PROSPECTUS
VETERINARY CENTERS OF AMERICA, INC.
801,053 SHARES OF COMMON STOCK
(par value $0.001 per share)
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This Prospectus relates to the sale of an aggregate of 801,053
shares (the "Shares") of the common stock, par value $.001 per share (the
"Common Stock") of Veterinary Centers of America, Inc. (the "Company" or
"VCA") offered for the account of certain stockholders of the Company (the
"Selling Stockholders"). The Common Stock offered by the Selling
Stockholders was acquired by the Selling Stockholders in exchange for the
capital stock of Pets' Rx, Inc. ("Pets' Rx") owned by the Selling
Stockholders and acquired by the Company in connection with the merger of a
subsidiary of the Company with Pets' Rx. See "Selling Stockholders and
Plan of Distribution." The Selling Stockholders may from time to time sell
all or a portion of the Common Stock which may be offered by them under
this Prospectus in routine brokerage transactions in the over-the-counter
market, at prices and terms prevailing at the time of sale. The Selling
Stockholders may also make private sales directly or through brokers. The
Selling Stockholders may pay customary brokerage fees, commissions and
expenses. The Company will pay all other expenses of the offering. The
Selling Stockholders and the brokers executing selling orders on behalf of
the Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"),
in which event commissions received by such brokers may be deemed
underwriting commissions under the Securities Act.
The Company will not receive any proceeds from the sale of the
Common Stock offered by the Selling Stockholders hereby.
The Common Stock is quoted on the Nasdaq Stock Market's National
Market ("Nasdaq National Market") under the symbol "VCAI." On July 24,
1997, the closing price of the Common Stock on the Nasdaq National Market
was $13.625.
THESE SHARES OF COMMON STOCK HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR
AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR
SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 HEREOF FOR A DISCUSSION OF
CERTAIN INFORMATION THAT SHOULD BE CAREFULLY CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE SHARES.
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The date of this Prospectus is August 6, 1997
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No dealer, salesman or any other person has been authorized to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This
Prospectus does not relate to any securities other than those described
herein or constitute an offer to sell, or the solicitation of an offer to
buy, securities in any jurisdiction where, or to any person to whom, it is
unlawful to make such an offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create an implication that the information herein is correct as of any time
subsequent to the date hereof or that there has been no change in the
affairs of the Company since such date.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement) under the Securities
Act with respect to the Common Stock offered hereby. This Prospectus,
which constitutes part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information with respect to the Company
and the Common Stock offered hereby, reference is hereby made to such
Registration Statement, and the exhibits and schedules thereto which may be
obtained from the Commission's principal office in Washington, D.C., upon
payment of the fees prescribed by the Commission. Statements contained in
this Prospectus as to the contents of any contract, agreement or other
document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to
the Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference.
VCA is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information
with the Commission. These reports, proxy statements and other information
can be inspected and copied at the public reference facilities maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the following regional offices of the Commission: Offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of the
material can be obtained at prescribed rates by writing to the Securities
and Exchange Commission, Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. The Common Stock is traded on the
Nasdaq National Market and the Company's reports, proxy or information
statements, and other information filed with the Nasdaq National Market may
be inspected at the offices of Nasdaq at 1735 K Street, N.W., Washington,
D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are incorporated by reference into
this Prospectus:
(1) Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 (as amended by Form 10-K/A
Amendment No. 1);
(2) Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997; and
(3) Registrant's Reports on Form 8-K, filed on July 5, 1996
(as amended on July 17, 1996), January 22, 1997,
February 18, 1997, February 27, 1997 and April 30, 1997.
All documents filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the securities covered by
this Prospectus shall be deemed to be incorporated by reference herein and
to be part hereof from the date of filing of such documents. Any statement
contained herein or in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon the oral
or written request of any such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are expressly incorporated by reference
into such documents). Written requests for such copies should be directed
to Tomas Fuller, Chief Financial Officer, Veterinary Centers of America,
Inc. 3420 Ocean Park Boulevard, Suite 1000, Santa Monica, California
90405. Telephone inquiries may be directed to Veterinary Centers of
America, Inc., at (310) 392-9599.
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD
BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION CONTAINED HEREIN
AND IN THE CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO,
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. UNLESS THE CONTEXT
OTHERWISE REQUIRES, ALL REFERENCES HEREIN TO THE "COMPANY" AND "VCA" REFER
TO VETERINARY CENTERS OF AMERICA, INC. AND ITS CONSOLIDATED SUBSIDIARIES.
THE DOCUMENTS INCORPORATED IN THIS PROSPECTUS CONTAIN FORWARD LOOKING
STATEMENTS, WHICH ARE INHERENTLY UNCERTAIN. ACTUAL RESULTS MAY DIFFER FROM
THOSE DISCUSSED IN SUCH FORWARD LOOKING STATEMENTS FOR THE REASONS, AMONG
OTHERS, DISCUSSED IN "RISK FACTORS."
