<PAGE>   1

                                  UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
    
     For the quarterly period ended June 30, 1998

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER: 1-10787

                       VETERINARY CENTERS OF AMERICA, INC.
             (Exact name of registrant as specified in its charter)

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

                      3420 OCEAN PARK BOULEVARD, SUITE 1000
                         SANTA MONICA, CALIFORNIA 90405
                    (Address of principal executive offices)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 392-9599

                                      NONE
       Former name, address and fiscal year, if changed since last report

            Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]

            State the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date: Common Stock, $.001
Par Value 20,575,438 shares as of August 10, 1998.



<PAGE>   2




PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

              VETERINARY CENTERS OF AMERICA, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
ASSETS                                                                                     June 30,           December 31,
                                                                                             1998                 1997
                                                                                         -------------        -------------
<S>                                                                                      <C>                  <C>          
Current assets:
   Cash and equivalents ..........................................................       $  23,540,000        $  19,882,000
   Marketable securities .........................................................          29,326,000           51,371,000
   Trade accounts receivable, less allowance for uncollectible accounts ..........          13,002,000            8,964,000
   Inventory, prepaid expenses and other .........................................           7,898,000            6,482,000
   Deferred income taxes .........................................................           3,068,000            3,068,000
   Prepaid income taxes ..........................................................                  --            5,634,000
                                                                                         -------------        -------------
         Total current assets ....................................................          76,834,000           95,401,000
Property, plant and equipment, net ...............................................          44,435,000           39,985,000
Goodwill, net ....................................................................         254,912,000          239,117,000
Other assets .....................................................................          15,873,000           11,586,000
                                                                                         -------------        -------------
                                                                                         $ 392,054,000        $ 386,089,000
                                                                                         =============        =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
   Current portion of long-term obligations ......................................       $  18,802,000        $  19,369,000
   Accounts payable ..............................................................           7,479,000            6,267,000
   Other accrued liabilities .....................................................          21,385,000           22,335,000
                                                                                         -------------        -------------
         Total current liabilities ...............................................          47,666,000           47,971,000
Long-term obligations, less current portion ......................................         148,308,000          154,506,000
Deferred income taxes ............................................................           1,186,000            1,186,000
Minority interest ................................................................           2,316,000            1,575,000
Commitments and contingencies
Stockholders' equity:
   Common stock, par value $0.001 ................................................              20,000               20,000
   Additional paid-in capital ....................................................         200,135,000          196,745,000
   Notes receivable from stockholders ............................................            (598,000)            (546,000)
   Accumulated deficit ...........................................................          (4,499,000)         (12,888,000)
   Less cost of common stock held in treasury, 246,938 shares at June 30, 1998 and
     at December 31, 1997 ........................................................          (2,480,000)          (2,480,000)
                                                                                         -------------        -------------
     Total stockholders' equity ..................................................         192,578,000          180,851,000
                                                                                         -------------        -------------
                                                                                         $ 392,054,000        $ 386,089,000
                                                                                         =============        =============
</TABLE>

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


                                       2
<PAGE>   3


              VETERINARY CENTERS OF AMERICA, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                       FOR THE THREE AND SIX MONTHS ENDED
                             JUNE 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                  Three Months Ended                    Six Months Ended
                                                                       June 30,                              June 30,
                                                               1998               1997               1998               1997
                                                           ------------       ------------       ------------       ------------
<S>                                                        <C>                <C>                <C>                <C>         
Revenues .............................................     $ 76,072,000       $ 63,193,000       $139,384,000       $119,216,000
Direct costs .........................................       55,051,000         45,783,000        103,558,000         89,303,000
                                                           ------------       ------------       ------------       ------------
Gross profit .........................................       21,021,000         17,410,000         35,826,000         29,913,000
Selling, general and administrative ..................        4,476,000          4,645,000          9,364,000          9,494,000
Depreciation and amortization ........................        3,123,000          2,732,000          6,259,000          5,460,000
                                                           ------------       ------------       ------------       ------------
Operating income .....................................       13,422,000         10,033,000         20,203,000         14,959,000
Interest income ......................................          591,000            948,000          1,303,000          2,056,000
Interest expense .....................................        2,920,000          3,029,000          5,916,000          5,935,000
                                                           ------------       ------------       ------------       ------------
Income before minority interest and provision for
     income taxes ....................................       11,093,000          7,952,000         15,590,000         11,080,000
Minority interest in income of subsidiaries ..........          223,000            120,000            378,000            291,000
                                                           ------------       ------------       ------------       ------------
Income before provision for income taxes .............       10,870,000          7,832,000         15,212,000         10,789,000
Provision for income taxes ...........................        4,788,000          3,481,000          6,823,000          5,028,000
                                                           ------------       ------------       ------------       ------------
Net income ...........................................     $  6,082,000       $  4,351,000       $  8,389,000       $  5,761,000
                                                           ============       ============       ============       ============

Basic earnings per common share ......................     $       0.30       $       0.22       $       0.42       $       0.30
                                                           ============       ============       ============       ============

Diluted earnings per common share ....................     $       0.28       $       0.21       $       0.39       $       0.28
                                                           ============       ============       ============       ============

Shares used for computing basic earnings per share ...       20,214,000         19,502,000         20,210,000         19,473,000
                                                           ============       ============       ============       ============

Shares used for computing diluted earnings per share..       21,886,000         20,884,000         21,701,000         20,804,000
                                                           ============       ============       ============       ============
</TABLE>

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



                                       3
<PAGE>   4

              VETERINARY CENTERS OF AMERICA, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                            FOR THE SIX MONTHS ENDED
                             JUNE 30, 1998 AND 1997
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    1998                1997
                                                                                 ------------        ------------
<S>                                                                              <C>                 <C>         
Cash flows from operating activities:
   Net income ............................................................       $  8,389,000        $  5,761,000
   Adjustments to reconcile net income to net cash
      provided by operating activities:
         Depreciation and amortization ...................................          6,259,000           5,460,000
         Amortization of debt discount ...................................            101,000             279,000
         Minority interest in income of subsidiaries .....................            378,000             291,000
         Distributions to minority interest partners .....................           (233,000)           (176,000)
         Increase in accounts receivable, net ............................         (3,036,000)         (1,978,000)
         Decrease (increase) in inventory, prepaid expenses and other ....         (1,316,000)            190,000
         Decrease in prepaid income taxes ................................          5,634,000           2,137,000
         Increase in accounts payable and accrued liabilities ............          1,423,000           2,088,000
         Increase in income taxes payable ................................             27,000           2,311,000
                                                                                 ------------        ------------
            Net cash provided by operating activities ....................         17,626,000          16,363,000
                                                                                 ------------        ------------

Cash flows from investing activities:
      Property, plant and equipment additions, net .......................         (6,453,000)         (2,294,000)
      Business acquisitions, net of cash acquired ........................        (16,140,000)        (23,015,000)
      Purchases of marketable securities .................................        (14,536,000)                 --
      Sales of marketable securities ......................................        36,581,000           3,104,000
      Proceeds from the sale of assets ...................................                 --             180,000
      Investment in Veterinary Pet Insurance .............................         (4,000,000)                 --
                                                                                 ------------        ------------
            Net cash used in investing activities ........................         (4,548,000)        (22,025,000)
                                                                                 ------------        ------------

