |       | 394    |              |        |              | 2,941   |             |        |              | 162   |       |       |   |        |         |         |   | 3,497   |       
|Loss (gain) on sale of assets               |                                          |                                                                |       |        |        |       | (1     | )            |        |              | 79      |             |        |              |      |       |       |   |        |         |         |   | 78      |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       
|                                            |                                          | Operating income (loss)                                        |        |        |       |       |        |              | (4,167 | )            |         |             | 35,333 |              |       |       | 2,028 |   |         |         |        |   |         |        | 33,194 | 
|Interest expense, net                       |                                          |                                                                | (5     | )      |        |       | 6,429  |              |        |              | 37      |             |        |              | (43   | )     |       |   |        |         |         |   | 6,418   |       
|Other expense                               |                                          |                                                                |       |        |        |       | 131    |              |        |              |        |             |        |              |      |       |       |   |        |         |         |   | 131     |       
|Equity interest in income of subsidiaries   |                                          |                                                                | 15,347 |        |        |       | 21,491 |              |        |              | 1,609   |             |        |              |      |       |       |   | (38,447 | )       |         |   |        |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       
|                                            |                                          | Income before minority interest and
provision for income taxes |        |        | 15,352 |       |        |              | 10,764 |              |         |             | 36,905 |              |       |       | 2,071 |   |         |         | (38,447 | ) |         |        | 26,645 | 
|Minority interest in income of subsidiaries |                                          |                                                                |       |        |        |       |       |              |        |              |        |             |        |              |      |       |       |   | 462     |         |         |   | 462     |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       
|                                            | Income before provision for income taxes |                                                                |        | 15,352 |        |       |        | 10,764       |        |              |         | 36,905      |        |              |       | 2,071 |       |   |         | (38,909 | )       |   |         | 26,183 |       
|Provision (benefit) for income taxes        |                                          |                                                                | 2      |        |        |       | (4,583 | )            |        |              | 15,414  |             |        |              |      |       |       |   |        |         |         |   | 10,833  |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       
|                                            | Net income                               |                                                                | $      | 15,350 |        |       | $      | 15,347       |        |              | $       | 21,491      |        |              | $     | 2,071 |       |   | $       | (38,909 | )       |   | $       | 15,350 |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |         |   |         |       

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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2002
(Unaudited)
(In thousands)

|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |        | 
|------------------------------------------- | -------------------------------------------------------------- | - | ------ | ------ | ----- | - | ------------ | ------ | ------------ | - | ----------- | ------ | ------------ | - | ----- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   | Non-  |       |  |   |         |         |   |   |        
|                                            |                                                                |   |        |        |       |   |              |        |              |   | Guarantor   |        | Guarantor    |   |       |       |  |   |         |         |  
|                                            |                                                                |   | VCA    |        | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |        | Consolidated
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |             
|Revenue                                     |                                                                | $ |       |        |       | $ | 500          |        |              | $ | 107,515     |        |              | $ | 9,453 |       |  | $ | (243    | )       |   | $ | 117,225 |       
|Direct costs                                |                                                                |   |       |        |       |   |             |        |              |   | 70,507      |        |              |   | 6,740 |       |  |   | (243    | )       |   |   | 77,004  |       
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            |                                                                |   |       |        |       |   | 500          |        |              |   | 37,008      |        |              |   | 2,713 |       |  |   |        |         |   |   | 40,221  |       
|Selling, general and administrative         |                                                                |   |       |        |       |   | 3,665        |        |              |   | 4,503       |        |              |   | 371   |       |  |   |        |         |   |   | 8,539   |       
|Depreciation and amortization               |                                                                |   |       |        |       |   | 344          |        |              |   | 2,614       |        |              |   | 181   |       |  |   |        |         |   |   | 3,139   |       
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Operating income (loss)                                        |   |        |       |       |   |              | (3,509 | )            |   |             | 29,891 |              |   |       | 2,161 |  |   |         |        |   |   |         | 28,543 | 
|Interest expense, net                       |                                                                |   | 2,386  |        |       |   | 7,956        |        |              |   | 32          |        |              |   | (30   | )     |  |   |        |         |   |   | 10,344  |       
|Other income                                |                                                                |   |       |        |       |   | (61          | )      |              |   |            |        |              |   |      |       |  |   |        |         |   |   | (61     | )     
|Equity interest in income of subsidiaries   |                                                                |   | 11,995 |        |       |   | 19,204       |        |              |   | 1,663       |        |              |   |      |       |  |   | (32,862 | )       |   |   |        |       
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before minority interest and
provision for income taxes |   |        | 9,609  |       |   |              | 7,800  |              |   |             | 31,522 |              |   |       | 2,191 |  |   |         | (32,862 | ) |   |         | 18,260 | 
|Minority interest in income of
subsidiaries |                                                                |   |       |        |       |   |             |        |              |   |            |        |              |   |      |       |  |   | 528     |         |   |   | 528     |       
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before provision for
income taxes                       |   |        | 9,609  |       |   |              | 7,800  |              |   |             | 31,522 |              |   |       | 2,191 |  |   |         | (33,390 | ) |   |         | 17,732 | 
|Provision (benefit) for income taxes        |                                                                |   | (886   | )      |       |   | (4,195       | )      |              |   | 12,318      |        |              |   |      |       |  |   |        |         |   |   | 7,237   |       
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Net income                                                     |   | $      | 10,495 |       |   | $            | 11,995 |              |   | $           | 19,204 |              |   | $     | 2,191 |  |   | $       | (33,390 | ) |   | $       | 10,495 | 
|                                            |                                                                |   |        |        |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2003
(Unaudited)
(In thousands)

|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |        |        | 
|------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------- | ------ | ------ | ------ | ----- | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------ | ------------ | ------ | ----- | ----- | - | ------- | ------- | ------- | - | ------- | ------ | ------ | 
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        | Non-  |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         | Guarantor   |        | Guarantor    |        |       |       |   |         |         |         |  
|                                            |                                          |                                                                |        | VCA    |        | Vicar |        | Subsidiaries |        | Subsidiaries |         | Elimination |        | Consolidated
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |             
|Revenue                                     |                                          | $                                                              |       |        |        | $     |       |              |        | $            | 231,303 |             |        | $            | 17,535 |       |       | $ | (475    | )       |         | $ | 248,363 |       
|Direct costs                                |                                          |                                                                |       |        |        |       |       |              |        |              | 153,870 |             |        |              | 12,860 |       |       |   | (475    | )       |         |   | 166,255 |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |       |        |        |       |       |              |        |              | 77,433  |             |        |              | 4,675  |       |       |   |        |         |         |   | 82,108  |       
|Selling, general and administrative         |                                          |                                                                |       |        |        |       | 7,927  |              |        |              | 9,797   |             |        |              | 729    |       |       |   |        |         |         |   | 18,453  |       
|Depreciation and amortization               |                                          |                                                                |       |        |        |       | 740    |              |        |              | 6,018   |             |        |              | 316    |       |       |   |        |         |         |   | 7,074   |       
|Gain on sale of assets                      |                                          |                                                                |       |        |        |       | (1     | )            |        |              | (159    | )           |        |              |       |       |       |   |        |         |         |   | (160    | )     
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          | Operating income (loss)                                        |        |        |       |       |        |              | (8,666 | )            |         |             | 61,777 |              |        |       | 3,630 |   |         |         |        |   |         |        | 56,741 | 
|Interest expense, net                       |                                          |                                                                | 526    |        |        |       | 12,893 |              |        |              | 66      |             |        |              | (75    | )     |       |   |        |         |         |   | 13,410  |       
|Debt retirement costs                       |                                          |                                                                | 7,417  |        |        |       |       |              |        |              |        |             |        |              |       |       |       |   |        |         |         |   | 7,417   |       
|Other expense                               |                                          |                                                                |       |        |        |       | 258    |              |        |              |        |             |        |              |       |       |       |   |        |         |         |   | 258     |       
|Equity interest in income of subsidiaries   |                                          |                                                                | 25,219 |        |        |       | 38,076 |              |        |              | 2,882   |             |        |              |       |       |       |   | (66,177 | )       |         |   |        |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          | Income before minority interest and
provision for income taxes |        |        | 17,276 |       |        |              | 16,259 |              |         |             | 64,593 |              |        |       | 3,705 |   |         |         | (66,177 | ) |         |        | 35,656 | 
|Minority interest in income of subsidiaries |                                          |                                                                |       |        |        |       |       |              |        |              |        |             |        |              |       |       |       |   | 823     |         |         |   | 823     |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            | Income before provision for income taxes |                                                                |        | 17,276 |        |       |        | 16,259       |        |              |         | 64,593      |        |              |        | 3,705 |       |   |         | (67,000 | )       |   |         | 34,833 |       
|Provision (benefit) for income taxes        |                                          |                                                                | (3,257 | )      |        |       | (8,960 | )            |        |              | 26,517  |             |        |              |       |       |       |   |        |         |         |   | 14,300  |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            | Net income                               |                                                                | $      | 20,533 |        |       | $      | 25,219       |        |              | $       | 38,076      |        |              | $      | 3,705 |       |   | $       | (67,000 | )       |   | $       | 20,533 |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2002
(Unaudited)
(In thousands)

|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |        |        | 
|------------------------------------------- | ---------------------------------------- | -------------------------------------------------------------- | ------ | ------ | ------ | ----- | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------ | ------------ | ------ | ----- | ----- | - | ------- | ------- | ------- | - | ------- | ------ | ------ | 
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        | Non-  |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         | Guarantor   |        | Guarantor    |        |       |       |   |         |         |         |  
|                                            |                                          |                                                                |        | VCA    |        | Vicar |        | Subsidiaries |        | Subsidiaries |         | Elimination |        | Consolidated
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |             
|Revenue                                     |                                          | $                                                              |       |        |        | $     | 1,000  |              |        | $            | 203,941 |             |        | $            | 17,414 |       |       | $ | (435    | )       |         | $ | 221,920 |       
|Direct costs                                |                                          |                                                                |       |        |        |       |       |              |        |              | 137,484 |             |        |              | 12,543 |       |       |   | (435    | )       |         |   | 149,592 |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          |                                                                |       |        |        |       | 1,000  |              |        |              | 66,457  |             |        |              | 4,871  |       |       |   |        |         |         |   | 72,328  |       
|Selling, general and administrative         |                                          |                                                                |       |        |        |       | 7,100  |              |        |              | 9,384   |             |        |              | 677    |       |       |   |        |         |         |   | 17,161  |       
|Depreciation and amortization               |                                          |                                                                |       |        |        |       | 674    |              |        |              | 5,279   |             |        |              | 349    |       |       |   |        |         |         |   | 6,302   |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          | Operating income (loss)                                        |        |        |       |       |        |              | (6,774 | )            |         |             | 51,794 |              |        |       | 3,845 |   |         |         |        |   |         |        | 48,865 | 
|Interest expense, net                       |                                          |                                                                | 4,527  |        |        |       | 15,801 |              |        |              | 62      |             |        |              | (57    | )     |       |   |        |         |         |   | 20,333  |       
|Other income                                |                                          |                                                                |       |        |        |       | (154   | )            |        |              |        |             |        |              |       |       |       |   |        |         |         |   | (154    | )     
|Equity interest in income of subsidiaries   |                                          |                                                                | 18,750 |        |        |       | 31,731 |              |        |              | 2,972   |             |        |              |       |       |       |   | (53,453 | )       |         |   |        |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            |                                          | Income before minority interest and
provision for income taxes |        |        | 14,223 |       |        |              | 9,310  |              |         |             | 54,704 |              |        |       | 3,902 |   |         |         | (53,453 | ) |         |        | 28,686 | 
|Minority interest in income of subsidiaries |                                          |                                                                |       |        |        |       |       |              |        |              |        |             |        |              |       |       |       |   | 930     |         |         |   | 930     |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            | Income before provision for income taxes |                                                                |        | 14,223 |        |       |        | 9,310        |        |              |         | 54,704      |        |              |        | 3,902 |       |   |         | (54,383 | )       |   |         | 27,756 |       
|Provision (benefit) for income taxes        |                                          |                                                                | (1,907 | )      |        |       | (9,440 | )            |        |              | 22,973  |             |        |              |       |       |       |   |        |         |         |   | 11,626  |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       
|                                            | Net income                               |                                                                | $      | 16,130 |        |       | $      | 18,750       |        |              | $       | 31,731      |        |              | $      | 3,902 |       |   | $       | (54,383 | )       |   | $       | 16,130 |       
|                                            |                                          |                                                                |        |        |        |       |        |              |        |              |         |             |        |              |        |       |       |   |         |         |         |   |         |       

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2003
(Unaudited)
(In thousands)

|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |        |        | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ----- | ------------ | - | ------ | -- |  | - | ------- | - |  | - | ------ | ------ | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   | Non-   |    |  |   |         |   |  |   |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   | Guarantor   |       | Guarantor    |   |        |    |  |   |         |   | 
|                                      |                                                                                             |                                                     |   | VCA     |         | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |       | Consolidated
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |             
|Cash flows from operating activities: |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       
|                                      | Net income                                                                                  |                                                     | $ | 20,533  |         |       | $ | 25,219       |        |              | $ | 38,076      |       |              | $ | 3,705  |    |  | $ | (67,000 | ) |  | $ | 20,533 |       
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |        |       
|                                      | Equity interest in earnings of
subsidiaries                                                 |                                                     |   | (25,219 | )       |       |   | (38,076      | )      |              |   | (2,882      | )     |              |   |       |    |  |   | 66,177  |   |  |   |       |       
|                                      | Depreciation and amortization                                                               |                                                     |   |        |         |       |   | 740          |        |              |   | 6,018       |       |              |   | 316    |    |  |   |        |   |  |   | 7,074  |       
|                                      | Amortization of deferred financing costs
and debt discount                                  |                                                     |   | 14      |         |       |   | 442          |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 456    |       
|                                      | Provision for uncollectible accounts                                                        |                                                     |   |        |         |       |   |             |        |              |   | 1,408       |       |              |   | 149    |    |  |   |        |   |  |   | 1,557  |       
|                                      | Debt retirement costs                                                                       |                                                     |   | 7,417   |         |       |   |             |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 7,417  |       
|                                      | Gain of sale of assets                                                                      |                                                     |   |        |         |       |   | (1           | )      |              |   | (159        | )     |              |   |       |    |  |   |        |   |  |   | (160   | )     
|                                      | Minority interest in income of
subsidiaries                                                 |                                                     |   |        |         |       |   |             |        |              |   |            |       |              |   |       |    |  |   | 823     |   |  |   | 823    |       
|                                      | Distributions to minority interest
partners                                                 |                                                     |   |        |         |       |   | (797         | )      |              |   |            |       |              |   |       |    |  |   |        |   |  |   | (797   | )     
|                                      | Increase in trade accounts receivable                                                       |                                                     |   |        |         |       |   | (4           | )      |              |   | (5,196      | )     |              |   | (151   | )  |  |   |        |   |  |   | (5,351 | )     
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |                                                     |   | 70      |         |       |   | 363          |        |              |   | (322        | )     |              |   | 57     |    |  |   |        |   |  |   | 168    |       
|                                      | Increase (decrease) in accounts payable
and other accrued liabilities                       |                                                     |   |        |         |       |   | 2,395        |        |              |   | (1,132      | )     |              |   | 80     |    |  |   |        |   |  |   | 1,343  |       
|                                      | Decrease in accrued payroll
and related liabilities                                         |                                                     |   |        |         |       |   | (1,652       | )      |              |   | (521        | )     |              |   | (23    | )  |  |   |        |   |  |   | (2,196 | )     
|                                      | Increase (decrease) in accrued interest                                                     |                                                     |   |        |         |       |   | (54          | )      |              |   | 22          |       |              |   |       |    |  |   |        |   |  |   | (32    | )     
|                                      | Decrease in prepaid income taxes                                                            |                                                     |   |        |         |       |   | 4,910        |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 4,910  |       
|                                      | Increase in deferred income taxes asset                                                     |                                                     |   |        |         |       |   | (877         | )      |              |   |            |       |              |   |       |    |  |   |        |   |  |   | (877   | )     
|                                      | Increase in deferred income
taxes liability                                                 |                                                     |   |        |         |       |   | 3,652        |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 3,652  |       
|                                      | Increase in intercompany
payable/(receivable)                                               |                                                     |   | (15,011 | )       |       |   | 52,148       |        |              |   | (33,038     | )     |              |   | (4,099 | )  |  |   |        |   |  |   |       |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       
|                                      |                                                                                             | Net cash provided by (used in)
operating activities |   |         | (12,196 | )     |   |              | 48,408 |              |   |             | 2,274 |              |   |        | 34 |  |   |         |  |  |   |        | 38,520 | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS - (Continued)
For the Six Months Ended June 30, 2003
(Unaudited)
(In thousands)

