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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q

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



For the quarterly period ended September 30, 2003


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

Commission File Number: 001-16783

VCA ANTECH, INC.

(Exact name of registrant as specified in its charter)


|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(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)

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

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

Indicate the number of shares outstanding of each of the issuers class of
common stock as of the latest practicable date: common stock, $0.001 par
value 40,669,436 shares as of November 10, 2003.



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TABLE OF CONTENTS



|                              |                                                                                               |                                                       |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED, CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED, CONSOLIDATED INCOME STATEMENTS            
|                              |                                                                                               | CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES                                                                
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURE                    
|EXHIBIT INDEX                
|EXHIBIT 31.1                 
|EXHIBIT 31.2                 
|EXHIBIT 32.1                 



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

TABLE OF CONTENTS

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





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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

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

|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |              |         |  |  | 
|------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------- | ------- | ------------- | ------- | ------------ | ------- |  |  | 
|                                            |                                                                                                                                                                 |                                            |         |         |         | September 30, |         | December 31,
|                                            |                                                                                                                                                                 |                                            |         |         |         | 2003          |         | 2002        
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|ASSETS                                      |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|Current assets:                             |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            | Cash and cash equivalents                                                                                                                                       |                                            | $       | 18,445  |         |               | $       | 6,462        |        
|                                            | Trade accounts receivable, less allowance for uncollectible accounts of $7,111
and $6,408 at September 30, 2003 and December 31, 2002, respectively             |                                            |         | 23,931  |         |               |         | 20,727       |        
|                                            | Inventory, prepaid expenses and other                                                                                                                           |                                            |         | 9,275   |         |               |         | 8,643        |        
|                                            | Deferred income taxes                                                                                                                                           |                                            |         | 11,697  |         |               |         | 9,528        |        
|                                            | Prepaid income taxes                                                                                                                                            |                                            |         |        |         |               |         | 7,614        |        
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |              |        
|                                            |                                                                                                                                                                 | Total current assets                       |         |         | 63,348  |               |         |              | 52,974  | 
|Property and equipment, net                 |                                                                                                                                                                 |                                            | 98,410  |         |         |               | 95,303  |             
|Other assets:                               |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            | Goodwill, net                                                                                                                                                   |                                            |         | 370,009 |         |               |         | 342,614      |        
|                                            | Covenants not to compete, net                                                                                                                                   |                                            |         | 5,031   |         |               |         | 4,735        |        
|                                            | Deferred financing costs, net                                                                                                                                   |                                            |         | 4,766   |         |               |         | 6,778        |        
|                                            | Other                                                                                                                                                           |                                            |         | 4,284   |         |               |         | 5,024        |        
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            |                                                                                                                                                                 | Total assets                               |         | $       | 545,848 |               |         | $            | 507,428 | 
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |              |        
|LIABILITIES AND STOCKHOLDERS EQUITY        |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|Current liabilities:                        |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            | Current portion of long-term obligations                                                                                                                        |                                            | $       | 2,445   |         |               | $       | 9,622        |        
|                                            | Accounts payable                                                                                                                                                |                                            |         | 8,925   |         |               |         | 10,223       |        
|                                            | Accrued payroll and related liabilities                                                                                                                         |                                            |         | 15,855  |         |               |         | 14,734       |        
|                                            | Accrued interest                                                                                                                                                |                                            |         | 5,757   |         |               |         | 1,565        |        
|                                            | Income taxes payable                                                                                                                                            |                                            |         | 1,232   |         |               |         |             |        
|                                            | Other accrued liabilities                                                                                                                                       |                                            |         | 17,883  |         |               |         | 13,464       |        
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            |                                                                                                                                                                 | Total current liabilities                  |         |         | 52,097  |               |         |              | 49,608  | 
|Long-term obligations, less current portion |                                                                                                                                                                 |                                            | 315,507 |         |         |               | 371,935 |             
|Deferred income taxes                       |                                                                                                                                                                 |                                            | 19,316  |         |         |               | 15,376  |             
|Other liabilities                           |                                                                                                                                                                 |                                            | 2,007   |         |         |               | 2,007   |             
|Minority interest                           |                                                                                                                                                                 |                                            | 5,431   |         |         |               | 5,416   |             
|Stockholders equity:                       |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            | Common stock, par value $0.001, 75,000 shares authorized, and 40,650 and 36,765
shares outstanding as of September 30, 2003 and December 31, 2002, respectively |                                            |         | 41      |         |               |         | 37           |        
|                                            | Additional paid-in capital                                                                                                                                      |                                            |         | 243,345 |         |               |         | 188,941      |        
|                                            | Accumulated deficit                                                                                                                                             |                                            |         | (91,732 | )       |               |         | (125,754     | )      
|                                            | Accumulated comprehensive loss - unrealized loss on hedging instruments                                                                                         |                                            |         | (82     | )       |               |         |             |        
|                                            | Notes receivable from stockholders                                                                                                                              |                                            |         | (82     | )       |               |         | (138         | )      
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            |                                                                                                                                                                 | Total stockholders equity                 |         |         | 151,490 |               |         |              | 63,086  | 
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |             
|                                            |                                                                                                                                                                 | Total liabilities and stockholders equity |         | $       | 545,848 |               |         | $            | 507,428 | 
|                                            |                                                                                                                                                                 |                                            |         |         |         |               |         |              |        

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

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

|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |         | 
|---------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ------- | ------ | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                                     |                                                                                                                                                                                                                                     |   | Three Months Ended |        | Nine Months Ended
|                                                     |                                                                                                                                                                                                                                     |   | September 30,      |        | September 30,    
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                  
|                                                     |                                                                                                                                                                                                                                     |   | 2003               |        | 2002              |   | 2003    |        | 2002
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |     
|Revenue                                              |                                                                                                                                                                                                                                     | $ | 132,903            |        |                   | $ | 114,972 |        |      | $ | 381,266 |         |  | $ | 336,892 |        
|                                                     | Direct costs (excludes operating depreciation of $2,734
and $2,399 for the three months ended September 30, 2003
and 2002, respectively, and $8,153 and $7,007 for the
nine months ended September 30, 2003 and 2002,
respectively) |   |                    | 88,710 |                   |   |         | 77,157 |      |   |         | 254,965 |  |   |         | 226,749 | 
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|                                                     |                                                                                                                                                                                                                                     |   | 44,193             |        |                   |   | 37,815  |        |      |   | 126,301 |         |  |   | 110,143 |        
|Selling, general and administrative expense          |                                                                                                                                                                                                                                     |   | 8,931              |        |                   |   | 8,732   |        |      |   | 27,384  |         |  |   | 25,893  |        
|Depreciation and amortization                        |                                                                                                                                                                                                                                     |   | 3,579              |        |                   |   | 3,028   |        |      |   | 10,653  |         |  |   | 9,330   |        
|Write down and loss (gain) on sale of assets         |                                                                                                                                                                                                                                     |   | 442                |        |                   |   | (80     | )      |      |   | 282     |         |  |   | (80     | )      
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|                                                     | Operating income                                                                                                                                                                                                                    |   |                    | 31,241 |                   |   |         | 26,135 |      |   |         | 87,982  |  |   |         | 75,000  | 
|Interest expense, net                                |                                                                                                                                                                                                                                     |   | 6,361              |        |                   |   | 10,208  |        |      |   | 19,771  |         |  |   | 30,541  |        
|Debt retirement costs                                |                                                                                                                                                                                                                                     |   | 1,701              |        |                   |   | 3,391   |        |      |   | 9,118   |         |  |   | 3,391   |        
|Other (income) expense                               |                                                                                                                                                                                                                                     |   | (129               | )      |                   |   | (5      | )      |      |   | 129     |         |  |   | (159    | )      
|Minority interest in income of subsidiaries          |                                                                                                                                                                                                                                     |   | 456                |        |                   |   | 430     |        |      |   | 1,279   |         |  |   | 1,360   |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|                                                     | Income before provision for income taxes                                                                                                                                                                                            |   |                    | 22,852 |                   |   |         | 12,111 |      |   |         | 57,685  |  |   |         | 39,867  | 
|Provision for income taxes                           |                                                                                                                                                                                                                                     |   | 9,363              |        |                   |   | 5,076   |        |      |   | 23,663  |         |  |   | 16,702  |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|                                                     | Net income                                                                                                                                                                                                                          |   | $                  | 13,489 |                   |   | $       | 7,035  |      |   | $       | 34,022  |  |   | $       | 23,165  | 
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|Basic earnings per common share                      |                                                                                                                                                                                                                                     | $ | 0.33               |        |                   | $ | 0.19    |        |      | $ | 0.85    |         |  | $ | 0.63    |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|Diluted earnings per common share                    |                                                                                                                                                                                                                                     | $ | 0.33               |        |                   | $ | 0.19    |        |      | $ | 0.84    |         |  | $ | 0.63    |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|Shares used for computing basic earnings per share   |                                                                                                                                                                                                                                     |   | 40,641             |        |                   |   | 36,756  |        |      |   | 40,095  |         |  |   | 36,744  |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        
|Shares used for computing diluted earnings per share |                                                                                                                                                                                                                                     |   | 41,334             |        |                   |   | 37,094  |        |      |   | 40,650  |         |  |   | 37,088  |        
|                                                     |                                                                                                                                                                                                                                     |   |                    |        |                   |   |         |        |      |   |         |         |  |   |         |        

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

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VCA ANTECH, INC. AND SUBSIDIARIES

CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2003 and 2002
(Unaudited)
(In thousands)


|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |          |        |         |   |  |  |  | 
|------------------------------------------------ | --------------------------------------------------------------------------------- | --------------------------------------------------------------------- | ----------------------------------------- | -------- | ----------------- | ------- | ------ | -------- | ------ | ------- | - |  |  |  | 
|                                                 |                                                                                   |                                                                       |                                           |          | Nine Months Ended |         |        |          |       
|                                                 |                                                                                   |                                                                       |                                           |          | September 30,     |         |        |          |       
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |          |       
|                                                 |                                                                                   |                                                                       |                                           |          | 2003              |         | 2002   |          |        |         |  
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |          |        |         |  
|Cash flows from operating activities:            |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 | Net income                                                                        |                                                                       | $                                         | 34,022   |                   |         | $      | 23,165   |       
|                                                 | Adjustments to reconcile net income to net cash provided by operating
activities: |                                                                       |                                           |          |                   |         |        |          |       
|                                                 |                                                                                   | Depreciation and amortization                                         |                                           |          | 10,653            |         |        |          | 9,330  |        
|                                                 |                                                                                   | Amortization of deferred financing costs and debt discount            |                                           |          | 669               |         |        |          | 1,264  |        
|                                                 |                                                                                   | Provision for uncollectible accounts                                  |                                           |          | 2,371             |         |        |          | 2,347  |        
|                                                 |                                                                                   | Debt retirement costs                                                 |                                           |          | 9,118             |         |        |          | 3,391  |        
|                                                 |                                                                                   | Interest paid in kind on 15.5% senior notes                           |                                           |          |                  |         |        |          | 7,045  |        
|                                                 |                                                                                   | Write-down of assets                                                  |                                           |          | 392               |         |        |          |       |        
|                                                 |                                                                                   | Gain on sale of assets                                                |                                           |          | (110              | )       |        |          | (80    | )      
|                                                 |                                                                                   | Minority interest in income of subsidiaries                           |                                           |          | 1,279             |         |        |          | 1,360  |        
|                                                 |                                                                                   | Distributions to minority interest partners                           |                                           |          | (1,245            | )       |        |          | (1,339 | )      
|                                                 |                                                                                   | Increase in trade accounts receivable                                 |                                           |          | (4,399            | )       |        |          | (5,055 | )      
|                                                 |                                                                                   | Increase in inventory, prepaid expenses and other assets              |                                           |          | (438              | )       |        |          | (918   | )      
|                                                 |                                                                                   | Increase (decrease) in accounts payable and other accrued liabilities |                                           |          | (552              | )       |        |          | 3,945  |        
|                                                 |                                                                                   | Increase in accrued payroll and related liabilities                   |                                           |          | 1,121             |         |        |          | 2,792  |        
|                                                 |                                                                                   | Increase in accrued interest                                          |                                           |          | 4,192             |         |        |          | 3,405  |        
|                                                 |                                                                                   | Decrease in prepaid income taxes                                      |                                           |          | 7,614             |         |        |          | 2,782  |        
|                                                 |                                                                                   | Increase in income taxes payable                                      |                                           |          | 1,232             |         |        |          | 2,035  |        
|                                                 |                                                                                   | Increase in deferred income taxes asset                               |                                           |          | (2,169            | )       |        |          | (2,318 | )      
|                                                 |                                                                                   | Increase in deferred income taxes liability                           |                                           |          | 3,940             |         |        |          | 7,687  |        
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 |                                                                                   |                                                                       | Net cash provided by operating activities |          |                   | 67,690  |        |          |        | 60,838  |  
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|Cash flows from investing activities:            |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 | Business acquisitions, net of cash acquired                                       |                                                                       |                                           | (27,177  | )                 |         |        | (17,845  | )     
|                                                 | Real estate acquired in connection with business acquisitions                     |                                                                       |                                           | (589     | )                 |         |        |         |       
|                                                 | Property and equipment additions, net                                             |                                                                       |                                           | (11,040  | )                 |         |        | (13,405  | )     
|                                                 | Proceeds from sale of assets                                                      |                                                                       |                                           | 363      |                   |         |        | 1,391    |       
|                                                 | Other                                                                             |                                                                       |                                           | 447      |                   |         |        | 583      |       
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 |                                                                                   |                                                                       | Net cash used in investing activities     |          |                   | (37,996 | )      |          |        | (29,276 | )
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|Cash flows from financing activities:            |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 | Repayment of long-term obligations, including redemption fees                     |                                                                       |                                           | (217,492 | )                 |         |        | (145,978 | )     
|                                                 | Proceeds from the issuance of long-term debt                                      |                                                                       |                                           | 146,442  |                   |         |        | 143,061  |       
|                                                 | Payment of deferred financing and recapitalization costs                          |                                                                       |                                           | (1,069   | )                 |         |        | (3,415   | )     
|                                                 | Proceeds from issuance of common stock under stock option plans                   |                                                                       |                                           | 85       |                   |         |        | 25       |       
|                                                 | Proceeds from issuance of common stock                                            |                                                                       |                                           | 54,323   |                   |         |        |         |       
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|                                                 |                                                                                   |                                                                       | Net cash used in financing activities     |          |                   | (17,711 | )      |          |        | (6,307  | )
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|Increase in cash and cash equivalents            |                                                                                   |                                                                       | 11,983                                    |          |                   |         | 25,255 |         
|Cash and cash equivalents at beginning of period |                                                                                   |                                                                       | 6,462                                     |          |                   |         | 7,103  |         
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         
|Cash and cash equivalents at end of period       |                                                                                   | $                                                                     | 18,445                                    |          |                   | $       | 32,358 |         
|                                                 |                                                                                   |                                                                       |                                           |          |                   |         |        |         

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

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

(1) General

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

(2) Acquisitions

During the three months ended September 30, 2003, the Company purchased
three animal hospitals and one veterinary diagnostic laboratory. The acquired
laboratory was merged into an existing VCA facility upon acquisition.
Including acquisition costs, the Company paid an aggregate consideration of
$7.2 million, consisting of $6.8 million in cash and $423,000 in certain
obligations to sellers and other liabilities assumed. The $7.2 million
aggregate purchase price was allocated as follows: $429,000 to tangible
assets, $6.3 million to goodwill and $451,000 to other intangible assets.
Goodwill was assigned to the animal hospital and laboratory reporting units in
the amounts of $5.4 million and $942,000, respectively. The Company expects
that $4.5 million of the goodwill recorded will be fully deductible for income
tax purposes.

During the nine months ended September 30, 2003, the Company purchased 19
animal hospitals and four veterinary diagnostic laboratory companies with a
total of seven laboratory facilities. Five of the acquired animal hospitals
and three of the acquired laboratories were merged into existing VCA facilities
upon acquisition. Including acquisition costs, the Company paid an aggregate
consideration of $29.8 million, consisting of $26.2 million in cash, $2.3
million in an obligation to be settled in either cash or shares of the
Companys common stock, and $1.3 million in certain obligations to sellers and
other liabilities assumed. The $29.8 million aggregate purchase price was
allocated as follows: $1.7 million to tangible assets, $26.4 million to
goodwill and $1.7 million to other intangible assets. Goodwill was assigned to
the animal hospital and laboratory reporting units in the amounts of $19.2
million and $7.2 million, respectively. The Company expects that $15.5 million
of the goodwill recorded will be fully deductible for income tax purposes.

During the nine months ended September 30, 2003, the Company purchased the
total ownership interest of partners in three non-wholly owned subsidiaries of
the Company for approximately $1.0 million, consisting of $244,000 in cash,
$763,000 in a note payable, and $41,000 in the forgiveness of a note owed to
the Company by one of the partners. The Company recorded goodwill of $295,000
related to these purchases and expects that it will be fully deductible for
income tax purposes.

