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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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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 March 31, 2004                                           
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-16783



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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 classes of
common stock as of the latest practicable date: common stock, $0.001 par
value 40,775,396 shares as of May 7, 2004.





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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, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY 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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##### Table of Contents



VCA ANTECH, INC.
FORM 10-Q
MARCH 31, 2004

TABLE OF CONTENTS

|        |  |                                                                                                                 |  |       
|------- |  | --------------------------------------------------------------------------------------------------------------- |  | ------
|        |  |                                                                                                                 |  | Page  
|        |  |                                                                                                                 |  | Number
|        |  |                                                                                                                 |  |       
|Part I  |  | Financial Information                                                                                           |  |       
|Item 1. |  | Financial Statements                                                                                            |  |       
|        |  | Condensed, Consolidated Balance Sheets as of March 31, 2004 and
December 31, 2003 (Unaudited)                   |  | 1     
|        |  | Condensed, Consolidated Income Statements for the Three Months Ended
March 31, 2004 and 2003 (Unaudited)        |  | 2     
|        |  | Condensed, Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2004 and 2003 (Unaudited) |  | 3     
|        |  | Notes to Condensed, Consolidated Financial Statements                                                           |  | 4     
|Item 2. |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                           |  | 20    
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                      |  | 38    
|Item 4. |  | Controls and Procedures                                                                                         |  | 38    
|Part II |  | Other Information                                                                                               |  |       
|Item 1. |  | Legal Proceedings                                                                                               |  | 39    
|Item 2. |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                |  | 39    
|Item 3. |  | Defaults Upon Senior Securities                                                                                 |  | 39    
|Item 4. |  | Submission of Matters to a Vote of Security Holders                                                             |  | 39    
|Item 5. |  | Other Information                                                                                               |  | 39    
|Item 6. |  | Exhibits and Reports on Form 8-K                                                                                |  | 39    
|        |  | Signature                                                                                                       |  | 40    
|        |  | Exhibit Index                                                                                                   |  | 41    





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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED BALANCE SHEETS
As of March 31, 2004 and December 31, 2003
(Unaudited)
(In thousands, except par value)

|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |         |         |         | 
|----------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------------------------------------ | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                                                              |                                                                                                                                                             |                           |                                            |         | March 31, |         | December 31,
|                                                                              |                                                                                                                                                             |                           |                                            |         | 2004      |         | 2003        
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |             
|ASSETS                                                                        |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|Current assets:                                                               |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              | Cash and cash equivalents                                                                                                                                   |                           | $                                          | 29,361  |           |         | $            | 17,237  |        
|                                                                              | Trade accounts receivable, less allowance for uncollectible accounts of $6,850
and $6,681 at March 31, 2004 and December 31, 2003, respectively             |                           |                                            | 26,141  |           |         |              | 22,335  |        
|                                                                              | Inventory, prepaid expenses and other                                                                                                                       |                           |                                            | 9,378   |           |         |              | 9,432   |        
|                                                                              | Deferred income taxes                                                                                                                                       |                           |                                            | 11,433  |           |         |              | 11,040  |        
|                                                                              | Prepaid income taxes                                                                                                                                        |                           |                                            | 1,228   |           |         |              | 7,266   |        
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              |                                                                                                                                                             | Total current assets      |                                            |         | 77,541    |         |              |         | 67,310  |        
|Property and equipment, net                                                   |                                                                                                                                                             |                           | 99,686                                     |         |           |         | 99,161       |        
|Other assets:                                                                 |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              | Goodwill, net                                                                                                                                               |                           |                                            | 386,748 |           |         |              | 373,238 |        
|                                                                              | Covenants-not-to-compete, net                                                                                                                               |                           |                                            | 4,904   |           |         |              | 4,626   |        
|                                                                              | Deferred financing costs, net                                                                                                                               |                           |                                            | 4,421   |           |         |              | 4,601   |        
|                                                                              | Other                                                                                                                                                       |                           |                                            | 6,027   |           |         |              | 5,867   |        
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              |                                                                                                                                                             | Total assets              |                                            | $       | 579,327   |         |              | $       | 554,803 |        
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|LIABILITIES AND STOCKHOLDERS EQUITY                                          |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|Current liabilities:                                                          |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              | Current portion of long-term obligations                                                                                                                    |                           | $                                          | 2,356   |           |         | $            | 2,403   |        
|                                                                              | Accounts payable                                                                                                                                            |                           |                                            | 8,854   |           |         |              | 9,208   |        
|                                                                              | Accrued payroll and related liabilities                                                                                                                     |                           |                                            | 17,500  |           |         |              | 15,716  |        
|                                                                              | Accrued interest                                                                                                                                            |                           |                                            | 5,630   |           |         |              | 1,538   |        
|                                                                              | Other accrued liabilities                                                                                                                                   |                           |                                            | 16,416  |           |         |              | 15,006  |        
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              |                                                                                                                                                             | Total current liabilities |                                            |         | 50,756    |         |              |         | 43,871  |        
|Long-term obligations, less current portion                                   |                                                                                                                                                             |                           | 314,719                                    |         |           |         | 315,066      |        
|Deferred income taxes                                                         |                                                                                                                                                             |                           | 26,493                                     |         |           |         | 24,532       |        
|Other liabilities                                                             |                                                                                                                                                             |                           | 3,544                                      |         |           |         | 3,216        |        
|Mandatorily redeemable partnership interests                                  |                                                                                                                                                             |                           | 2,176                                      |         |           |         | 2,176        |        
|Minority interest                                                             |                                                                                                                                                             |                           | 4,227                                      |         |           |         | 4,019        |        
|Preferred stock, par value $0.001, 11,000 shares authorized, none outstanding |                                                                                                                                                             |                           |                                           |         |           |         |             |        
|Stockholders equity:                                                         |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              | Common stock, par value $0.001, 75,000 shares authorized, and 40,762 and 40,715
shares outstanding as of March 31, 2004 and December 31, 2003, respectively |                           |                                            | 41      |           |         |              | 41      |        
|                                                                              | Additional paid-in capital                                                                                                                                  |                           |                                            | 245,056 |           |         |              | 244,311 |        
|                                                                              | Accumulated deficit                                                                                                                                         |                           |                                            | (67,587 | )         |         |              | (82,331 | )      
|                                                                              | Accumulated other comprehensive loss  unrealized loss on hedging instruments                                                                               |                           |                                            | (82     | )         |         |              | (82     | )      
|                                                                              | Notes receivable from stockholders                                                                                                                          |                           |                                            | (16     | )         |         |              | (16     | )      
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              |                                                                                                                                                             |                           | Total stockholders equity                 |         |           | 177,412 |              |         |         | 161,923 | 
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        
|                                                                              |                                                                                                                                                             |                           | Total liabilities and stockholders equity |         | $         | 579,327 |              |         | $       | 554,803 | 
|                                                                              |                                                                                                                                                             |                           |                                            |         |           |         |              |        

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 Months Ended March 31, 2004 and 2003
(Unaudited)
(In thousands, except per share amounts)

|                                                                                                                                     |                                          |   |                    |        |      |   |            |        | 
|------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------------------- | - | ------------------ | ------ | ---- | - | ---------- | ------ | 
|                                                                                                                                     |                                          |   | Three
Months Ended
|                                                                                                                                     |                                          |   | March
31,         
|                                                                                                                                     |                                          |   |                   
|                                                                                                                                     |                                          |   | 2004               |        | 2003
|                                                                                                                                     |                                          |   |                    |        |     
|                                                                                                                                     |                                          |   |                    |        |      |   | (Restated)
|Revenue                                                                                                                              |                                          | $ | 144,350            |        |      | $ | 125,579    |       
|Direct costs (excludes operating depreciation of $2,782 and $2,754
for the three months ended March 31, 2004 and 2003, respectively) |                                          |   | 101,568            |        |      |   | 89,330     |       
|Selling, general and administrative                                                                                                  |                                          |   | 8,307              |        |      |   | 9,363      |       
|Depreciation and amortization                                                                                                        |                                          |   | 3,616              |        |      |   | 3,577      |       
|Loss (gain) on sale of assets                                                                                                        |                                          |   | 62                 |        |      |   | (238       | )     
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|                                                                                                                                     | Operating income                         |   |                    | 30,797 |      |   |            | 23,547 | 
|Interest expense, net                                                                                                                |                                          |   | 5,985              |        |      |   | 6,992      |       
|Debt retirement costs                                                                                                                |                                          |   |                   |        |      |   | 7,417      |       
|Other expense                                                                                                                        |                                          |   | 111                |        |      |   | 127        |       
|Minority interest in income of subsidiaries                                                                                          |                                          |   | 416                |        |      |   | 361        |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|                                                                                                                                     | Income before provision for income taxes |   |                    | 24,285 |      |   |            | 8,650  | 
|Provision for income taxes                                                                                                           |                                          |   | 9,541              |        |      |   | 3,467      |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|                                                                                                                                     | Net income                               |   | $                  | 14,744 |      |   | $          | 5,183  | 
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|Basic earnings per common share                                                                                                      |                                          | $ | 0.36               |        |      | $ | 0.13       |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|Diluted earnings per common share                                                                                                    |                                          | $ | 0.36               |        |      | $ | 0.13       |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|Shares used for computing basic earnings per share                                                                                   |                                          |   | 40,741             |        |      |   | 39,021     |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       
|Shares used for computing diluted earnings per share                                                                                 |                                          |   | 41,510             |        |      |   | 39,417     |       
|                                                                                                                                     |                                          |   |                    |        |      |   |            |       

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 Three Months Ended March 31, 2004 and 2003
(Unaudited)
(In thousands)

|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |        |         |  
|------------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------ | ------------------ | ------- | ---- | ------ | ------ | ------- | -
|                                                       |                                                                                   |                                                                     |        | Three Months Ended
|                                                       |                                                                                   |                                                                     |        | March 31,         
|                                                       |                                                                                   |                                                                     |        |                   
|                                                       |                                                                                   |                                                                     |        | 2004               |         | 2003
|                                                       |                                                                                   |                                                                     |        |                    |         |     
|Cash flows from operating activities:                  |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       | Net income                                                                        |                                                                     | $      | 14,744             |         |      | $      | 5,183  |        
|                                                       | Adjustments to reconcile net income to net cash provided by operating
activities: |                                                                     |        |                    |         |      |        |        |        
|                                                       |                                                                                   | Depreciation and amortization                                       |        |                    | 3,616   |      |        |        | 3,577   |  
|                                                       |                                                                                   | Amortization of deferred financing costs and debt discount          |        |                    | 184     |      |        |        | 233     |  
|                                                       |                                                                                   | Provision for uncollectible accounts                                |        |                    | 628     |      |        |        | 928     |  
|                                                       |                                                                                   | Debt retirement costs                                               |        |                    |        |      |        |        | 7,417   |  
|                                                       |                                                                                   | Loss (gain) on sale of assets                                       |        |                    | 62      |      |        |        | (238    | )
|                                                       |                                                                                   | Minority interest in income of subsidiaries                         |        |                    | 416     |      |        |        | 361     |  
|                                                       |                                                                                   | Distributions to minority interest partners                         |        |                    | (374    | )    |        |        | (409    | )
|                                                       |                                                                                   | Increase in accounts receivable                                     |        |                    | (4,485  | )    |        |        | (3,986  | )
|                                                       |                                                                                   | Decrease (increase) in inventory, prepaid expenses and other assets |        |                    | 42      |      |        |        | (222    | )
|                                                       |                                                                                   | Increase in accounts payable and other accrued liabilities          |        |                    | 473     |      |        |        | 2,662   |  
|                                                       |                                                                                   | Increase (decrease) in accrued payroll and related liabilities      |        |                    | 1,784   |      |        |        | (184    | )
|                                                       |                                                                                   | Increase in accrued interest                                        |        |                    | 4,092   |      |        |        | 4,216   |  
|                                                       |                                                                                   | Decrease in prepaid income taxes                                    |        |                    | 6,361   |      |        |        | 1,461   |  
|                                                       |                                                                                   | Increase in deferred income tax assets                              |        |                    | (393    | )    |        |        | (181    | )
|                                                       |                                                                                   | Increase in deferred income tax liabilities                         |        |                    | 2,386   |      |        |        | 1,561   |  
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       | Net cash provided by operating activities                                         |                                                                     |        | 29,536             |         |      |        | 22,379 |        
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|Cash flows used in investing activities:               |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       |                                                                                   | Business acquisitions, net of cash acquired                         |        |                    | (14,113 | )    |        |        | (6,011  | )
|                                                       |                                                                                   | Real estate acquired in connection with business acquisitions       |        |                    |        |      |        |        | (88     | )
|                                                       |                                                                                   | Property and equipment additions, net                               |        |                    | (3,465  | )    |        |        | (2,825  | )
|                                                       |                                                                                   | Proceeds from sale of assets                                        |        |                    | 178     |      |        |        | 353     |  
|                                                       |                                                                                   | Other                                                               |        |                    | 95      |      |        |        | 215     |  
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       | Net cash used in investing activities                                             |                                                                     |        | (17,305            | )       |      |        | (8,356 | )      
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|Cash flows provided by (used in) financing activities: |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       |                                                                                   | Repayment of long-term obligations, including redemption fees       |        |                    | (529    | )    |        |        | (42,293 | )
|                                                       |                                                                                   | Repayment of revolving credit facility                              |        |                    |        |      |        |        | (7,500  | )
|                                                       |                                                                                   | Payment of deferred financing costs                                 |        |                    |        |      |        |        | (382    | )
|                                                       |                                                                                   | Proceeds from issuance of common stock under stock option plans     |        |                    | 422     |      |        |        | 20      |  
|                                                       |                                                                                   | Proceeds from issuance of common stock                              |        |                    |        |      |        |        | 54,345  |  
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|                                                       | Net cash provided by (used in) financing activities                               |                                                                     |        | (107               | )       |      |        | 4,190  |        
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|Increase in cash and cash equivalents                  |                                                                                   |                                                                     | 12,124 |                    |         |      | 18,213 |       
|Cash and cash equivalents at beginning of period       |                                                                                   |                                                                     | 17,237 |                    |         |      | 6,462  |       
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       
|Cash and cash equivalents at end of period             |                                                                                   | $                                                                   | 29,361 |                    |         | $    | 24,675 |       
|                                                       |                                                                                   |                                                                     |        |                    |         |      |        |       

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
March 31, 2004
(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
months ended March 31, 2004 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 2003 Annual Report on Form 10-K.

2. Acquisitions

Primary Acquisitions

During the three months ended March 31, 2004, the Company purchased nine
animal hospitals, two of which were merged into existing animal hospitals upon
acquisition. During the three months ended March 31, 2003, the Company
purchased five animal hospitals and one veterinary diagnostic laboratory.