Cash flows from financing activities:
        Repayment of long-term obligations and notes payable .............         (9,693,000)         (8,516,000)
        Advances made on notes receivable ................................            (11,000)            (10,000)
        Payments received on notes receivable ............................             80,000              67,000
        Proceeds from issuance of common stock under stock option plans ..            250,000              94,000
        Payments on guaranteed purchase price contingently payable in cash
            or common stock ..............................................            (46,000)                 --
        Purchase of treasury stock .......................................                 --            (656,000)
        Capital contribution of minority interest partner ................                 --              10,000
        Capital distribution to minority interest partner ................                 --          (1,318,000)
                                                                                 ------------        ------------
            Net cash used in financing activities ........................         (9,420,000)        (10,329,000)
                                                                                 ------------        ------------
        Increase (decrease) in cash and equivalents ......................          3,658,000         (15,991,000)
        Cash and equivalents at beginning of period ......................         19,882,000          23,820,000
                                                                                 ------------        ------------
        Cash and equivalents at end of period ............................       $ 23,540,000        $  7,829,000
                                                                                 ============        ============
</TABLE>


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


                                       4
<PAGE>   5


              VETERINARY CENTERS OF AMERICA, INC. AND SUBSIDIARIES
                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 1998
                                   (UNAUDITED)

(1)         GENERAL

            The accompanying unaudited consolidated condensed financial
statements of Veterinary Centers of America, Inc. and subsidiaries (the
"Company" or "VCA") have been prepared in accordance with generally accepted
accounting principles 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 for complete
financial statements, as permitted under the applicable rules and regulations.
In the opinion of management, all adjustments considered necessary for a fair
presentation have been included. The results of operations for the three and six
months ended June 30, 1998 and 1997 are not necessarily indicative of the
results to be expected for the full year. For further information, refer to the
financial statements and footnotes thereto for the year ended December 31, 1997
included in the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission on March 31, 1998.

(2)         ACQUISITIONS & INVESTMENTS

            During the second quarter of 1998, the Company purchased five animal
hospitals for an aggregate consideration (including acquisition costs) of
$9,079,000, consisting of 130,803 shares of VCA common stock, with a value at
the date of acquisition of $2,350,000, $4,170,000 in cash, $2,409,000 in debt
and the assumption of liabilities totaling $150,000. The $9,079,000 aggregated
purchase price was allocated as follows: $762,000 to tangible assets, $7,917,000
to goodwill and $400,000 to other intangible assets. In conjunction with
acquisitions made prior to the second quarter of 1998, the Company paid $132,000
related to assumed liabilities and $214,000 related to stock guarantees,
earnouts and other.

            During the first quarter of 1998, the Company purchased one animal
hospital and one veterinary diagnostic laboratory for an aggregate consideration
(including acquisition costs) of $11,910,000, consisting of $10,900,000 in cash,
$400,000 in debt and the assumption of liabilities totaling $610,000. The
$11,910,000 aggregate purchase price was allocated as follows: $797,000 to
tangible assets, $10,613,000 to goodwill and $500,000 to other intangible
assets. In conjunction with previous acquisitions, the Company paid $542,000
related to assumed liabilities and $93,000 related to stock guarantees, earnouts
and other.

            In January 1998, the Company invested an additional $4,000,000 in
Series A Convertible Preferred Stock ("Series A Stock"), for a total investment
of $5,000,000, in Veterinary Pet Insurance, Inc. ("VPI"). VPI is the largest
provider of pet health insurance in the United States. The Company accounts for
the investment in VPI on the cost method.

            Each share of Series A Stock is convertible at the Company's option
at any time after issuance into that number of fully paid and non-assessable
shares of common stock of VPI as is equal to $14.00 divided by the conversion
price, which initially is set at $3.50. In the event of a liquidation, winding
up, merger or consolidation of VPI into another corporation in which the
shareholders of VPI will own less than 50% of the voting securities of the
surviving corporation, or the sale, transfer or lease of all or substantially
all of the assets of VPI, the holders of the Series A Stock shall be entitled to
be paid, out of legally available assets, before any payment is made in respect
of the common stock, an amount equal to $14.00 per share. Upon request of
holders of at least a majority of the outstanding shares of the convertible
preferred stock at any time after December 31, 2002, VPI shall redeem all shares
of Series A Stock outstanding at a cash price equal to $14.00 per share, plus
all accrued but unpaid dividends on each share (the "Redemption Price"). At any
time after December 31, 2004, VPI at its option may redeem the outstanding
shares of Series A Stock at the Redemption Price. The holders of the Series A
Stock are entitled to elect, voting as a single class, one director to the Board
of Directors of VPI.



                                       5
<PAGE>   6

(3)         VET'S CHOICE JOINT VENTURE

            In February 1997, the Company's joint venture, Vet's Choice was
restructured and management of the joint venture was assumed by the Company's
partner, Heinz Pet Products ("HPP"). Pursuant to a restructuring agreement, the
Company maintains its 50.5% equity interest in Vet's Choice. Profits and losses
are allocated 99.9% to HPP and 0.1% to the Company and all management control
has been transferred from the Company to HPP. Additionally, the Company agreed
to provide certain consulting and management services for a three-year period
commencing on February 1, 1997 for an aggregate fee of $15.3 million, payable in
semi-annual installments over a five-year period (the "Consulting Fees"). The
Consulting Fees earned in the six months ended June 30, 1998 and 1997, of
$2,550,000 and $2,125,000, respectively, are included in animal hospital
revenues.

            On or after the earlier of a change of control in the Company or
January 1, 2000, HPP may purchase all of the Company's interest in the
partnership at a purchase price equal to (i) 51% of (ii) 1.3 times the annual
sales of all products bearing the Select Balance or Select Care brand (the
"Annual Sales") less (iii) $4.5 million. If HPP fails to exercise its option
prior to January 1, 2001, the Company may purchase all of the interest of HPP in
the partnership at a purchase price equal to (i) 49.5% of (ii) 1.3 times the
Annual Sales plus (iii) $4.5 million. Effective February 1, 1997, the Company no
longer reports the results of operations of Vet's Choice on a consolidated
basis.

(4)         RESTRUCTURING RESERVES

            During 1996, the Company adopted and implemented a restructuring
plan (the "1996 Plan") designed to restructure the Company's animal hospital and
laboratory operations in connection with its 1996 acquisitions. In addition,
certain hospitals which did not meet the new standards for performance adopted
in light of the increase in the size of the Company's animal hospital
operations, were to be closed or sold. During the six months ended June 30,
1998, pursuant to the 1996 Plan, the Company closed one animal hospital
resulting in lease and contract termination cash expenditures of $148,000 and a
non-cash asset write-down of $61,000. The Company wrote-off $232,000 of computer
equipment and software in connection with the move to common computer systems.
In addition, the Company settled a contract relating to the restructuring of its
laboratory operations resulting in cash expenditures of $412,000. The Company
incurred an additional $230,000 of cash expenditures for lease and other
contractual obligations.