|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |         |         |  
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------ | ----- | ------ | ------------ | ------- | ------------ | ----- | ----------- | ------ | ------------ | --- | ---- | - | - | - | - | - | - | ------ | ------- | ------- | -
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     | Non- |   |   |   |   |   |   |        |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       | Guarantor   |        | Guarantor    |     |      |   |   |   |   |   |  
|                                                 |                                                                 |                                                     |   | VCA     |        | Vicar |        | Subsidiaries |         | Subsidiaries |       | Elimination |        | Consolidated
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |             
|Cash flows from investing activities:            |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Business acquisitions, net of
cash acquired                     |                                                     | $ |        |        |       | $      | (19,926      | )       |              | $     |            |        |              | $   |     |   |   | $ |  |   |   | $      | (19,926 | )      
|                                                 | Real estate acquired in connection with
acquisitions            |                                                     |   |        |        |       |        | (589         | )       |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (589    | )      
|                                                 | Property and equipment additions, net                           |                                                     |   |        |        |       |        | (4,404       | )       |              |       | (1,764      | )      |              |     |     |   |   |   |  |   |   |        | (6,168  | )      
|                                                 | Proceeds from sale of assets                                    |                                                     |   |        |        |       |        | 348          |         |              |       | 7           |        |              |     |     |   |   |   |  |   |   |        | 355     |        
|                                                 | Other                                                           |                                                     |   | (4      | )      |       |        | 138          |         |              |       | 227         |        |              |     |     |   |   |   |  |   |   |        | 361     |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash used in investing activities               |   |         | (4     | )     |        |              | (24,433 | )            |       |             | (1,530 | )            |     |      |  |   |   |   |  |   |        |         | (25,967 | )
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|Cash flows from financing activities:            |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Repayment of long-term obligations,
including redemption fees   |                                                     |   | (41,808 | )      |       |        | (8,703       | )       |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (50,511 | )      
|                                                 | Payment of financing costs                                      |                                                     |   | (382    | )      |       |        |             |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (382    | )      
|                                                 | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 67      |        |       |        |             |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | 67      |        
|                                                 | Proceeds from issuance of common
stock                          |                                                     |   | 54,323  |        |       |        |             |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | 54,323  |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash provided by (used in)
financing activities |   |         | 12,200 |       |        |              | (8,703  | )            |       |             |       |              |     |      |  |   |   |   |  |   |        |         | 3,497   |  
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|Increase in cash and cash equivalents            |                                                                 |                                                     |  |         |        |       | 15,272 |              |         |              | 744   |             |        |              | 34  |      |   |   |  |   |   |   | 16,050 |        
|Cash and cash equivalents at beginning
of period |                                                                 |                                                     |  |         |        |       | 5,083  |              |         |              | 1,233 |             |        |              | 146 |      |   |   |  |   |   |   | 6,462  |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        
|Cash and cash equivalents at end of
period       |                                                                 | $                                                   |  |         |        | $     | 20,355 |              |         | $            | 1,977 |             |        | $            | 180 |      |   | $ |  |   |   | $ | 22,512 |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |        

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2002
(Unaudited)
(In thousands)

|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   |        |      |   |   |         |   |  |   |        |        | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | --- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ---- | ------------ | - | ------ | ---- | - | - | ------- | - |  | - | ------ | ------ | 
|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   | Non-   |      |   |   |         |   |  |   |       
|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   | Guarantor   |      | Guarantor    |   |        |      |   |   |         |   | 
|                                      |                                                                                             |                                                     |   | VCA     |     | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |      | Consolidated
|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |             
|Cash flows from operating activities: |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   |        |      |   |   |         |   |  |   |       
|                                      | Net income                                                                                  |                                                     | $ | 16,130  |     |       | $ | 18,750       |        |              | $ | 31,731      |      |              | $ | 3,902  |      |   | $ | (54,383 | ) |  | $ | 16,130 |       
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   |        |      |   |   |         |   |  |   |        |       
|                                      | Equity interest in earnings of
subsidiaries                                                 |                                                     |   | (18,750 | )   |       |   | (31,731      | )      |              |   | (2,972      | )    |              |   |       |      |   |   | 53,453  |   |  |   |       |       
|                                      | Depreciation and amortization                                                               |                                                     |   |        |     |       |   | 674          |        |              |   | 5,279       |      |              |   | 349    |      |   |   |        |   |  |   | 6,302  |       
|                                      | Amortization of deferred financing costs
and debt discount                                  |                                                     |   | 313     |     |       |   | 534          |        |              |   |            |      |              |   |       |      |   |   |        |   |  |   | 847    |       
|                                      | Provision for uncollectible accounts                                                        |                                                     |   |        |     |       |   |             |        |              |   | 1,243       |      |              |   | 177    |      |   |   |        |   |  |   | 1,420  |       
|                                      | Interest paid in kind on 15.5% senior
notes                                                 |                                                     |   | 4,645   |     |       |   |             |        |              |   |            |      |              |   |       |      |   |   |        |   |  |   | 4,645  |       
|                                      | Minority interest in income of
subsidiaries                                                 |                                                     |   |        |     |       |   |             |        |              |   |            |      |              |   |       |      |   |   | 930     |   |  |   | 930    |       
|                                      | Distributions to minority interest
partners                                                 |                                                     |   |        |     |       |   | (805         | )      |              |   |            |      |              |   |       |      |   |   |        |   |  |   | (805   | )     
|                                      | Increase in trade accounts receivable                                                       |                                                     |   |        |     |       |   |             |        |              |   | (5,278      | )    |              |   | (567   | )    |   |   |        |   |  |   | (5,845 | )     
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |                                                     |   |        |     |       |   | 458          |        |              |   | (829        | )    |              |   | 9      |      |   |   |        |   |  |   | (362   | )     
|                                      | Increase (decrease) in accounts payable
and other accrued liabilities                       |                                                     |   |        |     |       |   | (703         | )      |              |   | 1,462       |      |              |   | 66     |      |   |   |        |   |  |   | 825    |       
|                                      | Increase (decrease) in accrued payroll
and related liabilities                              |                                                     |   |        |     |       |   | (518         | )      |              |   | 280         |      |              |   |       |      |   |   |        |   |  |   | (238   | )     
|                                      | Increase (decrease) in accrued interest                                                     |                                                     |   |        |     |       |   | (295         | )      |              |   | 25          |      |              |   |       |      |   |   |        |   |  |   | (270   | )     
|                                      | Decrease in prepaid income taxes                                                            |                                                     |   |        |     |       |   | 2,782        |        |              |   |            |      |              |   |       |      |   |   |        |   |  |   | 2,782  |       
|                                      | Increase in income taxes payable                                                            |                                                     |   |        |     |       |   | 1,901        |        |              |   |            |      |              |   |       |      |   |   |        |   |  |   | 1,901  |       
|                                      | Increase in deferred income taxes asset                                                     |                                                     |   |        |     |       |   | (946         | )      |              |   |            |      |              |   |       |      |   |   |        |   |  |   | (946   | )     
|                                      | Increase in deferred income
taxes liability                                                 |                                                     |   |        |     |       |   | 4,498        |        |              |   |            |      |              |   |       |      |   |   |        |   |  |   | 4,498  |       
|                                      | Increase in intercompany
payable/(receivable)                                               |                                                     |   | (2,423  | )   |       |   | 38,035       |        |              |   | (31,373     | )    |              |   | (4,239 | )    |   |   |        |   |  |   |       |       
|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   |        |      |   |   |         |   |  |   |       
|                                      |                                                                                             | Net cash provided by (used in)
operating activities |   |         | (85 | )     |   |              | 32,634 |              |   |             | (432 | )            |   |        | (303 | ) |   |         |  |  |   |        | 31,814 | 
|                                      |                                                                                             |                                                     |   |         |     |       |   |              |        |              |   |             |      |              |   |        |      |   |   |         |   |  |   |       

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VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS - (Continued)
For the Six Months Ended June 30, 2002
(Unaudited)
(In thousands)

|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |        |        |         |  
|------------------------------------------------ | -------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------------------------- | - | --- | -- | ------ | ------ | ------------ | ------- | ------------ | - | ----------- | ------ | ------------ | - | ---- | - | - | - | - | - | ------ | ------ | ------ | ------- | -
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   | Non- |   |   |   |   |   |        |        |       
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   | Guarantor   |        | Guarantor    |   |      |   |   |   |   |   |       
|                                                 |                                                          |                                                                 |                                                     |   | VCA |    | Vicar  |        | Subsidiaries |         | Subsidiaries |   | Elimination |        | Consolidated
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |             
|Cash flows from investing activities:            |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|                                                 |                                                          | Business acquisitions, net of
cash acquired                     |                                                     | $ |    |    |        | $      | (9,997       | )       |              | $ |            |        |              | $ |     |   |   | $ |  |   |        | $      | (9,997 | )      
|                                                 |                                                          | Property and equipment additions, net                           |                                                     |   |    |    |        |        | (4,774       | )       |              |   | (1,430      | )      |              |   |     |   |   |   |  |   |        |        | (6,204 | )      
|                                                 |                                                          | Other                                                           |                                                     |   | 68  |    |        |        |             |         |              |   | 61          |        |              |   |     |   |   |   |  |   |        |        | 129    |        
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|                                                 |                                                          |                                                                 | Net cash provided by (used in)
investing activities |   |     | 68 |        |        |              | (14,771 | )            |   |             | (1,369 | )            |   |      |  |   |   |   |  |        |        |        | (16,072 | )
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|Cash flows from financing activities:            |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|                                                 |                                                          | Repayment of long-term obligations                              |                                                     |   |    |    |        |        | (2,485       | )       |              |   |            |        |              |   |     |   |   |   |  |   |        |        | (2,485 | )      
|                                                 | Payment of deferred financing and
recapitalization costs |                                                                 |                                                     |  |     |    |        | (2,673 | )            |         |              |  |             |        |              |  |      |   |   |  |   |   |        | (2,673 | )     
|                                                 |                                                          | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 17  |    |        |        |             |         |              |   |            |        |              |   |     |   |   |   |  |   |        |        | 17     |        
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|                                                 |                                                          |                                                                 | Net cash provided by (used in)
financing activities |   |     | 17 |        |        |              | (5,158  | )            |   |             |       |              |   |      |  |   |   |   |  |        |        |        | (5,141  | )
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|Increase (decrease) in cash and cash
equivalents |                                                          |                                                                 |                                                    |   |     |    | 12,705 |        |              |         | (1,801       | ) |             |        | (303         | ) |      |   |  |   |   |   | 10,601 |       
|Cash and cash equivalents at beginning
of period |                                                          |                                                                 |                                                    |   |     |    | 3,467  |        |              |         | 3,260        |   |             |        | 376          |   |      |   |  |   |   |   | 7,103  |       
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       
|Cash and cash equivalents at end of
period       |                                                          | $                                                               |                                                    |   |     | $  | 16,172 |        |              | $       | 1,459        |   |             | $      | 73           |   |      | $ |  |   |   | $ | 17,704 |       
|                                                 |                                                          |                                                                 |                                                     |   |     |    |        |        |              |         |              |   |             |        |              |   |      |   |   |   |   |   |        |       

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed,
consolidated financial statements provided under Part I, Item 1 of this
quarterly report on Form 10-Q. Certain statements contained herein may
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve a number of
risks, uncertainties and other factors that could cause actual results to
differ materially, as discussed more fully herein.

The forward-looking information set forth in this quarterly report on Form
10-Q is as of August 11, 2003, and we undertake no duty to update this
information. Shareholders and prospective investors can find information filed
with the Securities and Exchange Commission after August 11, 2003 at our
website at www.vcaantech.com or at the Securities and Exchange Commissions
website at www.sec.gov. More information about potential factors that could
affect our business and financial results is included in the section entitled
Risk Factors.

Overview

We are a leading animal health care services company and operate the
largest networks of veterinary diagnostic laboratories and free-standing,
full-service animal hospitals in the United States. Our network of veterinary
diagnostic laboratories provides sophisticated testing and consulting services
used by veterinarians in the detection, diagnosis, evaluation, monitoring,
treatment and prevention of diseases and other conditions affecting animals.
Our animal hospitals offer a full range of general medical and surgical
services for companion animals. We treat diseases and injuries, offer
pharmaceutical products and perform a variety of pet wellness programs,
including routine vaccinations, health examinations, diagnostic testing,
spaying, neutering and dental care.

Our company was formed in 1986 by Robert Antin, Arthur Antin and Neil
Tauber, who have served since our inception as our Chief Executive Officer,
Chief Operating Officer and Senior Vice President of Development, respectively.
During the 1990s, we established a premier position in the veterinary
diagnostic laboratory and animal hospital markets through both internal growth
and acquisitions. By 1997, we achieved a critical mass, building a laboratory
network of 12 laboratories servicing animal hospitals in most states and
completing acquisitions for a total of 160 animal hospitals. At June 30, 2003,
our laboratory network consisted of 23 laboratories serving all 50 states and
our animal hospital network consisted of 238 animal hospitals in 34 states. We
primarily focus on generating internal growth to increase revenue and
profitability. In order to augment internal growth, we may selectively acquire
laboratories and intend to acquire approximately 15 to 25 animal hospitals per
year, depending upon the attractiveness of candidates and the strategic fit
with our existing operations.
24Table of ContentsThe following table summarizes our growth in facilities for the periods
presented:

|                         |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |     |  
|------------------------ | --------------------------------------------- |  | -------------- | --- | -------------- |  | ---- | --- | ---- |  | --- | --- | - |  | --- | --- | -
|                         |                                               |  | Three Months   |     | Six
Months    
|                         |                                               |  | Ended June 30, |     | Ended June 30,
|                         |                                               |  |                |     |               
|                         |                                               |  | 2003           |     | 2002           |  | 2003 |     | 2002
|                         |                                               |  |                |     |                |  |      |     |     
|Laboratories:            |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|                         | Beginning of period                           |  |                | 20  |                |  |      | 16  |      |  |     | 19  |   |  |     | 16  |  
|                         | Acquisitions and new facilities               |  |                | 5   |                |  |      | 2   |      |  |     | 6   |   |  |     | 2   |  
|                         | Relocated into other labs operated by us      |  |                | (2  | )              |  |      |    |      |  |     | (2  | ) |  |     |    |  
|                         |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|                         | End of period                                 |  |                | 23  |                |  |      | 18  |      |  |     | 23  |   |  |     | 18  |  
|                         |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|Animal hospitals:        |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|                         | Beginning of period                           |  |                | 233 |                |  |      | 216 |      |  |     | 229 |   |  |     | 214 |  
|                         | Acquisitions                                  |  |                | 11  |                |  |      | 8   |      |  |     | 16  |   |  |     | 11  |  
|                         | Relocated into other hospitals operated by us |  |                | (5  | )              |  |      | (4  | )    |  |     | (5  | ) |  |     | (5  | )
|                         | Sold or closed                                |  |                | (1  | )              |  |      |    |      |  |     | (2  | ) |  |     |    |  
|                         |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|                         | End of period                                 |  |                | 238 |                |  |      | 220 |      |  |     | 238 |   |  |     | 220 |  
|                         |                                               |  |                |     |                |  |      |     |      |  |     |     |   |  |     |    
|Owned at end of period   |                                               |  | 174            |     |                |  | 163  |     |      |  | 174 |     |   |  | 163 |    
|Managed at end of period |                                               |  | 64             |     |                |  | 57   |     |      |  | 64  |     |   |  | 57  |    

Basis of Reporting

General

Our discussion and analysis of our financial condition and results of
operations are based upon our condensed, consolidated financial statements,
which have been prepared in accordance with generally accepted accounting
principles in the United States, or GAAP. We report our operations in three
segments: laboratory, animal hospital and corporate. The preparation of these
financial statements requires us to make estimates and judgments that affect
the reported amounts of assets, liabilities, revenue and expense, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates. We base our estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

Revenue Recognition

We recognize revenue only after the following criteria are met:



| |  |  | there exists adequate evidence of the transaction;                                      
| | - |  | ----------------------------------------------------------------------------------------
|
| |  |  | delivery of goods has occurred or services have been rendered; and                      
|
| |  |  | the price is not contingent on future activity and collectibility is reasonably assured.