The following table summarizes the aggregate consideration, including
acquisition costs, paid by the Company for its acquisitions and the allocation
of the purchase price (in thousands):

|                           |                                             |       |   |                    |        |      |   |       |       | 
|-------------------------- | ------------------------------------------- | ----- | - | ------------------ | ------ | ---- | - | ----- | ----- | 
|                           |                                             |       |   | Three Months Ended
|                           |                                             |       |   | March 31,         
|                           |                                             |       |   |                   
|                           |                                             |       |   | 2004               |        | 2003
|                           |                                             |       |   |                    |        |     
|Consideration:             |                                             |       |   |                    |        |      |   |      
|                           | Cash                                        |       | $ | 13,777             |        |      | $ | 5,561 |      
|                           | Obligations to sellers (1)                  |       |   | 725                |        |      |   | 462   |      
|                           | Notes payable and other liabilities assumed |       |   | 90                 |        |      |   | 50    |      
|                           |                                             |       |   |                    |        |      |   |      
|                           |                                             | Total |   | $                  | 14,592 |      |   | $     | 6,073 | 
|                           |                                             |       |   |                    |        |      |   |      
|Purchase Price Allocation: |                                             |       |   |                    |        |      |   |      
|                           | Tangible assets (3)                         |       | $ | 515                |        |      | $ | 206   |      
|                           | Identifiable intangible assets              |       |   | 710                |        |      |   | 414   |      
|                           | Goodwill (2)(3)(4)                          |       |   | 13,367             |        |      |   | 5,453 |      
|                           |                                             |       |   |                    |        |      |   |      
|                           |                                             | Total |   | $                  | 14,592 |      |   | $     | 6,073 | 
|                           |                                             |       |   |                    |        |      |   |      



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|(1) |  | Represents a portion of the purchase price withheld (the holdback) for
offset of any amounts the Company may pay on behalf of the former owner
for any liabilities the Company did not assume at the time of acquisition.
The unused portion is paid to the seller after a designated period
following the date of acquisition.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | The Company expects that $11.9 million and $4.5 million of the goodwill
recorded for the three months ended March 31, 2004 and 2003, respectively,
will be fully deductible for income tax purposes.                                                                                                                             
|   
|   
|   
|   
|(3) |  | Includes adjustments to purchase price allocation related to prior period
acquisitions.                                                                                                                                                                                                                                          

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|(4) |  | The following table summarizes goodwill assigned to the animal hospital
and laboratory segments (in thousands):
|--- |  | ---------------------------------------------------------------------------------------------------------------

|                |       |   |                    |        |      |   |       |       | 
|--------------- | ----- | - | ------------------ | ------ | ---- | - | ----- | ----- | 
|                |       |   | Three Months Ended
|                |       |   | March 31,         
|                |       |   |                   
|                |       |   | 2004               |        | 2003
|                |       |   |                    |        |     
|Laboratory      |       | $ | 48                 |        |      | $ | 274   |      
|Animal hospital |       |   | 13,319             |        |      |   | 5,179 |      
|                |       |   |                    |        |      |   |       |      
|                | Total |   | $                  | 13,367 |      |   | $     | 5,453 | 
|                |       |   |                    |        |      |   |       |      

Partnership Interests

In each of the three months ended March 31, 2004 and 2003, the Company
purchased the total ownership interest of a partner in a partially-owned
subsidiary of the Company. The following table summarizes the consideration
paid by the Company and the amount of goodwill recorded (in thousands):

|                      |               |   |                    |     |      |   |     |     | 
|--------------------- | ------------- | - | ------------------ | --- | ---- | - | --- | --- | 
|                      |               |   | Three Months Ended
|                      |               |   | March 31,         
|                      |               |   |                   
|                      |               |   | 2004               |     | 2003
|                      |               |   |                    |     |     
|Consideration:        |               |   |                    |     |      |   |     |    
|                      | Cash          |   | $                  | 56  |      |   | $   |    | 
|                      | Notes payable |   |                    | 131 |      |   |     | 763 | 
|                      |               |   |                    |     |      |   |     |    
|                      | Total         |   | $                  | 187 |      |   | $   | 763 | 
|                      |               |   |                    |     |      |   |     |    
|Goodwill recorded (1) |               | $ | 163                |     |      | $ | 363 |    
|                      |               |   |                    |     |      |   |     |    



---

|(1) |  | The Company expects that the goodwill recorded for both transactions will
be fully deductible for income tax purposes.
|--- |  | ----------------------------------------------------------------------------------------------------------------------

Other Acquisition Payments

During the three months ended March 31, 2004 and 2003, the Company paid
$280,000 and $450,000, respectively, of unused holdbacks to the respective
sellers.

3. 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 three months ended March 31, 2004 (in thousands):

|                                                        |  |            |        |          |  |        |         |   |  |   |         |  
|------------------------------------------------------- |  | ---------- | ------ | -------- |  | ------ | ------- | - |  | - | ------- | -
|                                                        |  |            |        |          |  | Animal |         |   |  |  
|                                                        |  | Laboratory |        | Hospital |  | Total 
|                                                        |  |            |        |          |  |       
|Balance as of January 1, 2004                           |  | $          | 94,770 |          |  | $      | 278,468 |   |  | $ | 373,238 |  
|Goodwill acquired                                       |  |            | 48     |          |  |        | 13,482  |   |  |   | 13,530  |  
|Goodwill written off related to sale of animal hospital |  |            |       |          |  |        | (20     | ) |  |   | (20     | )
|                                                        |  |            |        |          |  |        |         |   |  |   |         |  
|Balance as of March 31, 2004                            |  | $          | 94,818 |          |  | $      | 291,930 |   |  | $ | 386,748 |  
|                                                        |  |            |        |          |  |        |         |   |  |   |         |  

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##### Table of Contents



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

|                         |       |   |                      |        |                         |   |          |        |          |   |              |       |          |   |        |        |     |   |        |        |   |   |       |       | 
|------------------------ | ----- | - | -------------------- | ------ | ----------------------- | - | -------- | ------ | -------- | - | ------------ | ----- | -------- | - | ------ | ------ | --- | - | ------ | ------ | - | - | ----- | ----- | 
|                         |       |   | As of March 31, 2004 |        | As of December 31, 2003
|                         |       |   |                      |        |                        
|                         |       |   | Gross                |        |                         |   |          |        | Net      |   | Gross        |       |          |   |        |        | Net
|                         |       |   | Carrying             |        | Accumulated             |   | Carrying |        | Carrying |   | Accumulated  |       | Carrying
|                         |       |   | Amount               |        | Amortization            |   | Amount   |        | Amount   |   | Amortization |       | Amount  
|                         |       |   |                      |        |                         |   |          |        |          |   |              |       |         
|Covenants-not-to-compete |       | $ | 10,844               |        |                         | $ | (5,940   | )      |          | $ | 4,904        |       |          | $ | 10,141 |        |     | $ | (5,515 | )      |   | $ | 4,626 |      
|Client lists             |       |   | 505                  |        |                         |   | (447     | )      |          |   | 58           |       |          |   | 498    |        |     |   | (432   | )      |   |   | 66    |      
|                         |       |   |                      |        |                         |   |          |        |          |   |              |       |          |   |        |        |     |   |        |        |   |   |       |      
|                         | Total |   | $                    | 11,349 |                         |   | $        | (6,387 | )        |   | $            | 4,962 |          |   | $      | 10,639 |     |   | $      | (5,947 | ) |   | $     | 4,692 | 
|                         |       |   |                      |        |                         |   |          |        |          |   |              |       |          |   |        |        |     |   |        |        |   |   |       |      

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

|                               |  |                    |     |      |  |   |     | 
|------------------------------ |  | ------------------ | --- | ---- |  | - | --- | 
|                               |  | Three Months Ended
|                               |  | March 31,         
|                               |  |                   
|                               |  | 2004               |     | 2003
|                               |  |                    |     |     
|Aggregate amortization expense |  | $                  | 440 |      |  | $ | 477 | 
|                               |  |                    |     |      |  |   |     | 

Based on balances at March 31, 2004, estimated amortization expense for
other intangible assets for the current year and the next four fiscal years is
as follows (in thousands):

|     |  |   |       | 
|---- |  | - | ----- | 
|2004 |  | $ | 1,700 | 
|2005 |  | $ | 1,328 | 
|2006 |  | $ | 945   | 
|2007 |  | $ | 742   | 
|2008 |  | $ | 351   | 

4. 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
|                                            |                                   |                                                |        | March 31,         
|                                            |                                   |                                                |        |                   
|                                            |                                   |                                                |        | 2004               |     | 2003
|                                            |                                   |                                                |        |                    |     |     
|Net income                                  |                                   | $                                              | 14,744 |                    |     | $    | 5,183 |       
|                                            |                                   |                                                |        |                    |     |      |       |       
|Weighted average common shares outstanding: |                                   |                                                |        |                    |     |      |       |       
|                                            | Basic                             |                                                |        | 40,741             |     |      |       | 39,021 |    
|                                            | Effect of dilutive common shares: |                                                |        |                    |     |      |       |        |    
|                                            |                                   | Stock options                                  |        |                    | 698 |      |       |        | 396 | 
|                                            |                                   | Contracts that may be settled in stock or cash |        |                    | 71  |      |       |        |    | 
|                                            |                                   |                                                |        |                    |     |      |       |       
|                                            | Diluted                           |                                                |        | 41,510             |     |      |       | 39,417 |    
|                                            |                                   |                                                |        |                    |     |      |       |       
|                                            | Basic earnings per common share   |                                                | $      | 0.36               |     |      | $     | 0.13   |    
|                                            |                                   |                                                |        |                    |     |      |       |       
|                                            | Diluted earnings per common share |                                                | $      | 0.36               |     |      | $     | 0.13   |    
|                                            |                                   |                                                |        |                    |     |      |       |       

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5. Interest Rate Hedging Agreements

The Company entered into no-fee swap agreements (Swap Agreements),
whereby the Company pays to the counter party amounts based on fixed interest
rates and set notional amount 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     | 
|Counter party                      |  |         | Wells Fargo Bank |         |  |         | Wells Fargo Bank |  |  |  | Goldman Sachs | 
|Qualifies for hedge accounting (1) |  |         | No               |         |  |         | No               |  |  |  | Yes           | 



---

|(1) |  | Swap #1 and #2 were no longer considered effective as of May 2003 and
March 2004, respectively.
|--- |  | -----------------------------------------------------------------------------------------------

Both Swap #1 and Swap #2 were initially considered to be cash-flow hedging
instruments; however, management has determined that they are no longer
effective tools for mitigating interest-rate risk within an acceptable degree
of variance because the current interest rate environment is materially
different than managements projections at the inception of the contracts. As
a result of this determination, Swap #1 and Swap #2 no longer qualify for hedge
accounting and all changes in their market value are recognized as income or
expense in the period of change.

The following table summarizes the Companys payments and unrealized
losses recognized under the Swap Agreements (in thousands):

|                      |  |                    |     |      |  |   |     | 
|--------------------- |  | ------------------ | --- | ---- |  | - | --- | 
|                      |  | Three Months Ended
|                      |  | March 31,         
|                      |  |                   
|                      |  | 2004               |     | 2003
|                      |  |                    |     |     
|Cash paid (1)         |  | $                  | 164 |      |  | $ | 85  | 
|Unrealized losses (2) |  | $                  | 111 |      |  | $ | 127 | 



---

|(1) |  | These payments are included in interest expense in the condensed,
consolidated income statements.      
|--- |  | -------------------------------------------------------------------------------------------------------
|   
|(2) |  | These unrealized losses are included in other expense in the condensed,
consolidated income statements.

The valuations of the Swap Agreements were determined by the counter
parties based on fair market valuations for similar agreements. At March 31,
2004 and December 31, 2003, the fair market values of the Swap Agreements
resulted in a liability from interest rate hedging activities of $388,000 and
$277,000, respectively. These amounts have been reported as part of other
accrued liabilities.

6. Consolidation of Variable Interest Entities

Under the provisions of Financial Accounting Standards Board (FASB)
Interpretation No. 46R (FIN No. 46R), Consolidation of Variable Interest
Entities, adopted by the Company in the fourth quarter of 2003, the veterinary
medical groups for which the Company provides management services are variable
interest entities. As a result of adopting FIN No. 46R, the Company
consolidated the veterinary medical groups. The prior period presented has
been restated to conform to the current period presentation. The
restatement resulted in
an increase in both revenue and direct costs in the amount of $9.6 million,
thus there was no impact on operating income, net income, earnings per share or
cash flows.

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7. Lines of Business

During the three months ended March 31, 2004 and 2003, 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 2003
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.

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

|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |         |        | 
|--------------------------------- | ----------------------------------------------- | ----------------------- | - | ---------- | ------ | -------- | - | --------- | ------ | ------------ | - | ------ | ------ | ------------ | - | ------ | - |  | - | ------- | ------ | 
|                                  |                                                 |                         |   |            |        |          |   | Animal    |        |              |   |        |        | Intercompany |   |        |   | 
|                                  |                                                 |                         |   | Laboratory |        | Hospital |   | Corporate |        | Eliminations |   | Total 
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       
|Three Months Ended March 31, 2004 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Revenue                                         |                         | $ | 49,182     |        |          | $ | 97,956    |        |              | $ |       |        |              | $ | (2,788 | ) |  | $ | 144,350 |       
|                                  | Direct costs (excluding
operating depreciation) |                         |   | 26,894     |        |          |   | 77,462    |        |              |   |       |        |              |   | (2,788 | ) |  |   | 101,568 |       
|                                  | Selling, general and administrative             |                         |   | 3,173      |        |          |   | 2,748     |        |              |   | 2,386  |        |              |   |       |   |  |   | 8,307   |       
|                                  | Depreciation and amortization                   |                         |   | 821        |        |          |   | 2,401     |        |              |   | 394    |        |              |   |       |   |  |   | 3,616   |       
|                                  | Loss (gain) on sale of assets                   |                         |   | (1         | )      |          |   | 63        |        |              |   |       |        |              |   |       |   |  |   | 62      |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  |                                                 | Operating income (loss) |   | $          | 18,295 |          |   | $         | 15,282 |              |   | $      | (2,780 | )            |   | $      |  |  |   | $       | 30,797 | 
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Capital expenditures                            |                         | $ | 746        |        |          | $ | 2,453     |        |              | $ | 266    |        |              | $ |       |   |  | $ | 3,465   |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|Three Months Ended March 31, 2003 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Revenue                                         |                         | $ | 41,698     |        |          | $ | 86,307    |        |              | $ |       |        |              | $ | (2,426 | ) |  | $ | 125,579 |       
|                                  | Direct costs (excluding
operating depreciation) |                         |   | 23,456     |        |          |   | 68,300    |        |              |   |       |        |              |   | (2,426 | ) |  |   | 89,330  |       
|                                  | Selling, general and administrative             |                         |   | 2,707      |        |          |   | 2,503     |        |              |   | 4,153  |        |              |   |       |   |  |   | 9,363   |       
|                                  | Depreciation and amortization                   |                         |   | 754        |        |          |   | 2,477     |        |              |   | 346    |        |              |   |       |   |  |   | 3,577   |       
|                                  | Gain on sale of assets                          |                         |   | (2         | )      |          |   | (236      | )      |              |   |       |        |              |   |       |   |  |   | (238    | )     
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  |                                                 | Operating income (loss) |   | $          | 14,783 |          |   | $         | 13,263 |              |   | $      | (4,499 | )            |   | $      |  |  |   | $       | 23,547 | 
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Capital expenditures                            |                         | $ | 1,174      |        |          | $ | 1,193     |        |              | $ | 458    |        |              | $ |       |   |  | $ | 2,825   |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|At March 31, 2004                 |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Identifiable assets                             |                         | $ | 135,556    |        |          | $ | 390,025   |        |              | $ | 53,746 |        |              | $ |       |   |  | $ | 579,327 |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|At December 31, 2003              |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        
|                                  | Identifiable assets                             |                         | $ | 130,799    |        |          | $ | 374,940   |        |              | $ | 49,064 |        |              | $ |       |   |  | $ | 554,803 |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |        |        |              |   |        |   |  |   |        

