Edgar Filing: VCA ANTECH INC

As filed with the Securities and Exchange Commission on January 10, 2003
REGISTRATION NO. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

VCA ANTECH, INC.
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 0742 95-4097995
(State or Other (Primary Standard (I.R.S. Employer
Jurisdiction Industrial Identification No.)
of Incorporation Classification
or Organization) Code Number)

12401 West Olympic Boulevard
Los Angeles, California 90064-1022
(310) 571-6500
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)

Robert L. Antin
Chief Executive Officer and President
12401 West Olympic Boulevard
Los Angeles, California 90064-1022
(310) 571-6500
(Name, Address, Including Zip Code, and Telephone Number, Including
Area Code, of Agent for Service)

-------------------------

COPIES TO:

JULIE M. KAUFER, ESQ. GREGG A. NOEL, ESQ.
MICHAEL W. EVERETT, ESQ. Skadden, Arps, Slate,
Akin Gump Strauss Hauer & Feld LLP Meagher & Flom LLP
2029 Century Park East 300 South Grand Avenue, Suite 3400
Los Angeles, California 90067 Los Angeles, California 90071
310. 229.1000 213.687.5600

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED
SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
-----------

If the only securities being registered on this form are being offered
pursuant to dividend or reinvestment plans, please check the following box. [_]

If any of the securities being registered in this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]

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CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
TITLE OF EACH CLASS PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED PRICE (1) FEE (2)
-------------------------------------------------------------------------------
Common Stock, par value
$0.001 per share $154,939,500 $14,260
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(1) Includes common stock issuable upon exercise of the underwriters'
over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(o) under the Securities Act of 1933.

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 10, 2003

9,000,000 Shares

[LOGO]

VCA ANTECH, INC.
Common Stock

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This is an offering of shares of common stock of VCA Antech, Inc. This
prospectus relates to an offering of 9,000,000 shares.

VCA Antech, Inc. is offering 3,300,000 shares of the shares to be sold in
this offering. The selling stockholders identified in this prospectus are
offering an additional 5,700,000 shares. VCA Antech, Inc. will not receive any
proceeds from the sale of shares by the selling stockholders.

Our common stock is quoted on The Nasdaq Stock Market's National Market
under the symbol "WOOF." The last reported sale price of our common stock on
January 9, 2003 was $14.97 per share.

See "Risk Factors" beginning on page 11 to read about the factors you
should consider before buying shares of our common stock.

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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

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PER SHARE TOTAL
------------ ---------
Initial price to public................................ $ $
Underwriting discount.................................. $ $
Proceeds, before expenses, to VCA Antech, Inc.......... $ $
Proceeds, before expenses, to the selling stockholders. $ $

To the extent that the underwriters sell more than 9,000,000 shares of
common stock, the underwriters have the option to purchase up to an additional
1,350,000 shares from VCA Antech, Inc. and the selling stockholders at the
initial price less the underwriting discount.

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The underwriters expect to deliver the shares against payment in New York,
New York on __________, 2003.

JOINT BOOK-RUNNING MANAGERS

GOLDMAN, SACHS & CO. CREDIT SUISSE FIRST BOSTON

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Prospectus dated [ ], 2003

Page 2

DESCRIPTION OF ARTWORK:

The gatefold includes the VCA Antech logo, VCA Animal Hospitals logo and
Antech Diagnostics logo. The gatefold also includes pictures of a VCA animal
hospital, a VCA veterinarian performing a surgical procedure, a VCA laboratory
and a VCA laboratory worker. The following text is contained on this gatefold:
VCA Animal Hospitals: Largest network of free standing animal hospitals in the
nation; 225* hospitals in 33 states. * as of September 30, 2002; Antech
Diagnostics: Largest network of veterinary diagnostic laboratories in the
nation; Established infrastructure serving 13,000 animal hospitals in all 50
states; 83 veterinary specialist consultants; Capitalizing on growing demand for
diagnostics in veterinary medicine.

Page 3

PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING OUR COMPANY AND THE COMMON STOCK SOLD IN THIS OFFERING AND
OUR CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO THOSE STATEMENTS APPEARING
ELSEWHERE IN THIS PROSPECTUS. WE URGE YOU TO READ THIS ENTIRE PROSPECTUS
CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION.

VCA ANTECH, INC.

OUR BUSINESS

DIAGNOSTIC LABORATORIES

We operate the only full-service, veterinary diagnostic laboratory network
serving all 50 states. Our 19 state-of-the-art, automated diagnostic
laboratories service a diverse client base of over 13,000 animal hospitals, and
non-affiliated animal hospitals generated approximately 95% of our laboratory
revenue in 2001. We support our laboratories with what we believe is the
industry's largest transportation network, which picks up an average of 20,000
to 25,000 samples daily. In the nine months ended September 30, 2002, we derived
approximately 70.1% of our laboratory revenue from our clients in major
metropolitan areas, where we offer twice-a-day pick-up service and same-day
results. Outside of these areas, we typically provide test results to
veterinarians before 8:00 a.m. the following day.

Our diagnostic spectrum includes over 300 different tests in the areas of
chemistry, pathology, endocrinology, hematology and microbiology, as well as
tests specific to particular diseases. In 2001, we handled approximately 6.9
million requisitions and performed approximately 18.3 million tests. Although
modified to address the particular requirements of the species tested, the tests
performed in our veterinary laboratories are similar to those performed in human
clinical laboratories and utilize similar laboratory equipment and technologies.

From 1999 through the twelve months ended September 30, 2002, our
laboratory revenue, laboratory operating income and laboratory operating income
before depreciation and amortization increased at compounded annual growth rates
of 14.5%, 24.0% and 20.6%, respectively. We will refer to operating income
before depreciation and amortization as "EBITDA." In the twelve months ended
September 30, 2002, our laboratory operating income was $50.7 million, or 33.8%
of our laboratory revenue, and our laboratory EBITDA was $54.0 million, or 36.1%
of our laboratory revenue.

ANIMAL HOSPITALS

At September 30, 2002, we operated 225 animal hospitals in 33 states that
were supported by over 750 veterinarians. In addition to general medical and
surgical services, we offer specialized treatments for companion animals,
including advanced diagnostic services, internal medicine, oncology,
ophthalmology, dermatology and cardiology. We also provide pharmaceutical
products for use in the delivery of treatments by our veterinarians and pet
owners. Our facilities typically are located in high-traffic, densely populated
areas and have an established reputation in the community with a stable client
base. Since 2000, our animal hospitals have been connected to an enterprise-wide
management information system. This system provides us opportunities to manage
our animal hospitals more effectively and to implement throughout our animal
hospital network veterinarian practices and procedures that we have identified,
tested and believe to provide a high level of client care.

Page 1

From 1999 through the twelve months ended September 30, 2002, our animal
hospital revenue, animal hospital operating income and our animal hospital
EBITDA increased at compounded annual growth rates of 10.9%, 25.6% and 18.9%,
respectively. In the twelve months ended September 30, 2002, our animal hospital
operating income was $50.1 million, or 17.3% of our animal hospital revenue, and
our animal hospital EBITDA was $60.0 million, or 20.7% of our animal hospital
revenue.

OUR OPPORTUNITY

We intend to continue to grow by capitalizing on the following market
opportunities:

o LARGE, GROWING MARKET. According to the 2001-2002 American Pet
Products Manufacturers Association Pet Owners Survey, the ownership of
pets is widespread, with over 62% of U.S. households owning at least
one pet, including companion and other animals. The U.S. population of
companion animals is approximately 188 million, including about 141
million dogs and cats. According to the U.S. Pet Ownership &
Demographics Sourcebook published by the American Veterinary Medical
Association, over $11 billion was spent on companion animal health
care services in 1996, with an annual growth rate of over 9.5% from
1991 through 1996 for spending on dogs and cats. We believe this
growth is primarily driven by an increased emphasis on pet health and
wellness, continued technological developments driving new and
previously unconsidered diagnostic tests, procedures and treatments,
and favorable demographic trends supporting a growing pet population.

o RAPIDLY GROWING VETERINARY DIAGNOSTIC TESTING SERVICES. We believe
that outsourced diagnostic testing is among the fastest growing
segments of the animal health care services industry. Reflecting this
trend, our laboratory internal revenue growth has averaged 11.4% over
the last three fiscal years. The growth in outsourced diagnostic
testing resulted from an overall increase in the number of tests
requisitioned by veterinarians and from veterinarians' increased
reliance on outsourced diagnostic testing rather than in-house
testing. The overall increase in the number of tests performed is
primarily due to the growing focus by veterinarians on wellness and
monitoring programs, the emphasis in veterinary education on utilizing
diagnostic tests for more accurate diagnoses and continued
technological developments in veterinary medicine leading to new and
improved tests. The increased utilization of outsourced testing is
primarily due to the relative low cost and high accuracy rates
provided by outside laboratories and the diagnostic consulting
provided by experts employed by the leading outside laboratories.

o ATTRACTIVE CLIENT PAYMENT DYNAMICS. The animal health care services
industry does not experience the problems of extended payment
collection cycles or pricing pressures from third-party payors faced
by human health care providers. Outsourced laboratory testing is a
wholesale business that collects payments directly from animal
hospitals, generally on terms requiring payment within 30 days of the
date the charge is invoiced. Fees for animal hospital services are due
and typically paid for at the time of the service. For example, over
95% of our animal hospital services are paid for in cash or by credit
card at the time of the service. In addition, over the past three
fiscal years, our bad debt expense has averaged only 1% of total
revenue.

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COMPETITIVE STRENGTHS

We believe we are well positioned for profitable growth due to the
following competitive strengths:

o MARKET LEADER. We are a market leader in each of the business segments
in which we operate. We maintain the only veterinary diagnostic
laboratory network serving all 50 states, which is supported by the
largest group of consulting veterinary specialists in the industry.
Our network of animal hospitals and veterinarians is the largest in
the United States. We believe that it would be difficult, time
consuming and expensive for new entrants or existing competitors to
assemble a comparable nationwide laboratory or animal hospital
network.

o COMPELLING BUSINESS MODEL. The fixed cost nature of our business
allows us to generate strong margins, particularly on incremental
revenues. In each quarter since 1999, we have generated positive
laboratory internal revenue growth. The growth in our laboratory
revenue, combined with greater utilization of our infrastructure, has
enabled us to improve our laboratory operating margin from 27.1% in
1999 to 33.8% for the twelve months ended September 30, 2002, and our
laboratory adjusted EBITDA margin from 31.2% to 36.1% over the same
period. In each quarter since 1999, we have generated positive animal
hospital same-facility revenue growth. Due to the operating leverage
associated with our animal hospital business, the increase in animal
hospital revenue has enabled us to improve our animal hospital
operating margin from 12.3% in 1999 to 17.3% for the twelve months
ended September 30, 2002, and our animal hospital adjusted EBITDA
margin from 17.1% to 20.7% over the same period. These high margins,
combined with our modest working capital needs and low maintenance
capital expenditures, provide cash that we can use for acquisitions or
to reduce indebtedness.

o LEADING TEAM OF SPECIALISTS. We believe our laboratories are a
valuable diagnostic resource for veterinarians. Due to the trend
towards offering specialized services in veterinary medicine, our
network of 83 specialists, which includes veterinarians, chemists and
other scientists with expertise in fields such as pathology, internal
medicine, oncology, cardiology, dermatology, neurology and
endocrinology, provides us with a significant competitive advantage.
These specialists are available to consult with our laboratory
clients, providing a compelling reason for them to use our
laboratories rather than those of our competitors, most of whom offer
no comparable service. Our team of specialists represents the largest
interactive source for readily available diagnostic advice in the
veterinary industry and interact with animal health care professionals
over 90,000 times a year.

o HIGH QUALITY SERVICE PROVIDER. We believe that we have built a
reputation as a trusted animal health brand among veterinarians and
pet owners alike. In our laboratories, we maintain rigorous quality
assurance programs to ensure the accuracy of reported results. We
calibrate our laboratory equipment several times daily with test
specimens of known concentration or reactivity to assure accuracy and
use only qualified personnel to perform testing. Further, our
specialists review all test results outside of the range of
established norms. As a result of these measures, we believe our
diagnostic accuracy rate is over 99%. In our animal hospitals, we
provide continuing education programs, promote the sharing of
professional knowledge and expertise and have developed and
implemented a program of best practices to promote quality medical
care.

o SHARED EXPERTISE AMONG VETERINARIANS. We believe our group of animal
hospitals and veterinarians provide us with a competitive advantage
through our collective expertise and experience. Our veterinarians
consult with other veterinarians in our network to share information
regarding the practice of veterinary medicine, which continues to
expand our collective knowledge. We maintain an internal continuing
education program for our veterinarians and have an established
infrastructure for the dissemination of information on new
developments in diagnostic testing, procedures and treatment programs.

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BUSINESS STRATEGY

Our business strategy is to continue to expand our market leadership in
animal health care services through our diagnostic laboratories and animal
hospitals. Key elements of our strategy include:

o CAPITALIZING ON OUR LEADING MARKET POSITION TO GENERATE REVENUE
GROWTH. Our leading market position in each of our business segments
positions us to take advantage of favorable growth trends in the
animal health care services industry. In our laboratories, we seek to
generate revenue growth by capitalizing on the growing number of
outsourced diagnostic tests and by increasing our market share. In our
animal hospitals, we seek to generate revenue growth by capitalizing
on the growing emphasis on pet health and wellness and favorable
demographic trends supporting a growing pet population.

o LEVERAGING ESTABLISHED INFRASTRUCTURE TO IMPROVE MARGINS. Due to our
established networks and the fixed cost nature of our business model,
we are able to realize high margins on incremental revenues from both
laboratory and animal hospital clients. For example, given that our
nationwide transportation network servicing our laboratory clients is
a relatively fixed cost, we are able to achieve significantly higher
margins on most incremental tests ordered by the same client when
picked up by our couriers at the same time. We estimate that in most
cases, we realize an operating and EBITDA margin between 60% and 75%
on these incremental tests.

o UTILIZING ENTERPRISE-WIDE SYSTEMS TO IMPROVE OPERATING EFFICIENCIES.
In 2001, we completed the migration of our animal hospital operations
to an enterprise-wide management information system. This common
system has enabled us to effectively manage the key operating metrics
that drive our business. We use this system to help standardize our
pricing, implement and monitor the effectiveness of targeted marketing
programs, expand the services provided by our veterinarians and
capture unbilled services.

o PURSUING SELECTED ACQUISITIONS. Although we have substantially
completed our laboratory infrastructure, we may make selective,
strategic laboratory acquisitions, with any new operations likely to
be merged into existing facilities. Additionally, the fragmentation of
the animal hospital industry provides us with significant expansion
opportunities in our animal hospital segment. Depending on the
attractiveness of the candidates and the strategic fit with our
existing operations, we intend to acquire approximately 15 to 25
animal hospitals per year primarily utilizing internally generated
cash.

BUSINESS RISKS

Some of the key risks associated with our business strategy include:

o CONTINUED GROWTH. Our success depends, in part, on our ability to
build on our position as a leading animal health care services company
through a balanced program of internal growth initiatives and
selective acquisitions of established animal hospitals and
laboratories. We may be unable to successfully execute our growth
strategy and, as a result, our business may be harmed.

o MANAGEMENT OF GROWTH. Our business and results of operations may be
adversely affected if we are unable to manage our growth effectively,
which may increase our costs of operations and hinder our ability to
execute our business strategy.

o SUBSTANTIAL DEBT. Our substantial amount of debt, including senior and
secured debt, as well as the guarantees of our subsidiaries and the
security interests in our assets, could impair our ability to operate
our business effectively and may limit our ability to take advantage
of business opportunities.

o CONCENTRATION OF OWNERSHIP. Concentration of ownership among our
existing executive officers, directors and principal stockholders may
inhibit new investors from influencing significant corporate
decisions. These stockholders will be able to significantly affect our
management, our policies and all matters requiring stockholder
approval.

Page 4

o FIXED COSTS. A significant percentage of our expenses, particularly
rent and personnel costs, are fixed costs and are based in part on
expectations of revenue. We may be unable to reduce spending in a
timely manner to compensate for any significant fluctuations in our
revenues.

Our principal offices are located at 12401 West Olympic Boulevard, Los
Angeles, California 90064. Our telephone number is (310) 571-6500.

Page 5

THE OFFERING

Common stock offered................... 9,000,000 shares
By us................................ 3,300,000 shares
By the selling stockholders.......... 5,700,000 shares
Over-allotment granted................. 1,350,000 shares
By us................................ 500,000 shares
By the selling stockholders.......... 850,000 shares
Common stock to be outstanding
after this offering.................. 40,060,975 shares
Use of proceeds........................ We intend to use the net proceeds from
this offering to repay indebtedness and
for general corporate purposes. We will
not receive any proceeds from the sale
of shares by the selling stockholders.
Nasdaq National Market symbol.......... WOOF
________________

Unless otherwise indicated, all share information in this prospectus is
based on the number of shares outstanding as of September 30, 2002 and:

o excludes 1,955,901 shares of common stock issuable upon exercise of
outstanding options under our stock incentive plans, at a weighted
average exercise price of $9.95 per share;

o excludes 650,000 shares available for future issuance under our stock
incentive plans; and

o assumes no exercise of the underwriters' over-allotment option.

Page 6

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary financial data for the years in the periods ended December 31,
2001, 2000 and 1999 were derived from our audited financial statements. The
summary financial data for the nine month periods ended September 30, 2002 and
2001 were derived from our unaudited financial statements and include, in the
opinion of management, all adjustments necessary for a fair presentation of our
financial position and operating results for these periods and as of those
dates. Our results for the interim periods are not necessarily indicative of our
results for a full year's operations. The pro forma statement of operations data
adjusts the financial data to give effect to this offering, our initial public
offering, the concurrent note offering by one of our wholly owned subsidiaries,
and the application of the net proceeds therefrom and the use of $12.3 million
cash on hand, as more fully described in note (2) below. You should read the
following information together with "Selected Historical Consolidated Financial
Data," "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and our consolidated financial statements and related notes
included elsewhere in this prospectus.

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
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2002 2001 2001 2000 1999
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(DOLLARS IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
Laboratory revenue......................... $ 116,911 $ 101,855 $ 134,711 $ 119,300 $ 103,282
Animal hospital revenue.................... 225,383 207,665 272,113 240,624 217,988
Total revenue (1).......................... 336,892 305,365 401,362 354,687 320,560
Operating income........................... 75,000 33,680 27,706 19,205 47,016
Net income (loss) available to common
stockholders............................ $ 23,165 $ (22,368) $ (46,574) $ (13,802) $ 22,357
Pro forma net income (loss) available to
common stockholders (2)................. $ 25,791 $ (24,130)

OTHER FINANCIAL DATA:
Adjusted EBITDA (3) (4).................... $ 84,330 $ 70,892 $ 89,505 $ 73,526 $ 64,445
Adjusted EBITDA margin (5)................. 25.0% 23.2% 22.3% 20.7% 20.1%

Adjusted laboratory EBITDA (6)............. $ 43,734 $ 35,264 $ 45,561 $ 38,827 $ 32,273
Adjusted laboratory EBITDA margin (6)...... 37.4% 34.6% 33.8% 32.5% 31.2%

Adjusted animal hospital EBITDA (7)........ $ 49,472 $ 43,159 $ 53,658 $ 42,985 $ 37,237
Adjusted animal hospital EBITDA margin (7). 22.0% 20.8% 19.7% 17.9% 17.1%

Net cash provided by operating activities.. $ 60,838 $ 49,316 $ 57,104 $ 60,054 $ 38,467
Net cash used in investing activities...... $ (29,700) $ (30,331) $ (36,202) $ (47,679) $ (13,676)
Net cash used in financing activities...... $ (5,883) $ (5,873) $ (24,318) $ (12,476) $ (23,148)
Capital expenditures....................... $ 13,405 $ 9,929 $ 13,481 $ 22,555 $ 21,803

OPERATING DATA:
Laboratory internal revenue growth (8)..... 14.8% 11.5% 12.5% 12.6% 9.1%
Animal hospital same-facility revenue
growth (9).............................. 3.6% 4.4% 5.0% 7.0% 2.6%

AS OF SEPTEMBER 30, 2002
----------------------------------------
AS ADJUSTED PRO FORMA AS
ACTUAL (10) ADJUSTED (11)
---------- ----------- -------------
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 32,358 $ 7,602 $ 13,471
Total assets............................... 513,380 489,984 498,360
Total debt................................. 388,834 373,048 339,346
Total stockholders' equity................. 64,914 59,339 101,417

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(1) Includes other revenue of $1.5 million for each of the nine months ended
September 30, 2002 and 2001, and $2.0 million, $925,000 and $5.1 million
for the years ended December 31, 2001, 2000 and 1999. Total revenue is net
of intercompany eliminations of $6.9 million and $5.7 million for the nine
months ended

Page 7

September 30, 2002 and 2001, and $7.5 million, $6.2 million and $5.8
million for the years ended December 31, 2001, 2000 and 1999.

(2) The pro forma statement of operations data for the nine months ended
September 30, 2002 and the year ended December 31, 2001 are presented as if
this offering, our initial public offering, the concurrent note offering
by one of our wholly owned subsidiaries and the application of the net
proceeds therefrom, and our use of $12.3 million of cash on hand, which
occurred in November 2001, occurred on January 1, 2001.

(3) EBITDA is operating income before depreciation and amortization. Adjusted
EBITDA for the 2001 and 2000 periods represents EBITDA adjusted to exclude
non-cash compensation and management fees paid pursuant to our management
services agreement with Leonard Green & Partners, which was terminated in
November 2001. Adjusted EBITDA for the 2001 periods also excludes agreement
termination costs and write-down of assets. Adjusted EBITDA for the 2000
period also excludes recapitalization costs. Adjusted EBITDA for the 1999
period represents EBITDA adjusted to exclude Year 2000 remediation expense
and other non-cash operating items. No adjustments were made to the EBITDA
calculations for 2002.

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

The calculation of EBITDA and adjusted EBITDA is shown below (dollars in
thousands):

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------
2002 2001 2001 2000 1999
--------- --------- --------- -------- ---------
Operating income.......... $ 75,000 $ 33,680 $ 27,706 $19,205 $ 47,016
Depreciation and
amortization............ 9,330 19,121 25,166 18,878 16,463
--------- --------- --------- -------- ---------
EBITDA............. 84,330 52,801 52,872 38,083 63,479
Management fees (a)....... -- 1,860 2,273 620 --
Agreement termination
costs................... -- -- 17,552 -- --
Recapitalization costs.... -- -- -- 34,268 --
Year 2000 remediation
expense................. -- -- -- -- 2,839
Other non-cash operating
items (b)............... -- 16,231 16,808 555 (1,873)
--------- --------- --------- -------- ---------
Adjusted EBITDA.... $ 84,330 $ 70,892 $ 89,505 $73,526 $ 64,445
========= ========= ========= ======== =========

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(a) Management fees were paid pursuant to our management services
agreement and are included in selling, general and administrative
expense in our statements of operations. Effective November 27, 2001,
the parties terminated the management services agreement.

(b) Other non-cash operating items include a write-down of assets of $8.6
million and non-cash compensation of $1.4 million included in direct
costs and $6.2 million included in selling, general and administrative
expense for the nine months ended September 30, 2001; a write-down of
assets of $9.2 million and non-cash compensation of $1.4 million
included in direct costs and $6.2 million included in selling, general
and administrative expense for the year ended December 31, 2001;
non-cash compensation of $103,000 included in direct costs and
$452,000 included in selling, general and administrative expense for
the year ended December 31, 2000 and reversal of restructuring charges
of $1.9 million for the year ended December 31, 1999.

(4) Adjusted EBITDA is the sum of adjusted laboratory EBITDA, adjusted animal
hospital EBITDA and other revenue, less corporate selling, general and
administrative expense, excluding non-cash compensation and management
fees, and including the effect of gain (loss) on sale of assets.

Page 8

The calculation of adjusted EBITDA is shown below (dollars in thousands):

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------
2002 2001 2001 2000 1999
--------- --------- --------- -------- ---------
Adjusted laboratory
EBITDA.................. $ 43,734 $ 35,264 $ 45,561 $ 38,827 $ 32,273
Adjusted animal
hospital EBITDA......... 49,472 43,159 53,658 42,985 37,237
Other revenue............. 1,500 1,500 2,000 925 5,100
Corporate selling,
general and
administrative
expense (a)............. (10,456) (8,906) (11,832) (9,211) (10,165)
Gain (loss) on sale
of assets............... 80 (125) 118 -- --
--------- --------- --------- -------- ---------
Adjusted EBITDA...... $ 84,330 $ 70,892 $ 89,505 $ 73,526 $ 64,445
========= ========= ========= ========= =========

---------------------

(a) Corporate selling, general and administrative expense excludes
non-cash compensation of $771,000 and management fees of $1.9 million
for the nine months ended September 30, 2001, non-cash compensation of
$771,000 and management fees of $2.3 million for the year ended
December 31, 2001; and non-cash compensation of $56,000 and management
fees of $620,000 for the year ended December 31, 2000. Management fees
were paid pursuant to our management services agreement. Effective
November 27, 2001, the parties terminated the management services
agreement.

(5) Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total
revenue.

(6) Adjusted laboratory EBITDA excludes non-cash compensation of $4.3 million
for the nine months ended September 30, 2001, and non-cash compensation of
$4.3 million and $311,000 for the years ended December 31, 2001 and 2000.
Adjusted laboratory EBITDA margin is calculated by dividing adjusted
laboratory EBITDA by laboratory revenue.

(7) Adjusted animal hospital EBITDA excludes non-cash compensation of $2.6
million for the nine months ended September 30, 2001, and non-cash
compensation of $2.6 million and $188,000 for the years ended December 31,
2001 and 2000. Adjusted animal hospital EBITDA margin is calculated by
dividing adjusted animal hospital EBITDA by animal hospital revenue.

(8) Laboratory internal revenue growth is calculated using laboratory revenue
as reported, adjusted to exclude, for those laboratories that we did not
own for the entire period presented, an estimate of revenue generated by
these newly acquired laboratories subsequent to the date of our purchase.
We calculate this estimate of revenue for each newly acquired laboratory
using an historical twelve-month revenue figure (in some cases on an
annualized basis) provided to us by the seller of the acquired laboratory,
which amount is increased by our laboratory revenue growth rate for the
prior year. In calculating the laboratory revenue growth rate for the year
in which the acquisition occurred, we exclude from our reported laboratory
revenue the estimated annual revenue attributable to newly acquired
laboratories multiplied by a fraction representing the portion of the year
that we owned the related facility. In calculating the laboratory revenue
growth rate for the year following the acquisition, we exclude from our
reported laboratory revenue the estimated annual revenue attributable to
newly acquired laboratories multiplied by a fraction representing the
portion of the year that we did not own the facility. To determine
laboratory internal revenue growth rate for the applicable period, we
compare laboratory revenue net of estimated laboratory revenue of acquired
laboratories to laboratory revenue as reported for the prior comparable
period. We believe this fairly presents laboratory internal revenue growth
for the periods presented, although our calculation may not be comparable
to similarly titled measures reported by other companies.

(9) Animal hospital same-facility revenue growth is calculated using the
combined revenue of the animal hospitals owned and managed for the entire
periods presented.

Page 9

(10) The as adjusted balance sheet data are presented as if (a) the issuance of
$25.0 million in additional senior term C notes under our senior credit
facility; (b) the redemption of the entire principal amount of our 13.5%
senior subordinated notes; and (c) the redemption of $30.0 million
principal amount of our 15.5% senior notes, each of which occurred in
October 2002, had occurred at September 30, 2002.

(11) The pro forma as adjusted balance sheet data are presented as if (a) this
offering and the application of the net proceeds therefrom; (b) the
issuance of $25.0 million in additional senior term C notes under our
senior credit facility; (c) the redemption of the entire principal amount
of our 13.5% senior subordinated notes; and (d) the redemption of $30.0
million principal amount of our 15.5% senior notes, each of which occurred
in October 2002, had occurred at September 30, 2002.

Page 10

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
AND OTHER INFORMATION INCLUDED IN THIS PROSPECTUS IN EVALUATING US AND OUR
BUSINESS. IF ANY OF THE EVENTS DESCRIBED BELOW OCCUR, OUR BUSINESS AND FINANCIAL
RESULTS COULD BE ADVERSELY AFFECTED IN A MATERIAL WAY. THIS COULD CAUSE THE
TRADING PRICE OF OUR COMMON STOCK TO DECLINE, PERHAPS SIGNIFICANTLY.

RISKS RELATED TO OUR BUSINESS

IF WE ARE UNABLE TO EFFECTIVELY EXECUTE OUR GROWTH STRATEGY, WE MAY NOT ACHIEVE
OUR DESIRED ECONOMIES OF SCALE AND OUR MARGINS AND PROFITABILITY MAY DECLINE.

Our success depends in part on our ability to build on our position as a
leading animal health care services company through a balanced program of
internal growth initiatives and selective acquisitions of established animal
hospitals and laboratories. If we cannot implement or effectively execute these
initiatives and acquisitions, our results of operations will be adversely
affected. Even if we effectively implement our growth strategy, we may not
achieve the economies of scale that we have experienced in the past or that we
anticipate. Our internal growth rate may decline and could become negative. Our
laboratory internal revenue growth rate has fluctuated between 9.1% and 12.6%
for each fiscal year from 1999 through 2001. Similarly, our animal hospital
same-facility revenue growth rate has fluctuated between 2.6% and 7.0% over the
same fiscal years. Our internal growth may continue to fluctuate and may be
below our historical rates. Any reductions in the rate of our internal growth
may cause our revenues and margins to decrease. Our historical growth rates and
margins are not necessarily indicative of future results.

OUR BUSINESS AND RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED IF WE ARE
UNABLE TO MANAGE OUR GROWTH EFFECTIVELY.

Since January 1, 1996, we have experienced rapid growth and expansion. Our
failure to manage our growth effectively may increase our costs of operations
and hinder our ability to execute our business strategy. Our rapid growth has
placed, and will continue to place, a significant strain on our management and
operational systems and resources. At January 1, 1996, we operated 59 hospitals,
operated laboratories servicing approximately 9,000 customers in 27 states and
had approximately 1,150 full-time equivalent employees. At September 30, 2002,
we operated 225 hospitals, operated laboratories servicing approximately 13,000
customers in all 50 states and had approximately 3,500 full-time equivalent
employees. If our business continues to grow, we will need to continue to
improve and enhance our overall financial and managerial controls, reporting
systems and procedures, and expand, train and manage our workforce in order to
maintain control of expenses and achieve desirable economies of scale. We also
will need to increase the capacity of our current systems to meet additional
demands.

DIFFICULTIES INTEGRATING NEW ACQUISITIONS MAY IMPOSE SUBSTANTIAL COSTS AND CAUSE
OTHER PROBLEMS FOR US.

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

o negative effects on our operating results;

Page 11

o impairment of goodwill and other intangible assets;

o dependence on retention, hiring and training of key personnel,
including specialists; and

o contingent and latent risks associated with the past operations of,
and other unanticipated problems arising in, an acquired business.

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

THE CARRYING VALUE OF OUR GOODWILL COULD BE SUBJECT TO IMPAIRMENT WRITE-DOWNS.

At September 30, 2002, our balance sheet reflected $332.5 million of
goodwill, which is a substantial portion of our total assets of $513.4 million
at that date. We expect that the aggregate amount of goodwill on our balance
sheet will increase as a result of future acquisitions. We continually evaluate
whether events or circumstances have occurred that suggest that the fair market
value of each of our reporting units exceeds their carrying values. If we
determine that the fair market value of one of our reporting units does not
exceed its carrying value, this may result in an impairment write-down of the
goodwill for that reporting unit. The impairment write-down would be reflected
as expense and could have a material adverse effect on our results of operations
during the period in which we recognize the expense. In 2002, an independent
valuation group concluded that the fair value of our goodwill exceeded its
carrying value and accordingly, as of that date, there were no goodwill
impairment issues. However, in the future we may incur impairment charges
related to the goodwill already recorded or arising out of future acquisitions
or as a result of the sale or closure of animal hospitals.

WE REQUIRE A SIGNIFICANT AMOUNT OF CASH TO SERVICE OUR DEBT AND EXPAND OUR
BUSINESS AS PLANNED.

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

In October 2002, we borrowed $25.0 million in additional senior term C
notes. These proceeds and cash on-hand were used to voluntarily repay the entire
outstanding principal amount on our 13.5% senior subordinated notes and $30.0
million in principal on our 15.5% senior notes. The following table details our
debt balances at September 30, 2002 and the pro forma balances as if the
additional senior term C notes were incurred and the voluntary repayment of our
13.5% senior subordinated notes and a portion of our 15.5% senior notes had
occurred on September 30, 2002 (dollars in thousands):

AS OF SEPTEMBER 30, 2002
----------------------------------------
ACTUAL ADJUSTMENT PRO FORMA
----------- ---------- ----------

Senior term C notes.................. $ 142,703 $ 25,000 $ 167,703
13.5% senior subordinated notes...... 15,000 (15,000) --
9.875% senior subordinated notes..... 170,000 170,000
15.5% senior notes................... 66,715 (30,000) 36,715
Other................................ 1,658 1,658
---------- ----------
396,076 376,076
Less - unamortized discount.......... (7,242) 4,214 (3,028)
---------- ----------
Total debt obligations.......... $ 388,834 $ 373,048
========== ==========

The following table sets forth our scheduled principal and interest
payments due by us for each of the years ending December 31, adjusted to reflect
the impact of the no-fee swap agreement with Wells Fargo, which became effective
November 29, 2002, the additional senior term C notes borrowed and the voluntary
repayment of our

Page 12

13.5% senior subordinated notes and a portion of our 15.5% senior notes, which
occurred in October 2002 (dollars in thousands):

2002 2003 2004 2005(1) 2006(1)
---------- ---------- ---------- ---------- ----------

Long-term debt........... $ 3,541 $ 1,894 $ 1,860 $ 4,044 $ 21,487
Fixed interest........... 20,694 19,333 19,134 21,328 22,448
Variable interest........ 7,714 6,966 7,698 10,614 11,313
Collar agreement......... 2,340 -- -- -- --
PIK interest............. -- -- -- 16,610 --
---------- ---------- ---------- ---------- ----------
Total............... $ 34,289 $ 28,193 $ 28,692 $ 52,596 $ 55,248
========== ========== ========== ========== ==========

(1) We intend to use the proceeds from this offering to repay the
entire outstanding principal amount of our 15.5% senior notes. If we
repay the entire outstanding principal amount of these notes, our
future cash obligations as set forth in the table above will be
reduced by $23.0 million in 2005 and $5.3 million in 2006.

We have both fixed-rate and variable-rate debt. Our variable-rate debt is
based on a variable-rate component plus a fixed margin. Our interest rate on the
variable-rate component of our debt was approximately 1.89% for 2002. For
purposes of the foregoing table, we have estimated the interest rate on the
variable-rate component of our debt to be 2.50%, 3.00%, 3.50% and 4.00% for
years 2003 through 2006, respectively. Our consolidated financial statements
included in this prospectus discuss these variable-rate notes in more detail.

On November 7, 2002 we entered into a no-fee swap agreement with Wells
Fargo Bank effective November 29, 2002 and expiring November 29, 2004. The
agreement swaps monthly variable LIBOR rates for a fixed rate of 2.22% on a
notional amount of $40.0 million. The agreement qualifies for hedge accounting.

Through March 2005, interest on our 15.5% senior notes is payable
semi-annually and, at our option, in cash or by issuing additional 15.5% senior
notes. After March 2005, interest is payable semi-annually, in cash. Any
additional 15.5% senior notes are considered PIK interest and are reflected in
the above table. These notes have the same terms as the original notes except
they mature in September 2005. We have issued additional 15.5% senior notes for
all of our historical interest payments on the 15.5% senior notes and intend to
continue doing so pending consummation of this offering.

Our ability to make payments on our debt, and to fund acquisitions, will
depend on our ability to generate cash in the future. Insufficient cash flow
could place us at risk of default under our debt agreements or could prevent us
from expanding our business as planned. Our ability to generate cash is subject
to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control. Our business may not generate sufficient
cash flow from operations, our strategy to increase operating efficiencies may
not be realized and future borrowings may not be available to us under our
senior credit facility in an amount sufficient to enable us to service our debt
or to fund our other liquidity needs. In order to meet our debt obligations, we
may need to refinance all or a portion of our debt. We may not be able to
refinance any of our debt on commercially reasonable terms or at all.

OUR DEBT INSTRUMENTS MAY ADVERSELY AFFECT OUR ABILITY TO RUN OUR BUSINESS.

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

o limit our funds available to repay the 15.5% senior notes and 9.875%
senior subordinated notes;

o limit our ability to borrow additional funds or to obtain other
financing in the future for working capital, capital expenditures,
acquisitions, investments and general corporate purposes;

o limit our ability to dispose of our assets, create liens on our assets
or to extend credit;

Page 13

o make us more vulnerable to economic downturns and reduce our
flexibility in responding to changing business and economic
conditions;

o limit our flexibility in planning for, or reacting to, changes in our
business or industry;

o place us at a competitive disadvantage to our competitors with less
debt; and

o restrict our ability to pay dividends, repurchase or redeem our
capital stock or debt, or merge or consolidate with another entity.

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

OUR FAILURE TO SATISFY COVENANTS IN OUR DEBT INSTRUMENTS WILL CAUSE A DEFAULT
UNDER THOSE INSTRUMENTS.

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

DUE TO THE FIXED COST NATURE OF OUR BUSINESS, FLUCTUATIONS IN OUR REVENUE COULD
ADVERSELY AFFECT OUR OPERATING INCOME.

Approximately 57% of our expense, particularly rent and personnel costs,
are fixed costs and are based in part on expectations of revenue. We may be
unable to reduce spending in a timely manner to compensate for any significant
fluctuations in our revenue. Accordingly, shortfalls in revenue may adversely
affect our operating income.

THE SIGNIFICANT COMPETITION IN THE COMPANION ANIMAL HEALTH CARE SERVICES
INDUSTRY COULD CAUSE US TO REDUCE PRICES OR LOSE MARKET SHARE.

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

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

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

Page 14

WE MAY EXPERIENCE DIFFICULTIES HIRING SKILLED VETERINARIANS DUE TO SHORTAGES
THAT COULD DISRUPT OUR BUSINESS.

As the pet population continues to grow, the need for skilled veterinarians
continues to increase. If we are unable to retain an adequate number of skilled
veterinarians, we may lose customers, our revenue may decline and we may need to
sell or close animal hospitals. As of September 30, 2002, there were 28
veterinary schools in the country accredited by the American Veterinary Medical
Association. These schools graduate approximately 2,100 veterinarians per year.
There is a shortage of skilled veterinarians across the country, particularly in
some regional markets in which we operate animal hospitals including Northern
California. During these shortages in these regions, we may be unable to hire
enough qualified veterinarians to adequately staff our animal hospitals, in
which event we may lose market share and our revenues and profitability may
decline.

IF WE FAIL TO COMPLY WITH GOVERNMENTAL REGULATIONS APPLICABLE TO OUR BUSINESS,
VARIOUS GOVERNMENTAL AGENCIES MAY IMPOSE FINES, INSTITUTE LITIGATION OR PRECLUDE
US FROM OPERATING IN CERTAIN STATES.

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. As of September 30, 2002 we operated 58 animal hospitals
in 11 states with these laws, including 21 in New York. We may experience
difficulty in expanding our operations into other states with similar laws.
Given varying and uncertain interpretations of the veterinary laws of each
state, we may not be in compliance with restrictions on the corporate practice
of veterinary medicine in all states. A determination that we are in violation
of applicable restrictions on the practice of veterinary medicine in any state
in which we operate could have a material adverse effect on us, particularly if
we were unable to restructure our operations to comply with the requirements of
that state.

We currently are a party to a lawsuit in the State of Ohio in which that
State has alleged that our management of a veterinary medical group licensed to
practice veterinary medicine in that state violates the Ohio statute prohibiting
business corporations from providing or holding themselves out as providers of
veterinary medical care. On March 20, 2001, the trial court in the case entered
summary judgment in favor of the State of Ohio and issued an order enjoining us
from operating in the State of Ohio in a manner that is in violation of the
State of Ohio statute. Since that time, we have been engaged in discussions with
the Attorney General's office to restructure our operations. We have reached an
agreement in principal with the Attorney General's office that our management
services agreement, as amended, does not constitute the practice of veterinary
medicine by a corporation. We anticipate filing our agreement with the court as
soon as practicable.

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

ANY FAILURE IN OUR INFORMATION TECHNOLOGY SYSTEMS OR DISRUPTION IN OUR
TRANSPORTATION NETWORK COULD SIGNIFICANTLY INCREASE TESTING TURN-AROUND TIME,
REDUCE OUR PRODUCTION CAPACITY AND OTHERWISE DISRUPT OUR OPERATIONS.

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

Our computer systems are vulnerable to damage or interruption from a
variety of sources, including telecommunications failures, electricity brownouts
or blackouts, malicious human acts and natural disasters. Moreover, despite
network security measures, some of our servers are potentially vulnerable to
physical or electronic break-ins, computer viruses and similar disruptive
problems. Despite the precautions we have taken, unanticipated problems
affecting our systems could cause interruptions in our information technology
systems. Our

Page 15

insurance policies may not adequately compensate us for any losses that may
occur due to any failures in our systems.

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

Any substantial reduction in the number of available flights or delays in
the departure of flights will disrupt our transportation network and our ability
to provide test results in a timely manner. In addition, our Test Express
service, which services customers outside of major metropolitan areas, is
dependent on flight services in and out of Memphis and the transportation
network of Federal Express. Any sustained interruption in either flight services
in Memphis or the transportation network of Federal Express would result in
increased turn-around time for the reporting of test results to customers
serviced by our Test Express service.

THE LOSS OF MR. ROBERT ANTIN, OUR CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS.

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

RISKS ASSOCIATED WITH THIS OFFERING

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

At November 30, 2002, our executive officers, directors and principal
stockholders beneficially owned, in the aggregate, approximately 42.2% of our
outstanding common stock. Following this offering, these persons will own, in
the aggregate, approximately 31.6% of our outstanding common stock. As a result,
these stockholders are able to significantly affect our management, our policies
and all matters requiring stockholder approval. The directors supported by these
stockholders will be able to significantly affect decisions relating to our
capital structure, including decisions to issue additional capital stock,
implement stock repurchase programs and incur indebtedness. This concentration
of ownership may have the effect of deterring hostile takeovers, delaying or
preventing changes in control or changes in management, or limiting the ability
of our other stockholders to approve transactions that they may deem to be in
their best interests.

Page 16

FUTURE SALES OF SHARES OF OUR COMMON STOCK IN THE PUBLIC MARKET MAY DEPRESS OUR
STOCK PRICE AND MAKE IT DIFFICULT FOR YOU TO RECOVER THE FULL VALUE OF YOUR
INVESTMENT IN OUR SHARES.

If our existing stockholders sell substantial amounts of our common stock
in the public market following this offering or if there is a perception that
these sales may occur, the market price of our common stock could decline. Based
on shares outstanding as of September 30, 2002, upon completion of this offering
we will have outstanding approximately 40,065,975 shares of common stock. Of
these shares, _________ shares of common stock are freely tradable, without
restriction, in the public market, unless the shares offered in the offering are
purchased by affiliates. After the lockup agreements pertaining to this offering
expire 90 days from the date of this prospectus unless waived, an additional
________ shares will be eligible for sale in the public market at various times,
subject to the restrictions of Rule 144 of the Securities Act of 1933, and
______ shares will be eligible for sale in the public market subject to the
restrictions of Rule 701 of the Securities Act of 1933.

THE PRICE OF OUR COMMON STOCK MAY BE VOLATILE.

The stock market has from time to time experienced significant price and
volume fluctuations that have affected the market prices of securities. These
fluctuations often have been unrelated or disproportionate to the operating
performance of publicly traded companies. In the past, following periods of
volatility in the market price of a particular company's securities, securities
class-action litigation has often been brought against that company. We may
become involved in this type of litigation in the future. Litigation of this
type is often expensive to defend and may divert management's attention and
resources from the operation of our business.

POLITICAL EVENTS AND THE UNCERTAINTY RESULTING FROM THEM MAY HAVE A MATERIAL
ADVERSE EFFECT ON OUR OPERATING RESULTS.

The terrorist attacks that took place in the United States on September 11,
2001, along with the United States' military campaign against terrorism in
Afghanistan and elsewhere, ongoing violence in the Middle East and increasing
speculation regarding future military action against Iraq have created many
economic and political uncertainties, some of which may affect the markets in
which we operate, our operations and profitability and your investment. The
potential near-term and long-term effect these attacks may have for our
customers, the markets for our services and the U.S. economy are uncertain. The
consequences of any terrorist attacks, or any armed conflicts which may result,
are unpredictable and we may not be able to foresee events that could have an
adverse effect on our markets, our business or your investment.

OUR STOCK PRICE MAY BE ADVERSELY AFFECTED BECAUSE OUR RESULTS OF OPERATIONS MAY
FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.

Our operating results may fluctuate significantly in the future. If our
quarterly revenue and operating results fall below the expectations of
securities analysts and investors, the market price of our common stock could
fall substantially. Historically, after eliminating the effect of acquisitions,
we have experienced higher revenue in the second and third quarters than in the
first and fourth quarters. The demand for our veterinary services is 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. Also, use of veterinary services may be affected by levels of
infestation of fleas, heartworms and ticks, and the number of daylight hours. A
substantial portion of our costs are fixed and do not vary with the level of
demand for our services. Therefore, net income for the second and third quarters
at individual animal hospitals and veterinary diagnostic laboratories generally
is higher than in the first and fourth quarters.

Operating results also may vary depending on a number of factors, many of
which are outside our control, including:

o demand for our tests;

o changes in our pricing policies or those of our competitors;

Page 17

o the hiring and retention of key personnel;

o wage and cost pressures;

o changes in fuel prices or electrical rates;

o costs related to acquisitions of technologies or businesses; and

o seasonal and general economic factors.

TAKEOVER DEFENSE PROVISIONS MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK.

Various provisions of Delaware corporation law and of our corporate
governance documents may inhibit changes in control not approved by our board of
directors and may have the effect of depriving you of an opportunity to receive
a premium over the prevailing market price of our common stock in the event of
an attempted hostile takeover. In addition, the existence of these provisions
may adversely affect the market price of our common stock. These provisions
include:

o a classified board of directors;

o a prohibition on stockholder action through written consents;

o a requirement that special meetings of stockholders be called only by
our board of directors, the Chairman of our board of directors,
our President or our Chief Executive Officer;

o advance notice requirements for stockholder proposals and nominations;
and

o availability of "blank check" preferred stock.

Page 18

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business," and elsewhere in this prospectus are forward-looking
statements. We generally identify forward-looking statements in this prospectus
using words like "believe," "intend," "expect," "estimate," "may," "should,"
"plan," "project," "contemplate," "anticipate," "predict," or similar
expressions. These statements involve known and unknown risks, uncertainties,
and other factors, including those described in the "Risk Factors" section, that
may cause our or our industry's actual results, levels of activity, performance,
or achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by these
forward-looking statements. Except as required by applicable law, including the
securities laws of the United States, and the rules and regulations of the
Securities and Exchange Commission, we do not plan to publicly update or revise
any forward-looking statements after we distribute this prospectus, whether as a
result of any new information, future events or otherwise.

We use market data and industry forecasts and projections throughout this
prospectus, which we have obtained from market research, publicly available
information and industry publications. These sources generally state that the
information they provide has been obtained from sources believed to be reliable,
but that the accuracy and completeness of such information are not guaranteed.
The forecasts and projections are based on industry surveys and the preparers'
experience in the industry and there is no assurance that any of the projected
amounts will be achieved. Similarly, we believe that the surveys and market
research others have performed are reliable, but we have not independently
verified this information.

----------------------------------------------

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY
SUPPLEMENT AND ANY INFORMATION INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR
ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY
INFORMATION THAT IS DIFFERENT. IF YOU RECEIVE ANY UNAUTHORIZED INFORMATION, YOU
MUST NOT RELY ON IT. YOU SHOULD DISREGARD ANYTHING WE SAID IN AN EARLIER
DOCUMENT THAT IS INCONSISTENT WITH WHAT IS INCLUDED IN OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS
PROSPECTUS OR ANY SUPPLEMENT IS CURRENT AS OF ANY DATE OTHER THAN THE DATE ON
THE FRONT PAGE OF THIS PROSPECTUS.

