##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2009
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 001-16783
 
 VCA Antech, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    95-4097995(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 12401 West Olympic Boulevard
Los Angeles, California 90064-1022  (Address of principal executive offices)
 (310) 571-6500  (Registrants telephone number, including area code)
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer   o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




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##### 



VCA Antech, Inc.
Form 10-Q
March 31, 2009
 Table of Contents
 PageNumberPart I.
    
    Financial InformationItem 1.
    
    Financial Statements (Unaudited)Condensed, Consolidated Balance Sheets as of March 31, 2009 and
December 31, 2008
    
    
    1Condensed, Consolidated Income Statements for the Three Months Ended
March 31, 2009 and 2008
    
    
    2Condensed, Consolidated Statements of Equity for the Three Months
Ended March 31, 2009 and 2008
    
    
    3Condensed, Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2009 and 2008
    
    
    4Notes to Condensed, Consolidated Financial Statements
    
    
    5Item 2.
    
    Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    17Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    31Item 4.
    
    Controls and Procedures
    
    
    31Part II.
    
    Other InformationItem 1.
    
    Legal Proceedings
    
    
    32Item 1A.
    
    Risk Factors
    
    
    32Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    32Item 3.
    
    Defaults Upon Senior Securities
    
    
    32Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    32Item 5.
    
    Other Information
    
    
    32Item 6.
    
    Exhibits
    
    
    32Signature
    
    
    33Exhibit Index
    
    
    34EX-31.1EX-31.2EX-32.1




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 VCA Antech, Inc. and Subsidiaries
 
 Condensed, Consolidated Balance Sheets
 (Unaudited)
 (In thousands, except par value)
 March 31,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    109,084
    
    
    $
    88,959Trade accounts receivable, less allowance for uncollectible accounts of $11,540
and $11,025 at March 31, 2009 and December 31, 2008, respectively
    
    
    47,929
    
    
    
    43,453Inventory
    
    
    26,366
    
    
    
    26,631Prepaid expenses and other
    
    
    18,112
    
    
    
    18,800Deferred income taxes
    
    
    16,566
    
    
    
    15,938Prepaid income taxes
    
    
    
    
    
    
    5,287Total current assets
    
    
    218,057
    
    
    
    199,068Property and equipment, less accumulated depreciation and amortization of $144,722
and $138,431 at March 31, 2009 and December 31, 2008, respectively
    
    
    273,230
    
    
    
    263,443Goodwill
    
    
    940,124
    
    
    
    922,057Other intangible assets, net
    
    
    36,600
    
    
    
    35,645Notes receivable, net
    
    
    4,719
    
    
    
    12,893Deferred financing costs, net
    
    
    947
    
    
    
    1,067Other
    
    
    20,849
    
    
    
    14,865Total assets
    
    $
    1,494,526
    
    
    $
    1,449,038Liabilities and EquityCurrent liabilities:Current portion of long-term obligations
    
    $
    8,117
    
    
    $
    7,771Accounts payable
    
    
    23,704
    
    
    
    26,087Accrued payroll and related liabilities
    
    
    39,795
    
    
    
    42,840Income taxes payable
    
    
    9,370
    
    
    
    Other accrued liabilities
    
    
    43,699
    
    
    
    46,424Total current liabilities
    
    
    124,685
    
    
    
    123,122Long-term obligations, less current portion
    
    
    542,670
    
    
    
    544,860Deferred income taxes
    
    
    54,255
    
    
    
    47,331Other liabilities
    
    
    10,174
    
    
    
    9,890Total liabilities
    
    
    731,784
    
    
    
    725,203Commitments and contingenciesPreferred stock, par value $0.001, 11,000 shares authorized, none outstanding
    
    
    
    
    
    
    VCA Antech, Inc. stockholders equity:Common stock, par value $0.001, 175,000 shares authorized, 84,704 and 84,633
shares outstanding as of March 31, 2009 and December 31, 2008, respectively
    
    
    85
    
    
    
    85Additional paid-in capital
    
    
    310,782
    
    
    
    308,674Accumulated earnings
    
    
    440,552
    
    
    
    408,582Accumulated other comprehensive loss
    
    
    (4,986
    )
    
    
    (6,352
    )Total VCA Antech, Inc. stockholders equity
    
    
    746,433
    
    
    
    710,989Noncontrolling interest
    
    
    16,309
    
    
    
    12,846Total equity
    
    
    762,742
    
    
    
    723,835Total liabilities and equity
    
    $
    1,494,526
    
    
    $
    1,449,038
  1




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
 
 Condensed, Consolidated Income Statements
 (Unaudited)
 (In thousands, except per share amounts)
 Three Months EndedMarch 31,2009
    
    
    2008Revenue
    
    $
    315,850
    
    
    $
    307,832Direct costs
    
    
    233,409
    
    
    
    224,801Gross profit
    
    
    82,441
    
    
    
    83,031Selling, general and administrative expense
    
    
    23,189
    
    
    
    23,178Gain on sale of assets
    
    
    (248
    )
    
    
    (184
    )Operating income
    
    
    59,500
    
    
    
    60,037Interest expense, net
    
    
    6,118
    
    
    
    7,615Other (income) expense
    
    
    (110
    )
    
    
    177Income before provision for income taxes
    
    
    53,492
    
    
    
    52,245Provision for income taxes
    
    
    20,611
    
    
    
    20,086Net income
    
    
    32,881
    
    
    
    32,159Net income attributable to noncontrolling interests
    
    
    911
    
    
    
    957Net income attributable to VCA Antech, Inc.
    