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(3) Calculation of Earnings per Common Share

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

|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |        |     | 
|------------------------------------------- | --------------------------------- | ---------------------------------------------- | ------ | ------------------ | --- | ----------------- | ----- | ------ | --- | ---- | ------ | ------ | --- | - | ------ | ------ | --- | 
|                                            |                                   |                                                |        | Three Months Ended |     | Nine Months Ended
|                                            |                                   |                                                |        | September 30,      |     | September 30,    
|                                            |                                   |                                                |        |                    |     |                  
|                                            |                                   |                                                |        | 2003               |     | 2002              |       | 2003   |     | 2002
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |     
|Net income                                  |                                   | $                                              | 13,489 |                    |     | $                 | 7,035 |        |     | $    | 34,022 |        |     | $ | 23,165 |       
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|Weighted average common shares outstanding: |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|                                            | Basic                             |                                                |        | 40,641             |     |                   |       | 36,756 |     |      |        | 40,095 |     |   |        | 36,744 |    
|                                            | Effect of dilutive common shares: |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |        |    
|                                            |                                   | Stock options                                  |        |                    | 589 |                   |       |        | 338 |      |        |        | 508 |   |        |        | 344 | 
|                                            |                                   | Contracts that may be settled in
stock or cash |        |                    | 104 |                   |       |        |    |      |        |        | 47  |   |        |        |    | 
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|                                            | Diluted                           |                                                |        | 41,334             |     |                   |       | 37,094 |     |      |        | 40,650 |     |   |        | 37,088 |    
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|Earnings per common share:                  |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|                                            | Basic                             |                                                | $      | 0.33               |     |                   | $     | 0.19   |     |      | $      | 0.85   |     |   | $      | 0.63   |    
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       
|                                            | Diluted                           |                                                | $      | 0.33               |     |                   | $     | 0.19   |     |      | $      | 0.84   |     |   | $      | 0.63   |    
|                                            |                                   |                                                |        |                    |     |                   |       |        |     |      |        |        |     |   |        |       

(4) Comprehensive Income

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

|                         |                                                   |   |                    |      |                   |   |       |     |      |   |        |      |   |   |        |       |  
|------------------------ | ------------------------------------------------- | - | ------------------ | ---- | ----------------- | - | ----- | --- | ---- | - | ------ | ---- | - | - | ------ | ----- | -
|                         |                                                   |   | Three Months Ended |      | Nine Months Ended
|                         |                                                   |   | September 30,      |      | September 30,    
|                         |                                                   |   |                    |      |                  
|                         |                                                   |   | 2003               |      | 2002              |   | 2003  |     | 2002
|                         |                                                   |   |                    |      |                   |   |       |     |     
|Net income               |                                                   | $ | 13,489             |      |                   | $ | 7,035 |     |      | $ | 34,022 |      |   | $ | 23,165 |      
|                         | Unrealized gain
(loss) on hedging
instruments     |   |                    | 150  |                   |   |       | 645 |      |   |        | (211 | ) |   |        | 1,695 |  
|                         | Less portion of
unrealized loss
(gain) recognized |   |                    | (129 | )                 |   |       | (5  | )    |   |        | 129  |   |   |        | (159  | )
|                         |                                                   |   |                    |      |                   |   |       |     |      |   |        |      |   |   |        |      
|Net comprehensive income |                                                   | $ | 13,510             |      |                   | $ | 7,675 |     |      | $ | 33,940 |      |   | $ | 24,701 |      
|                         |                                                   |   |                    |      |                   |   |       |     |      |   |        |      |   |   |        |      

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

(5) Interest Rate Hedging Agreements

The Company entered into three no-fee swap agreements (Swap Agreements),
whereby the Company pays to the counter party amounts based on fixed interest
rates and set notional principal amounts in exchange for the receipt of
payments from the counter party based on London interbank offer rates (LIBOR)
and the same set notional principal amounts. A summary of these agreements is
as follows:

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|                    |  |                  |            |                  |  |               |            |  |  |  |            | 
|------------------- |  | ---------------- | ---------- | ---------------- |  | ------------- | ---------- |  |  |  | ---------- | 
|                    |  | Swap #1          |            | Swap #2          |  | Swap #3      
|                    |  |                  |            |                  |  |              
|Fixed interest rate |  |                  | 2.22%      |                  |  |               | 1.72%      |  |  |  | 1.51%      | 
|Notional amount     |  | $40.0 million    |            | $20.0 million    |  | $20.0 million
|Effective date      |  |                  | 11/29/2002 |                  |  |               | 05/30/2003 |  |  |  | 05/30/2003 | 
|Expiration date     |  |                  | 11/29/2004 |                  |  |               | 05/31/2005 |  |  |  | 05/31/2005 | 
|Counter party       |  | Wells Fargo Bank |            | Wells Fargo Bank |  | Goldman Sachs

Swap #2 and Swap #3 qualify for hedge accounting and the Company considers
these to be cash-flow hedging instruments. Prior to May 2003, Swap #1 was also
considered to be a cash-flow hedging instrument. At that time, management
determined that Swap #1 was no longer an effective tool for mitigating interest
rate risk within an acceptable degree of variance because the projected LIBOR
rates at May 2003 for the remaining term of the contract, June 2003 through
November 2004, were materially different from the LIBOR projections made at the
inception of the contract for this same time period. This difference in LIBOR
projections was a result of changes in the interest rate environment which
occurred from November 2002 through May 2003. As a result of this
determination, Swap #1 no longer qualifies for hedge accounting and all changes
in its market value are recognized as income or expense in the period of
change.

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

The valuations of the Swap Agreements and the Collar Agreement were
determined by the counter parties. At September 30, 2003 and December 31,
2002, the fair market values of the Swap Agreements resulted in a liability
from interest rate hedging activities of $524,000 and $313,000, respectively.
As a result of the Companys interest rate hedging activities, it recognized an
unrealized gain of $129,000 and $5,000 during the three months ended September
30, 2003 and 2002, respectively, and it recognized an unrealized loss of
$129,000 and an unrealized gain of $159,000 during the nine months ended
September 30, 2003 and 2002, respectively. These charges have been reported as
part of other (income) expense.

The Company made payments under the Swap Agreements amounting to $165,000
for the three months ended September 30, 2003 and $352,000 for the nine months
ended September 30, 2003, resulting from LIBOR being below the fixed interest
rate. The Company made payments under the Collar Agreement amounting to
$666,000 for the three months ended September 30, 2002 and $1.9 million for the
nine months ended September 30, 2002 resulting from LIBOR being below the floor
interest rate of 5.9%. These payments have been reported as part of interest
expense.

(6) Lines of Business

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

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

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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 September 30, 2003 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 46,429     |        |          | $ | 89,079    |        |              | $ |       |         |              | $ | (2,605 | ) |  | $ | 132,903 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 25,870     |        |          |   | 65,445    |        |              |   |       |         |              |   | (2,605 | ) |  |   | 88,710  |       
|                                      | Selling, general and administrative             |                         |   | 2,826      |        |          |   | 2,492     |        |              |   | 3,613  |         |              |   |       |   |  |   | 8,931   |       
|                                      | Depreciation and amortization                   |                         |   | 823        |        |          |   | 2,387     |        |              |   | 369    |         |              |   |       |   |  |   | 3,579   |       
|                                      | Write-down and loss on sale of assets           |                         |   | 39         |        |          |   | 403       |        |              |   |       |         |              |   |       |   |  |   | 442     |       
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      |                                                 | Operating income (loss) |   | $          | 16,871 |          |   | $         | 18,352 |              |   | $      | (3,982  | )            |   | $      |  |  |   | $       | 31,241 | 
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |         |       
|                                      | Capital expenditures                            |                         | $ | 621        |        |          | $ | 3,900     |        |              | $ | 351    |         |              | $ |       |   |  | $ | 4,872   |       
|Three Months Ended September 30, 2002 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 38,650     |        |          | $ | 78,118    |        |              | $ | 500    |         |              | $ | (2,296 | ) |  | $ | 114,972 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 21,849     |        |          |   | 57,604    |        |              |   |       |         |              |   | (2,296 | ) |  |   | 77,157  |       
|                                      | Selling, general and administrative             |                         |   | 2,563      |        |          |   | 2,359     |        |              |   | 3,810  |         |              |   |       |   |  |   | 8,732   |       
|                                      | Depreciation and amortization                   |                         |   | 715        |        |          |   | 1,961     |        |              |   | 352    |         |              |   |       |   |  |   | 3,028   |       
|                                      | Loss (gain) on sale of assets                   |                         |   | 24         |        |          |   | 9         |        |              |   | (113   | )       |              |   |       |   |  |   | (80     | )     
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      |                                                 | Operating income (loss) |   | $          | 13,499 |          |   | $         | 16,185 |              |   | $      | (3,549  | )            |   | $      |  |  |   | $       | 26,135 | 
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |         |       
|                                      | Capital expenditures                            |                         | $ | 4,501      |        |          | $ | 2,417     |        |              | $ | 283    |         |              | $ |       |   |  | $ | 7,201   |       
|Nine Months Ended September 30, 2003  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 134,818    |        |          | $ | 254,231   |        |              | $ |       |         |              | $ | (7,783 | ) |  | $ | 381,266 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 74,142     |        |          |   | 188,606   |        |              |   |       |         |              |   | (7,783 | ) |  |   | 254,965 |       
|                                      | Selling, general and administrative             |                         |   | 8,330      |        |          |   | 7,514     |        |              |   | 11,540 |         |              |   |       |   |  |   | 27,384  |       
|                                      | Depreciation and amortization                   |                         |   | 2,376      |        |          |   | 7,168     |        |              |   | 1,109  |         |              |   |       |   |  |   | 10,653  |       
|                                      | Write-down and loss (gain) on sale of assets    |                         |   | 58         |        |          |   | 225       |        |              |   | (1     | )       |              |   |       |   |  |   | 282     |       
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      |                                                 | Operating income (loss) |   | $          | 49,912 |          |   | $         | 50,718 |              |   | $      | (12,648 | )            |   | $      |  |  |   | $       | 87,982 | 
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |         |       
|                                      | Capital expenditures                            |                         | $ | 2,385      |        |          | $ | 7,258     |        |              | $ | 1,397  |         |              | $ |       |   |  | $ | 11,040  |       
|Nine Months Ended September 30, 2002  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 116,911    |        |          | $ | 225,383   |        |              | $ | 1,500  |         |              | $ | (6,902 | ) |  | $ | 336,892 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 65,545     |        |          |   | 168,106   |        |              |   |       |         |              |   | (6,902 | ) |  |   | 226,749 |       
|                                      | Selling, general and administrative             |                         |   | 7,632      |        |          |   | 7,351     |        |              |   | 10,910 |         |              |   |       |   |  |   | 25,893  |       
|                                      | Depreciation and amortization                   |                         |   | 2,138      |        |          |   | 6,166     |        |              |   | 1,026  |         |              |   |       |   |  |   | 9,330   |       
|                                      | Loss (gain) on sale of assets                   |                         |   | 24         |        |          |   | 9         |        |              |   | (113   | )       |              |   |       |   |  |   | (80     | )     
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |         |       
|                                      |                                                 | Operating income (loss) |   | $          | 41,572 |          |   | $         | 43,751 |              |   | $      | (10,323 | )            |   | $      |  |  |   | $       | 75,000 | 
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |              |   |        |   |  |   |         |       
|                                      | Capital expenditures                            |                         | $ | 5,931      |        |          | $ | 6,372     |        |              | $ | 1,102  |         |              | $ |       |   |  | $ | 13,405  |       

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|                      |                     |  |            |         |          |  |           |         |              |  |       |        |              |  |   |   |  |  |   |         | 
|--------------------- | ------------------- |  | ---------- | ------- | -------- |  | --------- | ------- | ------------ |  | ----- | ------ | ------------ |  | - | - |  |  | - | ------- | 
|                      |                     |  |            |         |          |  | Animal    |         |              |  |       |        | Intercompany |  |   |   | 
|                      |                     |  | Laboratory |         | Hospital |  | Corporate |         | Eliminations |  | Total
|                      |                     |  |            |         |          |  |           |         |              |  |      
|At September 30, 2003 |                     |  |            |         |          |  |           |         |              |  |       |        |              |  |   |   |  |  |   |        
|                      | Identifiable assets |  | $          | 131,132 |          |  | $         | 371,865 |              |  | $     | 42,851 |              |  | $ |  |  |  | $ | 545,848 | 
|At December 31, 2002  |                     |  |            |         |          |  |           |         |              |  |       |        |              |  |   |   |  |  |   |        
|                      | Identifiable assets |  | $          | 117,443 |          |  | $         | 350,980 |              |  | $     | 39,005 |              |  | $ |  |  |  | $ | 507,428 | 

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

|                                                  |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        |  
|------------------------------------------------- |  | ------------------ | ------ | ----------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | -
|                                                  |  | Three Months Ended |        | Nine Months Ended
|                                                  |  | September 30,      |        | September 30,    
|                                                  |  |                    |        |                  
|                                                  |  | 2003               |        | 2002              |  | 2003 |        | 2002
|                                                  |  |                    |        |                   |  |      |        |     
|Total segment operating income after
eliminations |  | $                  | 31,241 |                   |  | $    | 26,135 |      |  | $ | 87,982 |  |  | $ | 75,000 |  
|Interest expense, net                             |  |                    | 6,361  |                   |  |      | 10,208 |      |  |   | 19,771 |  |  |   | 30,541 |  
|Debt retirement costs                             |  |                    | 1,701  |                   |  |      | 3,391  |      |  |   | 9,118  |  |  |   | 3,391  |  
|Other (income) expense                            |  |                    | (129   | )                 |  |      | (5     | )    |  |   | 129    |  |  |   | (159   | )
|Minority interest in income of subsidiaries       |  |                    | 456    |                   |  |      | 430    |      |  |   | 1,279  |  |  |   | 1,360  |  
|                                                  |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        |  
|Income before provision for income taxes          |  | $                  | 22,852 |                   |  | $    | 12,111 |      |  | $ | 57,685 |  |  | $ | 39,867 |  
|                                                  |  |                    |        |                   |  |      |        |      |  |   |        |  |  |   |        |  

(7) Refinancing, Secondary Offering and Debt Retirement

In August 2003, the Company refinanced its senior credit facility retiring
$166.4 million principal balance outstanding under the senior term C notes with
$20.0 million of cash on-hand and $146.4 million received from the issuance of
new senior term D notes, with an interest rate margin of 2.5% compared to 3.0%
for the senior term C notes. In conjunction with that transaction, the Company
recorded debt retirement costs of $1.7 million.

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

(8) Goodwill and Other Intangible Assets

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

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

|                                                 |  |            |        |          |  |        |         |  |  |   |         | 
|------------------------------------------------ |  | ---------- | ------ | -------- |  | ------ | ------- |  |  | - | ------- | 
|                                                 |  |            |        |          |  | Animal |         |  |  |  
|                                                 |  | Laboratory |        | Hospital |  | Total 
|                                                 |  |            |        |          |  |       
|Balance as of January 1, 2003                    |  | $          | 87,313 |          |  | $      | 255,301 |  |  | $ | 342,614 | 
|Goodwill acquired and purchase
price adjustments |  |            | 7,263  |          |  |        | 20,132  |  |  |   | 27,395  | 
|                                                 |  |            |        |          |  |        |         |  |  |   |         | 
|Balance as of September 30, 2003                 |  | $          | 94,576 |          |  | $      | 275,433 |  |  | $ | 370,009 | 
|                                                 |  |            |        |          |  |        |         |  |  |   |         | 

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

|                         |       |   |                          |        |              |   |              |        |   |   |       |       | 
|------------------------ | ----- | - | ------------------------ | ------ | ------------ | - | ------------ | ------ | - | - | ----- | ----- | 
|                         |       |   | As of September 30, 2003
|                         |       |   |                         
|                         |       |   | Gross Carrying           |        | Accumulated  |   | Net Carrying
|                         |       |   | Amount                   |        | Amortization |   | Amount      
|                         |       |   |                          |        |              |   |             
|Covenants not to compete |       | $ | 13,374                   |        |              | $ | (8,343       | )      |   | $ | 5,031 |      
|Client lists             |       |   | 594                      |        |              |   | (515         | )      |   |   | 79    |      
|                         |       |   |                          |        |              |   |              |        |   |   |       |      
|                         | Total |   | $                        | 13,968 |              |   | $            | (8,858 | ) |   | $     | 5,110 | 
|                         |       |   |                          |        |              |   |              |        |   |   |       |      

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

|                               |  |                    |     |                   |  |      |     |      |  |   |       |  |  |   |       | 
|------------------------------ |  | ------------------ | --- | ----------------- |  | ---- | --- | ---- |  | - | ----- |  |  | - | ----- | 
|                               |  | Three Months Ended |     | Nine Months Ended
|                               |  | September 30,      |     | September 30,    
|                               |  |                    |     |                  
|                               |  | 2003               |     | 2002              |  | 2003 |     | 2002
|                               |  |                    |     |                   |  |      |     |     
|Aggregate amortization expense |  | $                  | 476 |                   |  | $    | 277 |      |  | $ | 1,391 |  |  | $ | 1,297 | 

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

|     |  |   |       | 
|---- |  | - | ----- | 
|2003 |  | $ | 1,849 | 
|2004 |  | $ | 1,568 | 
|2005 |  | $ | 1,177 | 
|2006 |  | $ | 802   | 
|2007 |  | $ | 591   | 

(9) Accounting Pronouncements

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

In May 2003, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.SFAS No. 150 clarifies the accounting for certain financial
instruments with characteristics of both liabilities and equity and requires
that those instruments be classified as liabilities. SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. The Company currently has a $2.3 million obligation to be
settled in either cash or common stock that is classified as a liability. In
addition, the Company has certain partnerships in non-wholly owned subsidiaries
whereby the Company is required under the terms of the respective partnership
agreements to purchase the partners equity in the partnership in the event of
the partners death. Under SFAS No. 150, the Company is required to recognize
these obligations as liabilities in its financial statements at fair market
value. Currently, the Company is recognizing these liabilities as a component
of minority interest.

b.     Accounting for Derivative Instruments and Hedging Activities

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

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c.     Consolidations of Variable Interest Entities

In January 2003, the FASB issued FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities,requiring that companies
consolidate variable interest entities if they are the primary beneficiaries,
as defined under FIN No. 46, of the activities of the variable interest
entities. Companies are required to apply FIN No. 46 immediately for all
variable interest entities created after January 31, 2003 and per FASB Staff
Position FIN No. 46-6 issued in October 2003, as of the first annual period
ending after December 15, 2003 for all other variable interest entities.

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

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

|                                                |  |                                              |         |                 |  |            |         |  |  |   |        | 
|----------------------------------------------- |  | -------------------------------------------- | ------- | --------------- |  | ---------- | ------- |  |  | - | ------ | 
|                                                |  | For the Nine Months Ended September 30, 2003
|                                                |  |                                             
|                                                |  | As Reported                                  |         | As Consolidated |  | Difference
|                                                |  |                                              |         |                 |  |           
|Revenue                                         |  | $                                            | 381,266 |                 |  | $          | 412,224 |  |  | $ | 30,958 | 
|Direct costs (excluding
operating depreciation) |  | $                                            | 254,965 |                 |  | $          | 285,923 |  |  | $ | 30,958 | 
|Operating income                                |  | $                                            | 87,982  |                 |  | $          | 87,982  |  |  | $ |       | 

d.     Guarantors Accounting and Disclosure Requirements for Guarantees

In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002 for periods ending after
December 15, 2002.

The Company has guaranteed all liabilities for certain veterinary medical
groups for which it provides management services. All of these liabilities
have been included in the Companys condensed, consolidated financial
statements. The Company pays these liabilities and recovers money spent
through the management fee charged to the veterinary medical groups. The
Company does not expect FIN No. 45 to have a material impact on its financial
statements in the future.

e.     Consideration Received from a Vendor

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



| |  |  | cash received from a vendor is presumed to be a reduction of
the cost of the vendors products or services, however that
presumption is overcome when the consideration is either a) payment
for assets or services, in which case the consideration is
characterized as revenue, or b) a reimbursement of
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | specific and
identifiable costs incurred on behalf of the vendor in selling the
vendors products or services, in which case the consideration is a
reduction of that cost; and                                             
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | rebates offered to a customer or reseller should be
recognized as a reduction of the cost of sales based on a systematic
and rational allocation provided that the amounts recognized are
probable and reasonably estimable.

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

f.     Costs Associated with Exit or Disposal Activities

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

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

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

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

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

During the nine months ended September 30, 2003, the Company made two
significant changes to its capital structure:



| |  |  | in August 2003, the Company refinanced its senior credit
facility voluntarily repaying $20.0 million of senior term C notes
and retiring the remaining senior term C notes with senior term D
notes, resulting in debt retirement costs of approximately $1.7
million; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in February 2003, the Company redeemed the remaining
principal amount outstanding of its 15.5% senior notes with proceeds
from its secondary offering resulting in debt retirement costs of
approximately $7.4 million.                                                   

Management has concluded that these debt retirement costs do not qualify
for extraordinary treatment under APB No. 30 because management has
historically changed the Companys capital structure to take advantage of
favorable market conditions and it is probable that it will continue to do so
in the future. As a result, these costs for all periods presented have been
included as a component from recurring operations in the Condensed,
Consolidated Income Statements.