Page 19

USE OF PROCEEDS

We expect to receive approximately $46.3 million in net proceeds, after
deducting underwriting discounts and commissions and estimated offering expenses
payable by us, from the sale of shares of our common stock in this offering
based on the sale of 3,300,000 shares at an assumed public offering price of
$14.97 per share. If the underwriters exercise their over-allotment option in
full, we expect our additional net proceeds to be approximately $7.1 million. We
will not receive any proceeds from the sale of the shares by the selling
stockholders in this offering.

We intend to use the net proceeds from this offering:

o to repay the entire outstanding principal amount, or approximately
$36.7 million, of our 15.5% senior notes due 2010 at a redemption
price of 110% of the principal amount, for an aggregate of $40.4
million, plus accrued and unpaid interest; and

o for general corporate purposes.

If the underwriters exercise their over-allotment option, any additional
net proceeds received by us will be used for general corporate purposes. We will
not receive any proceeds from the sale of the shares by the selling stockholders
pursuant to the exercise of the over-allotment option.

Pending application of the net proceeds as described above, we intend to
invest the net proceeds in short-term investment grade securities.

Page 20

PRICE RANGE OF OUR COMMON STOCK

Since November 21, 2001, our common stock has traded on The Nasdaq Stock
Market's National Market under the symbol "WOOF." From September 20, 2000
through November 20, 2001, our common stock was not publicly traded. From March
19, 1993 through September 19, 2000, our common stock was traded on the Nasdaq
National Market under the symbol "VCAI." The following table sets forth the
range of high and low bid information per share for our common stock as quoted
on the Nasdaq National Market for the periods indicated. The stock prices for
fiscal 2000 have been restated to reflect a fifteen-for-one stock split effected
concurrent with the consummation of our recapitalization in September 2000.

HIGH LOW
-------- --------
Fiscal 2002 by Quarter
Fourth................................... $ 16.40 $ 12.16
Third.................................... $ 16.48 $ 11.90
Second................................... $ 16.36 $ 12.71
First.................................... $ 14.62 $ 11.65

Fiscal 2001 by Quarter
Fourth (commencing November 21, 2001).... $ 12.45 $ 8.83

Fiscal 2000 by Quarter
Third (through September 19, 2000)....... $ 0.99 $ 0.90
Second .................................. $ 0.93 $ 0.83
First ................................... $ 0.96 $ 0.68

At December 31, 2002, the closing price of our common stock on the Nasdaq
National Market was $15.00, and at that date, there were approximately 97
holders of record of our common stock.

DIVIDEND POLICY

We have not paid cash dividends on our common stock, and we do not
anticipate paying cash dividends in the foreseeable future. In addition, our
senior credit facility and the indentures governing our outstanding senior and
senior subordinated notes place limitations on our ability to pay dividends or
make other distributions in respect of our common stock. Any future
determination as to the payment of dividends on our common stock will be
restricted by these limitations, will be at the discretion of our board of
directors and will depend on our results of operations, financial condition,
capital requirements and other factors deemed relevant by the board of
directors, including the General Corporation Law of the State of Delaware, which
provides that dividends are only payable out of surplus or current net profits.

Page 21

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2002:

o on an actual basis;

o on an as adjusted basis to reflect transactions that occurred in
October 2002; and

o on a pro forma as adjusted basis to reflect transactions that occurred
in October 2002 and this offering at an assumed public offering price
of $14.97 per share and the intended application of the net proceeds
therefrom.

AS OF SEPTEMBER 30, 2002
-------------------------------------------
AS ADJUSTED PRO FORMA AS
ACTUAL (1) ADJUSTED (2)
----------- ----------- ------------

(DOLLARS IN THOUSANDS)
Total debt:
Senior credit facility:
Revolving credit facility (3)................ $ -- $ -- $ --
Senior term C notes (4)...................... 142,703 167,703 167,703
13.5% senior subordinated notes due 2010........ 15,000 -- --
9.875% senior subordinated notes due 2009....... 170,000 170,000 170,000
15.5% senior notes due 2010..................... 66,715 36,715 --
Other debt...................................... 1,658 1,658 1,658
Unamortized discount............................ (7,242) (3,028) (15)
----------- ----------- -----------
Total debt................................... 388,834 373,048 339,346
----------- ----------- -----------
Stockholders' equity:
Common stock, 75,000,000 shares authorized,
36,760,975 shares issued and outstanding,
actual and as adjusted; 75,000,000 shares
authorized and 40,060,975 shares issued and
outstanding, pro forma as adjusted (5)....... 37 37 41
Additional paid-in capital...................... 188,865 188,865 235,117
Notes receivable from stockholders.............. (240) (240) (240)
Accumulated deficit............................. (123,429) (129,004) (133,182)
Accumulated comprehensive loss.................. (319) (319) (319)
----------- ----------- -----------
Total stockholders' equity................... 64,914 59,339 101,417
----------- ----------- -----------
Total capitalization......................... $ 453,748 $ 432,387 $ 440,763
=========== =========== ===========

(1) The as adjusted data are presented as if (a) the issuance of $25.0 million
in additional senior term C notes under our senior credit facility; (b) the
repayment of the entire outstanding principal amount of our 13.5% senior
subordinated notes; and (c) the repayment of $30.0 million in principal of
our 15.5% senior notes, each of which occurred in October 2002, had
occurred at September 30, 2002.

(2) The pro forma as adjusted data are presented as if (a) this offering and
the application of the net proceeds therefrom; (b) the issuance of $25.0
million in additional senior term C notes under our senior credit facility;
(c) the repayment of the entire outstanding principal amount of our 13.5%
senior subordinated notes; and (d) the repayment of $30.0 million in
principal of our 15.5% senior notes, each of which occurred in October
2002, had occurred at September 30, 2002.

(3) The revolving credit facility provides for borrowings of up to $50.0
million, $7.5 million of which was drawn in December 2002 and is
outstanding.

Page 22

(4) On August 29, 2002, we repaid our senior term A and senior term B notes
with the proceeds acquired from the issuance of senior term C notes, which
bear a lower interest rate than the weighted average interest rate for the
senior term A and senior term B notes. See "Description of Certain
Indebtedness" for additional information.

(5) Share information is based on the number of shares outstanding as of
September 30, 2002, and:

o excludes 1,955,901 shares of common stock issuable upon exercise of
outstanding options under our stock incentive plans, at a weighted
average exercise price of $9.95 per share;

o excludes 650,000 shares available for future issuance under our stock
incentive plans; and

o assumes no exercise of the underwriters' over-allotment option.

Page 23

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

Our selected historical consolidated financial data for the years ended
December 31, 2001, 2000, 1999, 1998 and 1997 were derived from our audited
financial statements. Our financial statements for each of the fiscal years
ended December 31, 2001, 2000 and 1999 were audited by KPMG LLP. Our financial
statements for each of the fiscal years ended December 31, 1998 and 1997 were
audited by Arthur Andersen LLP. Our selected historical consolidated financial
data for the nine months ended September 30, 2002 and 2001 have been derived
from our unaudited interim financial statements and include, in the opinion of
management, all adjustments necessary for a fair presentation of our financial
position and operating results for these periods and as of those dates. Our
results for the interim periods are not necessarily indicative of our results
for a full year's operations. You should read the following information together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and related notes. Our
audited consolidated financial statements for the years ended December 31, 2001
and 2000 and for each of the three years in the period ended December 31, 2001
and our unaudited condensed, consolidated financial statements as of the nine
months ended September 30, 2002 and 2001 are included in this prospectus.

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- ---------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENTS OF OPERATIONS DATA:
Laboratory revenue............... $ 116,911 $ 101,855 $ 134,711 $ 119,300 $ 103,282 $ 89,896 $ 68,997
Animal hospital revenue........... 225,383 207,665 272,113 240,624 217,988 191,888 165,848
Other revenue (1)................. 1,500 1,500 2,000 925 5,100 5,100 5,764
Intercompany...................... (6,902) (5,655) (7,462) (6,162) (5,810) (5,845) (4,696)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue..................... 336,892 305,365 401,362 354,687 320,560 281,039 235,913
Direct costs...................... 226,749 213,454 283,226 254,890 232,493 209,380 178,630
Selling, general and
administrative.................. 25,893 30,365 38,633 27,446 23,622 19,693 17,676
Depreciation and amortization..... 9,330 19,121 25,166 18,878 16,463 13,132 11,199
Agreement termination costs....... -- -- 17,552 -- -- -- --
Recapitalization costs............ -- -- -- 34,268 -- -- --
Year 2000 remediation expense..... -- -- -- -- 2,839 -- --
Other operating and non-cash
items........................... (80) 8,745 9,079 -- (1,873) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)........... 75,000 33,680 27,706 19,205 47,016 38,834 28,408
Net interest expense.............. 30,541 32,387 42,918 19,892 9,449 8,832 7,411
Other (income) expense, net....... (159) 233 168 1,800 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before minority
interest, provision for
income taxes and
extraordinary item.............. 44,618 1,060 (15,380) (2,487) 37,567 30,002 20,997
Minority interest in income of
subsidiaries.................... 1,360 1,104 1,439 1,066 850 780 424
Provision for income taxes........ 18,092 6,741 445 2,199 14,360 12,954 9,347
Extraordinary loss on early
extinguishment of debt (net
of taxes)....................... 2,001 -- 10,159 2,659 -- -- --
Increase in carrying amount of
redeemable preferred stock...... -- 15,583 19,151 5,391 -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) available to
common stockholders.............$ 23,165 $ (22,368) $ (46,574) $ (13,802) $ 22,357 $ 16,268 $ 11,226
========== ========== ========== ========== ========== ========== ==========

Basic earnings (loss) per share...$ 0.63 $ (1.27) $ (2.39) $ (0.06) $ 0.07 $ 0.05 $ 0.04
Diluted earnings (loss) per
share...........................$ 0.63 $ (1.27) $ (2.39) $ (0.06) $ 0.07 $ 0.05 $ 0.04
Shares used for computing basic
earnings (loss) per share....... 36,744 17,643 19,509 234,055 315,945 305,250 294,390
Shares used for computed
diluted earnings (loss) per
share........................... 37,088 17,643 19,509 234,055 329,775 329,100 315,195

Page 24

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ --------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
---------- ---------- ---------- ---------- --------- --------- ----------
(DOLLARS IN THOUSANDS)
OTHER FINANCIAL DATA:
Adjusted EBITDA (2) (3)............ $ 84,330 $ 70,892 $ 89,505 $ 73,526 $ 64,445 $ 51,966 $ 39,607
Adjusted EBITDA margin (4)......... 25.0% 23.2% 22.3% 20.7% 20.1% 18.5% 16.8%

Adjusted laboratory EBITDA (5)..... $ 43,734 $ 35,264 $ 45,561 $ 38,827 $ 32,273 $ 24,215 $ 20,142
Adjusted laboratory EBITDA
margin (5)....................... 37.4% 34.6% 33.8% 32.5% 31.2% 26.9% 29.2%

Adjusted animal hospital
EBITDA (6)....................... $ 49,472 $ 43,159 $ 53,658 $ 42,985 $ 37,237 $ 31,975 $ 23,243
Adjusted animal hospital EBITDA
margin (6)....................... 22.0% 20.8% 19.7% 17.9% 17.1% 16.7% 14.0%

Net cash provided by operating
activities....................... $ 60,838 $ 49,316 $ 57,104 $ 60,054 $ 38,467 $ 27,123 $ 22,674
Net cash used in investing
activities....................... (29,700) (30,331) (36,202) (47,679) (13,676) (19,474) (16,368)
Net cash used in financing
activities....................... (5,883) (5,873) (24,318) (12,476) (23,148) (18,554) (16,045)
Capital expenditures............... 13,405 9,929 13,481 22,555 21,803 11,678 7,241

BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.......... $ 32,358 $ 23,631 $ 7,103 $ 10,519 $ 10,620 $ 8,977 $ 19,882
Net working capital................ (6,176) 2,175 (2,574) 5,289 9,605 6,694 (4,454)
Total assets....................... 513,380 501,227 468,521 483,070 426,500 393,960 386,089
Total debt......................... 388,834 371,365 384,332 362,749 161,535 159,787 173,875
Total redeemable preferred
stock............................ -- 170,205 -- 154,622 -- -- --
Total stockholders' equity
(deficit)........................ $ 64,914 $ (97,946) $ 39,764 $ (81,310) $ 231,229 $ 202,685 $ 180,851
-------------------------

(1) Other revenue includes consulting fees of $1.5 million for each of the nine
months ended September 30, 2002 and 2001, and consulting fees of $2.0
million, $925,000, $5.1 million, $5.1 million and $4.7 million for the
years ended December 31, 2001, 2000, 1999, 1998 and 1997. For the year
ended December 31, 1997, other revenue also includes revenue from our pet
product joint venture; we transferred the control of the joint venture to
our joint venture partner in February 1997.

(2) EBITDA is operating income before depreciation and amortization. Adjusted
EBITDA for the 2001 and 2000 periods represents EBITDA adjusted to exclude
non-cash compensation and management fees paid pursuant to our management
services agreement with Leonard Green & Partners, which was terminated in
November 2001. Adjusted EBITDA for the 2001 periods also excludes agreement
termination costs and write-down of assets. Adjusted EBITDA for the 2000
period also excludes recapitalization costs. Adjusted EBITDA for the 1999
period represents EBITDA adjusted to exclude Year 2000 remediation expense
and other non-cash operating items. No adjustments were made to the EBITDA
calculations for 2002.

Page 25

The calculation of EBITDA and adjusted EBITDA is shown below (dollars in
thousands):

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
Operating income................ $75,000 $33,680 $27,706 $19,205 $47,016 $38,834 $28,408
Depreciation and amortization... 9,330 19,121 25,166 18,878 16,463 13,132 11,199
-------- -------- -------- -------- -------- -------- --------
EBITDA................... 84,330 52,801 52,872 38,083 63,479 51,966 39,607
Management fees (a)............. -- 1,860 2,273 620 -- -- --
Agreement termination costs..... -- -- 17,552 -- -- -- --
Recapitalization costs.......... -- -- -- 34,268 -- -- --
Year 2000 remediation expense... -- -- -- -- 2,839 -- --
Other non-cash operating
items (b)..................... -- 16,231 16,808 555 (1,873) -- --
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA.......... $84,330 $70,892 $89,505 $73,526 $64,445 $51,966 $39,607
======== ======== ======== ======== ======== ======== ========
-----------------------

(a) Management fees were paid pursuant to our management services
agreement and are included in selling, general and administrative
expense in our statements of operations. Effective November 27, 2001,
the parties terminated the management services agreement.

(b) Other non-cash operating items include a write-down of assets of $8.6
million and non-cash compensation of $1.4 million included in direct
costs and $6.2 million included in selling general and administrative
expense for the nine months ended September 30, 2001; a write-down of
assets of $9.2 million and non-cash compensation of $1.4 million
included in direct costs and $6.2 million included in selling, general
and administrative expense for the year ended December 31, 2001;
non-cash compensation of $103,000 included in direct costs and
$452,000 included in selling, general and administrative expense for
the year ended December 31, 2000; reversal of restructuring charges of
$1.9 million for the year ended December 31, 1999.

(3) Adjusted EBITDA is the sum of adjusted laboratory EBITDA, adjusted animal
hospital EBITDA and other revenue, less corporate selling, general and
administrative expense, excluding non-cash compensation and management
fees, and including the effect of gain (loss) on sale of assets. For the
year ended December 31, 1997, adjusted EBITDA also includes EBITDA of our
pet products joint venture of $168,000.

The calculation of adjusted EBITDA is shown below (dollars in thousands):

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
Adjusted laboratory EBITDA....... $43,734 $35,264 $45,561 $38,827 $32,273 $24,215 $20,142
Adjusted animal hospital
EBITDA......................... 49,472 43,159 53,658 42,985 37,237 31,975 23,243
Other revenue.................... 1,500 1,500 2,000 925 5,100 5,100 4,700
Corporate selling, general and
administrative expense (a).... (10,456) (8,906) (11,832) (9,211) (10,165) (9,324) (8,646)
Gain (loss) on sale of assets.... 80 (125) 118 -- -- -- --
Pet products joint venture
EBITDA......................... -- -- -- -- -- -- 168
-------- -------- -------- -------- -------- -------- --------
Adjusted EBITDA (b)....... $84,330 $70,892 $89,505 $73,526 $64,445 $51,966 $39,607
======== ======== ======== ======== ======== ======== ========

----------------------

Page 26

(4) Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by total
revenue.

(5) Adjusted laboratory EBITDA excludes non-cash compensation of $4.3 million
for the nine months ended September 30, 2001, and non-cash compensation of
$4.3 million and $311,000 for the years ended December 31, 2001 and 2000.
Adjusted laboratory EBITDA margin is calculated by dividing adjusted
laboratory EBITDA by laboratory revenue.

(6) Adjusted animal hospital EBITDA excludes non-cash compensation of $2.6
million for the nine months ended September 30, 2001, and non-cash
compensation of $2.6 million and $188,000 for the years ended December 31,
2001 and 2000. Adjusted animal hospital EBITDA margin is calculated by
dividing adjusted animal hospital EBITDA by animal hospital revenue.

Page 27

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL
CONDITION AND RESULTS OF OPERATIONS TOGETHER WITH OUR CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS PROSPECTUS. SOME OF THE
INFORMATION CONTAINED IN THIS DISCUSSION AND ANALYSIS OR SET FORTH ELSEWHERE IN
THIS PROSPECTUS, INCLUDING INFORMATION WITH RESPECT TO OUR PLANS AND STRATEGIES
FOR OUR BUSINESS, INCLUDES FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. YOU SHOULD REVIEW THE "RISK FACTORS" SECTION OF THIS PROSPECTUS
FOR A DISCUSSION OF IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE RESULTS DESCRIBED IN OR IMPLIED BY THE FORWARD-LOOKING
STATEMENTS CONTAINED IN THIS PROSPECTUS.

OVERVIEW

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

Our company was formed in 1986 by Robert Antin, Arthur Antin and Neil
Tauber, who have served since our inception as our Chief Executive Officer,
Chief Operating Officer and Senior Vice President of Development, respectively.
During the 1990s, we established a premier position in the veterinary diagnostic
laboratory and animal hospital markets through both internal growth and
acquisitions. By 1997, we achieved a critical mass, building a laboratory
network of 12 laboratories servicing animal hospitals in all 50 states and
completing acquisitions for a total of 160 animal hospitals. At September 30,
2002, our laboratory network consisted of 19 laboratories serving all 50 states
and our animal hospital network consisted of 225 animal hospitals in 33 states.
We primarily focus on generating internal growth to increase revenue and
profitability. In order to augment internal growth, we may selectively acquire
laboratories and intend to acquire approximately 15 to 25 animal hospitals per
year, depending upon the attractiveness of candidates and the strategic fit with
our existing operations.

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

NINE MONTHS ENDED YEAR ENDED DECEMBER
SEPTEMBER 30, 31,
----------------- --------------------------
2002 2001 2001 2000 1999
------ ------ ------ ------ ------

Laboratories:
Beginning of period ........................... 16 15 15 13 12
Acquisitions and new facilities ............... 3 -- 1 3 3
Relocated into laboratories operated by us..... -- -- -- (1) (2)
------ ------ ------ ------ ------
End of period ................................. 19 15 16 15 13
====== ====== ====== ====== ======
Animal hospitals:
Beginning of period ........................... 214 209 209 194 168
Acquisitions .................................. 18 18 21 24 39
Relocated into hospitals operated by us ....... (7) (10) (13) (8) (11)
Sold or closed ................................ -- (3) (3) (1) (2)
------ ------ ------ ------ ------
End of period ................................. 225 214 214 209 194
====== ====== ====== ====== ======

Owned at end of period ........................ 167 161 160 157 149
Managed at end of period ...................... 58 53 54 52 45

Page 28

We were a publicly traded company from 1991 until September 2000, when we
completed a recapitalization with an entity controlled by Leonard Green &
Partners. The recapitalization was completed in a financial market that we
believed did not adequately value companies of our size and type because the
market's focus and attention was largely on technology and Internet-based
companies. The recapitalization was financed by:

o the contribution of $155.0 million by a group of investors led by
Leonard Green & Partners;

o borrowings of $250.0 million under a $300.0 million senior credit
facility;

o the issuance of an aggregate of $100.0 million of 15.5% senior notes;
and

o the issuance of an aggregate of $20.0 million of 13.5% senior
subordinated notes.

Our subsequent performance and the changing market dynamics supported the
determination by our board of directors to re-enter the public sector. On
November 27, 2001, we consummated our initial public offering. As a result of
this offering and the underwriters' exercise of their over-allotment option, we
issued 17,370,000 shares of common stock and received net proceeds of $161.5
million. Concurrent with the consummation of our initial public offering, our
wholly owned subsidiary issued $170.0 million of senior subordinated notes. We
applied the net proceeds from the offering and the sale of the senior
subordinated notes, plus cash on hand, as follows:

o redeemed all of our outstanding series A and series B redeemable
preferred stock for $173.8 million;

o repaid $100.0 million of our senior term A and B notes;

o repaid $59.1 million in principal of our 15.5% senior notes due 2010,
at a redemption price of 110%, plus accrued and unpaid interest; and

o repaid $5.0 million in principal of our 13.5% senior subordinated
notes due 2010, at a redemption price of 110%, plus accrued and unpaid
interest.

In subsequent transactions, we

o repaid our senior term A and senior term B notes with the proceeds
acquired from the issuance of senior term C notes, which bear a lower
interest rate than the weighted average interest rate for the senior
term A and senior term B notes;

o repaid $15.0 million, the entire remaining principal amount, of our
13.5% senior subordinated notes due 2010, at a redemption price of
110%, plus accrued and unpaid interest; and

o repaid $30.0 million in principal amount of our 15.5% senior notes due
2010, at a redemption price of 110%, plus accrued and unpaid interest.

BASIS OF REPORTING

GENERAL

Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. We report our operations in three segments: laboratory, animal
hospital and corporate. The preparation of these financial statements requires
us to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expense, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

Page 29

REVENUE RECOGNITION

Revenue is recognized only after the following criteria are met:

o there exists adequate evidence of the transaction;

o delivery of goods has occurred or services have been rendered; and

o the price is not contingent on future activity and collectibility is
reasonably assured.

LABORATORY REVENUE

A portion of laboratory revenue is intercompany revenue that was generated
by providing laboratory services to our animal hospitals. Laboratory internal
revenue growth is calculated using laboratory revenue as reported, adjusted to
exclude, for those laboratories that we did not own for the entire period
presented, an estimate of revenue generated by these newly acquired laboratories
subsequent to the date of our purchase. We calculate this estimate of revenue
for each newly acquired laboratory using an historical twelve-month revenue
figure (in some cases on an annualized basis) provided to us by the seller of
the acquired laboratory, which amount is increased by our laboratory revenue
growth rate for the prior year. In calculating the laboratory revenue growth
rate for the year in which the acquisition occurred, we exclude from the
reported laboratory revenue the estimated annual revenue attributable to newly
acquired laboratories multiplied by a fraction representing the portion of the
year that we owned the related facility. In calculating the laboratory revenue
growth rate for the year following the acquisition, we exclude from our reported
laboratory revenue the estimated annual revenue attributable to newly acquired
laboratories multiplied by a fraction representing the portion of the year that
we did not own the facility. To determine our laboratory internal revenue growth
rate for the applicable period, we compare our laboratory revenue net of
estimated laboratory revenue of newly acquired laboratories, to our laboratory
revenue as reported for the prior comparable period. We believe this fairly
presents our laboratory internal revenue growth for the periods presented. Our
calculation may not be comparable to similarly titled measures by other
companies, however, any differences in calculations or errors in estimates used
would not have a material effect on our laboratory internal growth rates
presented in this prospectus.

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

ANIMAL HOSPITAL REVENUE

Animal hospital revenue is comprised of revenue of the animal hospitals
that we own and the management fees of animal hospitals that we manage. Certain
states prohibit business corporations from providing or holding themselves out
as providers of veterinary medical care. In these states, we enter into
arrangements with a veterinary medical group that provides all veterinary
medical care, while we manage the administrative functions associated with the
operation of the animal hospitals and we own or lease the hospital facility. In
return for our services, the veterinary medical group pays us management fees.
We do not consolidate the operations of animal hospitals that we manage.
However, for purposes of calculating same-facility revenue growth in our animal
hospitals, we use the combined revenue of animal hospitals owned and managed for
the entire periods presented. Same-facility revenue growth includes revenue
generated by customers referred from relocated or combined animal hospitals.

OTHER REVENUE

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

Page 30

DIRECT COSTS

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

SELLING, GENERAL AND ADMINISTRATIVE

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

EBITDA AND ADJUSTED EBITDA

EBITDA is operating income before depreciation and amortization. Adjusted
EBITDA for the 2001 and 2000 periods represents EBITDA adjusted to exclude
non-cash compensation and management fees paid pursuant to our management
services agreement with Leonard Green & Partners, which was terminated in
November 2001. Adjusted EBITDA for the 2001 periods also excludes agreement
termination costs and write-down of assets. Adjusted EBITDA for the 2000 period
also excludes recapitalization costs. Adjusted EBITDA for the 1999 period
represents EBITDA adjusted to exclude Year 2000 remediation expense and other
non-cash operating items. No adjustments were made to the EBITDA calculations
for 2002.

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

NON-CASH COMPENSATION

Certain stock options granted in 2000 qualified as variable stock options.
Related to these variable stock options, we recorded non-cash compensation of
approximately $7.6 million in the nine months ended September 30, 2001 and the
year ended December 31, 2001, and $555,000 in the year ended December 31, 2000.
Non-cash compensation is included in laboratory direct costs and in laboratory,
animal hospital and corporate selling, general and administrative expense. In
August 2001, all of these options were exercised.

SOFTWARE DEVELOPMENT COSTS

We frequently research, develop and implement new software to be used
internally, or enhance our existing internal software. We develop the software
using our own employees and/or outside consultants. Most costs associated with
the development of new software are expensed as incurred, particularly in the
preliminary planning stages and the post-implementation and training stages.
Costs related directly to the software design, coding, testing

Page 31

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

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES

Under accounting principles generally accepted in the United States,
management is required to make assumptions and estimates that directly impact
our consolidated financial statements and related disclosures. Because of the
uncertainties inherent in making assumptions and estimates, actual results in
future periods may differ significantly from our assumptions and estimates.
Management bases its assumptions and estimates on historical experience and on
various other factors believed to be reasonable under the circumstances. The
following represent what management believes are the critical accounting
policies most affected by significant management estimates and judgments.

WORKER'S COMPENSATION EXPENSE

On October 8, 2001, we entered into a one-year workers' compensation
insurance policy with a $250,000 per-occurrence deductible and a stop-loss
aggregate deductible of $4.7 million. We have determined that $3.9 million is a
reasonable estimate of expected claims losses under this policy and we accrued
for these losses over the twelve-month period ended September 30, 2002. In
determining this estimate, in conjunction with the insurance carrier, we
reviewed our five-year history of total claims losses, ratio of losses to
premiums paid, payroll growth and the current risk control environment. We are
pre-funding estimated claims losses to the insurance carrier of approximately
$2.9 million.

IMPAIRMENT OF GOODWILL

Goodwill relates to acquisitions and represents the purchase price paid and
liabilities assumed in excess of the fair market value of tangible assets
acquired. Under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS, we are required to
allocate our goodwill to identifiable reporting units, which are then tested for
impairment using a two-step process detailed in the statement. The first step
requires comparing the fair value of each reporting unit with its carrying
amount, including goodwill. If that fair value exceeds the carrying amount, the
second step of the process is not necessary and there are no impairment issues.
If that fair value does not exceed that carrying amount, companies must perform
the second step that requires a hypothetical allocation of the fair value of the
reporting unit to the reporting unit's assets and liabilities as if the unit
were just purchased by the company at the fair value price. In this hypothetical
purchase, the excess of the fair value of the reporting unit over its
re-evaluated, marked-to-market net assets would be the new basis for the
reporting unit's goodwill and a write-down to this new value would be recognized
as an expense.

We have determined that we have two reporting units, laboratory and animal
hospital. We hired independent valuation experts to estimate the fair market
value of these reporting units. The independent valuation experts concluded that
the estimated value for each reporting unit is greater than the carrying amount
of the net assets for those reporting units. Therefore, no impairment issues
existed, and the second step of the test was not necessary. We plan to perform a
valuation of our reporting units in the fourth quarter of each year or upon
significant changes in our business environment.

IMPAIRMENT OF LONG-LIVED ASSETS

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

Page 32

LEGAL SETTLEMENTS

We are a party to various legal proceedings. Although we cannot determine
the ultimate disposition of these proceedings, we can use judgment to reasonably
estimate our liability for legal settlement costs that may arise as a result of
these proceedings. Based on our prior experience, the nature of the current
proceedings, and our insurance policy coverage for such matters, we have accrued
$900,000 as of September 30, 2002 for legal settlements as part of other accrued
liabilities.

RESULTS OF OPERATIONS

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

NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
--------------------- -------------------------------
2002 2001 2001 2000 1999
--------- ---------- --------- -------- --------

Revenue:
Laboratory......................... 34.7 % 33.4 % 33.6 % 33.6 % 32.2 %
Animal hospital.................... 66.9 68.0 67.8 67.8 68.0
Other.............................. 0.4 0.5 0.5 0.3 1.6
Intercompany....................... (2.0) (1.9) (1.9) (1.7) (1.8)
-------- -------- ------- ------- -------
Total revenue............... 100.0 100.0 100.0 100.0 100.0
Direct costs........................... 67.3 69.9 70.6 71.9 72.5
Selling, general and administrative.... 7.7 9.9 9.6 7.6 7.4
Depreciation and amortization.......... 2.7 6.3 6.3 5.4 5.1
Agreement termination costs............ -- -- 4.4 -- --
Write-down and (gain) loss on sale
of assets.......................... -- 2.9 2.2 -- --
Recapitalization costs................. -- -- -- 9.7 --
Year 2000 remediation expense.......... -- -- -- -- 0.9
Reversal of restructuring charges...... -- -- -- -- (0.6)
-------- -------- ------- ------- -------
Operating income............ 22.3 11.0 6.9 5.4 14.7
Net interest expense................... 9.0 10.6 10.7 5.6 2.9
Other expense, net..................... -- 0.1 -- 0.5 --
Minority interest...................... 0.4 0.3 0.4 0.3 0.3
Provision for income taxes............. 5.4 2.2 0.1 0.6 4.5
Extraordinary loss on early
extinguishment of debt, net
of taxes........................ 0.6 -- 2.5 0.8 --
-------- -------- ------- ------- -------
Net income (loss)........... 6.9 % (2.2)% (6.8)% (2.4)% 7.0 %
======== ======== ======= ======= =======

Page 33

The following table is a summary of the components of operating income by
segment for the nine months ended September 30, 2002 and 2001 and the last three
fiscal years (dollars in thousands):

INTER-
ANIMAL COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 2002 LABORATORY HOSPITAL CORPORATE ELIMINATIONS TOTAL
---------- ---------- ---------- ------------ -----------

Revenue............................. $ 116,911 $ 225,383 $ 1,500 $ (6,902) $ 336,892
Direct costs........................ 65,545 168,106 -- (6,902) 226,749
Selling, general and
administrative...................... 7,632 7,805 10,456 -- 25,893
Depreciation and amortization....... 2,138 6,166 1,026 -- 9,330
Gain on sale of assets.............. -- -- (80) -- (80)
---------- ---------- --------- --------- ----------
Operating income (loss).......... $ 41,596 $ 43,306 $ (9,902) $ -- $ 75,000
========== ========== ========= ========= ==========

NINE MONTHS ENDED SEPTEMBER 30, 2001
Revenue............................. $ 101,855 $ 207,665 $ 1,500 $ (5,655) $ 305,365
Direct costs........................ 61,566 157,543 -- (5,655) 213,454
Selling, general and
administrative...................... 9,305 9,523 11,537 -- 30,365
Depreciation and amortization....... 3,457 10,829 4,835 -- 19,121
Write-down and loss on sale of
assets.............................. -- -- 8,745 -- 8,745
---------- ---------- --------- --------- ----------
Operating income (loss).......... $ 27,527 $ 29,770 $(23,617) $ -- $ 33,680
========== ========== ========= ========= ==========

2001
Revenue............................. $ 134,711 $ 272,113 $ 2,000 $ (7,462) $ 401,362
Direct costs........................ 81,996 208,692 -- (7,462) 283,226
Selling, general and
administrative...................... 11,434 12,323 14,876 -- 38,633
Depreciation and amortization....... 4,657 14,491 6,018 -- 25,166
Agreement termination costs......... -- -- 17,552 -- 17,552
Write-down and gain on sale of
assets.............................. -- -- 9,079 -- 9,079
---------- ---------- --------- --------- ----------
Operating income (loss).......... $ 36,624 $ 36,607 $(45,525) $ -- $ 27,706
========== ========== ========= ========= ==========

2000
Revenue............................. $ 119,300 $ 240,624 $ 925 $ (6,162) $ 354,687
Direct costs........................ 72,662 188,390 -- (6,162) 254,890
Selling, general and
administrative...................... 8,122 9,437 9,887 -- 27,446
Depreciation and amortization....... 4,472 12,167 2,239 -- 18,878
Recapitalization costs.............. -- -- 34,268 -- 34,268
---------- ---------- --------- --------- ----------
Operating income (loss).......... $ 34,044 $ 30,630 $(45,469) $ -- $ 19,205
========== ========== ========= ========= ==========

1999
Revenue............................. $ 103,282 $ 217,988 $ 5,100 $ (5,810) $ 320,560
Direct costs........................ 64,234 174,069 -- (5,810) 232,493
Selling, general and
administrative...................... 6,775 6,682 10,165 -- 23,622
Depreciation and amortization....... 4,234 10,472 1,757 -- 16,463
Year 2000 remediation expense....... -- -- 2,839 -- 2,839
Reversal of restructuring charges... -- -- (1,873) -- (1,873)
---------- ---------- --------- --------- ----------
Operating income (loss).......... $ 28,039 $ 26,765 $ (7,788) $ -- $ 47,016
========== ========== ========= ========= ==========

Page 34

NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (UNAUDITED)

REVENUE

The following table summarizes our revenue (dollars in thousands):

NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2002 2001 % CHANGE
--------- --------- --------
Laboratory........................... $116,911 $101,855 14.8%
Animal hospital...................... 225,383 207,665 8.5%
Other................................ 1,500 1,500
Intercompany......................... (6,902) (5,655)
--------- ---------
Total revenue................ $336,892 $305,365 10.3%
========= =========

LABORATORY REVENUE

Laboratory revenue increased $15.1 million, or 14.8% for the nine months
ended September 30, 2002 compared to the same prior-year period. The components
of same-facility revenue growth were sales volume, which contributed 5.7%, and
average price per requisition, which contributed 9.1%. The increase in sales
volume and average price per requisition primarily was the result of continued
emphasis on selling our pet health and wellness programs and implementation of a
price increase for most tests in February 2002.

ANIMAL HOSPITAL REVENUE

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

NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------
2002 2001 % CHANGE
--------- --------- --------
Animal hospital revenue as reported.. $225,383 $207,665 8.5%
Less: Management fees paid to us
by veterinary medical groups....... (33,713) (28,270)
Add: Revenue of animal hospitals
managed............................ 61,501 52,580
--------- ---------
Combined revenue of animal
hospitals owned and managed........ $253,171 $231,975 9.1%
========= =========

Animal hospital revenue as reported increased $17.7 million, or 8.5%, for
the nine months ended September 30, 2002 compared to the same prior-year period.
This increase in animal hospital revenue resulted from the acquisition of animal
hospitals and same-facility revenue growth.

Combined revenue of animal hospitals that we owned and managed increased
$21.2 million, or 9.1% for the nine months ended September 30, 2002 compared to
the same prior-year period. This increase is primarily the result of
same-facility growth of 3.6%, or $7.9 million, and net acquired revenue of $13.3
million. Net acquired revenue is from the change in revenue that results from
the hospitals that are acquired, sold or closed on or subsequent to January 1,
2001. Same-facility revenue growth was primarily due to increases in the average
amount spent per visit and revenue generated by customers referred from
relocated or combined animal hospitals.

Discussions in medical literature suggest than small animals may not
require as many or as frequent vaccinations as is currently accepted practice.
Any reduction in the number of visits to our hospitals resulting from less
frequent vaccinations will negatively impact our ability to continue to achieve
same-facility revenue growth rates consistent with our current levels. In
addition, products and supplies that we currently sell are becoming available in
other distribution channels that may adversely affect our sales and the number
of client visits to our hospitals.

Page 35

DIRECT COSTS

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

NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
2002 2001
------------------- -----------------
% OF % OF %
$ REVENUE $ REVENUE CHANGE
--------- ------- -------- ------- ------
Laboratory............... $ 65,545 56.1% $ 61,566 60.4% 6.5%
Animal hospital.......... 168,106 74.6% 157,543 75.9% 6.7%
Intercompany............. (6,902) (5,655)
--------- ---------
Total direct costs.... $226,749 67.3% $213,454 69.9% 6.2%
========= =========

LABORATORY DIRECT COSTS

Laboratory direct costs increased $4.0 million, or 6.5%, for the nine
months ended September 30, 2002 compared to the same prior-year period.
Laboratory direct costs as percentages of laboratory revenue was 56.1% and 60.4%
for the nine months ended September 30, 2002 and 2001. However, laboratory
direct costs for the nine months ended September 30, 2001 includes non-cash
compensation of $1.4 million. Excluding non-cash compensation, laboratory direct
costs as a percentage of laboratory revenue would have been 59.1% for the nine
months ended September 30, 2001. The current year decrease in laboratory direct
costs as a percentage of laboratory revenue as compared to the same prior-year
period primarily was attributable to additional operating leverage gained on
increases in laboratory revenue.

ANIMAL HOSPITAL DIRECT COSTS

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

NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
2002 2001
------------------ ------------------
% OF % OF %
$ REVENUE $ REVENUE CHANGE
--------- ------- --------- ------- ------
Animal hospital direct costs
as reported................... $ 168,106 74.6% $157,543 75.9% 6.7%
Add: Direct costs of animal
hospitals managed............. 61,501 52,580
Less: Management fees charged
by us to veterinary medical
groups...................... (33,713) (28,270)
---------- ---------
Combined direct costs of
animal hospitals owned
and managed................. $ 195,894 77.4% $181,853 78.4% 7.7%
========== =========

Combined direct costs of animal hospitals owned and managed increased $14.0
million, or 7.7% for the nine months ended September 30, 2002. Combined direct
costs of animal hospitals owned and managed as a percentage of animal hospital
revenue decreased to 77.4% for the nine months ended September 30, 2002 from
78.4% for the prior year period.

Animal hospital direct costs as reported increased $10.6 million, or 6.7%,
for the nine months ended September 30, 2002 compared to the same prior-year
period. Animal hospital direct costs as reported as a percentage of animal
hospital revenue decreased to 74.6% for the nine months ended September 30, 2002
from 75.9% for the prior-year period.

The decrease in animal hospital direct costs as a percentage of animal
hospital revenue during this period primarily was attributable to additional
operating leverage gained on increases in animal hospital revenue, because most
of the costs associated with this business do not increase proportionately with
increases in the volume of services rendered.

Page 36

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

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

NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
2002 2001
------------------ ------------------
% OF % OF %
$ REVENUE $ REVENUE CHANGE
--------- ------- --------- ------- ------
Laboratory................. $7,632 6.5% $ 9,305 9.1% (18.0)%
Animal hospital............ 7,805 3.5% 9,523 4.6% (18.0)%
Corporate.................. 10,456 3.1% 11,537 3.8% (9.4)%
-------- --------
Total SG&A............... $25,893 7.7% $30,365 9.9% (14.7)%
======== ========

LABORATORY SG&A

Laboratory SG&A for the nine months ended September 30, 2002 decreased $1.7
million, or 18.0%, compared to the same prior-year period. However, laboratory
SG&A includes non-cash compensation of $2.9 million for the nine months ended
September 30, 2001. If non-cash compensation were excluded from the nine months
ended September 30, 2001, current period laboratory SG&A would have increased
$1.2 million, or 18.6%, compared to the same prior-year period. Prior-year
period laboratory SG&A would have been 6.3% of laboratory revenue as compared to
6.5% for the nine months ended September 30, 2002.

The increase in laboratory SG&A in 2002 as compared to 2001, as adjusted to
exclude non-cash compensation, was primarily due to the salaries associated with
new sales representatives, an increase in commission payments to sales
representatives due to increased sales, additional marketing costs incurred on
our pet health and wellness programs, and an increase in legal costs in 2002.

ANIMAL HOSPITAL SG&A

Animal hospital SG&A for the nine months ended September 30, 2002 decreased
$1.7 million, or 18.0%, compared to the same prior-year period. However, animal
hospital SG&A includes non-cash compensation of $2.6 million for the nine months
ended September 30, 2001. If non-cash compensation were excluded for the nine
months ended September 30, 2001, current period animal hospital SG&A would have
increased $842,000 or 12.1%, compared to the same prior-year period. Prior-year
period animal hospital SG&A would have been 3.4% of animal hospital revenue as
compared to 3.5% for the nine months ended September 30, 2002.

The increase in animal hospital SG&A in 2002 as compared to 2001, as
adjusted to exclude non-cash compensation, primarily was due to the salaries
associated with the addition of regional medical directors and an increase in
legal costs in 2002.

CORPORATE SG&A

Corporate SG&A for the nine months ended September 30, 2002 decreased $1.1
million or 9.4%, compared to the same prior-year period. However, corporate SG&A
for the nine months ended September 30, 2001 includes non-cash compensation of
$771,000 and management fees of $1.9 million paid pursuant to our management
agreement with Leonard Green & Partners that was terminated in November 2001. If
non-cash compensation and management fees were excluded from the nine months
ended September 30, 2001, current year corporate SG&A would have increased $1.6
million, or 17.4%, compared to the same prior-year period. Prior-year period
corporate SG&A would have been 2.9% as a percentage of total revenue as compared
to 3.1% for the nine months ended September 30, 2002.

The increase in corporate SG&A in 2002 as compared to 2001, as adjusted to
exclude non-cash compensation and management fees, was primarily due to the fees
associated with increased professional services

Page 37

and insurance costs as a result of becoming a publicly-traded company and
accounting fees incurred in connection with changing our external auditors from
Arthur Andersen LLP to KPMG LLP.

ADJUSTED EBITDA

The following table summarizes our adjusted EBITDA and our adjusted EBITDA
as a percentage of applicable revenue (dollars in thousands):

Laboratory adjusted EBITDA (1).. $ 43,734 37.4 % $ 35,264 34.6 % 24.0%
Animal hospital adjusted
EBITDA (2).................... 49,472 22.0 % 43,159 20.8 % 14.6%
Other revenue................... 1,500 1,500
Corporate selling, general
and administrative (3)........ (10,456) (8,906)
Gain (loss) on sale of assets... 80 (125)
--------- ---------
Total Adjusted EBITDA...... $ 84,330 25.0 % $ 70,892 23.2 % 19.0%
========= =========

(1) For the nine months ended September 30, 2001, laboratory EBITDA was
adjusted to exclude non-cash compensation of $4.3 million. No
adjustments were made in 2002.

(2) For the nine months ended September 30, 2001, animal hospital EBITDA
was adjusted to exclude non-cash compensation of $2.6 million. No
adjustments were made in 2002.

(3) For the nine months ended September 30, 2001, corporate selling,
general and administrative expense was adjusted to exclude non-cash
compensation of $771,000 and management fees of $1.9 million. No
adjustments were made in 2002.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense decreased $9.8 million, or 51.2%, for
the nine months ended September 30, 2002, compared to the same prior-year
period.

The decrease is primarily related to our implementation of SFAS No. 142,
the result of which was that we no longer amortized goodwill as of January 1,
2002. For a detailed discussion of SFAS No. 142, see "New Accounting
Pronouncements." For the nine months ended September 30, 2001 we had $6.9
million of goodwill amortization expense. Additionally, in November 2001, we
terminated non-competition agreements with members of senior management. For the
nine months ended September 30, 2001, we had expense related to the amortization
of non-competition agreements of $3.9 million.

NET INTEREST EXPENSE

Net interest expense decreased $1.9 million, or 5.7%, to $30.5 million for
the nine months ended September 30, 2002 from $32.4 million for the nine months
ended September 30, 2001.

The decrease in net interest expense primarily was due to the effect of
decreasing interest rates on our variable-rate obligations, and the refinancing
of a portion of our higher-yield, fixed-rate debt with lower-yield, fixed-rate
debt.

OTHER (INCOME) EXPENSE

Other (income) expense consisted of non-cash gains or losses on a hedging
instrument resulting from changes in the time value of our collar agreement.

Page 38

PROVISION FOR INCOME TAXES

Our effective income tax rate for each period can vary from the statutory
rate primarily due to the non-deductibility for income tax purposes of certain
items. In 2001, our effective income tax rate varied from the statutory rate
primarily due to the non-deductibility of the amortization of a portion of
goodwill, the recognition of non-cash compensation and the write-down of
zero-tax-basis assets. In 2002, our effective income tax rate is comparable to
the statutory rate.

MINORITY INTEREST IN INCOME OF SUBSIDIARIES

Minority interest in income of subsidiaries represents our partners'
proportionate share of net income generated by our subsidiaries that we do not
wholly own. The increase in minority interest for the nine months ended
September 30, 2002 was the result of a change in the aggregate proportionate
ownership percentages of the subsidiaries, primarily due to an increase in the
number of partnerships.

INCREASE IN CARRYING AMOUNT OF REDEEMABLE PREFERRED STOCK

The holders of our series A redeemable preferred stock and our series B
redeemable preferred stock were entitled to receive dividends at a rate of 14%
and 12%, respectively. The dividends not paid in cash compounded quarterly. The
dividends earned during the nine months ended September 30, 2001 were added to
the liquidation preference of the preferred stock. In November 2001, we redeemed
all of the outstanding series A and series B redeemable preferred stock using
proceeds from our initial public offering together with cash on hand.

EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT

On August 29, 2002 we refinanced our senior credit facility by borrowing
$143.1 million in senior term C notes and used these proceeds to pay the entire
outstanding principal amount on the senior term A and B notes. In conjunction
with that transaction, we wrote off $3.4 million in deferred financing costs as
an extraordinary loss on early extinguishment of debt that provided a related
tax benefit of $1.4 million.

YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

REVENUE

The following table summarizes our revenue for the years ended December 31,
2001, 2000 and 1999 (dollars in thousands):

% CHANGE
---------------
2001 2000 1999 2001 2000
---------- ---------- ---------- ------ -----

Laboratory..................... $ 134,711 $ 119,300 $ 103,282 12.9% 15.5%
Animal hospital................ 272,113 240,624 217,988 13.1% 10.4%
Other.......................... 2,000 925 5,100
Intercompany................... (7,462) (6,162) (5,810)
---------- ---------- ----------
Total revenue........ $ 401,362 $ 354,687 $ 320,560 13.2% 10.6%
========== ========== ==========

LABORATORY REVENUE

Laboratory revenue increased $15.4 million, or 12.9%, for the year ended
December 31, 2001, compared to the year ended December 31, 2000, which increased
$16.0 million, or 15.5%, compared to the year ended December 31, 1999. The
increase in laboratory revenue for the year ended December 31, 2001, compared to
the comparable prior period primarily was due to internal growth of 12.5%. This
internal laboratory revenue growth resulted from the increase in the overall
number of tests and requisitions and an increase in the average revenue per
requisition. These increases were primarily the result of the continued emphasis
on selling our pet health and wellness programs and the implementation of a
price increase for most tests in February 2001. The increase in laboratory
revenue for the year ended December 31, 2000, compared to the comparable prior
period primarily was due to internal growth of 12.6%. This internal laboratory
revenue growth also resulted from an increase in the overall number of tests and

Page 39

requisitions and an increase in the average revenue per requisition. These
increases primarily were due to the development and sale of new programs, the
implementation of a price increase for most tests in February 2000 and the
continued growth of our Test Express business.