8



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

|                                                  |  |                    |        |      |  |   |        | 
|------------------------------------------------- |  | ------------------ | ------ | ---- |  | - | ------ | 
|                                                  |  | Three Months Ended
|                                                  |  | March 31,         
|                                                  |  |                   
|                                                  |  | 2004               |        | 2003
|                                                  |  |                    |        |     
|Total segment operating income after eliminations |  | $                  | 30,797 |      |  | $ | 23,547 | 
|Interest expense, net                             |  |                    | 5,985  |      |  |   | 6,992  | 
|Debt retirement costs                             |  |                    |       |      |  |   | 7,417  | 
|Other expense                                     |  |                    | 111    |      |  |   | 127    | 
|Minority interest in income of subsidiaries       |  |                    | 416    |      |  |   | 361    | 
|                                                  |  |                    |        |      |  |   |        | 
|Income before provision for income taxes          |  | $                  | 24,285 |      |  | $ | 8,650  | 
|                                                  |  |                    |        |      |  |   |        | 

8. Common Stock Offering and Debt Retirement

In February 2003, the
Company sold 3.8 million shares of its common stock in
exchange for net proceeds of $54.3 million. The Company used $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. As a result of the
debt retirement we incurred debt retirement costs of $7.4 million.

9. Stock-Based Compensation

The Company has granted stock options to various employees under multiple
stock option plans and is accounting for those options under the intrinsic
value method as prescribed in Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees. Under that method, when options
are issued with a strike price equal to or greater than market price on date of
issuance, there is no impact on earnings either on the date of issuance or
thereafter, absent modification to the options. This method is not a
fair-value-based method of accounting as defined by Statements of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation. Fair-value-based methods of accounting require compensation
expense to be recognized annually equal to the fair market value of the options
granted divided by their vesting period. The following table presents net
income and earnings per common share for the three months ended March 31, 2004
and 2003 as if the Company accounted for its stock options under SFAS No. 123
and the fair-value-based method of accounting (in thousands, except per share
amounts):

|                           |                                                                                                                                             |   |                    |        |      |   |       |       |  
|-------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | ----- | ----- | -
|                           |                                                                                                                                             |   | Three Months Ended
|                           |                                                                                                                                             |   | March 31,         
|                           |                                                                                                                                             |   |                   
|                           |                                                                                                                                             |   | 2004               |        | 2003
|                           |                                                                                                                                             |   |                    |        |     
|As reported                |                                                                                                                                             | $ | 14,744             |        |      | $ | 5,183 |      
|                           | Deduct: Total stock-based employee compensation
expense determined under fair-value-based method
for all awards, net of related tax effects |   |                    | (222   | )    |   |       | (213  | )
|                           |                                                                                                                                             |   |                    |        |      |   |       |      
|                           | Pro forma net income available to common stockholders                                                                                       |   | $                  | 14,522 |      |   | $     | 4,970 |  
|                           |                                                                                                                                             |   |                    |        |      |   |       |      
|Earnings per common share: |                                                                                                                                             |   |                    |        |      |   |       |      
|                           | Basic  as reported                                                                                                                         |   | $                  | 0.36   |      |   | $     | 0.13  |  
|                           | Basic  pro forma                                                                                                                           |   | $                  | 0.36   |      |   | $     | 0.13  |  
|                           | Diluted  as reported                                                                                                                       |   | $                  | 0.36   |      |   | $     | 0.13  |  
|                           | Diluted  pro forma                                                                                                                         |   | $                  | 0.35   |      |   | $     | 0.13  |  

9



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10. Commitments and 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 have a
material adverse effect on the Companys consolidated financial position or
results of operations.

11. 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.

10



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

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of March 31, 2004
(Unaudited)
(In thousands)

|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |         |         | 
|-------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ------ | ------ | ------ |  | ------ | -------- | -------- | - | ------- | ------- | ------- | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        | Non-   |        |  |        |          |          |   |         |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |        |        |        |  |        |          |          |  
|                                             |                                                                               |                                            |        | VCA     |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |             
|Current assets:                              |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             | Cash and cash equivalents                                                     |                                            | $      |        |         |       | $        | 25,682       |         |              | $       | 3,559       |         |              | $      | 120    |        |  | $      |         |          |   | $       | 29,361  |        
|                                             | Trade accounts receivable, net                                                |                                            |        |        |         |       |          | 7            |         |              |         | 25,570      |         |              |        | 564    |        |  |        |         |          |   |         | 26,141  |        
|                                             | Inventory, prepaid expenses and other                                         |                                            |        |        |         |       |          | 2,462        |         |              |         | 6,372       |         |              |        | 544    |        |  |        |         |          |   |         | 9,378   |        
|                                             | Deferred income taxes                                                         |                                            |        |        |         |       |          | 11,433       |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | 11,433  |        
|                                             | Prepaid income taxes                                                          |                                            |        |        |         |       |          | 1,228        |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | 1,228   |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             |                                                                               | Total current assets                       |        |         |        |       |          |              | 40,812  |              |         |             | 35,501  |              |        |        | 1,228  |  |        |          |         |   |         |         | 77,541  | 
|Property and equipment, net                  |                                                                               |                                            |       |         |         |       | 6,556    |              |         |              | 91,245  |             |         |              | 1,885  |        |        |  |       |          |          |   | 99,686  |        
|Other assets:                                |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             | Goodwill, net                                                                 |                                            |        |        |         |       |          |             |         |              |         | 363,839     |         |              |        | 22,909 |        |  |        |         |          |   |         | 386,748 |        
|                                             | Covenants-not-to-compete, net                                                 |                                            |        |        |         |       |          |             |         |              |         | 4,378       |         |              |        | 526    |        |  |        |         |          |   |         | 4,904   |        
|                                             | Deferred financing costs, net                                                 |                                            |        |        |         |       |          | 4,421        |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | 4,421   |        
|                                             | Other                                                                         |                                            |        | 30      |         |       |          | 1,927        |         |              |         | 3,009       |         |              |        | 2,476  |        |  |        | (1,415   | )        |   |         | 6,027   |        
|                                             | Investment in subsidiaries                                                    |                                            |        | 217,884 |         |       |          | 333,064      |         |              |         | 26,524      |         |              |        |       |        |  |        | (577,472 | )        |   |         |        |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             |                                                                               | Total assets                               |        | $       | 217,914 |       |          | $            | 386,780 |              |         | $           | 524,496 |              |        | $      | 29,024 |  |        | $        | (578,887 | ) |         | $       | 579,327 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|Current liabilities:                         |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             | Current portion of long-term obligations                                      |                                            | $      |        |         |       | $        | 1,546        |         |              | $       | 810         |         |              | $      |       |        |  | $      |         |          |   | $       | 2,356   |        
|                                             | Accounts payable                                                              |                                            |        |        |         |       |          | 6,735        |         |              |         | 2,119       |         |              |        |       |        |  |        |         |          |   |         | 8,854   |        
|                                             | Accrued payroll and related liabilities                                       |                                            |        |        |         |       |          | 11,079       |         |              |         | 6,083       |         |              |        | 338    |        |  |        |         |          |   |         | 17,500  |        
|                                             | Accrued interest                                                              |                                            |        |        |         |       |          | 5,610        |         |              |         | 16          |         |              |        | 4      |        |  |        |         |          |   |         | 5,630   |        
|                                             | Other accrued liabilities                                                     |                                            |        |        |         |       |          | 11,079       |         |              |         | 5,337       |         |              |        |       |        |  |        |         |          |   |         | 16,416  |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             |                                                                               | Total current liabilities                  |        |         |        |       |          |              | 36,049  |              |         |             | 14,365  |              |        |        | 342    |  |        |          |         |   |         |         | 50,756  | 
|Long-term obligations, less current portion  |                                                                               |                                            |       |         |         |       | 315,479  |              |         |              | 655     |             |         |              |       |        |        |  | (1,415 | )        |          |   | 314,719 |        
|Deferred income taxes                        |                                                                               |                                            |       |         |         |       | 26,493   |              |         |              |        |             |         |              |       |        |        |  |       |          |          |   | 26,493  |        
|Other liabilities                            |                                                                               |                                            |       |         |         |       | 3,544    |              |         |              |        |             |         |              |       |        |        |  |       |          |          |   | 3,544   |        
|Mandatorily redeemable partnership interests |                                                                               |                                            |       |         |         |       |         |              |         |              | 2,176   |             |         |              |       |        |        |  |       |          |          |   | 2,176   |        
|Intercompany payable/(receivable)            |                                                                               |                                            | 40,502 |         |         |       | (212,669 | )            |         |              | 174,236 |             |         |              | (2,069 | )      |        |  |       |          |          |   |        |        
|Minority interest                            |                                                                               |                                            |       |         |         |       |         |              |         |              |        |             |         |              |       |        |        |  | 4,227  |          |          |   | 4,227   |        
|Preferred stock                              |                                                                               |                                            |       |         |         |       |         |              |         |              |        |             |         |              |       |        |        |  |       |          |          |   |        |        
|Stockholders equity:                        |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             | Common stock                                                                  |                                            |        | 41      |         |       |          |             |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | 41      |        
|                                             | Additional paid-in capital                                                    |                                            |        | 245,056 |         |       |          |             |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | 245,056 |        
|                                             | Accumulated equity (deficit)                                                  |                                            |        | (67,587 | )       |       |          | 217,966      |         |              |         | 333,064     |         |              |        | 30,751 |        |  |        | (581,781 | )        |   |         | (67,587 | )      
|                                             | Accumulated other comprehensive loss -
unrealized loss on hedging instruments |                                            |        | (82     | )       |       |          | (82          | )       |              |         |            |         |              |        |       |        |  |        | 82       |          |   |         | (82     | )      
|                                             | Notes receivable from stockholders                                            |                                            |        | (16     | )       |       |          |             |         |              |         |            |         |              |        |       |        |  |        |         |          |   |         | (16     | )      
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             |                                                                               | Total stockholders equity                 |        |         | 177,412 |       |          |              | 217,884 |              |         |             | 333,064 |              |        |        | 30,751 |  |        |          | (581,699 | ) |         |         | 177,412 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        
|                                             |                                                                               | Total liabilities and stockholders equity |        | $       | 217,914 |       |          | $            | 386,780 |              |         | $           | 524,496 |              |        | $      | 29,024 |  |        | $        | (578,887 | ) |         | $       | 579,327 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |        |          |          |   |         |        

11



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##### Table of Contents



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

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of December 31, 2003
(In thousands)