    $
    31,970
    
    
    $
    31,202Basic earnings per share
    
    $
    0.38
    
    
    $
    0.37Diluted earnings per share
    
    $
    0.37
    
    
    $
    0.36Weighted-average shares outstanding
for basic earnings per share
    
    
    84,680
    
    
    
    84,348Weighted-average shares outstanding
for diluted earnings per share
    
    
    85,386
    
    
    
    85,865
  2




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
 
 Condensed, Consolidated Statements of Equity
 (Unaudited)
 (In thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    NoncontrollingShares
    
    
    Amount
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Interest
    
    
    TotalBalances, December 31, 2007
    
    
    84,335
    
    
    $
    84
    
    
    $
    296,037
    
    
    $
    275,598
    
    
    $
    (3,335
    )
    
    $
    10,207
    
    
    $
    578,591Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,202
    
    
    
    
    
    
    
    957
    
    
    
    32,159Unrealized loss on hedging
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,323
    )
    
    
    
    
    
    
    (3,323
    )Losses on hedging instruments
reclassified to income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    420Formation of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,769
    
    
    
    1,769Distribution to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (760
    )
    
    
    (760
    )Purchase of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (158
    )
    
    
    (158
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,309
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,309Exercise of stock options
    
    
    15
    
    
    
    
    
    
    
    214
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    214Tax benefit from stock options exercised
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113Balances, March 31, 2008
    
    
    84,350
    
    
    $
    84
    
    
    $
    297,673
    
    
    $
    306,800
    
    
    $
    (6,238
    )
    
    $
    12,015
    
    
    $
    610,334Balances, December 31, 2008
    
    
    84,633
    
    
    $
    85
    
    
    $
    308,674
    
    
    $
    408,582
    
    
    $
    (6,352
    )
    
    $
    12,846
    
    
    $
    723,835Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,970
    
    
    
    
    
    
    
    911
    
    
    
    32,881Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (178
    )
    
    
    
    
    
    
    (178
    )Unrealized loss on foreign currency,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58
    )
    
    
    
    
    
    
    (58
    )Unrealized loss on hedging
instruments, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (374
    )
    
    
    
    
    
    
    (374
    )Losses on hedging instruments
reclassified to income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,976
    
    
    
    
    
    
    
    1,976Formation of noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,440
    
    
    
    3,440Distribution to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (888
    )
    
    
    (888
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,976
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,976Exercise of stock options
    
    
    71
    
    
    
    
    
    
    
    557
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    557Stock repurchases
    
    
    
    
    
    
    
    
    
    
    (180
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (180
    )Tax shortfall from stock options exercised
    
    
    
    
    
    
    
    
    
    
    (245
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (245
    )Balances, March 31, 2009
    
    
    84,704
    
    
    $
    85
    
    
    $
    310,782
    
    
    $
    440,552
    
    
    $
    (4,986
    )
    
    $
    16,309
    
    
    $
    762,742
  3




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
 
 Condensed, Consolidated Statements of Cash Flows
 (Unaudited)
 (In thousands)
 Three Months EndedMarch 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    32,881
    
    
    $
    32,159Adjustments to reconcile net income to net cash provided by operating
activities:Depreciation and amortization
    
    
    9,152
    
    
    
    7,263Amortization of debt issue costs
    
    
    120
    
    
    
    116Provision for uncollectible accounts
    
    
    1,559
    
    
    
    820Gain on sale of assets
    
    
    (248
    )
    
    
    (184
    )Share-based compensation
    
    
    1,976
    
    
    
    1,309Deferred income taxes
    
    
    5,304
    
    
    
    2,329Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    (133
    )Other
    
    
    (148
    )
    
    
    86Changes in operating assets and liabilities:Accounts receivable
    
    
    (5,455
    )
    
    
    (6,463
    )Inventory, prepaid expenses and other assets
    
    
    (2,790
    )
    
    
    (2,351
    )Accounts payable and other accrued liabilities
    
    
    (2,362
    )
    
    
    2,767Accrued payroll and related liabilities
    
    
    (3,204
    )
    
    
    (5,629
    )Income taxes
    
    
    14,413
    
    
    
    16,946Net cash provided by operating activities
    
    
    51,198
    
    
    
    49,035Cash flows from investing activities:Business acquisitions, net of cash acquired
    
    
    (14,467
    )
    
    
    (47,826
    )Real estate acquired in connection with business acquisitions
    
    
    (963
    )
    
    
    (3,612
    )Property and equipment additions
    
    
    (12,886
    )
    
    
    (9,463
    )Proceeds from sale of assets
    
    
    74
    
    
    
    1,747Other
    
    
    (373
    )
    
    
    (12,124
    )Net cash used in investing activities
    
    
    (28,615
    )
    
    
    (71,278
    )Cash flows from financing activities:Repayment of long-term obligations
    
    
    (1,946
    )
    
    
    (1,966
    )Distributions to noncontrolling interest partners
    
    
    (888
    )
    
    
    (760
    )Proceeds from issuance of common stock under stock option plans
    
    
    557
    
    
    
    214Excess tax benefit from exercise of stock options
    
    
    
    
    
    
    133Stock repurchases
    
    
    (180
    )
    
    
    Net cash used in financing activities
    
    
    (2,457
    )
    
    
    (2,379
    )Effect of currency exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    20,125
    
    
    
    (24,622
    )Cash and cash equivalents at beginning of period
    
    
    88,959
    
    
    
    110,866Cash and cash equivalents at end of period
    
    $
    109,084
    
    
    $
    86,244Supplemental disclosures of cash flow information:Interest paid
    
    $
    6,430
    
    
    $
    8,422Income taxes paid
    
    $
    894
    
    
    $
    811Supplemental schedule of non-cash investing and financing activites:Detail of acquisitions:Fair value of assets acquired
    
    $
    23,333
    
    
    $
    48,183Cash paid for acquisitions
    
    
    (13,095
    )
    
    
    (45,789
    )Non-cash note conversion to equity interest in subsidiary
    
    
    (5,700
    )
    