            At June 30, 1998, the 1996 Plan restructuring reserve balance was
$1,929,000, consisting primarily of lease and other contractual obligations. The
major components of the 1996 Plan that are to be completed include: (1) the
termination of leases, the write-down of property and equipment, and employee
terminations in connection with the closure of two animal hospitals and the sale
of one animal hospital; (2) the payment of lease obligations of animal hospitals
that have been closed or sold; (3) the payment of employment severance
contracts; and (4) lease payments on unused equipment and contract terminations.
As of June 30, 1998, the Company has completed a majority of the 1996 Plan, with
remaining actions expected to be completed in 1998, although certain lease and
contractual obligations will continue through 2014.

            During 1997, the Company reviewed the financial performance of its
hospitals. As a result of this review, an additional twelve hospitals were
determined not to meet the Company's performance standards. Accordingly, the
Company adopted phase two of its restructuring plan (the "1997 Plan"). During
the six months ended June 30, 1998, pursuant to the 1997 Plan, the Company
closed two animal hospitals resulting in the write-off of $38,000 of property
and equipment, and $24,000 of cash expenditures for lease obligations of
$24,000.

            At June 30, 1998, the 1997 Plan restructuring reserve balance was
$1,546,000, consisting primarily of lease obligations and reserves for asset
write-downs. The major components of the 1997 Plan that are to be completed
consist primarily of the terminations of leases and the write-down of property
and equipment in connection with the closure or sale of nine animal hospitals.
The 1997 Plan is expected to be completed in 1998, although certain lease
obligations will continue through 2005.



                                       6
<PAGE>   7


            The following tables summarize the activity in the Company's
restructuring reserves by plan year:

                                  The 1995 Plan

<TABLE>
<CAPTION>
                                                                           Cash              Non-cash
                                                                           Charges           Charges            Total
                                                                          ---------        ------------       ---------
<S>                                                                       <C>              <C>                <C>      
Balance, December 31, 1997                                                $ 376,000        $         --       $ 376,000
      No activity                                                                --                  --              --
                                                                          ---------        ------------       ---------
Balance, March 31, 1998                                                     376,000                  --         376,000
      Cash expenditures for lease and other contractual obligations         (59,000)                 --         (59,000)
                                                                          ---------        ------------       ---------
Balance, June 30, 1998                                                    $ 317,000        $         --       $ 317,000
                                                                          =========        ============       =========

</TABLE>


                                  The 1996 Plan

<TABLE>
<CAPTION>
                                                                            Cash              Non-cash
                                                                           Charges             Charges            Total
                                                                          -----------        -----------        -----------
<S>                                                                       <C>                <C>                <C>        
Balance, December 31, 1997                                                $ 2,635,000        $   377,000        $ 3,012,000
      Cash expenditures for lease and other contractual obligations          (625,000)                --           (625,000)
                                                                          -----------        -----------        -----------
Balance, March 31, 1998                                                     2,010,000            377,000          2,387,000
      Cash expenditures for lease and other contractual obligations          (165,000)                --           (165,000)
      Non-cash net asset write-downs                                               --           (293,000)          (293,000)
                                                                          -----------        -----------        -----------
Balance, June 30, 1998                                                    $ 1,845,000        $    84,000        $ 1,929,000
                                                                          ===========        ===========        ===========
</TABLE>

                                  The 1997 Plan

<TABLE>
<CAPTION>
                                                                            Cash              Non-cash
                                                                            Charges           Charges            Total
                                                                          -----------        -----------        -----------
<S>                                                                      <C>                <C>                <C>        
Balance, December 31, 1997                                                $   842,000        $   766,000        $ 1,608,000
      Non-cash net asset write-downs                                               --            (10,000)           (10,000)
                                                                          -----------        -----------        -----------
Balance, March 31, 1998                                                       842,000            756,000          1,598,000
      Cash expenditures for lease and other contractual obligations           (24,000)                --            (24,000)
      Non-cash net asset write-downs                                               --            (28,000)           (28,000)
                                                                          -----------        -----------        -----------
Balance, June 30, 1998                                                    $   818,000        $   728,000        $ 1,546,000
                                                                          ===========        ===========        ===========
</TABLE>


(5)         STOCKHOLDER LAWSUIT

            The Company and certain of its current and former officers and
directors were named as defendants in two purported class action lawsuits filed
in Los Angeles Superior Court (Marilyn J. Thompson, et al. v. Veterinary
Centers of America, inc., et al., filed April 1, 1997, and John Martin v.
Veterinary Centers of America, Inc., et al, filed August 8, 1997), and a
purported class action lawsuit filed on June 9, 1997, in the United States
District Court for the Central District of California, entitled Marilyn J.
Thompson, et al. v. Veterinary Centers of America, Inc., et al., (collectively,
the "Class Actions"). The Class Actions were filed on behalf of individuals
claiming to have purchased common stock of the Company during the time period
from February 15, 1996 through November 14, 1996, and the plaintiffs seek
unspecified damages arising from alleged misstatements regarding the Company's
animal hospitals, diagnostic laboratories, pet food operations and success in
integrating certain acquisitions.

             In addition, certain of the Company's current and former directors
and officers were named as defendants in a lawsuit filed on September 26, 1997,
in the Superior Court of California for the County of Los Angeles, entitled
Kent E. Mason IRA SEP v. Robert L. Antin, et al. (the "Derivative Action"). In
the Derivative Action, the plaintiff has alleged that the defendants breached
various duties owed to the Company, and seeks unspecified damages on the
Company's behalf. 


                                       7
<PAGE>   8

             A settlement has been reached with respect to the Class Actions
and the Derivative Action and is pending approval by the respective courts.
Under the settlement, the claims against the Company and all the other
defendants will be dismissed without presumption or admission of any liability
or wrongdoing. The full amount of the settlement and associated legal costs
have either been previously reserved or are covered by the Company's insurance
carriers.

             The Company and certain of its current and former officers and
directors were named as defendants in lawsuits filed in both Los Angeles
Superior Court and the United States District Court for the Central District of
California, each entitled Pegasus Holdings and Pacific Strategic Funds Group,
Inc. v. Veterinary Centers of America, Inc., et al., (the "Pegasus Lawsuits")
each filed on June 19, 1998. The Pegasus Lawsuits primarily involve claims
alleging securities fraud. The Company has not yet filed a responsive pleading
to the Pegasus Lawsuits and since discovery has not commenced, the Company is
unable to assess the likelihood of an adverse result. There can be no
assurances as to the outcome of the Pegasus Lawsuits. The inability of the
Company to resolve the claims that are the basis for the lawsuits or to prevail
in any related litigation could result in the Company being required to pay
substantial monetary damages for which the Company may not be adequately
insured, which could have a material adverse effect on the Company's business,
financial position and results of operations. In any event, the Company's
defense of the Pegasus Lawsuits may result in substantial costs to the Company,
as well as significant dedication of management resources, as the Company
intends to vigorously defend against the Pegasus Lawsuits.

(6)         RECLASSIFICATIONS

            Certain 1997 balances have been reclassified to conform with the
1998 financial statement presentation.

