##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

|                                              |  |                                                                                         
|--------------------------------------------- |  | ----------------------------------------------------------------------------------------
|(XBox)                                        |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 
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|For the quarterly period ended March 31, 2002
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|OR                                           
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|(Box)                                         |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-16783

VCA ANTECH, INC.

(Exact name of registrant as specified in its charter)


|                                                                        |  |                                                
|----------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or other jurisdiction of
incorporation or organization) |  | 95-4097995
(I.R.S. Employer
Identification No.)

12401 West Olympic Boulevard
Los Angeles, California 90064-1022
(Address of principal executive offices)

(310) 571-6500
(Registrants telephone number, including area code)

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 Box)  No (Box).

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
36,736,081 shares as of May 10, 2002.

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TABLE OF CONTENTS



|                              |                                                                                               |                                                                                                     |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED, CONSOLIDATED BALANCE SHEETS As of March 31, 2002 and December 31, 2001                  
|                              |                                                                                               | CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS For the Three Months Ended March 31, 2002 and 2001
|                              |                                                                                               | CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2002 and 2001
|                              |                                                                                               | 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                           
|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                    



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##### Table of Contents



VCA ANTECH, INC.
FORM 10-Q
MARCH 31, 2002

TABLE OF CONTENTS

|         |  |                                                                       |  |  |    |             |  | 
|-------- |  | --------------------------------------------------------------------- |  |  | -- | ----------- |  | 
|         |  |                                                                       |  |  |    | Page Number
|         |  |                                                                       |  |  |    |            
|Part I.  |  | Financial Information                                                 |  |  |    |            
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|         |  |                                                                       |  |  |    |             |  | 
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|Item 1.  |  | Financial Statements                                                  |  |  | 3  |            
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|         |  |                                                                       |  |  |    |             |  | 
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|         |  | Condensed, Consolidated Balance Sheets as of March 31, 2002 and       |  |  |    |            
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|         |  | December 31, 2001 (Unaudited)                                         |  |  | 3  |            
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|         |  |                                                                       |  |  |    |             |  | 
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|         |  | Condensed, Consolidated Statements of Operations for the Three Months |  |  |    |            
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|         |  | Ended March 31, 2002 and 2001 (Unaudited)                             |  |  | 4  |            
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|         |  |                                                                       |  |  |    |             |  | 
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|         |  | Condensed, Consolidated Statements of Cash Flows for the Three Months |  |  |    |            
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|         |  | Ended March 31, 2002 and 2001 (Unaudited)                             |  |  | 5  |            
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|         |  |                                                                       |  |  |    |             |  | 
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|         |  | Notes to Condensed, Consolidated Financial Statements                 |  |  | 6  |            
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|         |  |                                                                       |  |  |    |             |  | 
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|Item 2.  |  | Management's Discussion and Analysis of Financial Condition and       |  |  |    |            
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|         |  | Results of Operations                                                 |  |  | 18 |            
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|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk            |  |  | 35 |            
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|Part II. |  | Other Information                                                     |  |  |    |            
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|Item 1.  |  | Legal Proceedings                                                     |  |  | 36 |            
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|Item 2.  |  | Changes in Securities                                                 |  |  | 36 |            
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|Item 3.  |  | Defaults Upon Senior Securities                                       |  |  | 37 |            
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|         |  |                                                                       |  |  |    |             |  | 
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|Item 4.  |  | Submission of Matters to a Vote of Security Holders                   |  |  | 37 |            
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|         |  |                                                                       |  |  |    |             |  | 
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|Item 5.  |  | Other Information                                                     |  |  | 37 |            
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|         |  |                                                                       |  |  |    |             |  | 
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|Item 6.  |  | Exhibits and
Reports on Form 8-K                                      |  |  | 37 |            
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|         |  |                                                                       |  |  |    |             |  | 
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|         |  | Signature                                                             |  |  | 38 |            

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED BALANCE SHEETS
As of March 31, 2002 and December 31, 2001
(Unaudited)
(In thousands, except par value)

|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |          |         | 
|------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | --------- | ------- | ------------ | ------- | -------- | ------- | 
|                                            |                                                                                                                                                 |                                            |         | March 31, |         | December 31,
|                                            |                                                                                                                                                 |                                            |         | 2002      |         | 2001        
|                                            |                                                                                                                                                 |                                            |         |           |         |             
|ASSETS                                      |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|Current assets:                             |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and cash equivalents                                                                                                                       |                                            | $       | 17,854    |         |              | $       | 7,103    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Trade accounts receivable, less allowance for uncollectible accounts of
$5,323 and $5,241 at March 31, 2002 and December 31, 2001,
respectively |                                            |         | 21,547    |         |              |         | 18,036   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory, prepaid expense and other                                                                                                            |                                            |         | 7,124     |         |              |         | 6,879    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred income taxes                                                                                                                           |                                            |         | 7,364     |         |              |         | 7,364    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Prepaid income taxes                                                                                                                            |                                            |         |          |         |              |         | 2,782    |        
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total current assets                       |         |           | 53,889  |              |         |          | 42,164  | 
|                                           
|                                           
|                                           
|                                           
|Property and equipment, net                 |                                                                                                                                                 |                                            | 89,868  |           |         |              | 89,244  |         
|                                           
|                                           
|                                           
|                                           
|Other assets:                               |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Goodwill, net                                                                                                                                   |                                            |         | 319,367   |         |              |         | 317,262  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Covenants not to compete, net                                                                                                                   |                                            |         | 4,560     |         |              |         | 4,827    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred financing costs, net                                                                                                                   |                                            |         | 10,913    |         |              |         | 11,380   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other assets                                                                                                                                    |                                            |         | 3,981     |         |              |         | 3,644    |        
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total assets                               |         | $         | 482,578 |              |         | $        | 468,521 | 
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|Current liabilities:                        |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term obligations                                                                                                        |                                            | $       | 5,250     |         |              | $       | 5,159    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts payable                                                                                                                                |                                            |         | 7,877     |         |              |         | 7,313    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued payroll and related liabilities                                                                                                         |                                            |         | 13,000    |         |              |         | 11,717   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued interest                                                                                                                                |                                            |         | 6,964     |         |              |         | 2,254    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Income taxes payable                                                                                                                            |                                            |         | 1,663     |         |              |         |         |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other accrued liabilities                                                                                                                       |                                            |         | 14,911    |         |              |         | 16,351   |        
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total current liabilities                  |         |           | 49,665  |              |         |          | 42,794  | 
|                                           
|                                           
|                                           
|                                           
|Long-term obligations, less current portion |                                                                                                                                                 |                                            | 380,350 |           |         |              | 379,173 |         
|                                           
|                                           
|                                           
|                                           
|Deferred income taxes                       |                                                                                                                                                 |                                            | 1,684   |           |         |              | 1,684   |         
|                                           
|                                           
|                                           
|                                           
|Minority interest                           |                                                                                                                                                 |                                            | 5,124   |           |         |              | 5,106   |         
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total liabilities                          |         |           | 436,823 |              |         |          | 428,757 | 
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|Stockholders equity:                       |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock, par value $0.001, 75,000 shares authorized, 36,736
shares outstanding as of March 31, 2002 and December 31, 2001                  |                                            |         | 37        |         |              |         | 37       |        
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid-in capital                                                                                                                      |                                            |         | 188,840   |         |              |         | 188,840  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated deficit                                                                                                                             |                                            |         | (140,959  | )       |              |         | (146,594 | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated comprehensive lossunrealized loss on investment                                                                                    |                                            |         | (1,488    | )       |              |         | (1,855   | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Notes receivable from stockholders                                                                                                              |                                            |         | (675      | )       |              |         | (664     | )      
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total stockholders equity                 |         |           | 45,755  |              |         |          | 39,764  | 
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         
|                                            |                                                                                                                                                 | Total liabilities and stockholders equity |         | $         | 482,578 |              |         | $        | 468,521 | 
|                                            |                                                                                                                                                 |                                            |         |           |         |              |         |         

The accompanying notes are an integral part of these condensed, consolidated balance sheets.

3



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##### Table of Contents






VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
(In thousands, except per share amounts)

|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | - | ------- | ------ | ---- | - | ------ | ------ | -
|                                                                                                                                                                                                            |                                                    |   | 2002    |        | 2001
|                                                                                                                                                                                                            |                                                    |   |         |        |     
|Revenue                                                                                                                                                                                                     |                                                    | $ | 104,695 |        |      | $ | 95,680 |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Direct costs (includes non-cash compensation of $565 for the period ended
March 31, 2001; excludes operating depreciation of $2,246 and $1,995
for the periods ended March 31, 2002 and 2001, respectively) |                                                    |   | 72,588  |        |      |   | 69,462 |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            |                                                    |   | 32,107  |        |      |   | 26,218 |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Selling, general and administrative (includes non-cash compensation of
$2,479 for the period ended March 31, 2001)                                                                                          |                                                    |   | 8,622   |        |      |   | 10,558 |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Depreciation and amortization                                                                                                                                                                               |                                                    |   | 3,163   |        |      |   | 6,254  |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Loss on sale of assets                                                                                                                                                                                      |                                                    |   |        |        |      |   | 143    |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            | Operating income                                   |   |         | 20,322 |      |   |        | 9,263  |  
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Net interest expense                                                                                                                                                                                        |                                                    |   | 9,989   |        |      |   | 11,153 |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Other income                                                                                                                                                                                                |                                                    |   | 93      |        |      |   |       |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Minority interest in income of subsidiaries                                                                                                                                                                 |                                                    |   | 402     |        |      |   | 275    |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            | Income (loss) before provision for income taxes    |   |         | 10,024 |      |   |        | (2,165 | )
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Provision for income taxes                                                                                                                                                                                  |                                                    |   | 4,389   |        |      |   | 824    |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            | Net income (loss)                                  |   | $       | 5,635  |      |   | $      | (2,989 | )
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Increase in carrying amount of redeemable preferred stock                                                                                                                                                   |                                                    |   |        |        |      |   | 5,028  |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            | Net income (loss) available to common stockholders |   | $       | 5,635  |      |   | $      | (8,017 | )
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                            | Basic earnings (loss) per common share             |   | $       | 0.15   |      |   | $      | (0.46  | )
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            | Diluted earnings (loss) per common share           |   | $       | 0.15   |      |   | $      | (0.46  | )
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|                                                                                                                                                                                                           
|Shares used for computing basic earnings (loss) per share                                                                                                                                                   |                                                    |   | 36,736  |        |      |   | 17,524 |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       
|Shares used for computing diluted earnings (loss) per share                                                                                                                                                 |                                                    |   | 37,081  |        |      |   | 17,524 |       
|                                                                                                                                                                                                            |                                                    |   |         |        |      |   |        |       

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

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##### Table of Contents






VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002 and 2001
(Unaudited)
(In thousands)

|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |         |   |         |  
|------------------------------------------------ | ----------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------ | ---- | ------ | ------ | ------- | - | ------- | -
|                                                 |                                           |                                                                                          |                                                                    |        | 2002 |        | 2001  
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |       
|Cash flows from operating activities:            |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 | Net income (loss)                         |                                                                                          | $                                                                  | 5,635  |      |        | $      | (2,989  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           | Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                                                    |        |      |        |        |         |   |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Depreciation and amortization                                      |        |      | 3,163  |        |         |   | 6,254   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Amortization of deferred financing costs and debt discount         |        |      | 457    |        |         |   | 531     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Provision for uncollectible accounts                               |        |      | 620    |        |         |   | 554     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Non-cash compensation                                              |        |      |       |        |         |   | 3,044   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Interest paid in kind on senior subordinated notes                 |        |      | 2,168  |        |         |   | 3,875   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Loss on sale of assets                                             |        |      |       |        |         |   | 143     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Minority interest in income of subsidiaries                        |        |      | 402    |        |         |   | 275     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Distributions to minority interest partners                        |        |      | (384   | )      |         |   | (338    | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Increase in accounts receivable                                    |        |      | (4,119 | )      |         |   | (3,280  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Decrease (increase) in inventory, prepaid expense and other assets |        |      | (230   | )      |         |   | 341     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Increase in accounts payable and accrued liabilities               |        |      | 3,021  |        |         |   | 3,325   |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Increase (decrease) in accrued interest                            |        |      | 4,710  |        |         |   | (1,442  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Decrease in prepaid income taxes                                   |        |      | 2,782  |        |         |   | 664     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Increase in income taxes payable                                   |        |      | 1,663  |        |         |   |        |  
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                 | Net cash provided by operating activities |                                                                                          |                                                                    | 19,888 |      |        |        | 10,957  |  
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|Cash flows from investing activities:            |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Business acquisitions, net of cash acquired                        |        |      | (3,011 | )      |         |   | (10,728 | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Real estate acquired in connection with business acquisitions      |        |      |       |        |         |   | (475    | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Property and equipment additions, net                              |        |      | (3,168 | )      |         |   | (2,302  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Proceeds from sale of assets                                       |        |      |       |        |         |   | 370     |  
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Other                                                              |        |      | (23    | )      |         |   | (939    | )
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                 | Net cash used in investing activities     |                                                                                          |                                                                    | (6,202 | )    |        |        | (14,074 | )
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|Cash flows from financing activities:            |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Repayment of long-term obligations                                 |        |      | (1,253 | )      |         |   | (1,814  | )
|                                                
|                                                
|                                                
|                                                
|                                                 |                                           |                                                                                          | Payment of deferred financing costs and recapitalization           |        |      | (1,682 | )      |         |   | (1,169  | )
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|                                                 | Net cash used in financing activities     |                                                                                          |                                                                    | (2,935 | )    |        |        | (2,983  | )
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|Increase (decrease) in cash and cash equivalents |                                           |                                                                                          | 10,751                                                             |        |      |        | (6,100 | )      
|                                                
|                                                
|                                                
|                                                
|Cash and cash equivalents at beginning of period |                                           |                                                                                          | 7,103                                                              |        |      |        | 10,519 |        
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        
|Cash and cash equivalents at end of period       |                                           | $                                                                                        | 17,854                                                             |        |      | $      | 4,419  |        
|                                                 |                                           |                                                                                          |                                                                    |        |      |        |        |        

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

5



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##### Table of Contents






VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(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 accounting principles generally accepted 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 accounting principles generally accepted 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
months ended March 31, 2002 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 2001 Annual Report on Form 10-K.