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SFAS No. 145 also amends SFAS No. 13, Accounting for Leases.Under SFAS
No. 145, if a capital lease is modified such that it becomes an operating
lease, a gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At
September 30, 2003, the Company had capital lease obligations of $333,000;
however, the Company currently has no plans to modify these or any future
capital leases.

h.     Asset Retirement Obligations

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

(10) Stock-Based Compensation

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

|                           |                                                                                                                                             |   |                    |        |                   |   |       |       |      |   |        |        |   |   |        |        |  
|-------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ----------------- | - | ----- | ----- | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                           |                                                                                                                                             |   | Three Months Ended |        | Nine Months Ended
|                           |                                                                                                                                             |   | September 30,      |        | September 30,    
|                           |                                                                                                                                             |   |                    |        |                  
|                           |                                                                                                                                             |   | 2003               |        | 2002              |   | 2003  |       | 2002
|                           |                                                                                                                                             |   |                    |        |                   |   |       |       |     
|As reported                |                                                                                                                                             | $ | 13,489             |        |                   | $ | 7,035 |       |      | $ | 34,022 |        |   | $ | 23,165 |       
|                           | Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects |   |                    | (216   | )                 |   |       | (25   | )    |   |        | (644   | ) |   |        | (62    | )
|                           |                                                                                                                                             |   |                    |        |                   |   |       |       |      |   |        |        |   |   |        |       
|                           | Pro forma net income available to common stockholders                                                                                       |   | $                  | 13,273 |                   |   | $     | 7,010 |      |   | $      | 33,378 |   |   | $      | 23,103 |  
|                           |                                                                                                                                             |   |                    |        |                   |   |       |       |      |   |        |        |   |   |        |       
|Earnings per common share: |                                                                                                                                             |   |                    |        |                   |   |       |       |      |   |        |        |   |   |        |       
|                           | Basic - as reported                                                                                                                         |   | $                  | 0.33   |                   |   | $     | 0.19  |      |   | $      | 0.85   |   |   | $      | 0.63   |  
|                           | Basic - pro forma                                                                                                                           |   | $                  | 0.33   |                   |   | $     | 0.19  |      |   | $      | 0.83   |   |   | $      | 0.63   |  
|                           | Diluted - as reported                                                                                                                       |   | $                  | 0.33   |                   |   | $     | 0.19  |      |   | $      | 0.84   |   |   | $      | 0.63   |  
|                           | Diluted - pro forma                                                                                                                         |   | $                  | 0.32   |                   |   | $     | 0.19  |      |   | $      | 0.82   |   |   | $      | 0.62   |  

(11) Commitments and Contingencies

a.     State Laws

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

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a material adverse effect, particularly if the Company were
unable to restructure its operations to comply with the requirements of that
state.

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

b.     Other Contingencies

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

(12) Reclassifications

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

(13) Subsequent Events

From October 1, 2003 through November 10, 2003, the Company acquired two
animal hospitals, one of which was merged into an existing animal hospital upon
acquisition. Including acquisition costs, the Company paid an aggregate
consideration of $2.6 million, consisting of $2.5 million in cash and $65,000
in certain obligations to sellers and other liabilities assumed.

(14) Condensed, Consolidating Information

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

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

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

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

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

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

|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         |         | 
|------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ------ | ------ | ------ |  | ----- | -------- | -------- | - | ------- | ------- | ------- | 
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        | Non-   |        |  |       |          |          |   |         |        
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |        |        |        |  |       |          |          |  
|                                            |                                                                         |                                            |        | VCA     |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |             
|Current assets:                             |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            | Cash and cash equivalents                                               |                                            | $      |        |         |       | $        | 16,401       |         |              | $       | 1,922       |         |              | $      | 122    |        |  | $     |         |          |   | $       | 18,445  |        
|                                            | Trade accounts receivable, net                                          |                                            |        |        |         |       |          | 10           |         |              |         | 23,378      |         |              |        | 543    |        |  |       |         |          |   |         | 23,931  |        
|                                            | Inventory, prepaid expenses and other                                   |                                            |        |        |         |       |          | 2,464        |         |              |         | 6,267       |         |              |        | 544    |        |  |       |         |          |   |         | 9,275   |        
|                                            | Deferred income taxes                                                   |                                            |        |        |         |       |          | 11,697       |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 11,697  |        
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            |                                                                         | Total current assets                       |        |         |        |       |          |              | 30,572  |              |         |             | 31,567  |              |        |        | 1,209  |  |       |          |         |   |         |         | 63,348  | 
|                                            | Property and equipment, net                                             |                                            |        |        |         |       |          | 7,055        |         |              |         | 89,534      |         |              |        | 1,821  |        |  |       |         |          |   |         | 98,410  |        
|                                            | Goodwill, net                                                           |                                            |        |        |         |       |          |             |         |              |         | 347,904     |         |              |        | 22,105 |        |  |       |         |          |   |         | 370,009 |        
|                                            | Covenants not to compete, net                                           |                                            |        |        |         |       |          |             |         |              |         | 4,394       |         |              |        | 637    |        |  |       |         |          |   |         | 5,031   |        
|                                            | Deferred financing costs, net                                           |                                            |        |        |         |       |          | 4,766        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 4,766   |        
|                                            | Other                                                                   |                                            |        | 31      |         |       |          | 427          |         |              |         | 2,445       |         |              |        | 2,296  |        |  |       | (915     | )        |   |         | 4,284   |        
|                                            | Investment in subsidiaries                                              |                                            |        | 193,740 |         |       |          | 298,288      |         |              |         | 23,733      |         |              |        |       |        |  |       | (515,761 | )        |   |         |        |        
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            |                                                                         | Total assets                               |        | $       | 193,771 |       |          | $            | 341,108 |              |         | $           | 499,577 |              |        | $      | 28,068 |  |       | $        | (516,676 | ) |         | $       | 545,848 | 
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         |        
|Current liabilities:                        |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            | Current portion of long-term obligations                                |                                            | $      |        |         |       | $        | 1,543        |         |              | $       | 902         |         |              | $      |       |        |  | $     |         |          |   | $       | 2,445   |        
|                                            | Accounts payable                                                        |                                            |        |        |         |       |          | 6,560        |         |              |         | 2,365       |         |              |        |       |        |  |       |         |          |   |         | 8,925   |        
|                                            | Accrued payroll and related liabilities                                 |                                            |        |        |         |       |          | 9,546        |         |              |         | 5,992       |         |              |        | 317    |        |  |       |         |          |   |         | 15,855  |        
|                                            | Accrued interest                                                        |                                            |        |        |         |       |          | 5,713        |         |              |         | 42          |         |              |        | 2      |        |  |       |         |          |   |         | 5,757   |        
|                                            | Income taxes payable                                                    |                                            |        |        |         |       |          | 1,232        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 1,232   |        
|                                            | Other accrued liabilities                                               |                                            |        |        |         |       |          | 11,826       |         |              |         | 5,980       |         |              |        | 77     |        |  |       |         |          |   |         | 17,883  |        
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            |                                                                         | Total current liabilities                  |        |         |        |       |          |              | 36,420  |              |         |             | 15,281  |              |        |        | 396    |  |       |          |         |   |         |         | 52,097  | 
|Long-term obligations, less current portion |                                                                         |                                            |       |         |         |       | 314,837  |              |         |              | 1,585   |             |         |              |       |        |        |  | (915  | )        |          |   | 315,507 |        
|Deferred income taxes                       |                                                                         |                                            |       |         |         |       | 19,316   |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 19,316  |        
|Other liabilities                           |                                                                         |                                            |       |         |         |       | 2,007    |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 2,007   |        
|Intercompany payable/(receivable)           |                                                                         |                                            | 42,281 |         |         |       | (225,212 | )            |         |              | 184,423 |             |         |              | (1,492 | )      |        |  |      |          |          |   |        |        
|Minority interest                           |                                                                         |                                            |       |         |         |       |         |              |         |              |        |             |         |              |       |        |        |  | 5,431 |          |          |   | 5,431   |        
|Stockholders equity:                       |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            | Common stock                                                            |                                            |        | 41      |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 41      |        
|                                            | Additional paid-in capital                                              |                                            |        | 243,345 |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 243,345 |        
|                                            | Accumulated equity (deficit)                                            |                                            |        | (91,732 | )       |       |          | 193,822      |         |              |         | 298,288     |         |              |        | 29,164 |        |  |       | (521,274 | )        |   |         | (91,732 | )      
|                                            | Accumulated comprehensive loss -
unrealized loss on hedging instruments |                                            |        | (82     | )       |       |          | (82          | )       |              |         |            |         |              |        |       |        |  |       | 82       |          |   |         | (82     | )      
|                                            | Notes receivable from stockholders                                      |                                            |        | (82     | )       |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | (82     | )      
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            |                                                                         | Total stockholders equity                 |        |         | 151,490 |       |          |              | 193,740 |              |         |             | 298,288 |              |        |        | 29,164 |  |       |          | (521,192 | ) |         |         | 151,490 | 
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                            |                                                                         | Total liabilities and stockholders
equity |        | $       | 193,771 |       |          | $            | 341,108 |              |         | $           | 499,577 |              |        | $      | 28,068 |  |       | $        | (516,676 | ) |         | $       | 545,848 | 
|                                            |                                                                         |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         |        

14



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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


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

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

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##### Table of Contents



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

CONDENSED, CONSOLIDATING INCOME STATEMENTS
For the Three Months Ended September 30, 2003
(Unaudited)
(In thousands)

|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |        |        | 
|-------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ------ | ------ | - | ----- | ------ | ------------ | ------ | ------------ | ------- | ----------- | ------ | ------------ | ----- | ----- | ----- | - | ------- | ------- | - | - | ------- | ------ | ------ | 
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       | Non-  |       |   |         |         |   |   |         |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         | Guarantor   |        | Guarantor    |       |       |       |   |         |         |   |  
|                                             |                                                                |                         |        | VCA    |   | Vicar |        | Subsidiaries |        | Subsidiaries |         | Elimination |        | Consolidated
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |             
|Revenue                                      |                                                                | $                       |       |        |   | $     |       |              |        | $            | 123,810 |             |        | $            | 9,342 |       |       | $ | (249    | )       |   | $ | 132,903 |       
|Direct costs                                 |                                                                |                         |       |        |   |       |       |              |        |              | 82,206  |             |        |              | 6,753 |       |       |   | (249    | )       |   |   | 88,710  |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       
|                                             |                                                                |                         |       |        |   |       |       |              |        |              | 41,604  |             |        |              | 2,589 |       |       |   |        |         |   |   | 44,193  |       
|Selling, general and administrative          |                                                                |                         |       |        |   |       | 3,613  |              |        |              | 4,917   |             |        |              | 401   |       |       |   |        |         |   |   | 8,931   |       
|Depreciation and amortization                |                                                                |                         |       |        |   |       | 369    |              |        |              | 3,052   |             |        |              | 158   |       |       |   |        |         |   |   | 3,579   |       
|Write-down and loss (gain) on sale of assets |                                                                |                         |       |        |   |       |       |              |        |              | 442     |             |        |              |      |       |       |   |        |         |   |   | 442     |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       
|                                             |                                                                | Operating income (loss) |        |        |  |       |        |              | (3,982 | )            |         |             | 33,193 |              |       |       | 2,030 |   |         |         |  |   |         |        | 31,241 | 
|Interest expense, net                        |                                                                |                         | (2     | )      |   |       | 6,354  |              |        |              | 38      |             |        |              | (29   | )     |       |   |        |         |   |   | 6,361   |       
|Debt retirement costs                        |                                                                |                         |       |        |   |       | 1,701  |              |        |              |        |             |        |              |      |       |       |   |        |         |   |   | 1,701   |       
|Other income                                 |                                                                |                         |       |        |   |       | (129   | )            |        |              |        |             |        |              |      |       |       |   |        |         |   |   | (129    | )     
|Equity interest in income of subsidiaries    |                                                                |                         | 13,488 |        |   |       | 20,541 |              |        |              | 1,603   |             |        |              |      |       |       |   | (35,632 | )       |   |   |        |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       
|                                             | Income before minority interest and
provision for income taxes |                         |        | 13,490 |   |       |        | 8,633        |        |              |         | 34,758      |        |              |       | 2,059 |       |   |         | (35,632 | ) |   |         | 23,308 |       
|Minority interest in income of subsidiaries  |                                                                |                         |       |        |   |       |       |              |        |              |        |             |        |              |      |       |       |   | 456     |         |   |   | 456     |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       
|                                             | Income before provision for income taxes                       |                         |        | 13,490 |   |       |        | 8,633        |        |              |         | 34,758      |        |              |       | 2,059 |       |   |         | (36,088 | ) |   |         | 22,852 |       
|Provision (benefit) for income taxes         |                                                                |                         | 1      |        |   |       | (4,855 | )            |        |              | 14,217  |             |        |              |      |       |       |   |        |         |   |   | 9,363   |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       
|                                             | Net income                                                     |                         | $      | 13,489 |   |       | $      | 13,488       |        |              | $       | 20,541      |        |              | $     | 2,059 |       |   | $       | (36,088 | ) |   | $       | 13,489 |       
|                                             |                                                                |                         |        |        |   |       |        |              |        |              |         |             |        |              |       |       |       |   |         |         |   |   |         |       

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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED,
CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
CONDENSED, CONSOLIDATING INCOME STATEMENTS
For the Three Months Ended September 30, 2002
(Unaudited)
(In thousands)


|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |        | 
|------------------------------------------- | -------------------------------------------------------------- | - | ----- | ----- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ------ | ------------ | - | ----- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   | Non-  |       |  |   |         |         |   |   |        
|                                            |                                                                |   |       |       |       |   |              |        |              |   | Guarantor   |        | Guarantor    |   |       |       |  |   |         |         |  
|                                            |                                                                |   | VCA   |       | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |        | Consolidated
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |             
|Revenue                                     |                                                                | $ |      |       |       | $ | 500          |        |              | $ | 105,480     |        |              | $ | 9,228 |       |  | $ | (236    | )       |   | $ | 114,972 |       
|Direct costs                                |                                                                |   |      |       |       |   |             |        |              |   | 70,573      |        |              |   | 6,820 |       |  |   | (236    | )       |   |   | 77,157  |       
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            |                                                                |   |      |       |       |   | 500          |        |              |   | 34,907      |        |              |   | 2,408 |       |  |   |        |         |   |   | 37,815  |       
|Selling, general and administrative         |                                                                |   |      |       |       |   | 3,810        |        |              |   | 4,551       |        |              |   | 371   |       |  |   |        |         |   |   | 8,732   |       
|Depreciation and amortization               |                                                                |   |      |       |       |   | 352          |        |              |   | 2,497       |        |              |   | 179   |       |  |   |        |         |   |   | 3,028   |       
|Loss (gain) on sale of assets               |                                                                |   |      |       |       |   | (113         | )      |              |   | 33          |        |              |   |      |       |  |   |        |         |   |   | (80     | )     
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Operating income (loss)                                        |   |       |      |       |   |              | (3,549 | )            |   |             | 27,826 |              |   |       | 1,858 |  |   |         |        |   |   |         | 26,135 | 
|Interest expense, net                       |                                                                |   | 2,408 |       |       |   | 7,813        |        |              |   | 21          |        |              |   | (34   | )     |  |   |        |         |   |   | 10,208  |       
|Debt retirement costs                       |                                                                |   |      |       |       |   | 3,391        |        |              |   |            |        |              |   |      |       |  |   |        |         |   |   | 3,391   |       
|Other income                                |                                                                |   |      |       |       |   | (5           | )      |              |   |            |        |              |   |      |       |  |   |        |         |   |   | (5      | )     
|Equity interest in income of subsidiaries   |                                                                |   | 8,507 |       |       |   | 17,123       |        |              |   | 1,462       |        |              |   |      |       |  |   | (27,092 | )       |   |   |        |       
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before minority interest and
provision for income taxes |   |       | 6,099 |       |   |              | 2,375  |              |   |             | 29,267 |              |   |       | 1,892 |  |   |         | (27,092 | ) |   |         | 12,541 | 
|Minority interest in income of
subsidiaries |                                                                |   |      |       |       |   |             |        |              |   |            |        |              |   |      |       |  |   | 430     |         |   |   | 430     |       
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before provision for
income taxes                       |   |       | 6,099 |       |   |              | 2,375  |              |   |             | 29,267 |              |   |       | 1,892 |  |   |         | (27,522 | ) |   |         | 12,111 | 
|Provision (benefit) for income taxes        |                                                                |   | (936  | )     |       |   | (6,132       | )      |              |   | 12,144      |        |              |   |      |       |  |   |        |         |   |   | 5,076   |       
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Net income                                                     |   | $     | 7,035 |       |   | $            | 8,507  |              |   | $           | 17,123 |              |   | $     | 1,892 |  |   | $       | (27,522 | ) |   | $       | 7,035  | 
|                                            |                                                                |   |       |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       