ANIMAL HOSPITAL REVENUE

The following table summarizes our animal hospital revenue as reported and
the combined revenue of animal hospitals that we owned and managed had we
consolidated the operating results of the animal hospitals we manage into our
operating results for the years ended December 31, 2001, 2000 and 1999 (dollars
in thousands):

% CHANGE
---------------
2001 2000 1999 2001 2000
---------- ---------- ---------- ------ -----

Animal hospital revenue as
reported...................... $272,113 $240,624 $217,988 13.1% 10.4%
Less: Management fees paid to
us by veterinary medical
groups...................... (37,770) (31,133) (30,202)
Add: Revenue of animal
hospitals managed............. 71,591 60,380 42,829
--------- --------- ---------
Combined revenue of animal
hospitals owned
and managed................. $305,934 $269,871 $230,615 13.4% 17.0%
========= ========= ========

Animal hospital revenue increased $31.5 million, or 13.1%, for the year
ended December 31, 2001, compared to the year ended December 31, 2000, which
increased $22.6 million, or 10.4%, compared to the year ended December 31, 1999.
The increase in animal hospital revenue for the year ended December 31, 2001, as
compared to the comparable prior period resulted primarily from the acquisition
of 21 animal hospitals that we owned, managed or relocated into other hospitals
owned by us subsequent to December 31, 2000. Similarly, the increase for the
year ended December 31, 2000, as compared to the comparable prior period
resulted primarily from the acquisition of 24 animal hospitals that we owned,
managed or relocated into other hospitals owned by us subsequent to December 31,
1999. The increase in animal hospital revenue for the year ended December 31,
2001 also was due to same-facility revenue growth of 5.0%, and the increase in
animal hospital revenue for the year ended December 31, 2000 also was due to
same-facility revenue growth of 7.0%. Same-facility revenue growth in both years
primarily was due to increases in the average amount spent per visit and revenue
generated by clients referred from our relocated animal hospitals.

OTHER REVENUE

Other revenue increased $1.1 million for the year ended December 31, 2001
compared to the year ended December 31, 2000, which decreased $4.2 million
compared to the year ended December 31, 1999. Our consulting agreement with
Heinz Pet Products expired February 1, 2000. Under this agreement we had
received monthly consulting fees of $425,000 from February 1997 through January
2000. We entered into a new agreement with Heinz Pet Products effective October
1, 2000 that provides for monthly consulting fees of approximately $167,000 over
a term of 24 months ending September 2002. Consequently, for the year ended
December 31, 2001, other revenue includes consulting fees for the entire year as
compared to an aggregate of four months for the year ended December 31, 2000 and
for the year ended December 31, 1999.

DIRECT COSTS

The following table summarizes our direct costs and our direct costs as a
percentage of applicable revenue for the years ended December 31, 2001, 2000 and
1999 (dollars in thousands):

2001 2000 1999 % CHANGE
------------------ ------------------ ------------------ --------------
% OF % OF % OF
$ REVENUE $ REVENUE $ REVENUE 2001 2000
--------- ------- --------- ------- --------- ------- ------ ------

Laboratory.............. $ 81,996 60.9% $ 72,662 60.9% $ 64,234 62.2% 12.8% 13.1%
Animal hospital......... 208,692 76.7% 188,390 78.3% 174,069 79.9% 10.8% 8.2%
Other................... -- -- --
Intercompany............ (7,462) (6,162) (5,810) 21.1% 6.1%
--------- --------- ---------
Total direct costs... $283,226 70.6% $254,890 71.9% $232,493 72.5% 11.1% 9.6%
========= ========= =========

Page 40

LABORATORY DIRECT COSTS

Laboratory direct costs increased $9.3 million, or 12.8%, for the year
ended December 31, 2001 compared to the year ended December 31, 2000, which
increased $8.4 million, or 13.1%, compared to the year ended December 31, 1999.
Laboratory direct costs as a percentage of laboratory revenue was 60.9% for each
of the years ended December 31, 2001 and 2000, which decreased from 62.2% for
the year ended December 31, 1999. Laboratory direct costs include non-cash
compensation of $1.4 million and $103,000 for the years ended December 31, 2001
and 2000. Laboratory direct costs excluding non-cash compensation as a
percentage of laboratory revenue decreased to 59.8% for the year ended December
31, 2001 and from 60.8% for the year ended December 31, 2000. The decreases in
laboratory direct costs as a percentage of laboratory revenue during these
periods primarily were attributable to increases in laboratory revenue combined
with operating leverage associated with our laboratory business.

ANIMAL HOSPITAL DIRECT COSTS

The following table summarizes our animal hospital direct costs as reported
and the combined direct costs of animal hospitals that we owned and managed had
we consolidated the operating results of the animal hospitals we manage into our
operating results for the years ended December 31, 2001, 2000 and 1999 (dollars
in thousands):

Animal hospital direct
costs as reported............ $208,692 76.7% $188,390 78.3% $174,069 79.9% 10.8% 8.2%
Add: Direct costs of animal
hospitals managed............ 71,591 60,380 42,829
Less: Management fees charged
by us to veterinary medical
groups....................... (37,770) (31,133) (30,202)
--------- --------- ---------
Combined direct costs of
animal hospitals owned
and managed.................. $242,513 79.3% $217,637 80.6% $186,696 81.0% 11.4% 16.6%
========= ========= =========

Animal hospital direct costs increased $20.3 million, or 10.8%, for the
year ended December 31, 2001 compared to the year ended December 31, 2000, which
increased $14.3 million, or 8.2%, compared to the year ended December 31, 1999.
Animal hospital direct costs as a percentage of animal hospital revenue
decreased to 76.7% for the year ended December 31, 2001 from 78.3% for the year
ended December 31, 2000, which decreased from 79.9% for the year ended December
31, 1999. The decreases in animal hospital direct costs as a percentage of
animal hospital revenue during these periods primarily were attributable to the
increase in revenue combined with the operating leverage associated with the
animal hospital business, as most of the costs associated with this business do
not increase proportionately with increases in the volume of services rendered.
The decrease in animal hospital direct costs as a percentage of animal hospital
revenue for the year ended December 31, 2000 as compared to 1999 was also
attributable to a reduction in some of our obligations to the animal hospitals
we manage which reduced our costs, together with a corresponding reduction in
our management fees.

Page 41

SELLING, GENERAL AND ADMINISTRATIVE EXPENSE

The following table summarizes our selling, general and administrative
expense and expense ("SG&A") as a percentage of applicable revenue for the years
ended December 31, 2001, 2000 and 1999 (dollars in thousands):

Laboratory....................... $ 11,434 8.5% $ 8,122 6.8% $ 6,775 6.6% 40.8% 19.9%
Animal hospital.................. 12,323 4.5% 9,437 3.9% 6,682 3.1% 30.6% 41.2%
Corporate........................ 14,876 3.7% 9,887 2.8% 10,165 3.2% 50.5% (2.7)%
--------- --------- ---------
Total selling, general
and administrative.......... $ 38,633 9.6% $ 27,446 7.7% $ 23,622 7.4% 40.8% 16.2%
========= ========= =========

LABORATORY SG&A

Laboratory SG&A for the year ended December 31, 2001 increased $3.3
million, or 40.8%, compared to the year ended December 31, 2000, which increased
$1.3 million, or 19.9%, compared to the year ended December 31, 1999. The
increase in laboratory SG&A for the year ended December 31, 2001 compared to the
comparable prior period primarily was due to $2.9 million of non-cash
compensation, as well as an increase in commission payments to sales
representatives, which was caused by an increase in sales. Excluding non-cash
compensation, laboratory SG&A as a percentage of laboratory revenue was 6.4% and
6.6% in 2001 and 2000. The increase in laboratory SG&A for the year ended
December 31, 2000 compared to the comparable prior period primarily was due to
an increase in commission payments to sales representatives, which was caused by
an increase in sales, and salaries attributable to new sales representatives.

ANIMAL HOSPITAL SG&A

Animal hospital SG&A for the year ended December 31, 2001 increased $2.9
million, or 30.6% compared to the year ended December 31, 2000, which increased
$2.8 million, or 41.2%, compared to the year ended December 31, 1999. The
increase in animal hospital SG&A for the year ended December 31, 2001 compared
to the comparable prior period primarily was due to $2.6 million of non-cash
compensation. Excluding the non-cash compensation, animal hospital SG&A as a
percentage of revenue was 3.6% and 3.8% in 2001 and 2000. The increase in animal
hospital SG&A for the year ended December 31, 2000 primarily was attributable to
salaries associated with new personnel hired in connection with the expansion of
our management and administrative infrastructure to support the additional
number of animal hospitals we owned and managed.

CORPORATE SG&A

Corporate SG&A for the year ended December 31, 2001 increased $5.0 million,
or 50.5%, compared to the year ended December 31, 2000. The increase was
primarily due to a $1.7 million increase in management fees paid, a $717,000
increase in corporate bonuses, an $845,000 increase in legal expense, a $716,000
increase in non-cash compensation and approximately $400,000 of salary increases
at corporate.

Corporate SG&A for the year ended December 31, 2000 decreased $278,000, or
2.7% compared to the year ended December 31, 1999. This decrease was due to
efficiencies realized in our information systems, accounting and finance
departments that resulted from our systems upgrade.

Excluding non-cash compensation and management fees, corporate SG&A as a
percentage of revenue was 2.9% and 2.6% in 2001 and 2000.

Page 42

ADJUSTED EBITDA

The following table summarizes our adjusted EBITDA and our adjusted EBITDA
as a percentage of applicable revenue for the years ended December 31, 2001,
2000 and 1999 (dollars in thousands):

Laboratory adjusted EBITDA (1).... $ 45,561 33.8% $38,827 32.5% $32,273 31.2% 17.3% 20.3%
Animal hospital adjusted
EBITDA (2)...................... 53,658 19.7% 42,985 17.9% 37,237 17.1% 24.8% 15.4%
Other revenue .................... 2,000 925 5,100
Corporate selling, general and
administrative (3).............. (11,832) (9,211) (10,165)
Gain on sale of assets............ 118 -- --
--------- -------- --------
Total adjusted EBITDA..... .. $ 89,505 22.3% $73,526 20.7% $64,445 20.1% 21.7% 14.1%
========= ======== ========

(1) Laboratory EBITDA was adjusted to exclude non-cash compensation of $4.3
million and $311,000 for the years ended December 31, 2001 and 2000,
respectively.

(2) Animal hospital EBITDA was adjusted to exclude non-cash compensation of
$2.6 million and $188,000 for the years ended December 31, 2001 and 2000,
respectively.

(3) Corporate selling, general and administrative expense was adjusted to
exclude non-cash compensation of $771,000 and management fees of $2.3
million for the year ended December 31, 2001; and non-cash compensation of
$56,000 and management fees of $620,000 for the year ended December 31,
2000.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense increased $6.3 million, or 33.3%, for
the year ended December 31, 2001 compared to the year ended December 31, 2000,
which increased $2.4 million, or 14.7%, compared to the year ended December 31,
1999. The increases in depreciation and amortization expense primarily were due
to the amortization over a three-year period of $15.6 million paid to our
executives pursuant to non-competition agreements entered into in September
2000, the purchase of property and equipment and the acquisition of animal
hospitals.

As a result of the implementation of SFAS No. 142, we will no longer
amortize goodwill in 2002. For a detailed discussion of SFAS No. 142, see "New
Accounting Pronouncements." This change, in conjunction with the termination of
our non-competition agreements with members of senior management, will have the
impact of lowering amortization expense in 2002 by approximately $14.4 million.

RECAPITALIZATION COSTS

We incurred $34.3 million of recapitalization costs for the year ended
December 31, 2000 pertaining to our recapitalization in September 2000. These
costs consisted of $24.1 million associated with the buy-out of stock options
held by employees, $1.2 million paid to our employees for services rendered in
connection with our recapitalization, $7.6 million of professional fees and $1.4
million of other expense. We do not expect any similar charges in 2002 or
subsequent years.

AGREEMENT TERMINATION COSTS

During the year ended December 31, 2001, we terminated non-competition
agreements with four members of senior management and recorded a non-cash charge
of $9.6 million. In addition, we paid $8.0 million to terminate our management
services agreement with Leonard Green & Partners. We do not expect any similar
charges in 2002 or subsequent years.

Page 43

OTHER NON-CASH OPERATING ITEMS

Other non-cash operating items consisted of $9.1 million write-down and
loss on sale of assets for the year ended December 31, 2001. The write-down of
assets primarily was attributable to the relocation of five of our animal
hospitals into existing animal hospitals we operated, the determination that
goodwill was impaired at one of our existing animal hospitals and the write-down
of real property available for sale to fair market value. Other non-cash
operating items consisted of $1.9 million reversal of restructuring charges
pertaining to our 1996 and 1997 restructuring plans for the year ended December
31, 1999.

NET INTEREST EXPENSE

Net interest expense increased $23.0 million, or 115.8% to $42.9 million
for the year ended December 31, 2001 from $19.9 million for the year ended
December 31, 2000, which represents an increase of $10.5 million, or 110.5%,
from $9.4 million for the year ended December 31, 1999. The increase in net
interest expense in 2001 and 2000 primarily was due to debt we incurred in
connection with the recapitalization in September 2000.

OTHER EXPENSE, NET

Other expense was $168,000 for the year ended December 31, 2001, consisting
of a non-cash loss on a hedging instrument pertaining to the changes in the time
value of our collar agreement. Other expense was $1.8 million for the year ended
December 31, 2000, consisting of a $3.2 million gain on sale of our investment
in Veterinary Pet Insurance, Inc. and a $5.0 million loss resulting from the
write-down of our investment in Zoasis.com, Inc.

PROVISION FOR INCOME TAXES

Provision for income taxes was $445,000, $2.2 million and $14.4 million for
the years ended December 31, 2001, 2000 and 1999. Our effective income tax rate
for each year varies from the statutory rate primarily due to the
non-deductibility for income tax purposes of the amortization of a portion of
goodwill. In 2001, our effective income tax rate also was impacted by the
write-down of zero tax basis assets and non-cash compensation.

MINORITY INTEREST

Minority interest in income of the consolidated subsidiaries was $1.4
million, $1.1 million and $850,000 for the years ended December 31, 2001, 2000
and 1999, respectively. Minority interest in income represents our partners'
proportionate share of net income generated by our subsidiaries that we do not
wholly own.

INCREASE IN CARRYING AMOUNT OF REDEEMABLE PREFERRED STOCK

The holders of our series A redeemable preferred stock and our series B
redeemable preferred stock were entitled to receive dividends at a rate of 14%
and 12%, respectively. The dividends not paid in cash compounded quarterly. The
dividends earned during 2001 and 2000 were added to the liquidation preference
of the preferred stock. In November 2001, we redeemed all of the outstanding
series A and series B redeemable preferred stock.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents increased to $32.4 million at September 30,
2002, from $7.1 million at December 31, 2001. The increase is primarily from
$60.8 million provided by operating activities offset by $29.7 million used in
investing activities and $5.9 million used in financing activities. Cash and
cash equivalents decreased to $7.1 million at December 31, 2001 from $10.5
million at December 31, 2000. The decrease primarily resulted from $57.1 million
provided by operating activities offset by $36.2 million used in investing
activities and $24.3 million used in financing activities. Cash and cash
equivalents decreased to $10.5 million at December 31, 2000 from $10.6 million
at December 31, 1999. The decrease primarily resulted from $60.1 million
provided by operating activities offset by $47.7 million used in investing
activities and $12.5 million used in financing activities.

Page 44

Net cash provided by operations for the nine months ended September 30,
2002 and 2001 was $60.8 million and $49.3 million, and for the years ended
December 31, 2001, 2000 and 1999 was $57.1 million, $60.1 million and $38.5
million. The increases during the nine months ended September 30, 2002 and the
year ended December 31, 2000 were primarily attributable to increases in revenue
and operating margins. The decrease during the year ended December 31, 2001 was
primarily attributable to approximately $4.8 million used in working capital
activities.

Net cash used in investing activities for the nine months ended September
30, 2002 and 2001 was $29.7 million and $30.3 million, and for the years ended
December 31, 2001, 2000 and 1999 was $36.2 million, $47.7 million and $13.7
million. In the nine months ended September 30, 2002 and 2001, and in the years
ended December 31, 2001, 2000 and 1999, we used cash of $13.4 million, $9.9
million, $13.5 million, $22.6 million and $21.8 million for property and
equipment additions. In these same periods, we used $15.1 million to acquire 18
animal hospitals, $18.1 million to acquire 18 animal hospitals, $20.9 million to
acquire 21 animal hospitals, $16.5 million to acquire 24 animal hospitals and
one laboratory and $15.2 million to acquire 39 animal hospitals and two
laboratories. Also in these same periods, we used $2.7 million, $2.5 million,
$3.4 million, $1.7 million and $0.9 million for contractual obligations related
to prior year acquisitions. In the nine months ended September 30, 2002, we did
not purchase any real estate in connection with our acquisitions and in the nine
months ended September 30, 2001, and the years ended December 31, 2001, 2000 and
1999, we used $675,000, $675,000, $1.8 million and $4.2 million to purchase real
estate in connection with our acquisitions. During the year ended December 31,
2000, we made payments in the aggregate amount of $15.6 million to four of our
executives in connection with the recapitalization transaction.

Net cash of $5.9 million used in financing activities during the nine
months ended September 30, 2002 is primarily the result of regularly-scheduled
debt payments of $2.9 million and payments related to accrued financing costs of
$3.4 million. In addition, we borrowed approximately $143.1 million in senior
term C notes, and used the proceeds to repay all of our outstanding senior term
A and B notes of $143.1 million.

Net cash of $5.9 million used in financing activities during the nine
months ended September 30, 2001 is primarily the result of regularly-scheduled
debt payments of $3.7 million and payments related to accrued financing costs of
$2.1 million.

Net cash of $24.3 million used in financing activities for the year ended
December 31, 2001 primarily was related to our initial public offering on
November 27, 2001. As a result of the initial public offering and the
underwriters' exercise of their over-allotment option, we issued 17,370,000
shares of common stock and received net proceeds of approximately $161.5
million. Concurrent with our initial public offering, one of our wholly owned
subsidiaries issued $170.0 million of 9.875% senior subordinated notes. We
applied the net proceeds from our initial public offering and our wholly owned
subsidiary's concurrent note offering, plus cash on hand, as follows:

o redeemed all of our outstanding series A and series B redeemable
preferred stock for $173.8 million;

o repaid $100.0 million of our senior term A and B notes;

o repaid $59.1 million in principal of our 15.5% senior notes due 2010,
at a redemption price of 110%, plus accrued and unpaid interest;

o repaid $5.0 million in principal of our wholly owned subsidiary's
13.5% senior subordinated notes due 2010, at a redemption price of
110%, plus accrued and unpaid interest; and

o made deferred financing payments in the amount of approximately $4.4
million.

Net cash of $12.5 million used in financing activities for the year ended
December 31, 2000 primarily was related to our recapitalization transaction on
September 30, 2000. We received $149.2 million from the issuance of preferred
stock, $14.4 million from the issuance of common stock, $1.1 million from the
issuance of stock warrants and $356.7 million from the issuance of long-term
debt. We primarily applied the net proceeds from our recapitalization
transaction as follows:

Page 45

o repaid long-term obligations in the amount of $172.9 million;

o repurchased common stock in the amount of $314.5 million;

o made deferred financing and recapitalization payments in the amount of
approximately $44.1 million; and

o made non-competition payments in the aggregate amount of $15.6 million
to four of our executive officers including: Robert L. Antin, our
Chief Executive Officer, President and founder; Arthur J. Antin, our
Chief Operating Officer, Senior Vice President and founder; Neil
Tauber, our Senior Vice President of Development and founder; and
Tomas W. Fuller, our Chief Financial Officer. These payments are
included in investing activities.

For the year ended December 31, 1999, cash used in financing activities was
$23.1 million, primarily for the repayment of long term debt.

FUTURE CASH REQUIREMENTS

We expect to fund our liquidity needs primarily from operating cash flows,
cash on hand and, if needed, borrowings under our $50.0 million revolving credit
facility, $7.5 million of which is outstanding as of December 31, 2002. We
believe these sources of funds will be sufficient to continue our operations and
planned capital expenditures and satisfy our scheduled principal and interest
payments under debt and capital lease obligations for at least the next 12
months. However, a significant portion of our cash requirements will be
determined by the pace and size of our acquisitions.

In the fourth quarter of 2002, we used $4.9 million of cash for capital
expenditures for land, buildings and equipment. Also in the fourth quarter of
2002, we used $7.4 million of cash for the acquisition of seven animal hospitals
and $2.4 million of cash for the acquisition of one laboratory. Estimated future
uses of cash for 2003 include capital expenditures for land, buildings and
equipment of approximately $18.0 million. In addition, we intend to use
available liquidity to continue our growth through the selective acquisition of
animal hospitals, primarily for cash. We continue to examine acquisition
opportunities in the laboratory field, which may impose additional cash
requirements. Our acquisition program contemplates the acquisition of 15 to 25
animal hospitals per year and a planned cash commitment of up to $30.0 million.
However, we may purchase either fewer or greater number of facilities depending
upon opportunities that present themselves and our cash requirements may change
accordingly. In addition, although we intend primarily to use cash in our
acquisitions, we may use debt or stock to the extent we deem it appropriate.

In October 2002, we used $25.2 million of cash on hand and incurred
additional borrowings of $25.0 million under our senior credit facility to
voluntarily repay the entire outstanding principal amount on our 13.5% senior
subordinated notes and $30.0 million principal amount of our 15.5% senior notes,
plus accrued and unpaid interest and prepayment premiums. See "Description of
Certain Indebtedness" for additional information.

DESCRIPTION OF INDEBTEDNESS

SENIOR CREDIT FACILITY

In September 2000, we entered into a senior credit facility for $300.0
million of senior secured credit facilities, which included a $50.0 million
revolving credit facility as well as senior term A and B notes. On August 29,
2002, we amended our senior credit facility to refinance our existing senior
term A and senior term B notes with an equal principal amount of senior term C
notes, which bear a lower interest rate than the weighted average interest rate
for the senior term A and B notes. In conjunction with the transaction we wrote
off $3.4 million in deferred financing costs as extraordinary loss on early
extinguishment of debt, which provided a related tax benefit of $1.4 million.

Page 46

Borrowings under our senior credit facility bear interest, at our option,
on either the base rate, which is the higher of the administrative agent's prime
rate or the Federal funds rate plus 0.5%, or the adjusted eurodollar rate, which
is the rate per annum obtained by dividing (1) the rate of interest offered to
the administrative agent on the London interbank market by (2) a percentage
equal to 100% minus the stated maximum rate of all reserve requirements
applicable to any member bank of the Federal Reserve System in respect of
"eurocurrency liabilities." The base rate margins for the revolving credit
facility range from 1.00% to 2.25% per annum and the margin for the senior term
C notes is 2.00%. The eurodollar rate margins for the revolving credit facility
range from 2.00% to 3.25% per annum and the margin for the senior term C notes
is 3.00%.

As of September 30, 2002, we had $142.7 million principal amount
outstanding under our senior term C notes and we had not utilized our revolving
credit facility. In December 2002, we borrowed $7.5 million under our revolving
credit facility. The senior term C notes mature in September 2008 and the
revolving credit facility matures in September 2006.

Our senior credit facility contains certain financial covenants pertaining
to interest coverage, fixed charge coverage and leverage ratios. In addition,
our senior credit facility has restrictions pertaining to capital expenditures,
acquisitions and the payment of dividends on all classes of stock. We currently
believe the most restrictive covenant is the fixed-charge coverage ratio, which
is calculated on a last twelve-month basis by dividing pro forma adjusted EBITDA
by fixed charges. Fixed charges are defined as cash interest expense, scheduled
principal payments on debt obligations, capital expenditures, management fees
paid and provision for income taxes. At September 30, 2002, we had a fixed
charge coverage ratio of 1.50 to 1.00. Our senior credit facility requires a
fixed-charge coverage ratio of no less than 1.10 to 1.00.

13.5% AND 9.875% SENIOR SUBORDINATED NOTES

In September 2000, we issued $20.0 million principal amount of 13.5% senior
subordinated notes due on September 20, 2010. As of September 30, 2002, the
outstanding principal balance of our 13.5% senior subordinated notes was $15.0
million. On October 24, 2002 we repaid the entire outstanding principal amount
of these notes. See "October 2002 Debt Prepayment" below.

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

15.5% SENIOR NOTES

In September 2000, we issued $100.0 million principal amount of 15.5%
senior notes due September 20, 2010. Interest on our 15.5% senior notes is 15.5%
per annum, payable semi-annually in arrears in cash or by issuance of additional
senior notes. We have issued $25.9 million in additional 15.5% senior notes to
pay interest since the issue date. As of September 30, 2002, the outstanding
principal balance of our 15.5% senior notes was $66.7 million. On October 24,
2002 we repaid $30.0 million principal amount on our 15.5% senior notes, plus
accrued and unpaid interest and prepayment premiums. See "October 2002 Debt
Prepayment" below. Upon the consummation of this offering, we intend to repay
the entire outstanding principal amount of these notes at a redemption price of
110% of the principal amount, for an aggregate of $40.4 million, plus accrued
and unpaid interest.

OTHER DEBT

We have secured seller notes, unsecured debt and capital leases which total
$1.7 million at September 30, 2002.

Page 47

OCTOBER 2002 DEBT PREPAYMENT

On October 24, 2002 we repaid the entire outstanding principal amount of
our 13.5% senior subordinated notes and $30.0 million principal amount of our
15.5% senior notes, plus accrued and unpaid interest and prepayment premiums. We
repaid these notes with funds from an additional $25.0 million of senior term C
notes issued under our senior credit facility and $25.2 million of cash on hand.
For the next twelve months, this net reduction in debt and the lower effective
interest rate will result in an estimated net annual pre-tax savings of
approximately $5.0 million in interest expense calculated assuming a 5.0% rate
on our variable senior term C notes and an opportunity cost of 1.5% for the cash
used.

In connection with this repayment we expect to incur approximately $9.6
million of costs, including $4.8 million in prepayment premium and transaction
costs, and $4.8 million in non-cash costs pertaining to the write-off of
unamortized discount and deferred financing costs associated with the debt
retired. These charges will be recognized during the fourth quarter of 2002 as
an extraordinary loss in the amount of approximately $5.5 million, net of income
tax benefit.

FUTURE CASH OBLIGATIONS FOR LONG-TERM DEBT, INTEREST AND OPERATING LEASES

The following table sets forth our scheduled principal, interest and other
contractual annual cash obligations due by us for each of the years ending
December 31, adjusted to reflect the impact of the no-fee swap agreement with
Wells Fargo, which became effective November 29, 2002, the additional senior
term C notes borrowed and the voluntary repayment of all of our 13.5% senior
subordinated notes and a portion of our 15.5% senior notes, which occurred in
October 2002 (dollars in thousands):

TOTAL (1) 2002 2003 2004 2005 (1) 2006 (1) THEREAFTER(1)
--------- -------- --------- -------- -------- -------- -------------

Long-term debt........ $ 378,538 $ 3,541 $ 1,894 $ 1,860 $ 4,044 $21,487 $345,712
Fixed interest........ 174,720 20,694 19,333 19,134 21,328 22,448 71,783
Variable interest..... 55,020 7,714 6,966 7,698 10,614 11,313 10,715
Collar agreement...... 2,340 2,340 -- -- -- -- --
PIK interest.......... 16,610 -- -- -- 16,610 -- --
Capital lease
obligations......... 79 79 -- -- -- -- --
Operating leases...... 192,612 12,247 12,530 12,575 12,285 12,165 130,810
Other long-term
obligations......... 2,424 2,424 -- -- -- -- --
--------- -------- --------- -------- -------- -------- ---------
$ 822,343 $ 49,039 $ 40,723 $41,267 $64,881 $67,413 $559,020
========= ======== ========= ======== ======== ======== =========

(1) We intend to use the proceeds from this offering to repay the entire
outstanding principal amount of our 15.5% senior notes. If we repay
the entire outstanding principal amount of these notes, our future
cash obligations will be reduced by $23.0 million in 2005, $5.3
million in 2006 and $55.9 million thereafter, for an aggregate
reduction of $84.2 million.

Through March 2005, interest on our 15.5% senior notes is payable
semi-annually and, at our option, in cash or by issuing additional 15.5% senior
notes. After March 2005, interest is payable semi-annually, in cash. Any
additional 15.5% senior notes are considered paid-in-kind interest, commonly
referred to as "PIK interest," and are reflected in the above table. These notes
have the same terms as the original notes except they mature in September 2005.
We have issued additional 15.5% senior notes for all of our historical interest
payments on the 15.5% senior notes and intend to continue doing so pending
consummation of this offering.

Page 48

INTEREST RATE HEDGING AGREEMENTS

On November 13, 2000, we entered into a no-fee interest rate collar
agreement with Wells Fargo Bank effective November 15, 2000 and that expired on
November 15, 2002. Our collar agreement was considered a cash flow hedge based
on the London interbank offer rate, or LIBOR. Our collar agreement paid out
monthly, reset monthly and had a cap and floor notional amount of $62.5 million,
with a cap rate of 7.5% and floor rate of 5.9%.

The actual cash paid by us as a result of LIBOR rates falling below the
floor of our collar agreement is recorded as a component of earnings. For the
nine months ended September 30, 2002, we made payments of $1.9 million that are
included in interest expense.

At September 30, 2002, the fair market value of our collar agreement was a
net liability to us of $326,000 and is included in other accrued liabilities on
our balance sheet.

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

NEW ACCOUNTING PRONOUNCEMENTS

GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board, ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS. SFAS No. 142 prohibits the amortization of goodwill and
intangible assets with indefinite useful lives. SFAS No. 142 requires that these
assets be reviewed for impairment at least annually, or whenever there is an
indication of impairment. Intangible assets with finite lives will continue to
be amortized over their estimated useful lives and reviewed for impairment in
accordance with SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS.

SFAS No. 142 requires companies to allocate their goodwill to identifiable
reporting units, which are then tested for impairment using a two-step process
detailed in the statement. The first step requires comparing the fair value of
each reporting unit with its carrying amount, including goodwill. If that fair
value exceeds the carrying amount, the second step of the process is not
necessary and there are no impairment issues. If that fair value does not exceed
that carrying amount, companies must perform the second step that requires a
hypothetical allocation of the fair value of the reporting unit to the reporting
unit's assets and liabilities as if the unit were just purchased by the company
at the fair value price. In this hypothetical purchase, the excess of the fair
value of the reporting unit over its re-evaluated, marked-to-market net assets
would be the new basis for the reporting unit's goodwill and a write down to
this new value would be recognized as an expense.

We adopted SFAS No. 142 on January 1, 2002. In doing so, we determined that
we have two reporting units, Laboratory and Animal Hospital. On April 15, 2002,
an independent valuation group concluded that the fair value of our reporting
units exceeded their carrying value and accordingly, as of that date, we
concluded there were no goodwill impairment issues. We plan to perform a
valuation of our reporting units annually, or upon significant changes in our
business environment.

As of September 30, 2002 our goodwill, net of accumulated amortization, was
$332.5 million. As a result of the adoption of SFAS No. 142, we recorded no
amortization of goodwill for the nine months ended September 30, 2002. We
recorded $6.9 million in goodwill amortization for the nine months ended
September 30, 2001. We recorded $9.2 million, $8.3 million and $7.5 million in
goodwill amortization for the fiscal years ended December 31, 2001, 2000 and
1999, respectively.

Page 49

GOODWILL IMPAIRMENT TEST

In August 2002, the FASB's Emerging Issues Task Force (EITF) issued EITF
Issue No. 02-13, DEFERRED INCOME TAX CONSIDERATIONS IN APPLYING THE GOODWILL
IMPAIRMENT TEST IN FASB NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. EITF
Issue No. 02-13 was issued to provide guidance on how to account for deferred
tax balances in determining a reporting unit's fair value, a reporting unit's
carrying amount and the implied fair value of goodwill. The consensus in this
issue will be applied prospectively in performing either the first or second
step of the impairment test required by SFAS No. 142 for tests performed after
September 12, 2002. We do not expect the adoption of EITF Issue No. 02-13 to
have a material impact on our consolidated financial statements.

ASSET RETIREMENT OBLIGATIONS

In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. We will adopt SFAS No. 143 in the first
quarter of fiscal year 2003. We do not expect the adoption of SFAS No. 143 to
have a material impact on our consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which establishes one accounting model to be
used for long-lived assets to be disposed of by sale and broadens the
presentation for discontinued operations to include more disposal transactions.
SFAS No. 144 supercedes SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS TO BE DISPOSED OF BY SALE, and the accounting and reporting
provisions of Accounting Principles Board Opinion No. 30 ("APB No. 30"),
REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS. We adopted SFAS No. 144 on January 1, 2002 without
material impact on our financial statements.

We will continually evaluate whether events, circumstances or net losses at
the entity level have occurred that indicate the remaining estimated useful life
of long-lived assets may warrant revision or that the remaining balance of these
assets may not be recoverable. When factors indicate that these assets should be
evaluated for possible impairment, we will estimate the sum of the undiscounted
cash flows expected to result from the use and eventual disposition of the
long-lived assets in question. If that estimate is less than the carrying value
of the assets under review, we will recognize an impairment loss equal to that
difference.

GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT AND CAPITAL LEASES

In April 2002, the FASB issued SFAS No. 145, RESCISSION OF FASB STATEMENTS
NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO. 13, AND TECHNICAL
CORRECTIONS, to be applied in fiscal years beginning after May 15, 2002 with
early adoption encouraged.

Under SFAS No. 145, gains and losses from extinguishment of debt should be
classified as extraordinary items only if they meet the criteria of APB No. 30.
Under APB No. 30, events are considered extraordinary only if they possess a
high degree of abnormality and are not likely to recur in the foreseeable
future. Any gains or losses on extinguishment of debt that do not meet the
criteria of APB No. 30 shall be classified as a component of income from
recurring operations. In addition, any gains or losses on extinguishment of debt
that were classified as an extraordinary item in prior periods presented that do
not meet the criteria of APB No. 30 shall be reclassified as a component of
income from recurring operations.

We will adopt SFAS No. 145 at the beginning of fiscal year 2003. As
detailed in Footnote (5) to our financial statements, "Extraordinary Loss on
Early Extinguishment of Debt," we recognized extraordinary losses related to the
early extinguishment of debt of approximately $3.4 million, before taxes, in
August 2002. We also expect to incur an additional extraordinary loss in the
fourth quarter of 2002 related to the prepayment of debt in the amount of $9.3
million, before taxes. In addition, we recognized extraordinary losses related
to the early extinguishment of debt, before taxes in the amount of approximately
$17.2 million and $4.5 million during years

Page 50

2001 and 2000, respectively. We do not believe these losses on extinguishment of
debt meet the criteria of APB No. 30 as we have historically participated in and
may continue to participate in periodic debt refinancing. As a result of
adopting SFAS No. 145, we will reclassify the losses on extinguishment of debt
from extraordinary losses to a component of income from recurring operations for
filings subsequent to January 1, 2003. This reclassification will not impact net
income.

SFAS No. 145 also amends SFAS No. 13, ACCOUNTING FOR LEASES. Under SFAS No.
145, if a capital lease is modified such that it becomes an operating lease, a
gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At September
30, 2002, we had capital lease obligations of $43,000. Although the Company may
enter into more capital leases, management does not expect SFAS No. 145 to have
a material impact on its financial statements.

COSTS ASSOCIATED WITH EXIT OR DISPOSAL OF ACTIVITIES

In June 2002, FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires that liabilities
associated with exit or disposal activities be recognized when a company is
committed to future payment of those liabilities under a binding, legal
obligation. SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3,
LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS
TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING), which
required that exit and disposal costs be recognized as liabilities when a
company formalized its plan for exiting or disposing of an activity even if no
legal obligation had been established.

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

QUARTERLY RESULTS

The following tables set forth selected unaudited quarterly results for the
eleven quarters commencing January 1, 2000, and ending September 30, 2002. The
quarterly financial data as of each period presented below have been derived
from our unaudited consolidated financial statements for those periods. Results
for these interim periods are not necessarily indicative of our results for a
full year's operations. The quarterly financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," "Results of Operations" and our consolidated
financial statements and related notes included elsewhere in this prospectus.

IN DOLLARS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS):

2002 QUARTER ENDED 2001 QUARTER ENDED 2000 QUARTER ENDED
----------------------------- -------------------------------------- -------------------------------------
SEP. 30 JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 MAR. 31
--------- --------- -------- --------- --------- --------- ------- -------- --------- -------- --------

Revenue:
Laboratory....... $ 38,650 $ 40,604 $ 37,657 $ 32,856 $ 33,471 $ 35,707 $32,677 $28,469 $ 30,105 $31,921 $28,805
Animal hospital.. 78,118 78,621 68,644 64,448 70,531 72,780 64,354 57,908 63,449 63,472 55,795
Other............ 500 500 500 500 500 500 500 500 -- -- 425
Intercompany..... (2,296) (2,500) (2,106) (1,807) (1,866) (1,938) (1,851) (1,471) (1,558) (1,459) (1,674)
--------- --------- --------- --------- --------- --------- -------- -------- --------- -------- --------
Total revenue...... 114,972 117,225 104,695 95,997 102,636 107,049 95,680 85,406 91,996 93,934 83,351
Adjusted EBITDA.... 29,163 31,682 23,485 18,613 24,599 27,112 19,181 15,986 20,334 21,980 15,226
Operating income
(loss)............. 26,135 28,543 20,322 (5,974) 16,024 8,393 9,263 9,681 (19,075) 17,524 11,075
Net income (loss).. 7,035 10,495 5,635 (20,638) 2,024 (5,820) (2,989) (6,526) (16,713) 8,436 6,392
Diluted earnings
(loss) per share... $ 0.19 $ 0.28 $ 0.15 $ (0.97) $ (0.19) $ (0.63) $ (0.46) $ (0.65) $ (0.06) $ 0.02 $ 0.02

Page 51

IN PERCENTAGES OF REVENUE:

2002 QUARTER ENDED 2001 QUARTER ENDED 2000 QUARTER ENDED
--------------------------- ------------------------------------- ------------------------------------
SEP. 30 JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 MAR. 31 DEC. 31 SEP. 30 JUN. 30 MAR. 31
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------

Revenue:
Laboratory.... 33.6 % 34.6 % 36.0 % 34.2 % 32.6 % 33.3 % 34.1 % 33.3 % 32.7 % 34.0 % 34.6 %
Animal hospital 68.0 % 67.1 % 65.5 % 67.1 % 68.7 % 68.0 % 67.3 % 67.8 % 69.0 % 67.6 % 66.9 %
Other.......... 0.4 % 0.4 % 0.5 % 0.5 % 0.5 % 0.5 % 0.5 % 0.6 % -- -- 0.5 %
Intercompany... (2.0)% (2.1)% (2.0)% (1.8)% (1.8)% (1.8)% (1.9)% (1.7)% (1.7)% (1.6)% (2.0)%
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenue...... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Adjusted EBITDA.... 25.4 % 27.0 % 22.4 % 19.4 % 24.0 % 25.3 % 20.0 % 18.7 % 22.1 % 23.4 % 18.3 %
Operating income
(loss)............. 22.7 % 24.3 % 19.4 % (6.2)% 15.6 % 7.8 % 9.7 % 11.3 % (20.7)% 18.7 % 13.3 %
Net income (loss).. 6.1 % 9.0 % 5.4 % (21.5)% 2.0 % (5.4)% (3.1)% (7.6)% (18.2)% 9.0 % 7.7 %

Although not readily detectable because of the impact of acquisitions, our
operations are subject to seasonal fluctuation. In particular, our revenue
historically has been greater in the second and third quarters than in the first
and fourth quarters.

The demand for our 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. A substantial
portion of our costs are fixed and do not vary with the level of demand.
Consequently, our EBITDA, Adjusted EBITDA and operating income, as well as our
EBITDA, Adjusted EBITDA and operating margins, generally have been higher for
the second and third quarters than that experienced in the first and fourth
quarters.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have certain debt obligations that are exposed to market risk associated
with variable interest rates. As of September 30, 2002, we had borrowings of
$142.7 million under our senior credit facility with variable interest rates
based on market benchmarks such as LIBOR. To reduce the risk of increasing
interest rates, we entered into a no-fee interest rate collar agreement that
expired on November 15, 2002. This collar agreement had a cap and floor notional
amount of $62.5 million, a cap rate of 7.5% and a floor rate of 5.9%, both based
on LIBOR.

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

o if the benchmark rate is below 5.9% and a change in the rate does not
cause the benchmark to exceed 5.9%, every one-half percent increase in
the benchmark rate will cause interest expense to increase by
$445,000, while a one-half percent decrease will cause interest
expense to decrease by $445,000;

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

o if the benchmark rate is above 7.5% and a change in the rate does not
cause the benchmark to drop below 7.5%, every one-half percent
increase in the benchmark rate would cause interest expense to
increase by $445,000, while a one-half percent decrease would cause
interest expense to decrease by $445,000.

On October 24, 2002 we repaid the entire outstanding principal amount of
our 13.5% senior subordinated notes and $30.0 million principal amount of our
15.5% senior notes, plus accrued and unpaid interest and prepayment premiums.
Funds used to repay these notes and related fees and transaction costs were
derived from an additional $25.0 million of senior term C notes issued under our
senior credit facility and $25.2 million of cash on

Page 52

hand. As a result of this transaction we increased the amount of our debt
subject to variable interest rates from $142.7 million at September 30, 2002 to
$167.7 million.

On December 23, 2002, we borrowed $7.5 million under our revolving credit
facility, which is subject to variable interest rates based on market benchmarks
such as LIBOR.

For fiscal 2003, $135.2 million of our debt obligations are subject to the
risk of variable interest rates. Based on this amount, for every 1% increase or
decrease in interest rates, our annual interest expense will increase or
decrease by $1.4 million.

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

INFLATION

Historically, our operations have not been materially affected by
inflation. We cannot assure you that our operations will not be affected by
inflation in the future.

Page 53

BUSINESS

GENERAL

We are a leading animal health care services company and operate the
largest networks of veterinary diagnostic laboratories and free-standing,
full-service animal hospitals in the United States. Our network of veterinary
diagnostic laboratories provides sophisticated testing and consulting services
to the veterinarian comparable to that provided by the human diagnostic
laboratory to the physician. Veterinarians use these services in the detection,
diagnosis, evaluation, monitoring, treatment and prevention of diseases and
other conditions affecting animals. With the only nationwide veterinary
laboratory network serving all 50 states, we provide diagnostic testing for an
estimated 13,000 animal hospitals. Our network of animal hospitals offers a full
range of general medical and surgical services for companion animals, as well as
specialized treatments including advanced diagnostic services, internal
medicine, oncology, ophthalmology, dermatology and cardiology. In addition, we
provide pharmaceutical products and perform a variety of pet wellness programs
including routine vaccinations, health examinations, diagnostic testing,
spaying, neutering and dental care. The more than 750 veterinarians supporting
our 225 animal hospitals had over three million patient visits in 2002.

INDUSTRY OVERVIEW

The U.S. population of companion animals has reached approximately 188
million, including about 141 million dogs and cats. Industry data shows that
over $11 billion was spent on animal health care services in 1996, with an
annual growth rate of over 9.5% from 1991 through 1996 for spending on dogs and
cats.

The ownership of pets is widespread, with over 62% of U.S. households
owning at least one pet, including companion and other animals. Pet ownership is
highest among households with children under 18 and empty-nesters whose pets
have become their new "children."

Among this expanding number of pet owners is a growing awareness of pet
health and wellness, including the benefits of preventive care and specialized
services. As technology continues to migrate from the human healthcare sector
into the practice of veterinary medicine, more sophisticated treatments and
diagnostic tests are becoming available to treat companion animals. These new
and increasingly complex procedures, diagnostic tests and pharmaceuticals are
gaining wider acceptance as pet owners are exposed to these previously
unconsidered treatment programs through literature and marketing programs
sponsored by large pharmaceutical and pet nutrition companies. We believe this
is evidenced by an industry survey revealing that 70% of pet owners view their
animals as important members of the family and are willing to pay for more
veterinary services to promote the good health and extend the life of their pet.

Even as treatments available in veterinary medicine become more complex,
prices for veterinary services typically remain a low percentage of a
pet-owner's income, facilitating payment at the time of service. Unlike the
human health care industry, providers of veterinary services are not dependent
on third-party payors in order to collect fees. As a consequence, providers of
veterinary services do not have the problems of extended payment collection
cycles or pricing pressures from third party-payors faced by human health care
providers. Outsourced laboratory testing is a wholesale business that collects
payments directly from animal hospitals, generally on terms requiring payment
within 30 days of the date the charge is invoiced. Fees for animal hospital
services are due at the time of the service. For example, over 95% of our animal
hospital services are paid for in cash or by credit card at that time. In
addition, over the past three fiscal years, our bad debt expense has averaged
only 1% of total revenue.

The practice of veterinary medicine is subject to seasonal fluctuation. In
particular, demand for veterinary services is significantly higher during the
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.

Page 54

DIAGNOSTIC LABORATORIES. Laboratory tests are used by veterinarians to
diagnose, monitor and treat illnesses and conditions in animals through the
detection of substances in urine, tissue, fecal and blood samples and other
specimens. As is the case with the physician treating a human patient,
laboratory diagnostic testing is becoming a routine diagnostic tool used by the
veterinarian.

Veterinary laboratory tests are performed primarily at free-standing
veterinary diagnostic laboratories, universities or animal hospitals using
on-site diagnostic equipment. For particular types of tests, on-site diagnostic
equipment can provide more timely results than outside laboratories, but this
in-house testing requires the animal hospital or veterinarian to purchase or
lease the equipment, maintain and calibrate the equipment periodically to avoid
testing errors, and employ trained personnel to operate it. Conversely,
veterinary diagnostic laboratories can provide a wider range of tests than
generally are available on-site at most animal hospitals and do not require any
up-front investment on the part of the animal hospital or veterinarian. Also,
leading veterinary diagnostic laboratories employ highly trained individuals who
specialize in the detection and diagnosis of diseases and thus are a valuable
resource for the veterinarian.

Within the outsourcing market, our laboratories specialize in the
veterinary market and offer a broad spectrum of standard and customized tests,
convenient sample pick-up times, rapid test reporting and access to professional
consulting services provided by trained specialists. Providing the client with
this level of service at competitive prices requires high throughput volumes due
to the operating leverage associated with the laboratory business. As a result,
larger laboratories likely maintain a competitive advantage relative to smaller
laboratories.

We believe that the outsourced laboratory testing market is one of the
fastest growing segments of the animal health care services industry, and expect
continued growth as a result of:

o the increased focus on wellness and monitoring programs in veterinary
medicine, which is increasing the overall number of tests being
performed;

o the emphasis in veterinary education on diagnostic tests and the trend
toward specialization in veterinary medicine, which are causing
veterinarians to increasingly rely on tests for more accurate
diagnoses;

o the continued technological developments in veterinary medicine, which
are increasing the breadth of tests offered; and

o the trend toward outsourcing tests because of the relative low cost,
the high accuracy rates and the diagnostic support provided by
specialists employed by the laboratory.

ANIMAL HOSPITALS. Animal health care services are provided predominately by
the veterinarian practicing as a sole practitioner, or as part of a larger
animal medical group or hospital. Veterinarians diagnose and treat animal
illnesses and injuries, perform surgeries, provide routine medical exams and
prescribe medication. Some veterinarians specialize by type of medicine, such as
orthopedics, dentistry, ophthalmology or dermatology. Others focus on a
particular type of animal. The principal factors in a pet owner's decision as to
which veterinarian to use include convenient location, recommendation of
friends, reasonable fees, convenient hours and quality of care.

The U.S. market for veterinary services is highly fragmented, with more
than 35,000 veterinarians practicing at over 18,000 companion animal hospitals.
Although most animal hospitals are single site, sole practitioner facilities, we
believe veterinarians are increasingly gravitating toward animal hospitals that
provide state-of-the-art facilities, treatments, methods and pharmaceuticals to
enhance the services they can provide their clients.

Well-capitalized animal hospital operators have the opportunity to
supplement their internal growth with selective acquisitions. We believe the
extremely fragmented animal hospital industry is consolidating due to:

o the purchasing, marketing and administrative cost advantages that can
be realized by a large, multiple location, multi-practitioner
veterinary provider;

Page 55

o the cost of financing equipment purchases and upgrading technology
necessary for a successful practice;

o the desire of veterinarians to focus on practicing veterinary
medicine, rather than spending large portions of their time at work
performing the administrative tasks necessary to operate an animal
hospital;

o the choice of some owners of animal hospitals to diversify their
investment portfolio by selling all or a portion of their investment
in the animal hospital; and

o the appeal to many veterinarians of the benefits and work scheduling
flexibility that are not typically available to a sole practitioner or
single site-provider.