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

During the first quarter of 2002, the Company purchased three animal
hospitals, for an aggregate consideration (including acquisition costs) of
$2.5 million, consisting of $2.2 million in cash and the assumption of
liabilities totaling $300,000. The $2.5 million aggregate purchase price was
allocated as follows: $64,000 to tangible assets, $2.1 million to goodwill
and $300,000 to other intangible assets.



|(3) |  | Calculation of Per Share Amounts
|--- |  | --------------------------------

Below is a reconciliation of the income (loss) and shares used in the
computations of the basic and diluted earnings (loss) per share (EPS)
(amounts in thousands, except per share amounts):

|                                                                   |                                   |               |       |                    |     |      |        |        |   | 
|------------------------------------------------------------------ | --------------------------------- | ------------- | ----- | ------------------ | --- | ---- | ------ | ------ | - | 
|                                                                   |                                   |               |       | Three Months Ended
|                                                                   |                                   |               |       | March 31,         
|                                                                   |                                   |               |       |                   
|                                                                   |                                   |               |       | 2002               |     | 2001
|                                                                   |                                   |               |       |                    |     |     
|Net income (loss)                                                  |                                   | $             | 5,635 |                    |     | $    | (2,989 | )     
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Increase in carrying amount of redeemable preferred stock          |                                   |               |      |                    |     |      | (5,028 | )     
|                                                                   |                                   |               |       |                    |     |      |        |       
|Income (loss) available to common shareholders (basic and
diluted) |                                   | $             | 5,635 |                    |     | $    | (8,017 | )     
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Weighted average common shares outstanding:                        |                                   |               |       |                    |     |      |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Basic                             |               |       | 36,736             |     |      |        | 17,524 |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Effect of dilutive common shares: |               |       |                    |     |      |        |        |  
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   |                                   | Stock options |       |                    | 345 |      |        |        |  | 
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                   | Diluted                           |               |       | 37,081             |     |      |        | 17,524 |  
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|Earnings (loss) per share:                                         |                                   |               |       |                    |     |      |        |       
|                                                                  
|                                                                  
|                                                                  
|                                                                  
|                                                                   | Basic                             |               | $     | 0.15               |     |      | $      | (0.46  | )
|                                                                   |                                   |               |       |                    |     |      |        |       
|                                                                   | Diluted                           |               | $     | 0.15               |     |      | $      | (0.46  | )
|                                                                   |                                   |               |       |                    |     |      |        |       

For the three months ended March 31, 2001, the effect of anti-dilutive
common shares of 1,150,000 and 489,000 from outstanding warrants and stock
options, respectively, have been excluded from EPS calculations.

6



---



##### Table of Contents





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

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

|                                                         |  |                    |       |      |  |   |        |  
|-------------------------------------------------------- |  | ------------------ | ----- | ---- |  | - | ------ | -
|                                                         |  | Three Months Ended
|                                                         |  | March 31,         
|                                                         |  |                   
|                                                         |  | 2002               |       | 2001
|                                                         |  |                    |       |     
|Net income (loss)                                        |  | $                  | 5,635 |      |  | $ | (2,989 | )
|                                                        
|                                                        
|                                                        
|                                                        
|Cumulative effect of change to new accounting principle  |  |                    |      |      |  |   | (525   | )
|                                                        
|                                                        
|                                                        
|                                                        
|Unrealized gain on hedging instruments                   |  |                    | 460   |      |  |   |       |  
|                                                        
|                                                        
|                                                        
|                                                        
|Less portion of unrealized gain recognized in net income |  |                    | (93   | )    |  |   |       |  
|                                                         |  |                    |       |      |  |   |        |  
|Net comprehensive income (loss)                          |  | $                  | 6,002 |      |  | $ | (3,514 | )
|                                                         |  |                    |       |      |  |   |        |  

All gains on hedging instruments are the result of an interest rate collar
agreement. See footnote (7), Derivatives for additional information. By the
end of the agreement, these unrealized gains will offset against unrealized
losses recognized in prior periods and will in aggregate net to zero.
Accordingly, there has been no income tax benefit or expense relating to these
unrealized gains and losses recognized in the Companys net income (loss) or
comprehensive income (loss).



|(5) |  | Lines of Business
|--- |  | -----------------

During the three months ended March 31, 2002 and 2001, 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
products. Corporate provides selling, general and administrative support for
the other segments and recognizes revenue associated with consulting
agreements.

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 2001
Annual Report on Form 10-K. The Company evaluates performance of segments
based on profit or loss before income taxes, interest income, interest expense
and minority interest, which are evaluated on a consolidated level. 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.

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 March 31, 2002 |                                   |  |            |         |          |  |           |         |              |  |       |        |              |  |   |        |   |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Revenue                           |  | $          | 37,657  |          |  | $         | 68,644  |              |  | $     | 500    |              |  | $ | (2,106 | ) |  | $ | 104,695 | 
|                                 
|                                 
|                                 
|                                 
|                                  | Operating income (loss)           |  |            | 12,725  |          |  |           | 10,697  |              |  |       | (3,100 | )            |  |   |       |   |  |   | 20,322  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Depreciation/amortization expense |  |            | 697     |          |  |           | 2,136   |              |  |       | 330    |              |  |   |       |   |  |   | 3,163   | 
|                                 
|                                 
|                                 
|                                 
|                                  | Capital expenditures              |  |            | 605     |          |  |           | 2,137   |              |  |       | 426    |              |  |   |       |   |  |   | 3,168   | 
|                                 
|                                 
|                                 
|                                 
|Three Months Ended March 31, 2001 |                                   |  |            |         |          |  |           |         |              |  |       |        |              |  |   |        |   |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Revenue                           |  | $          | 32,677  |          |  | $         | 64,354  |              |  | $     | 500    |              |  | $ | (1,851 | ) |  | $ | 95,680  | 
|                                 
|                                 
|                                 
|                                 
|                                  | Operating income (loss)           |  |            | 7,920   |          |  |           | 6,511   |              |  |       | (5,168 | )            |  |   |       |   |  |   | 9,263   | 
|                                 
|                                 
|                                 
|                                 
|                                  | Depreciation/amortization expense |  |            | 1,161   |          |  |           | 3,494   |              |  |       | 1,599  |              |  |   |       |   |  |   | 6,254   | 
|                                 
|                                 
|                                 
|                                 
|                                  | Capital expenditures              |  |            | 464     |          |  |           | 1,378   |              |  |       | 460    |              |  |   |       |   |  |   | 2,302   | 
|                                 
|                                 
|                                 
|                                 
|At March 31, 2002                 |                                   |  |            |         |          |  |           |         |              |  |       |        |              |  |   |        |   |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Identifiable assets               |  |            | 112,485 |          |  |           | 325,645 |              |  |       | 44,448 |              |  |   |       |   |  |   | 482,578 | 
|                                 
|                                 
|                                 
|                                 
|At December 31, 2001              |                                   |  |            |         |          |  |           |         |              |  |       |        |              |  |   |        |   |  |   |        
|                                 
|                                 
|                                 
|                                 
|                                  | Identifiable assets               |  |            | 110,466 |          |  |           | 322,657 |              |  |       | 35,398 |              |  |   |       |   |  |   | 468,521 | 

7



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##### Table of Contents



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

|                                                  |  |                    |        |      |  |   |         |  
|------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------- | -
|                                                  |  | Three Months Ended
|                                                  |  | March 31,         
|                                                  |  |                   
|                                                  |  | 2002               |        | 2001
|                                                  |  |                    |        |     
|Total segment operating income after eliminations |  | $                  | 20,322 |      |  | $ | 9,263   |  
|                                                 
|                                                 
|                                                 
|                                                 
|Net interest expense                              |  |                    | (9,989 | )    |  |   | (11,153 | )
|                                                 
|                                                 
|                                                 
|                                                 
|Other income                                      |  |                    | 93     |      |  |   |        |  
|                                                 
|                                                 
|                                                 
|                                                 
|Minority interest in income of subsidiaries       |  |                    | (402   | )    |  |   | (275    | )
|                                                  |  |                    |        |      |  |   |         |  
|Income (loss) before provision for income taxes   |  | $                  | 10,024 |      |  | $ | (2,165  | )
|                                                  |  |                    |        |      |  |   |         |  



|(6) |  | Other Income
|--- |  | ------------

For the three months ended March 31, 2002, the Company recognized a
non-cash gain of $93,000 for changes in the time value of a collar agreement.
See footnote (7), Derivatives, for additional information.



|(7) |  | Derivatives
|--- |  | -----------

As a requirement of the Companys senior debt obligations, the Company
entered into an arrangement to hedge interest rate exposure for a minimum
notional amount of $62.0 million and a minimum term of two years. On November
13, 2000, the Company entered into a no-fee interest rate collar agreement with
Wells Fargo Bank effective November 15, 2000 and expiring November 15, 2002,
(the Collar Agreement). The Collar Agreement is based on the London
interbank offer rate (LIBOR), which resets monthly, and has a cap and floor
notional amount of $62.5 million, with a cap and floor interest rate of 7.5%
and 5.9%, respectively. During the three months ended March 31, 2002 and 2001,
the Company made payments under this agreement amounting to $615,000 and
$39,000, respectively, resulting from LIBOR rates being below the floor
interest rate of 5.9%. These payments have been reported as part of interest
expense.

The Collar Agreement is accounted for as a cash flow hedge with its market
value reported as a liability in the balance sheet. This liability decreased
approximately $460,000 to $1.5 million at March 31, 2002 from $2.0 million at
December 31, 2001. Of this decrease, $367,000 has been recognized in
comprehensive income and the other $93,000 has been recognized in other income.
The valuation of the collar agreement is determined by Wells Fargo Bank. As
the result of adopting Statement of Financial Accounting Standards (SFAS) No.
133 in 2001, the Company recorded a cumulative adjustment to other
comprehensive income of approximately $525,000 during the three months ended
March 31, 2001.

With the exception of the Collar Agreement, management does not intend to
enter into derivative contracts in the future.



|(8) |  | Accounting Pronouncements
|--- |  | -------------------------

In June 2001, the Financial Accounting Standards Board, (FASB) issued
SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
SFAS No. 142 requires that these assets be reviewed for impairment at least
annually. Intangible assets with finite lives will continue to be amortized
over their estimated useful lives.

The Company adopted SFAS No. 142 on January 1, 2002. As of March 31, 2002
the Companys goodwill balance was $319.4 million and for the three months
ended March 31, 2001 the Company recorded $2.3 million in goodwill
amortization. Because of the adoption of SFAS No. 142 there was no
amortization of goodwill for the three months ended March 31, 2002. The
Company will test goodwill for impairment using the two-step process described
in SFAS No. 142. The first step is a screen for potential impairment, while
the second step measures the amount of the impairment, if any. The Company
expects to complete the two-step process by June 30, 2002. The

8



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##### Table of Contents



Company has not yet determined the amount of the potential impairment loss, if
any. Any impairment recognized in association with the adoption of SFAS No.
142 will be accounted for as a cumulative adjustment for a change in accounting
principle.

The
following table presents net income (loss) and earnings (loss) per share as if SFAS
No. 142 had been adopted as of January 1, 2001:

|                                           |                                   |   |                    |      |      |   |        |       |  
|------------------------------------------ | --------------------------------- | - | ------------------ | ---- | ---- | - | ------ | ----- | -
|                                           |                                   |   | Three Months Ended
|                                           |                                   |   | March 31,         
|                                           |                                   |   |                   
|                                           |                                   |   | 2002               |      | 2001
|                                           |                                   |   |                    |      |     
|Net income (loss)                          |                                   | $ | 5,635              |      |      | $ | (2,989 | )    
|                                          
|                                          
|                                          
|                                          
|Add back goodwill amortization, net of tax |                                   |   |                   |      |      |   | 1,710  |      
|                                           |                                   |   |                    |      |      |   |        |      
|Adjusted net income (loss)                 |                                   | $ | 5,635              |      |      | $ | (1,279 | )    
|                                           |                                   |   |                    |      |      |   |        |      
|Basic earnings (loss) per share:           |                                   |   |                    |      |      |   |        |      
|                                          
|                                          
|                                          
|                                          
|                                           | Reported net income (loss)        |   | $                  | 0.15 |      |   | $      | (0.46 | )
|                                          
|                                          
|                                          
|                                          
|                                           | Goodwill amortization, net of tax |   |                    |     |      |   |        | 0.10  |  
|                                           |                                   |   |                    |      |      |   |        |      
|                                           | Adjusted net income (loss)        |   | $                  | 0.15 |      |   | $      | (0.36 | )
|                                           |                                   |   |                    |      |      |   |        |      
|Diluted earnings (loss) per share:         |                                   |   |                    |      |      |   |        |      
|                                          
|                                          
|                                          
|                                          
|                                           | Reported net income (loss)        |   | $                  | 0.15 |      |   | $      | (0.46 | )
|                                          
|                                          
|                                          
|                                          
|                                           | Goodwill amortization, net of tax |   |                    |     |      |   |        | 0.10  |  
|                                           |                                   |   |                    |      |      |   |        |      
|Adjusted net income (loss)                 |                                   | $ | 0.15               |      |      | $ | (0.36  | )    
|                                           |                                   |   |                    |      |      |   |        |      

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 will adopt SFAS
No. 143 in the first quarter of fiscal year 2003. The Company is evaluating
the impact of the adoption of SFAS No. 143 on the consolidated financial
statements.

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which establishes one accounting
model to be used for long-lived assets to be disposed of by sale and broadens
the presentation for discontinued operations to include more disposal
transactions. SFAS No. 144 supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets to be Disposed of by Sale, and the accounting
and reporting provisions of Accounting Principles Board Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. The Company adopted SFAS No. 144 effective January 1,
2002.



|(9) |  | Reclassifications
|--- |  | -----------------

Certain 2001 balances have been reclassified to conform to the 2002
financial statement presentation.



|(10) |  | Commitments and Contingencies
|---- |  | -----------------------------

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 55 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.

The Company currently is a party to a lawsuit in the State of Ohio in
which that state has alleged that the management of a veterinary medical group
licensed to practice veterinary medicine in that state violates the Ohio
statute prohibiting business corporations from providing or holding themselves
out as providers of veterinary

9



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##### Table of Contents



medical care. On March 20, 2001, the trial court in the case entered
summary judgment in favor of the State of Ohio and issued an order enjoining
the Company from operating in the State of Ohio in a manner that is in
violation of the state statute. In response, the Company has restructured its
operations in the State of Ohio in a manner believed to conform to the state
law and the courts order. The Attorney General of the State of Ohio informed
the Company that it disagrees with its position that the Company is in
compliance with the courts order. In June 2001, the Company appeared at a
status conference before the trial court at which time the court directed the
parties to meet together to attempt to settle this matter. Consistent with the
trial courts directive, the Company engaged in discussions with the Attorney
Generals office in the State of Ohio. The parties appeared at an additional
status conference in February 2002. The parties were not able to reach a
settlement prior to the February status conference. At that status conference,
the court ordered the parties to participate in a court-supervised settlement
conference that was scheduled for March 19, 2002. The court postponed the
settlement conference until April 19, 2002. Pursuant to discussions with the
Ohio Attorney General at the settlement conference, we are in the process of
further restructuring our operations in Ohio. The next settlement conference
has yet to be scheduled. If a settlement cannot be reached, the Company would
be required to discontinue operations in the state. The five animal hospitals
in the State of Ohio had a net book value of $6.2 million as of March 31, 2002.
If the Company was required to discontinue operations in the State of Ohio, it
may not be able to dispose of the hospital assets for their book value. The
animal hospitals located in the State of Ohio generated revenue and operating
income of $440,000 and $90,000, respectively, in the three months ended March
31, 2002 and $441,000 and $122,000, respectively, in the three months ended
March 31, 2001.