    
    Liabilities assumed
    
    $
    4,538
    
    
    $
    2,394
  4




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
 
 Notes to Condensed, Consolidated Financial Statements
 March 31, 2009
 (Unaudited)
 1. Nature of Operations
     2. Basis of Presentation
 Noncontrolling Interests
in Consolidated Financial Statements  an amendment of Accounting Research Bulletins (ARB) No. 51
(SFAS No. 160).
  3. Acquisitions
 Business Combinations
(revised 2007) Business Combinations Accounting for Income Taxes
 5




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 3. Acquisitions, continued
  Animal Hospitals:Acquisitions
    
    
    9Acquisitions relocated into our existing
animal hospitals
    
    
    (2
    )Total
    
    
    7
  Animal Hospital and Laboratory Acquisitions
  Preliminary Purchase Price:Cash
    
    $
    13,095Non-cash note conversion to equity interest in subsidiary
    
    
    5,700Other liabilities assumed
    
    
    4,538Total
    
    $
    23,333Preliminary Allocation of the Purchase Price:Tangible assets
    
    $
    6,134Identifiable intangible assets
    
    
    3,063Goodwill (1)
    
    
    14,136Total
    
    $
    23,333
 
 (1)
    
    We expect that $7.0 million of the goodwill recorded for these acquisitions as of March 31,
2009 will be fully deductible for income tax purposes.  Other Acquisition Payments
   6




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 4. Goodwill and Other Intangible Assets
 Determination of the Useful Life of
Intangible Assets Goodwill and Other
Intangible Assets
 Goodwill
  Animal
    
    
    
    
    
    
    MedicalHospital
    
    
    Laboratory
    
    
    Technology
    
    
    TotalBalance as of December 31, 2008
    
    $
    807,203
    
    
    $
    95,694
    
    
    $
    19,160
    
    
    $
    922,057Goodwill acquired
    
    
    14,044
    
    
    
    92
    
    
    
    
    
    
    
    14,136Goodwill related to noncontrolling interests
    
    
    3,440
    
    
    
    
    
    
    
    
    
    
    
    3,440Other (1)
    
    
    507
    
    
    
    (16
    )
    
    
    
    
    
    
    491Balance as of March 31, 2009
    
    $
    825,194
    
    
    $
    95,770
    
    
    $
    19,160
    
    
    $
    940,124
 
 (1)
    
    Other includes purchase price adjustments, buy-outs and currency translation adjustments. Other Intangible Assets
  As of March 31, 2009
    
    
    As of December 31, 2008Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountNon-contractual customer
relationships
    
    $
    28,674
    
    
    $
    (4,611
    )
    
    $
    24,063
    
    
    $
    26,412
    
    
    $
    (3,689
    )
    
    $
    22,723Covenants not-to-compete
    
    
    16,033
    
    
    
    (8,087
    )
    
    
    7,946
    
    
    
    16,195
    
    
    
    (8,001
    )
    
    
    8,194Favorable lease asset
    
    
    4,119
    
    
    
    (153
    )
    
    
    3,966
    
    
    
    4,689
    
    
    
    (629
    )
    
    
    4,060Technology
    
    
    1,270
    
    
    
    (1,139
    )
    
    
    131
    
    
    
    1,270
    
    
    
    (1,076
    )
    
    
    194Trademarks
    
    
    748
    
    
    
    (273
    )
    
    
    475
    
    
    
    699
    
    
    
    (251
    )
    
    
    448Client lists
    
    
    76
    
    
    
    (57
    )
    
    
    19
    
    
    
    84
    
    
    
    (58
    )
    
    
    26Total
    
    $
    50,920
    
    
    $
    (14,320
    )
    
    $
    36,600
    
    
    $
    49,349
    
    
    $
    (13,704
    )
    
    $
    35,645
 7




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 4. Goodwill and Other Intangible Assets, continued
  Three Months EndedMarch 31,2009
    
    
    2008Aggregate amortization expense
    
    $
    1,807
    
    
    $
    1,204
  Remainder of 2009
    
    $
    5,5242010
    
    
    6,7132011
    
    
    5,8952012
    
    
    5,0112013
    
    
    2,963Thereafter
    
    
    10,494Total
    
    $
    36,600
 5. Noncontrolling Interests
  6. Other Accrued Liabilities
  March 31,
    
    
    December 31,2009
    
    
    2008Accrued workers compensation insurance
    
    $
    4,302
    
    
    $
    4,436Deferred revenue
    
    
    6,937
    
    
    
    7,303Interest rate swap liability
    
    
    6,218
    
    
    
    8,899Other
    
    
    26,242
    
    
    
    25,786$
    43,699
    
    
    $
    46,424
 7. Interest Rate Swap Agreements
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging
Activities
 8




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 7. Interest Rate Swap Agreements, continued
 Accounting for Derivative Instruments and Hedging Activities,
      Interest Rate Swap AgreementsFixed interest rate
    
    5.51%
    
    4.95%
    
    5.34%
    
    2.64%Notional amount (in millions)
    
    $50.0
    
    $75.0
    
    $100.0
    
    $100.0Effective date
    
    6/20/2006
    
    4/30/2007
    
    6/11/2007
    
    2/12/2008Expiration date
    
    6/30/2009
    
    4/30/2009
    
    12/31/2009
    
    2/26/2010Counterparty
    
    Goldman Sachs
    
    Wells Fargo
    
    Goldman Sachs
    
    Wells FargoQualifies for hedge accounting
    
    Yes
    
    Yes
    
    Yes
    
    Yes
 9




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 7. Interest Rate Swap Agreements, continued
  Three Months EndedMarch 31,2009
    
    2008Cash paid (1)
    
    $
    3,245
    
    
    $
    688Recognized (gain) loss from ineffectiveness (2)
    