COMPETITIVE STRENGTHS

We believe that we are well-positioned for profitable growth due to the
following competitive strengths:

o COMPELLING BUSINESS MODEL. We believe our business model enables us to
generate consistent growth and increasing cash flows. The fixed cost
nature of our business allows us to generate strong margins,
particularly on incremental revenues. In each quarter since 1999, we
have generated positive laboratory internal revenue growth. The growth
in our laboratory revenue, combined with greater utilization of our
infrastructure, has enabled us to improve our laboratory operating
margin from 27.1% in 1999 to 33.8% for the twelve months ended
September 30, 2002, and our laboratory adjusted EBITDA margin from
31.2% to 36.1% over the same period. In each quarter since 1999, we
have generated positive animal hospital same-facility revenue growth.
Due to the operating leverage associated with our animal hospital
business, the increase in animal hospital revenue has enabled us to
improve our animal hospital operating margin from 12.3% in 1999 to
17.3% for the twelve months ended September 30, 2002, and our animal
hospital adjusted EBITDA margin from 17.1% to 20.7% over the same
period. These high margins, combined with our modest working capital
needs and low maintenance capital expenditures, provide cash that we
can use for acquisitions or to reduce indebtedness.

Page 56

sharing of professional knowledge and expertise and have developed and
implemented a program of best practices to promote quality medical
care.

BUSINESS STRATEGY

Our business strategy is to continue to expand our market leadership in
animal health care services through our diagnostic laboratories and animal
hospitals. Key elements of our strategy include:

o CAPITALIZING ON OUR LEADING MARKET POSITION TO GENERATE REVENUE
GROWTH. Our leading market position in each of our business segments
positions us to capitalize on favorable growth trends in the animal
health care services industry. In our laboratories, we seek to
generate revenue growth by taking advantage of the growing number of
outsourced diagnostic tests and by increasing our market share. We
continually educate veterinarians on new and existing technologies and
test offerings available to diagnose medical conditions. Further, we
leverage the knowledge of our specialists by providing veterinarians
with extensive client support in promoting and understanding these
diagnostic tests. In our animal hospitals, we seek to generate revenue
growth by capitalizing on the growing emphasis on pet health and
wellness.

o LEVERAGING ESTABLISHED INFRASTRUCTURE TO IMPROVE MARGINS. We intend to
leverage our established laboratory and animal hospital infrastructure
to continue to increase our operating margins. Due to our established
networks and the fixed cost nature of our business model, we are able
to realize high margins on incremental revenues from both laboratory
and animal hospital clients. For example, given that our nationwide
transportation network servicing our laboratory clients is a
relatively fixed cost, we are able to achieve significantly higher
margins on most incremental tests ordered by the same client when
picked up by our couriers at the same time. We estimate that in most
cases, we realize an operating and EBITDA margin between 60% and 75%
on these incremental tests.

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DIAGNOSTIC LABORATORIES

We operate the only full-service, veterinary diagnostic laboratory network
serving all 50 states. In 2001, we performed approximately 18.3 million tests
and handled roughly 6.9 million requisitions in our state-of-the-art, automated
diagnostic laboratories. Our laboratory network services a diverse client base
of over 13,000 animal hospitals, and non-affiliated animal hospitals generated
approximately 95% of our laboratory revenue in 2001.

SERVICES. Our diagnostic spectrum includes over 300 different tests in the
areas of chemistry, pathology, endocrinology, hematology, and microbiology, as
well as tests specific to particular diseases. The average revenue per
requisition is approximately $21. We do not conduct experiments on animals and
are not engaged in animal research.

Although modified to address the particular requirements of the species
tested, the tests performed in our veterinary laboratories are similar to those
performed in human clinical laboratories and utilize similar laboratory
equipment and technologies. The growing concern for animal health, combined with
the movement of veterinary medicine toward increasing specialization, should
spur the migration of additional areas of human testing into the veterinary
field. For example, we now provide cancer testing for household pets whereas
several years ago, these tests were not available.

Given the recent advancements in veterinary medical technology and the
increased breadth and depth of knowledge required for the practice of veterinary
medicine, many veterinarians solicit the knowledge and experience of our 83
specialists to interpret test results, consult on the diagnosis of illnesses and
suggest treatment programs. This resource includes veterinarians, chemists, and
other scientists with expertise in pathology, internal medicine, oncology,
cardiology, dermatology, neurology and endocrinology. This depth of experience
and expertise enables our specialists to suggest additional testing or provide
diagnostic advice that assists the veterinarian in developing an appropriate
treatment plan.

Together with our specialist support, we believe the quality of our service
further distinguishes our laboratory services. We maintain quality assurance
programs to ensure that specimens are collected and transported properly, that
tests are performed accurately and that client, patient and test information is
reported and billed correctly. Our quality assurance programs include quality
control testing of specimens of known concentration or reactivity to ensure
accuracy and precision, routine checks and preventive maintenance of laboratory
testing equipment, and personnel standards ensuring that only qualified
personnel perform testing. As a result, we believe that our accuracy rate is
over 99%.

LABORATORY NETWORK

At September 30, 2002, we operated 19 full-service laboratories. Our
laboratory network includes:

o primary hubs that are open 24 hours per day and offer a full testing
menu;

o secondary laboratories that service large metropolitan areas, are open
24 hours per day and offer a wide testing menu; and

o STAT laboratories that service other locations with demand sufficient
to warrant nearby laboratory facilities and are open primarily during
daytime hours.

We connect our laboratories to our clients with what we believe is the
industry's largest transportation network, which picks up an average of 20,000
to 25,000 requisitions daily through an extensive network of drivers and
independent couriers. In the nine months ended September 30, 2002, we derived
approximately 70.1% of our laboratory revenue from major metropolitan areas,
where we offer twice-a-day pick-up service and same-day results. In addition, in
these areas, we generally offer to report results within three hours of pick-up.
Outside of these areas, we typically provide test results to veterinarians
before 8:00 a.m. the following day.

Veterinarian clients located outside the areas covered by our
transportation network are serviced using our Test Express service. Users of the
Test Express service send patient specimens by Federal Express to our laboratory

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just outside of Memphis, the proximity of which to the Federal Express primary
sorting facility permits speedy and cost-efficient testing.

SALES, MARKETING AND CLIENT SERVICE. We employ over 45 full-time sales and
field service representatives who market laboratory services and maintain
relationships with existing clients. The sales force is commissioned-based and
organized along geographic regions. We support our sales efforts by
strengthening our industry-leading team of specialists, developing marketing
literature, attending trade shows, participating in trade associations and
providing educational services to veterinarians. In addition, we employ over 85
client service representatives who respond to client inquiries, provide test
results and, when appropriate, introduce the client to other services offered by
the laboratory.

Given the high margins we enjoy on many of our incremental tests, our sales
force is compensated primarily on its success in maximizing the amount of
business from existing clients as well as adding new clients.

PERSONNEL. At September 30, 2002, we employed a staff of approximately
1,100 full-time-equivalent employees in our laboratory network. At that same
date, we employed on average 325 employees at each of our primary laboratories,
73 employees at each of our secondary laboratories and 13 employees at each of
our STAT laboratories. We employ some of our specialists and enter into
consulting arrangements with others. Our laboratory network consists of an
eastern and western division and we employ a vice president to manage each
region. We employ a manager at each of our laboratories and supervisors for each
department within the laboratories.

ANIMAL HOSPITALS

At September 30, 2002, we operated 225 animal hospitals in 33 states that
were supported by over 750 veterinarians. Our nationwide network of
free-standing, full-service animal hospitals has facilities located in the
following states:

California 45 Delaware 4
New York* 21 Connecticut 3
Florida 17 New Mexico 3
Illinois 17 Minnesota* 2
Michigan 13 Nebraska* 2
Texas* 12 North Carolina* 2
Pennsylvania 11 Utah 2
New Jersey* 9 Washington* 2
Maryland 8 Wisconsin 2
Indiana 7 Alabama* 1
Massachusetts 7 Georgia 1
Virginia 6 Hawaii 1
Alaska 5 Louisiana* 1
Nevada 5 Missouri 1
Ohio * 5 South Carolina 1
Arizona 4 West Virginia* 1
Colorado 4

* States in which we manage animal hospitals owned by veterinary
medical groups.

We seek to provide quality medical care in clean, attractive facilities
that are open on average between 10 and 15 hours per day, six to seven days per
week. Our typical animal hospital:

o is located in a 4,000 to 6,000 square foot, free-standing facility in
an attractive location;

o has annual revenue between $1.0 million and $2.0 million;

o is supported by three to five veterinarians; and

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o has an operating history of over ten years.

In addition to general medical and surgical services, we offer specialized
treatments for companion animals, including advanced diagnostic services,
internal medicine, oncology, ophthalmology, dermatology and cardiology. We also
provide pharmaceutical products for use in the delivery of treatments by our
veterinarians and pet owners. Many of our animal hospitals offer additional
services, including grooming, bathing and boarding. We also sell specialty pet
products at our hospitals, including pet food, vitamins, therapeutic shampoos
and conditioners, flea collars and sprays, and other accessory products.

As part of the growth strategy of our hospital business, we intend to
continue our disciplined acquisition strategy by identifying high quality
practices that may have value to be unlocked through the services and scale we
can provide. We contemplate the acquisition of 15 to 25 animal hospitals per
year. Our typical candidate mirrors the profile of our existing hospital base.
Acquisitions will be used to both expand in existing markets and enter new
geographical areas. We intend primarily to use cash in our acquisitions, but we
may use debt or stock to the extent we deem appropriate. By undertaking prudent
acquisitions, we are able to grow our hospital business without diluting the
local market for veterinary services. As of December 20, 2002, we had identified
and were in negotiations to acquire six animal hospitals.

PERSONNEL. Our animal hospitals generally employ a staff of between 10 to
30 full-time equivalent employees, depending upon the facility's size and client
base. The staff includes administrative and technical support personnel, three
to five veterinarians, an office manager who supervises the day-to-day
activities of the facility, and a small office staff. We employ a relatively
small corporate staff to provide centralized administrative services to all of
our animal hospitals.

We actively recruit highly qualified veterinarians and technicians and are
committed to supporting continuing education for our professional staff. We
operate post-graduate teaching programs for veterinarians at eight of our
facilities, which train approximately 40 veterinarians each year. We believe
that these programs enhance our reputation in the veterinary profession and
further our ability to continue to recruit the most talented veterinarians.

We seek to establish an environment that supports the veterinarian in the
delivery of quality medicine and fosters professional growth through increased
patient flow and a diverse case mix, continuing education, state-of-the-art
equipment and access to specialists. We believe our hospitals offer attractive
employment opportunities to veterinarians because of this professional
environment, competitive compensation programs, management opportunities,
employee benefits not generally available to a sole practitioner, scheduling
flexibility to accommodate personal lifestyles and the ability to relocate to
different regions of the country. Further, we permit some of our veterinarians
to participate with us in the ownership and operation of selected animal
hospitals. In these circumstances, the veterinarian purchases an equity position
in our animal hospital and is our partner in its operation. As of September 30,
2002, we operated 25 hospitals under a partnership structure. Typically, the
salary of the veterinarian partner is based on a percentage of the revenue of
the animal hospital that is generated by the veterinarian. The operating income
of the partnership that is distributed to the veterinarian partner is based on
the veterinarian partner's percentage interest in the partnership, which is
typically between 10% and 25%.

We have established a Medical Advisory Board to support our operations. The
Medical Advisory Board's function, under the direction of our Chief Medical
Officer, is to recommend medical standards for our network of animal hospitals.
The committee is comprised of leading veterinarians representing both the
different geographic regions in which we operate and the medical specialties
practiced by our veterinarians. Currently, four members of the Medical Advisory
Board are faculty members at leading veterinary colleges in the United States.
These members serve as medical consultants to us.

MARKETING. Our marketing efforts are primarily directed towards our
existing clients through client education efforts. We inform and educate our
clients about pet wellness and quality care through mailings of the Healthy Pet
Magazine, a magazine focused on pet care and wellness published by an affiliate
of ours, targeted demographic mailings regarding specific pet health issues and
collateral health material available at each animal hospital. With these
internal marketing programs, we seek to leverage our existing client base by
increasing the number of visits of existing clients and intensity of the
services used during each visit. Further, reminder notices are

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used to increase awareness of the advantages of regular, comprehensive
veterinary medical care, including preventive care such as vaccinations, dental
screening and geriatric care.

We also enter into referral arrangements with local pet shops and humane
societies to increase our client base. In addition, we seek to obtain referrals
from veterinarians by promoting our specialized diagnostic and treatment
capabilities to veterinarians and veterinary practices that cannot offer their
clients these services.

OWNERSHIP LIMITATIONS. Some states have laws that prohibit business
corporations from providing veterinary services through the direct employment of
veterinarians. At September 30, 2002, we operated 58 animal hospitals in 11
states with these types of ownership restrictions. In these states, instead of
owning an animal hospital, we provide management services to veterinary medical
groups. We do not consolidate the operating results of these hospitals for
financial statement purposes. We provide our management services pursuant to
long-term management agreements with the veterinary medical groups, ranging from
10 to 40 years, with non-binding renewal options where allowable. Pursuant to
the management agreements, the veterinary medical groups are each solely
responsible for all aspects of the practice of veterinary medicine, as defined
by their respective state. We are responsible for providing the following
services:

o availability of all facilities and equipment;

o day-to-day financial and administrative supervision and management;

o maintenance of patient records;

o recruitment of veterinarians and animal hospital staff;

o marketing; and

o malpractice and general insurance.

As compensation for these services, we receive management fees, which are
included in animal hospital revenue.

SYSTEMS

We maintain a nationwide management information system to support our
veterinary laboratories. In 2001, we completed the migration of our animal
hospital operations onto an enterprise-wide management information system.
Substantially all of our animal hospitals utilize consistent patient
accounting/point-of-sale software, and we are able to track the performance of
hospitals on a per service, per veterinarian basis. Laboratory technicians and
specialists are able to electronically access test results from remote testing
sites, enabling our specialists from varying fields of veterinary medicine to
assist in the interpretation of test results and help structure potential
treatment programs. In addition, we can provide diagnostic test results to
veterinarian clients online and via electronic mail, a service which we believe
provides additional tools for veterinarians in their practice and solidifies our
relationship with these clients. We expect that this operational visibility will
lead to increases in laboratory, veterinarian and hospital productivity.

We continue to upgrade and integrate our management information systems. We
currently are implementing an upgrade to the management information systems for
our animal hospitals which will improve our ability to track performance data on
a per client basis. We expect this upgrade and integration to be substantially
complete in early 2003.

COMPETITION

The companion animal health care services industry is highly competitive
and subject to continual change in the manner in which services are delivered
and providers are selected. We believe that the primary factors influencing a
client's selection of an animal hospital are convenient location, recommendation
of friends, reasonable fees, quality of care and convenient hours. Our primary
competitors for our animal hospitals in most markets are

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individual practitioners or small, regional multi-clinic practices. In addition,
some national companies in the pet care industry, including the operators of
super-stores, are developing multi-regional networks of animal hospitals in
markets that include our animal hospitals. Among veterinary diagnostic
laboratories, we believe that quality, price, specialist support and the time
required to report results are the major competitive factors. Although there are
many individual clinical laboratories that provide a broad range of diagnostic
testing services in the same markets serviced by us, few outsourced laboratory
companies compete on a national level. Our client base is twice that of our
primary competitor in the laboratory business. In addition to competing with
dedicated veterinary laboratories, we face competition from several providers of
on-site diagnostic equipment that allow veterinarians to perform their own
laboratory tests.

GOVERNMENT REGULATION

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. At September 30, 2002, we operated 58 hospitals in 11
states with these laws. Although we seek to structure our operations to comply
with veterinary medicine laws of each state in which we operate, given the
varying and uncertain interpretations of these laws, we may not be in compliance
with restrictions on the corporate practice of veterinary medicine in all
states. A determination that we are in violation of applicable restrictions on
the practice of veterinary medicine in any state in which we operate could have
a material adverse effect on us, particularly if we were unable to restructure
our operations to comply with the requirements of that state.

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

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 our operations through the assessment
of fines or penalties against us or the possible requirement of divestiture of
one or more of our operations.

EMPLOYEES

At September 30, 2002, we had approximately 3,500 full-time-equivalent
employees, including approximately 620 licensed veterinarians. At September 30,
2002, none of our employees were a party to a collective bargaining agreement
with the exception of 45 employees whom we employ as courier drivers in the
State of New York. These employees are subject to a collective bargaining
agreement expiring on July 10, 2003 with the Teamsters Local Union 813.

PROPERTIES

Our corporate headquarters and principal executive offices are located in
West Los Angeles, California, in approximately 30,000 square feet of leased
space. As of September 30, 2002, we maintained leased and owned facilities at
244 other locations that house our animal hospitals and laboratories. We own 63
facilities and the remainder are leased. We believe that our real property
facilities are adequate for our current needs.

LEGAL PROCEEDINGS

The Ohio Attorney General's office filed a lawsuit on December 14, 1998, in
the Franklin County Court of Common Pleas in the State of Ohio in which the
state alleged that our management of a veterinary medical group licensed to
practice veterinary medicine in that state violates the Ohio statute prohibiting
business corporations from providing, or holding themselves out as providers of,
veterinary medical care. On March 20, 2001, the trial court in the case entered
summary judgment in favor of the State of Ohio and issued an order enjoining us
from operating in the State of Ohio in a manner that is in violation of the
state statute. Since that time, we have been engaged in discussions with the
Attorney General's office to restructure our operations. We have reached an
agreement in principal

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with the Attorney General's office that our management services agreement, as
amended, does not constitute the practice of veterinary medicine by a
corporation. We anticipate filing our agreement with the court as soon as
practicable.

On November 30, 2001, two majority stockholders of a company that merged
with Zoasis.com, Inc. in June 2000 filed a civil complaint against VCA,
Zoasis.com, Inc. and Robert Antin. In the merger, the two stockholders received
a less than 10% interest in Zoasis. At the same time, VCA acquired a less than
20% interest in Zoasis.com, Inc. for an investment of $5.0 million. Robert
Antin, VCA's Chief Executive Officer, President and Chairman of the Board, is
the majority stockholder of Zoasis.com and serves on its board of directors. The
complaint alleges securities fraud under California law, common law fraud,
negligent misrepresentation and declaratory judgment arising from the
plaintiffs' investment in Zoasis.com. On December 31, 2001, we filed a demurrer
to the complaint. On February 25, 2002, the plaintiffs filed an opposition to
our demurrer, and on March 1, 2002, we filed our reply to plaintiffs'
opposition. On March 7, 2002, our demurrer was denied. On March 22, 2002, we
filed an answer to plaintiffs' complaint denying all allegations in the
complaint, and Zoasis.com, Inc. filed a counter claim alleging breach of
contract and claim and delivery. We have completed the discovery process. A
status conference was held on May 9, 2002 at which the judge ordered the parties
to participate in mediation. Mediation occurred on August 7, 2002, and no
settlement was reached. On August 30, 2002, plaintiffs filed a first amended
complaint stating the same causes of action. On December 17, 2002, we filed a
motion for summary judgment. Mediation occurred on December 18, 2002, and no
settlement was reached. On December 20, 2002, we answered plaintiffs' first
amended complaint. Our motion for summary judgment will be heard on February 6,
2003. The court has scheduled a final status conference for February 6, 2003,
and a trial date of February 14, 2003. If we reach a settlement in the action or
if damages are awarded to the plaintiffs at trial, it may result in a charge to
earnings in the fourth quarter of fiscal 2002 or the first quarter of fiscal
2003. We do not expect any such settlement or judgment to have a material
adverse impact on our financial condition.

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

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

As of January 10, 2003, the following persons are our directors:

DIRECTORS AGE PRESENT POSITION
--------- --- ----------------
Robert L. Antin.................. 52 Chairman of the Board
Arthur J. Antin.................. 55 Director
John M. Baumer................... 35 Director
John G. Danhakl.................. 46 Director
John A. Heil..................... 48 Director
Peter J. Nolan................... 44 Director
Frank Reddick.................... 49 Director

As of January 10, 2003, the following persons are our executive officers
and key employees:

EXECUTIVE OFFICERS AGE PRESENT POSITION
------------------ --- ----------------
Robert L. Antin.................. 52 President and Chief Executive Officer
Arthur J. Antin.................. 55 Chief Operating Officer, Senior Vice
President and Secretary
Neil Tauber...................... 51 Senior Vice President of Development
Tomas W. Fuller.................. 45 Chief Financial Officer, Vice President
and Assistant Secretary
KEY EMPLOYEE
Dawn R. Olsen.................... 44 Vice President and Controller

Our executive officers are appointed by and serve at the discretion of our
board of directors. Robert L. Antin and Arthur J. Antin are brothers. There are
no other family relationships between any of our directors and/or any of our
executive officers.

ROBERT L. ANTIN, one of our founders, has served as our Chief Executive
Officer, President and Chairman of the Board since our inception in 1986. From
September 1983 until our founding, Mr. Antin was President, Chief Executive
Officer, a director and co-founder of AlternaCare Corp., a publicly held company
that owned, operated and developed freestanding out-patient surgical centers.
From July 1978 until September 1983, Mr. Antin was employed as an officer by
American Medical International, Inc., an owner and operator of health care
facilities. While at American Medical International, Inc., Mr. Antin initially
served as Director of Marketing of Professional Hospital Services, then as
Director of New Business Development responsible for non-hospital related
acquisitions and development, and then as a Vice President of American Medical
International, Inc. and President of AMI Ambulatory Center, Inc., a subsidiary
of American Medical International, Inc. operating a chain of ambulatory care
centers. Mr. Antin received his MBA with a certification in hospital and health
administration from Cornell University.

ARTHUR J. ANTIN, one of our founders, has served as our Chief Operating
Officer, Senior Vice President, Secretary and director since our inception. From
October 1983 to September 1986, Mr. Antin served as Director of
Marketing/Investor Relations of AlternaCare Corp. At AlternaCare Corp., Mr.
Antin developed and implemented marketing strategies for a network of outpatient
surgical centers. Mr. Antin received an MA in Community Health from New York
University.

NEIL TAUBER, one of our founders, has served as our Senior Vice President
of Development since our inception. From 1984 to 1986, Mr. Tauber served as the
Director of Corporate Development at AlternaCare. At AlternaCare, Mr. Tauber was
responsible for the acquisition of new businesses and syndication to hospitals
and physician groups. From 1981 to 1984, Mr. Tauber served as Chief Operating
Officer of MDM Services, a wholly owned subsidiary of Mediq, a publicly held
health care company, where he was responsible for operating and

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developing a network of retail dental centers and industrial medical clinics.
Mr. Tauber holds an MBA from Wagner College.

TOMAS W. FULLER joined us in January 1988 and served as Vice President and
Controller until November 1990 when he became Chief Financial Officer, Vice
President and Assistant Secretary. From 1980 to 1987, Mr. Fuller worked at
Arthur Andersen LLP, the last two years of which he served as audit manager. Mr.
Fuller received his BA in business/economics from the University of California
at Los Angeles.

DAWN R. OLSEN joined us in January 1997 as Vice President, Controller. From
April 1996 to December 1996, Ms. Olsen worked as an independent consultant at
the Rand Corporation. From November 1993 to March 1996, Ms. Olsen served as
Senior Vice President, Controller of Optel, Inc., a privately held
telecommunications company. From 1987 to 1993, Ms. Olsen served as Assistant
Controller and later as Vice President, Controller of Qintex Entertainment,
Inc., a publicly held television film distribution and production company. From
1981 to 1987, Ms. Olsen worked at Arthur Andersen LLP, the last year of which
she served as audit manager. Ms. Olsen is a certified public accountant and
received her BS in business/accounting from California State University,
Northridge.

JOHN M. BAUMER has served as our director since September 2000. Mr. Baumer
is a partner of Leonard Green & Partners, where he has been employed since May
1999. Prior to joining Leonard Green & Partners, he served as a Vice President
in the Corporate Finance Division of Donaldson, Lufkin & Jenrette Securities
Corporation, or DLJ in Los Angeles. Prior to joining DLJ in 1995, Mr. Baumer
worked at Fidelity Investments and Arthur Andersen. Mr. Baumer currently serves
on the boards of directors of Intercontinental Art, Inc., Communication and
Power Industries, Inc., Leslie's Poolmart, Inc., Phoenix Scientific, Inc. and
Petco Animal Supplies, Inc. Mr. Baumer is a 1990 graduate of the University of
Notre Dame. He received his MBA from the Wharton School at the University of
Pennsylvania.

JOHN G. DANHAKL has served as our director since September 2000. Mr.
Danhakl is a partner of Leonard Green & Partners. Prior to becoming a partner of
Leonard Green & Partners in 1995, Mr. Danhakl was a Managing Director at DLJ and
had been with DLJ since 1990. Prior to joining DLJ, Mr. Danhakl was a Vice
President at Drexel Burnham Lambert from 1985 to 1990. Mr. Danhakl presently
serves on the boards of directors of The Arden Group, Inc., Big 5 Holding Corp.,
Communications & Power Industries, Inc., TwinLab Corporation, Diamond Triumph
Auto Glass, Inc., Liberty Group Publishing, Inc., Leslie's Poolmart, Inc. and
Petco Animal Supplies, Inc., and on the board of managers of AsianMedia Group
LLC. Mr. Danhakl is a graduate of the University of California at Berkeley. He
received his MBA from the Harvard Business School.

JOHN A. HEIL joined us as a director in February 2002 and served as a
director for us from May 1995 to September 2000. Mr. Heil currently serves as
President and Chief Executive Officer of United Pet Group, Inc., a manufacturer
of pet products. Prior to joining United Pet Group, Mr. Heil spent twenty-four
years with the H. J. Heinz Company in various general management and
sales/marketing positions including President and Managing Director of Heinz Pet
Products, President of Heinz Specialty Pet Foods and Vice President
Sales/Marketing of StarKist Seafood. Mr. Heil holds a BA in economics from
Lycoming College.

PETER J. NOLAN has served as our director since September 2000. Mr. Nolan
became a partner of Leonard Green & Partners in April 1997. Mr. Nolan previously
served as Managing Director and Co-Head of DLJ's Los Angeles Investment Banking
Division since 1990. Prior to that, Mr. Nolan had been a First Vice President in
corporate finance at Drexel Burnham Lambert since 1986. Before 1986, Mr. Nolan
was a Vice President at Prudential Securities, Inc. where he had worked from
1982 to 1986, after working as an Associate at the Manufacturers Hanover Trust.
He presently serves on the boards of directors of Liberty Group Publishing,
Inc., Contractors Source, Inc., White Cap Industries, Inc., AsianMedia Group
LLC, and M2 Automotive. Mr. Nolan is a graduate of Cornell University with a BS
in Agricultural Economics and Finance. He received his MBA from Cornell
University.

FRANK REDDICK joined us as a director in February 2002. Mr. Reddick is a
member of the California Bar and a partner in the Los Angeles office of Akin
Gump Strauss Hauer & Feld LLP, where he has served as chair of the Los Angeles
corporate practice group since January 2001. Before joining Akin Gump Strauss
Hauer & Feld LLP, Mr. Reddick served as chair of the corporate practice group
and managing partner of the Los Angeles-based

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law firm of Troop Steuber Pasich Reddick & Tobey, LLP. Mr. Reddick is
principally engaged in the practice of corporate and securities law, with a
concentration on corporate finance, mergers and acquisitions, joint ventures and
other strategic alliances. Mr. Reddick holds a JD from the University of
California, Hastings College of the Law.

BOARD OF DIRECTORS AND COMMITTEES

Our board of directors consists of eight members. In accordance with the
provisions of our certificate of incorporation, the terms of office of our board
of directors are divided into three classes. As a result, a portion of our board
of directors will be elected each year. The division of the three classes and
their respective election dates are as follows:

o the class I directors' term will expire at our annual meeting of
stockholders to be held in 2003;

o the class II directors' term will expire at our annual meeting of
stockholders to be held in 2004; and

o the class III directors' term will expire at our annual meeting of
stockholders to be held in 2005.

At each annual meeting of our stockholders, the successors to directors
whose terms will then expire will be elected to serve from the time of election
and qualification until the third annual meeting following election. In
addition, our bylaws provide that the authorized number of directors may be
changed by resolution duly adopted by the board of directors. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the total number of directors.

We pay our non-employee directors who are not affiliated with Leonard Green
& Partners, L.P. $1,000 for each Board meeting attended in person or committee
meeting attended in person which is not held on the same day as a Board meeting,
including reimbursement for out-of-pocket expenses incurred in attending. Upon
appointment to the Board, each non-employee director receives an initial grant
of ten-year options to purchase 15,000 shares of common stock at the fair market
value of the common stock on the date of grant, which options vest in two equal
annual installments on the anniversary date of the grant. In addition, each
non-employee director receives an annual automatic grant of ten-year options to
purchase 5,000 shares of common stock at the fair market value of the common
stock on the date of grant, which options vest one year after the date of grant.

The Board of Directors held three meetings during fiscal 2001. The Board of
Directors has an Audit Committee and a Compensation Committee. It currently does
not have a Nominating Committee.

The Audit Committee currently consists of John Baumer, John Heil and Frank
Reddick. The Audit Committee engages and oversees our independent auditor,
approves the compensation payable to our independent auditor, pre-approves all
audit and non-audit services provided by any independent auditor, reviews and
determines the scope of the audit to be conducted by the independent auditor,
reviews and approves all related party transactions and periodically meets
separately with the independent auditor and our Chief Financial Officer to
review matters relating to our financial statements, our critical accounting
policies, the judgments which members of our management make in applying those
critical accounting policies and our system of internal accounting controls, and
reports its recommendations as to the approval of our financial statements to
the Board of Directors. The role and responsibilities of the Audit Committee are
more fully set forth in a written Charter adopted by the Board of Directors. The
Audit Committee was formed and its members appointed in February 2002.
Therefore, the Audit Committee did not hold any meetings during fiscal 2001.

The Compensation Committee currently consists of John M. Baumer and Frank
Reddick. The Compensation Committee is responsible for considering and making
recommendations to the Board of Directors or its other committees regarding
executive compensation. Following review and approval by the committee,
determinations pertaining to executive compensation will be submitted to the
full Board of Directors for approval. In connection with its deliberations, the
committee will seek, and will be significantly influenced by, the views of the
Chief Executive Officer with respect to appropriate compensation levels of the
other officers. The Compensation Committee was formed and its members appointed
in April 2002. Therefore, the Compensation Committee did not hold any meetings
during fiscal 2001.

Page 66

All directors attended 75% or more of all the meetings of the Board of
Directors during fiscal 2001.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During the last fiscal year, none of our executive officers served as a
member of the board of directors or compensation committee of any entity that
has or has had one or more executive officers serving as a member of our board
of directors or compensation committee.

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding beneficial ownership
of our common stock as of November 30, 2002, prior to and after giving effect to
this offering, with respect to:

o each of our directors;

o each of our executive officers;

o all of our directors and executive officers as a group;

o all other stockholders known by us to beneficially own more than 5% of
our outstanding common stock; and

o the selling stockholders.

Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or exercisable within
60 days of the date as of which this information is provided, and not subject to
repurchase as of that date, are deemed outstanding. These shares, however, are
not deemed outstanding for the purposes of computing the percentage ownership of
any other person.

Except as indicated in the notes to this table, and except pursuant to
applicable community property laws, each stockholder named in the table has sole
voting and investment power with respect to the shares shown as beneficially
owned by them. Percentage ownership is based on 36,765,273 shares of common
stock outstanding on November 30, 2002, and 40,065,273 shares of common stock
outstanding after the completion of this offering. This table assumes no
exercise of the underwriter's over-allotment option. Unless otherwise indicated,
the address for each of the stockholders listed below is c/o VCA Antech, Inc.,
12401 West Olympic Boulevard, Los Angeles, California 90064.

SHARES OF COMMON STOCK SHARES OF COMMON STOCK
BENEFICIALLY OWNED PRIOR BENEFICIALLY OWNED AFTER
TO OFFERING OFFERING (1)
------------------------ SHARES -----------------------
NUMBER OF PERCENT OF BEING NUMBER OF PERCENT OF
SHARES CLASS OFFERED SHARES CLASS
----------- ---------- --------- --------- ----------

Green Equity Investors III, L.P. (2)............ 10,508,139 28.6% 1,807,543 8,700,596 21.7%
11111 Santa Monica Boulevard,
Suite 2000
Los Angeles, California 90025

California Public Employees' Retirement
System....................................... 2,109,680 5.7 1,054,840 1,054,840 2.6
400 P. Street
Lincoln Plaza, Suite 3492
Sacramento, CA 95814-2749

Robert L. Antin (3)............................. 1,851,880 5.0 1,851,880 4.6
Arthur J. Antin (4)............................. 731,902 2.0 -- 731,902 1.8
Tomas W. Fuller (5)............................. 212,743 * -- 212,743 *
Neil Tauber (6)................................. 69,995 * -- 69,995 *
Dawn R. Olsen (7)............................... 25,362 * -- 25,362 *
John M. Baumer (8).............................. 10,508,139 28.6 1,807,543 8,700,596 21.7
John G. Danhakl (8)............................. 10,508,139 28.6 1,807,543 8,700,596 21.7
John A. Heil.................................... -- * -- -- *
Peter J. Nolan (8).............................. 10,508,139 28.6 1,807,543 8,700,596 21.7

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Frank Reddick (9)............................... 4,167 * -- 4,167 *

Capital d'Amerique CDPQ, Inc.................... 949,349 2.6 474,675 474,674 1.2
2001 McGill College Avenue
6th Floor
Montreal, Quebec H3A 1G1

Procific........................................ 949,349 2.6 474,675 474,674 1.2
P.O. Box 7106
125 Corniche Street
Abu Dhabi
United Arab Emirates

Northwestern Mutual............................. 623,241 1.7 623,241 -- *
720 East Wisconsin Avenue
Milwaukee, WS 53202

TCW/Crescent Mezzanine Partners II, L.P......... 290,095 * 290,095 -- *
TCW/Crescent Mezzanine Trust II................. 70,326 * 70,326 -- *
TCW/Leveraged Trust, L.P........................ 30,038 * 30,038 -- *
TCW/Leveraged Trust II, L.P..................... 30,038 * 30,038 -- *
TCW/Leveraged Trust IV, L.P..................... 30,038 * 30,038 -- *
c/o TCW/Crescent/Mezzanine
11100 Santa Monica Boulevard,
Suite 2000
Los Angeles, CA 90025

GS Mezzanine Partners II, L.P................... 624,147 1.7 624,147 -- *
GS Mezzanine Partners II Offshore, L.P.......... 190,345 * 190,345 -- *
c/o Goldman, Sachs & Co.
85 Broad Street, 10th Floor
New York, New York 10004

All directors and executive officers as a group
(11 persons) (10)............................ 13,404,188 36.5% 1,807,543 11,596,645 28.9%

* Indicates less than one percent.
_______________________

(1) Green Equity Investors III, L.P. has granted to the underwriters an option
to purchase 850,000 additional shares to cover the over-allotment of
shares.

(2) Green Equity Investors III, L.P. is managed by Leonard Green & Partners,
L.P.

(3) Includes: (a) 250,000 shares held by family trusts established for the
benefit of Mr. Robert L. Antin's family, and for which Mr. Robert L. Antin
disclaims beneficial ownership; (b) 60,000 shares held by Mr. Arthur J.
Antin for the benefit Mr. Robert L. Antin's minor children pursuant to the
California Uniform Gifts to Minors Act, and for which Mr. Robert L. Antin
disclaims beneficial ownership; and (c) 10,000 shares of common stock
reserved for issuance upon exercise of stock options which are or will
become exercisable on or before January 29, 2003.

(4) Includes: (a) 250,000 shares held by Mr. Arthur J. Antin as trustee of
family trusts established for the benefit of Mr. Robert L. Antin's family,
and for which Mr. Arthur J. Antin disclaims beneficial ownership;

Page 69

(b) 60,000 shares held by Mr. Arthur J. Antin as custodian for Mr. Robert
L. Antin's minor children pursuant to the California Uniform Gifts to
Minors Act, and for which Mr. Arthur J. Antin disclaims beneficial
ownership; and (c) 21,897 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
January 29, 2003.

(5) Includes 13,333 shares of common stock reserved for issuance upon exercise
of stock options which are or will become exercisable on or before January
29, 2003.

(6) Includes 20,000 shares of common stock reserved for issuance upon exercise
of stock options which are or will become exercisable on or before January
29, 2003.

(7) Includes 5,367 shares of common stock reserved for issuance upon exercise
of stock options which are or will become exercisable on or before January
29, 2003.

(8) Each of John M. Baumer, John G. Danhakl and Peter J. Nolan is a partner of
Leonard Green & Partners, L.P. As such, Messrs. Baumer, Danhakl and Nolan
may be deemed to have shared voting and investment power with respect to
all shares held by Leonard Green & Partners, L.P. These individuals
disclaim beneficial ownership of the securities held by Leonard Green &
Partners, L.P., except to the extent of their respective pecuniary
interests therein.

(9) Consists of 4,167 shares of common stock reserved for issuance upon
exercise of stock options which are or will become exercisable on or before
January 29, 2003.

(10) Includes 74,764 shares of common stock reserved for issuance upon exercise
of options which are or will become exercisable on or before January 29,
2003.

Page 70

DESCRIPTION OF CAPITAL STOCK

This prospectus contains a summary of the material terms of our capital
stock. The following description of our capital stock is subject to, and
qualified in its entirety by, our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement of which this prospectus
forms a part, and by the provisions of applicable Delaware law.

Our authorized capital stock consists of 75,000,000 shares of common stock,
par value $.001 per share, and 11,000,000 shares of preferred stock, par value
$.001 per share. As of December 31, 2002, 36,765,739 shares of our common stock
are outstanding and held of record by approximately 97 holders of record and no
shares of our preferred stock are outstanding.

COMMON STOCK

VOTING RIGHTS. The holders of common stock are entitled to one vote per
share on all matters submitted to a vote of our stockholders. The common stock
does not have cumulative voting rights.

DIVIDENDS. Subject to preferences that may be applicable to any preferred
stock outstanding at the time, the holders of outstanding shares of common stock
are entitled to receive ratably any dividends out of assets legally available
therefor as our board of directors may from time to time determine. For a
description of our dividend policy, please refer to the information in this
prospectus under the heading "Dividend Policy."

LIQUIDATION AND DISSOLUTION. Upon our liquidation, dissolution or winding
up, holders of our common stock are entitled to share ratably in all assets
remaining after payment of all liabilities and the liquidation preference of any
then outstanding shares of preferred stock.

NO PREEMPTIVE OR SIMILAR RIGHTS. Holders of our common stock have no right
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock.

Holders of shares of the common stock are not required to make additional
capital contributions. All outstanding shares of common stock are fully paid and
nonassessable.

REGISTRATION RIGHTS

Under our stockholders agreement, the holders of _________ shares of common
stock, or their transferees, will be entitled to register these shares under the
Securities Act. The provisions of the stockholders agreement provide that the
holders may demand that we file a registration statement under the Securities
Act covering some or all of the holder's registrable securities. The stockholder
agreement limits the number of demand registrations that we are required to make
on behalf of the holders. In an underwritten offering, the managing underwriter
has the right, subject to specified conditions, to limit the number of
registrable securities.

In addition, holders have "piggyback" registration rights. If we propose to
register any of our equity securities under the Securities Act other than
pursuant to demand registration right noted above or specified excluded
registrations, holders may require us to include all or a portion of their
registrable securities in the registration and in any related underwriting. In
an underwritten offering, the managing underwriter, if any, has the right,
subject to specified conditions, to limit the number of registrable securities.

In general, we will bear all fees, costs and expenses of registrations,
other than underwriting discounts and commissions.

ANTI-TAKEOVER PROVISIONS OF DELAWARE LAW

We are subject to Section 203 of the Delaware General Corporation Law.
Section 203 provides that specified persons who, together with affiliates and
associates, own, or within three years did own, 15% or more of

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the outstanding voting stock of a corporation cannot engage in specified
business combinations with the corporation for a period of three years after the
date on which the person became an interested stockholder, unless:

o prior to the date, our board of directors approved either the business
combination or the transaction that resulted in the stockholder
becoming an interested stockholder;

o upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of our voting stock of the corporation outstanding at the
time the transaction commenced, excluding those shares owned by
persons who are directors and also officers, and employee stock plans
in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or

o on or subsequent to the date, the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote
of at least two-thirds of the outstanding voting stock that is not
owned by the interested stockholder.

Section 203 defines "business combination" to include:

o any merger or consolidation involving the corporation and the
interested stockholder;

o any sale, transfer, pledge or other disposition involving the
interested stockholder of 10% or more of the assets of the
corporation;

o subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the
interested stockholder; or

o the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by
or through the corporation.

ANTI-TAKEOVER PROVISIONS OF OUR CHARTER

Our bylaws provide that candidates for director may be nominated only by
the board of directors or by a stockholder who gives written notice to us no
later than 90 days prior nor earlier than 120 days prior to the first
anniversary of the last annual meeting of stockholders. The board of directors
may consist of one or more members to be determined from time to time by the
board of directors. The board of directors currently consists of eight members
divided into three different classes. As a result, only one class of directors
will be elected at each annual meeting of our stockholders, with the other
classes continuing for the remainder of their respective terms. Between
stockholder meetings, the board of directors may appoint new directors to fill
vacancies or newly created directorships.

Our certificate of incorporation requires that any action required or
permitted to be taken by our stockholders must be effected at a duly called
annual or special meeting of stockholders and may not be effected by a consent
in writing. Our certificate of incorporation also provides that the authorized
number of directors may be changed only by resolution of the board of directors.
Delaware law and these charter provisions may have the effect of deterring
hostile takeovers or delaying changes in control of our management, which could
depress the market price of our common stock.

INDEMNIFICATION OF DIRECTORS AND OFFICERS AND LIMITATION OF LIABILITY

Our certificate of incorporation and bylaws allow us to eliminate the
personal liability of our directors and to indemnify directors and officers to
the fullest extent permitted by the Delaware General Corporation law.

We also entered into indemnity agreements with each of our directors and
officers, which provide for mandatory indemnity of an officer or director made
party to a "proceeding" by reason of the fact that he or she is or

Page 72

was a director of ours, if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to our best interests. These
agreements also obligate us to advance expenses to a director provided that he
or she will repay advanced expenses in the event he or she is not entitled to
indemnification. Directors are also entitled to partial indemnification, and
indemnification for expenses incurred as a result of acting at our request as a
director, officer or agent of an employee benefit plan or other partnership,
corporation, joint venture, trust or other enterprise owned or controlled by us.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the above statutory provisions or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission that indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is U.S. Stock
Transfer Corporation.

LISTING

Our common stock is quoted on The Nasdaq Stock Market's National Market
under the symbol "WOOF."

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DESCRIPTION OF CERTAIN INDEBTEDNESS

AMENDED SENIOR CREDIT FACILITY

We, through our wholly owned subsidiary, have a senior secured credit
facility, dated as of September 20, 2000, with the lenders party thereto,
Goldman Sachs Credit Partners, L.P., as syndication agent, and Wells Fargo Bank,
N.A., as administrative agent. On August 29, 2002, we amended our senior credit
facility to refinance our existing senior term A and senior term B notes with an
equal principal amount of senior term C notes which bear a lower interest rate
than the weighted average interest rate for the senior term A and B notes. On
October 24, 2002, we issued $25.0 million principal amount of additional senior
term C notes to repay existing debt.

STRUCTURE. As amended, the senior credit facility consists of a revolving
facility and senior term C notes. Under the revolving facility, up to $50.0
million may be borrowed and the lesser of (1) $5.0 million or (2) the aggregate
unused amount of the revolving facility then in effect may be borrowed under a
"swing line" facility on same-day notice to the lenders. In December 2002, we
borrowed $7.5 million under our revolving credit facility, which remains
outstanding.

MATURITY. We are required to repay the amounts borrowed under our senior
term C notes in quarterly installments. The aggregate scheduled principal
payments are $420,000, $1.7 million, $1.7 million, $1.7 million, $21.4 million,
$80.5 million and $60.4 million for the fourth quarter ended December 31, 2002
and the years 2003 through 2008, respectively. Our senior term C notes mature on
September 30, 2008.

The entire outstanding principal amount under the revolving facility is due
on September 20, 2006.

Mandatory prepayments under our senior term C notes are applied pro rata to
each required quarterly payment, subject to a lender's ability to waive a senior
term C note payment and have it applied to other facilities. Our senior term C
notes and revolving facility may be voluntarily prepaid in whole or in part
without premium or penalty.

As of September 30, 2002, the outstanding principal amount due under our
senior credit facility is $142.7 million.

GUARANTEES AND SECURITY. Our obligations under the senior credit facility
are guaranteed by us and our wholly owned, consolidated subsidiaries. The
borrowings under the senior credit facility and the subsidiary guarantees are
secured by substantially all of our consolidated assets. In addition, borrowings
under the senior credit facility are secured by a pledge of substantially all of
the capital stock, or similar equity interests, of our wholly owned,
consolidated subsidiaries.

INTEREST RATE. In general, borrowings under the senior credit facility bear
interest based, at our option, on either:

o the base rate (as defined below) plus a margin ranging from 1.00% to
2.25% per annum for the revolving facility and a margin of 2.00% per
annum for the senior term C notes; or

o the adjusted eurodollar rate (as defined below) plus a margin ranging
from 2.00% to 3.25% per annum for the revolving facility and a margin
of 3.00% per annum for the senior term C notes.

The base rate is the higher of Wells Fargo's prime rate or the federal
funds rate plus 0.5%. The adjusted eurodollar rate is defined as the rate per
annum obtained by dividing (1) the rate of interest offered to Wells Fargo on
the London interbank market by (2) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements applicable to any member bank of the
Federal Reserve System in respect of "eurocurrency liabilities."

Swing line borrowings bear interest at the base rate, plus a margin ranging
from 1.00% to 2.25%.

Page 74

COVENANTS. The senior credit facility contains financial covenants that
require us to satisfy, on a consolidated basis, specified quarterly financial
tests, including:

o a minimum consolidated interest expense coverage ratio;

o a minimum fixed charge coverage ratio;

o a maximum consolidated senior leverage ratio; and

o a maximum consolidated total leverage ratio.

The senior credit facility also contains a number of other customary
covenants that restrict our ability to:

o dispose of assets;

o incur additional debt;

o prepay other debt, subject to specified exceptions, or amend specified
debt instruments;

o pay dividends;

o create liens on assets;

o make investments, loans or advances;

o make acquisitions;

o engage in mergers or consolidations;

o change the business conducted by us;

o engage in sale and leaseback transactions;

o purchase shares of the outstanding common stock of our wholly owned
subsidiary; make capital expenditures or engage in transactions with
affiliates; and

o otherwise undertake various corporate activities.

EVENTS OF DEFAULT. The senior credit facility also contains customary
events of default, including defaults based on:

o nonpayment of principal, interest or fees when due, subject to
specified grace periods;

o cross-defaults to other debt;

o breach of specified covenants;

o material inaccuracy of representations and warranties;

o specified other defaults under other credit documents;

o events of bankruptcy and insolvency;

o material judgments;

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o dissolution and liquidation;

o specified occurrences relating to subordinated debt;

o change in control; and

o invalidity of any guaranty or security interest.

CHANGE OF CONTROL. A change of control will trigger an event of default and
permit the acceleration of the senior credit facility debt. A change of control
will occur if:

o certain specified persons, including Leonard Green & Partners, its
affiliated co-investors and management investors, collectively cease
to own and control at least 35% on a fully diluted basis of the voting
interests in our capital stock;

o any person or group has acquired ownership of a percentage greater
than that owned by Leonard Green & Partners, its affiliated
co-investors and management investors collectively, on a fully diluted
basis of the voting interests in our capital stock;

o any person or group has obtained the power to elect a majority of the
members of our board of directors;

o Leonard Green & Partners and its affiliated co-investors collectively
cease to beneficially own and control on a fully diluted basis a
percentage of the voting interests in our capital stock greater than
any other person or group;

o we cease to beneficially own and control 100% of the capital stock of
our wholly owned subsidiary;

o the majority of the seats on the board of directors of our wholly
owned subsidiary cease to be occupied by persons who either were
members of its board of directors on September 20, 2000, or were
nominated for election by its board of directors, a majority of whom
were directors on September 20, 2000, or whose election or nomination
for election was previously approved by a majority of these directors;
or

o any change of control has occurred under our outstanding 15.5% senior
notes.

15.5% SENIOR NOTES

On September 20, 2000, we issued $100.0 million principal amount of 15.5%
senior notes due 2010 pursuant to an indenture of the same date with Chase
Manhattan Bank and Trust Company, National Association, as trustee.

INTEREST RATE. Interest on the 15.5% senior notes is payable semi-annually
in arrears in cash, commencing March 31, 2001, at the rate of 15.5% per annum;
provided that on any semi-annual interest payment date prior to September 20,
2005, we have the option to pay all or any portion of the interest payable on
said date by issuing additional 15.5% senior notes in a principal amount equal
to the interest we elect not to pay in cash on that date; and further provided,
however, that if we fail timely to meet specified obligations to holders of the
15.5% senior notes as set forth in a registration rights agreement dated as of
September 20, 2000, interest on the 15.5% senior notes may increase by up to 1%
per annum. As of September 30, 2002, we have issued an aggregate of $25.9
million in additional 15.5% senior notes to pay interest.