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,
have appointed a licensed veterinarian to act on behalf of each facility. All
veterinary doctors practicing in the Companys clinics are required to maintain
valid state licenses to practice.



|(11) |  | Subsequent Events
|---- |  | -----------------

From April 1, 2002 through May 10, 2002, the Company has acquired four
animal hospitals for an aggregate consideration (including acquisition costs)
of $1.9 million, consisting of $1.8 million in cash, and the assumption of
liabilities of $110,000.



|(12) |  | Condensed, Consolidating Information
|---- |  | ------------------------------------

In 2000, the Company established 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
senior debt credit agreement 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.

10



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##### Table of Contents



Pursuant to Rule 3-10 of Regulation S-X, the following condensed
consolidating information is for VCA, Vicar, the wholly-owned Guarantor 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 and the Non-Guarantor
Subsidiaries. The condensed financial information may not necessarily be
indicative of results of operations or financial position had the Guarantors
and 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.







11



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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 March 31, 2002
(Unaudited)
(In thousands)

|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |          |         | 
|------------------------------------------- | ---------------------------------------- | ------------------------------------------ | ------- | -------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ----- | ------ | ------ |  | -------- | -------- | -------- | - | ------- | -------- | ------- | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       | Non-   |        |  |          |          |          |   |         |         
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |       |        |        |  |          |          |          |  
|                                            |                                          |                                            |         | VCA      |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |             
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|Current assets:                             |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and equivalents                     |                                            | $       |         |         |       | $        | 15,820       |         |              | $       | 1,869       |         |              | $     | 165    |        |  | $        |         |          |   | $       | 17,854   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Trade accounts receivable, net           |                                            |         |         |         |       |          | 10           |         |              |         | 20,902      |         |              |       | 635    |        |  |          |         |          |   |         | 21,547   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory prepaid expenses and other     |                                            |         |         |         |       |          | 735          |         |              |         | 5,860       |         |              |       | 529    |        |  |          |         |          |   |         | 7,124    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred income taxes                    |                                            |         |         |         |       |          | 7,364        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 7,364    |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total current assets                       |         |          |        |       |          |              | 23,929  |              |         |             | 28,631  |              |       |        | 1,329  |  |          |          |         |   |         |          | 53,889  | 
|                                           
|                                           
|                                           
|                                           
|Property and equipment, net                 |                                          |                                            |        |          |         |       | 8,481    |              |         |              | 78,839  |             |         |              | 2,548 |        |        |  |         |          |          |   | 89,868  |         
|                                           
|                                           
|                                           
|                                           
|Other assets:                               |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Goodwill, net                            |                                            |         |         |         |       |          |             |         |              |         | 300,010     |         |              |       | 19,357 |        |  |          |         |          |   |         | 319,367  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Covenants not to compete, net            |                                            |         |         |         |       |          |             |         |              |         | 3,692       |         |              |       | 868    |        |  |          |         |          |   |         | 4,560    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred financing costs, net            |                                            |         | 780      |         |       |          | 10,133       |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 10,913   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other assets                             |                                            |         | 321      |         |       |          | 802          |         |              |         | 1,690       |         |              |       | 1,168  |        |  |          |         |          |   |         | 3,981    |        
|                                           
|                                           
|                                           
|                                           
|Investment in subsidiaries                  |                                          |                                            | 130,964 |          |         |       | 191,819  |              |         |              | 20,418  |             |         |              |      |        |        |  | (343,201 | )        |          |   |        |         
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            | Total assets                             |                                            | $       | 132,065  |         |       | $        | 235,164      |         |              | $       | 433,280     |         |              | $     | 25,270 |        |  | $        | (343,201 | )        |   | $       | 482,578  |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|Current liabilities:                        |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term
obligations |                                            | $       |         |         |       | $        | 4,893        |         |              | $       | 355         |         |              | $     | 2      |        |  | $        |         |          |   | $       | 5,250    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts payable                         |                                            |         |         |         |       |          | 4,697        |         |              |         | 3,169       |         |              |       | 11     |        |  |          |         |          |   |         | 7,877    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued payroll and related liabilities  |                                            |         |         |         |       |          | 7,036        |         |              |         | 5,668       |         |              |       | 296    |        |  |          |         |          |   |         | 13,000   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued interest                         |                                            |         |         |         |       |          | 6,964        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 6,964    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Income taxes payable                     |                                            |         |         |         |       |          | 1,663        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 1,663    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other accrued liabilities                |                                            |         |         |         |       |          | 12,161       |         |              |         | 2,693       |         |              |       | 57     |        |  |          |         |          |   |         | 14,911   |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total current liabilities                  |         |          |        |       |          |              | 37,414  |              |         |             | 11,885  |              |       |        | 366    |  |          |          |         |   |         |          | 49,665  | 
|                                           
|                                           
|                                           
|                                           
|Long-term obligations, less current
portion |                                          |                                            | 56,476  |          |         |       | 322,892  |              |         |              | 978     |             |         |              | 4     |        |        |  |         |          |          |   | 380,350 |         
|                                           
|                                           
|                                           
|                                           
|Deferred income taxes                       |                                          |                                            |        |          |         |       | 1,684    |              |         |              |        |             |         |              |      |        |        |  |         |          |          |   | 1,684   |         
|                                           
|                                           
|                                           
|                                           
|Minority interest                           |                                          |                                            |        |          |         |       |         |              |         |              |        |             |         |              |      |        |        |  | 5,124    |          |          |   | 5,124   |         
|                                           
|                                           
|                                           
|                                           
|Intercompany payable (receivable)           |                                          |                                            | 29,834  |          |         |       | (257,790 | )            |         |              | 228,598 |             |         |              | (642  | )      |        |  |         |          |          |   |        |         
|                                           
|                                           
|                                           
|                                           
|Stockholders equity:                       |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock                             |                                            |         | 37       |         |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 37       |        
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid-in capital               |                                            |         | 188,840  |         |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 188,840  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Retained earnings (accumulated deficit)  |                                            |         | (140,959 | )       |       |          | 132,452      |         |              |         | 191,819     |         |              |       | 25,542 |        |  |          | (349,813 | )        |   |         | (140,959 | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated comprehensive loss           |                                            |         | (1,488   | )       |       |          | (1,488       | )       |              |         |            |         |              |       |       |        |  |          | 1,488    |          |   |         | (1,488   | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Notes receivable from stockholders       |                                            |         | (675     | )       |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | (675     | )      
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total stockholders equity                 |         |          | 45,755  |       |          |              | 130,964 |              |         |             | 191,819 |              |       |        | 25,542 |  |          |          | (348,325 | ) |         |          | 45,755  | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total liabilities and stockholders
equity |         | $        | 132,065 |       |          | $            | 235,164 |              |         | $           | 433,280 |              |       | $      | 25,270 |  |          | $        | (343,201 | ) |         | $        | 482,578 | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         

12



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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, 2001
(Unaudited)
(In thousands)

|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |          |         | 
|------------------------------------------- | ---------------------------------------- | ------------------------------------------ | ------- | -------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ----- | ------ | ------ |  | -------- | -------- | -------- | - | ------- | -------- | ------- | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       | Non-   |        |  |          |          |          |   |         |         
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |       |        |        |  |          |          |          |  
|                                            |                                          |                                            |         | VCA      |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |             
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|Current assets:                             |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Cash and equivalents                     |                                            | $       |         |         |       | $        | 3,467        |         |              | $       | 3,260       |         |              | $     | 376    |        |  | $        |         |          |   | $       | 7,103    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Trade accounts receivable, net           |                                            |         |         |         |       |          |             |         |              |         | 17,702      |         |              |       | 334    |        |  |          |         |          |   |         | 18,036   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Inventory, prepaid expenses and other    |                                            |         |         |         |       |          | 1,165        |         |              |         | 5,160       |         |              |       | 554    |        |  |          |         |          |   |         | 6,879    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred income taxes                    |                                            |         |         |         |       |          | 7,364        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 7,364    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Prepaid income taxes                     |                                            |         |         |         |       |          | 2,782        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 2,782    |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total current assets                       |         |          |        |       |          |              | 14,778  |              |         |             | 26,122  |              |       |        | 1,264  |  |          |          |         |   |         |          | 42,164  | 
|                                           
|                                           
|                                           
|                                           
|Property and equipment, net                 |                                          |                                            |        |          |         |       | 8,421    |              |         |              | 78,225  |             |         |              | 2,598 |        |        |  |         |          |          |   | 89,244  |         
|                                           
|                                           
|                                           
|                                           
|Other assets:                               |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Goodwill, net                            |                                            |         |         |         |       |          |             |         |              |         | 298,198     |         |              |       | 19,064 |        |  |          |         |          |   |         | 317,262  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Covenants not to compete, net            |                                            |         |         |         |       |          |             |         |              |         | 4,211       |         |              |       | 616    |        |  |          |         |          |   |         | 4,827    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Deferred financing costs, net            |                                            |         | 780      |         |       |          | 10,600       |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 11,380   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other assets                             |                                            |         | 320      |         |       |          | 498          |         |              |         | 1,986       |         |              |       | 840    |        |  |          |         |          |   |         | 3,644    |        
|                                           
|                                           
|                                           
|                                           
|Investment in subsidiaries                  |                                          |                                            | 123,842 |          |         |       | 179,391  |              |         |              | 19,920  |             |         |              |      |        |        |  | (323,153 | )        |          |   |        |         
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            | Total assets                             |                                            | $       | 124,942  |         |       | $        | 213,688      |         |              | $       | 428,662     |         |              | $     | 24,382 |        |  | $        | (323,153 | )        |   | $       | 468,521  |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|Current liabilities:                        |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Current portion of long-term obligations |                                            | $       |         |         |       | $        | 4,766        |         |              | $       | 389         |         |              | $     | 4      |        |  | $        |         |          |   | $       | 5,159    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accounts payable                         |                                            |         |         |         |       |          | 5,223        |         |              |         | 2,074       |         |              |       | 16     |        |  |          |         |          |   |         | 7,313    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued payroll and related liabilities  |                                            |         |         |         |       |          | 5,019        |         |              |         | 6,440       |         |              |       | 258    |        |  |          |         |          |   |         | 11,717   |        
|                                           
|                                           
|                                           
|                                           
|                                            | Accrued interest                         |                                            |         |         |         |       |          | 2,254        |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 2,254    |        
|                                           
|                                           
|                                           
|                                           
|                                            | Other accrued liabilities                |                                            |         |         |         |       |          | 13,373       |         |              |         | 2,968       |         |              |       | 10     |        |  |          |         |          |   |         | 16,351   |        
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total current liabilities                  |         |          |        |       |          |              | 30,635  |              |         |             | 11,871  |              |       |        | 288    |  |          |          |         |   |         |          | 42,794  | 
|                                           
|                                           
|                                           
|                                           
|Long-term obligations, less current
portion |                                          |                                            | 54,345  |          |         |       | 324,152  |              |         |              | 672     |             |         |              | 4     |        |        |  |         |          |          |   | 379,173 |         
|                                           
|                                           
|                                           
|                                           
|Deferred income taxes                       |                                          |                                            |        |          |         |       | 1,684    |              |         |              |        |             |         |              |      |        |        |  |         |          |          |   | 1,684   |         
|                                           
|                                           
|                                           
|                                           
|Minority interest                           |                                          |                                            |        |          |         |       |         |              |         |              |        |             |         |              |      |        |        |  | 5,106    |          |          |   | 5,106   |         
|                                           
|                                           
|                                           
|                                           
|Intercompany payable (receivable)           |                                          |                                            | 30,833  |          |         |       | (266,625 | )            |         |              | 236,728 |             |         |              | (936  | )      |        |  |         |          |          |   |        |         
|                                           
|                                           
|                                           
|                                           
|Stockholders equity:                       |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock                             |                                            |         | 37       |         |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 37       |        
|                                           
|                                           
|                                           
|                                           
|                                            | Additional paid-in capital               |                                            |         | 188,840  |         |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | 188,840  |        
|                                           
|                                           
|                                           
|                                           
|                                            | Retained earnings (accumulated deficit)  |                                            |         | (146,594 | )       |       |          | 125,697      |         |              |         | 179,391     |         |              |       | 25,026 |        |  |          | (330,114 | )        |   |         | (146,594 | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Accumulated comprehensive loss           |                                            |         | (1,855   | )       |       |          | (1,855       | )       |              |         |            |         |              |       |       |        |  |          | 1,855    |          |   |         | (1,855   | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Notes receivable from stockholders       |                                            |         | (664     | )       |       |          |             |         |              |         |            |         |              |       |       |        |  |          |         |          |   |         | (664     | )      
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total stockholders equity                 |         |          | 39,764  |       |          |              | 123,842 |              |         |             | 179,391 |              |       |        | 25,026 |  |          |          | (328,259 | ) |         |          | 39,764  | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         
|                                            |                                          | Total liabilities and stockholders
equity |         | $        | 124,942 |       |          | $            | 213,688 |              |         | $           | 428,662 |              |       | $      | 24,382 |  |          | $        | (323,153 | ) |         | $        | 468,521 | 
|                                            |                                          |                                            |         |          |         |       |          |              |         |              |         |             |         |              |       |        |        |  |          |          |          |   |         |         