(7)         ACCOUNTING PRONOUNCEMENTS

            The Emerging Issues Task Force of the FASB has recently issued its
Consensus Opinion 97-2 ("EITF 97-2"). EITF 97-2 addresses certain specific
matters pertaining to the contractual management relationships between entities
that operate in the health care industry, which includes the practices of
medicine, dentistry and veterinary science. EITF 97-2 will be effective for the
Company for its year ending December 31, 1998. EITF 97-2 addresses the ability
of EITF 97-2 management companies to consolidate the results of practices with
which it has an existing contractual relationship. The Company is still in the
process of analyzing the effect of EITF 97-2 on all of its contractual
relationships, but currently believes that the adoption of EITF 97-2 will not
have a material effect on its financial position or results of operations.

(8)         CALCULATION OF PER SHARE AMOUNTS

            A reconciliation of the income and shares used in the computations
of the basic and diluted earnings per share ("EPS") for the three-month and
six-month periods ended June 30, 1998 and 1997 follows:

<TABLE>
<CAPTION>
                                          Three Months Ended June 30, 1998            Six Months Ended June 30, 1998
                                     -------------------------------------------   ---------------------------------------
                                                                     Per Share                                  Per Share
                                       Income           Shares         Amount       Income        Shares         Amount
                                     ----------       ----------   -------------   ----------   ----------   -------------
<S>                                  <C>              <C>          <C>             <C>          <C>          <C>          
Basic EPS
      Net income                     $6,082,000       20,214,000   $        0.30   $8,389,000   20,210,000   $        0.42
                                                                   =============                             =============
Effect of dilutive securities:
      Stock options                          --        1,630,000                           --    1,426,000
      Stock guarantees                       --           17,000                           --       40,000
      Convertible debt                    3,000           25,000                        7,000       25,000
                                     ----------       ----------                   ----------   ----------
Diluted EPS                          $6,085,000       21,886,000   $        0.28   $8,396,000   21,701,000   $        0.39
                                     ==========       ==========   =============   ==========   ==========   =============

</TABLE>



                                       8
<PAGE>   9


<TABLE>
<CAPTION>
                                          Three Months Ended June 30, 1997            Six Months Ended June 30, 1997
                                     -------------------------------------------   ---------------------------------------
                                                                     Per Share                                  Per Share
                                       Income           Shares         Amount       Income        Shares         Amount
                                     ----------       ----------   -------------   ----------   ----------   -------------
<S>                                  <C>              <C>          <C>             <C>          <C>          <C>          

Basic EPS

      Net income                     $4,351,000       19,502,000   $      0.22     $5,761,000   19,473,000    $      0.30
                                                                   ===========                                ===========

Effect of dilutive securities:

      Convertible preferred stock            --          583,000                           --      583,000
      Stock options                          --          483,000                           --      410,000
      Stock guarantees                       --          291,000                           --      313,000
      Convertible debt                    3,000           25,000                        7,000       25,000
                                     ----------       ----------                   ----------   ----------                
Diluted EPS                          $4,354,000       20,884,000   $      0.21     $5,768,000   20,804,000    $      0.28
                                     ==========       ==========   ===========     ==========   ==========    ===========

</TABLE>

(9)        SUBSEQUENT EVENTS

           From July 1, 1998 through August 10, 1998, the Company has
purchased two animal hospitals for a total consideration (including acquisition
costs) of $2,341,000, consisting of $1,201,000 in cash, $1,130,000 in notes
payable and the assumption of liabilities totaling $10,000.

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

        Veterinary Centers of America, Inc. and subsidiaries ("VCA" or the
"Company") is a leading animal health care company. The Company has established
a premier position in two core businesses, animal hospitals ("Animal Hospitals")
and veterinary diagnostic laboratories ("Laboratories"). In addition, the
Company owns a partnership interest in a joint venture, Vet's Choice, with Heinz
Pet Products ("HPP"), which markets and distributes premium pet foods. The
Company also has an investment in Veterinary Pet Insurance, Inc., the nation's
largest pet health insurance company. The Company operates the largest network
of free-standing, full-service animal hospitals in the country and the
largest network of veterinary-exclusive laboratories in the nation.

            Over the past several years, the Company has expanded its animal
hospital network and veterinary diagnostic laboratory operations through
acquisitions. Animal hospitals and veterinary diagnostic laboratories have been
acquired through a combination of issuance of common stock, notes and/or the 
payment of cash.

            Effective February 1, 1997, the day-to-day management of Vet's
Choice was assumed by HPP. The Company maintains its 50.5% equity interest in
Vet's Choice, but the profits and losses are allocated 99.9% to HPP and 0.1% to
the Company. The Company ceased consolidating the results of operations of Vet's
Choice on February 1, 1997.

FUTURE OPERATING RESULTS

            This filing contains statements that constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The words "expect", "estimate", "anticipate", "predict", "believe" and
similar expressions and variations thereof are intended to identify
forward-looking statements. Such statements appear in a number of places in this
filing and include statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things (i) trends affecting the Company's financial condition or
results of operations, and (ii) the Company's business and growth strategies.
The readers of this filing are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in this filing, including, without limitation, the information set
forth under the heading "Risk Factors", as well as the information set forth
below.


                                       9
<PAGE>   10

RESULTS OF OPERATIONS

Revenues

             The following table summarizes the Company's revenues for the three
and six months ended June 30:

<TABLE>
<CAPTION>
                                   Three Months Ended June 30,                          Six Months Ended June 30,
                         -------------------------------------------      ----------------------------------------------
                             1998            1997        % Increase           1998             1997          % Increase
                         -------------   -------------   -----------      -------------    -------------     -----------
<S>                      <C>             <C>             <C>              <C>              <C>               <C>  
Animal Hospital            $53,518,000     $45,929,000       16.5%         $ 99,102,000     $ 85,868,000         15.4%
Laboratory                  24,142,000      18,482,000       30.6%           43,244,000       34,728,000         24.5%
Premium Pet Food                    --              --         --                    --        1,064,000           --
Intercompany Sales          (1,588,000)     (1,218,000)        --            (2,962,000)      (2,444,000)          --
                           -----------     -----------                     ------------     ------------
                           $76,072,000     $63,193,000       20.4%         $139,384,000     $119,216,000         16.9%
                           ===========     ===========                     ============     ============         

</TABLE>

             The increases in Animal Hospital revenues in 1998 from the 1997
comparable periods were primarily the result of the increase in the number of
facilities operated by the Company. The results for 1998 include the revenues of
15 veterinary hospitals acquired subsequent to June 30, 1997. The increase in
revenues resulting from changes in volume or prices at existing facilities, as
compared to the corresponding period in the prior year, was approximately 5.9%
and 5.2% for the three and six months ended June 30, 1998, respectively.

           Pursuant to the restructuring agreement and other related agreements
between HPP and the Company, the Company has agreed to provide certain
consulting and management services for a three-year period commencing February
1, 1997 for an aggregate fee of $15.3 million payable in semi-annual
installments over a five-year period (the "Consulting Fees"). The Consulting
Fees earned in the six months ended June 30, 1998 and 1997, of $2,550,000 and
$2,125,000, respectively, are included in Animal Hospital revenues.