    $
    (49
    )
    
    $
    177
 
 (1)
    
    Our interest rate swap agreements 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. The above table depicts both cash payments to and receipts from the
counterparties on our swap agreements. These payments and receipts are offset by a
corresponding decrease or increase in interest paid on our variable-rate debt under our senior
credit facility.(2)
    
    These recognized losses are included in other (income) expense in our Condensed, Consolidated
Income Statements. 8. Fair Value Measurements
 Fair Value
Measurement
  
    
    Level 1.Observable inputs such as quoted prices in active markets;
    
    Level 2.Inputs, other than quoted prices, that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for similar assets
or liabilities in active markets and quoted prices for identical or similar assets or
liabilities in markets that are not active; and
    
    Level 3.Unobservable inputs in which there is little or no market data, which require
the reporting entity to develop its own assumptions.
 10




---



##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 8. Fair Value Measurements, continued
 Fair Value of Financial Instruments
 Disclosures
about Fair Value of Financial Instruments Interim Financial Reporting
  Cash and Cash Equivalents.
 Receivables, Less Allowance for Doubtful Accounts and Accounts Payable.
 Long-Term Debt.
  As of March 31, 2009
    
    
    As of December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairValue
    
    
    Value
    
    
    Value
    
    
    ValueVariable-rate long-term debt
    
    $
    520,934
    
    
    $
    474,085
    
    
    $
    522,282
    
    
    $
    499,025
 Interest Rate Swap Agreements
  Basis of Fair Value MeasurementQuoted Prices
    
    
    Significant Other
    
    
    SignificantIn Active Markets
    
    
    Observable
    
    
    Unobservablefor Identical Items
    
    
    Inputs
    
    
    InputsBalance
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)At March 31, 2009Other accrued liabilities
    
    $
    (6,218
    )
    
    $
    
    
    
    $
    (6,218
    )
    
    $
    At December 31, 2008Other accrued liabilities
    
    $
    (8,899
    )
    
    $
    
    
    
    $
    (8,899
    )
    
    $
    
 11




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 9. Share-Based Compensation
 Stock Option Activity
    Non-vested Stock Activity
    Weighted-Average FairValueShares
    
    Per ShareOutstanding at December 31, 2008
    
    
    724,235
    
    
    $
    31.52Granted
    
    
    
    
    
    $
    Vested
    
    
    (44,873
    )
    
    $
    32.77Forfeited/Canceled
    
    
    (5,625
    )
    
    $
    35.78Outstanding at March 31, 2009
    
    
    673,737
    
    
    $
    31.40
 12




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 10. Calculation of Earnings per Share
  Three Months EndedMarch 31,2009
    
    
    2008Net income attributable to VCA Antech, Inc.
    
    $
    31,970
    
    
    $
    31,202Weighted-average common shares outstanding:Basic
    
    
    84,680
    
    
    
    84,348Effect of dilutive potential common shares:Stock options
    
    
    568
    
    
    
    1,414Non-vested shares
    
    
    138
    
    
    
    103Diluted
    
    
    85,386
    
    
    
    85,865Basic earnings per share
    
    $
    0.38
    
    
    $
    0.37Diluted earnings per share
    
    $
    0.37
    
    
    $
    0.36
  11. Comprehensive Income
  Three Months EndedMarch 31,2009
    
    
    2008Net income
    
    $
    32,881
    
    
    $
    32,159Other comprehensive (loss) income:Foreign currency translation adjustments
    
    
    (178
    )
    
    
    Unrealized loss on foreign currency
    
    
    (95
    )
    
    
    Tax benefit
    
    
    37
    
    
    
    Unrealized loss on hedging instruments
    
    
    (614
    )
    
    
    (5,440
    )Tax benefit
    
    
    240
    
    
    
    2,117Losses on hedging instruments reclassified to income
    
    
    3,245
    
    
    
    688Tax benefit
    
    
    (1,269
    )
    
    
    (268
    )Other comprehensive income (loss)
    
    
    1,366
    
    
    
    (2,903
    )Total comprehensive income
    
    
    34,247
    
    
    
    29,256Comprehensive income attributable to noncontrolling interests
    
    
    (911
    )
    
    
    (957
    )Comprehensive income attributable to VCA Antech, Inc.
    
    $
    33,336
    
    
    $
    28,299
 13




---



##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 12. Lines of Business
    Animal
    
    
    
    
    
    
    Medical
    
    
    
    
    
    
    IntercompanyHospital
    
    
    Laboratory
    
    
    Technology
    
    
    Corporate
    
    
    Eliminations
    
    
    TotalThree Months Ended March 31, 2009External revenue
    
    $
    238,358
    
    
    $
    69,492
    
    
    $
    8,000
    
    
    $
    
    
    
    $
    
    
    
    $
    315,850Intercompany revenue
    
    
    
    
    
    
    7,997
    
    
    
    1,158
    
    
    
    
    
    
    
    (9,155
    )
    
    
    Total revenue
    
    
    238,358
    
    
    
    77,489
    
    
    
    9,158
    
    
    
    
    
    
    
    (9,155
    )
    
    
    315,850Direct costs
    
    
    195,194
    
    
    
    41,483
    
    
    
    5,633
    
    
    
    
    
    
    
    (8,901
    )
    
    
    233,409Gross profit
    
    
    43,164
    
    
    
    36,006
    
    
    
    3,525
    
    
    
    
    
    
    
    (254
    )
    
    
    82,441Selling, general and administrative expense
    
    
    5,384
    
    
    
    5,567
    
    
    
    3,084
    
    
    
    9,154
    
    
    
    
    
    
    
    23,189(Gain) loss on sale of assets
    
    
    (259
    )
    
    
    2
    
    
    
    1
    
    
    
    8
    
    
    
    
    
    
    