13



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

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2002
(Unaudited)
(In thousands)

|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |        | 
|------------------------------------------- | -------------------------------------------------------------- | - | ------ | ----- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ------ | ------------ | - | ----- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   | Non-  |       |  |   |         |         |   |   |        
|                                            |                                                                |   |        |       |       |   |              |        |              |   | Guarantor   |        | Guarantor    |   |       |       |  |   |         |         |  
|                                            |                                                                |   | VCA    |       | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |        | Consolidated
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |             
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                           
|                                           
|                                           
|                                           
|Revenue                                     |                                                                | $ |       |       |       | $ | 500          |        |              | $ | 96,426      |        |              | $ | 7,961 |       |  | $ | (192    | )       |   | $ | 104,695 |       
|                                           
|                                           
|                                           
|                                           
|Direct costs                                |                                                                |   |       |       |       |   |             |        |              |   | 66,977      |        |              |   | 5,803 |       |  |   | (192    | )       |   |   | 72,588  |       
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            |                                                                |   |       |       |       |   | 500          |        |              |   | 29,449      |        |              |   | 2,158 |       |  |   |        |         |   |   | 32,107  |       
|                                           
|                                           
|                                           
|                                           
|Selling, general and administrative         |                                                                |   |       |       |       |   | 3,269        |        |              |   | 5,047       |        |              |   | 306   |       |  |   |        |         |   |   | 8,622   |       
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |                                                                |   |       |       |       |   | 328          |        |              |   | 2,667       |        |              |   | 168   |       |  |   |        |         |   |   | 3,163   |       
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Operating income (loss)                                        |   |        |      |       |   |              | (3,097 | )            |   |             | 21,735 |              |   |       | 1,684 |  |   |         |        |   |   |         | 20,322 | 
|                                           
|                                           
|                                           
|                                           
|Net interest expense                        |                                                                |   | 2,141  |       |       |   | 7,845        |        |              |   | 30          |        |              |   | (27   | )     |  |   |        |         |   |   | 9,989   |       
|                                           
|                                           
|                                           
|                                           
|Other income                                |                                                                |   |       |       |       |   | 93           |        |              |   |            |        |              |   |      |       |  |   |        |         |   |   | 93      |       
|                                           
|                                           
|                                           
|                                           
|Equity interest in income of subsidiaries   |                                                                |   | 6,755  |       |       |   | 12,428       |        |              |   | 1,309       |        |              |   |      |       |  |   | (20,492 | )       |   |   |        |       
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before minority
interest and provision for income
taxes |   |        | 4,614 |       |   |              | 1,579  |              |   |             | 23,014 |              |   |       | 1,711 |  |   |         | (20,492 | ) |   |         | 10,426 | 
|                                           
|                                           
|                                           
|                                           
|Minority interest in income of
subsidiaries |                                                                |   |       |       |       |   |             |        |              |   |            |        |              |   |      |       |  |   | 402     |         |   |   | 402     |       
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income (loss) before provision for
income taxes                |   |        | 4,614 |       |   |              | 1,579  |              |   |             | 23,014 |              |   |       | 1,711 |  |   |         | (20,894 | ) |   |         | 10,024 | 
|                                           
|                                           
|                                           
|                                           
|Provision (benefit) for income taxes        |                                                                |   | (1,021 | )     |       |   | (5,176       | )      |              |   | 10,586      |        |              |   |      |       |  |   |        |         |   |   | 4,389   |       
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Net income (loss)                                              |   | $      | 5,635 |       |   | $            | 6,755  |              |   | $           | 12,428 |              |   | $     | 1,711 |  |   | $       | (20,894 | ) |   | $       | 5,635  | 
|                                            |                                                                |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       

14



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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 March 31, 2001
(Unaudited)
(In thousands)

|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |        |   | 
|------------------------------------------- | --------------------------------------------------------------------- | - | ------ | ------ | - | ----- | ------ | ------------ | - | ------------ | ------ | ----------- |  | ------------ | ----- | ----- |  | - | ------ | ------ | - | - | ------ | ------ | - | 
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       | Non-  |  |   |        |        |   |   |        |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        | Guarantor   |  | Guarantor    |       |       |  |   |        |        |   |  
|                                            |                                                                       |   |        | VCA    |   | Vicar |        | Subsidiaries |   | Subsidiaries |        | Elimination |  | Consolidated
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |             
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                           
|                                           
|                                           
|                                           
|Revenue                                     |                                                                       | $ |       |        |   | $     | 500    |              |   | $            | 89,023 |             |  | $            | 6,306 |       |  | $ | (149   | )      |   | $ | 95,680 |       
|                                           
|                                           
|                                           
|                                           
|Direct costs                                |                                                                       |   |       |        |   |       |       |              |   |              | 64,795 |             |  |              | 4,816 |       |  |   | (149   | )      |   |   | 69,462 |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                            |                                                                       |   |       |        |   |       | 500    |              |   |              | 24,228 |             |  |              | 1,490 |       |  |   |       |        |   |   | 26,218 |       
|                                           
|                                           
|                                           
|                                           
|Selling, general and administrative         |                                                                       |   |       |        |   |       | 3,926  |              |   |              | 6,407  |             |  |              | 225   |       |  |   |       |        |   |   | 10,558 |       
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |                                                                       |   |       |        |   |       | 1,599  |              |   |              | 4,427  |             |  |              | 228   |       |  |   |       |        |   |   | 6,254  |       
|                                           
|                                           
|                                           
|                                           
|Loss on sale of assets                      |                                                                       |   |       |        |   |       | 143    |              |   |              |       |             |  |              |      |       |  |   |       |        |   |   | 143    |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                            | Operating income (loss)                                               |   |        |       |   |       |        | (5,168       | ) |              |        | 13,394      |  |              |       | 1,037 |  |   |        |       |   |   |        | 9,263  |  
|                                           
|                                           
|                                           
|                                           
|Net interest expense                        |                                                                       |   | 3,875  |        |   |       | 7,241  |              |   |              | 55     |             |  |              | (18   | )     |  |   |       |        |   |   | 11,153 |       
|                                           
|                                           
|                                           
|                                           
|Equity interest in income of subsidiaries   |                                                                       |   | (463   | )      |   |       | 7,624  |              |   |              | 780    |             |  |              |      |       |  |   | (7,941 | )      |   |   |       |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                            | Income (loss) before minority
interest and provision for income
taxes |   |        | (4,338 | ) |       |        | (4,785       | ) |              |        | 14,119      |  |              |       | 1,055 |  |   |        | (7,941 | ) |   |        | (1,890 | )
|                                           
|                                           
|                                           
|                                           
|Minority interest in income of subsidiaries |                                                                       |   |       |        |   |       |       |              |   |              |       |             |  |              |      |       |  |   | 275    |        |   |   | 275    |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                            | Income (loss) before provision for
income taxes                       |   |        | (4,338 | ) |       |        | (4,785       | ) |              |        | 14,119      |  |              |       | 1,055 |  |   |        | (8,216 | ) |   |        | (2,165 | )
|                                           
|                                           
|                                           
|                                           
|Provision (benefit) for income taxes        |                                                                       |   | (1,349 | )      |   |       | (4,322 | )            |   |              | 6,495  |             |  |              |      |       |  |   |       |        |   |   | 824    |       
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       
|                                            | Net income (loss)                                                     |   | $      | (2,989 | ) |       | $      | (463         | ) |              | $      | 7,624       |  |              | $     | 1,055 |  |   | $      | (8,216 | ) |   | $      | (2,989 | )
|                                            |                                                                       |   |        |        |   |       |        |              |   |              |        |             |  |              |       |       |  |   |        |        |   |   |        |       

15



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##### Table of Contents



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

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2002
(Unaudited)
(In thousands)

|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |       |        |        |  
|--------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ------------------------------------- | ----- | ------ | - | ------ | ----- | ------------ | ------ | ------------ | ------ | ----------- | ---- | ------------ | ----- | ------ | - | - | ------- | ------ | - | ------ | ----- | ------ | ------ | -
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       | Non-   |   |   |         |        |   |        |       |       
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        | Guarantor   |      | Guarantor    |       |        |   |   |         |        |   |       
|                                                    |                                                                                          |                                                                    |                                       |       | VCA    |   | Vicar  |       | Subsidiaries |        | Subsidiaries |        | Elimination |      | Consolidated
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |             
|Cash from operating activities:                     |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Net income (loss)                                                                        |                                                                    | $                                     | 5,635 |        |   | $      | 6,755 |              |        | $            | 12,428 |             |      | $            | 1,711 |        |   | $ | (20,894 | )      |   | $      | 5,635 |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Adjustments to reconcile net income (loss) to
net cash provided by operating activities: |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |       |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Equity interest in earnings of subsidiaries                        |                                       |       | (6,755 | ) |        |       | (12,428      | )      |              |        | (1,309      | )    |              |       |       |   |   |         | 20,492 |   |        |       |       |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Depreciation and amortization                                      |                                       |       |       |   |        |       | 328          |        |              |        | 2,667       |      |              |       | 168    |   |   |         |       |   |        |       | 3,163  |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Amortization of deferred financing costs and
debt discount         |                                       |       |       |   |        |       | 457          |        |              |        |            |      |              |       |       |   |   |         |       |   |        |       | 457    |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Provision for uncollectible accounts                               |                                       |       |       |   |        |       |             |        |              |        | 556         |      |              |       | 64     |   |   |         |       |   |        |       | 620    |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Interest paid in kind on senior subordinated
notes                 |                                       |       | 2,168  |   |        |       |             |        |              |        |            |      |              |       |       |   |   |         |       |   |        |       | 2,168  |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Minority interest in income of subsidiaries                        |                                       |       |       |   |        |       |             |        |              |        |            |      |              |       |       |   |   |         | 402    |   |        |       | 402    |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Distributions to minority interest partners                        |                                       |       |       |   |        |       | (384         | )      |              |        |            |      |              |       |       |   |   |         |       |   |        |       | (384   | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Increase in accounts receivable                                    |                                       |       |       |   |        |       | (10          | )      |              |        | (3,744      | )    |              |       | (365   | ) |   |         |       |   |        |       | (4,119 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Decrease (increase) in inventory, prepaid
expense and other assets |                                       |       |       |   |        |       | 117          |        |              |        | (372        | )    |              |       | 25     |   |   |         |       |   |        |       | (230   | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Increase in accounts payable and accrued
liabilities               |                                       |       |       |   |        |       | 7,038        |        |              |        | 660         |      |              |       | 33     |   |   |         |       |   |        |       | 7,731  |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Decrease in prepaid income taxes                                   |                                       |       |       |   |        |       |             |        |              |        | 2,782       |      |              |       |       |   |   |         |       |   |        |       | 2,782  |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Increase
(decrease) in income tax payable                          |                                       |       |       |   |        |       | 4,445        |        |              |        | (2,782      | )    |              |       |       |   |   |         |       |   |        |       | 1,663  |       
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Increase (decrease) in intercompany payable
(receivable)           |                                       |       | (1,048 | ) |        |       | 14,575       |        |              |        | (11,680     | )    |              |       | (1,847 | ) |   |         |       |   |        |       |       |       
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                   
|                                                   
|                                                   
|                                                   
|Net cash provided by (used in) operating activities |                                                                                          |                                                                    |                                      |       |        |   | 20,893 |       |              |        | (794         | )      |             |      | (211         | )     |        |   |  |         |        |   | 19,888 |      
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|Cash flows from investing activities:               |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Business acquisitions, net of cash acquired                        |                                       |       |       |   |        |       | (3,011       | )      |              |        |            |      |              |       |       |   |   |         |       |   |        |       | (3,011 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Property and equipment additions, net                              |                                       |       |       |   |        |       | (2,563       | )      |              |        | (605        | )    |              |       |       |   |   |         |       |   |        |       | (3,168 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Other                                                              |                                       |       |       |   |        |       | (31          | )      |              |        | 8           |      |              |       |       |   |   |         |       |   |        |       | (23    | )     
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                    |                                                                                          |                                                                    | Net cash used in investing activities |       |        |  |        |       |              | (5,605 | )            |        |             | (597 | )            |       |        |  |   |         |        |  |        |       |        | (6,202 | )
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|Cash flows from financing activities:               |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Repayment of long-term obligations                                 |                                       |       |       |   |        |       | (1,253       | )      |              |        |            |      |              |       |       |   |   |         |       |   |        |       | (1,253 | )     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    |                                                                                          | Payment of deferred financing costs and
recapitalization           |                                       |       |       |   |        |       | (1,682       | )      |              |        |            |      |              |       |       |   |   |         |       |   |        |       | (1,682 | )     
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|                                                    |                                                                                          |                                                                    | Net cash used in financing activities |       |        |  |        |       |              | (2,935 | )            |        |             |     |              |       |        |  |   |         |        |  |        |       |        | (2,935 | )
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|Increase (decrease) in cash and equivalents         |                                                                                          |                                                                    |                                      |       |        |   | 12,353 |       |              |        | (1,391       | )      |             |      | (211         | )     |        |   |  |         |        |   | 10,751 |      
|                                                   
|                                                   
|                                                   
|                                                   
|Cash and equivalents at beginning of year           |                                                                                          |                                                                    |                                      |       |        |   | 3,467  |       |              |        | 3,260        |        |             |      | 376          |       |        |   |  |         |        |   | 7,103  |      
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      
|Cash and equivalents at end of year                 |                                                                                          | $                                                                  |                                      |       |        | $ | 15,820 |       |              | $      | 1,869        |        |             | $    | 165          |       |        | $ |  |         |        | $ | 17,854 |      
|                                                    |                                                                                          |                                                                    |                                       |       |        |   |        |       |              |        |              |        |             |      |              |       |        |   |   |         |        |   |        |      

16



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##### Table of Contents



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

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2001
(Unaudited)
(In thousands)