We report our revenue net of discounts.

Laboratory Revenue

A portion of laboratory revenue is intercompany revenue that was generated
by providing laboratory services to our animal hospitals. Laboratory internal
revenue growth for the three and six months ended June 30, 2003 was calculated
using laboratory revenue as reported, adjusted to exclude revenue for the newly
acquired laboratories that we did not own for the entire period presented and
adjusted to exclude the impact resulting from differences in the number of
billing days in comparable periods.

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Laboratory revenue is presented net of discounts. Some discounts, such as
those given to clients for prompt payment, are applied to clients accounts in
periods subsequent to the period the revenue was recognized. These discounts
are estimated and deducted from revenue in the period the related revenue was
recognized. These estimates are based upon historical experience. Errors in
estimates would not have a material effect on our financial statements.

Animal Hospital Revenue

Animal hospital revenue is comprised of revenue of the animal hospitals
that we own and the management fees for animal hospitals that we manage.
Certain states prohibit business corporations from providing, or holding
themselves out as providers of, veterinary medical care. In these states, we
provide administrative and support services to veterinary medical groups
pursuant to management agreements. The veterinary medical groups are each
solely responsible for all aspects of the practice of veterinary medicine. In
return for our services, the veterinary medical group pays us a management fee.
We do not consolidate the operations of animal hospitals that we manage.

However, we believe that investors understanding of the performance of
our animal hospitals is enhanced by disclosing combined animal hospital revenue
and animal hospital adjusted same-facility revenue, both of which include the
revenue of the animal hospitals that we manage and exclude the management fees
charged to those same animal hospitals. Management uses these non-GAAP
financial measures to aid in its understanding of how all animal hospitals
owned and managed are performing as a group.

There are material limitations associated with the use of these non-GAAP
financial measures, as they are not reflective of the consolidated results for
animal hospitals owned and managed as reported in our consolidated financials
statements. To compensate for these limitations, we ensure that our
disclosures provide a complete understanding of all adjustments found in
non-GAAP financial measures, and we provide a reconciliation between the GAAP
financial measures and the non-GAAP financial measures in Results of
Operations.

Same-facility revenue growth based on GAAP and adjusted same-facility
revenue growth include revenue generated by customers referred from our
relocated or combined animal hospitals, including those combined upon
acquisition.

Other Revenue

We recorded consulting fees from Heinz Pet Products relating to the
marketing of its proprietary pet food. As of September 2002, the consulting
agreement with Heinz Pet Products had expired.

Direct Costs

Laboratory direct costs are comprised of all costs of laboratory services,
including salaries of veterinarians, specialists, technicians and other
non-administrative, laboratory-based personnel, facilities rent, occupancy
costs and supply costs. Animal hospital direct costs are comprised of all
costs of services and products at the hospitals, including salaries of
veterinarians, technicians and all other hospital-based personnel employed by
the hospitals we own, facilities rent, occupancy costs, supply costs, certain
marketing and promotional expense and costs of goods sold associated with the
retail sales of pet food and pet supplies. Direct costs do not include
salaries of veterinarians, technicians and certain other hospital-based
personnel employed by the hospitals we manage. As a result, our direct costs
are lower as a percentage of revenue than if we had consolidated the operating
results of the animal hospitals we manage into our operating results.

However, we believe that the investors understanding of our performance
is enhanced by disclosing the combined direct costs of animal hospitals owned
and manged for the entire periods presented. Management uses this non-GAAP
financial measure to aid in its understanding of how all animal hospitals owned
and managed are performing as a group.

There are material limitations associated with the use of this non-GAAP
financial measure, as it is not reflective of the consolidated results for
animal hospitals owned and managed as reported in our consolidated financial
statements. To compensate for this limitation, we ensure that our disclosures
provide a complete

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understanding of all adjustments found in non-GAAP financial
measures, and we provide a reconciliation between the GAAP financial measures
and the non-GAAP financial measures in Results of Operations.

Selling, General and Administrative Expense

Our selling, general and administrative expense is divided between our
laboratory, animal hospital and corporate segments. Laboratory selling,
general and administrative expense consists primarily of sales and
administrative and accounting personnel and selling, marketing and promotional
expense. Animal hospital selling, general and administrative expense consists
primarily of field management, certain administrative and accounting personnel,
recruiting and certain marketing expense. Corporate selling, general and
administrative expense consists of administrative expense at our headquarters,
including the salaries of corporate officers, rent, accounting, finance, legal
and other professional expense and occupancy costs.

Software Development Costs

We frequently research, develop and implement new software to be used
internally, or enhance our existing internal software. We develop the software
using our own employees and/or outside consultants. Costs associated with the
development of new software are expensed as incurred, particularly in the
preliminary planning stages and the post-implementation and training stages.
Costs related directly to the software design, coding, testing and installation
are capitalized and amortized over the expected life of the software, generally
three to five years. Costs related to upgrades or enhancements of existing
systems are capitalized if the modifications result in additional
functionality.

Critical Accounting Policies and Significant Estimates

Management is required to make critical accounting estimates that directly
impact our consolidated financial statements and related disclosures. Critical
accounting estimates are estimates that meet two criteria: (1) the estimates
require that we make assumptions about matters that are highly uncertain at the
time the estimates are made; and (2) there exist different estimates that could
reasonably be used in the current period, or changes in the estimates used are
reasonably likely to occur from period to period, both of which would have a
material impact on the presentation of the financial condition or our results
of our operations. Management bases its assumptions and estimates on
historical experience and on various other factors believed to be reasonable
under the
circumstances. The following represent what management believes are the
critical accounting policies most affected by significant management estimates
and judgments. Management has discussed these critical accounting policies,
the basis for their underlying assumptions and estimates and the nature of our
related disclosures herein with our audit committee.

Workers Compensation Expense

Workers compensation expense is the cost to insure our company against
losses related to injuries incurred by our employees in the normal course of
their duties. Our workers compensation insurance policies are self-insurance
retention programs, which mean that we bear the significant portion of the
financial risk associated with claims losses, while the insurance company bears
only the financial risk of large individual losses and large aggregate losses.

As a result of utilizing self-insurance retention policies, we must
estimate the amount that we will ultimately pay for losses associated with
workers compensation claims, or claims losses for the policy period. These
estimated claims losses must be recorded as expense during the policy period.
Claims losses can vary substantially and, because they can take years to
develop fully, can be difficult to estimate. These estimates are based on
complex judgments regarding the probable number of claims that will be filed
and the nature of those claims. Both of those variables are highly uncertain
and combine to form a factor referred to as the loss pick. The loss pick
factor is multiplied by our payroll cost to determine what the projected costs
for claims and our related expense will be.

We estimate the loss pick by reviewing a minimum of five years of our
historical claims loss data and analyzing the trend of the development of
claims over time. We also review and adjust the loss pick for other major
factors such as the risk control environment and claims handling. The risk
control environment includes proper safety training, safe working environment,
availability of safety equipment for specific tasks, and management

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emphasis
and monitoring of safe practices. Claims handling includes proper reporting of
claims, proper care given to injured employees, availability of return-to-work
programs, and oversight of the claims process by both the insurance claims
handler and our own management. We review our loss pick on a quarterly basis
considering the current loss trend and any changes in the environment as
indicated above. The loss pick is then applied to our actual payroll costs to
estimate the claims loss portion of our workers compensation expense for the
given period.

Our insurance carrier required us to pre-fund claims losses at a loss pick
of 1.54% for the policy year ending September 30, 2002 and gave us a maximum
loss pick of 2.49%, above which the carrier is responsible for paying all
claims. For the policy year ending September 30, 2003, we are required to
pre-fund claims losses at a loss pick of 1.59% and have a maximum loss pick of
2.55%. The ranges set forth by the insurance carrier reflect the most probable
potentials for our workers compensation claims losses. The increase in the
insurance carriers range reflects the trend over the last several years toward
increasing workers compensation costs. Based on these ranges and the factors
described above, we chose a loss pick of 2.04% for the policy year ended
September 30, 2002 and 2.00% for the policy year ending September 30, 2003.
The decrease in our loss pick reflects the implementation of programs to reduce
the risks in our operating environment and the improving trends in our
historical claims losses.

The following table reflects the ranges for the loss picks and the loss
picks used by us in the estimate of our workers compensation costs (in
thousands):

|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |       | 
|---------------------------------------------------------------------- | ----------------------------------- | - | --------- |  | -------- | - | ------- | ----- | -------- | - | ---------------------- | ----- |  | - | ----- | ----- | 
|                                                                       |                                     |   |           |  |          |   |         |       |          |   | Probable Expense Range
|                                                                       |                                     |   | Estimated |  | Expense  |   |        
|                                                                       |                                     |   | Payroll   |  | Recorded |   | Low-end |       | High-end
|                                                                       |                                     |   |           |  |          |   |         |       |         
|Policy year ended September 30, 2002:                                  |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Loss pick percentage                                                   |                                     |   |           |  |          |   | 2.04    | %     |          |   | 1.54                   | %     |  |   | 2.49  | %    
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Calculated loss pick in dollars                                        |                                     | $ | 169,022   |  |          | $ | 3,441   |       |          | $ | 2,603                  |       |  | $ | 4,208 |      
|Premiums and other fees                                                |                                     |   |           |  |          |   | 1,387   |       |          |   | 1,353                  |       |  |   | 1,419 |      
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|                                                                       | Total workers compensation expense |   |           |  |          |   | $       | 4,828 |          |   | $                      | 3,956 |  |   | $     | 5,627 | 
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Policy year ending September 30, 2003
(9 months of a 12-month policy): |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Loss pick percentage                                                   |                                     |   |           |  |          |   | 2.00    | %     |          |   | 1.59                   | %     |  |   | 2.55  | %    
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Calculated loss pick in dollars                                        |                                     | $ | 135,972   |  |          | $ | 2,719   |       |          | $ | 2,162                  |       |  | $ | 3,467 |      
|Premiums and other fees                                                |                                     |   |           |  |          |   | 1,190   |       |          |   | 1,166                  |       |  |   | 1,220 |      
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|                                                                       | Total workers compensation expense |   |           |  |          |   | $       | 3,909 |          |   | $                      | 3,328 |  |   | $     | 4,687 | 
|                                                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      

We recognize workers compensation expense in direct costs and selling,
general and administrative expense of our segments, based on their respective
payroll cost and the loss pick percentage discussed and shown above, to
calculate the claims loss portion of the expense. The difference between the
minimum amount of claims losses pre-funded to the insurance carrier and the
amount expensed is accrued and included in other liabilities. If our estimates
prove to be incorrect as the losses develop over several years, we will either
have to pay additional claims losses or will receive a refund from our
insurance carrier. This could result in a need for us to recognize additional
expense or have expense reduced in future periods within the range shown above.

The insurance policies in place for 2000 and prior years did not have
large deductibles and we have accrued for the maximum possible expense under
these policies.

Impairment of Goodwill

Our goodwill represents the purchase price paid and liabilities assumed
for animal hospital and laboratory acquisitions in excess of the fair market
value of the net tangible assets acquired. The total amount of our net
goodwill at June 30, 2003 was $363.2 million, consisting of $93.6 million for
our laboratory operating segment and $269.6 million for our animal hospital
operating segment.

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We estimate annually the fair market
value of our laboratory and animal hospital operating segments and compare that
estimated fair market value against the net book value of those operating
segments, as reflected in our financial statements, to determine if our
goodwill is fairly stated or if its value is impaired. At December 31, 2002,
we estimated the fair value of each of our operating segments and determined
that the estimated fair value of each exceeded their respective net book value,
resulting in a conclusion that our goodwill was fairly stated. For the period
from December 31, 2002 through the date of this filing, there have been no
significant changes in the operating environment of our operating segments or
in the other variables used in our estimate of fair value that would cause us
to believe that the fair value of our operating segments might have materially
changed since our evaluation at December 31, 2002. We will review our goodwill
for impairment again at December 31, 2003 or upon material changes in our
operating environment. We do not anticipate that there will be significant
changes in our operations or operating environments in the near future other
than those related to possible acquisitions.

Legal Settlements

We are a party to various legal proceedings. Although we cannot determine
the ultimate disposition of these proceedings, we can use judgment to
reasonably estimate our liability for legal settlement costs that may arise as
a result of these proceedings. Based on our prior experience, the nature of
the current proceedings and our insurance policy coverage for such matters, we
have accrued $1.9 million as of June 30, 2003 for legal settlements as part of
other accrued liabilities. We believe that our present insurance coverage and
reserves are sufficient to cover currently known claims, but we cannot assure
you that we will not incur liabilities in excess of recorded reserves.

Allowance for Uncollectible Accounts

Provision for uncollectible accounts is estimated based primarily upon age
of accounts receivable and loss history. Accounts receivable balances are
routinely reviewed in conjunction with collection efforts, historical
collection rates and other economic conditions which might ultimately affect
the collectibility of accounts when considering the adequacy of the amounts
recorded as allowance for uncollectible accounts. Significant changes in
client mix or economic conditions could affect our collection of accounts
receivable, cash flows and results of operations.

Income Taxes

We make estimates in recording our provision for income taxes, including
our determination of deferred income taxes assets, deferred income taxes
liabilities and any valuation allowance against a deferred income taxes asset.

We operate in multiple states with varying tax laws. Our Federal income
tax returns have been examined by the Internal Revenue Service through our
fiscal year 1998, which resulted in no adjustment to our financial statements.