GUARANTEE. The 15.5% senior notes are general unsecured and unsubordinated
obligations that mature on September 20, 2010.

Page 76

REDEMPTION. The 15.5% senior notes have the following specified optional
redemption provisions:

o An aggregate principal amount of at least $5 million of the 15.5%
senior notes may be prepaid, at our option in whole or in part, at any
time on or after September 20, 2003, initially at 107.5% of their
principal amount at maturity and declining in annual increments to
101.55% of that principal amount on and after September 20, 2009, in
each case plus accrued interest.

o The 15.5% senior notes may be prepaid, at our option, in their
entirety, concurrently with the consummation of a public offering of
our common stock or a change of control, on or after September 20,
2002 and prior to September 20, 2003, at a price of 110% of the
principal amount plus accrued interest.

In 2001, upon the consummation of our initial public offering and our
wholly owned subsidiary's concurrent debt offering, and the underwriters'
exercise of their over-allotment option, we used $66.6 million to repay
approximately $59.1 million of the outstanding principal amount of our 15.5%
senior notes at a redemption price of 110% of the principal amount, plus accrued
and unpaid interest. As of September 30, 2002, the principal amount outstanding
under our 15.5% senior notes was $66.7 million. On October 24, 2002, we used the
funds acquired from additional borrowings under our senior credit facility,
together with cash on hand, to repay $30.0 million of the remaining outstanding
principal amount of our 15.5% senior notes at a redemption price of 110% of the
principal amount, plus accrued and unpaid interest. This repayment reduced the
outstanding principal amount of these notes to $36.7 million. Upon the
consummation of this offering, we intend to repay the entire outstanding
principal amount of our 15.5% senior notes at a redemption price of 110% of the
principal amount, for an aggregate of $40.4 million, plus accrued and unpaid
interest.

The 15.5% senior notes are also subject to partial mandatory redemption,
without premium, on any interest payment date occurring after September 20,
2005, in an aggregate amount equal to the difference, if any, between

o the aggregate amount which would be includable in the holders' gross
income for federal income tax purposes with respect to the 15.5%
senior notes before that interest payment date, and

o the sum of the following:

o the aggregate amount of interest paid in cash under the 15.5%
senior notes before that interest payment date, and

o the product of the issue price of all of the 15.5% senior notes
(as determined under United States Treasury Regulations Sections
1.1273-2(a)) multiplied by 17.25%.

Any such partial mandatory redemption has been expressly subordinated in
time and right of payment by the holders of the 15.5% senior notes to the prior
payment in full of all obligations under the credit facility, as it may be
supplemented, replaced, restructured, refinanced or otherwise modified from time
to time.

COVENANTS. The indenture contains a number of covenants, including a
provision regarding a change of control. A change of control will occur upon:

o the sale, lease, transfer, conveyance or other disposition of
substantially all of our assets and those of our subsidiaries to a
person other than persons affiliated with Leonard Green & Partners,
specified equity investors and management investors;

o the adoption of a plan relating to our liquidation or dissolution or
the liquidation or dissolution of our wholly owned subsidiary;

o the consummation of any transaction as result of which,

o prior to the 15.5% senior notes being registered or exchanged for
registered notes,

Page 77

o persons, including Leonard Green & Partners, its affiliated
co-investors and management investors, collectively own less
than 40% of the voting interests in our capital stock; or

o Leonard Green & Partners and its affiliates own less than
20% of the voting interests in our capital stock; or

o we cease to own directly 100% of the outstanding equity of our
wholly owned subsidiary; or

o any person or group, other than Leonard Green & Partners, its
affiliated co-investors and management investors has acquired
beneficial ownership of 35% or more on a fully diluted basis of
the aggregate voting interest attributable to all of our
outstanding capital stock and Leonard Green & Partners, its
affiliated co-investors and management investors have less voting
power than that person or group; or

o the first day on which a majority of our board of directors are not
directors who were directors on September 20, 2000 or whose election
or nomination was previously approved by a majority of those
directors.

In the event of a change of control event, or in the event of specified
dispositions of the assets by us or our subsidiaries, the proceeds of which are
neither used to repay the senior credit facility, the 15.5% senior notes or to
acquire long term assets, we are required to offer to repurchase the 15.5%
senior notes at a purchase price equal to 101% (in the case of a specified
change of control) or 100% (in the case of a specified disposition of assets) of
the principal amount thereof, in each case plus accrued interest.

The indenture governing the 15.5% senior notes also contains covenants that
restrict our ability to:

o incur additional debt;

o incur specified liens on our assets;

o pay dividends on stock or repurchase stock;

o make investments;

o engage in specified transactions with affiliates;

o create or permit to exist specified dividend or payment restrictions
affecting subsidiaries;

o engage in specified sale/lease-back transactions;

o sell all or substantially all of their assets or merge with or into
other companies; and

o engage in business activities unrelated to activities engaged in at
the original date of issuance of the 15.5% senior notes.

EVENTS OF DEFAULT. The indenture governing the 15.5% senior notes also
provides for various defaults, including:

o failure to pay interest on the 15.5% senior notes when due after a
specified grace period;

o failure to pay any principal on the 15.5% senior notes when the same
becomes due at maturity, upon redemption or otherwise;

Page 78

o failure to observe or perform any other covenant or agreement in the
indenture governing the 15.5% senior notes where that failure
continues for 30 days after actual knowledge thereof by a senior
officer; and

o failure to pay at final maturity or other default leading to actual
acceleration with respect to other indebtedness having an aggregate
principal amount of $7.5 million or more.

9.875% SENIOR SUBORDINATED NOTES

On November 27, 2001, we, through our wholly owned subsidiary, issued
$170.0 million principal amount of 9.875% senior subordinated notes due 2009
pursuant to an indenture of the same date with Chase Manhattan Bank and Trust
Company, National Association, as trustee. On June 13, 2002, we completed an
exchange offer in which these notes were exchanged for notes registered under
the Securities Act.

INTEREST RATE. Interest on the 9.875% senior subordinated notes is payable
in cash, semi-annually in arrears, commencing June 1, 2002, at the rate of
9.875% per annum; provided, however, that if we fail timely to meet specified
obligations to holders of the 9.875% senior subordinated notes, as set forth in
a registration rights agreement dated as of November 27, 2001, interest on the
9.875% senior subordinated notes may increase by up to 1% per annum.

GUARANTEE. The 9.875 % senior subordinated notes are general unsecured and
subordinated obligations, and are guaranteed by our wholly owned, consolidated
subsidiaries, that mature on December 1, 2009. The 9.875% senior subordinated
notes rank junior in right of payment to our senior credit facility, our 15.5%
senior notes and all of our other existing and future senior indebtedness and
that of our subsidiaries. The 9.875% senior subordinated notes rank senior in
right of payment solely to future indebtedness which is expressly subordinated
to the 9.875% senior subordinated notes.

REDEMPTION. The 9.875% senior subordinated notes have specified optional
redemption provisions:

o in whole or in part, at any time on or after December 1, 2005,
initially at 104.938% of their principal amount at maturity and
declining in annual increments to 100.0% of that principal amount on
and after December 1, 2008, in each case plus accrued interest; or

o up to 35% of the aggregate principal amount of the 9.875% senior
subordinated notes, at any time prior to November 1, 2004, from the
proceeds of a public offering of our common stock and within 90 days
of the closing of that public offering, at a price of 109.875% of the
principal amount plus accrued interest; provided that, after giving
effect to the prepayment, at least 65% of the original principal
amount of the senior subordinated notes issued on November 27, 2001,
remains outstanding.

As of September 30, 2002, the outstanding principal amount due under our
9.875% senior subordinated notes was $170.0 million.

COVENANTS. The indenture contains a number of covenants, including a
provision regarding a change of control. A change of control will occur upon:

o the sale, lease, transfer, conveyance or other disposition of
substantially all of our assets and our subsidiaries to a person other
than specified persons affiliated with Leonard Green & Partners,
specified equity investors and management investors;

o the adoption of a plan relating to our liquidation or dissolution or
the liquidation or dissolution of our wholly owned subsidiary;

o we cease to own directly 100% of the outstanding equity of our wholly
owned subsidiary,

o any person or group, other than Leonard Green & Partners, its
affiliated co-investors and management investors, has acquired
beneficial ownership of 35% or more on a fully diluted basis of the
aggregate

Page 79

voting interest attributable to all of our outstanding capital stock
and Leonard Green & Partners, its affiliated co-investors and
management investors have less voting power than that person or group;
or

o the first day on which a majority of our board of directors are not
directors who were directors on September 20, 2000, or whose election
or nomination was previously approved by a majority of these
directors.

In the event of a change of control event, or in the event of specified
dispositions of assets by us or our subsidiaries, the proceeds of which are
neither used to repay the senior credit facility, the 15.5% senior notes or to
acquire long term assets, we are required to offer to repurchase the 9.875%
senior subordinated notes at a purchase price equal to 101% (in the case of a
specified change of control) or 100% (in the case of a specified disposition of
assets) of the principal amount thereof, in each case plus accrued interest.

The indenture governing the 9.875% senior subordinated notes also contains
covenants that restrict the ability of our wholly owned subsidiary and our other
indirect wholly owned subsidiaries to:

o incur additional debt;

o incur specified liens on our assets;

o pay dividends on stock or repurchase stock;

o make investments;

o engage in specified transactions with affiliates;

o create or permit to exist specified dividend or payment restrictions
affecting subsidiaries;

o engage in specified sale/lease-back transactions;

o sell all or substantially all of their assets or merge with or into
other companies; and

o engage in business activities unrelated to activities engaged in at
the original date of issuance of the 9.875% senior subordinated notes.

EVENTS OF DEFAULT. The indenture governing the 9.875% senior subordinated
notes also provides for various defaults, including:

o failure to pay interest on the 9.875% senior subordinated notes when
due (after a specified grace period);

o failure to pay any principal on the 9.875% senior subordinated notes
when the same becomes due at maturity, upon redemption or otherwise;

o failure to observe or perform any other covenant or agreement in the
indenture governing the 9.875% senior subordinated notes where that
failure continues for 30 or 60 days after actual knowledge thereof by
a senior officer, depending on the nature of the covenant; and

o failure to pay at final maturity or other default leading to actual
acceleration with respect to other indebtedness having an aggregate
principal amount of $10.0 million or more.

Page 80

UNDERWRITING

We, the selling stockholders and the underwriters named below have entered
into an underwriting agreement with respect to the shares being offered in this
offering. Subject to certain conditions, each underwriter has severally agreed
to purchase the number of shares indicated in the following table. Goldman,
Sachs & Co. and Credit Suisse First Boston Corporation are the representatives
of the underwriters.

UNDERWRITERS NUMBER OF SHARES

Goldman, Sachs & Co......................................
Credit Suisse First Boston Corporation...................
----------------
Total................................................. 9,000,000
================

The underwriters are committed to take and pay for all of the shares being
offered, if any are taken, other than the shares covered by the option described
below unless and until this option is exercised.

If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
1,350,000 shares from us and the selling stockholders to cover such sales. They
may exercise that option for 30 days. If any shares are purchased pursuant to
this option, the underwriters will severally purchase shares in approximately
the same proportion as set forth in the table above.

The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us and the selling
stockholders. Such amounts are shown assuming both no exercise and full exercise
of the underwriters' option to purchase 1,350,000 additional shares.

PAID BY US
----------
NO EXERCISE FULL EXERCISE
----------- -------------
Per Share....................................... $ $
Total........................................... $ $

PAID BY THE SELLING STOCKHOLDERS
--------------------------------
NO EXERCISE FULL EXERCISE
----------- -------------
Per Share....................................... $ $
Total........................................... $ $

Shares sold by the underwriters to the public will initially be offered at
the initial price to public set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $[_______] per share from the initial price to public. Any such
securities dealers may resell any shares purchased from the underwriters to
certain other brokers or dealers at a discount of up to $[_______] per share
from the initial price to public. If all the shares are not sold at the initial
price to public, the representatives may change the offering price and the other
selling terms.

We, our directors, our executive officers and the selling stockholders have
agreed with the underwriters not to sell, dispose of, loan, pledge or grant any
rights to any shares of common stock or securities convertible into or
exchangeable for shares of common stock during the period from the date of this
prospectus continuing through the date 90 days after the date of this
prospectus, except with the prior written consent of Goldman, Sachs & Co. This
agreement does not apply to any existing employee benefit plans.

In connection with the offering, the underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.

Page 81

The underwriters also may impose a penalty bid. This occurs when a
particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or short covering
transactions.

These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.

We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $674,754.

We and the selling stockholders have agreed to indemnify the several
underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.

The offering is being conducted in accordance with the applicable
provisions of Rule 2710(c)(8) of the National Association of Securities Dealers,
Inc. Conduct Rules because affiliates of Goldman, Sachs & Co., one of the
representatives, will receive more than 10% of the net proceeds from this
offering. Rule 2710(c)(8) requires that the public offering price of the shares
of common stock not be higher than that recommended by a "qualified independent
underwriter" meeting specified standards. Accordingly, Credit Suisse First
Boston Corporation is assuming the responsibilities of acting as the qualified
independent underwriter in pricing the offering and conducting the due
diligence. The public offering price of the shares of common stock will be no
higher than the price recommended by Credit Suisse First Boston Corporation.

As of December 31, 2002, GS Mezzanine Partners II, L.P. and GS Mezzanine
Partners II Offshore, L.P., affiliates of Goldman, Sachs & Co., held an
aggregate principal amount of $34.3 million of our 15.5% senior notes and an
aggregate of 814,492 shares of our common stock. In October 2002, we repaid the
entire outstanding principal amount of our 13.5% senior subordinated notes and
$30.0 million in principal of our 15.5% senior notes. GS Mezzanine Partners II,
L.P. and GS Mezzanine Partners II Offshore, L.P. received approximately $46.8
million, in the aggregate, in connection with the repayment of such debt. In
addition, GS Mezzanine Partners II, L.P. and GS Mezzanine Partners II Offshore,
L.P. are offering to sell an aggregate of 814,492 shares of common stock in this
offering.

Melina Higgins served as one of our directors until January 9, 2003, and
she is the Chief Financial Officer of GS Mezzanine Partners II, L.P. and GS
Mezzanine II Offshore, L.P.

Some of the representatives or their affiliates have provided investment
banking and advisory services for us from time to time for which they have
received customary fees and reimbursements of expenses and may in the future
provide additional services. In connection with our recapitalization, an
affiliate of Goldman, Sachs & Co. acted as sole lead arranger and sole
syndication agent for our senior credit facility and received customary fees in
connection therewith. In addition, Credit Suisse First Boston Corporation
provided advisory services in connection with our recapitalization and received
customary fees for those services. Credit Suisse First Boston Corporation and
Goldman, Sachs & Co. acted as representatives of the underwriters in connection
with our initial public offering. In November 2001, Goldman, Sachs & Co. also
acted as sole initial purchaser in connection with our wholly owned subsidiary's
offering of $170.0 million aggregate principal amount of 9.875% senior
subordinated notes due 2009. Credit Suisse First Boston Corporation and Goldman,
Sachs & Co. received customary fees and commissions for their services.

Page 82

U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS

OVERVIEW

The following general discussion summarizes the material U.S. federal
income and estate tax aspects of the acquisition, ownership and disposition of
our common stock applicable to beneficial owners that are non-U.S. holders
purchasing our common stock pursuant to this offering and that will hold our
common stock as a capital asset (generally, property held for investment). In
general, a "non-U.S. holder" is a beneficial owner of our common stock who is an
individual or entity other than:

o a citizen or resident of the U.S.;

o a corporation (including any entity taxable as a corporation) or
partnership created or organized in or under the laws of the U.S. or
any of its political subdivisions;

o an estate the income of which is subject to U.S. federal income
taxation regardless of its source;

o a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more of the individuals or
entities described above have authority to control all substantial
decisions of the trust; or

o a trust that has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a U.S. person.

This discussion is based upon the Internal Revenue Code of 1986, as
amended, U.S. Treasury regulations, Internal Revenue Service rulings and
pronouncements, judicial decisions and other applicable authorities, all as now
in effect, all of which are subject to change (possibly on a retroactive basis).
The discussion does not address aspects of U.S. federal taxation other than
income and estate taxation and does not address all aspects of U.S. federal
income and estate taxation, that may be relevant to non-U.S. holders that may be
subject to special treatment under such law, such as insurance companies,
tax-exempt organizations, financial institutions, dealers in securities or
currencies, partnerships, holders whose "functional currency" is not the U.S.
dollar, holders of securities held as part of a straddle, hedge or conversion
transaction, U.S. expatriates, controlled foreign corporations, passive foreign
investment companies or foreign personal holding companies. The discussion also
does not address U.S. state or local or foreign tax consequences. We have not
sought, and will not seek, any ruling from the IRS with respect to the tax
consequences discussed in this prospectus, and there can be no assurance that
the IRS will not take a position contrary to the tax consequences discussed
below or that any positions taken by the IRS would not be sustained.

INVESTORS CONSIDERING THE PURCHASE OF OUR COMMON STOCK ARE URGED TO CONSULT
THEIR TAX ADVISORS CONCERNING THE APPLICATION OF U.S. FEDERAL INCOME TAX LAWS TO
THEIR PARTICULAR SITUATIONS, AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
FEDERAL ESTATE OR GIFT TAX RULES OR UNDER THE LAWS OF ANY STATE, LOCAL OR
FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.

DIVIDENDS

Subject to the discussion below under "--Income or Gains Effectively
Connected With a U.S. Trade or Business," if any dividend is paid on our common
stock, the gross amount of such dividends paid to a non-U.S. holder generally
will be subject to withholding of U.S. federal income tax at a 30 percent rate,
or a lower rate prescribed by an applicable tax treaty.

A non-U.S. holder who wishes to claim the benefit of an applicable treaty
rate (and avoid backup withholding as discussed below) will be required to
satisfy applicable certification and other requirements. If a non-U.S. holder
holds our common stock through a foreign partnership or a foreign intermediary,
the foreign partnership or foreign intermediary will also be required to comply
with certain certification requirements. A non-U.S. holder

Page 83

who is eligible for a reduced rate of U.S. withholding tax under an income tax
treaty may obtain a refund of any excess amounts withheld by filing an
appropriate claim for refund with the Internal Revenue Service.

DISPOSITION OF COMMON STOCK

A non-U.S. holder generally will not be subject to U.S. federal income tax
(including by way of withholding) on gains recognized on the sale, exchange or
other disposition of our common stock unless (1) such non-U.S. holder is an
individual who is present in the U.S. for 183 days or more in the taxable year
of the sale, exchange or other disposition, and other required conditions are
met; (2) such gain is effectively connected with the conduct by the non-U.S.
holder of a trade or business in the U.S. and, if an applicable income tax
treaty requires, is attributable to a U.S. permanent establishment maintained by
the non-U.S. holder.

Unless an applicable treaty provides otherwise, a non-U.S. holder described
in clause (1) above will be subject to a flat 30% U.S. federal income tax on the
gain realized on the sale, which may be offset by U.S. source capital losses.
Gain described in clause (2) above will be subject to the U.S. federal income
tax in the manner discussed below under "Income or Gains Effectively Connected
With A U.S. Trade or Business."

INCOME OR GAINS EFFECTIVELY CONNECTED WITH A U.S. TRADE OR BUSINESS

If a non-U.S. holder is engaged in a trade or business in the U.S. and if
dividends on our common stock or gain realized on the sale, exchange or other
disposition of our common stock is effectively connected with the non-U.S.
holder's conduct of such trade or business (and, if an applicable tax treaty
requires, is attributable to a U.S. permanent establishment maintained by the
non-U.S. holder in the U.S.), the non-U.S. holder, although exempt from
withholding tax (provided that the certification requirements discussed in the
next sentence are met), will generally be subject to U.S. federal income tax on
such dividends or gain on a net income basis in the same manner as if it were a
U.S. holder. The non-U.S. holder will be required, under currently effective
Treasury Regulations, to provide a properly executed Internal Revenue Service
form W-8ECI or successor form in order to claim an exemption from U.S.
withholding tax. In addition, if such non-U.S. holder is a foreign corporation,
it may be subject to a branch profits tax equal to 30 percent (or such lower
rate provided by an applicable U.S. income tax treaty) of a portion of its
effectively connected earnings and profits for the taxable year.

ESTATE TAX

Common stock owned, or treated as owned, by an individual non-U.S. holder
at the time of death will be includable in the individual's gross estate for
U.S. federal estate tax purposes and may be subject to U.S. federal estate tax,
unless an applicable treaty provides otherwise.

BACKUP WITHHOLDING AND INFORMATION REPORTING

A non-U.S. holder may have to comply with specific certification procedures
to establish that the holder is not a U.S. person in order to avoid backup
withholding tax requirements with respect to our payments of dividends on the
common stock. The backup withholding tax rate currently is 30% (reduced to 29%
for 2004 and 2005 and 28% for 2006 and later years). We must report annually to
the Internal Revenue Service and to each non-U.S. holder the amount of any
dividends paid to such holder and the tax withheld with respect to such
dividends, regardless of whether any tax was actually withheld. Copies of these
information returns may also be made available under the provisions of a
specific treaty or agreement to the tax authorities of a country in which the
non-U.S. holder resides.

Information reporting and backup withholding will generally not apply to
payments of proceeds of a sale or other taxable disposition of our common stock
effected outside the U.S. by a foreign office of a foreign broker. Both
information reporting and backup withholding will apply, however, to payments of
proceeds of a sale or other taxable disposition of our common stock effected
outside the U.S. by a foreign office of a U.S. broker or a foreign broker with
certain types of relationships to the U.S., unless the broker has documentary
evidence in its records that the holder is a non-U.S. holder and certain
conditions are met, or the holder otherwise establishes an exemption. Payment of
the proceeds from a sale, exchange or other disposition by a non-U.S. holder
made by or through the U.S. office of a broker is generally subject to
information reporting and backup withholding unless the non-U.S.

Page 84

holder certifies as to its non-U.S. status under penalties of perjury or
otherwise establishes an exemption from information reporting and backup
withholding.

Any amounts withheld under the backup withholding rules from a payment to a
non-U.S. holder of common stock will be allowed as a refund or credit against
such holder's U.S. federal income tax provided that the required information is
furnished to the Internal Revenue Service in a timely manner.

Page 85

LEGAL MATTERS

The validity of the common stock will be passed upon for us by our legal
counsel, Akin Gump Strauss Hauer & Feld LLP, Los Angeles, California. Skadden,
Arps, Slate, Meagher & Flom, LLP, Los Angeles, California, is acting as legal
counsel for the underwriters.

EXPERTS

Our consolidated financial statements and schedules as of December 31, 2001
and 2000, and for each of the years in the three-year period ended December 31,
2001, have been included in this registration statement in reliance upon the
report of KPMG LLP, independent accountants, appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

We are incorporating by reference certain documents we file with the SEC,
which means that we can disclose important information to you by referring you
to those documents. The information in the documents incorporated by reference
is considered to be part of this prospectus. Information in documents that we
file with the SEC after the date of this prospectus will automatically update
and supersede information in this prospectus. We incorporate by reference the
documents listed below and any future filings we may make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus.

o Our Annual Report on Form 10-K for the fiscal year ended December 31,
2001, filed with the SEC on March 29, 2002, as amended by our Form
10-K/A filed with the SEC on April 30, 2002;

o Our Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 2002, filed with the SEC on May 15, 2002;

o Our Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2002, filed with the SEC on August 14, 2002;

o Our Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 2002, filed with the SEC on November 14, 2002;

o Our Current Reports on Form 8-K filed with the SEC on February 22,
2002; April 26, 2002; May 14, 2002; June 13, 2002; June 19, 2002; July
26, 2002; September 3, 2002; October 25, 2002 and November 14, 2002;
and

o The description of our common stock contained in our Form 8-A filed
with the SEC on November 15, 2002, as amended by our Form 8-A/A filed
with the SEC on November 16, 2002.

Information contained in this prospectus supplements, modifies or
supercedes, as applicable, the information contained in earlier-dated documents
incorporated by reference. Information contained in later-dated documents
incorporated by reference supplements, modifies or supersedes, as applicable,
the information contained in this prospectus or in earlier-dated documents
incorporated by reference.

We have filed a registration statement on Form S-3 with the Securities and
Exchange Commission regarding this offering. The registration statement of which
this prospectus is a part contains additional relevant information about us and
our capital stock and you should refer to the registration statement and its
exhibits to read that information. References in this prospectus to any of our
contracts or other documents are not necessarily complete, and you should refer
to the exhibits attached to the registration statement for copies of the actual
contract or document.

You may read and copy the registration statement, the related exhibits and
the other material we file with the Securities and Exchange Commission at the
Securities and Exchange Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington D.C. 20549. You can also request copies of those documents,
upon payment of a duplication fee, by writing to the Securities and Exchange
Commission. Please call the Securities and Exchange Commission at (800) SEC-0330
for further information on the operation of the public reference rooms. The
Securities and Exchange Commission also maintains an internet site that contains
reports, proxy and information

Page 86

statements and other information regarding issuers that file with the Securities
and Exchange Commission. The site's address is WWW.SEC.GOV.

We also will provide to you a copy of these filings at no cost. You may
request copies of these filings by writing or telephoning us as follows: 12401
West Olympic Boulevard, Los Angeles, California 90064-1022, Attention, Chief
Financial Officer, or 310-571-6500. In addition, you may access these filings at
our website. Our website's address is WWW.VCAANTECH.COM.

You should rely only on the information contained in this prospectus,
including information incorporated by reference as described above, or any
prospectus supplement or that we have specifically referred you to. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any prospectus supplement is
accurate as of any date other than the date on the front of those documents or
that any document incorporated by reference is accurate as of any date other
than its filing date. You should not consider this prospectus to be an offer or
solicitation relating to the securities in any jurisdiction in which such an
offer or solicitation relating to the securities is not authorized. Furthermore,
you should not consider this prospectus to be an offer or solicitation relating
to the securities if the person making the offer or solicitation is not
qualified to do so, or if it is unlawful for you to receive such an offer or
solicitation.

Page 87

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

VCA ANTECH, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

_______________

PAGE

Report of Independent Public Accountants................................... F-2

Consolidated Balance Sheets as of December 31, 2001 and 2000............... F-3

Consolidated Statements of Operations for the Years Ended December 31,
2001, 2000, and 1999.................................................... F-4

Consolidated Statements of Stockholders' Equity (Deficit) for the Years
Ended December 31, 2001, 2000 and 1999 ................................. F-5

Consolidated Statements of Comprehensive Loss for the Years Ended
December 31, 2001, 2000 and 1999........................................ F-6

Consolidated Statements of Cash Flows for the Years Ended December 31,
2001, 2000 and 1999 .................................................... F-7

Notes to Consolidated Financial Statements................................. F-9

Schedule II - Valuation and Qualifying Accounts............................ F-44

Condensed, Consolidated Balance Sheets as of September 30, 2002 and
December 31, 2001 (Unaudited)........................................... F-45

Condensed, Consolidated Statements of Operations for the Nine Months
Ended September 30, 2002 and 2001 (Unaudited)........................... F-46

Condensed, Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2002 and 2001 (Unaudited)........................... F-47

Notes to Condensed, Consolidated Financial Statements...................... F-48

Page F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors of VCA Antech, Inc.:

We have audited the consolidated financial statements of VCA Antech, Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express and
opinion on these consolidated financial statements and financial statement
schedules based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management. as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of VCA Antech,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

KPMG LLP

Los Angeles, California

August 16, 2002, except for Note 16,
as to which the date is November 7, 2002.

Page F-2

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2001 AND 2000
(IN THOUSANDS, EXCEPT PAR VALUE)

2001 2000
---------- ----------

ASSETS
Current assets:
Cash and cash equivalents..................................... $ 7,103 $ 10,519
Trade accounts receivable, less allowance for uncollectible
accounts of $5,241 and $4,110 at December 31, 2001 and
2000, respectively.......................................... 18,036 15,450
Inventory..................................................... 4,501 5,773
Prepaid expense and other..................................... 2,378 3,424
Deferred income taxes......................................... 7,364 4,655
Prepaid income taxes.......................................... 2,782 9,402
---------- ----------
Total current assets..................................... 42,164 49,223
Property and equipment, net......................................... 89,244 86,972
Other assets:
Goodwill, net................................................. 317,262 310,185
Covenants not to compete, net................................. 4,827 19,549
Notes receivable, net......................................... 2,672 2,178
Deferred financing costs, net................................. 11,380 13,373
Other......................................................... 972 1,590
---------- ----------
Total assets............................................. $ 468,521 $ 483,070
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term obligations...................... $ 5,159 $ 5,756
Accounts payable.............................................. 7,313 8,393
Accrued payroll and related liabilities....................... 11,717 8,335
Accrued interest ............................................. 2,254 1,622
Accrued recapitalization costs................................ 1,322 3,459
Other accrued liabilities..................................... 15,029 11,606
---------- ----------
Total current liabilities................................ 42,794 39,171
Long-term obligations, less current portion......................... 379,173 356,993
Deferred income taxes............................................... 1,684 8,484
Other liabilities................................................... -- 1,500
Minority interest................................................... 5,106 3,610

Series A Redeemable Preferred Stock, at redemption value............ -- 77,875

Series B Redeemable Preferred Stock, at redemption value............ -- 76,747
Stockholders' equity (deficit):
Common stock, par value $0.001 and $0.01, 75,000 and 24,000
shares authorized, 36,736 and 17,524 shares outstanding
as of December 31, 2001 and 2000, respectively................ 37 175
Additional paid-in capital.................................... 188,840 19,053
Accumulated deficit........................................... (146,594) (100,020)
Accumulated comprehensive loss-unrealized loss on investment.. (1,855) --
Notes receivable from stockholders............................ (664) (518)
---------- ----------
Total stockholders' equity (deficit)..................... 39,764 (81,310)
---------- ----------
Total liabilities and stockholders' equity .............. $ 468,521 $ 483,070
========== ==========

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

Page F-3

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2001 2000 1999
---------- ---------- ----------

Revenue......................................................... $ 401,362 $ 354,687 $ 320,560
Direct costs (includes non-cash compensation of $1,412 and
$103 for the years ended December 31, 2001 and 2000,
respectively; excludes operating depreciation of $8,345,
$6,872 and $6,853 for the years ended December 31, 2001,
2000 and 1999, respectively)................................. 283,226 254,890 232,493
---------- ---------- ----------
118,136 99,797 88,067
Selling, general and administrative (includes non-cash
compensation of $6,199 and $452, for the years ended
December 31, 2001 and 2000, respectively).................... 38,633 27,446 23,622
Depreciation and amortization................................... 25,166 18,878 16,463
Agreement termination costs .................................... 17,552 -- --
Write-down and loss on sale of assets........................... 9,079 -- --
Recapitalization costs.......................................... -- 34,268 --
Year 2000 remediation expense................................... -- -- 2,839
Reversal of restructuring charges............................... -- -- (1,873)
---------- ---------- ----------
Operating income........................................ 27,706 19,205 47,016
Interest income................................................. 669 850 1,194
Interest expense................................................ 43,587 20,742 10,643
Other expense, net.............................................. 168 1,800 --
---------- ---------- ----------
Income (loss) before minority interest, provision for
income taxes and extraordinary item................... (15,380) (2,487) 37,567
Minority interest in income of subsidiaries..................... 1,439 1,066 850
---------- ---------- ----------
Income (loss) before provision for income taxes and
extraordinary item.................................... (16,819) (3,553) 36,717
Provision for income taxes...................................... 445 2,199 14,360
---------- ---------- ----------
Income (loss) before extraordinary item................. (17,264) (5,752) 22,357
Extraordinary loss on early extinguishment of debt (net of
income tax benefit of $7,059 and $1,845 for the years ended
December 31, 2001 and 2000, respectively)....................... 10,159 2,659 --
---------- ---------- ----------
Net income (loss)....................................... (27,423) (8,411) 22,357

Increase in carrying amount of Redeemable Preferred Stock....... 19,151 5,391 --
---------- ---------- ----------
Net income (loss) available to common stockholders...... $ (46,574) $ (13,802) $ 22,357
========== ========== ==========

Basic earnings (loss) per common share:
Income (loss) before extraordinary item................. $ (1.87) $ (0.05) $ 0.07
Extraordinary loss on early extinguishment of debt ..... (0.52) (0.01) --
---------- ---------- ----------
Earnings (loss) per common share........................ $ (2.39) $ (0.06) $ 0.07
========== ========== ==========
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item................. $ (1.87) $ (0.05) $ 0.07
Extraordinary loss on early extinguishment of debt...... (0.52) (0.01) --
---------- ---------- ----------
Earnings (loss) per common share........................ $ (2.39) $ (0.06) $ 0.07
========== ========== ==========

Shares used for computing basic earnings (loss) per share....... 19,509 234,055 315,945
========== ========== ==========
Shares used for computing diluted earnings (loss) per share..... 19,509 234,055 329,775
========== ========== ==========

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

Page F-4

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

NOTES ACCUMU-
RECEIVABLE LATED
COMMON STOCK ADDITIONAL TREASURY SHARES FROM RETAINED COMPRE-
----------------- PAID-IN ----------------- STOCK- EARNINGS HENSIVE
SHARES AMOUNT CAPITAL SHARES AMOUNT HOLDERS (DEFICIT) LOSS TOTAL
-------- ------- ---------- ------- -------- ---------- ---------- -------- ---------

Balances, December 31, 1998 ........... 312,240 $ 3,122 $ 199,748 (3,405) $(2,480) $ (617) $ 3,380 $ (468) $202,685
Net income ......................... -- -- -- -- -- -- 22,357 -- 22,357
Unrealized loss on investments...... -- -- -- -- -- -- -- (218) (218)
Recognized loss on investments ..... -- -- -- -- -- -- -- 325 325
Exercise of stock options .......... 750 8 527 -- -- -- -- -- 535
Exercise of warrants ............... 45 -- -- -- -- -- -- -- --
Interest on notes .................. -- -- -- -- -- (37) -- -- (37)
Business acquisitions .............. 8,820 88 8,740 -- -- -- -- -- 8,828
Conversion of convertible debt ..... 150 2 72 -- -- -- -- -- 74
Restricted stock bonus ............. 3,615 36 1,405 -- -- -- -- -- 1,441

Purchase of treasury shares ........ -- -- -- (5,895) (4,761) -- -- -- (4,761)
-------- ------- ---------- ------- -------- --------- ---------- -------- ---------
Balances, December 31, 1999 ........... 325,620 3,256 210,492 (9,300) (7,241) (654) 25,737 (361) 231,229
Net loss ........................... -- -- -- -- -- -- (8,411) -- (8,411)
Unrealized loss on investments ..... -- -- -- -- -- -- -- (219) (219)
Recognized loss on investments .... -- -- -- -- -- -- -- 580 580
Exercise of stock options .......... 1,830 18 905 -- -- -- -- -- 923
Restricted stock bonus ............. 3,060 31 1,071 -- -- -- -- -- 1,102
Interest on notes .................. -- -- -- -- -- (34) -- -- (34)
Purchase of treasury shares ........ -- -- -- (7,715) (3,323) -- -- -- (3,323)
Issuance of common stock ........... 14,865 149 14,716 -- -- (518) -- -- 14,347
Issuance of warrants ............... -- -- 1,149 -- -- -- -- -- 1,149
Write-off of notes receivable
from stockholders................ -- -- -- -- -- 688 -- -- 688
Increase in carrying amount of
Redeemable Preferred Stock ...... -- -- -- -- -- -- (5,391) -- (5,391)
Repurchase and retirement of
common stock..................... (327,851) (3,279) (209,835) 17,015 10,564 -- (111,955) -- (314,505)
Non-cash compensation .............. -- 555 555
-------- ------- ---------- ------- -------- --------- ---------- -------- ---------
Balances, December 31, 2000 ........... 17,524 175 19,053 -- -- (518) (100,020) -- (81,310)
Net loss ........................... -- -- -- -- -- -- (27,423) -- (27,423)
Cumulative effect of change to
a new accounting principle....... -- -- -- -- -- -- -- (525) (525)
Unrealized loss on investments...... -- -- -- -- -- -- -- (1,498) (1,498)
Recognized loss on investments...... -- -- -- -- -- -- -- 168 168
Non-cash compensation .............. -- -- 7,611 -- -- -- -- -- 7,611
Interest on notes................... -- -- -- -- -- (46) -- -- (46)
Exercise of stock options .......... 692 7 543 -- -- (100) -- -- 450
Increase in carrying amount of
Redeemable Preferred Stock ...... -- -- -- -- -- -- (19,151) -- (19,151)
Change in par value of common stock. -- (163) 163 -- -- -- -- -- --
Issuance of common stock ........... 17,370 17 161,471 -- -- -- -- -- 161,488
Exercise of stock warrants ......... 1,150 1 (1) -- -- -- -- -- --
-------- ------- ---------- ------- -------- --------- ---------- -------- ---------
Balances, December 31, 2001 ........... 36,736 $ 37 $ 188,840 -- $ -- $ (664) $(146,594) $(1,855) $ 39,764
======== ======== ========== ======= ======== ========= ========== ======== =========

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

Page F-5

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

2001 2000 1999
--------- --------- --------

Net income (loss).................................................. $(27,423) $ (8,411) $22,357
Other comprehensive income:
Cumulative effect of change to new accounting principle...... (525) -- --
Unrealized loss on investments and hedging instruments....... (1,498) (219) (218)
Recognized loss on investments and hedging instruments....... 168 580 325
--------- --------- --------
Other comprehensive income (loss).................................. (1,855) 361 107
--------- --------- --------
Net comprehensive income (loss).................................... $(29,278) $ (8,050) $22,464
========= ========= ========

Accumulated comprehensive loss at beginning of year................ $ -- $ (361) $ (468)
Other comprehensive income (loss).................................. (1,855) 361 107
--------- --------- --------
Accumulated comprehensive loss at end of year...................... $ (1,855) $ -- $ (361)
========= ========= ========

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

Page F-6

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

2001 2000 1999
---------- ---------- ---------

Cash flows from operating activities:
Net income (loss) ........................................................ $ (27,423) $ (8,411) $ 22,357
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization ........................................ 25,166 18,878 16,463
Amortization of deferred financing costs and debt discount ........... 2,153 836 241
Provision for uncollectible accounts ................................. 3,973 3,105 2,515
Extraordinary loss on early extinguishment of debt ................... 17,218 4,504 --
Recapitalization costs ............................................... -- 34,268 --
Non-cash compensation ................................................ 7,611 555 --
Interest paid in kind on senior subordinated notes ................... 14,528 4,306 --
Gain on sale of investment in VPI .................................... -- (3,200) --
Loss recognized on investment in Zoasis .............................. -- 5,000 --
Agreement termination costs .......................................... 9,552 -- --
Write down of assets ................................................. 8,531 -- --
Loss on sale of assets ............................................... 548 -- --
Minority interest in income of subsidiaries .......................... 1,439 1,066 850
Distributions to minority interest partners .......................... (1,635) (1,400) (926)
Increase in accounts receivable ...................................... (6,386) (3,362) (5,535)
Decrease (increase) in inventory, prepaid expenses and other assets... 2,348 2,006 (761)
Increase (decrease) in accounts payable and accrued liabilities ...... 1,959 5,932 (1,383)
Decrease (increase) in prepaid income taxes .......................... 7,031 (5,416) 1,054
Increase in deferred income tax asset ................................ (2,709) (442) (102)
Increase (decrease) in deferred income tax liability ................. (6,800) 1,829 3,694
---------- ---------- ---------
Net cash provided by operating activities ................................ 57,104 60,054 38,467
---------- ---------- ---------
Cash flows from investing activities:
Business acquisitions, net of cash acquired........................... (24,306) (18,183) (16,079)
Real estate acquired in connection with business acquisitions......... (675) (1,800) (4,241)
Property and equipment additions, net................................. (13,481) (22,555) (21,803)
Investments in marketable securities.................................. -- (129,992) (58,258)
Proceeds from sales or maturities of marketable securities............ -- 135,666 86,410
Proceeds from sale of assets ......................................... 1,705 -- --
Payment for covenants not to compete.................................. -- (15,630) --
Net proceeds from sale of investment in VPI........................... -- 8,200 --
Investment in Zoasis.................................................. -- (5,000) --
Other................................................................. 555 1,615 295
---------- ---------- ---------
Net cash used in investing activities..................................... (36,202) (47,679) (13,676)
---------- ---------- ---------
Cash flows from financing activities:
Repayment of long-term obligations including prepayment penalty ...... (175,530) (172,854) (18,922)
Proceeds from the issuance of long-term debt ......................... 170,000 356,670 --
Payment of deferred financing costs and recapitalization ............. (6,503) (44,114) --
Proceeds from issuance of common stock under stock option plans ...... -- 923 535
Proceeds from issuance (repayment) of redeemable preferred stock ..... (173,773) 149,231 --
Proceeds from issuance of common stock ............................... 161,488 14,350 --
Proceeds from issuance of stock warrants ............................. -- 1,149 --
Repurchase of common stock ........................................... -- (314,508) --
Purchase of treasury stock ........................................... -- (3,323) (4,761)
---------- ---------- ---------
Net cash used in financing activities .................................... (24,318) (12,476) (23,148)
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents ............................. (3,416) (101) 1,643
Cash and cash equivalents at beginning of year ............................... 10,519 10,620 8,977
---------- ---------- ---------
Cash and cash equivalents at end of year...................................... $ 7,103 $ 10,519 $ 10,620
========== ========== =========

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

Page F-7

VCA ANTECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

2001 2000 1999
--------- --------- ---------

Supplemental disclosures of cash flow information:
Interest paid .................................... $ 26,274 $ 15,237 $ 10,517
Income taxes paid ................................ 2,782 4,337 9,603

Supplemental schedule of non-cash investing and
financing activities:
In connection with acquisitions, assets acquired
and liabilities assumed were as follows:
Fair value of assets acquired..................... $ 24,424 $ 27,816 48,968
Less compensation given:
Cash paid and acquisition costs .............. (20,899) (16,430) (15,256)
Cash paid in settlement of assumed
liabilities and notes payable.............. (749) (1,262) (517)
Common stock issued .......................... -- -- (8,828)
--------- --------- ---------
Notes payable and assumed liabilities............ $2,776 $ 10,124 $ 24,367
========= ========= =========

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

Page F-8

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001, 2000 AND 1999

1. THE COMPANY

Based in Los Angeles, California, VCA Antech, Inc. ("VCA"), a Delaware
corporation, is an animal health care service company with positions in two core
businesses, veterinary diagnostic laboratories ("Laboratory") and animal
hospitals ("Animal Hospital"). In 2000, the Company established a new legal
structure comprised of a holding company and an operating company. VCA is the
holding company. Vicar Operating, Inc. ("Vicar") is wholly owned by VCA and owns
the capital stock of all of the Company's subsidiaries. Collectively, VCA and
Vicar are referred to as the Company. Prior to September 24, 2001, VCA was known
as Veterinary Centers of America, Inc.

The Company operates a full-service, veterinary diagnostic laboratory
network serving all 50 states. The laboratory network provides sophisticated
testing and consulting services used by veterinarians in the detection,
diagnosis, evaluation, monitoring, treatment and prevention of diseases and
other conditions affecting animals.

As of December 31, 2001, the Company operated 16 full-service laboratories.
The laboratory network includes primary hubs that are open 24 hours per day and
offer a full testing menu, secondary laboratories that service large
metropolitan areas, that are open 24 hours per day and offer a wide testing menu
and ten STAT laboratories that service other locations with demand sufficient to
warrant nearby laboratory facilities and are open primarily during daytime
hours.

Animal Hospitals offer a full range of general medical and surgical
services for companion animals. Animal Hospitals treat diseases and injuries,
provide pharmaceutical products and perform a variety of pet wellness programs,
including routine vaccinations, health examinations, spaying, neutering and
dental care.

At December 31, 2001, the Company owned or operated 214 animal hospitals
throughout 33 states, as follows:

California 44 Connecticut 3
New York (a) 21 New Mexico 3
Florida 17 Arizona 2
Illinois 16 Minnesota (a) 2
Michigan 12 Nebraska (a) 2
Pennsylvania 11 North Carolina (a) 2
Texas (a) 9 Utah 2
New Jersey (a) 9 Alabama (a) 1
Maryland 8 Georgia 1
Indiana 7 Hawaii 1
Massachusetts 7 Louisiana (a) 1
Virginia 6 Missouri 1
Nevada 5 South Carolina 1
Ohio (a) 5 Washington (a) 1
Alaska 4 West Virginia (a) 1
Colorado 4 Wisconsin 1
Delaware 4

(a) states where the Company manages animal hospitals under long-term
management agreements.

The Company was formed in 1986 and during the 1990s, established a position
in the veterinary diagnostic laboratory and animal hospital markets through both
internal growth and acquisitions. By 1997, the Company had

Page F-9

built a laboratory network of 12 laboratories servicing animal hospitals in all
50 states and operated a total of 160 animal hospitals.

On September 20, 2000, the Company completed a recapitalization transaction
(the "Recapitalization") with certain investors who are affiliated with Leonard
Green & Partners. The Company purchased 99% of its outstanding shares of common
stock for $1.00 per share for a total consideration of $314.5 million, and such
shares were subsequently retired. The Company then issued 14,350,005 new common
shares to certain investors in exchange for an 80% controlling interest in the
Company. An additional 517,995 shares of common stock were issued to certain
members of management. In connection with the Recapitalization, the Company also
authorized and issued redeemable preferred stock for which it received
approximately $149.2 million and entered into various debt agreements through
which it received approximately $356.7 million in cash.

The Recapitalization did not result in a change in the historical cost
basis of the Company's assets and liabilities because certain management
shareholders retained their ownership of the Company common stock, which
amounted to approximately 20% of the Company's outstanding common stock
following the Recapitalization. The Company incurred $34.3 million of
Recapitalization costs for the year ended December 31, 2000, which consisted of
$24.1 million associated with the buy-out of stock options held by employees,
$1.2 million paid to employees for services rendered in connection with the
Recapitalization, $7.6 million in professional fees and $1.4 million of other
expenses. Additionally, the Company paid $15.6 million out of the
Recapitalization proceeds for covenants not to compete to the following
executive officers: Robert Antin, Chief Executive Officer; Arthur Antin, Chief
Operating Officer; Tomas Fuller, Chief Financial Officer; and Neil Tauber,
Senior Vice President of Development. The payments made for the covenants not to
compete were being amortized over a three-year period commencing on September
20, 2000. Following the closing of the Company's initial public offering of its
common stock in November 2001 (described below), the Company terminated the
non-competition agreements with certain members of management and recorded a
non-cash charge of $9.6 million.

On November 27, 2001, the Company completed an initial public offering of
its common stock (the "IPO"). As a result of this offering and the underwriters'
exercise of its over-allotment, the Company issued 17,370,000 shares of common
stock and received net proceeds of $161.5 million. Concurrent with the IPO, the
Company issued $170.0 million of 9.875% senior subordinated notes due 2009. The
Company applied the net proceeds from the IPO and the sale of the notes, plus
cash on hand, as follows:

o redeemed all of the outstanding series A and series B redeemable
preferred stock;

o repaid $100.0 million under the senior subordinated credit facilities;

o repaid $59.1 million in principal of the Company's 15.5% senior notes
due 2010, at a redemption price of 110%, plus accrued and unpaid
interest; and

o repaid $5.0 million in principal of the Company's 13.5% senior
subordinated notes due 2010, at a redemption price of 110%, plus
accrued and unpaid interest.

Affiliates of Leonard Green & Partners and Robert Antin, CEO, President and
Chairman of the Board of the Company, purchased 2,000,000 and 40,000 additional
shares of common stock, respectively, in the IPO.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a. PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all those majority-owned subsidiaries where the Company has control.
Significant intercompany transactions and balances have been eliminated.

The Company provides management services to certain veterinary medical
groups in states with laws that prohibit business corporations from providing
veterinary services through the direct employment of veterinarians. As of
December 31, 2001, the Company operated in eleven of these states. In these
states, instead of owning an

Page F-10

animal hospital, the Company provides management services to veterinary medical
groups. The Company provides management services pursuant to long-term
management agreements (the "Management Agreements") with the veterinary medical
groups, ranging from 10 to 40 years with non-binding renewal options, where
allowable. Pursuant to the Management Agreements, the veterinary medical groups
are each solely responsible for all aspects of the practice of veterinary
medicine, as defined by their respective state. The Company is responsible for
providing the following services:

o availability of all facilities and equipment

o day-to-day financial and administrative supervision and management

o maintenance of patient records

o recruitment of veterinary and hospital staff

o marketing

o malpractice and general insurance

The Company does not consolidate the operations of the veterinary medical
groups since it has no control over the practice of veterinary medicine at these
hospitals. As compensation for the Company's services, it receives management
fees which are included in revenue and were $37.8 million, $31.1 million and
$30.2 million for the years ended December 31, 2001, 2000 and 1999,
respectively.

b. CASH AND CASH EQUIVALENTS

For purposes of the balance sheets and statements of cash flows, the
Company considers only highly liquid investments to be cash equivalents.