    (248
    )Operating income (loss)
    
    $
    38,039
    
    
    $
    30,437
    
    
    $
    440
    
    
    $
    (9,162
    )
    
    $
    (254
    )
    
    $
    59,500Depreciation and amortization
    
    $
    6,299
    
    
    $
    2,183
    
    
    $
    369
    
    
    $
    488
    
    
    $
    (187
    )
    
    $
    9,152Capital expenditures
    
    $
    9,123
    
    
    $
    2,129
    
    
    $
    1,121
    
    
    $
    885
    
    
    $
    (372
    )
    
    $
    12,886Three Months Ended March 31, 2008External revenue
    
    $
    226,100
    
    
    $
    69,058
    
    
    $
    12,674
    
    
    $
    
    
    
    $
    
    
    
    $
    307,832Intercompany revenue
    
    
    
    
    
    
    7,671
    
    
    
    1,175
    
    
    
    
    
    
    
    (8,846
    )
    
    
    Total revenue
    
    
    226,100
    
    
    
    76,729
    
    
    
    13,849
    
    
    
    
    
    
    
    (8,846
    )
    
    
    307,832Direct costs
    
    
    184,963
    
    
    
    39,387
    
    
    
    8,936
    
    
    
    
    
    
    
    (8,485
    )
    
    
    224,801Gross profit
    
    
    41,137
    
    
    
    37,342
    
    
    
    4,913
    
    
    
    
    
    
    
    (361
    )
    
    
    83,031Selling, general and administrative expense
    
    
    5,478
    
    
    
    4,951
    
    
    
    3,434
    
    
    
    9,315
    
    
    
    
    
    
    
    23,178(Gain) loss on sale of assets
    
    
    (193
    )
    
    
    (11
    )
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    (184
    )Operating income (loss)
    
    $
    35,852
    
    
    $
    32,402
    
    
    $
    1,459
    
    
    $
    (9,315
    )
    
    $
    (361
    )
    
    $
    60,037Depreciation and amortization
    
    $
    4,883
    
    
    $
    1,647
    
    
    $
    397
    
    
    $
    459
    
    
    $
    (123
    )
    
    $
    7,263Capital expenditures
    
    $
    7,055
    
    
    $
    1,778
    
    
    $
    82
    
    
    $
    825
    
    
    $
    (277
    )
    
    $
    9,463At March 31, 2009Total assets
    
    $
    1,096,347
    
    
    $
    202,582
    
    
    $
    42,245
    
    
    $
    163,034
    
    
    $
    (9,682
    )
    
    $
    1,494,526At December 31, 2008Total assets
    
    $
    1,069,963
    
    
    $
    194,164
    
    
    $
    42,839
    
    
    $
    150,891
    
    
    $
    (8,819
    )
    
    $
    1,449,038
 14




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 13. Commitments and Contingencies
  a. Earn-out Payments
  b. Officers Compensation
     c. Other Contingencies
  15




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##### Table of Contents



VCA Antech, Inc. and Subsidiaries
Notes to Condensed, Consolidated Financial Statements (Continued)
 14. Recent Accounting Pronouncements
 Interim Disclosures about Fair
Value of Financial Instruments
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies
 15. Subsequent Events
  16




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 PageNumberIntroduction
    
    
    18Executive Overview
    
    
    18Critical Accounting Policies
    
    
    19Consolidated Results of Operations
    
    
    20Segment Results
    
    
    21Liquidity and Capital Resources
    
    
    26Recent Accounting Prouncements
    
    
    30
 17




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##### Table of Contents



Introduction
 The following discussion should be read in conjunction with our condensed, consolidated
financial statements provided under Part I, Item I of this Quarterly report on Form 10-Q . We have
included herein statements that constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. We generally identify forward-looking statements
in this report using words like believe, intend, expect, estimate, may, plan, should
plan, project, contemplate, anticipate, predict, potential, continue, or similar
expressions. You may find some of these statements below and elsewhere in this report. These
forward-looking statements are not historical facts and are inherently uncertain and outside of our
control. Any or all of our forward-looking statements in this report may turn out to be wrong.
They can be affected by inaccurate assumptions we might make or by known or unknown risks and
uncertainties. Many factors mentioned in our discussion in this report will be important in
determining future results. Consequently, no forward-looking statement can be guaranteed. Actual
future results may vary materially. Factors that may cause our plans, expectations, future
financial condition and results to change are described throughout this report and in our Annual
Report on Form 10-K , particularly in Risk Factors, Part I, Item 1A of that report.
 The forward-looking information set forth in this Quarterly report on Form 10-Q is as of May
8, 2009, and we undertake no duty to update this information. Shareholders and prospective
investors can find information filed with the SEC after May 8, 2009 at our website at http://investor.vcaantech.com or at the SECs website at www.sec.gov
  
    
    Our Animal Hospital segment operates the largest network of freestanding, full-service
animal hospitals in the nation. Our animal hospitals offer a full range of general medical
and surgical services for companion animals. We treat diseases and injuries, offer
pharmaceutical and retail products and perform a variety of pet wellness programs,
including health examinations, diagnostic testing, routine vaccinations, spaying, neutering
and dental care. At March 31, 2009, our animal hospital network consisted of 478 animal
hospitals in 39 states.
    
    Our Laboratory segment operates the largest network of veterinary diagnostic
laboratories in the nation. Our laboratories provide sophisticated testing and consulting
services used by veterinarians in the detection, diagnosis, evaluation, monitoring,
treatment and prevention of diseases and other conditions affecting animals. At March 31,
2009, our Laboratory network consisted of 46 laboratories serving all 50 states and certain
areas in Canada.
    
    Our Medical Technology segment sells digital radiography and ultrasound imaging
equipment, related computer hardware, software and ancillary services.
  