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##### Table of Contents



VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


CONDENSED, CONSOLIDATING INCOME STATEMENTS
For the Nine Months Ended September 30, 2003
(Unaudited)
(In thousands)

|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |        |        | 
|------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ------ | ------ | - | ----- | ------- | ------------ | ------- | ------------ | ------- | ----------- | ------ | ------------ | ------ | ----- | ----- | - | -------- | -------- | - | - | ------- | ------ | ------ | 
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        | Non-  |       |   |          |          |   |   |         |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         | Guarantor   |        | Guarantor    |        |       |       |   |          |          |   |  
|                                            |                                                                |                         |        | VCA    |   | Vicar |         | Subsidiaries |         | Subsidiaries |         | Elimination |        | Consolidated
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |             
|Revenue                                     |                                                                | $                       |       |        |   | $     |        |              |         | $            | 355,113 |             |        | $            | 26,877 |       |       | $ | (724     | )        |   | $ | 381,266 |       
|Direct costs                                |                                                                |                         |       |        |   |       |        |              |         |              | 236,076 |             |        |              | 19,613 |       |       |   | (724     | )        |   |   | 254,965 |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       
|                                            |                                                                |                         |       |        |   |       |        |              |         |              | 119,037 |             |        |              | 7,264  |       |       |   |         |          |   |   | 126,301 |       
|Selling, general and administrative         |                                                                |                         |       |        |   |       | 11,540  |              |         |              | 14,714  |             |        |              | 1,130  |       |       |   |         |          |   |   | 27,384  |       
|Depreciation and amortization               |                                                                |                         |       |        |   |       | 1,109   |              |         |              | 9,070   |             |        |              | 474    |       |       |   |         |          |   |   | 10,653  |       
|Write-down and (gain) on sale of assets     |                                                                |                         |       |        |   |       | (1      | )            |         |              | 283     |             |        |              |       |       |       |   |         |          |   |   | 282     |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       
|                                            |                                                                | Operating income (loss) |        |        |  |       |         |              | (12,648 | )            |         |             | 94,970 |              |        |       | 5,660 |   |          |          |  |   |         |        | 87,982 | 
|Interest expense, net                       |                                                                |                         | 524    |        |   |       | 19,247  |              |         |              | 104     |             |        |              | (104   | )     |       |   |         |          |   |   | 19,771  |       
|Debt retirement costs                       |                                                                |                         | 7,417  |        |   |       | 1,701   |              |         |              |        |             |        |              |       |       |       |   |         |          |   |   | 9,118   |       
|Other expense                               |                                                                |                         |       |        |   |       | 129     |              |         |              |        |             |        |              |       |       |       |   |         |          |   |   | 129     |       
|Equity interest in income of subsidiaries   |                                                                |                         | 38,707 |        |   |       | 58,617  |              |         |              | 4,485   |             |        |              |       |       |       |   | (101,809 | )        |   |   |        |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       
|                                            | Income before minority interest and
provision for income taxes |                         |        | 30,766 |   |       |         | 24,892       |         |              |         | 99,351      |        |              |        | 5,764 |       |   |          | (101,809 | ) |   |         | 58,964 |       
|Minority interest in income of subsidiaries |                                                                |                         |       |        |   |       |        |              |         |              |        |             |        |              |       |       |       |   | 1,279    |          |   |   | 1,279   |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       
|                                            | Income before provision for income taxes                       |                         |        | 30,766 |   |       |         | 24,892       |         |              |         | 99,351      |        |              |        | 5,764 |       |   |          | (103,088 | ) |   |         | 57,685 |       
|Provision (benefit) for income taxes        |                                                                |                         | (3,256 | )      |   |       | (13,815 | )            |         |              | 40,734  |             |        |              |       |       |       |   |         |          |   |   | 23,663  |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       
|                                            | Net income                                                     |                         | $      | 34,022 |   |       | $       | 38,707       |         |              | $       | 58,617      |        |              | $      | 5,764 |       |   | $        | (103,088 | ) |   | $       | 34,022 |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |          |          |   |   |         |       

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

CONDENSED, CONSOLIDATING INCOME STATEMENTS
For the Nine Months Ended September 30, 2002
(Unaudited)
(In thousands)

|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |        |        | 
|------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ------ | ------ | - | ----- | ------- | ------------ | ------- | ------------ | ------- | ----------- | ------ | ------------ | ------ | ----- | ----- | - | ------- | ------- | - | - | ------- | ------ | ------ | 
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        | Non-  |       |   |         |         |   |   |         |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         | Guarantor   |        | Guarantor    |        |       |       |   |         |         |   |  
|                                            |                                                                |                         |        | VCA    |   | Vicar |         | Subsidiaries |         | Subsidiaries |         | Elimination |        | Consolidated
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |             
|Revenue                                     |                                                                | $                       |       |        |   | $     | 1,500   |              |         | $            | 309,421 |             |        | $            | 26,642 |       |       | $ | (671    | )       |   | $ | 336,892 |       
|Direct costs                                |                                                                |                         |       |        |   |       |        |              |         |              | 208,057 |             |        |              | 19,363 |       |       |   | (671    | )       |   |   | 226,749 |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       
|                                            |                                                                |                         |       |        |   |       | 1,500   |              |         |              | 101,364 |             |        |              | 7,279  |       |       |   |        |         |   |   | 110,143 |       
|Selling, general and administrative         |                                                                |                         |       |        |   |       | 10,910  |              |         |              | 13,935  |             |        |              | 1,048  |       |       |   |        |         |   |   | 25,893  |       
|Depreciation and amortization               |                                                                |                         |       |        |   |       | 1,026   |              |         |              | 7,776   |             |        |              | 528    |       |       |   |        |         |   |   | 9,330   |       
|Loss (gain) on sale of assets               |                                                                |                         |       |        |   |       | (113    | )            |         |              | 33      |             |        |              |       |       |       |   |        |         |   |   | (80     | )     
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       
|                                            |                                                                | Operating income (loss) |        |        |  |       |         |              | (10,323 | )            |         |             | 79,620 |              |        |       | 5,703 |   |         |         |  |   |         |        | 75,000 | 
|Interest expense, net                       |                                                                |                         | 6,935  |        |   |       | 23,614  |              |         |              | 83      |             |        |              | (91    | )     |       |   |        |         |   |   | 30,541  |       
|Debt retirement costs                       |                                                                |                         |       |        |   |       | 3,391   |              |         |              |        |             |        |              |       |       |       |   |        |         |   |   | 3,391   |       
|Other income                                |                                                                |                         |       |        |   |       | (159    | )            |         |              |        |             |        |              |       |       |       |   |        |         |   |   | (159    | )     
|Equity interest in income of subsidiaries   |                                                                |                         | 27,257 |        |   |       | 48,854  |              |         |              | 4,434   |             |        |              |       |       |       |   | (80,545 | )       |   |   |        |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       
|                                            | Income before minority interest and
provision for income taxes |                         |        | 20,322 |   |       |         | 11,685       |         |              |         | 83,971      |        |              |        | 5,794 |       |   |         | (80,545 | ) |   |         | 41,227 |       
|Minority interest in income of subsidiaries |                                                                |                         |       |        |   |       |        |              |         |              |        |             |        |              |       |       |       |   | 1,360   |         |   |   | 1,360   |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       
|                                            | Income before provision for income taxes                       |                         |        | 20,322 |   |       |         | 11,685       |         |              |         | 83,971      |        |              |        | 5,794 |       |   |         | (81,905 | ) |   |         | 39,867 |       
|Provision (benefit) for income taxes        |                                                                |                         | (2,843 | )      |   |       | (15,572 | )            |         |              | 35,117  |             |        |              |       |       |       |   |        |         |   |   | 16,702  |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       
|                                            | Net income                                                     |                         | $      | 23,165 |   |       | $       | 27,257       |         |              | $       | 48,854      |        |              | $      | 5,794 |       |   | $       | (81,905 | ) |   | $       | 23,165 |       
|                                            |                                                                |                         |        |        |   |       |         |              |         |              |         |             |        |              |        |       |       |   |         |         |   |   |         |       

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

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

|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |     |   |   |          |   |  |   |        |        | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ----- | ------------ | - | ------ | --- | - | - | -------- | - |  | - | ------ | ------ | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   | Non-   |     |   |   |          |   |  |   |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   | Guarantor   |       | Guarantor    |   |        |     |   |   |          |   | 
|                                      |                                                                                             |                                                     |   | VCA     |         | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |       | Consolidated
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |             
|Cash flows from operating activities: |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |     |   |   |          |   |  |   |       
|                                      | Net income                                                                                  |                                                     | $ | 34,022  |         |       | $ | 38,707       |        |              | $ | 58,617      |       |              | $ | 5,764  |     |   | $ | (103,088 | ) |  | $ | 34,022 |       
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |     |   |   |          |   |  |   |        |       
|                                      | Equity interest in earnings of
subsidiaries                                                 |                                                     |   | (38,707 | )       |       |   | (58,617      | )      |              |   | (4,485      | )     |              |   |       |     |   |   | 101,809  |   |  |   |       |       
|                                      | Depreciation and amortization                                                               |                                                     |   |        |         |       |   | 1,109        |        |              |   | 9,070       |       |              |   | 474    |     |   |   |         |   |  |   | 10,653 |       
|                                      | Amortization of deferred financing costs
and debt discount                                  |                                                     |   | 14      |         |       |   | 655          |        |              |   |            |       |              |   |       |     |   |   |         |   |  |   | 669    |       
|                                      | Provision for uncollectible accounts                                                        |                                                     |   |        |         |       |   |             |        |              |   | 2,134       |       |              |   | 237    |     |   |   |         |   |  |   | 2,371  |       
|                                      | Debt retirement costs                                                                       |                                                     |   | 7,417   |         |       |   | 1,701        |        |              |   |            |       |              |   |       |     |   |   |         |   |  |   | 9,118  |       
|                                      | Write-down of assets                                                                        |                                                     |   |        |         |       |   |             |        |              |   | 392         |       |              |   |       |     |   |   |         |   |  |   | 392    |       
|                                      | Gain of sale of assets                                                                      |                                                     |   |        |         |       |   | (1           | )      |              |   | (109        | )     |              |   |       |     |   |   |         |   |  |   | (110   | )     
|                                      | Minority interest in income of
subsidiaries                                                 |                                                     |   |        |         |       |   |             |        |              |   |            |       |              |   |       |     |   |   | 1,279    |   |  |   | 1,279  |       
|                                      | Distributions to minority interest
partners                                                 |                                                     |   |        |         |       |   | (1,245       | )      |              |   |            |       |              |   |       |     |   |   |         |   |  |   | (1,245 | )     
|                                      | Increase in trade accounts receivable                                                       |                                                     |   |        |         |       |   | (5           | )      |              |   | (4,251      | )     |              |   | (143   | )   |   |   |         |   |  |   | (4,399 | )     
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |                                                     |   | 108     |         |       |   | 100          |        |              |   | (647        | )     |              |   | 1      |     |   |   |         |   |  |   | (438   | )     
|                                      | Increase (decrease) in accounts payable
and other accrued liabilities                       |                                                     |   |        |         |       |   | 1,233        |        |              |   | (1,847      | )     |              |   | 62     |     |   |   |         |   |  |   | (552   | )     
|                                      | Decrease in accrued payroll
and related liabilities                                         |                                                     |   |        |         |       |   | 2,478        |        |              |   | (1,347      | )     |              |   | (10    | )   |   |   |         |   |  |   | 1,121  |       
|                                      | Increase in accrued interest                                                                |                                                     |   |        |         |       |   | 4,166        |        |              |   | 24          |       |              |   | 2      |     |   |   |         |   |  |   | 4,192  |       
|                                      | Decrease in prepaid income taxes                                                            |                                                     |   |        |         |       |   | 7,614        |        |              |   |            |       |              |   |       |     |   |   |         |   |  |   | 7,614  |       
|                                      | Increase in income taxes payable                                                            |                                                     |   |        |         |       |   | 1,232        |        |              |   |            |       |              |   |       |     |   |   |         |   |  |   | 1,232  |       
|                                      | Increase in deferred income taxes asset                                                     |                                                     |   |        |         |       |   | (2,169       | )      |              |   |            |       |              |   |       |     |   |   |         |   |  |   | (2,169 | )     
|                                      | Increase in deferred income taxes
liability                                                 |                                                     |   |        |         |       |   | 3,940        |        |              |   |            |       |              |   |       |     |   |   |         |   |  |   | 3,940  |       
|                                      | Increase in intercompany
payable/(receivable)                                               |                                                     |   | (15,067 | )       |       |   | 76,234       |        |              |   | (54,756     | )     |              |   | (6,411 | )   |   |   |         |   |  |   |       |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |     |   |   |          |   |  |   |        |       
|                                      |                                                                                             | Net cash provided by (used in)
operating activities |   |         | (12,213 | )     |   |              | 77,132 |              |   |             | 2,795 |              |   |        | (24 | ) |   |          |  |  |   |        | 67,690 | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |     |   |   |          |   |  |   |        |       

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

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

|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |         |  
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------ | ----- | ------ | ------------ | ------- | ------------ | ----- | ----------- | ------ | ------------ | --- | ---- | - | - | - | - | - | - | ------ | -------- | ------- | -
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     | Non- |   |   |   |   |   |   |        |         
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       | Guarantor   |        | Guarantor    |     |      |   |   |   |   |   |  
|                                                 |                                                                 |                                                     |   | VCA     |        | Vicar |        | Subsidiaries |         | Subsidiaries |       | Elimination |        | Consolidated
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |             
|Cash flows from investing activities:            |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |         
|                                                 | Business acquisitions, net of
cash acquired                     |                                                     | $ |        |        |       | $      | (27,177      | )       |              | $     |            |        |              | $   |     |   |   | $ |  |   |   | $      | (27,177  | )      
|                                                 | Real estate acquired in connection with
acquisitions            |                                                     |   |        |        |       |        | (589         | )       |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (589     | )      
|                                                 | Property and equipment additions, net                           |                                                     |   |        |        |       |        | (8,655       | )       |              |       | (2,385      | )      |              |     |     |   |   |   |  |   |   |        | (11,040  | )      
|                                                 | Proceeds from sale of assets                                    |                                                     |   |        |        |       |        | 355          |         |              |       | 8           |        |              |     |     |   |   |   |  |   |   |        | 363      |        
|                                                 | Other                                                           |                                                     |   | (5      | )      |       |        | 181          |         |              |       | 271         |        |              |     |     |   |   |   |  |   |   |        | 447      |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        
|                                                 |                                                                 | Net cash used in investing activities               |   |         | (5     | )     |        |              | (35,885 | )            |       |             | (2,106 | )            |     |      |  |   |   |   |  |   |        |          | (37,996 | )
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        
|Cash flows from financing activities:            |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |         
|                                                 | Repayment of long-term obligations,
including redemption fees   |                                                     |   | (41,808 | )      |       |        | (175,684     | )       |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (217,492 | )      
|                                                 | Proceeds from issuance of
long-term debt                        |                                                     |   |        |        |       |        | 146,442      |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | 146,442  |        
|                                                 | Payment of financing costs                                      |                                                     |   | (382    | )      |       |        | (687         | )       |              |       |            |        |              |     |     |   |   |   |  |   |   |        | (1,069   | )      
|                                                 | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 85      |        |       |        |             |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | 85       |        
|                                                 | Proceeds from issuance of common
stock                          |                                                     |   | 54,323  |        |       |        |             |         |              |       |            |        |              |     |     |   |   |   |  |   |   |        | 54,323   |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        
|                                                 |                                                                 | Net cash provided by (used in)
financing activities |   |         | 12,218 |       |        |              | (29,929 | )            |       |             |       |              |     |      |  |   |   |   |  |   |        |          | (17,711 | )
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        
|Increase (decrease) in cash and cash equivalents |                                                                 |                                                     |  |         |        |       | 11,318 |              |         |              | 689   |             |        |              | (24 | )    |   |   |  |   |   |   | 11,983 |         
|Cash and cash equivalents at beginning
of period |                                                                 |                                                     |  |         |        |       | 5,083  |              |         |              | 1,233 |             |        |              | 146 |      |   |   |  |   |   |   | 6,462  |         
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        
|Cash and cash equivalents at end of
period       |                                                                 | $                                                   |  |         |        | $     | 16,401 |              |         | $            | 1,922 |             |        | $            | 122 |      |   | $ |  |   |   | $ | 18,445 |         
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |         |              |       |             |        |              |     |      |   |   |   |   |   |   |        |          |        

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

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

|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   |        |      |   |   |         |   |  |   |        |        | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ---- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ----- | ------------ | - | ------ | ---- | - | - | ------- | - |  | - | ------ | ------ | 
|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   | Non-   |      |   |   |         |   |  |   |       
|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   | Guarantor   |       | Guarantor    |   |        |      |   |   |         |   | 
|                                      |                                                                                             |                                                     |   | VCA     |      | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |       | Consolidated
|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |             
|Cash flows from operating activities: |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   |        |      |   |   |         |   |  |   |       
|                                      | Net income                                                                                  |                                                     | $ | 23,165  |      |       | $ | 27,257       |        |              | $ | 48,854      |       |              | $ | 5,794  |      |   | $ | (81,905 | ) |  | $ | 23,165 |       
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   |        |      |   |   |         |   |  |   |        |       
|                                      | Equity interest in earnings of
subsidiaries                                                 |                                                     |   | (27,257 | )    |       |   | (48,854      | )      |              |   | (4,434      | )     |              |   |       |      |   |   | 80,545  |   |  |   |       |       
|                                      | Depreciation and amortization                                                               |                                                     |   |        |      |       |   | 1,026        |        |              |   | 7,776       |       |              |   | 528    |      |   |   |        |   |  |   | 9,330  |       
|                                      | Amortization of deferred financing costs
and debt discount                                  |                                                     |   | (84     | )    |       |   | 1,348        |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 1,264  |       
|                                      | Provision for uncollectible accounts                                                        |                                                     |   |        |      |       |   |             |        |              |   | 2,068       |       |              |   | 279    |      |   |   |        |   |  |   | 2,347  |       
|                                      | Debt retirement costs                                                                       |                                                     |   |        |      |       |   | 3,391        |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 3,391  |       
|                                      | Interest paid in kind on 15.5% senior
notes                                                 |                                                     |   | 7,045   |      |       |   |             |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 7,045  |       
|                                      | Loss (gain) on sale of assets                                                               |                                                     |   |        |      |       |   | (80          | )      |              |   |            |       |              |   |       |      |   |   |        |   |  |   | (80    | )     
|                                      | Minority interest in income of
subsidiaries                                                 |                                                     |   |        |      |       |   |             |        |              |   |            |       |              |   |       |      |   |   | 1,360   |   |  |   | 1,360  |       
|                                      | Distributions to minority interest
partners                                                 |                                                     |   |        |      |       |   | (1,339       | )      |              |   |            |       |              |   |       |      |   |   |        |   |  |   | (1,339 | )     
|                                      | Increase in trade accounts receivable                                                       |                                                     |   |        |      |       |   |             |        |              |   | (4,413      | )     |              |   | (642   | )    |   |   |        |   |  |   | (5,055 | )     
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |                                                     |   | 74      |      |       |   | (155         | )      |              |   | (817        | )     |              |   | (20    | )    |   |   |        |   |  |   | (918   | )     
|                                      | Increase (decrease) in accounts payable
and other accrued liabilities                       |                                                     |   |        |      |       |   | 1,358        |        |              |   | 2,544       |       |              |   | 43     |      |   |   |        |   |  |   | 3,945  |       
|                                      | Increase (decrease) in accrued payroll
and related liabilities                              |                                                     |   |        |      |       |   | 3,157        |        |              |   | (365        | )     |              |   |       |      |   |   |        |   |  |   | 2,792  |       
|                                      | Increase (decrease) in accrued interest                                                     |                                                     |   |        |      |       |   | 3,395        |        |              |   | 10          |       |              |   |       |      |   |   |        |   |  |   | 3,405  |       
|                                      | Decrease in prepaid income taxes                                                            |                                                     |   |        |      |       |   | 2,782        |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 2,782  |       
|                                      | Increase in income taxes payable                                                            |                                                     |   |        |      |       |   | 2,035        |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 2,035  |       
|                                      | Increase in deferred income taxes asset                                                     |                                                     |   |        |      |       |   | (2,318       | )      |              |   |            |       |              |   |       |      |   |   |        |   |  |   | (2,318 | )     
|                                      | Increase in deferred income
taxes liability                                                 |                                                     |   |        |      |       |   | 7,687        |        |              |   |            |       |              |   |       |      |   |   |        |   |  |   | 7,687  |       
|                                      | Increase in intercompany
payable/(receivable)                                               |                                                     |   | (3,392  | )    |       |   | 56,117       |        |              |   | (46,548     | )     |              |   | (6,177 | )    |   |   |        |   |  |   |       |       
|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   |        |      |   |   |         |   |  |   |        |       
|                                      |                                                                                             | Net cash provided by (used in)
operating activities |   |         | (449 | )     |   |              | 56,807 |              |   |             | 4,675 |              |   |        | (195 | ) |   |         |  |  |   |        | 60,838 | 
|                                      |                                                                                             |                                                     |   |         |      |       |   |              |        |              |   |             |       |              |   |        |      |   |   |         |   |  |   |        |       