             The increases in Laboratory revenues were primarily due to the
acquisition of the businesses of four veterinary diagnostic laboratories since
June 30, 1997 and to the success achieved with increased marketing efforts.

           Effective February 1, 1997, the Company no longer reports the results
of operations of Vet's Choice on a consolidated basis. Consequently, revenues
for the Pet Food operations include one month's activity in 1997.

Gross Profit

             The following tables summarizes the Company's gross profit for the
three and six months ended June 30:

<TABLE>
<CAPTION>
                        Three Months Ended June 30,            Six Months Ended June 30,
                   ------------------------------------  -------------------------------------
                      1998           1997    % Increase     1998         1997      % Increase
                   -----------   ----------- ----------  ----------   ----------   -----------
<S>                <C>           <C>         <C>        <C>           <C>          <C>  
Animal Hospital    $12,833,000   $10,437,000    23.0%   $21,549,000   $16,811,000    28.2%
Laboratory           8,188,000     6,973,000    17.4%    14,277,000    12,534,000    13.9%
Premium Pet Food            --            --      --             --       568,000      --
                   -----------   -----------            ----------    -----------
                   $21,021,000   $17,410,000    20.7%   $35,826,000   $29,913,000    19.8%
                   ===========   ===========            ===========   ===========    

</TABLE>

             Gross profit for the Animal Hospital operations is comprised of
revenues less all costs of services and products at the hospitals, including
salaries of veterinarians, technicians and all other hospital-based personnel,
facilities rent, occupancy costs, medical supply costs and costs of goods sold
associated with the retail sales of pet food and pet supplies. Animal Hospital
gross profit represented 24.0% and 22.7% of Animal Hospital revenues for the
three months ended June 30, 1998 and 1997, respectively. Animal Hospital gross
profit margins at existing hospitals for the quarter increased to 22.9% in 1998
from 19.5% in 1997. Gross profit margins at newly acquired hospitals were 22.2%
for the quarter. Animal Hospital gross profit represented 21.7% and 19.6% of
Animal Hospital revenues for the six months ended June 30, 1998 and 1997,
respectively. Animal Hospital gross profit margins at existing hospitals for the
six-month period increased to 21.0% in 1998 from 18.0% in 1997. Gross profit
margins at newly acquired hospitals were 20.8% for the six-month period. The
Company 



                                       10
<PAGE>   11
 continues to take actions designed to improve gross margins at the Animal
Hospitals. However, there can be no assurance that in the future the Company
will be successful in its efforts to improve gross profit margins at these
facilities.

            Gross profit of the Laboratory operations is comprised of revenues
less all direct costs of services, including salaries of veterinarians,
technicians and other non-administrative laboratory-based personnel, facilities
rent, occupancy costs and supply costs. Laboratory gross profit represented
33.9% and 37.7% of Laboratory revenues for the three months ended June 30, 1998
and 1997, respectively. For the six-month periods ended June 30, 1998 and 1997,
Laboratory gross margins were 33.0% and 36.1%, respectively. The decreases in
the gross profit percentages for the three and six months ended June 30, 1998
when compared to the comparable 1997 periods were primarily attributable to
costs incurred in connection with the phase-in of the operations from the $10.9
million acquisition of certain assets of the veterinary diagnostics laboratory
business from Laboratory Corporation of America Holdings ("Lab Corp.").
Approximately 50% of the acquired operations of Lab Corp. was merged into the
Laboratory operations on April 1, 1998, at which point revenue generation began.
The remaining 50% of the acquired Lab Corp. operations was combined into
Laboratory operations in May 1998.

           The Company's Animal Hospital business historically has realized
lower gross profit margins than that of the Laboratory business. As the portion
of the Company's revenues attributable to its Animal Hospital operations grows
in the future, the historical gross profit margins for the Company as a whole
may not be indicative of those to be expected in the future.

Selling, General and Administrative Expenses

             VCA Corporate selling, general and administrative expenses consists
of administrative expense at the Company's headquarters, including the salaries
of corporate officers and other personnel, accounting, legal and other
professional expenses as well as rent and occupancy costs.

             Selling, general and administrative expense for the three and six
months ended June 30 is comprised of the following:

<TABLE>
<CAPTION>
                         Three Months Ended June 30,       Six Months Ended June 30,
                         ---------------------------       ---------------------------
                             1998             1997             1998             1997
                         ----------       ----------       ----------       ----------
<S>                      <C>              <C>              <C>              <C>       
VCA Corporate ........   $3,123,000       $3,692,000       $6,745,000       $7,181,000
Laboratory ...........    1,353,000          953,000        2,619,000        1,913,000
Premium Pet Food .....           --               --               --          400,000
                         ----------       ----------       ----------       ----------
                         $4,476,000       $4,645,000       $9,364,000       $9,494,000
                         ==========       ==========       ==========       ==========
</TABLE>

             VCA Corporate and Laboratory selling, general and administrative
expense, as a percentage of Animal Hospital and Laboratory revenues was 5.8% and
7.2% for the three months ended June 30, 1998 and 1997, respectively. For the
six months ended June 30, 1998 and 1997, VCA Corporate and Laboratory selling,
general and administrative expense as a percentage of Animal Hospital and
Laboratory revenues was 6.6% and 7.5%, respectively. The decreases from 1997 to
1998 were primarily attributable to increases in revenues without a comparable
increase in expense.

Depreciation and Amortization

            Depreciation and amortization expense primarily relates to the
depreciation of capital assets and the amortization of excess cost over the fair
value of net assets acquired (goodwill) and certain other intangibles.
Depreciation and amortization expense increased to $6,259,000 for the six months
ended June 30, 1998 from $5,460,000 for the six months ended June 30, 1997. The
increase in depreciation and amortization expense is due to the acquisition of
hospitals and laboratories since June 30, 1997. The Company's policy is to
amortize goodwill over the expected period to be benefited, not exceeding forty
years.

 Restructuring Reserves

            During 1996, the Company adopted and implemented a restructuring
plan (the "1996 Plan") designed to restructure the Company's animal hospital and
laboratory operations in connection with its 1996 acquisitions. In addition,
certain hospitals which did not meet the new standards for performance adopted
in light of the increase in the size of the Company's animal hospital
operations, were to be closed or sold. During the six months ended June 30,
1998, pursuant to the 1996 Plan, 



                                       11
<PAGE>   12

the Company closed one animal hospital resulting in lease and contract
termination cash expenditures of $148,000 and a non-cash asset write-down of
$61,000. The Company wrote-off $232,000 of computer equipment and software in
connection with the move to common computer systems. In addition, the Company
settled a contract relating to the restructuring of its Laboratory operations
resulting in cash expenditures of $412,000. The Company incurred an additional
$230,000 of cash expenditures for lease and other contractual obligations.

            At June 30, 1998, the 1996 Plan restructuring reserve balance was
$1,929,000, consisting primarily of lease and other contractual obligations. The
major components of the 1996 Plan that are to be completed include: (1) the
termination of leases, the write-down of property and equipment, and employee
terminations in connection with the closure of two animal hospitals and the sale
of one animal hospital; (2) the payment of lease obligations of animal hospitals
that have been closed or sold; (3) the payment of employment severance
contracts; and (4) lease payments on unused equipment and contract terminations.
As of June 30, 1998, the Company has completed a majority of the 1996 Plan, with
remaining actions expected to be completed in 1998, although certain lease and
contractual obligations will continue through 2014.