|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |         |         |  
|------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | ------ | ------ | ----- | ------ | ------------ | ------- | ------------ | ----- | ----------- | ------- | ------------ | --- | ----- | ------ | - | - | ------ | ----- | - | ------ | ------- | ------- | -
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     | Non-  |        |   |   |        |       |   |        |        
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       | Guarantor   |         | Guarantor    |     |       |        |   |   |        |       |  
|                                            |                                                                                          |                                                                    |   | VCA    |        | Vicar |        | Subsidiaries |         | Subsidiaries |       | Elimination |         | Consolidated
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |             
|Cash from operating activities:             |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                           
|                                           
|                                           
|                                           
|                                            | Net income (loss)                                                                        |                                                                    | $ | (2,989 | )      |       | $      | (463         | )       |              | $     | 7,624       |         |              | $   | 1,055 |        |   | $ | (8,216 | )     |   | $      | (2,989  | )      
|                                           
|                                           
|                                           
|                                           
|                                            | Adjustments to reconcile net income (loss) to net
cash provided by operating activities: |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |         |        
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Equity interest in earnings of subsidiaries                        |   |        | 463    |       |        |              | (7,624  | )            |       |             | (780    | )            |     |       |       |   |   |        | 7,941 |   |        |         |        |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Depreciation and amortization                                      |   |        |       |       |        |              | 1,599   |              |       |             | 4,427   |              |     |       | 228    |   |   |        |      |   |        |         | 6,254   |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Amortization of deferred financing costs and debt
discount         |   |        | 8      |       |        |              | 523     |              |       |             |        |              |     |       |       |   |   |        |      |   |        |         | 531     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Provision for uncollectible accounts                               |   |        |       |       |        |              |        |              |       |             | 509     |              |     |       | 45     |   |   |        |      |   |        |         | 554     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Non-cash compensation                                              |   |        |       |       |        |              | 304     |              |       |             | 2,740   |              |     |       |       |   |   |        |      |   |        |         | 3,044   |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Interest paid in kind on senior subordinated notes                 |   |        | 3,875  |       |        |              |        |              |       |             |        |              |     |       |       |   |   |        |      |   |        |         | 3,875   |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Loss on sale of assets                                             |   |        |       |       |        |              | 143     |              |       |             |        |              |     |       |       |   |   |        |      |   |        |         | 143     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Minority interest in income of subsidiaries                        |   |        |       |       |        |              |        |              |       |             |        |              |     |       |       |   |   |        | 275   |   |        |         | 275     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Distributions to minority interest partners                        |   |        |       |       |        |              | (338    | )            |       |             |        |              |     |       |       |   |   |        |      |   |        |         | (338    | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Increase in accounts receivable                                    |   |        |       |       |        |              |        |              |       |             | (3,235  | )            |     |       | (45    | ) |   |        |      |   |        |         | (3,280  | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Decrease (increase) in inventory, prepaid expense
and other assets |   |        | (8     | )     |        |              | (89     | )            |       |             | 484     |              |     |       | (46    | ) |   |        |      |   |        |         | 341     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Increase (decrease) in accounts payable and
accrued liabilities    |   |        |       |       |        |              | (318    | )            |       |             | 2,185   |              |     |       | 16     |   |   |        |      |   |        |         | 1,883   |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Increase in prepaid income taxes                                   |   |        |       |       |        |              | 664     |              |       |             |        |              |     |       |       |   |   |        |      |   |        |         | 664     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Increase (decrease) in intercompany payable
(receivable)           |   |        | (1,349 | )     |        |              | 14,436  |              |       |             | (11,938 | )            |     |       | (1,149 | ) |   |        |      |   |        |         |        |  
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                            | Net cash provided by operating activities                                                |                                                                    |   |       |        |       |        | 8,837        |         |              |       | 2,016       |         |              |     | 104   |        |   |   |       |       |   |        | 10,957  |        
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|Cash flows from investing activities:       |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Business acquisitions, net of cash acquired                        |   |        |       |       |        |              | (10,728 | )            |       |             |        |              |     |       |       |   |   |        |      |   |        |         | (10,728 | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Real estate acquired in connection with business
acquisitions      |   |        |       |       |        |              | (475    | )            |       |             |        |              |     |       |       |   |   |        |      |   |        |         | (475    | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Property and equipment additions, net                              |   |        |       |       |        |              | (1,844  | )            |       |             | (458    | )            |     |       |       |   |   |        |      |   |        |         | (2,302  | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Proceeds from sale of assets                                       |   |        |       |       |        |              | 370     |              |       |             |        |              |     |       |       |   |   |        |      |   |        |         | 370     |  
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Other                                                              |   |        |       |       |        |              |        |              |       |             | (939    | )            |     |       |       |   |   |        |      |   |        |         | (939    | )
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                            | Net cash used in investing activities                                                    |                                                                    |   |       |        |       |        | (12,677      | )       |              |       | (1,397      | )       |              |     |      |        |   |   |       |       |   |        | (14,074 | )      
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|Cash flows from financing activities:       |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Repayment of long-term obligations                                 |   |        |       |       |        |              | (1,814  | )            |       |             |        |              |     |       |       |   |   |        |      |   |        |         | (1,814  | )
|                                           
|                                           
|                                           
|                                           
|                                            |                                                                                          | Payment of deferred financing costs and
recapitalization           |   |        |       |       |        |              | (1,169  | )            |       |             |        |              |     |       |       |   |   |        |      |   |        |         | (1,169  | )
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|                                            | Net cash used in financing activities                                                    |                                                                    |   |       |        |       |        | (2,983       | )       |              |       |            |         |              |     |      |        |   |   |       |       |   |        | (2,983  | )      
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|Increase (decrease) in cash and equivalents |                                                                                          |                                                                    |  |        |        |       | (6,823 | )            |         |              | 619   |             |         |              | 104 |       |        |   |  |        |       |   | (6,100 | )      
|                                           
|                                           
|                                           
|                                           
|Cash and equivalents at beginning of year   |                                                                                          |                                                                    |  |        |        |       | 8,165  |              |         |              | 2,073 |             |         |              | 281 |       |        |   |  |        |       |   | 10,519 |        
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        
|Cash and equivalents at end of year         |                                                                                          | $                                                                  |  |        |        | $     | 1,342  |              |         | $            | 2,692 |             |         | $            | 385 |       |        | $ |  |        |       | $ | 4,419  |        
|                                            |                                                                                          |                                                                    |   |        |        |       |        |              |         |              |       |             |         |              |     |       |        |   |   |        |       |   |        |        

17



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##### Table of Contents






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 May 10, 2002, and we undertake no duty to update this
information. Should events occur subsequent to May 10, 2002 that make it
necessary to update the forward-looking information contained in this Form
10-Q, the updated forward-looking information will be filed with the Securities
and Exchange Commission in a quarterly report on Form 10-Q or a current report
on Form 8-K, each of which will be available at our website at
www.vcaantech.com. More information about potential factors that could affect
our business and financial results is included in the section entitled Risk
Factors.

Overview

We operate 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 all 50 states and
completing acquisitions for a total of 160 animal hospitals. At March 31,
2002, our laboratory network consisted of 16 laboratories serving all 50 states
and our animal hospital network consisted of 216 animal hospitals in 33 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.

18



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##### Table of Contents



The following table summarizes our growth in facilities for the periods
presented:

|                  |                                          |  |                    |     |      |  |  |     |  
|----------------- | ---------------------------------------- |  | ------------------ | --- | ---- |  |  | --- | -
|                  |                                          |  | Three Months Ended
|                  |                                          |  | March 31,         
|                  |                                          |  |                   
|                  |                                          |  | 2002               |     | 2001
|                  |                                          |  |                    |     |     
|Laboratories:     |                                          |  |                    |     |      |  |  |    
|                 
|                 
|                 
|                 
|                  | Beginning of period                      |  |                    | 16  |      |  |  | 15  |  
|                 
|                 
|                 
|                 
|                  | Acquisitions and new facilities          |  |                    |    |      |  |  |    |  
|                 
|                 
|                 
|                 
|                  | Relocated into other labs operated by us |  |                    |    |      |  |  |    |  
|                  |                                          |  |                    |     |      |  |  |    
|                  | End of period                            |  |                    | 16  |      |  |  | 15  |  
|                  |                                          |  |                    |     |      |  |  |    
|Animal hospitals: |                                          |  |                    |     |      |  |  |    
|                 
|                 
|                 
|                 
|                  | Beginning of period                      |  |                    | 214 |      |  |  | 209 |  
|                 
|                 
|                 
|                 
|                  | Acquisitions                             |  |                    | 3   |      |  |  | 9   |  
|                 
|                 
|                 
|                 
|                  | Relocated into hospitals operated by us  |  |                    | (1  | )    |  |  | (4  | )
|                 
|                 
|                 
|                 
|                  | Sold or closed                           |  |                    |    |      |  |  | (1  | )
|                  |                                          |  |                    |     |      |  |  |    
|                  | End of period                            |  |                    | 216 |      |  |  | 213 |  
|                  |                                          |  |                    |     |      |  |  |    
|                  | Owned at end of period                   |  |                    | 161 |      |  |  | 160 |  
|                 
|                 
|                 
|                 
|                  | Managed at end of period                 |  |                    | 55  |      |  |  | 53  |  

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 accounting principles generally
accepted in the United States. 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

Revenue is recognized 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.

Laboratory Revenue

A portion of laboratory revenue is intercompany revenue that was generated
by providing laboratory services to our animal hospitals. This revenue is
eliminated in the condensed, consolidated statements of operations.

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. Such discounts
not yet applied to clients accounts are estimated and deducted from revenue in
the period the related revenue was recognized. Such estimates are based upon
historical experience. Errors in estimates would not have a material effect on
our financial statements.

19



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##### Table of Contents



Animal Hospital Revenue

Animal hospital revenue is comprised of revenue of the animal hospitals
that we own and the management fees of 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
enter into arrangements with a veterinary medical group that provides all
veterinary medical care, although we manage the administrative functions
associated with the operation of the animal hospitals and we own or lease the
hospital facility. 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, for purposes of calculating same-facility
revenue growth in our animal hospitals, we use the combined revenue of animal
hospitals owned and managed for the entire periods presented. Same-facility
revenue growth includes revenue generated by customers referred from our
relocated animal hospitals.

Other Revenue

Other revenue is comprised of consulting fees from Heinz Pet Products
relating to the marketing of its proprietary pet food.

Direct Costs

Laboratory direct costs are comprised of all costs of laboratory services,
including salaries of veterinarians, 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 and costs of goods sold associated with the
retail sales of pet food and pet supplies.

Selling, General and Administrative

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 personnel and selling, marketing and promotional expense.
Animal hospital selling, general and administrative expense consists primarily
of field management and administrative personnel, recruiting and marketing
expense. Corporate selling, general and administrative expense consists of
administrative expense at our headquarters, including the salaries of corporate
officers, professional expense, rent and occupancy costs.

EBITDA and Adjusted EBITDA

EBITDA is operating income (loss) before depreciation and amortization.
Adjusted EBITDA for the 2001 period represents EBITDA adjusted to exclude
management fees paid pursuant to our management services agreement with Leonard
Green & Partners which was terminated in November 2001, non-cash compensation
and loss on sale of assets. No adjustments have been made to the EBITDA
calculation for 2002. Corporate EBITDA is comprised of other revenue less
corporate selling, general and administrative expense, adjusted to exclude
non-cash compensation.

EBITDA and Adjusted EBITDA (EBITDA) are not measures of financial
performance under generally accepted accounting principles, or GAAP. EBITDA
should not be considered in isolation or as a substitute for net income, cash
flows from operating activities and other income or cash flow statement data
prepared in accordance with GAAP, or as a measure of profitability or
liquidity. We believe EBITDA is a useful measure of our operating performance
as it reflects earnings before the impact of items that may change from period
to period for reasons not directly related to our operations, such as the
depreciation and amortization, interest and taxes and other non-operating or
non-recurring items, which occurred in 2001. EBITDA is also an important
component of the financial ratios included in our debt covenants and provides
us with a measure of our ability to service our debt and meet capital
expenditure requirements from our operating results. Our calculation of EBITDA
may not be comparable to similarly titled measures reported by other companies.

20



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##### Table of Contents



Non-Cash Compensation

Some stock options issued in 2000 qualified as variable stock options.
Related to these variable stock options, we recorded non-cash compensation of
approximately $3.0 million in the three months ended March 31, 2001. In August
2001, all of these options were exercised or cancelled. Non-cash compensation
is included in laboratory direct costs and in selling, general and
administrative expense.

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. Most 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. Costs related to upgrades or enhancements of existing systems
are capitalized if the modifications result in additional functionality.

Critical Accounting Policies and Significant Estimates

Under accounting principles generally accepted in the United States,
management is required to make assumptions and estimates that directly impact
our consolidated financial statements and related disclosures. Because of the
uncertainties inherent in making assumptions and estimates, actual results in
future periods may differ significantly from our assumptions and estimates.
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.

Workers Compensation Expense

On October 8, 2001, we entered into a one-year workers compensation
insurance policy with a $250,000 per-occurrence deductible and a stop-loss
aggregate deductible of $4.7 million. We have determined that $3.3 million is
a reasonable estimate of expected claims losses under this policy and we are
accruing for these losses over the twelve-month period ending September 30,
2002. In determining this estimate, in conjunction with the insurance
carrier, we reviewed our five-year history of total claims losses, ratio of
losses to premiums paid, payroll growth and the current risk control
environment. We are pre-funding estimated claims losses to the insurance
carrier of approximately $2.9 million.

Goodwill Impairment

Goodwill relating to acquisitions represents the purchase price paid and
liabilities assumed in excess of the fair market value of net assets acquired.
Under the provisions of Statement of Financial Accounting Standards (SFAS)
No. 142, Goodwill and Other Intangible Assets, we will test goodwill for
impairment using the prescribed two-step process. The first step is a screen
for potential impairment, while the second step measures the amount of the
impairment, if any. We adopted SFAS No. 142 January 1, 2002. We expect to
complete our initial screen for potential impairment by June 30, 2002. We have
not yet determined the amount of the potential impairment loss, if any. Any
impairment recognized in association with the adoption of SFAS No. 142 will be
accounted for as a cumulative effect of a change in accounting principle.

Long-lived Asset Impairment

We adopted SFAS No. 144, Accounting for the Impairment of Disposal of
Long-Lived Assetson January 1, 2002. Under SFAS No. 144, we will continually
evaluate whether events, circumstances or net losses at the entity level have
occurred that indicate the remaining estimated useful life of long-lived assets
may warrant revision or that the remaining balance of these assets may not be
recoverable. When factors indicate that these assets should be evaluated for
possible impairment, we will estimate the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the long-lived
assets in question. If that estimate is less than the carrying value of the
assets under review, we will recognize an impairment loss equal to that
difference.

21



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##### Table of Contents



Legal Settlements

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 $450,000 for legal
settlements as part of other accrued liabilities.