 Executive Overview
  18




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##### Table of Contents



Acquisitions and Facilities
  Animal Hospitals:Beginning of period
    
    
    471Acquisitions
    
    
    9Acquisitions relocated into our existing animal hospitals
    
    
    (2
    )End of period
    
    
    478Laboratories:Beginning of period
    
    
    44Acquisitions (1)
    
    
    Created
    
    
    2End of period
    
    
    46
 
 (1)
    
    During the three months ended March 31, 2009 we acquired one pathology office, bringing the
total number of pathology offices to four. Pathology offices are not included in our
laboratory count. 
 Critical Accounting Policies
  Valuation of Goodwill
 Goodwill and
Other Intangible Assets
 19




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##### Table of Contents



Consolidated Results of Operations
  Three Months EndedMarch 31,2009
    
    2008Revenue:Animal Hospital
    
    
    75.5
    %
    
    
    73.4
    %Laboratory
    
    
    24.5
    
    
    
    24.9Medical Technology
    
    
    2.9
    
    
    
    4.5Intercompany
    
    
    (2.9
    )
    
    
    (2.8
    )Total revenue
    
    
    100.0
    
    
    
    100.0Direct costs
    
    
    73.9
    
    
    
    73.0Gross profit
    
    
    26.1
    
    
    
    27.0Selling, general and administrative expense
    
    
    7.3
    
    
    
    7.5Gain on sale of assets
    
    
    
    
    
    
    Operating income
    
    
    18.8
    
    
    
    19.5Interest expense, net
    
    
    1.9
    
    
    
    2.5Income before provision for income taxes
    
    
    16.9
    
    
    
    17.0Provision for income taxes
    
    
    6.5
    
    
    
    6.6Net income
    
    
    10.4
    
    
    
    10.4Net income
attributable to noncontrolling interests
    
    
    0.3
    
    
    
    0.3Net income attributable to VCA Antech, Inc.
    
    
    10.1
    %
    
    
    10.1
    %
 Revenue
  Three Months Ended March 31,2009
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    %$
    
    
    Total
    
    
    $
    
    
    Total
    
    
    ChangeAnimal Hospital
    
    $
    238,358
    
    
    
    75.5
    %
    
    $
    226,100
    
    
    
    73.4
    %
    
    
    5.4
    %Laboratory
    
    
    77,489
    
    
    
    24.5
    %
    
    
    76,729
    
    
    
    24.9
    %
    
    
    1.0
    %Medical Technology
    
    
    9,158
    
    
    
    2.9
    %
    
    
    13,849
    
    
    
    4.5
    %
    
    
    (33.9
    )%Intercompany
    
    
    (9,155
    )
    
    
    (2.9
    )%
    
    
    (8,846
    )
    
    
    (2.8
    )%
    
    
    3.5
    %Total revenue
    
    $
    315,850
    
    
    
    100.0
    %
    
    $
    307,832
    
    
    
    100.0
    %
    
    
    2.6
    %
  20




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##### Table of Contents



Gross Profit
  Three Months Ended March 31,2009
    
    
    2008Gross
    
    
    
    
    
    
    Gross
    
    
    %$
    
    
    Margin
    
    
    $
    
    
    Margin
    
    
    ChangeAnimal Hospital
    
    $
    43,164
    
    
    
    18.1
    %
    
    $
    41,137
    
    
    
    18.2
    %
    
    
    4.9
    %Laboratory
    
    
    36,006
    
    
    
    46.5
    %
    
    
    37,342
    
    
    
    48.7
    %
    
    
    (3.6
    )%Medical Technology
    
    
    3,525
    
    
    
    38.5
    %
    
    
    4,913
    
    
    
    35.5
    %
    
    
    (28.3
    )%Intercompany
    
    
    (254
    )
    
    
    
    
    
    
    (361
    )Total gross profit
    
    $
    82,441
    
    
    
    26.1
    %
    
    $
    83,031
    
    
    
    27.0
    %
    
    
    (0.7
    )%
  
 Segment Results
 Animal Hospital Segment
  Three Months Ended March 31,2009
    
    2008
    
    % ChangeRevenue
    
    $
    238,358
    
    
    $
    226,100
    
    
    
    5.4
    %Gross profit
    
    $
    43,164
    
    
    $
    41,137
    
    
    
    4.9
    %Gross margin
    
    
    18.1
    %
    
    
    18.2
    %
  Three Months Ended March 31,2009
    
    
    2008
    
    
    % ChangeSame-store facilities:Orders (1)(2)
    
    
    1,391
    
    
    
    1,491
    
    
    
    (6.7
    )%Average revenue per order (3)
    
    $
    150.75
    
    
    $
    144.49
    
    
    
    4.3
    %Same-store revenue (1)
    
    $
    209,652
    
    
    $
    215,370
    
    
    
    (2.7
    )%Business day adjustment (4)
    
    
    
    
    
    
    2,709Net acquired revenue (5)
    
    
    28,706
    
    
    
    8,021Total
    
    $
    238,358
    
    
    $
    226,100
    
    
    
    5.4
    %
 21




---



##### Table of Contents



(1)
    
    Same-store revenue and orders were calculated using Animal Hospital operating results,
adjusted to exclude the operating results for newly acquired animal hospitals that we did not
own as of the beginning of the comparable
period in the prior period and adjusted for the impact resulting from any differences in the
number of business days in the comparable period. Same-store revenue also includes revenue
generated by customers referred from our relocated or combined animal hospitals, including those
merged upon acquisition.(2)
    
    The change in orders may not calculate exactly due to rounding.(3)
    
    Computed by dividing same-store revenue by same-store orders. The average revenue per order
may not calculate exactly due to rounding.(4)
    
    The 2008 business day adjustment reflects the impact of one fewer business day in 2009 as
compared to 2008.(5)
    