Cash and cash equivalents at December 31 consisted of (in thousands):

2001 2000
--------- ---------
Cash............................... $ 7,103 $ 3,443
Money market funds ................ -- 7,076
--------- ---------
$ 7,103 $ 10,519
========= =========

c. MARKETABLE SECURITIES

During the year ending December 31, 2000, the Company realized a loss on
the sale of an investment of $1.3 million and had previously recorded unrealized
losses of $727,000 on this investment in years prior to 2000.

d. PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost. Equipment held under capital
leases is recorded at the lower of the present value of the minimum lease
payments or the fair value of the equipment at the beginning of the lease term.

Depreciation and amortization are provided for on the straight-line method
over the following estimated useful lives:

Buildings and improvements.......... 5 to 40 years
Leasehold improvements.............. Lesser of lease term or 15 years
Furniture and equipment ............ 5 to 7 years
Property held under capital leases.. 5 to 30 years

Page F-11

Property and equipment at December 31, consisted of (in thousands):

2001 2000
--------- ---------
Land ..................................... $ 20,008 $ 19,788
Building and improvements ................ 33,668 33,920
Leasehold improvements ................... 19,000 17,565
Furniture and equipment .................. 49,565 43,771
Equipment held under capital leases ...... 1,533 1,533
Construction in progress ................. 5,292 1,293
--------- ---------
Total fixed assets........................ 129,066 117,870
Less--Accumulated depreciation and
amortization........................... (39,822) (30,898)
--------- ---------
$ 89,244 $ 86,972
========= =========

Accumulated depreciation on equipment held under capital leases amounted to
$1.5 million and $1.3 million at December 31, 2001 and 2000, respectively.

During 2001, the Company performed an analysis of the fair market value of
certain properties and determined that five properties' value had been impaired
and recorded an impairment charge of approximately $1.4 million. In addition,
the Company sold four properties during 2001 with a carrying value of
approximately $1.2 million.

During 2001, the Company sold two animal hospitals with a fixed asset
carrying value of approximately $52,000. In addition, the Company closed one
animal hospital and relocated thirteen animal hospitals operated by the Company
during 2001. As a result, the Company disposed of certain fixed assets with a
carrying value of approximately $230,000.

e. GOODWILL

Goodwill relating to acquisitions represents the purchase price paid and
liabilities assumed in excess of the fair market value of net assets acquired.

The Company continually evaluates whether events, circumstances or net
losses on the entity level have occurred that indicate the remaining estimated
useful life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. When factors indicate that goodwill should be
evaluated for possible impairment, the Company uses an estimate of the related
facility's undiscounted, tax adjusted net income over the remaining life of the
goodwill to measure whether the goodwill is recoverable. If it is determined
that goodwill on a given entity is partially or totally unrecoverable, losses
will be recognized to the extent that projected aggregate tax adjusted net
income over the life of the goodwill does not cover the goodwill balance at the
date of impairment. Accumulated amortization of goodwill was $43.3 million and
$35.0 million at December 31, 2001 and 2000, respectively.

As a result of evaluation in 2001, the Company recorded a write-down of
goodwill from one hospital of approximately $800,000 and recorded an additional
write-down of goodwill of approximately $6.3 million in 2001 from the closure of
six animal hospitals.

In accordance with SFAS No. 142 "Goodwill and Other Intangibles", goodwill
relating to acquisitions effective June 30, 2001 is not amortized and will be
evaluated in the future on a periodic basis for impairment. Goodwill acquired
prior to June 30, 2001 was amortized through December 31, 2001 on a
straight-line basis over the expected period to be benefited, not to exceed 40
years; however, this goodwill will no longer be amortized beginning January 1,
2002, in accordance with SFAS No. 142. See Note 2, section n., RECENT ACCOUNTING
PRONOUNCEMENTS, for additional information.

Page F-12

f. COVENANTS NOT TO COMPETE

Covenants not to compete are amortized on a straight-line basis over the
term of the agreements, usually three to ten years. Accumulated amortization of
covenants not to compete was $6.5 million and $6.6 million at December 31, 2001
and 2000, respectively.

g. NOTES RECEIVABLE

Notes receivable are not market traded financial instruments. The amounts
recorded approximate fair value and are shown net of valuation allowances of
$63,000 as of December 31, 2001 and 2000. The notes bear interest at rates
varying from 7% to 10% per annum.

h. DEFERRED REVENUE

As part of a partnership with Heinz Pet Products ("HPP"), the Company
agreed to provide certain consulting and management services for a three-year
period that commenced on February 1, 1997 and ended on February 1, 2000. The
agreement was for an aggregate fee of $15.3 million payable in semi-annual
installments over a five-year period.

In October of 2000, after the expiration of the above-mentioned consulting
and management services agreement, HPP bought out the Company's interest in the
partnership and entered into a two-year consulting agreement with the Company.
The agreement called for an aggregate fee of $5.0 million, $4.0 million of which
will be recognized as revenue ratably over the life of the agreement and $1.0
million will be used for certain marketing obligations under the agreement.

Fees earned under these agreements are included in revenue and amounted to
$2.0 million, $925,000 and $5.1 million for the years ended December 31, 2001,
2000 and 1999, respectively. The Company had liabilities related to the two-year
consulting agreement of $1.5 million and $3.5 million at December 31, 2001 and
2000, respectively.

i. DEFERRED FINANCING COSTS

In connection with the issuance of long-term debt in 2001 and 2000, the
Company incurred $4.4 million and $14.0 million of deferred financing costs,
respectively. These deferred financing costs are shown net of accumulated
amortization of $1.6 million and $586,000 in the consolidated balance sheets at
December 31, 2001 and 2000, respectively. The deferred financing costs are
amortized using the effective interest method over the life of the related debt.

j. INVESTMENT IN VPI AND ZOASIS

During portions of 2000 and 1999, the Company had investments in Veterinary
Pet Insurance, Inc. ("VPI") and Zoasis.com, Inc. ("Zoasis"), both of which were
accounted for on the cost basis. See Footnote 4, JOINT VENTURES AND INVESTMENTS,
for a description of these investments.

k. FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF CREDIT RISK

The carrying amount reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and accrued liabilities approximates fair
value because of the immediate or short-term maturity of these financial
instruments. Concentration of credit risk with respect to accounts receivable
are limited due to the diversity of the Company's customer base.

l. USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and contingent liabilities at
the date of the financial statements and

Page F-13

the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.

m. CASH FLOW HEDGE

In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS No. 133, which as amended is
for fiscal years which began after June 15, 2000, establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts and for hedging activities,
(collectively referred to as "derivatives"). It requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value.

Under the provisions of the Credit and Guaranty Agreement, dated September
20, 2000, the Company was required to enter into an arrangement to hedge
interest rate exposure for a minimum notional amount of $62.0 million and a
minimum term of two years. On November 13, 2000, the Company entered into a no
fee interest rate collar agreement with Wells Fargo Bank effective November 15,
2000 and expiring November 15, 2002, (the "Collar Agreement"). The Collar
Agreement is based on the London interbank offer rate ("LIBOR"), which resets
monthly, and has a cap and floor notional amount of $62.5 million, with a cap
and floor interest rate of 7.5% and 5.9%, respectively. During 2001, the Company
has made payments under this agreement amounting to $1.2 million resulting from
LIBOR rates being below the floor interest rate of 5.9%. These payments have
been reported as part of interest expense for 2001. The Company made no such
payments during 2000.

The Collar Agreement is accounted for as a cash flow hedge that requires
the Company report the market value of the Collar Agreement in the consolidated
balance sheet.

The Company adopted SFAS No. 133 effective January 1, 2001. At December 31,
2001, the Company reported a liability from interest rate hedging activities of
$2.0 million, $1.8 million of which has been recognized in comprehensive income
and $168,000 of which has been recognized in other expense, net. The valuation
is determined by Wells Fargo Bank. As the result of adopting SFAS No. 133 in
2001, the Company recorded a cumulative adjustment to other comprehensive income
of approximately $525,000 in 2001.

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

n. RECENT ACCOUNTING PRONOUNCEMENTS

o GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS, and SFAS
No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 141 also includes guidance on the initial
recognition and measurement of goodwill and other intangible assets arising from
business combinations completed after June 30, 2001. SFAS No. 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
SFAS No. 142 requires that these assets be reviewed for impairment at least
annually, or whenever there is an indication of impairment. Intangible assets
with finite lives will continue to be amortized over their estimated useful
lives and reviewed for impairment in accordance with SFAS No. 144, ACCOUNTING
FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS.

SFAS No. 142 requires companies to allocate their goodwill to identifiable
reporting units, which are then tested for impairment using a two-step process
detailed in the statement. The first step requires comparing the fair value of
each reporting unit with its carrying amount, including goodwill. If that fair
value exceeds the carrying amount, the second step of the process is not
necessary and there are no impairment issues. If that fair value does not exceed
that carrying amount, companies must perform the second step that requires a
hypothetical allocation of the fair value of the reporting unit to the reporting
unit's assets and liabilities as if the unit were just purchased by the company
at the fair value price. In this hypothetical sale, the excess of the fair value
of the reporting unit over

Page F-14

its re-evaluated, marked-to-market net assets would be the new basis for the
reporting unit's goodwill and a write down to this new value would be recognized
as an expense.

The Company will adopt SFAS No. 142 on January 1, 2002. In doing so, it
determined that it had two reporting units, Laboratory and Animal Hospitals. On
April 15, 2002, an independent valuation group concluded that the fair value of
the Company's reporting units exceeded it's carrying value and accordingly, as
of that date, there were no goodwill impairment issues. The Company plans to
perform a valuation of its reporting units annually, or upon significant changes
in the Company's business environment.

As of December 31, 2001, the Company's goodwill balance was $317.3 million.
For the years ended December 31, 2001, 2000 and 1999, the Company reported
goodwill amortization of $9.2 million, $8.3 million and $7.5 million,
respectively.

o GOODWILL IMPAIRMENT TEST

In August 2002, the FASB's Emerging Issues Task Force ("EITF") issued EITF
Issue No. 02-13, DEFERRED INCOME TAX CONSIDERATIONS IN APPLYING THE GOODWILL
IMPAIRMENT TEST IN FASB NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. EITF
Issue No. 02-13 was issued to provide guidance on how to account for deferred
tax balances in determining a reporting unit's fair value, a reporting unit's
carrying amount and the implied fair value of goodwill. The consensus in this
issue will be applied prospectively in performing either the first or second
step of the impairment test required by SFAS No. 142 for tests performed after
September 12, 2002. The Company has not determined yet what impact EITF Issue
No. 02-17 will have on its consolidated financial statements.

o ASSET RETIREMENT OBLIGATIONS

In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company will adopt SFAS No. 143 in the
first quarter of fiscal year 2003. The Company is evaluating the impact the
adoption of SFAS No. 143 will have on its consolidated financial statements.

o IMPAIRMENT OF LONG-LIVED ASSETS

In August 2001, the FASB issued SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT
OR DISPOSAL OF LONG-LIVED ASSETS, which establishes one accounting model to be
used for long-lived assets to be disposed of by sale and broadens the
presentation for discontinued operations to include more disposal transactions.
SFAS No. 144 supercedes SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS TO BE DISPOSED OF BY SALE, and the accounting and reporting
provisions relating to the impairment or disposal of long-lived assets of
Accounting Principles Board Opinion No. 30 ("APB No. 30"), REPORTING THE RESULTS
OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A SEGMENT OF A BUSINESS,
AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING EVENTS AND TRANSACTIONS.
The Company will adopt SFAS No. 144 on January 1, 2002, with no material impact
to its financial statements.

o GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT AND CAPITAL LEASES

Page F-15

The Company will adopt SFAS No. 145 at the beginning of fiscal year 2003.
The Company recognized extraordinary losses related to the early extinguishment
of debt, before taxes in the amount of approximately $17.2 million and $4.5
million during years 2001 and 2000, respectively. The Company does not believe
these losses on extinguishment of debt meet the criteria of APB No. 30 as the
Company has historically participated in periodic debt refinancing. As a result
of adopting SFAS No. 145, the Company will reclassify the losses on
extinguishment of debt from extraordinary losses to a component of income from
recurring operations. This reclassification will not impact net income.

SFAS No. 145 also amends SFAS No. 13, ACCOUNTING FOR LEASES. Under SFAS No.
145, if a capital lease is modified such that it becomes an operating lease, a
gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At December
31, 2001, the Company had capital lease obligations of $79,000. Although the
Company may enter into more capital leases, management does not expect SFAS No.
145 to have a material impact on its consolidated financial statements.

o COSTS ASSOCIATED WITH EXIT OR DISPOSAL OF ACTIVITIES

In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires that liabilities
associated with exit or disposal activities be recognized when a company is
committed to future payment of those liabilities under a binding, legal
obligation. SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3,
LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS
TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING), which
required that exit and disposal costs be recognized as liabilities when a
company formalized its plan for exiting or disposing of an activity even if no
legal obligation had been established.

SFAS No. 146 is effective for exit or disposal activities that are
initiated after December 31, 2002, however early adoption is encouraged. Costs
associated with exit or disposal activities will be recognized in income from
continuing operations before income taxes, unless these are costs associated
with discontinued operations, which would require disclosure as part of
discontinued operations, net of taxes. The Company has no plans to exit or
dispose of any of its business activities under the definition of SFAS No. 146,
nor does the Company anticipate that SFAS No. 146 will change any of its
business practices.

o. RECLASSIFICATIONS

Certain prior year balances have been reclassified to conform with the 2001
financial statement presentation.

p. REVENUE RECOGNITION

Revenue is recognized only after the following criteria are met: (i) there
exists adequate evidence of the transactions; (ii) delivery of goods has
occurred or services have been rendered; (iii) the price is not contingent on
future activity; and (iv) collectibility is reasonably assured.

q. MARKETING AND ADVERTISING

Marketing and advertising production costs are expensed as incurred or the
first time the advertisement is run. Media (primarily print) placement costs are
expensed in the month the advertising appears. Total marketing and advertising
expense is included in direct costs and amounted to $5.0 million, $5.6 million,
$4.3 million for the years ended December 31, 2001, 2000 and 1999, respectively.

r. WORKERS' COMPENSATION LIABILITY

On October 8, 2001, the Company entered into a one-year workers'
compensation insurance policy with a $250,000 per-occurrence deductible and a
stop-loss aggregate deductible of $4.7 million. Management has determined that
$3.0 million is a reasonable estimate of expected claims losses under this
policy and is accruing for these losses ratably over the twelve month period
ending September 30, 2002. In determining this estimate, in conjunction with the
insurance carrier, management reviewed the Company's five-year history of claims
losses,

Page F-16

ratio of losses to premiums paid, payroll growth and the current risk control
environment. The Company is pre-funding estimated claims losses to the insurance
carrier of approximately $2.9 million. If the Company were accruing the maximum
possible claims losses for the three months the policy was effective in 2001, it
would have recorded an additional $430,000 of expense for the year ended
December 31, 2001. The policies in place for 2000 and 1999 did not have large
deductibles and the Company has accrued for the maximum possible expense under
these policies.

3. RELATED PARTY TRANSACTIONS

Management believes, based on reasonable judgment, but without further
investigation, that the terms of each of the following transactions or
arrangements between the Company and its affiliates, officers, directors or
stockholders which were parties to the transactions were, on an overall basis,
at least as favorable to the Company as could then have been obtained from
unrelated parties.

a. ACQUISITIONS

As part of an often-used acquisition strategy, the Company hires the
selling doctor upon purchase of their practice. The Company may lease facilities
from the selling doctor; the related lease agreements are negotiated at
prevailing market rates as part of the acquisition before the doctor is hired.
These lease arrangements are not contingent upon the current or future
employment of the doctors.

b. RECAPITALIZATION

On September 20, 2000, the Company completed the Recapitalization with an
entity controlled by Leonard Green & Partners. In the Recapitalization, each
outstanding share of our common stock, other than shares retained by management
and employees, was canceled and converted into the right to receive $1.00. The
Recapitalization was financed by:

o the contribution of $155.0 million by a group of investors led by
Leonard Green & Partners;

o the issuance of an aggregate of $20.0 million of senior subordinated
notes;

o the borrowing of $250.0 million under our $300.0 million senior credit
facility; and

o the issuance of an aggregate of $100.0 million of senior notes.

Upon the completion of the Recapitalization, Robert Antin, Arthur Antin,
Neil Tauber, Tom Fuller, other stockholders and a group of investors led by
Leonard Green & Partners acquired 17,524,335 shares of common stock at a
purchase price of $1.00 per share. Goldman Sachs Credit Partners L.P. is a
lender under the Company's senior credit facility. GS Mezzanine Partners II,
L.P. and GS Mezzanine II Offshore, L.P., affiliates of Goldman, Sachs & Co.,
purchased portions of the Company's securities for an aggregate purchase price
of $85.0 million. Melina Higgins, one of the Company's directors, is the Chief
Financial Officer of GS Mezzanine Partners II, L.P. and GS Mezzanine Partners II
Offshore, L.P. The following partners of Leonard Green & Partners also serve on
the Company's board of directors: John Baumer, John Danhakl and Peter Nolan.

c. STOCKHOLDERS AGREEMENT

On September 20, 2000, the Company entered into a stockholders agreement
with each of its stockholders. Under the stockholders agreement, each party to
the stockholders agreement has call rights with respect to shares of common
stock and stock options held by members of management in the event of
termination of employment for any reason. The call rights permit the Company to
repurchase callable shares at $1.00 per share. In connection with the IPO, the
stockholders' agreement was amended such that effective October 1, 2001:

o Call rights expired on one-half of Robert Antin's shares that
initially were subject to the stockholders agreement. Of the remaining
shares, call rights will expire ratably over a six-month period
commencing on October 1, 2001;

Page F-17

o Call rights expired on one-half of Arthur Antin's, Neil Tauber's and
Tomas Fuller's shares that initially were subject to the stockholders
agreement. Of the amount remaining, call rights will expire on
one-half of those shares on April 1, 2002, and on the remaining
one-half on October 1, 2002; and

o Call rights expired on one-half of the other employees' shares that
initially were subject to the stockholders agreement. Of the remaining
shares, call rights will expire ratably over a 12-month period
commencing May 1, 2002.

The stockholders agreement also provided for the discharge of $580,000 and
$108,000 of indebtedness owed to the Company by Robert Antin and Arthur Antin,
respectively, including interest accrued thereon. This indebtedness was forgiven
as part of the Recapitalization.

d. NOTES RECEIVABLE FROM STOCKHOLDERS

In 2001, certain employees exercised their options to purchase shares of
the Company's common stock. As consideration for the exercise of their options,
the Company received notes with an aggregate value of approximately $100,000.
Each note earns interest at the rate of 10.125% per annum and is due and payable
on August 1, 2004. These notes are collateralized by the Company's common stock
that was purchased by the stockholders and are an unconditional obligation of
the employee. The total outstanding principal and interest of these notes at
December 31, 2001 was approximately $104,000.

Concurrent with the Recapitalization, the Company sold 518,000 common
shares to certain non-executive employees of the Company. As consideration for
the issuance of common stock, the Company received notes with an aggregate value
approximating $518,000. Each note earns interest at the rate of 6.2% per annum,
is compounded annually and is due and payable on September 16, 2007. The notes
are collateralized by the Company's common stock that was purchased by the
stockholders. The total outstanding principal and interest of these notes at
December 31, 2001 and 2000 was $560,000 and $518,000, respectively.

e. MANAGEMENT SERVICES AGREEMENT

On September 20, 2000, the Company entered into a 10-year management
services agreement with Leonard Green & Partners. The agreement provides that
Leonard Green & Partners would provide general investment-banking services,
management, consulting and financial planning services and transaction-related
financial advisory and investment banking services to the Company. The Company
paid a one-time structuring fee of $7.5 million to Leonard Green & Partners in
September 2000 under the agreement. Leonard Green & Partners received annual
fees as compensation for the general services and normal and customary fees for
transaction-related services. In the years ended December 31, 2001 and 2000, the
Company paid management fees in an aggregate amount of $2.3 million and
$620,000, respectively. Upon the consummation of the IPO, the parties agreed to
terminate the management services agreement. In connection with the termination
the Company paid Leonard Green & Partners $8.0 million.

f. NON-COMPETITION AGREEMENTS

On September 20, 2000, Robert Antin, Arthur Antin, Neil Tauber and Tomas
Fuller each entered into non-competition agreements with the Company for a term
of three years.

In consideration for the execution of the non-competition agreements, the
Company paid approximately $6.2 million, $4.0 million, $2.7 million and $2.5
million to Robert Antin, Arthur Antin, Neil Tauber and Tomas Fuller, or their
affiliates, respectively. Upon the consummation of the IPO, these
non-competition agreements were terminated.

g. INVESTMENT IN AND TRANSACTIONS WITH ZOASIS

During the year ended December 31, 2000, the Company made a $5.0 million
investment in Zoasis, an internet start-up company, majority owned by Robert
Antin, the Company's Chief Executive Officer and Chairman

Page F-18

of the Board. In December 2000, the Company determined that the value of this
investment was impaired and, as a result, recognized a loss of $5.0 million on
the write-down of its investment in Zoasis.

The Company incurred marketing expense for vaccine reminder services
provided by Zoasis of $709,000 and $81,000 for the years ended December 31, 2001
and 2000. The pricing of these services is comparable to prices paid by the
Company to independent third parties.

In 2001, the Company began development of software that can gather data in
order to be able to automatically fax diagnostic laboratory results to the
laboratory clients. The Company initially used an independent outside contractor
to begin programming this software but now intends to use an in-house programmer
working in conjunction with Zoasis. Zoasis will not be paid for this programming
effort but will be able to use and amend the software to market it to other
veterinary hospitals and laboratories. In relation to this project, Zoasis is
also working with the Company to facilitate the collection and delivery of
laboratory results to its clients.

h. RELATED PARTY VENDORS

Patricia Antin, wife of the Company's Chief Operating Officer Arthur Antin,
is an independent sales representative for Citi Print and Westpro Graphics, both
local printing companies. The Company used these companies' services to print
forms and marketing materials for the Company's hospitals nationwide.
Transactions are based on arms-length market prices and the Company has no, nor
has the Company ever had, any contractual obligation binding the Company to
their services. The Company paid Citi Print $345,000, $321,000 and $339,000 for
the years ended December 31, 2001, 2000 and 1999, respectively. The Company paid
Westpro Graphics $7,000, $17,000 and $106,000 for the years ended December 31,
2001, 2000 and 1999, respectively.

i. INVESTMENT IN VET'S CHOICE AND THE WISDOM GROUP, L.P.

In September 2000, the Company sold its entire equity interest in Vet's
Choice, which had zero-cost basis, to HPP. VCA received $500,000 in proceeds
from the sale. At the time of the sale, one of the Company's directors, Mr. John
Heil, served as president of an affiliate of HPP. In connection with the sale,
HPP also paid VCA $1.0 million which was transferred to the Wisdom Group, L.P.
and used to redeem the limited partnership interests in the Wisdom Group, L.P.
Members of the Company's executive management had a 30.5% ownership interest in
the Wisdom Group, L.P. as limited partners and one of the Company's subsidiaries
owned a 1% ownership interest as the general partner. The Wisdom Group, L.P. was
dissolved in November 2000 upon redemption of all the partnership interests. The
nature of the business of the Wisdom Group, L.P. was to provide consulting
services to Vet's Choice with respect to the development, marketing and sale of
premium pet food products.

j. RECEIPT OF PROCEEDS FROM THE INITIAL PUBLIC OFFERING AND DEBT ISSUANCE

Prior to the IPO on November 27, 2001, affiliates of Leonard Green &
Partners owned 2,826,000 shares of 14% series A redeemable preferred stock and
2,800,000 shares of 12% series B redeemable stock. Affiliates of Goldman, Sachs
& Co. owned 122,123 shares of 14% series A redeemable preferred stock and
121,000 shares of 12% series B redeemable preferred stock and held approximately
$82.5 million aggregate principal amount of senior notes and approximately $14.2
million aggregate principal amount of the senior subordinated notes, and
warrants to purchase 814,575 shares of common stock at an exercise price of
$0.0007 per share. An affiliate of Goldman, Sachs & Co. was the syndication
agent and a lender under the senior credit facility. The proceeds from the IPO
and debt issuance were used to repay $100.0 million of borrowings under the
senior credit facility, $59.1 million aggregate principal amount of the senior
notes, $5.0 million aggregate principal amount of the senior subordinated notes
and the redemption value of all of the shares of preferred stock.

k. PURCHASE OF COMMON STOCK

Affiliates of Leonard Green & Partners purchased 2,000,000 shares of the
Company's common stock at the IPO price of $10.00 per share. These shares are
subject to lock-up agreements under which these affiliates of Leonard Green &
Partners agree not to offer, sell, contract to sell, pledge or otherwise dispose
of, directly or indirectly any share of common stock or any securities
convertible into or exchangeable or exercisable for any shares of common stock
without the prior written consent of Credit Suisse First Boston until May 20,
2002.

Page F-19

Robert Antin purchased 40,000 of the 725,000 shares of the Company's common
stock reserved by the underwriters for sale to employees and other persons
associated with the Company. These shares are subject to lock-up agreements
under which Mr. Antin agrees not to offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly any share of common stock or any
securities convertible into or exchangeable or exercisable for any shares of
common stock without the prior written consent of Credit Suisse First Boston
until May 20, 2002.

4. ACQUISITIONS

During 2001, the Company purchased 21 animal hospitals, all of which were
accounted for as purchases. Six of the acquired animal hospitals were merged
into existing VCA facilities upon acquisition. Including acquisition costs, VCA
paid an aggregate consideration of $24.4 million, consisting of $20.9 million
cash, $1.0 million in debt, and the assumption of liabilities of $2.5 million.
The aggregate purchase price was allocated as follows: $747,000 to tangible
assets, $22.5 million to goodwill and $1.2 million to other intangibles.

During 2000, the Company purchased 24 animal hospitals and one veterinary
diagnostic laboratory, all of which were accounted for as purchases. Three of
the acquired animal hospitals and the laboratory were merged into existing VCA
facilities upon acquisition. Including acquisition costs, VCA paid an aggregate
consideration of $27.8 million, consisting of $16.5 million in cash, $11.1
million in debt, and the assumption of liabilities totaling $315,000. The
aggregated purchase price was allocated as follows: $914,000 to tangible assets,
$21.6 million to goodwill and $5.3 million to other intangibles.

During 1999, the Company purchased 24 animal hospitals and two veterinary
diagnostic laboratories all of which were accounted for as purchases. Five of
the acquired animal hospitals and both laboratories were merged into existing
VCA facilities upon acquisition. Including acquisition costs, VCA paid an
aggregate consideration of $23.7 million, consisting of $9.8 million in cash,
$12.4 million in debt, 70,712 shares of common stock of the Company with a value
of $1.1 million, and the assumption of liabilities totaling $369,000. The
aggregated purchase price was allocated as follows: $1.4 million to tangible
assets, $18.6 million to goodwill and $3.8 million to other intangibles.

In addition, on April 1, 1999, the Company completed the acquisition of AAH
Management Corp. ("AAH") for a total consideration (including acquisition costs)
of $25.3 million, consisting of 517,585 shares of VCA common stock, with a value
at the date of acquisition of $7.8 million, $5.4 million in cash, $1.2 million
in notes payable and the assumption of $10.9 million in liabilities. AAH
operated 15 animal hospitals located in New York and New Jersey. The acquisition
of AAH was accounted for as a purchase. The purchase price has been allocated as
follows: $2.7 million to tangible assets, $21.9 million to goodwill, and
$725,000 to other intangible assets.

The pro forma results listed below are unaudited and reflect purchase price
accounting adjustments assuming 2001 and 2000 acquisitions occurred at January
1, 2000. The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisitions had been in effect for the entire
periods presented. In addition, they are not intended to be a projection of
future results and do not reflect any efficiencies that might be achieved from
the combined operation.

FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
2001 2000
---------- ----------
Revenue.............................................. $ 412,161 $ 395,505
Net income (loss) available to common stockholders... $ (46,119) $ (10,666)
Diluted earnings per share........................... $ (2.36) $ (0.05)
Shares used for computing diluted earnings per share. 19,509 234,055

In connection with certain acquisitions, the Company assumed certain
contractual arrangements whereby cash may be issued to former owners of acquired
hospitals upon attainment of specified financial criteria over periods of three
to five years ("Earn-Out Payments"), as set forth in the respective agreements
(the "Earn-Out Arrangements"). The Earn-Out Arrangements provide for contingent
Earn-Out Payments if the acquired entity

Page F-20

achieves or exceeds contractually defined revenue targets during the defined
earn-out period. The payments are either fixed in amount or are based on a
multiple of revenue. When the contingency is resolved and the additional
consideration is distributed, the Company records the consideration issued as an
additional cost of the acquired entity. The additional consideration of affected
assets, usually goodwill, is amortized over the remaining life of the asset.
Earn-Out Payments in 2001, 2000 and 1999 consisted entirely of cash
approximating $496,000, $486,000 and $326,000, respectively.

5. JOINT VENTURES AND INVESTMENTS

During fiscal year 2000, the Company invested $5.0 million for convertible
preferred stock of Zoasis, an internet start-up business, majority-owned by
Robert Antin, the Company's Chief Executive Officer and a director of the
Company. Zoasis was to develop and provide services to the veterinary industry
such as consumer e-commerce, e-commerce of veterinary supplies for hospitals,
internet diagnostic laboratory results, on-line continuing education for
veterinarians, hosted web sites for veterinarian clients, and a marketing
reminder service. Due to the decline in the market value of many internet
companies, Zoasis was not able to raise additional capital to continue its
development. Zoasis scaled back its operations significantly. In December 2000,
the Company determined that the value of this investment was impaired and, as a
result, recognized a loss of $5.0 million on the write-down of its investment in
Zoasis.

In September 2000, the Company sold its 50.5% equity interest in Vet's
Choice, which had a zero cost basis, to HPP. The Company received $500,000 in
the sale. In connection with the sale, the Company also received $1.0 million,
which was transferred to the Wisdom Group, L.P. in January 2001.

In December 1997 and January 1998, the Company made a combined $5.0 million
investment in Veterinary Pet Insurance, the largest provider of pet health
insurance in the United States. The Company sold its investment in VPI and
received $8.2 million in cash in February 2000, resulting in a one-time gain of
approximately $3.2 million.

6. LONG-TERM OBLIGATIONS

Long-term obligations consisted of the following at December 31 (in
thousands):

2001 2000
--------- ---------

SENIOR TERM A Notes payable, maturing in 2006, secured by
assets, variable interest rates (weighted
average interest rate of 7.4% and 9.9% during
2001 and 2000, respectively)........................ $24,112 $50,000

SENIOR TERM B Notes payable, maturing in 2008, secured by
assets, variable interest rates (weighted average
interest rate of 7.9% and 10.4% during 2001 and
2000, respectively)................................. 121,242 200,000

13.5% SENIOR Notes payable, maturing in 2010, unsecured, fixed
SUBORDINATED NOTES interest rate of 13.5%.............................. 15,000 20,000

9.875% SENIOR Notes payable, maturing in 2010, unsecured, fixed
SUBORDINATED NOTES interest rate of 9.875%............................. 170,000 --

SENIOR NOTES Notes payable, maturing in 2010, unsecured, fixed
interest rate of 15.5%.............................. 59,670 104,306

SECURED SELLER Notes payable and other obligations, various
NOTES maturities through 2010, secured by assets and
stock of certain subsidiaries, various interest
rates ranging from 5.3 to 10.0%..................... 1,182 1,328

Page F-21

2001 2000
--------- ---------
UNSECURED DEBT Notes payable, various maturities through 2008,
various interest rates ranging from 7.0% to 9.7%.... 225 350
--------- ---------
Total debt obligations................................ 391,431 375,984

Capital lease obligations ............................ 79 110

Less--unamortized discount ........................... (7,178) (13,345)
--------- ---------
384,332 362,749

Less--current portion ................................ (5,159) (5,756)
--------- ---------
$379,173 $356,993
========= =========

The annual aggregate scheduled maturities of debt obligations for the five
years subsequent to December 31, 2001 are presented below (in thousands):

2002................................ $ 5,159
2003................................ 5,456
2004................................ 6,160
2005................................ 22,089
2006................................ 21,971
Thereafter.......................... 330,596
---------
$391,431
=========

Interest expense consisted of the following for the year ended December 31,
2001 (in thousands):

SUBORDINATED AMORTIZATION SECURED
SENIOR NOTES OF DEFERRED SELLER
SENIOR SENIOR ------------------ SENIOR FINANCING NOTES &
TERM A TERM B 13.5% 9.8975% NOTES COLLAR COSTS OTHER TOTAL
------ ------- ------- ------- ------- ------ ------------ -------- --------

Interest $3,645 $15,760 $2,654 $1,585 $16,044 $1,176 $2,072 $651 $43,587

The Company has had two major shifts in its capital structure during the
last two years. The first shift occurred in 2000 with the Recapitalization. The
second shift occurred in 2001 with the Company's IPO and debt offering. The
following table summarizes the activity in the Company's long term obligations
for the two years ended December 31, 2001 (in thousands):

SUBORDINATED SENIOR SECURED
REVOLVING NOTES SELLER
SENIOR SENIOR CREDIT ------------------- SENIOR NOTES AND
TERM A TERM B FACILITY 13.5% 9.875% NOTES OTHER TOTAL
-------- --------- --------- -------- -------- ---------- ---------- ---------

Balance at December
31, 1999............ $ -- $ -- $ -- $ -- $ -- $ -- $ 161,595 $161,595
Recapitalization.... 50,000 200,000 -- 20,000 -- 100,000 (172,854) 197,146
PIK interest........ -- -- -- -- -- 4,306 -- 4,306
New debt, net of
principal payments.. -- -- -- -- -- -- 12,937 12,937
-------- --------- --------- -------- -------- ---------- ---------- --------
Balance at
December 31, 2000 50,000 200,000 -- 20,000 -- 104,306 1,678 375,984
IPO and debt
offering............ (24,126) (75,874) -- (5,000) 170,000 (59,164) -- 5,836
PIK interest........ -- -- -- -- -- 14,528 -- 14,528
Principal payments.. (1,762) (2,884) -- -- -- -- (271) (4,917)
-------- --------- --------- -------- -------- ---------- ---------- ---------
Balance at
December 31, 2001 $24,112 $121,242 $ -- $ 15,000 $170,000 $ 59,670 $ 1,407 $391,431
======== ========= ========= ======== ======== ========== ========== =========

Page F-22

The Company had extraordinary losses related to the debt repaid with net
proceeds from the Recapitalization and the IPO and debt offering as follows (in
thousands):

13.5%
SENIOR
SUBORDINATED SENIOR
NOTES NOTES DEBENTURES TOTAL
------------ --------- ---------- ----------

EXTRAORDINARY LOSSES
Recapitalization............................. $ -- $ -- $ 4,504 $ 4,504
Tax benefit.................................. -- -- (1,845) (1,845)
--------- --------- --------- ----------
Net extraordinary loss for the year ended
December 31, 2000.......................... $ -- $ -- $ 2,659 $ 2,659
========= ========= ========= ==========

IPO and debt offering ....................... $5,028 $ 12,190 $ -- $ 17,218
Tax benefit.................................. (2,061) (4,998) -- (7,059)
--------- --------- --------- ----------
Net extraordinary loss for the year ended
December 31, 2001.......................... $ 2,967 $ 7,192 $ -- $ 10,159
========= ========= ========= ==========

SENIOR TERM A, SENIOR TERM B AND REVOLVING CREDIT FACILITY

As part of the Recapitalization, Vicar entered into a Credit and Guaranty
Agreement with various lenders for $300.0 million of Senior Secured Credit
Facilities (the "Credit Agreement"), with Goldman Sachs Credit Partners, L.P. as
the syndication agent, and Wells Fargo Bank, N.A. as the administrative agent.
The Credit Agreement includes a Revolving Credit Facility as well as the Senior
Term A and B Notes. The Revolving Credit Facility allows the Company to borrow
up to an aggregate principal amount of $50.0 million and may be used to borrow,
on a same-day notice under a "swing line," the lesser of (1) $5.0 million or (2)
the aggregate unused amount of the Revolving Credit Facility then in effect. As
of December 31, 2001, the Company has not utilized the Revolving Credit
Facility.

INTEREST RATE. In general, borrowings under the Credit Agreement bear
interest, at the Company's option, on either:

o The base rate (as defined below) plus a margin, as defined in the
Credit Agreement based on the Company's leverage ratio, ranging from
1.00% to 2.25% per annum for the Senior Term A Notes and the Revolving
Credit Facility and a margin of 2.75% per annum for the Senior Term B
Notes; or

o The adjusted eurodollar rate (as defined below) plus a margin, as
defined in the Credit Agreement based on the Company's leverage ratio,
ranging from 2.00% to 3.25% per annum for the Senior Term A Notes and
the Revolving Credit Facility and a margin of 3.75% per annum for the
Senior Term B Notes.

The base rate is the higher of Wells Fargo's prime rate or the Federal
funds rate plus 0.5%. The adjusted eurodollar rate is defined as the rate per
annum obtained by dividing (1) the rate of interest offered to Wells Fargo on
the London interbank market by (2) a percentage equal to 100% minus the stated
maximum rate of all reserve requirements applicable to any member bank of the
Federal Reserve System in respect of "eurocurrency liabilities."

Swing line borrowings bear interest at the base rate, plus a margin ranging
from 1.00% to 2.25%, as defined in the Credit Agreement.

MATURITY AND PRINCIPAL PAYMENTS. The Senior Term A Notes and Revolving
Credit Facility mature on September 20, 2006. The Senior Term B Notes matures on
September 20, 2008. Principal payments on the Revolving Credit Notes are made at
the Company's discretion with the entire unpaid amount due at maturity. From the
proceeds of the IPO and debt offering, the Company repaid $100.0 million of the
Senior Term A and B Notes.

Page F-23

The remaining principal payments on the Senior Term A and B Notes are paid
quarterly with the annual aggregate scheduled maturities as follows (in
thousands):

2002 2003 2004 2005 2006 2007 2008 TOTAL
------- ------- ------- ------- -------- -------- -------- --------

Senior Term A..... $ 3,173 $ 3,680 $ 4,442 $ 6,345 $ 6,472 $ - $ - $ 24,112
Senior Term B..... $ 1,540 $ 1,540 $ 1,540 $ 1,540 $ 15,396 $ 56,963 $ 42,723 $121,242

Starting December 31, 2002, as defined in the Credit Agreement, mandatory
prepayments are due on the Senior Term A and B Notes if the Company's cash and
cash equivalents exceed a defined amount. These payments are applied on a pro
rata basis. All outstanding indebtedness under the Credit Agreement may be
voluntarily prepaid in whole or in part without premium or penalty.

GUARANTEES AND SECURITY. VCA and each of its wholly owned subsidiaries
guarantee the outstanding debt under the Credit Agreement. These borrowings,
along with the guarantees of the subsidiaries, are further secured by
substantially all of the Company's consolidated assets. In addition, these
borrowings are secured by a pledge of substantially all of the capital stock, or
similar equity interests, of the Company's wholly owned subsidiaries.

DEBT COVENANTS. The Credit Agreement contains certain financial covenants
pertaining to interest coverage, fixed charge coverage and leverage ratios. In
addition, the Credit Agreement has restrictions pertaining to capital
expenditures, acquisitions and the payment of dividends on all classes of stock.
Management of the Company believes the most restrictive covenant is the fixed
charge coverage ratio. During 2001, the Company had a fixed charge coverage
ratio of 1.64 to 1.00. The Credit Agreement required a fixed charge coverage
ratio of no less than 1.10 to 1.00 during 2001 and requires a fixed charge
coverage ratio of no less than 1.10 to 1.00 in future years.

13.5% SENIOR SUBORDINATED NOTES

As part of the Recapitalization, Vicar issued $20.0 million principal
amount of senior subordinated notes due 2010 pursuant to an indenture dated
September 20, 2000 with Chase Manhattan Bank and Trust Company, N.A., as
trustee.

INTEREST RATE AND DISCOUNTS. Interest on the senior subordinated notes is
payable in cash, semi-annually in arrears at the rate of 13.5% per annum;
provided, however, that if the Company fails to meet specified obligations to
holders of the senior subordinated notes, as set forth in an exchange and
registration rights agreement dated as of September 20, 2000, interest on the
senior subordinated notes may increase by up to 1% per annum.

The notes have an effective interest rate of 16.2% and are reported net of
a discount of $1.8 million as of December 31, 2001.

GUARANTEE. The senior subordinated notes are general, unsecured and
subordinated obligations, and are guaranteed by the Company's wholly owned
subsidiaries.

MATURITY AND PRINCIPAL PAYMENTS. The senior subordinated notes are due
September 20, 2010. As part of the IPO and debt offering, the Company repaid
$5.0 million of the senior subordinated notes leaving an outstanding principal
balance of $15.0 million at December 31, 2001.

9.875% SENIOR SUBORDINATED NOTES

Concurrent with the consummation of the IPO Vicar issued $170.0 million of
senior subordinated notes due 2009 with Chase Manhattan Bank and Trust Company,
N.A., as trustee. The Company filed a registration statement with the Securities
and Exchange Commission for an exchange offer in which these notes were
exchanged on June 13, 2002 for substantially similar securities that are
registered under the Securities Act.

Page F-24

INTEREST RATE. Interest is payable semi-annually in arrears on June 1 and
December 1, commencing on June 1, 2002. Interest is computed on the basis of a
360-day year comprised of twelve 30-day months at the rate of 9.875% per annum.

GUARANTEE. The notes are general, unsecured obligations of the Company.
They are subordinated in right of payment to all existing and future debt
incurred under the Credit Agreement and are equal in right of payment to Vicar's
other senior subordinated notes. They are unconditionally guaranteed on a senior
subordinated basis by VCA, Vicar and its wholly owned subsidiaries.

MATURITY. The notes will mature on December 1, 2009.

SENIOR NOTES

As part of the Recapitalization, VCA issued $100.0 million principal amount
of senior notes due 2010 pursuant to an indenture dated September 20, 2000 with
Chase Manhattan Bank and Trust Company, N.A., as trustee.

INTEREST RATE AND DISCOUNTS. Interest on the senior notes is payable
semi-annually in arrears, at the rate of 15.5% per annum; provided that on any
semi-annual interest payment date prior to September 20, 2005, the Company has
the option to pay all or any portion of the interest payable on said date by
issuing additional senior notes in a principal amount equal to the interest; and
further provided, however, that if the Company fails to meet specified
obligations to holders of the senior notes as set forth in a registration rights
agreement dated as of September 20, 2000, interest on the senior notes may
increase by up to 1% per annum. The Company has issued an aggregate of $16.6
million in additional senior notes to pay interest since the issue date.

The notes have an effective interest rate of 16.8% and are reported net of
a discount of $5.4 million.

GUARANTEE. The senior notes are general, unsecured and unsubordinated
obligations that are not guaranteed by Vicar and its wholly owned subsidiaries,
nor is Vicar and its wholly owned subsidiaries an obligor of these notes.

MATURITY AND PRINCIPAL PAYMENTS. As part of the IPO and debt offering, the
Company repaid $59.1 million of the senior notes. As discussed above, the
Company is issuing additional notes to pay interest. This first principal
payment on the aggregate balance is a balloon payment due September 20, 2005 of
approximately $51.2 million and the remaining principal is due September 20,
2010.

FAIR VALUE OF THE COMPANY'S DEBT

The following disclosure of the estimated fair value of the Company's debt
at December 31, 2001 is made in accordance with the requirements of Statement of
Financial Accounting Standards No. 107, DISCLOSURES ABOUT FAIR VALUE OF
FINANCIAL INSTRUMENTS. The Company used available market information and
appropriate valuation methodologies to determine the estimated fair value
amounts. Considerable judgment is required to develop the estimates of fair
value, and the estimates provided herein are not necessarily indicative of the
amounts that could be realized in a current market exchange.

(IN THOUSANDS)
CARRYING
AMOUNT FAIR VALUE
--------- ----------
Fixed-rate long-term debt............... $ 246,077 $ 250,510
Variable-rate long-term debt............ 145,354 145,354

The estimated fair value of the Company's fixed-rate long-term debt is
based on market value or LIBOR plus an estimated spread at December 31, 2001 for
similar securities with similar remaining maturities. The carrying value of
variable-rate long-term debt is a reasonable estimate of its fair value.

Page F-25

7. REDEEMABLE PREFERRED STOCKS

In 2000, the Company adopted an Amended and Restated Certificate of
Incorporation, which authorized the issuance of up to 6,000,000 shares of
preferred stock. In connection with the Recapitalization, the Company issued
2,998,408 shares of Series A Senior Redeemable Exchangeable Cumulative Preferred
Stock ("Series A Preferred Stock"), par value $0.01 per share, and 2,970,822
shares of Series B Junior Redeemable Cumulative Preferred Stock ("Series B
Preferred Stock"), par value $0.01 per share. In exchange for the issuance of
the Series A Preferred Stock and Series B Preferred Stock, the Company received
$75.0 million and $74.2 million, respectively. The Series A and Series B
Preferred Stock earned dividends at the rate of 14% and 12% per annum of the
liquidation preference, respectively. The liquidation preference and redemption
value for both the Series A and Series B Preferred Stock was the sum of $25.00
per share plus accrued and unpaid dividends less any special dividend paid.
Holders of Series A and Series B Preferred Stock were entitled to receive
dividends, whether or not declared by the Board of Directors, out of funds
legally available. Dividends were payable in cash on a quarterly basis. If
dividends were not paid when due, the amount payable was added to the
liquidation preference and redemption value. For the years ended December 31,
2001 and 2000, dividends earned but not paid were $19.2 million and $5.4
million, respectively. These dividends were recorded as an increase to preferred
stock and a corresponding decrease to retained earnings.

On November 27, 2001, the Company completed an initial public offering and
in connection therewith redeemed all its outstanding Series A and Series B
Preferred Stock.

8. COMMON STOCK

In November 2001, the Company sold 16,000,000 shares of common stock at
$10.00 per share in connection with the IPO, which generated net proceeds of
approximately $148.7 million. In addition, during December 2001, the Company's
underwriters exercised their overallotment option to purchase an additional
1,370,000 shares of common stock at $10.00 per share, which generated net
proceeds of approximately $12.8 million.

In connection with the Recapitalization, the Company issued warrants to
certain investors to purchase 1,149,990 shares of the Company's common stock.
The warrants allowed the holders to purchase common shares at a price equal to
$0.0007 per share. The Company valued these warrants at their fair market value
on the date of issuance at $1.1 million, which was recorded as part of
stockholders' equity. In November 2001, the investors exercised their warrants
to purchase 1,149,871 shares of common stock. In lieu of paying cash to exercise
the warrants, the investors opted to cancel 119 of the previously outstanding
1,149,990 warrants.

In August 2001, certain employees exercised 691,875 of their options to
purchase shares of common stock granted in connection with the Recapitalization.

In 2000, the Company adopted an Amended and Restated Certificate of
Incorporation, which authorized the issuance of up to 24,000,000 common shares
with a par value of $0.01 per common share. The Company amended and restated the
Certificate of Incorporation in 2001 to authorize the issuance of up to
75,000,000 common shares and changed the par value to $0.001 per common share.
The Company had 36,736,081 and 17,524,335 common shares outstanding at December
31, 2001 and 2000, respectively.

In 2000, the Company's Board of Directors declared a fifteen-for-one stock
split. The stock split has been retroactively reflected in the accompanying
financial statements and footnotes.

During 2000 and prior to the Recapitalization, the Company repurchased
7,715,000 shares of its common stock for $3.3 million. These shares, along with
all other treasury shares held prior to 2000, were retired.

On September 20, 2000, in connection with the Recapitalization, the Company
repurchased and retired a majority of the outstanding common stock of the
Company. Certain members of senior management who held 2,656,335 shares before
the Recapitalization continued to hold those shares.

Page F-26

9. STOCK-BASED COMPENSATION PLANS

The Company has granted stock options to various employees. The Company
accounts for these plans under APB Opinion 25.