THE COMPANY
Veterinary Centers of America. Inc. ("VCA" or the "Company") was
founded in 1986 and is a leading companion animal health care company. The
Company has established a premier position in the animal hospital and
veterinary diagnostic laboratory segments and has an emerging presence in
the premium pet food segment. The Company operates the largest network of
free-standing animal hospitals in the country. As a leader in the
industry, the Company employs more veterinarians than any single private-
sector employer. The Company's network includes privately owned teaching
hospitals which provide clinical training for recent veterinary school
graduates. In addition, the Company operates the largest network of
veterinary-exclusive laboratories in the nation. The Company also markets
both a life-stage and a therapeutic line of premium pet foods through Vet's
Choice, a joint venture with Heinz Pet Products, an affiliate of H.J. Heinz
Company.
The Company operates in three market segments which had total
domestic revenues in 1994 of approximately $10.0 billion, composed of
approximately $8.2 billion for veterinary care (animal hospitals and
veterinary diagnostic laboratories) and $1.8 billion for premium pet food.
The animal hospital industry is highly fragmented with approximately 115
million dogs and cats in the United States being cared for by an estimated
55,000 veterinarians practicing at 16,000 animal hospitals. These animal
hospitals are primarily single site, sole practitioner facilities. The
Company believes that its larger size and multi-site network offer
advantages to the veterinary professional and consumer alike. The
Company's size and breadth of operations enable it to leverage corporate
overhead, centralize administrative functions, realize economies of scale
in purchasing and other administrative functions, enhance medical care
through specialists and state of the art equipment and technology and free
the veterinary professional from administrative tasks, thereby allowing the
veterinarian greater time to practice veterinary medicine.
The Company's animal hospitals offer a full range of general
medical and surgical services and also perform specialty services such as
orthopedics for small animals, including dogs, cats, birds and other
household pets. In addition to treating disease and injury, the Company's
animal hospitals emphasize pet wellness and offer programs to encourage
routine vaccinations, health examinations, spaying and neutering and dental
care. The Company's veterinary diagnostic laboratories offer a full range
of diagnostic and reference tests. Laboratory tests are used by
veterinarians to diagnose, monitor and treat diseases through the detection
of substances in blood, urine or tissue samples and other specimens. The
Company does not conduct experiments on animals and is not engaged in
animal research. Vet's Choice markets a line of life-stage and therapeutic
premium pet foods under the brand names, SELECT BALANCE and SELECT CARE,
respectively.
The Company's business strategy focuses on (i) expanding its
animal hospital and veterinary diagnostic laboratory businesses through
acquisitions and internal growth, (ii) achieving cost savings by
consolidating operations and realizing economies of scale in purchasing and
administrative support functions and the implementation of the Company's
standard management programs, (iii) taking advantage of its unique
opportunity to deliver its products and services through multiple channels
to its customers, who are primarily veterinarians and pet owners, and (iv)
capitalizing on its leadership position within the companion animal health
care industry to expand into other products and services for veterinarians
and pet owners.
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RISK FACTORS
IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR INCORPORATED
BY REFERENCE INTO THIS PROSPECTUS, THE FOLLOWING FACTORS SHOULD BE
CONSIDERED BEFORE MAKING AN INVESTMENT IN THE COMPANY.
ANTICIPATED EFFECTS OF ACQUISITIONS
VCA has acquired Pets' Rx and The Pet Practice, Inc. ("Pet
Practice") with the expectation that the transactions will result in
beneficial synergies for the combined business. These synergies include
the potential to realize improved operating margins at animal hospitals
through a strategy of centralizing various corporate and administrative
functions and leveraging fixed costs while providing customers with
improved services.
Achieving these anticipated benefits depends in part on the
efficient, effective and timely integration of the operations of Pets' Rx
and Pet Practice with those of the Company. The combination of these
businesses requires, among other things, integration of the companies'
management staffs, coordination of the companies' sales and marketing
efforts, integration and coordination of the companies' development teams
and the identification and elimination of redundant overhead and poor-
performing hospitals. These tasks are substantially complete as of the
date of this report. However, full integration will require additional
efforts.
As a result of the integration process, the Company was unable to
engage in adequate marketing activities and, as a result, same-store sales
growth of the animal hospitals of the Company and those acquired through
the Pet Practice and Pets' Rx acquisitions declined. In addition, there
existed significant redundant overhead at the regional and corporate
offices of the companies which resulted in increased operational expenses
during the integration period. Also during this period, the Company
closed, combined or sold approximately 17 animal hospitals which did not
meet the Company's performance criteria. The integration process also
required significant dedication of management resources. During the
integration period, the accounting staff of the Company primarily focused
on consolidating the books of the Pet Practice and Pets' Rx and recording
the acquisition on the books of the Company. Operations personnel focused
on integrating the management staffs and organizational cultures of the
three geographically separated organizations. The combined staff focused
on reducing overhead, integrating personnel policies and procedures and
developing the VCA identity in marketing materials and hospital signage.