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Results of Operations

The following table sets forth components of our statements of operations
data expressed as a percentage of revenue for the indicated periods:

|                                                |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |      |       |  
|----------------------------------------------- | --------------- | ---------------- | ---- | ------------------ | ----- | ---------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | - | ---- | ---- | ----- | -
|                                                |                 |                  |      | Three Months Ended |       | Six Months Ended
|                                                |                 |                  |      | June 30,           |       | June 30,        
|                                                |                 |                  |      |                    |       |                 
|                                                |                 |                  |      | 2003               |       | 2002             |      | 2003 |       | 2002
|                                                |                 |                  |      |                    |       |                  |      |      |       |     
|Revenue:                                        |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |     
|                                                | Laboratory      |                  |      | 35.3               | %     |                  |      | 34.6 | %     |      |      | 35.6 | %     |   |      | 35.3 | %    
|                                                | Animal hospital |                  |      | 66.8               |       |                  |      | 67.1 |       |      |      | 66.5 |       |   |      | 66.4 |      
|                                                | Other           |                  |      |                   |       |                  |      | 0.4  |       |      |      |     |       |   |      | 0.4  |      
|                                                | Intercompany    |                  |      | (2.1               | )     |                  |      | (2.1 | )     |      |      | (2.1 | )     |   |      | (2.1 | )    
|                                                |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Total revenue    |      |                    | 100.0 |                  |      |      | 100.0 |      |      |      | 100.0 |   |      |      | 100.0 |  
|Direct costs (excluding operating depreciation) |                 |                  | 65.4 |                    |       |                  | 65.7 |      |       |      | 66.9 |      |       |   | 67.4 |     
|Selling, general and administrative             |                 |                  | 6.9  |                    |       |                  | 7.3  |      |       |      | 7.4  |      |       |   | 7.7  |     
|Depreciation and amortization                   |                 |                  | 2.6  |                    |       |                  | 2.7  |      |       |      | 2.9  |      |       |   | 2.9  |     
|                                                |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Operating income |      |                    | 25.1  |                  |      |      | 24.3  |      |      |      | 22.8  |   |      |      | 22.0  |  
|Interest expense, net                           |                 |                  | 4.9  |                    |       |                  | 8.8  |      |       |      | 5.4  |      |       |   | 9.2  |     
|Debt retirement costs                           |                 |                  |     |                    |       |                  |     |      |       |      | 3.0  |      |       |   |     |     
|Other (income) expense                          |                 |                  | 0.1  |                    |       |                  | (0.1 | )    |       |      | 0.1  |      |       |   | (0.1 | )   
|Minority interest in income of subsidiaries     |                 |                  | 0.3  |                    |       |                  | 0.4  |      |       |      | 0.3  |      |       |   | 0.4  |     
|Provision for income taxes                      |                 |                  | 8.2  |                    |       |                  | 6.2  |      |       |      | 5.7  |      |       |   | 5.2  |     
|                                                |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Net income       |      |                    | 11.6  | %                |      |      | 9.0   | %    |      |      | 8.3   | % |      |      | 7.3   | %
|                                                |                 |                  |      |                    |       |                  |      |      |       |      |      |      |       |   |      |      |      

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The following table is a summary of the components of operating income by
segment (in thousands):

|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |         |        |  
|-------------------------------- | ----------------------------------------------- | ----------------------- | - | ---------- | ------ | -------- | - | --------- | ------ | ------------ | - | ----- | ------ | ------- | - | ------ | - |  | - | ------- | ------ | -
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   | Inter- |   |  |   |        
|                                 |                                                 |                         |   |            |        |          |   | Animal    |        |              |   |       |        | company |   |        |   | 
|                                 |                                                 |                         |   | Laboratory |        | Hospital |   | Corporate |        | Eliminations |   | Total
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |      
|Three Months Ended June 30, 2003 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 | Revenue                                         |                         | $ | 46,691     |        |          | $ | 88,424    |        |              | $ |      |        |         | $ | (2,752 | ) |  | $ | 132,363 |       
|                                 | Direct costs (excluding
operating depreciation) |                         |   | 24,816     |        |          |   | 64,440    |        |              |   |      |        |         |   | (2,752 | ) |  |   | 86,504  |       
|                                 | Selling, general and administrative             |                         |   | 2,797      |        |          |   | 2,519     |        |              |   | 3,774 |        |         |   |       |   |  |   | 9,090   |       
|                                 | Loss (gain) on sale of assets                   |                         |   | 21         |        |          |   | 58        |        |              |   | (1    | )      |         |   |       |   |  |   | 78      |       
|                                 | Depreciation and amortization                   |                         |   | 799        |        |          |   | 2,304     |        |              |   | 394   |        |         |   |       |   |  |   | 3,497   |       
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating income (loss) |   | $          | 18,258 |          |   | $         | 19,103 |              |   | $     | (4,167 | )       |   | $      |  |  |   | $       | 33,194 |  
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating margin        |   |            | 39.1   | %        |   |           | 21.6   | %            |   |       | (3.1   | )%      |   |        |  |  |   |         | 25.1   | %
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|Three Months Ended June 30, 2002 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 | Revenue                                         |                         | $ | 40,604     |        |          | $ | 78,621    |        |              | $ | 500   |        |         | $ | (2,500 | ) |  | $ | 117,225 |       
|                                 | Direct costs (excluding
operating depreciation) |                         |   | 22,134     |        |          |   | 57,370    |        |              |   |      |        |         |   | (2,500 | ) |  |   | 77,004  |       
|                                 | Selling, general and administrative             |                         |   | 2,396      |        |          |   | 2,478     |        |              |   | 3,665 |        |         |   |       |   |  |   | 8,539   |       
|                                 | Depreciation and amortization                   |                         |   | 726        |        |          |   | 2,069     |        |              |   | 344   |        |         |   |       |   |  |   | 3,139   |       
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating income (loss) |   | $          | 15,348 |          |   | $         | 16,704 |              |   | $     | (3,509 | )       |   | $      |  |  |   | $       | 28,543 |  
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating margin        |   |            | 37.8   | %        |   |           | 21.2   | %            |   |       | (3.0   | )%      |   |        |  |  |   |         | 24.3   | %
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|Six Months Ended June 30, 2003   |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 | Revenue                                         |                         | $ | 88,389     |        |          | $ | 165,152   |        |              | $ |      |        |         | $ | (5,178 | ) |  | $ | 248,363 |       
|                                 | Direct costs (excluding
operating depreciation) |                         |   | 48,272     |        |          |   | 123,161   |        |              |   |      |        |         |   | (5,178 | ) |  |   | 166,255 |       
|                                 | Selling, general and administrative             |                         |   | 5,504      |        |          |   | 5,022     |        |              |   | 7,927 |        |         |   |       |   |  |   | 18,453  |       
|                                 | Loss (gain) on sale of assets                   |                         |   | 19         |        |          |   | (178      | )      |              |   | (1    | )      |         |   |       |   |  |   | (160    | )     
|                                 | Depreciation and amortization                   |                         |   | 1,553      |        |          |   | 4,781     |        |              |   | 740   |        |         |   |       |   |  |   | 7,074   |       
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating income (loss) |   | $          | 33,041 |          |   | $         | 32,366 |              |   | $     | (8,666 | )       |   | $      |  |  |   | $       | 56,741 |  
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating margin        |   |            | 37.4   | %        |   |           | 19.6   | %            |   |       | (3.5   | )%      |   |        |  |  |   |         | 22.8   | %
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|Six Months Ended June 30, 2002   |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 | Revenue                                         |                         | $ | 78,261     |        |          | $ | 147,265   |        |              | $ | 1,000 |        |         | $ | (4,606 | ) |  | $ | 221,920 |       
|                                 | Direct costs (excluding
operating depreciation) |                         |   | 43,696     |        |          |   | 110,502   |        |              |   |      |        |         |   | (4,606 | ) |  |   | 149,592 |       
|                                 | Selling, general and administrative             |                         |   | 5,069      |        |          |   | 4,992     |        |              |   | 7,100 |        |         |   |       |   |  |   | 17,161  |       
|                                 | Depreciation and amortization                   |                         |   | 1,423      |        |          |   | 4,205     |        |              |   | 674   |        |         |   |       |   |  |   | 6,302   |       
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating income (loss) |   | $          | 28,073 |          |   | $         | 27,566 |              |   | $     | (6,774 | )       |   | $      |  |  |   | $       | 48,865 |  
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                 |                                                 | Operating margin        |   |            | 35.9   | %        |   |           | 18.7   | %            |   |       | (3.1   | )%      |   |        |  |  |   |         | 22.0   | %
|                                 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        

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Revenue

The following table summarizes our revenue (in thousands):

|                |               |   |                             |         |                           |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |      |  
|--------------- | ------------- | - | --------------------------- | ------- | ------------------------- | - | -------- | ------- | ---- |  | ---- | ---- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                |               |   | Three Months Ended June 30, |         | Six Months Ended June 30,
|                |               |   |                             |         |                          
|                |               |   | 2003                        |         | 2002                      |   | % Change |         | 2003 |  | 2002 |      | % Change
|                |               |   |                             |         |                           |   |          |         |      |  |      |      |         
|Laboratory      |               | $ | 46,691                      |         |                           | $ | 40,604   |         |      |  | 15.0 | %    |          | $ | 88,389  |         |  | $ | 78,261  |         |  |  | 12.9 | %   
|Animal hospital |               |   | 88,424                      |         |                           |   | 78,621   |         |      |  | 12.5 | %    |          |   | 165,152 |         |  |   | 147,265 |         |  |  | 12.1 | %   
|Other           |               |   |                            |         |                           |   | 500      |         |      |  |      |      |          |   |        |         |  |   | 1,000   |         |  |  |      |     
|Intercompany    |               |   | (2,752                      | )       |                           |   | (2,500   | )       |      |  |      |      |          |   | (5,178  | )       |  |   | (4,606  | )       |  |  |      |     
|                |               |   |                             |         |                           |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|                | Total revenue |   | $                           | 132,363 |                           |   | $        | 117,225 |      |  |      | 12.9 | %        |   | $       | 248,363 |  |   | $       | 221,920 |  |  |      | 11.9 | %
|                |               |   |                             |         |                           |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     

Laboratory Revenue

Laboratory revenue increased $6.1 million for the three months ended June
30, 2003 and increased $10.1 million for the six months ended June 30, 2003
compared to the same periods in the prior year. The components of the increase
in laboratory revenue are detailed below (in thousands, except average price
per requisition):

|                           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |      |  
|-------------------------- | ----------------------------------- | ---- | --------------------------- | ------ | ------------------------- | -------- | ------ | ------ |  | ---- | ---- | -------- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | ---- | ---- | -
|                           |                                     |      | Three Months Ended June 30, |        | Six Months Ended June 30,
|                           |                                     |      |                             |        |                          
|Laboratory
Revenue:        |                                     | 2003 |                             | 2002   |                           | % Change |        | 2003   |  | 2002 |      | % Change
|                           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |  
|Internal growth:           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|                           | Number of requisitions              |      |                             | 2,169  |                           |          |        | 2,064  |  |      |      | 5.1      | % |   |        | 4,005  |  |   |        | 3,840  |  |  |      | 4.3  | %
|                           | Average revenue per
requisition (1) |      | $                           | 21.02  |                           |          | $      | 19.67  |  |      |      | 6.9      | % |   | $      | 21.73  |  |   | $      | 20.25  |  |  |      | 7.3  | %
|                           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|Total internal revenue (2) |                                     | $    | 45,583                      |        |                           | $        | 40,604 |        |  |      | 12.3 | %        |   | $ | 87,031 |        |  | $ | 77,753 |        |  |  | 11.9 | %   
|Billing day adjustment     |                                     |      |                            |        |                           |          |       |        |  |      |      |          |   |   |       |        |  |   | 508    |        |  |  |      |     
|Acquired revenue           |                                     |      | 1,108                       |        |                           |          |       |        |  |      |      |          |   |   | 1,358  |        |  |   |       |        |  |  |      |     
|                           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     
|                           | Total                               |      | $                           | 46,691 |                           |          | $      | 40,604 |  |      |      | 15.0     | % |   | $      | 88,389 |  |   | $      | 78,261 |  |  |      | 12.9 | %
|                           |                                     |      |                             |        |                           |          |        |        |  |      |      |          |   |   |        |        |  |   |        |        |  |  |      |     

(1)  Computed by dividing total internal revenue by the number of
requisitions.
(2)  Numbers may not calculate exactly due to rounding.

Laboratory revenue and requisitions generated from internal growth, as
referred to in the above table, have been adjusted to exclude revenue and
requisitions for newly acquired laboratories (those laboratories that we did
not own for the entire periods presented) and have been adjusted for
differences in the number of billing days in comparable periods.

The increase in requisitions from internal growth during the three and six
months ended June 30, 2003 is the result of a trend in veterinary medicine to
focus on the importance of laboratory diagnostic testing in the diagnosis and
treatment of diseases. In addition, our marketing programs include
comprehensive education to our veterinarian clients, which have contributed to
the growth in our revenue in both volume and breadth of tests performed.

The increase in the average revenue per requisition during the three and
six months ended June 30, 2003 is attributable to our sales and marketing
efforts of our pet health and wellness programs, which have contributed to an
increase in the number of tests performed per requisition, as well as a change
in the mix of tests to more comprehensive and expensive tests. Also
contributing to our increase in average revenue per requisition are price
increases. The prices of most tests were increased 4% to 5% in February 2003.

As the result of acquiring seven laboratories between November 2002 and
June 2003, we generated an additional $1.1 million of revenue (referred to in
the above table as acquired revenue) during the three months ended June 30,
2003 and $1.4 million of revenue during the six months ended June 30, 2003
compared to the same periods in the prior year.

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The billing day adjustment, referred to in the above table, reflects the
impact of one more billing day for the six months ended June 30, 2002 compared
to the current period.

Animal Hospital Revenue

The following table reconciles our animal hospital revenue, as reported
under GAAP, to the combined revenue of animal hospitals that we owned and
managed, referred to as combined animal hospital revenue, as if we had
consolidated the operating results of the animal hospitals we managed into our
operating results (in thousands):

|                                         |                              |      |                             |        |                           |          |         |        |  |      |      |          |   |   |         |         |  |   |         |         |  |  |      |      |  
|---------------------------------------- | ---------------------------- | ---- | --------------------------- | ------ | ------------------------- | -------- | ------- | ------ |  | ---- | ---- | -------- | - | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                                         |                              |      | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                         |                              |      |                             |        |                          
|Animal
Hospital Revenue:                 |                              | 2003 |                             | 2002   |                           | % Change |         | 2003   |  | 2002 |      | % Change
|                                         |                              |      |                             |        |                           |          |         |        |  |      |      |          |  
|As reported                              |                              | $    | 88,424                      |        |                           | $        | 78,621  |        |  |      | 12.5 | %        |   | $ | 165,152 |         |  | $ | 147,265 |         |  |  | 12.1 | %   
|Less: Management fees (1)                |                              |      | (13,656                     | )      |                           |          | (12,488 | )      |  |      |      |          |   |   | (24,600 | )       |  |   | (22,193 | )       |  |  |      |     
|Add: Revenue of animal
hospitals managed |                              |      | 24,054                      |        |                           |          | 21,940  |        |  |      |      |          |   |   | 44,577  |         |  |   | 40,255  |         |  |  |      |     
|                                         |                              |      |                             |        |                           |          |         |        |  |      |      |          |   |   |         |         |  |   |         |         |  |  |      |     
|                                         | Combined animal
hospital (2) |      | $                           | 98,822 |                           |          | $       | 88,073 |  |      |      | 12.2     | % |   | $       | 185,129 |  |   | $       | 165,327 |  |  |      | 12.0 | %
|                                         |                              |      |                             |        |                           |          |         |        |  |      |      |          |   |   |         |         |  |   |         |         |  |  |      |     

(1)  Paid to us by veterinary medical groups.(2)  Represents the combined animal hospital revenue of hospitals owned
and managed.

The combined animal hospital revenue increased $10.7 million for the three
months ended June 30, 2003 and increased $19.8 million for the six months ended
June 30, 2003 compared to the same periods in the prior year. The components
of the increase are summarized in the following table (in thousands, except
average price per order):

|                                       |                              |      |                             |        |                           |          |        |        |  |      |     |          |    |   |         |         |  |   |         |         |  |  |     |      |   
|-------------------------------------- | ---------------------------- | ---- | --------------------------- | ------ | ------------------------- | -------- | ------ | ------ |  | ---- | --- | -------- | -- | - | ------- | ------- |  | - | ------- | ------- |  |  | --- | ---- | --
|                                       |                              |      | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                       |                              |      |                             |        |                          
|Animal
Hospital Revenue:               |                              | 2003 |                             | 2002   |                           | % Change |        | 2003   |  | 2002 |     | % Change
|                                       |                              |      |                             |        |                           |          |        |        |  |      |     |          |   
|Adjusted same-facility:                |                              |      |                             |        |                           |          |        |        |  |      |     |          |    |   |         |         |  |   |         |         |  |  |     |     
|                                       | Orders (1)                   |      |                             | 842    |                           |          |        | 854    |  |      |     | (1.4     | )% |   |         | 1,584   |  |   |         | 1,613   |  |  |     | (1.8 | )%
|                                       | Average price per order (2)  |      | $                           | 106.26 |                           |          | $      | 101.78 |  |      |     | 4.4      | %  |   | $       | 106.10  |  |   | $       | 101.10  |  |  |     | 4.9  | % 
|                                       |                              |      |                             |        |                           |          |        |        |  |      |     |          |    |   |         |         |  |   |         |         |  |  |     |     
|Adjusted same-facility
revenue (1) (3) |                              | $    | 89,467                      |        |                           | $        | 86,924 |        |  |      | 2.9 | %        |    | $ | 168,055 |         |  | $ | 163,072 |         |  |  | 3.1 | %   
|Net acquired revenue (1)               |                              |      | 9,355                       |        |                           |          | 1,149  |        |  |      |     |          |    |   | 17,074  |         |  |   | 2,255   |         |  |  |     |     
|                                       |                              |      |                             |        |                           |          |        |        |  |      |     |          |    |   |         |         |  |   |         |         |  |  |     |     
|                                       | Combined animal
hospital (4) |      | $                           | 98,822 |                           |          | $      | 88,073 |  |      |     |          |    |   | $       | 185,129 |  |   | $       | 165,327 |  |  |     |      |   
|                                       |                              |      |                             |        |                           |          |        |        |  |      |     |          |    |   |         |         |  |   |         |         |  |  |     |     



| | (1) |  | Adjusted same-facility revenue, orders and net acquired revenue are
non-GAAP measures of combined animal hospitals owned and managed.
These non-GAAP measures are reconciled to the GAAP measures in tables
below.
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (2) |  | Computed by dividing adjusted same-facility revenue by adjusted
same-facility orders.                                                                                                                             
| | (3) |  | Numbers may not calculate exactly due to rounding.                                                                                                                                                                
| | (4) |  | Represents the combined animal hospital revenue of hospitals owned
and managed.                                                                                                                                   

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Our animal hospital segment has placed a greater emphasis on providing
high-quality veterinary care and comprehensive wellness programs, which has
contributed to the increase in the average price per order and the increase in
adjusted same-facility revenue for the three and six months ended June 30,
2003. The decrease in the number of orders for the current quarter is partly
related to a decrease in the number of orders for sales of vaccines. Additionally, sales of flea and other over-the-counter products have decreased as a result of changes in the channels of distribution for these products.