In November 1995, the FASB issued SFAS No. 123 "Accounting for Stock-Based
Compensation." SFAS No. 123 recommends changes in accounting for employee
stock-based compensation plans and requires certain disclosures with respect to
these plans. SFAS No. 123 disclosures were adopted by the Company effective
January 1, 1996.

The 1996 Stock Incentive Plan (the "1996 Plan") was amended August 6, 2001.
Under the amended plan, no additional incentive or nonqualified stock options
may be granted to directors, officers, key employees or consultants. In
September 2000, the Company issued 633,795 stock options under the 1996 Plan.
These options vest ratably over four years from the date of grant with an
exercise price of $1.00 and expire in 2010.

In August 2001, the Company's board of directors approved the 2001 Stock
Incentive Plan (the "2001 Plan") that provides for the granting of incentive or
nonqualified stock options to directors, officers, key employees or consultants
of the Company. The number of shares reserved and authorized for issuance under
the 2001 Plan is 2,000,000 shares. The terms of the stock options will be
established by the compensation committee of the Company's board of directors.

Had compensation cost for these plans been determined consistent with SFAS
123, the Company's net income (loss) and earnings (loss) per share would have
been reduced to the following pro forma amounts (in thousands, except per share
amounts):

2001 2000 1999
--------- ---------- --------

Net income (loss) available to common
stockholders:
As reported ............................. $(46,574) $ (13,802) $22,357
Pro forma................................ (46,606) (14,178) 19,214
Diluted earnings (loss) per share:
As reported ............................. $ (2.39) $ (0.06) $ 0.07
Pro forma................................ (2.39) (0.06) 0.06

The fair value of each option grant is estimated on the date of grant using
the minimum value option pricing model with the following weighted-average
assumptions:

2001 2000 1999
--------- ---------- --------

Risk free interest rate.................... 6.0% 6.0% 5.8%
Dividend yield ............................ 0.0% 0.0% 0.0%
Expected volatility ....................... 0.0% 0.0% 54.2%
Weighted average fair value ............... $ 0.25 $ 0.78 $ 7.97
Expected option life (years) .............. 5 5 7

In connection with the Recapitalization, certain of the Company's employees
elected to exchange their stock options for newly issued stock options. The
number of stock options issued to each employee was equal to the intrinsic value
of their old stock options divided by the strike price of the new stock options
($0.20). These stock options were accounted for as variable awards, and related
non-cash compensation of $555,000 was recorded in the year ended December 31,
2000. An additional charge for non-cash compensation of $7,611,000 was recorded
in the year ended December 31, 2001, as a result of the increase in the
estimated market value of the common stock. In August 2001, 691,875 of the new
options were exercised and 1,995 were cancelled, leaving none outstanding as of
December 31, 2001.

Page F-27

The table below summarizes the transactions in the Company's stock option
plans (in thousands, except per share amounts):

2001 2000 1999
--------- ---------- --------

Options outstanding at beginning of year....... 1,328 57,300 57,315
Exchanged in connection with Recapitalization.. -- 694 --
Granted ....................................... -- 634 2,490
Exercised ..................................... (692) (1,815) (750)
Purchased ..................................... -- (54,585) --
Canceled ...................................... (2) (900) (1,755)
--------- ---------- --------
Options outstanding at end of year
(exercise price of $1.00 as of
December 31, 2001)........................... 634 1,328 57,300
========= ========== ========
Exercisable at end of year................... 41 694 30,465
========= ========== ========

The following table summarizes information about the options in the 2001
Plan outstanding as of December 31, 2001 in accordance with SFAS No. 123 (in
thousands, except per share amounts):

OPTIONS OUTSTANDING OPTIONS EXERCISABLE
---------------------------------------------------- -----------------------
WEIGHTED AVG. WEIGHTED WEIGHTED
REMAINING AVG. AVG.
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
-------- ----------- ------------- --------- ----------- --------

$ 1.00 634 8.73 $1.00 41 $1.00

10. COMMITMENTS AND CONTINGENCIES

a. LEASES

The Company operates many of its animal hospitals from premises that are
leased from the hospitals' previous owners under operating leases with terms,
including renewal options, ranging from one to 35 years. Certain leases include
purchase options which can be exercised at the Company's discretion at various
times within the lease terms.

The annual lease payments under the lease agreements have provisions for
annual increases based on the Consumer Price Index or other amounts specified
within the lease contracts.

The future minimum lease payments on operating leases at December 31, 2001,
including renewal option periods, are as follows (in thousands):

2002 ............................................ $12,247
2003 ............................................ 12,530
2004 ............................................ 12,575
2005 ............................................ 12,285
2006 ............................................ 12,165
Thereafter ...................................... 130,810

Rent expense totaled $12.6 million, $11.7 million and $10.4 million for the
years ended December 31, 2001, 2000 and 1999, respectively. Rental income
totaled $176,000, $259,000 and $310,000 for the years ended December 31, 2001,
2000 and 1999, respectively.

b. EARN-OUT PAYMENTS

In connection with certain acquisitions, the Company assumed certain
contractual arrangements whereby additional cash may be paid to former owners of
acquired hospitals upon attainment of specified financial criteria over periods
of one to two years, as set forth in the respective agreements. The amount to be
paid cannot be determined until the earn-out periods expire and the attainment
of criteria is established. If the specified financial

Page F-28

criteria is attained in the next twelve months, the Company will be obligated to
make cash payments of approximately $802,000.

c. HOLDBACKS

In connection with certain acquisitions, the Company withheld a portion of
the purchase price (the "holdback"). The holdback is used to offset any cost the
Company may pay on behalf of the former owner for any liabilities the Company
did not assume at the time of acquisition. The amounts held accrue interest not
to exceed 7% per annum and are payable within a twelve-month period. The total
outstanding holdbacks at December 31, 2001 were approximately $1.6 million.

d. OFFICERS' COMPENSATION

Effective upon the closing of the Company's IPO, three members of the
Company's executive management amended and restated their employment agreements
with the Company. These members include the Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer. The Senior Vice President
retained his existing employment agreement. These agreements aggregate to $1.4
million in salary per year. The agreements allow for upward adjustments to
annual salary based on the Consumer Price Index for Los Angeles County. The
agreements also call for a maximum of $1.1 million to be paid as annual bonuses
based on annual performance goals to be set by the compensation committee of the
board of directors. The agreements also call for aggregate severance payments
under different scenarios with the maximum amount approximating $8.5 million.

e. STATE LAWS

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. The Company operates 54 animal hospitals in 11 states
with these laws. The Company may experience difficulty in expanding operations
into other states with similar laws. Given varying and uncertain interpretations
of the veterinary laws of each state, the Company may not be in compliance with
restrictions on the corporate practice of veterinary medicine in all states. A
determination that the Company is in violation of applicable restrictions on the
practice of veterinary medicine in any state in which it operates could have a
material adverse effect, particularly if the Company were unable to restructure
its operations to comply with the requirements of that state.

For example, the Company currently is a party to a lawsuit in the State of
Ohio in which that State has alleged that the management of a veterinary medical
group licensed to practice veterinary medicine in that state violates the Ohio
statute prohibiting business corporations from providing or holding themselves
out as providers of veterinary medical care. On March 20, 2001, the trial court
in the case entered summary judgment in favor of the State of Ohio and issued an
order enjoining the Company from operating in the State of Ohio in a manner that
is in violation of the state statute. In response, the Company has restructured
its operations in the State of Ohio in a manner believed to conform to the state
law and the court's order. The Attorney General of the State of Ohio informed
the Company that it disagrees with its position that the Company is in
compliance with the court's order. In June 2001, the Company appeared at a
status conference before the trial court at which time the court directed the
parties to meet together to attempt to settle this matter. Consistent with the
trial court's directive, the Company engaged in discussions with the Attorney
General's office in the State of Ohio. The parties appeared at an additional
status conference in February 2002. The parties were not able to reach a
settlement prior to the February status conference. At that status conference,
the court ordered the parties to participate in a court-supervised settlement
conference that was scheduled for March 19, 2002. The court postponed the
settlement conference and has not yet scheduled a new date. If a settlement
cannot be reached, the Company would be required to discontinue operations in
the state. The five animal hospitals in the State of Ohio have a book value of
$6.1 million as of December 31, 2001. If the Company was required to discontinue
operations in the State of Ohio, it might not be able to dispose of the hospital
assets for their book value. The animal hospitals located in the State of Ohio
generated revenue and operating income of $2.1 million and $409,000,
respectively, in the year ended December 31, 2001 and $2.2 million and $513,000,
respectively, in the year ended December 31, 2000.

Page F-29

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

f. OTHER CONTINGENCIES

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

11. CALCULATION OF PER SHARE AMOUNTS

A reconciliation of the income and shares used in the computations of the
basic and diluted earnings (loss) per share ("EPS") for the years ended December
31, 2001, 2000 and 1999 follows (amounts shown in thousands, except per share
amounts):

2001 2000 1999
---------- ---------- ----------

Income (loss) before extraordinary item........................... $ (17,264) $ (5,752) $ 22,357
Increase in carrying amount of Redeemable Preferred Stock..... (19,151) (5,391) --
Income (loss) before extraordinary item available to common
stockholders (basic and diluted)................................ $ (36,415) $ (11,143) $ 22,357
Weighted average common share outstanding:
Basic......................................................... 19,509 234,055 315,945
Effect of dilutive common share stock options............. -- -- 13,830
Diluted....................................................... 19,509 234,055 329,775
Earnings per share (before extraordinary items)
Basic......................................................... $ (1.87) $ (0.05) $ 0.07
Diluted....................................................... $ (1.87) $ (0.05) $ 0.07

On September 20, 2000, the Company paid $1.00 per share, for a total
payment of $314.5 million, to repurchase 310,836,000 shares of its outstanding
common stock in connection with the Recapitalization, of which approximately
$3.7 million was attributable to costs incurred in connection with the
repurchase of the Company's common stock. These per share and share amounts have
been adjusted to reflect a 15-for-1 stock split which took place after the
Recapitalization. Immediately after this repurchase, the Company issued 517,995
and 14,350,005 shares of common stock to its management and certain investors,
respectively, for $1.00 per share.

As of December 31, 2001, 633,795 stock options with an exercise price of
$1.00 were outstanding and at December 31, 2000, 1,327,670 stock options and
warrants to purchase an aggregate 1,149,990 common shares were outstanding.
These stock options and warrants were not included in the computation of Diluted
EPS because conversion would have had an antidilutive effect on Diluted EPS.

The $84.4 million of 5.25% convertible debentures which were convertible
into 36,849,345 shares of common stock were outstanding at December 31, 1999,
but were not included in the computation of Diluted EPS, because conversion
would have had an antidilutive effect on Diluted EPS. These convertible
debentures were retired in 2000.

Page F-30

12. INCOME TAXES

The provision (benefit) for income taxes is comprised of the following for
the three years ended December 31, (in thousands):

2001 2000 1999
--------- --------- ---------

Federal:
Current.............................. $ 803 $ (889) $ 10,161
Deferred ............................ (8,366) 1,219 515
--------- --------- ---------
(7,563) 330 10,676
--------- --------- ---------
State:
Current ............................. 2,090 (142) 2,850
Deferred ............................ (1,141) 166 834
--------- --------- ---------
949 24 3,684
--------- --------- ---------
$ (6,614) $ 354 $ 14,360
========= ========= =========

The consolidated statements of operations for the years ended December 31,
2001 and 2000 includes a provision for income taxes of $445,000 and $2.2 million
and a benefit for income taxes of $7.1 million and $1.8 million, respectively,
associated with the early extinguishment of debt. The net benefit of
approximately $6.6 million and $354,000, respectively, is reflected in the table
above.

The Company accounts for income taxes under the provisions of SFAS No. 109,
"ACCOUNTING FOR INCOME TAXES." SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future consequences of events that have
been included in the financial statements or tax returns. Under this method,
deferred tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities using
enacted tax rates for the year in which the differences are expected to reverse.

The net deferred tax asset (liability) at December 31 is comprised of (in
thousands):

2001 2000
--------- ---------

Current deferred tax assets (liabilities):
Accounts receivable .................................. $ 2,048 $ 1,273
State taxes .......................................... (710) (903)
Other liabilities and reserves ....................... 5,438 3,696
Start-up costs ....................................... 66 66
Other assets ......................................... (295) (294)
Inventory ............................................ 817 817
--------- ---------
Total current deferred tax asset, net .......... $ 7,364 $ 4,655
========= =========

2001 2000
--------- ---------
Non-current deferred tax (liabilities) assets:
Net operating loss carryforwards ..................... $ 12,233 $ 6,460
Write-down of assets ................................. 2,012 1,377
Start-up costs ....................................... 302 302
Other assets ......................................... 6,429 3,537
Intangible assets .................................... (15,735) (11,934)
Property and equipment ............................... (1,642) (1,720)
Unrealized loss on investments ....................... 2,588 2,555
Valuation allowance .................................. (7,871) (9,061)
--------- ---------
Total non-current deferred tax liability, net... $ (1,684) $ (8,484)
========= =========

Under the Tax Reform Act of 1986, the utilization of Federal net operating
loss ("NOL") carryforwards to reduce taxable income will be restricted under
certain circumstances. Events that cause such a limitation include, but are not
limited to, a cumulative ownership change of more than 50% over a three-year
period. Management believes that past mergers caused such a change of ownership
and, accordingly, utilization of the NOL carryforwards may be limited in future
years. Accordingly, the valuation allowance is principally related to

Page F-31

subsidiaries' NOL carryforwards as well as certain acquisition related
expenditures where the realization of this deduction is uncertain at this time.

At December 31, 2001, the Company had NOL carryforwards of approximately
$29.2 million, comprised of NOL carryforwards acquired in the past. Also
included in this amount is approximately $13.6 million of losses generated in
the current year which can be utilized with no cumulative ownership change
limitations. These NOL's expire at various dates through 2015.

On October 25, 1999, the FASB's Emerging Issues Task Force ("EITF") reached
consensus in Issue 99-15, "Accounting for Decreases in Deferred Tax Asset
Valuation Allowances Established in a Purchase Business Combination as a Result
of a Change in Tax Regulation" ("Issue No. 99-15"). Issue No. 99-15 is the
EITF's response to the Internal Revenue Services's June 25, 1999 ruling, as
stated in Treasury Regulation 1.1502-21, reducing the requirements for using
certain net operating loss carryovers and carrybacks ("NOLs"). As a result, the
Company recorded a deferred tax benefit during the year ended December 31, 1999
equal to $2.1 million.

A reconciliation of the provision (benefit) for income taxes to the amount
computed at the Federal statutory rate for the three years ended December 31, is
as follows:

2001 2000 1999
------ ------ ------

Federal income tax at statutory rate ............ (35)% (35)% 35%
Effect of amortization of goodwill .............. 4 18 4
State taxes, net of Federal benefit ............. (3) (2) 7
Tax exempt income ............................... -- (1) (1)
Write-down of zero tax basis assets ............. 7 -- --
Non-cash compensation charges ................... 8 -- --
Valuation allowance ............................. (2) 24 (6)
------ ------ ------
(21)% 4% 39%
====== ====== ======

13. 401(K) PLAN

During 1992, the Company established a voluntary retirement plan under
Section 401(k) of the Internal Revenue Code. The plan covers all employees with
at least six months of employment with the Company and provides for annual
matching contributions by the Company at the discretion of the Company's board
of directors. In 2001, 2000 and 1999, the Company provided a total matching
contribution approximating $1.1 million, $715,000 and $353,000, respectively.

14. LINES OF BUSINESS

During the three years ending December 31, 2001, the Company had three
reportable segments: Laboratory, Animal Hospital and Corporate. These segments
are strategic business units that have different products, services and
functions. The segments are managed separately because each is a distinct and
different business venture with unique challenges, rewards and risks. The Animal
Hospital segment provides veterinary services for companion animals and sells
related retail products. The Laboratory segment provides testing services for
veterinarians both associated with the Company and independent of the Company.
Corporate provides selling, general and administrative support for the other
segments and recognizes revenue associated with consulting agreements.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. The Company evaluates
performance of segments based on profit or loss before income taxes, interest
income, interest expense and minority interest, which are evaluated on a
consolidated level. For purposes of reviewing the operating performance of the
segments, all intercompany sales and purchases are accounted for as if they were
transactions with independent third parties at current market prices.

Page F-32

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

INTERCOMPANY
ANIMAL SALES
LABORATORY HOSPITAL CORPORATE ELIMINATIONS TOTAL
---------- -------- ---------- ------------ ----------

2001
Revenue ......................... $134,711 $272,113 $ 2,000 $(7,462) $ 401,362
Operating income (loss) ......... 36,624 36,607 (45,525) -- 27,706
Depreciation/amortization
expense........................ 4,657 14,491 6,018 -- 25,166
Identifiable assets ............. 110,466 322,657 35,398 -- 468,521
Capital expenditures ............ 1,944 9,075 2,462 -- 13,481

2000
Revenue ......................... $119,300 $240,624 $ 925 $(6,162) $ 354,687
Operating income (loss) ......... 34,044 30,630 (45,469) -- 19,205
Recapitalization costs .......... -- -- 34,268 -- 34,268
Depreciation/amortization
expense........................ 4,472 12,167 2,239 -- 18,878
Identifiable assets ............. 109,453 312,473 61,144 -- 483,070
Capital expenditures ............ 2,194 18,751 1,610 -- 22,555

1999
Revenue ......................... $103,282 $217,988 $ 5,100 $(5,810) $ 320,560
Operating income (loss) ......... 28,039 26,765 (7,788) -- 47,016
Year 2000 remediation costs ..... -- -- 2,839 -- 2,839
Reversal of restructuring
charges........................ -- -- 1,873 -- 1,873
Depreciation/amortization
expense ......................... 4,234 10,472 1,757 -- 16,463
Identifiable assets ............. 105,224 280,742 40,534 -- 426,500
Capital expenditures ............ 1,997 15,970 3,836 -- 21,803

Corporate operating loss includes salaries, general and administrative
expense for the executive, finance, accounting, human resources, marketing,
purchasing and regional operational management functions that support the
Laboratory and Animal Hospital segments.

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

2001 2000 1999
--------- --------- ---------

Total segment operating income after eliminations ......... $ 27,706 $ 19,205 $ 47,016
Interest income ........................................... 669 850 1,194
Interest expense .......................................... (43,587) (20,742) (10,643)
Minority interest in income of subsidiaries ............... (1,439) (1,066) (850)
Gain on sale of VPI........................................ -- 3,200 --
Loss on investment in Zoasis .............................. -- (5,000) --
Other ..................................................... (168) -- --
--------- --------- ---------
Income (loss) before provision for income taxes and
extraordinary items...................................... $(16,819) $ (3,553) $ 36,717
========= ========= =========

15. CONDENSED CONSOLIDATING INFORMATION

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

Page F-33

to do so. Vicar conducts all of its business through and derives virtually all
of its income from its subsidiaries. Therefore, Vicar's ability to make required
payments with respect to its indebtedness (including the 9.875% senior
subordinated notes) and other obligations depends on the financial results and
condition of its subsidiaries and its ability to receive funds from its
subsidiaries.

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

Page F-34

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF DECEMBER 31, 2001
(IN THOUSANDS)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
-------- --------- ------------ ------------ ----------- ------------

Current assets:
Cash and equivalents........... $ -- $ 3,467 $ 3,260 $ 376 $ -- $ 7,103
Trade accounts receivable, net. -- -- 17,702 334 -- 18,036
Inventory...................... -- -- 4,111 390 -- 4,501
Prepaid expenses and other..... -- 1,165 1,049 164 -- 2,378
Deferred income taxes ......... -- 7,364 -- -- -- 7,364
Prepaid income taxes........... -- 2,782 -- -- -- 2,782
-------- -------- -------- -------- ---------- --------
Total current assets........ -- 14,778 26,122 1,264 -- 42,164
Property and equipment, net....... -- 8,421 78,225 2,598 -- 89,244
Other assets:
Goodwill, net.................. -- -- 298,198 19,064 -- 317,262
Covenants not to compete, net.. -- -- 4,211 616 -- 4,827
Notes receivable, net.......... 320 498 1,017 837 -- 2,672
Deferred financing costs, net.. 780 10,600 -- -- -- 11,380
Other.......................... -- -- 969 3 -- 972
Investment in subsidiaries........ 123,842 179,391 19,920 -- (323,153) --
-------- -------- -------- -------- ---------- --------
Total assets................... $124,942 $213,688 $428,662 $ 24,382 $(323,153) $468,521
======== ======== ======== ======== ========== ========
Current liabilities:
Current portion of long-term
obligations.................. $ -- $ 4,766 $ 389 $ 4 $ -- $ 5,159
Accounts payable............... -- 5,223 2,074 16 -- 7,313
Accrued payroll and related
liabilities.................. -- 5,019 6,440 258 -- 11,717
Other accrued liabilities...... -- 15,627 2,968 10 -- 18,605
-------- -------- -------- -------- ---------- --------
Total current liabilities... -- 30,635 11,871 288 -- 42,794
Long-term obligations, less
current portion................. 54,345 324,152 672 4 -- 379,173
Deferred income taxes............. -- 1,684 -- -- -- 1,684
Minority interest................. -- -- -- -- 5,106 5,106
Intercompany payable (receivable). 30,833 (266,625) 236,728 (936) -- --
Stockholders' equity:
Common stock................... 37 -- -- -- -- 37
Additional paid-in capital..... 188,840 -- -- -- -- 188,840
Retained earnings
(accumulated deficit)........ (146,594) 125,697 179,391 25,026 (330,114) (146,594)
Accumulated comprehensive loss. (1,855) (1,855) -- -- 1,855 (1,855)
Notes receivable from
stockholders.................. (664) -- -- -- -- (664)
-------- -------- -------- -------- ---------- --------
Total stockholders' equity.. 39,764 123,842 179,391 25,026 (328,259) 39,764
-------- -------- -------- -------- ---------- --------
Total liabilities and
stockholders' equity...... $124,942 $213,688 $ 428,662 $ 24,382 $(323,153) $468,521
======== ======== ======== ======== ========== ========

Page F-35

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING BALANCE SHEETS

AS OF DECEMBER 31, 2000
(IN THOUSANDS)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
--------- --------- ------------ ------------ ----------- ------------

Current assets:
Cash and equivalents.......... $ - $ 8,165 $ 2,073 $ 281 $ - $ 10,519
Trade accounts receivable, net - - 15,095 355 - 15,450
Inventory..................... - - 5,333 440 - 5,773
Prepaid expenses and other.... 9 1,896 1,396 123 - 3,424
Deferred income taxes ........ - 4,655 - - - 4,655
Prepaid income taxes.......... - 9,402 - - - 9,402
--------- --------- --------- --------- ---------- ----------
Total current assets....... 9 24,118 23,897 1,199 - 49,223
Property and equipment, net...... - 8,678 74,801 3,493 - 86,972
Other assets:
Goodwill, net................. - - 296,585 13,600 - 310,185
Covenants not to compete, net. - 14,348 4,780 421 - 19,549
Notes receivable, net......... - 605 828 745 - 2,178
Deferred financing costs, net. 1,722 11,651 - - - 13,373
Other......................... - 13 1,577 - - 1,590
Investment in subsidiaries....... 135,719 140,672 16,272 - (292,663) -
--------- --------- --------- --------- ---------- ----------
Total assets.................. $137,450 $ 200,085 $ 418,740 $ 19,458 $(292,663) $ 483,070
========= ========= ========= ========= ========== ==========
Current liabilities:
Current portion of long-term
obligations................. $ - $ 5,674 68 14 - 5,756
Accounts payable.............. - 6,634 1,759 - - 8,393
Accrued payroll and related
liabilities................. - 3,032 5,098 205 - 8,335
Other accrued liabilities..... - 14,229 2,451 7 - 16,687
--------- --------- --------- --------- ---------- ----------
Total current liabilities.. - 29,569 9,376 226 - 39,171
Long-term obligations, less
current portion................ 93,549 262,232 1,212 - - 356,993
Deferred income taxes............ - 8,484 - - - 8,484
Other liabilities................ - 1,500 - - - 1,500
Minority interest................ - - - - 3,610 3,610
Intercompany payable (receivable) (29,411) (237,419) 267,480 (650) - -
Series A Redeemable Preferred
Stock, at redemption value..... 77,875 - - - - 77,875
Series B Redeemable Preferred
Stock, at redemption value..... 76,747 - - - - 76,747
Stockholders' equity (deficit):
Common stock.................. 175 - - - - 175
Additional paid-in capital.... 19,053 - - - - 19,053
Retained earnings
(accumulated deficit)....... (100,020) 135,719 140,672 19,882 (296,273) (100,020)
Notes receivable from
stockholders................ (518) - - - - (518)
--------- --------- --------- --------- ---------- ----------
Total stockholders' equity
(deficit)................ (81,310) 135,719 140,672 19,882 (296,273) (81,310)
--------- --------- --------- --------- ---------- ----------
Total liabilities and
stockholders' equity
(deficit).............. $137,450 $ 200,085 $ 418,740 $ 19,458 $(292,663) $ 483,070
========= ========= ========= ========= ========== ==========

Page F-36

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2001
(IN THOUSANDS)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- ---------- ------------ ------------ ----------- ------------

Revenue............................... $ -- $ 2,000 $ 370,549 $ 29,464 $ (651) $401,362
Direct costs.......................... -- -- 262,386 21,491 (651) 283,226
---------- ---------- ---------- ---------- ---------- ---------
-- 2,000 108,163 7,973 -- 118,136
Selling, general and administrative... -- 14,876 22,648 1,109 -- 38,633
Depreciation and amortization ........ -- 6,018 18,100 1,048 -- 25,166
Agreement termination costs........... -- 17,552 -- -- -- 17,552
Write-down and loss on sale of assets. -- 9,079 -- -- -- 9,079
---------- ---------- ---------- ---------- ---------- ---------
Operating income (loss)............. -- (45,525) 67,415 5,816 -- 27,706
Net interest expense ................. 16,142 26,687 (3) 92 -- 42,918
Other expense, net.................... -- 168 -- -- -- 168
Equity interest in income of
subsidiaries........................ (10,022) 38,719 4,285 -- (32,982) --
---------- ---------- ---------- ---------- ---------- ---------
Income (loss) before minority
interest, provision for income
taxes and extraordinary item.... (26,164) (33,661) 71,703 5,724 (32,982) (15,380)
Minority interest in income of
subsidiaries ....................... -- -- -- -- 1,439 1,439
---------- ---------- ---------- ---------- ---------- ---------
Income (loss) before provision
for income taxes and
extraordinary item.............. (26,164) (33,661) 71,703 5,724 (34,421) (16,819)
Provision (benefit) for income taxes.. (5,933) (26,606) 32,984 -- -- 445
---------- ---------- ---------- ---------- ---------- ---------
Income (loss) before
extraordinary item.............. (20,231) (7,055) 38,719 5,724 (34,421) (17,264)
Extraordinary loss on extinguishment
of debt, net of tax................. 7,192 2,967 -- -- -- 10,159
---------- ---------- ---------- ---------- ---------- ---------
Net income (loss)................. $ (27,423) $ (10,022) $ 38,719 $ 5,724 $ (34,421) $(27,423)
========== ========== ========== ========== ========== =========

Page F-37

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2000
(in thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ----------- ------------ ------------- ----------- -----------

Revenue............................... $ 425 $ 500 $ 333,233 $ 20,980 $ (451) $ 354,687
Direct costs.......................... -- -- 239,642 15,699 (451) 254,890
----------- ----------- ------------- ------------- ----------- -----------
425 500 93,591 5,281 -- 99,797
Selling, general and administrative... 7,660 2,227 16,814 745 -- 27,446
Depreciation and amortization......... 697 1,542 15,833 806 -- 18,878
Recapitalization costs................ 34,268 -- -- -- -- 34,268
----------- ----------- ------------- ------------- ----------- -----------
Operating income (loss)............. (42,200) (3,269) 60,944 3,730 -- 19,205
Net interest expense.................. 9,438 6,728 3,836 (110) -- 19,892
Other expense, net.................... (3,200) 5,000 -- -- -- 1,800
Equity interest in income of
subsidiaries........................ 20,641 6,742 2,774 -- (30,157) --
----------- ----------- ------------- ------------- ----------- -----------
Income (loss) before minority
interest, provision for income
taxes and extraordinary item.... (27,797) (8,255) 59,882 3,840 (30,157) (2,487)
Minority interest in income of
subsidiaries........................ -- -- -- -- 1,066 1,066
----------- ----------- ------------- ------------- ----------- -----------
Income (loss) before provision
for income taxes and
extraordinary item.............. (27,797) (8,255) 59,882 3,840 (31,223) (3,553)
Provision for income taxes............ (22,045) (3,302) 27,546 -- -- 2,199
----------- ----------- ------------- ------------- ----------- -----------
Income (loss) before
extraordinary item.............. (5,752) (4,953) 32,336 3,840 (31,223) (5,752)
Extraordinary loss on
extinguishment of debt, net of tax.. 2,659 -- -- -- -- 2,659
----------- ----------- ------------- ------------- ----------- -----------
Net income (loss)................. $ (8,411) $ (4,953) $ 32,336 $ 3,840 $ (31,223) $ (8,411)
=========== =========== ============= ============= =========== ===========

Page F-38

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Year Ended December 31, 1999
(in thousands)

NON-
GUARANTOR GUARANTOR
VCA SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ------------ ------------ ----------- ------------

Revenue................................. $ 5,100 $ 298,394 $ 17,489 $ (423) $ 320,560
Direct costs............................ -- 219,584 13,332 (423) 232,493
----------- ------------ ------------ ---------- ----------
5,100 78,810 4,157 -- 88,067
Selling, general and administrative..... 10,165 12,843 614 -- 23,622
Depreciation and amortization........... 1,757 14,069 637 -- 16,463
Year 2000 remediation expense........... 2,839 -- -- -- 2,839
Reversal of restructuring charges....... (1,873) -- -- -- (1,873)
----------- ------------ ------------ ---------- ----------
Operating income (loss)............... (7,788) 51,898 2,906 -- 47,016
Net interest expense.................... 4,983 4,566 (100) -- 9,449
Equity interest in income of
subsidiaries.......................... 26,724 2,156 -- (28,880) --
----------- ------------ ------------ ---------- ----------
Income before minority interest
and provision for income taxes...... 13,953 49,488 3,006 (28,880) 37,567
Minority interest in income of
Subsidiaries.......................... -- -- -- 850 850
----------- ------------ ------------ ---------- ----------
Income before provision for
income taxes........................ 13,953 49,488 3,006 (29,730) 36,717
Provision for income taxes.............. (8,404) 22,764 -- -- 14,360
----------- ------------ ------------ ---------- ----------
Net income............................ $ 22,357 $ 26,724 $ 3,006 $ (29,730) $ 22,357
=========== ============ ============ ========== ==========

Page F-39

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2001
(in thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ---------- ------------- ------------- ----------- -----------

Cash from operating activities:
Net income (loss)..................... $ (27,423) $ (10,022) $ 38,719 $ 5,724 $(34,421) $ (27,423)
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Equity interest in earnings of
subsidiaries...................... 10,022 (38,719) (4,285) -- 32,982 --
Depreciation and amortization....... -- 6,018 18,100 1,048 -- 25,166
Amortization of debt discount
and deferred financing costs...... 1,598 555 -- -- -- 2,153
Provision for uncollectible
accounts.......................... -- -- 3,649 324 -- 3,973
Extraordinary loss on early
extinguishment of debt............ 12,190 5,028 -- -- -- 17,218
Non-cash compensation............... -- 771 6,840 -- -- 7,611
Interest paid in kind on senior
subordinated notes................ 14,528 -- -- -- -- 14,528
Agreement termination costs......... -- 9,552 -- -- -- 9,552
Write-down on sale of assets........ -- 8,531 -- -- -- 8,531
Loss on sale of assets.............. -- 548 -- -- -- 548
Minority interest in income of
subsidiaries...................... -- -- -- -- 1,439 1,439
Distributions to minority
interest partners................. -- (1,635) -- -- -- (1,635)
Increase in accounts receivable,
net............................... -- -- (6,083) (303) -- (6,386)
Decrease in inventory, prepaid
expenses and other assets......... 9 744 1,586 9 -- 2,348
Increase (decrease) in accounts
payable and accrued liabilities... -- 6,707 (4,817) 69 -- 1,959
Decrease in prepaid income taxes.... -- 7,031 -- -- -- 7,031
Increase (decrease) in intercompany
payable (receivable).............. (10,924) 68,402 (50,702) (6,776) -- --
Increase in deferred taxes, net..... -- (9,509) -- -- -- (9,509)
---------- ---------- ---------- --------- --------- ----------
Net cash provided by operating
activities............................... -- 54,002 3,007 95 -- 57,104
---------- ---------- ---------- --------- --------- ----------
Cash flows from investing activities:
Business acquisitions, net of
cash acquired..................... -- (24,306) -- -- -- (24,306)
Property and equipment
additions, net.................... -- (12,212) (1,944) -- -- (14,156)
Proceeds from sale of assets........ -- 1,705 -- -- -- 1,705
Other............................... -- 430 125 -- -- 555
---------- ---------- ---------- --------- --------- ----------
Net cash used in investing
activities...................... -- (34,383) (1,819) -- -- (36,202)
---------- ---------- ---------- --------- --------- ----------
Cash flows from financing activities:
Repayment of long-term obligations
including prepayment of penalties.. (66,578) (108,952) -- -- -- (175,530)
Proceeds from issuance of
long-term debt.................... -- 170,000 -- -- -- 170,000
Intercompany transfer of debt
proceeds.......................... 78,863 (78,863) -- -- -- --
Payment of deferred financing costs. -- (4,366) -- -- -- (4,366)
Repayment of preferred stock........ (173,773) -- -- -- -- (173,773)
Proceeds from issuance of common
stock............................. 161,488 -- -- -- -- 161,488
Net payments related to
recapitalization.................. -- (2,137) -- -- -- (2,137)
---------- ---------- ---------- --------- --------- ----------
Net cash used in financing
activities...................... -- (24,318) -- -- -- (24,318)
---------- ---------- ---------- --------- --------- ----------
Increase (decrease) in cash and
equivalents........................... -- (4,699) 1,188 95 -- (3,416)
Cash and equivalents at beginning of
year.................................. -- 8,165 2,073 281 -- 10,519
---------- ---------- ---------- --------- --------- ----------
Cash and equivalents at end of year...... $ -- $ 3,466 $ 3,261 $ 376 $ -- $ 7,103
========== ========== ========== ========= ========= ==========

Page F-40

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

For the Year Ended December 31, 2000
(in thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- ---------- ------------- ------------ ----------- -----------

Cash from operating activities:
Net income (loss).............................. $ (8,411) $ (4,953) $ 32,336 $ 3,840 $ (31,223) $ (8,411)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Equity interest in earnings of subsidiaries.. (20,641) (6,742) (2,774) -- 30,157 --
Depreciation and amortization................ 697 1,542 15,833 806 -- 18,878
Provision for uncollectable accounts......... -- -- 2,838 267 -- 3,105
Amortization of debt discount and deferred
financing costs............................ 315 521 -- -- -- 836
Extraordinary loss on early extinguishment
of debt.................................... 4,504 -- -- -- -- 4,504
Recapitalization costs....................... 34,268 -- -- -- -- 34,268
Non-cash compensation........................ -- 56 499 -- -- 555
Interest paid in kind on senior
subordinated notes......................... 4,306 -- -- -- -- 4,306
Gain on sale of investments in VPI........... (3,200) -- -- -- -- (3,200)
Loss recognized on investment in Zoasis...... -- 5,000 -- -- -- 5,000
Minority interest in income of subsidiaries.. -- -- -- -- 1,066 1,066
Distributions to minority interest partners.. (1,031) (369) -- -- -- (1,400)
Increase in accounts receivable.............. -- -- (3,088) (274) -- (3,362)
Decrease (increase) in inventory, prepaid
expense and other.......................... (2,409) 2,688 1,837 (110) -- 2,006
Increase (decrease) in accounts payable
and accrued liabilities.................... 6,396 2,892 (3,431) 75 -- 5,932
Increase in prepaid income taxes............. (2,662) (2,754) -- -- -- (5,416)
Increase (decrease) in intercompany
payable (receivable)....................... 18,156 28,649 (42,354) (4,451) -- --
Increase in deferred taxes, net.............. -- 1,387 -- -- -- 1,387
---------- ---------- ----------- ---------- ----------- -----------
Net cash provided by operating activities..... 30,288 27,917 1,696 153 -- 60,054
---------- ---------- ----------- ---------- ----------- -----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired.. (12,478) (5,705) -- -- -- (18,183)
Property and equipment additions, net........ (8,988) (13,173) (2,194) -- -- (24,355)
Investments in marketable securities......... (129,992) -- -- -- -- (129,992)
Proceeds from sales or maturities of
marketable securities...................... 135,666 -- -- -- -- 135,666
Payment for covenants not to compete......... (15,630) -- -- -- -- (15,630)
Net proceeds from sale of investment in VPI.. 8,200 -- -- -- -- 8,200
Investment in Zoasis......................... (5,000) -- -- -- -- (5,000)
Other........................................ 44 151 1,420 -- -- 1,615
---------- ---------- ----------- ---------- ----------- -----------
Net cash used in investing activities......... (28,178) (18,727) (774) -- -- (47,679)
---------- ---------- ----------- ---------- ----------- -----------
Cash flows from financing activities:
Repayment of long-term obligations........... (172,342) (512) -- -- -- (172,854)
Proceeds from the issuance of long-term
debt....................................... 356,670 -- -- -- -- 356,670
Payment of deferred financing costs.......... (13,958) -- -- -- -- (13,958)
Proceeds from issuance of common stock
under stock option plans................... 923 -- -- -- -- 923
Proceeds from issuance of preferred stock.... 149,231 -- -- -- -- 149,231
Proceeds from issuance of common stock....... 14,350 -- -- -- -- 14,350
Proceeds from issuance of warrants........... 1,149 -- -- -- -- 1,149
Repurchase of common stock................... (314,508) -- -- -- -- (314,508)
Purchase of treasury stock................... (3,323) -- -- -- -- (3,323)
Payments for recapitalization expense........ (29,643) (513) -- -- -- (30,156)
---------- ---------- ----------- ---------- ----------- -----------
Net cash used in financing activities......... (11,451) (1,025) -- -- -- (12,476)
---------- ---------- ----------- ---------- ----------- -----------
Increase (decrease) in cash and equivalents....... (9,341) 8,165 922 153 -- (101)
Cash and equivalents at beginning of year......... 9,341 -- 1,151 128 -- 10,620
---------- ---------- ----------- ---------- ----------- -----------
Cash and equivalents at end of year............... $ -- $ 8,165 $ 2,073 $ 281 $ -- $ 10,519
========== ========== =========== ========== =========== ===========

Page F-41

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Year Ended December 31, 1999
(in thousands)

NON-
GUARANTOR GUARANTOR
VCA SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ------------ ------------ ----------- ------------

Cash from operating activities:
Net income ...................................... $ 22,357 $ 26,724 $ 3,006 $(29,730) $ 22,357
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity interest in earnings of subsidiaries.... (26,724) (2,156) -- 28,880 --
Depreciation and amortization.................. 1,757 14,069 637 -- 16,463
Amortization of debt discount and deferred
financing costs.............................. 241 -- -- -- 241
Provision for uncollectible accounts........... -- 2,357 158 -- 2,515
Minority interest in income of subsidiaries.... -- -- -- 850 850
Distributions to minority interest partners.... (926) -- -- -- (926)
Increase in accounts receivable................ -- (5,215) (320) -- (5,535)
Increase in inventory, prepaid expense and
other........................................ (502) (238) (21) -- (761)
Increase (decrease) in accounts payable and
accrued liabilities.......................... 2,383 (3,752) (14) -- (1,383)
Decrease in prepaid income taxes............... 1,054 -- -- -- 1,054
Increase (decrease) in intercompany payable
(receivable)................................. 33,933 (30,522) (3,411) -- --
Increase in deferred taxes, net................ 3,592 -- -- -- 3,592
---------- ---------- --------- ---------- ----------
Net cash provided by operating activities....... 37,165 1,267 35 -- 38,467
---------- ---------- --------- ---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired.... (16,079) -- -- -- (16,079)
Real estate acquired in connection with
business acquisitions........................ (4,241) -- -- -- (4,241)
Property and equipment additions, net.......... (19,806) (1,997) -- -- (21,803)
Investments in marketable securities........... (58,258) -- -- -- (58,258)
Proceeds from sales or maturities of
marketable securities........................ 86,410 -- -- -- 86,410
Other.......................................... 104 191 -- -- 295
---------- ---------- --------- ---------- ----------
Net cash used in investing activities........... (11,870) (1,806) -- -- (13,676)
---------- ---------- --------- ---------- ----------
Cash flows from financing activities:
Repayment of long-term obligations............. (18,922) -- -- -- (18,922)
Proceeds from issuance of common stock under
stock option plans........................... 535 -- -- -- 535
Purchase of treasury shares.................... (4,761) -- -- -- (4,761)
---------- ---------- --------- ---------- ----------
Net cash used in financing activities........... (23,148) -- -- -- (23,148)
---------- ---------- --------- ---------- ----------
Increase (decrease) in cash and equivalents......... 2,147 (539) 35 -- 1,643
Cash and equivalents at beginning of year........... 7,194 1,690 93 -- 8,977
---------- ---------- --------- ---------- ----------
Cash and equivalents at end of year................. $ 9,341 $ 1,151 $ 128 $ -- $ 10,620
========== ========== ========= ========== ==========

Page F-42

16. SUBSEQUENT EVENTS

ACQUISITIONS

From January 1, 2002 through November 1, 2002, the Company acquired 19
animal hospitals and one laboratory for an aggregate consideration (including
acquisition costs) of $19.1 million, consisting of $17.5 million in cash, and
the assumption of liabilities totaling $1.6 million.

REFINANCING OF SENIOR CREDIT FACILITY

On August 29, 2002, the Company refinanced its senior credit facility by
borrowing $143.1 million in Senior Term C notes and used these proceeds to pay
the entire amount due under the Senior Term A and B notes. As a result of
repaying these notes, the Company recognized an extraordinary loss on early
extinguishment of debt in the third quarter of 2002 of $2.0 million, net of
income tax.

REPAYMENT OF 13.5% SENIOR SUBORDINATED AND 15.5% SENIOR NOTES

On October 24, 2002, the Company borrowed $25.0 million in additional
Senior Term C notes under the Credit and Guaranty Agreement. The proceeds from
this borrowing and $25.2 million of cash on-hand were used to voluntarily repay
the remaining principal balance of $15.0 million for the Company's 13.5% senior
subordinated notes and repay $30.0 million of its 15.5% senior notes. As a
result of repaying these notes, the Company will recognize an extraordinary loss
of approximately $5.5 million, net of income tax, during the fourth quarter of
2002.

SWAP AGREEMENT

On November 7, 2002 the Company entered into a no-fee swap agreement with
Wells Fargo Bank effective November 29, 2002 and expiring November 29, 2004. The
agreement swaps monthly variable LIBOR rates for a fixed rate of 2.22% on a
notional amount of $40.0 million. The agreement qualifies for hedge accounting.

Page F-43

VCA ANTECH, INC. AND SUBSIDIARIES

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)

BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES WRITE-OFFS OTHER (1) PERIOD
---------- ---------- ---------- --------- ----------

Year ended December 31, 2001
Allowance for uncollectible accounts
(2).................................... $ 4,173 $ 3,973 $ (3,016) $ 174 $ 5,304

Year ended December 31, 2000
Allowance for uncollectible accounts
(2).................................... $ 7,432 $ 3,105 $ (6,771) $ 407 $ 4,173

Year ended December 31, 1999
Allowance for uncollectible accounts
(2).................................... $ 6,532 $ 2,515 $ (2,252) $ 637 $ 7,432

(1) "Other" changes in the allowance for uncollectible accounts include
allowances acquired with animal hospitals and laboratory acquisitions.

(2) Balance includes allowance for trade accounts receivable and notes
receivable.

Page F-44

VCA ANTECH, INC. AND SUBSIDIARIES

CONDENSED, CONSOLIDATED BALANCE SHEETS

As of September 30, 2002 and December 31, 2001
(Unaudited)
(In thousands, except par value)

September 30, December 31,
2002 2001
------------- ------------

ASSETS
Current assets:
Cash and cash equivalents........................................... $ 32,358 $ 7,103
Trade accounts receivable, less allowance for uncollectible
accounts of $6,011 and $5,241 at September 30, 2002 and
December 31, 2001, respectively................................. 20,791 18,036
Inventory, prepaid expenses and other............................... 7,880 6,879
Deferred income taxes............................................... 9,682 7,364
Prepaid income taxes................................................ -- 2,782
---------- ----------
Total current assets......................................... 70,711 42,164
Property and equipment, net............................................... 93,604 89,244
Other assets:
Goodwill, net....................................................... 332,543 317,262
Covenants not to compete, net....................................... 4,522 4,827
Deferred financing costs, net....................................... 7,394 11,380
Other assets........................................................ 4,606 3,644
---------- ----------
Total assets................................................. $ 513,380 $ 468,521
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations............................ $ 1,793 $ 5,159
Accounts payable.................................................... 9,131 7,313
Accrued payroll and related liabilities............................. 14,509 11,717
Accrued interest.................................................... 5,659 2,254
Income taxes payable................................................ 2,035 --
Other accrued liabilities........................................... 13,195 16,351
---------- ----------
Total current liabilities.................................... 46,322 42,794
Long-term obligations, less current portion............................... 387,041 379,173
Deferred income taxes..................................................... 9,371 1,684
Minority interest......................................................... 5,732 5,106

Stockholders' equity:
Common stock, par value $0.001, 75,000 shares authorized,
36,761 and 36,736 shares outstanding as of September 30,
2002 and December 31, 2001, respectively........................ 37 37
Additional paid-in capital.......................................... 188,865 188,840
Accumulated deficit................................................. (123,429) (146,594)
Accumulated comprehensive loss--unrealized loss on
hedging instruments............................................. (319) (1,855)
Notes receivable from stockholders.................................. (240) (664)
---------- ----------
Total stockholders' equity................................... 64,914 39,764
---------- ----------
Total liabilities and stockholders' equity................... $ 513,380 $ 468,521
========== ==========

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

Page F-45

VCA ANTECH, INC. AND SUBSIDIARIES
CONDENSED, CONSOLIDATED STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
(In thousands, except per share)

Nine Months Ended
September 30,
2002 2001
------------ -----------

Revenue........................................................... $ 336,892 $ 305,365
Direct costs (excludes operating depreciation of $7,007 and
$6,183 for the nine months ended September 30, 2002
and 2001, respectively; includes non-cash compensation
of $1,412 for the nine months ended September 30, 2001)....... 226,749 213,454
----------- ----------
110,143 91,911
Selling, general and administrative expense (includes non-
cash compensation of $6,199 for nine months ended
September 30, 2001)........................................... 25,893 30,365
Depreciation and amortization..................................... 9,330 19,121
Write-down and (gain) loss on sale of assets...................... (80) 8,745
----------- ----------
Operating income.......................................... 75,000 33,680
Net interest expense.............................................. 30,541 32,387
Other (income) expense............................................ (159) 233
Minority interest in income of subsidiaries....................... 1,360 1,104
----------- ----------
Income (loss) before provision for income taxes and
extraordinary item........................................ 43,258 (44)
Provision for income taxes........................................ 18,092 6,741
----------- ----------
Income (loss) before extraordinary item........................ 25,166 (6,785)
Extraordinary loss on early extinguishment of debt (net
of income tax benefit of $1,390)............................... 2,001 --
----------- ----------
Net income (loss).......................................... 23,165 (6,785)

Increase in carrying amount of redeemable preferred stock......... -- 15,583
----------- ----------
Net income (loss) available to common stockholders........ $ 23,165 $ (22,368)
=========== ==========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item....................... $ 0.68 $ (1.27)
Extraordinary loss on early extinguishment of debt............ (0.05) --
----------- ----------
Earnings (loss) per common share.............................. $ 0.63 $ (1.27)
=========== ==========
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item....................... $ 0.68 $ (1.27)
Extraordinary loss on early extinguishment of debt............ (0.05) --
----------- ----------
Earnings (loss) per common share.............................. $ 0.63 $ (1.27)
=========== ==========
Shares used for computing basic earnings (loss) per share......... 36,744 17,643
=========== ==========
Shares used for computing diluted earnings (loss) per share....... 37,088 17,643
=========== ==========

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

Page F-46

VCA ANTECH, INC. AND SUBSIDIARIES

CONDENSED, CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
(In thousands)

Nine Months Ended
September 30,
------------------------
2002 2001
---------- ----------

Cash flows from operating activities:
Net income (loss)......................................................... $ 23,165 $ (6,785)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization....................................... 9,330 19,121
Amortization of deferred financing costs and debt discounts......... 1,264 1,667
Provision for uncollectible accounts................................ 2,347 2,182
Extraordinary loss on early extinguishment of debt.................. 3,391 --
Non-cash compensation............................................... -- 7,611
Interest paid in kind on 15.5% senior notes......................... 7,045 12,259
Write-down and (gain) loss on sale of assets........................ (80) 8,745
Minority interest in income of subsidiaries......................... 1,360 1,104
Distributions to minority interest partners......................... (1,339) (1,083)
Increase in accounts receivable..................................... (5,055) (3,736)
Decrease (increase) in inventory, prepaid expenses and other assets. (918) 685
Increase (decrease) in accounts payable and accrued liabilities..... 3,945 (307)
Increase in accrued payroll and related liabilities................. 2,792 3,930
Increase (decrease) in accrued interest............................. 3,405 (1,547)
Decrease in prepaid income taxes.................................... 2,782 479
Increase in income taxes payable.................................... 2,035 --
Increase in deferred income tax asset............................... (2,318) (1,180)
Increase in deferred income tax liability........................... 7,687 6,171
---------- ----------
Net cash provided by operating activities.............................. 60,838 49,316
---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash acquired......................... (17,845) (20,615)
Real estate acquired in connection with business acquisitions....... -- (675)
Property and equipment additions, net............................... (13,405) (9,929)
Proceeds from sale of assets........................................ 1,391 603
Other............................................................... 159 285
---------- ----------
Net cash used in investing activities.................................. (29,700) (30,331)
---------- ----------
Cash flows from financing activities:
Repayment of long-term obligations................................. (145,978) (3,735)
Proceeds from issuance of long-term debt............................ 143,061 --
Payment of accrued financing and recapitalization costs............. (3,415) (2,138)
Proceeds from issuance of common stock under stock option plans..... 25 --
Other............................................................... 424 --
---------- ----------
Net cash used in financing activities.................................. (5,883) (5,873)
---------- ----------
Increase in cash and cash equivalents......................................... 25,255 13,112
Cash and cash equivalents at beginning of period.............................. 7,103 10,519
---------- ----------
Cash and cash equivalents at end of period.................................... $ 32,358 $ 23,631
========== ==========

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

Page F-47

VCA ANTECH, INC. AND SUBSIDIARIES
NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)

(1) GENERAL

The accompanying unaudited, condensed, consolidated financial statements of
VCA Antech, Inc. and subsidiaries (the "Company" or "VCA") have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and in accordance with the rules and
regulations of the United States Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements as permitted under applicable rules and regulations. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included. The results of operations for the nine months
ended September 30, 2002 are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the Company's
consolidated financial statements and footnotes thereto included in the
Company's 2001 Annual Report on Form 10-K.