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

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

|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |         |  
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------- | - | --- | --- | ----- | ------ | ------------ | ------- | ------------ | ------ | ----------- | ------ | ------------ | ---- | ---- | - | - | - | - | - | - | ------ | -------- | ------- | -
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      | Non- |   |   |   |   |   |   |        |         
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        | Guarantor   |        | Guarantor    |      |      |   |   |   |   |   |  
|                                                 |                                                                 |                                                     |   | VCA |     | Vicar |        | Subsidiaries |         | Subsidiaries |        | Elimination |        | Consolidated
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |             
|Cash flows from investing activities:            |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |         
|                                                 | Business acquisitions, net of
cash acquired                     |                                                     | $ |    |     |       | $      | (17,845      | )       |              | $      |            |        |              | $    |     |   |   | $ |  |   |   | $      | (17,845  | )      
|                                                 | Property and equipment additions, net                           |                                                     |   |    |     |       |        | (7,475       | )       |              |        | (5,930      | )      |              |      |     |   |   |   |  |   |   |        | (13,405  | )      
|                                                 | Proceeds from sale of assets                                    |                                                     |   |    |     |       |        | 1,391        |         |              |        |            |        |              |      |     |   |   |   |  |   |   |        | 1,391    |        
|                                                 | Other                                                           |                                                     |   | 424 |     |       |        | 447          |         |              |        | (288        | )      |              |      |     |   |   |   |  |   |   |        | 583      |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        
|                                                 |                                                                 | Net cash provided by (used in)
investing activities |   |     | 424 |       |        |              | (23,482 | )            |        |             | (6,218 | )            |      |      |  |   |   |   |  |   |        |          | (29,276 | )
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        
|Cash flows from financing activities:            |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |         
|                                                 | Repayment of long-term obligations                              |                                                     |   |    |     |       |        | (145,978     | )       |              |        |            |        |              |      |     |   |   |   |  |   |   |        | (145,978 | )      
|                                                 | Proceeds from the issuance of long-term
debt                    |                                                     |   |    |     |       |        | 143,061      |         |              |        |            |        |              |      |     |   |   |   |  |   |   |        | 143,061  |        
|                                                 | Payment of deferred financing and
recapitalization costs        |                                                     |   |    |     |       |        | (3,415       | )       |              |        |            |        |              |      |     |   |   |   |  |   |   |        | (3,415   | )      
|                                                 | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 25  |     |       |        |             |         |              |        |            |        |              |      |     |   |   |   |  |   |   |        | 25       |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        
|                                                 |                                                                 | Net cash provided by (used in)
financing activities |   |     | 25  |       |        |              | (6,332  | )            |        |             |       |              |      |      |  |   |   |   |  |   |        |          | (6,307  | )
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        
|Increase (decrease) in cash and cash
equivalents |                                                                 |                                                     |  |     |     |       | 26,993 |              |         |              | (1,543 | )           |        |              | (195 | )    |   |   |  |   |   |   | 25,255 |         
|Cash and cash equivalents at beginning
of period |                                                                 |                                                     |  |     |     |       | 3,467  |              |         |              | 3,260  |             |        |              | 376  |      |   |   |  |   |   |   | 7,103  |         
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        
|Cash and cash equivalents at end of
period       |                                                                 | $                                                   |  |     |     | $     | 30,460 |              |         | $            | 1,717  |             |        | $            | 181  |      |   | $ |  |   |   | $ | 32,358 |         
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |        |             |        |              |      |      |   |   |   |   |   |   |        |          |        

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

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

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

Overview

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

Our company was formed in 1986 by Robert Antin, Arthur Antin and Neil
Tauber, who have served since our inception as our Chief Executive Officer,
Chief Operating Officer and Senior Vice President of Development, respectively.
During the 1990s, we established a premier position in the veterinary diagnostic
laboratory and animal hospital markets through both internal growth and
acquisitions. At September 30, 2003, our laboratory network consisted of 23
laboratories serving all 50 states and our animal hospital network consisted of
241 animal hospitals in 34 states. We primarily focus on generating internal
growth to increase revenue and profitability. In order to augment internal
growth, we may selectively acquire laboratories and intend to acquire
approximately 15 to 25 animal hospitals per year, depending upon the
attractiveness of candidates and the strategic fit with our existing operations.

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

|                         |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |     |  
|------------------------ | --------------------------------------------- |  | ------------------ | --- | ----------------- |  | ---- | --- | ---- |  | --- | --- | - |  | --- | --- | -
|                         |                                               |  | Three Months Ended |     | Nine Months Ended
|                         |                                               |  | September 30,      |     | September 30,    
|                         |                                               |  |                    |     |                  
|                         |                                               |  | 2003               |     | 2002              |  | 2003 |     | 2002
|                         |                                               |  |                    |     |                   |  |      |     |     
|Laboratories:            |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |    
|                         | Beginning of period                           |  |                    | 23  |                   |  |      | 18  |      |  |     | 19  |   |  |     | 16  |  
|                         | Acquisitions and new facilities               |  |                    | 1   |                   |  |      | 1   |      |  |     | 7   |   |  |     | 3   |  
|                         | Relocated into other labs operated by us      |  |                    | (1  | )                 |  |      |    |      |  |     | (3  | ) |  |     |    |  
|                         |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |     |  
|                         | End of period                                 |  |                    | 23  |                   |  |      | 19  |      |  |     | 23  |   |  |     | 19  |  
|                         |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |     |  
|Animal hospitals:        |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |    
|                         | Beginning of period                           |  |                    | 238 |                   |  |      | 220 |      |  |     | 229 |   |  |     | 214 |  
|                         | Acquisitions                                  |  |                    | 3   |                   |  |      | 7   |      |  |     | 19  |   |  |     | 18  |  
|                         | Relocated into other hospitals operated by us |  |                    |    |                   |  |      | (2  | )    |  |     | (5  | ) |  |     | (7  | )
|                         | Sold or closed                                |  |                    |    |                   |  |      |    |      |  |     | (2  | ) |  |     |    |  
|                         |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |     |  
|                         | End of period                                 |  |                    | 241 |                   |  |      | 225 |      |  |     | 241 |   |  |     | 225 |  
|                         |                                               |  |                    |     |                   |  |      |     |      |  |     |     |   |  |     |     |  
|Owned at end of period   |                                               |  | 177                |     |                   |  | 167  |     |      |  | 177 |     |   |  | 167 |    
|Managed at end of period |                                               |  | 64                 |     |                   |  | 58   |     |      |  | 64  |     |   |  | 58  |    

Basis of Reporting

General

Our discussion and analysis of our financial condition and results of operations are based upon our
condensed, consolidated financial statements, which have been prepared in accordance with generally accepted
accounting principles in the United States, or GAAP. We report our operations in three segments: laboratory,
animal hospital and corporate. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenue and expense, and related disclosure of
contingent assets and liabilities. We evaluate our estimates on an on-going basis. 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 due to changes in future
conditions.

Revenue Recognition

We recognize revenue only after the following criteria are met:



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

We report our revenue net of discounts.

Laboratory Revenue

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

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Laboratory internal revenue growth for the three and nine months ended
September 30, 2003 was calculated using laboratory revenue as reported, adjusted
to exclude both revenue for the newly acquired laboratories that we did not own
for the entire period presented and the impact resulting from differences in the
number of billing days in comparable periods.

A portion of laboratory revenue is intercompany revenue that was
generated by providing laboratory services to our animal hospitals. For purposes
of reviewing the operating performance of the business segments, all
intercompany revenue is accounted for as if the transaction was with an
independent third party at current market prices. For financial reporting
purposes, intercompany revenue is eliminated as part of our consolidation.

Animal Hospital Revenue

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

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

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

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

Other Revenue

In 2002, we earned consulting fees under an agreement with Heinz Pet
Products related to the marketing of its proprietary pet food. This agreement
expired in September 2002.

Direct Costs

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

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

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There is a material limitation associated with the use of this non-GAAP
financial measure, as it does not reflect the consolidated results for animal
hospitals owned and managed as reported in our consolidated financial
statements. To compensate for this limitation, we ensure that our disclosures
provide a complete understanding of all adjustments found in non-GAAP financial
measures, and we provide a reconciliation between GAAP financial measures and
non-GAAP financial measures in Results of Operations.

Selling, General and Administrative Expense

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

Software Development Costs

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

Critical Accounting Policies and Significant Estimates

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

Workers Compensation Expense

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

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

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We estimate the loss pick by reviewing a minimum of five years of our
historical claims loss data and analyzing the trend of the development of claims
over time. We also review and adjust the loss pick for other major factors such
as the risk control environment and claims handling. The risk control
environment includes proper safety training, safe working environment,
availability of safety equipment for specific tasks, and management emphasis and
monitoring of safe practices. Claims handling includes proper reporting of
claims, proper care given to injured employees, availability of return-to-work
programs, and oversight of the claims process by both the insurance claims
handler and our own management. We review our loss pick on a quarterly basis
considering the current loss trend and any changes in the environment as
indicated above. The loss pick is then applied to our actual payroll costs to
estimate the claims loss portion of our workers compensation expense for the
given period.

Our insurance carrier required us to pre-fund claims losses at a loss
pick of 1.59% for the policy year ended September 30, 2003 and gave us a maximum
loss pick of 2.55%, above which the carrier is responsible for paying all
claims. For the policy year ended September 30, 2002, we were required to
pre-fund claims losses at a loss pick of 1.54% and have a maximum loss pick of
2.49%. The ranges set forth by the insurance carrier reflect the most probable
potentials for our workers compensation claims losses. The increase in the
insurance carriers range reflects the trend over the last several years toward
increasing workers compensation costs. Based on these ranges and the factors
described above, we used a loss pick of 2.10% for the policy year ended
September 30, 2003 and 2.04% for the policy year ended September 30, 2002. The
increase in our loss pick reflects an increase in our claims loss trend during
the past year.

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

|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |       | 
|-------------------------------------- | ----------------------------------- | - | --------- |  | -------- | - | ------- | ----- | -------- | - | ---------------------- | ----- |  | - | ----- | ----- | 
|                                       |                                     |   |           |  |          |   |         |       |          |   | Probable Expense Range
|                                       |                                     |   | Estimated |  | Expense  |   |        
|                                       |                                     |   | Payroll   |  | Recorded |   | Low-end |       | High-end
|                                       |                                     |   |           |  |          |   |         |       |         
|Policy year ending September 30, 2003: |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Loss pick percentage                   |                                     |   |           |  |          |   | 2.10    | %     |          |   | 1.59                   | %     |  |   | 2.55  | %    
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Calculated loss pick in dollars        |                                     | $ | 185,907   |  |          | $ | 3,904   |       |          | $ | 2,931                  |       |  | $ | 4,741 |      
|Premiums and other fees                |                                     |   |           |  |          |   | 1,618   |       |          |   | 1,578                  |       |  |   | 1,652 |      
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|                                       | Total workers compensation expense |   |           |  |          |   | $       | 5,522 |          |   | $                      | 4,509 |  |   | $     | 6,393 | 
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Policy year ended September 30, 2002:  |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Loss pick percentage                   |                                     |   |           |  |          |   | 2.04    | %     |          |   | 1.54                   | %     |  |   | 2.49  | %    
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|Calculated loss pick in dollars        |                                     | $ | 169,022   |  |          | $ | 3,441   |       |          | $ | 2,603                  |       |  | $ | 4,208 |      
|Premiums and other fees                |                                     |   |           |  |          |   | 1,387   |       |          |   | 1,353                  |       |  |   | 1,419 |      
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      
|                                       | Total workers compensation expense |   |           |  |          |   | $       | 4,828 |          |   | $                      | 3,956 |  |   | $     | 5,627 | 
|                                       |                                     |   |           |  |          |   |         |       |          |   |                        |       |  |   |       |      

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

Impairment of Goodwill

Our goodwill represents the purchase price paid and liabilities assumed
for animal hospital and laboratory acquisitions in excess of the fair market
value of the net assets acquired. The total amount of our net goodwill
at September 30, 2003 was $370.0 million, consisting of $94.6 million for our
laboratory operating segment and $275.4 million for our animal hospital
operating segment.

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

Legal Settlements

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

Allowance for Uncollectible Accounts

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

Income Taxes

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

We operate in multiple states with varying tax laws. Our Federal income
tax returns have been examined by the Internal Revenue Service through our
fiscal year 1998 without an adjustment to our financial statements.

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Results of Operations

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

|                                                |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |      |       |  
|----------------------------------------------- | --------------- | ---------------- | ---- | ------------------ | ----- | ----------------- | ---- | ---- | ----- | ---- | ---- | ---- | ----- | - | ---- | ---- | ----- | -
|                                                |                 |                  |      | Three Months Ended |       | Nine Months Ended
|                                                |                 |                  |      | September 30,      |       | September 30,    
|                                                |                 |                  |      |                    |       |                  
|                                                |                 |                  |      | 2003               |       | 2002              |      | 2003 |       | 2002
|                                                |                 |                  |      |                    |       |                   |      |      |       |     
|Revenue:                                        |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |     
|                                                | Laboratory      |                  |      | 34.9               | %     |                   |      | 33.6 | %     |      |      | 35.4 | %     |   |      | 34.7 | %    
|                                                | Animal hospital |                  |      | 67.1               |       |                   |      | 68.0 |       |      |      | 66.6 |       |   |      | 66.9 |      
|                                                | Other           |                  |      |                   |       |                   |      | 0.4  |       |      |      |     |       |   |      | 0.4  |      
|                                                | Intercompany    |                  |      | (2.0               | )     |                   |      | (2.0 | )     |      |      | (2.0 | )     |   |      | (2.0 | )    
|                                                |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Total revenue    |      |                    | 100.0 |                   |      |      | 100.0 |      |      |      | 100.0 |   |      |      | 100.0 |  
|Direct costs (excluding operating depreciation) |                 |                  | 66.7 |                    |       |                   | 67.1 |      |       |      | 66.9 |      |       |   | 67.3 |     
|Selling, general and administrative             |                 |                  | 6.7  |                    |       |                   | 7.6  |      |       |      | 7.2  |      |       |   | 7.7  |     
|Depreciation and amortization                   |                 |                  | 2.8  |                    |       |                   | 2.6  |      |       |      | 2.7  |      |       |   | 2.7  |     
|Write-down of assets                            |                 |                  | 0.3  |                    |       |                   |     |      |       |      | 0.1  |      |       |   |     |     
|                                                |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Operating income |      |                    | 23.5  |                   |      |      | 22.7  |      |      |      | 23.1  |   |      |      | 22.3  |  
|Interest expense, net                           |                 |                  | 4.8  |                    |       |                   | 8.9  |      |       |      | 5.2  |      |       |   | 9.1  |     
|Debt retirement costs                           |                 |                  | 1.3  |                    |       |                   | 2.9  |      |       |      | 2.4  |      |       |   | 1.0  |     
|Other (income) expense                          |                 |                  |     |                    |       |                   |     |      |       |      | 0.1  |      |       |   | (0.1 | )   
|Minority interest in income of subsidiairies    |                 |                  | 0.3  |                    |       |                   | 0.4  |      |       |      | 0.3  |      |       |   | 0.4  |     
|Provision for income taxes                      |                 |                  | 7.0  |                    |       |                   | 4.4  |      |       |      | 6.2  |      |       |   | 5.0  |     
|                                                |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |      |      
|                                                |                 | Net income       |      |                    | 10.1  | %                 |      |      | 6.1   | %    |      |      | 8.9   | % |      |      | 6.9   | %
|                                                |                 |                  |      |                    |       |                   |      |      |       |      |      |      |       |   |      |      |      

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

|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |        |  
|------------------------------------- | ----------------------------------------------- | ----------------------- | - | ---------- | ------ | -------- | - | --------- | ------ | ------------ | - | ------ | ------- | ------- | - | ------ | - |  | - | ------- | ------ | -
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   | Inter- |   |  |   |        
|                                      |                                                 |                         |   |            |        |          |   | Animal    |        |              |   |        |         | company |   |        |   | 
|                                      |                                                 |                         |   | Laboratory |        | Hospital |   | Corporate |        | Eliminations |   | Total 
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |       
|Three Months Ended September 30, 2003 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 46,429     |        |          | $ | 89,079    |        |              | $ |       |         |         | $ | (2,605 | ) |  | $ | 132,903 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 25,870     |        |          |   | 65,445    |        |              |   |       |         |         |   | (2,605 | ) |  |   | 88,710  |       
|                                      | Selling, general and administrative             |                         |   | 2,826      |        |          |   | 2,492     |        |              |   | 3,613  |         |         |   |       |   |  |   | 8,931   |       
|                                      | Depreciation and amortization                   |                         |   | 823        |        |          |   | 2,387     |        |              |   | 369    |         |         |   |       |   |  |   | 3,579   |       
|                                      | Write-down and loss on sale of assets           |                         |   | 39         |        |          |   | 403       |        |              |   |       |         |         |   |       |   |  |   | 442     |       
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating income (loss) |   | $          | 16,871 |          |   | $         | 18,352 |              |   | $      | (3,982  | )       |   | $      |  |  |   | $       | 31,241 |  
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating margin        |   |            | 36.3   | %        |   |           | 20.6   | %            |   |        | (3.0    | )%      |   |        |   |  |   |         | 23.5   | %
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|Three Months Ended September 30, 2002 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 38,650     |        |          | $ | 78,118    |        |              | $ | 500    |         |         | $ | (2,296 | ) |  | $ | 114,972 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 21,849     |        |          |   | 57,604    |        |              |   |       |         |         |   | (2,296 | ) |  |   | 77,157  |       
|                                      | Selling, general and administrative             |                         |   | 2,563      |        |          |   | 2,359     |        |              |   | 3,810  |         |         |   |       |   |  |   | 8,732   |       
|                                      | Depreciation and amortization                   |                         |   | 715        |        |          |   | 1,961     |        |              |   | 352    |         |         |   |       |   |  |   | 3,028   |       
|                                      | Loss (gain) on sale of assets                   |                         |   | 24         |        |          |   | 9         |        |              |   | (113   | )       |         |   |       |   |  |   | (80     | )     
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating income (loss) |   | $          | 13,499 |          |   | $         | 16,185 |              |   | $      | (3,549  | )       |   | $      |  |  |   | $       | 26,135 |  
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating margin        |   |            | 34.9   | %        |   |           | 20.7   | %            |   |        | (3.1    | )%      |   |        |   |  |   |         | 22.7   | %
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|Nine Months Ended September 30, 2003  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 134,818    |        |          | $ | 254,231   |        |              | $ |       |         |         | $ | (7,783 | ) |  | $ | 381,266 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 74,142     |        |          |   | 188,606   |        |              |   |       |         |         |   | (7,783 | ) |  |   | 254,965 |       
|                                      | Selling, general and administrative             |                         |   | 8,330      |        |          |   | 7,514     |        |              |   | 11,540 |         |         |   |       |   |  |   | 27,384  |       
|                                      | Depreciation and amortization                   |                         |   | 2,376      |        |          |   | 7,168     |        |              |   | 1,109  |         |         |   |       |   |  |   | 10,653  |       
|                                      | Write-down and loss (gain) on sale of assets    |                         |   | 58         |        |          |   | 225       |        |              |   | (1     | )       |         |   |       |   |  |   | 282     |       
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating income (loss) |   | $          | 49,912 |          |   | $         | 50,718 |              |   | $      | (12,648 | )       |   | $      |  |  |   | $       | 87,982 |  
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating margin        |   |            | 37.0   | %        |   |           | 19.9   | %            |   |        | (3.3    | )%      |   |        |   |  |   |         | 23.1   | %
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|Nine Months Ended September 30, 2002  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        
|                                      | Revenue                                         |                         | $ | 116,911    |        |          | $ | 225,383   |        |              | $ | 1,500  |         |         | $ | (6,902 | ) |  | $ | 336,892 |       
|                                      | Direct costs (excluding
operating depreciation) |                         |   | 65,545     |        |          |   | 168,106   |        |              |   |       |         |         |   | (6,902 | ) |  |   | 226,749 |       
|                                      | Selling, general and administrative             |                         |   | 7,632      |        |          |   | 7,351     |        |              |   | 10,910 |         |         |   |       |   |  |   | 25,893  |       
|                                      | Depreciation and amortization                   |                         |   | 2,138      |        |          |   | 6,166     |        |              |   | 1,026  |         |         |   |       |   |  |   | 9,330   |       
|                                      | Loss (gain) on sale of assets                   |                         |   | 24         |        |          |   | 9         |        |              |   | (113   | )       |         |   |       |   |  |   | (80     | )     
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating income (loss) |   | $          | 41,572 |          |   | $         | 43,751 |              |   | $      | (10,323 | )       |   | $      |  |  |   | $       | 75,000 |  
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |         |       
|                                      |                                                 | Operating margin        |   |            | 35.6   | %        |   |           | 19.4   | %            |   |        | (3.1    | )%      |   |        |   |  |   |         | 22.3   | %
|                                      |                                                 |                         |   |            |        |          |   |           |        |              |   |        |         |         |   |        |   |  |   |        