Consequently, during this period, the Company experienced operational
inefficiencies and increased expenses.
Moreover, during the integration period, the Company was in the
process of implementing new management information systems designed to
integrate the financial information of all of the animal hospitals and
veterinary laboratories of the companies in one system. See "Management
Information Systems" below.
While a significant portion of the integration of the companies
is complete, it is anticipated that the integration will continue to
require substantial dedication from management. There can be no assurance
that the problems associated with the integration identified above will not
continue or that the integration on an ongoing basis will proceed smoothly
or successfully. Furthermore, even if the operations of the three
companies are ultimately successfully integrated, it is anticipated that
the integration will continue to be accomplished over time and, in the
interim, the combination may continue to have an adverse effect on the
business, results of operations and financial condition of VCA.
RAPID EXPANSION AND MANAGEMENT OF GROWTH
Due to the number and size of acquisitions completed since
January 1, 1995, the Company has experienced rapid growth. In 1995, the
Company completed 32 acquisitions (25 animal hospitals, six veterinary
diagnostic laboratories and the remaining 30 percent interest in
Professional Animal Laboratory). In 1996, the Company completed the
acquisition of Pet Practice, 22 animal hospitals and 6 veterinary
diagnostic laboratories and combined its operations with Pets' Rx in a
transaction accounted for as a pooling-of-interests. As a result of these
acquisitions and the Pets' Rx pooling-of-interests transaction, the
Company's revenues have grown from $42.2 million in 1994 to $92.1 million
in 1995, to $182.2 million in 1996 and to unaudited proforma 1996 revenue
of over $228 million. In addition, during this period, the Company entered
two new lines of business, veterinary diagnostic laboratories and premium
pet food.
The Company's growth and pace of acquisitions have placed, and
will continue to place, a substantial strain on its management,
operational, financial and accounting resources. The successful management
of this growth will require the
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Company to continue to implement and improve its financial and management
information systems and to train, motivate and manage its employees. There
can be no assurance that the combined business will be able to identify,
consummate or integrate acquisitions without substantial delays, costs or
other problems. Once integrated, acquisitions may not achieve sales,
profitability and asset productivity commensurate with the combined
business' other operations. In addition, acquisitions involve several
other risks, including adverse short-term effects on the combined business'
reported operating results, impairments of goodwill and other intangible
assets, the diversion of management's attention, the dependence on
retention, hiring and training of key personnel, the amortization of
intangible assets and risks associated with unanticipated problems or legal
liabilities. The combined business' failure to manage growth effectively
would have a material adverse effect on the combined business' results of
operations and its ability to execute its business strategy.
ALLEGED MISSTATEMENTS REGARDING THE COMPANY'S OPERATIONS AND PROSPECTS
The Company and certain of its current and former officers and
directors have been named as defendants in a class action lawsuit filed on
April 1, 1997, entitled Marilyn J. Thompson, et al. v. Veterinary Centers
of America, Inc., et al., Los Angeles Superior Court, Case No. BC168547.
The lawsuit has been filed on behalf of individuals claiming to have
purchased Common Stock of the Company during the time period from February
15, 1996 through November 14, 1996, and the plaintiffs seek unspecified
damages arising from alleged misstatements regarding the Company's animal
hospitals, diagnostic laboratories, pet food operations and success in
integrating certain acquisitions. While the Company has not yet filed an
answer to the complaint, the Company intends to vigorously defend itself
against the lawsuit.
Since discovery has not yet commenced, the Company is unable to
assess the likelihood of an adverse result in the class action lawsuit.
There can be no assurances as to the outcome of such lawsuit. The
inability of the Company to resolve the claims that are the basis for the
lawsuit or to prevail in any related litigation could result in the Company
being required to pay substantial monetary damages for which the Company
may not be adequately insured, which could have a material adverse effect
on the Company's business, financial condition and results of operations.
In any event, the Company's defense of such lawsuit, even if the outcome is
favorable to the Company, may result in substantial costs to the Company,
as well as significant dedication of management resources.
MANAGEMENT INFORMATION SYSTEMS
The growth experienced by the Company, and specifically the
acquisitions of Pet Practice and Pets' Rx, and the corresponding increased
need for timely information, have placed significant demands on the
Company's existing accounting and management information systems. The
Company is in the process of implementing new management information
systems to collect and organize data from all of its operations. Once
integrated, the Company anticipates that the new systems will result in the
automation of certain time intensive manual procedures, daily access, if
desired, to information relating to sales, revenues and other financial and
operational data from each animal hospital and veterinary laboratory and
ultimately in the delivery of financial information to management and
preparation of consolidated financial reports, each on a more timely basis.