            During 1997, the Company reviewed the financial performance of its
hospitals. As a result of this review, an additional twelve hospitals were
determined not to meet the Company's performance standards. Accordingly, the
Company adopted phase two of its restructuring plan (the "1997 Plan"). During
the six months ended June 30, 1998, pursuant to the 1997 Plan, the Company
closed two animal hospitals resulting in the write-off of $38,000 of property
and equipment, and $24,000 of cash expenditures for lease obligations of
$24,000.

            At June 30, 1998, the 1997 Plan restructuring reserve balance was
$1,546,000, consisting primarily of lease obligations and reserves for asset
write-downs. The major components of the 1997 Plan that are to be completed
consist primarily of the terminations of leases and the write-down of property
and equipment in connection with the closure or sale of nine animal hospitals.
The 1997 Plan is expected to be completed in 1998, although certain lease
obligations will continue through 2005.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operations during the six months ended June 30, 1998 was
$17,626,000 compared to $16,363,000 for the comparable period ended June 30,
1997, for an increase of $1,263,000. The most significant components of this
increase are related to the timing of certain receipts and disbursements.

           The Company incurred $3.6 million during the six months ended June
30, 1998 related to plans to build, upgrade, expand or replace facilities for 21
animal hospitals, the total cost of which is expected to be approximately $12
million. Additionally, the Company spent $3.5 million on other hospital and lab
equipment and expects to continue to upgrade or replace equipment as needed.

            In January 1998, the Company invested an additional $4 million in
Series A Convertible Preferred Stock ("Series A Stock"), for a total investment
at June 30, 1998 of $5 million in Veterinary Pet Insurance, Inc. ("VPI"). VPI is
the largest provider of pet health insurance in the United States. This
strategic investment offers VPI and the Company the opportunity to collaborate
on the marketing of quality pet care directly to the Company's clients. The
Company believes the growth of VPI will encourage the use of pet health services
in VCA's animal hospitals. The Company currently has no plans to make any
additional investments in VPI.

            In February 1998, the Company acquired certain assets of the
veterinary diagnostic laboratory business of Lab Corp. for $10.9 million. This
acquisition will enhance the Laboratory operations' presence in the Midwest and
East coast and help in the growth of the Test Express laboratory business. Test
Express is a segment of the Laboratory operations that utilizes Federal Express
to service the Company's veterinary customers in remote areas.

           The Company has achieved its growth in the past, and anticipates it
will continue its growth in the future through the acquisition of animal
hospitals for cash, stock and notes. The Company anticipates it will complete
the acquisition of an additional 5 to 10 individual animal hospitals during the
remainder of 1998, which will require cash of up to $8 million. In addition, the
Company continues to examine acquisition opportunities in the veterinary
diagnostic laboratory field which may impose additional cash requirements.



                                       12
<PAGE>   13

           The Company intends to fund its future cash requirements primarily
from its cash and marketable securities and internally generated funds. The
Company believes these sources of funds will be sufficient to continue the
Company's operations and planned capital expenditures for at least the next 12
months. A significant portion of the Company's cash requirements is determined
by the pace and size of its acquisitions.

RISK FACTORS

Rapid Expansion and Management of Growth

            Due to the number and size of acquisitions completed since January
1, 1995, the Company has experienced rapid growth. In 1996, the Company
completed the acquisition of the Pet Practice Inc. ("Pet Practice"), Pets' Rx
Inc. ("Pets Rx"), 22 individual animal hospitals and six veterinary diagnostic
laboratories. In 1997, the Company completed the acquisition of 15 individual
animal hospitals and three veterinary diagnostic laboratories. As a result of
these acquisitions, the Company's revenues have grown from $107.7 million in
1995 to $182.2 million in 1996 and to $239.4 million in 1997. In 1998, through
August 10, the Company completed the acquisition of eight animal hospitals and
one veterinary diagnostic laboratory.

            The Company's growth and pace of acquisitions have placed, and will
continue to place, a substantial strain on its management, operational,
financial and accounting resources. There can be no assurance that the Company
will be able to identify, consummate or integrate acquisitions without
substantial delays, costs or other problems. Once integrated, acquisitions may
not achieve sales, profitability and asset productivity commensurate with the
Company's other operations. In addition, acquisitions involve several other
risks, including adverse short-term effects on the Company's reported operating
results, impairments of goodwill and other intangible assets, the diversion of
management's attention, the dependence on retention, hiring and training of key
personnel, the amortization of intangible assets and risks associated with
unanticipated problems or legal liabilities. The Company's failure to manage
growth effectively would have a material adverse effect on the Company's results
of operations and its ability to execute its business strategy.

Dependence on Acquisitions for Future Growth

            The Company's growth strategy is dependent principally on its
ability to acquire established animal hospitals. Successful acquisitions involve
a number of factors which are difficult to control, including the identification
of potential acquisition candidates, the willingness of the owners to sell on
reasonable terms and the satisfactory completion of negotiations. In addition,
acquisitions may be subject to pre-merger or post-merger review by governmental
authorities for antitrust and other legal compliance. Adverse regulatory action
could negatively affect the Company's operations through the assessment of fines
or penalties against the Company or the possible requirement of divestiture of
one or more of the Company's operations.

            There can be no assurance that the Company will be able to identify
and acquire acceptable acquisition candidates on terms favorable to the Company
in a timely manner in the future. Assuming the availability of capital, the
Company's plans include an aggressive acquisition program involving the
acquisition of at least 15 to 25 facilities per year. The Company continues to
evaluate acquisitions and negotiate with several potential acquisition
candidates. The failure to complete acquisitions and continue expansion could
have a materially adverse effect on the Company's financial performance. As the
Company proceeds with its acquisition strategy, it will continue to encounter
the risks associated with the integration and post-integration of acquisitions
described above.

Substantial Leverage; Ability to Service Indebtedness

            The Company has incurred substantial indebtedness in connection with
the acquisition of animal hospitals and veterinary diagnostic laboratories
and through the sale of the $84,385,000 of 5.25% convertible debentures in April
1996. In certain instances, debt issued in connection with the acquisition of
animal hospitals is secured by the assets of the hospital acquired. The Company
has at June 30, 1998, consolidated long-term obligations (including current
portion) of $167 million. At June 30, 1998 and December 31, 1997, the Company's
ratio of long-term debt to total stockholders' equity was 86.8% and 96.1%,
respectively.



                                       13
<PAGE>   14

Risks Associated with Intangible Assets

            A substantial portion of the assets of the Company consists of
intangible assets, including goodwill and covenants not to compete relating to
the acquisition of Animal Hospitals and veterinary diagnostic laboratories. At
June 30, 1998, the Company's balance sheet reflected $260 million of intangible
assets of these types, a substantial portion of the Company's total assets of
$392 million. The Company expects the aggregate amounts of goodwill and other
intangible assets on its balance sheet to increase in the future in connection
with additional acquisitions. This increase will have an adverse impact on
earnings as goodwill and other intangible assets will be amortized against
future operating results. In the event of any sale or liquidation of the
Company, there can be no assurance that the value of these intangible assets
will be realized.