Net acquired revenue for the three months ended June 30, 2003 and 2002
represents revenue from hospitals acquired, sold or closed on or subsequent to
April 1, 2002. Net acquired revenue for the six months ended June 30, 2003 and
2002 represents revenue from hospitals acquired, sold or closed on or
subsequent to January 1, 2002.

Reconciliation Between Non-GAAP and GAAP Measures

In the above tables, we use non-GAAP measures to reflect the combined
performance of animal hospitals owned and managed. The tables below reconcile
those non-GAAP measures to their comparable GAAP measures (in thousands):

|                                                  |                       |      |                             |        |                           |        |         |        |  |      |     |        |   |   |         |         |  |   |         |         |   |  |     |     |  
|------------------------------------------------- | --------------------- | ---- | --------------------------- | ------ | ------------------------- | ------ | ------- | ------ |  | ---- | --- | ------ | - | - | ------- | ------- |  | - | ------- | ------- | - |  | --- | --- | -
|                                                  |                       |      | Three Months Ended June 30, |        | Six Months Ended June 30,
|                                                  |                       |      |                             |        |                          
|                                                  |                       |      |                             |        |                           |        |         |        |  |      | %   |        |   |   |         |         |  |   |         |         | %
|Animal Hospital Revenue:                          |                       | 2003 |                             | 2002   |                           | Change |         | 2003   |  | 2002 |     | Change
|                                                  |                       |      |                             |        |                           |        |         |        |  |      |     |        |  
|Adjusted same-facility revenue (1)                |                       | $    | 89,467                      |        |                           | $      | 86,924  |        |  |      | 2.9 | %      |   | $ | 168,055 |         |  | $ | 163,072 |         |   |  | 3.1 | %  
|Same-facility revenue of animal
hospitals managed |                       |      | (21,482                     | )      |                           |        | (21,592 | )      |  |      |     |        |   |   | (39,743 | )       |  |   | (39,610 | )       |   |  |     |    
|                                                  |                       |      |                             |        |                           |        |         |        |  |      |     |        |   |   |         |         |  |   |         |         |   |  |     |    
|Same-facility revenue of animal
hospitals owned   |                       |      | 67,985                      |        |                           |        | 65,332  |        |  |      |     |        |   |   | 128,312 |         |  |   | 123,462 |         |   |  |     |    
|Same-facility management fees (2)                 |                       |      | 12,210                      |        |                           |        | 12,292  |        |  |      |     |        |   |   | 21,898  |         |  |   | 21,821  |         |   |  |     |    
|                                                  |                       |      |                             |        |                           |        |         |        |  |      |     |        |   |   |         |         |  |   |         |         |   |  |     |    
|                                                  | Same-facility revenue |      | $                           | 80,195 |                           |        | $       | 77,624 |  |      |     | 3.3    | % |   | $       | 150,210 |  |   | $       | 145,283 |   |  |     | 3.4 | %
|                                                  |                       |      |                             |        |                           |        |         |        |  |      |     |        |   |   |         |         |  |   |         |         |   |  |     |    

(1)  Adjusted same-facility revenue is a non-GAAP measure of combined
animal hospitals owned and managed.

(2)  Paid to us by veterinary medical groups.


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The following table reconciles the non-GAAP measure of orders for combined
animal hospitals owned and managed to the GAAP measure of orders for animal
hospitals owned (in thousands, except average price per order):

|                                                                     |                                                        |   |                             |        |      |   |          |        |   |  |     |      |   
|-------------------------------------------------------------------- | ------------------------------------------------------ | - | --------------------------- | ------ | ---- | - | -------- | ------ | - |  | --- | ---- | --
|                                                                     |                                                        |   | Three Months Ended June 30,
|                                                                     |                                                        |   |                            
|                                                                     |                                                        |   | 2003                        |        | 2002 |   | % Change
|                                                                     |                                                        |   |                             |        |      |   |         
|Same-facility:                                                       |                                                        |   |                             |        |      |   |          |        |   |  |     |     
|                                                                     | Orders for combined animal hospitals owned and
managed |   |                             | 842    |      |   |          | 854    |   |  |     |      |   
|                                                                     | Orders for animal hospitals managed                    |   |                             | (207   | )    |   |          | (217   | ) |  |     |      |   
|                                                                     |                                                        |   |                             |        |      |   |          |        |   |  |     |     
|                                                                     | Orders for animal hospitals owned                      |   |                             | 635    |      |   |          | 637    |   |  |     | (0.3 | )%
|                                                                     | Average price per order for animal hospitals
owned (1) |   | $                           | 107.06 |      |   | $        | 102.56 |   |  |     | 4.4  | % 
|                                                                     |                                                        |   |                             |        |      |   |          |        |   |  |     |     
|Same-facility revenue for animal hospitals owned (2)                 |                                                        | $ | 67,985                      |        |      | $ | 65,332   |        |   |  | 4.1 | %   
|Same-facility management fees                                        |                                                        |   | 12,210                      |        |      |   | 12,292   |        |   |  |     |     
|Acquired revenue and management fees from acquired
managed practices |                                                        |   | 8,229                       |        |      |   | 997      |        |   |  |     |     
|                                                                     |                                                        |   |                             |        |      |   |          |        |   |  |     |     
|                                                                     | Animal hospital revenue as reported                    |   | $                           | 88,424 |      |   | $        | 78,621 |   |  |     |      |   
|                                                                     |                                                        |   |                             |        |      |   |          |        |   |  |     |     

|                                                                     |                                                        |   |                           |         |      |   |          |         |   |  |     |      |   
|-------------------------------------------------------------------- | ------------------------------------------------------ | - | ------------------------- | ------- | ---- | - | -------- | ------- | - |  | --- | ---- | --
|                                                                     |                                                        |   | Six Months Ended June 30,
|                                                                     |                                                        |   |                          
|                                                                     |                                                        |   | 2003                      |         | 2002 |   | % Change
|                                                                     |                                                        |   |                           |         |      |   |         
|Same-facility:                                                       |                                                        |   |                           |         |      |   |          |         |   |  |     |     
|                                                                     | Orders for combined animal hospitals owned and
managed |   |                           | 1,584   |      |   |          | 1,613   |   |  |     |      |   
|                                                                     | Orders for animal hospitals managed                    |   |                           | (386    | )    |   |          | (404    | ) |  |     |      |   
|                                                                     |                                                        |   |                           |         |      |   |          |         |   |  |     |     
|                                                                     | Orders for animal hospitals owned                      |   |                           | 1,198   |      |   |          | 1,209   |   |  |     | (0.9 | )%
|                                                                     | Average price per order for animal hospitals
owned (1) |   | $                         | 107.11  |      |   | $        | 102.12  |   |  |     | 4.9  | % 
|                                                                     |                                                        |   |                           |         |      |   |          |         |   |  |     |     
|Same-facility revenue for animal hospitals owned (2)                 |                                                        | $ | 128,312                   |         |      | $ | 123,462  |         |   |  | 3.9 | %   
|Same-facility management fees                                        |                                                        |   | 21,898                    |         |      |   | 21,821   |         |   |  |     |     
|Acquired revenue and management fees from acquired
managed practices |                                                        |   | 14,942                    |         |      |   | 1,982    |         |   |  |     |     
|                                                                     |                                                        |   |                           |         |      |   |          |         |   |  |     |     
|                                                                     | Animal hospital revenue as reported                    |   | $                         | 165,152 |      |   | $        | 147,265 |   |  |     |      |   
|                                                                     |                                                        |   |                           |         |      |   |          |         |   |  |     |     



| | (1) |  | Computed by dividing same-facility revenue for animal hospitals owned
by same-facility orders for animal
hospitals owned.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------
| | (2) |  | Numbers may not calculate exactly due to rounding.                                                                       

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The following table reconciles the non-GAAP measure of acquired revenue
for combined animal hospitals
owned and managed to the GAAP measure of acquired revenue (in thousands):

|                                                                 |                                             |   |                    |       |                  |   |       |     |      |   |        |        |  |   |       |       | 
|---------------------------------------------------------------- | ------------------------------------------- | - | ------------------ | ----- | ---------------- | - | ----- | --- | ---- | - | ------ | ------ |  | - | ----- | ----- | 
|                                                                 |                                             |   | Three Months Ended |       | Six Months Ended
|                                                                 |                                             |   | June 30,           |       | June 30,        
|                                                                 |                                             |   |                    |       |                 
|                                                                 |                                             |   | 2003               |       | 2002             |   | 2003  |     | 2002
|                                                                 |                                             |   |                    |       |                  |   |       |     |     
|Acquired revenue for combined animal
hospitals owned and managed |                                             | $ | 9,355              |       |                  | $ | 1,149 |     |      | $ | 17,074 |        |  | $ | 2,255 |      
|Less: acquired revenue for animal hospitals
managed              |                                             |   | (2,571             | )     |                  |   | (349  | )   |      |   | (4,833 | )      |  |   | (646  | )    
|                                                                 |                                             |   |                    |       |                  |   |       |     |      |   |        |        |  |   |       |      
|                                                                 | Acquired revenue for animal hospitals owned |   | $                  | 6,784 |                  |   | $     | 800 |      |   | $      | 12,241 |  |   | $     | 1,609 | 
|                                                                 |                                             |   |                    |       |                  |   |       |     |      |   |        |        |  |   |       |      

Other Revenue

Other revenue consists of fees earned from a marketing consulting
agreement with Heinz Pet Products, which paid a monthly fee of approximately
$167,000 commencing October 1, 2000 through September 30, 2002. For the three
and six months ended June 30, 2002, we recognized revenue of $500,000 and $1.0
million, respectively, related to this agreement. There were no consulting
agreements effective in 2003.

Direct Costs

The following table summarizes our direct costs (excluding operating
depreciation) and our direct costs (excluding operating depreciation) as a
percentage of applicable revenue (in thousands):

|                |                    |   |                             |        |                           |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |      |  
|--------------- | ------------------ | - | --------------------------- | ------ | ------------------------- |  | ---- | ---- | ------- | - | ------ | ------ | ---- |  | ------- | ---- | - |  | ------- | ---- | ------ | - | ------- | ------- |  |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | - |  | ---- | ---- | -
|                |                    |   | Three Months Ended June 30, |        | Six Months Ended June 30,
|                |                    |   |                             |        |                          
|                |                    |   | 2003                        |        | 2002                      |  |      |      |         |   | 2003   |        | 2002 |  |         |      |  
|                |                    |   |                             |        |                           |  |      |      |         |   |        |        |      |  |         |      |  
|                |                    |   |                             |        |                           |  | % of |      |         |   |        |        | % of |  | %       |      |   |  |         |      | % of   |   |         |         |  |  | % of |      | %
|                |                    |   | $                           |        | Revenue                   |  | $    |      | Revenue |   | Change |        | $    |  | Revenue |      | $ |  | Revenue |      | Change
|                |                    |   |                             |        |                           |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |       
|Laboratory      |                    | $ | 24,816                      |        |                           |  | 53.1 | %    |         | $ | 22,134 |        |      |  | 54.5    | %    |   |  | 12.1    | %    |        | $ | 48,272  |         |  |  | 54.6 | %    |   | $ | 43,696  |         |  |  | 55.8 | %    |   |  | 10.5 | %   
|Animal hospital |                    |   | 64,440                      |        |                           |  | 72.9 | %    |         |   | 57,370 |        |      |  | 73.0    | %    |   |  | 12.3    | %    |        |   | 123,161 |         |  |  | 74.6 | %    |   |   | 110,502 |         |  |  | 75.0 | %    |   |  | 11.5 | %   
|Intercompany    |                    |   | (2,752                      | )      |                           |  |      |      |         |   | (2,500 | )      |      |  |         |      |   |  |         |      |        |   | (5,178  | )       |  |  |      |      |   |   | (4,606  | )       |  |  |      |      |   |  |      |     
|                |                    |   |                             |        |                           |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |     
|                | Total direct costs |   | $                           | 86,504 |                           |  |      | 65.4 | %       |   | $      | 77,004 |      |  |         | 65.7 | % |  |         | 12.3 | %      |   | $       | 166,255 |  |  |      | 66.9 | % |   | $       | 149,592 |  |  |      | 67.4 | % |  |      | 11.1 | %
|                |                    |   |                             |        |                           |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |     

Laboratory Direct Costs

The decrease in laboratory direct costs as a percentage of laboratory
revenue was primarily attributable to an increase in laboratory revenue
combined with operating leverage associated with our laboratory business. Our
operating leverage comes from the incremental margins we realize on additional
tests ordered by the same client, as well as when more comprehensive tests are
ordered. We are able to benefit from these incremental margins due to the
relative fixed cost nature of our laboratory business.

36



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Animal Hospital Direct Costs

The following table summarizes our animal hospital direct costs as
reported and the combined direct costs of animal hospitals that we owned and
managed, referred to as combined animal hospital direct costs, had we
consolidated the operating results of the animal hospitals we manage into our
operating results (in thousands):

|                                              |                              |   |                             |         |      |   |      |         |   |          |         |        |      |  |      |      |   |  |      |      |  
|--------------------------------------------- | ---------------------------- | - | --------------------------- | ------- | ---- | - | ---- | ------- | - | -------- | ------- | ------ | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                              |                              |   | Three Months Ended June 30,
|                                              |                              |   |                            
|                                              |                              |   | 2003                        |         | 2002 |   |      |         |  
|                                              |                              |   |                             |         |      |   |      |         |  
|                                              |                              |   |                             |         |      |   | % of |         |   |          |         |        | % of |  |      |      |  
|Animal Hospital Direct Costs:                 |                              | $ |                             | Revenue |      | $ |      | Revenue |   | % Change
|                                              |                              |   |                             |         |      |   |      |         |   |          |        
|As reported                                   |                              | $ | 64,440                      |         |      |   | 72.9 | %       |   | $        | 57,370  |        |      |  | 73.0 | %    |   |  | 12.3 | %   
|Add: Direct costs of animal hospitals
managed |                              |   | 24,054                      |         |      |   |      |         |   |          | 21,940  |        |      |  |      |      |   |  |      |     
|Less: Management fees (1)                     |                              |   | (13,656                     | )       |      |   |      |         |   |          | (12,488 | )      |      |  |      |      |   |  |      |     
|                                              |                              |   |                             |         |      |   |      |         |   |          |         |        |      |  |      |      |   |  |      |     
|                                              | Combined animal hospital (2) |   | $                           | 74,838  |      |   |      | 75.7    | % |          | $       | 66,822 |      |  |      | 75.9 | % |  |      | 12.0 | %
|                                              |                              |   |                             |         |      |   |      |         |   |          |         |        |      |  |      |      |   |  |      |     

|                                              |                              |   |                           |         |      |   |      |         |   |          |         |         |      |  |      |      |   |  |      |      |  
|--------------------------------------------- | ---------------------------- | - | ------------------------- | ------- | ---- | - | ---- | ------- | - | -------- | ------- | ------- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                              |                              |   | Six Months Ended June 30,
|                                              |                              |   |                          
|                                              |                              |   | 2003                      |         | 2002 |   |      |         |  
|                                              |                              |   |                           |         |      |   |      |         |  
|                                              |                              |   |                           |         |      |   | % of |         |   |          |         |         | % of |  |      |      |  
|Animal Hospital Direct Costs:                 |                              | $ |                           | Revenue |      | $ |      | Revenue |   | % Change
|                                              |                              |   |                           |         |      |   |      |         |   |          |        
|As reported                                   |                              | $ | 123,161                   |         |      |   | 74.6 | %       |   | $        | 110,502 |         |      |  | 75.0 | %    |   |  | 11.5 | %   
|Add: Direct costs of animal hospitals
managed |                              |   | 44,577                    |         |      |   |      |         |   |          | 40,255  |         |      |  |      |      |   |  |      |     
|Less: Management fees (1)                     |                              |   | (24,600                   | )       |      |   |      |         |   |          | (22,193 | )       |      |  |      |      |   |  |      |     
|                                              |                              |   |                           |         |      |   |      |         |   |          |         |         |      |  |      |      |   |  |      |     
|                                              | Combined animal hospital (2) |   | $                         | 143,138 |      |   |      | 77.3    | % |          | $       | 128,564 |      |  |      | 77.8 | % |  |      | 11.3 | %
|                                              |                              |   |                           |         |      |   |      |         |   |          |         |         |      |  |      |      |   |  |      |     



| | (1) |  | Charged by us to veterinary medical groups.                                         
| | --- |  | ------------------------------------------------------------------------------------
| | (2) |  | Represents the combined animal hospital direct costs of hospitals
owned and managed.