    Net acquired revenue represents the revenue from those animal hospitals acquired, net of
revenue from those animal hospitals sold or closed, on or after the beginning of the
comparable period, which was January 1, 2008. Fluctuations in net acquired revenue occur due
to the volume, size, and timing of acquisitions and dispositions during the periods from this
date through the end of the applicable period.       22




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##### Table of Contents



Laboratory Segment
  Three Months Ended March 31,2009
    
    2008
    
    % ChangeRevenue
    
    $
    77,489
    
    
    $
    76,729
    
    
    
    1.0
    %Gross profit
    
    $
    36,006
    
    
    $
    37,342
    
    
    
    (3.6
    )%Gross margin
    
    
    46.5
    %
    
    
    48.7
    %
  Three Months Ended March 31,2009
    
    
    2008
    
    
    % ChangeInternal growth:Number of requisitions (1)
    
    
    3,279
    
    
    
    3,198
    
    
    
    2.5
    %Average revenue per reqisition (2)
    
    $
    23.48
    
    
    $
    23.68
    
    
    
    (0.8
    )%Total internal revenue (1)
    
    $
    77,001
    
    
    $
    75,732
    
    
    
    1.7
    %Billing day adjustment (3)
    
    
    
    
    
    
    997Acquired revenue (4)
    
    
    488
    
    
    
    Total
    
    $
    77,489
    
    
    $
    76,729
    
    
    
    1.0
    %
 
 (1)
    
    Internal revenue and requisitions were calculated using Laboratory operating results,
adjusted to exclude the operating results of acquired laboratories for the comparable periods
that we did not own them in the prior year and adjusted for the impact resulting from any
differences in the number of billing days in comparable periods.(2)
    
    Computed by dividing internal revenue by the number of requisitions.(3)
    
    The billing day adjustment reflects the impact of differences in the number of billing days
in 2009 as compared to 2008.(4)
    
    Acquired revenue represents the revenue of the laboratories acquired subsequent to April 1,
2008.    23




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##### Table of Contents



Medical Technology Segment
  Three Months Ended March 31,%2009
    
    2008
    
    ChangeRevenue
    
    $
    9,158
    
    
    $
    13,849
    
    
    
    (33.9
    )%Gross profit
    
    $
    3,525
    
    
    $
    4,913
    
    
    
    (28.3
    )%Gross margin
    
    
    38.5
    %
    
    
    35.5
    %
    Intercompany Revenue
  24




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##### Table of Contents



Selling, General and Administrative Expense
  Three Months Ended March 31,2009
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    ChangeAnimal Hospital
    
    $
    5,384
    
    
    
    2.3
    %
    
    $
    5,478
    
    
    
    2.4
    %
    
    
    (1.7
    )%Laboratory
    
    
    5,567
    
    
    
    7.2
    %
    
    
    4,951
    
    
    
    6.5
    %
    
    
    12.4
    %Medical Technology
    
    
    3,084
    
    
    
    33.7
    %
    
    
    3,434
    
    
    
    24.8
    %
    
    
    (10.2
    )%Corporate
    
    
    9,154
    
    
    
    2.9
    %
    
    
    9,315
    
    
    
    3.0
    %
    
    
    (1.7
    )%Total SG&A
    
    $
    23,189
    
    
    
    7.3
    %
    
    $
    23,178
    
    
    
    7.5
    %
    
    
    0.0
    %
  Operating Income
  Three Months Ended March 31,2009
    
    
    2008% of
    
    
    
    
    
    
    % of
    
    
    %$
    
    
    Revenue
    
    
    $
    
    
    Revenue
    
    
    ChangeAnimal Hospital
    
    $
    38,039
    
    
    
    16.0
    %
    
    $
    35,852
    
    
    
    15.9
    %
    
    
    6.1
    %Laboratory
    
    
    30,437
    
    
    
    39.3
    %
    
    
    32,402
    
    
    
    42.2
    %
    
    
    (6.1
    )%Medical Technology
    
    
    440
    
    
    
    4.8
    %
    
    
    1,459
    
    
    
    10.5
    %
    
    
    (69.8
    )%Corporate
    
    
    (9,162
    )
    
    
    (2.9
    )%
    
    
    (9,315
    )
    
    
    (3.0
    )%
    
    
    (1.6
    )%Intercompany
    
    
    (254
    )
    
    
    2.8
    %
    
    
    (361
    )
    
    
    4.1
    %
    
    
    (29.6
    )%Total operating income
    
    $
    59,500
    
    
    
    18.8
    %
    
    $
    60,037
    
    
    
    19.5
    %
    
    
    (0.9
    )%
  25




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##### Table of Contents



Interest Expense, Net
  Three Months EndedMarch 31,2009
    
    
    2008Interest expense (income):Senior term notes
    
    $
    2,587
    
    
    $
    7,013Interest rate hedging agreements
    
    
    3,245
    
    
    
    782Capital leases and other
    
    
    580
    
    
    
    641Amortization of debt costs
    
    
    120
    
    
    
    1166,532
    
    
    
    8,552Interest income
    
    
    (414
    )
    
    
    (937
    )Total interest expense, net of interest income
    
    $
    6,118
    
    
    $
    7,615
  Provision for Income Taxes
  
 Liquidity and Capital Resources
 Introduction
     26




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##### Table of Contents



Future Cash Flows
 Short-term
   Long-term
   Debt Related Covenants
    27




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##### Table of Contents



Historical Cash Flows
  Three Months EndedMarch 31,2009
    
    
    2008Cash provided by (used in):Operating activities
    
    $
    51,198
    
    
    $
    49,035Investing activities
    
    
    (28,615
    )
    
    
    (71,278
    )Financing activities
    
    
    (2,457
    )
    
    
    (2,379
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1
    )
    