While the Company has begun the process of implementing new system, the
continued development and installation of the systems involves the risk of
unanticipated delay and expenses. There can be no assurance that the
Company will successfully or timely implement the new systems or that it
will effectively serve the Company's future information requirements.
DEPENDENCE ON ACQUISITIONS FOR FUTURE GROWTH
The Company's growth strategy is dependent principally on its
ability to acquire existing animal hospitals. Successful acquisitions
involve a number of factors which are difficult to control, including the
identification of potential acquisition candidates, the willingness of the
owners to sell on reasonable terms and the satisfactory completion of
negotiations. In addition, acquisitions may be subject to pre-merger or
post-merger review by governmental authorities for antitrust and other
legal compliance. Adverse regulatory action could negatively affect the
Company's operations through the assessment of fines or penalties against
the Company or the possible requirement of divestiture of one or more of
the Company's operations.
There can be no assurance that the Company will be able to
identify and acquire acceptable acquisition candidates on terms favorable
to the Company in a timely manner in the future. Assuming the availability
of capital, the Company's plans include an aggressive acquisition program
involving the acquisition of at least 15 to 25 facilities per year. The
Company continues to evaluate acquisitions and negotiate with several
potential acquisition candidates. The failure to complete acquisitions and
continue expansion could have a material adverse effect on the Company's
financial performance. As the combined business
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proceeds with its acquisition strategy, it will continue to encounter the
risks associated with the integration of acquisitions described above.
LEVERAGE
The Company has incurred substantial indebtedness in connection
with the acquisition of its animal hospitals and veterinary diagnostic
laboratories and through the sale of the $84,385,000 of 5.25% convertible
debentures in April 1996. The Company had at March 31, 1997,
consolidated long-term obligations (including current portion) of
$175.7 million. At March 31, 1997 and December 31, 1996 the Company's
ratio of long-term debt to total stockholders' equity was 103% and 88.9%,
respectively.
RISKS ASSOCIATED WITH INTANGIBLE ASSETS
A substantial portion of the assets of the Company consists of
intangible assets, including goodwill and covenants not to compete relating
to the acquisition of animal hospitals and veterinary diagnostic
laboratories. At March 31, 1997, the Company's balance sheet reflected
$233.7 million of intangible assets of these types, a substantial portion
of the Company's $383.5 million in total assets at such date. The Company
expects the aggregate amounts of goodwill andother intangible assets on its
balance sheet to increase in the future inconnection with additional
acquisitions. This increase will have an adverse impact on earnings as
goodwill and other intangible assets will be amortized against earnings. In
the event of any sale or liquidation of the Company, there can be no
assurance that the value of these intangible assets will be realized.
In addition, the Company continually evaluates whether events and
circumstances have occurred that indicate the remaining balance of
intangible assets may not be recoverable. When factors indicate that these
intangible assets should be evaluated for possible impairment, they may be
required to reduce the carrying value of intangible assets, which could
have a material adverse effect on results of operations during the periods
in which such reduction is recognized. In accordance with this policy, the
Company recognized a writedown of goodwill and related assets in the amount
of $2.3 million in 1993 in connection with three of the Company's
facilities which were not performing to the level deemed acceptable by
management. Further, the Company has recognized a writedown of
goodwill and related assets in the amount of $9.5 million as part
of its restructuring plan adopted during the third and fourth quarters
of 1996. There can be no assurance that the Company will not be required
to writedown assets further in future periods.
GUARANTEED PAYMENTS
In connection with acquisitions in which the purchase price
consists, in part, of the Company's common stock (the "Guarantee Shares"),
the Company often guarantees (the "Guarantee Right") that the value of such
stock (the "Measurement Price") two to three years following the date of
the acquisition (the "Guarantee Period") will equal or exceed the value of
the stock on the date of acquisition (the "Issue Price"). In the event the
Measurement Price does not equal or exceed the Issue Price, the Company
typically is obligated either to (i) pay to the seller in cash, notes
payable or additional shares of the Company's common stock the difference
between the Issue Price and the Measurement Price multiplied by the number
of Guarantee Shares then held by the seller, or (ii) purchase the Guarantee
Shares then held by the seller. Once the Guarantee Shares are delivered
and registered for resale under the Securities Act, which registration the
Company covenants to effect generally within nine months of issuance of the
Guarantee Shares, the seller's Guarantee Right typically terminates if the
Company's common stock trades at 110% to 120% of the Issue Price (the
"Release Price") for five to 15 consecutive days, depending on the terms of
the specific acquisition at issue. There are 256,672 Guarantee Shares
outstanding at June 30, 1997 with Issue Prices ranging from $11.62 to
$24.53, with a weighted average of $17.30, that have not met their
respective Release Prices for the specified period or have not been
delivered due to escrow arrangements. If the value of the Company's common
stock decreases and is less than an Issue Price at the end of the
respective Guarantee Period for these shares, the Company may be obligated
to compensate these sellers.