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Revenue

The following table summarizes our revenue (in thousands):

|                |               |   |                                  |         |                                 |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |      |  
|--------------- | ------------- | - | -------------------------------- | ------- | ------------------------------- | - | -------- | ------- | ---- |  | ---- | ---- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                |               |   | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                |               |   |                                  |         |                                
|                |               |   | 2003                             |         | 2002                            |   | % Change |         | 2003 |  | 2002 |      | % Change
|                |               |   |                                  |         |                                 |   |          |         |      |  |      |      |         
|Laboratory      |               | $ | 46,429                           |         |                                 | $ | 38,650   |         |      |  | 20.1 | %    |          | $ | 134,818 |         |  | $ | 116,911 |         |  |  | 15.3 | %   
|Animal hospital |               |   | 89,079                           |         |                                 |   | 78,118   |         |      |  | 14.0 | %    |          |   | 254,231 |         |  |   | 225,383 |         |  |  | 12.8 | %   
|Other           |               |   |                                 |         |                                 |   | 500      |         |      |  |      |      |          |   |        |         |  |   | 1,500   |         |  |  |      |     
|Intercompany    |               |   | (2,605                           | )       |                                 |   | (2,296   | )       |      |  |      |      |          |   | (7,783  | )       |  |   | (6,902  | )       |  |  |      |     
|                |               |   |                                  |         |                                 |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|                | Total revenue |   | $                                | 132,903 |                                 |   | $        | 114,972 |      |  |      | 15.6 | %        |   | $       | 381,266 |  |   | $       | 336,892 |  |  |      | 13.2 | %
|                |               |   |                                  |         |                                 |   |          |         |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     

Laboratory
Revenue

Laboratory revenue increased $7.8 million for the three months ended
September 30, 2003 and increased $17.9 million for the nine months ended
September 30, 2003 compared to the same periods in the prior year. The
components of the increase in laboratory revenue are detailed below (in
thousands, except average price per requisition):

|                           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |      |  
|-------------------------- | ----------------------------------- | - | -------------------------------- | ------ | ------------------------------- | - | -------- | ------ | ---- |  | ---- | ---- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                           |                                     |   | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                           |                                     |   |                                  |        |                                
|                           |                                     |   | 2003                             |        | 2002                            |   | % Change |        | 2003 |  | 2002 |      | % Change
|                           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |     
|Laboratory
Revenue:        |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|Internal growth:           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|                           | Number of requisitions              |   |                                  | 1,929  |                                 |   |          | 1,799  |      |  |      | 7.2  | %        |   |         | 5,956   |  |   |         | 5,664   |  |  |      | 5.2  | %
|                           | Average revenue per
requisition (1) |   | $                                | 22.51  |                                 |   | $        | 21.48  |      |  |      | 4.8  | %        |   | $       | 22.00   |  |   | $       | 20.64   |  |  |      | 6.6  | %
|                           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|Total internal revenue (2) |                                     | $ | 43,422                           |        |                                 | $ | 38,650   |        |      |  | 12.3 | %    |          | $ | 131,024 |         |  | $ | 116,911 |         |  |  | 12.1 | %   
|Billing day adjustment     |                                     |   | 571                              |        |                                 |   |         |        |      |  |      |      |          |   |        |         |  |   |        |         |  |  |      |     
|Acquired revenue           |                                     |   | 2,436                            |        |                                 |   |         |        |      |  |      |      |          |   | 3,794   |         |  |   |        |         |  |  |      |     
|                           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|                           | Total                               |   | $                                | 46,429 |                                 |   | $        | 38,650 |      |  |      | 20.1 | %        |   | $       | 134,818 |  |   | $       | 116,911 |  |  |      | 15.3 | %
|                           |                                     |   |                                  |        |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     



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

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

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

The increase in the average revenue per requisition during the three
and nine months ended September 30, 2003 is attributable to our sales and
marketing efforts of our pet health and wellness programs, which have
contributed to an increase in the number of tests performed per requisition, as
well as a change in the mix of tests to include more comprehensive and expensive
tests. Also contributing to our increase in average revenue per requisition are
price increases. The prices of most tests were increased 3% to 5% in February
2003.

As the result of acquiring eight laboratory facilities between November
2002 and September 2003, we generated an additional $2.4 million of revenue
(referred to in the above table as acquired revenue) during the

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three months ended September 30, 2003 and $3.8 million of revenue during the
nine months ended September 30, 2003 compared to the same periods in the prior
year.

The billing day adjustment, referred to in the above table, reflects
the impact of one additional billing day for the three months ended September
30, 2003 compared to the same period in the prior year.

Animal Hospital Revenue

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

|                                         |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |      |  
|---------------------------------------- | ---------------------------- | - | -------------------------------- | ------- | ------------------------------- | - | -------- | ------ | ---- |  | ---- | ---- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | ---- | ---- | -
|                                         |                              |   | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                                         |                              |   |                                  |         |                                
|                                         |                              |   | 2003                             |         | 2002                            |   | % Change |        | 2003 |  | 2002 |      | % Change
|                                         |                              |   |                                  |         |                                 |   |          |        |      |  |      |     
|Animal Hospital Revenue:                 |                             
|As reported                              |                              | $ | 89,079                           |         |                                 | $ | 78,118   |        |      |  | 14.0 | %    |          | $ | 254,231 |         |  | $ | 225,383 |         |  |  | 12.8 | %   
|Less: Management fees (1)                |                              |   | (13,027                          | )       |                                 |   | (11,520  | )      |      |  |      |      |          |   | (37,627 | )       |  |   | (33,713 | )       |  |  |      |     
|Add: Revenue of animal
hospitals managed |                              |   | 24,008                           |         |                                 |   | 21,246   |        |      |  |      |      |          |   | 68,585  |         |  |   | 61,501  |         |  |  |      |     
|                                         |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     
|                                         | Combined animal hospital (2) |   | $                                | 100,060 |                                 |   | $        | 87,844 |      |  |      | 13.9 | %        |   | $       | 285,189 |  |   | $       | 253,171 |  |  |      | 12.6 | %
|                                         |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |      |     



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

The combined animal hospital revenue increased $12.2 million for the
three months ended September 30, 2003 and increased $32.0 million for the nine
months ended September 30, 2003 compared to the same periods in the prior year.
The components of the increase are summarized in the following table (in
thousands, except average price per order):

|                                       |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |     |      |   
|-------------------------------------- | ---------------------------- | - | -------------------------------- | ------- | ------------------------------- | - | -------- | ------ | ---- |  | ---- | ---- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | --- | ---- | --
|                                       |                              |   | Three Months Ended September 30, |         | Nine Months Ended September 30,
|                                       |                              |   |                                  |         |                                
|                                       |                              |   | 2003                             |         | 2002                            |   | % Change |        | 2003 |  | 2002 |      | % Change
|                                       |                              |   |                                  |         |                                 |   |          |        |      |  |      |     
|Animal Hospital Revenue:               |                             
|Adjusted same-facility:                |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |     |     
|                                       | Orders (1)                   |   |                                  | 851     |                                 |   |          | 865    |      |  |      | (1.6 | )%       |   |         | 2,413   |  |   |         | 2,456   |  |  |     | (1.8 | )%
|                                       | Average price per order (2)  |   | $                                | 106.56  |                                 |   | $        | 100.31 |      |  |      | 6.2  | %        |   | $       | 106.40  |  |   | $       | 100.95  |  |  |     | 5.4  | % 
|                                       |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |     |     
|Adjusted same-facility
revenue (1) (3) |                              | $ | 90,680                           |         |                                 | $ | 86,764   |        |      |  | 4.5  | %    |          | $ | 256,746 |         |  | $ | 247,939 |         |  |  | 3.6 | %   
|Net acquired revenue (1)               |                              |   | 9,380                            |         |                                 |   | 1,080    |        |      |  |      |      |          |   | 28,443  |         |  |   | 5,232   |         |  |  |     |     
|                                       |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |     |     
|                                       | Combined animal hospital (4) |   | $                                | 100,060 |                                 |   | $        | 87,844 |      |  |      | 13.9 | %        |   | $       | 285,189 |  |   | $       | 253,171 |  |  |     | 12.6 | % 
|                                       |                              |   |                                  |         |                                 |   |          |        |      |  |      |      |          |   |         |         |  |   |         |         |  |  |     |     



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

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Our animal hospital segment has placed a greater emphasis on providing
high-quality veterinary care and comprehensive wellness programs, which has
contributed to the increase in the average price per order and the increase in
adjusted same-facility revenue for the three and nine months ended September 30,
2003. The decrease in the number of orders for the three and nine months ended
September 30, 2003 is partly attributable to a decrease in the number of orders
for sales of vaccinations, flea and tick products and boarding. Sales of flea
and tick products have decreased as a result of changes in the channels of
distribution for these products.

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

Reconciliation Between Non-GAAP and GAAP Measures

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

|                                                  |                       |   |                                  |        |                                 |   |          |        |      |  |      |     |          |   |         |         |  |   |         |         |  |  |     |     |  
|------------------------------------------------- | --------------------- | - | -------------------------------- | ------ | ------------------------------- | - | -------- | ------ | ---- |  | ---- | --- | -------- | - | ------- | ------- |  | - | ------- | ------- |  |  | --- | --- | -
|                                                  |                       |   | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                                  |                       |   |                                  |        |                                
|                                                  |                       |   | 2003                             |        | 2002                            |   | % Change |        | 2003 |  | 2002 |     | % Change
|                                                  |                       |   |                                  |        |                                 |   |          |        |      |  |      |    
|Animal
Hospital Revenue:                          |                      
|Adjusted same-facility revenue (1)                |                       | $ | 90,680                           |        |                                 | $ | 86,764   |        |      |  | 4.5  | %   |          | $ | 256,746 |         |  | $ | 247,939 |         |  |  | 3.6 | %  
|Same-facility revenue of animal
hospitals managed |                       |   | (21,517                          | )      |                                 |   | (21,036  | )      |      |  |      |     |          |   | (60,318 | )       |  |   | (59,728 | )       |  |  |     |    
|                                                  |                       |   |                                  |        |                                 |   |          |        |      |  |      |     |          |   |         |         |  |   |         |         |  |  |     |    
|Same-facility revenue of animal
hospitals owned   |                       |   | 69,163                           |        |                                 |   | 65,728   |        |      |  |      |     |          |   | 196,428 |         |  |   | 188,211 |         |  |  |     |    
|Same-facility management fees (2)                 |                       |   | 11,633                           |        |                                 |   | 11,423   |        |      |  |      |     |          |   | 32,990  |         |  |   | 32,752  |         |  |  |     |    
|                                                  |                       |   |                                  |        |                                 |   |          |        |      |  |      |     |          |   |         |         |  |   |         |         |  |  |     |    
|                                                  | Same-facility revenue |   | $                                | 80,796 |                                 |   | $        | 77,151 |      |  |      | 4.7 | %        |   | $       | 229,418 |  |   | $       | 220,963 |  |  |     | 3.8 | %
|                                                  |                       |   |                                  |        |                                 |   |          |        |      |  |      |     |          |   |         |         |  |   |         |         |  |  |     |    



|(1) |  | Adjusted same-facility revenue is a non-GAAP measure of combined animal hospitals owned and
managed.
|--- |  | ----------------------------------------------------------------------------------------------------
|   
|(2) |  | Paid to us by veterinary medical groups.                                                            

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

|                                                                     |                                                        |   |                                  |        |      |   |          |        |   |  |     |      |   
|-------------------------------------------------------------------- | ------------------------------------------------------ | - | -------------------------------- | ------ | ---- | - | -------- | ------ | - |  | --- | ---- | --
|                                                                     |                                                        |   | Three Months Ended September 30,
|                                                                     |                                                        |   |                                 
|                                                                     |                                                        |   | 2003                             |        | 2002 |   | % Change
|                                                                     |                                                        |   |                                  |        |      |   |         
|Same-facility:                                                       |                                                        |   |                                  |        |      |   |          |        |   |  |     |     
|                                                                     | Orders for combined animal hospitals owned and managed |   |                                  | 851    |      |   |          | 865    |   |  |     |      |   
|                                                                     | Orders for animal hospitals managed                    |   |                                  | (213   | )    |   |          | (219   | ) |  |     |      |   
|                                                                     |                                                        |   |                                  |        |      |   |          |        |   |  |     |     
|                                                                     | Orders for animal hospitals owned                      |   |                                  | 638    |      |   |          | 646    |   |  |     | (1.2 | )%
|                                                                     | Average price per order for animal hospitals owned (1) |   | $                                | 108.41 |      |   | $        | 101.75 |   |  |     | 6.5  | % 
|                                                                     |                                                        |   |                                  |        |      |   |          |        |   |  |     |     
|Same-facility revenue for animal hospitals owned (2)                 |                                                        | $ | 69,163                           |        |      | $ | 65,728   |        |   |  | 5.2 | %   
|Same-facility management fees                                        |                                                        |   | 11,633                           |        |      |   | 11,423   |        |   |  |     |     
|Acquired revenue and management fees from acquired
managed practices |                                                        |   | 8,283                            |        |      |   | 967      |        |   |  |     |     
|                                                                     |                                                        |   |                                  |        |      |   |          |        |   |  |     |     
|                                                                     | Animal hospital revenue as reported                    |   | $                                | 89,079 |      |   | $        | 78,118 |   |  |     |      |   
|                                                                     |                                                        |   |                                  |        |      |   |          |        |   |  |     |     

|                                                                     |                                                        |   |                                 |         |      |   |          |         |   |  |     |      |   
|-------------------------------------------------------------------- | ------------------------------------------------------ | - | ------------------------------- | ------- | ---- | - | -------- | ------- | - |  | --- | ---- | --
|                                                                     |                                                        |   | Nine Months Ended September 30,
|                                                                     |                                                        |   |                                
|                                                                     |                                                        |   | 2003                            |         | 2002 |   | % Change
|                                                                     |                                                        |   |                                 |         |      |   |         
|Same-facility:                                                       |                                                        |   |                                 |         |      |   |          |         |   |  |     |     
|                                                                     | Orders for combined animal hospitals owned and managed |   |                                 | 2,413   |      |   |          | 2,456   |   |  |     |      |   
|                                                                     | Orders for animal hospitals managed                    |   |                                 | (589    | )    |   |          | (614    | ) |  |     |      |   
|                                                                     |                                                        |   |                                 |         |      |   |          |         |   |  |     |     
|                                                                     | Orders for animal hospitals owned                      |   |                                 | 1,824   |      |   |          | 1,842   |   |  |     | (1.0 | )%
|                                                                     | Average price per order for animal hospitals owned (1) |   | $                               | 107.69  |      |   | $        | 102.18  |   |  |     | 5.4  | % 
|                                                                     |                                                        |   |                                 |         |      |   |          |         |   |  |     |     
|Same-facility revenue for animal hospitals owned (2)                 |                                                        | $ | 196,428                         |         |      | $ | 188,211  |         |   |  | 4.4 | %   
|Same-facility management fees                                        |                                                        |   | 32,990                          |         |      |   | 32,752   |         |   |  |     |     
|Acquired revenue and management fees from acquired
managed practices |                                                        |   | 24,813                          |         |      |   | 4,420    |         |   |  |     |     
|                                                                     |                                                        |   |                                 |         |      |   |          |         |   |  |     |     
|                                                                     | Animal hospital revenue as reported                    |   | $                               | 254,231 |      |   | $        | 225,383 |   |  |     |      |   
|                                                                     |                                                        |   |                                 |         |      |   |          |         |   |  |     |     



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

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

|                                                                 |                                                                      |   |                    |       |                   |   |       |     |      |   |        |        |  |   |        |       | 
|---------------------------------------------------------------- | -------------------------------------------------------------------- | - | ------------------ | ----- | ----------------- | - | ----- | --- | ---- | - | ------ | ------ |  | - | ------ | ----- | 
|                                                                 |                                                                      |   | Three Months Ended |       | Nine Months Ended
|                                                                 |                                                                      |   | September 30,      |       | September 30,    
|                                                                 |                                                                      |   |                    |       |                  
|                                                                 |                                                                      |   | 2003               |       | 2002              |   | 2003  |     | 2002
|                                                                 |                                                                      |   |                    |       |                   |   |       |     |     
|Acquired revenue for combined animal
hospitals owned and managed |                                                                      | $ | 9,380              |       |                   | $ | 1,080 |     |      | $ | 28,443 |        |  | $ | 5,232  |      
|Less: acquired revenue for animal hospitals
managed              |                                                                      |   | (2,491             | )     |                   |   | (210  | )   |      |   | (8,267 | )      |  |   | (1,773 | )    
|                                                                 |                                                                      |   |                    |       |                   |   |       |     |      |   |        |        |  |   |        |      
|Acquired revenue for animal hospitals owned                      |                                                                      |   | 6,889              |       |                   |   | 870   |     |      |   | 20,176 |        |  |   | 3,459  |      
|Management fees from acquired managed practices                  |                                                                      |   | 1,394              |       |                   |   | 97    |     |      |   | 4,637  |        |  |   | 961    |      
|                                                                 |                                                                      |   |                    |       |                   |   |       |     |      |   |        |        |  |   |        |      
|                                                                 | Acquired revenue and management fees from
acquired managed practices |   | $                  | 8,283 |                   |   | $     | 967 |      |   | $      | 24,813 |  |   | $      | 4,420 | 
|                                                                 |                                                                      |   |                    |       |                   |   |       |     |      |   |        |        |  |   |        |      

Other Revenue

Other revenue consists of fees earned from a marketing consulting
agreement with Heinz Pet Products, which paid a monthly fee of approximately
$167,000 commencing October 1, 2000 through September 30, 2002. For the three
and nine months ended September 30, 2002, we recognized revenue of $500,000 and
$1.5 million, respectively, related to this agreement. There were no consulting
agreements effective in 2003.