The decrease in combined animal hospital direct costs as a percentage of
applicable revenue was attributable to the increase in the combined animal
hospital revenue combined with the operating leverage associated
with the animal hospital business, as most of the costs associated with
this business do not increase proportionately with increases in the volume of
services rendered.

Selling, General and Administrative Expense

The following table summarizes our selling, general and administrative
expense, or SG&A, and our expense as a percentage of applicable revenue (in
thousands):

|                |            |   |                             |       |                           |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |       |        |  |  |      |     |   |   |       |        |  |  |     |     |   |  |      |     |  
|--------------- | ---------- | - | --------------------------- | ----- | ------------------------- |  | ---- | --- | ------- | - | ------ | ----- | ---- |  | ------- | --- | - |  | ------- | --- | ------ | - | ----- | ------ |  |  | ---- | --- | - | - | ----- | ------ |  |  | --- | --- | - |  | ---- | --- | -
|                |            |   | Three Months Ended June 30, |       | Six Months Ended June 30,
|                |            |   |                             |       |                          
|                |            |   | 2003                        |       | 2002                      |  |      |     |         |   | 2003   |       | 2002 |  |         |     |  
|                |            |   |                             |       |                           |  |      |     |         |   |        |       |      |  |         |     |  
|                |            |   |                             |       |                           |  | % of |     |         |   |        |       | % of |  | %       |     |   |  |         |     | % of   |   |       |        |  |  | % of |     | %
|                |            |   | $                           |       | Revenue                   |  | $    |     | Revenue |   | Change |       | $    |  | Revenue |     | $ |  | Revenue |     | Change
|                |            |   |                             |       |                           |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |       
|Laboratory      |            | $ | 2,797                       |       |                           |  | 6.0  | %   |         | $ | 2,396  |       |      |  | 5.9     | %   |   |  | 16.7    | %   |        | $ | 5,504 |        |  |  | 6.2  | %   |   | $ | 5,069 |        |  |  | 6.5 | %   |   |  | 8.6  | %  
|Animal hospital |            |   | 2,519                       |       |                           |  | 2.8  | %   |         |   | 2,478  |       |      |  | 3.2     | %   |   |  | 1.7     | %   |        |   | 5,022 |        |  |  | 3.0  | %   |   |   | 4,992 |        |  |  | 3.4 | %   |   |  | 0.6  | %  
|Corporate       |            |   | 3,774                       |       |                           |  | 2.9  | %   |         |   | 3,665  |       |      |  | 3.1     | %   |   |  | 3.0     | %   |        |   | 7,927 |        |  |  | 3.2  | %   |   |   | 7,100 |        |  |  | 3.2 | %   |   |  | 11.6 | %  
|                |            |   |                             |       |                           |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |       |        |  |  |      |     |   |   |       |        |  |  |     |     |   |  |      |    
|                | Total SG&A |   | $                           | 9,090 |                           |  |      | 6.9 | %       |   | $      | 8,539 |      |  |         | 7.3 | % |  |         | 6.5 | %      |   | $     | 18,453 |  |  |      | 7.4 | % |   | $     | 17,161 |  |  |     | 7.7 | % |  |      | 7.5 | %
|                |            |   |                             |       |                           |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |       |        |  |  |      |     |   |   |       |        |  |  |     |     |   |  |      |    

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Laboratory SG&A

The increase in laboratory SG&A as a percentage of laboratory revenue
during the three months ended June 30, 2003 as compared to the same period in
the prior year was primarily attributable to additional information technology
personnel and commission payments to sales representatives. The decrease in
laboratory SG&A as a percentage of laboratory revenue during the six months
ended June 30, 2003 as compared to the same periods in the prior year was
primarily attributable to a decrease in legal costs offset by the same factors
attributable to the increase during the three months ended June 30, 2003.

Animal Hospital SG&A

The decrease in animal hospital SG&A as a percentage of animal hospital
revenue during the three and six months ended June 30, 2003 as compared to the
same periods in the prior year was primarily attributable to an increase in
animal hospital revenue combined with operating leverage associated with our
animal hospital business.

Corporate SG&A

The decrease in corporate SG&A as a percentage of total revenue for the
three months ended June 30, 2003 as compared to the same period in the prior
year was primarily due to a decrease in accounting fees. Corporate SG&A for
the three months ended June 30, 2002 included additional accounting fees
incurred in connection with changing our external auditors from Arthur Andersen
LLP to KPMG LLP. For the six months ended June 30, 2003 and 2002, corporate
SG&A remained constant as a percentage of revenue but increased 11.6% for the
six months
ended June 30, 2003 compared to the same period in the prior year. This
increase was primarily attributable to increased legal and insurance fees as
well as increases in salaries and bonuses.

Depreciation and Amortization

Depreciation and amortization expense increased $358,000, or 11.4%, for
the three months ended June 30, 2003 and increased $772,000, or 12.3%, for the
six months ended June 30, 2003 compared to the same periods in the prior year.
The increase in depreciation and amortization was due to the purchase of
property and equipment and the addition of non-competition agreements executed
in connection with the acquisition of animal hospitals and laboratories.

Loss (Gain) on Sale of Assets

During the three and six months ended June 30, 2003, we sold certain
assets for a loss of $78,000 and a gain of $160,000, respectively. The sales
transactions consisted of real estate, one animal hospital practice and other
fixed assets.

Interest Expense, Net

Interest expense, net of interest income decreased $3.9 million, or 38.0%,
for the three months ended June 30, 2003 and decreased $6.9 million, or 34.0%,
for the six months ended June 30, 2003 compared to the same periods in the
prior year. The change in net interest expense was attributable to a decrease
in the average debt balances outstanding and a decrease in the weighted average
interest rate.

Debt Retirement Costs

On February 4, 2003, we voluntarily retired the entire principal amount of
our 15.5% senior notes with net proceeds from the sale of our common stock
during our secondary offering. In conjunction with that transaction, we
recorded debt retirement costs of $7.4 million. The debt retirement costs
consisted of the write-off of deferred financing costs and debt discounts and
the payment of related transaction and retirement fees.

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Other (Income) Expense

Other expense was $131,000 for the three months ended June 30, 2003 and
$258,000 for the six months ended June 30, 2003, consisting of a non-cash loss
on the interest rate swap agreements. Other income was $61,000 for the three
months ended June 30, 2002 and $154,000 for the six months ended June 30, 2002,
consisting of a non-cash gain on the interest rate collar agreement.

Minority Interest in Income of Subsidiaries

Minority interest in income of the consolidated subsidiaries was $462,000
and $528,000 for the three months ended June 30, 2003 and 2002, respectively,
and $823,000 and $930,000 for the six months ended June 30, 2003 and 2002,
respectively. Minority interest in income of subsidiaries represents our
partners proportionate share of net income generated by those subsidiaries
that we do not wholly own.

Provision for Income Taxes

Our effective income tax rate for each period can vary from the statutory
rate primarily due to the non-deductibility for income tax purposes of certain
items. During the three and six months ended June 30, 2003, our effective
income tax rate varied from the statutory rate primarily due to the
non-deductibility of the amortization of a portion of intangible assets.

Liquidity and Capital Resources

Discussion of the Six Months Ended June 30, 2003

Our cash and cash equivalents increased to $22.5 million at June 30, 2003
compared to $6.5 million at December 31, 2002. The increase resulted from
$38.5 million provided by operating activities and $3.5 million provided by
financing activities offset by $26.0 million used in investing activities.

Net cash provided by operating activities increased to $38.5 million
during the six months ended June 30, 2003 compared to $31.8 million during the
six months ended June 30, 2002. This increase was primarily attributable to an
increase in operating income and a $2.2 million decrease in interest paid,
offset by a $3.2 million increase in income taxes paid.

We used net cash of $26.0 million for investing activities during the six
months ended June 30, 2003 in which we:



| |  |  | paid $19.9 million related to the acquisition of 16 animal
hospitals and six laboratories and the settlement of certain
obligations incurred or agreed to on the date of acquisition;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | paid $589,000 for real estate acquired in connection with acquisitions;                                                                                                              
|
| |  |  | paid $6.2 million in property and equipment additions; and                                                                                                                           
|
| |  |  | received $716,000 from the sale of assets and other activities.                                                                                                                      

We received net cash of $3.5 million from financing activities during the
six months ended June 30, 2003 in which we:



| |  |  | received $54.3 million in net proceeds from the issuance of
3.8 million shares of our common stock;                                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | paid $41.8 million to voluntarily redeem the entire principal
amount of our 15.5% senior notes at a redemption price of 110% of
the principal amount;
|
| |  |  | paid $1.2 million for scheduled maturities of debt obligations;                                                                                      

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| |  |  | repaid $7.5 million, the entire outstanding balance, of our revolving credit facility; and
| | - |  | ------------------------------------------------------------------------------------------
|
| |  |  | paid $382,000 of financing costs.                                                         

Future Cash Requirements

We expect to fund our liquidity needs primarily from operating cash flows,
cash on hand and, if needed, borrowings under our $50.0 million revolving
credit facility. At June 30, 2003, we had no borrowings outstanding under our
revolving credit facility. We believe these sources of funds will be
sufficient to continue our operations and planned capital expenditures and to
satisfy our scheduled principal and interest payments under debt obligations
for at least the next 12 months. However, a significant portion of our cash
requirements will be determined by the pace and size of our acquisitions.

Estimated future uses of cash for the remainder of 2003 include capital
expenditures for land, buildings and equipment of approximately $11.8 million.
In addition, we intend to use available liquidity to continue our growth
through the selective acquisition of animal hospitals, primarily for cash. Our
acquisition program contemplates the acquisition of 15 to 25 animal hospitals
per year and a planned cash commitment of up to $30.0 million. However, we may
purchase either a fewer or greater number of animal hospital facilities and we
may purchase laboratory facilities during any year depending upon opportunities
that present themselves and our cash requirements may change accordingly. We
anticipate purchasing up to 20 animal hospitals and seven laboratories with a
planned cash commitment of $31.9 million during 2003. Although we intend to
primarily use cash in our acquisitions, we may use debt or stock to the extent
we deem it appropriate.

In addition to the foregoing, we will use approximately $1.3 million of
cash for the remainder of 2003 to pay the mandatory principal payments due on
our outstanding indebtedness. Also, we plan to pre-pay approximately $20.0
million of our senior term C notes in the near future and we may elect to
pre-pay additional debt obligations.

Description of Indebtedness

Credit and Guaranty Agreement.On September 20, 2000, we entered into a
credit and guaranty agreement, which included senior term notes and a $50.0
million revolving credit facility. At June 30, 2003, we had $166.4 million
principal amount outstanding under our senior term C notes and no borrowings
outstanding under our revolving credit facility.

Borrowings under the credit and guaranty agreement bear interest, at our
option, on either the base rate, which is the higher of the administrative
agents prime rate or the Federal funds rate plus 0.5%, or the adjusted
eurodollar rate, which is the rate per annum obtained by dividing (1) the rate
of interest offered to the administrative agent on the London interbank market
by (2) a percentage equal to 100% minus the stated maximum rate of all reserve
requirements applicable to any member bank of the Federal Reserve System in
respect of eurocurrency liabilities. The base rate margins for the revolving
credit facility range from 1.00% to 2.25% per annum and the margin for the
senior term C notes is 2.00%. The eurodollar rate margins for the revolving
credit facility range from 2.00% to 3.25% per annum and the margin for the
senior term C notes is 3.00%.

The senior term C notes mature in September 2008 and the revolving credit
facility matures in September 2006.

The credit and guaranty agreement contains certain financial covenants
pertaining to interest coverage, fixed charge coverage and leverage ratios. In
addition, the credit and guaranty agreement has restrictions pertaining to
capital expenditures, acquisitions and the payment of dividends on all classes
of stock. We currently believe the most restrictive covenant is the
fixed-charge coverage ratio. Our credit agreement defines the fixed charge
coverage ratio as that ratio which is calculated on a last twelve-month basis
by dividing pro forma EBITDA, as defined by the agreement, by fixed charges.
Fixed charges are defined as cash interest expense, scheduled principal
payments on debt obligations, capital expenditures and provision for income
taxes. At June 30, 2003, we had a fixed charge coverage ratio of 1.44 to 1.00.
The credit and guaranty agreement requires a fixed-charge coverage ratio of no
less than 1.10 to 1.00.

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9.875% Senior Subordinated Notes.On November 27, 2001, Vicar Operating,
Inc., our wholly-owned subsidiary, issued $170.0 million in principal amount of
senior subordinated notes due December 1, 2009, which were exchanged on June
13, 2002 for substantially similar securities that are registered under the
Securities Act. Interest on these senior subordinated notes is 9.875% per
annum, payable semi-annually in arrears in cash. At June 30, 2003, the
outstanding principal balance of these senior subordinated notes was $170.0
million. We and each existing and future domestic wholly-owned subsidiary of
Vicar have jointly and severally, fully and unconditionally guaranteed these
notes. These guarantees are unsecured and subordinated in right of payment to
all existing and future indebtedness outstanding under the credit and guaranty
agreement and any other indebtedness permitted to be incurred by Vicar under
the terms of the indenture agreement governing these notes.

15.5% Senior Notes.On February 4, 2003, we used approximately $42.7
million of the net proceeds received from the sale of our common stock during
our secondary offering to redeem the remaining principal amount outstanding of
our 15.5% senior notes due 2010 at a redemption price of 110% of the principal
amount, plus accrued and unpaid interest.

Other Debt.We had seller notes secured by assets of animal hospitals,
unsecured debt and capital leases that totaled $2.1 million at June 30, 2003.

Contractual Obligations.There have been no significant changes to our
contractual obligations or commitments from those disclosed in our most
recently filed Form 10-K.

Interest Rate Hedging Agreements

We entered into the following no-fee swap agreements, which swap monthly
variable LIBOR for the fixed rates indicated below:

|                    |  |                  |            |                  |  |               |           |  |  |  |           | 
|------------------- |  | ---------------- | ---------- | ---------------- |  | ------------- | --------- |  |  |  | --------- | 
|                    |  | Swap #1          |            | Swap #2          |  | Swap #3      
|                    |  |                  |            |                  |  |              
|Fixed interest rate |  |                  | 2.22%      |                  |  |               | 1.72%     |  |  |  | 1.51%     | 
|Notional amount     |  | $40.0 million    |            | $20.0 million    |  | $20.0 million
|Effective date      |  |                  | 11/29/2002 |                  |  |               | 5/30/2003 |  |  |  | 5/30/2003 | 
|Expiration date     |  |                  | 11/29/2004 |                  |  |               | 5/31/2005 |  |  |  | 5/31/2005 | 
|Counter party       |  | Wells Fargo Bank |            | Wells Fargo Bank |  | Goldman Sachs

Swap # 2 and Swap #3 qualify for hedge accounting and we consider them to
be cash flow hedging instruments. However, in May 2003 management determined
that Swap #1 was no longer an effective tool to hedge against interest rate
risk because LIBOR projections were considerably below the initial LIBOR
forecasts used to price the swap at inception of the contract. As a result of
this determination, Swap #1 no longer qualifies for hedge accounting and all
changes in its market value are recognized as income or expense in the period
of change.