            In addition, the Company continually evaluates whether events and
circumstances have occurred that indicate that the remaining balance of
intangible assets may not be recoverable or the estimated useful lives of the
intangible assets have changed. When factors indicate that these intangible
assets should be evaluated for possible impairment, the carrying value of the
intangible assets may be reduced, which could have a material adverse effect on
results of operations during the periods in which such reduction is recognized.
Further, any change in the estimated useful lives of the intangible assets could
result in a reduction of the carrying value of the intangible assets and/or the
future depreciation or amortization of these assets, which could have a material
adverse effect on the results of operations of the Company. There can be no
assurance that the Company will not be required to write-down assets in future
periods.

Impact of Year 2000

            The Company maintains its general ledger and accounting systems
primarily on four separate PC based systems. Some of the Company's older
computer programs were written using two digits rather than four to define the
applicable year. As a result, those computer programs have time-sensitive
software that recognize a date using "00" as the year 1900 rather than the year
2000. This could cause a system failure or miscalculations causing disruptions
of operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.

            The Company has completed an assessment of its existing software
systems and after reviewing various factors, one of which being the year 2000
issue, has determined that modifications or upgrades to or replacements of
certain software are required. The Company anticipates that the required changes
to its existing computer systems will be substantially completed no later than
September 30, 1999, which is prior to any anticipated impact on its operating
systems. The Company believes that with these changes, the year 2000 issue will
not pose significant operational problems for its computer systems. The total
cost associated with these changes is estimated at approximately $3 million.

            The costs of the project and the date on which the Company believes
it will complete the changes to its computer systems are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those anticipated.

Seasonality and Fluctuating Quarterly Results

            A large portion of the Company's business is seasonal, with
operating results varying substantially from quarter to quarter. Historically,
the Company's revenues have been greater in the second and third quarters than
in the first and fourth quarters. The demand for the Company's veterinary
services are significantly higher during warmer months because pets spend a
greater amount of time outdoors, where they are more likely to be injured and
are more susceptible to disease and parasites. In addition, use of veterinary
services may be affected by levels of infestation of fleas, heartworms and
ticks, and the number of daylight hours, as well as general economic conditions.
A substantial portion of the Company's costs are fixed and do not vary with the
level of demand. Consequently, net income for the second and third quarters at
individual animal hospitals generally has been higher than that experienced in
the first and fourth quarters.



                                       14
<PAGE>   15

Guaranteed Purchase Price Contingently Payable in Cash or Common Stock

            In connection with acquisitions in which the purchase price
consists, in part, of the Company's common stock (the "Guarantee Shares"), the
Company in some instances guarantees (the "Guarantee Right") that the value of
such stock (the "Measurement Price") two to three years following the date of
the acquisition (the "Guarantee Period") will equal or exceed the value of the
stock on the date of acquisition (the "Issue Price"). In the event the
Measurement Price does not equal or exceed the Issue Price, the Company is
obligated to pay to the seller in cash or additional shares of the Company's
common stock the difference between the Issue Price and the Measurement Price
multiplied by the number of Guarantee Shares then held by the seller. The
seller's Guarantee Right terminates if the Company's common stock trades at or
above the Issue Price (the "Release Price") for five consecutive days. There are
156,010 Guarantee Shares outstanding at August 10, 1998 with an average Issue
Price of $19.84 per share that have not met their respective Release Prices for
the specified period. The Guarantee Period through which the Guaranteed Shares
extend is September 1998, and the liability for such shares at August 10, 1998
totals approximately $228,000. If the value of the Company's common stock
decreases and is less than an Issue Price at the end of the respective Guarantee
Period for these shares, the Company may be obligated to compensate these
sellers.

Dependence on Key Management

            The Company's success will continue to depend to a significant
extent on the Company's executive officers and other key management,
particularly its Chief Executive Officer, Robert L. Antin. VCA has employment
contracts with Mr. Robert Antin, Mr. Arthur Antin, Chief Operating Officer of
VCA, and Mr. Neil Tauber, Senior Vice President of VCA, each of which expires in
January 2002. VCA has no other written employment agreements with its executive
officers. None of VCA's officers are parties to noncompetition covenants which
extend beyond the term of their employment with VCA. VCA does not maintain any
key man life insurance on the lives of its senior management. As VCA continues
to grow, it will continue to hire, appoint or otherwise change senior managers
and other key executives. There can be no assurance that VCA will be able to
retain its executive officers and key personnel or attract additional qualified
members to management in the future. In addition, the success of certain of
VCA's acquisitions may depend on VCA's ability to retain selling veterinarians
of the acquired companies. The loss of services of any key manager or selling
veterinarian could have a materially adverse effect upon VCA's business.

Competition

            The companion animal health care industry is highly competitive and
subject to continual change in the manner in which services are delivered and
providers are selected. The Company believes that the primary competitive
factors in connection with animal hospitals are convenient location,
recommendation of friends, reasonable fees, quality of care and convenient
hours. The Company's primary competitors for its animal hospitals in most
markets are individual practitioners or small, regional multi-clinic practices.
In addition, certain national companies in the pet care industry, including the
operators of super-stores, are developing multi-regional networks of animal
hospitals in markets which include the Company's animal hospitals. Among
veterinary diagnostic laboratories, the Company believes that quality, price and
the time required to report results are the major competitive factors. There are
many clinical laboratory companies which provide a broad range of laboratory
testing services in the same markets serviced by the Company. In addition,
several national companies provide on-site diagnostic equipment that allows
veterinarians to perform their own laboratory tests.

Government Regulation

            The laws of many states prohibit veterinarians from splitting fees
with non-veterinarians and 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. While the Company seeks to structure its operations to
comply with the corporate practice of veterinary medicine laws of each state in
which it operates, there can be no assurance that, given varying and uncertain
interpretations of such laws, the Company would be found to be in compliance
with restrictions on the corporate practice of veterinary medicine in all
states. A determination that the Company is in violation of applicable
restrictions on the practice of veterinary medicine in any state in which it
operates, could have a materially adverse effect on the Company if the Company
were unable to restructure its operations to comply with the requirements of
such states.



                                       15
<PAGE>   16

Anti-takeover Effect

            A number of provisions of the Company's Certificate of Incorporation
and Bylaws and certain Delaware laws and regulations relating to matters of
corporate governance, certain rights of directors and the issuance of preferred
stock without stockholder approval, may be deemed to have and may have the
effect of making more difficult, and thereby discouraging, a merger, tender
offer, proxy contest or assumption of control and change of incumbent
management, even when stockholders other than the Company's principal
stockholders consider such a transaction to be in their best interest. In
addition, H.J. Heinz Company has an option to purchase the Company's interest in
the Vet's Choice joint venture upon the occurrence of a change in control (as
defined in the joint venture agreement), which may have the same effect.
Accordingly, stockholders may be deprived of an opportunity to sell their shares
at a substantial premium over the market price of the shares.