Results of Operations

The following table sets forth components of our statements of operations
data expressed as a percentage of revenue for the three months ended March 31,
2002 and 2001:

|                                            |                 |                   |      |      |       |      |      |      |       |   
|------------------------------------------- | --------------- | ----------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | --
|                                            |                 |                   |      | 2002 |       | 2001
|                                            |                 |                   |      |      |       |     
|Revenue:                                    |                 |                   |      |      |       |      |      |     
|                                           
|                                           
|                                           
|                                           
|                                            | Laboratory      |                   |      | 36.0 | %     |      |      | 34.1 | %    
|                                           
|                                           
|                                           
|                                           
|                                            | Animal hospital |                   |      | 65.5 |       |      |      | 67.3 |      
|                                           
|                                           
|                                           
|                                           
|                                            | Other           |                   |      | 0.5  |       |      |      | 0.5  |      
|                                           
|                                           
|                                           
|                                           
|                                            | Intercompany    |                   |      | (2.0 | )     |      |      | (1.9 | )    
|                                            |                 |                   |      |      |       |      |      |     
|                                            |                 | Total revenue     |      |      | 100.0 |      |      |      | 100.0 |   
|                                           
|                                           
|                                           
|                                           
|Direct costs                                |                 |                   | 69.3 |      |       |      | 72.6 |     
|                                           
|                                           
|                                           
|                                           
|Selling, general and administrative         |                 |                   | 8.3  |      |       |      | 11.0 |     
|                                           
|                                           
|                                           
|                                           
|Depreciation and amortization               |                 |                   | 3.0  |      |       |      | 6.5  |     
|                                           
|                                           
|                                           
|                                           
|Loss on sale of assets                      |                 |                   |     |      |       |      | 0.2  |     
|                                            |                 |                   |      |      |       |      |      |     
|                                            |                 | Operating income  |      |      | 19.4  |      |      |      | 9.7   |   
|                                           
|                                           
|                                           
|                                           
|Net interest expense                        |                 |                   | 9.5  |      |       |      | 11.7 |     
|                                           
|                                           
|                                           
|                                           
|Other income                                |                 |                   | 0.1  |      |       |      |     |     
|                                           
|                                           
|                                           
|                                           
|Minority interest in income of subsidiaries |                 |                   | 0.4  |      |       |      | 0.3  |     
|                                           
|                                           
|                                           
|                                           
|Provision for income taxes                  |                 |                   | 4.2  |      |       |      | 0.8  |     
|                                            |                 |                   |      |      |       |      |      |     
|                                            |                 | Net income (loss) |      |      | 5.4   | %    |      |      | (3.1  | )%
|                                            |                 |                   |      |      |       |      |      |     

The following table is a summary of the components of operating income by
segment for the three months ended March 31, 2002 and 2001 (dollars in
thousands):

|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |         |        | 
|---- | ----------------------------------- | ----------------------- | - | ---------- | ------ | -------- | - | --------- | ------ | ------------ | - | ----- | ------ | ------- | - | ------ | - |  | - | ------- | ------ | 
|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   | Inter- |   |  |   |        
|     |                                     |                         |   |            |        |          |   | Animal    |        |              |   |       |        | company |   |        |   | 
|     |                                     |                         |   | Laboratory |        | Hospital |   | Corporate |        | Eliminations |   | Total
|     |                                     |                         |   |            |        |          |   |           |        |              |   |      
|2002 |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|    
|    
|    
|    
|     | Revenue                             |                         | $ | 37,657     |        |          | $ | 68,644    |        |              | $ | 500   |        |         | $ | (2,106 | ) |  | $ | 104,695 |       
|     | Direct costs                        |                         |   | 21,562     |        |          |   | 53,132    |        |              |   |      |        |         |   | (2,106 | ) |  |   | 72,588  |       
|     | Selling, general and
administrative |                         |   | 2,673      |        |          |   | 2,679     |        |              |   | 3,270 |        |         |   |       |   |  |   | 8,622   |       
|     | Depreciation and amortization       |                         |   | 697        |        |          |   | 2,136     |        |              |   | 330   |        |         |   |       |   |  |   | 3,163   |       
|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|     |                                     | Operating income (loss) |   | $          | 12,725 |          |   | $         | 10,697 |              |   | $     | (3,100 | )       |   | $      |  |  |   | $       | 20,322 | 
|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|    
|    
|    
|    
|2001 |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|    
|    
|    
|    
|     | Revenue                             |                         | $ | 32,677     |        |          | $ | 64,354    |        |              | $ | 500   |        |         | $ | (1,851 | ) |  | $ | 95,680  |       
|     | Direct costs                        |                         |   | 20,319     |        |          |   | 50,994    |        |              |   |      |        |         |   | (1,851 | ) |  |   | 69,462  |       
|     | Selling, general and
administrative |                         |   | 3,277      |        |          |   | 3,355     |        |              |   | 3,926 |        |         |   |       |   |  |   | 10,558  |       
|     | Depreciation and amortization       |                         |   | 1,161      |        |          |   | 3,494     |        |              |   | 1,599 |        |         |   |       |   |  |   | 6,254   |       
|     | Loss on sale of assets              |                         |   |           |        |          |   |          |        |              |   | 143   |        |         |   |       |   |  |   | 143     |       
|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|     |                                     | Operating
income (loss) |   | $          | 7,920  |          |   | $         | 6,511  |              |   | $     | (5,168 | )       |   | $      |  |  |   | $       | 9,263  | 
|     |                                     |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        

22



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##### Table of Contents



Revenue

The following table summarizes our revenue for the three months ended
March 31, 2002 and 2001 (dollars in thousands):

|                |               |   |        |         |      |   |          |        |  |  |      |     |  
|--------------- | ------------- | - | ------ | ------- | ---- | - | -------- | ------ |  |  | ---- | --- | -
|                |               |   | 2002   |         | 2001 |   | % Change
|                |               |   |        |         |      |   |         
|Laboratory      |               | $ | 37,657 |         |      | $ | 32,677   |        |  |  | 15.2 | %  
|               
|               
|               
|               
|Animal hospital |               |   | 68,644 |         |      |   | 64,354   |        |  |  | 6.7  | %  
|               
|               
|               
|               
|Other           |               |   | 500    |         |      |   | 500      |        |  |  |      |    
|               
|               
|               
|               
|Intercompany    |               |   | (2,106 | )       |      |   | (1,851   | )      |  |  |      |    
|                |               |   |        |         |      |   |          |        |  |  |      |    
|                | Total revenue |   | $      | 104,695 |      |   | $        | 95,680 |  |  |      | 9.4 | %
|                |               |   |        |         |      |   |          |        |  |  |      |    

Laboratory Revenue

Laboratory revenue increased $5.0 million, or 15.2%, for the three months
ended March 31, 2002 comparable to the same period in the prior year. However,
the first quarter of 2002 contained one more billing day than the first quarter
of 2001. This increase, all of which was from internal growth, resulted from
the increase in the overall number of tests and requisitions and an increase in
the average revenue per requisition. These increases primarily were the result
of the continued emphasis on selling our pet health and wellness programs and
the implementation of a price increase for most tests in February 2002.

Animal Hospital Revenue

The following table summarizes our animal hospital revenue as reported and
the combined revenue of animal hospitals that we owned and managed had we
consolidated the operating results of the animal hospitals we managed into our
operating results for the three months ended March 31, 2002 and 2001 (dollars
in thousands):

|                                                              |                                                        |   |        |        |      |   |          |        |  |  |     |     |  
|------------------------------------------------------------- | ------------------------------------------------------ | - | ------ | ------ | ---- | - | -------- | ------ |  |  | --- | --- | -
|                                                              |                                                        |   | 2002   |        | 2001 |   | % Change
|                                                              |                                                        |   |        |        |      |   |         
|Animal hospital revenue as reported                           |                                                        | $ | 68,644 |        |      | $ | 64,354   |        |  |  | 6.7 | %  
|                                                             
|                                                             
|                                                             
|                                                             
|Less: Management fees paid to us by veterinary
medical groups |                                                        |   | (9,705 | )      |      |   | (8,614   | )      |  |  |     |    
|                                                             
|                                                             
|                                                             
|                                                             
|Add: Revenue of animal hospitals managed                      |                                                        |   | 18,315 |        |      |   | 16,366   |        |  |  |     |    
|                                                              |                                                        |   |        |        |      |   |          |        |  |  |     |    
|                                                              | Combined revenue of animal hospitals owned
and managed |   | $      | 77,254 |      |   | $        | 72,106 |  |  |     | 7.1 | %
|                                                              |                                                        |   |        |        |      |   |          |        |  |  |     |    

Animal hospital revenue as reported increased $4.3 million, or 6.7%, for
the three months ended March 31, 2002 compared to the same period in the prior
year. The increase in animal hospital revenue primarily resulted from the
acquisition of 15 animal hospitals that we owned, managed or relocated into
other hospitals owned by us subsequent to March 31, 2001. The increase in
animal hospital revenue also was due to same-facility revenue growth of 2.0%.
However, the first quarter of 2002 contained one less revenue day than in the
same quarter in 2001. Same-facility revenue growth primarily was due to
increases in the average amount spent per visit and revenue generated by
customers referred from our relocated animal hospitals.

Direct Costs

The following table summarizes our direct costs and our direct costs as a
percentage of applicable revenue for the three months ended March 31, 2002 and
2001 (dollars in thousands):

|                |                    |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |     |  
|--------------- | ------------------ | - | ------ | ------ | ------- |  | ---- | ---- | ------- | - | -------- | ------ | ---- |  | ---- | ---- | - |  | ---- | --- | -
|                |                    |   | 2002   |        | 2001    |  |      |      |        
|                |                    |   |        |        |         |  |      |      |        
|                |                    |   |        |        |         |  | % of |      |         |   |          |        | % of |  |      |      |  
|                |                    |   | $      |        | Revenue |  | $    |      | Revenue |   | % Change
|                |                    |   |        |        |         |  |      |      |         |   |         
|Laboratory      |                    | $ | 21,562 |        |         |  | 57.3 | %    |         | $ | 20,319   |        |      |  | 62.2 | %    |   |  | 6.1  | %  
|               
|               
|               
|               
|Animal hospital |                    |   | 53,132 |        |         |  | 77.4 | %    |         |   | 50,994   |        |      |  | 79.2 | %    |   |  | 4.2  | %  
|               
|               
|               
|               
|Intercompany    |                    |   | (2,106 | )      |         |  |      |      |         |   | (1,851   | )      |      |  |      |      |   |  | 13.8 | %  
|                |                    |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |    
|                | Total direct costs |   | $      | 72,588 |         |  |      | 69.3 | %       |   | $        | 69,462 |      |  |      | 72.6 | % |  |      | 4.5 | %
|                |                    |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |    

23



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##### Table of Contents



Laboratory Direct Costs

Laboratory direct costs increased $1.2 million, or 6.1%, for the three
months ended March 31, 2002 compared to the same period in the prior year.
Laboratory direct costs as a percentage of laboratory revenue was 57.3% and
62.2% for the three months ended March 31, 2002 and 2001, respectively.
However, laboratory direct costs for the three months ended March 31, 2001
include non-cash compensation of $565,000. Excluding non-cash compensation,
laboratory direct costs as a percentage of laboratory revenue would have been
60.5% for the three months ended March 31, 2001. The decreases in laboratory
direct costs as a percentage of laboratory revenue during these periods
primarily were attributable to additional operating leverage gained on
increases in laboratory revenue.

Animal Hospital Direct Costs

The following table summarizes our animal hospital direct costs as
reported and the combined direct costs of animal hospitals owned and managed
had we consolidated the operating results of the animal hospitals we manage
into our operating results for the three months ended March 31, 2002 and 2001
(dollars in thousands):

|                                                                 |  |      |        |         |  |          |      |         |  |          |        |          |  |  |      |   |  |  |     |  
|---------------------------------------------------------------- |  | ---- | ------ | ------- |  | -------- | ---- | ------- |  | -------- | ------ | -------- |  |  | ---- | - |  |  | --- | -
|                                                                 |  | 2002 |        | 2001    |  |          |      |        
|                                                                 |  |      |        |         |  |          |      |        
|                                                                 |  |      |        |         |  | % of     |      |         |  |          |        | % of     |  |  |      |  
|                                                                 |  |      |        |         |  | Combined |      |         |  |          |        | Combined |  |  |      |  
|                                                                 |  | $    |        | Revenue |  | $        |      | Revenue |  | % Change
|                                                                 |  |      |        |         |  |          |      |         |  |         
|Animal hospital direct costs as reported                         |  | $    | 53,132 |         |  |          | 77.4 | %       |  | $        | 50,994 |          |  |  | 79.2 | % |  |  | 4.2 | %
|                                                                
|                                                                
|                                                                
|                                                                
|Add: Direct costs of animal hospitals managed                    |  |      | 18,315 |         |  |          |      |         |  |          | 16,366 |          |  |  |      |   |  |  |     |  
|                                                                
|                                                                
|                                                                
|                                                                
|Less: Management fees charged by us to
veterinary medical groups |  |      | (9,705 | )       |  |          |      |         |  |          | (8,614 | )        |  |  |      |   |  |  |     |  
|                                                                 |  |      |        |         |  |          |      |         |  |          |        |          |  |  |      |   |  |  |     |  
|Combined direct costs of animal
hospitals owned and managed      |  | $    | 61,742 |         |  |          | 79.9 | %       |  | $        | 58,746 |          |  |  | 81.5 | % |  |  | 5.1 | %
|                                                                 |  |      |        |         |  |          |      |         |  |          |        |          |  |  |      |   |  |  |     |  

Animal hospital direct costs as reported increased $2.1 million, or 4.2%,
for the three months ended March 31, 2002 compared to the same period in the
prior year. Animal hospital direct costs as a percentage of animal hospital
revenue decreased to 77.4% for the three months ended March 31, 2002 from 79.2%
for the three months ended March 31, 2001. The decreases in animal hospital
direct costs as a percentage of animal hospital revenue during these periods
primarily were attributable to additional operating leverage gained on
increases in animal hospital revenue, because most of the costs associated with
this business do not increase proportionately with increases in the volume of
services rendered.

Selling, General and Administrative

The following table summarizes our selling, general and administrative
expense and expense as a percentage of applicable revenue for the three months
ended March 31, 2002 and 2001 (dollars in thousands):

|                |                                           |   |       |       |         |  |      |     |         |   |          |        |      |  |      |      |   |  |       |       |   
|--------------- | ----------------------------------------- | - | ----- | ----- | ------- |  | ---- | --- | ------- | - | -------- | ------ | ---- |  | ---- | ---- | - |  | ----- | ----- | --
|                |                                           |   | 2002  |       | 2001    |  |      |     |        
|                |                                           |   |       |       |         |  |      |     |        
|                |                                           |   |       |       |         |  | % of |     |         |   |          |        | % of |  |      |      |  
|                |                                           |   | $     |       | Revenue |  | $    |     | Revenue |   | % Change
|                |                                           |   |       |       |         |  |      |     |         |   |         
|Laboratory      |                                           | $ | 2,673 |       |         |  | 7.1  | %   |         | $ | 3,277    |        |      |  | 10.0 | %    |   |  | (18.4 | )%   
|               
|               
|               
|               
|Animal hospital |                                           |   | 2,679 |       |         |  | 3.9  | %   |         |   | 3,355    |        |      |  | 5.2  | %    |   |  | (20.1 | )%   
|               
|               
|               
|               
|Corporate       |                                           |   | 3,270 |       |         |  | 3.1  | %   |         |   | 3,926    |        |      |  | 4.1  | %    |   |  | (16.7 | )%   
|                |                                           |   |       |       |         |  |      |     |         |   |          |        |      |  |      |      |   |  |       |      
|                | Total selling, general and
administrative |   | $     | 8,622 |         |  |      | 8.2 | %       |   | $        | 10,558 |      |  |      | 11.0 | % |  |       | (18.3 | )%
|                |                                           |   |       |       |         |  |      |     |         |   |          |        |      |  |      |      |   |  |       |      

Laboratory Selling, General and Administrative

Laboratory selling, general and administrative expense for the three
months ended March 31, 2002 decreased $604,000, or 18.4%, compared to the same
period in the prior year. Laboratory selling, general and administrative
expense includes non-cash compensation of $1.1 million for the three months
ended March 31, 2001. Excluding the non-cash compensation, laboratory selling,
general and administrative expense would have increased $543,000, or 25.5% for
the three months ended March 31, 2002, compared to the same period in the prior
year and

24



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##### Table of Contents



represented 7.1% and 6.5% of laboratory revenue for the three months ended
March 31, 2002 and 2001, respectively. This increase primarily was due to an
increase in commission payments to sales representatives, which was caused by
an increase in sales as well as additional legal settlement costs accrued in
2002.