At June 30, 2003, the fair market values of our swap agreements resulted
in a net liability to us of $674,000, which is included in other accrued
liabilities. For the three and six months ended June 30, 2003, we made
payments of $102,000 and $187,000, respectively, as a result of LIBOR being
below the fixed interest rates. These payments are included in interest
expense.

We are considering entering into additional interest rate strategies to
take advantage of the current rate environment. We have not yet determined
what those strategies will be or their possible impact.

New Accounting Pronouncements

Accounting for Certain Financial Instruments with Characteristics of Both
Liabilities and Equity

In May 2003, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.SFAS No. 150 clarifies the accounting for certain financial
instruments with characteristics of both liabilities and equity and requires
that those instruments be classified as liabilities. SFAS No.

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150 is effective
for financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. We currently have a $2.3 million obligation to be settled
in either cash or common stock that is classified as a liability; we do not
have any immediate plans to enter into other financial instruments subject to
the accounting requirements of SFAS No. 150. The adoption of SFAS No. 150 will
not have a material impact on our financial statements.

Accounting for Derivative Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.SFAS No. 149 clarifies
financial accounting and reporting requirements for derivative instruments and
hedging activities as set forth under SFAS No. 133. SFAS No. 149 is effective
for contracts entered into or modified after June 30, 2003 and for hedging
relationships entered into after June 30, 2003. The adoption of SFAS No. 149
will not have a material impact on our financial statements.

Consolidations of Variable Interest Entities

In January 2003, the FASB issued FASB Interpretation, or FIN, No. 46,
Consolidation of Variable Interest Entities,requiring that companies
consolidate variable interest entities if they are the primary beneficiaries,
as defined under FIN No. 46, of the activities of the variable interest
entities. Companies are required to apply FIN No.
46 immediately for all variable interest entities created after January
31, 2003 and as of the beginning of the first interim period beginning after
June 15, 2003 for all other variable interest entities.

We provide management services to certain veterinary medical groups in
states with laws that prohibit business corporations from providing, or holding
themselves out as providers of, veterinary medical care. As of June 30, 2003,
we operated in 11 of these states. In these states, we provide management
services to veterinary medical groups pursuant to long-term management
agreements ranging from 10 to 40 years with non-binding renewal options, where
allowable. Pursuant to the management agreements, the veterinary medical
groups are each solely responsible for all aspects of the practice of
veterinary medicine, as defined by their respective state. We provide
administrative and other support services.

Currently, we do not consolidate the operations of the veterinary medical
groups since we have no ownership interests in them. However, we are
finalizing our analysis of FIN No. 46 and it is reasonably possible that the
operations of the veterinary medical groups will be consolidated. If the
veterinary medical groups were to be consolidated into our operating results,
there would be no effect on operating income and we would not be exposed to
additional losses. We would consolidate the revenue and direct costs of the
veterinary medical groups but would not recognize the management fees charged
to them. See our discussions regarding animal hospital revenue included herein
in the Revenuesection for full details regarding the veterinary medical
groups.

Guarantors Accounting and Disclosure Requirements for Guarantees

In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002 for periods ending after
December 15, 2002. We do not have any obligations subject to the provisions of
FIN No. 45.

Consideration Received from a Vendor

In November 2002, FASBs Emerging Issues Task Force, or EITF, reached a
consensus regarding two issues raised by EITF Issue No. 02-16, Accounting by a
Customer (Including a Reseller) for Certain Consideration Received from a
Vendor.The EITF concluded that:



| |  |  | cash received by a vendor is presumed to be a reduction of
the cost of the vendors products or services, however that
presumption is overcome when the consideration is either (a) a
payment for
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | assets or services, or b) a reimbursement of specific
and identifiable costs incurred on behalf of the vendor in selling
the vendors products or services, in which case the consideration
is a reduction of that cost; and                                
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | rebates offered to a customer or reseller should be
recognized or new agreements entered into on or after January 1,
2003. We have adopted EITF Issue No. 02-16 and we do not expect it
to have a material impact on our financial statements in the future.

Costs Associated with Exit or Disposal Activities

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities.SFAS No. 146 requires that
liabilities associated with exit or disposal activities be recognized when a
company is committed to future payment of those liabilities under a binding,
legal obligation. SFAS No. 146 nullifies EITF Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (including Certain Costs Incurred in a Restructuring),which
required that exit and disposal costs be recognized as liabilities when a
company formalized its plan for exiting or disposing of an activity even if no
legal obligation had been established.

SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002. Currently, we have no plans to exit or
dispose of any of our business activities that would require the use of SFAS
No. 146 nor do we anticipate that SFAS No. 146 will change any of our business
practices.

Gains and Losses from Extinguishment of Debt and Capital Leases

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections,to be applied in fiscal years beginning after May 15, 2002.

Under SFAS No. 145, gains and losses from extinguishment of debt should be
classified as extraordinary items only if they meet the criteria of APB No. 30.
Under APB No. 30, events are considered extraordinary only if they possess a
high degree of abnormality and are not likely to recur in the foreseeable
future. Any gains or losses on extinguishment of debt that do not meet the
criteria of APB No. 30 shall be classified as a component of income from
recurring operations. In addition, any gains or losses on extinguishment of
debt that were classified as an extraordinary item in prior periods presented
that do not meet the criteria of APB No. 30 shall be reclassified as a
component of income from recurring operations. We adopted SFAS No. 145 on
January 1, 2003.

In February 2003, we redeemed the entire principal amount of our 15.5%
senior notes. This voluntary repayment resulted in the recognition of a loss
on the early extinguishment of debt of $7.4 million. We do not believe the
loss meets the criteria of APB No. 30 as we have historically and may continue
to change our capital structure to take advantage of current market conditions.
As a result of adopting SFAS No. 145, we recorded the debt retirement costs as
a component of income from recurring operations.

SFAS No. 145 also amends SFAS No. 13, Accounting for Leases.Under SFAS
No. 145, if a capital lease is modified such that it becomes an operating
lease, a gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At June 30,
2003, we had capital lease obligations of $454,000; however, we currently have
no plans to modify these or any future capital leases, and we do not expect
SFAS No. 145 to have a material impact on our financial statements.

Asset Retirement Obligations

In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations.SFAS No. 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. We adopted SFAS No. 143 on
January 1, 2003 without material impact on our financial statements.

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Risk Factors

This Form 10-Q, including Risk Factorsset forth below, contains
forward-looking statements that involve risks and uncertainties, as well as
assumptions that, if they materialize or prove incorrect, could cause our
results and the results of our consolidated subsidiaries to differ materially
from those expressed or implied by these forward-looking statements. All
statements other than statements of historical fact are statements that could
be deemed forward-looking statements, including any projections of earnings,
revenue or other financial items; any statements of the plans, strategies and
objectives of management for future operations; any statement concerning
proposed new services or developments; any statements regarding the future
economic conditions or performance; any statements of belief; and any
statements of assumptions underlying any of the foregoing. The risks,
uncertainties and assumptions referred to above include difficulty of managing
our growth and integrating our new acquisitions and other risks that are
described from time to time in our Securities and Exchange Commission reports,
including but not limited to the items discussed below.



| |  | If we are unable to effectively execute our growth strategy, we may not
achieve our desired economies of scale and our margins and profitability may
decline.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------

Our success depends in part on our ability to build on our position as a
leading animal health care services company through a balanced program of
internal growth initiatives and selective acquisitions of established animal
hospitals and laboratories. If we cannot implement or effectively execute
these initiatives and acquisitions, our results of operations will be adversely
affected. Even if we effectively implement our growth strategy, we may not
achieve the economies of scale that we have experienced in the past or that we
anticipate having in the future. Our internal growth rate may decline and
could become negative. Our laboratory internal revenue growth has fluctuated
between 12.5% and 14.1% for each fiscal year from 2000 through 2002.
Similarly, our animal hospital adjusted same-facility revenue growth rate has
fluctuated between 3.6% and 7.0% over the same fiscal years. Our internal
growth may continue to fluctuate and may be below our historical rates. Any
reductions in the rate of our internal growth may cause our revenues and
margins to decrease. Our historical growth rates and margins are not
necessarily indicative of future results.

Demand for certain over the counter products could decline as their
product life cycle matures and the products become available in more
retail-oriented locations. Certain of these products are replaced and are
distributed through veterinary hospitals only. This cycle and the replacement
of existing products could affect veterinary visits. Demand for vaccinations
may also be impacted in the future as protocols for vaccinations change.
Vaccinations have been recommended by some in the profession to be given less
frequently. This may result in fewer visits and potentially less revenue.
Vaccine protocols for our company are established by our veterinarians who use
their independent professional judgment. Some of our veterinarians have
changed their protocols and others may change their protocol in light of recent
literature.



| |  | Our business and results of operations may be adversely affected if we are
unable to manage our growth effectively.
| |  | -------------------------------------------------------------------------------------------------------------------

Since January 1, 1996, we have experienced rapid growth and expansion.
Our failure to manage our growth effectively may increase our costs of
operations and hinder our ability to execute our business strategy. Our rapid
growth has placed, and will continue to place, a significant strain on our
management and operational systems and resources. At January 1, 1996, we
operated 59 animal hospitals, operated laboratories servicing approximately
9,000 customers in 27 states and had approximately 1,150 full-time equivalent
employees. At June 30, 2003, we operated 238 animal hospitals, operated
laboratories servicing approximately 14,000 customers in all 50 states and had
approximately 4,000 full-time equivalent employees. If our business continues
to grow, we will need to improve and enhance our overall financial and
managerial controls, reporting systems and procedures, and expand, train and
manage our workforce in order to maintain control of expense and achieve
desirable economies of scale. We also will need to increase the capacity of
our current systems to meet additional demands.

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| |  | Due to the fixed cost nature of our business, fluctuations in our revenue

could adversely affect our operating income.
| |  | -----------------------------------------------------------------------------------------------------------------------

Approximately 57.2% of our expense, particularly rent and personnel costs,
are fixed costs and are based in part on expectations of revenue. We may be
unable to reduce spending in a timely manner to compensate for any significant
fluctuations in our revenue. Accordingly, shortfalls in revenue may adversely
affect our operating income.



| |  | Difficulties integrating new acquisitions may impose substantial costs and
cause other problems for us.
| |  | -------------------------------------------------------------------------------------------------------

Our success depends on our ability to timely and cost-effectively acquire,
and integrate into our business, additional animal hospitals and laboratories.
Any difficulties in the integration process may result in increased expense,
loss of customers and a decline in profitability. We expect to acquire 15 to
25 animal hospitals per year, however, based on the opportunity, the number
could be higher. Historically we have experienced delays and increased costs
in integrating some hospitals primarily where we acquire a large number of
hospitals in a single region at or about the same time. In these cases, our
field management may spend a predominant amount of time integrating these new
hospitals and less time managing our existing hospitals in those regions.
During these periods, there may be less attention directed to marketing efforts
or staffing issues. In these circumstances, we also have experienced delays in
converting the systems of acquired hospitals into our systems, which results in
increased payroll expense to collect our results and delays in reporting our
results, both for a particular region and on a consolidated basis. These
factors have resulted in decreased revenue, increased costs and lower margins.
We continue to face risks in connection with our acquisitions including:



| |  |  | negative effects on our operating results;                                                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | impairments of goodwill and other intangible assets;                                                                                  
|
| |  |  | dependence on retention, hiring and training of key personnel, including specialists; and                                             
|
| |  |  | contingent and latent risks associated with the past
operations of, and other unanticipated problems arising in, an
acquired business.

The process of integration may require a disproportionate amount of the
time and attention of our management, which may distract managements attention
from its day-to-day responsibilities. In addition, any interruption or
deterioration in service resulting from an acquisition may result in a
customers decision to stop using us. For these reasons, we may not realize
the anticipated benefits of an acquisition, either at all or in a timely
manner. If that happens and we incur significant costs, it could have a
material adverse impact on our business.



| |  | The carrying value of our goodwill could be subject to impairment
write-down.
| |  | -----------------------------------------------------------------------------

At June 30, 2003, our balance sheet reflected $363.2 million of goodwill,
which is a substantial portion of our total assets of $545.3 million at that
date. We expect that the aggregate amount of goodwill on our balance sheet
will increase as a result of future acquisitions. We continually evaluate
whether events or circumstances have occurred that suggest that the fair market
value of each of our reporting units is below their carrying values. If we
determine that the fair market value of one of our reporting units is less than
its carrying value, this may result in an impairment write-down of the goodwill
for that reporting unit. The impairment write-down would be reflected as
expense and could have a material adverse effect on our results of operations
during the period in which we recognize the expense. In 2002, we concluded
that the fair value of our reporting units exceeded their carrying value and
accordingly, as of that date, our net goodwill was fairly stated in our
financial statements and there are currently no impairment issues. However, in
the future we may incur impairment charges related to the goodwill already
recorded or arising out of future acquisitions.

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| |  | We require a significant amount of cash to service our debt and expand our
business as planned.
| |  | -----------------------------------------------------------------------------------------------

We have, and will continue to have, a substantial amount of debt. Our
substantial amount of debt requires us to dedicate a significant portion of our
cash flow from operations to pay down our indebtedness and related interest,
thereby reducing the funds available to use for working capital, capital
expenditures, acquisitions and general corporate purposes.

At June 30, 2003, our debt, excluding unamortized discount, consisted
primarily of:



| |  |  | $166.4 million in principal amount outstanding under our senior credit facility;              
| | - |  | ----------------------------------------------------------------------------------------------
|
| |  |  | $170.0 million in principal amount outstanding under our 9.875% senior subordinated notes; and
|
| |  |  | $2.1 million in principal amount outstanding under our other debt.                            

The following table sets forth the scheduled principal and interest
payments that are due on our debt for each of the periods indicated (in
thousands):

|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|------------------------- |  | ---------------------- | ------- | ---------- |  | ----------- | ------ | ----------- |  | ------- | ------ | - |  | - | ------- | --------- |  | - | ------- | 
|                          |  | Payments Due by Period
|                          |  |                       
|                          |  |                        |         |            |  | Less than   |        |             |  |         |        |   |  |   |         | More than
|                          |  | Total                  |         | 1 year (1) |  | 1 - 3 years |        | 3 - 5 years |  | 5 years
|                          |  |                        |         |            |  |             |        |             |  |        
|Long-term debt            |  | $                      | 338,042 |            |  | $           | 1,167  |             |  | $       | 4,235  |   |  | $ | 102,261 |           |  | $ | 230,379 | 
|Fixed interest            |  |                        | 110,721 |            |  |             | 8,658  |             |  |         | 34,519 |   |  |   | 33,945  |           |  |   | 33,599  | 
|Variable interest         |  |                        | 54,182  |            |  |             | 5,486  |             |  |         | 23,795 |   |  |   | 22,336  |           |  |   | 2,565   | 
|Capital lease obligations |  |                        | 454     |            |  |             | 172    |             |  |         | 281    |   |  |   | 1       |           |  |   |        | 
|Swap agreements           |  |                        | (2,763  | )          |  |             | (674   | )           |  |         | (2,089 | ) |  |   |        |           |  |   |        | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|                          |  | $                      | 500,636 |            |  | $           | 14,809 |             |  | $       | 60,741 |   |  | $ | 158,543 |           |  | $ | 266,543 | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 

(1)  Consists of the period July 1 through December 31, 2003.

We have both fixed-rate and variable-rate debt. The interest payments on
our variable-rate debt are based on a variable-rate component plus a fixed
3.0%. Including the fixed 3.0%, we estimate that the total interest rate on
our variable-rate debt will be 6.6%, 7.0%, 7.5%, 8.0%, 8.5% and 8.5% for years
2003 through 2008, respectively. Our consolidated financial statements
included in our 2002 Annual Report on Form 10-K discuss these variable-rate
notes in more detail.