    
    Increase (decrease) in cash and cash equivalents
    
    
    20,125
    
    
    
    (24,622
    )Cash and cash equivalents at beginning of period
    
    
    88,959
    
    
    
    110,866Cash and cash equivalents at end of period
    
    $
    109,084
    
    
    $
    86,244
 Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Three Months EndedMarch 31,2009
    
    
    2008
    
    
    VarianceInvesting Cash Flows:Acquisition of independent animal
hospitals and laboratories
    
    $
    (13,095
    )
    
    $
    (45,789
    )
    
    $
    32,694
    (1)Other
    
    
    (1,372
    )
    
    
    (2,037
    )
    
    
    665Total cash used for acquisitions
    
    
    (14,467
    )
    
    
    (47,826
    )
    
    
    33,359Property and equipment additions
    
    
    (12,886
    )
    
    
    (9,463
    )
    
    
    (3,423)
    (2)Real estate acquired with acquisitions
    
    
    (963
    )
    
    
    (3,612
    )
    
    
    2,649
    (3)Proceeds from sale of assets
    
    
    74
    
    
    
    1,747
    
    
    
    (1,673)
    (4)Other
    
    
    (373
    )
    
    
    (12,124
    )
    
    
    11,751
    (5)Net cash used in investing activities
    
    $
    (28,615
    )
    
    $
    (71,278
    )
    
    $
    42,663
 
 (1)
    
    The number of acquisitions will vary from year to year based upon the available pool of
suitable candidates. A discussion of our acquisitions is provided above in the Executive
Overview.(2)
    
    The increase in cash used to acquire property and equipment was primarily due to costs
related to maintaining the quality or expanding our existing animal hospital and laboratory
facilities.(3)
    
    Due to the lower return on investment realized on acquired real estate we are highly
selective in our decision to acquire real estate. The decrease in cash used to acquire real
estate is due to a decrease in opportunities that met our selective criteria.(4)
    
    The decrease in proceeds from sale of assets is primarily due to a significant land sale in
2008.(5)
    
    The decrease in other investing cash flows was primarily due to investments made in 2008
related to our expansion into other markets. 28




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##### Table of Contents



Cash Flows from Financing Activities
  Three Months EndedMarch 31,2009
    
    
    2008
    
    
    VarianceFinancing Cash Flows:Repayment of long-term obligations
    
    $
    (1,946
    )
    
    $
    (1,966
    )
    
    $
    20Distributions to noncontrolling interest partners
    
    
    (888
    )
    
    
    (760
    )
    
    
    (128)
    (1)Proceeds from stock options exercises
    
    
    557
    
    
    
    214
    
    
    
    343
    (2)Excess tax benefits from stock options
    
    
    
    
    
    
    133
    
    
    
    (133)
    (2)Stock repurchases
    
    
    (180
    )
    
    
    
    
    
    
    (180)
    (3)Net cash used in financing activities
    
    $
    (2,457
    )
    
    $
    (2,379
    )
    
    $
    (78
    )
 
 (1)
    
    The distributions to noncontrolling interest partners represents cash payments to
noncontrolling interest partners for their portion of partnership income. As mentioned in
Note 6 in our March 31, 2009 Notes to Condensed, Consolidated Financial Statements, we adopted
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements  an amendment of
Accounting Research Bulletins (ARB) No. 51(SFAS No. 160) effective January 1, 2009, which
resulted in a reclassification of these distributions from operating activities to financing
activities.(2)
    
    The number of stock option exercises has increased in comparison to the prior year. Although
there was an increase, we had a tax shortfall on the exercise of stock options. This
shortfall was caused by the decline in current market prices.(3)
    
    The stock repurchases in fiscal 2009 represent cash paid for taxes by VCA on behalf of
employees who elected to settle their income tax withholdings on vested stock awards with
stock. Off-Balance Sheet Arrangements
  Interest Rate Swap Agreements
  Interest Rate Swap AgreementsFixed interest rate
    
    5.51%
    
    5.34%
    
    2.64%Notional amount (in millions)
    
    $50.0
    
    $100.0
    
    $100.0Effective date
    
    6/20/2006
    
    6/11/2007
    
    2/12/2008Expiration date
    
    6/30/2009
    
    12/31/2009
    
    2/26/2010Counterparty
    
    Goldman Sachs
    
    Goldman Sachs
    
    Wells FargoQualifies for hedge accounting
    
    Yes
    
    Yes
    
    Yes
  29




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##### Table of Contents



Description of Indebtedness
 Senior Credit Facility
    Other Debt and Capital Lease Obligations
  
 Recent Accounting Pronouncements
 Interim Disclosures about Fair Value of Financial Instruments
 Determination of the Useful Life of Intangible
Assets Business Combinations
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133 Accounting for Derivative Instruments and Hedging
Activities
 Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arise from Contingencies
  30




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##### Table of Contents



Fair Value Measurements
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Swap AgreementsFixed interest rate
    
    5.51%
    
    5.34%
    
    2.64%Notional amount (in millions)
    
    $50.0
    
    $100.0
    
    $100.0Effective date
    
    6/20/2006
    
    6/11/2007
    
    2/12/2008Expiration date
    
    6/30/2009
    
    12/31/2009
    
    2/26/2010Counterparty
    
    Goldman Sachs
    
    Goldman Sachs
    
    Wells FargoQualifies for hedge accounting
    
    Yes
    
    Yes
    
    Yes
   
 ITEM 4. CONTROLS AND PROCEDURES
   31




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
  
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  
 ITEM 6. EXHIBITS
 31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 32




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##### Table of Contents



SIGNATURE
  Date: May 8, 2009
    By:
    /s/ Tomas W. FullerTomas W. FullerChief Financial Officer 33




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##### Table of Contents



EXHIBIT INDEX
 Exhibit No.
    
    Description31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
 34