Direct Costs

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

|                |                    |   |                                  |        |                                 |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |      |  
|--------------- | ------------------ | - | -------------------------------- | ------ | ------------------------------- |  | ---- | ---- | ------- | - | ------ | ------ | ---- |  | ------- | ---- | - |  | ------- | ---- | ------ | - | ------- | ------- |  |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | - |  | ---- | ---- | -
|                |                    |   | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                |                    |   |                                  |        |                                
|                |                    |   | 2003                             |        | 2002                            |  |      |      |         |   | 2003   |        | 2002 |  |         |      |  
|                |                    |   |                                  |        |                                 |  |      |      |         |   |        |        |      |  |         |      |  
|                |                    |   |                                  |        |                                 |  | % of |      |         |   |        |        | % of |  | %       |      |   |  |         |      | % of   |   |         |         |  |  | % of |      | %
|                |                    |   | $                                |        | Revenue                         |  | $    |      | Revenue |   | Change |        | $    |  | Revenue |      | $ |  | Revenue |      | Change
|                |                    |   |                                  |        |                                 |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |       
|Laboratory      |                    | $ | 25,870                           |        |                                 |  | 55.7 | %    |         | $ | 21,849 |        |      |  | 56.5    | %    |   |  | 18.4    | %    |        | $ | 74,142  |         |  |  | 55.0 | %    |   | $ | 65,545  |         |  |  | 56.1 | %    |   |  | 13.1 | %   
|Animal hospital |                    |   | 65,445                           |        |                                 |  | 73.5 | %    |         |   | 57,604 |        |      |  | 73.7    | %    |   |  | 13.6    | %    |        |   | 188,606 |         |  |  | 74.2 | %    |   |   | 168,106 |         |  |  | 74.6 | %    |   |  | 12.2 | %   
|Intercompany    |                    |   | (2,605                           | )      |                                 |  |      |      |         |   | (2,296 | )      |      |  |         |      |   |  |         |      |        |   | (7,783  | )       |  |  |      |      |   |   | (6,902  | )       |  |  |      |      |   |  |      |     
|                |                    |   |                                  |        |                                 |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |     
|                | Total direct costs |   | $                                | 88,710 |                                 |  |      | 66.7 | %       |   | $      | 77,157 |      |  |         | 67.1 | % |  |         | 15.0 | %      |   | $       | 254,965 |  |  |      | 66.9 | % |   | $       | 226,749 |  |  |      | 67.3 | % |  |      | 12.4 | %
|                |                    |   |                                  |        |                                 |  |      |      |         |   |        |        |      |  |         |      |   |  |         |      |        |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |   |  |      |     

Laboratory Direct Costs

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

36



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Animal Hospital Direct Costs

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

|                                              |                              |   |                                  |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |      |  
|--------------------------------------------- | ---------------------------- | - | -------------------------------- | ------ | ------- |  | ---- | ---- | ------- | - | -------- | ------ | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                              |                              |   | Three Months Ended September 30,
|                                              |                              |   |                                 
|                                              |                              |   | 2003                             |        | 2002    |  |      |      |        
|                                              |                              |   |                                  |        |         |  |      |      |        
|                                              |                              |   |                                  |        |         |  | % of |      |         |   |          |        | % of |  |      |      |  
|                                              |                              |   | $                                |        | Revenue |  | $    |      | Revenue |   | % Change
|                                              |                              |   |                                  |        |         |  |      |      |         |  
|Animal Hospital Direct Costs:                 |                             
|As reported                                   |                              | $ | 65,445                           |        |         |  | 73.5 | %    |         | $ | 57,604   |        |      |  | 73.7 | %    |   |  | 13.6 | %   
|Add: Direct costs of animal hospitals
managed |                              |   | 24,008                           |        |         |  |      |      |         |   | 21,246   |        |      |  |      |      |   |  |      |     
|Less: Management fees (1)                     |                              |   | (13,027                          | )      |         |  |      |      |         |   | (11,520  | )      |      |  |      |      |   |  |      |     
|                                              |                              |   |                                  |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |     
|                                              | Combined animal hospital (2) |   | $                                | 76,426 |         |  |      | 76.4 | %       |   | $        | 67,330 |      |  |      | 76.6 | % |  |      | 13.5 | %
|                                              |                              |   |                                  |        |         |  |      |      |         |   |          |        |      |  |      |      |   |  |      |     

|                                              |                              |   |                                 |         |         |  |      |      |         |   |          |         |      |  |      |      |   |  |      |      |  
|--------------------------------------------- | ---------------------------- | - | ------------------------------- | ------- | ------- |  | ---- | ---- | ------- | - | -------- | ------- | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                                              |                              |   | Nine Months Ended September 30,
|                                              |                              |   |                                
|                                              |                              |   | 2003                            |         | 2002    |  |      |      |        
|                                              |                              |   |                                 |         |         |  |      |      |        
|                                              |                              |   |                                 |         |         |  | % of |      |         |   |          |         | % of |  |      |      |  
|                                              |                              |   | $                               |         | Revenue |  | $    |      | Revenue |   | % Change
|                                              |                              |   |                                 |         |         |  |      |      |         |  
|Animal Hospital Direct Costs:                 |                             
|As reported                                   |                              | $ | 188,606                         |         |         |  | 74.2 | %    |         | $ | 168,106  |         |      |  | 74.6 | %    |   |  | 12.2 | %   
|Add: Direct costs of animal hospitals
managed |                              |   | 68,585                          |         |         |  |      |      |         |   | 61,501   |         |      |  |      |      |   |  |      |     
|Less: Management fees (1)                     |                              |   | (37,627                         | )       |         |  |      |      |         |   | (33,713  | )       |      |  |      |      |   |  |      |     
|                                              |                              |   |                                 |         |         |  |      |      |         |   |          |         |      |  |      |      |   |  |      |     
|                                              | Combined animal hospital (2) |   | $                               | 219,564 |         |  |      | 77.0 | %       |   | $        | 195,894 |      |  |      | 77.4 | % |  |      | 12.1 | %
|                                              |                              |   |                                 |         |         |  |      |      |         |   |          |         |      |  |      |      |   |  |      |     



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

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

Selling, General and Administrative Expense

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

|                |            |   |                                  |       |                                 |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |        |        |  |  |      |     |   |   |        |        |  |  |     |     |   |  |     |     |  
|--------------- | ---------- | - | -------------------------------- | ----- | ------------------------------- |  | ---- | --- | ------- | - | ------ | ----- | ---- |  | ------- | --- | - |  | ------- | --- | ------ | - | ------ | ------ |  |  | ---- | --- | - | - | ------ | ------ |  |  | --- | --- | - |  | --- | --- | -
|                |            |   | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                |            |   |                                  |       |                                
|                |            |   | 2003                             |       | 2002                            |  |      |     |         |   | 2003   |       | 2002 |  |         |     |  
|                |            |   |                                  |       |                                 |  |      |     |         |   |        |       |      |  |         |     |  
|                |            |   |                                  |       |                                 |  | % of |     |         |   |        |       | % of |  | %       |     |   |  |         |     | % of   |   |        |        |  |  | % of |     | %
|                |            |   | $                                |       | Revenue                         |  | $    |     | Revenue |   | Change |       | $    |  | Revenue |     | $ |  | Revenue |     | Change
|                |            |   |                                  |       |                                 |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |       
|Laboratory      |            | $ | 2,826                            |       |                                 |  | 6.1  | %   |         | $ | 2,563  |       |      |  | 6.6     | %   |   |  | 10.3    | %   |        | $ | 8,330  |        |  |  | 6.2  | %   |   | $ | 7,632  |        |  |  | 6.5 | %   |   |  | 9.1 | %  
|Animal hospital |            |   | 2,492                            |       |                                 |  | 2.8  | %   |         |   | 2,359  |       |      |  | 3.0     | %   |   |  | 5.6     | %   |        |   | 7,514  |        |  |  | 3.0  | %   |   |   | 7,351  |        |  |  | 3.3 | %   |   |  | 2.2 | %  
|Corporate       |            |   | 3,613                            |       |                                 |  | 2.7  | %   |         |   | 3,810  |       |      |  | 3.3     | %   |   |  | (5.2    | )%  |        |   | 11,540 |        |  |  | 3.0  | %   |   |   | 10,910 |        |  |  | 3.2 | %   |   |  | 5.8 | %  
|                |            |   |                                  |       |                                 |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |        |        |  |  |      |     |   |   |        |        |  |  |     |     |   |  |     |    
|                | Total SG&A |   | $                                | 8,931 |                                 |  |      | 6.7 | %       |   | $      | 8,732 |      |  |         | 7.6 | % |  |         | 2.3 | %      |   | $      | 27,384 |  |  |      | 7.2 | % |   | $      | 25,893 |  |  |     | 7.7 | % |  |     | 5.8 | %
|                |            |   |                                  |       |                                 |  |      |     |         |   |        |       |      |  |         |     |   |  |         |     |        |   |        |        |  |  |      |     |   |   |        |        |  |  |     |     |   |  |     |    

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Laboratory SG&A

The decrease in laboratory SG&A as a percentage of laboratory revenue
during the three and nine months ended September 30, 2003 as compared to the
same periods in the prior year was primarily attributable to an increase in
laboratory revenue combined with operating leverage associated with our
laboratory business. The decrease in laboratory SG&A as a percentage of
laboratory revenue during the nine months ended September 30, 2003 as compared
to the same period in the prior year was also attributable to a $300,000
decrease in legal settlements and costs due to a specific litigative matter that
occurred only in 2002.

Animal Hospital SG&A

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

Corporate SG&A

The decrease in corporate SG&A as a percentage of total revenue for the
three months ended September 30, 2003 as compared to the same period in the
prior year was primarily attributable to a $145,000 decrease in general legal
settlements and costs. The decrease in corporate SG&A as a percentage of total
revenue for the nine months ended September 30, 2003 as compared to the same
period in the prior year was primarily attributable to a decrease in accounting
fees. Corporate SG&A for the nine months ended September 30, 2002 included
additional accounting fees of $300,000 incurred for the reaudit of prior year
financial statements in connection with changing our independent auditors from
Arthur Andersen LLP to KPMG LLP.

Depreciation and Amortization

Depreciation and amortization expense increased $551,000, or 18.2%, for
the three months ended September 30, 2003 and increased $1.3 million, or 14.2%,
for the nine months ended September 30, 2003 compared to the same periods in the
prior year. The increase in depreciation and amortization was due to the
purchase of property and equipment and the addition of non-competition
agreements executed in connection with the acquisition of animal hospitals and
laboratories.

Write-down of Assets

During the three and nine months ended September 30, 2003, we
determined that the value of one of our parcels of real estate was impaired and
recorded an impairment charge of $392,000.

Loss (Gain) on Sale of Assets

During the three and nine months ended September 30, 2003, we sold
assets no longer needed in our operations for a loss of $50,000 and a gain of
$110,000, respectively. The sales transactions consisted of real estate, one
animal hospital practice and other fixed assets.

Interest Expense, Net

Interest expense, net of interest income decreased $3.8 million, or
37.7%, for the three months ended September 30, 2003 and decreased $10.8
million, or 35.3%, for the nine months ended September 30, 2003 compared to the
same periods in the prior year. The change in net interest expense was
attributable to a decrease in the average debt balances outstanding and a
decrease in the weighted average interest rate.

Debt Retirement Costs

On August 19, 2003, we refinanced our senior credit facility retiring
$166.4 million principal balance outstanding under our senior term C notes with
$20.0 million of cash on-hand and $146.4 million received from the

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issuance of new senior term D notes, with an interest rate margin of 2.5% compared to 3.0%
for the senior term C notes. In conjunction with that transaction, we recorded
debt retirement costs of $1.7 million.

On February 4, 2003, we voluntarily retired the entire principal amount of
our 15.5% senior notes with net proceeds from the sale of our common stock
during our secondary offering. In conjunction with that transaction, we
recorded debt retirement costs of $7.4 million.

All debt retirement costs have been reported as a component of continuing
operations in our Condensed, Consolidated Income Statements.

Other (Income) Expense

Other income was $129,000 for the three months ended September 30, 2003
and other expense was $129,000 for the nine months ended September 30, 2003,
representing non-cash gains and losses on our interest rate swap agreements.
Other income was $5,000 and $159,000 for the three and nine months ended
September 30, 2003, respectively, representing non-cash gains on our interest
rate collar agreement.

Minority Interest in Income of Subsidiaries

Minority interest in income of the consolidated subsidiaries was $456,000
and $430,000 for the three months ended September 30, 2003 and 2002,
respectively, and $1.3 million and $1.4 million for the nine months ended
September 30, 2003 and 2002, respectively. Minority interest in income of
subsidiaries represents our partners proportionate share of net income
generated by those subsidiaries that we do not wholly own.

Provision for Income Taxes

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

Liquidity and Capital Resources

Discussion of the Nine Months Ended September 30, 2003

Our cash and cash equivalents increased to $18.4 million at September 30,
2003 compared to $6.5 million at December 31, 2002. The increase resulted from
$67.7 million provided by operating activities offset by $38.0 million used in
investing activities and $17.7 million used in financing activities.

Net cash provided by operating activities increased to $67.7 million
during the nine months ended September 30, 2003 compared to $60.8 million
during the nine months ended September 30, 2002. This increase was primarily
attributable to an increase in operating income and a $4.0 million decrease in
interest paid, offset by a $6.5 million increase in income taxes paid and
changes in working capital.

We used net cash of $38.0 million from investing activities during the
nine months ended September 30, 2003 in which we:



| |  |  | paid $27.0 million related to the acquisition of 19 animal
hospitals and four laboratory companies and the settlement of
certain obligations incurred or agreed to on the date of
acquisition;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | paid $244,000 to purchase the ownership interest held by two of our animal hospital partners;                                                                                                 
|
| |  |  | paid $589,000 for real estate acquired in connection with acquisitions;                                                                                                                       
|
| |  |  | paid $11.0 million in property and equipment additions; and                                                                                                                                   

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| |  |  | received $810,000 from the sale of assets and other activities.
| | - |  | ---------------------------------------------------------------

We used net cash of $17.7 million from financing activities during the
nine months ended September 30, 2003 in which we:



| |  |  | received $54.3 million in net proceeds from the issuance of
3.8 million shares of our common stock;                                                                                                  
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | paid $41.8 million to voluntarily redeem the entire principal
amount of our 15.5% senior notes at a redemption price of 110% of
the principal amount;                                                
|
| |  |  | paid $166.4 million to retire the entire principal amount of
our senior term C notes by using $20.0 million of cash on-hand and
$146.4 million received from the issuance of new senior term D
notes;
|
| |  |  | paid $1.7 million for scheduled maturities of debt obligations;                                                                                                                                      
|
| |  |  | paid $7.5 million to repay the entire outstanding balance of our revolving credit facility; and                                                                                                      
|
| |  |  | paid $1.0 million of financing costs.                                                                                                                                                                

Future Cash Requirements

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

Estimated future uses of cash for the remainder of 2003 include capital
expenditures for land, buildings and equipment of approximately $5.0 million.
In addition, we intend to use available liquidity to continue our growth
through the selective acquisition of animal hospitals, primarily for cash.
From October 1, 2003 through November 10, 2003, we acquired two animal
hospitals using cash of approximately $2.5 million. We do not anticipate
purchasing additional animal hospital or laboratory facilities during the
remainder of 2003 because we have achieved our acquisition goals for the
current year. Our acquisition program contemplates the acquisition of 15 to 25
animal hospitals per year and a planned cash commitment of up to $30.0 million.
However, we may purchase either a fewer or greater number of animal hospital
facilities and we may purchase laboratory facilities during any year depending
upon opportunities that present themselves and our cash requirements may change
accordingly. Although we intend to primarily use cash in our acquisitions, we
may use debt or stock to the extent we deem it appropriate and to the extent we
do not violate certain covenants in our senior credit facility.

In addition to the foregoing, we will use approximately $733,000 of cash
for the remainder of 2003 to pay the mandatory principal payments due on our
outstanding indebtedness. In addition, we may elect to prepay certain debt
obligations.

Description of Indebtedness

Credit and Guaranty Agreement.On September 20, 2000, we entered into a
credit and guaranty agreement, which included senior term notes and a $50.0
million revolving credit facility. On August 19, 2003, we refinanced our
credit and guaranty agreement retiring $166.4 million principal balance
outstanding under our senior term C notes with $20.0 million of cash on-hand
and $146.4 million received from the issuance of new senior term D notes, with
an interest rate margin of 2.5% compared to 3.0% for the senior term C notes.
At September 30, 2003, we had $146.1 million principal amount outstanding
under our senior term D notes and no borrowings outstanding under our revolving
credit facility.

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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% plus a base rate margin,
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 plus a
eurodollar rate margin. The base rate margins for the revolving credit
facility range from 1.00% to 2.25% per annum and the margin for the senior term
D notes is 1.50%. The eurodollar rate margins for the revolving credit
facility range from 2.00% to 3.25% per annum and the margin for the senior term
D notes is 2.50%. The senior term D notes mature in September 2008 and the
revolving credit facility matures in September 2006.