We entered into the following no-fee swap agreements, which swap monthly
variable LIBOR for the fixed rates indicated below:

|                    |  |               |            |               |  |               |           |  |  |  |           | 
|------------------- |  | ------------- | ---------- | ------------- |  | ------------- | --------- |  |  |  | --------- | 
|                    |  | Swap #1       |            | Swap #2       |  | Swap #3      
|                    |  |               |            |               |  |              
|Fixed interest
rate |  |               | 2.22%      |               |  |               | 1.72%     |  |  |  | 1.51%     | 
|Notional
amount     |  | $40.0 million |            | $20.0 million |  | $20.0 million
|Effective
date      |  |               | 11/29/2002 |               |  |               | 5/30/2003 |  |  |  | 5/30/2003 | 
|Expiration
date     |  |               | 11/29/2004 |               |  |               | 5/31/2005 |  |  |  | 5/31/2005 | 

Swap #2 and Swap #3 qualify for hedge accounting and we consider them to
be cash flow hedging instruments. However, as of May 2003 we no longer
considered Swap #1 to be a cash flow hedge because the current rate environment
was significantly different than the rate environment in existence at the
effective date.

Our ability to make payments on our debt, and to fund acquisitions, will
depend upon our ability to generate cash in the future. Insufficient cash flow
could place us at risk of default under our debt agreements or could prevent us
from expanding our business as planned. Our ability to generate cash is
subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. Our business may not generate

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sufficient cash flow from operations, our strategy to increase operating
efficiencies may not be realized and future borrowings may not be available to
us under our senior credit facility in an amount sufficient to enable us to
service
our debt or to fund our other liquidity needs. In order to meet our debt
obligations, we may need to refinance all or a portion of our debt. We may not
be able to refinance any of our debt on commercially reasonable terms or at
all.



| |  | Our debt instruments may adversely affect our ability to run our business.
| |  | --------------------------------------------------------------------------

Our substantial amount of debt, as well as the guarantees of our
subsidiaries and the security interests in our assets and those of our
subsidiaries, could impair our ability to operate our business effectively and
may limit our ability to take advantage of business opportunities. For
example, our indenture and senior credit facility:



| |  |  | limit our funds available to repay the 9.875% senior
subordinated notes;                                                                                                                    
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | limit our ability to borrow additional funds or to
obtain other financing in the future for working capital, capital
expenditures, acquisitions, investments and general corporate
purposes;
|
| |  |  | limit our ability to dispose of our assets, create
liens on our assets or to extend credit;                                                                                                 
|
| |  |  | make us more vulnerable to economic downturns and
reduce our flexibility in responding to changing business and
economic conditions;                                                        
|
| |  |  | limit our flexibility in planning for, or reacting to, changes in our business or industry;                                                                                                 
|
| |  |  | place us at a competitive disadvantage to our competitors with less debt; and                                                                                                               
|
| |  |  | restrict our ability to pay dividends, repurchase or
redeem our capital stock or debt, or merge or consolidate with
another entity.                                                         

The terms of our indenture and senior credit facility allow us, under
specified conditions, to incur further indebtedness, which would heighten the
foregoing risks. If compliance with our debt obligations materially hinders
our ability to operate our business and adapt to changing industry conditions,
we may lose market share, our revenue may decline and our operating results may
suffer.



| |  | Our failure to satisfy covenants in our debt instruments will cause a default under those instruments.
| |  | ------------------------------------------------------------------------------------------------------

In addition to imposing restrictions on our business and operations, our
debt instruments include a number of covenants relating to financial ratios and
tests. Our ability to comply with these covenants may be affected by events
beyond our control, including prevailing economic, financial and industry
conditions. The breach of any of these covenants would result in a default
under these instruments. An event of default would permit our lenders and
other debtholders to declare all amounts borrowed from them to be due and
payable, together with accrued and unpaid interest. Moreover, these lenders

and other debtholders would have the option to terminate any obligation to make
further extensions of credit under these instruments. If we are unable to
repay debt to our senior lenders, these lenders and other debtholders could
proceed against our assets.



| |  | The significant competition in the companion animal health care services
industry could cause us to reduce prices or lose market share.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------

The companion animal health care services industry is highly competitive
with few barriers to entry. To compete successfully, we may be required to
reduce prices, increase our operating costs or take other measures that could
have an adverse effect on our financial condition, results of operations,
margins and cash flow. If we are unable to compete successfully, we may lose
market share.

There are many clinical laboratory companies that provide a broad range of
laboratory testing services in the same markets we service. Our largest
competitor for outsourced laboratory testing services is Idexx Laboratories,
Inc., which currently competes or intends to compete in most of the same
markets in which we operate.

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Also, Idexx and several other national companies
provide on-site diagnostic equipment that allows veterinarians to perform their
own laboratory tests.

Our primary competitors for our animal hospitals in most markets are
individual practitioners or small, regional, multi-clinic practices. Also,
regional pet care companies and some national companies, including operators of
super-stores, are developing multi-regional networks of animal hospitals in
markets in which we operate. Historically, when a competing animal hospital
opens in close proximity to one of our hospitals, we have reduced prices,
expanded our facility, retained additional qualified personnel, increased our
marketing efforts or taken other actions designed to retain and expand our
client base. As a result, our revenue may decline and our costs increase.



| |  | We may experience difficulties hiring skilled veterinarians due to
shortages that could disrupt our business.
| |  | -------------------------------------------------------------------------------------------------------------

As the pet population continues to grow, the need for skilled
veterinarians continues to increase. If we are unable to retain an adequate
number of skilled veterinarians, we may lose customers, our revenue may decline
and we may need to sell or close animal hospitals. As of June 30, 2003, there
were 28 veterinary schools in the country accredited by the American Veterinary
Medical Association. These schools graduate approximately 2,100 veterinarians
per year. There is a shortage of skilled veterinarians across the country,
particularly in some regional markets in which we operate animal hospitals
including Northern California. During these shortages in these regions, we may
be unable to hire enough qualified veterinarians to adequately staff our animal
hospitals, in which event we may lose market share and our revenues and
profitability may decline.



| |  | If we fail to comply with governmental regulations applicable to our
business, various governmental agencies may impose fines, institute
litigation or preclude us from operating in certain states.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws
vary from state to state and are enforced by the courts and by regulatory
authorities with broad discretion. As of June 30, 2003 we operated 64 animal
hospitals in 11 states with these laws, including 21 in New York. We may
experience difficulty in expanding our operations into other states with
similar laws. Given varying and uncertain interpretations of the veterinary
laws of each state, we may not be in compliance with restrictions on the
corporate practice of veterinary medicine in all states. A determination that
we are in violation of applicable restrictions on the practice of veterinary
medicine in any state in which we operate could have a material adverse effect
on us, particularly if we were unable to restructure our operations to comply
with the requirements of that state.

All of the states in which we operate impose various registration
requirements. To fulfill these requirements, we have registered each of our
facilities with appropriate governmental agencies and, where required, have
appointed a licensed veterinarian to act on behalf of each facility. All
veterinarians practicing in our clinics are required to maintain valid state
licenses to practice.



| |  | Any failure in our information technology systems or disruption in our
transportation network could significantly increase testing turn-around
time, reduce our production capacity and otherwise disrupt our operations.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our laboratory operations depend, in part, on the continued and
uninterrupted performance of our information technology systems and
transportation network. Our growth has necessitated continued expansion and
upgrade of our information technology systems and transportation network.
Sustained system failures or interruption in our transportation network or in
one or more of our laboratory operations could disrupt our ability to process
laboratory requisitions, perform testing, provide test results in a timely
manner and/or bill the appropriate party. We could lose customers and revenue
as a result of a system or transportation network failure.

Our computer systems are vulnerable to damage or interruption from a
variety of sources, including telecommunications failures, electricity
brownouts or blackouts, malicious human acts and natural disasters. Moreover,
despite network security measures, some of our servers are potentially
vulnerable to physical or electrical break-ins, computer viruses and similar
disruptive problems. Despite the precautions we have taken, unanticipated

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problems affecting our systems could cause interruptions in our information
technology systems. Our insurance policies may not adequately compensate us
for any losses that may occur due to any failures in our systems.

In addition, over time we have significantly customized the computer
systems in our laboratory business. We rely on a limited number of employees
to upgrade and maintain these systems. If we were to lose the services of
some or all of these employees, it may be time-consuming for new employees to
become familiar with our systems, and we may experience disruptions in service
during these periods.

Any substantial reduction in the number of available flights or delays in
the departure of flights, whether as a result of severe weather conditions, as
we recently experienced in the eastern United States, a terrorist attack or any
other type of disruption, will disrupt our transportation network and our
ability to provide test results in a timely manner. In addition, our Test
Express service, which services customers outside of major metropolitan areas,
is dependent on flight services in and out of Memphis and the transportation
network of Federal Express. Any sustained interruption in either flight
services in Memphis or the transportation network of Federal Express would
result in increased turn-around time for the reporting of test results to
customers serviced by our Test Express service.



| |  | The loss of Mr. Robert Antin, our Chairman, President and Chief Executive
Officer, could materially and adversely affect our business.
| |  | --------------------------------------------------------------------------------------------------------------------------------------

We are dependent upon the management and leadership of our Chairman,
President and Chief Executive Officer, Robert Antin. We have an employment
contract with Mr. Antin which may be terminated at the option of Mr. Antin. We
do not maintain any key man life insurance coverage for Mr. Antin. The loss of
Mr. Antin could materially adversely affect our business.



| |  | Concentration of ownership among our existing executive officers, directors
and principal stockholders may prevent new investors from influencing
significant corporate decisions.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our executive officers, directors and principal stockholders beneficially
own, in the aggregate, 25.4% of our outstanding common stock. As a result,
these stockholders are able to significantly affect our management, our
policies and all matters requiring stockholder approval. The directors
supported by these stockholders will be able to significantly affect decisions
relating to our capital structure, including decisions to issue additional
capital stock, implement stock repurchase programs and incur indebtedness.
This concentration of ownership may have the effect of deterring hostile
takeovers, delaying or preventing changes in control or changes in management,
or limiting the ability of our other stockholders to approve transactions that
they may deem to be in their best interests.



| |  | Political and military events and the uncertainty resulting from them may
have a material adverse effect on our operating results.
| |  | ----------------------------------------------------------------------------------------------------------------------------------

The United States militarys continuing involvement in Iraq, the terrorist
attacks which took place in the United States on September 11, 2001, the United
States military campaign against terrorism, ongoing violence in the Middle East
and the increasing concern with respect to developments in North Korea have
created many economic and political uncertainties, some of which may affect the
markets in which we operate, our operations and profitability and your
investment. The potential near-term and long-term effect that political
uncertainty, armed conflict and possible terrorist and other attacks may have
for our customers, the markets for our services and the U.S. economy are
uncertain. The consequences of our involvement in Iraq and any terrorist
attacks or other armed conflicts are unpredictable and we may not be able to
foresee events that could have an adverse effect on our markets, our business
or your investment.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2003, we had borrowings of $166.4 million under our senior
credit facility with fluctuating interest rates based on market benchmarks such
as LIBOR. To reduce the risk of increasing interest rates, we have entered
into three separate no-fee interest rate swap agreements. The first agreement
is for $40.0 million and commenced on November 29, 2002 and expires November
29, 2004. The second agreement is for $20.0 million and

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commenced on May 30,
2003 and expires May 31, 2005. The third agreement is for $20.0 million and
commenced on May 30, 2003 and expires May 31, 2005. These swap agreements have
the effect of reducing the amount of our debt exposed to variable interest
rates from $166.4 million to $86.4 million. Accordingly, for the next 12-month
period, for every 1.0% increase in the LIBOR rate we will pay an additional
$864,000 in interest expense and for every 1.0% decrease in the LIBOR rate we
will save $864,000 in interest expense.

We are considering entering into additional interest rate strategies to
take advantage of the current rate environment. We have not yet determined
what those strategies may be or their possible impact.




ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this quarterly report on Form
10-Q, we carried out an evaluation, under the supervision and with the
participation of our Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of our disclosure controls and
procedures. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective in timely alerting them to material information required to be
included in our periodic reports with the Securities and Exchange Commission.

In accordance with the requirements of the Securities and Exchange
Commission, our Chief Executive Officer and Chief Financial Officer note that,
since the date of the most recent evaluation of our disclosure controls and
procedures to the date of this quarterly report on Form 10-Q, there have been
no significant changes in our internal controls or in other factors that could
significantly affect internal controls, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls or our internal controls
will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple errors or mistakes. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls.
The design of any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions; over time, controls may become inadequate because
of changes in conditions, or the degree of compliance with the policies or

procedures may deteriorate. Because of the inherent limitations in a
cost-effective control system, misstatements due to error or fraud may occur
and not be detected.







PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As previously disclosed, the litigation between VCA, Zoasis Corporation
and Robert Antin and two majority stockholders of a company that merged with
Zoasis, was dismissed with prejudice on April 17, 2003 pursuant to the
settlement agreement announced in our 2002 annual report on Form 10-K.

We are a party to various legal proceedings that arise in the ordinary
course of business. Although we cannot determine the ultimate disposition of
these proceedings, we can use judgment to reasonably estimate our liability for
legal settlement costs that may arise as a result of these proceedings. Based
on our prior experience, the nature of the current proceedings and our
insurance policy coverage for such matters, we have accrued $1.9 million as of
June 30, 2003 for legal settlements as part of other accrued liabilities.

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ITEM 2. CHANGES IN SECURITIES

None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On May 28, 2003, we held our annual meeting of stockholders at which our
stockholders:



| |  |  | elected three Class I directors;                                                                                                
| | - |  | --------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | approved an additional 1,500,000 shares of our common stock
to be reserved for issuance under our 2001 Stock Incentive Plan; and
|
| |  |  | ratified KPMG LLP as our independent auditor.                                                                                   

The names of the three nominees elected to serve as our Class I directors
and the results of the election are as follows:

|                |  |           |            |          |  |         |   |                 |  |  |           |  |  |  |   | 
|--------------- |  | --------- | ---------- | -------- |  | ------- | - | --------------- |  |  | --------- |  |  |  | - | 
|Candidates      |  | Yes Votes |            | No Votes |  | Abstain |   | Broker-Non-Vote
|                |  |           |            |          |  |         |   |                
|Arthur J. Antin |  |           | 27,077,087 |          |  |         |  |                 |  |  | 5,549,014 |  |  |  |  | 
|John M. Baumer  |  |           | 31,859,432 |          |  |         |  |                 |  |  | 766,669   |  |  |  |  | 
|Frank Reddick   |  |           | 26,872,732 |          |  |         |  |                 |  |  | 5,753,369 |  |  |  |  | 

The results of the other two matters upon which our stockholders voted are
as follows:

|                                                                                                     |  |           |            |          |  |         |            |                 |  |  |        |  |  |  |   | 
|---------------------------------------------------------------------------------------------------- |  | --------- | ---------- | -------- |  | ------- | ---------- | --------------- |  |  | ------ |  |  |  | - | 
|Proposal                                                                                             |  | Yes Votes |            | No Votes |  | Abstain |            | Broker-Non-Vote
|                                                                                                     |  |           |            |          |  |         |            |                
|Reserve additional 1,500,000 shares
of common stock for issuance under
our 2001 Stock Incentive Plan |  |           | 19,761,751 |          |  |         | 12,845,080 |                 |  |  | 19,270 |  |  |  |  | 
|Ratify KPMG LLP as our
independent
auditor                                                           |  |           | 3,554,136  |          |  |         | 54,580     |                 |  |  | 17,385 |  |  |  |  | 

ITEM 5. OTHER INFORMATION

None

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) 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 Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
|       |  |                                                                                                    
|32.2** |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.



---

|*  |  | Filed herewith    
|-- |  | ------------------
|  
|** |  | Furnished herewith

(b) Reports on Form 8-K:



| |  | (1) | Report on Form 8-K, filed April 25, 2003, under
item 5, updated financial guidance for the fiscal year 2003,
and under item 12, provided financial information for the
three months ended March 31, 2003.
| |  | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Los Angeles, State of
California, on todays date, August 11, 2003.

|     |  |                        
|---- |  | -----------------------
|By:  |  | /s/ Tomas W. Fuller    
|     |  |                        
|     |  | Tomas W. Fuller        
|Its: |  | Chief Financial Officer

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EXHIBIT INDEX

|       |  |                                                                                                    
|------ |  | ---------------------------------------------------------------------------------------------------
|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 Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
|       |  |                                                                                                    
|32.2** |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.



---

|*  |  | Filed herewith    
|-- |  | ------------------
|  
|** |  | Furnished herewith

54