Animal Hospital Selling, General and Administrative

Animal hospital selling, general and administrative expense for the three
months ended March 31, 2002 decreased $676,000, or 20.1%, compared to the same
period in the prior year. Animal hospital selling, general and administrative
expense includes non-cash compensation of $1.0 million for the three months
ended March 31, 2001. Excluding the non-cash compensation, animal hospital
selling, general and administrative expense would have increased $348,000, or
14.9%, for the three months ended March 31, 2002, compared to the same period
in the prior year and represented 3.9% and 3.6% as a percentage of animal
hospital revenue, respectively. This increase primarily was due to the
addition of a number of field management positions, primarily regional medical
director positions.

Corporate Selling, General and Administrative

Corporate selling, general and administrative expense for the three months
ended March 31, 2002 decreased $656,000, or 16.7%, compared to the same period
in the prior year. Corporate selling, general and administrative expense for
the three months ended March 31, 2001 includes non-cash compensation of
$308,000 and management fees of $620,000 paid pursuant to our management
agreement with Leonard Green & Partners that was terminated in November 2001.
Excluding the non-cash compensation and management fees, corporate selling,
general and administrative expense would have been 3.1% as a percentage of
total revenue for the three months ended March 31, 2001 and would have
increased $272,000, or 9.1%, for the three months ended March 31, 2002,
compared to the same period in the prior year. This increase primarily was
due to increased professional services and shareholder relations costs as a
result of becoming a public company.

Adjusted EBITDA

The following table summarizes our Adjusted EBITDA and our Adjusted EBITDA
as a percentage of applicable revenue for the three months ended March 31, 2002
and 2001 (dollars in thousands):

|                                                  |                       |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |      |  
|------------------------------------------------- | --------------------- | - | ------ | ------ | ------- |  | ---- | ---- | ------- | - | -------- | ------ | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                                  |                       |   | 2002   |        | 2001    |  |      |      |        
|                                                  |                       |   |        |        |         |  |      |      |        
|                                                  |                       |   |        |        |         |  | % of |      |         |   |          |        | % of |  |      |      |  
|                                                  |                       |   | $      |        | Revenue |  | $    |      | Revenue |   | % Change
|                                                  |                       |   |        |        |         |  |      |      |         |   |         
|Laboratory Adjusted EBITDA (1)                    |                       | $ | 13,422 |        |         |  | 35.6 | %    |         | $ | 10,793   |        |      |  | 33.0 | %    |   |  | 24.4 | %   
|                                                 
|                                                 
|                                                 
|                                                 
|Animal hospital Adjusted EBITDA (2)               |                       |   | 12,833 |        |         |  | 18.7 | %    |         |   | 11,029   |        |      |  | 17.1 | %    |   |  | 16.4 | %   
|                                                 
|                                                 
|                                                 
|                                                 
|Other revenue                                     |                       |   | 500    |        |         |  |      |      |         |   | 500      |        |      |  |      |      |   |  |      |     
|                                                 
|                                                 
|                                                 
|                                                 
|Corporate selling, general and administrative (3) |                       |   | (3,270 | )      |         |  | 3.1  | %    |         |   | (2,998   | )      |      |  | 3.1  | %    |   |  |      |     
|                                                  |                       |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |     
|                                                  | Total Adjusted EBITDA |   | $      | 23,485 |         |  |      | 22.4 | %       |   | $        | 19,324 |      |  |      | 20.2 | % |  |      | 21.5 | %
|                                                  |                       |   |        |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |     



---

|(1) |  | For the three months ended March 31, 2001, laboratory EBITDA was adjusted to exclude non-cash compensation of $1.7
million. There were no adjustments in 2002.                                                                
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | For the three months ended March 31, 2001, animal hospital EBITDA was adjusted to exclude non-cash compensation of $1.0
million. There were no adjustments in 2002.                                                           
|   
|   
|   
|   
|(3) |  | For the three months ended
March 31, 2001, corporate selling, general and administrative
expense was adjusted to exclude non-cash
compensation of $308,000 and management fees of $620,000. There were no adjustments in 2002.

Depreciation and Amortization

Depreciation and amortization expense decreased $3.1 million, or 49.4%,
for the three months ended March 31, 2002 compared to the comparable period in
the prior year.

As a result of the implementation of SFAS No. 142, we will no longer
amortize goodwill as of January 1, 2002. For a detailed discussion of SFAS No.
142, see New Accounting Pronouncements. For the three months ended March 31,
2001 we had $2.3 million of goodwill amortization expense. In addition to the
impact of SFAS No. 142, we terminated our non-competition agreements with
members of senior management in November of 2001.

25



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##### Table of Contents



Net Interest Expense

Net interest expense decreased $1.2 million, or 10.4%, to $10.0 million
for the three months ended March 31, 2002 from $11.2 million for the three
months ended March 31, 2001. The decrease in net interest expense primarily
was due to the effect of decreasing interest rates on our variable rate
obligations, and the refinancing of a portion of our higher-yield, fixed rate
debt with lower-yield, fixed rate debt.

Other Income

Other
income of $93,000 for the three months ended March 31, 2002,
consisted of a non-cash gain on a hedging instrument resulting from the changes
in the time value of our collar agreement.

Provision for Income Taxes

Provision for income taxes was $4.4 million and $824,000 for the three
months ended March 31, 2002 and 2001, respectively. Our effective income tax
rate for each period varies from the statutory rate primarily due to the
non-deductibility for income tax purposes of the amortization of a portion of
goodwill.

Minority Interest

Minority interest in income of the consolidated subsidiaries was $402,000
and $275,000 for the three months ended March 31, 2002 and 2001, respectively.
Minority interest in income represents our partners proportionate share of net
income generated by our subsidiaries, which we do not wholly own.

Increase in Carrying Amount of Redeemable Preferred Stock

The holders of our series A redeemable preferred stock and our series B
redeemable preferred stock were entitled to receive dividends at a rate of 14%
and 12%, respectively. The dividends not paid in cash compounded quarterly.
The dividends earned during the three months ended March 31, 2001 were added to
the liquidation preference of the preferred stock. In November 2001, the
Company redeemed all of the outstanding series A and series B redeemable
preferred stock.

Liquidity and Capital Resources

Discussion of 2002

Cash and cash equivalents increased to $17.9 million at March 31, 2002
from $7.1 million at December 31, 2001. The increase primarily resulted from
$19.9 million provided by operating activities offset by $6.2 million used in
investing activities and $2.9 million used in financing activities.

Net cash of $19.9 million provided by operating activities primarily
consisted of $5.6 million of net income adjusted for non-cash expenses of $6.4
million, a $4.7 million increase in accrued interest, a $1.7 million increase
in income taxes payable, and $1.5 million provided by other working capital
changes.

Net cash of $6.2 million used in investing activities primarily resulted
from $3.2 million to purchase property and equipment and
$3.0 million related to the acquisition of animal hospitals.

Net cash of $2.9 million used in financing activities primarily resulted
from the use of $1.3 million to repay debt obligations and $1.7 million to pay
deferred 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, which we have not utilized as of March 31, 2002. We believe
these sources of funds will be sufficient to continue our operations and
planned capital expenditures and

26



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##### Table of Contents



satisfy our scheduled principal and interest payments under debt and capital
lease 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 2002 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. We
continue to examine acquisition opportunities in the laboratory field, which
may impose additional cash requirements. 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 fewer or
greater number of facilities depending upon opportunities that present
themselves and our cash requirements may change accordingly. In addition,
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 $3.9 million of
cash for the remainder of 2002 to pay the mandatory principal payments due on
our outstanding indebtedness. However, we may elect to pre-pay principal. See
Description of Indebtedness below for additional cash obligations.

Description of Indebtedness

In September 2000, we entered into a credit and guaranty agreement for
$300.0 million of senior secured credit facilities. The credit and guaranty
agreement includes a $50.0 million revolving credit facility as well as the
senior term A and B notes. The revolving credit facility and senior term A
notes mature in September 2006. The senior term B notes mature in September
2008. 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 senior
term A notes and the revolving credit facility range from 1.00% to 2.25% per
annum and the margin for the senior term B notes is 2.75%. The eurodollar rate
margins for the senior term A notes and the revolving credit facility range
from 2.00% to 3.25% per annum and the margin for the senior term B notes is
3.75%. As of March 31, 2002, we have not utilized the revolving credit
facility. As of March 31, 2002, we have $23.4 million principal amount
outstanding under the senior term A notes and $120.9 million principal amount
outstanding under the senior term B notes.

In September 2000, we issued $20.0 million principal amount of senior
subordinated notes due on September 20, 2010. Interest on these senior
subordinated notes is 13.5% per annum, payable in cash, semi-annually in
arrears. As of March 31, 2002, the outstanding principal balance of our senior
subordinated notes was $15.0 million.

In September 2000, we issued $100.0 million principal amount of senior
notes due September 20, 2010. Interest on our senior notes is 15.5% per annum
payable semi-annually in arrears in cash or by issuance of additional senior
notes. We have issued $21.0 million in additional senior notes to pay interest
since the issue date. As of March 31, 2002, the outstanding principal balance
of our senior notes was $61.8 million.

In November 2001, we issued $170.0 million principal amount of senior
subordinated notes due December 1, 2009. We have filed a registration
statement with the Securities and Exchange Commission for an exchange offer in
which these notes will be exchanged 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. As of March 31,
2002, the outstanding principal balance of these senior subordinated notes was
$170.0 million. We and each existing and future domestic wholly-owned
restricted subsidiary of our subsidiary, 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 for these notes.

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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 believe the most restrictive covenant is the fixed charge
coverage ratio. At March 31, 2002, we had a fixed charge coverage ratio of
1.60 to 1.00. The credit and guaranty agreement required a fixed charge
coverage ratio of no less than 1.10 to 1.00 and requires a fixed charge
coverage ratio of no less than 1.10 to 1.00 in future periods.

The following table indicates our current contractual annual cash
obligations:

|                            |  |       |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 
|--------------------------- |  | ----- | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---------- | ------ |  |  | - | ------- |  |  | - | ------ |  |  | - | ------- | 
|                            |  | Total |         | 2002 |  | 2003 |        | 2004 |  | 2005 |        | 2006 |  | Thereafter
|                            |  |       |         |      |  |      |        |      |  |      |        |      |  |           
|Long-term debt              |  | $     | 391,431 |      |  | $    | 5,159  |      |  | $    | 5,456  |      |  | $          | 6,160  |  |  | $ | 22,089  |  |  | $ | 21,971 |  |  | $ | 330,596 | 
|                           
|                           
|                           
|                           
|Fixed interest              |  |       | 197,318 |      |  |      | 20,880 |      |  |      | 19,270 |      |  |            | 19,245 |  |  |   | 26,720  |  |  |   | 26,196 |  |  |   | 85,007  | 
|                           
|                           
|                           
|                           
|Variable interest           |  |       | 78,744  |      |  |      | 10,020 |      |  |      | 12,160 |      |  |            | 13,378 |  |  |   | 12,914  |  |  |   | 12,079 |  |  |   | 18,193  | 
|                           
|                           
|                           
|                           
|Collar agreement            |  |       | 2,080   |      |  |      | 2,080  |      |  |      |       |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|                           
|                           
|                           
|                           
|PIK interest                |  |       | 37,104  |      |  |      |       |      |  |      |       |      |  |            |       |  |  |   | 37,104  |  |  |   |       |  |  |   |        | 
|                           
|                           
|                           
|                           
|Capital lease obligations   |  |       | 79      |      |  |      | 79     |      |  |      |       |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|                           
|                           
|                           
|                           
|Operating leases            |  |       | 192,612 |      |  |      | 12,247 |      |  |      | 12,530 |      |  |            | 12,575 |  |  |   | 12,285  |  |  |   | 12,165 |  |  |   | 130,810 | 
|                           
|                           
|                           
|                           
|Other long-term
obligations |  |       | 2,424   |      |  |      | 2,424  |      |  |      |       |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|                            |  |       |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 
|                            |  | $     | 901,792 |      |  | $    | 52,889 |      |  | $    | 49,416 |      |  | $          | 51,358 |  |  | $ | 111,112 |  |  | $ | 72,411 |  |  | $ | 564,606 | 
|                            |  |       |         |      |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 

We have both fixed rate and variable rate debt. Our variable rate debt is
based on a variable rate component plus a fixed margin. We projected the
variable rate component to be 3.35%, 5.13%, 6.38%, 6.50% and 6.65% for years
2002 through 2006, respectively. Our consolidated financial statements
included in our 2001 Annual Report on Form 10-K discuss these variable rate
notes in more detail.

PIK interest is considered interest on our senior notes prior to September
20, 2005, which we pay by issuing additional senior notes in a principal amount
equal to the interest. From January 1, 2002 through March 31, 2005, we plan to
pay the interest on our senior notes by issuing additional senior notes in the
amount of approximately $37.1 million, which will be paid in cash on September
20, 2005. Subsequent to September 20, 2005, we will be required to make
semi-annual cash interest payments on our senior notes.

Our Collar Agreement

On November 13, 2000, we entered into a no-fee interest rate collar
agreement with Wells Fargo Bank, N.A. effective November 15, 2000 and expiring
November 15, 2002. Our collar agreement is considered a cash flow hedge based
on the London interbank offer rate, or LIBOR, pays out monthly, resets monthly
and has a cap and floor notional amount of $62.5 million, with a cap rate of
7.5% and floor rate of 5.9%.

Under SFAS No. 133, the actual cash paid by us as a result of LIBOR rates
being below the floor of our collar agreement is recorded as a component of
earnings. For the three months ending March 31, 2002, we have made payments of
$615,000, which are included in interest expense.

At March 31, 2002, the fair market value of our collar agreement was a net
liability to us of $1.5 million. We have recorded that liability in our
balance sheet as part of other accrued liabilities.

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New Accounting Pronouncements

Goodwill and Other Intangible Assets

In July 2001, the Financial Accounting Standards Board, or FASB, issued
SFAS No. 142, Goodwill and Other Intangible Assets, which changes the way
companies account for intangible assets and goodwill associated with business
combinations. The principal changes of SFAS No. 142 are as follows:



| |  |  | All goodwill amortization ceased effective January 1, 2002.                                                                                                                                                            
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | All goodwill acquired in acquisitions after June 30, 2001 was not subject to
amortization.                                                                                                                             
|
| |  |  | All goodwill will be reviewed annually, or as circumstances warrant, using the
fair-value-based goodwill impairment tests discussed in SFAS No. 142. As of March 31,
2002, our net goodwill balance was $319.4 million.

We will test goodwill for impairment using the two-step process described
in SFAS No. 142. The first step is a screen for potential impairment, while
the second step measures the amount of the impairment, if any. We expect to
complete the two-step process by June 30, 2002. We have not yet determined the
amount of the potential impairment loss, if any. Any impairment recognized in
association with the adoption of SFAS No. 142 will be accounted for as a
cumulative adjustment for a change in accounting principle.