SEASONALITY AND FLUCTUATING QUARTERLY RESULTS
A large portion of the business of the Company is seasonal, with
operating results varying substantially from quarter to quarter.
Historically, the Company's revenues have been greater in the second and
third quarters than in the first and fourth quarters. The demand for the
Company's veterinary services are significantly higher during warmer months
because pets spend a greater amount of time outdoors, where they are more
likely to be injured and are more susceptible to disease and parasites.
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In addition, use of veterinary services may be affected by levels of
infestation of fleas, heartworms and ticks, and the number of daylight
hours, as well as general economic conditions. A substantial portion of
the Company's costs are fixed and do not vary with the level of demand.
Consequently, net income for the second and third quarters at individual
animal hospitals generally has been higher than that experienced in the
first and fourth quarters.
DEPENDENCE ON KEY MANAGEMENT
The Company's success will continue to depend to a significant
extent on the Company's executive officers and other key management,
particularly its Chief Executive Officer, Robert L. Antin. VCA has an
employment contract with Mr. Robert Antin, Mr. Arthur Antin, Chief
Operating Officer of VCA, and Mr. Neil Tauber, Senior Vice President of
VCA, each of which expires in December 2002. VCA has no other written
employment agreements with its executive officers. None of VCA's officers
are parties to noncompetition covenants which extend beyond the term of
their employment with VCA. VCA maintains "key man" life insurance on Mr.
Robert Antin in the amount of $3.0 million, of which VCA is the sole
beneficiary. VCA does not maintain any insurance on the lives of its other
senior management. As VCA continues to grow, it will continue to hire,
appoint or otherwise change senior managers and other key executives.
There can be no assurance that VCA will be able to retain its executive
officers and key personnel or attract additional qualified members to
management in the future. In addition, the success of certain of VCA's
acquisitions may depend on VCA's ability to retain selling veterinarians of
the acquired companies. The loss of services of any key manager or selling
veterinarian could have a material adverse effect upon VCA's business.
COMPETITION
The companion animal health care industry is highly competitive
and subject to continual change in the manner in which services are
delivered and providers are selected. The Company believes that the primary
competitive factors in connection with animal hospitals are convenient
location, recommendation of friends, reasonable fees, quality of care and
convenient hours. The Company's primary competitors for its animal
hospitals in most markets are individual practitioners or small, regional
multi-clinic practices. In addition, certain national companies in the pet
care industry, including the operators of super-stores, are developing
multi-regional networks of animal hospitals in markets which include the
Company's animal hospitals. Among veterinary diagnostic laboratories, the
Company believes that quality, price and the time required to report
results are the major competitive factors. There are many clinical
laboratory companies which provide a broad range of laboratory testing
services in the same markets serviced by the Company. In addition, several
national companies provide on-site diagnostic equipment that allows
veterinarians to perform their own laboratory tests.
GOVERNMENT REGULATION
The laws of many states prohibit veterinarians from splitting
fees with non-veterinarians and prohibit business corporations from
providing, or holding themselves out as providers of, veterinary medical
care. These laws vary from state to state and are enforced by the courts
and by regulatory authorities with broad discretion. While the Company
seeks to structure its operations to comply with the corporate practice of
veterinary medicine laws of each state in which it operates, there can be
no assurance that, given varying and uncertain interpretations of such
laws, the Company would be found to be in compliance with restrictions on
the corporate practice of veterinary medicine in all states. A
determination that the Company is in violation of applicable restrictions
on the practice of veterinary medicine in any state in which it operates
could have a material adverse effect on the Company if the Company were
unable to restructure its operations to comply with the requirements of
such states.
ANTI-TAKEOVER EFFECT
A number of provisions of the Company's Certificate of
Incorporation and bylaws and certain Delaware laws and regulations relating
to matters of corporate governance, certain rights of directors and the
issuance of preferred stock without stockholder approval, may be deemed to
have and may have the effect of making more difficult, and thereby
discouraging, a merger, tender offer, proxy contest or assumption of
control and change of incumbent management, even when stockholders other
than the Company's principal stockholders consider such a transaction to be
in their best interest. In addition, H.J. Heinz Company has an option to
purchase the Company's interest in the Vet's Choice joint venture upon the
occurrence of a change in control (as defined in the joint venture
agreement), which may have the same effect. Accordingly, stockholders may
be deprived of an opportunity to sell their shares at a substantial premium
over the market price of the shares.