|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |         |         | 
|-------------------------------------------- | ----------------------------------------------------------------------------- | ------------------------------------------ | ------ | ------- | ------- | ----- | -------- | ------------ | ------- | ------------ | ------- | ----------- | ------- | ------------ | ------ | ------ | ------ |  | ----- | -------- | -------- | - | ------- | ------- | ------- | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        | Non-   |        |  |       |          |          |   |         |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         | Guarantor   |         | Guarantor    |        |        |        |  |       |          |          |  
|                                             |                                                                               |                                            |        | VCA     |         | Vicar |          | Subsidiaries |         | Subsidiaries |         | Elimination |         | Consolidated
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |             
|Current assets:                              |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             | Cash and cash equivalents                                                     |                                            | $      |        |         |       | $        | 14,883       |         |              | $       | 2,244       |         |              | $      | 110    |        |  | $     |         |          |   | $       | 17,237  |        
|                                             | Trade accounts receivable, net                                                |                                            |        |        |         |       |          | 6            |         |              |         | 21,790      |         |              |        | 539    |        |  |       |         |          |   |         | 22,335  |        
|                                             | Inventory, prepaid expenses and other                                         |                                            |        |        |         |       |          | 2,607        |         |              |         | 6,228       |         |              |        | 597    |        |  |       |         |          |   |         | 9,432   |        
|                                             | Deferred income taxes                                                         |                                            |        |        |         |       |          | 11,040       |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 11,040  |        
|                                             | Prepaid income taxes                                                          |                                            |        |        |         |       |          | 7,266        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 7,266   |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             |                                                                               | Total current assets                       |        |         |        |       |          |              | 35,802  |              |         |             | 30,262  |              |        |        | 1,246  |  |       |          |         |   |         |         | 67,310  | 
|Property and equipment, net                  |                                                                               |                                            |       |         |         |       | 6,692    |              |         |              | 90,933  |             |         |              | 1,536  |        |        |  |      |          |          |   | 99,161  |        
|Other assets:                                |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             | Goodwill, net                                                                 |                                            |        |        |         |       |          |             |         |              |         | 351,130     |         |              |        | 22,108 |        |  |       |         |          |   |         | 373,238 |        
|                                             | Covenants-not-to-compete, net                                                 |                                            |        |        |         |       |          |             |         |              |         | 4,050       |         |              |        | 576    |        |  |       |         |          |   |         | 4,626   |        
|                                             | Deferred financing costs, net                                                 |                                            |        |        |         |       |          | 4,601        |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 4,601   |        
|                                             | Other                                                                         |                                            |        | 30      |         |       |          | 1,939        |         |              |         | 2,517       |         |              |        | 2,296  |        |  |       | (915     | )        |   |         | 5,867   |        
|                                             | Investment in subsidiaries                                                    |                                            |        | 203,141 |         |       |          | 313,565      |         |              |         | 25,109      |         |              |        |       |        |  |       | (541,815 | )        |   |         |        |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             |                                                                               | Total assets                               |        | $       | 203,171 |       |          | $            | 362,599 |              |         | $           | 504,001 |              |        | $      | 27,762 |  |       | $        | (542,730 | ) |         | $       | 554,803 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|Current liabilities:                         |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             | Current portion of long-term obligations                                      |                                            | $      |        |         |       | $        | 1,544        |         |              | $       | 859         |         |              | $      |       |        |  | $     |         |          |   | $       | 2,403   |        
|                                             | Accounts payable                                                              |                                            |        |        |         |       |          | 7,295        |         |              |         | 1,913       |         |              |        |       |        |  |       |         |          |   |         | 9,208   |        
|                                             | Accrued payroll and related liabilities                                       |                                            |        |        |         |       |          | 7,837        |         |              |         | 7,541       |         |              |        | 338    |        |  |       |         |          |   |         | 15,716  |        
|                                             | Accrued interest                                                              |                                            |        |        |         |       |          | 1,517        |         |              |         | 16          |         |              |        | 5      |        |  |       |         |          |   |         | 1,538   |        
|                                             | Other accrued liabilities                                                     |                                            |        |        |         |       |          | 10,590       |         |              |         | 4,423       |         |              |        | (7     | )      |  |       |         |          |   |         | 15,006  |        
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             |                                                                               | Total current liabilities                  |        |         |        |       |          |              | 28,783  |              |         |             | 14,752  |              |        |        | 336    |  |       |          |         |   |         |         | 43,871  | 
|Long-term obligations, less current portion  |                                                                               |                                            |       |         |         |       | 314,451  |              |         |              | 1,530   |             |         |              |       |        |        |  | (915  | )        |          |   | 315,066 |        
|Deferred income taxes                        |                                                                               |                                            |       |         |         |       | 24,532   |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 24,532  |        
|Other liabilities                            |                                                                               |                                            |       |         |         |       | 3,216    |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   | 3,216   |        
|Mandatorily redeemable partnership interests |                                                                               |                                            |       |         |         |       |         |              |         |              | 2,176   |             |         |              |       |        |        |  |      |          |          |   | 2,176   |        
|Intercompany payable/(receivable)            |                                                                               |                                            | 41,248 |         |         |       | (211,524 | )            |         |              | 171,978 |             |         |              | (1,702 | )      |        |  |      |          |          |   |        |        
|Minority interest                            |                                                                               |                                            |       |         |         |       |         |              |         |              |        |             |         |              |       |        |        |  | 4,019 |          |          |   | 4,019   |        
|Preferred stock                              |                                                                               |                                            |       |         |         |       |         |              |         |              |        |             |         |              |       |        |        |  |      |          |          |   |        |        
|Stockholders equity:                        |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             | Common stock                                                                  |                                            |        | 41      |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 41      |        
|                                             | Additional paid-in capital                                                    |                                            |        | 244,311 |         |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | 244,311 |        
|                                             | Accumulated equity (deficit)                                                  |                                            |        | (82,331 | )       |       |          | 203,223      |         |              |         | 313,565     |         |              |        | 29,128 |        |  |       | (545,916 | )        |   |         | (82,331 | )      
|                                             | Accumulated other comprehensive loss -
unrealized loss on hedging instruments |                                            |        | (82     | )       |       |          | (82          | )       |              |         |            |         |              |        |       |        |  |       | 82       |          |   |         | (82     | )      
|                                             | Notes receivable from stockholders                                            |                                            |        | (16     | )       |       |          |             |         |              |         |            |         |              |        |       |        |  |       |         |          |   |         | (16     | )      
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             |                                                                               | Total stockholders equity                 |        |         | 161,923 |       |          |              | 203,141 |              |         |             | 313,565 |              |        |        | 29,128 |  |       |          | (545,834 | ) |         |         | 161,923 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        
|                                             |                                                                               | Total liabilities and stockholders equity |        | $       | 203,171 |       |          | $            | 362,599 |              |         | $           | 504,001 |              |        | $      | 27,762 |  |       | $        | (542,730 | ) |         | $       | 554,803 | 
|                                             |                                                                               |                                            |        |         |         |       |          |              |         |              |         |             |         |              |        |        |        |  |       |          |          |   |         |        

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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 March 31, 2004
(Unaudited)
(In thousands)

|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |        | 
|------------------------------------------- | ------------------------------------------------------------------------ | - | ------ | ------ | ----- | - | ------------ | ------ | ------------ | - | ----------- | ------ | ------------ | - | ------ | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   | Non-   |       |  |   |         |         |   |   |        
|                                            |                                                                          |   |        |        |       |   |              |        |              |   | Guarantor   |        | Guarantor    |   |        |       |  |   |         |         |  
|                                            |                                                                          |   | VCA    |        | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |        | Consolidated
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |             
|Revenue                                     |                                                                          | $ |       |        |       | $ |             |        |              | $ | 133,862     |        |              | $ | 10,745 |       |  | $ | (257    | )       |   | $ | 144,350 |       
|Direct costs                                |                                                                          |   |       |        |       |   |             |        |              |   | 93,411      |        |              |   | 8,414  |       |  |   | (257    | )       |   |   | 101,568 |       
|Selling, general and administrative         |                                                                          |   |       |        |       |   | 2,386        |        |              |   | 5,556       |        |              |   | 365    |       |  |   |        |         |   |   | 8,307   |       
|Depreciation and amortization               |                                                                          |   |       |        |       |   | 394          |        |              |   | 3,061       |        |              |   | 161    |       |  |   |        |         |   |   | 3,616   |       
|Loss on sale of assets                      |                                                                          |   |       |        |       |   |             |        |              |   | 62          |        |              |   |       |       |  |   |        |         |   |   | 62      |       
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |       
|                                            | Operating income (loss)                                                  |   |        |       |       |   |              | (2,780 | )            |   |             | 31,772 |              |   |        | 1,805 |  |   |         |        |   |   |         | 30,797 | 
|Interest expense, net                       |                                                                          |   | (1     | )      |       |   | 5,983        |        |              |   | 40          |        |              |   | (37    | )     |  |   |        |         |   |   | 5,985   |       
|Other expense                               |                                                                          |   |       |        |       |   | 111          |        |              |   |            |        |              |   |       |       |  |   |        |         |   |   | 111     |       
|Equity interest in income of subsidiaries   |                                                                          |   | 14,743 |        |       |   | 19,499       |        |              |   | 1,426       |        |              |   |       |       |  |   | (35,668 | )       |   |   |        |       
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |       
|                                            | Income before minority interest and
provision (benefit) for income taxes |   |        | 14,744 |       |   |              | 10,625 |              |   |             | 33,158 |              |   |        | 1,842 |  |   |         | (35,668 | ) |   |         | 24,701 | 
|Minority interest in income of subsidiaries |                                                                          |   |       |        |       |   |             |        |              |   |            |        |              |   |       |       |  |   | 416     |         |   |   | 416     |       
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |       
|                                            | Income before provision (benefit)
for income taxes                       |   |        | 14,744 |       |   |              | 10,625 |              |   |             | 33,158 |              |   |        | 1,842 |  |   |         | (36,084 | ) |   |         | 24,285 | 
|Provision (benefit) for income taxes        |                                                                          |   |       |        |       |   | (4,118       | )      |              |   | 13,659      |        |              |   |       |       |  |   |        |         |   |   | 9,541   |       
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |       
|                                            | Net income                                                               |   | $      | 14,744 |       |   | $            | 14,743 |              |   | $           | 19,499 |              |   | $      | 1,842 |  |   | $       | (36,084 | ) |   | $       | 14,744 | 
|                                            |                                                                          |   |        |        |       |   |              |        |              |   |             |        |              |   |        |       |  |   |         |         |   |   |         |       

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

CONDENSED, CONSOLIDATING INCOME STATEMENTS
For the Three Months Ended March 31, 2003
(Unaudited)
(In thousands)

|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |        | 
|------------------------------------------- | ------------------------------------------------------------------------ | - | ------ | ----- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ------ | ------------ | - | ----- | ----- |  | - | ------- | ------- | - | - | ------- | ------ | 
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   | Non-  |       |  |   |         |         |   |   |        
|                                            |                                                                          |   |        |       |       |   |              |        |              |   | Guarantor   |        | Guarantor    |   |       |       |  |   |         |         |  
|                                            |                                                                          |   | VCA    |       | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |        | Consolidated
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |             
|Revenue                                     |                                                                          | $ |       |       |       | $ |             |        |              | $ | 116,167     |        |              | $ | 9,638 |       |  | $ | (226    | )       |   | $ | 125,579 |       
|Direct costs                                |                                                                          |   |       |       |       |   |             |        |              |   | 82,017      |        |              |   | 7,539 |       |  |   | (226    | )       |   |   | 89,330  |       
|Selling, general and administrative         |                                                                          |   |       |       |       |   | 4,153        |        |              |   | 4,867       |        |              |   | 343   |       |  |   |        |         |   |   | 9,363   |       
|Depreciation and amortization               |                                                                          |   |       |       |       |   | 346          |        |              |   | 3,077       |        |              |   | 154   |       |  |   |        |         |   |   | 3,577   |       
|Gain on sale of assets                      |                                                                          |   |       |       |       |   |             |        |              |   | (238        | )      |              |   |      |       |  |   |        |         |   |   | (238    | )     
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Operating income (loss)                                                  |   |        |      |       |   |              | (4,499 | )            |   |             | 26,444 |              |   |       | 1,602 |  |   |         |        |   |   |         | 23,547 | 
|Interest expense, net                       |                                                                          |   | 531    |       |       |   | 6,464        |        |              |   | 29          |        |              |   | (32   | )     |  |   |        |         |   |   | 6,992   |       
|Debt retirement costs                       |                                                                          |   | 7,417  |       |       |   |             |        |              |   |            |        |              |   |      |       |  |   |        |         |   |   | 7,417   |       
|Other expense                               |                                                                          |   |       |       |       |   | 127          |        |              |   |            |        |              |   |      |       |  |   |        |         |   |   | 127     |       
|Equity interest in income of subsidiaries   |                                                                          |   | 9,872  |       |       |   | 16,585       |        |              |   | 1,273       |        |              |   |      |       |  |   | (27,730 | )       |   |   |        |       
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before minority interest and
provision (benefit) for income taxes |   |        | 1,924 |       |   |              | 5,495  |              |   |             | 27,688 |              |   |       | 1,634 |  |   |         | (27,730 | ) |   |         | 9,011  | 
|Minority interest in income of subsidiaries |                                                                          |   |       |       |       |   |             |        |              |   |            |        |              |   |      |       |  |   | 361     |         |   |   | 361     |       
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Income before provision (benefit)
for income taxes                       |   |        | 1,924 |       |   |              | 5,495  |              |   |             | 27,688 |              |   |       | 1,634 |  |   |         | (28,091 | ) |   |         | 8,650  | 
|Provision (benefit) for income taxes        |                                                                          |   | (3,259 | )     |       |   | (4,377       | )      |              |   | 11,103      |        |              |   |      |       |  |   |        |         |   |   | 3,467   |       
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       
|                                            | Net income                                                               |   | $      | 5,183 |       |   | $            | 9,872  |              |   | $           | 16,585 |              |   | $     | 1,634 |  |   | $       | (28,091 | ) |   | $       | 5,183  | 
|                                            |                                                                          |   |        |       |       |   |              |        |              |   |             |        |              |   |       |       |  |   |         |         |   |   |         |       

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

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004
(Unaudited)
(In thousands)

|                                      |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |              |  |      |        |   |  |   |         |   |  |   |        |  
|------------------------------------- | ------------------------------------------------------------------------------------------- |  | --- | ------- | ----- |  | ------------ | ------- | ------------ |  | ----------- | ------- | ------------ |  | ---- | ------ | - |  | - | ------- | - |  | - | ------ | -
|                                      |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |              |  | Non- |        |   |  |   |         |   |  |  
|                                      |                                                                                             |  |     |         |       |  |              |         |              |  | Guarantor   |         | Guarantor    |  |      |        |   |  |   |         |  
|                                      |                                                                                             |  | VCA |         | Vicar |  | Subsidiaries |         | Subsidiaries |  | Elimination |         | Consolidated
|                                      |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |             
|Cash flows from operating activities: |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |              |  |      |        |   |  |   |         |   |  |   |       
|                                      | Net income                                                                                  |  | $   | 14,744  |       |  | $            | 14,743  |              |  | $           | 19,499  |              |  | $    | 1,842  |   |  | $ | (36,084 | ) |  | $ | 14,744 |  
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |  |     |         |       |  |              |         |              |  |             |         |              |  |      |        |   |  |   |         |   |  |   |        |  
|                                      | Equity interest in earnings of subsidiaries                                                 |  |     | (14,743 | )     |  |              | (19,499 | )            |  |             | (1,426  | )            |  |      |       |   |  |   | 35,668  |   |  |   |       |  
|                                      | Depreciation and amortization                                                               |  |     |        |       |  |              | 394     |              |  |             | 3,061   |              |  |      | 161    |   |  |   |        |   |  |   | 3,616  |  
|                                      | Amortization of deferred financing costs
and debt discount                                  |  |     |        |       |  |              | 180     |              |  |             | 4       |              |  |      |       |   |  |   |        |   |  |   | 184    |  
|                                      | Provision for uncollectible accounts                                                        |  |     |        |       |  |              |        |              |  |             | 569     |              |  |      | 59     |   |  |   |        |   |  |   | 628    |  
|                                      | Loss on sale of assets                                                                      |  |     |        |       |  |              |        |              |  |             | 62      |              |  |      |       |   |  |   |        |   |  |   | 62     |  
|                                      | Minority interest in income of subsidiaries                                                 |  |     |        |       |  |              |        |              |  |             |        |              |  |      |       |   |  |   | 416     |   |  |   | 416    |  
|                                      | Distributions to minority interest partners                                                 |  |     |        |       |  |              | (374    | )            |  |             |        |              |  |      |       |   |  |   |        |   |  |   | (374   | )
|                                      | Increase in accounts receivable                                                             |  |     |        |       |  |              | (1      | )            |  |             | (4,400  | )            |  |      | (84    | ) |  |   |        |   |  |   | (4,485 | )
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |  |     |        |       |  |              | 145     |              |  |             | (156    | )            |  |      | 53     |   |  |   |        |   |  |   | 42     |  
|                                      | Increase (decrease) in accounts payable
and other accrued liabilities                       |  |     |        |       |  |              | (71     | )            |  |             | 537     |              |  |      | 7      |   |  |   |        |   |  |   | 473    |  
|                                      | Increase (decrease) in accrued payroll and
related liabilities                              |  |     |        |       |  |              | 3,242   |              |  |             | (1,458  | )            |  |      |       |   |  |   |        |   |  |   | 1,784  |  
|                                      | Increase (decrease) in accrued interest                                                     |  |     |        |       |  |              | 4,093   |              |  |             |        |              |  |      | (1     | ) |  |   |        |   |  |   | 4,092  |  
|                                      | Decrease in prepaid income taxes                                                            |  |     |        |       |  |              | 6,361   |              |  |             |        |              |  |      |       |   |  |   |        |   |  |   | 6,361  |  
|                                      | Increase in deferred income tax assets                                                      |  |     |        |       |  |              | (393    | )            |  |             |        |              |  |      |       |   |  |   |        |   |  |   | (393   | )
|                                      | Increase in deferred income tax liabilities                                                 |  |     |        |       |  |              | 2,386   |              |  |             |        |              |  |      |       |   |  |   |        |   |  |   | 2,386  |  
|                                      | Increase in intercompany payable/(receivable)                                               |  |     | (423    | )     |  |              | 16,764  |              |  |             | (14,314 | )            |  |      | (2,027 | ) |  |   |        |   |  |   |       |  
|                                      |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |              |  |      |        |   |  |   |         |   |  |   |       
|                                      | Net cash provided by (used in) operating
activities                                         |  |     | (422    | )     |  |              | 27,970  |              |  |             | 1,978   |              |  |      | 10     |   |  |   |        |   |  |   | 29,536 |  
|                                      |                                                                                             |  |     |         |       |  |              |         |              |  |             |         |              |  |      |        |   |  |   |         |   |  |   |       