            On December 22, 1997, the Company adopted a Stockholder Rights Plan
(the "Rights Agreement") and in connection therewith, out of its authorized but
unissued shares of preferred Stock, designated 400,000 shares as Series B
Preferred Stock, par value $0.001 per share (the "Series B Preferred Stock").
Pursuant to the Rights Agreement, the Company distributed to its stockholders,
rights entitling the holders to purchase one one-hundredth of a share of Series
B Preferred Stock for each share of common stock then held at an exercise price
of $60.00. One one-hundredth of a share of Series B Preferred Stock is
functionally equivalent in all respects, including voting and dividend rights to
one share of common stock. Upon the occurrence of certain "triggering events,"
each right entitles its holder to purchase, at the rights then-current exercise
price, a number of one one-hundredths of a share of Series B Preferred Stock
having a market value equal to twice the exercise price. A triggering event
occurs ten days following the date a person or group (other than an "Exempt
Person"), without the consent of the Company's board of directors, acquires 15%
or more of the Company's common stock or upon the announcement of a tender offer
or an exchange offer, the consummation of which would result in the ownership by
a person or group of 15% or more of the Company's common stock. The rights will
expire on January 5, 2008.

Impact of Shares Eligible for Future Sale

            Future sales by existing stockholders could adversely affect the
prevailing market price of the Company's common stock. As of August 10, 1998,
the Company had 20,575,438 shares of common stock outstanding (including 246,938
shares held in treasury), most of which are either freely tradable in the public
market without restriction or tradable in accordance with Rule 144 under the
Act. There are also 19,935 shares which the Company is obligated to issue in
connection with the Pets' Rx and Pet Practice mergers and certain acquisitions;
3,685,627 shares of the Company's common stock issuable upon exercise of
outstanding stock options; 41,046 shares issuable upon conversion of convertible
notes; and 2,456,623 shares issuable upon conversion of convertible debentures.
Shares may also be issued under price guarantees delivered in connection with
acquisitions. These shares will be eligible for immediate sale upon issuance.

Possible Volatility of Stock Price

            The market price of the Company's common stock could be subject to
significant fluctuations caused by variations in quarterly operating results,
litigation involving the Company, announcements by the Company or its
competitors, general conditions in the companion animal health care industry and
other factors. The stock market in recent years has experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of publicly traded companies. The broad fluctuations
may adversely affect the market price of the Company's common stock.

Alleged Misstatements Regarding the Company's Operations and Prospects

            The Company and certain of its current and former officers and
directors were named as defendants in two purported class action lawsuits filed
in Los Angeles Superior Court (Marilyn J. Thompson, et al. v. Veterinary Centers
of America, Inc., et al., filed April 1, 1997, and John Martin v. Veterinary
Centers of America, Inc., et al., filed August 8, 1997), and a purported class
action lawsuit filed on June 9, 1997, in the United States District court for
the Central District of California, entitled Marilyn J. Thompson, et al. v.
Veterinary Centers of America, Inc., et al. (collectively, the "Class Actions").
The Class Actions have been filed on behalf of individuals claiming to have
purchased common stock of the Company during the time period from February 15,
1996 through November 14, 1996, and the plaintiffs seek unspecified damages
arising from alleged misstatements regarding the Company's animal hospitals,
diagnostic laboratories, pet food operations and success in integrating certain
acquisitions.



                                       16
<PAGE>   17

           In addition, certain of the Company's current and former directors
and officers were named as defendants in a lawsuit filed on September 26, 1997,
in the Superior Court of California for the County of Los Angeles, entitled Kent
E. Mason IRA SEP v. Robert L. Antin, et al. (the "Derivative Action"). In the
Derivative Action, the plaintiff has alleged that the defendants breached
various duties owed to the Company, and seeks unspecified damages on the
Company's behalf.

           A settlement has been reached with respect to the Class Actions and
the Derivative Action and is pending approval by the respective courts. Under
the settlement, the claims against the Company and all other defendants will be
dismissed without presumption or admission of any liability or wrongdoing. The
full amount of the settlement and associated legal costs have either been
previously reserved or will be covered by the Company's insurance carriers.

           The Company and certain of its current and former officers and
directors were named as defendants in lawsuits filed in both Los Angeles
Superior Court and the United States District Court for the Central District of
California, each entitled Pegasus Holdings and Pacific Strategic Funds Group,
Inc. v. Veterinary Centers of America, Inc., et al., (the "Pegasus Lawsuits")
each filed on June 19, 1998. The Pegasus Lawsuits primarily involve claims
alleging securities fraud. The Company has not yet filed a responsive pleading
to the Pegasus Lawsuits and since discovery has not commenced, the Company is
unable to assess the likelihood of an adverse result. There can be no assurances
as to the outcome of the Pegasus Lawsuits. The inability of the Company to
resolve the claims that are the basis for the lawsuits or to prevail in any
related litigation could result in the Company being required to pay substantial
monetary damages for which the Company may not be adequately insured, which
could have material adverse effect on the Company's business, financial position
and results of operations. In any event, the Company's defense of the Pegasus
Lawsuits may result in substantial cost to the Company, as well as significant
dedication of management resources, as the Company intends to vigorously defend
against the Pegasus Lawsuits.

PART II.  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           For discussion on legal proceedings, see Risk Factors - "Alleged
           Misstatements Regarding the Company's Operations and Prospects". In
           addition to the legal proceedings described herein, the Company is a
           party to other litigation which arises in the ordinary course of its
           business, none of which is material.

ITEM 2.    CHANGES IN SECURITIES

           None

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           None

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

           On July 29, 1998, the Company held its Annual Meeting of
           Stockholders. The following sets forth the identity of the
           directors elected as Class III Directors to hold office for
           three years and until their respective successors have been
           elected and voting results as well as the voting results of
           the approval of an amendment to the Company's Certificate of
           Incorporation to increase the authorized number of shares of
           Preferred Stock.
<TABLE>
<CAPTION>
                                                                                        Broker
                 Proposal                            Yes           No       Abstain    Non-Vote
                 --------                            ---           --       -------    --------
           <S>                                    <C>           <C>         <C>        <C>
           1. Election of Directors
                 Arthur J. Antin                  18,471,862      180,983
                 John Heil                        18,464,498      188,347

           2. Amendment to the Certificate of     11,170,570    1,464,127    60,422     5,957,706
              Incorporation to increase the
              authorized number of shares of
              Preferred Stock
</TABLE>

ITEM 5.    OTHER INFORMATION

           None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

           (a)         Exhibits:

                       Exhibit 27.1 Financial Data Schedule

           (b)         Reports on Form 8-K:

                       Current Report on Form 8-K filed May 5, 1998, Item 5.
                    
                       Current Report on Form 8-K filed July 9, 1998, Item 5.

                       Current Report on Form 8-K filed July 28, 1998, Item 5.

                                       17
<PAGE>   18


                                    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.


                                        VETERINARY CENTERS OF AMERICA, INC.


Date:  August 10, 1998                  /s/ Tomas W. Fuller
                                        ----------------------------------------
                                        Tomas W. Fuller
                                        Chief Financial Officer


<PAGE>   19

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
ITEM             EXHIBIT                                         PAGE
----             -------                                         ----

<S>              <C>                                          <C>
27.1             Financial Data Schedule

</TABLE>