(2) ACQUISITIONS

During the nine months ended September 30, 2002, the Company purchased 18
animal hospitals, for an aggregate consideration (including acquisition costs)
of $16.1 million, consisting of $15.1 million in cash and the assumption of
liabilities totaling $1.0 million. The $16.1 million aggregate purchase price
was allocated as follows: $449,000 to tangible assets, $14.7 million to goodwill
and $956,000 to other intangible assets.

During the nine months ended September 30, 2002, the Company also made
payments in the amount of approximately $2.7 million related to contractual
obligations related to prior year acquisitions.

(3) CALCULATION OF PER SHARE AMOUNTS

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

Nine Months Ended
September 30,
--------------------------
2002 2001
---------- -----------

Income (loss) before extraordinary item............... $ 25,166 $ (6,785)
Increase in carrying amount of redeemable
preferred stock.................................. -- 15,583
---------- -----------
Income (loss) available to common
stockholders before extraordinary item........... 25,166 (22,368)
Extraordinary loss on early extinguishment of
debt, net of income tax benefit.................. 2,001 --
---------- -----------
Net income (loss) available to common
stockholders (basic and diluted)................. $ 23,165 $ (22,368)
========== ===========
Weighted average common shares outstanding:
Basic............................................ 36,744 17,643
Effect of dilutive common stock equivalents:
Stock options............................... 344 --
---------- -----------
Diluted.......................................... 37,088 17,643
========== ===========
Basic earnings (loss) per common share:
Income (loss) before extraordinary item.......... 0.68 $ (1.27)
Extraordinary loss on early extinguishment of
debt........................................ (0.05) --
---------- -----------
Earnings (loss) per common share................. $ 0.63 $ (1.27)
========== ===========
Diluted earnings (loss) per common share:
Income (loss) before extraordinary item.......... $ 0.68 $ (1.27)
Extraordinary loss on early extinguishment of
debt........................................ (0.05) --
---------- -----------
Earnings (loss) per common share................. $ 0.63 $ (1.27)
========== ===========

Page F-48

The anti-dilutive effect of 1,150,000 shares of common stock equivalents
from outstanding warrants has been excluded from EPS calculations for the nine
months ended September 30, 2001. Additionally, the anti-dilutive effect of
651,000 shares from outstanding stock options have been excluded from EPS
calculations for the nine months ended September 30, 2001.

(4) COMPREHENSIVE INCOME (LOSS)

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

Nine Months Ended
September 30,
-----------------------
2002 2001
---------- ----------

Net income (loss)......................................... $ 23,165 $ (6,785)
Cumulative effect of change to new accounting principle... -- (525)
Unrealized gain (loss) on hedging instruments............. (1,695) (1,726)
Less portion of unrealized (gain) loss recognized
as other (income) expense............................ (159) 233
--------- ---------
Net comprehensive income (loss)........................... $ 24,701 $ (8,803)
========= =========

All gains and losses on hedging instruments are the result of an interest
rate collar agreement. See Footnote (8), "Derivatives " for additional
information. By the end of the agreement, these unrealized gains will offset
against unrealized losses recognized in prior periods and will in aggregate net
to zero. Accordingly, there has been no income tax benefit or expense relating
to these unrealized gains and losses recognized in the Company's net income
(loss) or comprehensive income (loss). The unrealized gains and losses
recognized as other (income) expense relate to the ineffective portion of the
interest rate collar agreement.

(5) EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT

On August 29, 2002, the Company refinanced its senior credit facility by
borrowing $143.1 million in Senior Term C notes and used these proceeds to pay
the entire outstanding principal balance on the Senior Term A and B notes. In
conjunction with the transaction the Company wrote off $3.4 million in deferred
financing costs as an extraordinary loss on early extinguishment of debt, which
provided a related tax benefit of $1.4 million.

(6) LINES OF BUSINESS

During the nine months ended September 30, 2002 and 2001, the Company had
three reportable segments: Laboratory, Animal Hospital and Corporate. These
segments are strategic business units that have different products, services and
functions. The segments are managed separately because each is a distinct and
different business venture with unique challenges, rewards and risks. The
Laboratory segment provides testing services for veterinarians both associated
with the Company and independent of the Company. The Animal Hospital segment
provides veterinary services for companion animals and sells related retail
products. Corporate provides selling, general and administrative support for the
other segments and recognizes revenue associated with a consulting agreement.

The accounting policies of the segments are the same as those described in
the summary of significant accounting policies as detailed in the Company's
consolidated financial statements and footnotes thereto included in the 2001
Annual Report on Form 10-K. The Company evaluates performance of segments based
on profit or loss before income taxes, interest income, interest expense and
minority interest, which are evaluated on a consolidated level. For purposes of
reviewing the operating performance of the segments, all intercompany sales and
purchases are accounted for as if they were transactions with independent third
parties at current market prices.

Page F-49

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

ANIMAL INTERCOMPANY
LABORATORY HOSPITAL CORPORATE ELIMINATIONS TOTAL
---------- ----------- ----------- ------------- -----------

NINE MONTHS ENDED SEPTEMBER 30, 2002
Revenue.............................. $ 116,911 $ 225,383 $ 1,500 $ (6,902) $ 336,892
Operating income (loss).............. 41,596 43,306 (9,902) -- 75,000
Depreciation/amortization expense.... 2,138 6,166 1,026 -- 9,330
Capital expenditures................. 5,931 6,372 1,102 -- 13,405

NINE MONTHS ENDED SEPTEMBER 30, 2001
Revenue.............................. $ 101,855 $ 207,665 $ 1,500 $ (5,655) $ 305,365
Operating income (loss).............. 27,527 29,770 (23,617) -- 33,680
Depreciation/amortization expense.... 3,457 10,829 4,835 -- 19,121
Capital expenditures................. 1,548 6,418 1,963 -- 9,929

AT SEPTEMBER 30, 2002
Identifiable assets.................. $ 114,913 $ 341,106 $ 57,361 -- $ 513,380
AT DECEMBER 31, 2001
Identifiable assets.................. $ 110,466 $ 322,657 $ 35,398 -- $ 468,521

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

Nine Months Ended
SEPTEMBER 30,
----------------------
2002 2001
---------- ----------
Total segment operating income after
eliminations.................................... $ 75,000 $ 33,680
Net interest expense............................ 30,541 32,387
Other (income) expense.......................... (159) 233
Minority interest in income of subsidiaries..... 1,360 1,104
--------- ---------
Income (loss) before provision for income
taxes and extraordinary item................ $ 43,258 $ (44)
========= =========

(7) OTHER (INCOME) EXPENSE

As a result of changes in the time value of an interest rate collar
agreement, the Company recognized a non-cash gain of $159,000 and a non-cash
loss of $233,000 during the nine months ended September 30, 2002 and 2001,
respectively. See Footnote (8), "Derivatives" for additional information.

(8) DERIVATIVES

The Company entered into a no-fee interest rate collar agreement with Wells
Fargo Bank effective November 15, 2000 and expiring November 15, 2002, (the
"Collar Agreement"). The Collar Agreement is based on the London interbank offer
rate ("LIBOR"), which resets monthly, and has a cap and floor notional amount of
$62.5 million, with a cap and floor interest rate of 7.5% and 5.9%,
respectively. As a result of LIBOR rates being below the floor interest rate of
5.9%, the Company made payments under this agreement amounting to $1.9 million
and $600,000 for the nine months ended September 30, 2002 and 2001,
respectively. These payments have been reported as part of interest expense.

The Collar Agreement is accounted for as a cash flow hedge with its market
value reported as a liability on the balance sheet. This liability decreased
approximately $1.7 million to $326,000 at September 30, 2002 from $2.0 million
at December 31, 2001. Of this decrease, $1.5 million has been recognized in
comprehensive income and the other $159,000 has been recognized in other income.
The valuation of the Collar Agreement is determined by Wells Fargo Bank. As the
result of adopting Statement of Financial Accounting Standards ("SFAS") No. 133,
ACCOUNTING

Page F-50

FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, in 2001, the Company recorded
a cumulative adjustment to other comprehensive income of approximately $525,000
during the nine months ended September 30, 2001.

When the Collar Agreement expires on November 15, 2002, the Company intends
to enter into additional derivative contracts to hedge against part or all of
the risk of increasing interest rates that would increase interest payments on
the $142.7 million of Senior Term C notes, which are based on variable rates.

(9) GOODWILL AND OTHER INTANGIBLE ASSETS

In June 2001, the Financial Accounting Standards Board, (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, GOODWILL AND OTHER
INTANGIBLE ASSETS. SFAS No. 142 prohibits the amortization of goodwill and
intangible assets with indefinite useful lives. SFAS No. 142 requires that these
assets be reviewed for impairment at least annually, or whenever there is an
indication of impairment. Intangible assets with finite lives will continue to
be amortized over their estimated useful lives and reviewed for impairment in
accordance with SFAS No. 144, ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF
LONG-LIVED ASSETS.

The Company adopted SFAS No. 142 on January 1, 2002. In doing so, it
determined that it had two reporting units, Laboratory and Animal Hospital. On
April 15, 2002, an independent valuation group concluded that the fair value of
the Company's reporting units exceeded it's carrying value and accordingly, as
of that date, there were no goodwill impairment issues. The Company plans to
perform a valuation of its reporting units in January of each year, or upon
significant changes in the Company's business environment.

As of September 30, 2002 the Company's goodwill, net of accumulated
amortization was $332.5 million. The Company recorded $6.9 million in goodwill
amortization, for the nine months ended September 30, 2001. Because of the
adoption of SFAS No. 142 there was no amortization of goodwill for the nine
months ended September 30, 2002.

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

Nine Months Ended
SEPTEMBER 30,
------------------------
2002 2001
--------- -----------

Net income (loss) available to common
stockholders............................... $ 23,165 $ (22,368)
Add back goodwill amortization, net of tax.... -- 5,206
---------- -----------
Adjusted net income (loss)................ $ 23,165 $ (17,162)
========== ===========
Basic earnings (loss) per share:
Reported net income (loss).............. $ 0.63 $ (1.27)
Goodwill amortization, net of tax....... -- 0.30
---------- -----------
Adjusted basic earning (loss) per share. $ 0.63 $ (0.97)
========== ===========
Diluted earnings (loss) per share:
Reported net income (loss).............. $ 0.63 $ (1.27)
Goodwill amortization, net of tax....... -- 0.30
---------- -----------
Adjusted diluted earnings (loss)
per share............................. $ 0.63 $ (0.97)
========== ===========

Page F-51

The following table presents the changes in the carrying amount of goodwill
for the nine months ended September 30, 2002 (in thousands):

Animal
Laboratory Hospital Total
---------- ---------- ---------

Balance as of January 1, 2002............. $ 85,101 $ 232,161 $ 317,262
Goodwill acquired and purchase price
adjustments............................. -- 15,281 15,281
-------- --------- ---------
Balance as of September 30, 2002.......... $ 85,101 $ 247,442 $ 332,543
======== ========= =========

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

As of September 30, 2002
------------------------
Gross Carrying Accumulated Net Carrying
Amount Amortization Amount
-------------- ------------ -------------

Covenants not to compete...... $ 12,301 $ (7,779) $ 4,522
Client lists.................. 579 (461) 118
---------- ----------- ---------
Total....................... $ 12,880 $ (8,240) $ 4,640
========== =========== =========

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

Nine Months Ended
September 30,
-------------------
2002 2001
------- -------

Aggregate amortization expense (1)........ $ 1,297 $ 5,158
======= =======

(1) Does not include goodwill amortization of $6.9 million for the nine months
ended September 30, 2001, respectively. There was no goodwill amortization
recorded in 2002.

Estimated amortization expense for other intangible assets for the next
five years is as follows (in thousands):

For the Year Ending
DECEMBER 31,
-----------------------------
2002 $ 1,773
2003 1,814
2004 1,802
2005 1,492
2006 1,389

(10) ACCOUNTING PRONOUNCEMENTS

ASSET RETIREMENT OBLIGATIONS

In June 2001, the FASB issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. The Company will adopt SFAS No. 143 in the
first quarter of fiscal year 2003. The Company does not expect the adoption of
SFAS No. 143 to have a material impact on its consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

Page F-52

accounting and reporting provisions relating to the impairment or disposal of
long-lived assets of Accounting Principles Board Opinion No. 30 ("APB No. 30"),
REPORTING THE RESULTS OF OPERATIONS - REPORTING THE EFFECTS OF DISPOSAL OF A
SEGMENT OF A BUSINESS, AND EXTRAORDINARY, UNUSUAL AND INFREQUENTLY OCCURRING
EVENTS AND TRANSACTIONS. The Company adopted SFAS No. 144 on January 1, 2002,
with no material impact to its financial statements.

GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT AND CAPITAL LEASES

The Company will adopt SFAS No. 145 at the beginning of fiscal year 2003.
As detailed in Footnote (5), "Extraordinary Loss on Early Extinguishment of
Debt," the Company recognized an extraordinary loss related to the early
extinguishment of debt of approximately $3.4 million, before taxes, during the
nine months ended September 30, 2002. In addition, the Company recognized
extraordinary losses related to the early extinguishment of debt, before taxes
in the amount of approximately $17.2 million and $4.5 million during years 2001
and 2000, respectively. The Company does not believe these losses on
extinguishment of debt meet the criteria of APB No. 30 as the Company has
historically participated in and may continue to participate in periodic debt
refinancing. As a result of adopting SFAS No. 145, the Company will reclassify
losses on extinguishment of debt from extraordinary losses to a component of
income from recurring operations. This reclassification will not impact net
income.

SFAS No. 145 also amends SFAS No. 13, ACCOUNTING FOR LEASES. Under SFAS No.
145, if a capital lease is modified such that it becomes an operating lease, a
gain or loss must be recognized similar to the accounting used for
sale-leaseback transactions as provided in SFAS No. 28 and No. 98. At September
30, 2002, the Company had capital lease obligations of $43,000. Although the
Company may enter into more capital leases, management does not expect this
provision of SFAS No. 145 to have a material impact on its financial statements.

COSTS ASSOCIATED WITH EXIT OR DISPOSAL OF ACTIVITIES

In June 2002, the FASB issued SFAS No. 146, ACCOUNTING FOR COSTS ASSOCIATED
WITH EXIT OR DISPOSAL ACTIVITIES. SFAS No. 146 requires that liabilities
associated with exit or disposal activities be recognized when a company is
committed to future payment of those liabilities under a binding, legal
obligation. SFAS No. 146 supercedes Emerging Issues Task Force Issue No. 94-3,
LIABILITY RECOGNITION FOR CERTAIN EMPLOYEE TERMINATION BENEFITS AND OTHER COSTS
TO EXIT AN ACTIVITY (INCLUDING CERTAIN COSTS INCURRED IN A RESTRUCTURING), which
required that exit and disposal costs be recognized as liabilities when a
company formalized its plan for exiting or disposing of an activity even if no
legal obligation had been established.

Page F-53

GOODWILL IMPAIRMENT TEST

In August 2002, the FASB's Emerging Issues Task Force ("EITF") issued EITF
Issue No. 02-13, DEFERRED INCOME TAX CONSIDERATIONS IN APPLYING THE GOODWILL
IMPAIRMENT TEST IN FASB NO. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. EITF
Issue No. 02-13 was issued to provide guidance on how to account for deferred
tax balances in determining a reporting unit's fair value, a reporting unit's
carrying amount and the implied fair value of goodwill. The consensus in this
issue will be applied prospectively in performing either the first or second
step of the impairment test required by SFAS No. 142 for tests performed after
September 12, 2002. The Company has not determined yet what impact EITF Issue
No. 02-13 will have on its consolidated financial statements.

(11) RECLASSIFICATIONS

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

(12) COMMITMENTS AND CONTINGENCIES

The laws of many states prohibit business corporations from providing, or
holding themselves out as providers of, veterinary medical care. These laws vary
from state to state and are enforced by the courts and by regulatory authorities
with broad discretion. The Company operates 58 animal hospitals in 11 states
with these laws. The Company may experience difficulty in expanding operations
into other states with similar laws. Given varying and uncertain interpretations
of the veterinary laws of each state, the Company may not be in compliance with
restrictions on the corporate practice of veterinary medicine in all states. A
determination that the Company is in violation of applicable restrictions on the
practice of veterinary medicine in any state in which it operates could have a
material adverse effect, particularly if the Company were unable to restructure
its operations to comply with the requirements of that state.

The Company currently is a party to a lawsuit in the State of Ohio in which
that state has alleged that the management of a veterinary medical group
licensed to practice veterinary medicine in that state violates the Ohio statute
prohibiting business corporations from providing or holding themselves out as
providers of veterinary medical care. On March 20, 2001, the trial court in the
case entered summary judgment in favor of the State of Ohio and issued an order
enjoining the Company from operating in the State of Ohio in a manner that is in
violation of the state statute. In response, the Company restructured its
operations in the State of Ohio in a manner believed to conform to the state law
and the court's order. The Attorney General of the State of Ohio informed the
Company that it disagreed with the Company's position that the Company is in
compliance with the court's order. In June 2001, the Company appeared at a
status conference before the trial court at which time the court directed the
parties to meet together to attempt to settle this matter. Consistent with the
trial court's directive, the Company engaged in discussions with the Attorney
General's office in the State of Ohio. The parties were not able to reach a
settlement prior to an additional status conference that occurred in February
2002. At that status conference, the court ordered the parties to participate in
a court-supervised settlement conference that occurred in April 2002. Pursuant
to discussions with the Ohio Attorney General at that settlement conference, the
Company submitted to the Ohio Attorney General a revised management agreement
that incorporates further revisions to the structure of its operations in Ohio.
Following its review of the revised agreement, the Ohio Attorney General
requested further revisions to the management agreement, and, in response, the
Company has submitted a further revised agreement which is consistent with those
suggestions and which currently is under review by the Ohio Attorney General. If
a settlement cannot be reached, the Company may be required to discontinue
operations in the state. The five animal hospitals in the State of Ohio had a
net book value of $6.4 million as of September 30, 2002. If the Company was
required to discontinue operations in the State of Ohio, it may not be able to
dispose of the hospital assets for their book value. The animal hospitals
located in the State of Ohio generated revenue and operating income of $1.6
million and $461,000, respectively, for the nine months ended September 30,
2002, and $2.1 million and $409,000, for the year ended December 31, 2001.

Page F-54

securities fraud under California law, common law fraud, negligent
misrepresentation and declaratory judgment arising from the plaintiffs'
investment in Zoasis.com. On December 31, 2001, the Company filed a demurrer to
the complaint. On February 25, 2002, the plaintiffs filed an opposition to the
Company's demurrer, and on March 1, 2002, the Company filed our reply to
plaintiffs' opposition. On March 7, 2002, the Company's demurrer was denied. On
March 22, 2002, the Company filed an answer to plaintiffs' complaint denying all
allegations in the complaint, and the Company filed a counter claim alleging
breach of contract and claim and delivery. The Company is currently involved in
the discovery process. A status conference was held on May 9, 2002 at which the
judge ordered the parties to participate in mediation. Mediation occurred on
August 7, 2002, and no settlement was reached. The court has scheduled a final
status conference for January 31, 2003, and a trial date of February 14, 2003.

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

(13) SUBSEQUENT EVENTS

ACQUISITIONS

From October 1, 2002 through December 20, 2002, the Company acquired seven
animal hospitals and one laboratory for an aggregate consideration (including
acquisition costs) of $10.9 million, consisting of $9.8 million in cash, and the
assumption of liabilities totaling $1.1 million.

REPAYMENT OF 13.5% SENIOR SUBORDINATED AND 15.5% SENIOR NOTES

On October 24, 2002, the Company borrowed $25.0 million in additional
Senior Term C notes under the credit and guaranty agreement. The proceeds from
this borrowing and $25.2 million of cash on-hand were used to voluntarily repay
the remaining principal balance of $15.0 million for the Company's 13.5% senior
subordinated notes and repay $30.0 million of its 15.5% senior notes. As a
result of repaying these notes, the Company will recognize an additional
extraordinary loss, net of income tax benefit, of approximately $5.5 million
during the fourth quarter of 2002.

SWAP AGREEMENT

(14) CONDENSED, CONSOLIDATING INFORMATION

In 2000, the Company established a legal structure comprised of a holding
company and an operating company. VCA is the holding company. Vicar Operating,
Inc. ("Vicar") is the operating company and wholly owned by VCA. Vicar owns the
capital stock of all of the Company's other subsidiaries.

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

Vicar's subsidiaries are composed of wholly owned restricted subsidiaries
and partnerships. The partnerships may elect to serve as guarantors of Vicar's
obligations, however, none of the partnerships have elected to do so (the
"Non-Guarantor Subsidiaries"). Vicar conducts all of its business through and
derives virtually all of its income from its subsidiaries. Therefore, Vicar's
ability to make required payments with respect to its

Page F-55

indebtedness (including the 9.875% senior subordinated notes) and other
obligations depends on the financial results and condition of its subsidiaries
and its ability to receive funds from its subsidiaries.

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

Page F-56

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

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of September 30, 2002
(Unaudited)
(In thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- ---------- ------------ ------------ ----------- ------------
Current assets:

Cash and equivalents............... $ -- $ 30,460 $ 1,717 $ 181 $ -- $ 32,358
Trade accounts receivable, net..... -- -- 20,094 697 -- 20,791
Inventory, prepaid expenses and
other................................. -- 1,246 6,060 574 -- 7,880
Deferred income taxes.............. -- 9,682 -- -- -- 9,682
---------- ---------- ---------- ---------- ----------- ----------
Total current assets............ -- 41,388 27,871 1,452 -- 70,711
Property and equipment, net........... -- 7,877 83,133 2,594 -- 93,604
Other assets:
Goodwill, net...................... -- -- 310,012 22,531 -- 332,543
Covenants not to compete, net...... -- -- 3,807 715 -- 4,522
Deferred financing costs, net...... 714 6,680 -- -- -- 7,394
Other assets....................... 246 456 2,137 1,767 -- 4,606
Investment in subsidiaries............ 152,635 227,997 24,094 -- (404,726) --
---------- ---------- ---------- ---------- ----------- ----------
Total assets.................... $ 153,595 $ 284,398 $ 451,054 $ 29,059 $ (404,726) $ 513,380
========== ========== ========== ========== =========== ==========
Current liabilities:
Current portion of long-term
obligations..................... $ -- $ 1,484 $ 305 $ 4 $ -- $ 1,793
Accounts payable................... -- 5,978 3,153 -- -- 9,131
Accrued payroll and related
liabilities........................... -- 8,176 6,016 317 -- 14,509
Accrued interest................... -- 5,649 10 -- -- 5,659
Income taxes payable............... -- 2,035 -- -- -- 2,035
Other accrued liabilities.......... -- 9,719 3,338 138 -- 13,195
---------- ---------- ---------- ---------- ----------- ----------
Total current liabilities....... -- 33,041 12,822 459 -- 46,322
Long-term obligations, less current
portion............................ 61,240 324,825 976 -- -- 387,041
Deferred income taxes................. -- 9,371 -- -- -- 9,371
Minority interest..................... -- -- -- -- 5,732 5,732
Intercompany payable (receivable)..... 27,441 (235,474) 209,259 (1,226) -- --
Stockholders' equity:
Common stock....................... 37 -- -- -- -- 37
Additional paid-in capital......... 188,865 -- -- -- -- 188,865
Retained earnings (accumulated
deficit)........................ (123,429) 152,954 227,997 29,826 (410,777) (123,429)
Accumulated comprehensive loss..... (319) (319) -- -- 319 (319)
Notes receivable from stockholders. (240) -- -- -- -- (240)
---------- ---------- ---------- ---------- ----------- ----------
Total stockholders' equity...... 64,914 152,635 227,997 29,826 (410,458) 64,914
---------- ---------- ---------- ---------- ----------- ----------
Total liabilities and
stockholders' Equity............ $ 153,595 $ 284,398 $ 451,054 $ 29,059 $ (404,726) $ 513,380
========== ========== ========== ========== =========== ==========

Page F-57

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

CONDENSED, CONSOLIDATING BALANCE SHEETS
As of December 31, 2001
(In thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- ---------- ------------ ------------ ----------- ------------

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

Page F-58

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

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

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- --------- ------------ ------------ ----------- ------------

Revenue............................... $ -- $ 1,500 $309,421 $ 26,642 $ (671) $336,892
Direct costs.......................... -- -- 208,057 19,363 (671) 226,749
---------- --------- --------- --------- --------- ---------
-- 1,500 101,364 7,279 -- 110,143
Selling, general and administrative
expense............................ -- 10,456 14,389 1,048 -- 25,893
Depreciation and amortization......... -- 1,026 7,776 528 -- 9,330
Gain on sale of assets................ -- (80) -- -- -- (80)
---------- --------- --------- --------- --------- ---------
Operating income (loss)........... -- (9,902) 79,199 5,703 -- 75,000
Net interest expense ................. 6,935 23,614 83 (91) -- 30,541
Other income.......................... -- (159) -- -- -- (159)
Equity interest in income of
subsidiaries........................ 27,257 48,606 4,434 -- (80,297) --
---------- --------- --------- --------- --------- ---------
Income before minority
interest, provision for income
taxes and extraordinary item...... 20,322 15,249 83,550 5,794 (80,297) 44,618
Minority interest in income of
subsidiaries........................ -- -- -- -- 1,360 1,360
---------- --------- --------- --------- --------- ---------
Income before provision for
income taxes and extraordinary
item.............................. 20,322 15,249 83,550 5,794 (81,657) 43,258
Provision (benefit) for income taxes.. (2,843) (14,009) 34,944 -- -- 18,092
---------- --------- --------- --------- --------- ---------
Income before extraordinary item.. 23,165 29,258 48,606 5,794 (81,657) 25,166
Extraordinary loss on early
extinguishment of debt, net of
tax ................................ -- 2,001 -- -- -- 2,001
---------- --------- --------- --------- --------- ---------
Net income....................... $ 23,165 $ 27,257 $ 48,606 $ 5,794 $(81,657) $ 23,165
========== ========= ========= ========= ========= =========

Page F-59

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

CONDENSED, CONSOLIDATING STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 2001
(Unaudited)
(In thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
---------- --------- ------------ ------------ ----------- ------------

Revenue............................... $ -- $ 1,500 $281,814 $ 22,538 $ (487) $305,365
Direct costs.......................... -- -- 197,342 16,599 (487) 213,454
---------- --------- --------- --------- --------- ---------
-- 1,500 84,472 5,939 -- 91,911
Selling, general and administrative
expense........................... -- 11,537 18,010 818 -- 30,365
Depreciation and amortization......... -- 4,835 13,533 753 -- 19,121
Write-down and (gain) loss on sale
of assets........................... -- 8,745 -- -- -- 8,745
---------- --------- --------- --------- --------- ---------
Operating income (loss)........... -- (23,617) 52,929 4,368 -- 33,680
Net interest expense ................. 12,332 19,976 102 (23) -- 32,387
Other expense......................... -- 233 -- -- -- 233
Equity interest in income of
subsidiaries........................ 1,194 30,302 3,287 -- (34,783) --
---------- --------- --------- --------- --------- ---------
Income before minority interest
and provision for income taxes.. (11,138) (13,524) 56,114 4,391 (34,783) 1,060
Minority interest in income of
subsidiaries........................ -- -- -- -- 1,104 1,104
---------- --------- --------- --------- --------- ---------
Income (loss) before provision
for income taxes................ (11,138) (13,524) 56,114 4,391 (35,887) (44)
Provision (benefit) for income taxes.. (4,353) (14,718) 25,812 -- -- 6,741
---------- --------- --------- --------- --------- ---------
Net income (loss)................. $ (6,785) $ 1,194 $ 30,302 $ 4,391 $(35,887) $ (6,785)
========== ========= ========= ========= ========= =========

Page F-60

VCA ANTECH, INC. AND SUBSIDIARIES

NOTES TO CONDENSED, CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

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

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ----------- ------------ ------------ ------------ ------------

Cash from operating activities:
Net income........................... $ 23,165 $ 27,257 $ 48,606 $ 5,794 $ (81,657) $ 23,165
Adjustments to reconcile net
income to net cash provided
by (used in) operating
activities:
Equity interest in earnings of
subsidiaries...................... (27,257) (48,606) (4,434) -- 80,297 --
Depreciation and amortization....... -- 1,026 7,776 528 -- 9,330
Amortization of deferred
financing costs and debt
discount.......................... (84) 1,348 -- -- -- 1,264
Provision for uncollectible
accounts.......................... -- -- 2,068 279 -- 2,347
Extraordinary loss on early
extinguishment of debt............ -- 3,391 -- -- -- 3,391
Interest paid in kind on senior
subordinated notes................ 7,045 -- -- -- -- 7,045
Gain on sale of assets.............. -- (80) -- -- -- (80)
Minority interest in income of
subsidiaries...................... -- -- -- -- 1,360 1,360
Distributions to minority
interest partners................. -- (1,339) -- -- -- (1,339)
Increase in accounts receivable..... -- -- (4,413) (642) -- (5,055)
Decrease (increase) in inventory,
prepaid expenses and other
assets............................ 74 (155) (817) (20) -- (918)
Increase in accounts payable and
accrued liabilities............... -- 1,358 2,544 43 -- 3,945
Increase (decrease) in accrued
payroll and related liabilities... -- 3,157 (365) -- -- 2,792
Increase in accrued interest........ -- 3,395 10 -- -- 3,405
Decrease in prepaid income taxes.... -- 2,782 -- -- -- 2,782
Increase in income tax payable...... -- 2,035 -- -- -- 2,035
Increase in deferred income tax
asset............................. -- (2,318) -- -- -- (2,318)
Increase in deferred income tax
liability......................... -- 7,687 -- -- -- 7,687
Increase (decrease) in
intercompany payable (receivable). (3,392) 55,869 (46,300) (6,177) -- --
---------- ----------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities.............. (449) 56,807 4,675 (195) -- 60,838
---------- ----------- ---------- ---------- ---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash
acquired.......................... -- (17,845) -- -- -- (17,845)
Property and equipment additions,
net............................... -- (7,475) (5,930) -- -- (13,405)
Proceeds from sale of assets.... -- 1,391 -- -- -- 1,391
Other............................... -- 447 (288) -- -- 159
---------- ----------- ---------- ---------- ---------- ----------
Net cash used in investing
activities...................... -- (23,482) (6,218) -- -- (29,700)
---------- ----------- ---------- ---------- ---------- ----------
Cash flows from financing activities:
Repayment of long-term obligations.. -- (145,978) -- -- -- (145,978)
Proceeds from issuance of long
term debt......................... -- 143,061 -- -- -- 143,061
Payment of accrued financing and
recapitalization costs............ -- (3,415) -- -- -- (3,415)
Proceeds from issuance of
common stock under stock
option plans................ 25 -- -- -- -- 25
Other........................... 424 -- -- -- -- 424
---------- ----------- ---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities............. 449 (6,332) -- -- -- (5,883)
---------- ----------- ---------- ---------- ---------- ----------
Increase (decrease) in cash and cash
equivalents........................... -- 26,993 (1,543) (195) -- 25,255
Cash and cash equivalents at beginning
of year............................... -- 3,467 3,260 376 -- 7,103
---------- ----------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of year. $ -- $ 30,460 $ 1,717 $ 181 $ -- $ 32,358
========== =========== ========== ========== ========== ==========

Page F-61

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

CONDENSED, CONSOLIDATING STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2001
(Unaudited)
(In thousands)

NON-
GUARANTOR GUARANTOR
VCA VICAR SUBSIDIARIES SUBSIDIARIES ELIMINATION CONSOLIDATED
----------- ----------- ------------ ------------ ------------ ------------

Cash from operating activities:
Net income (loss)...................... $ (6,785) $ 1,194 $ 30,302 $ 4,391 $ (35,887) $ (6,785)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Equity interest in earnings of
subsidiaries........................ (1,194) (30,302) (3,287) -- 34,783 --
Depreciation and amortization......... -- 4,835 13,533 753 -- 19,121
Amortization of deferred financing
costs and debt discount............. 97 1,570 -- -- -- 1,667
Provision for uncollectible accounts.. -- -- 1,959 223 -- 2,182
Non-cash compensation................. -- 771 6,840 -- -- 7,611
Interest paid in kind on senior
subordinated notes.................. 12,259 -- -- -- -- 12,259
Write-down and loss on sale of
assets.............................. -- 8,745 -- -- -- 8,745
Minority interest in income of
subsidiaries........................ -- -- -- -- 1,104 1,104
Distributions to minority interest
partners............................ -- (1,083) -- -- -- (1,083)
Increase in accounts receivable, net.. -- -- (3,435) (301) -- (3,736)
Decrease (increase) in inventory,
prepaid expense and other assets.... (25) 177 624 (91) -- 685
Increase (decrease) in accounts
payable and accrued liabilities..... -- (790) 483 -- -- (307)
Increase (decrease) in accrued
payroll and related liabilities..... -- 3,900 (19) 49 -- 3,930
Increase (decrease) in accrued
interest............................ -- (1,678) 131 -- -- (1,547)
Decrease in prepaid income taxes...... -- 479 -- -- -- 479
Increase in deferred income tax
asset............................... -- (1,180) -- -- -- (1,180)
Increase in deferred income tax
liability........................... -- 6,171 -- -- -- 6,171
Decrease (increase) in intercompany
payable (receivable)................ (4,352) 52,837 (43,588) (4,897) -- --
--------- ---------- ---------- --------- ---------- ----------
Net cash provided by operating
activities.......................... -- 45,646 3,543 127 -- 49,316
--------- ---------- ---------- --------- ---------- ----------
Cash flows from investing activities:
Business acquisitions, net of cash
acquired............................ -- (20,615) -- -- -- (20,615)
Real estate acquired in connection
with business acquisitions.......... -- (675) -- -- -- (675)
Property and equipment additions,
net................................. -- (8,381) (1,548) -- -- (9,929)
Proceeds from sale of assets.......... -- 603 -- -- -- 603
Other................................. -- 195 90 -- -- 285
--------- ---------- ---------- --------- ---------- ----------
Net cash used in investing activities.. -- (28,873) (1,458) -- -- (30,331)
--------- ---------- ---------- --------- ---------- ----------
Cash flows from financing activities:
Repayment of long-term obligations.... -- (3,735) -- -- -- (3,735)
Payment of accrued financing and
recapitalization costs.............. -- (2,138) -- -- -- (2,138)
--------- ---------- ---------- --------- ---------- ----------
Net cash used in financing activities.. -- (5,873) -- -- -- (5,873)
--------- ---------- ---------- --------- ---------- ----------
Increase in cash and cash equivalents...... -- 10,900 2,085 127 -- 13,112
Cash and cash equivalents at beginning
of year................................. -- 8,165 2,073 281 -- 10,519
--------- ---------- ---------- --------- ---------- ----------
Cash and cash equivalents at end of year... $ -- $ 19,065 $ 4,158 $ 408 $ -- $ 23,631
========= ========== ========== ========= ========== ==========

Page F-62

No dealer, salesperson or other
person is authorized to give any
information or to represent anything not
contained in this prospectus. You must
not rely on any unauthorized information
or representations. This prospectus is
an offer to sell only the shares offered
hereby, but only under circumstances and
in jurisdictions where it is lawful to
do so. The information contained in this
prospectus is current only as of its
date. Shares 9,000,000
SHARES

------------------------ VCA ANTECH, INC.

Common Stock
TABLE OF CONTENTS

PAGE

Prospectus Summary.................... 1 ----------------
Risk Factors..........................11
Cautionary Note Regarding
Forward-Looking Statements..........19
Use of Proceeds.......................20 PROSPECTUS
Price Range of Our Common Stock.......21
Dividend Policy.......................21
Capitalization........................22 ----------------
Selected Historical Consolidated
Financial Data......................24
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...........28
Business..............................54
Management............................64
Principal and Selling Stockholders....68
Description of Capital Stock..........71
Description of Certain Indebtedness...74
Underwriting..........................81
U.S. Tax Consequences to Non-U.S.
Holders.............................83
Legal Matters.........................86
Experts...............................86
Incorporation of Certain Documents
By Reference........................86
Index to Consolidated Financial
Statements..........................F-1

GOLDMAN, SACHS & CO.
CREDIT SUISSE FIRST BOSTON

Representatives of the Underwriters

Page i

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the securities being
registered, other than underwriting discounts. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee and the
NASD filing fee.

Registration fee--Securities and Exchange Commission........... $ 14,260
Filing fee - National Association of Securities Dealers, Inc... 15,994
Additional Listing fee - The Nasdaq National Market............ 22,500
Accounting fees and expenses................................... 200,000
Legal fees and expenses (other than blue sky).................. 160,000
Blue sky fees and expenses, including legal fees............... 10,000
Printing; stock certificates................................... 200,000
Transfer agent and registrar fees.............................. 2,000
Miscellaneous.................................................. 50,000
----------
Total.......................................................... $ 674,754
==========

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware, the "DGCL," empowers a corporation to indemnify any person who by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.

Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he
acted in any of the capacities set forth above, against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted under similar
standards, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

Section 145 further provides that to the extent that a director or officer
of a corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of Section
145, or in the defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith; that indemnification provided by, or
granted pursuant to, Section 145 shall not be deemed exclusive of any other
rights to which those seeking indemnification may be entitled; and empowers the
corporation to purchase and maintain insurance on behalf of any person who is or
was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or against another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his

Page 1

status as such whether or not the corporation would have the power to indemnify
him against such liabilities under Section 145.

As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for the following:

o for liability for any breach of duty of loyalty to us or to our
stockholders;

o for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

o for unlawful payment of dividends or unlawful stock repurchases or
redemptions under Section 174 of the Delaware General Corporation Law;
or

o for any transaction from which the director derived an improper
personal benefit.

Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify our
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our certificate of
incorporation covers negligence and gross negligence on the part of indemnified
parties. Our amended and restated bylaws provide us with the authority to
indemnify our directors, officers and agents to the full extent allowed by
Delaware law.

We have entered into indemnification agreements, the form of which is
incorporated by reference to Exhibit 10.13 to the Registrant's registration
statement on Form S-1 filed August 9, 2001, with each of our directors and
officers. These agreements will require us to indemnify each director and
officer for certain expenses including attorneys' fees, judgments, fines and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in our right, arising out of the person's services as
our director or officer, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request.

The underwriting agreement will provide for indemnification by our
underwriters, our directors, our officers who sign the registration statement,
and our controlling persons for some liabilities, including liabilities arising
under the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

A. EXHIBITS

NUMBER EXHIBIT DESCRIPTION

1.1 Form of Underwriting Agreement.*

4.1 Stockholders Agreement, dated as of September 20, 2000, by and among
Registrant, Green Equity Investors III, L.P., Co-Investment Funds and
Stockholders. Incorporated by reference to Exhibit 4.1 to the
Registrant's registration statement on Form S-1 filed August 9, 2001.

4.2 Amendment No. 1 to Stockholders Agreement, dated as of November 27,
2001, by and among Registrant, Green Equity Investors III, L.P., GS
Mezzanine Partners II, L.P. and Robert Antin. Incorporated by
reference to Exhibit 4.2 to Amendment No. 2 to the Registrant's
registration statement on Form S-1 filed October 31, 2001.

4.3 Indenture Agreement, dated as of November 27, 2001, by and between
Vicar Operating, Inc., the Guarantors (as defined therein), and Chase
Manhattan Bank and Trust Company, National Association. Incorporated
by reference to Exhibit 4.1 to the Registrant's registration statement
on Form S-4 filed February 1, 2002.

Page 2

4.4 Indenture Agreement, dated as of September 20, 2000, by and between
Registrant, Chase Manhattan Bank and Trust Company, National
Association. Incorporated by reference to Exhibit 4.3 to the
Registrant's registration statement on Form S-1 filed August 9, 2001.

4.5 First Amendment to Indenture Agreement, dated as of November 20, 2001,
by and between Registrant, Chase Manhattan Bank and Trust Company,
National Association. Incorporated by reference to Exhibit 4.5 to the
Registrant's annual report on Form 10-K filed March 29, 2002.

4.6 Consent & Waiver, dated as of November 20, 2001, by and among the
Registrant, Vicar Operating, Inc. and its subsidiaries as Guarantors,
Chase Manhattan Bank and Trust Company, National Association.
Incorporated by reference to Exhibit 4.8 to the Registrant's annual
report on Form 10-K filed March 29, 2002.

4.7 Consent & Waiver, dated as of October 24, 2002, by and among the
Registrant, Vicar Operating, Inc. and its subsidiaries as Guarantors,
Chase Manhattan Bank and Trust Company, National Association.
Incorporated by reference to Exhibit 10.2 to the Registrant's current
report on Form 8-K filed October 25, 2002.

4.8 Second Amendment to Indenture Agreement, dated as of January 7, 2003,
by and between Registrant and JPMorgan Trust Company, National
Association (formerly Chase Manhattan Bank and Trust Company, National
Association).

4.9 Credit and Guaranty Agreement, dated as of September 20, 2000, by and
among Registrant, Vicar Operating, Inc., certain subsidiaries of
Registrant as Guarantors, Goldman Sachs Credit Partners L.P., and
Wells Fargo Bank, National Association as Administrative and
Collateral Agent. Incorporated by reference to Exhibit 4.5 to the
Registrant's registration statement on Form S-1 filed August 9, 2001.

4.10 First Amendment to Credit and Guaranty Agreement, dated as of October
23, 2000, by and among Registrant, Vicar Operating, Inc., certain
subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent. Incorporated by reference to
Exhibit 4.10 to the Registrant's annual report on Form 10-K filed
March 29, 2002.

4.11 Second Amendment to Credit and Guaranty Agreement, dated as of
November 16, 2001, by and among Registrant, Vicar Operating, Inc.,
certain subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent. Incorporated by reference to
Exhibit 4.11 to the Registrant's annual report on Form 10-K filed
March 29, 2002.

4.12 Third Amendment to Credit and Guaranty Agreement, dated as of March
20, 2002, by and among Registrant, Vicar Operating, Inc., certain
subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent.

4.13 Fourth Amendment to Credit and Guaranty Agreement, dated as of August
29, 2002, by and among Registrant, Vicar Operating, Inc., certain
subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent. Incorporated by reference to
Exhibit 99.2 to the Registrant's current report on Form 8-K filed
September 3, 2002.

4.14 Fifth Amendment to Credit and Guaranty Agreement, dated as of October
24, 2002, by and among Registrant, Vicar Operating, Inc., certain
subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent. Incorporated by reference to
Exhibit 10.1 to the Registrant's current report on Form 8-K filed
October 25, 2002.

Page 3

4.15 Sixth Amendment to Credit and Guaranty Agreement, dated as of
December 20, 2002, by and among Registrant, Vicar Operating, Inc.,
certain subsidiaries of Registrant as Guarantors, Goldman Sachs Credit
Partners L.P., and Wells Fargo Bank, National Association as
Administrative and Collateral Agent.

4.16 Specimen Certificate for shares of common stock of Registrant.
Incorporated by reference to Exhibit 4.9 to Amendment No. 3 to the
Registrant's registration statement on Form S-1 filed November 16,
2001.

5.1 Opinion of Akin Gump Strauss Hauer & Feld LLP, regarding the validity
of securities.*

23.1 Consent of KPMG LLP.

23.2 Consent of Akin Gump Strauss Hauer & Feld LLP (set forth in Exhibit
5.1).

24.1 Power of Attorney (included in signature page).

__________

*To be filed by amendment.

ITEM 17. UNDERTAKINGS.

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sale are being made, a
post-effective amendment to this registration statement to include any material
information with respect to the plan of distribution not previously disclosed in
the registration statement or any material change to such information in the
registration statement;

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof; and

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act of 1934) that is incorporated by reference in
this registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial BONA FIDE offering thereof.

(c) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the indemnification provisions described herein, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.

(d) The undersigned registrant hereby undertakes that:

Page 4

(1) For the purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the Offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.

Page 5

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California, on January 9,
2003.

/S/ ROBERT L. ANTIN
-----------------------
By: Robert L. Antin

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Robert
L. Antin and Tomas W. Fuller, and each of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and
re-substitution, for him and his name, place and stead, in any and all
capacities, to sign any or all amendments (including post effective amendments)
to this Registration Statement and a new Registration Statement filed pursuant
to Rule 462(b) of the Securities Act and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, or
their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.

SIGNATURE TITLE DATE
------------------------ ------------------------------------- -----------------

/S/ ROBERT L. ANTIN Chairman of the Board, President January 9, 2003
------------------------ and Chief Executive Officer
Robert L. Antin

Director, Chief Operating Officer,
------------------------ Senior Vice President and Secretary
Arthur J. Antin

/S/ TOMAS W. FULLER Chief Financial Officer, Principal January 9, 2003
------------------------ Accounting Officer, Vice President
Tomas W. Fuller and Assistant Secretary

/S/ JOHN M. BAUMER
------------------------ January 9, 2003
John. M. Baumer Director

/S/ JOHN G. DANHAKL
------------------------ January 9, 2003
John G. Danhakl Director

/S/ JOHN HEIL
------------------------ January 9, 2003
John Heil Director

/S/ PETER J. NOLAN
------------------------ January 9, 2003
Peter J. Nolan Director

/S/ FRANK REDDICK
------------------------ January 9, 2003
Frank Reddick Director

Page 1

LIST OF EXHIBITS

EXHIBIT
NUMBER DESCRIPTION

1.1 Form of Underwriting Agreement.*

Page 2

5.1 Opinion of Akin Gump Strauss Hauer & Feld LLP, regarding the validity
of securities.*

23.1 Consent of KPMG LLP.

23.2 Consent of Akin Gump Strauss Hauer & Feld LLP (set forth in Exhibit
5.1).

24.1 Power of Attorney (included in signature page).

------------------
*To be filed by amendment

Page 3