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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 Three Months Ended March 31, 2004
(Unaudited)
(In thousands)

|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |         |         |  
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------- | - | --- | --- | ----- | ------ | ------------ | ------- | ------------ | ----- | ----------- | ---- | ------------ | --- | ---- | - | - | - | - | - | - | ------ | ------- | ------- | -
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     | Non- |   |   |   |   |   |   |        |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       | Guarantor   |      | Guarantor    |     |      |   |   |   |   |   |  
|                                                 |                                                                 |                                                     |   | VCA |     | Vicar |        | Subsidiaries |         | Subsidiaries |       | Elimination |      | Consolidated
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |             
|Cash flows used in investing activities:         |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Business acquisitions, net of cash acquired                     |                                                     | $ |    |     |       | $      | (14,113      | )       |              | $     |            |      |              | $   |     |   |   | $ |  |   |   | $      | (14,113 | )      
|                                                 | Property and equipment additions, net                           |                                                     |   |    |     |       |        | (2,719       | )       |              |       | (746        | )    |              |     |     |   |   |   |  |   |   |        | (3,465  | )      
|                                                 | Proceeds from sale of assets                                    |                                                     |   |    |     |       |        | 178          |         |              |       |            |      |              |     |     |   |   |   |  |   |   |        | 178     |        
|                                                 | Other                                                           |                                                     |   |    |     |       |        | 12           |         |              |       | 83          |      |              |     |     |   |   |   |  |   |   |        | 95      |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash used in investing activities               |   |     |    |       |        |              | (16,642 | )            |       |             | (663 | )            |     |      |  |   |   |   |  |   |        |         | (17,305 | )
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Cash flows from financing activities:            |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Repayment of long-term obligations                              |                                                     |   |    |     |       |        | (529         | )       |              |       |            |      |              |     |     |   |   |   |  |   |   |        | (529    | )      
|                                                 | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 422 |     |       |        |             |         |              |       |            |      |              |     |     |   |   |   |  |   |   |        | 422     |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash provided by (used in) financing
activities |   |     | 422 |       |        |              | (529    | )            |       |             |     |              |     |      |  |   |   |   |  |   |        |         | (107    | )
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Increase in cash and cash equivalents            |                                                                 |                                                     |  |     |     |       | 10,799 |              |         |              | 1,315 |             |      |              | 10  |      |   |   |  |   |   |   | 12,124 |        
|Cash and cash equivalents at beginning
of period |                                                                 |                                                     |  |     |     |       | 14,883 |              |         |              | 2,244 |             |      |              | 110 |      |   |   |  |   |   |   | 17,237 |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Cash and cash equivalents at end of period       |                                                                 | $                                                   |  |     |     | $     | 25,682 |              |         | $            | 3,559 |             |      | $            | 120 |      |   | $ |  |   |   | $ | 29,361 |        
|                                                 |                                                                 |                                                     |   |     |     |       |        |              |         |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        

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

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2003
(Unaudited)
(In thousands)

|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |        |        | 
|------------------------------------- | ------------------------------------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------- | ----- | - | ------------ | ------ | ------------ | - | ----------- | ----- | ------------ | - | ------ | -- |  | - | ------- | - |  | - | ------ | ------ | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   | Non-   |    |  |   |         |   |  |   |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   | Guarantor   |       | Guarantor    |   |        |    |  |   |         |   | 
|                                      |                                                                                             |                                                     |   | VCA     |         | Vicar |   | Subsidiaries |        | Subsidiaries |   | Elimination |       | Consolidated
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |             
|Cash flows from operating activities: |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       
|                                      | Net income                                                                                  |                                                     | $ | 5,183   |         |       | $ | 9,872        |        |              | $ | 16,585      |       |              | $ | 1,634  |    |  | $ | (28,091 | ) |  | $ | 5,183  |       
|                                      | Adjustments to reconcile net income to net
cash provided by (used in) operating activities: |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |        |       
|                                      | Equity interest in earnings of subsidiaries                                                 |                                                     |   | (9,872  | )       |       |   | (16,585      | )      |              |   | (1,273      | )     |              |   |       |    |  |   | 27,730  |   |  |   |       |       
|                                      | Depreciation and amortization                                                               |                                                     |   |        |         |       |   | 346          |        |              |   | 3,077       |       |              |   | 154    |    |  |   |        |   |  |   | 3,577  |       
|                                      | Amortization of deferred financing costs
and debt discount                                  |                                                     |   | 14      |         |       |   | 219          |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 233    |       
|                                      | Provision for uncollectible accounts                                                        |                                                     |   |        |         |       |   |             |        |              |   | 848         |       |              |   | 80     |    |  |   |        |   |  |   | 928    |       
|                                      | Debt retirement costs                                                                       |                                                     |   | 7,417   |         |       |   |             |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 7,417  |       
|                                      | Gain on sale of assets                                                                      |                                                     |   |        |         |       |   |             |        |              |   | (238        | )     |              |   |       |    |  |   |        |   |  |   | (238   | )     
|                                      | Minority interest in income of subsidiaries                                                 |                                                     |   |        |         |       |   |             |        |              |   |            |       |              |   |       |    |  |   | 361     |   |  |   | 361    |       
|                                      | Distributions to minority interest partners                                                 |                                                     |   |        |         |       |   | (409         | )      |              |   |            |       |              |   |       |    |  |   |        |   |  |   | (409   | )     
|                                      | Increase in accounts receivable                                                             |                                                     |   |        |         |       |   | (2           | )      |              |   | (3,937      | )     |              |   | (47    | )  |  |   |        |   |  |   | (3,986 | )     
|                                      | Decrease (increase) in inventory, prepaid
expenses and other assets                         |                                                     |   | 17      |         |       |   | 106          |        |              |   | (358        | )     |              |   | 13     |    |  |   |        |   |  |   | (222   | )     
|                                      | Increase in accounts payable and other
accrued liabilities                                  |                                                     |   |        |         |       |   | 1,739        |        |              |   | 879         |       |              |   | 44     |    |  |   |        |   |  |   | 2,662  |       
|                                      | Increase (decrease) in accrued payroll and
related liabilities                              |                                                     |   |        |         |       |   | 1,550        |        |              |   | (1,737      | )     |              |   | 3      |    |  |   |        |   |  |   | (184   | )     
|                                      | Increase in accrued interest                                                                |                                                     |   |        |         |       |   | 4,200        |        |              |   | 16          |       |              |   |       |    |  |   |        |   |  |   | 4,216  |       
|                                      | Decrease in prepaid income taxes                                                            |                                                     |   |        |         |       |   | 1,461        |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 1,461  |       
|                                      | Increase in deferred income tax assets                                                      |                                                     |   |        |         |       |   | (181         | )      |              |   |            |       |              |   |       |    |  |   |        |   |  |   | (181   | )     
|                                      | Increase in deferred income tax liabilities                                                 |                                                     |   |        |         |       |   | 1,561        |        |              |   |            |       |              |   |       |    |  |   |        |   |  |   | 1,561  |       
|                                      | Increase in intercompany payable/(receivable)                                               |                                                     |   | (14,932 | )       |       |   | 28,626       |        |              |   | (11,843     | )     |              |   | (1,851 | )  |  |   |        |   |  |   |       |       
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       
|                                      |                                                                                             | Net cash provided by (used in) operating
activities |   |         | (12,173 | )     |   |              | 32,503 |              |   |             | 2,019 |              |   |        | 30 |  |   |         |  |  |   |        | 22,379 | 
|                                      |                                                                                             |                                                     |   |         |         |       |   |              |        |              |   |             |       |              |   |        |    |  |   |         |   |  |   |       

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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 Three Months Ended March 31, 2003
(Unaudited)
(In thousands)

|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |         |        |  
|------------------------------------------------ | --------------------------------------------------------------- | --------------------------------------------------- | - | ------- | ------ | ----- | ------ | ------------ | ------ | ------------ | ----- | ----------- | ---- | ------------ | --- | ---- | - | - | - | - | - | - | ------ | ------- | ------ | -
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     | Non- |   |   |   |   |   |   |        |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       | Guarantor   |      | Guarantor    |     |      |   |   |   |   |   |  
|                                                 |                                                                 |                                                     |   | VCA     |        | Vicar |        | Subsidiaries |        | Subsidiaries |       | Elimination |      | Consolidated
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |             
|Cash flows used in investing activities:         |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Business acquisitions, net of cash acquired                     |                                                     | $ |        |        |       | $      | (6,011       | )      |              | $     |            |      |              | $   |     |   |   | $ |  |   |   | $      | (6,011  | )     
|                                                 | Real estate acquired in connection with
business acquisitions   |                                                     |   |        |        |       |        | (88          | )      |              |       |            |      |              |     |     |   |   |   |  |   |   |        | (88     | )     
|                                                 | Property and equipment additions, net                           |                                                     |   |        |        |       |        | (1,651       | )      |              |       | (1,174      | )    |              |     |     |   |   |   |  |   |   |        | (2,825  | )     
|                                                 | Proceeds from sale of assets                                    |                                                     |   |        |        |       |        | 353          |        |              |       |            |      |              |     |     |   |   |   |  |   |   |        | 353     |       
|                                                 | Other                                                           |                                                     |   | (2      | )      |       |        | 38           |        |              |       | 179         |      |              |     |     |   |   |   |  |   |   |        | 215     |       
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash used in investing activities               |   |         | (2     | )     |        |              | (7,359 | )            |       |             | (995 | )            |     |      |  |   |   |   |  |   |        |         | (8,356 | )
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Cash flows from financing activities:            |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 | Repayment of long-term obligations,
including redemption fees   |                                                     |   | (41,808 | )      |       |        | (485         | )      |              |       |            |      |              |     |     |   |   |   |  |   |   |        | (42,293 | )     
|                                                 | Repayment of revolving credit facility                          |                                                     |   |        |        |       |        | (7,500       | )      |              |       |            |      |              |     |     |   |   |   |  |   |   |        | (7,500  | )     
|                                                 | Payment of deferred financing costs                             |                                                     |   | (382    | )      |       |        |             |        |              |       |            |      |              |     |     |   |   |   |  |   |   |        | (382    | )     
|                                                 | Proceeds from issuance of common
stock under stock option plans |                                                     |   | 20      |        |       |        |             |        |              |       |            |      |              |     |     |   |   |   |  |   |   |        | 20      |       
|                                                 | Proceeds from issuance of common stock                          |                                                     |   | 54,345  |        |       |        |             |        |              |       |            |      |              |     |     |   |   |   |  |   |   |        | 54,345  |       
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|                                                 |                                                                 | Net cash provided by (used in) financing
activities |   |         | 12,175 |       |        |              | (7,985 | )            |       |             |     |              |     |      |  |   |   |   |  |   |        |         | 4,190  |  
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Increase in cash and cash equivalents            |                                                                 |                                                     |  |         |        |       | 17,159 |              |        |              | 1,024 |             |      |              | 30  |      |   |   |  |   |   |   | 18,213 |        
|Cash and cash equivalents at beginning
of period |                                                                 |                                                     |  |         |        |       | 5,083  |              |        |              | 1,233 |             |      |              | 146 |      |   |   |  |   |   |   | 6,462  |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        
|Cash and cash equivalents at end of period       |                                                                 | $                                                   |  |         |        | $     | 22,242 |              |        | $            | 2,257 |             |      | $            | 176 |      |   | $ |  |   |   | $ | 24,675 |        
|                                                 |                                                                 |                                                     |   |         |        |       |        |              |        |              |       |             |      |              |     |      |   |   |   |   |   |   |        |        

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12. Subsequent Events

From April 1,
2004 through May 10, 2004, the Company acquired five animal
hospitals for an aggregate consideration of $11.8
million, consisting of $11.5 million in cash and the assumption of liabilities
of $350,000.

On May 9, 2004,
the Company entered into a merger agreement with National PetCare
Centers, Inc. (NPC), pursuant to which the Company will
acquire NPC for $76.5 million (less assumed debt), to be paid in
cash. NPC operates 69 animal hospitals in 11 states with
annual revenues for the year ended December 31, 2003 of
$81.7 million. This merger agreement is subject to customary
closing conditions, including approval of the stockholders of NPC.

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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 I 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 or
risks, uncertainties and other factors that could cause actual results to
differ materially, as discussed more fully herein.

The forward-looking information set forth in this quarterly report on Form
10-Q is as of May 10, 2004, and we undertake no duty to update this information.
Shareholders and prospective investors can find information filed with the SEC
after May 10, 2004 at our website at www.investor.vcaantech.com or at the SEC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 freestanding,
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 health examinations, diagnostic testing, routine vaccinations,
spaying, neutering and dental care.

At March 31, 2004, our laboratory network consisted of 23 laboratories
serving all 50 states and our animal hospital network consisted of 247 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 20 to 25 animal
hospitals per year with aggregate annual revenues of approximately $25.0
million, depending upon the attractiveness of candidates and the strategic fit
with our existing operations. In addition, if presented with a favorable
opportunity, we may pursue acquisitions of additional animal hospitals or
laboratories, including additional chains.

The following table summarizes our growth in facilities:

|                  |                                         |  |                    |     |      |  |  |     |  
|----------------- | --------------------------------------- |  | ------------------ | --- | ---- |  |  | --- | -
|                  |                                         |  | Three Months Ended
|                  |                                         |  | March 31,         
|                  |                                         |  |                   
|                  |                                         |  | 2004               |     | 2003
|                  |                                         |  |                    |     |     
|Laboratories:     |                                         |  |                    |     |      |  |  |    
|                  | Beginning of period                     |  |                    | 23  |      |  |  | 19  |  
|                  | Acquisitions                            |  |                    |    |      |  |  | 1   |  
|                  |                                         |  |                    |     |      |  |  |    
|                  | End of period                           |  |                    | 23  |      |  |  | 20  |  
|                  |                                         |  |                    |     |      |  |  |    
|Animal hospitals: |                                         |  |                    |     |      |  |  |    
|                  | Beginning of period                     |  |                    | 241 |      |  |  | 229 |  
|                  | Acquisitions                            |  |                    | 9   |      |  |  | 5   |  
|                  | Relocated into hospitals operated by us |  |                    | (2  | )    |  |  |    |  
|                  | Sold or closed                          |  |                    | (1  | )    |  |  | (1  | )
|                  |                                         |  |                    |     |      |  |  |    
|                  | End of period                           |  |                    | 247 |      |  |  | 233 |  
|                  |                                         |  |                    |     |      |  |  |    

We adopted Financial Accounting Standards Board, FASB, Interpretation No.
46R, FIN No. 46R, Consolidation of Variable Interest Entities, in the fourth
quarter of 2003 and accordingly, restated the prior period to conform to the
current period presentation. Under FIN No. 46R we consolidate the operating
results of the veterinary medical groups for which we provide management
services. The result of the consolidation is an increase

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in both revenue and direct costs by an equal amount, thus there is no
impact on operating income, net income, earnings per share or cash flows.
However, hospital and consolidated operating margins are lower than our
historical reported margins because of the increase in revenue without a
corresponding increase in operating income.