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IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Future sales by existing stockholders could adversely affect the
prevailing market price of the Company's common stock. As of July 24,
1997, the Company had 19,495,770 shares of common stock outstanding
(including 141,615 shares held in treasury), most of which are either
freely tradeable in the public market without restriction or tradeable in
accordance with Rule 144 under the Act. There are also 102,241 shares
which the Company is obligated to issue in connection with the Pets' Rx
andPet Practice mergers and certain acquisitions; 583,333 shares issuable
uponconversion of outstanding preferred stock; 3,670,018 shares of the
Company'scommon stock issuable upon exercise of outstanding stock options;
35,876shares issuable upon conversion of convertible notes; and 2,456,623
sharesissuable upon conversion of convertible debentures. Shares may also
be issued under price guarantees delivered in connection with acquisitions.
These shares will be eligible for immediate sale upon issuance.
POSSIBLE VOLATILITY OF STOCK PRICE
The market price of the Company's common stock could be subject
to significant fluctuations caused by variations in quarterly operating
results, litigation involving the Company, announcements by the Company or
its competitors, general conditions in the companion animal health care
industry and other factors. The stock market in recent years has
experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of publicly
traded companies. The broad fluctuations may adversely affect the market
price of the Company's common stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Securities offered by the Selling Stockholders hereunder.
Page 9
<PAGE>
SELLING STOCKHOLDERS AND PLAN OF DISTRIBUTION
The Shares were issued by the Company on June 19, 1996 in a private
placement pursuant to Regulation D under the Securities Act. Pursuant to an
Agreement and Plan of Reorganization dated February 27, 1996, as amended (the
"Merger Agreement"), the Company covenanted to use its best efforts to register
one-third of the shares of Common Stock issued pursuant to the Merger Agreement
on or prior to January 30, 1997, one-third of such shares on or prior to April
30, 1997 and one-third of such shares on or prior to July 30, 1997. The
purpose of this Registration Statement is to register the final one-third of
the shares of Common Stock issued pursuant to the Merger. The following table
sets forth certain information regarding the beneficial ownership of the Common
Stock by the Selling Stockholders as of July 24, 1997, and as adjusted to
reflect the sale of 801,053 shares by the Selling Stockholders. The
Selling Stockholders have the sole voting and investment power with respect to
the shares owned, subject to applicable community property laws. It is the
intention of the Company that this Registration Statement shall remain
effective until June 19, 1998. As of July 24, 1997, the Company had
outstanding 19,495,770 shares of Common Stock, par value $0.001 per share,
the only outstanding voting security of the Company.
<TABLE>
<CAPTION>
COMMON STOCK OWNED AFTER THE
NAME COMMON STOCK OWNED PRIOR TO THE OFFERING(1) OFFERING (1)
- ----------------------------- -------------------------------------------- ------------------------------
Number of Percent of Number of Shares Percent of
Shares Class to be Sold Number of Shares Class
<S> <C> <C> <C> <C> <C>
Richard E. Watson &
Nancy P. Watson
6992 Burnside Drive
San Jose, CA 95120 41,361 * 41,361 0 *
Richard E. Watson, as
Cust. for Andrew Watson
6992 Burnside Drive
San Jose, CA 95120 7,755 * 7,755 0 *
Hyprom, S.A.
Chemin Neuf 16
1028 Preverenges, Switzerland 266,301 * 266,301 0 *
Trilon Dominion Partners, LLC
10800 Midlothian Turnpike,
Suite 129
Richmond, VA 23235 120,638 * 120,638 0 *
John W. Hunter
100 Kennedy Ave, #8
San Antonio, TX 78209 127,328 * 127,328 0 *
William D. Benjes
Stratfield Management, Inc.
40 Broad Street, Suite 825
Boston, MA 02109 22,404 * 22,404 0 *
Robert M. Wallace &
Carol A. Wallace
15305 Top of the Hill Court
Los Gatos, CA 95030 19,388 * 19,388 0 *
Eyeries Associates
c/o Brian McCarthy, Administrator
20 The Fairfield
Farmham Surrey GU9 8AJ
England 17,866 * 17,866 0 *
Mega Life & Health Insurance Co.
c/o Pat McLaughlin
Emerald Capital
100 Chetwind Drive, Suite 202
Rosemont, PA 19010 58,414 * 58,414 0 *
Page 10
<PAGE>
NAME COMMON STOCK OWNED PRIOR TO THE OFFERING(1) OFFERING (1)
- ----------------------------- -------------------------------------------- ------------------------------
Number of Percent of Number of Shares Percent of
Shares Class to be Sold Number of Shares Class
Midwest Nat'l Life Insurance Co.
c/o Pat McLaughlin
Emerald Capital
100 Chetwind Drive, Suite 202
Rosemont, PA 19010 13,199 * 13,199 0 *
Everest Capital Fund LP
c/o Marko Dimitrijevic
20 Parliament St., Corner House
Box HM2458
Hamilton, Bermuda HMJX 11,150 * 11,150 0 *
Lowell Morse & Vera Morse
c/o Cypress Ventures, Inc.