The credit and guaranty agreement contains certain financial covenants
pertaining to interest coverage, fixed charge coverage and leverage ratios. In
addition, the credit and guaranty agreement has restrictions pertaining to
capital expenditures, acquisitions and the payment of dividends on all classes
of stock. We currently believe the most restrictive covenant is the
fixed-charge coverage ratio. Our credit agreement defines the fixed charge
coverage ratio as that ratio which is calculated on a last twelve-month basis
by dividing pro forma EBITDA, as defined by the agreement, by fixed charges.
Fixed charges are defined as cash interest expense, scheduled principal
payments on debt obligations, capital expenditures and provision for income
taxes. At September 30, 2003, we had a fixed charge coverage ratio of 1.53 to
1.00, exceeding the required ratio of 1.10 to 1.00.

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

Other Debt.We had seller notes secured by assets of animal hospitals,
unsecured debt and capital leases that totaled $1.9 million at September 30,
2003.

Future Cash Obligations for Long-Term Debt, Interest and Leases

The following table sets forth the scheduled principal, interest and other
contractual cash obligations due by us for each of the periods indicated (in
thousands):

|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|------------------------- |  | ---------------------- | ------- | ---------- |  | ----------- | ------ | ----------- |  | ------- | ------ | - |  | - | ------- | --------- |  | - | ------- | 
|                          |  | Payments Due by Period
|                          |  |                       
|                          |  |                        |         |            |  | Less than   |        |             |  |         |        |   |  |   |         | More than
|                          |  | Total                  |         | 1 year (1) |  | 1 - 3 years |        | 3 - 5 years |  | 5 years
|                          |  |                        |         |            |  |             |        |             |  |        
|Long-term debt            |  | $                      | 317,624 |            |  | $           | 647    |             |  | $       | 3,831  |   |  | $ | 90,020  |           |  | $ | 223,126 | 
|Fixed interest            |  |                        | 110,589 |            |  |             | 8,525  |             |  |         | 34,520 |   |  |   | 33,945  |           |  |   | 33,599  | 
|Variable interest         |  |                        | 42,298  |            |  |             | 2,228  |             |  |         | 19,492 |   |  |   | 18,454  |           |  |   | 2,124   | 
|Capital lease obligations |  |                        | 333     |            |  |             | 86     |             |  |         | 246    |   |  |   | 1       |           |  |   |        | 
|Operating leases          |  |                        | 246,387 |            |  |             | 4,709  |             |  |         | 30,323 |   |  |   | 30,031  |           |  |   | 181,324 | 
|Swap agreements           |  |                        | (2,426  | )          |  |             | (337   | )           |  |         | (2,089 | ) |  |   |        |           |  |   |        | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|                          |  | $                      | 714,805 |            |  | $           | 15,858 |             |  | $       | 86,323 |   |  | $ | 172,451 |           |  | $ | 440,173 | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 

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

We have both fixed-rate and variable-rate debt. The interest payments on
our variable-rate debt are based on a variable-rate component plus a fixed
2.5%. Including the fixed 2.5%, we estimate that the total interest rate on
our variable-rate debt will be 6.1%, 6.5%, 7.0%, 7.5%, 8.0% and 8.0% for years
2003 through 2008, respectively.

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Our consolidated financial statements
included in our 2002 Annual Report on Form 10-K discuss these variable-rate
notes in more detail.

Interest Rate Hedging Agreements

We entered into certain no-fee swap agreements, whereby we pay to the
counter party amounts based on fixed interest rates and set notional principal
amounts in exchange for the receipt of payments from the counter party based on
LIBOR, London interbank offer rates, and the same set notioanl principal
amounts. A summary of these agreements is as follows:

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

Swap # 2 and Swap #3 qualify for hedge accounting and we consider them to
be cash flow hedging instruments. Prior to May 2003, Swap #1 was also
considered to be a cash-flow hedging instrument. At that time, we determined
that Swap #1 was no longer an effective tool for mitigating interest rate risk
within an acceptable degree of variance because the projected LIBOR rates at
May 2003 for the remaining term of the contract, June 2003 through November
2004, were materially different from the LIBOR projections made at the
inception of the contract for this same time period. This difference in LIBOR
projections was a result of changes in the interest rate environment which
occurred from November 2002 through May 2003. As a result of this
determination, Swap #1 no longer qualifies for hedge accounting and all changes
in its market value are recognized as income or expense in the period of
change.

At September 30, 2003, the fair market values of our swap agreements
resulted in a net liability to us of $524,000, which is included in other
accrued liabilities. For the three and nine months ended September 30, 2003,
we made payments of $165,000 and $352,000, respectively, as a result of LIBOR
being below the fixed interest rates. These payments are included in interest
expense.

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

New Accounting Pronouncements

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

In May 2003, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards, or SFAS, No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity.SFAS No. 150 clarifies the accounting for certain financial
instruments with characteristics of both liabilities and equity and requires
that those instruments be classified as liabilities. SFAS No. 150 is effective
for financial instruments entered into or modified after May 31, 2003 and
otherwise is effective at the beginning of the first interim period beginning
after June 15, 2003. We currently have a $2.3 million obligation to be settled
in either cash or common stock that is classified as a liability. In addition,
we have certain partnerships in non-wholly owned subsidiaries whereby we are
required under the terms of the respective partnership agreements to purchase
the partners equity in the partnership in the event of the partners death.
Under SFAS No. 150, we are required to recognize these obligations as
liabilities in our financial statements at fair market value. Currently, we are recognizing these liabilities as a
component of minority interest. We do not anticipate that SFAS No. 150 will
have a material impact on our future financial statements.

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Accounting for Derivative Instruments and Hedging Activities

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

Consolidations of Variable Interest Entities

In January 2003, the FASB issued FASB Interpretation, or FIN, No. 46,
Consolidation of Variable Interest Entities,requiring that companies
consolidate variable interest entities if they are the primary beneficiaries,
as defined under FIN No. 46, of the activities of the variable interest
entities. Companies are required to apply FIN No. 46 immediately for all
variable interest entities created after January 31, 2003 and per FASB Staff
Position FIN No. 46-6 issued in October 2003, as of the first annual period
ending after December 15, 2003 for all other variable interest entities.

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

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

Guarantors Accounting and Disclosure Requirements for Guarantees

In January 2003, the FASB issued FIN No. 45, Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others.FIN No. 45 requires a company to recognize a liability
for the obligations it has undertaken in issuing a guarantee. This liability
would be recorded at the inception of a guarantee and would be measured at fair
value. The measurement provisions of this statement apply prospectively to
guarantees issued or modified after December 31, 2002 for periods ending after
December 15, 2002.

We have guaranteed all liabilities for certain veterinary medical groups
for which we provide management services. All of these liabilities have been
included in our condensed, consolidated financial statements. We pay these
liabilities and recover money spent through the management fee we charge the
veterinary medical groups. We do not expect FIN No. 45 to have a material
impact on our financial statements in the future.

Consideration Received from a Vendor

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



| |  |  | cash received from a vendor is presumed to be a reduction of
the cost of the vendors products or services, however that
presumption is overcome when the consideration is either a) a
payment for assets or services, or b) a reimbursement of specific
and identifiable costs incurred on behalf of the
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | vendor in selling
the vendors products or services, in which case the consideration
is a reduction of that cost; and     
| | - |  | --------------------------------------------------------------------------------------------------------------------------
|
| |  |  | rebates offered to a customer or reseller should be
recognized or new agreements entered into on or after January 1,
2003.

We have adopted EITF Issue No. 02-16 and it has not had, nor do we expect
it to have a material impact on our financial statements in the future.

Costs Associated with Exit or Disposal Activities

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

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

Gains and Losses from Extinguishment of Debt and Capital Leases

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

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

During the nine months ended September 30, 2003, we made two significant
changes to our capital structure:



| |  |  | in August 2003, we refinanced our senior credit facility
voluntarily repaying $20.0 million of senior term C notes and
retiring the remaining senior term C notes with senior term D notes,
resulting in debt retirement costs of approximately $1.7 million;
and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | in February 2003, we redeemed the remaining principal amount
outstanding of our 15.5% senior notes with proceeds from our
secondary offering resulting in debt retirement costs of
approximately $7.4 million.                                                   

We have concluded that these debt retirement costs do not qualify for
extraordinary treatment under APB No. 30 because we have historically changed
our capital structure to take advantage of favorable market conditions and it
is probable that we will continue to do so in the future. As a result, these
costs for all periods presented have been included as a component from
recurring operations in the Condensed, Consolidated Income Statements.

SFAS No. 145 also amends SFAS No. 13, Accounting for Leases. Under SFAS
No. 145, if a capital lease is modified such that it becomes an operating
lease, a gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At
September 30, 2003, we had capital lease obligations of $333,000; however, we
currently have no plans to modify these or any future capital leases, and we do
not expect SFAS No. 145 to have a material impact on our financial statements.

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Asset Retirement Obligations

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

Risk Factors

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



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

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

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



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

Since January 1, 1996, we have experienced rapid growth and expansion.
Our failure to manage our growth effectively may increase our costs of
operations and hinder our ability to execute our business strategy. Our
rapid growth has placed, and will continue to place, a significant strain
on our management and operational systems and resources. At January 1, 1996,
we operated 59 animal hospitals, operated laboratories servicing approximately
9,000 customers in 27 states and had approximately 1,150 full-time equivalent
employees. At September 30, 2003, we operated 241 animal hospitals, operated
laboratories servicing approximately 14,000 customers in all 50 states and had
approximately 4,000 full-time equivalent employees. If our business continues
to grow, we will need to improve

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and enhance our overall financial and
managerial controls, reporting systems and procedures, and expand, train and
manage our workforce in order to maintain control of expense and achieve
desirable economies of scale. We also will need to increase the capacity of
our current systems to meet additional demands.



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

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



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

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



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

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

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

At September 30, 2003, our balance sheet reflected $370.0 million of
goodwill, which is a substantial portion of our total assets of $545.8 million
at that date. We expect that the aggregate amount of goodwill on our balance
sheet will increase as a result of future acquisitions. We continually
evaluate whether events or circumstances have occurred that suggest that the
fair market value of each of our reporting units is below their
carrying values. If we determine that the fair market value of one of our
reporting units is less than its carrying value, this may result in an
impairment write-down of the goodwill for that reporting unit. The impairment
write-down would be reflected as expense and could have a material adverse
effect on our results of operations during the period in which we recognize the
expense. In 2002, we concluded that the fair value of our reporting units
exceeded their carrying value and accordingly, as of that date, our net
goodwill was fairly stated in our financial statements and there are currently
no impairment issues. However, in the future we may incur impairment charges
related to the goodwill already recorded or arising out of future acquisitions.

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

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

At September 30, 2003, our debt, excluding unamortized discounts,
consisted of:



| |  |  | $146.1 million in principal amount outstanding under our senior credit facility;              
| | - |  | ----------------------------------------------------------------------------------------------
|
| |  |  | $170.0 million in principal amount outstanding under our 9.875% senior subordinated notes; and
|
| |  |  | $1.9 million in principal amount outstanding under our other debt.                            

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

|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|------------------------- |  | ---------------------- | ------- | ---------- |  | ----------- | ------ | ----------- |  | ------- | ------ | - |  | - | ------- | --------- |  | - | ------- | 
|                          |  | Payments Due by Period
|                          |  |                       
|                          |  |                        |         |            |  | Less than   |        |             |  |         |        |   |  |   |         | More than
|                          |  | Total                  |         | 1 year (1) |  | 1 - 3 years |        | 3 - 5 years |  | 5 years
|                          |  |                        |         |            |  |             |        |             |  |        
|Long-term debt            |  | $                      | 317,624 |            |  | $           | 647    |             |  | $       | 3,831  |   |  | $ | 90,020  |           |  | $ | 223,126 | 
|Fixed interest            |  |                        | 110,589 |            |  |             | 8,525  |             |  |         | 34,520 |   |  |   | 33,945  |           |  |   | 33,599  | 
|Variable interest         |  |                        | 42,298  |            |  |             | 2,228  |             |  |         | 19,492 |   |  |   | 18,454  |           |  |   | 2,124   | 
|Capital lease obligations |  |                        | 333     |            |  |             | 86     |             |  |         | 246    |   |  |   | 1       |           |  |   |        | 
|Swap agreements           |  |                        | (2,426  | )          |  |             | (337   | )           |  |         | (2,089 | ) |  |   |        |           |  |   |        | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 
|                          |  | $                      | 468,418 |            |  | $           | 11,149 |             |  | $       | 56,000 |   |  | $ | 142,420 |           |  | $ | 258,849 | 
|                          |  |                        |         |            |  |             |        |             |  |         |        |   |  |   |         |           |  |   |         | 

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

We have both fixed-rate and variable-rate debt. The interest payments on
our variable-rate debt are based on a variable-rate component plus a fixed
2.5%. Including the fixed 2.5%, we estimate that the total interest rate on
our variable-rate debt will be 6.1%, 6.5%, 7.0%, 7.5%, 8.0% and 8.0% for years
2003 through 2008, respectively. Our consolidated financial statements
included in our 2002 Annual Report on Form 10-K discuss these variable-rate
notes in more detail.

We entered into certain no-fee swap agreements, whereby we pay to the
counter party amounts based on fixed interest rates and set notional principal
amounts in exchange for the receipt of payments from the counter party based on
LIBOR and the same set notional principal amounts. A summary of these
agreements is as follows:

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

Swap #2 and Swap #3 qualify for hedge accounting and we consider them to
be cash-flow hedging instruments. Prior to May 2003, Swap #1 was also
considered to be a cash-flow hedging instrument. At that time, we determined
that Swap #1 was no longer considered a cash-flow hedging instrument because
the current rate environment was significantly different than the rate
environment in existence at the effective date.

Our ability to make payments on our debt, and to fund acquisitions, will
depend upon our ability to generate cash in the future. Insufficient cash flow
could place us at risk of default under our debt agreements or could prevent

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

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

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



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

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

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

In addition to imposing restrictions on our business and operations, our
debt instruments include a number of covenants relating to financial ratios and
tests. Our ability to comply with these covenants may be affected by events
beyond our control, including prevailing economic, financial and industry
conditions. The breach of any of these covenants would result in a default
under these instruments. An event of default would permit our lenders and
other debtholders to declare all amounts borrowed from them to be due and
payable, together with accrued and unpaid interest. Moreover, these lenders
and other debtholders would have the option to terminate any obligation to make
further extensions of credit under these instruments. If we are unable to
repay debt to our senior lenders, these lenders and other debtholders could
proceed against our assets.



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

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

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There are many clinical laboratory companies that provide a broad range of
laboratory testing services in the same markets we service. Our largest
competitor for outsourced laboratory testing services is Idexx Laboratories,
Inc., which currently competes or intends to compete in most of the same
markets in which we operate. Also, Idexx and several other national companies
provide on-site diagnostic equipment that allows veterinarians to perform their
own laboratory tests.

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

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

As the pet population continues to grow, the need for skilled
veterinarians continues to increase. If we are unable to retain an adequate
number of skilled veterinarians, we may lose customers, our revenue may decline
and we may need to sell or close animal hospitals. As of September 30, 2003,
there were 28 veterinary schools in the country accredited by the American
Veterinary Medical Association. These schools graduate approximately 2,100
veterinarians per year. There is a shortage of skilled veterinarians across
the country, particularly in some regional markets in which we operate animal
hospitals. 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 September 30, 2003 we operated 64
animal hospitals in 11 states with these laws, including 21 in New York. We
may experience difficulty in expanding our operations into other states with
similar laws. Given varying and uncertain interpretations of the veterinary
laws of each state, we may not be in compliance with restrictions on the
corporate practice of veterinary medicine in all states. A determination that
we are in violation of applicable restrictions on the practice of veterinary
medicine in any state in which we operate could have a material adverse effect
on us, particularly if we were unable to restructure our operations to comply
with the requirements of that state.

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



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

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

Our computer systems are vulnerable to damage or interruption from a
variety of sources, including telecommunications failures, electricity
brownouts or blackouts, malicious human acts and natural disasters.

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Moreover,
despite network security measures, some of our servers are potentially
vulnerable to physical or electrical break-ins, computer viruses and similar
disruptive problems. Despite the precautions we have taken, unanticipated
problems affecting our systems could cause interruptions in our information
technology systems. Our insurance policies may not adequately compensate us
for any losses that may occur due to any failures in our systems.

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

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



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

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



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

Our executive officers, directors and principal stockholders beneficially
own, in the aggregate, 22.8% of our outstanding common stock. As a result,
these stockholders are able to significantly affect our management, our
policies and all matters requiring stockholder approval. The directors
supported by these stockholders will be able to significantly affect decisions
relating to our capital structure, including decisions to issue additional
capital stock, implement stock repurchase programs and incur indebtedness.
This concentration of ownership may have the effect of deterring hostile
takeovers, delaying or preventing changes in control or changes in management,
or limiting the ability of our other stockholders to approve transactions that
they may deem to be in their best interests.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2003, we had borrowings of $146.1 million under our
senior credit facility with fluctuating interest rates based on market
benchmarks such as LIBOR. To reduce the risk of increasing interest rates, we
have entered into three separate no-fee interest rate swap agreements. The
first agreement is for $40.0 million and commenced on November 29, 2002 and
expires November 29, 2004. The second agreement is for
$20.0 million and commenced on May 30, 2003 and expires May 31, 2005.
The third agreement is for $20.0 million and commenced on May 30, 2003 and
expires May 31, 2005. These swap agreements have the effect of reducing the
amount of our debt exposed to variable interest rates from $146.1 million to
$66.1 million. Accordingly, for the next 12-month period, for every 1.0%
increase in the LIBOR rate we will pay an additional $661,000 in interest
expense and for every 1.0% decrease in the LIBOR rate we will save $661,000 in
interest expense.

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

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ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we have carried out an
evaluation, under the supervision and with the participation of our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in timely alerting
them to material information required to be included in our periodic reports
with the Securities and Exchange Commission.

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

Our management, including our Chief Executive Officer and Chief Financial
Officer, does not expect that our disclosure controls or our internal controls
will prevent all error and all fraud. A control system, no matter how well
conceived and operated, can provide only reasonable, not absolute, assurance
that the objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty and that
breakdowns can occur because of simple errors or mistakes. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls.
Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

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

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




ITEM 2. CHANGES IN SECURITIES

None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

None

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ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                            
|     |  |                                                                                                                                
|31.2 |  | Certification of Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.                            
|     |  |                                                                                                                                
|32.1 |  | Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

(b) Reports on Form 8-K:



| | (1) |  | Report on Form 8-K, filed July 23, 2003,
reporting under Item 5 updated financial guidance for fiscal
year 2003, and under Item 9, earnings for the second quarter
of fiscal year 2003.                                                                                                                     
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (2) |  | Report on Form 8-K, filed August 21, 2003,
reporting under Item 5 the Eighth Amendment to the Credit and
Guaranty Agreement, and the repayment of Senior Term C notes
with $20.0 million of cash on-hand and $146.4 million
received from the issuance of Senior Term D notes bearing a
lower interest rate.

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##### Table of Contents






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, November 12, 2003.

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

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##### Table of Contents






EXHIBIT INDEX

|     |  |                                                                                                                               
|---- |  | ------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                            
|     |  |                                                                                                                               
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002                            
|     |  |                                                                                                                               
|32.1 |  | Certification of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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