Subsequent Event

On May 9, 2004, we
entered into a merger agreement with National PetCare Centers, Inc.,
which we refer to as NPC, pursuant to which we will acquire NPC for
$76.5 million (less assumed debt), to be paid in cash. NPC operates
69 animal hospitals in 11 states with annual revenues for the year
ended December 31, 2003 of $81.7 million. The merger will allow us to
expand our animal hospital operations in nine states, particularly
California and Texas, and to expand into two new states, Oregon and
Oklahoma.

We expect to incur
integration expenses during the remainder of 2004 as we integrate
NPC's animal hospital operations into our existing animal hospital
operations. Our integration plan includes eliminating duplicative
overhead and the closure, sale or merger of those NPC animal
hospitals that do not fit our model or which we expect cannot meet
our operating goals. We believe that the combination of the two
companies will be accretive to net income and diluted earnings per
share, starting in the third quarter of 2004. We expect a positive
impact (after integration costs) of between one and two cents per
diluted earnings per share in 2004. The impact in the second quarter
of 2004 is not expected to be material.

We expect to require
approximately $80.0 million to $85.0 million in cash to fund merger
consideration, assumed debt, transaction costs and integration costs.
We intend to fund these requirements from cash on hand and increased
borrowings. We will need to negotiate amendments to our existing
credit facilities or enter into new facilities in order to provide
for these requirements.

The NPC board of
directors unanimously approved the merger agreement. The merger
agreement is subject to customary closing conditions, including
approval of the stockholders of NPC. Significant stockholders of NPC,
representing over 36% of the vote required to approve the
transaction, have agreed to vote in favor of the transaction while
the merger agreement is in effect. VCA Antech's board of directors
unanimously approved the merger. Closing is targeted for June 2004.

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 of America, 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. Our estimates form the
basis for making judgments about the carrying values of assets and liabilities.
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 sales discounts.

Laboratory Revenue

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

Approximately 6% 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.

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 condensed,
consolidated financial statements.

Animal Hospital Revenue

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 groups pay us management fees.
We consolidate the financial results of these veterinary medical groups.

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Same-facility revenue growth includes revenue generated by customers
referred from our relocated or combined animal hospitals, including those
combined upon acquisition and adjusted for the impact resulting from any
differences in the number of business days in comparable periods.

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, 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.

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 develop and implement new software to be used internally, or
enhance our existing internal software. We develop the software using our own
employees and/or outside consultants. Costs associated with the development of
new software are expensed as incurred. Costs related directly to the software
design, coding, testing and installation are capitalized and amortized over the
expected life of the software, generally three 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

We are required to make significant accounting estimates that directly
impact our consolidated financial statements and related disclosures.
Significant 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 results of
operations. We base our assumptions and estimates on historical experience and
on various other factors believed to be reasonable under the circumstances. We
have 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. We believe the critical accounting
policies for our company that are most affected by significant 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. In 2001, we restructured our workers compensation insurance
policies to a self-insurance retention program. The effect of this
restructuring was a shift of the significant portion of the financial risk
associated with claims losses from the insurance company to our company, while
the insurance company bears only the financial risk of large individual losses
and large aggregate losses.

We 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 are recorded as expense during the policy period.

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Claims losses can vary substantially and, because they can take years to
develop fully, can be difficult to estimate. These estimates are based on
complex judgments regarding the probable number of claims that will be filed
and the nature of those claims. Both of those variables are highly uncertain
and combine to form a factor referred to as the loss pick. The loss pick
factor is multiplied by our payroll cost to determine what the projected costs
for claims and our related expense will be.

We estimate the loss pick by reviewing a minimum of five years of our
historical claims loss data and analyzing the trend of the development of
claims over time. We also review and adjust the loss pick for other major
factors such as the risk control environment and claims handling. 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 carriers require us to pre-fund claims at a certain loss
pick (the low-end in the following table), and give us a maximum loss pick
(the high-end in the following table), above which the carrier is responsible
for paying all claims. The ranges set forth by the insurance carrier reflect
the most probable potential 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 estimated our losses using a loss
pick of 2.10% for the policy years ending September 30, 2004 and 2003. The
increase in our loss pick reflects an increase in our claims loss trend during
the previous years.

The following table reflects the loss pick percentages and total estimated
claims expense recorded by us and the probable ranges for the ultimate realized
loss picks and claims expense (in thousands):

|                                                                      |       |   |         |         |   |  |                |      |                               |   |          |       |   |  |      |      |   |   |       |       |  |  |      |      |   |   |       |        | 
|--------------------------------------------------------------------- | ----- | - | ------- | ------- | - |  | -------------- | ---- | ----------------------------- | - | -------- | ----- | - |  | ---- | ---- | - | - | ----- | ----- |  |  | ---- | ---- | - | - | ----- | ------ | 
|                                                                      |       |   |         |         |   |  | Claims Expense |      | Probable Claims Expense Range
|                                                                      |       |   |         |         |   |  | Recorded       |      | Low-End                       |   | High-End
|                                                                      |       |   |         |         |   |  |                |      |                               |   |         
|                                                                      |       |   | Payroll |         | % |  | $              |      | %                             |   | $        |       | % |  | $   
|                                                                      |       |   |         |         |   |  |                |      |                               |   |          |       |   |  |     
|Policy
year ending 9/30/04
(6 months of policy
elapsed as of 3/31/04) |       | $ | 98,843  |         |   |  | 2.10           | %    |                               | $ | 2,076    |       |   |  | 1.53 | %    |   | $ | 1,512 |       |  |  | 2.82 | %    |   | $ | 2,784 |       
|Policy
year ended 9/30/03                                             |       |   | 185,907 |         |   |  | 2.10           | %    |                               |   | 3,904    |       |   |  | 1.59 | %    |   |   | 2,931 |       |  |  | 2.55 | %    |   |   | 4,741 |       
|Policy
year ended 9/30/02                                             |       |   | 169,022 |         |   |  | 2.04           | %    |                               |   | 3,441    |       |   |  | 1.54 | %    |   |   | 2,603 |       |  |  | 2.49 | %    |   |   | 4,208 |       
|                                                                      |       |   |         |         |   |  |                |      |                               |   |          |       |   |  |      |      |   |   |       |       |  |  |      |      |   |   |       |       
|                                                                      | Total |   | $       | 453,772 |   |  |                | 2.08 | %                             |   | $        | 9,421 |   |  |      | 1.55 | % |   | $     | 7,046 |  |  |      | 2.59 | % |   | $     | 11,733 | 
|                                                                      |       |   |         |         |   |  |                |      |                               |   |          |       |   |  |      |      |   |   |       |       |  |  |      |      |   |   |       |       

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

The insurance policies in place prior to September 30, 2001 did not have
large deductibles, and we have accrued for the maximum possible expense under
these policies.

Impairment of Goodwill

Our goodwill represents the purchase price paid and liabilities assumed
for animal hospital and laboratory acquisitions in excess of the fair market
value of the net assets acquired. The total amount of our net goodwill at
March 31, 2004 was $386.7 million, consisting of $94.8 million for our
laboratory operating segment and $291.9 million for our animal hospital
operating segment.

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Annually, and upon material changes in our operating environment, we test
our goodwill for impairment by comparing the fair market value of our reporting
units, which equate to our laboratory and animal hospital operating segments,
to their respective net book value. At December 31, 2003, we estimated the
fair market 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 three months ended March 31, 2004, 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, 2003. We will review our goodwill for
impairment again at December 31, 2004 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. Significant changes in the proceedings of
current claims or the occurrence of new claims could result in the need for
additional accruals.

Allowance for Uncollectible Accounts

The allowance 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.

Results of Operations

The following table sets forth components of our income statements expressed as a percentage of revenue:

|                                                |                                          |               |      |                    |       |      |      |      |       | 
|----------------------------------------------- | ---------------------------------------- | ------------- | ---- | ------------------ | ----- | ---- | ---- | ---- | ----- | 
|                                                |                                          |               |      | Three Months Ended
|                                                |                                          |               |      | March 31,         
|                                                |                                          |               |      |                   
|                                                |                                          |               |      | 2004               |       | 2003
|                                                |                                          |               |      |                    |       |     
|Revenue:                                        |                                          |               |      |                    |       |      |      |     
|                                                | Laboratory                               |               |      | 34.1               | %     |      |      | 33.2 | %    
|                                                | Animal hospital                          |               |      | 67.9               |       |      |      | 68.7 |      
|                                                | Intercompany                             |               |      | (2.0               | )     |      |      | (1.9 | )    
|                                                |                                          |               |      |                    |       |      |      |     
|                                                |                                          | Total revenue |      |                    | 100.0 |      |      |      | 100.0 | 
|Direct costs (excluding operating depreciation) |                                          |               | 70.4 |                    |       |      | 71.1 |     
|Selling, general and administrative             |                                          |               | 5.8  |                    |       |      | 7.5  |     
|Depreciation and amortization                   |                                          |               | 2.5  |                    |       |      | 2.8  |     
|Loss (gain) on sale of assets                   |                                          |               |     |                    |       |      | (0.2 | )   
|                                                |                                          |               |      |                    |       |      |      |     
|                                                | Operating income                         |               |      | 21.3               |       |      |      | 18.8 |      
|Interest expense, net                           |                                          |               | 4.1  |                    |       |      | 5.6  |     
|Debt retirement costs                           |                                          |               |     |                    |       |      | 5.9  |     
|Other expense                                   |                                          |               | 0.1  |                    |       |      | 0.1  |     
|Minority interest in income of subsidiaries     |                                          |               | 0.3  |                    |       |      | 0.3  |     
|                                                |                                          |               |      |                    |       |      |      |     
|                                                | Income before provision for income taxes |               |      | 16.8               |       |      |      | 6.9  |      
|Provision for income taxes                      |                                          |               | 6.6  |                    |       |      | 2.8  |     
|                                                |                                          |               |      |                    |       |      |      |     
|                                                | Net income                               |               |      | 10.2               | %     |      |      | 4.1  | %    
|                                                |                                          |               |      |                    |       |      |      |     

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

|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |         |        |  
|--------------------------------- | ----------------------------------------------- | ----------------------- | - | ---------- | ------ | -------- | - | --------- | ------ | ------------ | - | ----- | ------ | ------- | - | ------ | - |  | - | ------- | ------ | -
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   | Inter- |   |  |   |        
|                                  |                                                 |                         |   |            |        |          |   | Animal    |        |              |   |       |        | company |   |        |   | 
|                                  |                                                 |                         |   | Laboratory |        | Hospital |   | Corporate |        | Eliminations |   | Total
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |      
|Three Months Ended March 31, 2004 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  | Revenue                                         |                         | $ | 49,182     |        |          | $ | 97,956    |        |              | $ |      |        |         | $ | (2,788 | ) |  | $ | 144,350 |       
|                                  | Direct costs (excluding
operating depreciation) |                         |   | 26,894     |        |          |   | 77,462    |        |              |   |      |        |         |   | (2,788 | ) |  |   | 101,568 |       
|                                  | Selling, general and administrative             |                         |   | 3,173      |        |          |   | 2,748     |        |              |   | 2,386 |        |         |   |       |   |  |   | 8,307   |       
|                                  | Depreciation and amortization                   |                         |   | 821        |        |          |   | 2,401     |        |              |   | 394   |        |         |   |       |   |  |   | 3,616   |       
|                                  | Loss (gain) on sale of assets                   |                         |   | (1         | )      |          |   | 63        |        |              |   |      |        |         |   |       |   |  |   | 62      |       
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  |                                                 | Operating income (loss) |   | $          | 18,295 |          |   | $         | 15,282 |              |   | $     | (2,780 | )       |   | $      |  |  |   | $       | 30,797 |  
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  |                                                 | Operating margin        |   |            | 37.2   | %        |   |           | 15.6   | %            |   |       | (1.9   | )%      |   |        |   |  |   |         | 21.3   | %
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|Three Months Ended March 31, 2003 |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  | Revenue                                         |                         | $ | 41,698     |        |          | $ | 86,307    |        |              | $ |      |        |         | $ | (2,426 | ) |  | $ | 125,579 |       
|                                  | Direct costs (excluding
operating depreciation) |                         |   | 23,456     |        |          |   | 68,300    |        |              |   |      |        |         |   | (2,426 | ) |  |   | 89,330  |       
|                                  | Selling, general and administrative             |                         |   | 2,707      |        |          |   | 2,503     |        |              |   | 4,153 |        |         |   |       |   |  |   | 9,363   |       
|                                  | Depreciation and amortization                   |                         |   | 754        |        |          |   | 2,477     |        |              |   | 346   |        |         |   |       |   |  |   | 3,577   |       
|                                  | Gain on sale of assets                          |                         |   | (2         | )      |          |   | (236      | )      |              |   |      |        |         |   |       |   |  |   | (238    | )     
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  |                                                 | Operating income (loss) |   | $          | 14,783 |          |   | $         | 13,263 |              |   | $     | (4,499 | )       |   | $      |  |  |   | $       | 23,547 |  
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        
|                                  |                                                 | Operating margin        |   |            | 35.5   | %        |   |           | 15.4   | %            |   |       | (3.6   | )%      |   |        |   |  |   |         | 18.8   | %
|                                  |                                                 |                         |   |            |        |          |   |           |        |              |   |       |        |         |   |        |   |  |   |        

Revenue

The following table summarizes our revenue (in thousands):

|                |               |   |                              |         |      |   |          |         |  |  |      |      |  
|--------------- | ------------- | - | ---------------------------- | ------- | ---- | - | -------- | ------- |  |  | ---- | ---- | -
|                |               |   | Three Months Ended March 31,
|                |               |   |                             
|                |               |   | 2004                         |         | 2003 |   | % Change
|                |               |   |                              |         |      |   |         
|Laboratory      |               | $ | 49,182                       |         |      | $ | 41,698   |         |  |  | 17.9 | %   
|Animal hospital |               |   | 97,956                       |         |      |   | 86,307   |         |  |  | 13.5 | %   
|Intercompany    |               |   | (2,788                       | )       |      |   | (2,426   | )       |  |  |      |     
|                |               |   |                              |         |      |   |          |         |  |  |      |     
|                | Total revenue |   | $                            | 144,350 |      |   | $        | 125,579 |  |  |      | 14.9 | %
|                |               |   |                              |         |      |   |          |         |  |  |      |     

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Laboratory Revenue

Laboratory revenue increased $7.5 million for the three months ended March
31, 2004 compared to the same period 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 March 31,
|                           |                                     |      |                             
|Laboratory Revenue:        |                                     | 2004 |                              | 2003   |  | % Change
|                           |                                     |      |                              |        |  |         
|Internal growth:           |                                     |      |                              |        |  |          |        |        |  |  |      |     
|                           | Number of requisitions              |      |                              | 1,999  |  |          |        | 1,846  |  |  |      | 8.3  | %
|                           | Average revenue per requisition (1) |      | $                            | 23.22  |  |          | $      | 22.59  |  |  |      | 2.8  | %
|                           |                                     |      |                              |        |  |          |        |        |  |  |      |     
|Total internal revenue (2) |                                     | $    | 46,411                       |        |  | $        | 41,698 |        |  |  | 11.3 | %   
|Billing day adjustment (3) |                                     |      | 611                          |        |  |          |       |        |  |  |      |     
|Acquired revenue           |                                     |      | 2,160                        |        |  |          |       |        |  |  |      |     
|                           |                                     |      |                              |        |  |          |        |        |  |  |      |     
|                           | Total                               |      | $                            | 49,182 |  |          | $      | 41,698 |  |  |      | 17.9 | %
|                           |                                     |      |                              |        |  |          |        |        |  |  |      |     



---

|(1) |  | Computed by dividing total internal revenue by the number of
requisitions.                                                                                                   
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Numbers may not calculate exactly due to rounding.                                                                                                                           
|   
|   
|   
|   
|(3) |  | The 2004 billing day adjustment reflects the impact of one additional
billing day for the three months ended March 31, 2004 as compared to the
same period in the prior year.