5335 S. W. Meadows Road, #365
Lake Oswego, OR 97035 11,115 * 11,115 0 *
Robert B. Luthi & Carolee Luthi
7182 Brooktree Lane
San Jose, CA 95120 2,980 * 2,980 0 *
Rebecca N. Watson
6992 Burnside Drive
San Jose, CA 95120 7,755 * 7,755 0 *
Jeff Watson
6992 Burnside Drive
San Jose, CA 95120 7,755 * 7,755 0 *
George Couponas
35 Singletree Road
Chestnut Hill, MA 02167 875 * 875 0 *
Cameo L. Wallace
15305 Top of the Hill Court
Los Gatos, CA 95030 6,462 * 6,462 0 *
Carol A. Wallace\Cust. for
Charity N. Wallace
15305 Top of the Hill Court
Los Gatos, CA 95030 6,462 * 6,462 0 *
William T. Murphy &
Diane S. Murphy
41 Great Hill Farms Road
Bedford, NY 10506 7,329 * 7,329 0 *
Gateway Advisors/Cross
Capital Profit Sharing Plan
c/o Robert M. Wallace
15305 Top of the Hill Court
Los Gatos, CA 95030 598 * 598 0 *
Marko Dimitrijevic
c/o Everest Capital Inc.
20 Parliament St., Corner House
Box HM2458
Hamilton, Bermuda HMJX 4,656 * 4,656 0 *
Lowell Morse
c/o Cypress Ventures, Inc.
5335 S.W. Meadows Road, #365
Lake Oswego, OR 97035 4,653 * 4,653 0 *
Page 11
<PAGE>
NAME COMMON STOCK OWNED PRIOR TO THE OFFERING(1) OFFERING (1)
- ----------------------------- -------------------------------------------- ------------------------------
Number of Percent of Number of Shares Percent of
Shares Class to be Sold Number of Shares Class
Robert M. Wallace
15305 Top of the Hill Court
Los Gatos, CA 95030 4,653 * 4,653 0 *
Joseph A. Pellegrini
Robertson Stephens & Co.
555 California Street
San Francisco, CA 94104 2,906 * 2,906 0 *
Carl Renda
320 Central Park West, #2A
New York, NY 10025 857 * 857 0 *
Delaware Charter\Cust.
for Mildred Hanstein IRA
1484 Dry Creek Road
San Jose, CA 95125 2,408 * 2,408 0 *
Maxine E. Wallace
3394 Beacon Lane
San Jose, CA 95118 2,256 * 2,256 0 *
Nor-Cal Veterinary Practices
4440 La Paz Lane
Santa Rosa, CA 95404 1,292 * 1,292 0 *
Exeland West, Ltd.
c/o Scott Anderson
5618 Yerba Buena Road
Santa Rosa, CA 95400 861 * 861 0 *
Laurence Berger &
Dorothea Berger
333 West End Avenue, #15B
New York, NY 10023 775 * 775 0 *
Charles B. Runnels
556 Catalonia Ave
Pacific Palisades, CA 90272-3010 2,026 * 2,026 0 *
Mary E. Benjes
Stratfield Management, Inc.
40 Broad Street, Suite 825
Boston, MA 02109 2,025 * 2,025 0 *
Ralph O'Brien
c/o Aegon Investments
4333 Edgewood Road NE
Cedar Rapids, IA 52499 1,938 * 1,938 0 *
Arthur Amon & Leta Amon
104 Dana Highlands Ct.
Danville, CA 94506 1,605 * 1,605 0 *
Kenneth Moelis & Julie
Moelis TTEE Moelis Family
624 N. Alpine Drive
Beverly Hills, CA 90210 1,605 * 1,605 0 *
Anna Ruth Frost Trust U/A
4/18/85 FBO Frost Family Trust B
2365 N. Iris Lane
Esconchida, CA 92026 1,605 * 1,605 0 *
Page 12
<PAGE>
NAME COMMON STOCK OWNED PRIOR TO THE OFFERING(1) OFFERING (1)
- ----------------------------- -------------------------------------------- ------------------------------
Number of Percent of Number of Shares Percent of
Shares Class to be Sold Number of Shares Class
Michael S. Morse &
Paula D. Morse
4052 Orchard Drive
Lake Oswego, OR 97035 1,464 * 1,464 0 *
Joseph Gali & Janice Gali
57 Alpine Avenue
Los Gatos, CA 95032 757 * 757 0 *
Valley Christian Schools
1570 Branham Lane
San Jose, CA 95118 690 * 690 0 *
William A. Stinson
915 Dry Creek Drive
Campbell, CA 95008 687 * 687 0 *
William Benak & Judith Benak
3 Biltmore Lane
Menlo Park, CA 94025-6686 626 * 626 0 *
M. Roger Leach
TTEE Roger Leach Living Trust
38254 S. Samaniego Drive
Tucson, AZ 85739-1046 413 * 413 0 *
Everest Capital International LTD.