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 will adopt SFAS No. 143
in the first quarter of fiscal year 2003. We are evaluating the impact of the
adoption of SFAS No. 143 on our financial statements.

Impairment of Long-Lived Assets

In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which establishes one accounting
model to be used for long-lived assets to be disposed of by sale and broadens
the presentation for discontinued operations to include more disposal
transactions. SFAS No. 144 supercedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets to be Disposed of by Sale, and the accounting
and reporting provisions of Accounting Principles Board Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions. We adopted SFAS No. 144 on January 1, 2002.

Outlook

In our first quarter of 2002, we reported earnings per share of $0.15, or
three cents better than street consensus, and Adjusted EBITDA of $23.5 million.
In light of these results, we raised our targets for 2002. Our 2002 EBITDA
goal has increased to a range of $99 to $102 million. We have increased our
goal for 2002 net income to a range of $25 to $26 million. Based upon 37.3
million shares expected to be outstanding, on a diluted basis, annual earnings
per share for 2002 is currently expected to be $0.67.

Our future results of operations in this outlook involve a number of risks
and uncertainties. We believe that we have the product offerings, facilities,
personnel, and competitive and financial resources for continued business
success, but future revenue, costs, margins and profits are all influenced by a
number of factors, all of which are inherently difficult to forecast.

Risk Factors

This Quarterly Report on Form 10-Q, including Risk Factors set forth
below, contains forward-looking statements that involve risks and
uncertainties, as well as assumptions that, if they never 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

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statements that could be deemed forward-looking statements, including any
projections of earnings, revenues or other financial items; any statements of
the plans, strategies and objectives of management for future operations; any
statement concerning proposed new products, 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 in Risk
Factors set forth below. We assume no obligation and do not intend to update
these forward-looking statements.

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. Our internal growth rate may decline and could become negative.
Our laboratory internal revenue growth has fluctuated between 9.1% and 12.6%
for each fiscal year from 1998 through 2001. Similarly, our animal hospital
same-facility revenue growth rate has fluctuated between 2.6% 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.

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 hospitals, operated laboratories servicing approximately 9,000
customers in 27 states and had approximately 1,150 employees. At March 31,
2002, we operated 216 hospitals, operated laboratories servicing approximately
13,000 customers in all 50 states and had approximately 3,500 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 expenses
and achieve desirable economies of scale. We also will need to increase the
capacity of our current systems to meet additional demands.

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 expenses 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;                  

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| |  |  | dependence on retention, hiring and training of key personnel, including specialists;                                                 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | impairment of intangible assets; 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.

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 March 31, 2002, our debt, excluding unamortized discount, consisted
primarily of:



| |  |  | $144.2 million of outstanding borrowings under our senior credit facility;   
| | - |  | -----------------------------------------------------------------------------
|
| |  |  | $246.8 million of outstanding senior notes and senior subordinated notes; and
|
| |  |  | $1.6 million of other debt.                                                  

The following table sets forth the principal and interest due by us for
each of the years ending December 31:

|                  |       |   |        |        |      |   |        |        |      |   |        |        |  |   |        |        |  |   |        |        | 
|----------------- | ----- | - | ------ | ------ | ---- | - | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ |  | - | ------ | ------ | 
|                  |       |   | 2002   |        | 2003 |   | 2004   |        | 2005 |   | 2006  
|                  |       |   |        |        |      |   |        |        |      |   |       
|Long-term debt    |       | $ | 5,159  |        |      | $ | 5,456  |        |      | $ | 6,160  |        |  | $ | 22,089 |        |  | $ | 21,971 |       
|                 
|                 
|                 
|                 
|Fixed interest    |       |   | 20,880 |        |      |   | 19,270 |        |      |   | 19,245 |        |  |   | 26,720 |        |  |   | 26,196 |       
|                 
|                 
|                 
|                 
|Variable interest |       |   | 10,020 |        |      |   | 12,160 |        |      |   | 13,378 |        |  |   | 12,914 |        |  |   | 12,079 |       
|                 
|                 
|                 
|                 
|Collar agreement  |       |   | 2,080  |        |      |   |       |        |      |   |       |        |  |   |       |        |  |   |       |       
|                 
|                 
|                 
|                 
|PIK interest      |       |   |       |        |      |   |       |        |      |   |       |        |  |   | 37,104 |        |  |   |       |       
|                  |       |   |        |        |      |   |        |        |      |   |        |        |  |   |        |        |  |   |        |       
|                  | Total |   | $      | 38,139 |      |   | $      | 36,886 |      |   | $      | 38,783 |  |   | $      | 98,827 |  |   | $      | 60,246 | 
|                  |       |   |        |        |      |   |        |        |      |   |        |        |  |   |        |        |  |   |        |       

We have both fixed rate and variable rate debt. Our variable rate debt is
based on a variable rate component plus a fixed margin. We projected the
variable rate component to be 3.35%, 5.13%, 6.38%, 6.50% and 6.65% for years
2002 through 2006, respectively. Our consolidated financial statements
included in our Annual Report on Form 10-K discuss these variable rate notes in
more detail.

PIK interest is considered interest on our senior notes prior to September
20, 2005, which we pay by issuing additional senior notes in a principal amount
equal to the interest. From January 1, 2002 through March 31, 2005, we plan to
pay the interest on our senior notes by issuing additional senior notes in the
amount of approximately $37.1 million, which will be paid in cash on September
20, 2005. Subsequent to September 20, 2005, we will be required to make
semi-annual cash interest payments on our senior notes.

Our ability to make payments on our debt, and to fund acquisitions, will
depend on 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
sufficient cash flow from operations, our strategy to increase operating
efficiencies may not be realized and future

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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 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 indentures and senior credit facility:



| |  |  | limit our funds available to repay the senior notes and
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 indentures 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.

Due to the fixed cost nature of our business, fluctuations in our revenue could
adversely affect our operating income.

Approximately 57.0% 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 revenues may adversely
affect our operating income.

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

The 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. 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
which 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 March 31, 2002, 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. Attracting veterinarians to these regions may
be difficult, due to the rural environment, an unwillingness to relocate and
lower compensation. 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 March 31, 2002 we operated 55 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.

We currently are a party to a lawsuit in the State of Ohio in which that
State has alleged that our management of a veterinary medical group licensed to
practice veterinary medicine in that state violates the Ohio statute
prohibiting business corporations from providing or holding themselves out as
providers of veterinary medical care. On March 20, 2001, the trial court in
the case entered summary judgment in favor of the State of Ohio and issued an
order enjoining us from operating in the State of Ohio in a manner that is in
violation of the State of Ohio statute. In response, we have restructured our
operations in the State of Ohio in a manner that we believe conforms to the
State of Ohio law and the courts order. The Attorney General of the State of
Ohio has informed us that it disagrees with our position that we are in
compliance with the courts order. In June 2001 we appeared at a status
conference before the trial court, at which time the court directed the parties
to meet together to attempt to settle this matter. Consistent with the trial
courts directive, we engaged in discussions with the Attorney Generals office
in the State of Ohio. The parties appeared at an additional status conference
in February 2002. The parties

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were not able to reach a settlement prior to the February status conference.
At that status conference, the court ordered the parties to participate in a
court-supervised settlement conference that was scheduled for March 19, 2002.
The court postponed the settlement conference until April 19, 2002. Pursuant
to discussions with the Ohio Attorney General at the settlement conference, we
are in the process of further restructuring our operations in Ohio. The next
settlement conference has yet to be scheduled. We may not be able to reach a
settlement, in which case we may be required to discontinue our operations in
the state. Our five animal hospitals in the State of Ohio have a net book
value of $6.2 million as of March 31, 2002. If we were required to discontinue
our operations in the State of Ohio, we may not be able to dispose of the
hospital assets for their book value. The animal hospitals located in the
State of Ohio generated revenue and operating income of $440,000 and $90,000,
respectively, in the three months ended March 31, 2002 and $441,000 and
$122,000, respectively, in the three months ended March 31, 2001.

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 infrastructure 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 electronic break-ins, computer viruses and similar
disruptive problems. Despite the precautions we have taken, unanticipated
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.

Any substantial reduction in the number of available flights or delays in
the departure of flights 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.

Our executive officers, directors and principal stockholders beneficially
own, in the aggregate, approximately 51.4% of our outstanding common stock. As
a result, these stockholders are able to exercise control over all matters
requiring stockholder approval and will have significant control over our
management and policies. The directors elected by these stockholders will be
able to make decisions affecting our capital structure, including decisions to
issue additional capital stock, implement stock repurchase programs and incur
indebtedness. This

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control 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.

Terrorism and the uncertainty of war may have a material adverse effect on our
operating results.

Terrorist attacks, such as the attacks that occurred in New York and
Washington, D.C. on September 11, 2001, the response initiated by the United
States on October 7, 2001, and other acts of violence or war may affect the
markets in which we operate, our operations and profitability and your
investment. Further terrorist attacks against the United States or United
States businesses may occur. The potential near-term and long-term effect
these attacks may have for our customers, the markets for our services and the
U.S. economy are uncertain. The consequences of any terrorist attacks, or any
armed conflicts which may result, 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

We have certain debt obligations as well as a collar agreement that are
exposed to market risk associated with variable interest rates. As of March
31, 2002, we had borrowings of $144.2 million under our senior secured credit
facility with fluctuating interest rates based on market benchmarks such as
LIBOR. To reduce the risk of increasing interest rates, we entered into a
no-fee collar agreement with a cap and floor notional amount of $62.5 million,
a cap rate of 7.5% and a floor rate of 5.9%, both based on LIBOR. The collar
agreement expires November 15, 2002.

Accordingly, for the period January 1, 2002 to November 15, 2002:



| |  |  | if the benchmark rate is below 5.9% and a change in the rate
does not cause the benchmark to exceed 5.9%, every one-half percent
increase in the benchmark rate will cause interest expense to
increase by $445,000, while a one-half percent decrease will cause
interest expense to decrease by $445,000;                                          
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | if the bench rate is equal to or between 5.9% and 7.5% and a
change in the rate does not cause the benchmark to exceed 7.5% or
drop below 5.9%, every one-half percent increase in the benchmark
rate will cause interest expense to increase by $718,000, while a
one-half percent decrease will cause interest expense to decrease by
$718,000; and
|
| |  |  | if the benchmark rate is above 7.9% and a change in the rate
does not cause the benchmark to drop below 7.9%, every one-half
percent increase in the benchmark rate would cause interest expense
to increase by $445,000, while a one-half percent decrease would
cause interest expense to decrease by $445,000.                                    

At March 31, 2002 LIBOR was approximately 1.9%.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Ohio Attorney Generals office filed a lawsuit on December 14, 1998,
in the Franklin County Court of Common Pleas in the State of Ohio in which the
state alleged that our management of a veterinary medical group licensed to
practice veterinary medicine in that state violates the Ohio statute
prohibiting business corporations from providing, or holding themselves out as
providers of, veterinary medical care. On March 20, 2001, the trial court in
the case entered summary judgment in favor of the State of Ohio and issued an
order enjoining us from operating in the State of Ohio in a manner that is in
violation of the state statute. In response, we have restructured our
operations in the State of Ohio in a manner that we believe conforms to the
state law and the courts order. The Attorney General of the State of Ohio
informed us that it disagrees with our position that we are in compliance with
the courts order. In June 2001, we appeared at a status conference before the
trial court at which time the court directed the parties to meet together to
attempt to settle this matter. Consistent with the trial courts directive, we
engaged in discussions with the Attorney Generals office in the State of Ohio.
The parties appeared at an additional status conference in February 2002. The
parties were not able to reach a settlement prior to the February status
conference. At that status conference, the court ordered the parties to
participate in a court-supervised settlement conference that was scheduled for
March 19, 2002. The court postponed the settlement conference until April 19,
2002. Pursuant to discussions with the Ohio Attorney General at the settlement
conference, we are in the process of further restructuring our operations in
Ohio. The next settlement conference has yet to be scheduled. If a settlement
cannot be reached, the company would be required to discontinue operations in
the state. Our five animal hospitals in the State of Ohio have a book value of
$6.2 million as of March 31, 2002. If we were required to discontinue our
operations in the State of Ohio, we may not be able to dispose of the hospital
assets for their book value. The animal hospitals located in the State of Ohio
generated revenue and operating income of $440,000 and $90,000, respectively,
in the three months ended March 31, 2002, and $441,000 and $110,000,
respectively, in the same period in the prior year.

On November 30, 2001, two majority stockholders of a company that merged
with Zoasis.com, Inc. in June 2000 filed a civil complaint against VCA,
Zoasis.com, Inc. and Robert Antin. In the merger, the two stockholders
received a less than 10% interest in Zoasis. At the same time, VCA acquired a
less than 20% interest in Zoasis.com, Inc. for an investment of $5.0 million.
Robert Antin, VCAs Chief Executive Officer, President and Chairman of the
Board, is the majority stockholder of Zoasis.com and serves on its board of
directors. The complaint alleges securities fraud under California law, common
law fraud, negligent misrepresentation and declaratory judgment arising from
the plaintiffs investment in Zoasis.com. On December 31, 2001, we filed a
demurrer to the complaint. On February 25, 2002, the plaintiffs filed an
opposition to our demurrer, and on March 1, 2002, we filed our reply to
plaintiffs opposition. On March 7, 2002, our demurrer was denied. On Mach
22, 2002, we filed an answer to plaintiffs complaint denying all allegations
in the complaint, and we filed a counter claim alleging breach of contract and
claim and delivery. We have responded to the plaintiffs initial discovery
request and the preparation of our initial discovery request, and the
plaintiffs have requested supplemental information following our initial
discovery responses. The plaintiffs have responded to our initial discovery
requests and we are in the process of determining the supplemental information
we will request, if any. A status conference was held on May 9, 2002. The
judge ordered the parties to choose a mediator by June 10, 2002 and complete
mediation by September 6, 2002. In the event that this case goes to trial, a
final status conference is set for November 22, 2002, and an estimated
seven-day trial is set to begin December 2, 2002.

We are a party to various other 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
a minimal amount for legal settlements as part of other accrued liabilities.




ITEM 2. CHANGES IN SECURITIES

None

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ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

None




ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



| | (a) |  | Exhibits:  None.   
| | --- |  | --------------------
|
| | (b) |  | Reports on Form 8-K:



| |  |  | (1)     Report on Form 8-K, filed February 22, 2002, reporting under
Item 5, financial information for the fourth quarter and fiscal
year ended December 31, 2001 and financial guidance for the fiscal
year 2002.       
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | (2)     Report on Form 8-K, filed April 25, 2002, reporting under Item
5, financial information for the first quarter of the fiscal year
ended December 31, 2002 and updated financial guidance for the
fiscal year 2002.







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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, May 10, 2002.

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







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