The increases in requisitions from internal growth for the three months
ended March 31, 2004 are the result of a continued trend in veterinary medicine
to focus on the importance of laboratory diagnostic testing in the diagnosis
and treatment of diseases. This trend is driven by an increase in the number
of specialists in the veterinary industry relying on diagnostic testing, the
increased focus on diagnostic testing in veterinary schools and general
increased awareness through ongoing marketing and continuing education programs
provided by ourselves, pharmaceutical companies and other service providers in
the industry. In addition, we continue to see the impact from the recent
migration of diagnostic testing from the human health care industry and the
advent of medicine in the veterinary industry that requires diagnostic
assessment and monitoring.

The increases in the average revenue per requisition for the three months
ended March 31, 2004 is primarily attributable to price increases, which
approximated 2% to 4% in February 2004 and 3% to 5% in February 2003. These
price increases were partially offset by changes in the mix of tests performed
per requisition.

As the result of our
laboratory acquisitions subsequent to January 1, 2003, we generated an additional $2.2 million of revenue (referred to
in the above table as acquired revenue) during the three months ended March
31, 2004 in comparison to the same period in the prior year.

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Animal Hospital Revenue

Animal hospital revenue increased $11.6 million for the three months ended
March 31, 2004 compared to the same period 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 March 31,
|                            |                               |      |                             
|Animal Hospital Revenue:    |                               | 2004 |                              | 2003   |  | % Change
|                            |                               |      |                              |        |  |         
|Same-facility:              |                               |      |                              |        |  |          |        |        |  |  |     |     
|                            | Orders                        |      |                              | 809    |  |          |        | 812    |  |  |     | (0.4 | )%
|                            | Average revenue per order (1) |      | $                            | 109.94 |  |          | $      | 104.14 |  |  |     | 5.6  | % 
|                            |                               |      |                              |        |  |          |        |        |  |  |     |     
|Same-facility revenue (2)   |                               | $    | 88,948                       |        |  | $        | 84,519 |        |  |  | 5.2 | %   
|Business day adjustment (3) |                               |      | 1,191                        |        |  |          |       |        |  |  |     |     
|Net acquired revenue        |                               |      | 7,817                        |        |  |          | 1,788  |        |  |  |     |     
|                            |                               |      |                              |        |  |          |        |        |  |  |     |     
|                            | Total                         |      | $                            | 97,956 |  |          | $      | 86,307 |  |  |     | 13.5 | % 
|                            |                               |      |                              |        |  |          |        |        |  |  |     |     



---

|(1) |  | Computed by dividing same-facility revenue by same-facility orders.                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Numbers may not calculate exactly due to rounding.                                                                                                                             
|   
|   
|   
|   
|(3) |  | The 2004 business day adjustment reflects the impact of one additional
business day for the three months ended March 31, 2004 as compared to the
same period in the prior year.

Over the last few years, certain pet-related products traditionally sold
at animal hospitals have become more widely available in retail stores and
other distribution channels, and, as a result, we have fewer customers coming
to our animal hospitals solely to purchase such items. In addition, there has
been a decline in the number of vaccinations as some recent professional
literature and research has suggested that vaccinations can be given to pets
less frequently. Orders for these pet-related products and vaccinations
generally generate revenue that is less than the average revenue for all
orders. In addition, the Companys business strategy has placed greater
emphasis on high-quality veterinary care and wellness programs, which are
higher priced orders. These trends have resulted in a decrease in the number
of orders and an increase in the average revenue per order.

Price increases also contributed to the increase in the average revenue
per order, which approximated 2.5% to 5% on services at most hospitals in both
February 2004 and 2003. Prices are reviewed on an annual basis for each
hospital and adjustments are made based on market considerations, demographics
and our costs.

Net acquired revenue represents the revenue from those hospitals acquired,
sold or closed on or subsequent to January 1, 2003. Fluctuations in net
acquired revenue occur due to the volume, size, and timing of acquisitions and
disposals during the periods compared.

Direct Costs (Excluding Operating Depreciation)

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

|                |                    |   |                              |         |         |  |      |      |         |   |        |        |      |  |      |      |   |  |      |      |  
|--------------- | ------------------ | - | ---------------------------- | ------- | ------- |  | ---- | ---- | ------- | - | ------ | ------ | ---- |  | ---- | ---- | - |  | ---- | ---- | -
|                |                    |   | Three Months Ended March 31,
|                |                    |   |                             
|                |                    |   | 2004                         |         | 2003    |  |      |      |        
|                |                    |   |                              |         |         |  |      |      |        
|                |                    |   |                              |         |         |  | % of |      |         |   |        |        | % of |  | %   
|                |                    |   | $                            |         | Revenue |  | $    |      | Revenue |   | Change
|                |                    |   |                              |         |         |  |      |      |         |   |       
|Laboratory      |                    | $ | 26,894                       |         |         |  | 54.7 | %    |         | $ | 23,456 |        |      |  | 56.3 | %    |   |  | 14.7 | %   
|Animal hospital |                    |   | 77,462                       |         |         |  | 79.1 | %    |         |   | 68,300 |        |      |  | 79.1 | %    |   |  | 13.4 | %   
|Intercompany    |                    |   | (2,788                       | )       |         |  |      |      |         |   | (2,426 | )      |      |  |      |      |   |  |      |     
|                |                    |   |                              |         |         |  |      |      |         |   |        |        |      |  |      |      |   |  |      |     
|                | Total direct costs |   | $                            | 101,568 |         |  |      | 70.4 | %       |   | $      | 89,330 |      |  |      | 71.1 | % |  |      | 13.7 | %
|                |                    |   |                              |         |         |  |      |      |         |   |        |        |      |  |      |      |   |  |      |     

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Laboratory Direct Costs

The decrease in laboratory direct costs as a percentage of laboratory
revenue during these periods was primarily attributable to increases 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.

Animal Hospital Direct Costs

Animal hospital direct costs as a percentage of applicable revenue was
consistent with the same period in the prior year.

Selling, General and Administrative Expense

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

|                |            |   |                              |       |         |  |      |     |         |   |        |       |      |  |     |     |   |  |       |       |   
|--------------- | ---------- | - | ---------------------------- | ----- | ------- |  | ---- | --- | ------- | - | ------ | ----- | ---- |  | --- | --- | - |  | ----- | ----- | --
|                |            |   | Three Months Ended March 31,
|                |            |   |                             
|                |            |   | 2004                         |       | 2003    |  |      |     |        
|                |            |   |                              |       |         |  |      |     |        
|                |            |   |                              |       |         |  | % of |     |         |   |        |       | % of |  | %  
|                |            |   | $                            |       | Revenue |  | $    |     | Revenue |   | Change
|                |            |   |                              |       |         |  |      |     |         |   |       
|Laboratory      |            | $ | 3,173                        |       |         |  | 6.5  | %   |         | $ | 2,707  |       |      |  | 6.5 | %   |   |  | 17.2  | %    
|Animal hospital |            |   | 2,748                        |       |         |  | 2.8  | %   |         |   | 2,503  |       |      |  | 2.9 | %   |   |  | 9.8   | %    
|Corporate       |            |   | 2,386                        |       |         |  | 1.7  | %   |         |   | 4,153  |       |      |  | 3.3 | %   |   |  | (42.5 | )%   
|                |            |   |                              |       |         |  |      |     |         |   |        |       |      |  |     |     |   |  |       |      
|                | Total SG&A |   | $                            | 8,307 |         |  |      | 5.8 | %       |   | $      | 9,363 |      |  |     | 7.5 | % |  |       | (11.3 | )%
|                |            |   |                              |       |         |  |      |     |         |   |        |       |      |  |     |     |   |  |       |      

Laboratory SG&A

Laboratory SG&A as a percentage of laboratory revenue was consistent with
the same period in the prior year. The increase in Laboratory SG&A was
primarily the result of hiring additional sales persons.

Animal Hospital SG&A

The decrease in animal hospital SG&A as a percentage of animal hospital
revenue was primarily attributable to increases in animal hospital revenue
combined with operating leverage associated with our animal hospital business.

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Corporate SG&A

During the three months ended March 31, 2004, a claim with our insurance
company was settled that provided for the partial reimbursement of the Zoasis
Corporation litigation settlement incurred in 2002 and related legal fees. The
following table reconciles corporate SG&A as reported to corporate SG&A
excluding the insurance claim settlement (in thousands):

|                                                        |                                     |   |                              |        |         |  |      |   |         |   |        |   |      |  |     |   |  |  |       |    | 
|------------------------------------------------------- | ----------------------------------- | - | ---------------------------- | ------ | ------- |  | ---- | - | ------- | - | ------ | - | ---- |  | --- | - |  |  | ----- | -- | 
|                                                        |                                     |   | Three Months Ended March 31,
|                                                        |                                     |   |                             
|                                                        |                                     |   | 2004                         |        | 2003    |  |      |   |        
|                                                        |                                     |   |                              |        |         |  |      |   |        
|                                                        |                                     |   |                              |        |         |  | % of |   |         |   |        |   | % of |  | %  
|                                                        |                                     |   | $                            |        | Revenue |  | $    |   | Revenue |   | Change
|                                                        |                                     |   |                              |        |         |  |      |   |         |   |       
|Corporate SG&A as reported                              |                                     | $ | 2,386                        |        |         |  | 1.7  | % |         | $ | 4,153  |   |      |  | 3.3 | % |  |  | (42.5 | )%
|Impact of insurance claim settlement:                   |                                     |   |                              |        |         |  |      |   |         |   |        |   |      |  |     |   |  |  |       |   
|                                                        | Litigation settlement reimbursement |   |                              | (1,124 | )       |  |      |   |         |   |        |  |      |  |     |   |  |  |       |    | 
|                                                        | Legal fees reimbursement            |   |                              | (801   | )       |  |      |   |         |   |        |  |      |  |     |   |  |  |       |    | 
|                                                        |                                     |   |                              |        |         |  |      |   |         |   |        |   |      |  |     |   |  |  |       |   
|Corporate SG&A excluding the
insurance claim settlement |                                     | $ | 4,311                        |        |         |  | 3.0  | % |         | $ | 4,153  |   |      |  | 3.3 | % |  |  | 3.8   | % 
|                                                        |                                     |   |                              |        |         |  |      |   |         |   |        |   |      |  |     |   |  |  |       |   

Excluding the impact of the insurance claim settlement, corporate SG&A as
a percentage of total revenue decreased due to an increase in total revenue
combined with operating leverage.

Interest Expense, Net

The following table summarizes our interest expense, net of interest
income (in thousands):

|                  |                                                            |                                                |       |                    |       |      |       |       |       | 
|----------------- | ---------------------------------------------------------- | ---------------------------------------------- | ----- | ------------------ | ----- | ---- | ----- | ----- | ----- | 
|                  |                                                            |                                                |       | Three Months Ended
|                  |                                                            |                                                |       | March 31,         
|                  |                                                            |                                                |       |                   
|                  |                                                            |                                                |       | 2004               |       | 2003
|                  |                                                            |                                                |       |                    |       |     
|Interest expense: |                                                            |                                                |       |                    |       |      |       |      
|                  | Revolving credit facility                                  |                                                | $     |                   |       |      | $     | 27    |      
|                  | Senior
term C notes                                        |                                                |       |                   |       |      |       | 1,839 |      
|                  | Senior
term D notes                                        |                                                |       | 1,342              |       |      |       |      |      
|                  | 9.875% senior subordinated notes                           |                                                |       | 4,197              |       |      |       | 4,197 |      
|                  | 15.5% senior notes                                         |                                                |       |                   |       |      |       | 522   |      
|                  | Interest rate hedging agreements                           |                                                |       | 164                |       |      |       | 85    |      
|                  | Amortization of deferred financing costs and debt discount |                                                |       | 184                |       |      |       | 233   |      
|                  | Secured seller notes & other                               |                                                |       | 188                |       |      |       | 182   |      
|                  |                                                            |                                                |       |                    |       |      |       |      
|                  |                                                            |                                                | 6,075 |                    |       |      | 7,085 |      
|Interest income   |                                                            |                                                | 90    |                    |       |      | 93    |      
|                  |                                                            |                                                |       |                    |       |      |       |      
|                  |                                                            | Total interest expense, net of interest income |       | $                  | 5,985 |      |       | $     | 6,992 | 
|                  |                                                            |                                                |       |                    |       |      |       |      

The decrease in net interest expense was primarily attributable to a
decrease in the average debt balances outstanding and a decrease in the
weighted average interest rate.

Debt Retirement Costs

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

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Provision for Income Taxes

We recognized a litigation settlement reimbursement of $1.1 million during
the three months ended March 31, 2004, which we discuss above in Corporate
SG&A. This reimbursement had no related tax expense reducing our effective
tax rate to 39.3% for the three months ended March 31, 2004. This
reimbursement will not impact our effective tax rate for quarters subsequent to
the quarter ended March 31, 2004.