c/o Marko Dimitrijevic
20 Parliament St., Corner House
Box HM2458
Hamilton, Bermuda HMJX 318 * 318 0 *
Lowell W. Morse Jr.
c/o Cypress Ventures, Inc.
5335 S. W. Meadows Road, #365
Lake Oswego, OR 97035 172 * 172 0 *
Stephen D. Morse
23755 SE Brittany Lane
Sherwood, OR 97140 172 * 172 0 *
Suzanne Whitcomb
Stratfield Management, Inc.
40 Broad Street, Suite 825
Boston, MA 02109 86 * 86 0 *
Mary Dunne Congdon
Stratfield Management, Inc.
40 Broad Street, Suite 825
Boston, MA 02109 43 * 43 0 *
William D. Benjes, Jr.
Stratfield Management, Inc.
40 Broad Street, Suite 825
Boston, MA 02109 2,154 * 2,154 0 *
J. David Reed
20120 Mendelson
Saratoga, CA 95070 215 * 215 0 *
- --------------------
<FN>
* Less than one percent.
<F1> Assumes no purchase of additional shares, no exercise of
outstanding warrants or options to purchase the Company's Common
Stock, and no conversion of any notes to shares of the Company's
Common Stock.
</FN>
</TABLE>
Page 13
<PAGE>
The Selling Stockholders may sell all or a portion of the shares
of Common Stock offered hereby from time to time in brokerage transactions
in the over-the-counter market at prices and terms prevailing at the times
of such sales. The Selling Stockholders may also make private sales
directly or through brokers. The Selling Stockholders may individually pay
customary brokerage commissions and expenses. In connection with any
sales, the Selling Stockholders and any brokers participating in such sales
may be deemed to be underwriters within the meaning of the Securities Act,
in which event commissions received by such brokers may be deemed
underwriting commissions under such Act.
Under the Exchange Act and the regulations thereunder, any person
engaged in a distribution of the shares of Common Stock of the Company
offered by this Prospectus may not simultaneously engage in market making
activities with respect to the shares of Common Stock of the Company during
the applicable"cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the Selling
Stockholders will need to comply with applicable provisions of the Exchange
Act and the rules and regulations thereunder including, without limitation,
Regulation M, which provisions may limit the timing of purchases and sales
of shares of Common Stock by the Selling Stockholders. Regulation M
contains certain limitations and prohibitions intended to prevent issuers
and selling security holders and other participants in a distribution of
securities form conditioning the market through manipulative or deceptive
devices to facilitate the distribution.
Page 14
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed
upon for the Company by Troop Meisinger Steuber & Pasich, LLP, Los Angeles,
California.
EXPERTS
The audited consolidated financial statements of VCA, the audited
supplemental combined financial statements of VCA, the audited financial
statements of Southwest Veterinary Diagnostic, Inc. and the audited
financial statements of Pets' Rx, Inc. incorporated by reference in this
Prospectus and elsewhere in the Registration Statement, to the extent and
for the periods indicated, have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
The financial statements of the Pet Practice and Professional
Veterinary Hospitals of America incorporated by reference in this
Prospectus have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said
firm as experts in auditing and accounting.
The Company has agreed to indemnify Price Waterhouse LLP for
legal costs and expenses that Price Waterhouse LLP might incur in
successfully defending itself in litigation resulting from the
incorporation by reference of its report in the registration statement of
which this prospectus forms a part. In the event Price Waterhouse LLP
enters into a settlement agreement with any such litigation, the settlement
agreement shall not constitute a "successful defense" of such litigation.
Such indemnification, however, shall be null and void should Price
Waterhouse LLP be found by a court to be liable for professional
malpractice.
No dealer, salesperson or other person has been authorized to
give any information or to make any representation, other than those
contained in this Prospectus, in connection with the offer made by this
Prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof. This Prospectus does not
constitute an offer or solicitation by anyone in any jurisdiction in which
such offer or solicitation is not authorized or in which the person making
such offer is not qualified to do so or to anyone to whom it is unlawful to
make such offer or solicitation.
Page 15
<PAGE>