Liquidity and Capital Resources

Cash and Cash Equivalents

Cash and cash equivalents at March 31, 2004 totaled $29.4 million up from
$17.2 million at December 31, 2003. The increase is a result of net cash
provided by operations exceeding net cash used in investing and financing
activities.

Cash Flows from Operating Activities

Net cash provided by operating activities increased $7.2 million for the
three months ended March 31, 2004 compared to the same period in the prior
year. This increase is primarily due to: (a) improved operating performance;
(b) acquisitions; and (c) an $837,000 decrease in interest paid as a result of
a reduction in the weighted average debt balances outstanding and a reduction
in the weighted average interest rate. This increase was partially offset by:
(a) a $561,000 increase in taxes paid; and (b) a use of $1.6 million from
changes in working capital.

Cash Flows used in Investing Activities

In each of the three months ended March 31, 2004 and 2003, net cash used
in investing activities was primarily comprised of cash used for the
acquisition of animal hospitals and laboratories and expenditures for property and equipment.

We anticipate spending approximately $25.0 to $30.0 million for
acquisitions and $18.0 million for property and equipment in 2004. Of
these amounts, approximately $14.1 million and $3.5 million was used in the
first quarter of 2004. The remaining amounts are intended to be spent over the
last three quarters of the year. However, we may purchase either a fewer or
greater number of animal hospital facilities, including additional chains, than
we are planning depending upon opportunities that present themselves and our
cash requirements may change accordingly. In addition, there may be
acquisition opportunities in the laboratory field that may impose additional
cash requirements. We intend to primarily use cash in our acquisitions but,
depending upon the timing and amount of our acquisitions, we may use stock or
debt to the extent we deem it appropriate. Our covenants under our senior
credit facility allow us to spend $40.0 million per year on acquisitions, and
we would require a waiver or amendment to the covenant to exceed this
amount.

See Subsequent Event for a discussion of
additional requirements that may arise in connection with a planned
merger.

Cash
flows from Financing Activities

During the three months ended March 31, 2003, we completed an offering of
common stock at an issue price of $15.25 per share, in which we sold 3.8
million shares of our common stock in exchange for net proceeds of $54.3
million. Approximately $42.7 million of the net proceeds received were used to
redeem the entire principal amount of our 15.5% senior notes due 2010 at a
redemption price of 110% of the principal amount, plus accrued and unpaid
interest.

Borrowings and repayments under our revolving credit facility are the
result of normal working capital shifts created by the seasonality of our
business and the timing of acquisition activity. In the fourth quarter of 2002
we borrowed $7.5 million, and in early 2003 we repaid the full amount. At
March 31, 2004, we had no borrowings under our revolving credit
facility.

See Subsequent Event for a discussion of
additional financing needs we may have in connection with a planned merger.

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Future Cash Requirements

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

|                                             |  |       |         |          |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 
|-------------------------------------------- |  | ----- | ------- | -------- |  | ---- | ------ | ---- |  | ---- | ------ | ---- |  | ---------- | ------ |  |  | - | ------- |  |  | - | ------ |  |  | - | ------- | 
|                                             |  | Total |         | 2004 (1) |  | 2005 |        | 2006 |  | 2007 |        | 2008 |  | Thereafter
|                                             |  |       |         |          |  |      |        |      |  |      |        |      |  |           
|Long-term debt                               |  | $     | 316,918 |          |  | $    | 1,761  |      |  | $    | 1,925  |      |  | $          | 18,944 |  |  | $ | 71,128  |  |  | $ | 53,153 |  |  | $ | 170,007 | 
|Capital lease obligations                    |  |       | 157     |          |  |      | 135    |      |  |      | 22     |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|Operating leases                             |  |       | 240,403 |          |  |      | 12,027 |      |  |      | 15,861 |      |  |            | 15,642 |  |  |   | 15,481  |  |  |   | 15,172 |  |  |   | 166,220 | 
|Fixed cash interest expense                  |  |       | 101,948 |          |  |      | 17,156 |      |  |      | 17,246 |      |  |            | 17,124 |  |  |   | 16,823  |  |  |   | 16,812 |  |  |   | 16,787  | 
|Variable cash interest expense (2)           |  |       | 31,736  |          |  |      | 5,165  |      |  |      | 7,902  |      |  |            | 9,242  |  |  |   | 7,303   |  |  |   | 2,124  |  |  |   |        | 
|Deferred income tax liabilities              |  |       | 26,493  |          |  |      |       |      |  |      |       |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   | 26,493  | 
|Mandatorily redeemable partnership
interests |  |       | 2,176   |          |  |      |       |      |  |      |       |      |  |            |       |  |  |   |        |  |  |   |       |  |  |   | 2,176   | 
|Swap agreements (2)                          |  |       | (431    | )        |  |      | (200   | )    |  |      | (231   | )    |  |            |       |  |  |   |        |  |  |   |       |  |  |   |        | 
|                                             |  |       |         |          |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 
|                                             |  | $     | 719,400 |          |  | $    | 36,044 |      |  | $    | 42,725 |      |  | $          | 60,952 |  |  | $ | 110,735 |  |  | $ | 87,261 |  |  | $ | 381,683 | 
|                                             |  |       |         |          |  |      |        |      |  |      |        |      |  |            |        |  |  |   |         |  |  |   |        |  |  |   |         | 



---

|(1) |  | Consists of the period April 1 through December 31, 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | 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 interest rate on our
variable rate debt will be 4.8%, 5.5%, 6.5%, 7.5%, and 8.0% for years 2004
through 2008, respectively. These estimates are based on interest rate
projections used to price our interest rate swap agreements. Our
consolidated financial statements included in our 2003 Annual Report on
Form 10-K discuss these variable-rate notes in more detail.

We anticipate that our cash on hand, cash from operations and, if needed,
our revolving credit facility will provide sufficient cash resources to fund
our contractual obligations and other cash needs for more than the next 12
months.

See Subsequent Event for a discussion of
additional cash requirements we may have in connection with a planned
merger.

Debt Related Covenants

The senior credit facility contains certain financial covenants pertaining
to interest coverage, fixed charge coverage and leverage ratios. In addition,
the senior credit facility has restrictions pertaining to capital expenditures,
acquisitions and the payment of dividends. We currently believe the most
restrictive covenant is the fixed charge coverage ratio. The senior credit
facility defines the fixed charge coverage ratio as that ratio which is
calculated on a last twelve-month basis by dividing pro forma earnings before
interest, taxes, depreciation and amortization, 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 March 31, 2004, we had a fixed charge coverage ratio of 1.67
to 1.00, which was in compliance with the required ratio of no less than 1.10
to 1.00.

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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
London interbank offer rates, 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     | 
|Counter party       |  |         | Wells Fargo Bank |         |  |         | Wells Fargo Bank |  |  |  | Goldman Sachs | 

We entered into the swap agreements to hedge against the risk of
increasing interest rates. The contracts effectively convert a certain amount
of our variable-rate debt under our senior credit facility to fixed-rate debt
for purposes of controlling cash paid for interest. That amount is equal to
the notional amount of the swap agreements and the fixed rate conversion period
is equal to the terms of the contract. The impact of the swap agreements has
been factored into our future contractual cash requirements table above.

In the future, we may enter into additional interest rate strategies to
take advantage of favorable current rate environments. We have not yet
determined what those strategies will be or their possible impact.

Description of Indebtedness

Senior Credit Facility

At March 31, 2004, we had $145.3 million principal amount outstanding
under our senior term D notes and no borrowings outstanding under our revolving
credit facility.

Borrowings under the senior credit facility 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%
per annum. 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% per annum.

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

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 March 31, 2004, 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.

Before December 1, 2004, we can redeem up to $59.5 million of principal on
our 9.875% senior subordinated notes at a redemption price of 109.9% of the
principal amount with proceeds from an equity offering. The remaining

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portion may be paid off at our discretion beginning December 1, 2005 at a
redemption price of 104.9% of the principal amount.

Other Debt

At March 31, 2004, we had seller notes secured by assets of animal
hospitals, unsecured debt and capital leases that totaled $1.7 million.

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 SEC reports, including but not limited to
the items discussed below.



| | We recently entered
into a merger agreement to acquire National PetCare Centers, Inc. The
planned merger entails risks about which our investors should be
aware.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

On May 9, 2004,
we entered into a merger agreement with NPC pursuant to which we
will acquire NPC for $76.5 million (less assumed debt), to be
paid in cash. Although we have targeted the closing of this merger
for June 1, 2004, the merger is subject to significant
conditions, some of which are outside of our control. Accordingly,
the closing of the merger may be delayed beyond June 1, 2004 or
may not occur at all.

We have entered into
a merger agreement with NPC with the expectation that the merger will
result in beneficial synergies. These include the potential to
realize improved operating margins at animal hospitals through a
strategy of centralizing various corporate and administrative
functions and leveraging fixed costs.

Achieving these
anticipated business benefits will depend on whether our operations
and NPCs operations can be integrated with each other in an
efficient, effective and timely manner. Any delays in the integration
process or unanticipated costs or results, could negatively impact
our combined revenues, operating margins and net income. The
combination of our two companies will require, among other things,
the integration of the companies management staffs, the
retention and expansion of the companies veterinarian and other
professional staff and the identification and elimination of
unnecessary overhead and non-performing hospitals. The success of this process will be significantly
influenced by our ability to retain key management and professional
personnel. If we are unsuccessful in accomplishing this, it may have
a negative impact on our combined revenues, operating margins and net
income.

The integration of
operations of the two companies will require the dedication of
management resources, which may temporarily detract attention from
the day-to-day business of the combined companies. In addition, the
employees of the combined company may be less productive as a result
of uncertainty during the integration process, which also may disrupt
our business. Our inability to successfully integrate the operations
of NPC could have an adverse effect on the business and results of
the combined companies. In addition, even if the integration is
successfully accomplished, it is anticipated that the integration
will be accomplished over time and, in the interim, the combination
may have an adverse effect on the business and results of operations
of the combined companies.

In addition, the
present and potential customers of NPC may not continue their current
utilization patterns or the proposed merger may have an adverse
impact on the relationships with veterinarians and other animal
health care professionals currently employed by NPC. Any significant
reduction in utilization patterns or any significant adverse impact
on relationships with the veterinarians or other animal health care
professionals currently employed by NPC, could have an adverse effect
on the business and results of operations of the combined companies.



| | 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 11.9% and 14.1% for each fiscal year from 2001 through 2003.
Similarly, our animal hospital adjusted same-facility revenue growth rate has
fluctuated between 3.6% and 5.0% 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 other channels of distribution
such as 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 currently established by our veterinarians. Some of our
veterinarians have changed their protocols and others may change their protocol
in light of recent literature.



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

Approximately 56% of our expense for the year ended December 31, 2003,
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

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expense, loss of customers and a decline in profitability. We expect to
acquire in the ordinary course of business 20 to 25 animal hospitals per year
with aggregate annual revenues of approximately $25.0 million. In some cases,
we have experienced delays and increased costs in integrating some hospitals,
particularly 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. If this were to occur in the
future, it could result in decreased revenue, increased costs or 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 March 31, 2004, our balance sheet reflected $386.7 million of goodwill,
which is a substantial portion of our total assets of $579.3 million at that
date. We expect that the aggregate amount of goodwill on our balance sheet
will increase as a result of future acquisitions. We continually evaluate
whether events or circumstances have occurred that suggest that the fair market
value of each of our reporting units is below their carrying values. If we
determine that the fair market value of one of our reporting units is less than
its carrying value, this may result in an impairment write-down of the goodwill
for that reporting unit. The impairment write-down would be reflected as
expense and could have a material adverse effect on our results of operations
during the period in which we recognize the expense. At December 31, 2003, we
concluded that the fair value of our reporting units exceeded their carrying
value and accordingly, as of that date, our net goodwill was not impaired in
our consolidated financial statements. However, in the future we may incur
impairment charges related to the goodwill already recorded or arising out of
future acquisitions.

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

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

At March 31, 2004, our debt consisted of:



| |  |  | $145.3 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
|
| |  |  | $1.7 million in principal amount outstanding under our other debt.                            

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Our ability to make payments on our debt, and to fund acquisitions, will
depend upon our ability to generate cash in the future. Insufficient cash flow
could place us at risk of default under our debt agreements or could prevent us
from expanding our business as planned. Our ability to generate cash is
subject to general economic, financial, competitive, legislative, regulatory
and other factors that are beyond our control. Our business may not generate
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 may 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 March 31, 2004, 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 in some regional
markets in which we operate animal hospitals. During shortages in these
regions, we may be unable to hire enough qualified veterinarians to adequately
staff our animal hospitals, in which event we may lose market share and our
revenues and profitability may decline.



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

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws
vary from state to state and are enforced by the courts and by regulatory
authorities with broad discretion. As of March 31, 2004, we operated 68 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. Moreover,
despite network security measures, some of our servers are potentially
vulnerable to physical or electrical break-ins, computer viruses and similar
disruptive problems. Despite the precautions we have taken, unanticipated

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

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

Any substantial reduction in the number of available flights or delays in
the departure of flights, whether as a result of severe weather conditions, as
we recently experienced in the eastern United States, a terrorist attack or any
other type of disruption, will disrupt our transportation network and our
ability to provide test results in a timely manner. Any change in government
regulation related to transporting samples or specimens could also have an
impact on our business. 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, 23.1% 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. Our largest
stockholder is Leonard Green & Partners, L.P., which owns 16.8% of our common
stock. Three of the partners of Leonard Green & Partners, L.P. sit on our
eight member board of directors. These directors, along with the two
management directors, 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.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2004, we had borrowings of $145.3 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 $145.3 million to $65.3 million. Accordingly, for the twelve month
period ending March 31, 2005, for every 1.0% increase in LIBOR we will pay an
additional $781,000 in interest expense and for every 1.0% decrease in LIBOR we
will save $781,000 in interest expense.

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




ITEM 4. CONTROLS AND PROCEDURES

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 SEC.

In accordance with the requirements of the SEC, 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.

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PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

We are not subject to any legal proceedings other than ordinarily routine
litigation incidental to the conduct of our business.




ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES

None




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None




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

None




ITEM 5. OTHER INFORMATION

None




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|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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(b) Reports on
Form 8-K:


|    |  |                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | Report on Form 8-K, filed February 24, 2004, reporting under Item
5, financial guidance for fiscal year 2004 and under Item 12,
financial information for the fourth quarter and fiscal year 2003.

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SIGNATURE

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

|                   |  |     |  |                                        
|------------------ |  | --- |  | ---------------------------------------
|Date: May 10, 2004 |  | By: |  | /s/ Tomas W. Fuller                    
|                   |  |     |  |                                        
|                   |  |     |  | Tomas W. Fuller
Chief Financial Officer

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EXHIBIT INDEX

|            |  |                                                                                                                                
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                    
|            |  |                                                                                                                                
|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.

41